Download Chapter 2

Part 2: Determine the Value Propositions Different Customers Want
Chapter 6
Understanding Consumer and Business Markets
I. CHAPTER OVERVIEW
In this chapter, consumer behavior is defined and reasons for purchasing studied. Students learn
about the process of purchase, beginning with prepurchase behavior and ending with
postpurchase behavior. Students will understand how situational factors at the time and place of
purchase can influence consumer behavior. Students begin to think about how consumers’
relationships with other people influence their decision-making process.
Although consumer marketing is an important area in marketing, so is business-to-business
marketing (B2B). In this chapter, students learn that the fortunes of business buyers and sellers
can hinge on a single transaction. Students learn how marketers categorize businesses and other
organizations to develop effective business marketing strategies. Business buying behavior and
the business buying decision process is evaluated. Finally, the important world of business-tobusiness e-commerce is explored.
II. CHAPTER OBJECTIVES
1. Define consumer behavior and explain the purchase decision-making process.
2. Explain how internal factors influence consumers’ decision-making processes.
3. Show how situational factors and consumers’ relationships with other people influence
consumer behavior
4. Understand the characteristics of business-to-business markets and business-to-business
market demand and how marketers classify business-to-business customers.
5. Identify and describe the different business buying situations and the business buying
decision process including the use of e-commerce and social media.
III. CHAPTER OUTLINE
MARKETING MOMENT INTRODUCTION
Retrace a complicated decision process such as a new cell phone, computer, or car. Think about
your decision to buy a can of soda (Coke) from a vending machine. These examples
demonstrate the different types of consumer decision processes.
p. 151
Exhibit 6. 1
REAL PEOPLE, REAL CHOICES—HERE’S MY
Adam Wexler
PROBLEM AT INSIGHTPOOL
Adam Wexler is the founder and chief strategy officer of
Insightpool, an Atlanta-based software company that specializes
in proactive social engagement. The company’s software helps
innovative brands, such as Home Depot, Intercontinental Hotels
Group, and General Mills, drive their social goals and develop
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
stronger relationships. One client, DocuSign, Inc., The Global
Standard for Digital Transaction Management™ (DTM), enables
organizations to securely sign, send, and manage transactions and
documents in the cloud. This client asked Insightpool to identify
and engage existing or potential customers about subjects of
interest.
One of DocuSign’s objectives is to generate demand. Because the
idea of transacting business and storing documents in the cloud
rather than on secure servers is still fairly new, it’s necessary to
persuade a prospective user to see a demo of the service. The
trick is to entice people to sign up for a demo. Insightpool
worked with DocuSign to target executives to engage in a one-toone dialogue using social media.
While the results of Insightpool’s initial direct marketing efforts
were good, there was room for improvement. The original
message templates were too “salesy,” and the content was not
resonating with the target audience. The Insightpool team wasn’t
sure if the gift card angle was attracting executives to sit through
a demo. Clearly, more needed to be done to move these busy
professionals down the path to purchase
Adam considered our options:
Option 1. Make the message sound like less of a sales pitch
Option 2. Boost the incentive to a $50 Starbucks gift card.
Option 3. Drop the sweepstakes approach in favor of a more
brand-focused campaign.
p. 152
The vignette ends by asking the student which option he/she
would choose.
 Adam selected option #3.
1. THE CONSUMER DECISION-MAKING PROCESS
Consumer behavior is the process individuals or groups go
through to select, purchase, use, and dispose of goods, services,
ideas, or experiences to satisfy their needs and desires. Consumer
decision making is an ongoing process—it’s more than what
happens at the moment a consumer pays for a product.
Marketers need to understand the many factors that influence
each step in the consumer-behavior process—internal factors
unique to each of us, situational factors at the time of purchase,
and the social influences of people around us.
Copyright © 2016 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
p. 152154
1.1 Not All Decisions are the Same
Decision makers actually employ a set of approaches that range
from painstaking analysis to pure whim, depending on the
importance of what they are buying and how much effort they
choose to put into the decision. Researchers find it convenient to
think in terms of an “effort” continuum that is anchored on one
end by habitual decision making, such as deciding to purchase a
box of cereal, and at the other end by extended problem solving,
such as deciding to purchase a new car.
Figure 6.1
The Consumer
DecisionMaking Process
When consumers engage in extended problem solving, indeed we
do carefully go through the steps Figure 6.1 outlines: problem
recognition, information search, and evaluation of alternatives,
product choice, and post-purchase evaluation.
Figure 6.2
Extended
Problem Solving
versus Habitual
Decision
Making
With habitual decision making, consumers make little or no
conscious effort. Many decisions fall somewhere in the middle
and are characterized by limited problem solving. This means that
consumers do some work to make a decision but not a great deal.
The effort we put into decisions depends on our level of
involvement. Involvement is the importance of the perceived
consequences of the purchase to the person. We tend to be more
involved in the decision-making process for products that we
think are risky in some way. Perceived risk exists when there is
uncertainty about a product, the product is complex or hard to
understand, the buyer will be embarrassed if he/she chose the
wrong product, etc.
