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Ch7 Kotler and Keller presentation
- 1. ANALYZING BUSINESS MARKETS Chapter 7, Kotler & Keller
- 3. I) Business versus Consumer Market Professional purchasing Mult. buying influences, sales Close relationship Fewer, large buyers
- 4. I) Business versus Consumer Market Demand Direct purchasing Concentrated buyers
- 5. II) Buying Situation Marketer’s greatest opportunity and challenge STRAIGHT MODIFIED Supplier Purchaser New Task
- 6. II) Buying Situation SYSTEMS BUYING SYSTEMS SELLING Key industrial marketing strategy for large-scale projects Primary Contractor Second-tier Contractor
- 7. II) Buying Situation Building cement factory SYSTEMS SELLING TRUE SYSTEMS SELLING= SYSTEMS SELLING +
- 8. III) Business-to-business buying 1. Buying Center Initiators Users Influencers Gatekeepers Purchasing Manager Deciders Approvers Buyers
- 9. III) Business-to-business buying 2. Buying Center Influences 3. Buying Center Targeting Small seller Large seller OrganisationEconomic, strategic Individual Achievement, reward Corporate brand
- 10. IV) Purchasing/Procurement Decision Making Staged buying-decision : Buy-phases (8) (1) Problem recognition (2-3) Need and product specification Multiple Marketers Product spec. Single
- 11. IV) Purchasing/Procurement Decision Making E-procurement Direct links Alliances RFPs (4) Supplier Search Advantageous
- 12. IV) Purchasing/Procurement Decision Making (6) Supplier selection Beauty Contest (5) Proposal solicitation Price Reputation Product reliability Service reliability Supplier flexibility Formal Simple products Next: Price pressure, # of suppliers
- 13. IV) Purchasing/Procurement Decision Making (8) Performance review (7) Order-routine specification Evaluation Rating Performance vs. price Final order Tech. spec. Qty needed Delivery Return policy Warranties
- 14. V) Customer Relationships Create more value, establish trust. Advertising agencies and clients: Market growth Information asymmetry Barriers to entry Dependence asymmetry Economies of scale
- 15. Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism. V) Customer Relationships
- 16. V) Customer Relationships Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism.
- 17. Institutional markets VI) Institutional, Govt. Markets Characterized by: Low budgets and captive clienteles
- 18. Government markets VI) Institutional, Govt. Markets Suppliers bid, contracts go to lowest bids Spending subject to public review Can be nationalistic Cumbersome: Comprehensive bid can be 500-700 pages
- 19. Summary Think BUY Decide Organizational buying Decision making process Business market Few large buyers Buying center Decision making unit
- 20. Summary Think BUY Decide Buying process Eight buyphases Business marketers Strong bonds, values Inst., Govt markets Customer, Supplier
Editor's Notes
- Good morning, I am here to give you a quick overview on what business markets are about. Major industries making up this market are agriculture, forestry, fisheries, mining, manufacturing, construction, transportation, communication, utilities, finance, insurance, services…
- Business markets are a lot larger than consumer marketsSuppliers are expected to customize offerings to business customer needs due to smaller customer base and power of large customers Purchasing is done by trained agents.Multiple buying influences –technical experts and senior managementMult. Sales calls as well
- Demand is derived from demand for consumer goods; they can’t simulate demand but fight to maintain share of demandDemand is not affected by price changes, is inelastic in the short run because producers cannot make quick changes to production methodsDemand is more volatile. A given % increase in consumer demand can lead to a larger increase in business demand50% of US business buyers are in 7 states: CA, NY, PA, IL, OH, NJ, MIDirect purchasing from manufactures especially for complex items like mainframes or aircrafts
- Straight: Purchasing dept reorders supplies on a routine basis and chooses from suppliers on an approved list Out-suppliers may try to come up with something new or exploit dissatisfaction to get a small order to begin withModified: Addtl. Participants on both sides due to modifications in ordersNew task. First time order. Greater the cost or risk more the number of people involved. Over time they become straight or modifiedMarketers like this: mass media can be important at the initial awareness stage, salespeople at the interest stage and technical sources during evaluations.
- Businesses prefer total soln to a problem from one sellerGovt. purchase of weapons and communication systemsBids from primary contractors and then bidding out and assembling subcomponents for to second-tier contractorse.g. Shell Oil manages inventory of of oil for many business customers and knows when to replenish.Usefull due to steady demand and less paperwork.
- Indonesian govt. bids to set a cement factory near Jakarta. U.S company proposed to do above on l.h.s. Japanese firm proposed all that + hiring and training of workers, using cement t build roads and new bldgs in Jakarta. They took the broad view and won the contract.
- These form the decision making unitGatekeepers ( purchasers, receptionists) can prevent salespersons from contractions users or deciders
- Buying center has several participants with differing interests, authority, status and diff. decision criteria.Motivations are different depending on the group.Industrial buying decisions are rational and emotional and serve both organisations needs and individuals needsImportant to have a global brand name or align independent brands under a global brand architecture , strengthening the corporate band
- Organization and Administration: Strategic, technical, team-oriented, more responsibility(1) When company realises a problem or need can be met by getting a good or service. Stimuli can be internal or exteral(2) For std items it can be simple . For complex items many are involved. For technical specifications a products value analysis approach is used to reduce costs and meet standards.
- Online buying offers great advantages: reduced transaction costs, delivery time, forges direct relationships.Eprocurement allows for aggregated purchasing, larger centrally negotiated volume discounts smaller purchasing staff and less buying of substandard goods from outside of approved list of suppliers.Eprocurement ca be thru direct links to major suppliers via direct extranet and buying alliances or buying sites for companies where they post RFPs etc.
- Negotiating for better prices is importantFor price pressure solution selling is useful: Soln to enhance customer revenues, decrease customer risks and reduce customer costs
- After selecting supplier, final order is negotiated…
- Corporate credibility depends on expertise, trustworthiness and likabilityMarket growth for mass-production techniques benefits from mass-media advertisingInformation asymmetry == partnership would generate more profits than if the partner was to invade another firms area, ad agencies have knowledge that clients would have difficulty obtainingBarriers to entry: difficult to enter businessDependence asymmetry: One partner can influence or control the others conduct. Advertising agencies control media accessEconomies of scale : provide same market information to many clients
- These relationships have risks and opportunities
- Organizational buying = Decision making processEstablish need, then identify/evaluate/choose supplierBusiness market = Few large buyersDemand from business market is derived from consumer market and fluctuates with business cycleBuying center = Decision making unitCharacterized by envtl., organizational, interpersonal and individual factors
- Buying process => 8 buyphaseProblem recognition, need description, product specification, supplier search, solicitation, selection, order-routine specification, performance reviewInstitutional markets provide goods/services to people, clientele have no control over service.Govt. organizations = require a lot of paperwork, cost conscious due to public scrutiny Suppliers need