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Presentation prepared by Robin Roberts, Griffith University and
Mike Spark, Swinburne University
Technology
Copyright Johnof
Wiley
& Sons 2007
Chapter 7
Business markets and
buying behaviour
Copyright John Wiley & Sons 2007
Chapter Objectives
1. Discuss the various types of business
markets
2. Identify the major characteristics of
business customers and transactions
3. Understand several attributes of demand
for business products
4. Recognise the major components of a
buying centre
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Copyright John Wiley & Sons 2007
Chapter Objectives
5. Understand the stages of the business
buying decision process and the factors
that affect this process
6. Describe industrial classification systems
and explain how they can be used to
identify and analyse business markets
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B2B marketing in the manufacturing sector
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Simon Bottomley, General Manager, HaveStock Manufacturing
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Business Markets
Business Markets consist of individuals or
groups that purchase a specific kind of
product for resale, direct use in producing
other products, or use in general daily
operations
The four categories of business markets are:
1. Producer
2. Reseller
3. Government
4. Institutional
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Business markets (cont’d)
Producer Markets
Individuals and business organisations
that purchase products to make profits
by using them to produce other
products or using them in operations
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Business markets (cont’d)
Reseller Markets
Intermediaries who buy finished goods
and resell them for profit
• Wholesalers purchase products for resale
to retailers
• Retailers purchase products and resell
them to final consumers
• Many factors affect resellers’ purchase
decisions including level of demand, profit
potential, suppliers ability to provide goods
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B2B reseller markets for a tourism product
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Tony Coates, Director of Sales, Story Bridge Adventure Climb
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Business Markets (cont’d)
Government Markets
Commonwealth (or Federal), State
and local governments
• Purchase a broad variety of goods and
services
• Public accountability results in complex
buying procedures requiring formal tenders,
public bids and negotiated contracts
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Business Markets (cont’d)
Institutional Markets
Organisations with charitable,
educational, community, or other
non-business goals
• Churches, some hospitals, sporting and
social clubs, charitable organisations,
and private colleges
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Dimensions of marketing
to business customers
Characteristics of Transactions with
Business Customers
– Orders are much larger and more
costly/expensive
– Purchase deliveries - more frequent
– Terms of sales contracts are longer
– Several people (or committees) may be
involved in the purchase decision
– A buyer and a seller purchase from each
other (reciprocity)
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Dimensions of Marketing
to Business Customers (cont’d)
Attributes of Business Customers
– Typically better informed about the
products they purchase
– Demand detailed product information
about functional features and technical
specifications
– Personal goals may influence buying
behaviour
– Often become partners in new product
developments
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Dimensions of Marketing
to Business Customers (cont’d)
Primary Concerns of Business Customers
– Price of goods affects the buyer’s
ability to compete
– Buyers look for return on investment
(ROI) from the product or cost savings
– Price of the product is compared to the
benefits it provides
– Quality of the product, and meeting
client specifications, is paramount
– Quality offered is valued highly
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Dimensions of Marketing
to Business Customers (cont’d)
Methods of Business Buying
• Description — products are standardised
and specified by certain characteristics
• Inspection — products with particular
characteristics must be inspected
• Sampling — used where a product is
homogenous
• Negotiation — sellers are asked to bid on
specified product characteristics, and
purchasers negotiate with bidders
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Dimensions of Marketing
to Business Customers (cont’d)
Types of Business Purchases
• New-task purchase — an initial item
purchase to be used to perform a new job
or solve a new problem
• Straight rebuy purchase — the routine
purchase of the same products
• Modified rebuy purchase — a new-task
purchase that is changed on subsequent
orders, or when the requirements of a
straight rebuy are modified
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Dimensions of Marketing
to Business Customers (cont’d)
Demand for Business Products
• Derived demand — the demand for
industrial products stems from demand for
consumer products
• Inelastic demand — demand that is not
significantly altered by a price change
• Joint demand — demand involving the
use of two or more items in combination
to produce a product.
• Fluctuating demand — demand that
varies as consumer demand varies
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Business Buying Decisions
Business (Organisational) Buying Behaviour
– The purchase behaviour of producers,
government units, institutions and
resellers
Buying Centre
– The people within an organisation who
make business purchase decisions.
• Users, Influencers, Approvers, Buyers,
Deciders and Gatekeepers
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Business Buying Decisions (cont’d)
Stages of the Business Buying Decision
Process include:
1. Problem Recognition — arises under a
variety of circumstances, both internal
and external
2. Development of Product Specifications
— buying centre participants assess
the problem or need and determine
what is necessary to resolve or
satisfy it
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Business Buying Decisions (cont’d)
3. Search for and Evaluation of Potential
Products and Suppliers — looking at all
available sources of information. This
can involve:
• Value Analysis: An evaluation of each
component of a potential purchase
• Vendor Analysis: A formal systematic
evaluation of current and potential
vendors
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Business Buying Decisions (cont’d)
4. Selection of Product and Supplier
• Multiple Sourcing: An organisation’s
decision to use several suppliers
• Sole Sourcing: An organisation’s
decision to use only one source
5. Evaluation of Product and Supplier
• Performance: may result in adjustment
of product specifications, corrective
action from the supplier, or search for a
new supplier
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Business Buying Decisions (cont’d)
Influences on the Business Buying
Decision Process
– Environmental Factors (Macro factors)
– Organisational Factors (Buying
process and procedures, and buying
centre composition)
– Interpersonal Factors (People factors)
– Individual Factors (Personal traits of
the buying centre participants)
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Similarities with Consumer Markets
– Group influence — can impact both B2B
and family purchase decisions
– Types of business purchase align closely
with consumer types
– Market segmentation can be similar for
B2B and B2C markets
– Close relationships can be just as critical
in both markets
– Reliance on brands can be similar and
used to simplify purchasing processes
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Copyright John Wiley & Sons 2007
Industrial Classification Systems
ANZSIC – Australian and New Zealand
Standard Classification system
–17 industry groups
–53 subdivisions
–Assist easy segmentation
–Commercial industrial directories are
often used
–Not always accurate or timely!
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Is elite level sport a
B2B or B2C product?
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Chapter 7
Copyright John Wiley & Sons 2007