Chapter No.6 Principles of Marketing

1. Chapter No. O6
BUSINESSMARKETS&
BUSINESSBUYERBEHAVIOR.

2. Learning Outcome:
Business Markets.
Business Buyer Behavior.
The Business Buying Process.
Institutional & Government Markets.

3. Market:
“ A market is an area or a place where buyers and sellers
negotiate for the exchange of a well defined commodity.”

4. Business Market:
 A marketplace where organizations purchase raw material, natural
resources and component of other product for resale.
OR
 It is a market in which buyer purchase product and services for resale
purposes.

5. Consumer Market :
It is a market in
which buyer purchase
product and services
for Personal
Consumption.
Business Market:
It is a market in
which buyer purchase
product and services
for resale purposes.
Difference Between Consumer Market And
Business Market
•We Discussed Only Business Market.

6. Characteristics Of Business Market:
 There Are 3 main characteristics of Business Market which are:
1) Market structure and demand.
2) Nature of the buying unit.
3) Types of decision and the decision process.

7. Market structure and demand:
 Business markets contains fewer but larger buyers.
 Business buyer demand is derived from final consumer demand.
 Demand in many business markets is more inelastic.
 Demand in business markets fluctuates more and more quickly.

8. Nature of the buying unit:
 Business purchases involves more buyers.
 Business buying involves a more professional purchasing effort.

9. Types of decision and the decision
process:
 Business buyers usually face more complex buying decisions.
 The business buying process is more formalized.
 In business buying, buyers and sellers work more closely together and build close
long term relationships.

10. Business Buyer Behavior
 Definition of Business buyer behavior
 General Model of business buyer behavior
 Major types of buying situations

11. Definition of Business buyer behavior
Business buyer behavior refers to the buying
behavior of the organizations that buy goods and services for
use in production of other products and services that are sold,
rented, or supplied to others. Also included are retailing and
wholesaling firms that acquire goods to resell or rent to
others for profit.
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12. General Model of business buyer behavior
 The Marketing stimuli
 The Other stimuli
 The Buying organization
 Responses of Buying organization

13. The Marketing stimuli
• Price
• Place
• Product
• Promotion

14. The Other stimuli
Additional stimuli include major economic forcesPolitical
• Political
• Economic
• Technological
• Cultural
• Competitive

15. The Buying organization
Within a buying organization the buying activity consist of two major parts ;
I. The buying decision process
II. The buying center

16. Responses of Buying organization
• Product or service choice
• Supplier choice
• Order quantities
• Delivery
• Service
• Payment terms

17. Major types of buying situations
• Straight rebuy
• Modified rebuy
• New task

18. Major Types of Buying Situations
Straight rebuy is a routine purchase decision such as a reorder
without any modification
Modified rebuy is a purchase decision that requires some
research where the buyer wants to modify the product
specification, price, terms, or suppliers
New task is a purchase decision that requires thorough
research such as a new product

19. Participants in Business Buying
Process:

20. Buying Center:
 All the individual and units that play a role in the purchase decision
making process.
 This group includes:
 Actual user of the product and services,
 Those who make the buying decision,
 Those who influence the buying decision,
 Those who do the actual buying,
 And, those who control the buying information.

21. Participants:
 There are five participant in the business buying process.
1. Users: Member of the buying organization who will actually use the purchased product
or service
2. Influencers: People in an organization’s buying center who affect the buying decision
3. Buyers: People in an organization’s buying center who make an actual purchase
4. Deciders: People in an organization’s buying center who have formal or informal
power to select or approve the final suppliers.
5. Gatekeepers: People in an organization’s buying center who control the flow of
information to others.

22. Buying process for:
 Simple purchases: These are routine purchases and one person may assume all
buying center roles.
 Complex purchases: The buying center includes more than one person.

23. Major Influences on Business
Buyers
Influences are the forces that affect the decisions of business buying processes.
These may be economic factors or personal emotions.

24. Influencing Factors:
 These factors affect the decisions of business buyers.
1. Environmental Factors
2. Organizational Factors
3. Interpersonal Factors
4. Individual Factors

25. 1.Environmental Factors
Environmental
Factors
o The economy
o Competition
o Technology
o Supply Conditions
o Politics
o Culture
o Custom
• Current and Expected economic environment,
• Competitive developments or advantages in the
environment,
• Advancement in Technology,
• Supply of raw material,
• Cultures and customs strongly influence
business buyer reactions to marketer’s behavior
and strategies, especially in international
marketing environment.

26. 2.Organizational Factors
Organizational
Factors
o Objectives
o Strategies
o Structure
o Systems
o Procedures
Every organization has it’s own:
objectives,
strategies,
structure,
systems,
and, procedures, and marketers must
understand
these well.

27. 3.Interpersonal Factors
Interpersonal
factors
o Influence
o Expertise
o Authority
o Dynamics
In buying center there are many participants
who influence each other.
The influence may be due to special expertise,
authority or have special relationship with other
important participants.

28. 4.Individual Factors
Individual factors
o Age
o Education
o Job position
o Motives
o Personality
o Preferences
o Buying style
Every individual has his own perceptions,
preferences, personality and attitudes towards
risk taking.
These individual factors affect buying process.

29. Business Buyer
Organization
al factors
Individual
factors
Interpersonal
factors
Environment
al factors

30. The Buying Process
1. Problem recognition
2. General need description
3. Product specification
4. Value analysis
5. Supplier search
6. Proposal solicitation
7. Supplier selection
8. Order-routine specifications
9. Performance review

31. 1.Problem recognition
It 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.

32. 2.General need description describes the characteristics and
quantity of the needed item.
3.Product specification describes the technical criteria.
4.Value analysis is an approach to cost reduction where
components are studied to determined if they can be
redesigned, standardized, or made with less costly methods
of production.
5.Supplier search involves compiling a list of qualified suppliers.
6.Proposal solicitation is the process of requesting proposals
from qualified suppliers.

33. 7.Supplier selection is the process when the buying center creates
a list of desired supplier attributes and negotiates with
preferred suppliers for favorable terms and conditions.
8.Order-routine specifications is the final order with the chosen
supplier and lists all of the specifications and terms of the
purchase.
9.Performance review involves a critique of supplier performance
to the purchase terms.

34. Institutional and
Government Markets

35. Institutional Markets:
 Consist of:
churches, schools, prisons, hospitals, nursing homes and other institutions,
that provide goods and services to people in their care.

36. Institutional Markets:
 Often characterized by low budgets and captive patrons.
 Marketers may develop separate divisions and marketing mixes to service
institutional markets.

37. Government Markets:
 Governmental units which may be,
 federal,
 state, or,
 local,
that purchase or rent goods and services for
carrying out the main functions of government.

38. Government Markets:
 More than 82,000 buying units.
 Require suppliers to submit bids.
 Favor domestic suppliers.
 Extensive paperwork is required from suppliers.

39. Government buyers often favor:
 Depressed business firms and areas
 Small businesses
 Minority-owned businesses
 Firms which practice non-discriminatory practices

40. Most firms that sell to government buyers
are not marketing oriented.
Some companies have separate
government marketing departments.
Much of government buying has migrated
online.