1. Marketing Management
By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
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SUMMARY by
Chapter 7
Analyzing Business Markets
and Buyer Behavior
Business buyers purchase goods and services to achieve specific goals, such as making
money, reducing operating costs, and satisfying social or legal obligations. Therefore to
provide superior customer value to the business buyers this chapter familiarizes you
with the underlying dynamics and process of business buying.
Blanket contract establishes a long-term relationship in which the supplier promises to
Organizatio- resupply the buyer as needed at agreed-upon prices over a specified period. Because
the seller holds the stock, blanket contracts are sometimes called stockless purchase
nal buying plans.
Product value analysis is an approach to cost reduction in which components are
is the decision- carefully studied to determine if they can be redesigned or standardized or made by
making process by cheaper methods of production.
which
organizations
establish the need
The Business Market versus the Consumer
for purchased Market
products and • Fewer buyers: Business marketers normally deal with far fewer buyers than do
services and consumer marketers.
• Larger buyers: Buyers for a few large firms do most of the purchasing in many
identify, evaluate,
industries.
and choose among • Close supplier customer relationship: Smaller customer base and importance of
alternative brands larger customers, suppliers have to customize offerings to meet the needs of
and suppliers. individual customers.
• Geographically concentrated buyers
• Derived demand: Demand for business goods is derived from demand for consumer
goods, so business marketers must monitor the buying patterns of ultimate
consumers.
• Inelastic demand: Not much affected by price changes as producers cannot make
quick production changes.
•

2. Chapter 7 - Analyzing Business Markets and Buyer Behavior
• Fluctuating demand: Demand for business products is more volatile than consumer
Three types of products.
• Professional purchasing: Organizational purchasing policies and constraints are followed
Business • Multiple buying influences: More people typically influence buying decisions
• Multiple sales calls: Multiple sales calls to win most business orders, and the sales cycle
Buying can take years.
• Direct purchasing: Business buyers often buy directly from manufacturers rather than
Situations: intermediaries
• Reciprocity: Business buyers often select suppliers who also buy from them.
• Leasing: Many industrial buyers lease rather than buy heavy equipment to conserve
Straight rebuy:
capital, get the latest products, receive better service, and gain tax advantages.
situation in which
the purchasing
The Buying Center
department
(Decision-making unit of a buying organization)
reorders on a Seven roles in the purchase decision process:
routine basis (e.g., • Initiators: People who request that something be purchased
office supplies, bulk • Users: use the product or service; often, users initiate the buying proposal and help
define product requirements.
chemicals).
• Influencers: People who influence the buying decision, including technical personnel.
• Deciders: Those who decide on product requirements or on suppliers.
Modified rebuy: • Approvers: People who authorize the proposed actions of deciders or buyers.
situation in which • Buyers: People who have formal authority to select the supplier and arrange the
the buyer wants to purchase
modify product • Gatekeepers: People who have the power to prevent sellers or information from reaching
members of the buying center
specifications,
prices, delivery
requirements, or
Major Influences on Business Buying
Environmental Factors
other terms.
Attention to numerous economic factors, including interest rates and levels of production,
investment, and consumer spending. Business buyers also monitor technological, political-
New task: regulatory, and competitive developments.
situation in which a
Organizational Factors
purchaser buys a
Business marketers need to be aware of the following organizational trends in purchasing:
product or service
• Purchasing department upgrading: Strategically positioned and highly
for the first time • Cross-functional roles: strategic, technical, team-oriented, and involving more
(e.g., office responsibility
building, new • Centralized purchasing: recentralized their purchasing, to gain more purchasing clout and
savings.
security system).
• Decentralized purchasing of small-ticket items
• Long-term contracts: Buyers are increasingly initiating long-term contracts
• Internet purchasing: Low transaction and personnel costs reduce time between order and
delivery, purchasing companies moving towards internet purchasing.
• Purchasing-performance evaluation & incentive systems and buyers’ professional

3. Chapter 7 - Analyzing Business Markets and Buyer Behavior
• Lean production: incorporates just-in-time (JIT) production, stricter quality control,
development frequent and reliable supply delivery, suppliers locating closer to
Major customers, computerized purchasing, and stable production schedules.
Influences on
8 stages of PURCHASING PROCESS
Business Buying: Stage 1: Problem Recognition
Someone in the company recognizes a problem or need that can be met by acquiring a good
or service. Internally, developing a new product, need for new equipment and materials or
Interpersonal Factors
to obtain lower prices or better quality. Externally, occur when a buyer gets new ideas at a
Buying centers usually
trade show, sees a supplier’s ad, or is contacted by a sales representative offering a better
include several product. Business marketers can stimulate problem recognition by direct mail,
participants with telemarketing, effective Internet communications, and calling on prospects.
differing interests, Stage 2: General Need Description
The buyer has to determine the needed item’s general characteristics and the required
authority, status,
quantity. In this stage, business marketers can assist buyers by describing how their products
empathy, and would meet such needs.
persuasiveness. Stage 3: Product Specification
Company assigns a product value analysis (PVA) to engineering team. By getting in early and
influencing buyer specifications, a supplier can significantly increase its chances of being
Individual Factors
chosen.
Each buyer carries
Stage 4: Supplier Search
personal motivations, The supplier should get listed in online catalogs or services develop communications to reach
perceptions, and buyers, and build a good reputation in the marketplace. After evaluating each company, the
preferences, as buyer will end up with a short list of qualified suppliers
Stage 5: Proposal Solicitation
influenced by the
The buyer invites qualified suppliers to submit proposals. When the item is complex or
buyer’s age, income, expensive, the buyer will require a detailed written proposal from each qualified supplier.
education, job position, After evaluating the proposals, the buyer will invite a few suppliers to make formal
personality, attitudes presentations.
toward risk, and Stage 6: Supplier Selection
The buying center specifies desired supplier attributes (such as product reliability and service
culture.
reliability) and indicate their relative. A blanket contract may be established. The buyer’s
computer automatically sends an order to the seller when stock is needed, and the supplier
Cultural Factors arranges delivery and billing according to the blanket contract.
Marketers carefully Stage 7: Order-Routine Specification
The buyer negotiates the final order, listing the technical specifications, the quantity needed,
study the culture and
the delivery schedule, and so on. In the case of MRO items, buyers are moving toward
customs of each region
blanket contracts rather than periodic purchase orders.
to better understand Stage 8: Performance Review
the cultural factors that The buyer periodically reviews the performance of the chosen supplier(s). Three methods
can affect buyers and are used. The buyer may contact the end users and ask for their evaluations. Or the buyer
may rate the supplier on several criteria using a weighted score method. Or the buyer might
the buying
aggregate the cost of poor supplier performance to come up with adjusted costs of
organization. purchase, including price.