Who buys the trillions of dollars’ worth of goods and services needed by business organizations? Purchasing agents are influential in straight-rebuy and modified-rebuy situations, whereas other employees are more influential in new-buy situations. Engineers are usually influential in selecting product components, and purchasing agents dominate in selecting suppliers.15
1. THE BUYING CENTER
Webster and Wind call the decision-making unit of a buying organization the buying center. It consists of “all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions.”16 The buying center includes all members of the organization who play any of seven roles in the purchase decision process.
- 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. Technical people are particularly important influencers.
- 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. Buyers may help shape product specifications, but they play their major role in selecting vendors and negotiating. In more complex purchases, buyers might include high-level managers.
- Gatekeepers—People who have the power to prevent sellers or information from reaching members of the buying center. For example, purchasing agents, receptionists, and telephone operators may prevent salespersons from contacting users or deciders.
Several people can occupy a given role such as user or influencer, and one person may play multiple roles.17 A purchasing manager, for example, is often buyer, influencer, and gatekeeper simultaneously. She can decide which sales reps can call on other people in the organization, what budget and other constraints to place on the purchase, and which firm will actually get the business, even though others (deciders) might select two or more potential vendors that can meet the company’s requirements.
A buying center typically has five or six members and sometimes dozens. Some may be outside the organization, such as government officials, consultants, technical advisors, and other members of the marketing channel.18
2. BUYING CENTER INFLUENCES
Buying centers usually include participants with differing interests, authority, status, susceptibility to persuasion, and sometimes very different decision criteria. Engineers may want to maximize the performance of the product; production people may want ease of use and reliability of supply; financial staff focus on the economics of the purchase; purchasing may be concerned with operating and replacement costs; union officials may emphasize safety issues.
Business buyers also have personal motivations, perceptions, and preferences influenced by their age, income, education, job position, personality, attitudes toward risk, and culture. Some are “keep-it-simple” buyers, or “own- expert,” “want-the-best,” or “want-everything-done” buyers. Some younger, highly educated buyers are technically proficient and conduct rigorous analyses of competitive proposals before choosing a supplier. Other buyers are “toughies” from the old school who pit competing sellers against one another, and in some companies, the purchasing powers-that-be are legendary.
Webster cautions that ultimately individuals, not organizations, make purchasing decisions.19 Individuals are motivated by their own needs and perceptions in attempting to maximize the organizational rewards they earn (pay, advancement, recognition, and feelings of achievement). But organizational needs legitimate the buying process and its outcomes.
In other words, according to Webster, businesspeople are not buying “products.” They are buying solutions to two problems: the organization’s economic and strategic problem and their own personal need for achievement and reward. In this sense, industrial buying decisions are both “rational” and “emotional”—they serve both the organization’s and the individual’s needs.20
Research by one industrial component manufacturer found that although top executives at its small- and medium-size customers were comfortable buying from other companies, they appeared to harbor subconscious insecurities about buying the manufacturer’s product. Constant changes in technology had left them concerned about internal effects within the company. Recognizing this unease, the manufacturer retooled its selling approach to emphasize more emotional appeals and the way its product line actually enabled the customer’s employees to improve their performance, relieving management of the complications and stress of using its components.21
3. TARGETING FIRMS AND BUYING CENTERS
Successful business-to-business marketing requires that business marketers know which types of companies to focus on in their selling efforts, as well as whom to concentrate on within the buying centers in those organizations.
TARGETING FIRMS As we will discuss in detail in Chapter 9, business marketers may divide the marketplace in many different ways to choose the types of firms to which they will sell. Finding the sectors with the greatest growth prospects, most profitable customers, and most promising opportunities for the firm is crucial, as Timken found out.22
TIMKEN When Timken, which manufactures bearings and rotaries for companies in a variety of industries, saw its net income and shareholder returns dip compared with competitors’, the firm became concerned that it was not investing in the most profitable areas. To identify businesses that operated in financially attractive sectors and would be most likely to value its offerings, it conducted an extensive market study and discovered that some customers generated a lot of business but had little profit potential, while for others the opposite was true. As a result, Timken shifted its attention away from the auto industry and into the heavy processing, aerospace, and defense industries. It also addressed customers that were financially unattractive or minimally attractive. A tractor manufacturer complained that Timken’s bearings prices were too high for its medium-sized tractors. Timken suggested the firm look elsewhere but continued to sell bearings at the higher price for the manufacturer’s large tractors to the satisfaction of both sides. By adjusting its products, prices, and communications to appeal to the right types of firms, Timken experienced record revenue despite a recession.
It’s also true, however, that as a slowing economy has put a stranglehold on large corporations’ purchasing departments, small and midsize business markets are offering new opportunities for suppliers. See “Marketing Insight: Big Sales to Small Businesses” for more on this important B-to-B market.
TARGETING WITHIN THE BUSINESS CENTER Once it has identified the type of businesses on which to focus marketing efforts, the firm must then decide how best to sell to them. Who are the major decision participants? What decisions do they influence, and how deeply? What evaluation criteria do they use? Consider the following example:
A company sells nonwoven disposable surgical gowns to hospitals. The hospital staff who participate in the buying decision include the vice president of purchasing, the operating-room administrator, and the surgeons.
