Business Markets and Business Buying Behavior

 Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in production of other products and services that are sold, rented, or supplied to others. Also included are retailing and wholesaling firms that acquire goods to resell or rent to others for profit.

Business buying process is the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands

•More decision participants

•More professional purchasing effort

Types of decisions and the decision making process

• Supplier development is the systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials that they will use in making their own products or resell

Major types of Buying situations

• Straight rebuy is a routine purchase decision such as reorder without any modification
• Modified rebuy is a purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliers
• New task is a purchase decision that requires thorough research such as a new product

Systems selling involves the purchase of a packaged solution from a single seller

Two-step process of selling:

• Interlocking products
• System of production, inventory control, distribution, and other services to meet the buyer’s need for a smooth-running operation

Participants in the Business Buying Process

Buying center is all of the individuals and units that participate in the business decision-making process

– Users

– Influencers

– Buyers

– Deciders

– Gatekeepers 

• Buying center provides a major challenge

• Who participates in the process

– Their relative authority

– What evaluation criteria each participant uses

– Informal participants 

Users are those that will use the product or service

Influencers help define specifications and provide information for evaluating alternatives

Buyers have formal authority to select the supplier and arrange terms of purchase

Deciders have formal or informal power to select and approve final suppliers

Gatekeepers control the flow of information 

The Buying Process

• Problem recognition occurs when someone in the company recognizes a problem or need

• Internal stimuli

  – Need for new product or production equipment

• External stimuli
  – Idea from a trade show or advertising 

General need description describes the characteristics and quantity of the needed item

Product specification describes the technical criteria

Value analysis is an approach to cost reduction where components are studied to determine if they can be redesigned, standardized, or made with less costly methods of production 

Supplier search involves compiling a list of qualified suppliers

Proposal solicitation is the process of requesting proposals from qualified suppliers 

Supplier selection is the process when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditions

Order-routine specifications is the final order with the chosen supplier and lists all of the specifications and terms of the purchase 

Performance review involves a critique of supplier performance to the purchase terms 

E-Procurement

• Online purchasing
• Company-buying sites • Extranets 

• Advantages
– Access to new suppliers
– Lowers costs
– Speeds order processing and delivery – Shares information
– Sales
– Service and support

• Disadvantages

– Can erode relationships as buyers search for new suppliers

– Security 

Institutional and Government Markets

Institutional markets consist of hospitals, nursing homes, and prisons that provide goods and services to people in their care

• Characteristics

• –  Low budgets

• –  “Captive” audience 

Government markets tend to favor domestic suppliers and require suppliers to submit bids and normally award to the lowest bidder

• Carefullymonitored

• Affectedbysimilarenvironmentalfactors

• Goodcredit

• Non-economicfactors

• Minoritysuppliers

• Depressedsuppliers

• Smallbusinesses