Chapter 6.pptx

Principles of Marketing

Chapter 6- Business buying Behavior

Business Buying Behavior

• This is where the term “B2B” comes from. • These are the buyers that are not end

consumers, but other businesses, institutions, or governmental organizations.

Main differences in B2B and B2C

• B2B transactions are (generally) very, very large

• Think about your phone.– Purchased from a retailer one time. One

transaction. – How did the retailer get the phone?


• Retailer purchased from a supplier (B2B)• Supplier purchased the components from other

component manufacturers (B2B)– Circuit board, antenna, display, microphone, speaker,

battery, etc.

• The components manufacturer purchased from other suppliers (silicon, gold, aluminum, etc) (B2B)

• **This doesn’t even count all the people involved with creating the building, labor, etc.


• The point is that the B2C part of this transaction is quite small in comparison to the other transactions that had to take place


• Product complexity:–When you bought your phone, could you alter the

size of the phone or change out a component?• (hint: no)

–When in a B2B selling situation, you generally are fully customizable. • Corrugate for big books example

– This also means that there is generally a small number of buyers for your product• Has anyone ever worked in an auto facility?


• Size of orders and accounts– Entrepreneurs and Walmart

• One order to a major firm can make or break smaller firms and sales positions– Some retailers have more net income than the GDP

of smaller countries. Think about that level of sales volume


• The timeframe for sales–When dealing with these specific

transactions, often the sales and development can take years. • Component for a sorting machine example• Ketchup packet

– Think about an aircraft and how long it takes to make that happen


• Stricter standards–When you purchased your phone, how many

phones did you try out?• Probably not many, since your time is finite and you

only need sufficiency

– Five Guys tried 18 different types of mayonnaise before settling on the one they use today.


• Personal selling– How much interaction was had with a salesperson

before, during, then after the purchase of your phone?• Before, probably little• During, probably some• After, probably little to none

– Selling in these situations is much different since you need to constantly be in contact with your people • Some places go as far as having locations specifically for

their salespeople when they drop in.

Demand for B2B

• Even with no* contact with consumers, B2B firms still need to know and follow consumer demand trends.

• Firms need to be able to derive demand from other sources to ensure they are prepared for consumer choices– Size of the firm and artificial demand generation

Demand for B2B

• Fluctuating demand is when a consumer response severely alters demand throughout the supply chain– Imagine a rapid change in consumption of

carbonated drinks• Retract, then expansion and the effects on the supply

chain (like a whip)

Demand for B2B

• Increasing demand directly– Often, suppliers will try to affect consumer

decisions by their use of advertising, etc. • Intel

– Joint demand• Focus on possible tie-ins to other sales

– When game consoles sell, so do games– New chips = more salsa sales

http://youtu.be/MNL9kuWwFes

Buyers for B2B

• Producers– Purchase goods and services to transform into

other products to sell• Dell uses components to make computers

– Without their suppliers, Dell has almost no product to sell

–Most* non-retailers are producers

Buyers for B2B

• Resellers– Sellers of goods and services produced by other

firms without materially changing them

• Most* retailers are resellers

Buyers for B2B

• Governments– The U.S. government is the biggest purchaser of

goods and services in the world• Offices need paper, rockets need fuel, and everything in

between

– Since most governments (U.S. included) have stipulations in place for the amount of small businesses they need to hire, it can be a quite lucrative for smaller firms to land a governmental contract

Buyers for B2B

• Institutions– Nonprofit organizations, churches, charities,

private colleges, clubs, etc. all are considered institutions

– Generally have large orders– Generally are varied as well

Buyers for B2B

• Who makes the decisions to purchase?– Depends• Book uses the example of textbooks

– How many of you were targeted by textbook manufacturers?

• Sometimes this is an instructor decision, sometimes it is a coordinator decision• Depending on who’s decision it is, this can be a very

powerful and influential position

Buying Centers

• Groups* of people that make buying decisions– Can be a committee, can be an individual

• Can be called purchasing agents, purchasing managers, procurement officers, etc.

