Chapter 6 – Analyzing Business Markets
I. Chapter Overview/Objectives/Outline
A. Overview
Business markets consist of individuals and organizations that buy goods for purposes of
is more concern for the status and power of potential vendors, and persuasiveness and empathy
play relatively lower roles.
The industrial market buys goods and services for the purpose of increasing sales, cutting
costs, or meeting social and legal requirements. Compared with the consumer market, the
persons who play any of seven roles: initiators, users, influencers, deciders, approvers, buyers,
and gatekeepers.
The industrial marketer needs to know: Who are the major participants? In what decisions do
they exercise influence? What is their relative degree of influence? In addition, what evaluation
marketing capabilities.
The institutional and government market shares many practices with the business market and
has some additional characteristics. Institutional buyers are less concerned with profit than with
other considerations when they define the products and services to buy for the people under
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B. Learning Objectives
Understand what a business market is and how it differs from the consumer market.
Evaluate organization buying situations.
Identify participants in the business-to-business buying process and how buying decisions
are made.
C. Chapter Outline
I. Introduction – Review Oracle example
II. What Is Organizational Buying?
A. The business market versus the consumer market:
1. Fewer buyers, larger buyers, close supplier-customer relationships,
geographically concentrated buyers, derived demand, and inelastic
markets)
2. In addition: fluctuating demand, professional purchasing, multiple
buying influences, direct purchasing, reciprocity, and leasing
attempt to produce value for their customers.
4. Key challenges include:
a) Identifying new opportunities for organic growth
b) Improving value management techniques
c) Develop metrics for measuring marketing performance and
accountability
B. Institutional and Government Markets
1. The institutional market
serve this market
c) Objective is not profit
d) Examples: schools, hospitals, nursing homes.
2. The government market – a major buyer of goods and services
reform
C. Buying situations
1. Straight re-buy (reorder on a routine basis)
2. Modified re-buy (product specs, prices, delivery requirements, or other
terms may be modified)
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major sub-decisions involved in the buying decision)
4. Because of complicated selling requirements, some organizations utilize
salespeople
D. Systems buying and selling
one supplier. Effectively provides a turnkey solution
2. Prime Contractors, usually hired by government, are responsible for
contractors.
3. Systems selling
a) Systems contracting single supplier provides buyer with its entire
requirement of MRO (Maintenance, Repair and Operating)
b) Key to building large scale industrial products
III. Participants in the Buying Process
knowledge required to make purchase decision
B. The buying center
Buying center includes initiators, users, influencers, deciders, approvers, buyers,
and gatekeepers
C. Buying Center Influences
operations
2. Business function may dictate priority, finance person concerned about ROI,
while engineer concerned about quality
3. Organizations are made up of people. People have personal biases, job
perceptions, and preferences, which are influenced by their own age,
culture
D. Targeting Firms and Buying Centers
1. Marketers must determine:
a. Who are the major participants?
b. What decisions do they influence?
c. What is their level of influence?
d. What evaluation criteria do they use?
into one of several categories:
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a. Price orientated
b. Solution orientated
c. Gold standard
d. Strategic value
4. Larger sellers go for multilevel-in-depth selling to reach as many
participants as possible
IV. Stages in the Business Buying Process
Business buying passes through eight stages called “buyphases”as identified by
Johnson and associates in the “buygrid” framework shown in Table 6.2. These
phases can be compressed or bypassed depending on the specific situation
A. Problem Recognition (stage can be triggered by internal or external
stimuli)
1. Internally, most common triggers are need for new equipment or
inputs to develop new product, mechanical or system flow
breakdowns requiring new parts or solution, poor product
quality, cost reduction efforts
2. Externally, new ideas precipitated in industry, potential new
supplier defines opportunities to reduce cost or purchase better
product
B. General Need Description and Product Specification
1. Determine general characteristics and quantity
2. Organization takes on an advisory role with complex solutions
3. Product value analysis (PVA): cost reduction approach to
determine products can be redesigned, standardized, or made
with a cheaper production method
marketplaces for businesses)
1. Suppliers can use a variety of ways to find suppliers
a. Vertical hubs focus on industries
b. Functional hubs focus on specific functions
c. Other sources are trade directories, contacts, trade
advertisements, trade shows
2. Suppliers need to make themselves visible
marketplace, exposure to agents
e. Develop knowledgeable sales force
D. Proposal solicitation
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be simple or complex
2. Suppliers must be efficient and skilled in writing, submitting, and
presenting proposals
E. Supplier selection – Buyer identifies key attributes and rates each
supplier on these attributes. Researchers found eight different
Customer Value Assessment (CVA) methods
1. Developing a Compelling Value Proposition
research methods
b. Specify the customer value proposition
c. Implement value proposition supported by respective
employee training and rewards.
2. Overcoming Price Pressures
3. Determine How Many suppliers to Use
4. Buyers need to determine number of suppliers to be used. Trend
is for less or single-source suppliers
F. Order-routine specification
1. With MRO items, trend is to use blanket contracts also called
stockless purchase plans and automatic replenishment, which
entry barriers for new suppliers
2. There are trends to more vendor-managed inventory systems.
Suppliers have access to buyer inventory levels and have
responsibility for continuous replenishment programs
G. Performance review (three common methods)
1. Buyers solicit internal users of supplier evaluation
2. Buyers rate supplier via weighted core method
V. Managing Business-to-Business Customer Relationships
A. The Benefits of Vertical Coordination (refer to “Marketing Insight: establishing
Corporate Trust, Credibility, and Reputation”
1. Basic Buying and Selling – single routine exchanges with moderate levels of
cooperation and information exchange
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information exchange
3. Contractual Transaction – Exchanges defined by formal contract and
generally have low levels of trust, cooperation and interaction.
4. Cooperative Systems – Partners ar eunited in operational ways, but neither
demonstrates structural commitment through legal means or adaption.
5. Collaborative – Trust and commitment lead to true partenrship
7. Customer is King – Seller adapts to meet the customer’s needs without
expecting much adaption or change in exchange.
B. Business relationships: Risks and Opportunism
of investments in company-specific training, equipment
and operating procedures or systems
switching costs
2. Opportunism
a. Opportunism can be thought of as “some form of cheating
purposes
VI. Executive Summary
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