Chapter 6

Report
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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