A topic of Marketing Management

1. Marketing
Management
Chapter: 7
Analyzing Business Market

2. Assignment
Submission Date: 29 March,2020
Submitted by:
Miskat Ahmed Ankur
ID: 19251024
Section: B
Department of Marketing
Submitted to:
Asst. Prof. Nowshin Tabassum Tunna
Course Instructor
Faculty of Business Studies
Bangladesh University of Professionals

3. Outline
 What is organizational buying?
 Participants in the business buying.
 The purchasing/procurement process.
 Stages in buying process.
 Developing effective business-to-business marketing programs.
 Managing business-to-business customer relationships.
 Institutional and Government markets.

4. What is Organizational Buying?
Frederick E. Webster Jr. and Yoram Wind define organizational buying as the decision-making process by
which formal organizations establish the need for purchased products and services and identify, evaluate,
and choose among alternative brands and suppliers.
The Business Market Versus the Consumer Market
 Business Market consists of all the organizations that acquire goods and services used in the
production of other products or services that are sold, rented, or supplied to others.
 A consumer market is the very system that allows us to purchase products, goods, and services.
These items can be used for personal use or shared with others. In a consumer market, you make
your own decisions about how you will spend money and use the products you purchase.

5. Business marketers face many of the same challenges as consumer marketers, especially understanding
their customers and what they value.
The 3 biggest hurdles for B-to-B marketing are:
1. Building stronger interfaces between marketing and sales.
2. Building stronger innovation marketing interfaces.
3. Extracting and leveraging more granular customer and market knowledge.
Four additional imperatives are:
1. Demonstrating marketing’s contribution to business performance.
2. Engaging more deeply with customers.
3. Finding the right mix of centralization versus decentralization marketing activities.
4. Finding and grooming marketing talent and competencies.

6. Business marketers, however, contrast sharply with consumer markets in some ways. They are:
Fewer, Larger Buyers
Close Supplier-Customer
Relationship
Professional Purchasing
Multiple Sales Calls
Derived Demand
Inelastic Demand
Fluctuating Demand
Geographically Concentrated
Buyers
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9Multiple Buying Influences
Direct Purchasing

7. Buying Situations
Straight Rebuy. In a straight rebuy, the purchasing department reorders items like office
supplies and bulk chemicals on a routine basis and chooses from suppliers on an approved list.1
Modified Rebuy. The buyer in a modified rebuy wants to change product specifications,
prices, delivery requirements, or other terms.2
New Task. A new-task purchaser buys a product or service for the first time. The greater the
cost or risk, the larger the number of participants.3
The business buyers faces many decision in making a purchase. How many depends on the complexity
of the problem, newness of the buying requirement, number of people involved and time. Three types of
buying situations are:

8. Participants in the Business Buying Process
Who buys the trillion of dollars’ worth of goods and services needed by business organizations?
Purchasing agents are influential in straight-rebuy and modified-rebuy situations, whereas other
employees are more influential in new-buy situations. Engineers are usually influential in selecting
product components, and purchasing agents dominate in selecting suppliers.
The Buying Center
The decision making unit of a buying organization is called the buying center. It consists of “all those in
dividuals and groups who participate in the purchasing decision making process. The buying center
includes all members of the organization who play any of the seven roles in the purchase decision
process.

9. Initiators
Users or others
in the org. who
request that
something be
purchased.
Users
Those who will use the
product or service. In
many cases, the users
initiate the buying
proposal.
Influencers
People who influence
the buying decision,
often by helping define
specifications and
evaluating alternatives.
Deciders
People who
decide on
product
requirements or
on suppliers.
Approvers
People who
authorize the
proposed
actions of
deciders.
Buyers
People who have
formal authority to
select the suppliers
and arrange the
purchase terms.
Gatekeepers
People who have the power
to prevent sellers or
information from reaching
members of the buying
center.

10. Buying Center Influences
Buying center usually include participants with different interests, authority, status, susceptibility to
persuasion and sometime very different decision criteria. Engineers may want to maximize the
performance of the product; production people may want ease of use and reliability of supply; finance
staff focus on the economics of the purchase.
Business buyers also have personal motivations, perceptions, and preferences influenced by their age,
income, education, job position, personality, attitudes toward risk, and culture. Some are “keep it simple”
buyers, or “ own-expert”, “want the best” or “want everything done” buyers. Some younger, highly
educated buyers are technically proficient and conduct rigorous analyses of competitive proposals
before choosing a supplier. Other buyers are “toughies” from the old school who pit in competing sellers
against one another, and in some companies, the purchasing power-that-be are legendry.
Ultimately individuals, not organizations make purchasing decisions. Individuals are motivated by their
own needs and perceptions.

