Chapter 7 Business-to-Business Marketing

Learning Objectives
1. Identify the major types of business market customers and their massive buying power 2. Appreciate the importance of developing close buyer-seller relationships in B2B marketing. 3. Understand organizational buyers decision process 4. Appreciate the forces that influence the buying decisions of organizations.

1. Understanding B2B Marketing

Business market consists of all organizations that buy goods and services for incorporation into other goods, for consumption, for use, or for resale. In business marketing, the customers are organizations

Commercial Enterprises
Objective 1

Institutions

Governments

Types of Organizational Buyers

Commercial Customers
Manufacturers Construction companies Service firms Transportation companies

Institutional Customers Governmental Customers

Schools, colleges, universities Health-care org. Libraries Foundations Federal gov. State gov. Local gov.

Selected professional groups Wholesalers

Retailers
Objective 1

Art galleries Clinics

1) Commercial Enterprises as Customers

Characteristics:
Concentration
By size and geographically

Large number of small businesses Significant buying power Professional & grouping purchasing

Objective 1

Demand Issues
The demand for business products differs from the demand for consumer products in that demand is derived and fluctuates. In addition, B2B marketers often stimulate household consumer demand, even though they do not sell directly to consumers.

Objective 1

Demand Issues
Fluctuating: Patterns and preferences in the household market can change the demand for industrial goods Stimulating: Some industrial products must market to the ultimate consumer directly

Derived: Link between demand for industrial product and demand for consumer products

Objective 1

2) Institutions as Customers
In most cases, depending on size, the institution will employ a purchasing agent and, in large institutions, a sizable purchasing department. Group purchasing allows institutions to enjoy lower prices, improved quality, reduced administrative costs, and greater competition.

Objective 1

3) Governmental Units as Customers

Two Purchasing strategies:
Formal Advertising - the government solicits bids from appropriate suppliers. Negotiated Contract - used by the government to purchase goods and services that cannot be differentiated on the basis of price alone or when there are few potential suppliers.

Objective 1

Government Buying
Defense and Homeland Security
The Department of Defense spends a large proportion of the federal governments total procurement budget.

E-Government
E-government involves transferring traditional government operations to an integrated Internet environment for improved public sector accessibility, efficiency, and customer service.
Objective 1
10

International Business-to-Business Markets

Great opportunities But need to consider extra factors
Culture Usage Purchasing behavior Law and regulation

Objective 1

11

B2B Classification Systems

Marketers can gain valuable strategy insights by identifying the needs and requirements of different types of commercial enterprises or business customers.
The North American Industrial Classification System (NIACS) The North American Free Trade Agreement (NAFTA)

Objective 1

12

2. Developing Closer Buyer-Seller Relationships

BUYER-SELLER RELATIONSHIPS

Relationship Marketing: Marketing activities directed toward establishing and maintaining exchanges with customers

Objective 2

13

Developing Closer Buyer-Seller Relationships

Longer-term and closer relationships with fewer suppliers

Relationship Marketing: Marketing activities directed toward establishing and maintaining exchanges with customers

Closer interactions among multiple functions on both buying and selling sides

Objective 2

14

Customer Relationship Management (CRM)

80/20 Rule - 20% of the customers account for 80% of the sales CRM Systems - enterprise software applications that synthesize customer information from all of a companys contact or touch points.

Objective 2

15

Customer Relationship Management (CRM)

To develop a profitable customer strategy, special attention must be given to the following activities:
1.Acquiring the right customers. 2.Crafting the right value proposition. 3.Instituting the best processes. 4.Motivating employees. 5.Learning to retain customers.
Objective 2

16

3. The Organizational Buying Process

A problem that can be solved or opportunity captured by acquiring a specific product Triggered by internal or external forces

Objective 3

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3. The Organizational Buying Process

Organization members must determine how the problem/opportunity can be dealt with Focus on general characteristics and quantity of item

Objective 3

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3. The Organizational Buying Process

Extension of general description of need Key buying individuals enter the process

Objective 3

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3. The Organizational Buying Process

Which suppliers to consider as candidates Time invested depends on buying situation

Objective 3

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3. The Organizational Buying Process

Can occur simultaneously with suppler search when standardized items involved

Different organization members enter (engineers, consultants, etc.)

Objective 3

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3. The Organizational Buying Process

Alternate proposals analyzed One or more offers accepted

Negotiations may continue on

Objective 3

22

3. The Organizational Buying Process

Purchase specifics are developed (delivery, warranties, etc.)

Objective 3

23

3. The Organizational Buying Process

Determines future buying processes Follow through by marketer is essential!

Objective 3

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Types of Buying Situations

1. New Task
Purchase situation that result in an extensive search for information and a lengthy decision process

2. Straight Rebuy
A routine reordering from the same supplier of a product that has been purchased in the past

3. Modified Rebuy
A purchase where the buyers have experience but feel the need for reevaluating a limited alternatives
Objective 3
25

4. Major Forces Impacting Organizational Buying Decisions

1. 2. 3. 4. Environmental Forces Organizational Forces Individual Forces Group Forces

Objective 4

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1) Environmental Forces
Economic influences
Sensitivity to demand in ultimate consumer markets Global economic variations

Technological influences

Objective 4

27

2) Organizational Forces
Advancing the Customers Goals
Support firms mission and strategies

Strategic role purchasing

Aligning purchasing with corporate strategy

Organizational positioning of purchasing

Centralized vs. individual user

Objective 4

28

3) Individual Forces
Personality Rational motives vs. emotional motives Differing evaluative criteria
Specifications that organizational buyers use to compare products/services Different educational background, experiences, etc.

Objective 4

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4) Group Forces: Buying Center

Isolating the buying situation Buying center & its roles
Users Influencers Buyers Deciders Gatekeepers

Objective 4

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