Transcript Chapter 6
Chapter 6
Business-toBusiness (B2B)
Marketing
Chapter Objectives
1. Explain each of the components of the business-to(B2B) market.
2. Describe the major approaches to segmenting
business-to-business (B2B) markets.
3. Identify the major characteristics of the business market
and its demand.
4. Discuss the decision to make, buy, or lease
5. Describe the major influences on business buying
behavior.
6. Outline the steps in the organizational buying process.
7. Classify organizational buying situations.
8. Explain the buying center concept.
9. Discuss the challenges of and strategies for marketing
to government, institutional, and international buyers.
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Nature of the Business Market
Business-to-business marketing:
organizational sales and purchase of goods
and services to support production of other
goods and services for daily company
operations or for resale
B2B: a popular acronym for the businessto-business market
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Like final consumers, organizations purchase
products and services to fill needs
Their primary need is meeting the demands of their
own customers
Business buying decisions:
Are more formal
Involve complex interactions among many
people
Must consider the organization’s goals
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Business-to-Business Marketing
Consumer-Goods
Marketing
Product
Relatively technical in nature, exact form
often variable, accompanying services
very important
Standardized form, service
important but less than for
business products
Price
Competitive bidding for unique items, list
prices for standard items
List prices
Promotion
Emphasis on personal selling
Emphasis on advertising
Distribution
Relatively short, direct channels to market Product passes through a
number of intermediate links
en route to consumer
Customer
Relations
Relatively enduring and complex
Comparatively infrequent
contact, relationship of
relatively short duration
Decision-making
process
Involvement of diverse group of
organization members in decision
Individual or household unit
makes decision
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Components of the Business Market
Commercial Market: Individuals and
firms that acquire goods and services to
support, directly or indirectly, production of
other goods and services
Trade Industries: Retailers and
wholesalers who purchase goods for
resale to others.
Reseller: often used to describe the
wholesalers and retailers that operate
in the trade sector
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Kmart and Sears
reselling Martha
Stewart paints
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Government
Organizations:
Include domestic
units of federal,
state, local and
foreign
governments
IRS buys
products to
provide federal
tax service
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Institutions:
includes a wide
variety of
organizations,
both public and
private, such as
hospitals,
churches,
universities,
museums, and
not-for-profit
agencies.
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B2B Market – The Internet Connection
Internet plays an important role in B2B
marketing
90 percent of all Internet sales are B2B
transactions
Differences in Foreign Business Markets
Must be willing to adapt to local customs
and business practices
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Segmenting B2B Markets
Demographic
Segmentation:
demographic
characteristics
define the useful
segmentation
criteria for business
markets
Using Demographic
Segmentation in
Business Markets
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Customer-Based Segmentation: dividing a
B2B market into homogenous groups based
on buyers’ product specifications
North American Industrial Classification
System (NAICS): classification used by
NAFTA to categorize the B2B marketplace
into details that market segments -- -replaced the Standard Industrial
Classification (SIC) System
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Segmentation by End-Use Application:
segmenting a business-to-business market
based on how industrial purchasers will use
the product
Segmentation by Purchase Categories
Centers on the purchasing situation
Organizations may use complicated
purchasing procedures
Firms also structure their purchasing
functions in specific ways (e.g. centralized
purchasing departments)
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Characteristics of the B2B Market
Geographic Market Concentration
U.S. business market is more geographically
concentrated than the consumer market
Manufacturers concentrate in certain
regions of the country
Certain industries locate in particular areas
to be close to their customers
For example, suppliers of automobile
components and assemblies frequently
build their plants close to their
customers
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Sizes and Numbers of Buyers
Business market features a limited number of
buyers
Use statistical information to estimate the
size and characteristics of business
markets is available
Federal government is largest single
source of such statistics
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The Purchase Decision Process
Businesses must understand the dynamics of
the organizational purchasing process
B2B suppliers often must work with
multiple buyers
Decision-makers at several layers may
influence final orders
Process is more formal and professional
than with consumers
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Buyer-Seller Relationships
More intense than consumer relationships
Require better communication among the
organizations’ personnel
Primary goal of B2B relationships is to
provide advantages that no other seller
can, for instance:
Lower-prices
Quicker delivery
Better quality and reliability
Customized product features
More favorable financing terms
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Genuine JD stressing the importance of
business relationships
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Evaluating International Business Markets
Business purchasing patterns often differ from
one country to the next
Companies must weigh quantitative and
qualitative data
Global sourcing: purchasing goods and
services from suppliers worldwide
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Chubu Electric
practices global
sourcing
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Derived Demand: demand for a resource
that results from demand for the goods and
services that are produced by that resource
Volatile Demand: changes in demand that
are disproportionate to normal trends
Joint Demand: demand for a product that
depends on the demand for another product
used in combination with it
Inelastic Demand: demand that, throughout
an industry, will not change significantly due
to a price change.
