Chapter 7:
Analyzing Business
Markets
What is Organizational Buying
• The Business Market consists of all the organizations that acquire
goods and services used iin the production of other products or
services that are sold, rented or supplied to others.
• Business markets :
• Fewer, larger buyers
• Close supplier-customer relationship
• Professional purchasing
• Multiple buying influences
• Multiple sales calls
• Derived demand
• Inelastic demand - not much affected by prices changes
• Flunctuating demand
• Geographically concentrated buyers
• Direct purchasing
• Organizational buying is the decision-making process by
which formal organizations establish the need for pur_x0002_chased
products and services, then identify, evaluate,
and choose among alternative brands and suppliers.
The 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.
Buying Situations
• Straight rebuy
• routine basis buying
• supplies make an effort to maintain quality and often propose automatic
reordering systems to save time
• Modified rebuy
• rebuy due to change product specifications, prices, delivery requirements.
• New task
• buy for the first time
Participants in the Business Buying
Process
• The Buying Center
• Initiators - request something to be purchased
• Users - those who use the products, define the product requirements
• Influencers- influence buying decision and help define the specifications
• Deciders - decide on the product requirements or on suppliers
• Approvers- authorize the actions to buy
• Buyers- select the supplier and arrange the purchase terms and negotiation
• Gatekeepers - power to prevent sellers or information reaching members in
the buying center (agent, receptionists etc)
The Purchasing/Procurement/Buying
Process
• Problem recognition
• General need description and product specification
• Product specification
• Supplier search
• Proposal solicitation
• Supplier selection
• Order-routine specification
• Performance review
-Business marketers are strengthening their
brands and using technology and other
communication tools to de_x0002_velop effective
marketing programs. They are also using
systems selling and adding services to provide
custom_x0002_ers added value.
- Businessmarketers must form strong bonds and
rela_x0002_tionships with their customers. Some
customers, how_x0002_ever, may prefer a
transactional relationship
The benefits of vertical coordination
• Basic buying and selling - simple, routine exchanges
• Bare bones - require more adaptation
• Contractual transaction - formal contract
• Customer supply - competition happen
• Cooperative systems - partners are united
• Collaborative - trust and commitment lead to true partnership
• Mutually adaptive - relationship-specific adaptations
• Customer is king - meet the customer’s needs without expecting
much adaptation or change in exchange
The institutional market consists of schools, hospitals,
nursing homes, prisons, and other institutions that pro_x0002_vide
goods and services to people in their care. Buyers for
government organizations tend to require a great deal of
paperwork from their vendors and to favor open bidding
and domestic companies. Suppliers must be prepared
to adapt their offers to the special needs and procedures
found in institutional and government markets.
End of Chapter 7
