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Marketing Management
Chapter 6: Analyzing Business
Market
Reported By: Eulisan J. Florague
Chapter questions
 What is the business market, and how does it differ
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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?
Content
I. What is organizational
buying?
II. Participants in the
business buying process
III. Managing business-tobusiness customer
relationships
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.
Characteristics of Business Markets
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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
How does it differ from the
consumer market ?
Consumer
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 Purchases are made for others to use
- image is important for its own sake - image is important where it adds
value to customers
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 The purchase event is conducted
to tender and negotiation
professionally and includes
tender and negotiation.
The exchange is one off
transaction. There is no longtime view (financial services
differ)
The exchange is often one of
strategic intent. There is the
potential for long term value
Buying situations
• Reorders supplies (office supplies, bulk
chemicals) at a routine basis and chooses from
Straight
list of suppliers.
rebuy
• The buyer want to modified products specs,
Modified prices, delivery requirements from previous
orders.
rebuy
• Purchaser buys a products for the first time
New task
II. Participants in the business buying
process
The buying center
1. Initiators
• 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
6. Buyers
• Those who have authority to select supplier &
arrange purchase terms
7. Gatekeepers
•• Those
tho who prevent information from reaching
members of buying center
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?
Stages in Buying Process
Problem
recognition
Supplier
selection
Order routine
specification
General need
description
Proposal
solicitation
Performance
review
Product
specification
Supplier
search
The buygrid framework
New Task
Problem recognition
General need description
Modified
Rebuy
Maybe
Maybe
Product specification
Supplier search
Proposal solicitation
Supplier selection
Order-routine specification
Performance review
Maybe
Maybe
Maybe
Maybe
Straight Buy
Searching for suppliers
Catalog sites
Vertical markets
Pure play auction sites
Spot markets
Private exchanges
Barter markets
Buying alliances
• Electronic catalogs
• Ordering raw materials from specialized
websites
• Online marketplaces (Ebay, Amazon)
• On spot electronic markets, prices change
by the minute
• Private exchange to link groups of
suppliers over the web
• Participants offer to trade goods or
services
• Companies buying the same goods join
together to form purchasing consortia
Overcoming Price Pressures
 Limit quantity purchased
 Allow no refunds
 Make no adjustments
 Provide no services
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
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:
1. The buyer may contact the end users and ask for
their evaluations
2. The buyer may rate the supplier on several criteria
using a weighted score method
3. The buyer might aggregate the cost of poor
performance to come up with adjusted costs of
purchase including price
III. Managing Business- to- Business
Customer Relationships
The Benefits of Vertical
Coordination
• Create more value for both buying partners and sellers
partners
Establishing Corporate Trust and
Credibility
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
Dependence asymmetry
existed such that one
partner was more able to
control or influence the
other’s conduct
At least one partner had
high barriers to entry that
would prevent the other
partner from entering the
business
One partner benefited
from economies of scale
related to the relationship
Factors of buyer-supplier
relationships
Availability
of
alternatives
Importance
of supply
Complexity
of supply
Supply
market
dynamism
Categories of Buyer-Supplier
Relationships
Basic buying
and selling
Cooperative
systems
Bare bones
Collaborative
Contractual
transaction
Mutually
adaptive
Customer
supply
Customer is
king
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
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
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
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.