Exhibit 6. 2
WildWash dog
grooming brand
When perceived risk is low – like when you buy a box of cereal –
we experience a small amount of involvement in the decisionmaking process. In low-involvement situations, the consumer’s
decision is often a response to environmental cues, such as when
you decide to try a new type of cereal because the grocery store
prominently displays it at the end of the aisle. Under these
circumstances, managers must concentrate on how a store
displays products at the time of purchase to influence the
decision-maker. For high-involvement purchases, such as when
we buy a house or a car, we are more likely to carefully process
all the available information and to have thought about the
decision well before we buy the item. The consequences of the
purchase are important and risky, especially because a bad
decision may result in significant financial losses, aggravation, or
embarrassment.
Discussion: Explain habitual decision making, limited problem solving, and extended problem
solving. What is the role of perceived risk in the decision process?
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
p. 154155
1.2
Step 1: Problem Recognition
Problem recognition occurs whenever a consumer sees a
significant difference between her current state of affairs and
some desired or ideal state.
Figure 6. 3
Responses to
DecisionProcess Stages
Most problem recognition occurs spontaneously. However,
marketers can develop creative advertising messages that
stimulate consumers to recognize that their current state just
doesn’t equal their desired state.
Use Brand You Chapter 6 (Why Employers Buy) Here—Think about employer’s needs
and/or how they might influence those needs.
p. 155
1.3
Step 2: Information Search
Information search is the step of the decision-making process in
which the consumer checks his memory and surveys the
environment to identify what options are out there that might
solve his problem.
1.3.1 The Internet as a Search Tool
Increasingly, consumers use Internet to search for information
about products.
Marketers develop sophisticated search marketing techniques.
With search engine optimization (SEO) marketers first find
what key words consumers use most in their searches. Then they
edit their site’s content or HTML to increase its relevance to
those keywords so they can try to place their site high up in the
millions of sites the search might generate. With search engine
marketing (SEM) the search engine company charges marketers
to display sponsored search ads that appear at the top or beside
the search results.
Comparison shopping agents (or ShopBots) such as
Shopzilla.com and NexTag.com are web applications that can
help online shoppers to find what they are looking for at the
lowest price.
p. 156
1.4
Step 3: Evaluation of Alternatives
There are two components to this stage of the decision-making
process. First, a consumer armed with information identifies a
small number of products in which he is interested. Then he
narrows down his choices by deciding which of all the
possibilities are feasible and by comparing the pros and cons of
each remaining option.
As a buyer begins to look systematically at different possibilities
Copyright © 2016 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
p. 156
he/she will also identify important characteristics or evaluative
criteria that he/she will use to decide among them.
1.5
Step 4: Product Choice
Deciding on one product and acting on this choice is the next step
in the decision-making process.
Consumers often rely on decision guidelines when weighing the
claims that companies make. These heuristics, or mental rulesof-thumb, help simplify the decision-making process. One such
heuristic is “price = quality.” Many people willingly buy the
more expensive brand because they assume that if it costs more,
it must be better.
Perhaps the most common heuristic is brand loyalty; this occurs
when we buy the same brand repeatedly and as you can guess it’s
The Holy Grail for marketers. Consumers who have strong brand
loyalty feel that it’s not worth the effort to consider competing
options. People form preferences for a favorite brand and then
may never change their minds in the course of a lifetime.
p. 157158
Another heuristic is based on country of origin. We assume that
a product has certain characteristics if it comes from a certain
country. Sometimes a marketer wants to encourage a country
association even when none exists.
1.6
Step 5: Postpurchase Evaluation
In the last step of the decision-making process, the consumer
evaluates just how good a choice it was. The evaluation of the
product results in a level of consumer satisfaction/
dissatisfaction, which is determined by the overall feelings, or
attitude, a person has about a product after purchasing it.
How well a product meets or exceeds expectations determines
customer satisfaction. Consumers assess product quality by
comparing what they have bought to a performance standard
created by a mixture of information from marketing
communications, informal information sources such as friends
and family, and their own experience with the product category.
This is why it is very important that marketers create accurate
expectations of their product in advertising and other
communications.
Even when a product performs to expectations, consumers may
suffer anxiety or regret, or cognitive dissonance, after we make a
purchase. When we reject product alternatives with attractive
features, we may second-guess our decision.
Copyright © 2016 Pearson Education, Inc.
Figure 6.4
Influences on
Consumer
Decision-
Chapter 6: Understanding Consumer and Business Markets
p. 158
p. 158
Marketers also try to ascertain what influences in consumers’
lives affect the decision-making process. There are three main
categories: internal, situational, and social influences. A
discussion of each follows.
2. INTERNAL INFLUENCES ON CONSUMERS’
DECISIONS
We can attribute much of these differences to internal influences
on consumer behavior—those things that cause each of us to
interpret information about the outside world, including which
car is the best, differently from one another.
