Chapter 6 Business-to-Business Markets: How and Why Organizations Buy.

Chapter 6

Business-to-Business Markets:How and Why

Organizations Buy

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall6-2

Chapter Objectives

Define business-to-business (B2B) markets Describe the characteristics of B2B markets that

differ from C2B markets Explain the unique aspects of B2B markets Describe how marketers classify B2B customers Identify different business buying situations Identify and discuss the stages in the business

buying decision process Understand the Internet’s role in B2B settings


Real People, Real Choices: Decision Time at NCR Corporation

Which option should NCR pursue in order to market the new generation of point of sale workstations effectively? – Option 1: Attend the trade show as in the past– Option 2: Skip the show this year and

reallocate resources to other alternatives– Option 3: Forego the show this year and find

out if the venue and sponsorship changes are real


Business Markets: Buying and Selling When Stakes Are High

Business-to-business marketing: The marketing of goods and services that businesses and other organizations buy for purposes other than personal consumption– Business-to-business (organizational)

markets include manufacturers, wholesalers, retailers, and other organizations such as hospitals, and government


Characteristics That Make a Difference in Business Markets

Business markets differ from consumer markets in several ways:– Multiple buyers are involved– Fewer organizational customers exist– Order quantities and cost are much larger– Business customers are more geographically

concentration These differences make B2B marketing

more complex


Business-to-Business Demand

Business-to-business demand differs from consumer product demand, because demand is:– Derived– Inelastic– Fluctuating– Joint



Derived demand:– Demand for organizational products is

caused by demand for consumer goods• Example: demand for rubber is caused by

demand for tires, sneakers, and other products that have rubber as a component

Inelastic demand:– Changes in price have little or no effect on

the amount demanded



Fluctuating demand: – Small changes in consumer demand create

large increases or decreases in business demand

– Life expectancy of the product can cause fluctuating demand

Joint demand: – Demand for two or more goods used together

to create a product


Types of Business-to-Business Customers

Producers: – Individuals or firms that purchase products for

use in the production of other goods and services

• Example: Dell buys RAM chips for integration into their PCs

Resellers: – Individuals or firms that buy goods for

reselling, renting, or leasing


Types of Business-to-Business Customers

Organizations: Government markets– Federal, state, county, and local governments that

buy goods and services to carry out public objectives and to support their operations

Organizations: Not-for-profit firms– Organizations with charitable, educational,

community, and other public service goals that buy goods and services to support their functions and to attract and serve their members


North American Industry Classification System

Marketers use the North American Industry Classification System (NAICS) to identify their customers and to find new customers– NAICS is a numerical coding of industries in

the United States, Canada, and Mexico


Business Buying Situations

Buy class framework– Identifies the degree of effort a firm needs to

collect information and make a decision

Three buy classes:– Straight rebuy – Modified rebuy– New-task buy


The Professional Buyer

Trained professional buyers typically carry out buying in business-to-business markets:– Purchasing agents – Procurement officers – Directors of materials management


The Buying Center

The group of people in an organization who participate in a buying decision – Initiator– User– Gatekeeper– Influencer– Decider– Buyer


Business Buying Decision Process Step 1: Problem Recognition

Recognition often stems from – A need to replace outdated equipment– Changes in technology – Marketing communications

Actions resulting from problem recognition include:– Initiation of a purchase requisition or request– Formation of a buying center


Business Buying Decision Process Step 2: Information Search

In this stage, buying center members:– Search for information about products and

suppliers– Develop product specifications

• Written descriptions of the quality, size, weight, color of the item to be purchased

– Identify potential suppliers and obtain proposals


Business Buying Decision Process Step 3: Evaluate the Alternatives

The buying center assesses proposals– Price is a primary consideration

• Evaluations include discount policies, returned-goods policies, cost of repair, terms of maintenance, cost of financing, etc.

– Other factors may be considered, such as extra services or other perks

– Customer reference programs, product demos, and presentations can help sell the marketer’s products to firms


Business Buying Decision Process Step 4: Select the Product and Supplier

Single sourcing: – Business practice of buying a particular

product from only one supplier

Multiple sourcing: – Buying from several different suppliers

Reciprocity: – Trading partnership in which two firms agree

to buy from one another


Business Buying Decision Process Step 4: Select the Product and Supplier

Outsourcing: – Obtaining vendors to provide goods/services

that might otherwise be supplied in-house Crowdsourcing:

– Via a formal network, firms use expertise from around the globe to solve a problem

Reverse marketing: – Buyers try to find capable suppliers and “sell”

their purchase to the suppliers


Business Buying Decision Process Step 5: Postpurchase Evaluation

Organizational buyers assess whether the performance of the product and the supplier live up to expectations– Users are surveyed to determine satisfaction– Producers may also research ultimate

consumer satisfaction with the final product– Changes in demand are analyzed– Supplier performance is documented


Business-to-Business E-Commerce

B2B E-Commerce:Internet exchanges between two or more businesses– Includes exchanges of information, products,

services, and payments– Allows business marketers to link to suppliers,

factories, distributors, and their customers– B2B Internet site provides technical support,

item/order status information, and customer service


Intranets, Extranets, and Private Exchanges

Intranets– Link a firms’ departments, employees, and

databases Extranets

– Allow authorized suppliers, customers, and other outsiders to access the firm’s intranet

Private exchanges – Link an invited group of suppliers and

partners over the Web


The Dark Side of B2B Commerce

Hackers threaten security– Customer credit card number theft– May destroy firm records or steal trade

secrets– Authenticating transactions is critical

Well-meaning employees can be security threats when careless with their passwords


The Dark Side of B2B Commerce

Most firms safeguard e-commerce transactions using firewalls and encryption– Firewalls are hardware and software that

ensure only authorized individuals gain entry to a computer system

– Encryption software scrambles a message so only another individual (or computer) with the right key can unscramble it


Real People, Real Choices: Decision Made at NCR Corporation

Brad chose option 2– NCR’s retail division passed on the trade show and

reallocated its resources to two smaller events– Implementation: Event A drew a solid number of

prospects, and NCR increased the quality and length of interactions with booth visitors. Event B did not draw the expected number of attendees

– Measuring success: # of attendees, # of interactions, total cost, cost per attendee and interaction, and # captured leads


Keeping It Real: Fast-Forward to Next Class Decision for NutriSystem

Meet Thomas Connerty, Chief Marketing Officer for NutriSystem

NutriSystem experienced tremendous growth as a result of their 28-day weight loss program among women

The decision to be made: Should NutriSystem actively target the male market?


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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Chapter 6 Business-to-Business Markets: How and Why Organizations Buy.

Documents

business demand business

business demand derived

business marketing

business b2b markets

different business

types of business

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consumer demand