MODULE 1 INTRODUCTION TO BUSINESS MARKETING

1. THE IMPORTANCE OF BUSINESS MARKETING

Definition

The concept of organizational or industrial marketing is used to describe marketing activities targeted
at all individuals and organizations that acquire products and services that are used in the production
of other products and services.

Importance of B2B marketing

a. Limitless Distribution Span

The business opportunities provided by this method does not limit customer reach within a
small locality. Venturing to a Business – to – Business marketing strategy allows companies and
business owners to expand and widen reach of audience. Maximizing the use what the internet
can offer, B2B commerce can reach all levels of market audience whenever and wherever part
of the world. The internet is one of the main key for B2B in effortlessly getting through the
every household. Both small and long stable players both rely on this e-commerce method.

b. Faster Growth
Start up business often competes fairly with old timers and seasoned business institutions
through direct business to business commerce. It is a fair trade and market play among
companies. There is no need for a head start of having a long term industry experience or does
not require long standing proof of huge investment amount. The partnership between
partnerships that assure income once business deals are closed makes it easier for starters to
succeed despite of the number of existing businesses. Retainers’ fee and project remuneration
can assure business is up and running for few years, depending on the business agreement.
Example, a well – known chemical business industry targets another major company to supply
raw material. This can produce thousands to millions of income for the chemical company in
just one closed deal. It will be a closed contract between the two companies that assures stable
and fix income.
c. Trim – down Product and Services Cost
B2B directly lessens the effort yet increases volume of investment by targeting specific client
type which regards to age, gender, industry, interests, and among others. In order to know
what appropriate business strategy to be applied – companies must know the definite type of
clients, product development, and popular demand first. You can start by knowing the
background of your target client’s preferences and needs. Checking out local suppliers and
producers needed for the products you needed must be considered, as well as getting into
details of what kind of buyers mostly like might patronize your business, and knowing what
product should sell out well. Interviews or series of questionnaires and surveys may be a good
lead to identify your future customers. This can be done through dynamic face to face
information gathering or virtual interactive online data collection.
 d. Creates a Niche Market
Business to Business tool can command trend for customers to buy. It is like a subliminal
message making buyers think the needed our company. With the existence of internet through
its social media, email system, and various website e-commerce platforms; the market is free to
somewhat control what the buyers should need. The market can now allow businesses’ to offer
a product without the need to be pushy and obviously scout for customers. The process starts
by creating a trend first, and then let consumers think they wanted your product or services.
e. Inexpensive Marketing Strategies
All you need is an internet and a creative mind to create a fad. Advertising does not limit you to
television show ad nor newspaper printout. Creating social media accounts and pages can get
you easily views and interactive movement in web world. The more people react to your posts
and page the more people will be able to see your product online: thus, the familiarity. Viral
content posts must be creatively made and wittingly catchy. For videos like in YouTube or
Instagram – those should be inspiring and entertaining. For written content – those should be
competently and professionally – made, free from erroneous grammar and wrong spelling.
There are writing firms that provides for both print and web content that will surely deliver
ideal ad materials. You can hire assignment writing service to do the writing, and editing jobs
for you to give you concise feature for your writing needs.
f. Interdependence- work together for each other’s business growth
In B2B, partnership of brands is seen as a win – win situation for the two or more companies’
growth and turnover.
g.Encourages Innovation
Business start-up is difficult. With business to business solutions, it becomes easier and gives a
lot of variety of options to market product and services. But on the other hand, it is not that
stress-free to sustain up a good market status. E-commerce assures business to keep company
running steadily or stay on top.E-commerce provides a field for online business transactions,
virtual banking, interactive customer services, technology integration method, and online
shopping system.
h. Cheaper Operation Cost
Expenses for business operations have the highest cost in order to keep company running.
Whether purchasing new technologies, upgrading business solutions, expanding product and
services offering, or investing in marketing ad; for all what it costs for – it is a way too pricey.
For initial baby steps in Business to Business marketing, it can be observed that it is costly but in
the long run it is all worth it.

Types of exchanges in B2B

There can be four different types of exchanges in industrial marketing

1. Product exchange:
 Supply of raw materials to the organization to process the finished goods for the end user or
consumer.Examples can be many. Supply of soap/ detergent powder to the manufacturers of
soaps or detergents. To HLL there must be suppliers of the raw materials of soap/ detergent raw
materials to give the end product s like Rin Detergent Bar or Surf Excel.
2. Information Exchange:
When one organization gives the technical knowledge, economic consultancy, or giving replies
to organizational questions to another organization it is termed as information exchange. To
cite an example we say that the installation of sophisticated software’s in an organization and
operating system of that software can be termed as information exchange.
3. Financial Exchange:

 Grant of credit facilities to an organization is financial exchange.

 Exchange of currency from one organization to another country.

Example of this we can say the functioning of Industrial Development Bank of India (IDBI), which
grants loans to industries.

4. Social Exchange:

Social exchange is important in areas of reducing uncertainty between buyer and seller, avoiding
short-term difficulties and thus maintaining a better relation over a long period of time.

2. BUSINESS MARKETING VS CONSUMER MARKETING

B2B marketing is more a responsibility of general management in comparison to consumer

marketing. Sometimes, it is difficult to separate B2B marketing strategy from the corporate
(company) strategy. But in case of consumer marketing, many times the changes in marketing
strategy are carried out within the marketing department, through changes in advertising, sales
promotion, and packaging strategies. However, the changes in B2B marketing strategy generally have
company-wide implications. The differences between B2B and consumer marketing are as shown in
Table.

Industrial Markets Consumer Markets

Market Geographically
Structure Concentrated. Geographically Dispersed.

Oligopolistic Competition Monopolistic competition.

Products Technical Complexity

 Customized Standardized.
Service very important Service somewhat important.
Buyer
Behavior Functional Involvement Family Involvement.
Interpersonal Relationship No personal Relationship.
Decision
Making Distinct observable stages. Unobservable mental stages.

Channels Shorter & Direct Indirect & multiple linkages.

Promotion Emphasis on Personal Selling Emphasis on Advertising
Price Competitive Biddings List Prices

and Negotiating.

Basically, the significant differences exist between B2B and consumer market characteristics that
affect the nature of B2B marketing. These differences are:

a. Size of the Market

Compared to the great number of households that constitute the mass market for consumer goods and
services, In the case of B2B markets, it is common to find less than 20 companies to represent the total
market for an B2B product or service. In fact, only three or four customers may comprise the major
portion of a total market. For example, for a consumer product like toothpaste or soap, a mass market,
consisting of all the households in India, exist.

