Analysing Business Markets

What is Organizational Buying?

Organizational buying refers to 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 Vs Consumer Market

Fewer, larger buyers Close supplier-customer relationship Professional purchasing Multiple buying influencers Multiple sales calls Derived demand Inelastic demand Fluctuating demand Geographically concentrated buyers Direct purchasing

Buying Situations
Straight rebuy- is when the purchasing department reorders on a routine basis and chooses from suppliers on an approved lists. Modified rebuy- is when the buyer wants to modify product specifications, prices, delivery requirements, or other items. New Task- is when the purchaser buys a product or service for the first time.

Systems Buying and Selling

Turnkey solution desired; bids solicited System subcomponents assembled

Prime contractors

Second-tier contractors

Business Buying Process

1) The Buying Center Initiators Users Influencers Deciders Approvers Buyers Gatekeepers 2) Buying Center Influences 3) Buying Center Targeting

Purchasing/Procurement ProcessBusiness buyers seek to obtain the highest benefit package (economic, technical, services, and social) in relation to a market offerings costs.
1) Purchase Department Perceptions Todays purchasing departments are more strategically orientated and have a mission to seek the best value from fewer and better suppliers. 2) Purchasing Organization and Administration The upgrading of purchasing means that business marketers must upgrade their sales personnel to match the high caliber of the business buyer. A) Most purchasing professionals describe their jobs as more strategic, technical, team-orientated, and involving more responsibility than ever before. B) In multi-divisional companies, most purchasing is carried out by separate divisions

Stages in Buying Process

1) Problem Recognition 2) General Need Description & 3) Product Specification 4) Supplier Search Catalog sites Vertical Markets Pure Play Auction sites Spot or Exchange market Private exchanges Barter markets Buying alliances

Methods of e-Procurement
Websites organized using vertical hubs Websites organized using functional hubs Direct extranet links to major suppliers Buying alliances Company buying sites

5) Proposal solicitation 6) Supplier Selection 7) Order routine specification 8) Performance Review

MANAGING BUSINESS-TO-BUSINESS CUSTOMER RELATIONSHIPS

To improve effectiveness and efficiency, business suppliers and customers are exploring different ways to manage their relationships. Closer relationships are driven in part by supply chain management, early supplier involvement, and purchasing alliances.

The Benefits of Vertical Coordination Building trust between parties is often seen as one prerequisite to healthy long-term relationships. Knowledge that is specific and relevant to a relationship partner is also an important factor in the strength of interfirm ties between partners.

Research has found that buyer-supplier relationships differ according to four factors: A) Availability of alternatives B) Importance of supply C) Complexity of supply D) Supply market dynamism

Based in this research, they classify buyersupplier relationships into 8 categories: 1) Basic buying and selling 2) Bare bones 3) Contractual transactions 4) Customer supply 5) Cooperative systems 6) Collaborative 7) Mutually adaptive 8) Customer is King