Chapter 6
Business Markets and Business Buyer Behavior
Learning outcomes
On completion of this chapter you will be able to:
• Define the business market
• Explain how business markets differ from consumer
markets
• Identify the key factors that influence business buyer
behavior
• Describe the steps in the business buying decision process
• Describe the buying practices of institutional and
government organizations
• Businesses are customers too.
• Business customers are those that buy goods and
services for use in producing their own products
and services or for resale to others.
Business market purchase a specific kind of product
for
• Resale
• Use to produce other products
• Use in general daily operations of the farm
Business buyer behavior
• Business buyer behavior refers to the buying
behavior of organizations that buy goods and
services for use in the production of other products
and services that are sold, rented, or supplied to
others.
• Also includes the behavior of the retailing and
wholesaling firms
Business buying process
• The decision process by which business buyers
determine which products and services their
organizations need to purchase, and then find,
evaluate, and choose among alternative suppliers
and brands.
Business Markets
• The business market is huge and involves many more
dollars and goods than do consumer markets.
• For a consumer transaction to take place, several prior
business-to-business transactions must have successfully
occurred.
• Business markets differ from consumer markets in many
ways. The main differences are in
• Market structure and demand
• Nature of the buying unit
• Types of decisions and the decision process
involved
Market Structure and Demand
Contain fewer, but
larger buyers
Customers are more
geographically concentrated
Business demand is derived
demand
Many business markets
have inelastic and more
fluctuating demand
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Nature of the Buying Unit
• Business purchases involve
more decision participants
• Business buying involves a
more professional purchasing
effort.
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Types of Decisions and the Decision
Process
Business In business
Business buying buying,
buyers process is buyers and
usually face more sellers work
more formalized. more closely
complex together and
buying build long-
decisions. term
relationships.
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Business Markets
Decision Process
Supplier development
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.
Summary of Differences
Dimensions Consumer Market Business Market
Number of Buyers Large Few
Size of Purchase Small Quantities Large in volume
Nature of Product Standard and Not Customized
Customized
No. of people Less number of people Lot of people
influencing Buying
Decision
Volatility of Demand Less Volatile Highly Volatile
Nature of Demand Direct and more elastic Derived and Inelastic
Length of Decision Time Short and Simple Long and Complex
Purchase Orientation To satisfy individual To satisfy
needs Organizational needs
Consequence of poor Comparatively not Highly Critical
purchase critical
Source:Marketing Management Professor Ashis Mishra Business and Consumer market. IIMBX
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business/application-development
• Business to Business (B-to-B) marketers must
understand the business markets & business buyer
behavior.
Business Buyer Behavior
The model suggests four questions about business buyer behavior-
• What buying decisions do business buyers make?
• Who participates in the business the buying process?
• What are the major influences on buyers?
• How do the business buyers make their decisions?
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Major Types of Buying Situations
Straight Rebuy
Modified Rebuy
New Task
The buyer routinely
Straight Re-buy reorders something
without any modification
The buyer wants to
modify product
Modified Re-buy specifications, prices,
terms, or suppliers
The buyer purchases
New Task a product or service
for the first time.
Systems Buying & Selling
• Buying a packaged
solution to a problem
from a single seller, thus
avoiding all the separate
decisions involved in a
complex buying
situation.
• System selling is often a
key business marketing
strategy for winning and
holding accounts.
Participants in the Business
Buying Process
Users
Ethical
Decision-
Factors Influence
Making
Situational rs
Unexpected
Unit of a
Roles Buying Buyers
Include Organizati
Attitudes
on is
of
called
Othersits
Buying
Center. Gatekeepe Deciders
rs
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Business Buyer Behavior
Participants in the Business Buying Process
Users are members who will actually use the
purchased products or service.
Influencers often 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 the final suppliers
Gatekeepers control the flow of information
Major Influences on Business
Buyer Behavior
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The Business Buyer Decision Process
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Business Buyer Behavior
The Buying Process
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
Business Buyer Behavior
The Buying Process
General need description describes the characteristics and
quantity of the needed item
Product specification describes the technical criteria
- Product 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
Business Buyer Behavior
The Buying Process
Supplier search involves compiling a list of qualified
suppliers
Proposal solicitation is the process of requesting
proposals from qualified suppliers
Business Buyer Behavior
The Buying Process
Supplier selection is the process when the buying
center creates a list of desired supplier attributes and
negotiates with preferred suppliers for favorable
terms and conditions
Order-routine specifications is the final order with the
chosen supplier and lists all of the specifications and
terms of the purchase
Business Buyer Behavior
The Buying Process
Order-routine specifications
• Technical specification
• Quantity needed
• Expected time of delivery
• Return policies
• Warranties
Business Buyer Behavior
The Buying Process
Performance review :
The stage in which the buyer assesses the
performance of the supplier and decides to
continue, modify or drop the arrangement
E-Procurement and Online Purchasing
• E-procurement is purchasing
through electronic connections
between buyers and sellers –
usually online.
• Online purchasing is standard
procedure for most companies
today.
• Business marketers can connect
with customers online to:
• Share marketing information
• Sell products & services
• Provide customer support
services
• Maintain on-going
relationships 33
Benefits and Problems Created
by Buying on the Internet
Benefits Problems
• It shaves transaction costs • Erode decades-old
and results in more customer-supplier
efficient purchasing for relationships
both buyers and suppliers
• Can create potential
• Increases productivity security concerns
• Frees people from a lot of
paperwork
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B-to-B digital and social media marketing
• Using digital and social media
marketing approaches to engage
business customers and manage
customer relationships anywhere,
anytime.
Institutional and Government Markets
Institutional
Markets
• Consist of schools,
prisons, hospitals,
nursing homes, and
other institutions that
provide goods and
services to people in
their care.
Institutional Markets
Often characterized
by low budgets and
captive patrons.
Many marketers set
up separate
divisions to serve
institutional buyers.
Institutional and Government Markets
Government markets
• Offers large opportunities
for many companies
• Tend to favor domestic
suppliers
• Require suppliers to submit
bids and normally award to
the lowest bidder
• Affected by environmental
factors
• Red tape is common
Review of Concept Connections
• Define the business market and explain how business
markets differ from consumer markets.
• Identify the major factors that influence business buyer
behavior.
• List and define the steps in the business buying decision
process.
• Compare the institutional and government markets and
explain how institutional and government buyers make
their buying decisions.
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• Mini Activity
• Think about a product which can be sold both in
the consumer market and business market. Find
(hypothetically) the buyers and sellers for each
market. Identify the differences.
Thank you
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