1. Chapter Five Business-to-Business Behavior

2. Business-to-Business Behavior
Chapter Objectives
Identify types of goods and services.
Identify types of business customers.
Explain derived and joint demand.
Identify types of buying situations and when each is used.
Describe the buying center and the different roles of employees.
Discuss factors that influence business-to-business buyer behavior.
List the steps in the B-to-B buying process.

3. Types of Business Goods and Services
Major equipment, buildings, and land
Accessory equipment
Fabricated and component parts
Process material
Maintenance and repair parts
Operating supplies
Raw materials
Goods for resale
Business services
All require a different marketing approach

4. Major Equipment, Buildings, and Land
Top management is always included in the decision.
High-cost items
 Financing is an issue, e.g., leasing.
Purchase has strategic implications.
Examples: factory machines, mainframe computers, robotic equipment, land, and buildings

5. Accessory Equipment
Item is usually not involved in the production or sale of the firm’s product.
Top management is involved in decision approval but not in the selection of equipment.
Examples: furniture, trucks, personal computers, fax machines, and copy machines

6. Fabricated and Component Parts
Identifiable products that are incorporated into another product
Purchased from an outside source (vendors) and only assembled at the manufacturer
Quality and Dependability need to be guaranteed in order to maintain brand name of finished product!
Examples: tires, batteries, spark plugs, radios, etc., used in automobiles

7. Process Materials Used in the manufacture of other products
Lose their identity
Defects in finished goods are attributed to the manufacturer.
Quality tends be the same from all vendors. Then other factors such as delivery time become more important.
Examples: cement, aluminum,
steel, plastic, and wire
Quality and Durability are crucial!

8. Maintenance and Repair Parts
Needed to keep machines running
Little or no brand recognition
May be supplied by vendor
Examples: oil, grease,
filters, gear, switches,
and motors
Price is an important determinant.

9. Operating Supplies
Price and convenience are important purchase criteria.
Little effort or time is devoted in purchasing.
Examples: light bulbs, paper, pencils,
paper clips, and cleaning chemicals.

10. Raw Materials
Materials are supplied by the agriculture, fishing, mining, and timber industries.
Materials must go through some type of manufacturing process.
Raw material lose their identity in the finished product.
Examples:
wheat, minerals, grain

11. Goods for Resale
Wholesalers and distributors buy products in order to resell these products to retail stores.
They function as middlemen.
manufacturer wholesaler
retail store consumer
Example: Reebok needs to understand the needs of every member in the chain. They all want to maximize their benefits.

12. Business Services Professional Services legal counsel medical services
CPA‘s
auditing services
consulting services
hired for a particular situation
Operating Services
telephone service
Internet provider
insurance carrier
lawn care service
shipping service
hired on contract for a fixed period of time
Companies often outsource
operating services
Guarantee quality
Save costs
Purchasing services
Trust and relationships are important.
Price is secondary.

13. Characteristics of Business-to-Business Markets
Few buyers
Large volume
Geographic concentration
Formal buying process
Consumer market
Large number of buyers
Small volume
Some geographic concentration
Different buying processes

14. Types of Customers
Manufacturers: Involved in producing goods for resale
Wholesalers: Purchase goods from a manufacturer
and resell to retailers/distributors
Retailers: Can purchase from wholesalers or
directly from manufacturers
Government agencies
Purchase major equipment, land, and buildings, supplies, etc.
Use competitive bidding process
Can be very lucrative for businesses
Nonprofit organizations
Hospitals, schools, etc.
Most use competitive bidding process
Raw materials
Process materials New goods
Component parts

15. Types of Buying Situations (cont.)
Low dollar amount
Little information needed
Low management involvement
High dollar amount
Lots of information needed
High management involvement
Straight rebuy Modified rebuy New buy
New buy
Purchases made for the first time
Normally complex decisions
Involve top management
High dollar amount
Land, buildings, equipment
Modified rebuy
Limited experience with goods or service
Dissatisfaction with the current vendor
End of a contractual relationship
Straight rebuy
Routine purchases
No changes in purchase criteria or specifications
Satisfied with current vendor
Derived demand
Joint demand

16. The Buying Center Gatekeeper: Responsible for the flow of information
User: Individual actually using the product. Provides information about the current product and vendor.
Influencer: Influences the purchase decision, e.g., an engineer familiar with certain component parts
Decider: Person who makes the final decision, e.g., the president of the company. May be a group if the decision is complex or is of high dollar value.
Purchaser: Person who makes the actual purchase

17. Influences on the Purchase Process
The behavior of each member of the buying center are influenced by a variety of factors:
Organizational
Individual
Social
Temporary

18. The Business-to-Business Buying Process
Identification of needs
Establishment of specification
Identification of feasible solutions
Identification of feasible vendors
Evaluation of vendors
Selection of vendor(s)
Negotiation of purchase terms
Seven
Steps

19. The B2B Buying Process
Identification of Need: Normally direct result of a companies operations. Advertisement and marketing are normally not involved,
e.g., a bakery needs flour, sugar, etc.
Establishment of Specifications:
Important when comparing vendors (modified rebuy or new buy)
Develop list of purchase criteria
Establish specifications
Identification of feasible solutions:
Purchase product from an external source
Produce product yourself
Lease product (e.g., equipment, buildings, or land)
Identification of Feasible Vendors: (only if external source)
Gatekeeper contacts and screens potential vendors.
Feasible vendors meet screening criteria.
Here there is only If not how well vendors meet criteria.

20. The Business-to-Business Buying Process (cont.)
Evaluation of Vendors:
1st level: Screening evaluates how well vendors meets specified criteria.
2nd level: Vendor analyses is concrete and more specific.
3rd level: Vendor audit or presentations to guarantee that vendor has potential to meet purchaser‘s supply demands.
EDI (electronic data interchange): Data of manufacturer is directly sent to suppliers through computer/guarantee always enough product

21. The Business-to-Business Buying Process (cont.)
Selection of Vendor(s):
One or multiple vendors
Dependability
Cost (discounts)
Relationship
Negotiation of Purchase Terms
e.g., payment method, due date, exact size of order, etc.