2.1
Perception
Perception is the process by which people select, organize, and
interpret information from the outside world. We receive
information in the form of sensations, the immediate response of
our sensory receptors—eyes, ears, nose, mouth, and fingers—to
such basic stimuli as light, color, and sound. We try to make
sense of the sensations we receive by interpreting them in light of
our past experiences.
The perception process has implications for marketers because, as
consumers absorb and make sense of the vast quantities of
information competing for their attention, the odds are that any
single message will get lost in the clutter. To help understand this
process, marketers need to understand exposure, attention, and
interpretation.
p. 159
2.1.1 Exposure
The stimulus must be within range of people’s sensory receptors
to be noticed. Exposure is the extent to which a person’s sensory
receptors are capable of registering a stimulus. Many people
believe that even messages they can’t see will persuade them to
buy advertised products. Claims about subliminal advertising of
messages surface frequently. However, there is little evidence to
support this technique and it is generally believed that it has no
effect on our perception of products.
p. 159
2.1.2 Attention
Attention is the extent to which mental processing activity is
devoted to a particular stimulus. Consumers are more likely to
pay attention to messages that speak to their current needs.
Grabbing consumers’ attention is becoming harder than ever,
because people’s attention spans are shorter than ever. Now that
we are accustomed to multitasking, flitting back and forth
between our e-mails, TV, IMs, and so on, advertisers have to be
more creative by mixing up the types of messages they send.
Copyright © 2016 Pearson Education, Inc.
Making
Part 2: Determine the Value Propositions Different Customers Want
p. 160
p. 160161
p. 160
2.1.3 Interpretation
Interpretation is the process of assigning meaning to a stimulus
based on prior associations we have with it and assumptions we
make about it.
2.2
Motivation
Motivation is an internal state that drives us to satisfy needs.
Once we activate a need, a state of tension exists that drives the
consumer toward some goal that will reduce this tension by
eliminating the need.
The theory, hierarchy of needs, categorizes motives according to
the five levels of importance, the more basic needs being on the
bottom of the hierarchy and the higher needs at the top. The
hierarchy suggests that before a person can meet needs in a given
level, she must first meet the lower level’s needs. Figure 6.5
shows the category of needs.
Gamification is a strategy in which marketers apply game
design techniques, often by awarding points or badges to
nongame experiences in order to drive consumer behavior.
Exhibit 6. 3 Van
Marcke
Figure 6.5
Maslow’s
Hierarchy of
Needs and
Related Products
Ethics Check
Find out what other students taking this course would do and why
at www.mymktlab.com
Should companies be allowed to collect and use information
about users obtained from gamification activities for marketing
purposes?
p.161
2.3
Learning
Learning is a change in behavior caused by information or
experience. Learning can occur deliberately or when we are not
trying. Psychologists have many theories explaining the learning
process. The following is a discussion of some of those theories.
p. 161
2.3.1 Behavioral Learning: Behavioral learning theories assume
that learning takes place as the result of connections that form
between events that we perceive. In one type of behavioral
learning, classical conditioning, a person perceives two stimuli
at about the same time. After a while, the person transfers his
response from one stimulus to the other.
Another common form of behavioral learning is called operant
conditioning, which occurs when people learn that their actions
result in rewards or punishments. This feedback influences how
they will respond in similar situations in the future.
Copyright © 2016 Pearson Education, Inc.
Ripped from the
Headlines
Ethical/Sustaina
Chapter 6: Understanding Consumer and Business Markets
p. 162
p. 162
2.3.2 Cognitive Learning: The cognitive learning theory
views people as problem solvers who do more than passively
react to associations between stimuli. Supporters of this
viewpoint stress the role of creativity and insight during the
learning process. Cognitive learning occurs when consumers
make a connection between ideas or by observing things in their
environment. Observational learning occurs when people watch
the actions of others and note what happens to them as a result.
2.4
Attitudes
An attitude is a lasting evaluation of a person, object, or issue.
Consumers have attitudes about brands. A person’s attitude has
three components: affect, cognition, and behavior.
ble Decisions in
the Real World
Exhibit 6. 4
Marmite
Affect is the feeling component of attitudes. Affect refers to the
overall emotional response a person has to a product. Affect is
usually dominant for expressive products.
Cognition, the knowing component, is the belief or knowledge a
person has about a product and its important characteristics.
p. 163
Behavior, the doing component, involves a consumer’s intention
to do something, such as the intention to purchase or use a certain
product.
2.5
Personality and the Self: Are You What You Buy?
Personality is the set of unique psychological characteristics that
consistently influences the way a person responds to situations in
the environment.
It makes sense to assume that consumers buy products that are
extensions of their personalities. That’s why marketers try to
create brand personalities that will appeal to different types of
people. A person’s self-concept is his attitude toward himself.
The self-concept is composed of a mixture of beliefs about one’s
abilities and observations of one’s own behavior and feelings
(both positive and negative) about one’s personal attributes, such
as body type or facial features. The extent to which a person’s
self-concept is positive or negative can influence the products he
buys and even the extent to which he fantasizes about changing
his life.
