Strategic Marketing Unit 4 PDF

Facultad de Comercio, Turismo y Ciencias Sociales “Jovellanos” STRATEGIC MARKETING U4 1 Consumer Behavior Industrial Markets 1 Characteristics of business markets TOC 2 The busine...

Facultad de Comercio, Turismo y Ciencias Sociales “Jovellanos” STRATEGIC MARKETING U4 1 Consumer Behavior Industrial Markets 1 Characteristics of business markets TOC 2 The business buying process 3 Types of buying situation and participants in the business buying process 2 1  Characteristics of business markets A call for rationality 3 4.1 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. 4 2  Characteristics of business markets Similarities to Consumer Markets: – Both involve people assuming buying roles – Needs are needed Differences to Consumer Markets – Market structure and demand – Nature of the buying unit – Types of decisions – Decision process 6 Characteristics of business markets Market structure and demand: – Far fewer but larger buyers. ¿Hoy many tires does Renault purchase every month? – Geographically concentrated. Luxury firms concentrate in Paris, NYC, or Milano. Petrochemicals and synthetic fibers around Rotterdam or Amsterdam – Derived demand. Car manufacturers demand tires when they have a demand for cars – Inelastic demand (esp. In the short term). 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. 7 3  4.1 Characteristics of business markets Nature of the buying unit: – Business purchase involves: More decision participants More professional purchasing effort – The more complex the purchase, the more likely is that several people will participate in the decision-making process. – Buying committees with: Technical experts Top management. 8 4.1 Characteristics of business markets 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 9 4  4.1 Characteristics of business markets 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 Helping customer to solve their needs Providing ad-hoc after sale support – B2B is the perfect ambient to let relationship marketing building. 10 2 The business buying process 11 5  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. 12 2 The business buying process Problem recognition – Someone in the company recognizes a problem or need that can be met by acquiring a specific product or service. Internal stimuli: we are about to launch a new product, and this means a new machine or a new raw material. 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. General need description: – Buyer prepares a document in which the characteristics and quantity of the needed item are listed. Checking with production department Checking with accountancy department 13 6  2 The business buying process Product specifications: – The buying organization develops the item’s product specifications: Value Analysis Supplier search: – Finding the best vendors for the required item. The newer the buying task The more complex and costly the item …. The greater the amount of effort that would be put in finding the right supplier. 14 2 The business buying process Proposal solicitation: – Buyer invites qualified suppliers to submit proposals, ranging from: Price lists, catalogues (simple) Ad-hoc propositions Supplier selection: – Buying department will rank suppliers using: Quality products and services On-time deliveries Ethical corporate behavior Honest communication and prices Repair and servicing capabilities Technical aid and advice Performance history and reputation 15 7  2 The business buying process Order-routine specification: – Preparing the final order (PO): Listing items, tech specs, quantities Expected time of delivery Returns and warranties Performance review: – Buying department will contact users (within the company): Assess their satisfaction Decide whether to go on with the purchase or not Monitor the usefulness of the purchased items. 16 4.3 Types of buying situations Main participants in business purchasing 18 8  4.3 Types of buying situations 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. 19 4.3 Participants in the business buying process Members of the organization who will use the product or service USERS They may be the initiators of a buying process Help define specifications INFLUENCERS Provide information for evaluating alternatives Technical profile Formal authority to select suppliers and terms of purchase BUYERS Select vendors and negotiate Formal or informal power to select buyers or offers DECIDERS In routine purchases, buyers and deciders may coincide GATEKEEPERS Control the flow of information to others 29 9  4.3 Participants in the business buying process Major influences on business buyers: – Business buyers are human and social as well 30 10