Marketing chapter 6
Marketing for E&BE (EBP033A05)
Rijksuniversiteit Groningen
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Marketing chapter 6
Business buyer behaviour refers to the buying behaviour of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. It also includes the behaviour of retailing and wholesaling firms that acquire goods to resell or rent to others at a profit. In the business buying process, business buyers determine which products and services their organizations need to purchase and then find, evaluate, and choose among alternative suppliers and brands. Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behaviour.
Business markets Business markets differ in many ways from consumer markets. The main differences are in market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.
Market structure and demand The business marketer normally deals with far fewer but far larger buyers than the consumer market does. Further, many business markets have inelastic and more fluctuating demand. The total demand for many business products is not much affected by price changes, especially in the short run. Finally, business demand is derived demand – it ultimately derives from the demand for consumer goods. Therefore, B-to-B marketers sometimes promote their products directly to final consumers to increase business demand.
Nature of the buying unit Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Often, business buying is done by trained purchasing agents who spend their working lives learning how to buy better.
Types of decisions and the decision process Business buyers usually face more complex buying decisions than do consumer buyers. Business purchases often involve large sums of money, complex technical and economic considerations, and interactions among people at many levels of the buyer’s organization. The business buying process also tend to be longer and more formalized. Finally, in the business buying process, the buyer and seller are often much more dependent on each other.
In recent years, relationships between most customers and suppliers have been changing from downright adversarial to close and chummy. In fact, many customer companies are now practicing supplier development, systematically developing networks of supplier-partners to ensure a dependable supply of the products and materials that they use in making their own products and reselling to others.
Business buyer behaviour
Within the organization, buying activity consists of two major parts: the buying center, composed of all the people involved in the buying decision, and the buying decision process. The model shows that the buying center end the buying decision process are influenced by internal organization, interpersonal, and individual factors as well as external environmental factors.
Types of buying situations There are three major types of buying situations. - In a straight rebuy, the buyer reorders something without any modifications. It is usually handled on a routine basis by the purchasing department. To keep the business, ‘in’ suppliers try to maintain customer engagement and product and service quality. ‘Out’ suppliers try to find new ways to add value or exploit dissatisfaction so that the buyer will consider them. - In a modified rebuy, the buyer wants to modify product specifications, prices, terms, or suppliers. The ‘in’ suppliers may become nervous and feel pressured to put their best foot forward to protect an account. ‘Out’ suppliers may see the modified rebuy situation as an opportunity to make a better offer and gain new business. - A company buying a product or service for the first time faces a new task situation. In such cases, the greater the cost or risk, the larger the number of decision participants and the greater the company’s efforts to collect information. The new task situation is the marketer’s greatest opportunity and challenge. The marketer does not only tries to reach as many key buying influences as possible, but also provides help and information. The buyer makes the fewest decisions in the straight rebuy and the most in the new task decision.
Many business buyer prefer to buy a complete solution to a problem from a single seller rather than buying separate products and services from several suppliers and putting them together. The sale often goes to the firm that engages business customers deeply and provides the most complete system for meeting a customer’s needs and solving its problems. Such system selling (or solution selling) is often a key business marketing strategy for winning and holding accounts.
Participants in the business process The decision-making unit of a buying organization is called its buying center. It consists of all the individuals and units that play a role in the business purchase decision-making process. This group includes the actual users of the product or service, those who make the buying decision, those who influence the buying decision, those who do the actual buying, and those who control buying information. The buying center includes all members of the organization who play any of five roles in the purchase decision process. 1) Users are members of the organization who will use the product or service. In many cases, users initiate the buying proposal and help define product specification.
Business buyer decision process
Problem recognition: The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a specific product or service. Problem recognition can result from internal or external stimuli. Internally, the company may decide to launch a new product that requires new production equipment and materials. Externally, the buyer may get some offering for a better product or lower price.
General need description Having recognized a need, the buyer next prepares a general need description that describes the characteristics and quantity of the needed item. The team may want to rank the importance of reliability, durability, price, and other attributes desired in the item (especially for complex items).
Product specification The buying organization next develops the item’s technical product specifications, often with the help of a value analysis engineering team. Product value analysis is an approach to cost reduction in which components are studies carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.
Supplier search The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of qualified suppliers. The newer the buying task and the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers.
Proposal solicitation In the proposal solicitation stage of the business buying process., the buyer invites qualified suppliers to submit proposals. In response, some suppliers will refer the buyer to their website or promotional materials to send a salesperson a call on the prospect. Business marketers must be skilled in researching, writing, and presenting proposals in response to buyer proposal solicitations.
Supplier selection The members of the buying center now review the proposals and select a supplier or suppliers. During supplier selection, the buying center often will draw up a list of the desired supplier attributes and their relative importance. Such attributes include product and service quality,
reputation, on-time delivery, ethical corporate behaviour, honest communication, and competitive prices. - Order-routine specification The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or suppliers and lists items such as technical specifications, quantity needed, expected delivery time. In the case of maintenance, repair, and operating items, buyers may use blanket contracts rather than periodic purchase orders. A blanker contract creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period. Many large buyers now practice vendor-managed inventory, in which they turn over ordering and inventory responsibilities to their suppliers.
- Performance review In this stage, the buyer reviews supplier performance. The buyer may contact users and ask them to rate their satisfaction. The performance review may lead the buyer to continue, modify, or drop the arrangement.
E-procurement and online purchasing Advances in information technology have dramatically affected the face of the B-to-B buying process. Online purchasing, often called e-procurement, has grown rapidly in recent years. Companies can do e-procurement in any of several ways. They van conduct reverse auctions, in which they put their purchasing requests online and invite suppliers to bid for the business. Or they can engage in online trading exchanges, through which companies work collectively to facilitate the trading process. Companies can also conduct e-procurement by setting up their own company buying sites. Or companies can create extranet links with key suppliers.
B-to-B e-procurement yields many benefits: - It shaves transaction costs and results in more efficient purchasing for both buyers and suppliers - E-procurement reduces the time between order and delivery - Online-powered purchasing program eliminates the paperwork associated with traditional requisition and ordering procedures and helps an organization keep better track of all purchases - E-procurement frees purchasing people from a lot of drudgery and paperwork
Business-to-business digital and social media marketing B-to-B digital and social media marketing is using digital and social media marketing approaches to engage business customers and manage customer relationships anywhere, anytime. Digital and social media marketing have rapidly become the new space for engaging business customers. B-to-B marketers know that they are not really targeting business, they are targeting individuals in those businesses who affect buying decisions. Digital and social media marketing gives both sellers and buyer more control of and access to important information. B-to-B marketing has always been social network marketing, but today’s digital environment offers an exciting array of new networking tools and applications.
Institutional and government markets The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care. Many institutional markets are characterized by low budgets and captive patrons.
Marketing chapter 6
Vak: Marketing for E&BE (EBP033A05)
Universiteit: Rijksuniversiteit Groningen
