BUSINESS MARKETS AND

BUSINESS BUYER
BEHAVIOUR
Done By: Avamarie Johnson, Venancio Williams, Eva Tech, Kiannie Logan and
Ailton Linarez
 BUSINESS BUYER BEHAVIOUR
• The buying behaviour of the organizations that buy goods and
services for use in the production of other products and services
or for the purpose of reselling or renting them to others at a profit.

Kiannie
 BUSINESS BUYING PROCESS
• The decision process by which business buyers determine which
products and services their organizations need to purchase, and
then find, evaluate, and choose among alternative suppliers and
brands.

Kiannie
 CHARACTERISTICS OF BUSINESS
MARKETS
1. Marketing structure and demand
2. Nature of the buying unit
3. Types of decisions and the decision process

Avamarie
 1. MARKETING STRUCTURE AND DEMAND
• Business markets contain fewer but larger buyers.
 For example, when Goodyear sells replacement tires to final customers its potential
market incudes the owners of the millions of cars currently in use in the United States.
But Goodyear’s faith in the business market depends on getting orders from one of only
a handful of large automakers.
• Business markets are more geographically concentrated.
o More than half the United States business buyers are concentrated in eight states:
California, New York, Ohio, Illinois, Michigan, Texas, Pennsylvania, and New Jersey.

Avamarie
• Business buyer demand is derived from final customer demand.
 General Motors buys steels because consumers buy cars. If consumers demand for
cars drops, so will the demand for steel and all the other products used to make cars.
• Business markets have more inelastic demand.
o Total demand of many business product is not affected much by price change,
especially in the short run.
 A drop in the price of leather will not cause shoe manufacturers to buy more leather
unless it results in lower shoe price that, in turn will increase consumer demand for
shoes.
• Business market have more fluctuating demand.
o The demand for many business goods and services tends to change more – and more
quickly – than the demand for consumer goods and service does.
o A small percentage increase in customer demand can cause large increases in
business demand.

Avamarie
 2. NATURE OF THE BUYING UNIT

• Business purchases involves more decision participants and more professional

purchasing effort.
o The more complex the purchase, the more likely that several people will participate
in the decision-making process.
 For some routine purchase, one person––say a purchasing agent––may serve as the
only person involved in the decision-making process.
 For more complex purchase, the decision-making process may include 20 or 30 people
from different levels and departments in the organization.

Avamarie
3. TYPES OF DECISION AND THE DECISION
PROCESS
• Business buyers usually face more complex buying decisions.
o Purchases often involve large sums of money, complex technical and economic
considerations, and interactions among many people at many levels of the buyer’s
organization.
• The business buying process is more formalized.
o Large business purchases usually call for detailed product specifications, written
purchase orders, careful supplier searches, and formal approval.
• In business buying, buyers and sellers work more closely together and build close
long-run relationships.
o Many customer companies are now practicing supplier relationship management,
developing a core of suppliers and working closely with them.

Avamarie
 MODEL OF BUSINESS BUYER BEHAVIOUR

The model suggests four questions about business buyer behaviour:

• What buying decisions do business buyers make? Who participates in the buying process?
What are the major influences on buying? How do business buyers make their buying
decisions?
Kiannie
 MAJOR TYPES OF BUYING SITUATIONS
1. Straight rebuy
2. Modified rebuy
3. New task

Eva
 1. STRAIGHT REBUY
• A business buying situation in which the buyer routinely reorder something without
and modifications.
 Based on the past buying satisfaction, the buyer simply choose from the various
suppliers on its list.
o “In” suppliers try to maintain product and service quality, while “Out” suppliers try to
offer something new or exploit dissatisfaction so that the buyer will consider them.

Eva
 2. MODIFIED REBUY
• A business buying situation in which the buyer wants to modify the product
specification, price, terms, or suppliers.
 Involves more decision participants than does the straight rebuy.
o The in suppliers may become nervous and feel pressured to put their best foot
forward to protect an account.
o Out suppliers may see the modified rebuy situation as an opportunity to make a
better offer and gain new business.

Eva
 3. NEW-TASK
• A business buying situation in which the buyer purchase a product or service for the
first time.
 They face greater cost and risk, the larger the number of decision participants and the
greater their effort will be to collect information.
 Buyers must decide on product specifications, suppliers, price limits, payment terms,
order quantities, delivery times, and service terms.
o The new-task situation is the marketer’s greatest opportunity and challenge.

