0. Business Markets and Business Buyer Behavior
Chapter 7

1. Objectives
Be able to define the business market and explain how business markets differ from consumer markets.
Know the major factors that influence business buyer behavior.

2. Objectives
Understand the steps in the business buying decision process.
Understand institutional and government markets and how buyers in these markets make their buying decisions.

3. Gulfstream Aerospace Sells jets exclusively for corporate use
300 – 500 buyers worldwide
Rational, objective, and human factors influence business buyer’s decisions
Multiple people are involved in the decision
Buying influences include the CEO, pilot, board members, even spouses
Company has been highly successful

4. Definition Business Buyer Behavior:
The buying behavior of organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.

5. Business Markets Characteristics of Business Markets
Sales in the business market far exceed sales in consumer markets.

6. Business Markets Characteristics of Business Markets
Business markets differ from consumer markets in many ways.
Marketing structure and demand
Nature of the buying unit
Types of decisions and the decision process

7. Business Markets Characteristics Compared to consumer markets:
have fewer but larger customers
Business customers
are concentrated geographically
Demand is different
Derived demand
Price inelastic
Fluctuates more, and changes more quickly
Marketing Structure and Demand
Nature of the Buying Unit
Types of Decisions and the Decision Process

8. Discussion Question
Think about derived demand in the context of vehicles. Which parts, components, or finished goods are most dependent upon the demand for new vehicle production?

9. Fujitsu promises more than just high-tech products: “Our technology helps keep you moving upward. And our people won’t let you down.”

10. Business Markets Characteristics Compared to consumer purchases:
Business purchases involve more buyers in the decision process.
Purchasing efforts are undertaken by professional buyers.
Marketing Structure and Demand
Nature of the Buying Unit
Types of Decisions and the Decision Process

11. Business Markets Characteristics In comparison to consumer purchases:
Business buyers face more complex buying decisions.
The buying process is more formalized.
Buyers and sellers work together closely and build long-term relationships.
Marketing Structure and Demand
Nature of the Buying Unit
Types of Decisions and the Decision Process

12. BusinessNow NerveWire Video Clip
Consultants work closely with their client companies.
What criteria might guide the selection of a firm such as NerveWire?
Click the picture above to play video

13. Model of Business Buyer Behavior
Figure 7-1:
Model of Business Buyer Behavior

14. Business Buyer Behavior
Major Types of Buying Situations
Straight rebuy
Reordering without modification
Modified rebuy
Requires modification to prior purchase
New task
First time purchase

15. Business Buyer Behavior
Systems Selling:
Buying a packaged solution to a problem from a single seller.
Convenience is a major benefit
Often a key marketing strategy for businesses seeking to win and hold accounts.

16. Business Buyer Behavior
Participants in the Buying Decision Process
Users
Buyers
Influencers
Deciders
Gatekeepers

17. Emotions also play a role in business buying
Emotions also play a role in business buying. Volvo stresses that the trucks’ benefits will make “drivers a lot more possessive”.

18. Major Influences on Business Buyer Behavior
Figure 7-2:
Major Influences on Business Buyer Behavior

19. Major Influences on Business Buyers
Key Factors
Economic trends
Supply conditions
Technological change
Regulatory and political environments
Competitive developments
Culture and customs
Environmental
Organizational
Interpersonal
Individual

20. Major Influences on Business Buyers
Key Factors
Objectives
Policies
Procedures
Organizational structure
Systems
Environmental
Organizational
Interpersonal
Individual

21. Major Influences on Business Buyers
Key Factors
Authority
Status
Empathy
Persuasiveness
Environmental
Organizational
Interpersonal
Individual

22. Major Influences on Business Buyers
Key Factors
Authority
Age
Education
Job position
Personality
Risk attitudes
Environmental
Organizational
Interpersonal
Individual

23. Stages of the Business Buying Process
Figure 7-3:
Stages of the Business Buying Process

24. Business Buying Process
Eight Stages:
Stage 1: Problem Recognition
Stage 2: General Need Description
Stage 3: Product Specification
Value analysis helps to reduce costs

25. Business Buying Process
Eight Stages:
Stage 4: Supplier Search
Supplier development

26. Business Buying Process
Eight Stages:
Stage 5: Proposal Solicitation

27. Business Buying Process
Eight Stages:
Stage 6: Supplier Selection
Stage 7: Order-Routine Specification
Blanket contracts are often used for maintenance, repair and operating items.
Stage 8: Performance Review

28. Business Buying Process
Business Buying on the Internet
E-procurement is growing rapidly.
Reverse auctions account for much of the online purchasing activity.
E-procurement offers many benefits:
Access to new suppliers
Lower purchasing costs
Quicker order processing and delivery

29. Institutional and Government Markets
Institutional Markets
Consist of churches, schools, prisons, hospitals, nursing homes and other institutions that provide goods and services to people in their care.

30. Institutional and Government Markets
Institutional Markets
Often characterized by low budgets and captive patrons.
Marketers may develop separate divisions and marketing mixes to service institutional markets.

31. Institutional Markets In Depth
The Background: Institutional markets are often overlooked in B2B marketing
The Potential: This market is somewhat recession-resistant; great target for hard economic times
How To Sell Them: Catalogs are often the best method of contact
Crossover Potential: Same consumer catalogue items could be targeted to institutions
For additional information, see the article by Alicia Orr Suman entitled, “Institutions are businesses, too” in Target Marketing, Vol. 25, Issue 10, p. 125 (October 2002)

32. Institutional Markets In Depth
Timing is Important: Appropriate times to mail vary by institution. For example, August is a good month for schools, but often a poor time for other institutions due to worker vacations.
Timing is Important: Understanding when government funding becomes available, or when the new budget year begins can help. Many institutions purchase early, then run low on funds.
For additional information, see the article by Alicia Orr Suman entitled, “Institutions are businesses, too” in Target Marketing, Vol. 25, Issue 10, p. 125 (October 2002)

33. Discussion Question
Name some examples of goods or services that a catalogue marketer could target to your university, church, or hospital.
Think beyond the obvious.

34. Institutional and Government Markets
Governmental units – federal, state, and local – that purchase or rent goods and services for carrying out the main functions of government.

35. Institutional and Government Markets
More than 82,000 buying units.
Require suppliers to submit bids.
Favor domestic suppliers.
Extensive paperwork is required from suppliers.

36. Institutional and Government Markets
Government buyers often favor:
Depressed business firms and areas
Small businesses
Minority-owned businesses
Firms which follow non-discriminatory practices

37. Institutional and Government Markets
Most firms that sell to government buyers are not marketing-oriented.
Some companies have separate government marketing departments.
Much of government buying has migrated online.

38. Institutional and Government Markets
Government buying online: Procurement Gateway allows authorized defense and civilian agencies to buy online.
Procurement Gateway