Inventory Adjustments: Just-in-time
inventory policies (JIT & JIT II)
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Business Market Demand
Derived Demand – the demand for corn derived from
demand for ethanol
Volatile Demand – the lower demand for new housing
construction results in lower demand for lumber,
concrete, plumbing items
Joint Demand – greater demand for gasoline will
cause greater demand for motor oil
Inventory Adjustments
Just-In-Time inventory policies require suppliers to
deliver inputs for production just as the production
process needs them
Just-In-Time II brings supplier representatives into
the customer’s facility to better manage supply
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Microprocessors: An Example of Derived Demand
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The Make, Buy, or Lease Decision
Three Basic Options:
Make the good or provide the service
in-house
Purchase it from another organization
Lease it from another organization
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The Rise of Outsourcing
Using outside vendors to produce goods
and services formerly produced in-house
Outsourcing
May be cost effective
Allows a firm to obtain specialized
technological expertise
Frees up the company to focus on its
core competencies
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An outsourcing
service for
reducing risk and
increasing
productivity
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Problems with Outsourcing
Many companies discover their cost savings
to be less than half the figure promised by
vendors
May require signing a multiyear contract that
eliminates most or all benefits in a year or two
Potential internal security problems
Potential problems with suppliers who fail to
deliver goods probably or provide required
services
Possible union difficulties
Risk of losing touch with customers
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The Business Buying Process
Influences on Purchase Decisions:
Environmental Factors
Organizational Factors
Multiple Sourcing: purchasing from
several vendors
Interpersonal Influences
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The Role of the Professional Buyer
Professional buyer (merchandisers):
technically qualified employees who are
responsible for securing needed products
at the best possible prices
Systems integration: Centralization of
the procurement function within an
internal division or as a service of an
external supplier
Category Captain: A firm designates a
major supplier as their systems integrator.
This supplier assumes responsibility for
dealing with all of the suppliers for the
firm.
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Model of the Organizational Buying Process
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Stage 1: Anticipate or recognize a
problem/need/opportunity and a general solution
Stage 2: Determine the characteristics and quantity
of a needed good or service
Stage 3: Describe characteristics and the quantity
of a needed good or service
Stage 4: Search for and qualify potential sources
Stage 5: Acquire and analyze proposals
Stage 6: Evaluate proposals and select suppliers
Stage 7: Select an order routine
Stage 8: Obtain feedback and evaluate
performance
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Whole Foods
Selecting a
supplier
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Classifying Business Buying Situations
Straight Rebuying
Recurring purchase decision in which a
customer repurchases a good or service
that has performed satisfactorily in the past
Modified Rebuying
Purchase decision in which a purchaser is
willing to reevaluate available options for
repurchasing a good or service
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New-Task Buying
First-time or unique purchase situation
that requires considerable effort by the
decision Makers
Reciprocity
Policy to extend purchasing preference
to suppliers that are also customers
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Analysis Tools
Value analysis: systematic study of the
components of a purchase to determine
the most cost-effective ways to acquire
items
Vendor analysis: assessment of supplier
performance in areas such as price, back
orders, timely delivery, and attention to
special requests
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The Buying Center Concept
Participants in an organizational buying action
Buying center roles played by various
participants in the purchase decision
process include:
Users – initiate purchase request,
develop specifications
Gatekeepers – control information
Influencers – provide information
Decider – actually chooses good or
service
Buyer – has formal authority to select
supplier
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International Buying Centers
Differentiated from domestic buying centers
since:
Their members are often more difficult to
identify
May include more participants than buying
centers in U.S. firms
Team selling
Introducing other associates in addition to
salespeople into selling situations to reach all
members of a customer’s buying center
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Developing Effective Business-ToBusiness Marketing Strategies
Challenges of Government Markets
Government purchasing procedures
Bids: written sales proposals from
vendor
Specifications: written descriptions of
needed goods or services
Online with the federal government
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Challenges of Institutional Markets
Widely diverse buying practices
Multiple buying influences may affect decisions
Group purchasing is an important factor
Challenges of International Markets
Widely diverse attitudes and cultural patterns
Local industries, economic conditions,
geographic characteristics and legal
restrictions also must be considered
Remanufacturing: production to restore
worn-out products to like new condition
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End of Chapter Six
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