11. Targeting Firms and Buying Centers
Successful b2b marketing requires that business marketers know which type of companies
to focus on in their selling effort.
Business marketers may
divide the marketplace in
many different ways to
choose the type of firm to
which they will sell.
Finding the sectors with
the greatest growth
prospect, most profitable
customers, and most
promising opportunities for
the firm is crucial.
Targeting Firms
Once it has been identified
the type of businesses on
which to focus marketing
efforts, the firms must then
decide how best to sell to
them.
Who are the major
decision participants?
What decisions do they
influence, and how deeply?
What evaluation criteria do
they use?
Targeting within the
Business Center

12. Marketing Insight
Big Sales to Small Businesses
Don’t lump small
and midsize
business together
There’s a big gap between $1 million in reve
nue and $50 million or between a start-up
with 10 employees and a more mature
business with 100 employees.
Do keep it simple
Offer one supplier point of contact for all ser
vice problems or one bill for all services and
products.
Do use the internet
It is seen that time-strapped small-business
decision makers prefer to buy, or at least
research, products and services online.
Don’t forget about
direct contact
Even if the first priority is via internet, but
you still need to offer phone or face time.
Do provide support
after sale
Small businesses want partners and loyal
customers, not pitchmen.
Do your homework
It is important for small businesses to know
about their customers before the purchase.

13. The Purchasing/Procurement Process
In principle, business buyers seek the highest benefit package in relationship to a market offerings’ costs.
The strength of their incentive to purchase will be a function of the difference between perceived benefits
and perceived costs.
Business marketers must therefore ensure that customers fully appreciate how the firm’s offerings are
different and better.
In the past, purchasing departments occupied a low position in the management hierarchy, in spite of
often managing more than half the company’s costs. Recent competitive pressures have led many
companies to upgrade their purchasing departments and elevate administrative to vice presidential rank.
Some multinationals have even elevated purchasing departments to “ strategic supply departments” with
responsibility for global sourcing and partnering.

14. Stages in the Buying Process (The Buyphases)
Phases New Task Modified Rebuy Straight Rebuy
Problem recognition Yes Maybe No
General need description Yes Maybe No
Product specification Yes Yes No
Supplier search Yes Maybe No
Proposal solicitation Yes Maybe No
Supplier selection Yes Maybe No
Order-routine specification Yes Maybe No
Performance review Yes Yes Yes

15. Stages in Buying Process
Supplier Search
The buyer next tries to identify the most appropriate
suppliers through trade directors, contacts with other
companies, trade advertisements, trade shows, and
the Internet.
Problem Recognition
The buying process begins when someone in the
company recognizes a problem or need that can be
met by acquiring a good or service. The recognition
can be triggered by internal or external stimuli.
General Need Description
Next, the buyer determines needed item’s general
characteristics and required quality.
Product Specification
The buying organization now develops the item’s
technical specifications. Often a product-value-
analysis engineer is assigned for this job.

16. Stages in Buying Process
Performance Review
The buyer periodically reviews the performance of
the chosen supplier using one of the three methods.
• Contact end users for evaluation
• Weighted score method
• Aggregate score of poor performance to come up
with adjusted cost of purchase
Proposal Solicitation
The buyer next invites qualifies suppliers to submit
written proposals. After evaluating them, the buyer
will invite a few suppliers to make formal
presentation.
Supplier Selection
Before selecting a supplier, the buying center will
specify and rank supplier attributes, often using
supplier evaluation model.
Order-Routine Specification
After selecting suppliers, the buyers negotiates the
final order, listening the technical specifications, the
quantity needed, the expected time od delivery,
return policies, warranties, and so on.

