Buyer Behavior in Business Markets
As we shift our attention to buyer behavior in business markets, keep in mind that business markets and consumer markets have many things in common. Both contain buyers and sellers who seek to make good purchases and satisfy their personal or organizational objectives. Both markets use similar buying processes that include stages associated with need identification, information search, and product evaluation. Finally, both processes focus on customer satisfaction as the desired outcome. However, business markets differ from consumer markets in important ways. One of the most important differences involves the consumption of the purchased products. Consumers buy products for their personal use or consumption. In contrast, organizational buyers purchase products for use in their operations. These uses can be direct, as in acquiring raw materials to produce finished goods; or indirect, as in buying office supplies or leasing cars for salespeople. There are four types of business markets
As we shift our attention to buyer behavior in business markets, keep in mind that business markets and consumer markets have many things in common. Both contain buyers and sellers who seek to make good purchases and satisfy their personal or organizational objectives. Both markets use similar buying processes that include stages associated with need identification, information search, and product evaluation. Finally, both processes focus on customer satisfaction as the desired outcome. However, business markets differ from consumer markets in important ways. One of the most important differences involves the consumption of the purchased products. Consumers buy products for their personal use or consumption. In contrast, organizational buyers purchase products for use in their operations. These uses can be direct, as in acquiring raw materials to produce finished goods; or indirect, as in buying office supplies or leasing cars for salespeople. There are four types of business markets
- Commercial Markets. These markets buy raw materials for use in producing finished goods, and they buy facilitating goods and services used in the production of finished goods. Commercial markets include a variety of industries, such as aerospace, agriculture, mining, construction, transportation, communication, and utilitie
- Reseller Markets. These markets consist of channel intermediaries such as wholesalers, retailers, or brokers that buy finished goods from the producer market and resell them at a profit. As we will see in Chapter 6, channel intermediaries have the responsibility for creating the variety and assortment of products offered to consumers. Therefore, they wield a great deal of power in the supply chain
- Government Markets. These markets include federal, state, county, city, and local governments. Governments buy a wide range of finished goods ranging from aircraft carriers to fire trucks to office equipment. However, most government purchases are for the services provided to citizens, such as education, fire and police protection, maintenance and repair of roads, and water and sewage treatment.
- Institutional Markets. These markets consist of a diverse group of non-commercial organizations such as churches, charities, schools, hospitals, or professional organizations. These organizations primarily buy finished goods that facilitate their ongoing operations.
Unique Characteristics of Business Markets
Business markets differ from consumer markets in at least four ways. These differences concern the nature of the decision-making unit, the role of hard and soft costs in making and evaluating purchase decisions, reciprocal buying relationships, and the dependence of the two parties on each other. As a general rule, these differences are more acute for firms attempting to build long-term client relationships. In business markets, buying needed products at the lowest possible price is not necessarily the most important objective. Since many business transactions are based on long-term relationships, trust, reliability, and overall goal attainment are often much more important than the price of the product.
The Buying Center
Business markets differ from consumer markets in at least four ways. These differences concern the nature of the decision-making unit, the role of hard and soft costs in making and evaluating purchase decisions, reciprocal buying relationships, and the dependence of the two parties on each other. As a general rule, these differences are more acute for firms attempting to build long-term client relationships. In business markets, buying needed products at the lowest possible price is not necessarily the most important objective. Since many business transactions are based on long-term relationships, trust, reliability, and overall goal attainment are often much more important than the price of the product.
The Buying Center
The first key difference relates to the role of the buying center the group of people responsible for making purchase decisions. In consumer markets, the buying center is fairly straightforward: The adult head-of-household tends to make most major purchase decisions for the family, with input and assistance from children and other family members as applicable. In an organization, however, the buying center tends to be much more complex and difficult to identify, in part because it may include three distinct groups of people economic buyers, technical buyers, and users each of which may have its own agenda and unique needs that affect the buying decision.
Any effort to build a relationship between the selling and buying organization must include economic buyers those senior managers with the overall responsibility of achieving the buying firm’s objectives. In recent years, economic buyers have become increasingly influential as price has become less important in determining a product’s true value to the buying firm. This has made economic buyers a greater target for promotional activities. Technical buyers employees with the responsibility of buying products to meet needs on an ongoing basis include purchasing agents and materials managers. These buyers have the responsibility of narrowing the number of product options and delivering buying recommendations to the economic buyer(s) that are within budget. Technical buyers are critical in the execution of purchase transactions and are also important to the day-to-day maintenance of long-term relationships. Users managers and employees who have the responsibility of using a product purchased by the firm comprise the last group of people in the buying center. The user is often not the ultimate decision maker, bu frequently has a place in the decision process, particularly in the case of technologically advanced products. For example, the head of information technology often has a major role in computer and IT purchase decisions.
Hard and Soft Costs
The second difference between business and consumer markets involves the significance of hard and soft costs. Consumers and organizations both consider hard costs, which include monetary price and associated purchase costs such as shipping and installation. Organizations, however, must also consider soft costs, such as downtime, opportunity costs, and human resource costs associated with the compatibility of systems, in the buying decision. The purchase and implementation of a new payroll system, for example, will decrease productivity and increase training costs in the payroll department until the new system has been fully integrated.
