2. Business-to-Business Markets and Buying Behavior
Chapter 5
Business-to-Business Markets and Buying Behavior
McGraw-Hill/Irwin
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

3. After studying this chapter, you should be able to:
Define the nature of business-to-business buying behavior and markets.
Explain the differences between business-to-business buying and consumer purchase behavior.
Recognize the different types of buying decisions.

4. After studying this chapter, you should be able to:
Define the different stages of the business buying process.
Describe the buying-center concept and the determinants of influence within the buying center.
Understand the nature of government, reseller, and other institutional markets.

5. The Nature of Business-to-Business Buying
Business-to-Business buying behavior:
Refers to decision making and other activities of organizations as buyers.
Business-to-Business buying is the selection of suppliers, sources, or vendors.

6. The Nature of Business-to-Business Buying
Organizations fall into four categories:
Business firms
Government markets
Reseller markets
Institutional markets

7. Supply-Chain Management
“The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers.”

8. Supply Management Supply Management:
“The identification, acquisition, access, positioning, and management of resources the organization needs or potentially needs in the attainment of its strategic objectives.”

9. Characteristics of Business-to-Business Buying Behavior
Consumers buy for their own use and for household consumption.
Business buyers purchase for:
Further production (raw materials, components)
Use in their firm’s operations
Resale to other customers

10. Characteristics of Business-to-Business Buying Behavior
Derived Demand:
Demand for business-to-business products is often dependent on demand in consumer markets.

11. Evaluating Business-to-Business Markets: NAICS

12. The Importance of Business-to-Business Buying
Two Key Reasons:
The size of business markets offers many opportunities for marketers.
Many firms are trying to increase profits by improving purchasing practices.

13. Trends in Business-to-Business Buying
Selected Purchasing Trends
1. Electronic Commerce
2. Strategic Cost management
3. Strategic Sourcing
4. Supply-chain partner selection & contribution
5. Relationship management
6. Performance measurement
7. Global-supplier development
8. Third-party purchasing
9. Competitive bidding
10. Strategic supplier
alliances
11. Win-win negotiation strategy
12. Complexity management

14. Productivity Improvement
Outsourcing
Corporate downsizing often involves downsizing of the purchasing function
Reducing cycle time

15. Use of Technology B2B Exchanges: Private Exchanges:
Organizational buying via the Internet.
Private Exchanges:
Those that link invitation-only buyers and sellers.

16. Electronic Commerce Applications in Purchasing
Requesting proposals and price quotes.
Posting bids.
Transmitting purchase orders.
Using Electronic Data Interchanges.
Ordering with electronic catalogs.
Seeking suppliers.
Tracking delivery schedules.
Managing contracts.
Managing inventory.
Paying invoices/making payments.

17. A Relationship Perspective

18. Customer Value Considerations
Buyers are interested in suppliers that can add value to their business by:
Continually increasing quality
Lowering costs

19. Environmental Impact Buyers emphasize an Ethics Perspective by:
Examining the costs associated with product disposal.
Looking for ways to recycle or reuse products.

20. Types of Buying Decisions
The Buying Decision Grid
Type of Buying Newness of Information Consideration of
Decision the Problem Requirements New Alternatives
New task High Maximum Important
Modified rebuy Medium Moderate Limited
Straight rebuy Low Minimal None

21. The Business Buying Process

22. The Buying Center Buying Center: The makeup of the buying center
Includes more than the purchasing department or the purchasing function; it is made up of people throughout the organization at all levels.
The makeup of the buying center
may vary as decisions change.

23. The Buying Center Gatekeepers: Sponsor:
Control the flow of information and communication among the buying-center participants.
Sponsor:
Advocates purchase of a particular product of service.

24. Government Markets Government Market:
Includes federal, state, and local government organizations that purchase goods and services.
The government market is the largest in the world, with the United States federal government the largest customer in this market

25. Reseller Markets Reseller Market: Wholesalers Retailers
Made up of firms that purchase goods and in turn sell them to others at a gain.
This market includes:
Wholesalers
Retailers
3.5 million companies with more
than 20 million employees make
up reseller markets.

26. Other Institutional Markets
Nonprofit organizations must also purchase goods and services to support their activities.
These organizations include:
Educational institutions
Public & private hospitals
Religious & charitable organizations
Trade associations

27. Ethical Issues
Ethics is a constant concern in business-to-business negotiations and transactions.
Bribery takes many forms:
Gifts from vendors to people involved in decision making
“Money under the table”
Promises for the future

28. Ethical Issues Reciprocity: When firm A purchases from supplier B who
in turn buys A’s own products and services.
Fairness, honesty, and trust should influence all
negotiations and selection of suppliers or vendors.
Firms pursuing global markets
encounter ethical dilemmas.