©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-0 Chapter 7 Why Organizations Buy: Business-to-Business Markets and B2B E-Commerce

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-1 Chapter Objectives_1  Describe the general characteristics of business-to- business markets and business buying practices  Tell how marketers classify business and organizational markets

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-2 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-3 Business-to-Business Marketing  Marketing of goods and services that businesses and organizations buy for purposes other than personal consumption  Also called organizational markets

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-4 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-5 B2B Demand Characteristics  Derived Demand  Inelastic Demand  Fluctuating Demand  Joint Demand

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-6 Derived Demand  B2B demand is derived demand because a business’s demand for goods and services comes either directly or indirectly from consumers’ demands

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-7 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.

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-8 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-9 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-10 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-11 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-12 The Nature of Business Buying  The Buying Situation  The Professional Buyer  The Buying Center

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-13 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-14 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-15 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-16 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-17 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

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-18 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