4/17/2020

Business Markets and

Business Buying Behavior
Topic Outline
• Business Markets
Global Edition • Business Buyer Behavior
• The Business Buying Process
Chapter Six • E-Procurement: Buying on the Internet
Business Markets and Business • Institutional and Government Markets
Buying Behavior

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Business Markets Business markets and business buyer behaviour:

Types of business markets

Business buyer behavior refers to the buying behavior

•
of the organizations that buy goods and services for
use in production of other products and services that
are sold, rented, or supplied to others. Industrial Reseller
market Purchase goods & market
services for use in Purchase goods &
Business buying process is the process where the production of services to resell
or rent at a profit
business buyers determine which products and other products and
services
services are needed to purchase, and then find,
evaluate, and choose among alternative brands

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Business Market Business Markets

Market Structure and Demand
• The business market is huge. In fact,
business markets involve far more dollars
and items than do consumer markets.
Fewer and larger buyers
• The main differences between consumer
Derived demand
and business markets are in market
structure and demand, the nature of the • Inelastic demand
buying unit, and the types of decisions and • Fluctuating demand
the decision process involved.
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Business Markets Business Markets

Decision Process
Decision Process
• More complex
Supplier development
• More decision participants
systematic development of networks of
• More professional supplier-partners to ensure an appropriate
purchasing effort and dependable supply of products and
• Buyer and seller more materials that they will use in making their
dependent own products or resell

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Business Buyer Behavior Business Buyer Behavior

The Model of Business Buyer Behavior Major Types of Buying Situations
Straight rebuy is a routine purchase decision such as
reorder without any modification
Modified rebuy is a purchase decision that requires
some research where the buyer wants to modify the
product specification, price, terms, or suppliers
New task is a purchase decision that requires thorough
research such as a new product

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Business Buyer Behavior Business Buyer Behavior

Participants in the Business Buying
Major Types of Buying Situations
Process
Buying center is all of the individuals
Systems selling/solutions selling and units that participate in the
business decision-making process
involves the purchase
of a packaged solution
from a single seller

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Business Buyer Behavior Business Buyer Behavior

Participants in the Business Buying Participants in the Business Buying
Process Process
Users are those that will use the product or service • Buying center provides
a major challenge
Influencers help define specifications and provide
information for evaluating alternatives
• Who participates in the
process
Buyers have formal authority to select the supplier and – Their relative authority
arrange terms of purchase
– What evaluation criteria
Deciders have formal or informal power to select and each participant uses
approve final suppliers – Informal participants

Gatekeepers control the flow of information

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Business Buyer Behavior Business Buyer Behavior

Major Influences on Business Buyers
Major Influences on Business Buyers Environmental Factors

Economic Personal Demand for Economic Cost of

product outlook money
Factors Factors

Price Supply of
Technology Culture
Materials
Emotion
Service Politics Competition

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Business Buyer Behavior Business Buyer Behavior

Major Influences on Business Buyers
Organizational Factors Major Influences on Business Buyers
Individual Factors

Objectives Motives Perceptions Preferences

Policies
Procedures Age Income Education
Structure
Systems Attitude
toward risk

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Business Buyer Behavior

Business Buyer Behavior
The Buying Process The Buying Process
Problem recognition occurs when someone in
the company recognizes a problem or need
• Internal stimuli
– Need for new product or production
equipment
• External stimuli
– Idea from a trade show or advertising

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Business Buyer Behavior Business Buyer Behavior

The Buying Process The Buying Process

General need description describes the characteristics Supplier search involves compiling a list of
and quantity of the needed item
qualified suppliers
Product specification describes the technical criteria
Value analysis is an approach to cost reduction where
components are studied to determine if they can be Proposal solicitation is the process of
redesigned, standardized, or made with less costly requesting proposals from qualified suppliers
methods of production

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Business Buyer Behavior Business Buyer Behavior

The Buying Process
Supplier selection is the process when the
buying center creates a list of desired supplier
attributes and negotiates with preferred
suppliers for favorable terms and conditions
The Buying Process
Performance review involves a critique of
supplier performance to the purchase terms

Order-routine specifications is the final order

with the chosen supplier and lists all of the
specifications and terms of the purchase

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Business Buyer Behavior Business Buyer Behavior

E-Procurement
E-Procurement • Advantages
– Access to new suppliers
• Online purchasing – Lowers costs
• Company-buying – Speeds order processing and delivery
sites – Shares information
• Extranets – Sales
– Service and support
• Disadvantages
– Can erode relationships as buyers search for new
suppliers
– Security
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Institutional and Government Markets

Institutional and Government Markets
Government markets
Institutional markets tend to favor domestic suppliers and require
consist of hospitals, suppliers to submit bids and normally
award to the lowest bidder
nursing homes, and
• Affected by environmental factors
prisons that provide
• Non-economic factors considered
goods and services to
– Minority suppliers
people in their care
– Depressed suppliers
• Characteristics – Small businesses
– Low budgets
– “Captive” audience

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Quizz No.4
• Provide at least two examples of organizational
factor in business buying behavior model

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