Chapter 6 ~ Business Markets and Business Buyer Behavior
Outline Topics:
• 6.1 Business Markets.
• 6.2 Business Buyer Behavior.
• The Business Buyer Decision Process.
• Engaging Business Buyers with Digital and Social Marketing.
• Institutional and Government Markets.
Business Buyer Behavior:
It is the buying behavior of organizations, retailers and wholesalers who buy goods and services for
use in the production of other products and services, which are sold, rented or supplied to others.
Business Buying Process:
Business buyers determine, which products or services they need to purchase and then find,
evaluate and choose among alternative brands and suppliers.
6.1. Business Markets:
The business market is so big and huge, it involves far more dollars and items than the consumer
markets do. There many business purchases are made for the consumer purchase.
Business markets are similar to consumer markets in some ways, like, both involve people who
assume buying roles and make purchase decisions to satisfy needs.
Business markets vary in many ways than consumer markets, like market structure and demand,
nature of buying unit, types of decisions and decision process. Let’s see their brief details;
Market Structure and Demand:
• Business marketers deal with far fewer but larger buyers than consumer marketers. These few
buyers account for most of the purchasing.
• Business markets are more inelastic and have more fluctuating demand. Means to say, the total
demand for many businesses is not much effected by the price change especially in the short run.
And for many businesses demand for products and services tend to change more and more quickly
than does the demand for consumer goods and services.
• Finally, business demand is derived demand, that is, business demand that is derived from
demand for consumer goods. Example; consumers buy Corning’ Gorilla Glass only when they buy
laptops, smartphones and tablets with gorilla glass screens. Producers using Gorilla glass in their
products are Dell, HP, Sony, Samsung, Apple etc.
Nature of Buying Unit:
Business purchase involves more decision participants and more professional purchasing agents.
These agents are well trained and have spent their working lives in learning, how to purchase better.
The more complex the purchase is, the more participants will involve in decision making. (Buying
committees composed of technical experts and top management.)
On other hand, in order to counter these well-trained buyers, companies must have well-trained
marketers and salespeople.
Types of Decisions and the Decision Process:
Business buyers face more complex buying decisions, as it involves much money, complex,
technical and economic considerations and lots of interactions among people at many levels.
The business buying process is also longer and more formalized than consumer buying process.
Business purchases look for detailed product specifications, careful supplier searches, formal
approvals and written purchase orders.
In the business buying process, both, the buyer and seller are often much dependent on each other.
Supplier Development:
It is to develop network of supplier partners; these supplier partners are appropriate and dependable
for the uncut supply of products and materials for use in making products or reselling them to
others.
6.2. Business Buyer Behavior:
Marketers want to know, how business buyers will respond to various marketing stimuli. To design
effective marketing strategies, marketers must understand what happens within the organization to
convert stimuli into purchase response.
Following figure shows the model of business buyer behavior. It suggests four questions about
business buyer behavior.
1. What business decisions do business buyers make.
2. Who participates in business buying process.
3. What influences the buyers.
4. How do business buyers make their buying decisions.
Major types of Buying Situations:
There are three major types of buying situations. These are as follows;
• Straight Rebuy: In this buying situation, buyer reorders something without modification. The
“In” Suppliers maintain good relationships with buyers and “Out” suppliers try their best to enlist
themselves in the supplier’ list.
• Modified Rebuy: It is a situation, in which buyer wants to make some modifications in the
products, it may be with price, specifications, terms or even suppliers. “In” suppliers may feel
pressure and become nervous in fulfilling the demands, where “Out” supplier will try to take this
opportunity and offer the best to buyers.
• New task: a company buying a product or service for the first time. In these situations, great risk
and costs are involved, more participants to take decision, much information is taken about the
product or service. On the other hand, it is the best opportunity for marketers.
Systems selling (or solutions selling):
It is to buy a complete solution to the problem for one seller, to avoid all separate decisions
involved in complex buying situations.
Participants in the Business Buying Process:
Buying Center: it is the decision-making unit of a buying organization. It includes actual users of
the product or service, individuals who make buying decision, those who influence the buying
decision, those who do actual buying and those people who control buying information. Its size
varies with the size of organization or depends upon purchase type whether it’s simple or complex.
