CH4.

Business Markets
and Buyer Behavior
ASST. PROF. ESRA ÖZTÜRK

PRINCIPLES OF MARKETING
 Course Content

Objectives Outline

Define the business market and explain how business markets differ from consumer markets

Identify the major factors that influence business buyer behavior.

List and define the steps in the business buying decision process.

Discuss how online, mobile, and social media have changed business-to-business marketing.

Compare the institutional and government markets and explain their buying decisions process.
 Introduction

❖What are business markets?

 Business Buyer Behavior

Business buyer behavior: The buying behavior of organizations

that buy goods and services for use in the production of other
products and services that are sold, rented, or supplied to
others.

Business (organizational) buying process: The decision-making

process by which business buyers determine which products
and services their organizations need to purchase and then find,
evaluate, and choose among alternative suppliers and brands.
 Similarities Between Consumer and Business Markets

➢ Both involve people who assume buying roles and make purchase
decisions to satisfy needs.
 Market structure and demand

Main
Differences of
The nature of the buying unit
Business
Markets

The types of decisions and the

decision process
 Market Structure and Demand

Fewer but larger buyer

Inelastic and more fluctuating demand

Derived demand

• Business demand that ultimately comes from (derives from)

the demand for consumer goods.
 Nature of the Buying Unit

Purchasing agents, buying committees, top

More decision participants management etc.

More professional purchasing Well-trained marketers, salespeople, and

digital support personnel to deal with these
effort well-trained, technology-oriented buyers

More buyer and seller interaction

Types of Decisions and the Decision Process

The buyer and seller

More complex Longer and more are often much
buying decision formalized more dependent on
each other
Types of Decisions and the Decision Process

Supplier development

Systematic development of networks of supplier-

partners to ensure an appropriate and dependable
supply of products and materials for use in making
products or reselling them to others.
Business Buyer Behavior
 Major Types of Buying Situations

Straight rebuy: A business buying situation in which the buyer routinely

reorders something without modifications. It is usually handled on a
routine basis by the purchasing department.

Modified rebuy: A business buying situation in which the buyer wants to

modify product specifications, prices, terms, or suppliers.

New task: A business buying situation in which the buyer purchases a

product or service for the first time. In such cases, the greater the cost or
risk, the larger the number of decision participants and the greater the
company’s efforts to collect information.
 Systems (Solutions) Selling

Systems selling (or solutions selling)

Buying a packaged solution to a problem from a single seller,

thus avoiding all the separate decisions involved in a complex
buying situation.
 Participants in the Business Buying Process

➢Buying center: All the individuals and

units that play a role in the purchase
decision-making process.
 Members of Buying Center

Users: Members of the buying organization who will actually use the purchased product
or service.

Influencers: People in an organization’s buying center who affect the buying decision; they
often help define specifications and also provide information for evaluating alternatives.

Buyers: People in an organization’s buying center who make an actual purchase.

Deciders: People in an organization’s buying center who have formal or informal power to
select or approve the final suppliers.

Gatekeepers: People in an organization’s buying center who control the flow of

information to others. (E.g. Personal secretaries)
Concerns for Business Marketers

Who are the major What decisions do they

decision participants? influence?

What is their level of What evaluation criteria

influence? do they use?
Major Influences on Business Buyer Behavior
Major Influences on Business Buyer Behavior

Economic Personal
Factors Factors

Price
Emotion
Service
Major Influences on Business Buyer Behavior
Environmental Factors

Demand for Economic Cost of

product outlook money

Supply of
Technology Culture
Materials

Politics Competition
Major Influences on Business Buyer Behavior
Organizational Factors

Objectives
Strategies
Structure
Systems
Procedures
Major Influences on Business Buyer Behavior
Interpersonal Factors

Influence Expertise

Authority Dynamics
Major Influences on Business Buyer Behavior
Individual Factors

Motives Perceptions Preferences Age

Attitude
Income Education
toward risk
The Business Buyer Decision Process
 1) Problem Recognition

Problem recognition: Someone in the company recognizes a problem or

need that can be met by acquiring a good or a service.

Problem recognition can result from internal or external stimuli.

Internal stimuli → need for new product or production equipment

External stimuli→ new ideas from a trade show or advertising

 2) General Need Description

General need description: A buyer describes the general

characteristics and quantity of a needed item.

For standard items, this process presents few problems.

For complex items, however, the buyer may need to work

with others—-engineers, users, consultants—to define the
item.
 3) Product Specification

Product specification: The buying organization decides on and specifies

the best technical product characteristics for a needed item.

Product value analysis is an approach to cost reduction in which

components are studied carefully to determine if they can be redesigned,
standardized, or made by less costly methods of production.

The team decides on the best product characteristics and specifies them
accordingly.
 4) Supplier Search

Supplier search: The buyer tries to find the best vendors.

The buyer can organize a small list of qualified suppliers by reviewing

trade directories, doing online searches, or phoning other companies
for recommendations.

Today, more and more companies are turning to the internet to find
suppliers.
 5) Proposal Solicitation

Proposal solicitation: The buyer invites qualified suppliers to submit

proposals.

In response, some suppliers will refer the buyer to their website or

promotional materials or send a salesperson to call on the prospect.

