2.3 Business-to-Business (B2B) Buying

Think back to your visit to the Abercrombie & Fitch store. It is pretty obvious that you are the customer and the end user of the product or service. You might be shopping for yourself or buying a gift for a family member or a friend. Either way, you (or the person to whom you are giving the product) are the ultimate consumer, which is what defines B2C buying. So, whether you are buying a cell phone and service at a Verizon store, a music download from Spotify, or a burger and fries at Burger King, you are buying in the B2C arena.

With B2B customers, sometimes referred to as organizational (or institutional) markets, there are several different types of situations that define needs and purchasing behaviour. Some companies buy products to sell directly to consumers, whereas others purchase products as ingredients or components to produce their product. Still other companies lease products or services, while others serve the public, such as government or nonprofit organizations. All of these businesses have unique needs and this will be important to a salesperson as it has impact on the buying process. Business buyers can be divided into Producers, Resellers, and Organizations and are laid out in Figure 2.3.1 which shows the types of buyers in a B2B environment.

Big Differences

B2C and B2B purchasers are different for several reasons. The most important differentiator is that consumers purchase for their own consumption (or the consumption of their household or friends), whereas B2B customers purchase to produce or resell the product to a company or the ultimate consumer. There are also several other key differences between B2C and B2B buyers. Generally, B2C buying is based—for the most part—on impulse, low-risk decisions for products and services that are readily accessible. Whether you shop online, in a store, or at a direct selling party, your buying decisions impact only yourself and your family and do not put you at risk. Although you may make some significant buying decisions such as a house or a car, your options are easily accessible (go online, go to the mall or store), and your decisions don’t put you in danger of losing anything—except, of course, if you spend money you don’t have.

Table 2.3.2: Comparison of B2C and B2B Buying Decisions

However, in a B2B buying decision, the buying decision is complex, and there is significant risk because a single decision can affect the quality of a product or service offered by a company to its customers, safety of consumers, or even profitability of the company. Forming a relationship is especially important in a B2B environment (Nussbaum, 2017).

Size of Purchases

Because B2C buyers are purchasing only for their consumption or for the consumption of a limited number of people, the size of the purchases is relatively small. By contrast, B2B purchases are significant because the companies are purchasing to sell to other companies or to many consumers. Consider the concept that you may buy one phone every few years but Telus and Bell and the other mobile phone providers bought over 30 million phones to sell in 2015 (eMarketer, 2015). The size of B2B purchases is always significantly larger than B2C purchases simply because a company is buying for more than one consumer.

Multiple Buyers

If you think it’s difficult to keep everyone in your apartment happy with the food purchases you make at the supermarket, that’s easy compared to the number of people involved in a B2B purchasing decision. In most B2B transactions, there are multiple decision makers involved in each purchase. Think about your trip to the supermarket from the B2B buyer’s perspective. The decision about which products to stock on the shelves was ultimately made by someone who holds the title of “buyer” in the company. However, they could not decide unilaterally what to carry in the bottled water section. They have to understand which bottled water their customers want, consult with the general merchandise manager, who is responsible for the shelf space, and the vice president of merchandising, who oversees all product choices. They may even need to make a presentation to a buying committee before they make the decision to carry another flavor of Vitaminwater. They will need to get approval for the money to invest in the inventory and shelf space. Depending on the organization and the size and impact of the decision, several people from several different departments may be involved in a B2B buying decision.

Number of Customers

There are over 37 million people who live in Canada and approximately 12 million households (Families, households and housing, 2018). However, there are less than two million employer businesses (Ward, 2019). Because B2B buyers are making decisions that may ultimately impact the sale of a product or service to millions of consumers, there are naturally fewer businesses.

Geographic Concentration

Since there are many fewer businesses and organizations compared to the number of ultimate consumers, it makes sense that there is a geographic concentration of B2B customers.

Example: Geographic Concentration

In the United States, the fashion industry is primarily located in New York, filmmaking in Los Angeles, and technology in Silicon Valley.

Business-to-Business Means Person-to-Person

Although B2C buying behaviour is very complicated, B2B buying behaviour is even more complex. The fact is, although it’s called business-to-business buying, the term actually describes people doing business with people. A business never makes a buying decision; the decision is made by people who work for the company. So B2B buying decisions are subject to the same behaviours as B2C buying decisions, but on a more challenging level because B2B buying decisions usually include multiple decision makers, an extensive evaluation process, extended analysis, and they represent a high risk on the part of the decision makers (B2B purchasing decisions, n.d.). When many people are involved in the decision making in the B2B environment, they usually form a buying centre—a bunch of people who have varying influences on the B2B decision (Understanding the buying centre can help B2B markets and supply chain innovation, 2020). For example, hospitals use buying centres to make decisions on new equipment or a retail company might use a buying centre to determine which point-of-sale register system to purchase. The buying centre usually includes people from the organization who have expertise in different areas, and each may play a different role in the buying decision. Following are some roles that may be included in the buying centre:

Users

The people in the B2B buying process may include some or all of the following roles. Users are the people who are actually using the product or service. In the case of a company purchasing a telecommunications system, the users are all employees of the company because each uses the telephone, Internet, and other communications technologies. But in the case of a company purchasing a security system, only the employees in the security department would be users of the product; other employees would simply enjoy the benefits of the product without actually using it. Because the users’ satisfaction is so important, many companies involve users at various points throughout the buying process, including gathering input, participating in product demonstrations, or even using the product as a test.

