Chapter 4: Business Buying Behavior

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Chapter 4: Business Buying Behavior

  1. 1. by Jeff Tanner and Mary Anne Raymondby Jeff Tanner and Mary Anne Raymond Principles of Marketing
  2. 2. Chapter 4Chapter 4 Business Buying BehaviorBusiness Buying Behavior ©2010 Flat World Knowledge, Inc.
  3. 3. ©2010 Flat World Knowledge, Inc. 3 1. Identify the ways in which business-to-business (B2B) markets differ from business-to-consumer (B2C) markets. 2. Explain why business buying is acutely affected by the behavior of consumers. Learning ObjectivesLearning Objectives
  4. 4. • Business-to-business (B2B) markets differ from business-to-consumer (B2C) markets. ©2010 Flat World Knowledge, Inc. 4 Business CustomersBusiness Customers
  5. 5. • B2B sellers watch general economic conditions to anticipate consumer buying patterns that can affect demand. • Derived demand—demand that is derived from a source other than the primary buyer of a product. • Fluctuating demand—a small change in demand by consumers can have a big effect throughout the chain of businesses that supply all the goods and services that produce it. • Joint demand—occurs when demand for one product increases the demand for another. • Companies try to influence their B2B sales by directly influencing consumers. ©2010 Flat World Knowledge, Inc. 5 Demand for B2B ProductsDemand for B2B Products
  6. 6. • B2B markets differ from B2C markets: -- more transactions in B2B markets -- larger transaction size in B2B -- there are fewer B2B customers • Derived demand is demand that comes from a secondary source. • Fluctuating demand is another characteristic of B2B markets. ©2010 Flat World Knowledge, Inc. 6 Key TakeawayKey Takeaway
  7. 7. Learning Objectives 1.Describe the major categories of business buyers. 2.Explain why finding decision makers in business markets is challenging for sellers. ©2010 Flat World Knowledge, Inc. 7 Types of B2B BuyersTypes of B2B Buyers
  8. 8. • Business buyers can be either nonprofit or for-profit businesses. • Four basic categories: ©2010 Flat World Knowledge, Inc. 8 B2B BuyersB2B Buyers
  9. 9. • Producers are companies that purchase goods and services that they transform into other products. • These businesses have to buy certain products to produce the goods and services they create. • Producers generally buy in large quantities. ©2010 Flat World Knowledge, Inc. 9 ProducersProducers
  10. 10. • Resellers are companies that sell goods and services produced by other firms without materially changing them. • Large wholesalers, brokers, and retailers are typical resellers. • Large resellers wield considerable power on producers as they provide customers and influence prices. ©2010 Flat World Knowledge, Inc. 10 ResellersResellers
  11. 11. • Business-to-government (B2G) markets --State/local governments buy huge amounts of products. --U.S. government is the world’s largest buyer of goods and services. --Each agency will have its own procurement policies. --Would-be sellers are often asked to submit sealed bids. --Contrary to popular belief, it’s not always the lowest bid that’s accepted. ©2010 Flat World Knowledge, Inc. 11 GovernmentsGovernments
  12. 12. ©2010 Flat World Knowledge, Inc. 12 InstitutionsInstitutions
  13. 13. ©2010 Flat World Knowledge, Inc. 13 Purchasing Decisions in Business MarketsPurchasing Decisions in Business Markets
  14. 14. • Business buyers can be either nonprofit or for-profit businesses. • Four basic categories of business buyers: -- producers -- resellers -- governments -- institutions • Institutional markets include nonprofit organizations. • Figuring out who exactly in B2B markets is responsible for what gets purchased and when often requires some detective work by marketing professionals and the salespeople they work with. ©2010 Flat World Knowledge, Inc. 14 Key TakeawayKey Takeaway
  15. 15. Learning Objectives 1. Explain what a buying center is. 2. Explain who the members of buying centers are and describe their roles. 3. Describe the duties of professional buyers. 4. Describe the personal and interpersonal dynamics that affect the decisions buying centers make. ©2010 Flat World Knowledge, Inc. 15 Buying CentersBuying Centers
  16. 16. • Buying centers are groups of people within organizations who make purchasing decisions. • Buyers—may have different titles -- agents -- purchasing managers -- procurement officers -- merchandisers (retailers) ©2010 Flat World Knowledge, Inc. 16 Buying CentersBuying Centers
  17. 17. The Duties of Professional Buyers • Considering the availability of products, the reliability of the products’ vendors, and the technical support they can provide • Studying a company’s sales records and inventory levels suppliers and obtaining bids from them • Negotiating prices, delivery dates, and payment terms for goods and services • Keeping abreast of changes in the supply and demand for goods and services their firms need • Staying informed of the latest trends so as to anticipate consumer buying patterns • Determining the media (TV, the Internet, newspapers, and so forth) in which advertisements will be placed • Tracking advertisements in newspapers and other media to check competitors’ sales activities ©2010 Flat World Knowledge, Inc. 17 Buyers’ ResponsibilitiesBuyers’ Responsibilities
