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Business-to-Business Markets:
How and Why Organizations Buy
Chapter Six© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Understand the characteristics of business-to-business markets, B2B market demand, and how marketers classify B2B customers
Appreciate opportunities for using e-commerce and social media in business-to-business settings
Identify and describe the different business buying situations and the business buying decision process
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Chapter Objectives
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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business Markets: Buying and Selling When the Customer is Another Firm
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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Factors That Make a Difference in Business Markets
Business-to-business demand differs from consumer product demand
Demand is:◦Derived◦Inelastic◦Fluctuating◦Joint
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business-to-Business Demand
Derived demand:◦Demand for organizational products is
caused by demand for consumer goods◦Changes in consumer trends can impact
B2B sales
Inelastic demand:◦Changes in price have little or no effect
on the amount demanded
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business-to-Business Demand
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 occurs for two or more goods
that are used together to create a product
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business-to-Business Demand
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 finished
goods for reselling, renting, or leasing
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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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 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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Types of Business-to-Business Customers
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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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North American Industry Classification System
B2B E-CommerceInternet 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 and order status information, and customer service
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business-to-Business E-Commerce and Social Media
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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Intranets, Extranets, and Private Exchanges
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
Firewalls and encryption safeguard e-commerce transactions`
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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The Dark Side of B2B Commerce
Games generate buzz and drive brand awareness
B2B marketers use social networking sites to promote themselves
Linked in is the most prominent social networking site for B2B marketers and offers several advantages
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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B2B and Social Media
http://www.youtube.com/watch?v=QzZyUaQvpdc&feature=related
Buy class framework◦Identifies the degree of effort a firm
needs to collect information and make a decision
Three buy classes:◦Straight re-buy ◦Modified re-buy◦New-task buy
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business Buying Situations and the Buying Decision Process
Trained professional buyers typically carry out buying in business-to-business markets:
◦ Purchasing agents ◦ Procurement officers ◦ Directors of materials
management
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Professional Buyers and Buying Centers
The group of people in an organization who participate in a buying decision:
◦ Initiator◦ User◦ Gatekeeper◦ Influencer◦ Decider◦ Buyer
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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The Buying Center
Factors prompting recognition:◦ Vary by buying situation
Actions resulting from problem recognition:◦Initiation of a purchase requisition or
request◦Formation of a buying center, if needed
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business Buying Decision Process Step 1: Problem Recognition
In this stage, buying center members:
◦ Search for info about products and suppliers Marketers must provide information where and
when business buyers need it
◦ Develop product specifications Written descriptions of the quality, size, weight,
color of the item to be purchased
◦ Identify potential suppliers/obtain proposals (bids)
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business Buying Decision Process Step 2: Information Search
The buying center assesses proposals:
◦Price is a primary consideration◦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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business Buying Decision Process Step 3: Evaluate the Alternatives
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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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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
Crowd-sourcing: ◦Pulling together expertise from around
the globe to work on solving a problem Reverse marketing:
◦Buyers try to find capable suppliers and “sell” their purchase to the suppliers
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Business Buying Decision Process Step 4: Select the Product and Supplier
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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Business Buying Decision Process Step 5: Evaluate Postpurchase
Metrics used by organizational buyers:
◦Satisfaction◦Quality◦Customer engagement◦Purchase intentions◦Promptness and effectiveness
of problem resolution
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Business Buying Decision Process Step 5: Evaluate Postpurchase