1. Analyzing Business Markets7
Analyzing Business Markets

2. What is Organizational Buying?
Organizational buying refers to the decision-making process
by which formal organizations establish the need for purchased products and services,
and identify, evaluate, and choose among alternative brands and suppliers.

3. Top Business Marketing Challenges
Expand understanding of customer needs
Compete globally other countries reshape markets
Master analytical tools and improve quantitative skills
Reinstate innovation as an engine of growth
Create new organizational models and linkages

4. Characteristics of Business Markets
Fewer, larger buyers
Close supplier-customer relationships
Professional purchasing
Many buying influences
Multiple sales calls
Derived demand (from consumer demand)
Inelastic demand (not effected by price)
Fluctuating demand
Geographically concentrated buyers
Direct purchasing

5. Buying Situation
Straight rebuy
Modified rebuy
New task

6. Buying Situations Straight re-buy Modified re-buy New task
PD reorders on routine basis. Automatic reordering system to save time.
buyers wants to modify product spec., prices, delivery req. or other terms.
purchaser buys a product or service for the first time.
chooses from suppliers on an approved list
in-suppliers becomes nervous and out suppliers see an opportunity
More number of participants and great information need
Maintain product and service quality
The greater the cost or risk, the larger the gathering of info and therefore long time to take a decision.
‘out-suppliers” attempt to get in. first small and then bigger for order

7. Systems Buying and Selling
Turnkey solution
desired;
bids solicited
System
subcomponents
assembled
Prime
contractors
Second-tier
contractors

8. Systems Buying and Selling
System buying: buying a total solution to a problem from one seller.
This practice originated with govt. purchases of major weapons and communication systems.
The govt. would solicit bids from Prime contractors who assembled the package or system.
The contractor who was awarded the contract would be responsible for bidding out and assembling the system’s subcomponents from second tier contractors.
The prime contractor would thus provide a turnkey solution.

9. Participants in Business buying process - The Buying Center
Initiators
Users
Influencers
Deciders
Approvers
Buyers
Gatekeepers

10. Participants in Business buying process - The Buying Center
Initiators- Those who request that something be purchased. User or other in org.
Users- Those who use the product or service
Influencers- people who influence the buying decision
Deciders- people who decide on product requirements or on suppliers
Approvers- people who authorize the proposed actions of deciders or buyers
Buyers- people who play a role in selecting vendors and negotiating.
Gatekeepers- people who have to power to prevent sellers or information from reaching the members of the 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. Sales Strategies Key Buying Influencers Small Sellers Multilevel
In-depth
Selling
Large Sellers
Business marketers should review periodically their assumptions about buying
participants

13. Target segment- 4 types of business customers
How to handle
Limiting the quantity that can be purchased
No refunds, No adjustments
No services
Solutions to enhance customer revenues. (ex. ITC e-choupal.)
Solutions to decrease customer risks. (ex. ICI explosives- safer to quarries)
Solutions to reduce customer costs. (ex. Tatas)
Price oriented customers (Transactional selling) – price is everything
2. Solution oriented customers (consultative selling) want low prices but listen to lower total cost or more dependable supply or service

14. Target segment- 4 types of business customers
best performance in terms of quality, assistance, reliable delivery etc
want a fairly permanent sole-supplier relationship
3. Gold standard customers (quality selling)
4. Strategic value customers (enterprise selling)

15. Purchase orientation 1. Buying orientation 2. Procurement orientation
3. Supply Chain Management orientation
focus is short term and tactical.
Lowest Price for the gn quality and availability
Commoditization and multi-sourcing
Simultaneously Seek quality improvement and cost reduction.
develop collaborative relationship for cost reduction
Early supplier involvement
Long time contracts
More strategic and value added operations
purchase executives work with marketing and other company executive to build a seamless supply chain management system.
Upgrading the sales personnel to the caliber of the business buyers

16. Types of Purchasing process
1. Routine products
2. Leverage products
3. Strategic products
4. Bottleneck products
low value and cost to the customer; involve little risk
Ex: office supplies
high value and cost to the customer; involve little risk of supply
Ex: engine piston
high value and cost to the customer; involve high risk
Ex: Main frame computers. Strategic alliance- early supplier involvement, co-development programs and co-investment.
low value and cost to the customer; involve some risk
ex: Spare parts. Require guaranteed steady supply of reliable products

17. Stages in the Buying Process: Buyphases
Problem recognition
General need description
Product specification
Supplier search
Proposal solicitation
Supplier selection
Order-routine specification
Performance review

18. Buygrid Framework

19. Forms of Electronic Marketplaces
Catalog sites
Vertical markets
Pure play auction sites
Spot markets
Private exchanges
Barter markets
Buying alliances

20. B2B cyber buying bazaar
Catalog sites- order through electronic catalogs distributed by e-procurement software, such as Grainger’s.
Vertical markets- These are specialized web sites for buying industrial products. Ex: plastics.com
Pure play auction sites: freemarkets.com provides online auctions for buyers and sellers of industrial parts, raw materials, commodities and services in over 50 product categories.
Spot (or exchange) markets: On spot electronic market, prices change by the minute. Ex: ChemConnect.com.
Private exchanges: HP, IBM and Walmart operate private exchanges to link with specially invited groups of suppliers and partners over the Web.
Barter markets: Trade goods or services
Buying alliances: Several companies buying the same goods join together to form purchasing consortia and gain deeper discounts on volume purchases (Transora, Covisint)

