PRINCIPLES OF MARKETING

Chapter 6:

Business Markets and

Business Buyer
Behavior

Copyright © 2016 Pearson Education, Inc. 6-1

 BUSINESS MARKETS AND BUSINESS
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.

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.

6-2
Copyright © 2016 Pearson Education, Inc.
 Business Markets

Market Structure and Demand

Fewer but larger buyers

Derived demand

Inelastic demand

Fluctuating demand

6-3
Copyright © 2016 Pearson Education, Inc.
Fewer but larger buyers
Boeing buys millions of dollars’ worth of engines from GE
Aviation, while an individual consumer might buy only one
airplane ticket.
Similarly, if Unilever buys palm oil, it buys thousands of tons
not a few bottles like a household customer.

Derived demand
The demand for steel depends on the demand for cars. If
consumers buy fewer cars, automakers buy less steel.
So business marketers must track not just their direct
customers, but also end-user trends.
Inelastic demand
If the price of microchips rises by 10%, a laptop
manufacturer can’t instantly reduce its chip purchases it still
needs chips to make laptops.
Similarly, a hospital won’t cut back on buying surgical gloves
even if prices rise.
The business buyer’s need is tied to production necessity,
not impulse.
Fluctuating demand
If car sales drop by 10%, an automaker might reduce steel
orders by 30% because it doesn’t want unused inventory.
Similarly, if tourism slows, airlines may sharply cut their fuel
purchases and aircraft maintenance contracts.
 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

6-6
Copyright © 2016 Pearson Education, Inc.
More decision participants
When a university decides to buy new classroom projectors, the
process may involve:
• Professors (users) who specify the teaching needs,
• The IT department (technical experts) who evaluate compatibility,
• The purchasing officer who handles bids and contracts,
• The finance department that approves the budget,
• And a senior administrator who gives final approval.
So, it’s not a one-person choice like a consumer buying a projector
for home use; it’s a multi-layered decision involving many roles and
negotiations.
More professional purchasing effort
A hospital buying an MRI machine won’t simply “shop
around.” It forms a purchasing committee to:
• Request proposals from multiple suppliers,
• Evaluate service contracts and warranties,
• Analyze total cost of ownership (not just the price),
• And inspect references and after-sales support.
This contrasts with a consumer buying a home
treadmill where emotion, price, or brand often drive
the choice.
More buyer and seller interaction
• When Starbucks sources coffee machines from
Thermoplan (a Swiss manufacturer), engineers from
both sides collaborate to design customized machines
that meet Starbucks’ specific requirements for
consistency and speed.
This relationship continues after the sale with regular
servicing, upgrades, and performance reviews.
• In consumer markets, you simply buy a coffee machine
and maybe contact customer service once; there’s no
ongoing relationship.
 MODEL OF BUYING BEHAVIOR

FIGURE | 6.1

6-10
Copyright © 2016 Pearson Education, Inc.
 Business Buyer Behavior
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.

6-11
Copyright © 2016 Pearson Education, Inc.
 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
• Influencers
• Deciders
• Purchasers
• Gatekeepers
6-12
Copyright © 2016 Pearson Education, Inc.
 Participants in the Business Buying
Process
Users are those that will use the product or service.

Influencers help define specifications and provide information for

evaluating alternatives.

Buyers have formal authority to select the supplier and arrange

terms of purchase.

Deciders have formal or informal power to select and approve

final suppliers.

Gatekeepers control the flow of information.

6-13
Copyright © 2016 Pearson Education, Inc.
 Business Buyer Behavior
Major Influences on Business Buyers

FIGURE | 6.2 Major Influences on Business Buying Behavior

6-14
Copyright © 2016 Pearson Education, Inc.
 Business Buyer Behavior
Major Influences on Business Buyers

Environmental Factors
Demand for Economic Cost of
product outlook money

Supply of
Technology Culture
Materials

Politics Competition

6-15
Copyright © 2016 Pearson Education, Inc.
1. Demand for Product
Business buyers respond to consumer demand for their own products.
Example:
If the demand for electric vehicles rises, companies like Tesla will order more batteries and
electronic parts from suppliers. When end-customer demand falls, they reduce their orders.