The vice president of purchasing analyzes whether the hospital should buy disposable or reusable gowns. If disposable, the operating-room administrator compares various competitors’ products on absorbency, antiseptic quality, design, and cost and normally buys the brand that meets functional requirements at the lowest cost. Surgeons influence the decision retroactively by reporting their satisfaction with the chosen brand.
The business marketer is not likely to know exactly what kind of group dynamics take place during the decision process, though whatever information he or she can obtain about personalities and interpersonal factors is useful.
Small sellers concentrate on reaching the key buying influencers. Larger sellers go for multilevel in-depth selling to reach as many participants as possible. Their salespeople virtually “live with” high-volume customers. Companies must rely more heavily on their communications programs to reach hidden buying influences and keep current customers informed.23
Business marketers must periodically review their assumptions about buying center participants. Traditionally, SAP sold its software products to CIOs at large companies. A shift to focus on selling to individual corporate units lower down the organizational chart raised the percentage of software license sales going to new customers to 40 percent.24
Insights into customers and buying centers are critical. GE’s ethnographic research into the plastic-fiber industry revealed that the firm wasn’t in a commodity business driven by price, as it had assumed. Instead it was in an artisanal industry, with customers who wanted collaboration at the earliest stages of development. GE completely reoriented the way it interacted with companies in the industry as a result. In developing markets, ethnographic research also can be very useful, especially in far-flung rural areas, given that marketers often do not know these consumers as well.25
In developing selling efforts, business marketers can also consider their customers’ customers, or end users, if appropriate. Many B-to-B sales are to firms using the products they purchase as components in products they sell to the ultimate consumers. Business marketers can seek out opportunities to interact with their customers’ customers and improve their offerings or even their business model. When XSENS, a Dutch supplier of three-dimensional motion-sensor technology, helped solve the problems of one of its customers’ customers, it also developed a new operating procedure that improved accuracy of its products by an order of magnitude.26
4. MARKETING INSIGHT Big Sales to Small Businesses
In its March 2012 guidelines, the Small Business Administration (SBA) defined small businesses as those with fewer than 500 employees for most mining and manufacturing industries and $7 million in average annual receipts for most nonmanufacturing industries. Some exceptions exist in specialized industries, such as grocery and department stores and motor vehicle and electronic appliance dealers, and the guidelines are constantly being updated to reflect changes in the business environment.
The SBA counted approximately 28 million small businesses in the United States in 2013. These provide almost half of all private-sector employment and have generated almost two-thirds of net new private- sector jobs since the 1970s. Those new ventures all need capital equipment, technology, supplies, and services. Look beyond the United States and you find a huge and growing B-to-B market, one that top companies have recognized.
IBM launched Express, a line of hardware, software services, and financing, specifically for the small to midsize customers (with fewer than 1,000 employees) that supply 20 percent of its business. As one VP of marketing noted, “In today’s world, we see that over 80% of the time a small or medium business makes a technology decision, it starts with a search engine. . . . We have to make sure we show up in their search queries, not just paid or organic search, but we want to drive stimulated search.”
IBM makes heavy use of social media—including blogs, Facebook, LinkedIn, and Twitter—to drive conversations around topics of interest to small and midsize businesses, such as IT security and cloud-based computing. The company is also using events to reach small businesses, such as a series on IT security that attracted more than 10,000 attendees. It has pledged $1 billion in financing to help small and midsize businesses procure certain IBM systems and services.
Small and midsize businesses present huge opportunities and huge challenges. The market is large and fragmented by industry, size, and number of years in operation. Small business owners are notably averse to long-range planning and often have an “I’ll buy it when I need it” decision-making style. Here are some guidelines for marketing to small businesses:
- Don’t lump small and midsize businesses together. There’s a big gap between $1 million in revenue and $50 million or between a start-up with 10 employees and a more mature business with 100 or more employees. IBM distinguishes its offerings to small and medium-sized businesses on its common Web site for the two.
- Do keep it simple. Offer one supplier point of contact for all service problems or one bill for all services and products. AT&T serves millions of small-business customers (with fewer than 100 employees) with services that bundle Internet, local phone, longdistance phone, data management, business networking, Web hosting, and teleconferencing.
- Do use the Internet. Hewlett-Packard found that time-strapped small-business decision makers prefer to buy, or at least research, products and services online. So it designed a site for them that pulls visitors through extensive advertising, direct mail, e-mail campaigns, catalogs, and events.
- Don’t forget about direct contact. Even if a small business owner’s first point of contact is via the Internet, you still need to offer phone or face time.
- Do provide support after the sale. Small businesses want partners, not pitchmen. When the DeWitt Company, a 100-employee landscaping products business, purchased a large piece of machinery from Moeller, the company’s president paid DeWitt’s CEO a personal visit and stayed until the machine was up and running properly.
- Do your homework. The realities of small or midsize business management are different from those of a large corporation. Microsoft created a small, fictional executive research firm, Southridge, and baseball-style trading cards of its key decision makers to train its employees to tie sales strategies to small-business realities.
Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.