Chapter 6

Page 1: Introduction to Business Markets

  • Title: Principles of Marketing, Chapter 6: Business Markets and Business Buyer Behavior

Page 2: LinkedIn as a B2B Platform

  • Overview:

    • LinkedIn is a leading platform for B-to-B marketing with over 590 million professionals.

    • Provides opportunities for marketers to directly engage with key business stakeholders.

    • Emphasizes the concept of marketing to relevant professionals.

Page 4: Understanding Business Buyer Behavior

  • Business Buyer Behavior:

    • Involves organizations purchasing goods/services for production use or resale.

    • The buying process entails determining needs, evaluating options, and making decisions among brands.

Page 5: Business Market Definition

  • Learning Objective:

    • Define what a business market is and differentiate it from consumer markets.

Page 6: Characteristics of Business Markets

  • Market Structure and Demand:

    • Fewer but larger buyers: business markets typically consist of a smaller number of buyers compared to consumer markets, yet these buyers purchase in significantly larger quantities, leading to a concentrated market structure.

    • Demand is derived (dependent on consumer demand): the demand for business products is directly influenced by the demand for consumer goods, meaning that fluctuations in consumer preferences can significantly impact the purchasing decisions of businesses.

    • Typically inelastic (demand does not change with price): In business markets, the demand for products is often inelastic, meaning that price changes have a limited effect on the quantity demanded, as businesses prioritize the needs of specific goods

    • Demand may fluctuate based on market conditions: changes in economic indicators, competitive actions, and technological advancements can all alter a businesses’ strategies

  • Complex Buying Decisions:

    • Business buyers face more intricate decisions than consumers.

    • Characteristics:

      • Involvement of multiple decision participants: Business purchases often require input from various stakeholders, including finance, operations, and management, leading to a more collaborative and sometimes cumbersome decision-making process.

        Ex: a tech company purchasing new software solutions must consider the needs of the IT department, the budget constraints set by finance, and the operational impact identified by management.

      • More professional purchasing effort required: Businesses often need to conduct thorough market research, evaluate supplier capabilities, and assess total cost of ownership to ensure that their purchasing decisions align with organizational goals.

        Ex: a manufacturing firm looking to source raw materials must analyze supplier reliability, compare pricing structures, and evaluate the long-term implications of various sourcing options.

      • Increased interaction between buyers and sellers: This collaboration fosters better understanding of product specifications, enhances negotiation processes, and can lead to more favorable terms for both parties.

        Ex: a technology company seeking to procure software solutions should engage with vendors to discuss customization options, service level agreements, and post-purchase support to maximize value and ensure alignment with business needs.

Page 8: The Decision Process in Business Markets

  • Types of Decisions:

    Business buyers face more complex buying decisions due to factors such as multiple stakeholders involved, the need for extensive research, and the importance of long-term relationships with suppliers.

    • Supplier Development: This involves the strategic approach of working closely with suppliers to enhance their capabilities and performance, ensuring that they can meet the evolving needs of the business effectively.

      Ex: Walmart

Page 9: Influences on Business Buyer Behavior

  • Learning Objective:

    • Identify key factors affecting business buyer behavior.

Page 10: Overview of Business Buyer Behavior Model

  • Figure Reference:

    • Introduces a model illustrating the dynamics of business buyer behavior.

      differences between business buyer behavior and consumer buyer behavior:

    • Business buyers are typically more rational and focused on long-term value, while consumer buyers often make more emotional decisions.

    • The purchasing process in business settings involves multiple decision-makers and a more complex approval process compared to individual consumer purchases.

    • Business buyers prioritize factors such as price, quality, and supplier reliability, whereas consumer buyers may focus more on brand image and personal preferences.

Page 11: Types of Buying Situations

  • Buying Situations Defined:

    • Straight Rebuy: Routine purchases where the buyer reorders the same goods or services without modifications.

      Ex: medical supplies for a hospital

    • Modified Rebuy: Purchases that require some changes, such as specifications or terms, based on previous experience with the product.

      Ex: supermarkets changing to eco-friendly bags

    • New Task: A decision-making process for first-time purchases, involving extensive research and evaluation of options.

      Ex: buying a new car, where consumers might compare different models, read reviews, and etc

    • System/ Solution Selling: buying or applying for a product or service to accomplish a complete task

      Ex: Aramex who offer storage units, delivery, and return services.

Page 13: Participants in the Business Buying Process

  • Buying Center:

    • Comprises individuals and units involved in the purchasing decision.

      • Roles: Users, Influencers, Buyers, Deciders, Gatekeepers.

Page 14: Roles in the Buying Center

  • Detailed Roles:

    • Users: Individuals using the product (employees)

    • Influencers: Establish product requirements (specific department, design dpt.)

