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Chapter 6-8 Marketing

Business buyer behavior
refers to the buying behavior of the organizations that buy goods and services for use in production of other products and services that are sold, rented, or supplied to others.
Business buying process
the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands
Business Market Characteristics
Fewer and larger buyers
Geographic concentration
Derived demand
Inelastic demand
Fluctuating demand
Buyer and seller dependency
More decision participants
More professional/knowledgeable purchasing effort
Derived Demand
Business demand that ultimately comes from (derives from) the demand for consumer goods.
Inelastic demand
the total demand for many business products is not much affected by price changes, especially in the short run
Fluctuating demand
The demand for many business goods and services tends to change more—and more quickly— than the demand for consumer goods and services does.

Example: A small percentage increase in consumer demand can cause large increases in business demand.

Short run
sales go to suppliers who meet buyers’ immediate product and service needs.
Long run
business-to-business marketers keep a customer’s sales and create customer value by meeting current needs and by partnering with customers to help them solve their problems.
Major types of buying situations
– Straight rebuy (Buyer makes fewest decisions)
– Modified rebuy
– New task (Buyer makes most decisions)
– Systems selling
Straight rebuy
A business buying situation in which the buyer routinely reorders something without any modifications. Buyer makes fewest decisions.
Modified rebuy
A business buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers.
New task
A business buying situation in which the buyer purchases a product or service for the first time.
Systems selling (solutions selling)
Buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation. Key business strategy for winning and holding accounts.
Users
are members of the organization who will use the product or service. In many cases, users initiate the buying proposal and help define product specifications.
Influencers
People in an organization’s buying center who affect the buying decision; they often help define specifications and also provide information for evaluating alternatives.Technical personnel are particularly important influencers.
Buyers
People in an organization’s buying center who make an actual purchase. Buyers may help shape product specifications, but their major role is in selecting vendors and negotiating.
Deciders
People in an organization’s buying center who have formal or informal power to select or approve the final suppliers. (buyers are often the deciders)
Gatekeepers
People in an organization’s buying center who control the flow of information to others.
Buying center
All the individuals and units that play a role in the purchase decision-making process.
– actual users of the product/service
– those making buying decisions
– those controlling buying info
– those influencing buying decisions
– those doing actual buying

Roles: Users, Influencers, Buyers, Deciders, Gatekeepers

Influences on Business buyers
Environmental
Organization
Interpersonal
Individual
Environmental factors
– The economy (demand, cost of money, economic outlook
– Supply conditions (buy/hold larger inventories)
– Technology
– Culture and Customs
– Politics/Regulation
– Competition
Organizational Factors
Each buying organization has its own objectives, strategies, structure, systems, and procedures
– how many people involved in the buying decision?
– who are they?
– what are their evaluation criterias?
– Company’s policies and limits?
Interpersonal Factors
The buying center usually includes many participants who influence each other.
– Participants may influence the buying decision because they control rewards and punishments, are well liked, have special expertise, or have a special relationship with other important participants.
Individual Factors
Personal motives, perceptions, and preferences
– Individual factors are affected by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk.
– buyers have different buying styles
1. Problem Recognition
The first stage of the business buying process in which someone in the company recognizes a problem or need that can be met by acquiring a good or a service.
2. General need description
The stage in the business buying process in which a buyer describes the general characteristics and quantity of a needed item.

(In this phase, the alert business marketer can help the buyers define their needs and provide information about the value of different product characteristics.)

3. Product specification
The stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item. Team decides the best product characteristics and specifies them accordingly.

Product value analysis: is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.

4. Supplier Search
The stage of the business buying process in which the buyer tries to find the best vendors.
5. Proposal solicitation
The stage of the business buying process in which the buyer invites qualified suppliers to submit proposals.
6. Supplier selection
The stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers.
7. Order-routine specification
The stage of the business buying process in which the buyer writes the final order with the chosen supplier(s), listing the technical specifications, quantity needed, expected time of delivery, return policies, and warranties.
8. Performance review
The stage of the business buying process in which the buyer assesses the performance of the supplier and decides to continue, modify, or drop the arrangement.
Institutional Markets
consist of schools, hospitals, nursing homes, and prisons that provide goods and services to people in their care

Characteristics:
– low budget
– “captive” audience

Government Markets
Government units – consist of town/city, county, state, federal, and international governments

