Chapter 6

Business Markets and Business

Buyer Behavior
 Learning Objectives
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.
Business Markets and 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.
In one way or another, most large companies sell to other organizations. Companies such as Boeing,
DuPont, IBM, Caterpillar, and countless other firms sell most of their products to other businesses.

Even large consumer-products companies, which make products used by final consumers, must first sell
their products to other businesses(intermediaries).

Business-to-business (B-to-B) marketers must do their best to understand business markets and business
buyer behavior. Then, like businesses that sell to final buyers, they must engage business customers and
build profitable relationships with them, by creating superior customer value. The business market is
huge. In fact, business markets involve far more dollars and items than do consumer markets.

In some ways, business markets are similar to consumer markets. Both involve people who assume buying
roles and make purchase decisions to satisfy needs. However, business markets differ in many ways from
consumer markets. The main differences are in market structure and demand, the nature of the buying
unit, the types of decisions, and the decision process involved.
Business Markets
Market Structure and Demand

Fewer but larger buyers

Derived demand

Inelastic demand

Fluctuating demand
Business markets have far fewer but far larger buyers than the consumer
marketer does. Even in large business markets, a few buyers often account
for most of the purchasing.

Derived demand is ultimately derived from the demand for consumer

goods. Consumers buy Intel processors only when they buy PCs,
tablets,smartphones, and other devices with Intel processors inside them
from producers such as HP, Dell, Lenovo, Samsung, Sony, and Toshiba.

Inelastic demand and more fluctuating demand- demand for many

business products is not affected much by price changes, especially in the
short run.
And the demand for many business goods and services tends to change more
—and more quickly—than does the demand for consumer goods and
services.
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
B-to-B marketers now face a new breed of higher-level, better-trained
supply managers (buyers). Therefore, companies must have well-trained
marketers and salespeople to deal with these well-trained buyers.
Business Markets
Types of Desions and the Decision Process
Business purchases tend to have the following characteristics:

Business buyers face more complex buying decisions than consumer buyers.
They involve large sums of money.
There are complex technical and economic considerations.
There are interactions among people at many levels of the buyer’s organization.
The process tends to be longer and more formalized.
They involve detailed product specifications and careful supplier searches.
They involve written purchase orders and formal approval.
Buyer and seller are often much more dependent on each other.
Business Markets
Decision Process
Supplier development is the 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.
Walmart doesn’t have a “Purchasing Department”; it has a “Supplier Development
Department.”
The giant retailer knows that it can’t just rely on spot suppliers who might be
available when needed.
Instead, Walmart manages a robust network of supplier-partners that help provide the
hundreds of billions of dollars of goods that it sells to its customers each year.
Business Buyer Behavior
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.
Business Buyer Behavior
Major Types of Buying Situations

Systems selling is buying a complete

solution to a problem from a single seller.

Solutions selling: UPS not only delivers packages for online retailer Overstock.com, it also manages
much of Overstock’s complex order and returns process in an efficient, customer-pleasing way.
Business Buyer Behavior
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
Business Buyer Behavior
Participants in the Business Buying Process
Users are those that will use the product or service. In many cases, users initiate the buying proposal and help define
product specifications.
Influencers help define specifications and provide information for evaluating alternatives. Technical personnel are
particularly important influencers.
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. In routine buying, the buyers are often the
deciders, or at least the approvers.
Gatekeepers control the flow of information. Purchasing agents often have authority to prevent salespersons from seeing
users or deciders. Other gatekeepers include technical personnel and even personal secretaries.
Business Buyer Behavior
Participants in the Business Buying Process
The buying center concept presents a major marketing challenge given
the varied groups involved in the decision.
Who participates in the decision?
Relative influence on decision by various participants
Evaluation criteria used by various participants
Are there informal participants involved in decision?
Business Buyer Behavior

Figure 6.2 Major Influences on Business Buying Behavior

The Business Buying Process
The Business 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

Problem recognition: Salesforce’s “Blaze your trail” ads show how it

solves problems for some of its high-profile customers, such as Intuit,
suggesting that it can do the same for new customers.
The Business Buying Process
General need description describes the characteristics and quantity of the needed
item.
Product specification describes the technical criteria.
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.
The Business Buying Process
Supplier search involves compiling a list of qualified suppliers to find the best vendors.
Proposal solicitation is the process of requesting proposals from qualified suppliers.
Supplier selection is when the buying center creates a list of desired supplier
attributes and negotiates with preferred suppliers for favorable terms and conditions.
 The Business Buying Process
Order-routine specifications includes the final order with the chosen supplier and lists all of the
specifications and terms of the purchase.

Performance review involves a critique of supplier performance to the order-routine specifications.

The review may lead the buyer to continue, modify, or drop the arrangement. The seller’s job is to
monitor the same factors used by the buyer to make sure that they are delivering the expected
satisfaction.
E-Procurement and Online Purchasing

Online purchasing
Company-buying sites
Extranets

Online procurement is standard procedure for most

companies today, letting business marketers connect
with customers online to sell products and services,
provide customer support services, and maintain
ongoing customer relationships.
E-Procurement and Online Purchasing
Advantages
Access to new suppliers
Lowers costs
Speeds order processing and delivery
Enhances information sharing
Improves sales
Facilitates service and support

Disadvantages
Erodes relationships as buyers search for new suppliers
Institutional and Government Markets
Institutional markets consist of schools, hospitals, nursing homes, and prisons that provide goods and services
to people in their care.

Characteristics
Low budgets
Captive patrons

Many marketers set up separate divisions to meet the special characteristics and needs of institutional buyers.
The General Mills Foodservice unit produces, packages, prices, and markets its broad assortment of cereals,
cookies, snacks, and other products to better serve the specific food service requirements of hospitals, schools,
hotels, and other institutional markets.
P&G’s Procter & Gamble Professional Division markets professional cleaning and laundry formulations and
systems to educational, healthcare, and other institutional and commercial customers.
Institutional and Government Markets
Government markets tend to favor domestic suppliers, require them to submit bids, and
normally award the contract to the lowest bidder.

Affected by environmental factors

Non-economic factors considered
Minority firms
Depressed firms
Small businesses