• Users: These are the members of buying center, who uses the product or service, most of the
times, these people initiate the buying proposal and describe the required specifications of product
or a service.
• Influencers: Technical employees are often important influencers. They too help in defining
product specifications and evaluating alternatives.
• Buyers: These members have formal buying authority, selecting suppliers and arrange terms of
purchase. In more complex purchases, buyers might include high-level officers participating in the
negotiations.
• Deciders: These members have the authority to select among suppliers, in routine purchases,
buyers are deciders or have the authority to approve the purchase.
• Gatekeepers: These members control the flow of information to others, personal secretaries or
technical personnel may play the role of gatekeepers.
Major Influences on Business Buyers:
Following picture enlists various groups of influences on business buyers.
Environmental factors:
Environmental group involves following factors;
(a) Economic environment: It includes the level of primary demand, the economic outlook or
the value of money.
(b) Supply: It includes the supply of key material.
(c) Technological, (d) Political, (e) Competition, (f) Culture and Customs: these
environmental factors greatly influences the buyer reactions to marketer’ behavior and
strategies, especially in the international marketing environment.
Organizational factors:
Every organization have its own strategies, objectives, systems, structures and procedures, that the
business marketer must understand well. It arises some questions like;
1. How many people are involved in the buying decision?
2. Who are they?
3. What are their criteria of evaluation?
4. What are company policies and limits on its buyers?
Interpersonal factors:
The buying center includes many participants, and they have influence on each other. Participants
influence each other because they share and control rewards and punishments, are well liked, have
special expertise and have special relationship with each other.
So, whenever possible, business marketers must try to understand these factors and design strategies
accordingly.
Individual factors:
Each participant in the buying center is of different nature, they are with different personal motives,
perceptions and preferences. During the buying process some participants are more technical
approach and others may prefer to go with their intuition.
These individual factors are affected by personal factors, such as age, income, professional
identification, personality and attitudes toward risks or their education.
6.3. The Business Buyer Decision Process:
There are eight steps in business buyer decision process. Buyers, who face new task buying
situation will go through all these eight steps. In case of modified or straight rebuys, buyer may skip
some steps.
Problem Recognition:
Buying process starts with problem recognition, it is when someone recognizes a problem or need
that can be fulfilled by acquiring a new product or service. It can be a result from both internal or
external stimuli.
Internally, a company may want to launch a new product, or manager is unhappy with existing
supplier, etc.
Externally, the buyer may conceive a new idea from some business conference or TV commercials
or by watching other competitors etc.
Business marketers often alert customers about potential problems and then show them, how their
products of services provide solution to such problems.
General Need Description:
It is to describe the characteristics of and quantity of required product. In case of standard purchase,
this step provides few problems but in case of complex purchase, the buyer may discuss with the
user, engineer or other consultants. They may raise the points regarding price, durability, reliability
or other attributes.
Even, alert business marketers can help buyers to define their needs and provide information about
the value of different product characteristics.
Product Specification:
The third stage in the business buying process, in which buying organization decides about and
specifies the best technical product characteristics for a needed item, and it is done with the help of
value analysis engineering team.
• Product Value Analysis: It is an approach used for cost reduction, in which different components
are studied carefully to determine if they can be redesigned, standardized, or made less costly
methods of production.
In this stage, sellers can turn straight rebuys into new task situations by showing buyers a better way
to make an object.
Supplier Search:
Here buyers conduct a supplier search, they may compile a list of available and qualified suppliers.
Buyers can do it by going through directories, online searches of by asking other companies for
recommendations. Today’ world of internet, search is made easy for buyers.
The newer the buyer, the more complex and costly the item the greater the amount of time buyer
will spend searching for suppliers.
Suppliers task is to get listed in major directories and maintain good reputation in the market, so
that buyer can consider them.
Proposal Solicitation:
After compiling the list of qualified suppliers, now is the time to invite proposals from qualified
suppliers. In some cases, suppliers may refer buyers towards their websites or promotional material.
But if the product is expensive, then, buyers ask for detailed written proposals and presentations.
Marketers must be skilled enough in researching, writing and presenting proposals in response to
buyer proposal solicitation.
Supplier Selection:
At this stage, buyers review the proposals and select a supplier or suppliers. This selection depends
upon some desired supplier attributes, which may include; product or service quality, on time
delivery, reputation, honest communication, ethical corporate behavior and competitive prices.