2. Economic Outlook
The general economic climate affects whether businesses expand or tighten spending.
Example:
During a recession, companies delay large equipment purchases. But in an economic boom,
factories invest heavily in new machinery to meet growing demand.

3. Cost of Money
Refers to interest rates and credit conditions.
Example:
If bank loan interest rates are high, a company might postpone buying expensive capital
goods like factory robots or vehicles because borrowing costs more.
4. Supply of Materials
Availability of raw materials or components influences purchase timing and volume.
Example:
If semiconductor chips are scarce, smartphone manufacturers like Samsung may stockpile chips when supply improves,
leading to large, irregular orders.

[Link]
New technology made old machinery inefficient and less competitive, pressuring businesses to adopt smarter, automated
systems to reduce errors, increase output, and lower long-term cost.
Example:
Suppose a car manufacturer Toyota used to rely heavily on manual welding and mechanical equipment. As automation
technology advanced, Toyota shifted toward:
• Robots that weld with ultrahigh precision,
• Vision systems that detect microscopic defects,
• Predictive-maintenance software that senses machine failure before it happens.
6. Culture
National or organizational culture shapes preferences and relationships in business markets.
Example:
A German manufacturer often requires formal proposals, strict technical reviews, and long approval cycles before
choosing a supplier (precision and documentation firs).
In contrast, an Indian company may prioritize building personal rapport and trust through multiple friendly meetings and
ongoing conversation before finalizing a deal (relationship first).
7. Politics
Politics influences business buying because government decisions change costs, risks, and
opportunities. When policies shift, companies adjust their purchasing behaviour to protect
themselves or take advantage of new rules.
Example:
Imagine a government suddenly bans single-use plastic.
A large food-packaging company that used to buy plastic film and cups now has to:
• Stop purchasing plastic raw materials
• Begin sourcing biodegradable packaging materials (like paper or cornstarch-based
products)
• Possibly invest in new machinery that handles eco-friendly materials

8. Competition
Competitive pressure forces firms to adjust buying strategies.
Example:
If a rival company upgrades to faster production machinery, others may rush to buy
similar or better equipment to stay competitive.
 Business Buyer Behavior
Major Influences on Business Buyers
Organizational Factors

Objectives
Strategies
Structure
Systems
Procedures

6-19
Copyright © 2016 Pearson Education, Inc.
1. Objectives
Every organization buys goods and services to meet its overall goals or
mission.
Example:
Toyota’s main objective is to produce reliable and sustainable vehicles. So when
Toyota’s procurement team buys materials, they prioritize suppliers that meet
high-quality and environmental standards aligning purchases with their mission of
sustainability.

2. Strategies
Strategy defines how the organization will achieve its objectives.
Example:
A company adopting a cost-leadership strategy (like Walmart) focuses on
buying from low-cost suppliers to keep prices down.
By contrast, a differentiation strategy (like Apple) leads to purchasing
premium materials or advanced components to enhance product uniqueness and
design.
3. Structure

Structure refers to how the organization’s decision-making is arranged, centralized or decentralized.

Example:
In a centralized structure, such as at Procter & Gamble, most purchasing decisions are made by the head office to
ensure consistency and control.
In a decentralized structure, like a multinational construction firm, regional offices may make their own buying
decisions based on local needs.

4. Systems

These are the formal processes and technologies used to manage buying activities.
Example:
A company using an Enterprise Resource Planning (ERP) system like SAP or Oracle automates purchasing orders,
inventory control and supplier payments. This system influences when and how quickly buying decisions can be made.

