Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata 6–16–1 Chapter

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix

Slides prepared by: Joe Rosagrata

6–1

Chapter 6

Understanding the Business Market



6–2

The business market

• Business buyers are defined as organisations that buy goods and services for:– Making other goods and services.– Reselling to other business users or to

consumers.– Conducting the organisation’s

operations.



6–3

The five business market segments

1 The agriculture market.

2 The reseller market.

3 The government market.

4 The services market.

5 The non-business, business market.



6–4

Business-market segments

• Agribusiness– High value of agricultural commodities

produced and sold.– Proportion of farmers decreasing.– Increase in large corporate farms.– As farms become fewer, larger and more

sophisticated, manufacturers must change their distribution and promotion strategies to reach the farm market effectively.



6–5

Agribusiness markets

• The agriculture market, farming, food processing, and other farming-related businesses.

• Quick to adopt the Internet.• Large buyers of spare parts and repair

services who prefer to deal through local dealers.

• High degree of specialisation in the farming sector.



6–6

Reseller market

• The reseller market consists of firms that buy products from suppliers and resell these items essentially in the same form.

• Buy goods and services for use in operating their business.



6–7

Government markets

• The government market—all commonwealth, State and local units buying for government institutions such as schools, offices, hospitals and military establishments.

• Sellers to governments must understand the ‘tender system’.

• Slow decision-making process.• Decision maker may not be the person making the

purchase decision or approving the contract.



6–8

Business services markets

• Services outnumber producers of tangible goods.

• Business services markets include:– Transport and goods and handling firms.– Public utilities.– Financial, insurance and real estate.– Entertainment, repairs and personal

care.



6–9

Non-business ‘business’ market

• The non-business ‘business’ market—non-profit organisations such as churches, colleges, universities, museums, hospitals and other health institutions.

• These groups of organisations still conduct marketing campaigns to attract consumers for the purpose of sponsorship, donations or assistance for worthwhile causes.

• E.g. Red Cross appeal.



6–10

Characteristics of business market demand

• Demand is derived from the demand for the ultimate consumer products in which the business product is finally used (e.g. steel).

• In the short run demand is inelastic, that is demand for a product responds very little to changes in price.

Copyright © 1997 by The McGraw-Hill Companies, Inc.



6–11

Characteristics of business market demand

• Demand is widely fluctuating, meaning that demand for most classes of business goods fluctuates considerably more than the demand for consumer products.

• Buyers are well informed and know the relative merits of alternative sources of supply and competitive products.



6–12

Influences on business-market demand

• The number and types of potential business users.

• Users’ buying power.• Users’ buying motives and habits.



6–13


• Small number of BMs.• BMs have larger purchasing power and

buy in quantity.• BMs are concentrated.• Sellers deal direct with business users.



6–14


• BMs are usually regionally concentrated.• BMs can be vertically or horizontally

concentrated. • BM’s buying motives are rational and

purchase is methodical and objective.



6–15

Business buying behaviour

• Problem recognition—someone in the firm recognises that the firm has a need for a product.

• Gathering information—deciding on the specifications for the product to satisfy the need and identifying alternatives.



6–16

Business buying behaviour

• Evaluation of alternatives—considering such factors as product performance, price, delivery, quality and also suppliers’ ability to meet commitments.

• Purchase decision—buyer decides on a specific brand, model and supplier.

• Post-purchase behaviour—buyer continues to evaluate the performance of the productand supplier.



6–17

Types of buying situations

• New-task buy• New purchase or product category.• More people involved in new purchase.• Extensive information must be collected

and evaluation done on alternative products.

• Seller displays creative selling ability in satisfying buyer needs.



6–18


• Straight re-buy• Information needs are minimal.• There is no great consideration of

alternatives.• Buying decision made in the purchasing

department.• E.g. purchasing of office supplies.



6–19


• Modified re-buy• A situation in which the buyer

wants to change (modify) the product specifications, price, terms or suppliers.



6–20

Multiple buying influences, the buying centre

• Users—people who actually use the good or service.• Influencers—people who set the specifications of, and help

determine aspects of the buying decision because of their expertise, financial position or political power.

• Deciders—people who make the actual buying decision regarding the product and supplier.

• Gatekeepers—people who control the flow of purchasing information within the organisation, as well as between the firm and potential vendors.

• Buyers—people who select the suppliers, arrange the terms of the sale and process the actual purchase orders.



6–21

Buying patterns of business users

• Direct purchase.• Frequency of purchases.• Size of order.• Length of negotiated period.• Reciprocity arrangements.• Service expectations.• Dependability of supply.• Leasing instead of buying.



6–22

Importance of relationships in business markets

• Selling and buying decisions dependent on both parties and based on relationship.

• Buying firms may be dominant in business relationships.

• Buyer and seller relationships are usually long term.



6–23

Building business trust

• Heart share—A measure of how customers feel about the firm.

• Mind share—A measure of how customers think about a firm.

• Business share—The proportion of product supplied to firms in the market.

• Barriers to entry and exit through building strong business relationships.

Documents

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata 6–16–1 Chapter