Use Website Here-www.colorquiz.com ‘personality’ assessment based on color preferences
p. 163
2.6
Age
A person’s age is another internal influence on purchasing
Exhibit 6. 5
behavior. Many of us feel we have more in common with those of Common Sort
our own age because we share a common set of experiences and
memories about cultural events. Goods and services often appeal
Copyright © 2016 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
to a specific age group.
Age is important, but actually regardless of how old we are, what Exhibit 6. 6
we buy often depends more on our current position in the family FitoSonno food
life cycle—the stages through which family members pass as
supplement
they grow older.
►Marketing Moment In-Class Activity
Using the product categories of dining out and automobiles, identify the types of restaurants and
cars that are likely to be purchased in the various stages of the family life cycle. (i.e., fine dining
and sports cars when dating/McDonald’s and mini-vans with full nest children/nice restaurants
and a Harley when the kids leave for college.) Can you see examples within their own family?
p. 164
Exhibit 6. 7
2.7
Lifestyle
A lifestyle is a pattern of living that determines how people
Walking shoes
choose to spend their time, money, and energy and that reflects
their values, tastes, and preferences. Consumers often choose
goods, services, and activities that are associated with a certain
lifestyle.
Demographic characteristics, such as age and income, tell
marketers what products people buy, but they don’t reveal why.
To breathe life into demographic analyses, marketers turn to
psychographics, which groups consumers according to
psychological and behavioral similarities. One way to do this is to
describe people in terms of their activities, interests, and opinions
(AIOs). These dimensions are based on preferences for vacation
destinations, club memberships, hobbies, political and social
attitudes, tastes in food and fashion, and so on.
►METRICS MOMENT
There are many potential metrics available to assess aspects of consumer behavior. Here are
some popular ones and an example of each.
 Overall awareness: The percentage of all consumers who recognize or know the name of a
brand
 Top-of-mind awareness: The first brand that comes to a consumer’s mind when he or she
thinks of a product category.
 Consumer knowledge: Measured by asking consumers if they have some specific knowledge
about a brand
● Attitude toward a brand: (1) beliefs about brand characteristics, (2) the importance of those
characteristics and (3) the measure of how much the consumer likes the brand.
 Purchase intentions: A consumer’s stated willingness to buy or expressed likelihood of
certain behavior.
 Purchase habits: Another measure of a consumer’s self-reported behavior.
 Customer loyalty: A measure of a consumer’s commitment to a specific brand.
 Customer satisfaction: A consumer survey may ask questions such as “How satisfied are you?
Apply the Metrics
Consider the consumer behavior metrics mentioned above. Pick out several metrics that you
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
think would be most useful to gain a better understand of each item below. How might you use
each metric you choose to do the following?
 Better understand a firm’s existing customers
 Identify potential new customers for a firm
 Gauge the market potential for a new product
p. 165
3.
SITUATIONAL AND SOCIAL INFLUENCES ON
CONSUMERS’ DECISIONS
Situational and social influences--factors external to the
consumer--have a big impact on the choices consumers make and
how they make them.
p. 165
3.1 Situational Influences
When, where, and how consumers shop—what we call
situational influences—shape their purchase choices. Some
important situational cues are our physical surroundings and time
pressures.
Marketers know that dimensions of the physical environment,
including factors such as decor, smells, lighting, music, and even
temperature, can significantly influence consumption. Sensory
marketing is becoming big business.
p. 166
Retailers have purchased custom scents to appeal to their
customers and enhance their brand. Marketers term this strategy
sensory branding
3.1.1 The Physical Environment
People’s moods and behaviors are strongly influenced by their
physical surroundings. The store environment influences many
purchases.
p. 166
Arousal and pleasure determine whether a shopper will react
positively or negatively to a store environment. The importance
of these surroundings explains why many retailers focus on
packing as much entertainment as possible into their stores.
p. 166167
3.1.2 Time
Marketers know that the time of day, the season of the year, and
how much time one has to make a purchase affects decision
making. Time is one of consumers’ most limited resources.
Indeed, many consumers believe that they are more pressed for
time than ever before. This sense of time poverty makes
consumers responsive to marketing innovations that allow them
to save time, including services such as one-hour photo
processing, drive-through lanes at fast-food restaurants, and
ordering products on the web.
Copyright © 2016 Pearson Education, Inc.
The Cutting
Edge : No More
Waiting on
Shipping
Part 2: Determine the Value Propositions Different Customers Want
p. 167
3.2 Social Influences on Consumers’ Decisions
Families, friends, and classmates often influence our decisions, as
do larger groups with which we identify, such as ethnic groups
and political parties.
p. 167
3.2.1 Culture
Culture is society’s personality. It is values, beliefs, customs,
and tastes, produced or practiced by a group of people. A
consumer’s culture influences his buying decisions.
p. 167
3.2.2 Values (Again)
Cultural values are deeply held beliefs about right and wrong
ways to live. Marketers who understand a culture’s values can
tailor their product offerings accordingly.
