Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha logo copy.tif SUMMARY by Chapter 7 Analyzing Business Markets and Buyer Behavior Business buyers purchase goods and services to achieve specific goals, such as making money, reducing operating costs, and satisfying social or legal obligations. Therefore to provide superior customer value to the business buyers this chapter familiarizes you with the underlying dynamics and process of business buying. Blanket contract establishes a long-term relationship in which the supplier promises toOrganizatio- resupply the buyer as needed at agreed-upon prices over a specified period. Because the seller holds the stock, blanket contracts are sometimes called stockless purchasenal buying plans. Product value analysis is an approach to cost reduction in which components areis the decision- carefully studied to determine if they can be redesigned or standardized or made bymaking process by cheaper methods of production.whichorganizationsestablish the need The Business Market versus the Consumerfor purchased Marketproducts and • Fewer buyers: Business marketers normally deal with far fewer buyers than doservices and consumer marketers. • Larger buyers: Buyers for a few large firms do most of the purchasing in manyidentify, evaluate, industries.and choose among • Close supplier customer relationship: Smaller customer base and importance ofalternative brands larger customers, suppliers have to customize offerings to meet the needs ofand suppliers. individual customers. • Geographically concentrated buyers • Derived demand: Demand for business goods is derived from demand for consumer goods, so business marketers must monitor the buying patterns of ultimate consumers. • Inelastic demand: Not much affected by price changes as producers cannot make quick production changes. •
Chapter 7 - Analyzing Business Markets and Buyer Behavior • Fluctuating demand: Demand for business products is more volatile than consumerThree types of products. • Professional purchasing: Organizational purchasing policies and constraints are followedBusiness • Multiple buying influences: More people typically influence buying decisions • Multiple sales calls: Multiple sales calls to win most business orders, and the sales cycleBuying can take years. • Direct purchasing: Business buyers often buy directly from manufacturers rather thanSituations: intermediaries • Reciprocity: Business buyers often select suppliers who also buy from them. • Leasing: Many industrial buyers lease rather than buy heavy equipment to conserveStraight rebuy: capital, get the latest products, receive better service, and gain tax advantages.situation in whichthe purchasing The Buying Centerdepartment (Decision-making unit of a buying organization)reorders on a Seven roles in the purchase decision process:routine basis (e.g., • Initiators: People who request that something be purchasedoffice supplies, bulk • Users: use the product or service; often, users initiate the buying proposal and help define product requirements.chemicals). • Influencers: People who influence the buying decision, including technical personnel. • Deciders: Those who decide on product requirements or on suppliers.Modified rebuy: • Approvers: People who authorize the proposed actions of deciders or buyers.situation in which • Buyers: People who have formal authority to select the supplier and arrange thethe buyer wants to purchasemodify product • Gatekeepers: People who have the power to prevent sellers or information from reaching members of the buying centerspecifications,prices, deliveryrequirements, or Major Influences on Business Buying Environmental Factorsother terms. Attention to numerous economic factors, including interest rates and levels of production, investment, and consumer spending. Business buyers also monitor technological, political-New task: regulatory, and competitive developments.situation in which a Organizational Factorspurchaser buys a Business marketers need to be aware of the following organizational trends in purchasing:product or service • Purchasing department upgrading: Strategically positioned and highlyfor the first time • Cross-functional roles: strategic, technical, team-oriented, and involving more(e.g., office responsibilitybuilding, new • Centralized purchasing: recentralized their purchasing, to gain more purchasing clout and savings.security system). • Decentralized purchasing of small-ticket items • Long-term contracts: Buyers are increasingly initiating long-term contracts • Internet purchasing: Low transaction and personnel costs reduce time between order and delivery, purchasing companies moving towards internet purchasing. • Purchasing-performance evaluation & incentive systems and buyers’ professional
Chapter 7 - Analyzing Business Markets and Buyer Behavior • Lean production: incorporates just-in-time (JIT) production, stricter quality control, development frequent and reliable supply delivery, suppliers locating closer toMajor customers, computerized purchasing, and stable production schedules.Influences on 8 stages of PURCHASING PROCESSBusiness Buying: Stage 1: Problem Recognition Someone in the company recognizes a problem or need that can be met by acquiring a good or service. Internally, developing a new product, need for new equipment and materials orInterpersonal Factors to obtain lower prices or better quality. Externally, occur when a buyer gets new ideas at aBuying centers usually trade show, sees a supplier’s ad, or is contacted by a sales representative offering a betterinclude several product. Business marketers can stimulate problem recognition by direct mail,participants with telemarketing, effective Internet communications, and calling on prospects.differing interests, Stage 2: General Need Description The buyer has to determine the needed item’s general characteristics and the requiredauthority, status, quantity. In this stage, business marketers can assist buyers by describing how their productsempathy, and would meet such needs.persuasiveness. Stage 3: Product Specification Company assigns a product value analysis (PVA) to engineering team. By getting in early and influencing buyer specifications, a supplier can significantly increase its chances of beingIndividual Factors chosen.Each buyer carries Stage 4: Supplier Searchpersonal motivations, The supplier should get listed in online catalogs or services develop communications to reachperceptions, and buyers, and build a good reputation in the marketplace. After evaluating each company, thepreferences, as buyer will end up with a short list of qualified suppliers Stage 5: Proposal Solicitationinfluenced by the The buyer invites qualified suppliers to submit proposals. When the item is complex orbuyer’s age, income, expensive, the buyer will require a detailed written proposal from each qualified supplier.education, job position, After evaluating the proposals, the buyer will invite a few suppliers to make formalpersonality, attitudes presentations.toward risk, and Stage 6: Supplier Selection The buying center specifies desired supplier attributes (such as product reliability and serviceculture. reliability) and indicate their relative. A blanket contract may be established. The buyer’s computer automatically sends an order to the seller when stock is needed, and the supplierCultural Factors arranges delivery and billing according to the blanket contract.Marketers carefully Stage 7: Order-Routine Specification The buyer negotiates the final order, listing the technical specifications, the quantity needed,study the culture and the delivery schedule, and so on. In the case of MRO items, buyers are moving towardcustoms of each region blanket contracts rather than periodic purchase orders.to better understand Stage 8: Performance Reviewthe cultural factors that The buyer periodically reviews the performance of the chosen supplier(s). Three methodscan affect buyers and are used. The buyer may contact the end users and ask for their evaluations. Or the buyer may rate the supplier on several criteria using a weighted score method. Or the buyer mightthe buying aggregate the cost of poor supplier performance to come up with adjusted costs oforganization. purchase, including price.