Business Buying Behavior (Business-to-Business, B2B) (Chapter 4)

Derived Demand

Demand that springs from, or is derived from, a secondary source other than the primary buyer of the product.

Demands for business produced is based on derived demand. When it comes to B2B sales, that source is consumers. If consumers aren't demanding the products produced by businesses, the firms that supply products to these businesses are in big trouble.

Fluctuating Demand

Demand that fluctuates sharply in response to a change in consumer demand.

Another characteristic of B2B markets. In other words, a small change in demand by consumers can have a huge effect throughout the chain of businesses that supply all the goods and services that produce the product. Often a bullwhip type of effect occurs.

"If you have ever held a whip, you know that a slight shake of the handle will result in a big snap of the whip at its tip. Essentially, consumers are the handle, and businesses along the chain comprise the whip - hence the need to keep tabs on end consumers. They are a powerful purchasing force.

Producers

Companies that purchase goods and services that they transform into other products.

This category included both manufactured and service providers. Procter & Gamble, McDonald's, Dell, Delta Airlines, and Tesla are examples. So are restaurants, your doctor, and local tattoo parlors.

Resellers

Companies that sell goods and services produced by other firms without materially changing them.

This category of buyers include wholesalers, brokers, and retailers. Walmart and Target are two big resellers. If you can get them to buy your products, you can increase your sales exponentially. Every day resellers flock to Walmart's cooperate headquarters in Bentonville, Arkansas, to try to hawk their priciest.

Value-Added Resellers (VARS)

Companies that buy finished products from other companies, customize them in some way, and then sell them and higher prices.

That can include making modifications to the products, and/or providing the buyer's personnel with training to use the product, among other things. The goal is to make the product a better "fit" for the buyer.

A company in the information tech ology sector that buyers computers and adapts them for special purposes, such as cloud-computing is an example of a VAR. So is an automobile dealer that customizes cars. By providing value-added services, VARs hope to develop better relationships with their customers and get repeat business from them.

Business-to-government (B2G) Markets

Markets in which local, state, and federal governments buy products.

This represents a major selling opportunity even for smaller sellers. Many government entities specify that their agencies must award a certain amount of buiness to small businesses, minority - and women-owned businesses, and businesses owned by veterans who are disabled. In addition, the U.S. government now requires even small businesses to pay their employees at least $15 per hour if they want to do business with the federal government.

Institutional Markets

Nonprofit organizations such as the American Red Cross, churches, hospitals, charitable organizations, private colleges, and civic clubs.

Like government and for-profit organizations, they buy a huge quantity of products and services. Holding costs down is especially important to these organizations. The lower their costs are, the more people they can provide their services to.

Buying Centers

Groups of people within organizations who make purchasing decisions.

Large organizations often have permanent departments that consists of the people who, in a sense, shop for a living. They are professional buyers, in other words. Their titles vary. In some companies, they are simply referred to as buyers. In other companies, they are referred to as purchasing agents, purchasing managers, or procurement officers. Retails often refer to their buyers as merchandisers. Most of the people who do these jobs have Bachelor of Science degrees. Some undergo additional industry training to obtain advanced purchasing certification designations.

Initiators

People within the organization who first see the need for a product, and, depending on their ability to make the final decision, either notify the purchasing agents of what is needed or lobby executives to consider making a change.

Sometimes they initiate a purchase by simply notifying their firm's purchasing agents about what is needed; at other times initiators have to lobby the executives within their firms to agree to purchase the items they think the firms need. The executives, such as a firm's CEO, are also often initiators because they choose new business paths for their firms to pursue. Doing so often requires purchasing new and different types of products that a company did in the past.

Users

The people and groups within the organization that actually use the product.

Frequently, one or more users serve as initiators in an effort to improve what a firm produces or how it is produced. Consequently, they are responsible for implementing what is purchased. Users often have certain specifications in mind for products and how they want them to performs. An example of a user might be a professor at your school who wants to use an online textbook and integrate it into her online class.

Influencers

People who may or may not use the product but actively participate in the purchasing process in order to secure a decision they consider favorable.

Gatekeepers

People who decide if and when a salesperson gets access to members of the buying center.

These people such as buying assistants, personal assistants, and other individuals who have some say about which sellers are able to get a foot in the door.

