Download Business Buyer Behavior

A Global Perspective
6
Business Markets and
Business Buyer
Behavior
Philip Kotler
Gary Armstrong
Swee Hoon Ang
Siew Meng Leong
Chin Tiong Tan
Oliver Yau Hon-Ming
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Learning Objectives
After studying this chapter, you should be able to:
1.
Define the business market and explain how business
markets differ from consumer markets
2.
Identify the major factors that influence business buyer
behavior
3.
List and define the steps in the business buying-decision
process
4.
Compare the institutional and government markets and
explain how institutional and government buyers make their
buying decisions
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Chapter Outline
1. Business Markets
2. Business Buyer Behavior
3. Institutional and Government Markets
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1. Business Markets
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Business Markets
•
•
Business buying process is the process where
business buyers determine which products and
services are needed to purchase and then find,
evaluate, and choose among alternative brands.
Business markets differ from consumer markets in:
– Market structure and demand
– Nature of the buying unit
– Types of decisions & the decision-making process
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Business Markets
Market Structure and Demand
•
Fewer and larger buyers
•
Geographic concentration
•
Derived demand – It ultimately derives from the
demand of consumer goods
–
–
Inelastic demand (not affected much by price changes)
Fluctuating demand (change more & more quickly)
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Example: Derived Demand Simplified
You make headlamp assemblies for autos – Auto company’s demand
for headlamp is affected by the consumers’ demand for cars.
Consumers want
more cars
Consumers stop
buying cars
Automobile
manufacturers need
more components
and steel
Automobile
manufacturers stop
making cars
Need more of
your company’s
headlamp
assemblies
You can’t sell
headlamp
assemblies
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Business Markets
Nature of the Buying Unit
• A business purchase involves more decision
participants (buying center or DMU) & a more
professional purchasing effort.
•
Many companies upgrade purchasing functions to
“supply management” or “supplier development”
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Business Markets
Types of Decisions & the Decision Process
• Business buyers usually face more complex buying
decisions
More formalized
• Buyer and seller dependency
•
•
Supplier development - the systematic
development of networks of supplier-partners to
ensure an appropriate and dependable supply of
products and materials that they will use in making
their own products or resell.
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2. Business Buyer Behavior
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Business Buyer Behavior
•
Business buyer behavior refers to
– the buying behavior of the organizations that buy
goods and services for use in production of other
products and services that are sold, rented, or
supplied to others; for facilitating their daily
operations.
– Also included are retailing and wholesaling firms that
acquire goods to resell or rent to others for profit.
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Business Buyer Behavior
A Model of Business Buyer Behavior
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Business Buyer Behavior
Marketing Stimuli
Similar to consumer buying, business buying consists of
the four Ps:
• Product
• Price
• Place
• Promotion
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Business Buyer Behavior
Other Stimuli
Additional stimuli include major economic forces:
• Political
• Economic
• Technological
• Cultural
• Competitive
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Business Buyer Behavior
Buyer Responses to Marketing Stimuli
•
•
•
•
•
•
Product or service choice
Supplier choice
Order quantities
Delivery
Service
Payment terms
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Business Buyer Behavior
Black box of business buying
Marketers must understand what happens within the
organization to turn stimuli into purchase
responses.
•
•
•
•
•
Major Types of Buying Situations
Participants in the Business Buying Process
Major Influences on Business Buyers
The Business Buying Process
E-Procurement
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Business Buyer Behavior
Major Types of Buying Situations
•
•
•
Straight rebuy
Modified rebuy
New task
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Business Buyer Behavior
Major Types of Buying Situations
•
Straight rebuy is a routine purchase decision such as a
reorder without any modification.
•
Modified rebuy is a purchase decision that requires
some research where the buyer wants to modify the
product specification, price, terms, or suppliers.
•
New task is a purchase decision that requires thorough
research such as a new product.
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Business Buyer Behavior
Major Types of Buying Situations
•
•
Systems selling involves the purchase of a packaged
solution from a single seller.
Two-step process of selling:
Interlocking products
• System of production, inventory control, distribution,
and other services to meet the buyer’s need for a
smooth-running operation
•
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Business Buyer Behavior
Participants in the Business Buying Process
•
The buying center is all of the individuals and units
that play a role in the purchase decision-making
process:
•
•
•
•
•
Users
Influencers
Buyers
Deciders
Gatekeepers
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Business Buyer Behavior
Participants in the Business Buying Process
•
•
•
•
•
Users are those that will use the product or service.
Influencers help define specifications and provide
information for evaluating alternatives.
Buyers have formal authority to select the supplier and
arrange terms of purchase.
Deciders have formal or informal power to select and
approve final suppliers.
Gatekeepers control the flow of information.
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Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, or
user – is most likely to make each of the following statements?
•
“This bonding agent better be good, because I have to put this product
together.”
•
“I specified this bonding agent on another job, and it worked for them.”
•
“Without an appointment, no sales rep gets in to see Mr. Johnson.”
•
“I don’t see any reason why we can’t use this bonding agent on the next
job.”
•
“Okay, it is a deal – we’ll buy it.”