Further, in B2B arena, oligopolistic selling organization (very large firms) tend to dominate many
markets such as, large power transformers or high-tension switchgears, there are limited numbers of
customers-mainly State Electricity Boards, large private and public sector organisations. There are
situations of relatively few B2B sellers and few customers, and all of them (vendors as well as the
purchasers) having larger size, the sales will follow a pattern of purchasing larger quantities, or
engaging in volume purchases on a repeat basis.

b. Geographical Concentration
B2B customers also tend to be concentrated in specific areas of India such as Andaman Nicobar, the
Leh Hills. Such concentration occurs mainly because of natural resources and manufacturing
processes. For example, the geographic location of natural resources explains the concentration
patterns of most energy-producing firms. Only a handful of counties in California, Oklahoma,. Texas,
and Louisiana produce the bulk of our gas and oil.

Manufacturers whose production processes add weight to their products tend to locate near customers,
while those whose processes subtract weight tend to locate near sources of input. Manufacturers of
computers and other advanced electronic products present an interesting case of plant location. They
tend to concentrate in areas that have advanced teaching and research facilities and desirable living
locales such as the Silicon Valley in Bangalore. Such locations are chosen to facilitate the attraction of
intelligent, educated employees, who seek both intellectual challenges and physical pleasures.

c. Competitive Nature
An additional difference between the two markets is the nature of oligopolistic buying. In the B2B
arena, oligopolistic buying organizations, organizations that are very large firms, tend to dominate
many markets. For instance, the small number of large automobile producers in the United States
purchase 60 percent of all synthetic rubber, 60 percent of all lead, and 72 percent of all plate glass
produced in the United States. These oligopolists’ reactions to changes in one another’s buying
practices affect B2B marketing strategy decisions.

Due to the fact that technological or cost-effective advantages override geographical considerations,
B2B organizations are more directly involved in international purchasing. Therefore, the major
finished goods exports of B2Bized nations tend to be B2B rather than consumer goods manufacturers.

B2B demand as well as B2B supply, therefore, is more apt to cross international boundaries than are
demand and supply in the consumer market. However, because of increasing improvements in foreign
technology and marketing skills, subsidized by government policies, worldwide competition makes it
more difficult for Indian suppliers of B2B goods to compete not only in foreign markets, but
domestically as well. B2B marketers, then, are more subject to world political, economic, and
competitive changes than are their consumer counterparts.

d. Product Characteristics
In B2B marketing, the products or services are generally technically complex and not purchased for
personal use. They are purchased as components parts of the products and services to be produced or
serve the operations of the organizations. Because of the importance given to the technical aspects of
products, the purchases are made based on the specifications evolved by the buyers. The real risk in
falling in love with the technical aspects of a product in B2B marketing is to ignore the flexibility in
responding to customer’s needs in a competitive market. Some companies, as a result, commit the
serious mistake of trying to change the customer to fit the product.

For example, the quality control manager of a “cold rolled (C.R.) steel strip” manufacturing company
informed an important customer (who used C.R. steel strip for the manufacture of luggage bags) that
the customer was not justified in rejecting his company product, as it was as per the relevant Indian
standard specifications and that the customer’s product specifications were more rigorous than the
Indian standard specifications. However, the customer refused to accept the product, as it was failing
at the shop floor operations. The customer, therefore, not only returned the entire rejections but also
cancelled the balance orders. Subsequently, other competitors supplied the product as per the needs
and specifications of the customer, who placed orders with them. As compared to consumer
marketing, B2B customers place a greater importance on service, that is, timeliness, certainly delivery
or availability of product, because any delay in supply will have a significant impact on the production
or operations.

e. Buyer Behavior
In B2B marketing, the buying process is more difficult as compared to consumer marketing. The
purchase decisions in B2B marketing are based on many factors, such as compliance with product
specifications product quality, availability, timely supply, acceptable payment and other commercial
terms cost effectiveness, after-sales service, and so on rather than on social and psychological needs.
The buying decisions generally take a longer time and involve many individuals from technical,
commercial/materials, and finance departments. After the initial offer made by a seller, there are
negotiations and exchange of information between both the prospective buyer and the seller’s
organization. Therefore, inter-organizational contacts take place and interpersonal relationships are
developed. The relationships between the sellers and buyers are highly valued and they become stable
in the long run because of a high degree of interdependence. Changes are few and occur relatively
slowly. Buyers charge problems in searching out and qualifying suppliers. The cost of selecting a
supplier who cannot meet delivery requirements or who delivers an unsatisfactory product can be high.
Thus, the purchasing firm must be certain of a potential supplier’s technical, administrative, and
financial capabilities.

In contrary, in consumer marketing the relationship between a buyer and a seller is non-personal.
Consumers change their purchasing habits frequently and the buying decisions are always based on
physiological, social and psychological needs of the members of a family household.

f. Channel Characteristics
Inventory or stock control is very much important factor in the business organizations therefore the
distribution channels are needed more direct from the manufacturer to the customer in B2B marketing.

g. Channel distribution in B2B and Consumer market

Often, the manufacturers use their own sales/marketing personnels to sell the products directly to
major customers. But, in case of selling to small-scale customers or geographically scattered markets,
many manufacturers use either distributors/dealers, or agents/representatives, which also helps in
minimizing the cost of marketing. In case of consumer marketing, the channel of distribution is longer
with multiple levels of intermediaries/middlemen, since the household consumers are geographically
dispersed all over the country.

h. Promotional Characteristics
In consumer marketing, the emphasis is given on advertising whereas, in B2B marketing, the
importance is given to the personal selling through the company’s sales force. As a result, a much
larger expenditure budget is provided for advertising in consumer marketing in comparison to B2B
marketing. Advertising is used to lay a foundation for the sales call rather than serve as the primary
communication tool. Sales people act more as consultants and technical problem solvers, utilizing in-
depth product knowledge and technical understanding of the buyers’ needs, whereas B2B advertising
normally stresses more factual and technical data. Some B2B advertisers use mainly the internet and
lesser of television to reach potential consumers, the primary means of reaching the market is through
business magazines, traditional trade journals, and direct mail. Sales promotion activities tend to
center on trade shows, trade fairs, catalogs and conducting technical seminars.

i. Price Characteristics
The products are sold through the intermediaries/middlemen to the consumers based on the “Price
List” of the manufacturer or the maximum retail price (MRP) for the packaged products in consumer
marketing. Sometimes, the retailer reduces the price by passing on to the consumer a part of his
discount due to different degrees of intensity of the competition.

