Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 6 Business-to- Business (B2B) Marketing.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter 6Chapter 6

Business-to-Business-to-Business (B2B) Business (B2B)

MarketingMarketing

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Chapter ObjectivesChapter Objectives1. Explain each of the components of the business-to-

(B2B) market.2. Describe the major approaches to segmenting

business-to-business (B2B) markets.3. Identify the major characteristics of the business market

and its demand.4. Discuss the decision to make, buy, or lease5. Describe the major influences on business buying

behavior.6. Outline the steps in the organizational buying process.7. Classify organizational buying situations.8. Explain the buying center concept.9. Discuss the challenges of and strategies for marketing

to government, institutional, and international buyers.

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Nature of the Business MarketNature of the Business Market

Business-to-Business MarketingBusiness-to-Business Marketing: organizational sales and purchase of goods and services to support production of other goods and services for daily company operations or for resaleB2BB2B: a popular acronym for the

business-to-business market

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Business-to-Business Marketing Consumer-Goods Marketing

Product Relatively technical in nature, exact form often variable, accompanying services very important

Standardized form, service important but less than for business products

Price Competitive bidding for unique items, list prices for standard items

List prices

Promotion Emphasis on personal selling Emphasis on advertising

Distribution Relatively short, direct channels to market

Product passes through a number of intermediate links en route to consumer

Customer Relations

Relatively enduring and complex Comparatively infrequent contact, relationship of relatively short duration

Decision-making process

Involvement of diverse group of organization members in decision

Individual or household unit makes decision

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Components of the Business Market Components of the Business Market Commercial MarketCommercial Market: Individuals and

firms that acquire goods and services to support, directly or indirectly, production of other goods and services

Trade IndustriesTrade Industries: Retailers and wholesalers who purchase goods for resale to others.ResellerReseller: often used to describe the

wholesalers and retailers that operate in the trade sector

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Government OrganizationsGovernment OrganizationsInclude domestic units of federal, state, local and foreign governments

InstitutionsInstitutionsIncludes a wide variety of organizations, both public and private, such as hospitals, churches, universities, museums, and not-for-profit agencies.

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B2B Market – The Internet ConnectionB2B Market – The Internet ConnectionInternet plays an important role in B2B

marketing90 percent of all Internet sales are B2B

transactions

Differences in Foreign Business MarketsDifferences in Foreign Business MarketsMust be willing to adapt to local customs

and business practices

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Segmenting B2B MarketsSegmenting B2B Markets

Demographic SegmentationDemographic Segmentation: demographic characteristics define the useful segmentation criteria for business markets

Customer-Based SegmentationCustomer-Based Segmentation: dividing a B2B market into homogenous groups based on buyers’ product specificationsNorth American Industrial

Classification System (NAICS)

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Segmentation by End-Use ApplicationSegmentation by End-Use Application: segmenting a business-to-business market based on how industrial purchasers will use the product

Segmentation by Purchase CategoriesSegmentation by Purchase CategoriesCenters on the purchasing situationOrganizations may use complicated

purchasing proceduresFirms also structure their purchasing

functions in specific ways (e.g. centralized purchasing departments)

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Characteristics of the B2B MarketCharacteristics of the B2B Market

Geographic Market ConcentrationGeographic Market ConcentrationU.S. business market is more geographically concentrated than the consumer marketManufacturers concentrate in certain

regions of the countryCertain industries locate in particular

areas to be close to their customers

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Sizes and Numbers of BuyersSizes and Numbers of BuyersBusiness market features a limited number of buyersUse statistical information to estimate the

size and characteristics of business markets is available

Federal government is largest single source of such statistics

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The Purchase Decision ProcessThe Purchase Decision ProcessBusinesses must understand the dynamics of the organizational purchasing processB2B suppliers often must work with

multiple buyersDecision-makers at several layers may

influence final ordersProcess is more formal and professional

than with consumers

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Buyer-Seller RelationshipsBuyer-Seller RelationshipsMore intense than consumer relationshipsRequire better communication among

the organizations’ personnelPrimary goal to provide advantages

that no other seller can, for instance:Lower-pricesQuicker deliveryBetter quality and reliabilityCustomized product featuresMore favorable financing terms

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Evaluating International Business MarketsEvaluating International Business MarketsBusiness purchasing patterns often differ from one country to the nextCompanies must weigh quantitative and

qualitative dataGlobal sourcing: purchasing goods and

services from suppliers worldwide

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The Make, Buy, or Lease DecisionThe Make, Buy, or Lease Decision

Three Basic Options:Three Basic Options:Make the good or provide the service

in-housePurchase it from another organizationLease it from another organization

The Rise of Outsourcing The Rise of Outsourcing Using outside vendors to produce

goods and services formerly produced in-house

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The Business Buying ProcessThe Business Buying Process

Influences on Purchase Decisions:Environmental FactorsOrganizational Factors

Multiple Sourcing: purchasing from several vendors

Interpersonal Influences

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The Role of the Professional BuyerThe Role of the Professional BuyerProfessional buyer (merchandisers):

technically qualified employees who are responsible for securing needed products at the best possible prices

Systems integration: Centralization of the procurement function within an internal division or as a service of an external supplierCategory Captain

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Stage 1: Anticipate or recognize a problem/need/opportunity and a general solution

Stage 2: Determine the characteristics and quantity of a needed good or service

Stage 3: Describe characteristics and the quantity of a needed good or service

Stage 4: Search for and qualify potential sources Stage 5: Acquire and analyze proposals Stage 6: Evaluate proposals and select suppliers Stage 7: Select an order routine Stage 8: Obtain feedback and evaluate performance

Model of the Organizational Buying ProcessModel of the Organizational Buying Process

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Classifying Business Buying Classifying Business Buying Situations Situations Straight rebuyingModified rebuyingNew-Task buyingReciprocity

Analysis ToolsAnalysis ToolsValue analysisVendor analysis

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The Buying Center ConceptThe Buying Center Concept

Participants in an organizational buying actionBuying center roles played by

various participants in the purchase decision process include:UsersGatekeepersInfluencersDeciderBuyer

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International Buying CentersInternational Buying CentersTheir members are often more

difficult to identify May include more participants than

buying centers in U.S. firms Team SellingTeam Selling

IIntroducing other associates in addition to salespeople into selling situations to reach all members of a customer’s buying center

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Developing Effective Business-To-Developing Effective Business-To-Business Marketing StrategiesBusiness Marketing Strategies

Challenges of Government MarketsChallenges of Government MarketsGovernment purchasing procedures

Bids: written sales proposals from vendor

Specifications: written descriptions of needed goods or services

Online with the federal government

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Challenges of Institutional MarketsChallenges of Institutional MarketsWidely diverse buying practicesMultiple buying influences may affect

decisionsGroup purchasing is an important factor

Challenges of International MarketsChallenges of International MarketsWidely diverse attitudes and cultural patternsLocal industries, economic conditions,

geographic characteristics and legal restrictions also must be consideredRemanufacturing