Session 7

Videos\Intel Commercial (early '90s).mp4

Videos\Intel microprocessors amazing advertising.flv
Business Buyer Behaviour
Learning Outcomes
1. Explain the main characteristics of business markets
2. Understand the different types of B2B organisations,
goods and services.
3. Understand the main processes and stages associated
with organisational buying and purchasing
4. Comprehend relationship building with business
customers.
5. Understand the buying by institutional buyers and
government buyers in the Indian context.
2
Business Markets
The marketing of goods and services to organisations
for purposes other than personal consumption.
The buying decision is much more complex than
consumer buying process.
Businesses are turning suppliers and distributors into
valued partners.
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.
3
Top Business Marketing Challenges
Expand understanding of customer needs
Identifying new opportunities for growth
Compete globally as China and India reshape
markets and developed markets slow down
Master analytical tools and improve quantitative
skills
Reinstate innovation as an engine of growth
Create new organizational models and linkages
Countering the threat of commoditisation
4
Characteristics of Business Markets
Fewer, larger buyers
concentrated geographically
Close supplier-customer
relationships
Many buying influences
Multiple sales calls
Derived demand
Inelastic demand
Fluctuating demand
Direct purchasing
Professional purchasing
5
Types of Organisational Customers
Distributors, wholesalers, and value added resellers
Original Equipment Manufacturers
Users
Commercial
DGS&D rate contracts
Other annual rate contracts
Government
Not-for-profit organisations, hospitals, educational
institutes
Institutions
6
Types of Business Goods and Services
Raw materials
Semi-finished goods
Finished goods
Input
goods
Capital items
Equipment
goods
Maintenance
Repairs
Operational
Supply
goods
7
Types of Buying Situation
Straight Rebuy
Routine buying from list of approved suppliers
Modified Rebuy
Changes in product specifications, pricing and other terms
New Task
Buying for the first time
8
Systems Buying and Selling
Turnkey solution
desired by
purchaser and
bids solicited
Prime
contractors enter
the bidding and
may also be
involved in the
development of
the specifications
Certain areas
then outsourced
to second tier
contractors by
prime
contractors
9
Business Markets
The Buying Centre
Normally by users
Initiators
Define product requirements
Users
Normally in evaluation of alternatives
Influencers
Limits for different levels
Deciders
May be a committee
Approvers
Decide purchase terms
Buyers
Power to prevent information flow
Gatekeepers
11
Stages in the Buying Process
12
Problem Recognition
Internal stimuli
New product
Unhappiness
with current
supplier on
quality, service,
price
External stimuli
Trade show
Advertisements
Call by a sales
person
13
Buy phases 2 and 3
General Need Description
Product Specification
Characteristics and quantity of
item
Need to work with others like
engineering, users, consultants
Product Value Analysis team for
redesigning, standardising or
less costly
Normally the seller helps out in
this
14
Buy phases 4 and 5
Supplier Search Proposal Solicitation
Trade directories
Internet search
Catalogue sites
Vertical markets
Pure Play auction sites
Spot (or exchange) markets
Private exchanges
Buying alliances
Recommendations from other
companies
Inviting qualified suppliers to
submit proposals
Proposals should be marketing
documents, not just technical
documents
15
Buyphases 6 and 7
Supplier Selection
Order-Routine
Specification
List of desirable attributes
and their ranking
Quality
Reputation
On time delivery
Honest communication
Ethical behaviour
Price competitiveness
Final order specifying:
Technical specification
Quantity required
Delivery schedule
Warranty policy
Returns policy
Vendor Managed Inventory
16
Performance Review
Normally done by the buyer using inputs from users,
influencers
Similarly the selling party may like to review the
buying centre
Methods used are:
o Evaluation from end users
o Weighted average
o Aggregation of cost of poor performance to come up
with adjusted cost of purchase price
01-17
The Buygrid Framework
Buy-phases
Buyclasses
New Buy Modified Rebuy Straight Rebuy
1. Problem recognition
Yes Maybe No
2. General need description
Yes Maybe No
3. Product specification
Yes Yes No
4. Supplier search
Yes Maybe No
5. Proposal solicitation
Yes Maybe No
6. Supplier selection
Yes Maybe No
7. Order-routine specification
Yes Maybe No
8. Performance review
Yes Yes Yes
18
Major Influences on Business Buying
Behaviour
19
Environmental Factors
20
Demand for
product
Economic
outlook
Cost of
money
Resource
availability
Technology Culture
Politics Competition
Organisational Factors
21
Objectives
Policies
Procedures
Structure
Systems
Interpersonal Factors
22
Authority Status
Empathy Persuasiveness
Individual Factors
23
Motives Perceptions Preferences
Age Income Education
Job
position
Personality
Risk
Attitudes
Major Influences on Business Buyer Behavior
Economic
Factors
Price
Service
Personal
Factors
Emotion
Handling Price-Oriented Customers
25
Limit quantity purchased
Allow no refunds
Make no adjustments
Provide no services
Methods for Researching Customer Value
Internal engineering assessment
Field value-in-use assessment
Focus-group value assessment
Direct survey questions
Conjoint analysis
Benchmarks
Compositional approach
Importance ratings

26
Order Routine Specification
27
Stockless purchase plans
Vendor managed inventory
Continuous replenishment
Categories of Buyer-Seller Relationships
Basic buying and selling
Bare bones
Contractual transaction
Customer supply
Cooperative systems
Collaborative
Mutually adaptive
Customer is king
28
Marketing of Farm Output from Rural
Areas
Contract Farming Pepsi
Procuring from Cooperatives Amul
Use ICT for procurement ITC
29
Business Buyer Behavior
Advantages
o Access to new suppliers
o Lowers costs
o Speeds order processing and delivery
o Shares information
o Sales
o Service and support
Disadvantages
o Can erode relationships as buyers search for new
suppliers
o Security

E-Procurement

Next Session (8)
31
Segmentation, Targeting and
Positioning
Reading Chapters 7 and 9 including
caselets