Reciprocity
The third key difference involves the existence of reciprocal buying relationships. With consumer purchases, the opportunity for buying and selling is usually a one-way street: The marketer sells and the consumer buys. Business marketing, however, is more often a two-way street, with each firm marketing products that the other firm buys. For example, a company may buy office supplies from another company that in turn buys copiers from the first firm. In fact, such arrangements can be an upfront condition of purchase in purely transaction-based marketing. Reciprocal buying is less likely to occur within long-term relationships unless it helps both parties achieve their respective goals.
Mutual Dependence
Finally, in business markets, the buyer and seller are more likely to be dependent on one another. For consumer–marketer relationships, this level of dependence tends to be low. If a store is out of a product, or a firm goes out of business, customers simply switch to another source to meet their needs. Likewise, the loss of a particular customer through brand switching, relocation, or death is unfortunate for a company, but not in itself particularly damaging. The only real exception to this norm is when consumers are loyal to a brand or merchant. In these cases, consumers become dependent on a single brand or merchant, and the firm can become dependent on the sales volume generated by these brand loyal consumers.
This is not the case in business markets where sole-source or limited-source buying may leave an organization’s operations severely distressed when a supplier shuts down or cannot deliver. The same is true for the loss of a customer. The selling firm has invested significantly in the client relationship, often modifying products and altering information or other systems central to the organization. Each client relationship represents a significant portion of the firm’s profit, and the loss of a single customer can take months or even years to replace. For example, after Rubbermaid’s relationships with Walmart, Lowe’s, and Home Depot soured in the mid-1990s, these retailers pulled Rubbermaid products from their shelves and turned to Sterilite, a small Massachusetts-based manufacturer, to supply plastic products (storage bins, containers, etc.) for their stores. Along with damaging Rubbermaid’s reputation and profits, the considerable buying power of Walmart, Lowe’s, and Home Depot turned Sterilite into a major competitor for Rubbermaid. Today, Sterilite is the world’s largest independent manufacturer of plastic housewares
Any effort to build a relationship between the selling and buying organization must include economic buyers those senior managers with the overall responsibility of achieving the buying firm’s objectives. In recent years, economic buyers have become increasingly influential as price has become less important in determining a product’s true value to the buying firm. This has made economic buyers a greater target for promotional activities. Technical buyers employees with the responsibility of buying products to meet needs on an ongoing basis include purchasing agents and materials managers. These buyers have the responsibility of narrowing the number of product options and delivering buying recommendations to the economic buyer(s) that are within budget. Technical buyers are critical in the execution of purchase transactions and are also important to the day-to-day maintenance of long-term relationships. Users managers and employees who have the responsibility of using a product purchased by the firm comprise the last group of people in the buying center. The user is often not the ultimate decision maker, bu frequently has a place in the decision process, particularly in the case of technologically advanced products. For example, the head of information technology often has a major role in computer and IT purchase decisions.
Hard and Soft Costs
The second difference between business and consumer markets involves the significance of hard and soft costs. Consumers and organizations both consider hard costs, which include monetary price and associated purchase costs such as shipping and installation. Organizations, however, must also consider soft costs, such as downtime, opportunity costs, and human resource costs associated with the compatibility of systems, in the buying decision. The purchase and implementation of a new payroll system, for example, will decrease productivity and increase training costs in the payroll department until the new system has been fully integrated.
Reciprocity
The third key difference involves the existence of reciprocal buying relationships. With consumer purchases, the opportunity for buying and selling is usually a one-way street: The marketer sells and the consumer buys. Business marketing, however, is more often a two-way street, with each firm marketing products that the other firm buys. For example, a company may buy office supplies from another company that in turn buys copiers from the first firm. In fact, such arrangements can be an upfront condition of purchase in purely transaction-based marketing. Reciprocal buying is less likely to occur within long-term relationships unless it helps both parties achieve their respective goals.
Mutual Dependence
Finally, in business markets, the buyer and seller are more likely to be dependent on one another. For consumer–marketer relationships, this level of dependence tends to be low. If a store is out of a product, or a firm goes out of business, customers simply switch to another source to meet their needs. Likewise, the loss of a particular customer through brand switching, relocation, or death is unfortunate for a company, but not in itself particularly damaging. The only real exception to this norm is when consumers are loyal to a brand or merchant. In these cases, consumers become dependent on a single brand or merchant, and the firm can become dependent on the sales volume generated by these brand loyal consumers.
This is not the case in business markets where sole-source or limited-source buying may leave an organization’s operations severely distressed when a supplier shuts down or cannot deliver. The same is true for the loss of a customer. The selling firm has invested significantly in the client relationship, often modifying products and altering information or other systems central to the organization. Each client relationship represents a significant portion of the firm’s profit, and the loss of a single customer can take months or even years to replace. For example, after Rubbermaid’s relationships with Walmart, Lowe’s, and Home Depot soured in the mid-1990s, these retailers pulled Rubbermaid products from their shelves and turned to Sterilite, a small Massachusetts-based manufacturer, to supply plastic products (storage bins, containers, etc.) for their stores. Along with damaging Rubbermaid’s reputation and profits, the considerable buying power of Walmart, Lowe’s, and Home Depot turned Sterilite into a major competitor for Rubbermaid. Today, Sterilite is the world’s largest independent manufacturer of plastic housewares
No comments:
Post a Comment