Unit 4: Consumer Behavior PDF

Marketing Strategy Sofía Alonso Ibáñez 2ºCYM UNIT 4: CONSUMER BEHAVIOR 1. CHARACTERISTICS OF BUSINESS MARKETS A business market comprises all the organizations that buy goods and services to use them in th...

Marketing Strategy Sofía Alonso Ibáñez 2ºCYM UNIT 4: CONSUMER BEHAVIOR 1. CHARACTERISTICS OF BUSINESS MARKETS A business market comprises all the organizations that buy goods and services to use them in the production of other products and services, or for the purpose of reselling or renting them to others at a profit. Comparison with consumer markets. - Similarities. o Both involve people assuming buying roles. o Needs are needed. ▪ There is always psychology and there´s always a need. Typical need in business exchanges is economic; money, profits. - Differences. o Market structure and demand. ▪ Far fewer but larger buyers. (Renault will buy much more than customers). It is difficult to invest in relational marketing with individual consumers because the money you make from customers is so small that you cannot invest in a relation. ▪ Geographically concentrated. ▪ Derived demand. Car manufacturers demand tires when they have a demand for cars. ▪ Inelastic demand. A drop in rubber’s price will not shift Michelin’s demand for it. ▪ Fluctuating demand. An increase of 10% on the final demand for a product may increase a 50% the demand for several of its components in the business markets. o Nature of the buying unit. ▪ Business purchase involves: More decision participants. More professional purchasing effort. ▪ The more complex the purchase is, the more likely is that several people will participate in the decision-making process. ▪ Buying committees with: Technical experts. Top management. o Types of decisions: ▪ More complex. Large sums of money. Complex technical and economic considerations. Interactions among many people. ▪ More formalized. Detailed product specifications. Written purchase orders. Supplier approval. Marketing Strategy Sofía Alonso Ibáñez 2ºCYM o Buying process: ▪ Buyer and seller are much more dependent on each other. ▪ B2C keeps a distance. ▪ B2B distance is arm’s length, but still may require close working together: Customizing (Adapt to the needs of consumers when the business is relevant). Helping customers to solve their needs. Providing ad-hoc after sale support. ▪ B2B is the perfect ambience to let relationship marketing building. 2. THE BUSINESS BUYING PROCESS 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. Problem recognition. - Someone in the company recognizes a problem or need that can be met by acquiring a specific product or service. o Internal stimuli: we are about to launch a new product, and this means a new machine or a new raw material (we notice that we don´t offer “X”). o External stimuli: we have been to a trade show and we could improve our offer by adding a new feature by means of this new component (I went to a shop, tasted “X” and liked). General need description. - Buyer prepares a document in which the characteristics and quantity of the needed item are listed. o Checking with production department. o Checking with accountancy department (Can we afford selling it?). Product specifications. - The buying organization develops the item’s product specifications: o Value analysis. ▪ Describing the item I want, the characteristics, etc. Supplier search. - Finding the best vendors for the required item. o The newer the buying task. o The more complex and costly the item. o …. The greater the amount of effort that would be put in finding the right supplier. Proposal solicitation. - Buyer invites qualified suppliers to submit proposals, ranging from: o Price lists, catalogues (simple). o Ad-hoc propositions. Marketing Strategy Sofía Alonso Ibáñez 2ºCYM Supplier selection. - Buying department will rank suppliers using: o Quality products and services. o On-time deliveries. o Ethical corporate behavior. o Honest communication and prices. o Repair and servicing capabilities. o Technical aid and advice. o Performance history and reputation. Order-routine specification. - Preparing the final order (PO): o Listing items, tech specs, quantities. o Expected time of delivery. o Returns and warranties. Performance preview. - Buying department will contact users (within the company). o Assess their satisfaction. o Decide whether to go on with the purchase or not. o Monitor the usefulness of the purchased items. 3. TYPES OF BUYING SITUATIONS. MAIN PARTICIPANTS IN BUSINESS PURCHASING If something works you buy again. If not, you modify. Straight rebuy: reordering something without any modifications. Modified rebuy: buyer wants to modify: - Product specifications. - Prices. - Terms. - Suppliers. New task situation: The greater the costs or risks. - The larger the number of decisions participants. - The greater the effort to collect information. Participants in the business buying process. - Users (production department). o Members of the organization who will use the product or service. o They may be the initiators of a buying process - Influencers. o Help define specifications. o Provide information for evaluating alternatives. o Technical profile. - Buyers. o Formal authority to select suppliers and terms of purchase. o Select vendors and negotiate. - Deciders. o Formal or informal power to select buyers or offers. o In routine purchases, buyers and deciders may coincide. - Gatekeepers. o Control the flow of information to others. Marketing Strategy Sofía Alonso Ibáñez 2ºCYM Major influences on business buyers: - Business buyers are human and social as well.