Most of the buyers prefer to select more than one supplier to avoid being fully dependent on one
supplier.
Order-Routine Specification:
Now it is the time to order-routine specification. It includes final order with the chosen supplier and
lists items such as quantity needed, technical specifications, expected delivery time, warranties and
return policies.
In case of maintenance or repair, buyer use blanket contracts, that means, to create a long-term
relationship, in which supplier promises to resupply the product to buyer on the agreed price for a
set time period.
Most of the big buyers now use Vendor-Managed Inventory, in this deal, buyers share sales and
inventory information with suppliers, and now it is their responsibility to replenish stock
automatically.
Performance Review:
In the final stage, buyer review the performance of chosen supplier. For this purpose, buyers may
ask users to rate their satisfaction. Performance review may lead the buyer to continue, modify or
drop the arrangement.
6.4. Engaging Business Buyers with Digital and Social Marketing:
Like other areas of marketing, the IT, Online, Mobile and social media has changed the face of B-
to-B buying and marketing process
E-Procurement and Online Purchasing:
Advancements in Information technology has dramatically effected the B-to-B buying process.
Online purchasing often termed as E-Procurement has grown rapidly in recent years. In turn
business marketers also use the same medium to get in touch with customers, attract new customers,
promote their products and maintain good customer relationships. Companies can do E-
Procurement in many ways;
• Reverse Auction: Buyers put purchasing requests online and invite suppliers for bids.
• Trading Exchange: Companies work together to facilitate the trading process.
• Company Buying sites: Some big companies have their own buying sites, on which they post
about their purchasing needs, and invite bids.
• Extranet Links: They create direct procurement accounts with suppliers.
Benefits:
• It reduces transaction costs and results in more efficient purchasing for both buyers and suppliers.
• It reduces the time between order and delivery.
• It eliminates hectic paperwork.
• It let the buyer to put more focus on strategic issues, finding better supply sources and working
with suppliers to reduce costs and developing new products.
Problems:
It can destroy the decade old, customer-supplier relationship, Use of internet, sharing data with
suppliers, and in the search of better deals, buying companies can put suppliers against each other.
Business to Business Digital and Social Media Marketing:
As business customers are shifting to online modes for purchasing, so, business marketers are also
using social media and large range of digital marketing approaches to engage business customers
and manage customer relationships anywhere, anytime. These approaches include; from websites,
blogs, mobile apps to mainstream social media such as LinkedIn, Facebook, YouTube and twitter.
B-to-B digital and social media marketing isn’t just growing, in fact it is exploding. Comparing
with traditional media and sales approaches digital and social media can create greater customer
engagement and interaction. B-to-B markers know well that, by using these online techniques they
are not targeting business but individuals in those businesses who effect buying decisions.
6.5. Institutional and Government Markets:
In this section we will discuss about the buying practices of two non-business markets, which are
institutional markets and Government market. These markets have some additional characteristics
and needs. Let’s discuss each;
Institutional Markets:
It includes schools, nursing homes, prisons, hospitals and other institutions that provide goods and
services to people in their care. Institutions vary from one another in their sponsors and objectives.
Every institution has different buying needs and resources.
The purchasing agent has to decide about the quality of product, as his objective is not profit nor
cost minimization is his goal. So, his major focus is on quality. Otherwise, the reputation of
institution is on stake.
Example: the food provided in the hospitals, purchasing agent need to ensure the food served is
fresh and meet quality standards.
Government Markets:
Government markets offer big opportunities to many companies regardless of their size, big or
small. In most of counties, government institutes are major buyers of goods and services. Example
includes USA. There are little differences between government buying and business buying, which
sellers must try to understand.
• Government organizations usually invite bids and awards the contract to lowest bidder.
• Government organizations usually give priority to domestic suppliers over international suppliers.
• One major difference is that, government’ spending’s are carefully watched by outside publics,
like political opponent parties, etc. That, how government is spending tax payer’s money.
Given all the red tape, companies still want to work with government institutes, why? It’s because
they buy every thing from as small as pair of socks to as big as ships, and their cheques don’t
bounce,
Some companies have established customized marketing programs for business buyers. For
Example: Dell have dedicated business units tailored to meet the needs of government buyers.