In B2B marketing, price is less critical factors for purchase decisions. Competitive bidding and price
negotiations are very common in B2B marketing and financing arrangements are often considered part
of pricing package. When there are no price negotiations in certain Government tenders, the
competitive bidding (i.e. quoting a competitive price against a tender enquiry) becomes very
important, as only the lowest bidders are considered for placement of orders. Almost in all private
sector and some Government organizations, price negotiations are held to decide the prices and the
volume of orders to be placed on various supplier firms. The payment and other commercial terms are
also negotiated at the time of price negotiation. Dealer discounts, and volume discounts on the price
list of standard B2B products are widely used in B2B marketing.

The above discussion clarifies that there are many basic differences exist between consumer and B2B
marketing. But, these differences in terms of market characteristics do not make a complete analysis.
Therefore, it is necessary to understand the concept of B2B demand in the market to analyze
completely.

B2B DEMAND

The demand for B2B products and services does not survive by itself. It is derived from the ultimate
demand for consumer goods and services. Therefore, B2B demand is called derived demand.
Sometimes, the demand for B2B product is called joint demand, when the demand for a product
depends upon its use along with the existence of other product or products. Cross elasticity of demand
exists for some substitute products in B2B market. These concepts are detailed as follows:

a. Derived Demand
The single most important force in marketing of B2B products and services is derived demand. B2B
customers buy goods and services for making the use in producing other goods and services and
finally produced product/service sold to the consumers. In B2B marketing, the demand for B2B goods
and services is derived from consumer goods and services. For example, the demand for precision
steel tubes does not exist in market. It is demanded for the production of bicycles, motorcycles,
scooters, and furniture (steel tables and chairs), which are consumed by the consumers.

Thus, the demand for precision steel tubes is derived from the forecast of consumer demand for
bicycles, motorcycles, scooters, and furniture. In case of capital goods, such as machinery and
equipment (e.g. machine tools, textile machinery, leather machinery, etc.) that are used to produce
other goods, the purchases are made not from the current accounts, but from capital accounts with the
assumption of profit flow in the usage of such capital goods over a certain period of time.

If businessmen feel that there may be a recession in near future, their purchases will be drastically
curtailed. On the other hand, if the attitude of businessmen is favorable (i.e. they feel the business is on
the upswing) their investment in capital goods and other B2B products will increase. Thus, the attitude
of businessmen is very important, as it reflects the optimism or pessimism about the future. During the
periods of recession, or reduced consumer demand, B2B firms reduce their inventories/stocks, or
reduce the production, or do both. On the other hand, during the period of prosperity, there is an
increased production and sales of consumer goods, which results in an increased demand for B2B
goods. This may be the right time for price increases and building stocks as ready availability and
shorter delivery period becomes very important. An B2B marketing firm should be in close touch of
information regarding customer’s purchase, finance, quality, R&D and marketing departments, so as
to get information on changes in customer’s sales, new product development, financial condition, and
the quality of its products.

b. Joint Demand
Joint demand is common in the B2B market, because it occurs when one specific B2B product is
required along with usage of another product. In other words its demand positively is linked to usage
of another product. For example, a pump sets cannot be used for pumping water, if the electric motor
or diesel engine is not availab1e. Similarly, the department of telecommunication (Dot), which
requires a complete kit, consisting of different items, for joining the underground telecom cables,
cannot buy only some of the items from a supplier as all of them are to be bought to make the product
effective. Thus, some B2B products do not have B2B demand, but are demanded only if the other
products are available from the B2B supplier.

c. Cross-Elasticity of Demand
Simply, elasticity is the change in demand from a change in price. The demand for most of the B2B
goods can be inelastic (i.e. insensitive to changes in prices) for a particular industry, but at the same
time, highly elastic (i.e. sensitive to changes in prices) for individual suppliers. This is because, the
total industry demand comes from the united needs of all the customers rather than price, and hence it
is relatively inelastic. Though, between the various suppliers, a slight change in the price by one firm
may create a major change in the quantity of another and thereby, be highly elastic for any other firm.
Cross-elasticity of demand is the reaction of the sales of one product to a price change in another
product. This fact is true for both consumer and B2B marketing, but it is more profound in B2B
marketing as it can have a dramatic impact on the marketing strategy of a B2B firm. For example, the
demand for aluminum is related to the prices of wood and steel for the doors and window frames, as
they are close substitutes.

Apart from other advantages of aluminum doors and windows, the cost comparison with steel and
wooden door and window frames play an important role in the purchase decisions in the construction
of houses, commercial offices, factories, hotels, hospitals, and so on. Aluminum extrusion companies
regularly collect the information on cost of steel and wood, and advertise the advantages of use of
aluminum in terms of negligible maintenance cost, elegant look, environment, friendly in comparison
to wood, and so on.

Whenever there is a change in the price of aluminum due to changes in excise duty or other input
costs, there is an impact on the sales of doors and windows made out of wood or steel. The reverse is
applicable for changes in the prices of steel or wood. Thus, the marketing persons working in the
aluminum extrusion companies should recognize that the cross-elasticity of demand exists for their
products. If the cross-elasticity of substitute products is high, it indicates that these products compete
in the same market.

A B2B marketer must know how the demand for his products is likely to be affected by the changes in
the prices of substitute products. Because of the unique characteristics of derived demand, the B2B
marketing persons would anticipate any increase or decrease in the demand for their products, based
on the changes in the demand for their customers’ products. They must know that existence of cross-
elasticity of demand for their products so as to recognize both direct and indirect competition. It ought
to be clear after going through this lesson that B2B marketing is more multifarious than consumer
marketing and the marketing success depends on understanding the intricacies involved in it.

B2B marketing strategy has company-wide implications and is, therefore, more of a general
management function, affecting the various departments or functions in an organization.

NOTE:-In all, the concept of B2B marketing may be referred as marketing of goods and services to
business organizations namely, manufacturing companies, service organizations, institutions and
middlemen in private and public sector organizations, and Government undertakings. The differences
between B2B and consumer marketing, conceptually in the type of demand itself. While B2B
marketing is based on derived demand the consumer marketing is based on primary demand. Again
difference is also based on certain characteristics such as market, product, buyer behavior, channel,
promotional, and price both are different. The demand for B2B products is derived from the ultimate
demand for consumer goods and services. It is, therefore, called as derived demand. This derived
demand are of two types, namely, ‘Joint Demand’ and ‘Cross-Elasticity of Demand’. Joint demand
occurs when one B2B product is required, if other product also exists. Cross-elasticity of demand is
the reaction of the sales of one product to a price change in another product.
3. TYPES OF BUSINESS CUSTOMERS

