Principles of Marketing PDF

Principles of Marketing Eighteenth Edition, Global Edition Chapter 6 Business Markets and Business Buyer Behavior Copyright © 2021 Pearson E...

Principles of Marketing Eighteenth Edition, Global Edition Chapter 6 Business Markets and Business Buyer Behavior Copyright © 2021 Pearson Education Ltd. The Marketing Process Copyright © 2021 Pearson Education Ltd.  B2B - BUSINESS TO BUSINESS Companies such as IBM, Boeing, DuPont, Caterpillar, GE, and countless other firms sell most of their products to other businesses. Copyright © 2021 Pearson Education Ltd. B2B - BUSINESS TO BUSINESS Even large consumer products companies, which make products used by final consumers, must first sell their products to other businesses. Copyright © 2021 Pearson Education Ltd. Business Markets and Buyer Behavior Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. It also includes the behavior of retailing and wholesaling firms that acquire goods to resell or rent to others at a profit. The business buying process is the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands. Copyright © 2021 Pearson Education Ltd. Business Markets Market Structure and Demand Fewer but larger buyers Derived demand Inelastic demand Fluctuating demand Copyright © 2021 Pearson Education Ltd. Fewer but larger buyers Even in large business markets, a few buyers often account for most of the purchasing. For example, when Goodyear sells replacement tires to final consumers, its potential market includes millions of car owners around the world. But its fate in business markets depends on getting orders from only a handful of large automakers. Derived demand Business demand is derived demand—it ultimately derives from the demand for consumer goods. Inelastic and more fluctuating demand The total demand for many business products is not much affected by price changes, especially in the short run. A drop in the price of leather will not cause shoe manufacturers to buy much more leather unless it results in lower shoe prices that, in turn, increase consumer demand for shoes. And the demand for many business goods and services tends to change more—and more quickly—than does the demand for consumer goods and services. A small percentage increase in consumer demand can cause large increases in business demand. Business Markets Nature of the Buying Unit Business buyers usually face more complex buying decisions than do consumer buyers. Compared with consumer purchases, a business purchase usually involves: More decision participants More professional purchasing effort More buyer and seller interaction Copyright © 2021 Pearson Education Ltd. Business Markets Types of Decisions and the Decision Process Business buyers usually face more complex buying decisions than consumer buyers. Supplier development is the systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others. Walmart doesn’t have a “Purchasing Department”; it has a “Supplier Development Department.” The giant retailer knows that it can’t just rely on spot suppliers who might be available when needed. Instead, Walmart manages a robust network of supplier-partners that help provide the hundreds of billions of dollars of goods that it sells to its customers each year. Copyright © 2021 Pearson Education Ltd. Business Buyer Behavior (1 of 7) Figure 6.1 A Model of Business Buyer Behavior The Model of Buyer Behavior Copyright © 2021 Pearson Education Ltd. Business Buyer Behavior (2 of 7) Major Types of Buying Situations Straight rebuy is a buying situation in which the buyer routinely reorders something without any modifications. Modified rebuy is a buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. New task is a buying situation in which the buyer purchases a product or service for the first time. Copyright © 2021 Pearson Education Ltd. Business Buyer Behavior (3 of 7) Major Types of Buying Situations Systems selling is buying a complete solution to a problem from a single seller. Or Solutions selling: UPS not only delivers packages for online retailer Overstock.com, it also manages much of Overstock’s complex order and returns process in an efficient, customer-pleasing way. Copyright © 2021 Pearson Education Ltd. Retailers such as Walmart or supermarkets routinely reorder Coca-Cola products (e.g., Coke, Diet Coke, Sprite) based on their usual stock levels. These orders are placed without modification to the product specifications or terms. The process is a straight rebuy because Coca-Cola is an established supplier, and the retailers continue to reorder the same products and quantities as before. The buyer (retailer) doesn’t change the order or consider any new suppliers; the product specification, price, and terms remain the same as the previous order. Marriott Hotels switching up the types of towels they order from a textile supplier to improve guest satisfaction. Marriott may decide to change the specifications of its towels (e.g., a softer texture or larger size) based on guest feedback, requiring a conversation with the supplier to make adjustments in terms of quality or pricing. Marriott has previously purchased towels but now seeks changes in quality or pricing, leading to a revised contract with the same or a new supplier. Tesla purchasing new software for electric vehicle autonomous driving. If Tesla decides to purchase AI software for a new level of autonomous vehicle capabilities, it may work with a tech supplier it has never partnered with before. This is a new product purchase for Tesla that involves extensive research, evaluation, and decision-making, as it’s the first time the company is integrating this specific type of AI software into their vehicles. Siemens providing a comprehensive hospital solution to a new medical facility. A hospital group in need of equipment, software, and ongoing maintenance might contract Siemens as a single provider for everything from diagnostic imaging machines, patient monitoring systems, and hospital management software to training and support. Instead of purchasing individual products from multiple vendors, the hospital buys a complete, integrated healthcare system from Siemens, streamlining the installation, compatibility, and maintenance processes. Gina Parker owns an ad agency in Baton Rouge. She regularly purchases cleaning supplies for her custodial staff, using the same vendor and ordering relatively consistent amounts of the same products on each purchase. This is an example of ________. A) a modified rebuy situation B) a new task C) a straight rebuy situation D) reverse auction E) product differentiation Business Buyer Behavior (4 of 7) Participants in the Business Buying Process Buying center consists of all the individuals and units that play a role in the business purchase decision-making process. Users: are members of the organization who will use the product or service. In many cases, users initiate the buying proposal and help define product specifications. Influencers: often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influencers Buyers: have formal authority to select the supplier and arrange terms of purchase. Deciders: have formal or informal power to select or approve the final suppliers. Gatekeepers: control the flow of information