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In
one way or another, most large companies sell to other organizations.
Many companies, such as DuPont, Boeing, Cisco Systems, Caterpillar, and
countless other firms, sell most of their products to other
businesses. Even large consumer-products companies, which make products
used by final consumers, must first sell their products to other
businesses. For example, General Mills makes many familiar consumer
products—Cheerios, Betty Crocker cake mixes, Gold Medal flour, and
others. But to sell these products to consumers, General Mills must
first sell them to the wholesalers and retailers that serve the
consumer market.
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Business buyer behavior
refers to the buying behavior of the organizations that buy goods and
services for use in the production of other products and services that
are sold, rented, or supplied to others. It also includes the behavior
of retailing and wholesaling firms that acquire goods for the purpose
of reselling or renting them to others at a profit. In the business buying process,
business buyers determine which products and services their
organizations need to purchase, and then find, evaluate, and choose
among alternative suppliers and brands. Companies that sell to other
business organizations must do their best to understand business
markets and business buyer behavior.
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Business MarketsComments by Dr. Laukamm
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The business market is huge.
In fact, business markets involve far more dollars and items than do
consumer markets. For example, think about the large number of business
transactions involved in the production and sale of a single set of
Goodyear tires. Various suppliers sell Goodyear the rubber, steel,
equipment, and other goods that it needs to produce the tires. Goodyear
then sells the finished tires to retailers, who in turn sell them to
consumers. Thus, many sets of business purchases were made for only one set of consumer
purchases. In addition, Goodyear sells tires as original equipment to
manufacturers who install them on new vehicles, and as replacement
tires to companies that maintain their own fleets of company cars,
trucks, buses, or other vehicles.
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CHARACTERISTICS OF BUSINESS MARKETSComments by Dr. Laukamm
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In
some ways, business markets are similar to consumer markets. Both
involve people who assume buying roles and make purchase decisions to
satisfy needs. However, business markets differ in many ways from
consumer markets. The main differences, shown in Table 7.1 and
discussed below, are in market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.
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Market Structure and DemandComments by Dr. Laukamm
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The business marketer normally deals with far fewer but far larger buyers
than the consumer marketer does. For example, when Goodyear sells
replacement tires to final consumers, its potential market includes the
owners of the millions of cars currently in use in the United States.
But Goodyear's fate in the business market depends on getting orders
from one of only a handful of large automakers. Even in large business
markets, a few buyers often account for most of the purchasing.
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Business markets are also more geographically concentrated.
More than half the nation's business buyers are concentrated in eight
states: California, New York, Ohio, Illinois, Michigan, Texas,
Pennsylvania, and New Jersey. Further, business demand is derived demand—it
ultimately derives from the demand for consumer goods. General Motors
buys steel because consumers buy cars. If consumer demand for cars
drops, so will the demand for steel and all the other products used to
make cars. Therefore, business marketers sometimes promote their
products directly to final consumers to increase business demand.
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For
example, Intel's long-running "Intel Inside" advertising campaign sells
personal computer buyers on the virtues of Intel microprocessors. The
increased demand for Intel chips boosts demand for the PCs containing
them, and both Intel and its business partners win. Similarly, DuPont
promotes Teflon directly to final consumers as a key ingredient in many
products—from nonstick cookware to stain-repellent, wrinkle-free
clothing. You see Teflon Fabric Protector hangtags on clothing lines
such as Levi's Dockers, Donna Karan's menswear, and Ralph Lauren denim.2 By making Teflon familiar and attractive to final buyers, DuPont also makes the products containing it more attractive.
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Many business markets have inelastic demand;
that is, total demand for many business products is not affected much
by price changes, especially in the short run. A drop in the price of
leather will not cause shoe manufacturers to buy much more leather
unless it results in lower shoe prices that, in turn, will increase
consumer demand for shoes.
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Finally, business markets have more fluctuating demand.
The demand for many business goods and services tends to change
more—and more quickly—than the demand for consumer goods and services
does. A small percentage increase in consumer demand can cause large
increases in business demand. Sometimes a rise of only 10 percent in
consumer demand can cause as much as a 200 percent rise in business
demand during the next period.
