Chap7 Analyzing business markets PDF

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Chapter 7. Analyzing business markets Organizational Buying Business Market characteristics vs. Consumer Market Business market: Fewer buyers, larger buyers, geographically concentrated buyers, close supplier-customer relationship, inelastic demand, derived demand, fluctuating demand, several buying...

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Chapter 7. Analyzing business markets Organizational Buying Business Market characteristics vs. Consumer Market Business market: Fewer buyers, larger buyers, geographically concentrated buyers, close supplier-customer relationship, inelastic demand, derived demand, fluctuating demand, several buying influences, professional purchasing, multiple sales calls (takes long to finalize a sale), direct purchasing (as opposed to through intermediaries), leasing, reciprocity. Three buying situations:  Straight rebuy: when a consumer buys routinely.  Modified rebuy: when the consumer wants to modify product specifications, prices.  New Task: when the purchaser buys a product/service for the first time. Participants in the Business Buying Process The buying center – consists of all those people and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions. There are seven roles group members can play in an buying decision: Initiators, users, influencers, deciders, approvers, buyers, and gatekeepers. The Purchasing/Procurement Process Companies have different purchasing orientations than individuals:  Buying Orientation: Focus on lowest price at a given quality level. The buyer’s Tactics can be of commodization: where the product is viewed as a commodity thus only price matters, or of multisourcing: where the suppliers are allowed to compete for their purchases.  Procurement Orientation: Focus on cost reductions, quality improvements, improved relations with supplier. (e.g. through longer term contracts, MRP)  Supply Chain Management: Focus on improving the entire value chain.  The Purchasing process varies according to different products:  Routine products: products with low prices and low value. Suppliers can offer blanket offers and facilities management.  Leverage products: products with high cost, high value and whith many sources for supply. Supplier can show own product as total cost minimizer.  Strategic products: products with high cost, high value and they involves risk. Supplier can work on strategic alliances  co-development programs, co-investment.  Bottleneck products: low cost, low value, involves risk. Supplier can decrease uncertainty by offering help desk, offer tracking system, deliver-demand. Stages in the Buying Process: Stage1: problem recognition, 2: the general need description and product specification, 3: search for supplier, 4: proposal solicitation, 5: selection of the supplier, 6: order routine specification, and finally the 7: performance review.  Product value analysis, PVA, can help determine the required quantity and the general characteristics of the needed item(Step 2), since it is an approach to cost reduction in which components are studied to determine if they can be standardized or redesigned or made by cheaper methods of production.  Vertical Hubs and Functional Hubs – these are e-hubs that help search for customers. (Step 3)  E-procurement ways: 1. Direct extranet links to major suppliers, 2: Buying alliances, 3: Company buying sites.

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Customer value assessment, CVA – these are methods to assess customer value. Blanket contract (a.k.a stockless purchase plans)– bind a long term buyer-supplier relationship to: resupply buyer as needed, at agreed upon prices, over a specified period of time.  Buy flow map – helps the marketer that specifies which buying company personnel is involved at which stage of the purchasing process. The Procurement Process from the Suppliers Point of View (Job of Marketers): 1. Stimulate problem recognition; direct mail, telemarketing, calling on prospects. 2. Use PVA as a tool to make themselves more attractive. 3. Get listed in major online catalogs or services, strong ad. And promotion program, build a reputation. 4. Describe value and benefits in customer terms in marketing documents, work on oral presentations. 5. Maintain satisfaction high. 6. Monitor the same variables that are monitored by the product’s buyers and end users. Institutional and Government Markets Major buyers of goods and services: A. Institutional market – consists of hospitals, nursing homes, schools, prisons, and other institutions that are obligated provide goods and services to people in their care.  Companies produce, package, and price their products depending to meet these institutions’ particular requirements, because they can generate large income. B. Government organizations – are also major buyers. For suppliers:  Much paperwork is involved, favor domestic suppliers.  Must prepare bids carefully, since open bids are preferred by governments  The feature of certainty motivates suppliers to try and sell to government organizations (no check bounces, loyalty (repeated business)).  Market orientation is generally not used for selling to governments. Advertising and personal are not very effective, because government focuses on lower costs....