Analyzing Business Markets and Buyer Behavior
Analyzing Business Markets and Buyer Behavior
Presentation by: Sheldon Zion Banji Nayankumar Dhariwal Krishnaprasad M.N
ObjectivesUnderstand the nature of the business market and how it differs from the consumer market.Learn how institutions and government agencies buy.Identify the different buying situations faced by organizational buyers.
ObjectivesIdentify the participants in the business buying process and the various influences impacting business buying decisions.Understand how business buyers make their decisions.
Contd..
Differences Between B2B and B2CMarket Features:Specific LocationsRelatively fewer & large buyers
Product Attributes:Technically ComplexCustomised
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Differences Between B2B and B2CService Aspects:High importance of :
Timely delivery
Good Service
Availability
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Differences Between B2B and B2CBuyer BehaviourInvolvement of various functional areasPurchase decisions-Objective, performance basisTechnical importanceStable interpersonal relationshipsDecision making- Observable stages & distinctHigh switching costs
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Differences Between B2B and B2CDistribution Channels:ShorterFewer IntermediariesMore DirectPromotion & Advertising:More emphasis on personal sellingTrade journals, Business magazines & direct mailTrade shows, Trade fairs & Technical seminarsInternet
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Differences Between B2B and B2CPricing:Competitive biddingNegotiated pricesList prices for standard products
Demand Characteristics:Derived DemandJoint DemandCross elasticity of Demand
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Differences Between B2B and B2C
Organizational BuyingOrganizational buying is:
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.
Organizational BuyingCompared to Consumer Markets, Business Markets have . . .Fewer buyersLarger buyersGeographically concentrated buyersClose relationships with their supplier-customersContd..
Fluctuating demandDerived demandInelastic demandProfessional purchasingMultiple buying influencesMultiple sales callsDirect purchasingReciprocityLeasingOther Business Market Characteristics
Groups in Business MarketThe Business Market Includes For-Profit Companies and Two Specialized Groups:The institutional market:Schools, hospitals, prisons, etc. with captive audiencesCost and quality standards drive purchases
The government market:Bidding process awards contracts
Systems Buying and SellingSystems BuyingA single provider provides the total package for the buyers needsMay involve turnkey solutions
Systems SellingManufacturers sell entire systemsSupplier provides all MRO items
Buying Situations
New Task Buying
Straight Rebuy
Involves Decision Making
Modified Rebuy
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Buying Situations
Straight rebuyModified rebuyNew task
Purchasing a product or service for the first time
High level of involvement and time commitment; multiple influences
Example: selecting a new model of aircraft to expand a fleet.
Buying Situations
Straight rebuyModified rebuyNew task
Specifications, prices, delivery terms or other aspects require modification
Moderate level of involvement and time commitment
Example: desktop computers
Buying Situations
Straight rebuyModified rebuyNew task
Routine reorders from approved vendor list.
Low involvement, minimal time commitment.
Example: copier paper
The Buying Center InitiatorsUsersInfluencersDecidersApproversBuyersGatekeepers (who are they?)
Other issues:Key buying influencers (small sellers)Multilevel in-depth selling and system selling (large sellers)How can we determine who is in the buying center?? Decisions? Influence? Criteria??
Participants in the Business Buying Process
Influences on Business BuyersMajor Influences
EnvironmentalOrganizationalInterpersonalIndividual
Demand levelEconomic outlookInterest ratesTechnological changePolitics/regulationsCompetitionConcerns for social responsibility
Influences on Business BuyersMajor Influences
EnvironmentalOrganizationalInterpersonalIndividual
ObjectivesPoliciesProceduresOrganizational structuresSystems
Influences on Business BuyersMajor Influences
EnvironmentalOrganizationalInterpersonalIndividual
InterestsAuthorityStatusEmpathyPersuasiveness
Influences on Business BuyersMajor Influences
EnvironmentalOrganizationalInterpersonalIndividual
AgeIncomeEducationJob positionPersonalityRisk attitudesCulture
Targeting Firms and Buying Centers:Do not lump small & midsize businesses together.Do keep it simple.Do use internet.Do not forget about direct contact.Do provide support after the sale.
Targeting within the Business Center:
The Purchasing Process: Stages in the Buying Process25Stage 1. Problem RecognitionStage 2. General Need Description: bill of materials/PVAStage 3. Product SpecificationStage 4. Supplier Search: extranet, alliances, co. sitesStage 5. Proposal Solicitation: RFP or RFQStage 6. Supplier Selection: vendor analysisStage 7. Order-Routine Specification: blanket?Stage 8. Performance Review
Purchasing ProcessRoutine Product Low value and cost and little risk.
Leverage Product High value and cost and little risk.
Strategic Product High value and cost and high risk.
Bottleneck Product Low value and cost and some risk.
27Methods of e-ProcurementWebsites organized using vertical hubs
Websites organized using functional hubs.
Direct extranet links to major suppliers
Methods of e - ProcurementBuying alliances
Company buying sites
Contd.
Forms of Electronic Marketplaces
Catalog sitesVertical marketsPure play auction sitesSpot marketsPrivate exchangesBarter marketsBuying alliances
30B2G E CommerceKorea Online E Procurement System- KONEPSBidding,Contract,Delivery inspection,Payment of proceeds
31B2G E Commerce
32KONEPS35,000 public organizations 150,000 supplying companies Online visit by 140,000 persons/dayDaily exchange of 100,000 electronic documents.93% of the public bidding Public Service Award from the UN
34An Example of Vendor Rating(price quoted is adjusted by quality, delivery, and service ratings)AttributesRating ScaleImportanceWeightsPoor(1)Fair(2)Good(3)Excellent(4)Price.30xSupplier reputation.20xProduct reliability.30xService reliability.10xSupplier Flexibility.10xTotal score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5
Customer Relationships
Create more value, establish trust.
Advertising agencies and clients: Market growthInformation asymmetryBarriers to entryDependence asymmetryEconomies of scale
Corporate credibility depends on expertise, trustworthiness and likabilityMarket growth for mass-production techniques benefits from mass-media advertisingInformation asymmetry == partnership would generate more profits than if the partner was to invade another firms area, ad agencies have knowledge that clients would have difficulty obtainingBarriers to entry: difficult to enter businessDependence asymmetry: One partner can influence or control the others conduct. Advertising agencies control media accessEconomies of scale : provide same market information to many clients
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Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism.
Customer Relationships
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Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism.
Customer Relationships
These relationships have risks and opportunities
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Institutional markets
Institutional, Govt. Markets
HospitalsSchoolsPrisons
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Government markets
Institutional, Govt. MarketsSuppliers bid, contracts go to lowest bids
Spending subject to public review
Can be nationalistic
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SummaryThinkBUYDecideOrganizational buying
Decision making processBusiness market
Few large buyers
Buying center
Decision making unit
Organizational buying = Decision making processEstablish need, then identify/evaluate/choose supplierBusiness market = Few large buyersDemand from business market is derived from consumer market and fluctuates with business cycleBuying center = Decision making unitCharacterized by envtl., organizational, interpersonal and individual factors
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SummaryThinkBUYDecideBuying process
Eight Buy phasesBusiness marketers
Strong bonds,values
Inst., Govt markets
Customer, Supplier
Buying process => 8 buyphaseProblem recognition, need description, product specification, supplier search, solicitation, selection, order-routine specification, performance review
Institutional markets provide goods/services to people, clientele have no control over service. Govt. organizations = require a lot of paperwork, cost conscious due to public scrutiny Suppliers need 41
Thank You
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