Marketing 101... Business Market and stuff... reference at the end. lessons in marketing! for educational purposes only...

1. Chapter 8
Analyzing Business
Markets and Business
Buying Behavior

2. Organizational Buying
• This is the decision-making process by which formal
organizations establish the need for purchased products and
services and identify, evaluate, and choose among alternative
brands and suppliers.
• For example, rather than manufacturing the parts themselves,
computer manufacturers often buy computer parts and put
them together to create a finished product.
• (Lenovo Product with Intel Processor)

3. The Business MarketVersusThe Consumer
Market
•For use in the operation of a
business or organization.
•To manufacture other
products
•For resale to others
Organizational
Product
For personal or
household use
Consumer
Product

4. Business Market
• consists of all the organizations that acquire goods and services
used in the production of other products or services that are sold,
rented, or supplied to others.
• Example:
• Mattel buys everything from plastic to paints to produce toys.

5. Fewer Buyers, larger Buyers
Fewer buyers: Business
marketers normally deal with
far fewer buyers than do
consumer marketers.
Larger buyers: Buyers for a few
large firms do most of the
purchasing in many industries.

6. Close Supplier-customer Relationship
• Business Market relationship is often are more complex
than consumer relationships, and they require superior
communication among the organizations’ personnel.
• Basic aim here is long term relationship.
• primary goal of business market relationship is to provide
advantages( lower price, quicker delivery, better quality
and reliability, customized product features, more
favorable financing terms and so on).

7. Geographically
Concentrated Buyers
• Certain industries locate in particular areas to be close to
customers.
• concentrated buyers Geographical concentration of
producers helps to reduce selling cost.
• Business marketers need to closely monitor regional
shifts of certain industries. Selling costs are reduced with
the geographical concentration of the producers.

8. Derived Demand
• Derived Demand refers to the linkage between demand for a company’s
output and its purchases of resources such as machinery, components,
suppliers and raw materials.
• Ex.The demand for computer microprocessor chips derived from the
demand for personal computer.

9. Inelastic Demand
• Demand throughout an industry will not change significantly due
to the price change.
• Example:
• If the price of lumber drops, a construction firm will not
necessarily buy more lumber from its supplier unless another
factor – such as low mortgage inteterest rates – causes more
consumers to purchase new homes.

10. Fluctuating Demand
Derived demand creates volatility in business market demand. This happens
when the demand for business goods and services tends to be more volatile
than the demand for consumer goods and services.
• Example: Assume the sales volume for a gasoline retailer is increasing at an
annual rate of 5%. Now supposed the demand for this gasoline brand slows
to a 3% annual increase.This slow down might persuade the firm to keep its
current gasoline pumps and replace them only market conditions improve.

11. Professional Purchasing
• In the business market, the purchases are often made by trained purchasing
officials. Purchasing policies, constraints, requirements etc are to be
followed.
• Some companies designate centralized purchasing departments to serve
the entire firm, and others allow each unit to handle its own buying. A
supplier may deal with one purchasing agent or several decision makers at
various levels. Each of these structures results in different buying behavior.
Example :
request for quotation, proposals, and purchase contacts.

12. Several Buying Influences
• More people typically influence business buying decisions.
Buying committees are common in the purchase of major
goods; marketers have to send well-trained sales reps and often
sales teams to deal with these well-trained buyers.
• Example: Metal supplier Phelps Dodge uses an “account
management approach” to reach all the key people who
influence business buying decisions in customer organizations.

13. Multiple Sales Calls
•Large sale cycles (often measured in years) for large
projects. Average industrial sale takes four sales calls to
close.
•In case of capital equipment sale for large projects,it may
take many attempts to fund a project, and the sales
cycle-between quoting a job and delivering a product.

14. Directed Purchasing
•Business buyers often buy directly from the
manufacturers rather than through
intermediaries.
•Example: mainframes, aircrafts etc.

15. Reciprocity
•Business buyers often select suppliers who also buy from
them.
•A practice of Buying from suppliers who are also
customers – is a controversial practice in a number of
procurement situations.
•An office manufacturer may favor a particular supplier of
component parts if the supplier has recently made a
major purchase of the manufacturer’s products.

16. Leasing
• Leasing is a process by which a firm can obtain the use of certain
fixed assets for which it must pay a series of contractual,
periodic, or tax deductible payments.
• leasing serves as an alternative method for customers looking to
use high-priced products and services .
• For example, customers often lease software products.The
process works similar to leasing a car, where customers pay a fee
over time to use the technology without owning the equipment.
At the end of the lease, the hardware is returned or purchased at
a fair market price .

