7

Analyzing Business Markets

Marketing Management
Canadian Fourteenth Edition
Copyright  2013 Pearson Canada Inc. 7-1
 Chapter Questions
• What is the business market, and how does
it differ from the consumer market?
• What buying situations do organizational
buyers face?
• Who participates in the business-to-business
buying process?

Copyright  2013 Pearson Canada Inc. 7-2

 Chapter Questions
• How do business buyers make their
decisions?
• How can companies build strong
relationships with business customers?
• How do institutional buyers and government
agencies do their buying?

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 What is Organizational
Buying?
• Organizational buying refers to the
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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 Top Marketing Challenges
• Understanding customer needs in new ways;
• Identifying new opportunities for growth;
• Improving value management techniques
• Calculating better marketing performance and
accountability metrics;
• Competing and growing in global markets
• Countering the threat of product and service
commoditization
• Convincing C-level executives to embrace the
marketing concept

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 Characteristics of
Business Markets
 Fewer buyers  Multiple sales calls
 Close supplier-  Derived demand
customer  Inelastic demand
relationships  Fluctuating demand
 Professional  Geographically
purchasing concentrated buyers
 Many buying  Direct purchasing
influences

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 Buying Situation

Straight Rebuy

Modified Rebuy

New Task

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 Systems Buying And Selling
• Systems buying: business buyers prefer to
buy a total problem solution from one seller.
• Turnkey solution - because the buyer
simply had to turn one key to get the job
done.
• Sellers have increasingly recognized that
buyers like to purchase in this way, and
many have adopted systems selling as a
marketing too.

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 The Buying Center
 Initiators  Approvers
 Users  Buyers
 Influencers  Gatekeepers
 Deciders

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 Of Concern to Marketers
• Who are the major decision participants?
• What decisions do they influence?
• What is their level of influence?
• What evaluation criteria do they use?

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 Stages in the Buying Process:
Buyphases
• Problem recognition
• General need description
• Product specification
• Supplier search
• Proposal solicitation
• Supplier selection
• Order-routine specification
• Performance review

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 Table 7.1 Buygrid Framework

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 Problem Recognition
• Problem recognition
– The buying process begins when someone in the
company recognizes a problem or need that can
be met by acquiring a good or service.

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 General Need Description and
Product Specification
• Need description and product
specification
– the buyer determines the needed item’s general
characteristics and required quantity

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 Supplier Search
• Supplier search
– buyer next tries to identify the most appropriate
suppliers through trade directories, contacts with
other companies, trade advertisements, trade
shows, and the Internet.

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 Forms of Electronic
Marketplaces
• Catalog sites
• Vertical markets
• “Pure Play” auction sites
• Spot (or exchange) markets
• Private exchanges
• Barter markets
• Buying alliances

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 E-Procurement
• Websites are organized around two types of
e-hubs:
– vertical hubs centred on industries (plastics,
steel, chemicals, paper)
– functional hubs (logistics, media buying,
advertising, energy management).

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 E-Procurement
• In addition to using these websites,
companies can use e-procurement in other
ways:
– Set up direct extranet links to major suppliers
– Form buying alliances
– Set up company buying sites

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 Proposal Solicitation
• Proposal solicitation
– the buyer next invites qualified suppliers to
submit proposals. If the item is complex or
expensive, the proposal will be written and
detailed. After evaluating the proposals, the
buyer will invite a few suppliers to make formal
presentations.

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 Supplier Selection
• Supplier selection
– before selecting a supplier, the buying centre will
specify and rank desired supplier attributes,
often using a supplier-evaluation model

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 Table 7.2 An Example of
Vendor Analysis

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 Methods for Researching
Customer Value
 Internal engineering  Conjoint analysis
assessment  Benchmarks
 Field value-in-use  Compositional
assessment approach
 Focus-group value  Importance ratings
assessment
 Direct survey
questions

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 Order-Routine Specification
• Order-routine specification
– After selecting suppliers, the buyer negotiates
the final order, listing the technical specifications,
quantity needed, expected time of delivery,
return policies, warranties, and so on.

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 Order Routine Specification
• Stockless purchase plans
• Vendor-managed inventory
• Continuous replenishment

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 Performance Review
• Performance Review
– the buyer periodically reviews the performance of
the chosen supplier(s) using one of three methods.
• buyer may contact end users and ask for their evaluations
• rate the supplier on several criteria using a weighted-
score method,
• aggregate the cost of poor performance to come up with
adjusted costs of purchase, including price.
– The performance review may lead the buyer to
continue, modify, or end a supplier relationship.

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 Categories of Buyer-Seller
Relationships

 Basic buying and  Cooperative

selling systems
 Bare bones  Collaborative
 Contractual  Mutually adaptive
transaction  Customer is king
 Customer supply

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 Business Relationships: Risks
and Opportunism
 Vertical coordination can facilitate
stronger customer–seller ties but at the
same time may increase the risk to the
customer’s and supplier’s specific
investments.
 Opportunism is some form of cheating or
undersupply relative to an implicit or
explicit contract.

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 Institutional Markets
 The institutional market consists of
schools, hospitals, nursing homes,
prisons, and other institutions that must
provide goods and services to people in
their care.

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