Download - Contemporary Marketing Ch6 Boone & Kurtz

Business-to-Business (B2B) MarketingC

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CHAPTER 6 Business-to-Business (B2B) Marketing

• 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 over

$515 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.

http://www.defenselink.mil/



NATURE OF THE BUSINESS MARKET



NATURE OF THE BUSINESS MARKET

• Companies also buy services, such as law, accounting, office-cleaning, and

other services.

• Some firms focus entirely on business markets.

• Example: Caterpillar, which makes construction and mining

equipment.

COMPONENTS OF THE BUSINESS MARKET

• Commercial market Individuals and firms that acquire products to

support, directly or indirectly, production of other goods and services.

• Trade industries Retailers or wholesalers (resellers) that purchase

products for resale to others.

• Government.

• Public and private institutions.

http://www.cat.com/



B2B MARKETS: THE INTERNET CONNECTION

• About 93 percent of all Internet sales are B2B transactions.

• Opens up foreign markets to sellers.

• Largest segment of the business market.

DIFFERENCES IN FOREIGN BUSINESS MARKETS

• May differ due to variations in regulations and cultural practices.

• Businesses must be willing to adapt to local customs and business practices

and research cultural preferences.



SEGMENTING B2B MARKETS

• Segmentation helps marketers develop the most appropriate strategy.

SEGMENTATION BY DEMOGRAPHIC

CHARACTERISTICS

• Grouping by size based on sales revenues or number of employees.

SEGMENTATION BY CUSTOMER TYPE

• Grouping in broad categories, such as by industry.

• Customer-based segmentation Dividing a business-to-business market

into homogeneous groups based on buyers’ product specifications.

• North American Industry Classification System (NAICS) Classification

used by NAFTA countries to categorize the business marketplace into

detailed market segments.



SEGMENTATION BY END-USE APPLICATION

• End-use application segmentation Segmenting a business-to-business

market based on how industrial purchasers will use the product.

• Example: A supplier of industrial gases that sells hydrogen to some

companies and carbon dioxide to others.

SEGMENTATION BY PURCHASE CATEGORIES

• Segmenting according to organizational buyer characteristics.

• Example: Whether a company has a designated central purchasing

department or each unit within the company handles its own purchasing.

• Businesses that have developed customer relationship management (CRM)

systems can segment customers in terms of the stage of the relationship

between the business and the customer.



CHARACTERISTICS OF THE B2B MARKET

GEOGRAPHIC MARKET CONCENTRATION

• Business market more concentrated than consumer market.

• Example: Companies that sell to the federal government are often

located near Washington, D.C.

• Geographic concentration decreasing as Internet technology improves.

SIZES AND NUMBER OF BUYERS

• Business market has smaller number of buyers than consumer market.

• Many buyers are large organizations, such as Boeing, which buys jet

engines.

http://www.boeing.com/



THE PURCHASE DECISION PROCESS

• Often involves multiple decision makers, is more formal, and may require

bidding and negotiations.

BUYER-SELLER RELATIONSHIPS

• Often more complex than in consumer market with a greater reliance on

relationship marketing.

EVALUATING INTERNATIONAL BUSINESS MARKETS

• Business purchasing patterns differ from country to country.

• Global sourcing Purchasing goods and services from suppliers worldwide.

• Can bring significant cost savings but requires adjustments.



BUSINESS MARKET DEMAND

• Demand characteristics vary from market to market.



DERIVED DEMAND

• The linkage between demand for a company’s output and its purchases of

resources such as machinery, components, supplies, and raw materials.

VOLATILE DEMAND

• Derived demand creates volatility; for example, demand for gasoline pumps

may be reduced if demand for gasoline slows.

JOINT DEMAND

• Demand for two products used in combination with each other.

INELASTIC DEMAND

• Demand not significantly influenced by price changes.

INVENTORY ADJUSTMENTS

• Just-in-time (JIT) inventory policies boost efficiency by cutting inventory

and requiring vendors to deliver inputs as they are needed.



THE MAKE, BUY, OR LEASE DECISION

• Firms acquiring needed products can get them in one of three ways:

• 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 RISE OF OFFSHORING AND OUTSOURCING

• Offshoring Movement of high-wage jobs from one country to lower-cost

overseas locations.