    • Buyers: Authorized to select suppliers and negotiate terms (procurement manager)

    • Deciders: Final choice-makers in supplier selection ( department head)

    • Gatekeepers: Control the information flow within the buying process. (administrators)

Page 15: Challenges in the Buying Center

  • Participants in the Business Buying Process:

    • Navigate the complexities of varied influences from multiple participants, evaluation criteria, and informal influences on decisions.

Page 16: Influences on Buyer Behavior

  • Figure Reference:

    • Details major influences shaping business buyer behavior:

    • Economic factors: These include overall economic conditions, purchasing power, and market trends that affect buyer decisions.

    • Social influences: Peer recommendations, cultural norms, and networking within industries can significantly impact purchasing choices.

    • Personal preferences: Individual tastes, experiences, and brand loyalty also play a crucial role in the decision-making process.

Page 17: Steps in the Business Buying Decision Process

  • Learning Objective:

    • Outline the various steps in the business buying decision process.

Page 18: Stages of the Decision Process

  • Illustration of Decision Process:

    • Figure depicting stages from problem recognition to performance review:

    • Problem Recognition: Identifying the need for a product or service that addresses a specific issue within the organization.

    • Information Search: Gathering relevant data and insights on potential solutions, including market research and supplier evaluations.

    • Evaluation of Alternatives: Comparing different options based on criteria such as price, quality, and supplier reliability.

    • Purchase Decision: Making the final choice on which product or service to buy, taking into account the input from various stakeholders.

    • Post-Purchase Evaluation: Assessing the effectiveness of the decision made, including the performance of the product or service against expectations to inform future buying decisions.

Page 19: Problem Recognition Stage

  • Definition and Stimuli:

    • Identifying a problem or need.

    • Internal Stimuli: Needs based on internal assessments.

    • External Stimuli: Influences from trade shows or marketing tactics (ex: Salesforce’s ads).

Page 20: Need Description and Specifications

  • Need Identification:

    • General Need Description: Specifies characteristics and quantities of needed products.

    • Product Specifications: Technical criteria mentioned.

    • Value Analysis: Cost-reduction approach assessing components for improvement.

Page 21: Supplier Selection Process

  • Business buying process:

    • Supplier Search: Compiling a list of potential suppliers.

    • Proposal Solicitation: Requesting bids from suppliers.

    • Supplier Selection: Evaluating supplier attributes and negotiating terms.

Page 22: Final Steps in Buying Process

  • Order-routine Specifications:

    • Finalizes orders with chosen suppliers detailing specifications and terms.

  • Performance Review:

    • Evaluation of supplier performance based on order fulfillment.

Page 23: Modern Changes in B2B Marketing

  • Learning Objective:

    • Analyze how digital channels have transformed B2B marketing.

Page 24: E-Procurement Essentials

  • E-Procurement:

    • Online purchasing and the integration of e-commerce solutions.

    • Company-buying sites and extranets facilitating business relationships.

    • Online procurement lets business marketers connect with customers more efficiently, streamlining the purchasing process and enhancing customer satisfaction.

Page 25: Benefits and Drawbacks of Online Procurement

  • Advantages:

    • Access to diverse suppliers, cost reduction, faster order processing, enhanced sharing of information, increased sales, and improved service support.

  • Disadvantages:

    • Potential erosion of personal relationships through supplier searches.

Page 26: B2B Digital and Social Media Engagement

  • Engagement Strategies:

    • Businesses utilize digital and social media to foster customer relationships.

    • Example: Maersk Line aims to connect with customers through innovative digital strategies.

Page 27: Comparing Institutional and Government Markets

  • Learning Objective:

    • Examine the characteristics and decision-making processes of institutional and government markets.

Page 28: Characteristics of Institutional Markets

  • Overview of Institutional Markets:

    • Comprised of entities like schools and hospitals that serve community needs.

    • Key Features:

      • Operate under low budgets

      • Have captive patrons dependent on their services.

      • Captive Patrons are individuals or groups that rely heavily on a specific service or organization, often due to limited alternatives, creating a consistent demand for the services provided.

Page 29: Case Study - IBM's B2B Marketing

  • IBM's Approach:

    • Adapting to digital and social media trends, maintaining relevance in B2B customer engagement strategies.

Page 30: Characteristics of Government Markets

  • Government Market Dynamics:

    • Favor domestic suppliers, establish a bid system, often awarding contracts to the lowest bidder.

    • Decisions influenced by both economic and non-economic factors.

      Non economic factors:

    • minority firms:These firms may face barriers in accessing contracts and require additional support to compete effectively in the bidding process.

    • Depressed firms: These firms often struggle with lower market demand and may need targeted assistance to revitalize their operations and improve their competitive standing.

    • Small businesses: These enterprises frequently encounter challenges related to financing, market visibility, and regulatory compliance, necessitating tailored resources and mentorship programs to enhance their growth potential.