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CHAPTER 8
Business Markets and Buying Behavior
TEACHING RESOURCES QUICK REFERENCE GUIDE
Resource
Location
Purpose and Perspective
IRM, p. 156
Lecture Outline
IRM, p. 157
Discussion Starters
IRM, p. 164
Class Exercises
IRM, p. 166
Chapter Quiz
IRM, p. 168
Semester Project
IRM, p. 169
PURPOSE AND PERSPECTIVE
In this chapter, we first describe the major types of business markets, including producer, reseller,
government, and institutional markets. Next, we look at the major characteristics of business customers
and transactions with those customers. We also examine the attributes of business customers and some of
Answers to Discussion and Review Questions
IRM, p. 170
Answers to Application Questions
IRM, p. 172
Answers to Internet Exercises
IRM, p. 174
Answers to Developing Your Marketing Plan
IRM, p. 175
Comments on the Cases
IRM, p. 176
Case 8.2
IRM, p. 177
Examination Questions: Multiple-Choice
Testing CD
PowerPoint Slides
Chapter 8: Business Markets and Buying Behavior 157
LECTURE OUTLINE
I. Business Markets
A. A business market (also called a business-to-business or B2B market) consists of individuals,
organizations, or groups who purchase a specific kind of product for resale, direct use in
producing other products, or use in general daily operations.
B. Although marketing to businesses employs the same concepts as marketing to ultimate
consumers, there are structural and behavioral differences in business markets.
1. A business marketer must understand how its product affects other organizations in the
marketing channel, such as resellers and other manufacturers.
C. For most business marketers, the goal is to understand customer needs and provide a value-added
exchange which focuses on customer retention and relationship development.
D. Producer Markets
1. Producer markets are individuals and organizations which purchase products for the
E. Reseller Markets
1. Reseller markets consist of intermediaries who buy finished goods and resell them for profit.
2. Resellers do not change the physical characteristics of the product except for occasional
minor alterations.
F. Government Markets
1. Government markets include federal, state, county, and local governments that buy goods
and services to support internal operations and provide products to their constituencies.
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G. Institutional Markets
1. Institutional markets are organizations with charitable, educational, community, or other
II. Dimensions of Marketing to Business Customers
A. Characteristics of Transactions with Business Customers
1. Transactions between businesses tend to be much larger than individual consumer sales.
2. Suppliers often must sell products in large quantities to make profits; they prefer to sell to
customers who place large orders.
B. Attributes of Business Customers
1. Business customers demand detailed information before buying to be sure products meet the
organization’s needs.
C. Primary Concerns of Business Customers
1. Price is very important to business customers.
a. Price influences operating cost and costs of goods sold, which in turn affects the selling
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2. Level of product quality is also of concern.
a. A product must meet specifications so its use will not result in malfunction for the
3. Business buyers value service.
a. Services offered by suppliers directly and indirectly influence customers’ costs, sales, and
profits.
4. Quality of service is critical because customers have higher service expectations than ever.
a. Marketers should aim for uniformity of service, simplicity, truthfulness, and accuracy.
5. Business customers are concerned about the costs of developing and maintaining
relationships with their suppliers.
D. Methods of Business Buying
1. Most business buyers use description, inspection, sampling, or negotiation purchase methods.
2. Description is commonly used when products are standardized to certain characteristics and
are graded according to these standards.
E. Types of Business Purchases
1. Most business purchases are one of three types: new-task purchase, straight rebuy, or
modified rebuy.
2. In a new-task purchase, the organization makes an initial purchase of an item to be used to
perform a new job or solve a new problem.
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3. A straight rebuy purchase is a routine purchase of the same products with approximately
the same contract terms.
4. In a modified rebuy purchase, a new-task purchase is changed on subsequent orders or
when the requirements of a straight-rebuy purchase are modified.
a. A business buyer might seek faster delivery, lower prices, or a different quality level of
F. Demand for Business Products
1. Several characteristics distinguish demand for business products from consumer demand. The
demand for different types of business products also varies.
2. Derived demand is the demand for business products derived from the demand for consumer
products.
3. Inelastic demand is a demand not significantly altered by a price increase or decrease.
a. When a sizable price increase for a component part represents a large proportion of the
4. Joint demand involves two or more items used in combination to produce a product.
5. The demand for business products may fluctuate enormously because it is derived from
consumer demand.
III. Business Buying Decisions
A. Business (organizational) buying behavior refers to the purchase behavior of producers,
government units, institutions, and resellers.
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B. The Buying Center
1. The buying center is a group of people within an organization, including users, influencers,
buyers, deciders, and gatekeepers, who make business purchase decisions.
a. Users are organizational participants who actually use the product being acquired.
