The first obvious difference is that there are significantly
fewer customers in the business market than in the consumer
market. These customers also buy in significantly
larger quantities (e.g., tires by the thousands) and the
prices of some of their single item purchases far exceed
those of an individual consumer (e.g., millions of dollars
for a new bridge). Finally, business customers in the same
industry often tend to be located in a concentrated geographic
region. For example, the Silicon Valley in California
has a high concentration of firms in the high-tech
industry.
The nature of the demand for products differs from
consumer demand because it is often derived from consumer
demand. A derived demand means that the
demand for original equipment leather seat covers
installed in new cars depends on the demand for the models
of automobiles that use those seat covers. They have a
more inelastic demand curve because the demand for the
seat covers depends on the consumer demand for the
automobiles, not on the price of the seat covers. Another
factor influenced by derived demand is that it may cause
large fluctuations in the demand for the seat covers. If the
demand for the automobiles drops, it may have a small
effect on the sales figures of the auto manufacturer, but if
this particular contract represents a large share of the seat
cover vendor’s production, that vendor could suffer a significant
loss of revenue.
Finally, the products and the buying process may differ
from the consumer market to varying degrees. While
some products purchased in the business market are the
same or very similar to the products bought by consumers
(e.g., office supplies), the buying process may be much
more involved because of negotiated contract and unique
or customized needs. Product specifications, price, quantity,
service requirements, length of the contract, and
delivery schedules are just a few of the terms that may
need to be negotiated. On the other hand, many of the
products are very complex and often custom-made to
agreed-upon specifications. The complexity of the buying
process is further complicated because a given purchase
will need to satisfy a number of different individuals and
departments within the company. Because of these factors,
the buying decisions in businesses and organizations
are often determined by a group of individuals known as
the buying center, which is discussed later in this entry.
TYPES OF CONSUMERS
The business market consists of many different organizations
involved in many different primary activities, but
they generally fall into four major types:
1. Manufacturers—Manufacturers produce products to
be sold at a profit. They buy products and services
that are directly used in the products they produce
or are consumed in the general operations of the
firm.
2. Trade—Trade includes organizations that purchase
finished goods and resell them at a profit or use
products and services for the general operations of
the firm. Wholesalers and retailers are included in
this type of business customer.
3. Government—Federal, state, and local governments
represent the largest single business or organizational
market. Collectively they spend trillions of dollars
for services and products needed for governmental
operations and to provide citizens with the products
and services needed for their general welfare.
4. Institutions—Institutions are those organizations
whose primary activities and goals are charitable,
educational, community, or nonbusiness in nature.
They include both public (such as libraries) and private
(some hospitals) institutions, which may be
nonprofit (charitable organizations) or profit (some
nursing homes) oriented.
TYPES OF BUYING SITUATIONS
There are three major types of buying situations, each
requiring a different buying approach. The straight rebuys
are routine purchases of standard products from an existing
vendor without modifying specifications or without
renegotiating new terms. Little effort, beyond a short performance
review, is necessary.
On the other hand, modified rebuys occur when the
product is not purchased on a regular basis, when there is
a change in the specification of the product, when there is
dissatisfaction with the current vendor, or if a new vendor
offers better terms. Modified rebuys may involve new
product specifications, additional evaluation of vendors,
or renegotiation of contracts.
The third buying situation is a new task buy. This situation
normally involves purchases made by a business for
the first time The buying process needs to start from
scratch and will probably be an extended problem-solving
endeavor. One of the early decisions will be whether the
firm wants to purchase the product from a vendor, lease
the product, or produce the product in-house. These decisions
and the actual purchase decisions are often the
responsibility of a buying center.
THE BUYING CENTER
Because of the size, importance, complexity, and commitment
involved in a business buying decision, often a comeobf_
68 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION
Business Professionals of America
mittee called the buying center is formed. The buying
center is responsible for deciding how best to acquire the
products and services needed to operate the business. The
individuals included in the buying center can differ from
one buying decision to another, but may involve representatives
from the purchasing, finance/accounting, and
engineering departments, as well as the departments that
will use the product, and an executive from management.