Activity: What are the core values of your culture? How do these
core values affect your behavior as a consumer? What are the
implications for marketers?
p. 168
3.3 Subcultures
A subculture is a group that coexists with other groups in a
larger culture but whose members share a distinctive set of
beliefs or characteristics – such as members of a religious
organization or an ethnic group. Micro cultures are groups of
consumers who identify with a specific activity or art form.
For marketers, some of the most important subcultures are racial
and ethnic groups because many consumers identify strongly
with their heritage and products that appeal to this aspect of their
identities appeal to them.
p.168
p. 168
3.4 Consumerism: An Emerging Lifestyle Trend
Powerful new social movements within a society also contribute
to how we decide what we want and what we don’t. One such
influence is consumerism, the social movement directed toward
protecting consumers from harmful business practices. Many
consumers are becoming very aware of the social and
environmental consequences of their purchases—and making
their decisions accordingly
3.5
Social Class
Social class is the overall rank of people in a society. People who
are within the same class work in similar occupations, have
similar income levels, and usually share taste in clothing,
decorating styles, and leisure activities. Class members also share
many political and religious beliefs as well as preferences for
AIOs. Luxury goods often serve as status symbols; visible
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
markers that provide a way for people to flaunt their membership
in higher social classes (or at least to make others believe they are
members). Mass-class term refers to the hundreds of millions of
global consumers who now enjoy a level of purchasing power
that’s sufficient to let them afford high-quality products offered
by well-known multinational companies.
p. 169
3.6
Group Membership
People act differently in groups than they do on their own. With
more people in a group, it becomes less likely that any one
member will be singled out for attention, and normal restraints on
behavior may be reduced. In many cases, group members show a
greater willingness to consider riskier alternatives than they
would if each member made the decision alone.
A reference group is a set of people a consumer wants to please
or imitate. Consumers “refer to” these groups when they decide
what to wear, where they hang out, and what brands they buy.
p. 169
3.7
Opinion Leaders
An opinion leader is a person who influences others’ attitudes or
behaviors because they believe that he possesses expertise about
the product. Opinion leaders usually exhibit high levels of
interest in the product category. They continuously update their
knowledge as they read blogs, talk to salespeople, or subscribe to
podcasts about the topic. Because of this involvement, opinion
leaders are valuable information sources.
p. 170
3.8
Gender Roles
Some of the strongest pressures to conform come from our
gender roles, society’s expectations regarding the appropriate
attitudes, behaviors, and appearance for men and women. These
assumptions about the proper roles of men and women, flattering
or not, are deeply ingrained in marketing communications.
p. 170
One of the biggest marketing buzzwords over the past few years
is the metrosexual—a straight, urban male who is keenly
interested in fashion, home design, gourmet cooking, and
personal care.
p. 171
4. BUSINESS MARKETS: BUYING AND SELLING WHEN
THE CUSTOMER IS ANOTHER ORGANIZATION
Business-to-business marketing is the marketing of goods and
services that businesses and other organizations buy for purposes
other than personal consumption. These business-to-business
markets or organizational markets include manufacturers,
Copyright © 2016 Pearson Education, Inc.
Exhibit 6. 8
Tailgaters
Exhibit 6. 9
Aparecida
Jewelry
Exhibit 6. 10
Bauker
Part 2: Determine the Value Propositions Different Customers Want
wholesalers, retailers, and a variety of other organizations, such
as hospitals, universities, and government agencies.
p. 172173
p. 172
p. 172
p. 172
p. 173
4.1 Factors That Make a Difference in Business Markets
In theory, the same basic marketing principles hold in both
consumer and business markets—firms identify customer needs
and develop a marketing mix to satisfy those needs. However,
there are differences that make business-to-business marketing
more complex. Some of the differences are described next.
Figure 6.6 Key
Differences in
Business versus
Consumer
Markets
4.2
Multiple Buyers
In business markets, products often have to do more than satisfy
an individual’s needs. They must meet the requirements of
everyone involved in the company’s purchase decision.
Table 6. 1
Differences
between
Organizational
and Consumer
Markets
4.3
Number of Customers
Organizational customers are rare compared to end consumers. In
the United States, there are about 100 million consumer
households but less than half a million businesses and other
organizations.
4.4
Size of Purchases
Business-to-business products can dwarf consumer purchases
both in the quantity of items ordered and in the price of
individual purchases. Recognizing such differences in the size of
purchases allows marketers to develop effective marketing
strategies.
4.5
Geographic Concentration
Many business customers are located in a small geographic area
rather than being spread out across the country.
Discussion: How do business-to-business markets differ from
consumer markets? How do these differences affect marketing
strategies?
p. 174
Activity: Pick a product. Put the size and complexity of the
business market into perspective by tracing back all of the
elements that had to come together to make the product. The text
gives a good example of the manufacture of jeans.
4.6 B2B Demand
Demand in business markets differs from consumer demand.
Most demand for B2B products is derived, inelastic, fluctuating,
and joint.
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
p. 174
4.6.1 Derived Demand
Business customers do not purchase goods and services to satisfy
their own needs. Businesses instead operate on derived demand,
because a business’s demand for goods and services comes either
directly or indirectly from consumers’ demand for what it
produces. Because of derived demand, the success of one
company may depend on another company in a different industry.
