BusinesstoBusiness B2B Marketing

1
Chapter 6

• Business-to-Business (B2B) Marketing

2
Chapter Objectives

• Explain each of the components of the
  business-to-(B2B) market.
• Describe the major approaches to segmenting
  business-to-business (B2B) markets.
• Identify the major characteristics of the
  business market and its demand.
• Discuss the decision to make, buy, or lease
• Describe the major influences on business buying
  behavior.
• Outline the steps in the organizational buying
  process.
• Classify organizational buying situations.
• Explain the buying center concept.
• Discuss the challenges of and strategies for
  marketing to government, institutional, and
  international buyers.

3
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
  business-to-business market

4

• 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 organizations goals

5
(No Transcript)
6

• 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

7

• Kmart and Sears reselling Martha Stewart paints

8

• Government Organizations Include domestic units
  of federal, state, local and foreign governments
• IRS buys products to provide federal tax service

9

• Institutions includes a wide variety of
  organizations, both public and private, such as
  hospitals, churches, universities, museums, and
  not-for-profit agencies.

10

• 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

11
Segmenting B2B Markets

• Demographic Segmentation demographic
  characteristics define the useful segmentation
  criteria for business markets
• Using Demographic Segmentation in Business Markets

12

• 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

13

• 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)

14
Characteristics of the B2B Market

• Geographic Market ConcentrationU.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

15

• Sizes and Numbers of BuyersBusiness 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

16

• The Purchase Decision ProcessBusinesses 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

17

• Buyer-Seller RelationshipsMore 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

18

• Genuine JD stressing the importance of business
  relationships

19

• Evaluating International Business
  MarketsBusiness 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

20

• Chubu Electric practices global sourcing

21
(No Transcript)
22

• 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)

23
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 customers facility to better manage
  supply

24

• Microprocessors An Example of Derived Demand

25
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

26

• 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

27

• An outsourcing service for reducing risk and
  increasing productivity

28

• 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

29
The Business Buying Process

• Influences on Purchase Decisions
• Environmental Factors
• Organizational Factors
• Multiple Sourcing purchasing from several
  vendors
• Interpersonal Influences

30

• 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.

31

• Model of the Organizational Buying Process

32

• 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

33

• Whole FoodsSelecting a supplier

34

• Classifying Business Buying Situations
• Straight RebuyingRecurring purchase decision in
  which a customer repurchases a good or service
  that has performed satisfactorily in the past
• Modified RebuyingPurchase decision in which a
  purchaser is willing to reevaluate available
  options for repurchasing a good or service

35

• New-Task BuyingFirst-time or unique purchase
  situation that requires considerable effort by
  the decision Makers
• ReciprocityPolicy to extend purchasing
  preference to suppliers that are also customers

36

• 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

37
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

38

• International Buying CentersDifferentiated 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 sellingIntroducing other associates in
  addition to salespeople into selling situations
  to reach all members of a customers buying center

39
Developing Effective Business-To-Business
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

40

• 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

41
End of Chapter Six