Business markets consist of individuals and organizations that buy goods
for purposes of
further production, resale, or redistribution. Business (including government and nonprofit organizations) are
a market for raw and manufactured materials and parts, installations, accessory
equipment, and supplies and services. The variables impact the business buyer
are similar to those of the consumer buyer in some ways but very different in others. In general, the
business buyer is generally much more technical, price-oriented, educated for the job, and risk
adverse than the consumer.
In certain business markets purchase decisions hinge on the outcome of a
bidding process
between competitors offering similar products & services. In these cases
the decision to
buy is often whittled down to one concern — who has the lowest price. However, in many other ways
business buying is much more complicated. For instance, the demand by businesses for
products & services is affected by consumer purchases (called derived demand)
& because so many organizations may have a part in creating consumer purchases, a
small swing in consumer demand can create big changes in business purchasing. For
business to business marketers the size of individual orders, along with a smaller number of
buyers, makes person to person contact by sales representatives a more effective
means of promotion.
The business market is much more geographically concentrated than the
consumer market.
Certain industries locate in particular areas to be close to consumers. Firms
may choose to
locate sales offices & distribution centers in these areas to provide more attentive service. In addition to
geographical concentration, the business market features a limited number of
buyers. Marketers can draw from a wealth of statistical information to estimate the sizes &
characteristics of business markets. Many buyers in limited buyer markets are large organization.
A significant percentage of business buying, especially within larger organizations, requires the input
of many. In marketing literature those associated with the purchase decision are known
to be part of a Buying Center, which consists of individuals within an
organization that perform one or more of the following roles:
1) Buyer - responsible for
dealing with suppliers & placing orders (e.g. purchasing agent)
2) Decider - has the power to
make the final purchase decision (e.g. CEO)
3) Influencer - has the ability to affect what is ordered such as setting
order specifications (e.g. Engineers, researchers, product managers)
4) User — those who will actually use the product when it is received (e.g.
Office staff)
5) Initiator — any buying center member who is first to determine that a
need exists.
6) Gatekeeper — anyone who controls access to other buying center members
(e.g. Administrative
assistant)
For marketers confronting a Buying Center it is important to first
identify who plays what role. Once identified the marketer must address the needs of each member,
which may differ significantly. For instance, the Decider, who may be the
company president wants to make sure the purchase will not negatively affect the company's bottom
line while the Buyer wants to be assured the product will be delivered on time. Thus,
the way each Buying
Center member is approached and marketed to requires careful planning in order
to address the unique needs of each member.
Industrial buyers make
decisions that vary with the buying situation or buy class. Buy classes comprise three types:
1) Straight Re-Purchase - These purchase situations involve routine ordering. In most cases buyers simply reorder the
same products or services that were previously purchased. In fact, many larger
companies have programmed re-purchases into an automated ordering system that
initiates electronic orders when inventory falls below a certain pre-determined level. For
the supplier benefiting from the re-purchase this situation is ideal since the
purchaser is not looking to evaluate other products. For competitors who are not getting
the order it may require extensive marketing efforts to persuade the buyer to
consider other product or service options.
2) Modified Re-Purchase — these purchases occur when products or services previously considered a straight re-purchase
are for some reason now under a re-evaluation process. There are many reasons why a
product is moved to the status of a modified re-purchase. Some of these reasons include:
end of purchase contract period, change in who is involved in making the purchase,
supplier is removed from an approved suppliers list, mandate from top level of
organization to re-evaluate all purchasing, or strong marketing effort by competitors. In this
circumstance the incumbent supplier faces the same challenges they may have faced
when they initially convinced the buyer to make the purchase. For competitors the
door is now open and they must work hard to make sure their message is heard by
those in charge of the purchase decision.
3) New Task Purchase — as the name suggests, these purchases are ones the buyer has never or rarely made before. In
some ways new task purchases can be considered as either minor or major depending
on the total cost or overall importance of the purchase. In either case the buyer will
spend considerably more time evaluating alternatives. For example, if faced with a major
new task purchase, which often involves complex items, such as computer systems,
buildings, robotic assembly lines, etc., the purchase cycle from first recognizing the need
to placement of the order may be months or even years.
Businesses
must understand the dynamics of the organizational purchase process. Suppliers who serve business to business markets
must work with multiple buyers, especially
when selling to larger customers. Suppliers must evaluate customer needs &
develop proposals that meet technical requirements & specifications.
A primary goal of business to business relationships is to provide
advantages that no other vendor can provide-for instance lower price, quicker delivery, better
quality & reliability,
customized products features or more favorable financing terms. Hence requiring superior communications
among the organization personnel. Providing these advantages means expanding the
company's external relationship which include suppliers, distributors &
other organizational partners.
In conclusion, close co-operations whether through informal contacts such
as the business
dinner or under terms specified in contractual partnerships & strategic
alliances enable
companies to meet buyers' needs for quality products & customer service.
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