The derived nature of business demand means that marketers
must constantly be alert to changes in consumer trends that
ultimately will have an effect on B2B sales.
p. 174
4.6.2 Inelastic Demand
Inelastic demand means that it usually does not matter if the
price of a business-to-business product goes up or down—
business customers still buy the same quantity. Demand in
business-to-business markets is mostly inelastic because what is
being sold is often just one of the many parts or materials that go
into producing the consumer product. It is not uncommon for a
large increase in a business product’s price to have little effect on
the final consumer product’s price.
Figure 6.7
Derived
Demand
Business-to-business demand is not always inelastic. Sometimes
producing a consumer good or service relies on only one or a few
materials or component parts. If the price of the part increases,
demand may become elastic if the manufacturer of the consumer
good passes the increase on to the consumer.
p. 174
4.6.3 Fluctuating Demand
Business demand also is subject to greater fluctuations than is
consumer demand. There are two reasons for this:
 First, even modest changes in consumer demand can
create large increases or decreases in business
demand.
 A product’s life expectancy—some machinery needs
to be replaced every 10 or 20 years and marketers
have to work hard to even out production.
p. 175
4.6.4 Joint Demand
Joint demand occurs when two or more goods are necessary to
create a product.
p. 175
4.7 Types of Business-to-Business Customers
p. 175
4.7.1 Producers
Producers purchase products for the production of other goods
and services that they in turn sell to make a profit. They are
Copyright © 2016 Pearson Education, Inc.
Figure 6.8 The
Business
Marketplace
Part 2: Determine the Value Propositions Different Customers Want
customers for a vast number of products from raw materials to
goods manufactured by still other producers.
p. 175
4.7.2 Resellers
Resellers buy finished goods for reselling, renting, or leasing to
consumers and other businesses. Although resellers do not
actually produce goods, they do provide their customers with
time, place, and possession utility by making the goods available
to consumers when and where they want them.
p. 176
4.7.3 Government and Not-for-Profit Organizations
Governments and not-for-profit institutions are two other types of
organizations in the business marketplace. Government markets
make up the largest single business and organizational market in
the United States.
Not-for-profit institutions are organizations with educational,
community, and other public service goals, such as hospitals,
churches, universities, museums, and charitable and cause-related
organizations such as the Salvation Army and the Red Cross.
p. 176
4.7.4 The North American Industry Classification System
Marketers can identify their customers using the North American
Industry Classification System (NAICS). This is a numerical
coding of industries developed by the United States, Canada, and
Mexico. The NAICS reports the number of firms, the total dollar
amount of sales, the number of employees, and the growth rate
for industries, all broken down by geographic region. Firms may
also use the NAICS to find new customers.
5. BUSINESS BUYING SITUATIONS AND THE BUSINESS
BUYING DECISION PROCESS
Table 6. 2
North American
Industry
Classification
System
p. 177
5.1 The Buyclass Framework
Like end user consumers, business buyers spend more time and
effort on some purchases than on others. This usually depends on
the complexity of the product and how often they need to make
the decision. A buyclass framework identifies the degree of effort
required of the firm’s personnel to collect information and make a
purchase decision. These classes, which apply to three different
buying situations, are straight rebuys, modified rebuys, and newtask buys.
Figure 6. 9
Elements of the
Buyclass
Framework
p. 177
5.1.1 Straight Rebuy
A straight rebuy refers to the routine purchase of items that a
B2B customer regularly needs. The buyer has purchased the same
items many times before and routinely reorders them when
p. 177
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
supplies are low, often from the same suppliers. Reordering the
items takes little time.
p. 177
5.1.2 Modified Rebuy
A modified rebuy occurs when a firm decides to shop around for
suppliers with better prices, quality, or delivery times. This
situation also can occur when the organization confronts new
needs for products it already buys.
Modified rebuys require more time and effort than straight
rebuys. The buyer generally knows the purchase requirements
and she has a few potential suppliers in mind
p. 178
5.1.3 New-Task Buy
A first-time purchase is a new-task buy. Uncertainty and risk
characterize buying decisions in this classification, and they
require the most effort because the buyer has no previous
experience on which to base a decision.
A prospective customer’s new-task buying situation represents
both a challenge and an opportunity. Although a new-task buy
can be significant in and of itself, many times the chosen supplier
gains the added advantage of becoming an “in” supplier for more
routine purchases that will follow.
►Marketing Moment Activity
Compare the various B2B buying tasks with consumer decision processes. What similarities do
you see? How might this affect the sales process differ with each type of purchase process?
(Straight Rebuy=Habitual; Modified Rebuy=Limited; New-task buy=Extended Decision
Process)
p. 1785.2
Professional Buyers and Buying Centers
179
Trained professional buyers typically carry out buying in
business-to-business markets. These people typically have titles
such as purchasing agents, procurement officer, or directors of
materials management. Professional purchasers shop all day,
every day. They are responsible for selecting quality products and Table 6.3
ensuring their timely delivery.
