Chapter 4 – Business Buying Behaviour
- Describe the major categories of business buyers.
- Explain why finding decision makers in business markets is challenging for sellers.
Business buyers can be either nonprofit or for-profit businesses. To help you get a better idea of the different types of business customers in B2B markets, we’ve put them into four basic categories: producers, resellers, governments, and institutions.
Producers are companies that purchase goods and services that they transform into other products and/or services. They include both manufacturers and service providers. Procter & Gamble, General Motors, McDonald’s, Dell, and Air Canada are examples. So are the restaurants around your campus, your dentist, your doctor, and the local tattoo parlor. All of these businesses have to buy certain products to produce the goods and services they create. General Motors needs steel and hundreds of thousands of other products to produce cars. McDonald’s needs beef and potatoes. Air Canada needs fuel and planes. Your dentist needs drugs such as Novocain, oral tools, and X-ray machines. Your local tattoo parlor needs special inks and needles and a bright neon sign that flashes “open” in the middle of the night.
Resellers are companies that sell goods and services produced by other firms without materially changing them. They include wholesalers, brokers, and retailers. Walmart and Home Depot are two big retailers you are familiar with. Large wholesalers, brokers, and retailers have a great deal of market power. If you can get them to buy your products, your sales can increase exponentially.
Every day, manufacturers flock to Walmart’s corporate headquarters in Bentonville, Arkansas, to try to convince them to carry their products. But would it surprise you that not everybody wants to do business with a powerhouse like Walmart? Jim Wier, one-time CEO of the company that produces Snapper-brand mowers and snowblowers, actually took a trip to Walmart’s headquarters to stop doing business with the company. Why? Snapper products are high-end, heavy-duty products. Wier knew that Walmart had been selling his company’s products for lower and lower prices, and wanted deeper and deeper discounts from Snapper. Wier believed Snapper products were too expensive for Walmart’s customers and always would be, unless the company started making cheaper-quality products or outsourced their manufacturing overseas, which is something he didn’t want to do.
“The whole visit to Wal-Mart’s headquarters is a great experience,” said Wier about his trip. “It’s so crowded, you have to drive around, waiting for a parking space. You have to follow someone who is leaving, walking back to their car, and get their spot. Then you go inside this building, you register for your appointment, they give you a badge, and then you wait in the pews with the rest of the peddlers, the guy with the bras draped over his shoulder.” Eventually, would-be suppliers were taken into small cubicles where they had thirty minutes to make their case (Fishman, 2007). “It’s a little like going to see the principal, really,” he said.
Can you guess one the biggest purchaser of goods and services in the world? It is the government. It purchases everything you can imagine, from paper and fax machines to tanks and weapons, buildings, toilets for NASA (the National Aeronautics and Space Administration), highway construction services, and medical and security services. State, Provincial and local governments buy enormous amounts of products, too. They contract companies that provide citizens with all kinds of services from transportation to garbage collection. (So do foreign governments, provinces, and localities, of course.) Business-to-government (B2G) markets, or when companies sell to local, state, and federal governments, represent a major selling opportunity, even for smaller sellers. In fact, many government entities specify that their agencies must award a certain amount of business to small businesses, minority- and women-owned businesses, and businesses owned by disabled veterans.
Institutional markets include nonprofit organizations such as the Canadian Red Cross, churches, hospitals, charitable organizations, private colleges, civic clubs, and so on. Like the government and for-profit organizations, they buy a huge quantity of products and services. Holding costs down is especially important to them. The lower their costs are, the more people they can provide their services to.
That said, a smart B2B marketer will look at all the markets we have mentioned to see if they represent potential opportunities. The Red Cross will have no use for a fighter jet, of course. However, a company that manufactures toilet paper might be able to market it to both the Red Cross and the government. B2B opportunities abroad and online B2B markets can also be successfully pursued.
Who Makes the Purchasing Decisions in Business Markets?
Figuring out who exactly in B2B markets is responsible for what gets purchased and when requires some detective work for marketing professionals and the salespeople they work with. Think about the college textbooks you buy. Who decides which ones ultimately are purchased by the students at your school? Do publishers send you e-mails about certain books they want you to buy? Do you see ads for different types of chemistry or marketing books in your school newspaper or on TV? Generally, you do not. The reason is that even though you buy the books, the publishers know that professors ultimately decide which textbooks are going to be used in the classroom. Consequently, B2B sellers largely concentrate their efforts on those people.
That’s not to say that the publishers don’t target you, at least to a certain extent. They may offer you a good deal by packaging a study guide with your textbook, or offer an online learning supplement you can purchase in addition to the textbook. They might also offer your bookstore manager a discount for buying a certain number of textbooks. However, a publishing company that focuses on selling its textbooks directly to you or to a bookstore manager would go out of business. They know that the true revenue generators are professors.
The question is, which professors? Some professors choose their own books. Adjunct professors often don’t have a choice—their books are chosen by a course coordinator, or the dean, or the chair of the department. Still other decisions are made by groups of professors, some of whom having more say over the final decision than others. Are you getting the picture? Figuring out where to start in B2B sales can be a little bit like a scavenger hunt.