Business Markets and Buying Behavior Chapter 8 PDF

Chapter 8 Business Markets and Buying Behavior © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part,...

Chapter 8 Business Markets and Buying Behavior © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password- © zayats-and- protected website for classroom use.  Learning Objectives © zayats-and- LO 8-1 Distinguish among the four zayats types of business markets LO 8-2 Identify the major characteristics of business customers and transactions LO 8-3 Identify the attributes of demand for business products LO 8-4 Describe the buying center, stages of the business buying decision process, and the factors that affect this process LO 8-5 Describe industrial classification systems and how © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Business Markets © zayats-and- OBusiness (B2B) markets zayats consists of individuals, organizations or groups that purchase a specific kind of product for one of three purposes: O Resale O Direct use in producing other products O Use in general daily Producer operations Reseller O The four categoriesInstitutional Government of business markets LO 8- are: 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Product Markets © zayats-and- OProducer Markets zayats O Individuals and business organizations that purchase products to make profits by using them to produce other products or using them in their operations O Include buyers of raw materials O Purchasers of semi-finished and finished items, used to produce other products O Producer markets include a wide array of industries LO 8- 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Product Markets © zayats-and- zayats LO 8- 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Table 8.1 – Number of Establishments in Industry Groups © zayats-and- zayats LO 8- 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Reseller Markets © zayats-and- OReseller markets zayats O Intermediaries, such as wholesalers and retailers, which buy finished goods and resell them for a profit O Resellers consider many factors, such as: O Level of demand O Resale price O Space required – sales per square foot O Supplier’s ability to provide adequate quantities when and where needed O Ease of placing orders LO 8- 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Government Markets © zayats-and- OGovernment Markets zayats O Federal, state, county and local governments that buy goods and services to support their internal operations and provide products to their constituencies O Total government spending accounts for around 39 percent of the U.S.’ total gross domestic product O Although government markets can impose intimidating requirements, they can also be very lucrative LO 8- 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Institutional Markets © zayats-and- OInstitutional zayats markets consist of organizations with charitable, educational, community or other non- business goals LO 8- 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Institutional Markets © zayats-and- OInstitutions have different goals zayats and fewer resources than other types of organizations OThis pipe organ producer supplies products mainly to churches OCan you think of other products LO 8- used mainly by institutional 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.   Bombardier specializes in planes Discussion and trains. This Canadian Point – company’s primary markets are Bombardier governments and businesses that purchase railroad and airplane related products. Bombardier also markets corporate jets under the names of Learjet, Challenger, and Global. Bombardier markets their products’ fuel efficiency, low operating costs, and other benefits.  Which business markets does Bombardier seem to focus on? There may be more than one answer.  What do you think is the most important concern of Bombardier’s LO 8- customers: price, quality, service, 1 or supplier relationships? © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a  Figure 8.1 – Dimensions of Marketing to Business Customers © zayats-and- zayats LO 8- 2 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Transaction Characteristics © zayats-and- OTransactions between zayats businesses differ from consumer sales in several ways O Business orders tend to be much larger O Purchases tend to be made by committee O Discussions and negotiations can require considerable marketing time and selling effort O Reciprocity is an arrangement unique to business markets in which two LO 8- organizations agree to buy from each 2 other © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Business Customer Attributes © zayats-and- OBusiness customers differ from zayats consumers O Better informed O Demand more detailed product information O Goals of a purchasing agent may include advancement or financial awards O Some suppliers and business customers build and maintain mutually beneficial relationships or partnerships LO 8- 2 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Business Customer Concerns © zayats-and- OConcerns of business zayats customers: O Price – Influences operating costs, which in turn affect selling price, profit margin and the ability to compete O Product quality – most firms have standards or specifications they must meet and not exceed O Service – typically business customers desire market information, inventory maintenance, on-time delivery and repair services LO 8- O Supplier relationships – with a strong 2 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Business Buying Methods © zayats-and- OMost business purchasers use zayats one of the following purchase methods: O Description – used when products are standardized such as agriculture products O Inspection – used when products have unique characteristics such as buildings or vehicles O Sampling – used for homogeneous products when examining the entire lot is not feasible such as grain LO 8- 2 O Negotiation – used commonly for © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Types of Business Purchases © zayats-and- OMost business purchases are zayats one of three types, each requiring modified selling approaches O New-task purchase O Initial purchase of an item for use in performing a new job or solving a new problem O Straight rebuy purchase O Routine purchases of the same products under approximately the same terms of sale O Modified rebuy purchase LO 8- 2 O When new-task purchases are changed on © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.   Apple products are appreciated for Discussion their quality and longevity. Assume Point – that you are a city of San Francisco Government employee in charge of ordering more Apple computers for your facility. Buyers Look at the different situations below and determine the type of business purchase.  Your facility has decided to upgrade to the newest model of Apple computers. You fill out an order to replace all your older models with new ones.  You got the go-ahead to hire new employees. You need to purchase more computers for them to use.  Apple is pulling its products from a green- registry. This does not fit with San Francisco’s emphasis on sustainability. You are told that the city will no longer do business with Apple and will use PCs from now on. When you need new computers, LO 8- you contact Dell. 2 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a  Demand for Business Products © zayats-and- ODemand for business products, zayats also called industrial demand, can be: O Derived demand – the demand for business products derives from demand for consumer products O Inelastic demand – price increases and decreases will not significantly alter industrial demand O Joint demand – occurs when two or more items are used in combination to produce a product LO 8- 3 O Because demand for business products is © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Derived Demand © zayats-and- zayats LO 8- 3 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.   