A FRAMEWORK for

MARKETING MANAGEMENT

Chapter 6
Analyzing
Business Markets

Kotler

Keller

 Business Marketing is the practice of

individuals,
or
organizations,
including
commercial businesses, governments and
institutions, facilitating the sale of their products
or services to other companies or organizations
that in turn resell them, use them as components
in products or services they offer, or use them to
support their operations. Also known as industrial
marketing, business marketing is also called
business-to-business
marketing,
or
B2B
marketing, for short.
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 Business marketing vs. consumer marketing

Business marketing generally entails shorter and

more
direct
channels
of
distribution.
While consumer marketing is aimed at large
demographic groups through mass media and
retailers, the negotiation process between the buyer
and seller is more personal in business marketing

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Business marketers commit only a small part of

their promotional budgets to advertising, and
that is usually through direct mail efforts and
trade journals. While that advertising is limited, it
often helps the business marketer set up
successful sales calls.
Marketing to a business trying to make a profit
(Business-to-Business marketing) as opposed
to an individual for personal use (Business-toConsumer, or B2C marketing) is similar in terms
of the fundamental principals of marketing.
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Organizational Buying

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

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Organizational Buying

Fewer buyers
Larger buyers
Geographically concentrated buyers
Closer relationships with suppliers
Closer relationships with customers

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Organizational Buying

Fluctuating demand
Inelastic demand
Leasing
Professional
purchasing
Direct purchasing

Multiple buying
influences
Multiple sales calls
Derived demand
Reciprocity

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Organizational Buying
Buying Situations
Straight rebuy
Modified rebuy
New task

Routine reorders from

approved vendor list
Low involvement,
minimal time
commitment
Example: copier
paper

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Organizational Buying
Buying Situations
Straight rebuy
Modified rebuy
New task

Specifications,
prices, delivery
terms, or other
aspects require
modification
Moderate level of
involvement and time
commitment
Example: desktop
computers
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Organizational Buying
Buying Situations
Straight rebuy
Modified rebuy
New task

Purchasing a product
or service for the first
time
High level of
involvement and time
commitment; multiple
influences
Example: selecting a
website design firm
or consultant
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Systems Buying and Selling

Many business buyers prefer to buy a
total solution to problem from one seller.
called system buying.
This practice originated with government
purchases
of
major
weapons
&
communication systems.
The government solicit bids from prime
contractors, who assembled package or
system.
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System Buying & Selling

The contractor who was awarded contract
will be responsible for bidding out &
assembling system subcomponents from
second tier contractors.
The prime contractor would thus provide a
turnkey solution, so called because the
buyer simply had to turn one key to get the
job done.
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System Buying & Selling

System selling is a key industrial
marketing strategy in bidding to build
large scale industrial projects, such as
dams, steel factories, irrigation systems,
sanitation systems, pipelines, utilities and
even new towns.
Firms must compete on price, quality,
reliability & other attributes to win
contracts.
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The Buying Centre

The buying centre is a collection of
individuals who contribute to the final
purchase decision.
Participants in the Business Buying
Process: The Buying Center
Users
Influencers
Deciders
Gatekeepers
Buyers
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The Buying Centre

Buying centre includes people who play any of buying
roles:
Users: People who actually use business products
example an executive, production line worker etc.
Influencers: People who set specifications of buying
decisions b/c of their technical expertise, organizational
position.
Deciders: People who make actual buying decision
regarding business product and the supplier. A
purchasing agent may be a decider in straight rebuy
condition. Top management may make decision
regarding whether to buy an expensive computer system.
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The Buying Centre

Gatekeepers: People who control the flow of
purchasing information within organization as
well as between firm and potential vendors.
These people may be purchasing agents,
secretaries or technical personnel.
Buyers: People who interact with suppliers,
arrange terms of sale & process purchase
orders. Basically it is purchasing department
role but if purchase is expensive, complex new
buy, the buyers role may be filled with someone
in top management.
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Types of Business Customers

Price-oriented: Price is everything.
Solution-oriented: They want low price but
will respond to argument about lower total
cost.
Gold-standard: They want the best
performance in terms of product quality,
assistance, reliable delivery and son on.
Strategic-value: They want a fairly
permanent sole supplier relationship with
your company.

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Types of Purchasing Processes

Peter Kraljic Identifies four product related
purchasing processes.
Routine products: Products that have low
value & cost to customer and involve little
risk. (e.g Office supplies)
Leverage Products: Product have high
value & cost to customer but involve little
risk of supply. (e.g. Engine Pistons).
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Types of Purchasing Processes

Strategic Products: Product have
high value and cost to customer and
also involve high risk. (e.g mainframe
computers).
Bottleneck Products: Product have
low value and cost to customer but
they involve some risk. (e.g Spare
Parts).
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Buyphases:
Stages in the Business Buying Process

Problem recognition
General need description
Product specification
Supplier search
Proposal solicitation
Supplier selection
Order-routine specification
Performance review
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Proposal Solicitation
The buyer invites qualifies suppliers to
submit proposals. If the item is complex the
buyer will require a detailed written
proposal from each qualifies suppliers.
After evaluating the proposal the buyer will
invite a few suppliers to make formal
presentation.
Business marketers must be skilled in
researching,
writing
&
presenting
proposals.
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Supplier Selection

Before selecting a supplier buying centre will

specify desired supplier attributes and indicate
their relative importance. To rate & identify
most attractive suppliers, buying centers use
following supplier evaluation model.
Price
Supplier Reputation
Product Reliability
Service Reliability
Supplier Flexibility
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