Slide 8.1 Business-to-business marketing Chapter 8.

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Business-to-business marketing

Chapter 8

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Typical transactions of business markets

Figure 8.1 Business transactions involved in producing and distributing a pair of shoes

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Characteristics of business markets

• Business markets differ from consumer markets by structure and demand– Geographically concentrated

• e.g. London for Financial services

– Derived demand• Derived from the demand for consumer goods.

– Inelastic demand• Total demand for a product that is not much affected by price

changes, especially in the short-term.

– Fluctuating demand• Small change in consumer demand may result in large

business demand.

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Nature of the purchase unit

• More buyers

• More professional purchasing process

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Types of decision and the decision process

• Business buyers generally involved in more complex buying decisions

• Buying process more formalised

• Buyer and seller more dependent upon each other

• Sellers frequently customise the products for the buyers

• Build close long-term relationships

• Proactive planning

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Other characteristics of business markets

• Direct purchasing– Fewer intermediaries

• Reciprocity– Leveraging products and services in associated

companies

• Leasing– Predominantly in capital equipment, cash flow

management and tax advantages as well as upgrade facilities

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Model of business buyer behaviour

Figure 8.2 A model of business buyer behaviour

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Business buyer behaviour

Figure 8.3 Three types of business buying situationSource: Ben M. Enis, Marketing Principles, 3rd edn (1980). © 1980 Scott, Foresman & Co.

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Main types of buying situation

• Straight re-buy– Routinely reorders something without

modification

• Modified re-buy– Buyer needs to modify product specifications,

prices, terms or suppliers

• New task– Order product or service for the first time

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Participants in the business buying process

• Buying centre• Users • Influencers• Buyers• Deciders• Gatekeepers

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Figure 8.4 The main influences on business buying behaviour

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Main influences on business buyers

• Environmental factors– Economic environment influencing demand, interest rates etc.

• Organisational factors– Upgraded purchasing mechanisms e.g. electronic data

interchange • Strategic materials management, TQM and JIT

– Centralised purchasing– Long-term contracts– Purchasing performance evaluation

• Interpersonal factors• Individual factors

– Every buyer has unique personal attributes that will affect the process.

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Table 8.1 Key stages of the business buying process in relation to important buying situationsSource: Adapted from Patrick J. Robinson, Charles W. Faris and Yoram Wind, Industrial Buying and Creative Marketing (Boston: Allyn & Bacon, 1967), p. 14.

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How do business buyers make their buying decisions?

• Problem recognition• General need description

– General characteristics and quantity needed• Product specification

– Value analysis approach to cost reduction.• Supplier search

– Key attributes specific to value adding partnerships• Proposal solicitation

– Formalised process of quotations• Supplier selection

– Preferred supplier status• Order-routine specification

– Order generation• Performance review

– Rating of supplier performance against set criteria

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Institutional and Government markets

• Institutional markets• Schools, hospitals, nursing homes, prisons and other

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

• Characterised by low budgets, captive patrons and often have unique needs.

• Government markets offer huge opportunities for many companies due to volume and regularity of demand.

• Predominantly tender or bid driven and practices vary from country to country.

• High level of bureaucracy

Slide 8.1 Business-to-business marketing Chapter 8.

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