Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Business to Business (B2B) Marketing Chapter 10

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Explain each of the components of the business market. 2.Describe the major approaches to segmenting business-to-business markets. 3.Identify the major characteristics of the business market and its demand. 4.Describe the major influences on business buying behavior. 5.Outline the steps in the organizational buying process. 6.Classify organizational buying situations. 7.Explain the buying center concept. 8.Discuss the challenges of marketing to government, institutional, and international buyers.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. B2B Marketing Deals with organizational purchases of goods and services to support production of other products, to facilitate daily company operations, or for resale.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. B2B Marketing StorageTek Company Vision Statement: “Be the Storage Experts who deliver easy to use, industry-leading, innovative storage solutions to manage and protect business critical information.” Source: storagetek.com/home/about/vi sion.htm

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Comparing Business-to-Business Marketing and Consumer Marketing Individual or household unit makes decision Diverse group of organization members makes decision Decision-Making Process Comparatively infrequent contact, relationship of relatively short duration Relatively enduring and complexCustomer Relations Product passes through a number of intermediate links en route to consumer Relatively short, direct channels to market Distribution Emphasis on advertisingEmphasis on personal sellingPromotion List pricesCompetitive bidding for unique items, list prices for standard items Price Standardized form, service important but less than for business products Relatively technical in nature, exact form often variable, accompanying services very important Product CONSUMER MARKETINGBUSINESS-TO-BUSINESS MARKETING

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Components of the Business Market 1.Commercial market 2.Trade industries 3.Government organization 4.Institutions

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. A Component of the Business Market, is a government agency we all know, the IRS. IRS buys products to provide federal tax service.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Commercial Market Largest segment of the business market. Includes all individuals and firms that acquire products to support, directly or indirectly, the production of other goods and services.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Approaches to Segmenting Business-to-Business Markets 1.Demographics 2.Customer type 3.End-use application 4.Purchasing situation

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. A Site Designed to Help Evaluate China as a B2B Market

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Characteristics That Distinguish the Business Market from the Consumer Market 1.Geographic market concentration 2.The sizes and number of buyers 3.Purchase decision procedures 4.Buyer-seller relationships

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Today’s International Marketplace Practice global sourcing, which involved contracting to purchase goods and services from suppliers worldwide which can result in substantial cost savings. Global sourcing requires companies to adopt a new mind-set; some must even reorganize their operations.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Business Market Demand Categories Derived Demand –Refers to the linkage between consumer demand for a company’s output and its purchases of business products. –Derived demand ultimately affects capital items and expense items. Joint Demand –Results when the demand for one business product is related to the demand for another business product used in combination with the first item. Volatile Demand –Derived demand creates volatility in business market demand. –Disproportionate impact of changes in consumer demand on business market demand is referred to as the accelerator principle. Inventory Adjustments

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Make, Buy, or Lease Decision Three basic options: 1.Make the good or provide the service in- house. 2.Purchase it from another organization. 3.Lease it from another organization.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Outsourcing Improves efficiency. Allows firms to concentrate their resources on their core business. It also allows access to specialized talent or expertise. Outsourcing downside: Can reduce a company’s ability to respond quickly. A major danger of outsourcing is the risk of losing touch with customers. Controversial topic with unions.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Influences on Purchase Decision Environmental Factors Organizational Factors Interpersonal Influences

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Economic Political Regulatory Competitive Technological Consideration Influence Influences on Purchase Decision Environmental Factors Organizational Factors Interpersonal Influences

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Economic Political Regulatory Competitive Technological Consideration Influence Customers’ organizational structures Policies Purchasing systems Influences on Purchase Decision Environmental Factors Organizational Factors Interpersonal Influences

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Economic Political Regulatory Competitive Technological Consideration Influence Customers’ organizational structures Policies Purchasing systems Should know who influences buying decisions: Group Individual Committees Influences on Purchase Decision Environmental Factors Organizational Factors Interpersonal Influences

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three General Categories of Business Buying Situations 1.Straight Rebuying The simplest buying situation is a straight rebuy, a recurring purchase decision in which an existing customer places a new order. 2.Modified Rebuying A purchaser is willing to reevaluate available options. The decision makers see some advantage in looking at alternative offerings. Perceived quality and cost differences can also provoke modified rebuys. 3.New-Task Buying The most complex category of business buying—first time or unique purchase situations that require considerable effort. Often requires a purchaser to carefully consider alternative offerings and vendors.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Two Analysis Tools 1.Value analysis examines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute. 2.Vendor analysis carries out an ongoing evaluation of a supplier’s performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Buying Center Concept Provides a vital model for understanding organizational buying behavior. Encompasses everyone who is involved in any aspect of its buying action. Not part of a firm’s formal organization structure.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Buying Center Roles Gatekeepers control the information that all buying center members will review. Influencers affect the buying decision by supplying information to guide evaluation of alternatives or by setting buying specifications. The decider actually chooses a good or service, although another person may have the formal authority to do so. The buyer actually has the formal authority to select a supplier and to implement the procedures for securing the good or service.