Types of B2B Customers

One way to understand the diversity of industrial customers and the products they purchase is to
begin by examining the various types of customers. Industrial customers are normally classified into
three groups:

a. Commercial Enterprises

Commercial enterprises, such as IBM, General Motors, Computer Land, and Raven Company,
purchase industrial goods and/or services for purposes other than selling directly to ultimate
consumers. However, since they purchase products for different uses, it is more useful from a
marketing point of view to define them in such a way as to understand their purchasing needs and,
when we have examined the variety of products they purchase, how marketing strategy can be
developed to meet their needs. Thus_ it is more logical to look at commercial enterprises as
consisting of
 i) Industrial Distributors and Dealers

When a commercial enterprise, such as Computer Land, or VWR, purchases industrial goods and
resells them in basically the same form to commercial, government, and institutional markets, we
classify them as industrial distributors or dealers. Industrial distributors and dealers take title to
goods; thus, they are the industrial marketer’s intermediaries-acting in a similar capacity to
wholesalers or even retailers. For instance, while living in California, your author’s often-patronized
industrial plumbing, lumber, and electronic supply houses to purchase, at wholesale prices, products
needed for home remodeling purposes. However, as Figure 2-1 indicates, while a few may also serve
the consumer market, they generally serve other business enterprises, government agencies, or
private and public institutions. Because of their importance in the industrial channel to both large
and small manufacturers and because they are growing in number and sophistication, we shall
discuss them further in Chapter Eleven.

ii) Original Equipment Manufacturers

When enterprises such as Shyster, Xerox, or Ford purchase industrial goods to incorporate into
products that they produce, we classify them as original equipment manufacturers (OEMs). That is,
the electronic engine controls producer who sells parts to Ford would view Ford as an OEM. The
important point, however, is that with this type of customer (Ford), the product of the industrial
marketer (in this case, Motorola) becomes a part of the customer’s product.

iii) Users
These categories; which at times tend to overlap, are useful to the industrial marketer because they
point out how products and services are used by buying firms.
On the other hand, when a commercial enterprise, be it Shyster, Montgomery Ward, or VWR,
purchases industrial products or services to support its manufacturing process or facilitate the
operation of its business, we classify it as a user. Products used to produce output consist of items
such as lathes, drilling machines, and grinding wheels, whereas products that facilitate the operation
of a business might consist of computers, typewriters, and adding machines. In contrast to the
products purchased by OEMs, products purchased by users are not incorporated into the final
product.

## Overlap of Categories

It should be obvious that the preceding classifications center on how products and services serve the
customer. A manufacturer of forklifts can be a user, purchasing metal-cutting machine tools to
support the manufacturing process, or an OEM, purchasing gear drives and transmissions to
incorporate into the forklifts being manufactured.

The important point is that OEM purchasers will be concerned with the impact that products have on
the quality and depend-ability of the end products they produce. Since users buy products for use in
the production process or to facilitate the operations of their businesses, their concerns will center
on prompt, predictable delivery and maintenance service. And industrial distributors or dealers will
be more concerned with how products match the needs of their customers. On one point, however,
all commercial customers agree: their purchases are expected to enhance the profit-making
capability of the firm.

b. Governmental Agencies

The largest purchasers of industrial goods in the United States are the various federal, state, and
local governments-spending nearly a trillion dollars annually for products and services. These
government units purchase virtually every kind of good-from $2900 Allen wrenches to multimillion-
dollar ICBM missiles-and represent a huge market, accounting for approximately thirty-seven
percent of our total gross national product. The result of this volume purchasing is that procurement
administration and practices are highly specialized and very often confusing.

When a particular product or service is needed, government buyers may negotiate directly with
vendors or carefully develop detailed specifications and invite qualified suppliers (through the media)
to submit a price bid in writing, usually awarding the bid to the lowest, qualified supplier. In the case
of the $2900 Allen wrench, in accordance with customary contract specifications at the time,
overhead and direct engineering man-hours were allocated across all items in the “kit.”

Thus, for the limited production run of the single Allen wrench, direct engineering costs came to
$1,034.64; engineering overhead came to $503; $507 was necessary for fringe benefits; $149 for
general and administrative costs and $388.79 was billed for profits, plus some other costs.

The total price-though thoroughly documented and necessary in view of cost allocations, various
actions necessary to comply with contract specifications and many visits, discussions, and inspections
by government officials-appeared to be an unrealistic $2,917.45 per wrench. Since effective
marketing strategy for reaching government customers lies in the marketer’s under-standing of these
complex purchasing procedures, we will discuss government purchasing in more detail when we
introduce the unique characteristics of organizational procurement later in this chapter.

c. Institutions

Public and private institutions such as churches, hospitals, colleges, sanitariums, and prisons are
another important classification of industrial customers. Some of these institutions follow rigid rules
and purchasing procedures while others follow far more casual procedures. The important
difference with this type of industrial customer is that effective marketing rests on the industrial
marketer’s ability to recognize the way in which each institution purchases its goods or services.
4. TYPES OF BUSINESS PRODUCTS
As further indicated by wide arrays of goods and services are required by industrial organizations.
Although solutions to industrial customers’ problems, go far beyond a preliminary identification
of which products belong under which classification, classifying industrial goods gives the
industrial marketer a better indication of the scope of the market, who is involved in the
purchasing process, and what marketing factors affect the buying decision. Whereas there are
various methods for classifying industrial goods, the most useful method analyzes how products
or services enter the production process or affect the cost structure of the firm. This enables
marketers to view their offerings from the customer’s perspective and adapt or adjust marketing
strategy to maximize potential customer benefits based on the product’s intended use.
a. MATERIALS AND PARTS

Goods that enter the product directly consist of raw materials, manufactured materials, and
component parts. The purchasing firm treats the costs of these items as expenses that are assigned
to the manufacturing process. These include raw material, finished material & parts. Raw materials
are mostly farm products namely cotton, wheat, vegetables etc. They can be some natural products
also, namely meat, petroleum product, iron etc. Manufactured material and parts could be iron
rods, linen yarns, wires and cables etc. Component and parts are the items like household appliance
motors, components of PC’s, component parts of motor vehicles etc.

Selling Method: Mostly they are sold directly to industrial users.

Price & Service: A major factor in marketing.