Eva
 SYSTEM SELLING
• Buying a packaged solution to a problem from a single seller, thus avoiding all the
separate decisions involved in a complex buying situation.
o Two-step process:
 First, the suppliers sell a group of interlocking products
 Second, the suppliers sells a system of production, inventory control, distribution, and
other services to meet the buyer’s need for a smooth-running operation.
o System selling is a key business strategy for winning and holding accounts.
 The sales goes to the firm that provides the most complete solution to the customer’s
needs

Eva
 PARTICIPANTS IN THE BUSINESS BUYING
PROCESS
1. Users
2. Influencers
3. Buyers
4. Deciders
5. Gatekeepers

Ailton
 BUYING CENTRE
o The decision-making unit of a buying organization is called its buying centre.
• All the individuals and units that participate in the business buying-decision process.
 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 buying, and those who
control buying information.
o The buying centre concept presents a major marketing challenge.
 Business marketers must learn who participates in the decision, each participant’s
relative influence, and what evaluation criteria each decision participants uses.

Ailton
1. Users
• Members of the buying organization who will actually use the purchased product or
service.
o Initiate the buying proposal and help define product specifications.
2. Influencers
• People in an organization’s buying centre who affect the buying decision; they often
help define specifications and also provide information for evaluating alternatives.
o Technical personnel are particularly important influencers.
3. Buyers
• The people who make an actual purchase.
o Have formal authority to select the suppliers and arrange terms of purchase.
o Select vendors and negotiate.

Ailton
4. Deciders
• People in the organization’s buying centre who have formal or informal power to
select or approve the final suppliers.
o In routine buying, the buyers are often the deciders, or at least the approvers.
5. Gatekeepers
• People in the organization’s buying centre who control the flow of information to
others.
 For example, purchasing agents often have authority to prevent salespersons from
seeing users or deciders.
 Other gatekeepers include; technical personnel and even personal secretaries.

Ailton
 MAJOR INFLUENCES ON BUSINESS
BUYERS
1. Environmental Factors
2. Organizational Factors
3. Interpersonal Factors
4. Individual Factors

Venancio
 1. ENVIRONMENTAL FACTORS
• Business buyers are influenced heavily by factors in the current and expected
economic environment, such as the level of primary demand, the economic outlook,
and the cost of money.
• An increasingly important environmental factor is shortage in key materials.
 Many companies are now more willing to buy and hold larger inventories of scarce
materials to ensure adequate supply.
• Business buyers are also affected by technological, political, and competitive
developments in the environment.
• Culture and customs can strongly influence business buyer reactions to the
marketer’s behaviour and strategies, especially in the international marketing
environment.

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 2. ORGANIZATIONAL FACTORS
• Each buying organization has its own objectives, policies, procedures, structure,
and system, and the business marketers must understand these factors well.
• Question such as these arise:
 How many people are involved in the buying decision? Who are they? What are their
evaluation criteria? What are the company’s polices and limits on its buyers?

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 3. INTERPERSONAL FACTORS
• The buying centre usually includes many participants who influence each other, so
interpersonal factors also influence the business.
 It is often difficult for business marketers to assess such interpersonal factors and group
dynamics.
• Business markets can never really know who the buying centre participants are.
 Participants may influence the buying decisions because they are the manager, people
with the highest ranks, are well liked, have special expertise, or have a special
relationship with other important participants.
o For example the decision about which corporate jet to buy form Gulfstream was
actually made by a corporate board member who has interest in flying and who
knows a lot about airplanes. This board member may work behind the scenes to
sway the decision.

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 4. PERSONAL FACTORS
• Each participant in the business buying-decision process brings in personal
motives, perceptions, and preferences.
 These individual factors are affected by personal characteristics such as age, income,
education, professional identification, personality, and attitudes toward risk.
• Buyers also have different buying styles.
 Some may be technical types who make in-depth analyses of competitive proposal
before choosing a supplier.
 Other buyers may be intuitive negotiators who are adept at pitting the sellers against
one another for the best deal.

Venancio
 THE BUSINESS BUYING PROCESS
• Buyers who face a new-task buying situation usually go through all stages of the
buying process.
• Buyers making modified or straight rebuy may skip some of the stages.