– Tend to require suppliers to submit bids and normally award to the lowest bidder

non-economic factors:
– minority suppliers
– depressed suppliers
– small businesses
– other exceptions

E-procurement
Purchasing through electronic connections between buyers and sellers— usually online (buying on internet)

Reverse auctions – put their purchasing request online and invite suppliers to bid for the business

Trading exchanges – companies work collectively to facilitate the trading process

company buying sites

Advantages: speeds ordering process, service/support, sales, lower cost, access to new suppliers, shares information

Disadvantages: security, erode relationships

Total Quality Management Approach (TQM)
– Emphasizes teamwork, empowerment, statistical analysis, quality (meeting customer requirements)
– Reduced number of suppliers
– Supplier development
Expanded role of procurement
Involvement in professional services purchasing
– Anecdote: RSMEC – WEC project
– Withheld payment and then asked for donations!
Request for Proposal
solicitation made often through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals.

Standard way of buying
SUNY Geneseo

Implications for marketing of the RFP process:
– Establish favorable impressions
– Get on bid list
– Skills required
—>Attention to detail
—>Organization skills
—>Coordinate activities of others in organization

Four steps in designing a customer-driven marketing strategy
1. Market segmentation (selecting customers)
2. Market targeting (selecting customers)
3. Differentiation (value prop)
4. Positioning (value prop)
Market segmentation
Dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes.
Geographic segmentation
Dividing a market into different geographical units, such as nations, states, regions, counties, cities, or even neighborhoods.
Demographic segmentation
Dividing the market into segments based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.
Age and life-cycle segmentation
Dividing a market into different age and life-cycle groups.
Gender segmentation
Dividing a market into different segments based on gender.
Income segmentation
Dividing a market into different income segments.
Behavioral segmentation
Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product.
– occasion, benefit, user status, usage rate, loyalty status
Occasion segmentation
Dividing the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item.
Benefit segmentation
Dividing the market into segments according to the different benefits that consumers seek from the product.
Psychographic segmentation
Dividing a market into different segments based on social class, lifestyle, or personality characteristics.
Intermarket segmentation (cross-market segmentation)
Forming segments of consumers who have similar needs and buying behavior even though they are located in different countries.
Geodemographic segmentation
example of multivariable segmentation that divides groups into consumer lifestyle patterns
Multiple segmentation
used to identify smaller, better-defined target groups Acxiom life stages
Requirements for effective segmentation
– Measurable (size and purchasing power of segment)
– Accessible (segment can be reached and served)
– Substantial (profitability)
– Differentiable (segment is distinguishable)
– Actionable (effective programs can be designed for attracting and serving the segment)
Market targeting (targeting)
The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

developing marketing programs and products tailored to each segment.

Most important because you need to define and focus on a market. It makes you realize in order to be competitive, you need to select a segment.

Target Market
A set of buyers sharing common needs or characteristics that the company decides to serve.
Targeting strategies
1. Undifferentiated (mass) marketing
2. Differentiated (segmented) marketing
3. Concentrated (niche) marketing
4. Micromarketing (local or individual) marketing
Choosing a Targeting Strategy
– company resources
– product variability (design)
– product life-cycle stage (version launched)
– market variability
-competitor’s marketing strategies (when competitors use differentiated marketing, undifferentiated marketing can be suicidal)
Undifferentiated (mass) Marketing
A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.

-mass marketing
-focus on what is common in needs of consumers

Differentiated (segmented) marketing
A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each.

-goal to achieve higher sales and stronger position
– increases cost of doing business, extra marketing research, forecasting, sales analysis
-more expensive than undifferentiated marketing

Concentrated (niche) marketing
A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches.

-limited company resources
-knowledge of market
-more effective & efficient

It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments.

It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

ex. Whole Foods target the wealthy who wants to eat healthy

Micromarketing (local or individual) marketing
Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; It includes local marketing and individual marketing.
Differentiation
Differentiating the market offering to create superior customer value.
Positioning
Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.
Product’s Position
The way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products.
(how marketer wants the product to be seen)

ex. Ipad as the “third device”

Choosing a differentiation and positioning strategy
– identifying a set of possible competitive advantages to build a position
– choosing the right competitive advantages
– selecting an overall positioning strategy
Then must effectively communicate and deliver the chosen position to the market
–> develop a positioning statement
—–> public IVY
—–> honors college

Choosing the position is often easier than implementing the position (tweaking product)

SUNY Geneseo
Marketing Mix:
Product – change courses to 4 credit class like private college
Price
Distribution
Market communication

Positioning statement
A statement that summarizes company or brand positioning. It takes this form: To (target segment and need) our (brand) is (concept) that (point of difference).
Competitive Advantage
An advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices.
Product
anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.