Advertising & Promotion: Less important.

i) Raw Materials

Raw materials such as agricultural products or natural gas normally enter the production process
with little or no alteration. They may be marketed as either OEM or user products. For instance,
when Sara Lee purchases gas to fire the massive ovens used to produce all those delicious cakes in
the freezer sections of the grocery stores, it ‘is a “user” customer. When it purchases fruits for
further processing to fill those delicious delicacies, it is an OEM.

ii) Electrical and Electronic Products

This industrial sector covers the manufacturing and marketing of electrical and electronic products
or in providing computer services. Marketing here refers to wholesaling and related service
functions.

iii) Household Appliances and Electrical Products

This subsector consists of groupings of companies primarily engaged in the manufacturing and
marketing of household appliances and electrical industrial machinery and equipment. The
manufacturing and marketing of electronic household appliances are covered here.

iv) Household Appliances

Companies primarily engaged in manufacturing and marketing household electrical and electronic
appliances.

v) Household Appliances Wholesaling

Companies primarily engaged in wholesaling small electrical household appliances, major household
appliances (electric and non-electric), and home entertainment appliances.

vi) Household Appliances Manufacturing

Companies primarily engaged in manufacturing and marketing small electrical household
appliances, major household appliances (electric and non-electric), and home entertainment
appliances.

vii) Electrical Industrial Products Manufacturing

Companies primarily engaged in manufacturing electrical transformers, electrical switchgear and
protective equipment and electrical industrial products not elsewhere classified. The manufacturing
of electronic industrial control equipment is covered in 3618 - Other Electronic Equipment
Manufacturing. The Manufacturing of motor vehicle generators is covered in 3021 - Motor Vehicle
Parts and Accessories Manufacturing; and cast iron pole line hardware is covered in 2012 - Iron
Foundries.

viii) Other Electrical Products Manufacturing

Companies primarily engaged in manufacturing electric wire and cable and electrical products not
elsewhere classified.

ix) Communication and Energy Wire and Cable Manufacturing

Companies primarily engaged in manufacturing electric wire and cable both insulated or armored
and non-insulated.

x) Other Electrical Products Manufacturing i.e.

Companies primarily engaged in manufacturing electrical lighting fixtures, electric lamps and shades,
light bulbs and tubes, batteries and other electrical products not elsewhere classified. The
manufacturing of power fuses is covered in 3521 Electrical Industrial Products Manufacturing.

xi) Electrical Machinery, Equipment and Supplies Wholesaling

Companies primarily engaged in wholesaling electrical wiring supplies, electrical construction
materials, new and used electrical generating and transmission equipment and supplies and
electrical equipment and supplies not elsewhere classified. The wholesaling of motor vehicle
generators and voltage regulators is covered in 3022 - Motor Vehicle Parts and Accessories
Wholesaling; and of electronic alarm apparatus in 3619 - Electronic Equipment Wholesaling.

xii) Electronic Equipment and Computer Services

This subsector consists of groupings of companies primarily engaged in the manufacturing and
wholesaling of electronic products including parts and components, business machines, data
processing equipment (along with the related input, software and maintenance services) and
telecommunications equipment. The manufacturing and wholesaling of electronic home
entertainment appliances are not covered here.

xiii) Electronic Equipment

Companies primarily engaged in manufacturing and wholesaling telecommunications equipment,
electronic parts and components and office, store and business machines except data processing
equipment. The manufacturing of data processing equipment is covered in Segment 363 -
Computer Equipment and Related Services, Integrated Operations.

xiv) Electronic Parts and Components Manufacturing

Companies primarily engaged in manufacturing electronic parts and components for electronic sub-
assemblies and electronic equipment.

xv) Communication Equipment Manufacturing

Companies primarily engaged in manufacturing telephone, telegraph, and microwave
transmitting and related equipment.

xvi) Other Electronic Equipment Manufacturing

Companies primarily engaged in manufacturing electronic and business machinery (except electronic
data processing equipment), alarm systems and electronic equipment not elsewhere classified.
Electronic data processing equipment manufacturing is covered in 3631 - Computer Equipment and
Related Services Integrated Operations. Manufacturing of electronic household appliances is
covered in 3512 - Household Appliances Manufacturing. Manufacturing of scientific scales including
electronic is covered in 2612 - Scientific and Professional Apparatus Manufacturing.

xvii) Electronic Equipment Wholesaling

Companies primarily engaged in wholesaling electronic parts and components, communications
equipment and other electronic equipment (except electronic data processing equipment) and
electronic household appliances.

xviii) Computer Services

Companies primarily engaged in computer programming and systems work, computer equipment
servicing and computer wholesaling.

xix) Computer Programming and Systems Analysis Services

Companies primarily engaged in providing computer programming and systems analysis services.

xx) Computer Data Input and Systems Services

Companies primarily engaged in renting computer time and providing data input and systems
services.

xxi) Computer and Peripheral Equipment Sales and Service

Companies primarily engaged in the selling and servicing of new and used computers and peripheral
equipment. Companies primarily engaged in finance leasing are covered in 6122 - Financial Leasing
Companies.

xxii) Computer Equipment and Related Services, Integrated Operations

Companies primarily engaged in operations which integrate the manufacturing, marketing and
servicing of electronic computing and peripheral equipment and provide computer programming
and systems analysis, computer time renting and data input preparation services.

b. CAPITAL ITEMS:

These are the industrial products that aid the buyer’s productions and operations. They can be
accessory equipments, installations or may be buildings, complex computer systems. There are also
some other items which can be added to this are the accessory equipment which can be like tools
for work in the production, fork lift trucks for material handling, equipments & furniture etc. These
have a shorter life span than the one mentioned for material parts.

c. SUPPLIES & SERVICES:

This is the final group of products and services in industrial marketing. Supplies are the items, which
have a continuous use in the plant or in office. Cleaning equipments, paints, pencils, printer inks,
photocopy papers, etc. Supplies are the convenience products and are purchased with ease.
Maintenance and repair services are the items like window and furniture cleaning material computer
repair etc. Lastly are the business advisory services like legal, management consulting, advertising
etc.
5. UNDERSTANDING BUSINESS MARKET ENVIRONMENT
Industrial buyers and sellers operate in a dynamic environment. The industrial marketing
environment could be divided into macro environment and micro environment.

a. Micro environment

The micro environment has two more levels namely the interface level and the public’s level.

i) The Interface Level

This involves those key participants who immediately interface with an industrial firm (buyer or
seller) in facilitating production, distribution and purchase of firm’s goods and services. Supply inputs
are transformed by a company and its competitors into outputs with added value that move on to
the end markets, the move being made through the firms interface with industrial distributors and
dealers, manufacturers representatives and the company’s own sales people. That move is made
possible by a firms interface with facilitating institutions such as banking, transportation, and
research and advertising firms.
Participants in the interface level include:

 Input supplier– Input goods such as the raw materials, labor and capital are supplied by
organizations to industrial firms for use in producing output goods and services. The survival and
success of a firm depend on the knowledge and relationship with its input suppliers. Interruptions
in the flow of inputs cause repercussions in the entire industry affecting not only production and
marketing plans but also the production and marketing plans of the suppliers.
 Distributors– Most organizational buyers buy from five or more industrial distributors. Industrial
distributors, contact potential buyers, negotiate orders; provide buffer inventories, credit and
technical advice to potential buyers. They are particularly important when joint demand is
present because they bring together the heterogeneous inputs needed for the production of
end products.
 Facilitators– Advertising agencies and public relations firms provide the necessary
communication flow between the sellers and buyers through the formulation of meaningful
information and media strategies. The use of advertising in reaching potential buyers and the
multitude of buying influencers is vital in the overall communication strategy. Transportation and
warehouse companies facilitate the free flow of goods that must be delivered in usable
condition to industrial customers and distributors when and where they are required. When
goods are not delivered on time and in usable solutions, buyers can be forced to shut down
production lines. Resources as they move from the supply inputs to end users must be financed
and insured.
 Competitors– Competitors actions whether domestic or foreign, ultimately influence the
company’s choice of target markets, distributors, product mix, and in fact its entire marketing
strategy.

ii) The Publics Level

Publics are distinct groups that have actual or potential interest or impact in each firm’s ability to
achieve its respective goals. Publics have the ability to help or hinder a firms effort to serve is
markets.

