1. CHAPTER 6 Business-to-Business Markets: How & Why Organizations Buy M A R K E T I N G Real People, Real Choices

2. 6-2 Chapter Objectives Describe the general characteristics of business-to-business markets Explain the unique characteristics of business demand Describe how business or organizational markets are classified Explain the business buying situation and describe business buyers

3. 6-3 Chapter Objectives Explain the roles in the business buying center Understand the stages in the business buying decision process Understand the growing role of B2B e- commerce

4. 6-4 Business-to-Business Marketing Marketing of goods & services that businesses & organizations buy for purposes other than personal consumption –Manufacturers –Wholesalers –Retailers –Government agencies –Hospitals

5. 6-5 Business Markets Generally, the same principles hold for business & consumer customers There are characteristics that make B2B buying more complex –Multiple Buyers –Number of customers –Size of purchases –Geographic concentration

6. 6-6 B2B Demand Characteristics Derived Demand Inelastic Demand Fluctuating Demand Joint Demand

7. 6-7 Derived Demand A business’ demand for goods & services comes from consumer demand –Can be direct or indirect –For example, demand for education impacts demand for forestry products

8. 6-8 Inelastic Demand Inelastic demand means that business customers buy the same quantity whether the price goes up or down Example: A BMW Z4 Roadster 3.0i has a list price starting at just over $55,000. If the price of tires, batteries, or stereos goes up or down, BMW still must buy enough to meet consumer demand for the Z4

9. 6-9 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 have a ripple effect through several related businesses

10. 6-10 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

11. 6-11 B2B Classifications Producers –purchase products to produce others Resellers –purchase finished goods for resale Governments –competitive bids/proposals Not-for-profit organizations

12. 6-12 The Nature of Business Buying The Buying Situation The Professional Buyer The Buying Center

13. 6-13 The Buying Situation A buy class framework identifies the degree of effort required of the firm’s personnel to collect information & make a purchase decision Straight rebuy Modified rebuy New task buying

14. 6-14 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 & delivery charges, accessory products or supplies, maintenance, disposal costs, etc. Large firms practice centralized purchasing - one department does all buying

15. 6-15 The Buying Center Group of people in the organization who participate in the decision-making process May include production workers, supervisors, engineers, secretaries, shipping clerks, & financial officers

16. 6-16 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/expertise Decider makes the final decision Buyer executes the purchase

17. 6-17 Considerations in Supplier Selection On-time deliveries –JIT delivery Single sourcing vs. multiple sourcing –Number of suppliers for a product Outsourcing Reverse marketing –Buyer searches for suppliers who will produce according to specifications

18. 6-18 Electronic B2B Commerce Internet exchanges between two or more businesses or organizations Allows marketers to link directly to suppliers, factories, distributors, and their customers –Walmart: Electronic Data Interchange Reduces time necessary to order and deliver goods, track sales, and get feedback