  18. 18. ©2010 Flat World Knowledge, Inc. 18 Buying Centers Other Buying Center PlayersOther Buying Center Players
  19. 19. • The dynamics that surround B2B marketing don’t always lead to the best purchasing decisions. • Interpersonal factors among the people making the buying decisions often have an impact on the products chosen. • B2B marketers are aware of these dynamics and try to influence the outcome. • B2B marketing is very strategic. Selling firms gather information about their customers and use that information to their advantage. ©2010 Flat World Knowledge, Inc. 19 Interpersonal and Personal DynamicsInterpersonal and Personal Dynamics of B2B Marketingof B2B Marketing
  20. 20. • Buying centers are groups of people within organizations who make purchasing decisions. • The buying centers of large organizations employ professional buyers. • Other people who provide input are -- users -- influencers -- gatekeepers -- deciders • Interpersonal dynamics between the people in a buying center may affect the choices the center makes. • Personal factors, such as how likeable is the seller, may also contribute. ©2010 Flat World Knowledge, Inc. 20 Key TakeawayKey Takeaway
  21. 21. Learning Objectives 1. Outline the stages in the B2B buying process. 2. Explain the scorecard evaluation of proposals. 3. Describe the different types of B2B buying situations and how they affect sellers. ©2010 Flat World Knowledge, Inc. 21 Stages in the B2B Buying ProcessStages in the B2B Buying Process
  22. 22. ©2010 Flat World Knowledge, Inc. 22 Stages in the B2B Buying ProcessStages in the B2B Buying Process
  23. 23. ©2010 Flat World Knowledge, Inc. 23 Stages in the B2B Buying Process, cont’dStages in the B2B Buying Process, cont’d
  24. 24. ©2010 Flat World Knowledge, Inc. 24 Types of B2B Buying SituationsTypes of B2B Buying Situations
  25. 25. • Stages in the B2B buying process -- need recognition -- need is described and quantified -- search for qualified suppliers -- supplier sent a request for proposal -- submitted proposals are evaluated -- supplier(s) selected and ordered routines -- postpurchase evaluation is conducted ©2010 Flat World Knowledge, Inc. 25 Key TakeawayKey Takeaway
  26. 26. Learning Objectives 1. Describe the reasons why firms in the same industries are often located in the same geographic areas. 2. Explain the effect e-commerce is having on the firms, the companies they do business with, where they are located, and the prices they charge. 3. Outline the different types of e-commerce sites and what each type of site is used for. ©2010 Flat World Knowledge, Inc. 26 International B2B Markets and E-CommerceInternational B2B Markets and E-Commerce
  27. 27. • B2B markets in the same industry tend to cluster in the same geographic areas. • Clustering occurs as the resources that these firms need are located in some areas but not others. • Clusters also occur as sellers want to be close to their buyers. • These clusters occur both domestically and internationally. ©2010 Flat World Knowledge, Inc. 27 B2B MarketsB2B Markets
  28. 28. • E-commerce, such as over the Internet, has made locating near buyers less important. • B2B e-commerce has been slower to take hold than B2C e-commerce. • Companies have developed e-commerce systems that allow their customers to do many things for themselves. • B2B over intranets and extranets enables JIT. ©2010 Flat World Knowledge, Inc. 28 B2B and E-CommerceB2B and E-Commerce
  29. 29. • B2B exchanges—e-commerce sites where buyers and sellers find and do business with one another. • B2B auctions—Web-based auctions that occur between businesses. • Reverse auctions—occur when buyer and seller roles are reversed. • Some companies conduct their own auctions on their Web sites. ©2010 Flat World Knowledge, Inc. 29 B2B Web SitesB2B Web Sites
  30. 30. • E-commerce empowers both consumers and businesses to shop for price. • As a result many products have reached commodity status. • Some companies refuse to sell their products directly online or list their prices on the Web site to avoid price wars. ©2010 Flat World Knowledge, Inc. 30 Pricing in E-Commerce MarketsPricing in E-Commerce Markets
  31. 31. • Firms in the same industry tend to cluster in the same geographic areas. • Clustering occurs because sellers want to be close to their buyers. • E-commerce has made locating near buyers less important. • E-commerce has also led to more competition and made it difficult to raise their prices. • B2B e-commerce was slower to take hold than B2C e-commerce. • Companies have since developed sophisticated e-commerce systems, including sell-side and buy-side Web sites, exchanges, and B2B auctions. ©2010 Flat World Knowledge, Inc. 31 Key TakeawayKey Takeaway

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