 Financial publics– Financial institutions such as investments firms and stock brokerage firms
and individual stakeholders invest in an organization on its ability to return profits. When they
become unhappy with the management or dissatisfied with a company’s social policies, they sell
their shares.
 Independent press – Industrial organizations must be accurately sensitive to the role that the
mass media play and how they can affect the achievement of the marketing objectives. The
independent press is capable of publishing news that can boost or destroy the reputation of a
firm as well as the sales potential of a product.
 Public interest groups– Industrial marketing decisions are increasingly affected by public
interest groups. Clearly, these various public interest groups limit the freedom of the suppliers
and buyers in the industrial market. While some organizations respond by fighting, others accept
these groups as another variable to be considered in developing strategic planning, working
through public affairs departments to determine their interests and to express favorably
the company’s goals and activities in the press. The impact of these groups however is felt by all
participants in the interface level.
 General public— Although the general public does not react in an organized way towards a
firm or an industry, as interest groups do, when sizeable portion of a population shifts attitude
towards a firm or industry, there is definite impact.
 Internal public– The board of directors and managers as well as blue and white color workers
are important emissaries between an organization and other participants in the interface and
public levels. Corporate policy must give consideration to employees and others who are held
responsible for the overall operation of the firm. Employee morale is an important factor in all
business decisions. And when morale is low, organizational efforts suffer. A firms employees
spend more than two thirds of their time off the job, interacting with their families and the
community, so employees attitudes do influence the public.

b. Macro Environment

This level of the organization is made up of components that have less specific and less immediate
implications for managing the organization effectively.
i) Economic component
Economic conditions greatly influence an organizations ability and willingness to buy and sell. Thus
emerging changes in the economic environment both at home and abroad, must be closely
monitored. It includes the following factors;

 GNP
 Inflation rates
 Balance of payment position
 Debts and spending
  Taxation rates
 Interest rates
 Consumer’s income
 Corporate profits

ii) Social component

This describes the characteristics of the society where an organization exists. It includes factors such
as;

 Literacy levels
 Values of people
 Educational levels
 Geographical distribution
 Customs and believes

iii) Legal component

This consists of legislation’s that have been passed. It describes the rules or the laws that all the
company members must follow. They include all laws affecting the organization e.g.

 Consumer health policy

 Energy policies and conservation Acts
 Employment Acts, etc.

iv) Political component

Comprise those elements related to the government affairs. This includes;

 Type of government
 Government attributes towards certain issues
 Lobbying efforts from interest groups
 Progress towards passing of laws affecting certain industries, etc.

v) Technological component
Given the rate of technological change in industries such as telecommunications, computers, and
semi conductors, large buying firms are developing forecasting techniques to enable them to
estimate time periods in which major technology developments might occur. Marketers must also
monitor technological change if they hope to adapt marketing strategy with sufficient speed and
accuracy to make the more scientific breakthroughs. This includes;

 New procedures
 Approaches to new plan of goods and services
 Addresses the issues of new equipments and new ways of improving production through the
use of computers /robots.
 vi) Demographic component
Industrial firms cannot ignore the demographic environments because of the derived nature of
industrial demand. World population explosion and changing population structure of the world has a
major impact on industrial demand.

6. ORGANISATIONAL BUYING AND BUYING BEHAVIOUR

A. Buying Situations in the B2B Marketing

There are three common types of buying situations in industrial market, which are discussed
as follows:
1. New Purchase
The industrial buyers buy the item for the first time in this situation. The need for a new purchase
may be due to internal or external factors. For example, when a firm decides to diversify into new
purchase situations the buyers have limited knowledge and lack of previous experience. Therefore,
they have to obtain a variety of information about the product, the suppliers, the prices and so on.
The risks are more, decisions may take longer time, and more people are involved in decision making
in the new purchase decisions.
2. Change in Supplier
This situation occurs when the organisation is not satisfied with the performance of the existing
suppliers, or the need arises for cost reduction or quality improvement. The change in supplier may
also be necessary if technical people in the buying organization ask for changes in the product
specification, or marketing department asks for redesigning the product to gain some
competitive advantage. As a result, search for information about alternative sources of supply
becomes necessary. Even though, certain attributes or factors can be used to evaluate the suppliers.
There may be uncertainty regarding the supplier who can best meet the needs of the buying firm.
Therefore, the modified re-buy situation occurs mostly when the buying firms are not satisfied with
the performance of the existing suppliers.
3. Repeat Purchase
If the buying organization requires certain products or services continuously and products/services
had been purchased in the past then the situation of repeat purchase occurs. In such a situation, the
buying organisation reorders/places repeat orders with the suppliers who are currently supplying
such items. This means that the product, the price, the delivery period, and the payment
terms remain the same in the reorder, as per the original purchase order. This is a routine decision
with low risk and less information needs, taken by a junior executive in the purchase department.
Generally, the buying firms do not change the existing suppliers if their performance is satisfactory.
 B. Stages in Organizational Buying
No two companies follow the same purchasing procedure. The industrial purchasing process might
be broken down into eight distinct stages for the purpose of analysis. Though, they are sequential &B
segmental, they may also occur concurrently. Table below shows the buy-grid analytic framework for
industrial buying situation.

