B2B Why Organizations Buy: Business-to-Business Markets and B2B E-Commerce

Business 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

Types of Organizational Markets Industrial Markets Industrial firms Reseller Market Resellers Government Markets Government Units Global Organizational Markets

Type and number of organizational customers

NAICS breakdown for information industries sector: NAICS code 51 (abbreviated)

Key characteristics of organizational buying behavior

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

Derived Demand Demand for education Derived demand - textbooks Derived demand - paper Derived demand - pulp Derived demand - forestry products

The Nature of Business Buying The Buying Situation The Professional Buyer The Buying Center

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

The Buying Center A cross-functional 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

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

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

How they buying situation affects buying center behavior

International Organization for Standardization (ISO) Geneva, Switzerland One standards organization per country: USA – ANSI Japan – JISC (MITI) Germany – DIN Australia – SAI ISO 9000

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

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

Security Issues Authentication - making sure only authorized individuals are allowed to access a site Firewalls - combination of hardware and software that ensures only authorized individuals gain entry Encryption - scrambling a message so that only another individual has the right “key” for deciphering it

Comparing the stages in consumer and organizational purchases