1. Chapter 6: Analyzing Business Market
Marketing Management
Chapter 6: Analyzing Business Market
Reported By: Eulisan J. Florague

2. Chapter 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-to-business buying process?
How do business buyers make their decisions?
How can companies build strong relationships with business customers?
How do institutional buyers and government agencies do their buying?

3. Content III. Managing business-to-business customer relationships
I. What is organizational buying?
II. Participants in the business buying process
III. Managing business-to-business customer relationships

4. I. What is organizational buying ?
What is business market?
A business market is a group of profit making organizations that buy goods and services for business use.
It consists of industries, distributors and retailers.
This market has rational buying with and experiences an inelastic demand.

5. Characteristics of Business Markets
Fewer, larger buyers
Close supplier-customer relationships
Professional purchasing
Multiple buying influences
Multiple sales calls
Derived demand
Inelastic demand
Fluctuating demand
Geographically concentrated buyers
Direct purchasing

6. How does it differ from the consumer market ?
Business
Every customer has equal value and represents a small % of revenue
There are a small number of big customers that account for a large % of revenue
Sales are made remotely, the manufacturer doesn't meet the customer
Sales are made personally, the manufacturer gets to know the customer
Products are the same for all customers. The service element is low
Products are customized for different customers. Service is highly valued
Purchases are made for personal use - image is important for its own sake
Purchases are made for others to use - image is important where it adds value to customers

7. Cont. The purchaser is normally the user
The purchaser is normally an integrator, someone down the supply chain is the user.
Costs are restricted to purchase costs
Purchase costs may be a small part of the total costs of use
The purchase event is not subject to tender and negotiation
The purchase event is conducted professionally and includes tender and negotiation.
The exchange is one off transaction. There is no long-time view (financial services differ)
The exchange is often one of strategic intent. There is the potential for long term value

8. Buying situations Straight rebuy Modified rebuy
Reorders supplies (office supplies, bulk chemicals) at a routine basis and chooses from list of suppliers.
Modified rebuy
The buyer want to modified products specs, prices, delivery requirements from previous orders.
New task
Purchaser buys a products for the first time

9. II. Participants in the business buying process

10. The buying center 1. Initiators 2. Users 3. Influencers 4. Deciders
Those requesting the product
2. Users
Those who will you use the product or service
3. Influencers
Those who influence the buying decisions
4. Deciders
Those who decide on products reqs & suppliers
5. Approvers
Those authorizing actions of buyers
tho
6. Buyers
Those who have authority to select supplier & arrange purchase terms
7. Gatekeepers
Those who prevent information from reaching members of buying center

11. Of Concern to Business Marketers
Who are the major decision participants?
What decisions do they influence?
What is their level of influence?
What evaluation criteria do they use?

12. Stages in Buying Process
Problem recognition
General need description
Product specification
Supplier search
Proposal solicitation
Supplier selection
Order routine specification
Performance review

13. The buygrid framework New Task Modified Rebuy Straight Buy
Problem recognition
General need description
Product specification
Supplier search
Proposal solicitation
Supplier selection
Order-routine specification
Performance review
Maybe
Maybe
Maybe
Maybe
Maybe
Maybe

14. Searching for suppliers
Catalog sites
Electronic catalogs
Vertical markets
Ordering raw materials from specialized websites
Pure play auction sites
Online marketplaces (Ebay, Amazon)
Spot markets
On spot electronic markets, prices change by the minute
Private exchanges
Private exchange to link groups of suppliers over the web
Barter markets
Participants offer to trade goods or services
Buying alliances
Companies buying the same goods join together to form purchasing consortia

15. Overcoming Price Pressures
Limit quantity purchased
Allow no refunds
Make no adjustments
Provide no services

16. Researching Customer Value
Internal engineering assessment
Field value-in-use assessment
Focus-group value assessment
Direct survey questions
Conjoint analysis
Benchmarks
Compositional approach
Importance ratings

17. Order – routine specification
The buyers negotiates: The final order; listing the technical specifications; the quantity needed; the expected time of delivery; return policies; warranties…
Performance review
Three methods:
The buyer may contact the end users and ask for their evaluations
The buyer may rate the supplier on several criteria using a weighted score method
The buyer might aggregate the cost of poor performance to come up with adjusted costs of purchase including price

18. III. Managing Business- to- Business Customer Relationships

19. The Benefits of Vertical Coordination
Create more value for both buying partners and sellers partners
Establishing Corporate Trust and Credibility

20. The relationship between advertising agencies and clients
In the relationship formation stage, one partner experienced substantial market growth.
Information asymmetry between partnership would generate more profit than if the partner attempted to invade the other firm’s area
At least one partner had high barriers to entry that would prevent the other partner from entering the business
Dependence asymmetry existed such that one partner was more able to control or influence the other’s conduct
One partner benefited from economies of scale related to the relationship

21. Factors of buyer-supplier relationships
Availability of alternatives
Importance of supply
Complexity of supply
Supply market dynamism

22. Categories of Buyer-Supplier Relationships
Basic buying and selling
Bare bones
Contractual transaction
Customer supply
Cooperative systems
Collaborative
Mutually adaptive
Customer is king

23. Business Relationship : Risks and Opportunism
Opportunism is a concern
Vertical coordination can facilitate stronger customer – seller ties but increase the risk to the customers and supplier specific investment

24. Institutional and Government Markets
Institutional market consists of schools ,hospitals, nursing home, prisons and other institutions that provide goods and services to people in their care

25. Institutional and Government Markets ( Cont )
Buyers for government organization tend to require a great deal of paperwork from their vendors and to favor open bidding and domestic companies
Suppliers must be prepared to adapt their offers to the special needs and procedures found in institutional and government markets

26. Summary Business markets differ from consumer markets
Business buyers make purchase decisions base on different buying situations
The buying process consists of eight stages.
sellers use different sales strategies according to their size. One is to use e – marketplaces
There are also different strategies in handling price – oriented customers
Business marketers must form strong bonds and relationships with their customers and provide them added value.