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Chapter 6

Chapter 6. Business Markets and Business Buyer Behavior. Last Week . Consumer Behavior What is it? Why is it important?. Learning Goals. Define the business market and how it differs from consumer markets Identify the major factors that influence business buyer behavior

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Chapter 6

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  1. Chapter 6 Business Markets and Business Buyer Behavior

  2. Last Week • Consumer Behavior • What is it? • Why is it important?

  3. Learning Goals • Define the business market and how it differs from consumer markets • Identify the major factors that influence business buyer behavior • List and define the steps in the business buying decision process

  4. Why Bother? • A business market comprises all 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 market is huge, growing globally and involves many dollars and goods.

  5. Customer Needs Consumers need fast, friendly, low-cost package delivery Business needs are more complex Shipping part of complex logistics process including purchasing, inventory, order status, invoices, payments, returns Services 360,000 people and 88,000 vehicles offer ground, air, freight worldwide Helps customer navigate the complexities of international shipping Offers a wide range of financial services Provides consulting services to improve logistics operations Case StudyUPS

  6. These UPS ads target businesses as a supply chain solution 6 - 6

  7. Learning Goals • Define the business market and how it differs from consumer markets • Identify the major factors that influence business buyer behavior • List and define the steps in the business buying decision process

  8. Definition • Business Buyer Behavior: • The buying behavior 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. • Also included are retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them or others at a profit.

  9. Characteristics of Business Markets

  10. Compared to consumer markets: Business markets have fewer but larger customers Business customers are more geographically concentrated Demand is different Demand is derived Demand is price inelastic Demand fluctuates more Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process Business Markets Characteristics

  11. Demand is often more inelastic Demand often fluctuates more, and more quickly Contain fewer, but larger buyers Characteristics of Business Markets Customers are more geographically concentrated Buyer demand is derived from final consumer demand Marketing Structure and Demand

  12. Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process Compared to consumer purchases: Involve more buyers in the decision process More professional purchasing effort Business Markets Characteristics

  13. Business buying involves a moreprofessional purchasing effort Business buying involves more buyers (participants) Characteristics of Business Markets Nature of the Buying Unit

  14. Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process Compared to consumer purchases More complex buying decisions The buying process is more formalized Buyers and sellers work more closely together and build long-term relationships Business Markets Characteristics

  15. Business buyers usually face more complex buying decisions. Business buying process is more formalized. In business buying, buyers and sellers work more closely together. Characteristics of Business Markets Types of Decisions and the Decision Process Build Long-Term Partnerships

  16. Model of Business Buyer Behavior Buyer Responses Product or service choice Supplier Choice Order Quantities Delivery terms and times Service terms Payment • The Environment • Marketing • Stimuli: • Product • Price • Place • Promotion • Other Stimuli: • Economic • Technological • Political • Cultural • Competitive The Buying Organization The buying center Buying decision process (Interpersonal and individual influences) (Organizational Influences)

  17. Business Buyer Behavior • Major Types of Buying Situations • Straight rebuy • Reordering without modification • Modified rebuy • Requires modification to prior purchase • New task • First-time purchase Involved Decision Making

  18. New Task Buying Modified Rebuy Involved Decision Making Straight Rebuy Major Types of Buying Situations

  19. T23 Stages of the Buying Process New Modified Straight Task Rebuy Rebuy Problem recognition Yes Maybe No General need description Yes Maybe No Product specification Yes Yes Yes Supplier search Yes Maybe No Proposal solicitation Yes Maybe No Supplier selection Yes Maybe No Order routing specification Yes Maybe No Performance review Yes Yes Yes Stages of the buying process Buying Situations Source: Adapted from Patrick J. Robinson, Charles W. Faris, and Yoram Wind, Industrial Buying and Creative Marketing (Boston: Allyn & Bacon, 1967), p.14.

  20. Business-to-Business CompanyDuPont Chemicals • Established in 1802 with gunpowder as its first product • In 1910 moved away from explosives with the first non-leather material, which was snatched up for upholstery and automobile parts • Today, the firm delivers science-based solutions that make real differences in people's lives around the world in areas such as food and nutrition, health care, apparel, safety and security, construction, electronics and transportation • Revenue of $27 billion

  21. Business-to-Business CompanyDuPont Chemicals • Examples of B2B markets and products: • Heath Care - Medical fabrics to provide comfort and safety to surgeons • Automobile – airbag fibers and engineering plastics for safety • Dental – filaments for toothbrushes • Glass – technology to reduce glare and noise, save energy, protect against breakage • Footware – flexibility for rubber, strength of plastic • Farming – pesticides • Guitar manufacturers – DuPont product give the look of vintage lacquer

  22. Business Buyer Behavior • Systems Selling • Buying a packaged solution to a problem from a single seller. • Often a key marketing strategy for businesses seeking to win and hold accounts. • Customization ????

  23. Business Buyer Behavior • Buying Center • The decision-making unit of a buying organization • Includes all individuals and units that participate in decision making

  24. Participants in the Business Buying Process Users Initiators Influencers Gatekeepers Buyers Deciders Approvers

  25. Discussion Question What are the advantages and disadvantages of buying from single suppliers versus multiple suppliers?

  26. Learning Goals • Define the business market and how it differs 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 and explain how they make their buying decisions

  27. Major Influences on Business Buyers

  28. Environmental Organizational Interpersonal Individual Economic trends Supply conditions Technological, political and competitive changes Culture and customs Major Influences on Business Buyers Key Factors

  29. Environmental Organizational Interpersonal Individual Objectives Policies Procedures Organizational structure Systems Major Influences on Business Buyers Key Factors

  30. Environmental Organizational Interpersonal Individual Influence of members in the buying center Authority Status Empathy Persuasiveness Major Influences on Business Buyers Key Factors

  31. Environmental Organizational Interpersonal Individual Personal characteristics of members in the buying center Age and income Education Job position Personality Risk attitudes Buying styles Major Influences on Business Buyers Key Factors

  32. Learning Goals • Define the business market and how it differs from consumer markets • Identify the major factors that influence business buyer behavior • List and define the steps in the business buying decision process

  33. Stages in the Business Buying Process

  34. Business Buying on the Internet • E-procurement is growing rapidly • Business buyers may purchase electronically by: • Electronic data interchange links (EDI) • The Internet • Online auctions and online trading exchanges (e-marketplaces) account for much of the online purchasing activity • E-procurement offers many benefits: • Access to new suppliers • Lower purchasing costs • Quicker order processing and delivery

  35. Benefits: Shave transaction costs Reduce time between order and delivery Create more efficient purchasing systems Forge more intimate relationships Level the playing field Problems: Cut purchasing jobs Erode supplier-buyer loyalty Create potential security disasters Benefits and Problems Created by Buying on the Internet

  36. Institutional Markets Low Budgets Captive Patrons Government Markets Public Review Red Tape is Common Noneconomic Criteria Negotiated Contracts Some Buying Online Institutional and Government Markets

  37. Learning Goals • Define the business market and how it differs from consumer markets • Identify the major factors that influence business buyer behavior • List and define the steps in the business buying decision process

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