21. Vendor Analysis

22. Methods for Researching Customer Value
Internal engineering assessment- company engineers use lab testing to estimate the performance
Field value-in-use assessment – customers are interviewed about cost elements associated with using the new-product offering compared to an incumbent product.
Focus-group value assessment – focus group are asked what value they would put on potential market offering
Direct survey questions – customers are asked to place direct rupee value on one or more changes in the market offering

23. Methods for Researching Customer Value
Conjoint analysis- customers are asked to rank their preference for alternative market offerings or concepts. The utility value is calculated for each attribute.
Benchmarks: Customers are shown a benchmark offering and a new market offering. They are asked how much more/less they would pay for the new offering if certain features are added/removed from the benchmark offering.
Compositional approach: Customers are asked to attach a monetary value to each of three alternative levels of a given attribute. This is repeated for other attributes. The values are then added together for any offer configuration.
Importance ratings: Customers are asked to rate the importance of different attributes and the suppliers firms’ performance on these attributes.

24. Order Routine Specification
Many industrial buyers lease heavy equipment like machinery and trucks
Advantage for lessee
Conserving capital
Getting latest products
receiving better service
tax advantage
Advantage for lessor
Larger net income

25. Order Routine Specification
1. Stockless
purchase plans
2. Vendor-managed
inventory
3. Continuous
replenishment
Blanket contracts or SPP – long term contracts, re supplies whenever needed at agreed upon prices over a specific period of time
The customers enter order directly on the computer, and these orders are automatically transmitted to the suppliers system.
Some companies shift the ordering responsibility to the supplier i.e. is managed by the vendors
The vendors are privy the customers inventory level and takes responsibility to replenish it automatically through continuous replenishment

26. Order Routine Specification
OTIFNE signifies three desirable outcome of a B-B transaction
OT- deliver on time (80%)
IF – in full (90%)
NE –No error(70%)
All 3 matters OT- deliver on time
(80%)x (90%) x(70%)=50%

27. Trust Dimensions Transparent Cooperating Design Product/Service
Quality
Product
Comparison
Incentive
Supply Chain
Partnering
Pervasive
Advocacy

28. Managing B to B customer relationships
Strong bonds and relationships between firms depend on their perceived credibility
Corporate credibility refers to the extent to which customers believe that firm can design and deliver products and services that satisfy their needs and wants.
CC relates to the reputation that a firm has achieved in the market place and is the foundation for a strong relationship.
CC depends on 3 factors

29. Establishing Corporate Trust and Credibility
Expertise
The extent to which a company is
seen as able to make and sell products
or conduct services
Trustworthiness
Likeability
The extent to which a company is seen as
Motivated to be honest, dependable and sensitive
Customer need
The extent to which a company
Is seen as likable, attractive,
prestigious and so on

30. Factors Affecting Buyer-Supplier Relationships
Availability of
alternatives
Importance of
supply
Complexity of
supply
Supply market
dynamism

31. Based on the four factors Buyer-Seller Relationships are categorized
Basic buying and selling – relatively simple, routine exchanges with moderately high level of cooperation and information exchange
Bare bones – same as previous, but more adaptation by the seller and less cooperation and information exchange.
Contractual transaction – generally low levels of trust, co-operation and interaction; exchange is defined by formal contract
Customer supply – traditional custom supply situation where competition rather than cooperation is the dominant form of governance
Cooperative systems – although coupled closely in operational ways, neither party demonstrates structural commitment through legal means or adaptation approaches
Collaborative – much trust and commitment leading to true partnership
Mutually adaptive – much relationship-specific adaptation for buyer and seller, but without necessarily strong trust or cooperation
Customer is king- although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s need without expecting much adaptation or change on the part of the customer in exchange

32. Based on the four factors Buyer-Seller Relationships are categorized
Basic buying and selling – relatively simple, routine exchanges with moderately high level of cooperation and information exchange
Bare bones – same as previous, but more adaptation by the seller and less cooperation and information exchange.
Contractual transaction – generally low levels of trust, co-operation and interaction; exchange is defined by formal contract
Customer supply – traditional custom supply situation where competition rather than cooperation is the dominant form of governance

33. Based on the four factors Buyer-Seller Relationships are categorized
5. Cooperative systems – although coupled closely in operational ways, neither party demonstrates structural commitment through legal means or adaptation approaches
6. Collaborative – much trust and commitment leading to true partnership
8. Mutually adaptive – much relationship-specific adaptation for buyer and seller, but without necessarily strong trust or cooperation
9. Customer is king- although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s need without expecting much adaptation or change on the part of the customer in exchange

34. What is Opportunism?
Opportunism is some form of cheating or undersupply relative to an implicit or explicit contract.
That is, when a buyer cannot monitor the supplier performance the supplier might shirk or cheat and not deliver the expected value

35. Institution and Government Markets
Institution Markets
consists of schools, hospital, nursing homes, hotels, prisons etc that provide good goods and services to people in their care.
Organization are characteristic by low budgets and captive clientele
Government Markets
Buyers for govt. 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 IM and GM.