to others. For example, purchasing agents often have authority to prevent salespersons from seeing users or deciders. Copyright © 2021 Pearson Education Ltd. Who among the following does NOT participate in the purchase decision process of a buying organization? A) individuals who use the product or service B) individuals who influence the buying decision C) individuals who make the buying decision D) individuals who supply raw materials E) individuals who control the flow of information to others Business Buyer Behavior Figure 6.2 Major Influences on Business Buyer Behavior Factors Influencing Consumer Behavior Copyright © 2021 Pearson Education Ltd. The Business Buying Process (1 of 5) Figure 6.3 Stages of the Business Buyer Decision Process The Buyer Decision Process Copyright © 2021 Pearson Education Ltd. The Business Buying Process (2 of 5) Problem recognition occurs when someone in the company recognizes a problem or need. Internal stimuli - Need for new product or production equipment External stimuli - Idea from a trade show or advertising Copyright © 2021 Pearson Education Ltd. Toyota’s manufacturing team notices that their existing assembly line machinery is becoming outdated and less efficient, causing slowdowns in production. This internal need prompts Toyota to invest in new, advanced robotics to streamline production and enhance productivity. IKEA’s product development team attends a technology trade show and sees a demonstration of augmented reality (AR) for furniture shopping. Recognizing an opportunity to enhance the customer experience, IKEA decides to integrate AR into their app so customers can visualize how furniture would look in their homes, leading to the launch of the IKEA Place app. Which of the following is an example of an internal stimulus that would most likely lead to problem recognition? A) A buyer gets a new idea from an advertisement. B) A buyer gets a new idea at a trade show. C) A buyer is unhappy with a current supplier's product quality. D) A buyer receives a call from a salesperson offering better service. E) A buyer learns about a new product at an industry convention. The Business Buying Process (3 of 5) General need description describes the characteristics and quantity of the needed item. For complex items, the buyer may need to work with engineers, users, and consultants to develop the general need description. The team may want to rank the importance of reliability, durability, price, and other attributes desired in the item. Product specification describes the technical criteria. Value analysis is an approach to cost reduction where components are studied to determine if they can be redesigned, standardized, or made with less costly methods of production. Copyright © 2021 Pearson Education Ltd. The Business Buying Process (4 of 5) Supplier search involves compiling a list of qualified suppliers to find the best vendors. Proposal solicitation is the process of requesting proposals from qualified suppliers. In response, some suppliers will refer the buyer to their website or promotional materials or send a salesperson to call on the prospect. However, when the item is complex or expensive, the buyer will usually require a detailed written proposal or formal presentation from each potential supplier. Supplier selection is when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditions. Copyright © 2021 Pearson Education Ltd. Mattel – Lead Paint Recall Issue: In 2007, Mattel had to recall millions of toys after it was found that some suppliers in China used lead-based paint, a dangerous substance especially for children. Impact: The scandal caused significant reputational damage and prompted Mattel to implement stricter quality control and supplier audit processes, especially in overseas manufacturing. McDonald's – Food Safety Issues with Suppliers Issue: In 2014, McDonald's faced scandal in China when it was discovered that one of its meat suppliers, Shanghai Husi Food Co., had sold expired meat. Impact: The incident led to supply chain audits and a re-evaluation of food safety practices in McDonald's Chinese operations, along with implementing more stringent supplier verification processes globally. Nike – Sweatshop Labor Scandal Issue: In the 1990s, Nike faced intense criticism for its reliance on suppliers in Southeast Asia, where workers were found to be working in poor conditions for very low wages and were often subjected to harsh treatment. Impact: Public outcry and boycotts led Nike to overhaul its supplier monitoring system, introducing transparency practices and setting new labor standards. The Business Buying Process (5 of 5) Order-routine specifications includes the final order with the chosen supplier and lists all of the specifications and terms of the purchase. Performance review involves a critique of supplier performance to the order-routine specifications. Copyright © 2021 Pearson Education Ltd.  Starbucks Purchasing Sustainable Coffee Equipment Stages of the Starbucks (Business Buyer) Decision Process 1. Problem Recognition: Starbucks recognizes a need for more sustainable coffee machines to reduce environmental impact and appeal to eco-conscious customers. The internal team identifies that their existing equipment consumes excessive energy and water. 2. General Need Description: Starbucks defines its need for coffee machines that consume less energy, reduce water waste, and meet certain environmental standards, ensuring they align with Starbucks’ sustainability goals. 3. Product Specification: Starbucks’ technical team outlines specific features needed in the coffee machines, such as energy-efficient design, water-saving capabilities, and compatibility with existing store layouts. They document requirements like durability and performance under high use. 4. Supplier Search: Starbucks’ procurement team begins researching potential suppliers who specialize in sustainable coffee equipment. They review suppliers known for their environmental commitment and innovative designs, such as La Marzocco or Mastrena, known suppliers of commercial espresso machines. 5. Proposal Solicitation: Starbucks requests proposals from several shortlisted suppliers. Each supplier submits a proposal detailing their product specifications, sustainability credentials, pricing, and availability timelines. 6. Supplier Selection: Starbucks evaluates proposals based on criteria such as sustainability performance, cost, maintenance support, and brand reputation. They select a supplier that meets their sustainability and operational requirements while offering an attractive long- term maintenance plan. 7. Order-Routine Specification: Starbucks places an initial order specifying the number of machines, delivery schedules, installation services, and maintenance plans. Terms of delivery, payment, and warranty coverage are finalized to ensure consistent supply and after-sales service. 8. Performance Review: After the new machines are installed, Starbucks monitors their performance over several months. They assess energy savings, water usage, and machine reliability, comparing these metrics against their sustainability targets. Feedback is documented for future buying decisions, including potential improvements for equipment.