•
“I’ll place the order first thing tomorrow.”
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Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, or
user – is most likely to make each of the following statements?
•
“This bonding agent better be good, because I have to put this product
together.” - user
•
“I specified this bonding agent on another job, and it worked for them.” influencer
•
“Without an appointment, no sales rep gets in to see Mr. Johnson.” gatekeeper
•
“I don’t see any reason why we can’t use this bonding agent on the next
job.” - influencer
•
“Okay, it is a deal – we’ll buy it.” - decider
•
“I’ll place the order first thing tomorrow.” - buyer
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Business Buyer Behavior
Participants in the Business Buying Process
The buying center provides a major challenge:
• Who participates in the process
• Their relative authority
• What evaluation criteria each participant uses
• Informal participants
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Business Buyer Behavior
Major Influences on Business
Buyer Behavior
• Economic factors
• Personal factors
• Environmental factors
• Organizational factors
• Interpersonal factors
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Major Influences on Business
Buyer Behavior
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Business Buyer Behavior
The Buying Process
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Business Buyer Behavior
Problem recognition occurs when someone in the
company recognizes a problem or need.
• Internal stimuli
•
•
Need for new product or production equipment
External stimuli
•
Idea from a trade show or advertising
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Business Buyer Behavior
The Buying Process
General need description describes the characteristics and
quantity of the needed item.
Product specification describes the technical criteria.
•
Value analysis is an approach to cost reduction where
components are studied to determined if they can be
redesigned, standardized, or made with less costly
methods of production.
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Business Buyer Behavior
The Buying Process
Supplier search involves compiling a list of qualified
suppliers.
Proposal solicitation is the process of requesting
proposals from qualified suppliers.
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Business Buyer Behavior
The Buying Process
Supplier selection is the process when the buying
center creates a list of desired supplier attributes
and negotiates with preferred suppliers for
favorable terms and conditions.
Order-routine specifications is the final order with the
chosen supplier and lists all of the specifications
and terms of the purchase.
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Business Buyer Behavior
The Buying Process
Performance review involves a critique of supplier
performance to the purchase terms.
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Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation
to Major Buying Situations (Buyclasses)
Buyclasses
Buyphases
New
Modified
Straight
Task
Rebuy
Rebuy
1. Problem recognition
Yes
Maybe
Yes
2. General need description
Yes
Maybe
No
3. Product specification
Yes
Yes
No
4. Supplier search
Yes
Maybe
No
5. Proposal solicitation
Yes
Maybe
No
6. Supplier selection
Yes
Maybe
No
7. Order-routine specification
Yes
Maybe
No
8. Performance review
Yes
Yes
Yes
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An Example of Vendor (Supplier) Analysis
Attributes
Rating Scale
Importance
Weights
Price
.30
Supplier reputation
.20
Product reliability
.30
Service reliability
.10
Supplier Flexibility
.10
Poor
(1)
Fair
(2)
Good
(3)
Excellent
(4)
x
x
x
x
x
Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5
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Business Buyer Behavior
E-Procurement and Buying on the Internet
75% of business buyers indicated that they use the
Internet to make at least some of their purchases.
Online purchasing
• Company buying sites
• Extranets
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The e-hub Plastics.com home page offers buyers and
sellers of plastics a marketplace plus news and
information
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Covisint’s Web site offers both services and
information
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Business Buyer Behavior
E-Procurement and Buying on the Internet
Advantages
• Access to new suppliers
• Lowers costs
• Speed in order processing and delivery
• Share information
• Sales track
• Service and support
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Business Buyer Behavior
E-Procurement and Buying on the Internet
Disadvantages
• Can erode relationships as buyers search for new
suppliers
• Lack of security
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Business Buyer Behavior
– E-Procurement
Much online purchasing takes place through online
auctions and e-market-places:
 An intranet is an internal corporate computer network
that uses Internet technology to link company
departments, employees, and databases
 An extranet allows outsiders to the organization to
access its intranet
 A private exchange links invited groups of suppliers
and partners over the Web
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Business Buyer Behavior
- E-Procurement
Security
 Authentication - making sure only authorized
individuals are allowed to access a site
 Firewalls - combination of hardware and software
that ensures only authorized individuals gain entry
 Encryption - scrambling a message so that only
another individual has the right “key” for deciphering
it
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3. Institutional & Government
Markets
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Institutional and Government Markets
Institutional markets consist of schools, hospitals,
nursing homes, prisons and other institutions that
provide goods and services to people in their care.
•
Characteristics
•
•
Low budgets
“Captive” audience
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Institutional and Government Markets
•
Government markets tend to favor domestic suppliers
and require suppliers to submit bids and normally
award to the lowest bidder
•
•
•
•
Carefully monitored by outside publics – require
considerable paperwork
Affected by similar environmental factors
Good credit
Non-economic factors – tend to favor
•
•
•
Minority suppliers
Depressed suppliers
Small businesses
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Video Case: Eaton
Discussion Questions:
1. What is Eaton’s value proposition?
2. To which decision makers does Eaton market its
products and services?
3. How does Eaton add value to its products &
services?
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