• Sometimes this job is easy (like mine), sometimes it can be difficult (World Market)

Buying Centers

• Other players– Users- people and groups that use the products

• Without users input, it’s difficult to know what to buy

– Influencers- Not users, but have expertise in that area• Creative and the easy graphic buy

– Gatekeepers- people who grant or deny access to buyers• Secretaries and Valentines

– Deciders- person who makes final purchase decisions• Can be a purchasing agent, but sometimes it can come from

higher-up people– Mic drop on the TMT

Buying Centers

• Interpersonal and personal dynamics– Sometimes it is simply a matter of being cordial• Sweaty newbie versus smooth veteran example• Reps across the board

Stages in the Buying Process

• Need recognition– Generally driven by users, but could be driven by

other factors• Book uses janitorial service


• Need described and quantified– Buying center is brought in to determine what

needs to by purchased and add parameters to the decision• Figure 6.6- Exact dimensions on what is needed• Does this need to have any specific features?

– Depending on the nature of the product, it may need to be hyper-specific» Bottle shape and quantity example


• Potential supplier are searched for– This is like information seeking. Buyer look to

what needs can be satisfied by what provider to hopefully satisfy the need• Are all needs met? Are they reliable? Do they have any

problems?


• Qualified suppliers are asked to complete responses to requests for proposals– Sometimes called a bid, this is where selected

companies vie for the sale• It is a semi-contract that gives details about the nature

of the business and the specifics of all the transactions• Can be in the form of a letter, formal presentation, or

anywhere in between– Depending on the nature of the good, this can be simple

(janitorial service), or very complex (ignition system for a jet engine)


• Proposals are evaluated and selections are made– There are generally a few decent options that need

to be sifted through to make sure the correct purchase is made• Price, timing, sellers, etc. can all influence the choices

made– Corrugate for short turnaround versus price


• Order routine is established– This is the order actually being put together– This is the agreement that lines all things out and

makes the contract enforceable, etc. – If this is a perpetual contract, this can be incredible

time consuming


• Postpurchase evaluation – Just like with a consumer product, there needs to be after-

sale evaluations on what occurred. – Need to have a metric in place to assess success, failure,

etc. • Janitorial service may be based solely on a certain level of

cleanliness or simply on no one noticing they were there. (so many times jobs can end up being out of sight, out of mind, until you make a mistake)

– If the service was as expected, then it can lead into more contracts or simply a good review for other people in the industry (everybody talks)

Types of Buying Situations

• Straight rebuy- repeat purchase of the same product type and quantity from the same vendor. – Almost like a heuristic for consumer buys. “I

always buy Tide because I always do” = “I always buy chalk from Greg because I always do”


• New-buy- First time purchase of a product from a firm or in general– Generally the most time consuming as the whole

buying process must be gone through


• Modified rebuy- same product buy, but with some modifications– Quantities, packaging, specific, etc.– Doesn’t have to be the same seller• We are unhappy with our current janitorial service, so

we will make a modified rebuy, with the modification being the supplier

International B2B

• Most of the time, businesses cluster– Advertising firms in New York (though this is

changing a little)– Consumable goods in Arkansas– Tech in Seattle, Austin, and the Silicon Valley

• Sometimes this is due to resources (natural, cultural, etc.), simplicity (proximity), etc.

B2B E-Commerce

• E-Commerce is making this clustering less restrictive and opening many avenues for people all over the world.

• Now the benefits and issues are shifted. – Distribution restrictions, production restriction,

etc. are more imposing than the now nonexistent demand issues

B2B E-Commerce

• Making the process simpler as well– Buying something routine can be done online now

for the ease of everyone involved

B2B E-Commerce

• Sell-Side Site- single seller sells products to many different buyers Fastenal.com

• Buy-Side Site- buyer buys products from multiple sellers (some government agencies)

• B2B Exchanges- (Alibaba)• B2B Auctions- web-based auctions between

firms (equipmentone.com)– Assets or products being sold to get rid of

inventory (surplus, overstock)

B2B E-Commerce

• Pricing– Since pricing information is almost perfect, pricing

is a difficult game* to play B2B, especially in a commoditized product line

Ethics in B2B

• Ethical question:– As a sales rep, is it ok to take a potential buyer out

to dinner?– As a manufacturer, if someone does a straight-

rebuy, but the product has changed, is it legitimate to not tell them the change was made?

– As a buyer, can you tell a representative what you will pay for a good?

For Next Time

• Read Chapter 7

Documents

Chapter 6.pptx