KotlerMM

MARKETING MANAGEMENT12th edition

Analyzing

Business Markets

KotlerKeller

7-2

Chapter Questions

•What is the business market, and how doesit differ from the consumer market?

•What buying situations do organizationalbuyers face?

•Who participates in the business-to-business buying process?

7-3

Chapter Questions

•How do business buyers make theirdecisions?

•How can companies build strongrelationships with business customers?

•How do institutional buyers andgovernment agencies do their buying?

7-4

Business market

•All organisations that buy goods andservices for use in the production of otherproducts and services that are sold, rented,or supplied to others.

•Also includes retailing and wholesalingfirms that acquire goods for the purpose ofreselling or renting them to others at aprofit.

7-5

Organizational Buying

Decision-making process by which

Business buyers establish the

need for purchased products and

services, and identify,

evaluate, and choose among

alternative brands and suppliers.

7-6

Characteristics of Businessmarkets

•Market Structure and Demand

•Fewer, larger buyers

•Geographically concentrated buyers

•Demand is derived from final consumer demand.e.g. GMbuys steel because, consumers demand its cars.

•Inelastic demand: Not affected in short run by pricechanges.

•Fluctuating demand: Demand in business marketsfluctuates more and more quickly. e.g a rise of only 10percent in consumer demand can cause as much as 100percent increase in business demand.

7-7

•Nature of Buying unit:

•Fewer, larger buyers

•More Professional purchasing effort.

•Type of Decisions and the DecisionProcess:

•Complex buying decisions

•More formalised buying process

•Close supplier-customer relationships

7-8

Buying Situation

Straight rebuy: buyerroutinely reorders withoutmodifications

Modified rebuy: buyer wantsto modify product specifications,prices, terms or suppliers

New task: buyer purchases aproduct or service for the firsttime.

7-9

New Task

•In such cases, the greater the cost or risk,the larger the number of decisionparticipants and the greater their efforts tocollect information will be.

•The new task situation is the marketer’sgreatest opportunity and challenge.

•The marketer tries to reach as many keybuying influences as possible and providehelp and information.

7-10

Systems Buying and Selling

Turnkey solution

desired;

Bids solicited

Prime

Contractors

Second-tier

Contractors

System

subcomponents

assembled

7-11

The Buying Center: Decision-makingunit that participate in buying process

Initiators

Users

Influencers: technical people

Deciders: have formal power toapprove the final suppliers

Buyers: have formalauthority to select

Gatekeepers: control flowof infomation

7-12

The Business Buying process

•The figure on the next page depicts 8stages of the buying process.

•Buyers who face a new task situation gothrough all stages of the buying process.

•Buyers making modified or straight rebuysmay skip some of the stages.

7-13

Table 7.1 Buy-grid Framework

7-14

Problem Recognition

•The buying process begins when someonein the company recognises a problem orneed that can be met by acquiring aspecific product or service.

•Can result from internal or external stimuli.

•Co may decide to launch a new productthat might require a new machinery.

•Machine may break down.

7-15

General need description

•Company describes the generalcharacteristics and quantity of a neededitem.

•Product Specification: Stage in which thebuying organisation decides on andspecifies the best technical productcharacteristics for a needed item.

7-16

Supplier Search

•The stage in which the buyer tries to findthe best vendors.

•Proposal Solicitation: The stage in whichthe buyer invites qualified suppliers tosubmit proposals.

•Supplier selection: The stage in whichbuyer reviews proposals and selects asupplier.

7-17

Table 7.2 Vendor Analysis

7-18

Order-Routine specification

•Stage in which buyer writes the final orderwith the chosen suppliers listing thetechnical specifications, quantity needed,expected time of delivery, and warranties.

•Performance review: The final stage inwhich the buyer rates its satisfaction withsuppliers, deciding whether to continue,modify or drop them.