Analyzing Business Markets

• Organizational buying


  The decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers
• 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, or supplied to others
• Systems buying originated with government purchases of major weapons and communications systems
• Systems selling


  A key industrial marketing strategy in bidding to build large-scale industrial projects such as dams, steel factories, irrigation systems, sanitation systems, pipelines, utilities, and even new towns
• Roles in the Purchase Decision Process

  • Initiators
  • Users
  • Influencers
  • Deciders
  • Approvers
  • Buyers
  • Gatekeepers
• Initiators


  Users or others in the organization who request that something be purchased
• Users


  Those who will use the product or service. In many cases, the users initiate the buying proposal and help define the product requirements
• Influencers


  People who influence the buying decision, often by helping define specifications and providing information for evaluating alternatives
• 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 the power to prevent sellers or information from reaching members of the buying center
• Buying centers


  Usually include several participants with differing interests, authority, status, and persuasiveness, and sometimes very different decision criteria
• Product value analysis


  An approach to cost reduction that studies whether components can be redesigned or standardized or made by cheaper methods of production without adversely impacting product performance
• Relevant Factors

  • availability of alternatives
  • importance of supply
  • complexity of supply
  • supply market dynamism
• Buyer-Supplier Relationships

  • Basic buying and selling
  • Bare bones
  • Contractual transaction
  • Customer supply
  • Cooperative systems
  • Collaborative
  • Mutually adaptive
  • Customer is king
• Basic buying and selling


  Simple, routine exchanges with moderate levels of cooperation and information exchange
• Bare bones


  Relationships require more adaptation by the seller and less cooperation and information exchange
• Contractual transaction


  Exchanges are defined by formal contract and generally have low levels of trust, cooperation, and interaction
• Customer supply


  In this traditional custom supply situation, competition rather than cooperation is the dominant form of governance
• Cooperative systems


  The partners are united in operational ways, but neither demonstrates structural commitment through legal means or adaptation
• Collaborative


  Much trust and commitment lead to true partnership
• Mutually adaptive


  Buyers and sellers make many relationship-specific adaptations, but without necessarily achieving strong trust or cooperation
• Customer is king


  In this close, cooperative relationship, the seller adapts to meet the customer's needs without expecting much adaptation or change in exchange
• Institutional market


  Consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care
• Business markets


  • Generally have fewer and larger buyers, a closer customer supplier relationship, and more geographically concentrated buyers
• Buying center


  The decision-making unit of a buying organization