1. Copyright 2004 © Pearson Education Canada Inc. 8-1 Chapter 8 Analyzing Business Markets and Business Buying Behaviour

2. Copyright 2004 © Pearson Education Canada Inc. 8-2 Kotler on Marketing Many businesses are wisely turning their suppliers and distributors into valued partners.

3. Copyright 2004 © Pearson Education Canada Inc. 8-3 Chapter Objectives In this chapter, we focus on six questions: –What is the business market, and how does it differ from the consumer market? –What buying situations do organizational buyers face? –Who participates in the business buying process? –What are the major influences on organizational buyers? –How do business buyers make their decisions? –How do institutions and government agencies do their buying?

4. Copyright 2004 © Pearson Education Canada Inc. 8-4 What is Organizational Buying? –Organizational buying The business market versus the consumer market –Business market Fewer buyers Larger buyers Close supplier-customer relationship Geographically concentrated buyers

5. Copyright 2004 © Pearson Education Canada Inc. 8-5 What is Organizational Buying? Derived demand Inelastic demand Fluctuating demand Professional purchasing

6. Copyright 2004 © Pearson Education Canada Inc. 8-6 What is Organizational Buying? Several buying influences Multiple sales calls Directed purchasing Reciprocity Leasing

7. Copyright 2004 © Pearson Education Canada Inc. 8-7 If you were tasked with marketing a product or service to an organization, would you attempt to initially contact the purchasing department, or potential users of your company’s offerings? Why? Would the product you were selling make a difference? Why?

8. Copyright 2004 © Pearson Education Canada Inc. 8-8 What is Organizational Buying? Buying Situations –Straight rebuy –Modified rebuy –New Task Systems Buying and Selling –Systems buying –Turnkey solution –Systems selling

9. Copyright 2004 © Pearson Education Canada Inc. 8-9 What are some of the benefits to an organization that can be derived from a single source solution, or a systems buying arrangement with a prime contractor? What are some of the potential pitfalls? What can the company do to protect itself from these hazards?

10. Copyright 2004 © Pearson Education Canada Inc. 8-10 Participants in the Business Buying Process The Buying Center –Initiators –Users –Influencers –Deciders –Approvers –Buyers –Gatekeepers Key buying influencers Multilevel in-depth selling

11. Copyright 2004 © Pearson Education Canada Inc. 8-11 Figure 8.1: Major Influences on Industrial Buying Behaviour

12. Copyright 2004 © Pearson Education Canada Inc. 8-12 Major Influences on Buying Decisions Environmental Factors Organizational Factors –Purchasing-Department Upgrading –Cross-Functional Roles –Centralized Purchasing –Decentralized Purchasing of Small-Ticket Items –Internet Purchasing

13. Copyright 2004 © Pearson Education Canada Inc. 8-13 The e-hub Plastics.com home page offers buyers and sellers of plastics a marketplace plus news and information

14. Copyright 2004 © Pearson Education Canada Inc. 8-14 Major Influences on Buying Decisions –Other Organizational Factors Long-Term Contracts –Vendor-managed inventory –Continuous replenishment programs Purchasing-Performance Evaluation and Buyers’ Professional Development Improved Supply Chain Management Lean Production –Just-in-time

15. Copyright 2004 © Pearson Education Canada Inc. 8-15 Major Influences on Buying Decisions Interpersonal and Individual Factors Cultural Factors –France –Germany –Japan –Korea –Latin America

16. Copyright 2004 © Pearson Education Canada Inc. 8-16 The Purchasing/ Procurement Process Incentive to purchase Three Company Purchasing Orientations –Buying Orientation Commoditization Multisourcing –Procurement Orientation Materials requirement planning (MRP) –Supply Chain Management Orientation

17. Copyright 2004 © Pearson Education Canada Inc. 8-17 The Purchasing/ Procurement Process Types of Purchasing Processes –Routine products –Leverage products –Strategic products –Bottleneck products

18. Copyright 2004 © Pearson Education Canada Inc. 8-18 The Purchasing/ Procurement Process Stages in the Buying Process –Problem Recognition –General Need Description and Product Specification Product value analysis –Supplier Search Vertical hubs Functional hubs Direct external links to major suppliers Buying alliances Company buying sites –Request for proposals (RFPs)

19. Copyright 2004 © Pearson Education Canada Inc. 8-19 Table 8.1: Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses) Buyclasses NewModifiedStraight TaskRebuy 1. Problem recognitionYesMaybeNo 2. General need descriptionYesMaybeNo 3. Product specificationYes Buyphases4. Supplier searchYesMaybeNo 5. Proposal solicitationYesMaybeNo 6. Supplier selectionYesMaybeNo 7. Order-routine specification YesMaybeNo 8. Performance reviewYes

20. Copyright 2004 © Pearson Education Canada Inc. 8-20 The Purchasing/ Procurement Process –Proposal Solicitation –Supplier Selection

21. Copyright 2004 © Pearson Education Canada Inc. 8-21 Table 8.2: An Example of Vendor Analysis Attributes Rating Scale Importance Weights Poor (1) Fair (2) Good (3) Excellent (4) Price.30x Supplier reputation.20x Product reliability.30x Service reliability.10x Supplier Flexibility.10x Total score:.30(4) +.20(3) +.30(4) +.10(2) +.10(3) = 3.5

22. Copyright 2004 © Pearson Education Canada Inc. 8-22 The Purchasing/ Procurement Process Customer value assessment Routine-order products Procedural-problem products Political-problem products –Order-Routine Specification Blanket contract Stockless purchase plans –Performance Review Buyflow map

23. Copyright 2004 © Pearson Education Canada Inc. 8-23 Figure 8.2: Organizational Buying Behaviour in Japan

24. Copyright 2004 © Pearson Education Canada Inc. 8-24 Institutional and Government Markets Institutional market