Organisation/Business Markets

By
Dipankar Das
 Organisation/Business Markets

• The Business market consists of all

organisations that buy goods and services for
production of their products and services.
• Business buyer behaviour refers to the buying
behaviour of people in business organisations
responsible for purchases.
• In the business buying process, business buyers
determine which products and services their
organisations need to purchase and then find
and evaluate suppliers and choose among them.
 Characteristics of Business Market

1. There are relatively fewer and large buyers.

2. There is a close supplier- customer relationship.
Because of the smaller customer base and the
importance and power of large customers, suppliers
frequently customise their products to individual
customer needs.
3. There is professional purchasing : Business goods
are often purchased by trained purchasing agents who
must follow their organisations purchasing policies,
constraints and requirements.
This means business marketers have to provide
greater technical data about their product and its
advantages over competitors’ products.
 Contd.

4. There are several buying influences: Many people

influence the business buying decisions. Buying
committees consisting of technical experts and even
senior management are common in the purchase of
major goods. Business marketers have to send well
trained sales representatives and sales teams to deal
with the well trained buyers.
5. Multiple sales calls: Because many people are
involved in the buying process it takes multiple sales
calls to win most business orders and some sales
cycles can take years
 Contd.

6. Derived Demand: The demand for business

goods is a derived demand from consumer
goods ex. The demand for cement and steel
industry may be due to a boom in the housing
and infrastructure sector.
7. Inelastic demand: The total demand for
many business goods and services is inelastic
ie. It is not much affected by price changes.
Demand is especially inelastic in the short run
because producers cannot make quick changes
in the production.
 Contd.

8.Fluctuating Demand: The demand for

business goods and services tends to be more
volatile than the demand for consumer goods
and services. A given percentage increase in
consumer goods demand can lead to a much
larger percentage increase in the demand for
plant and equipment necessary to produce the
additional output. Economists refer to this as
“Acceleration Effect”.
 Contd.

9. Geographically Concentrated Buyers:

Different types of industries tend to get
concentrated in specific regions of different
states. Ex. Concentration of hosiery and
knitting industries in Tirupur near Coimbatore,
Software companies in Bangalore, Diamond
cutting and polishing industry in Surat.
10. Direct Purchasing: Business buyers often
buy directly from manufacturers rather than
through intermediaries
 Buying Situations

• The business buyer faces many decisions while

making a purchase. The nature of Decision
depends on the buying situation – complexity of
the problem, newness of the buying
requirement, number of people involved and
time required.
• Based on above there are three types of Buying
Situations.
 The Straight Re-buy

• The purchasing department reorders on a routine

basis( office supplies, fasteners, lubricants) and chooses
from suppliers on an approved list.
• The suppliers strive to maintain product and service
quality and often propose automatic reordering systems
to save time.
• Out suppliers attempt to offer something new or to
exploit dissatisfaction with a current supplier.
• Out suppliers try to get a small order and enlarge their
share over time.
 Modified Re-Buy

• The buyer wants to modify product

specifications, prices, delivery requirements or
other terms. The modified re-buy usually
involves additional participants on both sides.
The in-suppliers become nervous and have to
protect the account. The out-suppliers see an
opportunity to propose a better offer to gain
some business.
 New Task

• A purchaser buys a product or service for the first time.

The greater the cost or risk, the larger the number of
participants and greater their information gathering and
therefore the longer the time to decide.
• The new task buying passes through the following
stages:
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption
 Contd.

• The effectiveness of communication tools varies at each

stage.
• Mass media are the most important during the initial
awareness stage. Sales people have the greatest impact
at the interest stage and technical sources are the most
important during the evaluation stage.
• In the new task situation, the buyer has to determine
product specification, price limits, delivery terms and
times, service terms, payment terms, order quantities,
acceptable suppliers and the selected supplier.
 Contd.

• The new task buying situation is the marketers

greatest opportunity and challenge.
• Because of the complicated selling involved,
many companies use a missionary sales force
comprising the most effective sales people. The
marketer also tries to reach as many key
participants as possible and provide helpful
information and assistance.
 Systems Buying & Selling

• Many business buyers prefer to buy a total

solution to a problem from one seller.
• The practice originated with government
purchases of major weapons and capital
equipment.
• Sellers have increasingly recognised that buyers
like to purchase in this way and many have
adopted systems selling as a marketing tool.
 The Buying Centre

• The Buying Centre is the decision making unit of the

buying organisation.
• It is composed of all those individuals and groups who
participate in the purchasing decision making process,
who share some common goals and the risk arising from
the decisions.
• The buying centre is not a fixed and formally identified
unit within the buying organisation.
• It is a set of buying roles assumed by different people for
different purchases within the organisation.
• The size and make up of the buying centre will vary for
different products and for different buying situations.
 Contd.

The buying centre includes all members of the

organisation who play the following seven roles in the
purchase decision process:
• Initiators: Those who request that something be
bought and used. They may be users or others in the
organisations.
• Users: Those who will use the product or service. In
many cases, the users initiate the buying proposal and
help define the product requirements.
• Influencers: People who influence the buying
decision. They often help define specifications and
also provide information for evaluating alternatives.
Technical personnel are particularly important
influencers.
 Contd

4. Deciders : People who decide on product

requirements or on suppliers.
5. Approvers: People who authorise the
proposed action of deciders or buyers.
6. Buyers: People who have formal authority to
select the supplier and arrange the purchase
terms. Buyers may help shape product
specifications. They play a major role in
selecting vendors and negotiating.
 Contd.

7. Gatekeepers: People who have the power to

prevent sellers or information from reaching
members of the buying centre eg. Purchasing
agents, receptionists and telephone operators
may prevent salespersons from contacting users
or deciders.
 Contd.

• Several individuals can occupy a given role ex.

There may be many users and influencers. A
Purchasing Manager for example often occupies
the roles of buyer, influencer and gatekeeper
simultaneously.
• The typical buying centre has a minimum of five
or six members and often has dozens.
• Buying centres usually include several
participants with differing interests, authority,
status and persuasiveness.
 Contd.

• People are not buying products. They are buying

solutions to two problems – the organisation’s
economic and strategic problem and their own
personal problem of obtaining individual
achievement and reward.
 Business Buying Process

1. Problem Recognition
2. General need description
3. Product specification
4. Supplier Search
5. Proposal solicitation
6. Supplier selection
7. Order
8. Performance Review