2. The number and structure of an organization’s buying centers are affected by the
organization’s size, its market position, the volume and types of products purchased, and the
firm’s managerial philosophy.
C. Stages of the Business Buying Decision Process
1. First stage: One or more individuals in the business recognize that a problem or need exists.
2. Second stage: The development of product specifications requires that buying center
3. Third stage: This stage involves searching for potential products to solve the problem and
locating suppliers of such products.
a. Some organizations engage in value analysis, an evaluation of each component of a
potential purchase: quality, design, materials, and so on.
4. Fourth stage: Results of deliberations and assessments from stage three are used to select the
product to be purchased and the supplier from which to buy it. The product is ordered.
a. Multiple sourcing is the selection and use of several suppliers.
D. Influences on the Business Buying Decision Process
1. Environmental factors are forces, such as competitive and economic factors, political forces,
legal and regulatory factors, technological changes, and sociocultural issues.
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2. Organizational factors include the company’s objectives, purchasing policies, and resources
as well as the size and composition of the buying center.
IV. Industrial Classification Systems
A. Much information about business customers is based on industrial classification systems.
1. In the U.S., marketers traditionally have relied on the Standard Industrial Classification (SIC)
2. The SIC system has been replaced by the North American Industry Classification System
(NAICS), a single industry classification system used by the United States, Canada, and
Mexico to generate comparable statistics among North American Free Trade Agreement
(NAFTA) partners.
a. The NAICS classification is based on the types of production activities performed.
B. Industrial classification systems are ready-made tools which allow marketers to divide
organizations into groups based mainly on the types of goods and services provided.
C. A marketer can take several approaches to determine the identities and locations of organizations
in specific groups.
1. One approach is to use state or commercial industrial directories, such as Standard and
Poor’s Register or Dun & Bradstreet’s Million Dollar Directory.
2. An organization may also employ the services of a commercial data service.
a. This type of service is more expedient, but more expensive.
products handled, names of executive officers, and other pertinent information.
D. In addition to deriving a list of potential customers, marketers must determine which ones to
pursue, a decision usually based on estimated purchase potential.
1. A marketer must verify the relationship between the size of potential customers’ purchases
Chapter 8: Business Markets and Buying Behavior 163
E. After estimating purchase potential of prospect segments, the marketer selects potential customers
to include within the target market.
F. There are several limitations to the use of industrial classification data.
1. A few industries do not have designations.
164 Chapter 8: Business Markets and Buying Behavior
DISCUSSION STARTERS
Discussion Starter 1: Sustainable Marketing
This discussion starter focuses on sustainable marketing (use the Going Green box on page 250 of the
text).
ASK: Why do you think more companies are “going green?”
Businesses generally make decisions based on profit potential. Many businesses are producing more
Discussion Starter 2: The Products You Depend on from the Firms You Have Never Hear d of
ASK: Have you ever thought about where the products you consume come from?
Many of us will purchase a loaf of bread or a candy bar and never think about how it was made or the
Discussion Starter 3: Government Purchasing
ASK: What types of goods and services do governments purchase?
Governments, being extremely large institutions, require a wide variety of goods and services.
Discussion Starter 4: Business–to-Business Marketing and Universities
Recommended as a group activity
In this chapter we examined the world of business-to-business marketing and learned that all types of
Chapter 8: Business Markets and Buying Behavior 165
166 Chapter 8: Business Markets and Buying Behavior
CLASS EXERCISES
Class Exercise 1: Business Buying Behavior vs. Consumer Buying Behavior
The objective of this class exercise is to show students that business buying behavior has many
similarities to consumer buying behavior.
Prompt for Students:
Although business buying behavior might seem quite different from your buying behavior, the two are
more similar than you may think. As you answer the following questions, think about how similar or
dissimilar the business buying process is to your own.
1. When you buy a new shirt, hair dryer, MP3 player, television, or car, which of the following criteria
is important to you?
Quality
Service
Product information
Repair services
Product availability
Credit
On-time delivery
Price
2. Give examples of products that you buy (or may buy) based on
Description
Inspection
Sampling
Negotiation
3. Match the business purchase situation with the consumer goods buying situation. How or why are
they related?
New-task purchase
Limited decision making
Modified rebuy
Routine decision making
Straight rebuy
Extended decision making
4. How is the buying center of a business similar to the following purchasing roles that family
members play?
Users
Buyers
Gatekeepers
Answers:
1. If you ask enough students, you will eventually have all of these criteria listed. Although businesses
are more likely to develop formal written specifications about these concerns, final consumers also