Chapter 6 Business Marketing

Business to Business Marketing Marketing Aimed at bringing about an exchange in which a product or service is sold for any use other than personal consumption.

Business Products Business Products: Chapter 6 Business Marketing Business Products The key is intended use. Business Products: Are used to manufacture other products Become part of another product Aid the normal operations of an organization Are acquired for resale without change in form Notes: A product that is purchased for personal use is considered a consumer good. If the same product is purchased for use in a business, it is a business product. The key in classification as a business product is intended use.

Business Marketing on the Internet Measuring On-Line Success Recency Frequency Monetary Value Stickiness = Frequency X Duration X Site Reach

Disintermediation Elimination of intermediaries from the distribution channel

Why do Businesses Form Relationships with Their Customers? More profitable May create competitive advantage Partnerships may create win-win situations

Strategic Alliances Licensing Distribution agreements Joint Ventures Consortia Keiretsu Alliances form between all types of companies

Major Categories of Business Customers Chapter 6 Business Marketing Major Categories of Business Customers Producers Resellers Governments Institutions OEMs, Growers, Extractors Wholesalers Retailers Federal Municipal Local Schools Hospitals Colleges Churches Unions Fraternal groups Civic Clubs Foundations Nonbusiness organizations Notes: Producers include profit-oriented organizations that use purchased goods and services to produce or incorporate into other products. Examples include construction, manufacturing, transportation, finance, real estate, and food service firms. The reseller market includes retail and wholesale businesses that buy finished goods to resell at a profit. Government organizations include thousands of federal, state, and local buying units. This may be the largest single market for goods and services in the world. The U.S. federal government, buying goods and services valued at over $590 billion a year, is the world’s largest customer. Institutions do not have the standard business goals of profit, market share, and return on investment. Includes schools, hospitals, colleges and universities, churches, labor unions, fraternal organizations, civic clubs, foundations, and other nonbusiness organizations. Discussion/Team Activity: Access the Web site http://www.cbd-net.com Discuss the information provided on this Web site that helps organizations do business with the federal government.

Industry Classification Chapter 6 Business Marketing NAICS NAICS A detailed numbering system developed by the U.S., Canada, and Mexico to classify North American business establishments by their main production processes. North American Industry Classification System Notes: The North American Industry Classification Systems, introduced in 1997, is a joint development by the United States, Canada, and Mexico to provide a common industry classification system for NAFTA partners.

NAICS Number, size, and geographic dispersion of firms Chapter 6 Business Marketing NAICS Provides a common industry classification system Valuable tool for marketers in analyzing, segmenting, and targeting markets Data can be used to determine: Number, size, and geographic dispersion of firms Market potential / market share estimates Sales forecasts New customer identification Notes: The information shown on this slide describes the usefulness of NAICS for marketers. For example, if a supplier understands the needs of a few firms within a classification, the needs can be projected to all firms in the category. This information can be converted into market potential, market share estimates, and sales forecasts. Discussion/Team Activity: Discuss how NAICS information can be used for other marketing applications.

What Makes Business Markets Different From Consumer Markets? Demand Derived Demand Inelastic Demand Joint Demand Fluctuating Demand Purchase Volume Number of Customers Location of Buyers Use of Leasing Primary Promotional Method

Types of Business Products Chapter 6 Business Marketing Types of Business Products Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services Online: Sysco What kind of business product does Sysco provide its customers? What do you think is Sysco’s largest category of business customers? Are there indications on the site that Sysco sells direct to customers? Notes: Major equipment: capital goods such as large or expensive machines, airplanes, buildings. Depreciated over time, often custom-designed. Personal selling is an important marketing strategy. Accessory equipment: Less expensive and shorter-lived than major equipment, includes fax machines, personal computers, power tools. Often charged as an expense. Often standardized and purchased by more customers. Advertising is an important promotional tool. Raw materials: Unprocessed products, such as minerals, timber, wheat, corn, fish. Become part of finished products. Personal selling is the marketing mix component used, distribution channels usually direct from producer to business user. Component parts: Finished items ready for assembly or that need very little processing. Examples are tires and electric motors. Two important markets for component parts: original equipment manufacturer (OEM) and replacement market. Processed materials are used directly in manufacturing other products. Sheet metals, chemicals, and lumber. Do not retain their identity in final products. Price and service are important factors in choosing a supplier. Supplies are consumable items that do not become part of the final product. Short lives and inexpensive. Generally fall into categories of maintenance, repair, or operating supplies (MRO), and include such items as detergents, pencils, paper, etc. Business services are expense items that do not become part of the final product. This includes janitorial, advertising, legal, management consulting, marketing research, and maintenance services. Online http://www.sysco.com

Buying Centers Buying Center Influencers Users Gatekeepers Deciders This slide relates to the material on pp. 134-136. Instructor’s Note: This slide corresponds to Exhibit 6-2 on p. 136 and Transparency 54. See also Overhead 67. Buying Center Influencers Users Gatekeepers Deciders Purchasers Summary Overview Organizations differ from individual consumers in relation to buying behavior in some important ways. One of them is the fact that organizations use professional buyers or purchasing managers who specialize in buying activities for their employers. Further, organizations are characterized by multiple buying influences -- which means that several people share in making a purchase decision. When marketing to organizations, it is useful to think of these influences as buying centers. Buying Centers Users. These are the people who will actually use the product. They may be production workers or support staff. Influencers. These are people whose expertise is used to help determine which products are needed. Influencers are often technical people who help write specifications for suppliers to meet. Buyers. These are the purchasing managers who are responsible for working with suppliers and arranging for the terms of the sale. Deciders. These are the people in the organization who have the power to select or approve the supplier. Gatekeepers. These are people in key positions in the organization who control the flow of information. Gatekeepers can include receptionists, secretaries, researchers, and others who the marketer must “go through” to reach other members of the buying center. Teaching Tip: Point out to students the importance of establishing a good rapport with gatekeepers when selling or marketing to organizations. It is crucial that students understand that marketing is concerned with every contact, not just with the purchasing manager. Exhibit 6-2 6-4

Evaluative Criteria Product Quality Price Related Services Bottom Line Delivery & Inventory

Buying Situations New Buy Modified Rebuy Straight Chapter 6 Business Marketing New Buy A situation requiring the purchase of a product for the first time. Modified Rebuy A situation where the purchaser wants some change in the original good or service. Straight A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.