Kiannie
1. Problem Recognition
2. General Need Description
3. Product Specification
4. Supplier Search
5. Proposal Solicitation
6. Supplier Selection
7. Oder-Routine Specification
8. Performance Review

Kiannie
 1. PROBLEM RECOGNITION

• The first stage of the business buying process, in which someone in the company
reorganizes a problem or need that can be met by acquiring a good or service.
o 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 new ideas at a trade show, see an ad, or receive a
call from a salesperson who offers a better product or a lower price.

Kiannie
 2. GENERAL NEED DESCRIPTION

• The stage in the business buying process in which the company describes the
general characteristics and quantity of a needed item.
 For standard items, this process presents few problems.
 For complex items, the buyer may have to work with others––engineers, users,
consultants––to define the item.
o In this phase, the alert business marketer can help the buyers define their needs
and provide information about the value of different product characteristics.

Kiannie
 3. PRODUCT SPECIFICATION
• The stage of the business buying process in which the buying organization decides
on and specifies the best technical product characteristics for a needed item.
 Often done with the help of a value analysis engineering team.
Value analysis
• An approach to cost reduction in which components are studied carefully to
determine if they can be redesigned, standardized, or made by less costly methods
of production.
o Sellers can also use value analysis as a tool to help secure a new account. By
showing buyers a better way to make an object, outside sellers can turn straight
rebuy situation into new-task situations that give them a chance to obtain new
business.

Kiannie
 4. SUPPLIER SEARCH
• The stage of the business buying process in which the buyer tries to find the best
vendors.
 The buyer can compile a small list of qualified suppliers by reviewing trade directories,
doing a computer search, or phoning other companies for recommendations.
o Many companies are viewing supplier search more as supplier development.
 These companies want to develop a system of supplier-partners that can help it bring
more value to its customers.
o 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.

Kiannie
 5. PROPOSAL SOLICITATION
• The stage of the business buying process in which the buyer invites qualified
suppliers to submit proposals.
 Some suppliers will send only a catalog or a salesperson.
 When the item is complex or expensive, the buyer will usually require detailed written
proposals or formal presentations from each potential supplier.
o Business marketers must be skilled in researching, writing, and presenting
proposals in response to buyer proposal solicitations.
 Presentations should inspire confidence and should make the marketer’s company
stand out from the competition.

Ailton
 6. SUPPLIER SELECTION
• The stage of the business buying process in which the buyer reviews proposals and
selects a supplier or suppliers.
o During supplier selection, the buying centre often will draw up a list of the desired
supplier attributes and their relative importance.
o The most important influence
 Quality product and services, on-time delivery, ethical corporate behaviour, honest
communication, and competitive price.
 Other important factors include repair and servicing capabilities, technical aid and
advice, geographic location, performance history and reputation.
o Many buyers prefer multiple sources of suppliers to avoid being totally dependent
on one supplier and to allow comparisons of prices and performance of several
suppliers over time.

Ailton
 7. ORDER-ROUTINE SPECIFICATION
• The stage of the business buying process in which the buyer writes the final order
with the chosen supplier(s), listing the technical specifications, quantity needed,
expected time of delivery, return polices, and warranties.
o In the case of maintenance, repair, and operating items, buyers may use blanket
contracts.
 Creates a long-term relationship in which the supplier promises to resupply the buyer as
needed at agreed prices for a set time period.
 Eliminates the expensive process of renegotiating a purchase each time that stock is
required.

Ailton
 8. PERFORMANCE REVIEW
• The stage of the business buying process in which the buyer rates its satisfaction
with suppliers, deciding whether to continue, modify, or drop them.
 Reviews suppliers performance.
o The seller’s job is to monitor the same factors used by the buyer to make sure that
they are giving the expected satisfaction.

Ailton
 BUSINESS BUYING ON THE INTERNET

• Online purchasing, which is often called e-procurement, is growing rapidly.

• It was estimated that the dollar value of materials purchased online would swell from
$75 billion in 2000 to more than $3 trillion in 2003.
• E-procurement gives buyers access to new suppliers, lowers purchasing costs, and
hastens order processing and delivery.
• In turn, business marketers can connect with customers online to share marketing
information, sell products and services, provide customer support services, and
maintain ongoing customer relationships.

Avamarie
 BENEFITS OF BUSINESS-TO-BUSINESS
E-PROCUREMENT
1. Shaves transaction costs and results in more efficient purchasing for both buyers
and suppliers.
 It eliminates the paperwork associated with traditional requisition and ordering
procedures.
• Companies can trim the costs of purchased goods alone by 15 to 20 percent.
o For example, Owens Corning estimates that e-procurement has shaved 10 percent
off its annual purchasing bill of $3.4 billion.

