BGMT 411: Chapter 6

Analyzing Business Markets

Boeing 787 Dreamliner, 3 Million Parts, 500 Suppliers

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?

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?

Local Examples

• While these businesses all operate in the B2C Space, many B2B suppliers call on these businesses and need to market to them as well

• Can you think of any examples of vendors that would market to these companies?

Local Examples

• IT Solutions

• Supplies

• Product

• Text Books

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.

Characteristics of Business Markets (Page 86)• Fewer, larger buyers

• Close supplier-customer relationships

• Professional purchasing

• Many buying influences

• Multiple sales calls

• Derived demand

• Inelastic demand

• Fluctuating demand

• Geographically concentrated buyers

• Direct purchasing

Buying Situation

• Straight rebuy

• Reordering of supplies on a routine basis, usually with current suppliers and automatic reorders

• Modified rebuy

• The buyer wants to change the product specs, prices, delivery, etc. This usually opens the door to out suppliers

• New task

• Buys a new product or service for the first time

Buygrid Framework

The Buying Center• Initiators: Those who request that something be purchased.

• Users: Those who will use the product or service. In many cases, the users initiate the buying proposal.

• Influences: People who influence the buying decision by defining specifications and providing information for evaluating alternatives. Technical personnel are particularly important influences.

• Decider: People who decide on product requirements and or on suppliers.

• Approvers: People who authorize the proposed actions of deciders or buyers.

• Buyers: People who have formal authority to select the supplier and arrange the purchase terms.

• Gatekeepers: People who have the power to prevent sellers or information from reaching to members of the buying center. e.g. purchasing agents, receptionists, and telephone operators may prevent sales

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Concerns to Business Marketers

• Who are the major decision participants?

• What decisions do they influence?

• What is their level of influence?

• What evaluation criteria do they use?

Stages in the Buying Process: Buy phases

1.Problem recognition: Someone identifies that a problem can be solved by purchasing a new good or service

2.General need description: Buyer determines the items characteristics and quantities needed

3.Product specification: (PVA) Product Value Analysis, reducing the cost to make a product

4.Supplier search: The buyer reaches out to suppliers or auction sites

Stages in the Buying Process: Buy phases

5.Proposal solicitation: Not all buyers ask for an RFP (Request for Proposals) but government buyers must

6.Supplier selection: Final suppliers selected from the field and chosen by the buying process

7.Order-routine specification: The final order is placed with all details listed

• MRO: Maintenance, Repair, Operations

8.Performance review: Evaluating suppliers in a structured process, or less structured, depending on the business

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