Marketing: Real People, Real Choices 3rd edition 7-1©2003 Prentice Hall, Inc

Chapter 7

Why Organizations Buy: Business-to-Business

Markets and B2B E-Commerce

Marketing: Real People, Real Choices 3rd edition 7-2©2003 Prentice Hall, Inc

Chapter Objectives_1

Describe the general characteristics of business-to-business markets and business buying practices

Tell how marketers classify business and organizational markets

Marketing: Real People, Real Choices 3rd edition 7-3©2003 Prentice Hall, Inc

Chapter Objectives _2

Explain the business buying situation and describe business buyers

Understand the stages of the business buying decision process

Understand the growing role of B2B E-Commerce

Marketing: Real People, Real Choices 3rd edition 7-4©2003 Prentice Hall, Inc

Business-to-Business Marketing

Marketing of goods and services that businesses and organizations buy for purposes other than personal consumption

Also called organizational markets

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Characteristics of B2B Markets

Generally, the same principles are true for business and consumer customers

There are characteristics that make B2B buying more complex

– Multiple buyers– Number of customers– Size of purchases– Geographic concentration

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B2B Demand Characteristics

Derived Demand

Inelastic Demand

Fluctuating Demand

Joint Demand

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Derived Demand

B2B demand is derived demand because a business’s demand for goods and services comes either directly or indirectly from consumers’ demands

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Inelastic Demand

Inelastic demand means that business customers buy the same quantity whether the price goes up or down

Example: A BMW Z3 Roadster 2.5i has a list price starting at just over $30,000. If the price of tires, batteries, or stereos goes up or down, BMW still must buy enough to meet consumer demand for the Z3.

Marketing: Real People, Real Choices 3rd edition 7-9©2003 Prentice Hall, Inc

Fluctuating Demand

Small changes in consumer demand can create large increases or decreases in business demand

Acceleration principles (multiplier effect) means that changes in consumer behavior has a ripple effect through several related businesses

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Joint Demand

Joint demand occurs when two or more goods are necessary to create a product

Companies try to avoid dependence on specific suppliers by dealing with multiple suppliers whenever possible

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B2B Classifications

Producers

Resellers

Governments

– Government contracts often require competitive bids

– Requests for proposals (RFPs) are posted in the Commerce Business Daily

Not-for-profit organizations

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North American Industry Classification System

(NAICS) Replaced the SIC system in 1997

Reports the number of firms, total dollar amount of sales, number of employees, growth rate for industries, broken down by geographic region

Can be used to assess potential markets and to determine how well a firm is doing compared to their industry group

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The Nature of Business Buying

The Buying Situation

The Professional Buyer

The Buying Center

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The Buying Situation

A buy class framework identifies the degree of effort required of the firm’s personnel to collect information and make a purchase decision

• Straight rebuy

• Modified rebuy

• New task buying

Marketing: Real People, Real Choices 3rd edition 7-15©2003 Prentice Hall, Inc

The Professional Buyer

Titles: purchasing agents, procurement officers, director of materials management

Focus on economic factors beyond the initial price of a product including transportation and delivery charges, accessory products or supplies, maintenance, disposal costs, etc.

Large firms practice centralized purchasing - one department does all buying

Marketing: Real People, Real Choices 3rd edition 7-16©2003 Prentice Hall, Inc

The Buying Center

The group of people in the organization who participate in the decision-making process

May include production workers, supervisors, engineers, secretaries, shipping clerks, and financial officers

Marketing: Real People, Real Choices 3rd edition 7-17©2003 Prentice Hall, Inc

Roles in the Buying Center

Initiator begins the buying process

User needs the product

Gatekeeper controls the flow of information to other members

Influencer dispenses advice or shares expertise

Decider makes the final decision

Buyer executes the purchase

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Electronic B2B Commerce

Internet exchanges between two or more businesses or organizations

Allows marketers to link directly to suppliers, factories, distributors, and their customers

Reduces time necessary to order and deliver goods, track sales, and get feedback

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Intranets, Extranets, and Private Exchanges

An intranet is an internal corporate computer network that uses Internet technology to link company departments, employees, and databases

An extranet allows outsiders to the organization to access its intranet

A private exchange links invited groups of suppliers and partners over the Web