17. Supplier Search
Companies that purchase online are utilizing electronic marketplace in several forms:
Companies can order thousands of items
through electronic catalogs.
Catalog cites
Companies buying industrial products or
chemical can go to web sites called
e-hubs.
Vertical markets
Ritchie Bros. Auctioneers is the world’s
largest industrial auctioneers, with 44
auction sides worldwide.
“Pure Play” auction company
On spot electronic markets, price change
by the minute.
Spot (or exchange) markets
Hewlett-Packard, IBM, and Walmart
operate private exchanges to link with
specially invited suppliers on the web.
Private exchange
In barter markets, participants offer to
trade goods and services.
Barter markets
Several companies buying the same
product can join together to form
purchasing consortia to gain deeper
discounts on volume purchases.
Buying alliances
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18. Supplier Analysis Method
Attributes Rating Scale
Importance
Weights
Poor (1) Fair (2) Good (3) Excellent (4)
Price .30 x
Supplier reputation .20 x
Product reliability .30 x
Service reliability .10 x
Supplier flexibility .10 x
Total score 3.5

19. Developing Effective B-to-B Marketing Programs
Business to business marketers are using every marketing tool at their disposal to attract and retain
customers. They are embracing systems selling and adding valuable services to their product offerings
and employing customer reference programs and a wide variety of online and offline communication
and branding activities.
For developing effective business-to-business marketing program we need:
 Communication and Branding Activities.
 Systems Buying and Selling.
 Role of Services.

20. Communication and Branding Activities
Business markets are increasingly recognizing
the importance of the their brand. In
a b-b marketing, the corporate brand
is often critical because it is associated
with many of the company’s products.
NetApp is a good example of the
increased importance placed on
branding in b-b marketing.
Systems Buying and Selling
Many business buyers prefer to buy a total problem
solution from one seller, called system
buying. Seller have recognized that buyers
like to purchase in this way and have
adopted this system as a marketing tool.
System selling is a key marketing strategy
in bidding to build large-scale industrial project.
Project engineers must compete on price, quality
and reliability to win contracts.
Role of Services
Services play an increasing strategic and financial role to b-b firms selling primarily products. Adding high quality services to their
product offerings allow them provide greater value and establish closer ties with customers. Here margins are higher because
customers are willing to pay a premium for the peace of mind. Today, all kinds of firms are finding ways to bundle value-added
services to their products.

21. Managing B-to-B Marketing Customer Relationship
Business suppliers and customers are exploring different ways to manage their relationships. Loyalty is
driven in part by supply chain management, early supplier involvement, and purchasing alliances.
Business-to-business marketers are avoiding “spray and pray” approaches to attracting and retaining
customers in favor of honing in on their targets and developing one-to-one marketing approaches.
The Benefits of Vertical Coordination
Much research has advocated greater vertical coordination between buying partners and sellers so they
can transcend merely transacting and instead create more value for both parties. Building trust is one
prerequisite to enjoying healthy long-term relationships.
A number of forces influence the development of a relationship between business partners. Four relevant
ones are availability of alternatives, importance of supply, complexity of supply, and supply market
dynamism.

22. Based on these we can classify buyer-supplier relationships in eight categories:
Simple, routine exchange with moderate
level of information exchange.
Basic buying and selling
More adaptation by seller and less
information exchange.
Bare bones
Formal contract and generally low levels of
trust and cooperation.
Contractual transaction
Competition rather than cooperation is
dominant form of governance.
Customer supply
Partners in cooperative systems are united in
operational ways, but neither demonstrates
structural commitment through legal means.
Cooperative systems
In collaborative exchange, much trust and
commitment lead to true partnership.
Collaborative
Buyers and sellers make many relationship-
specific adaptations, but without necessarily
achieving strong trust or cooperation.
Mutually adaptive
The seller adapts to meet the customer’s
need without expecting much in exchange.
Customer is king
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23. Researchers have noted that
establishing a customer-supplier
relationship creates tension between
safeguarding and adapting. Vertical
coordination can facilitate stronger
customer-seller ties but may also
increase the risk to the customer’s
and supplier’s specific investment.
When buyers cannot easily monitor
supplier performance, the supplier
might shirk or cheat and not deliver
the expected value. Opportunism is
some form of cheating or undersupply
relative to an implicit or explicit
contract.
Risk and
Opportunism in
Business
Relationships

24. Institutional and Government Market
Our discussion has concentrated largely on the buying behavior of profit-
seeking companies. Much of which also applies to the government
organizations. However, we want to highlight certain specific features of these
markets.
The institutional market consists of schools, hospitals, nursing homes, prisons
and other institutions that must provide goods and services to people in their
care. Many of these organizations are characterized by low budget and captive
clients. The buying objective here is not profit.
In most countries, government organizations are a major buyer of goods and
services. They typically require suppliers to submit bids and often the contract
to the lowest bidder, sometimes making allowance for superior quality or a
reputation for completing contracts on time. Government will also buy on a
negotiated contract basis, primarily in complex projects with major R&D costs
and risks and those where there is little competition.

25. The End