Initiators and Influencers

Initiators are the people who initiate the need (Understanding the buying centre can help B2B markets and supply chain innovation, 2020). For example, the e-commerce manager in the marketing department may begin the process of seeking a new technology provider for e-mail and social networking services on the company’s Web site or a machine operator may initiate the process for a specific tool. However, they may not be the final decision maker. There may be several departments involved in the purchasing decision including marketing, IT, and customer service, just to name a few.

Decision Makers

At the end of the day, it is the decision maker or decision makers who will make the final purchasing decision. Decision makers could be anyone who holds the responsibility or accountability for making buying decisions for the company. In the case of the e-mail and social networking technology purchase, depending on the company, the decision maker might be the CEO, the head of the marketing department, or even a committee of people from marketing, IT, and customer service. A smart decision maker involves the users and influencers in their decision-making process to make the best choice. The decision making process in B2B can take days, weeks, months, or even years to make, depending on the company and the product or service being purchased.

Finding the “Power Level”

When you are selling in a B2B environment, you may not always have access to the ultimate decision maker but building a relationship with the initiator, influencers, and users can be just as important and effective as meeting with the decision maker. However, you should always be aware of the “power level,” or exactly the level in the organization that is making the buying decision. Sometimes, salespeople do not get to the power level, but instead stop at one or two levels below that critical level where the purchasing decision is being made. If the vice president of human resources is making the decision as to which vendor to choose for the company’s training programs, it is important to build a relationship with them. Having a relationship with the director of training is critical, but a successful salesperson would not stop there; they would work to secure a relationship at the power level, which is the vice president.

Types of B2B Buying Situations

There is still more you can learn about the B2B buying environment. Although companies are so different from each other (some are large multinational corporations while others are one-person operations) and the types of products and services being purchased are so different (everything from business cards to office buildings), it might seem difficult to know how to apply the concepts covered to every buying situation. One way is to understand the different types of buying situations that face a B2B buyer.

New-Task Buy

If a company is moving its headquarters to a new building that does not come equipped with office furniture, the company will need to acquire furniture for all of its employees. When a company purchases a good or service for the first time, this could be considered as a new-task buy (Clow & Baack, 2005). When a customer is contemplating a new-task buy, it is an excellent opportunity to use your consultative selling skills to bring information to your customer to help them make the best possible decision.

Straight Rebuy

What if your customer is already purchasing the product or service regularly? Although they may currently be purchasing the product from you, they already know about the product or service, how to use it, and how much they are currently paying for it. This is called a straight rebuy (Clow & Baack, 2005)—when the buyer routinely repurchases a product or service. Usually, straight rebuys are consumable products or supplies such as office supplies, maintenance supplies, or parts. This is an opportunity for you to shine, whether the customer is currently purchasing from you or not. When purchases are on “auto pilot,” sometimes the salesperson gets lazy, takes the business for granted, and does not go the extra mile to suggest something new or better. If a prospective customer is already buying from someone else, you have the opportunity to win them over by suggesting a better or more efficient product, a different pack size or method of replenishment, or other ideas that will help the customer save time or money or increase quality. For straight rebuys, it is often price that gets the customer’s attention, but it is service (or lack of it) that makes the customer switch providers.

Modified Rebuy

Sometimes, your customer may already be purchasing the product but wants to change the terms, prices, suppliers, or product specifications — this is called a modified rebuy (Spacey, 2017). For example, let’s say a manager reviews their budge and finds that their costs on printer supplies is too high. They request that the purchasing team cut cost. The team reviews the cost of printer cartridges and find their supplier is charging a premium over other stores so they push the supplier for a lower price. Selling to a customer who is purchasing a modified rebuy is an excellent opportunity to demonstrate your flexibility and creativity. Many times, customers have an idea in mind for a modification, but if you can bring them ideas and insights that will help them increase their business profitably, you will have the upper hand in securing the buy.

Strategic Alliance

Although most B2B selling depends on relationships, some selling situations go beyond the traditional relationship between a salesperson and the customer. Some relationships go to the next level and actually create a partnership that puts both parties at risk and provides opportunities for all parties to gain; this is called a strategic alliance. For instance, Starbucks teamed up with Spotify where the stores received a premium membership from Spotify so they could create playlists customized for each store (and employee). This gave Starbucks access to Spotify’s music. Starbucks customers could access the playlist through the Starbucks’s app allowing Spotify to reach new audiences. The strategic alliance represents a way for both companies to prosper without sacrificing their brand.