5. Procedures

Procedures are the rules and steps that must be followed when making purchases.
Example:
A university may require at least three supplier quotations and a tender committee’s approval for any purchase
above a certain value. These internal procedures ensure transparency and accountability.
 Business Buyer Behavior
Major Influences on Business Buyers

Interpersonal Factors

Influence Expertise

Authority Dynamics

6-22
Copyright © 2016 Pearson Education, Inc.
1. Influence: Ability to shape decisions through persuasion or reputation, even without formal power.
Example:
A senior technician prefers a certain brand of machine and convinces the team it’s more reliable, so the
company chooses that brand.

2. Expertise: Knowledge and technical skill that help evaluate products and suppliers.
Example:
An IT expert examines cybersecurity software options and recommends the best one based on technical
performance.

3. Authority: Formal power to approve purchases and sign contracts.

Example:
The procurement head or CFO has the authority to finalize the supplier and approve payment terms.

4. Dynamics: The relationships, communication patterns, and internal politics between decision-makers.
Example:
Two department heads debate whether quality or low-cost matters more; their negotiation and internal
politics affect the final buying decision.
 Business Buyer Behavior
Major Influences on Business Buyers

Individual Factors

Perceptio Preferenc
Motives Age
ns es

Income Education

6-24
Copyright © 2016 Pearson Education, Inc.
Motives: Why a person supports a particular purchase — their internal reasons.
Example:
A manager may choose a supplier known for reliability because their motive is to avoid production delays.

Perceptions: How a person interprets information and forms judgments about products or suppliers.
Example:
If a buyer believes Brand A offers better service than Brand B (even if both are similar), they may prefer
Brand A.

Preferences: Personal likes, dislikes, or brand loyalties.

Example:
A procurement officer who prefers Lenovo laptops will likely support purchasing that brand for the
company.

Age: Different age groups may have different comfort levels with technology and innovation.
Example:
Younger managers may favor cloud-based software; older managers might prefer traditional systems they
trust
Income
Personal compensation or financial background may affect spending attitudes.
Example:
Executives with high bonus incentives for cost-saving might push for cheaper options.

Education
Knowledge level influences product evaluation and decision criteria.
Example:
A highly technical engineer might prioritize performance specs, while a general manager
focuses on cost and supplier reputation.

Attitude Toward Risk

Comfort level with uncertainty affects buying choices.
Example:
A risk-averse manager may choose a well-known supplier with higher price but guaranteed
service, while a risk-taker might try a new supplier offering lower cost.
 The Business Buying Process

FIGURE | 6.3 Stages of Business Buying Behavior

6-27
Copyright © 2016 Pearson Education, Inc.
 The Business Buying Process

1. Problem recognition occurs when someone in the company

recognizes a problem or need.
Example: Doctors complain the current MRI machine is slow and
outdated.
• Internal stimuli: Need for new product or production
equipment
• External stimuli: Idea from a trade show or advertising

6-28
Copyright © 2016 Pearson Education, Inc.
2. General need description describes the characteristics and quantity of
the needed item.
Example: Hospital decides it needs a faster, more accurate diagnostic
machine.

3. Product specification describes the technical criteria.

Example: Technical team lists required features (image resolution, scanning
speed, software compatibility).

4. Supplier search involves compiling a list of qualified suppliers to find the

best vendors.
Example: They research suppliers like Siemens, GE Healthcare, and Philips.

6-29
Copyright © 2016 Pearson Education, Inc.
5. Proposal solicitation is the process of requesting proposals
from qualified suppliers.
Example: Hospital requests proposals and quotations from
shortlisted vendors.

6. Supplier selection is when the buying center creates a list of

desired supplier attributes and negotiates with preferred
suppliers for favorable terms and conditions.
Example: After comparing price, performance, and service plans,
they select Siemens.

6-30
Copyright © 2016 Pearson Education, Inc.
7. Order-routine specifications includes the final order with
the chosen supplier and lists all of the specifications and terms
of the purchase.
Example: They finalize delivery schedule, installation, training, and
payment terms.

8. Performance review involves a critique of supplier

performance to the order-routine specifications.
Example: After installation and use, the hospital evaluates
machine performance and service quality to decide future
purchases.

6-31
Copyright © 2016 Pearson Education, Inc.