Last week on Marketing 05

• The model of buyer behavior in consumer

market
– The Buyer’s Black Box: buyer’s characteristics and
buyer’s decision process
• Types of buying decision behavior
• Five steps of buyer decision process

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 Marketing 06
Business Markets and Business Buyer Behavior
Learning objectives
• Define the business market and explain how business
markets differ from consumer markets.
• Identify the major factors that influence business buyer
behavior.
• List and define the steps in the business buying
decision process.
• Compare the institutional and government markets.

Kotler and Armstrong (2016)

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 Business Markets and Buyer Behavior
Business buyer behavior refers to the buying behavior of the
organizations that buy goods and services for use in the
production of other products and services that are sold, rented,
or supplied to others.
The business buying process is the process where business
buyers determine which products and services are needed to
purchase, and then find, evaluate, and choose among
alternative brands.
• Commercial market (support directly or indirectly production)
• Trade industries (wholesalers and retailers)
• Government organizations
• Institutions 3
Marketing Week (MW): Do you believe business-to-business (B2B) and
business- to-consumer (B2C) marketing are blurring into one, or are they
still different?

„There is similarity in the insights. Whether you’re in

business or consumer marketing, the core insights are the
same.
People used to spend time to save money, now they
spend money to save time. Couple that with the fact that
everything is so complicated these days, whether it’s a
business trying to bring in new technology to reduce the
time it takes to get things out the door or a consumer
trying to switch their apps from their old phone to a new
one, it is tough to do it yourself.

But that’s where it stops. When it comes to positioning,

what is important for the consumer or business, the
promotional side, the product being promoted, the
service and the distribution, they are ultimately very
different.” - Jonathan Earle, regional chief marketing officer, Telefónica
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Europe plc between Dec 2011 - Dec 2013
„From the research we have done, SOHOs [small-
office or home-office workers] specifically are fed
up of being treated as consumers. They want to be
treated as businesses. There are expectations as a
business, because they are giving you a
considerable part of their working capital and
they’re looking for a long-term relationship. That’s
different from being a consumer and just paying a
bill or making a transaction.”
- Jonathan Earle, regional chief marketing officer, Telefónica
Europe plc between Dec 2011 - Dec 2013
http://www.marketingweek.co.uk/analysis/cmo-strategy/all-for-one-and-one-for-all-are-b2b-and-
b2c-colliding/4008703.article

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 The Supply Chain
• Supply chain disruptions arise due to global
interconnectivity of industries. How COVID-19 has affected the
• Factories are being temporarily closed all supply chains?
over the world (eg most of the carmakers Euromonitor International, 2020
are closing factories in Europe and the
US).
• Uncertainty over the length of the Car
restrictions limits productivity investments Dealers
Buyers

Upstream Direct Car Consumer

suppliers suppliers Manufacturers marketing

Business Business Fleet

marketing marketing Buyers

Business
marketing 6
 Example of Videoton

▪ A privately owned, vertically integrated

industrial group in low-cost Europe

▪ A competent multi-commodity supplier of

parts, assemblies and modules

▪ A professional regional EMS provider with

extended engineering services

▪ A turn-key contract manufacturing partner

for outsourcing and transfer projects

▪ A complex service provider for the

establishment and operation of industrial
parks
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Videoton Automotive Electronics Ltd.
Tier 2 supplier in the automotive industry

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 Diversified customer base I.

Automotive

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 Business Markets
Market Structure and Demand

Fewer but larger buyers

Derived demand

Inelastic demand

Fluctuating demand

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 Demand in the business market

Derived demand: It ultimately derives from the demand for

consumer goods.
Inelastic demand: total demand for many business products is
not affected much by price changes, especially in the short run.
Fluctuating demand: The demand for many business goods and
services tends to change more —and more quickly—than the
demand for consumer goods and services does.

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 Business Markets
Nature of the Buying Unit
Business buyers usually face more complex buying
decisions than do consumer buyers. Compared with
consumer purchases, a business purchase usually
involves:
• More decision participants
• More professional purchasing effort
• More buyer and seller interaction

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 Business Buyer Behavior

Major Types of Buying Situations

Straight rebuy is a buying situation in which the buyer routinely
reorders something without any modifications.
Modified rebuy is a buying situation in which the buyer wants to
modify product specifications, prices, terms, or suppliers.
New task is a buying situation in which the buyer purchases a
product or service for the first time.

