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CHAPTER
Business-to-Business (B2B) Marketing Chapter Objectives
4 Discuss the decision 7 Classify 1 Explain each of the components of the to make, lease, or organizational business-to-business buy. buying situations. (B2B) market. 5 Describe the major 8 Explain the buying 2 Describe the major influences on center concept. approaches to business buying 9 Discuss the segmenting B2B behavior. challenges and markets. 6 Outline the steps in strategies for 3 Identify the major the organizational marketing to characteristics of buying process. government, the business market institutional, and and its demand. international buyers.
Business-to-business (B2B) market is significantly larger than the consumer market. Example: U.S. companies spend more than $300 billion annually just for office and maintenance supplies. Example: Department of Defense budget in a recent year was $500 billion. Business-to-business (B2B) marketing Organizational sales and purchases of goods and services to support production of other products, to facilitate daily company operations, or for resale.
NATURE OF THE BUSINESS MARKET buy services, such as legal, accounting, office-cleaning, Companies also
and other services. Some firms focus entirely on business markets. Example: Caterpillar, which makes construction and mining equipment. Diverse market, everything from a box of paper clips to thousands of parts for an automobile manufacturer.
SEGMENTING B2B MARKETS marketers develop the most appropriate strategy. Segmentation helps
SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS
Grouping by size based on sales revenues or number of employees.
BUYER-SELLER RELATIONSHIPS
Often more complex than in consumer market. Greater reliance on relationship marketing.
DERIVED DEMAND
The linkage between demand for a companys output and its purchases of resources such as machinery, components, supplies, and raw materials. Example: Demand for computer microprocessor chips is derived from demand for personal computers. Organizational buyers purchase two types of items: Capital itemslong-lived business aspects that depreciate. Expense itemsitems consumed within short time periods.
VOLATILE DEMAND
Derived demand creates volatility. Example: Demand for gasoline pumps may be reduced if demand for gasoline slows.
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. Example: If lumber supply falls, then decrease in construction will affect concrete market.
INELASTIC DEMAND
Demand throughout an industry will not change significantly due to a price change. Example: Construction firms will not necessarily buy more lumber if prices fall unless overall housing demand also increases.
INVENTORY ADJUSTMENTS
Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and requiring vendors to deliver inputs as they are needed. Often use sole sourcing, buying a firms entire stock of a product from just one supplier. Latest inventory trend: JIT II, suppliers to place representatives at the customers facility to work as part of an integrated, on-site customer supplier team. Inventory adjustments are also vital to wholesalers and retailers.
THE MAKE, BUY, OR LEASE DECISIONneeded products can get them in one of three ways: Firms acquiring
Make the good or provide the service in-house. Purchase it from another organization. Lease it from another organization. Producing the item may be cheapest route, but most firms cannot make all of the products they need. Many companies purchase many of the goods they need. Companies can spread out costs through leasing.
THE BUSINESS BUYING PROCESSthan the consumer decision process. More complex
Takes place within formal organizations budget, cost, and profit considerations.
Organizational Factors
Successful marketers understand their customers organizational structures, policies, and purchasing systems. Some firms have centralized procurement, others delegate it throughout the units. Many companies use multiple sourcing to avoid depending too heavily on a sole supplier.
Interpersonal Influences
Many different people influence B2B buying decisions, sometimes as individuals and sometimes as part of a committee. Marketers must know who the influencers are and understand their priorities. Sales personnel must be flexible and have a good technical understanding of their products.
Straight Rebuying
A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. Purchaser see little reason to assess competing options. Marketers who maintain good relationships with customers can go a long way toward ensuring straight rebuys. High-quality products. Superior service. Prompt delivery.
Modified Rebuying
Purchaser willing to reevaluate available options. May occur if supplier has let a rebuy circumstance deteriorate because of poor service or delivery performance.
New-Task Buying
First-time or unique purchase situations that require considerable effort by the decision makers. Most complex category of business buying. Often requires purchaser to consider alternative offerings and vendors.
Reciprocity
Practice of buying from suppliers that are also customers. In U.S., Department of Justice and the Federal Trade Commission view reciprocity as an attempt to reduce competition.
ANALYSIS TOOLS
Value analysisexamines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute. Vendor analysisan ongoing evaluation of a suppliers performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.
THE BUYING CENTER CONCEPT Participants in an organizational buying action. Buying center
BUYING CENTER ROLES
TEAM SELLING
Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision. May include members of the seller firms own supply network in the sales situation. Example: Reseller of specialized computer applications whose clients require access to training.
Marketer must develop strategy based on particular organizations buying behavior and on the buying situation.
Government agencies make up the largest customer group in the U.S. More than 85,000 government units buy products. Purchases typically involve dozens of interested parties. Influenced by social goals, such as minority subcontracting programs. Can have either fixed-price contracts or cost-reimbursement contracts.