Avamarie
2. Reduces order processing costs.
o Through online purchasing Texas Instruments has trimmed its cost of processing a
purchase order from $80 to $25.
o 3M slashed the price of processing an order from $120 to under $40, while also
cutting its error rate dramatically.
• A more effective centralized purchasing platform saves time and money.
 Companies are 20 to 25 percent more effective.
3. Reduces the time between order and delivery.
• Time saving are particularly dramatic for companies with many overseas suppliers.

Avamarie
o Adaptec, a leading supplier for computer storage, uses e-procurement to purchase
from its Taiwanese chip suppliers and has reduced the time between the order and
delivery of its chips from as long as 16 weeks to just 55 days.
4. Frees purchasing people to focus on more-strategic issues.
• Going online means reducing drudgery and paperwork and spending more time
managing inventory and working creatively with suppliers.
• Purchasing professionals can now find different sources and work with suppliers to
reduce costs and to develop new products.

Avamarie
 PROBLEMS CAUSE BY E-PROCUREMENT
1. Erode decades-old customer-supplier relationships.
2. Creates potential security disasters.
• More than 80 percent of companies say security is the leading barrier to expanding
electronic links with customers and partners.
• Companies are spending millions for research on defensive strategies to keep
hackers at bay.
o Cisco Systems, for example, specifies the types of routers, firewalls, and security
procedures that its partners must use to safeguard extranet connections.

Avamarie
 INSTITUTIONAL MARKETS
• Schools, hospitals, nursing, homes, prisons, and other institutions that provide
goods and services to people in their care.
o Institutions differ from one another in their sponsors and in their objectives.
 For example, Humana hospitals are run for profit, whereas a not-for-profit Sister of
Charity Hospital provides health care to the poor, and a government-run hospital might
provide special services to veterans.
o Many institutional markets are characterized by low budgets and captive patrons.
o Many marketers set up separate divisions to meet the special characteristics and
needs of institutional buyers.
 For example, Heinz produces, packages, and prices its ketchup and other products
differently to better serve the requirements of hospitals, colleges, and other institutional
markets.

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 GOVERNMENT MARKET
• Governmental units––federal, state, and local––that purchase or rent goods and
services for carrying out the main functions of government.
o Offers large opportunities for many companies, both big and small.
 In the United States alone, federal, state and local governments contain more than
82,000 buying units.
o To succeed in the government market, sellers must locate key decision makers,
identify the factors that affect buyer behaviour, and understand the buying-decision
process.
o Government organizations require suppliers to submit bids, and they award the
contract to the lowest bidder.
 In some cases, the government unit will make allowance for the supplier’s superior
quality or reputation for completing contracts on time.

Eva
o Government organizations tend to favour domestic suppliers over foreign suppliers.
 A major complaint of multinationals operating in Europe is that each country shows
favouritism toward its nationals in spite of superior offers that are made by foreign firms.
o Like customer and business buyers, government buyers are affected by
environmental, organizational, interpersonal, and individual factors.
o Government buying is carefully watched by outside publics, ranging from Congress
to a variety of private groups interested in how the government spends taxpayer’s
money.
 Because their spending decisions are subject to public review, government
organizations require considerable paperwork from suppliers.

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o Most governments provide would-be suppliers with detailed guides describing how
to sell to the government.
 For example the U.S. Small Business Administration prints a booklet entitled U.S.
Government Purchasing, Specifications, and Sales Directory, which lists thousands of
items most frequently purchased by the government and the specific agencies most
frequently buying them.
• In several major cities, the General Service Administration operates business
Service Centres with staffs to provide a complete education on the way government
agencies buy, the steps that suppliers should follow, and the procurement
opportunities available.

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o Noneconomic criteria also pays a growing role in government buying.
• Government buyers are asked to favour depressed business firms and areas; small
business firms; minority-owned firms; and business firms that avoid race, gender, or
age discrimination.
o Many companies that sell to the government have not been marketing oriented
because:
• Total government spending is determined by elected officials rather than by any
marketing effort to develop this market.
• When the product’s characteristics are specified carefully, product differentiation is
not a marketing factor.
• No advertising or personal selling matter much in winning bids on an open-bid
basis.

Venancio