17. Buying Situations
•Buying behavior also involves the degree of effort the
purchase decision demands and the levels within the
organization where it is made.
•1) straight rebuying 2) modified rebuying 3) new -task
buying

18. Systems Buying and Selling
Systems Buying
• A single provider provides the total package for the buyer’s
needs
• practice originated with government purchases of major
weapons and communications systems.
• May involve turnkey solutions
Systems Selling
• Manufacturers sell entire systems
• Supplier provides all MRO items (maintenance, repair,
operating)

19. Turnkey Solution
•is a type of project that is constructed so that it could be
sold to any buyer as a completed product.This is
contrasted with build to order, where the constructor
builds an item to the buyer's exact specifications, or
when an incomplete product is sold with the assumption
that the buyer would complete it.

20. Participants in the Business Buying Process
(The Buying Center)
1.Initiators
2.Users
3.Influencers
4.Deciders
5.Approvers
6.Buyers
7.Gatekeepers

21. The Buying Center
•A company’s buying center encompasses everyone
involved in any aspect of its buying activity.
•Buying center participants in any purchase seek to satisfy
personal needs, such as participation or status, as well as
organizational needs.A buying center is not part of a
firm’s formal organizational structure. It is an informal
group whose composition and size vary among purchase
situations and firms.

22. 7 Members of the
Buying Centre
• Those who request that
something be purchased.They
may be users of others in the
organization
• These people who “initiate” or
start the buying process are
called initiators.
Initiators

23. 7 Members of the Buying
Centre
•People in the
organization who
actually use the product
or service.
Users

24. 7 Members of the
Buying Centre
•affect the buying
decision, usually
by helping define
the specifications
for what is bought.
Influencers

25. 7 Members of the
Buying Centre
•have the formal
authority and
responsibility to
select the supplier
and negotiate the
terms of the
contract.
Decider

26. 7 Members of the
Buying Centre
•People who authorize
the proposed actions of
deciders or buyers are
approvers.
•They could also be
personnel from top
management or
finance department or
the users.Approvers

27. 7 Members of the Buying Centre
•Buyers select suppliers and
negotiate the terms of purchase.
•They are people who have formal
authority to select the supplier and
arrange the purchase terms.They
play a very important role in
selecting vendors and negotiating
and sometimes help to shape the
product specifications.
Buyers

28. 7 Members of the Buying
Centre
•A gatekeeper is like a filter of
information. He is the one the
marketer has to pass through
before he reaches the decision
makers.
•control the flow of
information to other
members of the buying
center.
Gatekeepers

29. Figure 8-1:Major influences on industrial
buying behavior
Environmental
Level of demand
•Economic outlook
•Interest rate
•Rate of technological
change
•Political and
regulatory
developments
•Competitive
developments
•Social responsibility
concerns
Organizational
•Objectives
•Policies
•Procedures
•Organizational
structures
systems
Interpersonal
•Interest
•Authority
•Status
•Empathy
•Persuasive-
ness
Individual
Age
Income
Education
Job position
Personality
Risk attitudes
culture
Business
buyer

30. Lean Production
• Enables the company to produce a more high-quality product at lower cost,
in less time, using less labor. Lean production incorporates just-in-time (JIT)
production, stricter quality control, frequent and reliable supply delivery,
suppliers locating closer to customers, computerized purchasing, stable
production schedules made available to suppliers, and single sourcing with
early supplier involvement.

31. Just InTime (JIT)
An inventory strategy companies employ to increase
efficiency and decrease waste by receiving goods only as
they are needed in the production process, thereby
reducing inventory costs.

32. Three company purchasing orientations
(Buying Orientation)
the purchaser’s focus is short term and tactical
(Procurement orientation)
buyers simultaneously seek quality improvements and
cost reductions
(Supply Chain ManagementOrientation)
purchasing’s role is further broadened to become a more
strategic, value-adding operation

33. The Purchasing/
Procurement Process
Problem
Recognition
General need
description
Product
Specification
Supplier
Search
Proposal
solicitation
Supplier
Selection
Order Routine
Specification
Performance
Review

34. Institutional And Government Markets
•Institutional Market
•Larger buyers (Consists of schools, hospitals,
nursing homes, prisons, and other institutions
that must provide goods and services to people
in their care.)

35. Institutional And Government Markets
Government Market
•government market is a market where the consumers
are federal, state, and local governments.
Governments purchase both goods and services from
the private sector. Governments buy the same types
of products and services as private sector consumers,
plus some more exotic products such as aircraft
carriers, fighter jets, tanks, spy satellites, and nuclear
weapons

36. Reference
• Marketing Management by Philip
Kotler (11th Edition)
• Marketing Management: A South
Asian Perspective by Kotler, Keller
Koshy, Jha (13th Edition)
• Marketing Management by Kotler,
Keller (14th Edition)
• Marketing Management by Philip
Kotler (Millenium Edition)
• Principles of Contemporary
Marketing by David L. Kurtz (15th
Edition)
• www.slidshare.com
• www.investopedia.com
• www.wikipedia.com
• www.cunsomerhandbook.com
• www.learntechnicaltrading.com