A manufacturer of snow tires provides Discussion a discount on its products during the Point – Type of summer months. What type of Demand  There are four types of demand is this? demand for business  A grocery store is running low on products: derived, hamburger buns. They must order inelastic, joint, and more to keep up with demand. fluctuating. Look at the Hamburger buns illustrate what type following situations. of demand for businesses? Categorize each  Fleetwood, an RV manufacturer, is according to its constructing its newest model of RV. demand: The windshield wipers for the RV has risen in price. What type of demand applies to this product?  Sales of computers are increasing. Intel markets its computer chips to computer manufacturers worldwide. Describe the type of demand for its computer chips. LO 8- 3 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a  Business Buying Decisions © zayats-and- OBusiness (organizational) zayats buying behavior refers to the purchase behavior of producers, government units, institutions and resellers O Some purchasing factors are the same as the consumer market but some are unique to business markets O We will first look at the buying center which is a group of people within an organization who make business LO 8- purchase decisions 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Buying Center © zayats-and- OThe people within an zayats organization who make business purchase decisions are called the buying center and includes the following roles: O Users – members who frequently initiate the purchase, use the product and evaluate the product O Influencers – technical personnel who develop the specifications and evaluate LO 8- 4 alternative products © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Buying Center © zayats-and- OBuyers – select suppliers and zayats negotiate terms ODeciders – actually choose the products OGatekeepers – control the flow of information to and among people who occupy other roles in the buying center LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.   You are a salesperson in charge of Discussion securing a contract with a Point – The construction company. You know Buying Center that there are a lot of people in the company that will influence whether it will choose to do business with your firm. Identify the following people according to their roles.  Because the company gets a lot of bids, Martha screens salespeople before they can talk to the purchasing department.  Sam is a trusted manager who has vast knowledge of construction. He gives the purchasing department advice about what to look for.  After receiving final approval, LO 8- 4 Dana places the order and © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a  Figure 8.2 – Business Buying Decision Process and Factors that May Influence It © zayats-and- zayats LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 1: Problem Recognition © zayats-and- OOne or more individuals zayats recognize a problem or need exists O Could be individuals in the buying center such as users, influencers or buyers who recognize the need or problem O Problems or needs could be identified by external sources such as sales representatives or advertisements LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 1: Problem Recognition © zayats-and- OMay arise under a variety of zayats circumstances O When machines malfunction O When an existing product is modified O When introducing new products LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 2: Specifications © zayats-and- OThe development of product zayats specifications requires the buying center participants assess the problem or need and determine what is necessary to resolve or satisfy it OUsers and influencers often provide information and advice OBy assessing and describing LO 8- needs, the organization should 4 be able to establish product © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 3: Potential Products © zayats-and- OSearching for and evaluating zayats potential products and suppliers is the third stage OSearching may include contacting suppliers for information, soliciting proposals and examining websites, catalogs and trade publications LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 3: Potential Products © zayats-and- OValue analysis is an zayats evaluation of each component of the potential purchase O Examines quality, design, materials etc. OVendor analysis is a formal, systematic evaluation of current and potential vendors O Examines price, product quality, delivery service, product availability and overall reliability LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 4: Selection © zayats-and- OThe fourth stage is to select the zayats product to be purchased and the supplier or suppliers O Multiple Sourcing – when the buyer selects and uses several suppliers O Sole Sourcing – when only one supplier is selected LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 4: Selection © zayats-and- OThis stage is where the actual zayats purchase takes place and the following details finalized O Terms and credit arrangements O Delivery dates and methods O Technical assistance arrangements LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Stage 5: Evaluation © zayats-and- ODuring the fifth stage the zayats product’s performance is evaluated by comparing it with the specifications O If the product meets specifications but does not work – specifications need adjusted O Supplier’s performance is also evaluated OThese 5 steps are used LO 8- primarily for new-task 4 purchases © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Figure 8.2 – Business Buying Decision Process and Factors that May Influence It © zayats-and- zayats LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Environmental Influences © zayats-and- OEnvironmental factors that zayats influence buying decisions can be: O Competitive and economic factors O Political forces O Legal and regulatory forces O Technological changes O Socio-cultural issues LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Organizational Influences © zayats-and- OOrganizational factors that zayats influence the buying decision process include O The company’s objectives O Purchasing policies O Resources O Size and composition of the buying center LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Interpersonal Influences © zayats-and- OInterpersonal factors are the zayats relationships among people in the buying center O Trust is crucial, especially with customized products O Trust and clear communication ensures the satisfaction of all parties O These interpersonal dynamics are often hidden, making it difficult for marketers to assess LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Individual Influences © zayats-and- OIndividual factors are personal zayats characteristics of participants in the buying center, such as: Age Personality Education level Position in the organization LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Individual Influences © zayats-and- OHow influential these factors zayats are depends on: O The buying situation O The type of product being purchased O Whether the purchase is new-task, modified or straight rebuy OEffective marketers must know customers well LO 8- 4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Industrial Classification Systems © zayats-and- OInformation about business zayats customers is based on industrial classification systems O Standard Industrial Classification (SIC) System was developed by the federal government but replaced O International Standard Industrial Classification (ISIC) is used mainly in Europe O North American Industry Classification System (NAICS) An industry classification system that LO 8- 5 generates comparable statistics among © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Industrial Classification Uses © zayats-and- OUseful for segmentation, most zayats appropriate when used with other types of date OMarketers must locate potential purchasers and estimate their purchase potential by finding a relationship between the potential purchases and a LO 8- variable from the industrial 5 classification data © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Industrial Classification Uses © zayats-and- OProblems with the data include: zayats O Some industries do not have a specific designation O Double counting of shipments could occur O Some data may be understated O Currency of data suffers due to lag time LO 8- 5 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.