However, when the item is complex or expensive, the buyer will

usually require a detailed written proposal or formal presentation
from each potential supplier.
 5) Proposal Solicitation

Request for Quotation (RFQ) or Proposal (RFP): A formal request is

sent to the selected vendors outlining the requirements and inviting
them to submit their proposals or quotations.

This document typically includes detailed specifications, terms and

conditions, and evaluation criteria.
 6) Supplier Selection

Supplier selection: The buyer reviews proposals and selects a supplier or

suppliers.

The buying center often will draw up a list of the desired supplier
attributes and their relative importance. Such attributes include product
and service quality, reputation, on-time delivery, ethical corporate
behavior, honest communication, and competitive prices.

The members of the buying center will rate suppliers against these
attributes and identify the best suppliers. Buyers may negotiate with
preferred suppliers for better prices.
7) Order-Routine Specification

Order-routine specification: The buyer writes the final order

with the chosen supplier(s), listing the technical specifications,
quantity needed, expected time of delivery, return policies, and
warranties.

In the case of maintenance, repair, and operating (MRO) items,

buyers may use blanket contracts rather than periodic purchase
orders. A blanket contract creates a long-term relationship in
which the supplier promises to resupply the buyer as needed at
agreed prices for a set time period.
7) Order-Routine Specification

Many large buyers now practice vendor-managed inventory, in

which they turn over ordering and inventory responsibilities to their
suppliers. Under such systems, buyers share sales and inventory
information directly with key suppliers. The suppliers then monitor
inventories and replenish stock automatically as needed. E.g., Dell…
 8) Performance Review

Performance review: The buyer assesses the

performance of the supplier and decides to continue,
modify, or drop the arrangement.

The seller’s job is to monitor the same factors used by

the buyer to make sure that the seller is giving the
expected satisfaction
Technology Advancements in Business Buyer Markets

E-PROCUREMENT AND B2B DIGITAL AND SOCIAL

ONLINE PURCHASING MEDIA MARKETING
E-procurement and Online Purchasing

E-procurement: Purchasing through electronic connections

between buyers and sellers—usually online.

Business marketers can connect with customers online to

share marketing information, sell products and services,
provide customer support services, and maintain ongoing
customer relationships
 They can conduct reverse auctions, in which
they put their purchasing requests online
and invite suppliers to bid for the business.

They can engage in online trading

exchanges, through which companies work
Ways of E- collectively to facilitate the trading process.

Procurement Companies also can conduct e-procurement

by setting up their own company buying
sites.

Companies can create extranet links with

key suppliers.
 Advantages

• Access to new suppliers

• Lowers costs
• Speeds order processing and delivery
E-procurement • Enhances information sharing
and Online • Improves sales
Purchasing • Facilitates service and support

Disadvantages

• Erodes relationships as buyers search for

new suppliers
B-to-B Digital and Social Media Marketing

B-to-B digital and social media marketing: Using digital and social media
marketing approaches to engage business customers and manage customer
relationships anywhere, any time.

Digital and social media can create greater customer engagement and
interaction.

B-to-B marketers know that they aren’t really targeting businesses, they are
targeting individuals in those businesses who affect buying decisions.
 Institutional Markets

Institutional market: Schools, hospitals, nursing homes, prisons, and other

institutions that provide goods and services to people in their care.

Each institution has different buying needs and resources.

Characteristics
Low budgets Captive patrons
 Government Markets
Government market: Governmental units—federal, state, and local—
that purchase or rent goods and services for carrying out the main
functions of government.

Government organizations tend to favor domestic suppliers over foreign

suppliers.

Government buying is carefully watched by outside publics. Because

their spending decisions are subject to public review.

Noneconomic criteria are playing a growing role in government buying

(Minority firms, Depressed firms, Small businesses…)
Desirable
Outcomes of a
B2B transaction:
OTIFNE
Factors Affecting
Buyer-Supplier Relationships
Availability of alternatives

Importance of supply

Complexity of supply

Supply market dynamism

 • Sustainability: Meeting present needs
Sustainability without compromising future generations.
and Green • Three Pillars (Triple Bottom Line)
Supply Chain • Environmental Sustainability
• Social Sustainability
Management • Economic Sustainability
Sustainability and Green Supply
Chain Management

Green Supply Chain Management (GSCM):

Integration of environmental considerations
into supply chain processes.
• Goals:
• Reduce carbon footprint
• Minimize waste and pollution
• Improve energy efficiency
Key Elements of Green Supply Chain Management

a) Green Procurement: b) Green Manufacturing:

Sourcing raw materials from Energy-efficient production
sustainable sources. and waste reduction.

d) Reverse Logistics &

c) Green Distribution & Recycling: Managing
Logistics: Reducing fuel product returns for reuse,
consumption and using eco- recycling, or disposal,
friendly packaging materials. supporting circular
economy.
 Benefits of Green Supply Chain
Management

• Cost reduction through efficient resource use.

• Improved brand reputation and customer loyalty.
Benefits and • Regulatory compliance and risk management.
• Competitive advantage in sustainable markets.
Challenges of
GSCM
Challenges in Implementing GSCM

• High initial investment costs.

• Resistance to change within organizations.
• Complexity in monitoring and measuring
sustainability performance.
 Tesla: Use of sustainable
materials and renewable energy
in production.

Examples of IKEA: Commitment to

sustainable forestry and eco-
GSCM friendly transportation.

Patagonia: Closed-loop supply

chain and recycled materials.