– also includes services, events, persons, places, organizations, ideas, etc

Service
form of product that consists of an activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything.

ex. banking, hotel services, airline travel, retail, wireless communication, home repair services

Levels of Products and Services
– Augmented product (warranty, product support, delivery and credit, aftersale service)
– Actual product (design, quality level, brand name, packaging, features)
– Core customer value (most basic level)
Consumer product
A product bought by final consumers for personal consumption.
Convenience product
A consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort.
Shopping product
A consumer product that the customer, in the process of selecting and purchasing, usually compares on such attributes as suitability, quality, price, and style.
Specialty product
A consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.

**Marketers want their products to be specialty – consumers are loyal to them**

Unsought product
A consumer product that the consumer either does not know about or knows about but does not normally consider buying.
Industrial product
A product bought by individuals and organizations for further processing or for use in conducting a business.

– raw material, repair/maintenance items

Organization marketing
consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization
People marketing
consists of activities under- taken to create, maintain, or change attitudes or behavior toward particular people.
Place marketing
involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. Cities, states, regions, and even entire nations compete to attract tourists, new residents, conventions, and company offices and factories.
Idea marketing
social ideas: defined by the Social Marketing Institute (SMI) as the use of commercial marketing concepts and tools in pro- grams designed to bring about social change

-public health campaigns

Product line
A group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.
Product mix (product portfolio
The set of all product lines and items that a particular seller offers for sale
Product line width
number of product lines
Product line length
number of items in all product lines
Product line depth
depth is the number of items in an individual product line
–line stretching
–line filling
Individual product and services decisions
1. product attribute
2. branding
3. packaging
4. labeling
5. product support services
1. Product attribute
– Product quality: The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs.
– Total quality management (TQM) is an approach in which all of the company’s people are involved in constantly improving the quality of products, services, and business processes.

-quality level, performance quality

-product features
-product style and design

2. Branding
A name, term, sign, symbol, design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.

-brand equity is the differential effect that the brand name has on customer response to the product and its marketing

“perhaps the most distinctive skill of professional marketers is their ability to build and manage brands.”

3. Packaging
The activities of designing and producing the container or wrapper for a product
4. Labeling
identifying the product or brand, describe attributes, and provide promotion

– promoting the brand, connect with customers, etc.

Branding strategy
1. brand positioning
2. brand name selection
3. brand sponsorship
4. brand development
Internal marketing (for service firms)
means that the service firm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction

internal marketing must precede external marketing

Interactive marketing (for service firms)
means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter
— service differentiation
— service quality
— service productivity
Marketing service differentiation
creates a competitive advantage from the offer, delivery, and image of the service

-offer can include distinctive features
-delivery can include more able and reliable customer contact people, environment, or process
-image can include symbols and branding

Marketing service differentiation
creates a competitive advantage from the offer, delivery, and image of the service

-offer can include distinctive features
-delivery can include more able and reliable customer contact people, environment, or process

Service variability
The quality of services may vary greatly depending on who provides them and when, where, and how.
Service perishability
Services cannot be stored for later sale or use.
Marketing service differentiation
Marketing service quality
provides competitive advantage by delivering consistently higher quality than its competitors

service quality always varies depending on interactions between employees and customers

Service variability
The quality of services may vary greatly depending on who provides them and when, where, and how.
Service perishability
Services cannot be stored for later sale or use.
Service intangibility
Services cannot be seen, tasted, felt, heard, or smelled before they are bought.

ex. cosmetic surgery

Service variability
The quality of services may vary greatly depending on who provides them and when, where, and how.
Service perishability
Services cannot be stored for later sale or use.
Service inseparability
Services are produced and consumed at the same time and cannot be separated from their providers.

ex. employee provides the service

Service variability
The quality of services may vary greatly depending on who provides them and when, where, and how.
Service perishability
Services cannot be stored for later sale or use.
Service variability

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