© 2013 Cengage Learning. All rights reserved. 1-1

1-2 7: Business Markets and Buying Behavior Part 3: Customer Behavior and E-Marketing © 2013 Cengage Learning. All rights reserved.

1-3  Distinguish among the various types of business markets  Identify the major characteristics of business customers and transactions  Understand several attributes of demand for business products  Become familiar with the major components of a buying center  Understand the stages of the business buying decision process and the factors that affect this process  Describe industrial classification systems, and explain how they can be used to identify and analyze business markets

1-4  Individuals, organizations, or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations  Also called business-to-business or B2B markets  Similar to marketing to consumer markets, but with some essential differences © 2013 Cengage Learning. All rights reserved.

1-5  Producer markets  Reseller markets  Government markets  Institutional markets © 2013 Cengage Learning. All rights reserved.

1-6  If GE features an advertisement for fluorescent light bulbs in CFO Magazine, is the company targeting the consumer market or business market?  What kinds of things would you look for when making this determination?

1-7  Individuals and business organizations that purchase products in order to make a profit by using them in producing other products or in their operations © 2013 Cengage Learning. All rights reserved.

1-8  Resellers: Intermediaries (wholesalers or retailers) who buy finished goods and resell them for a profit  Factors resellers consider Level of demand Space required relative to potential profit Ease of placing orders Availability of technical assistance Training programs from producers Does it compete or complement? © 2013 Cengage Learning. All rights reserved.

1-9  Federal, state, county, or local governments that buy goods and services to support their internal operations and provide products to their constituencies  Spend hundreds of billions annually on a wide range of goods and services  Government contracts are awarded to firms of all sizes in a wide variety of industries © 2013 Cengage Learning. All rights reserved.

1-10 Specifications Lowest Bid Government Entity Contract Award Private Firms (Qualified Bidders) Submit Bids

© 2013 Cengage Learning. All rights reserved  Dropbox automatically syncs files from one computer to another Dropbox  Enables easy sharing  No more ing files  No need for memory sticks or portable hard drives  Can help businesses with cumbersome systems that share large files

1-12  Organizations with charitable, educational, community, or other non-business goals  Members can include churches, hospitals, charitable organizations, and private colleges  Marketers may use special techniques to target them © 2013 Cengage Learning. All rights reserved.

1-13  Lockheed Martin produces aerospace, defense, and security products Lockheed Martin  Which market do you think provides the majority of Lockheed Martin’s business?  Producer  Reseller  Government  Institutional

1-14  Transactions between businesses differ from consumer sales  Are larger  May involve expensive items  Discussions and negotiations can require considerable marketing time and selling effort © 2013 Cengage Learning. All rights reserved.

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1-16  An arrangement in which two organizations agree to buy from each other  Unique to business markets  Reciprocal agreements that threaten competition are illegal © 2013 Cengage Learning. All rights reserved.

1-17  Well-informed about products they purchase  Demand detailed information and technical specifications  Help the firm achieve organizational objectives  Engage in rational buying behavior  Often form partnerships with suppliers © 2013 Cengage Learning. All rights reserved.

1-18  Price  Product quality  Service  Supplier relationships © 2013 Cengage Learning. All rights reserved.

1-19  Which concern of business customers does this advertisement address? © SSI

1-20  Description: When products are highly standardized, a buyer can order by describing quantity, grade, and other attributes  Inspection: Used with some products that have unique characteristics and vary in regard to condition  Sampling: Entails taking a specimen of the product and evaluating it for suitability before purchase  Negotiation: Some purchases are based on negotiated contracts, wherein buyers describe what they need and sellers submit bids © 2013 Cengage Learning. All rights reserved.

1-21  What methods of business buying (description, inspection, sampling, or negotiation) would most likely be used for the following products?  Used vehicles  New equipment  Pens and pencils  Raw materials  A new delivery truck

1-22  New task purchase: An item is purchased to be used to perform a new job or solve a new problem  Straight rebuy purchase: A routine purchase of the same products under approximately the same terms  Modified rebuy purchase: A new task purchase that is changed on subsequent orders; or when straight rebuy purchases are modified © 2013 Cengage Learning. All rights reserved.

1-23  Would new task purchase, straight rebuy, or modified rebuy be used for the following?  Light bulbs that burn out at varying times  Paper in a firm that uses the same amount every month  Equipment to start production on a new product line

1-24  Derived demand: Demand for business products that stems from demand for consumer products  Inelastic demand: Demand that is not significantly altered by a price increase or decrease © 2013 Cengage Learning. All rights reserved.

1-25  Joint demand: Demand involving the use of two or more items in combination to produce a product  Demand for the product drives demand for both items  The demand for any given business product can fluctuate in response to consumer demand changes © 2013 Cengage Learning. All rights reserved.

1-26  How is this advertisement attempting to stimulate derived demand for Intel processors? © Hewlett Packard Company

1-27  Business (Organizational) Buying Behavior: The purchase behavior of producers, government units, institutions, and resellers  The buying center: The group of people within the organization who make business purchase decisions  Roles include users, influencers, buyers, deciders, and gatekeepers © 2013 Cengage Learning. All rights reserved.

1-28  Users: The organizational members who actually use the product being acquired  Influencers: Those who develop the specifications and evaluate alternative products; often technical personnel  Buyers: Select suppliers and negotiate terms of purchase  Deciders: Actually choose the products  Gatekeepers: Control the flow of information to and among people in the buying center © 2013 Cengage Learning. All rights reserved.

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1-30  Value analysis: An evaluation of each component of a potential purchase  Vendor analysis: A formal, systematic evaluation of current and potential vendors  Multiple sourcing: An organization’s decision to use several suppliers  Sole sourcing: An organization’s decision to use only one supplier © 2013 Cengage Learning. All rights reserved.

1-31  How is this ad seeking to influence customers’ analysis of the product’s value? © Kyocita Mita America, Inc.

1-32  Environmental  Includes competitive and economic factors, political forces, legal and regulatory forces, technological changes, and sociocultural issues  Organizational  Includes company objectives, purchasing policies, and resources and the size and composition of its buying center  Interpersonal  The relationships between people in the business; trust and collaboration are important  Individual  Personal characteristics of participants in the buying center © 2013 Cengage Learning. All rights reserved.

1-33  Ready-made tools that enable marketers to categorize organizations into groups based on the types of goods and services provided  Two uses 1.Identifying potential business customers North American Industrial Classification System (NAICS) i s used by the U.S., Canada, North American Industrial Classification System (NAICS) and Mexico to help generate comparable statistics 2.Estimate purchase potential © 2013 Cengage Learning. All rights reserved.

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© 2013 Cengage Learning. All rights reserved Business marketInelastic demand Producer marketsJoint demand Reseller marketsBusiness (organizational) buying behavior Government marketsBuying center Institutional marketsValue analysis ReciprocityVendor analysis New-task purchaseMultiple sourcing Straight rebuy purchaseSole sourcing Modified rebuy purchaseNorth American Industry Classification System (NAICS) Derived demand