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 Business buying situations

Straight rebuying low cost items

reorder on a routine basis list
automatic reordering systems
difficult situation for competitors
Modified rebuying looking at alternative offerings
competitors’ chance to get in
first time or unique purchase situations
New-task buying all the 8 steps are needed
marketer’s greatest opportunity and challenge

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 Trade-offs in type of buying situations
Level at which
decisions are
made increases
BUYER’s
position Risk for buyer
increases

Straight Modified New task

Rebuy rebuy

Opportunity for
seller increases
SELLER’s
Time and effort
position
involved in sale
decreases

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Blythe (2006:165)
 Business Buyer Behavior
Participants in the Business Buying Process
Buying center consists of all the individuals and units that play a
role in the business purchase decision-making process.
• Users
• Influencers
• Deciders
• Purchasers
• Gatekeepers

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 Business Buyer Behavior
Participants in the Business Buying Process
Users are those that will use the product or service.
Influencers help define specifications and provide information
for evaluating alternatives.
Buyers have formal authority to select the supplier and
arrange terms of purchase.
Deciders have formal or informal power to select and approve
final suppliers.
Gatekeepers control the flow of information.

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Questions a marketer has to answer:

• Who are the major participants in the buying

center?
• In what decisions do they exercise influence?
• What is their relative degree of influence?
• What evaluation criteria does each decision
participant use?

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Business Buyer Behavior

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 Business Buyer Behavior

Figure 6.2 Major Influences on Business Buying Behavior

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The Business Buying Process

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 The Business Buying Process
1. General need description describes the characteristics and
quantity of the needed item.
2. Product specification describes the technical criteria.
3. Value analysis is an approach to cost reduction where
components are studied to determine if they can be redesigned,
standardized, or made with less costly methods of production.

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 The Business Buying Process
4. Supplier search involves compiling a list of qualified suppliers
to find the best vendors.
5. Proposal solicitation is the process of requesting proposals
from qualified suppliers.
6. Supplier selection is when the buying center creates a list of
desired supplier attributes and negotiates with preferred
suppliers for favorable terms and conditions.

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 An example of supplier selection
Rating Scale
Attributes Importance Poor Fair Good Excellent
weights (1) (2) (3) (4)
Price 0,30 X

Supplier 0,20 X
reputation
Product 0,30 X
reliability
Service 0,10 X
reliability
Supplier 0,10 X
flexibility
Total score: 0,30x4 + 0,20x3 + 0,10x2 + 0,10x3 = 3,5
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 The Business Buying Process
7. Order-routine specifications includes the final order with the
chosen supplier and lists all of the specifications and terms of
the purchase.
8. Performance review involves a critique of supplier
performance to the order-routine specifications.

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Let’s see a video about a supplier-buyer
relationship!

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 E-Procurement and Online Purchasing
• Online purchasing
• Company-buying sites
• Extranets

Companies can do e-procurement in any of several ways. They can

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 also can
conduct e-procurement by setting up their own company buying sites.
For example, GE operates a company trading site on which it posts its
buying needs and invites bids, negotiates terms, and places orders. Or
companies can create extranet links with key suppliers. For instance,
they can create direct procurement accounts with suppliers such as
Dell or Staples through which company buyers can purchase
equipment, materials, and supplies directly.

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 E-Procurement and Online Purchasing
Advantages
– Access to new suppliers
– Lowers costs
– Speeds order processing and delivery
– Enhances information sharing
– Improves sales
– Facilitates service and support
Disadvantages
– Erodes relationships as buyers search for new
suppliers
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 Market Segmentation
Segmenting Business Markets
Business buyers can be segmented geographically,
demographically (industry, company size) or by benefit
sought (user status, user rate, loyalty status).

Additional variables include:

• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
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 Institutional and Government Markets
Institutional markets consist of schools, hospitals,
nursing homes, and prisons that provide goods
and services to people in their care.

• Characteristics
▪ Low budgets
▪ The buying objective is not a profit

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Institutional and Government Markets
Government markets tend to favor domestic
suppliers, require them to submit bids, and normally
award the contract to the lowest bidder.

• require written proposals from vendors

• burocracy, needless regulations, much paperwork
• tend to favor domestic suppliers over foreign
suppliers

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Thank you for your attention!