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Chapter 7: Business-to-Business Marketing

business-to-business marketing
organizational sales and purchases of goods and services to support production of other products, facilitation daily company operations, and resell
product in b2b vs consumer marketing
b2b – relatively technical in nature; exact form often variablel accompanying services very important
consumer – standardized form; service important but less than for business products
promotion in b2b vs consumer marketing
b2b – emphasis on personal selling
consumer – emphasis on advertising
distribution in b2b vs consumer marketing
b2b – relatively short, direct channels to market
consumer – product passes through a number of intermediate links en route to consumer
customer relations in b2b vs consumer marketing
b2b – relatively enduring and complex
consumer – comparatively infrequent contact; relationship of relatively short duration
decision-making process in b2b vs consumer marketing
b2b – diverse group of organization members make decisions
consumer – individual or household unit makes decision
price in b2b vs consumer marketing
b2b – competitive bidding for unique items; list prices for standard items
consumer – list prices
commercial market
individuals and firms that acquire products to support, directly or indirectly, production of other goods and services; largest segment of the business market
trade industries
retailers and wholesalers (resellers) that purchase products for resale to other
resellers
marketing intermediaries that operate in the trade sector
government
domestic units of government including federal, state, local, and foreign government
segmentation of b2b markets
helps marketers develop a strategy that best suits a particular segment’s needs
segmented by demographic characteristics, customer type, end-use application, and purchase categories
segmentation by demographic characteristics
firms can be grouped by size, based on sales revenues or number of employees
segmentation by customer type
dividing a b2b market into homogeneous groups based on buyers’ product specifications
north american industry classification system (NAICS)
classification used by NAFTA countries to categories the business marketplace into detailed market segments
segmentation by end-use application
the division of a b2b market based on how industrial purchasers will use the product
segmentation by purchase categories
dividing a b2b market by the organizational buyer characteristics such as whether it’s the customer’s first order or is a valued client
customer relationship management (CRM)
combination of strategies and tools that drives relationship programs, reorienting the entire organization to a concentrated focus on satisfying customers
characteristics that distinguish the b2b market from the comsumer market
geographic market concentration
size and number of buyers
purchase decision process
buyer-seller relationship
geographic market concentration characteristic
US business market is more concentrated than the consumer market
certain industries locate in particular areas to be close to customers
business markets are becoming less geographically concentrated because of the internet
size and number of buyers characteristic
business market has limited number of buyers
many buyers in limited-buyer markets are large organizations
trade associations and business publications provide additional information on the business market
purchase decision process characteristic
suppliers who serve b2b markets must work with multiple buyers
more formal and professional than the consumer purchasing process
purchasers in b2b markets require a longer time frame because they involve more complex decisions
buyer-seller relationship
b2b relationships are more complex than consumer relationship
require superior communication among the organzations’ personnel
involve developing long-term, value-added customer relationships
relationship with not-for-profit organizations is important
global sourcing
purchasing goods and services from suppliers worldwide
requires companies to adopt a new mindset and some must even reorganize their operations
business market demand categories
derived demand
volatile demand
joint demand
inelastic demand
inventory adjustments
derived demand
demand for a resource that results from demand for the goods and services produced by that resource
two general categories of business products that derived demand affects
capital items
expense items
capital items
long-lived business assets that must be depreciated over time
expense items
items consumed within short periods of time
volatile demand
derived demand creates volatility in business market demand
joint demand
demand for a product that depends on the demand for another product used in combination with it
inelastic demand
demand that, throughout an industry, will not change significantly due to a price change
inventory adjustments
adjustments in inventory and inventory policies can also affect business demand
just-in-time (JIT) inventory policy
practices that seek to boost efficiency by cutting inventories to absolute minimum levels and by requiring vendors to deliver inputs as the production process needs them; can lead to sole sourcing
sole sourcing
purchasing a firm’s entire stock of an item just for one vendor
JIT II
leads suppliers to place representatives at the customer’s facility to work as part of an integrated, on-site customer-supplier team
the make, buy, or lease decision
firms acquiring finished goods can either make the good or provide the service in house, purchase the good from another organization, or lease the good from another organization
offshoring
movement of high-wage jobs from one country to lower-cost overseas locations
nearshoring
movement of jobs to vendors in countries close to the business’s home country
outsourcing
using outside vendors to provide goods and services formerly produced in house
reasons include cost reduction, quality and speed of software, and greater value
influences on purchase decisions
environmental factors
organizational factors
interpersonal factors
environmental factors
economic, political, regulatory, competitive, and technological considerations influence business buying decisions
organizational factors
structures and policies influence business buying decisions
multiple sourcing
purchasing from several vendors
interpersonal factors
individuals and committees influence b2b buying decisions
merchandisers
trade sector buyers who secure needed products at the best possible prices
functions of a merchandising unit
determining needs
locating and evaluating alternative suppliers
making purchasing decisions
systems integration
centralization of procurement function within an internal division or as a service of an external supplier
category advisor (captain)
trade industry vendor who develops a comprehensive procurement plan for a retail buyer
organizational buying process stages
anticipate or recognize a problem/need/opportunity and a general solution
determine the characteristics and quantity of a needed good or service
describe characteristics and the quantity of a needed good or service
search for and qualify potential sources
acquire and analyze proposals
evaluate proposals and select suppliers
select an order routine
obtain feedback and evaluate performance
classification of business buying situations
straight rebuy
modified rebuy
new-task buy
reciprocity
straight rebuy
recurring purchase decision in which a customer repurchases a good or service that has performed satisfactorily in the past
modified rebuy
situation in which a purchaser is willing to reevaluate available options for repurchasing a good or service
new-task buying
first-time or unique purchase situation that requires considerable effort by decision makers
reciprocity
buying from suppliers who are also customers
types of analysis tools
value analysis
vendor analysis
value analysis
systematic study of the components of a purchase to determine the most cost-effective approach
vendor analysis
assessment of supplier performance in categories such as price, back orders, timely delivery, and attention to special requests
buying center
participants in an organization buying decision
buying center roles
user
gatekeeper
influencer
decider
buyer
user
individual or group that actually uses a business good or service
gatekeeper
person who controls the information that all buying center members will review
influencer
technical staff who affect the buying decision by supplying information to guide evaluation of alternatives or by setting buying specifications
decider
person who chooses a good or service, although another person may have the formal authority to complete the sale
buyer
person who has the formal authority to select a supplier and to implement the procedures for securing a good or service
characteristics of 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 that US companies involve
challenges of government markets
purchases typically involve dozens of interested parties
purchases are influenced by social goals
contractual guidelines are an important influence in selling to government markets
types of contracts government buys products under
fixed-price contracts
cost-reimbursement contracts
fixed-price contracts
buyer and seller agree to a set price before finalizing the contract
cost-reimbursement conracts
the government pays the vendor for allowable costs, including profits, incurred during the performance of the contract
challenges of institutional markets
widely diverse buying practices
multiple buying influences can affect buying decisions
group purchasing
diverse practices
institutional buyers
wide variety of organizations such as schools, hospitals, libraries, foundations, clinics, churches, and not-for-profit agencies
challenge of international markets
must consider buyers’ attitudes and cultural patterns
must consider local industries, economic conditions, geographic locations, and legal restrictions
remanufacturing
efforts to restore older products to like-new conditions

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