Business Markets and Buying BehaviorBusiness Markets and Buying Behavior

Professor Chip BesioCox School of BusinessSouthern Methodist University

Business-to-Business Marketing

Sales to businesses rather than consumers

Example: Dell Business-to-Business - sale of a personal

computer to be used in an office environment Consumer Marketing - sale of a personal

computer for use by a student while at college

Business MarketBusiness Market -- all organizations that buy goods and services to use in the production of other products and services that are sold, rented, or supplied to others

Business markets involve many more dollars and items do consumer markets

WHAT AREBUSINESS MARKETS

THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS

Slide 6-6

• Business Marketing• Industrial Markets (Industrial Firms)• Reseller Markets (Resellers)• Government Markets (Government Units)• Global Organizational Markets

Few, large buyers

Geographically concentrated

Derived demand - comes from consumers at the end of the channel

Inelastic demand

CHARACTERISTICS OF ORGANIZATIONAL MARKETS

Slide 6-7

TYPE AND NUMBER OF ORGANIZATIONIAL CUSTOMERS IN THE U.S.

MEASURING DOMESTIC AND GLOBAL INDUSTRIAL, RESELLER, AND

GOVERNMENT MARKETS

Slide 6-9

• North AmericanIndustry ClassificationSystem (NAICS)

• North American Product Classification System (NAPCS)

NAICS breakdown for information industries sector: NAICS code 51 (abbreviated)

Key characteristics of organizational buying behavior

Key Organizational Buying Criteria

Nature of the Buying UnitNature of the Buying Unit

• More participants in the purchase• Professional purchasing effort

• More participants in the purchase• Professional purchasing effort

Nature of the Buying UnitNature of the Buying Unit

• Few participants in the purchase• “Amateur” purchasing effort

• Few participants in the purchase• “Amateur” purchasing effort

Types of Decisions &Decision Process

Types of Decisions &Decision Process

• More complex decisions• Often higher risk; more at stake• Process is more formalized• Buyer/seller depend on one another• Build close long-term relationships with customers

Types of Decisions &Decision Process

Types of Decisions &Decision Process

• Simpler decisions• Usually limited risk• No formal info search or decision• Buyer and seller have limited interface• Psychology can be important

Source: Adapted fromPrentice Hall

Marketing MixMarketing Mix

• Predominantly sales force • Price is often negotiated• Advertising and other

communications are frequently technical

• Predominantly sales force • Price is often negotiated• Advertising and other

communications are frequently technical

Marketing MixMarketing Mix

• Mostly mass communications • Price is fixed• Advertising is emotional or rational;

reminder, persuasive, comparative, or awareness

• Mostly mass communications • Price is fixed• Advertising is emotional or rational;

reminder, persuasive, comparative, or awareness

Organizational Markets Consumer Markets

Comparing consumer and organizational purchases

Comparing the stages in consumer and organizational purchases

CHARACTERISTICS OF ORGANIZATIONAL BUYING

• The Buying Center: A Cross-Functional Group

Buying Center

Buying Committee

People in the Buying Center

CHARACTERISTICS OF ORGANIZATIONAL BUYING

Slide 6-22

• The Buying Center: A Cross-Functional Group

Roles in the Buying Center

• Users

• Influencers

• Buyers

• Deciders

• Gatekeepers

Buying Center

Buying Center

UsersGatekeepers

Deciders Influencers

Buyers

Source: Prentice Hall

Participants in the Business Buying Process

Segmentation variables and breakdowns for U.S. organizational markets

Straight RebuyStraight Rebuy

New Task BuyingNew Task Buying

Modified RebuyModified Rebuy

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Dec

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Business Buying Situations

How the buying situation affects buying center behavior

(Rarest, most complex type) Big buying unit Many people involved Lots of indirect influence Slower-than-usual processes High risk Buying unit gathers and weighs lots of information Anyone can win Performance matters (price not always as much)

Business Buying SituationsNew Buy

(Most common, most simple)

Small buying unit (generally one person)

Low perceived risk

So long as quality is acceptable … "In supplier” wins "Out suppliers" can’t get an appointment

“Out supplier” salespeople must wait for "in supplier" to fail or requirements to change

Business Buying SituationsStraight Rebuy

A window of opportunity for other suppliersAn "aging" new task or a "rejuvenated" straight re-buyCompared to new buy: Smaller buying unit More rapid decision Less risk Performance and price considered

Compared to straight re-buy:

•Larger buying unit•Slower decision•More risk

Business Buying SituationsModfied Rebuy

Slide 6-42

NAVIGATING THE NAICS

GOING ONLINE

1. What is the three-digit industry subsector code for food manufacturing?

Going Online

Slide 6-44

2. What is the six-digit U.S. code for dog and cat food manufacturing?

Going Online

Slide 6-45

3. How many establishments and what is the value of shipments sold by the U.S. dog and cat food manufacturing industry based on the latest government statistics?

Going Online