Buying stages:
a. Anticipation or Recognition of a problem (need)
Recognition of a problem triggers the purchasing process .The firm’s product become out-
dated, equipment break down, or existing materials are unsatisfactory. A marketer can
precipitate the need for a product by demonstrating opportunities for improving the
organization’s performance, there by achieving a greater probability of success in securing the
account .It is important to note that purchasing managers and design engineers actively
encourage early supplier involvement, especially when confronting unfamiliar technology.

b. Determination of Characteristics and the Quantity of Needed Item

These decisions are generally made within the user department, where the needs invariably
emerge. For example, members of the production department determine the characteristics
needed in a high-speed packaging system. For technical products, the user department
prepares performance specifications. The development of performance s specifications has a
critical impact on the final choice of a product and a Supplier. The decisions made in the early
stages of the process inevitably limit and shape the decision-making in the later stages of the
process. The industrial salesperson is a vital source of information to organizational buyers
throughout the purchasing process.
c. Description of the Characteristics of the Item and the Quantity Needed
This involves a detailed and precise description of the needed item, a description that can be
readily communicated to others. This can ‘be a critical stage for the marketer because key
buying influences emerge here. Recognizing these buying influences and their relative roles
and importance can give the marketer a distinct advantage. A marketer who triggers the
initial need has the benefit of a close working relationship with key organizational members
throughout these formative stages in the procurement process.

d. Search for and Qualification of Potential Sources

Once the organization has defined the accurate that will satisfy its requirements, the search
turns to sources of supply, in order to determine which of the many possible suppliers can be
considered as potential vendors. The intensity of evaluation varies by organization and by the
particular buying situation. The organization invests more time and energy in the evaluation
process when the proposed product or service has a strong bearing on organizational
performance.

e. Acquisitions and Analysis of Proposals

For more complex goods such as machine tools, many months may be consumed in the
exchange of proposals and counter proposals. This stage emerges as a distinct component of
the buying process only when the information needs of the buying organization are high.
Here, the process of acquiring and analyzing proposals may involve different organizational
members.

f. Evaluation of Proposals and Selection of Suppliers

Alternative proposals are analyzed. One or more of the offers is accepted, and the others are
rejected. Negotiations concerning the terms of the transaction may continue with the
selected suppliers.

g. Selection of an Order Routine

The user department will not view its problem as resolved until the specified product is
available for its use. Concerning the order routine, a purchase order is forwarded to the
vendor, status reports are forwarded to the user department, and inventory levels are
planned. Thus procurement procedures (the size and frequency of orders) are established for
the item.

h. Performance Feedbacks and Evaluation

This is the final stage in the procurement process. Feedback may flow through formal or-
Informal channels. Feedback, critical of the chosen supplier and supportive of rejected
alternatives, can lead members of the decision-making unit to re-examine their position. If
 the product fails to, meet the needs of the user department, vendors screened earlier in the
procurement process maybe given further consideration. To retain a new account, the
marketer must ensure that the needs of the buying organization have been completely
satisfied. Failure to follow through at this critical stage leaves the marketer vulnerable.

FACTORS INFLUENCING THE BUYING PROCESS

Three groups of factors influence industrial buying process:
(1) the environment,
(2) the organization, and
(3) the decision making unit.
The environment in this regard covers government regulations, the economic climate within which
the buyers operate, and the general technological changes within the economy. In the increasingly
globalised economies of today, buying processes must take not only the domestic environmental
changes into account in their purchasing decision. Changes elsewhere in the world must also be
factored into the purchase decision process. The international environment is in fact assuming
greater importance than the domestic environment of most firms. The organizational structure,
politics and culture also shape the manner in which purchase decisions are made. Finally, the
decision making unit (the buying centre) to which the purchasing task has been assigned also has a
tremendous influence on the purchase process.

7. BUYING DECISION MAKING PROCESS

The Decision Making Unit (DMU) consists of individuals who actively participate in the purchase
decision-making process. All these decisions are influenced by economic (task) factors and
emotional (non task) factors. Some examples are given below:

Task Buyer Behavior Non-Task Buyer Behavior

Economic (Task) Emotional (Non-Task)
Source Searching Ego Enhancement
Vendor Evaluation Personal Risk Reduction
Product cost management Previous Experience
Purchase Price Analysis Interpersonal relationship
 Characteristics of DMU

(a) DMUs may differ with respect to the composition and position within the firm and with
respect to their decision-making behavior. If a DMU is composed of relatively newcomers,
none of whom occupies a top-level position in the department, it is likely to have little
power to press its recommendations

(b) DMUs may differ with respect to the importance they attach to the purchase of a
particular item, the relative weight they attach to such purchase variables as price, quality
and service, their attitudes towards particular type of vendors and the specific rules they
employ to seek and evaluate alternative offerings.

(c) DMUs which consider a specific product important require prompt delivery and perhaps
technical assistance, wish to deal with well known vendors and seek a bid first from a
supplier with whom they have-dealt previously.
8. BUYING GRID
Some of the key concepts and models that describe the industrial market system and marketing

strategies are

• The buy grid model

• The buying centre concept
• Vendor-buyer relationship models

Industrial buyers are reputed for making rational decisions and go through a number of clearly
defined stages in their decision making. The purchase behavior that they exhibit and they kind of
information they require to make their decisions will depend on the experience of the decision -
makers with the purchase of the same or similar products. The stages in the decision making
process and the influence of the purchase situations on the decisions are described in the
literature by a model referred to as buy grid model. Furthermore, organizational buying decisions
are usually made by a group of organizational members labeled in the marketing literature as a
buying centre. This section provides an overview of the buy grid model and the buying centre
concept.

The Buy grid Model

The buy grid model is a conceptual model, which describes the different combinations of buying
phases and buying situations. It incorporates three types of buying situations: (1) the new task, (2)
the straight rebuy, and (3) the modified rebuy, combined with eight phases in the buying decision
process. The model serves as an easy framework for visualizing the otherwise complex business
buying process and enables the vendor to identify the critical phases and situation requiring specific
types of information.

Buying Situations

As mentioned above the buying situation is usually classified into three major categories; the new
task, the modified rebuy, and the straight rebuy situations.
a. New Tasks. It is a buying situation in which the business buyer purchases a product or service
for the first time. In a new task buying situation the buyer seeks a wide variety of information to
explore alternative solutions to his purchasing problem. The greater the cost or perceived risks
related to the purchase the greater the need for information and the larger the number of
participants in the decision making unit. This provides the vendor with considerable
opportunity and challenge. The vendor is in a greater position to influence the decision making
process by the information that it provides. At the same time its personnel must respond to the
information needs and skepticism of a large number of people within the decision-making unit.
b. Modified Rebuy. It is a buying situation in which the business buyer wants to replace a product
or service that the firm has been using. The decision making may involve plans to modify the
product specifications, prices, terms or suppliers. This is the case when managers of the
company believe that significant benefits such as quality improvement or cost reduction can be
achieved by making the change. The fact that the company had previous experience with the
purchase and use of the product means that the decision criteria may be well defined in such
situations. Nevertheless, some uncertainties still linger in the minds of some decision-makers.
There is the risk that the new supplier may perform poorer than the present one. Again the
situation carries enormous opportunities and challenges for vendors competing for the order.
The decision making unit is however usually smaller than in new task situation and therefore
 makes it relatively easier for the vendor’s marketing personnel to attend effectively to the
information needs of the buyers.
c. Straight Rebuy. It is a buying situation in which the buyer routinely reorders a product or
service without any modification due to satisfaction with the supplier. The supplier is retained
as long as the level of satisfaction with the delivery, quality and price is maintained. New
suppliers can only be considered if these conditions change. The challenge for the new supplier
then is to offer better conditions or draw the buyer’s attention to some benefits that it is
missing for doing business with it present supplier. The buyer may in turn use the new offerings
from competitors to renegotiate its purchase conditions with the present supplier. It is
therefore difficult to capture orders from companies engaged in routine purchases.