Roles in the
Buying Center
The buying center is the group of people in the organization who
participate in the decision-making process. Although this term
may conjure up an image of “command central” buzzing with
purchasing activity, a buying center is not a place at all. Instead, it
is a cross-functional team of decision makers. Generally, the
members of a buying center have some expertise or interest in the
particular decision, and as a group, they are able to make the best
decision.
Copyright © 2016 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
Depending on the complexity of the purchase and the size of the
buying center a participant may assume one, several, or all of the
following roles:

User: a member of the buying center who actually
needs the product.
 Initiator: begins the buying process by first
recognizing that the firm needs to make a purchase.
 Gatekeeper: the person who controls the flow of
information to other members.
 Influencer: the person(s) who affects the buying
decision by dispensing advice or sharing expertise.
 Decider: the member of the buying center who makes
the final decision.
 Buyer: the person who has responsibility for executing
the purchase.
►Marketing Moment Activity
Identify and think about family decisions in which all members of the family participated (New
home? Relocation? Family pet? Family vacation?). How do the corporate roles compare to the
roles individual family members play? In your family, who tends to play which roles? (I.e.,
Dad maintains the cars; Mom ‘screens’ phone calls, etc.)
p. 180
Figure 6.10
5.3 The Business Buying Decision Process
The following is a description of the five steps involved in the
Steps in the
business buying decision process.
Business
Buying Process
p. 180
5.3.1 Step 1: Recognize the Problem
The first step occurs when someone sees that a purchase can
solve a problem. Two events may occur in the problem
recognition step. First, a request or requisition, usually written, is
made. Then, depending on the complexity of the purchase, a
buying center may be formed.
p. 180
5.3.2 Step 2: Search for Information
The buying center searches for information about products and
suppliers in this second step. Members of the buying center may
individually or collectively refer to reports in trade magazines and
journals, seek advice from outside consultants, and pay close
attention to marketing communications from different
manufacturers and suppliers. The job of marketers is to make sure
the information is available when and where business customers
want it.
Business buyers often develop product specifications, that is, a
written description of the quality, size, weight, color, features,
quantity, training, warranty, service terms, and delivery
requirements for the purchase. Once the product specifications
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
p. 181
are in hand, the next step is to identify potential suppliers and
obtain written or verbal proposals, or bids, from one or more of
them.
5.3.3 Step 3: Evaluate the Alternatives
The buying center assesses the proposals in this stage of the
buying decision process. Total spending for goods and services
can have a major impact on the firm’s profitability. All things
being equal, price is the primary consideration. Pricing
evaluations must take into account discount policies for certain
quantities, return-goods policies, the cost of repair and
maintenance services, terms of payment, and the cost of financing
large purchases. For capital equipment, cost criteria also include
the life expectancy of the purchase, the expected resale value, and
disposal cost for the old equipment.
Although a bidder is often selected because it offers the lowest
price, there are times when the buying decision is based on other
factors.
The more complex and costly the purchase, the more time buyers
spend searching for the best supplier—and the more marketers
must do to win the order. In some cases, a company may even ask
one or more of its current customers to participate in a customer
reference program. In these situations, customers formally share
success stories and actively recommend products to other
potential clients, often as part of an on-line community composed
of people with similar needs.
p. 182
Marketers often make formal presentations and product
demonstrations to the buying center group.
5.3.4 Step 4: Select the Product and Supplier
The next step in the buying process is the purchase decision—the
selection of the best product and supplier to meet the firm’s
needs. Reliability and durability rank especially high for
equipment and systems that keep the firm’s operations running
smoothly without interruption. For some purchases, warranties,
repair service, and regular maintenance after the sale are
important.
One of the most important decisions for a buyer is how many
suppliers can best serve the firm’s needs. Sometimes one supplier
is more beneficial to the organization than multiple suppliers are.
Single sourcing, in which a buyer and seller work quite closely,
is particularly important when a firm needs frequent deliveries or
specialized products.
Copyright © 2016 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
p. 182
Multiple sourcing means buying a product from several different
suppliers. Under this system, suppliers are more likely to remain
price competitive.
p. 182
Sometimes supplier selection is based on reciprocity, which
means that a buyer and seller agree to be each other’s customers
by saying essentially, “I’ll buy from you, and you buy from me.”
The U.S. government frowns on these types of agreements and
often determines that the agreements are illegal, limiting free
competition.
p. 182
Outsourcing occurs when firms obtain outside vendors to
provide goods or services that might otherwise be supplied inhouse.
p. 182
Many companies find that it’s both cost-efficient and productive
to call on outsiders from around the world to solve problems their
own scientists can’t handle—we call this process crowdsourcing
– put simply, a way to harness “crowds” to “source” solutions to
business problems.
p. 182
Reverse marketing occurs when buyers try to find suppliers that
can produce specifically needed products and then attempt to
“sell” the idea to the suppliers. The seller aims to satisfy the
buying firm’s needs.
p. 183
p. 183
Discussion: The practice of buying business products based on
sealed competitive bids is popular among all types of business
buyers. What are the advantages and disadvantages of this
practice to buyers? What are the advantages and disadvantages to
sellers? Should companies always give the business to the lowest
bidder? Why or why not?
