Business Buyer Behavior & Product Issues
Business Buyer Behavior What are the three reasons businesses produce a product? Resale to others Direct use in the production of other products Consumed in the normal course of business
Business Buyer Behavior The Buying Decision Process has five stages: Problem Recognition Develop Product Specifications to Solve Problem Search & Evaluation Alternative Products and Suppliers Select both Product & Supplier, the Order Product Evaluate Product and Supplier Performance
Business Buyer Behavior What are the major Influences on the buying decision process?
Business Buyer Behavior What are the major Influences on the buying decision process? Environmental Organizational Interpersonal Individual
Business Buyer Behavior Producer Reseller The Government Institutional What are the four types of business markets?
Business Buyer Behavior Producer Markets Wide array of industries Highly concentrated Raw Materials Components
Business Buyer Behavior Reseller Markets Distribution Channels Wholesalers Retailers Touch the end-user Highly sensitive to market demand
Business Buyer Behavior Government Markets Federal, State, County and Local (city) Roughly 1/5 of total goods and services sold Complex purchasing process Often bid basis
Business Buyer Behavior Institutional Markets Education, Non-Profits, etc. Specialized or niche marketing Highly cost-sensitive
Business Buyer Behavior Important Aspects of the B-to-B Transaction Longer sales process, more complex Relationships more important, larger jury Key Product Attributes include: Quality Availability Service Price and Terms
Business Buyer Behavior Important Aspects of the B-to-B Transaction Different purchasing procedures - Sampling - Inspection - Description - Negotiation Understanding the Demand - Derived - Inelastic - Joint - Fluctuating
Product Issues
A Product Life Cycle Product category sales (real dollars) Profit/unit Sales Life cycle extension Profit per unit (real dollars) Introduction Growth Competitive turbulence Maturity Time (years) Decline or extension
Product Concepts What is a Product? Goods Services Ideas
Product Concepts What are the major Product categories? Consumer Products Business Products
Product Concepts Consumer Products Convenience Products Shopping Products Specialty Products Unsought Products
Product Concepts Business Products Installations Accessory Equipment Raw Materials Components Process Materials Maintenance, Repair & Operating (MRO) items
Key Product Definitions Product Item specific version of the product Product Line a collection of closely related product items that can be considered a unit Product Mix all the products that are sold Width the number of product lines offered Depth the average number of different products offered in each product line
Generalized Product Life Cycle Product category sales (real dollars) Profit/unit Sales Life cycle extension Profit per unit (real dollars) Introduction Growth Competitive turbulence Maturity Time (years) Decline or extension
Common Product Life-Cycle Curves Unit sales I. Growth-decline-plateau II. Cycle-recycle Unit sales Unit sales Time III. Innovative-maturity Unit sales Intro. IV. Classical Time Growth Maturity Decline Time Time
Expected Characteristics and Responses by Major Life-Cycle Stages Introduction Stage in Product Life Cycle Stage characteristics Firm s Normative Responses Market growth rate (constant dollars) Technical change in product design Moderate High Strategic marketing objectives Product Stimulate demand Quality Segments Few Product line Narrow Competitors Profitability Small Negative Price Channels Skimming vs. penetration Selective Communications High
Expected Characteristics and Responses by Major Life-Cycle Stages Growth Stage in Product Life Cycle Stage characteristics Firm s Normative Responses Market growth rate (constant dollars) Technical change in product design High Moderate Strategic marketing objectives Product Build share Continue to improve quality Segments Few to many Product line Broad Competitors Large Price Reduce Profitability High Channels Intensive Communications High
Expected Characteristics and Responses by Major Life-Cycle Stages Shakeout Stage in Product Life Cycle Stage characteristics Firm s Normative Responses Market growth rate (constant dollars) Technical change in product design Segments Competitors Profitability Leveling off Limited Few to many Decreasing Low Strategic marketing objectives Product Product line Price Channels Communications Build share Rationalize Rationalize Reduce Intensive High
Expected Characteristics and Responses by Major Life-Cycle Stages Mature Stage in Product Life Cycle Stage characteristics Firm s Normative Responses Market growth rate (constant dollars) Technical change in product design Segments Competitors Insignificant Limited Few to many Limited Strategic marketing objectives Product Product line Price Hold share Concentrate on features Hold length of line Hold or cut selectively Profitability High for Market share leaders Channels Communications Intensive High to declining
Expected Characteristics and Responses by Major Life-Cycle Stages Decline Stage in Product Life Cycle Stage characteristics Firm s Normative Responses Market growth rate (constant dollars) Technical change in product design Segments Competitors Profitability Negative Limited Few Few Low Strategic marketing objectives Product Product line Price Channels Communications Harvest No change Cut length of line Reduce Selective Reduce
Product Development & Management Line Extensions Most new products fall into this category - Closely related - Serve a niche - Lower risk - Less expensive to develop Aggressive tactic to capture more market share Can also cause cannibalization of core product
Product Development & Management Product Modifications Quality Functional Aesthetic
New Product Development Generate the ideas Screen for the good ones/eliminate the others Conduct concept testing research Build the business case Complete the product development analysis Test market the product Go to commercialization
Product Differentiation Product Quality Level Consistency Product Design & Features Physical appearance (style) Functional characteristics Product Support Services
Dimensions of Product Quality Performance Durability Conformance with specifications Features Reliability Serviceability Fit and finish Brand name How well does the washing machine wash clothes? How long will the lawn mower last? What is the incidence of product defects? Does an airline flight offer a movie and dinner? Will each visit to a restaurant result in consistent quality? What percentage of the time will a product perform satisfactorily? Is the product easy to service? Is the service system efficient, competent, and convenient? Does the product look and feel like a quality product? Is this a name that customers associate with quality? What is the brand s image?.
Product Differentiation Features Product attributes Less quantifiable Often vague or ambiguous Benefits Tangible Measurable Clearly identifiable to end-user Results-oriented Specific consequence