9. BUYING CENTRE

The Buying Centre Concept

Companies do not buy, people do. It is therefore important to have a substantial knowledge about
those involved in the buying decision making process of the goods and/or services that a vendor
intends to sell. It has been shown that many individuals are involved in the buying processes of
industrial goods.
The theoretical foundation of the buying centre construct can be found in role theory. Role theory
suggests that people behave with a set of norms or expectations that others have in the roles in
which they have been placed. Roles can be both formal and informal. Formal roles are defined by
organizational structure and managers’ position within the structure. Apart from the formal roles
that managers play, they (like all other people) have the natural tendency to develop informal
social groupings within their organizations. These informal groupings can be harnessed to support
the performance of the main tasks that have been assigned to them. Occasionally, however, some
informal social relations can obstruct the performance of these tasks.

10.ROLE IN THE BUYING CENTRE

The Roles of Buying Centre Members
Buying managers are known to assume some common of roles in a buying process. These roles are

classified into six groups.

i) The initiator is the one or group of individuals who become aware of a company problem and
recognize that the problem can be solved via acquisition of a product or service.
ii) The gatekeepers usually act as problem or product experts. They have information about a
range of vendor offerings. Other buying centre members therefore rely on their information for
their assessment of prospective vendors’ offerings. Thus, by controlling information, and, by
having access to decision-makers in the firm, the gatekeepers largely determine which vendors
get the chance to sell.
iii) Influencers have been described as those who have say in whether a product or service is
bought or not. The more critical a purchase is to a company’s business, the higher the number
of influencers. Critically strategic purchases frequently entail high resource outlays and affect
the task performance of several employees the heads of whom naturally "have a say" in the
purchase decision making process.
iv) The deciders make the actual purchase decision. That is, they say yes or no to what vendors
offer. In less complex purchase situations, the decision-making responsibility may fall on one
person. But where the purchase is complex, group decision may be required.
v) The purchaser is the one who makes arrangements for the delivery of the goods. He is also
often directly involved in negotiating the conditions under which the transactions will be made.
vi) The users are those who actually make use of the products in normal working process.

A buying centre can be formalized, but not always so. Even in formalized buying centres
members are not designated with the titles of gatekeepers, influencers etc. A buying centre
member may play more than one role at different stages in the buying process. There may be
as few as one person playing all the six roles or as many as 50 or more in complex buying
situations. The degrees of influence of these buying centre members will depend on their
power base within the organization.
 Note:- One major characteristic of buying centres is that members come and go. The centre is
therefore fragmented in terms of time, a phenomenon described in the literature as time
fragmentation. The more buying centre members are involved for only short periods of time in
the purchase decision making process, the more fragmented the buying centre is over time.
This means that the influence of key buying centre members can be limited to a particular stage
in the purchasing process. It is therefore of utmost importance to vendors to exert the best
impact on them at the critical point in time to convince them of the superior value of their
offerings.

UNCERTAINTIES AND INFORMATION REQUIREMENT OF BUYING CENTRE MEMBERS

Buying centre members need information in order to reduce one or more of the following

three types of uncertainty:

i) Need uncertainty. That is, the buying centre member’s doubts concerning the nature of needs
that the vendor’s offerings are to satisfy. The general view is that buyers have clear
knowledge of the problems that new products to be purchased are to address. In practice,
however, not all the buying centre members are likely to be convinced about the nature of
the problem and the type of solutions suggested. The reason may be due to lack of technical
knowledge or the lack of clarity about the problem for the overall performance of the firm.
Vendors may supply information that clarify the nature of the problem.

ii) Market Uncertainty. Some buying centre members may initially reject the vendor’s offerings
simply because they do not know whether there exists superior offerings on the market. They
may therefore delay the decision making, particularly if they have substantial authority in the
overall decision making process. Here again the vendor can help speed up the decision-
making process if its salespeople can assist in providing information about the types of
offerings found on the market and indicate how the vendor’s offerings compare with other
possible offerings.
 iii) Transaction Uncertainty. This concerns problems that may arise in getting the
product/service from the vendor to the buyer. Some buying centre members may be
concerned about delivery and post-delivery problems. This may be particularly true for
deliveries to customers in foreign countries where logistical problems can be anticipated. It is
important for the vendor to provide detailed information about how the delivery will be
made and arrangements to be made to forestall any difficulties that can arise.

As much of the deliberations with the buying centres are aimed at addressing these
uncertainties, by supplying relevant information at appropriate times and stages in the decision
making process, the vendor can facilitate and speed up the decision to be taken, preferably in
its favour.

IMPORTANT NOTE :- There are two other important dimensions of the buying centre that
require attention, the vertical dimension and the horizontal dimension. The vertical dimension
refers to how many layers of management are involved in the purchase decision process. The
horizontal dimension concerns the number of departments involved. The more complex a
purchase decision, the wider both the horizontal and vertical coverage of the buying centre. It
implies that individuals with a wide variety of interests and departments with different norms
and rules of behaviour are involved in the process. This may create problems of co-ordination
and may produce conflicting decision signals to the vendor.

Summary of B2B Buying process

The Procurement Function
Objectives of the Procurement Function
Purchase Policy

The Buying Decision Process

Need Recognition
Product Characteristics
Searching for and Qualifying Potential Suppliers
Soliciting and Analyzing Proposals
Making the Purchase Decision
Selecting the Order Routine
Evaluating Vendor Performance

Types of Buying Situations

New Task
Straight Re-buy
Modified Re-buy
Buy-Grid Model
Profile of Business Buyers
Buying Center
Buying Committee

Value Analysis
Functions of Value Analysis
Activities of Value Analysis

Vendor Analysis
Criteria for Evaluating Potential Vendors
Vendor Rating

Models of Organizational Buying Behavior

Factors Influencing Organizational Buyer Behavior
The Sheth Model
The Webster and Wind Model
The Anderson and Chambers Reward/Measurement Model

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