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Slide 8.1
Business-to-business marketing
Chapter 8
Slide 8.2
Typical transactions of business markets
Figure 8.1 Business transactions involved in producing and distributing a pair of shoes
Slide 8.3
Characteristics of business markets
• Business markets differ from consumer markets by structure and demand– Geographically concentrated
• e.g. London for Financial services
– Derived demand• Derived from the demand for consumer goods.
– Inelastic demand• Total demand for a product that is not much affected by price
changes, especially in the short-term.
– Fluctuating demand• Small change in consumer demand may result in large
business demand.
Slide 8.4
Nature of the purchase unit
• More buyers
• More professional purchasing process
Slide 8.5
Types of decision and the decision process
• Business buyers generally involved in more complex buying decisions
• Buying process more formalised
• Buyer and seller more dependent upon each other
• Sellers frequently customise the products for the buyers
• Build close long-term relationships
• Proactive planning
Slide 8.6
Other characteristics of business markets
• Direct purchasing– Fewer intermediaries
• Reciprocity– Leveraging products and services in associated
companies
• Leasing– Predominantly in capital equipment, cash flow
management and tax advantages as well as upgrade facilities
Slide 8.7
Model of business buyer behaviour
Figure 8.2 A model of business buyer behaviour
Slide 8.8
Business buyer behaviour
Figure 8.3 Three types of business buying situationSource: Ben M. Enis, Marketing Principles, 3rd edn (1980). © 1980 Scott, Foresman & Co.
Slide 8.9
Main types of buying situation
• Straight re-buy– Routinely reorders something without
modification
• Modified re-buy– Buyer needs to modify product specifications,
prices, terms or suppliers
• New task– Order product or service for the first time
Slide 8.10
Participants in the business buying process
• Buying centre• Users • Influencers• Buyers• Deciders• Gatekeepers
Slide 8.11
Figure 8.4 The main influences on business buying behaviour
Slide 8.12
Main influences on business buyers
• Environmental factors– Economic environment influencing demand, interest rates etc.
• Organisational factors– Upgraded purchasing mechanisms e.g. electronic data
interchange • Strategic materials management, TQM and JIT
– Centralised purchasing– Long-term contracts– Purchasing performance evaluation
• Interpersonal factors• Individual factors
– Every buyer has unique personal attributes that will affect the process.
Slide 8.13
Table 8.1 Key stages of the business buying process in relation to important buying situationsSource: Adapted from Patrick J. Robinson, Charles W. Faris and Yoram Wind, Industrial Buying and Creative Marketing (Boston: Allyn & Bacon, 1967), p. 14.
Slide 8.14
How do business buyers make their buying decisions?
• Problem recognition• General need description
– General characteristics and quantity needed• Product specification
– Value analysis approach to cost reduction.• Supplier search
– Key attributes specific to value adding partnerships• Proposal solicitation
– Formalised process of quotations• Supplier selection
– Preferred supplier status• Order-routine specification
– Order generation• Performance review
– Rating of supplier performance against set criteria
Slide 8.15
Institutional and Government markets
• Institutional markets• Schools, hospitals, nursing homes, prisons and other
institutions that provide goods and services to people in their care.
• Characterised by low budgets, captive patrons and often have unique needs.
• Government markets offer huge opportunities for many companies due to volume and regularity of demand.
• Predominantly tender or bid driven and practices vary from country to country.
• High level of bureaucracy