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©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-0 Chapter 7 Why Organizations Buy: Business-to-Business Markets and B2B E-Commerce
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©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
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©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
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©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
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©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
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©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition7-5 B2B Demand Characteristics Derived Demand Inelastic Demand Fluctuating Demand Joint Demand
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©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
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©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.
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©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
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©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
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©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
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©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
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©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
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©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
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©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
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©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
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©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
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©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
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©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
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