5.3.5 Step 5: Evaluate Post Purchase
An organizational buyer assesses whether the performance of the
product and the supplier is living up to expectations. The buyer
surveys the users to determine their satisfaction with the product
as well as with the installation, delivery, and service provided by
the supplier.
Activity: List the five steps of the business buying decision
process. Explain the activities that occur in each. Pick a product.
Explain what might happen as the business buyer moves through
this process.
5.4 B2B E-Commerce and social media
Business-to-business (B2B) e-commerce refers to the Internet
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
exchanges between two or more businesses or organizations. B2B
e-commerce includes exchanges of information, goods, services,
and payments.
p. 184
Using the Internet for e-commerce allows business marketers to
link directly to suppliers, factories, distributors, and their
customers, radically reducing the time necessary for order and
delivery of goods, tracking sales, and getting feedback from
customers.
5.5
Intranets and Extranets,
Many companies maintain intranets, which provide more secure
means of conducting business. An intranet is an internal corporate
computer network that uses Internet technology to link company
departments, employees, and databases. Intranets give access
only to authorized employees.
When a company allows certain suppliers, customers, and others
outside the organization to access its intranet, the system is
known as an extranet. A business customer who has been
authorized to use a supplier’s extranet can place orders online.
Extranets can be especially useful for companies that need to
have secure communications between the company and its
dealers, distributors, and/or franchisees.
Intranets and extranets are very cost efficient. They allow
business partners to collaborate on projects and to build
relationships.
p.184
5.6 The Dark Side of B2B E-Commerce
There are several security issues that impact B2B e-commerce.
When hackers break into company sites, they can destroy
company records and steal trade secrets. Both B2C and B2B ecommerce companies worry about authentication and ensuring
that transactions are secure. This means making sure that only
authorized individuals are allowed to access a site and place an
order. Maintaining security also requires firms to keep the
information transferred as part of a transaction, such as a credit
card number, from criminals’ hard drives.
They can give out unauthorized access to company computer
systems by being careless about keeping their passwords into the
system a secret.
p. 184
Malware is software designed specifically to damage or disrupt
computer systems.
Copyright © 2016 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
p. 184
A firewall is a combination of hardware and software that
ensures that only authorized individuals gain entry into a
computer system. The firewall monitors and controls all traffic
between the Internet and the intranet to restrict access.
p. 185
Encryption means scrambling a message so that only another
individual (or computer) that has the right “key” can unscramble
it.
p. 185
5.7 B2B and Social Media
There is hardly a B2B firm of any size today that does not
promote itself through social networking sites such as LinkedIn,
Twitter, and Facebook.
Certain industries (advertising and marketing, computers and
software, and the Internet) and job roles (marketing and
consulting) are also heavier users of social media for business
than other industries (health care, legal and retail) and job
responsibilities (accounting, finance, customer support and sales).
Among the social media sites, the one that has become most
associated with B2B networking is LinkedIn.
p. 186
Real People, Real Choices: Here’s My Choice…
Adam chose option 3. People, Real Choices
WEB RESOURCES
Pearson MyMarketingLab: www.mymktlab.com
Pearson Education, Inc. www.pearson.com
Search engines: Google www.google.com, Excite (www.excite.com), Yahoo!
(www.yahoo.com),
Travel websites: TripAdvisor www.tripadvisor.com, Expedia.com www.expedia.com
, and Hotel Chatter (www.hotelchatter.com)
Social network services: Facebook www.facebook.com,, Sermo www.sermo.com, and SellaBand
www.sellaband.com
Comparison shopping agents (or ShopBots): www.Shopzilla.com and www.NexTag.com
Personality’ assessment based on color preferences: www.colorquiz.com
VALS segmentation groups and online survey: www.strategicbusinessinsights.com/
Copyright © 2016 Pearson Education, Inc.
Chapter 6: Understanding Consumer and Business Markets
Examples of companies that sell to other companies:
Copeland Corporation: www.emersonclimate.com
Social media site for B2B networking: www.linkedin.com
American Red Cross (not-for-profit institutions): www.redcross.org
Resellers: Wal-Mart (www.walmart.com), Target (www.target.com)
Federal Business Opportunities (federal government information on business opportunities—
“The U.S. Government’s One-Stop Virtual Marketplace”): www.FBO.gov
GE Healthcare (sells a wide range of equipment to hospitals from surgical equipment to
molecular imaging machines): www.gehealthcare.com
AFLAC, American Family Life Assurance Company of Columbus (insurance company):
www.aflac.com
InnoCentive (a network of over 90,000 “solvers” whose member companies like Boeing,
DuPont, Procter & Gamble, and Eli Lilly invite to tackle problems they wrestle with internally):
www.innocentive.com
Copyright © 2016 Pearson Education, Inc.