Business Market Behavior

1. Business Market Behavior Business-to-business market (B2B): individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations. Categories of organizational buyers: Producers: Individuals and business organizations that purchase products or services to make profits by using them to produce other products or using them in their operations. Ex. Buyers of raw materials, Purchasers of semi finished and finished items used to produce other products. - Producer markets include a broad array of industries ranging from agriculture, forestry, fisheries, and mining to construction, transportation, communications, and utilities.

2. Categories of organizational buyers (Cont’d) 2. Intermediaries: Intermediaries that buy finished goods and resell them for profit. Resellers make a minor alterations, but they don’t change the physical characteristics of the products they handle. Except for items producers sell directly to consumers. 3. Government Agencies: Federal, state, county, or local governments that buy goods and services to support their internal operations and provide products to their constituencies. 4. Other Institutions: Organizations with charitable, educational, community, or other non-business goals. Institutions purchase products with a significant amount of money annually to provide goods, services, and ideas to congregations, students, patients, and others. Hospitals, museums, universities, religious institutions, and other many non-profit organizations categorized under this type.

3. The Organizational Buying Process

4. Purchase-Type Influences • Based on the complexity of purchase, three types will be clarified: 1- Straight rebuy: is the simplest and the most common type. A routine purchase of the same products by a business buyer under approximately the same terms of sales. Buyers require little information for these routine purchase decision and tend to use familiar suppliers that have provided satisfactory service and products in the past. Marketers try to setup automatic recording systems to make recording easy and convenient for business buyers. A supplier may even monitor the business buyer’s inventories and indicate to the buyer what should be ordered and when (Just in time) inventory.

5. Purchase-Type Influences 2. Modified Rebuy: This type of purchase involves considering a limited number of alternatives before making a selection. This approach is followed when a routine purchase changes in some way; for example, a supplier discontinues a product or stops satisfying the customer, the price of a usual product rises, or a new product becomes available to meet the same need. 3. New task purchase: This type of purchase is most appropriate when buying products only occasionally, especially in the case of large investments such as machinery, equipment, and real state. Therefore, a new task purchase is time consuming and involves a relatively large number of decision makers, who may consider many alternatives. Decision makers need to: 1- Develop product specifications, 2-Vendor specifications, and 3-Procedures for future purchases of that product.

6. Structural influences Refers to the design of the organizational environment and how it affects the purchasing process. 1- Purchasing Roles: Its common in organizational buying for purchases to be made cross-functionally with representatives from different functional departments playing various roles in the process. Buying Center: The people within an organization who make business purchase decision. It is rarely to make a purchase decision by just one person. The buying center includes: Initiators, Users, Influencers, Buyers, Deciders, and Gatekeepers. One person may perform several roles.

7. Structural influences PURCAHSING ROLES: 1- Initiators: who start the purchasing process by recognizing a need or problem in the organization. 2- Users: Organization members who actually use the product acquired. They frequently initiate the purchase process and/or generate purchase specification. After the purchase, they evaluate product performance relative to the specifications. 3- Influencers:Technical personnel, such as engineers, who help develop the specifications and evaluate products. Technical personnel are especially important influencers when products being considered involve new, advanced technology. 4- Buyers:Select suppliers and negotiate terms of purchase. They may also become involved in developing specifications. They are called purchasing agents or purchasing managers. They play a major role in vendor selection and negotiations for straight re-buy purchase.

8. Structural influences 5- Deciders:People actually choose the products. Buyers may be deciders. For routinely purchased items, buyers are commonly deciders. In situations where making a purchase decision with amount exceeding a certain currency limit, a higher level management may be the deciders. 6- Gatekeepers:are secretaries and technical personnel, control the flow of information to and among people occupying other roles in the buying center. - A marketer attempting to sell to a business customer should determine 1)who is in the buying center, 2)the types of decisions each individual makes, and 3)which individuals are most influential in the decision process

9. Structural influences ORGANIZATION SPECIFIC FACTORS Orientation, Size, and Degree of centralization Orientation: The dominant function in an organization may control purchasing decision. Size: large company size is more likely to have a high degree of joint decision making for than other straight rebuys. Smaller one is more likely to have more autonomous decision making. Degree of centralization: influences whether decisions are made individually or jointly with others. PURCHASING POLICIES AND PROCEDURES Sole supplier V.S complicated require policies and procedures

10. Behavioral Influences PERSONAL MOTIVATION Friendship, Professional pride, Fear and Uncertainty (risk), Personal ambitions. PERSONAL PERCEPTIONS Organizational buyers’ perception of their role, their commitment to what they believe is expected of their role, the maturity of their role type, and the extent to which the institution is committed to the role type. Commitment refers to willingness to perform buyers job in the manner expected by the organization. Innovative firms: Individuals approach their occupational roles with a weak commitment to expected norms of behavior. Adaptive firm: there is a moderate commitment. Lethargic organization: individuals express a strong commitment to traditionally accepted behavior and behave accordingly (reducing conflict).

11. Stages in the organizational buying process 1- Organizational Need 2- Vendor Analysis. 3- Purchase Activities 4- Post-purchase Evaluation