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8/11/2019 CHAPTER 5 Industrial Markets
http://slidepdf.com/reader/full/chapter-5-industrial-markets 1/31
CHAPTER 5
Industrial Markets
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Business vs. Consumer Marketing
Fruit
Producers
Business Marketing Business Marketing Consumer Marketing
Fruit is grown
& harvested
Fruit is processed into
various forms
You
Brachs
(jelly beans)
Winn-Dixie(jams, jellies, etc.)
Kelloggs(Pop Tarts)
Processed fruit is
included as ingredients
in foods
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CISCO Targets Businesses
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What is Organizational Buying?
Organizational buying refers
to the decision-making process by
which formal organizations establish
the need for purchased products and
services, and identify, evaluate, and
choose among alternative brands
and suppliers.
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Characteristics of Business Markets
• Fewer, larger buyers
• Close supplier-
customer
relationships• Professional
purchasing
•
Multiple buyinginfluences
• Multiple sales calls
• Derived demand
• Inelastic demand
• Fluctuating demand
• Geographically
concentrated buyers
• Direct purchasing
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Example: Derived Demand SimplifiedYou make headlamp assemblies for autos – Auto company’s demand
for headlamp is affected by the consumers’ demand for cars.
Consumers want
more cars
Automobile
manufacturers need
more components
and steel
Need more ofyour company’s
headlamp
assemblies
Consumers stop buying cars
Automobile
manufacturers stop
making cars
You can’t sell
headlamp
assemblies
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• Fluctuating demand : the demand for
many business goods and services tends
to be more volatile than the demand forconsumer goods and services. A given
percentage increase in consumer demand
can lead to a much larger percentageincrease in the demand for plant and
equipment necessary to produce the
additional output. It is called the
acceleration effect.
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ORGANIZATIONAL BUYING
• Business vs. Consumer Market:
Mrk.Characteristics Consumer Business
Number of buyers Many Few
Size of Buyers Small Large
Supplier Relations No CloseConcentration No. Yes
Demand Unpredictable Derived
Demand Elastic Inelastic
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ORGANIZATIONAL BUYING (CONT.)
Mrk.Characteristics Consumer Business
Demand Normal Fluctuating
Professional Purchasing No Yes
Purchasing Middlemen Direct
Buying Influence No Yes
Reciprocity No Yes
Leasing Some Heavy
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A Model of Business Buyer Behavior
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Buying Situation
Straight rebuy
Modified rebuy
New task
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Organizational Buying
Buying Situations
• Straight rebuy• Modified rebuy
• New task
• Routine reorders from
approved vendor list
• Low involvement,
minimal timecommitment
• Example: copier
paper
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Organizational Buying
Buying Situations
• Straight rebuy• Modified rebuy
• New task
• Specifications,prices, delivery termsor other aspectsrequire modification
• Moderate level ofinvolvement and timecommitment
• Example: desktopcomputers
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Organizational Buying
Buying Situations
• Straight rebuy• Modified rebuy
• New task
• Purchasing a productor service for the first time
• High level ofinvolvement and timecommitment; multipleinfluences
• Example: selecting aweb site design firmor consultant
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How the buying situation affects buying
center behavior
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Examples of purchasing situations
Routine task
Low risk
New task
High risk
Straight rebuy Modified rebuy New task
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Systems Buying and Selling
Turnkey solution
desired;
bids solicited
Primecontractors
Second-tiercontractors
System
subcomponents
assembled
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Participants in the BusinessBuying Process
• Buying center : All the individuals andunits that participate in the businessbuying-decision process
• The buying center is not a fixed or formallyidentified unit
• It is a set of buying roles assumed by differentpeople for different purchases
5 - 19
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The Buying Center
Initiators
Users
Influencers
Deciders
Approvers
Buyers
Gatekeepers
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The buying center: – Initiator: those who request that something to be
purchased
– Users: those who will use the product or service
– Influencers: people who influence the buying decisions.
– Deciders: people who decide on product requirements or
on suppliers. – Approvers: people who authorize the proposed actions of
deciders or buyers
– Buyers: people who have formal authority to select the
supplier and arrange the purchase terms. – Gatekeepers: people who have power to prevent sellers or
information from reaching members of the buying centre.
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Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, oruser – is most likely to make each of the following statements?
• “This bonding agent better be good, because I have to put this product
together.”
• “I specified this bonding agent on another job, and it worked for them.”
• “Without an appointment, no sales rep gets in to see Mr. Johnson.”
• “I don’t see any reason why we can’t use this bonding agent on the next
job.”
• “Okay, it is a deal – we’ll buy it.”
• “I’ll place the order first thing tomorrow.”
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Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, oruser – is most likely to make each of the following statements?
• “This bonding agent better be good, because I have to put this product
together.” - user
• “I specified this bonding agent on another job, and it worked for them.” -influencer
• “Without an appointment, no sales rep gets in to see Mr. Johnson.” -
gatekeeper
• “I don’t see any reason why we can’t use this bonding agent on the next
job.” - influencer
• “Okay, it is a deal – we’ll buy it.” - decider
• “I’ll place the order first thing tomorrow.” - buyer
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Business Buyer Behavior
The Buying Process
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Business Buyer Behavior
Problem recognition occurs when someone in thecompany recognizes a problem or need.
• Internal stimuli
• Need for new product or production equipment
• External stimuli
• Idea from a trade show or advertising
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Business Buyer Behavior
The Buying Process
General need description describes the characteristics andquantity of the needed item.
Product specification describes the technical criteria.
• Value analysis is an approach to cost reduction wherecomponents are studied to determine if they can be
redesigned, standardized, or made with less costly
methods of production.
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Business Buyer Behavior
The Buying Process
Supplier selection is the process when the buying
center creates a list of desired supplier attributes
and negotiates with preferred suppliers forfavorable terms and conditions.
Order-routine specifications is the final order with the
chosen supplier and lists all of the specificationsand terms of the purchase.
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Business Buyer Behavior
The Buying Process
Performance review involves a critique of supplier
performance to the purchase terms.
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Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in
Relation to Major Buying Situations (Buyclasses)
Buyclasses
New Modified Straight
Task Rebuy Rebuy
1. Problem recognition Yes Maybe Yes
2. General need description Yes Maybe No
3. Product specification Yes Yes No
Buyphases 4. Supplier search Yes Maybe No
5. Proposal solicitation Yes Maybe No
6. Supplier selection Yes Maybe No
7. Order-routine specification Yes Maybe No
8. Performance review Yes Yes Yes
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What is Opportunism?
Opportunism is some form of
cheating or undersupply relative to
an implicit or explicit contract.