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Nature of the Buying UnitComments by Dr. Laukamm
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Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort.
Often, business buying is done by trained purchasing agents who spend
their working lives learning how to buy better. The more complex the
purchase, the more likely that several people will participate in the
decision-making process. Buying committees made up of technical experts
and top management are common in the buying of major goods. As one
observer notes, "It's a scary thought: Your customers may know more
about your company and products than you do. . . . Companies are
putting their best and brightest people on procurement patrol."3 Therefore, business marketers must have well-trained salespeople to deal with well-trained buyers.
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Types of Decisions and the Decision ProcessComments by Dr. Laukamm
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Business buyers usually face more complex
buying decisions than do consumer buyers. Purchases often involve large
sums of money, complex technical and economic considerations, and
interactions among many people at many levels of the buyer's
organization. Because the purchases are more complex, business buyers
may take longer to make their decisions. The business buying process
also tends to be more formalized than the consumer buying
process. Large business purchases usually call for detailed product
specifications, written purchase orders, careful supplier searches, and
formal approval.
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Finally, in the business buying process, buyer and seller are often much more dependent
on each other. Consumer marketers are often at a distance from their
customers. In contrast, B2B marketers may roll up their sleeves and
work closely with their customers during all stages of the buying
process—from helping customers define problems, to finding solutions,
to supporting after-sale operation. They often customize their
offerings to individual customer needs.
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In
the short run, sales go to suppliers who meet buyers' immediate product
and service needs. However, business marketers also must build close long-run
partnerships with customers. In recent years, relationships between
customers and suppliers have been changing from downright adversarial
to close and chummy. In fact, many customer companies are now
practicing supplier relationship management, developing a
core of suppliers and working closely with them. For example,
Caterpillar no longer calls its buyers "purchasing agents"—they are
managers of "purchasing and supplier development." Says one purchasing
expert, "You no longer treat your supplier as a ‘supplier' but as an
extension of your business." Consider this example:
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Motoman, a leading supplier of industry robotic systems, and Stillwater Technologies, a contract tooling and machinery company and a key supplier to Motoman, are tightly integrated. Not only do they occupy office and manufacturing space in the same facility, they also link their telephone and computer systems and share a common lobby, conference room, and employee cafeteria. Philip Morrison, chairman and CEO of Motoman, says it's like "a joint venture without the paperwork." Short delivery distances are just one benefit of the unusual partnership. Also key is the fact that employees of both companies have ready access to each other and can share ideas on improving quality and reducing costs. This close relationship has also opened the door to new opportunities. Both companies had been doing work for Honda Motor Company, and Honda suggested that the two work together on systems projects. The symbiotic relationship makes the two bigger and better than they could be individually.4 Comments by Dr. Laukamm
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In the long run, business marketers keep a customer's sales by meeting current needs and
by partnering with customers to help them solve their problems. This is
true for marketers in small as well as large businesses. For example,
small industrial detergent maker ChemStation does more than simply
supply its customers with cleaning chemicals. It works closely with
them to custom-design total solutions to their unique cleaning
problems. "Our customers . . . oftentimes think of us as more of a
partner than a supplier," says the company's newsletter.5
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A Model of Business Buyer BehaviorComments by Dr. Laukamm
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At
the most basic level, marketers want to know how business buyers will
respond to various marketing stimuli. Figure 7.1 shows a model of
business buyer behavior. In this model, marketing and other stimuli
affect the buying organization and produce certain buyer responses. As
with consumer buying, the marketing stimuli for business buying consist
of the four Ps: product, price, place, and promotion. Other
stimuli include major forces in the environment: economic,
technological, political, cultural, and competitive. These stimuli
enter the organization and are turned into buyer responses: product or
service choice; supplier choice; order quantities; and delivery,
service, and payment terms. In order to design good marketing-mix
strategies, the marketer must understand what happens within the
organization to turn stimuli into purchase responses.
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Within
the organization, buying activity consists of two major parts: the
buying center, made up of all the people involved in the buying
decision, and the buying-decision process. The model shows that the
buying center and the buying-decision process are influenced by
internal organizational, interpersonal, and individual factors as well
as by external environmental factors.
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