Analyzing business markets and business buying behavior







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By: Agung Utama


What is organizational buying?

Organizational buying: decision making

process by which formal organizations


The characteristics of business


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, supplied to others.

The major industries making up business

markets are: agriculture, transportation, manufacturing, mining, construction,

communication, banking, finance,


Several characteristics of business markets:

Fewer buyer: the business markets normally

deals with far fewer buyers than the consumer marketer does.

Larger buyer : a few large buyers do most of the

purchasing in such industries as aircraft engines and defense weapons.

Close supplier-customer relationship : because

of the smaller customer base and importance of and the power of the larger customers, supplier are frequently expected to customize their


Geographically concentrated buyers: the

geographical concentration of producers helps to reduce selling cost.

Derived demand : the demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the

business marketer must closely monitor the buying patterns of ultimate consumer.

In elastic demand : the total demand for many business goods and services is in elastic

demand, that is not much affected by price

changes. Demand is especially in elastic in the short run because producers can not make


Fluctuating demand : the demand for many

business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the


Professional purchasing : business goods are

purchased by trained purchasing agents, who must follow their organization’s purchasing policies, constraints, and requirements.

Several buying influences: more people

typically influence business buying decisions. Buying committees consisting of technical

experts and even senior management are common in the purchase of major goods.

Multiple sale calls: because more people are

involved in the selling process, it takes


Direct purchasing: business buyers often buy

directly from manufacturers rather than

through intermediaries, especially items that are technically complex or expensive (such as mainframes or aircraft).

Reciprocity: business buyers often select

suppliers who also buy from them.

Leasing: many industrial buyers lease instead

of buy heavy equipment like machinery and trucks. The lessee gain a number of


Buying situations

There are three types of buying situations (Patrick

Robinson and others):

Straight rebuy: a buying situation in which the

purchasing department reorders on a routine basis (eg., office supplies).

Modified rebuy: a buying situation in which the buyer

wants to modify product specifications, prices, delivery requirements or other terms.

New task: a buying situation in which purchaser buys

a product or service for the first time (eg., office


Systems buying and selling

Many business buyers prefer to buy a total

solution to their problem from one seller. Called system buying.

This practice originated with government


Participants in the business

buying process

Who does the buying of goods and services

needed by business organizations?

Webster and Wind call the Buying Centre,


Seven roles which playing by the all members in the

buying center:

Initiator: those who request that something to be


Users: those who will use the product or service

Influencers: people who influence the buying decisions.Deciders: people who decide on product requirements

or on suppliers.

Approvers: people who authorize the proposed actions

of deciders or buyers

Buyers: people who have formal authority to select the

supplier and arrange the purchase terms.

Gatekeepers: people who have power to prevent sellers


Major influences on industrial

•Interest rate

•Rate of technological


•Political and regulatory development

•Competitive developments

•Organizational structures

•Job position


Environmental factors

Business buyers pay close attention to current

and expected economic factors: level of

production, investment, consumer spending, and the interest rate.

In a recession, business reduce their investment

in plant, equipment, and inventories.

Business buyers actively monitor technological,

political regulatory, and competitive developments.

Organizational factors

Every organization has specific purchasing


Interpersonal and individual factors

Buying centers usually include several

participants with differing interest, authority, status, empathy, and persuasiveness.

Each buyer caries personal motivations,

perceptions, and preferences, which are influenced by the buyers age, income,


Cultural factors

Here are some rules of social and business etiquette

that marketers should understand when doing business in other countries:

France: if you do not speak french, apologize for your lack of

knowledge. The french are quite proud of their language and believe that everyone should feel privileged to speak it.

Germany: Germans are sticklers for titles. Try to introduce

people using their full, correct title, no matter how long it is.

Japan: Most Japanese businesspeople know what will be

discussed at a meeting, how everyone feels about it, and how it will affect their business before they even get there

Korea: Korean do not like foreigners to assume that their


Types of Purchasing Process

Peter Krajic distinguished four product related purchasing


1. Routine product: these product have low value and cost to the customer and involve little risk (office supplies) 2. Leverage product: these products have high value and

cost to the customer but involve little risk of supply

because many companies make them (engines pistons) 3. Strategic products : these products have high value and

cost to the customer, and also involve high risk (main frame computers)


The purchasing/procurement


Stages in the buying process

Problem recognition

General needs description and product


Supplier search

Proposal solicitationsSupplier selection