bk12e ch06 basic

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Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Part 2: Understanding BuyersPart 2: Understanding Buyersand Marketsand Markets

5. Consumer Behavior

6. Business-to-Business (B2B)

Marketing7. Serving Global Markets


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Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter 6Chapter 6

BusinessBusiness--toto--Business (B2B)Business (B2B)

MarketingMarketing


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Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 6-3

Chapter ObjectivesChapter 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 marketand its demand.

4. Discuss the decision to make, buy, or lease

5. Describe the major influences on business buyingbehavior.

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 marketingto government, institutional, and international buyers.


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Nature of the Business MarketNature of the Business Market

BusinessBusiness--toto--business marketingbusiness marketing:organizational sales and purchase of goodsand services to support production of othergoods and services for daily company

operations or for resale

B2BB2B: a popular acronym for the business-to-business market


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Like a final consumers, organizationspurchase products and services to fill needs

Their primary need is meeting the demandsof their own customers

Business buying decisions:Are more formal

Involve complex interactions amongmany people

Must consider the organizations 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 ofrelatively 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 MarketComponents of the Business Market

Commercial MarketCommercial Market: Individuals andfirms that acquire goods and services to

support, directly or indirectly, production of

other goods and services

Trade IndustriesTrade Industries: Retailers andwholesalers who purchase goods for

resale to others.

ResellerReseller: often used to describe the

wholesalers and retailers that operate

in the trade sector


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B2B MarketB2B Market The Internet ConnectionThe Internet Connection

Internet plays an important role in B2Bmarketing

90 percent of all Internet sales are B2B

transactions

Differences in Foreign Business MarketsDifferences in Foreign Business Markets

Must be willing to adapt to local customs

and business practices


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Segmenting B2B MarketsSegmenting B2B Markets

Demographic SegmentationDemographic Segmentation: demographiccharacteristics define the useful

segmentation criteria for business markets

CustomerCustomer--Based SegmentationBased Segmentation: dividing

a B2B market into homogenous groups

based on buyers product specifications


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North American Industrial ClassificationSystem (NAICS): classification used by

NAFTA to categorize the B2B marketplace

into details that market segments -- --

replaced the Standard IndustrialClassification (SIC) System


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Segmentation by EndSegmentation by End--Use ApplicationUse Application:

segmenting a business-to-business market

based on how industrial purchasers will usethe product

Segmentation by Purchase CategoriesSegmentation by Purchase CategoriesCenters on the purchasing situation

Organizations may use complicated

purchasing procedures

Firms also structure their purchasingfunctions in specific ways (e.g. centralized

purchasing departments)


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Characteristics of the B2B MarketCharacteristics of the B2B Market

Geographic Market ConcentrationGeographic 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 automobilecomponents and assemblies frequently

build their plants close to their

customers


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Sizes and Numbers of BuyersSizes and Numbers of Buyers

Business market features a limited number ofbuyers

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 ofthe 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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BuyerBuyer--SellerRelationshipsSellerRelationshipsMore intense than consumer relationships

Require better communication among theorganizations personnel

Primary goal of B2B relationships is toprovide advantages that no other sellercan, for instance:

Lower-prices

Quicker delivery

Better quality and reliabilityCustomized product features

More favorable financing terms


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Evaluating International Business MarketsEvaluating International Business Markets

Business purchasing patterns often differ from

one country to the next

Companies must weigh quantitative and

qualitative dataGlobal sourcing: purchasing goods and

services from suppliers worldwide


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Derived DemandDerived Demand: demand for a resource

that results from demand for the goods and

services that are produced by that resource Volatile DemandVolatile Demand: changes in demand that

are disproportionate to normal trends

Joint DemandJoint Demand: demand for a product that

depends on the demand for another product

used in combination with it

Inelastic DemandInelastic Demand: demand that, throughout

an industry, will not change significantly dueto a price change.

Inventory AdjustmentsInventory Adjustments: Just-in-time

inventory policies (JIT & JIT II)


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The Make, Buy, or Lease DecisionThe 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 OutsourcingThe Rise of OutsourcingUsing 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 itscore competencies


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Problems with OutsourcingProblems 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 twoPotential 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 ProcessThe Business Buying Process

Influences on Purchase Decisions:

Environmental Factors

Organizational Factors

Multiple Sourcing: purchasing fromseveral vendors

Interpersonal Influences


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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 ofa 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

Model of the Organizational Buying ProcessModel of the Organizational Buying Process


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Classifying Business Buying SituationsClassifying Business Buying Situations

Straight RebuyingStraight RebuyingRecurring purchase decision in which a

customer repurchases a good or service

that has performed satisfactorily in the past

Modified RebuyingModified Rebuying

Purchase decision in which a purchaser is

willing to reevaluate available options for

repurchasing a good or service


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NewNew--Task BuyingTask Buying

First-time or unique purchase situationthat requires considerable effort by the

decision Makers

ReciprocityReciprocity

Policy to extend purchasing preference

to suppliers that are also customers


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Analysis ToolsAnalysis 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 ConceptThe Buying Center Concept

Participants in an organizational buying actionBuying center roles played by various

participants in the purchase decision

process include:

Users

Gatekeepers

Influencers

Decider

Buyer


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International Buying CentersInternational Buying Centers

Differentiated from domestic buying centers

since:

Their members are often more difficult to

identify

May include more participants than buyingcenters in U.S. firms

Team sellingTeam selling

IIntroducing other associates in addition tosalespeople into selling situations to reach all

members of a customers buying center


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Developing Effective BusinessDeveloping Effective Business--ToTo--

Business Marketing StrategiesBusiness Marketing Strategies

Challenges of Government MarketsChallenges of Government Markets

Government purchasing procedures

Bids: written sales proposals fromvendor

Specifications: written descriptions of

needed goods or services

Online with the federal government


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Challenges of Institutional MarketsChallenges of Institutional Markets

Widely diverse buying practices

Multiple buying influences may affect decisions

Group purchasing is an important factor

Challenges of International MarketsChallenges of International MarketsWidely 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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