ANALYSING BUSINESS MARKETS

PART I

Business organizations do not only sell; but also buy vast quantities of raw materials, manufactured components, plant and equipment, supplies and business services.

What is Organizational

Buying?

It is 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.

Business Market

Consumer MarketVS

Business Market consists of all organizations that acquire goods and services used in the production of other products and services that are sold, rented or supplied to others.

agriculture, forestry and fisheries mining manufacturing construction transportation communication public utilities banking finance and insurance distribution and services

Hide dealer

Shoe Manufacturer

Tanners Wholesaler

RetailerConsumer

Commoditization eats away

margins and weakens

customer loyalty.

Challenges faced by Business

Marketers

Understanding customer needs

Identifying new opportunities for organic growth

Improving value management techniques & tools

Calculating better marketing performance & accountability metrics

Completing and growing in global markets

Countering the threat of product and service commoditization by bringing innovative offerings to mkt faster & moving to more competitive business models

Convincing C-level executives to embrace the marketing concept & support robust marketing programs

Ways in which business markets

contrast sharply with consumer markets

FEWER, LARGER BUYERS

Business marketers normally deals with far fewer,much larger buyers than the consumer marketer does.

aircraft engines

defense weapons

CLOSE SUPPLIER-CUSTOMER RELATIONSHIP

Business buyers often select suppliers that also buy from them

Paper manufacturer Chemical Company

PROFESSIONAL

PURCHASING

Business goods are often purchased by trained purchasing agents,who follow their organizations purchasing policies,constraints and requirements.

MULTIPLE BUYING INFLUENCE

More people typically influence business buying decisions.

Buying Committees consisting of technical experts and even senior management are common.

MULTIPLE SALES CALLS

As more people are involved in the selling process, it takes multiple sales calls to win most business

orders, and some sales cycles can take years.

DERIVED DEMAND

INELASTIC DEMAND

The total demand for many business goods and services is inelastic-that is,not much affected by price changes.

Demand is also inelastic for business goods that represent a small percentage to the item’s total cost.

FLUCTUATING DEMAND

The demand for business goods and

services tend to be more volatile than that

for consumer goods and services.

GEOGRAPHICALLY CONCENTRATED BUYERS

Business buyers tend to be concentrated in certain regions.

The geographical concentration of producers helps to reduce selling cost.

DIRECT PURCHASING

Business buyers often buy directly from

manufacturers rather than through

intermediaries,especially items that are expensive

and complex.

Created by Aburvaa Ramesh, SVCE , during an internship By Prof. Sameer Mathur, IIM Lucknow.www.IIMInternship.com