The members of any given buying center committee
could play one or more of the following roles:
• Gatekeeper—The individual responsible for the flow
of information to the other members of the buying
center
• User(s)—The member(s) most likely to use or be
responsible for the use of the product
• Influencer(s)—The individual(s) who will
influence(s) the decision but may not necessarily use
the product
• Decider(s)—The member(s) who make(s) the final
decision
• Purchaser—The member who negotiates the actual
purchase
BUSINESS-TO-BUSINESS BUYING
PROCESS
The typical process that is followed by the buying center
to analyze the needs and develop solutions to meet those
is:
1. Recognize or anticipate and clearly define a need
2. Determine and evaluate alternative solutions
a. Straight rebuy
b. Modified rebuy
c. New task buy
3. Select a course of action and develop product specification
4. Select a vendor
a. Identification of potential vendors
b. Evaluation of vendors—solicitation and analysis
of proposals
c. Select a vendor
5. Negotiate a contract
6. Review performance
SEE ALSO Careers in Marketing; Consumer and Business
Goods; Marketing
BIBLIOGRAPHY
Boone, Louis E., and Kurtz, David L. (2004). Contemporary
marketing (11th ed.). Mason, OH: Thomson South-Western.
Hoffman, K. Douglass (2006). Marketing principles and best
practices (3rd ed.). Mason, OH: Thomson South-Western.
Kotler, Philip, and Armstrong, Gary (2006). Principles of marketing
(11th ed.). Upper Saddle River, NJ: Pearson Prentice
Hall.
Lascu, Dana-Nicoleta, and Clow, Kenneth E. (2004). Marketing
frontiers: Concepts and tools. Cincinnati: Atomic Dog.
Pride, William M., and Ferrell, O. C. (2006). Marketing concepts
and strategies. Boston: Houghton Mifflin.
Solomon, Michael R., Marshall, Greg W., and Stuart, Elnora W.
(2006). Marketing: Real people, real choices (4th ed.). Upper
Saddle River, NJ: Pearson Prentice Hall.
Thomas Baird
BUSINESS
PROFESSIONALS OF
AMERICA
Business Professionals of America (BPA) is a national
vocational student organization for individuals preparing
for careers in business and/or office occupations. With
nineteen state associations and 45,000 members in middle,
secondary, and post-secondary schools throughout
North America, the BPA strives to contribute to the
preparation of a world-class work force by advancing
leadership, citizenship, and academic and technological
skills. Using a co-curricular focus, the BPA integrates
local programs and services into a business classroom curriculum
and focuses on real-world teaching and learning
strategies. Additionally, the BPA develops professionalism
in students and teachers through unique programs and
services.
Historically, the need for a student organization serving
individuals in vocational office programs was recognized
shortly after the passage of the Vocational Education
Act of 1963. The articles of incorporation for the Office
Education Association, the original name of the BPA,
were officially filed in 1966. The name was changed to
Business Professionals of America on July 1, 1988.
Business Professionals of America offers its student,
teacher, and alumni members a variety of programs and
services. The National Leadership Conference annually
hosts national officer elections and competitive events
that allow students to demonstrate workplace skills
obtained through the business classroom curriculum and
Industry Certification and Behavioral Skills Assessment
(“Workplace Skills Assessment Program,” 1998). Awards
programs also recognize successes of members and chapters.
ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 69
Business Professionals of America
Various written materials and the official quarterly
journal, Communique, provide members with services,
updates, and promotional opportunities. Additionally,
scholarship programs are sought at universities to encourage
participation in business education at the postsecondary
level. More information is available from
Business Professionals of America, 5454 Cleveland Ave.,
Columbus, Ohio 43231-4021, (800) 334-2007, or
http://www.bpa.org/.
SEE ALSO DECA; Future Business Leaders of America;
SkillsUSA
BIBLIOGRAPHY
Business Professionals of America (2004). “History of Business
Professionals of America.” Retrieved September 26, 2005,
from http://www.bpa.org/history.htm.
Jewel Evans Hairston
C
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