• Nearshoring Moving jobs to vendors in countries close to the business’s

home country.

• Outshoring Using outside vendors to provide goods and services formerly

produced in-house.

PROBLEMS WITH OFFSHORING AND OUTSOURCING

• Cost savings may be less than expected.

• Can raise security concerns over proprietary technology or customer data.

• Can reduce flexibility, create conflicts with unions, or negatively affect

employee morale and loyalty.



THE BUSINESS BUYING PROCESS

• More complex than the consumer decision process.

• Takes place within formal organization’s budget, cost, and profit

considerations.

INFLUENCES ON PURCHASE DECISIONS

• Environmental factors—economic, political, regulatory, competitive, and

technological considerations influence business buying decisions.

• Organizational factors—structures, policies, and purchasing systems,

which may be centralized in one office or delegated to units throughout the

organization.

• Interpersonal influences of all organizational members involved in the

buying decision.

• Concerns and procedures of professional buyers who implement systematic

buying procedures.



STAGES IN THE B2B BUYING PROCESS



CLASSIFYING BUSINESS BUYING SITUATIONS

• Business buying behavior involves degree of effort involved in the decision

and the levels within the organization in which these decisions are made.

• Straight rebuying—recurring purchase decision in which a customer

reorders a product that has satisfied needs in the past.

• Modified rebuying—purchaser willing to reevaluate available options.

• New-Task Buying—first-time or unique purchase situations that require

considerable effort by the decision makers.

• Reciprocity—practice of buying from suppliers that are also customers.

ANALYSIS TOOLS

• Value analysis—examines each component of a purchase in an attempt to

either delete the item or replace it with a more cost-effective substitute.

• Vendor analysis—ongoing evaluation of a supplier’s performance in a

variety of areas.



THE BUYING CENTER CONCEPT

• Buying center Participants in an organizational buying action.

BUYING CENTER ROLES



INTERNATIONAL BUYING CENTERS• Two distinct characteristics differentiate international buying centers:

• Marketers may have trouble identifying members of foreign buying

centers because of cultural differences in decision-making methods.

• A buying center in a foreign company often includes more participants

than U.S. companies involve.

• International buying centers can change in response to political and

economic trends.



DEVELOPING EFFECTIVE BUSINESS-TO-

BUSINESS MARKETING STRATEGIES

• Marketer must develop strategy based on particular organization’s buying

behavior and on the buying situation.

CHALLENGES OF GOVERNMENT MARKETS

• Purchases typically involve dozens of interested parties and may be

influenced by social goals.

• Contractual guidelines create another important influence in selling to

government markets.

• The government buys products under two basic types of contracts:

• Fixed-price contracts – seller and buyer agree to a set price before

finalizing the contract.

• Cost-reimbursement contracts – the government pays the vendor for

allowable costs, including profits, incurred during performance of the

contract.



GOVERNMENTS PURCHASING PROCEDURES

• Many purchases go through Government Services Agency, a central

management agency.

• By law, most federal government purchases must go through a complex

bidding process governed by the Federal Acquisition Regulation.

• Recent reforms have sped purchasing and increased flexibility.

• State and local governments follow procedures similar to federal

government.

ONLINE WITH THE FEDERAL GOVERNMENT

• Government buyers often rely on electronic commerce.

• GSA Advantage allows government buyers to make purchases

online at preferred government prices.

• Many government units lag behind the private sector in electronic

procurement procedures.

http://www.gsa.gov/

http://www.acquisition.gov/far/

http://www.gsaadvantage.gov/



CHALLENGES OF INSTITUTIONAL MARKETS

• Include schools, hospitals, libraries, foundations, and others.

• Multiple buying influences can affect buying decisions, such as conflicts

between professional staff and purchasing departments.

CHALLENGES OF INTERNATIONAL MARKETS

• Marketers must consider buyers’ attitudes and cultural patterns.

• Local industries, economic conditions, geographic characteristics, and legal

restrictions must all be considered.

• Foreign governments are also an important market.


Download - Contemporary Marketing Ch6 Boone & Kurtz

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