Chapter 6 – business markets and business buyer behaviour
Chapter 6 – business markets and business buyer behaviourObjective 1: Define the business market and explain how business markets differ from consumer markets. ?Key words: Business buyer behaviour, Business buying process, Derived demand, supplier development ?- Business market comprises all organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit - Compared to consumer markets, business markets usually have fewer but larger buyers. - Business demand is derived demand which tends to be more inelastic than consumer demand- The business buying decision usually involves more professional buyers- Business buyers usually face more complex buying decisions and the buying process tends to be more formalized - Business buyers and sellers are often more dependant on each other. ??Distinguishing characteristics of business markets: - concentrated demand- derived demand - higher levels of demand fluctuation- purchasing professionals- multiple buying influences- close buyer-seller relationships ?Objective 2: Identify the major factors that influence business buyer behaviour ?Key words: Straight rebuy, modified rebuy, new task, systems selling, buyer centre, users, influencers, buyers, deciders, gatekeepers? Business buyers make decisions that vary with 3 types of buying situations:Straight rebuys – buyer routinely reorders something without any modifications Modified rebuys – buyer wants to modify product specifications, prices or suppliersNew tasks – the buyer purchases a product or service for the first time - The buying centre consists of many different persons playing many different roles Business marketer must know: Who are the major buying centre participants? In what decisions do they exercise influence and to what degree?What evaluation criteria does each decision participant use?Should also understand the major environmental, organizational, interpersonal and individual influences on the buying process?Objective 3: List and define the steps in the business buying decision process ?key words: problem recognition, general need description, product specification, supplier search, proposal solicitation, supplier selection, order-routine specification, performance review, E-procurement ?The business buying decision process has 8 basic stages:Problem recognitionGeneral need description Product specificationSupplier search Proposal solicitation Supplier selectionOrder routine specificationPerformance review?Buyers who face a new task buying situation usually go through all stages of the buying process - Buyers making modified or straight rebuys may skip some of the stages - Companies must manage the overall customer relationship which often includes many different buying decisions in various stages of the buying decision process. ??Objective 4: compare the institutional and government markets and explain how institutional and government buyers make their buying decisions. ?Key words: Institutional market, government market ?The institutional market consists of Schools HospitalsPrisonsinstitutions that provide goods and services to people in their care. - Those markets are characterized by low budgets and captive patrons ?- The government market consists of government units (federal, state, local) thatpurchase or rent goods and services for carrying out the main functions of government ?Government buyer purchase products and services for defense, education, public welfare and other public needs Government buying practices are highly specialized and specified with open bidding or negotiated contracts characterizing most of the buying. Government buyers operate under the eye of the U.S congress & other private watchdog groups. à Tend to require more forms and respond more slowly and deliberately when placing orders. ??CASE STUDY – Veterinary pet insurance: health insurance for our furry or feathery friends ?Consumer decision making is difficult: Large number of alternatives that change Too much info / unorganized info / lack of good infoUncertainty about how products and services will perform Value trade-off (price of car vs. safety)?Decisions become more difficult as:Number of alternatives or/and attributes increase Uncertainty regarding values or attributes Number of shared attributes decrease Difficulty in valuing attributes Availability and ease of use of info ?We have limited cognitive resources, limited time, limited attentional resources: Impossible to solve decisions perfectly So what do we do?Use heuristics Satisfice ??Motivation:Risk / values of decisions Low risk and/or report decisions à we desire to reduce cognitive effort What is motivation?DesireIntensity Persistence ??MASLOW’S THEORY ?????EXTRA NOTES ??WHAT IS A COMPANY??MISSING NOTES (definition)?Non profit companies/organizations (NPOs) do not distribute profits to their owners ( or equivalent) but reinvest them further achieve its mission. Often they receive advantages tax savings as non-profits.NPOs can be charities, but they also tend to be either member-serving or community-serving. Member-serving organizations include mutual societies, cooperatives, trade unions, credit unions, industry associations, sports clubs etc. Typically, community serving organizations are focused on providing services to the community in in either globally or locally ?MISSING NOTES ?Privately held vs. Publicly owned Forms of ownershipSole proprietorshipPartnershipLimited Liability Company Corporation ................
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