Deciders

The person who makes the final purchasing decision.

The decider might or might not be a purchasing manager. Purchasing managers are generally solely responsible for deciding on routine purchases and small purchases. However, the decision to purchase a large, expensive product that will have a major impact on a company is likely to be made by or with the help of other people in the organization and perhaps even the CEO.

Stages in the B2B (Business-to-Buisness) Buying Process

1. A need is recognized.

2. The need is described and quantified.

3. Potential suppliers searched for.

4. Qualified suppliers are asked to complete responses to responses to requests for proposals (RFPs).

5. The proposals are evaluated and supplier(s) selected.

6. An order routine is established.

7. A post purchase evaluation is conducted and the feedback is provided to the vendor.

Request for Proposal (RPP)

An invitation to submit a bid to supply the good or service.

A scoreboard used to evaluate RFPs (Request for Proposal)

A scoreboard approach can help a company rate the RFPs

New Buy (type of buying situation)

When a firm purchased a product for the first time.

Generally speaking, with a new buy all the buying stages discussed in the buying process occur. New buys are the most time-consuming for both the purchasing firm and the firms selling to them. If ten product is complex, many vendors and products will be considered, and many RFPs will be solicited.

Modified Rebuy (type of buying situation)

When a company wants to buy the same type of product it has in the past but makes some modifications to it.

Maybe the buyer wants different quantities, packaging, or delivery, or the product customized slightly differently. For example, your instructor might have initially adopted this textbook "as is" from its published, FlatWorld, but then decided to customize it master with additional questions, problems, or content that they created or that was available from FlatWorld.

E-commerce

Transactions conducted electronically rather than face-to-face.

The transaction can be conducted between two companies directly connected to one another -say, the computer of a businesses and the computer of its supplier - via phone, or over the internet, or using gmail.

Sell-Side Site (type of B2B website)

A website in which single seller sells products to many different buyers.

Website such as the Hubert company.

Buy-Side Site (type of B2B website)

A site in which a business buys products from multiple sellers that go there to do business with the firm. Some government agencies have buy-side sites.

B2B Exchange (type of B2B website)

E-commerce sunrises where multiple buyers and sellers go to find and do business with one another.

You can think of the exchange as being somewhat like Craigslist but composed solely of business buyers and sellers. B2B exchange make money by charging buyers and sellers a fee when they conduct transactions with one another. Of the most successful and largest exchanges is Alibaba.com, a trading platform for small and Mexico in manufacturers to sell their products. ChemNet.com is a global exchange where companies go to buy and sell chemicals of all kinds.

B2B Auctions

Web-based actions that occur between businesses. The auctions can be either sell-side or buy-side. An example of a sell-side auction is a B2B auction that occurs on eBaby or a site like Asset-sales.con, where surplus industrial equipment is sold. Sell-side auctions are sometimes referred to as forward auctions.

Reverse Auctions

When the buyer lists what they want to buy and also states how much they are willing to pay. The reverse auction is finished when at least one firm is willing to accept the buyer's price.

Not all companies use an intermediary like eVat or Asset-sales.com to conduct their auctions, thought. Some companies conduct their own auctions on their websites so they don't have to pay a fee to an intermediary. For example, General Motors auctions off reconditioned vehicles to auto dealers on its own website.

Content Marketing

A strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly-defined audience - and , ultimately, to drive profitable customer action.

Content marketing leads itself perfectly to B2B marketing on social networks. Businesspeople online are not only looking to network and socialize with one another; they are looking for valuable information and experts who can help them get a leg up on the competition.

Artificial Intelligence (AI)

The ability of machines and computers to do things commonly associated with intelligent beings, such as the ability to reason, discover meaning, generalize, and learn from past experiences.

Vitural assistants such as Siri for iPhone and Alexa, and Amazon pro if, are examples. Many businesses large and small what to better understand how to utilize AI and leverage it to their advantage.

An example of a B2B seller that engages in content marketing is IBM. IBM's "Journey to AI Blog" features case studies, podcasts, animators, and clients stories about how AI is helping them - all of which can be easily shared via social media. This is helping IBM position itself as a go-to source not only for information about AI but other product solutions for businesses buyers.