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Chapter 7 – MC

A product is defined as a business product rather than a consumer good on the basis of its:
-Intended use, NOT physical characteristics
Business marketing does NOT include goods and services that
-Are used for personal consumption
Example of a sale that could only take place in the business market
-A librarian is purchasing new books for the school library
Both business and consumer goods
-Products are classified as either business or consumer goods, based on the intended use of the product
-Mailboxes, some are sold for business use some for personal use
The largest percentage of B to B social media spending goes towards creating
-Customer community, followed by podcasts and blogs to create thought leadership and spending on Twitter
Tools effective for B to B marketers to use for product demonstration
-Video, B to B marketers are increasingly using sites such as YouTube to boost brand awareness and demonstrate product and services
Recency
-Relates to the fact that customers who have made a purchase lately are more likely to purchase again in the near future than customers who have-not purchased for a while
Stickiness
-Is a measure of a Web site’s effectiveness and is calculated by multiplying the frequency of visits times the duration of a visit times the number of pages viewed during each visit.
-By measuring the stickiness factor of a Web site before and after a design or function change, the marketer can quickly determine whether visitors embraced the change.
Current roles of the Internet in business marketing
-Reduce costs
-Build channel partnership and trust
-Brand building and development
-Integrate online and traditional media
-DOES NOT eliminate distributors
Disintermediation
-The elimination of intermediaries such as wholesalers or distributors from a marketing channel, eliminate travel agents
Reintermediation
-The reintroduction of an intermediary between producers and users
Strategic alliance
-A cooperative agreement between business firms
-IBM and Ciso work together to provide banks with the products and services they need to manage their multiple locations
-Sharing resources
Relationship commitment
-Means that a firm believes an ongoing relationship with some other form is so important that it warrants maximum efforts at maintain it indefinitely
Trust
-The condition that exists when one partner has confidence in an exchange partners reliability and integrity
Amae
-The feeling of nurturing concern for, and dependence upon, another
-Reciprocity and personal relations contribute to Amae
Keiretsu
-A network of interlocking corporate affiliates in Japan
-Type of strategic alliance commonly found in Japan
Producer
-A particular segment of the business market includes those individuals and organizations that purchase goods and services for the purpose of making a profit,
-They achieve this goal by using purchased goods and services to make other goods, to become part of other goods, or to facilitate the daily operations of the organization
-Another commonly used name “Original equipment manufacturers”
Original equipment manufacturers (OEM)
-Another name for producers
-Includes all individuals and business that buy business goods and incorporate them into the products they produce for eventual sale to other producers or to consumers
Resellers
-Businesses that buy finished goods and sell them for profit
-Mothers Work purchases finished goods and resells them, it does not produce the goods or change their form
-Wholesale businesses that buy finished goods and resell them for profit
The US government is:
The worlds largest single customer
-The U.S. federal government is the world’s largest customer. -The other alternatives do not apply because various branches of the government have separate purchasing departments, and billions of dollars are spent on food, clothing, desks, and other standard supply items (not just military hardware).
The government business market
-Selling to states, counties, and cities can be less frustrating for both smaller and larger vendors than selling to the federal government
-One reason that selling to states, countries, and cities is less frustrating than selling to the federal government is that paperwork is typically simpler and more manageable than it is at the federal level
NAIC code for an economic Subsector
-3 digits
-Such as crop product or apparel manufacturing
Institutions
-One segment of the business market that has primary goals that differ from the ordinary business goals such as profit, market share, or return on investment
-Institutions such as schools, churches, civic clubs, and hospitals have a service or activity goals, but no profit goals and are important business market
-NOT for profit
NAICS codes
-Enhance a company’s marketing efforts
-More digits in a code, the more homogeneous the group will be
NAICS
-The North American Industry Classification System
-Industry classification system for classifying NOrth American business establishments
-Developed by the North American Free Trade Agreement partners
-Managers can use the NAISC date to identify potential new customers
Demand characteristics of business markets
-Inelastic demand
-Fluctuating demand
-Joint demand
-Derived demand
Derived demand
-The demand for consumer goods often affects the demand for business products
-The demand for business products is called derived demand because organizations buy products to be used in producing their customers products
Joint demand
-When two or more items are used in combination to produce a final product
Inelastic demand
-An increase or decrease in the price of the product will not significantly affect the demand for the product
-If they change in price causes little or no change in demand
-Paper used between hamburger patties is a fairly insignificant cost item
Multiplier effect
-The multiplier effect (accelerator principle) is a phenomenon in which a small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and equipment needed to make the consumer product.
-A small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and equipment needed to manufacture the consumer product
-Increased consumer demand leading to a larger increase in demand for manufacturing equipment to make the consumer product is known as the multiplier effect (or accelerator principle)
Purchase volume
-Business customers buy in much larger quantities than consumers
Buyers in the business market vs buyers in the consumer market
-Business customers tend to be much more geographically concentrated than consumers
-More than half of all US business consumers are concentrated in just 7 out of the 50 states
Lessor
-The firm providing the product
Direct channels
-Manufacturers market directly to users
-Much more common in business markets than in consumer markets
-The distribution structure in business marketing
Negotiation
-Commonplace in business marketing and can sometimes occur over several months
Reciprocity
-The practice of business purchasers choosing to buy from their own customers
-If a business needs a particular good or service and decides to look among its own customers for a provider of that good or service
-The normal business practice of using customers as suppliers of goods or services
Business market
-Business customers tend to be more geographically concentrated, and customers in consumer markets tend to be geographically dispersed
-The channel of distribution is most often direct for business markets than for consumer markets
-Purchasing by businesses is a more formal process than it is in consumer markets
-Business marketers tend to have far fewer customers than consumer marketers
-NOT business buying decisions are usually made independently by a purchasing agent, while consumer buying decisions are made jointly
Personal selling
-The primary promotional method for the sale of all business products
-Business sales tend to be large in dollar amounts and quantities and may require negotiation; thus they may rely heavily on the salesperson’s ability to communicate and work with the customer
Major equipment
-Business products that include such capital goods as large or expensive machines, mainframe computers, blast furnaces, generators, airplanes, and buildings
-Also called Installations
-“Baseball stadium”
Accessory equipment
-Business products that represent goods, such as portable tools and office equipment that are less expensive and shorter lived than major equipment
-Generally less expensive and tends to be purchased by a widely dispersed market
-Copying machines, personal computers, and fax machines
-Wrenches, drills, and circular saws
-A store display rack
Raw materials
-Unprocessed extractive or agricultural products, such as copper, peanuts, soybean, fruits, ore
Business products
-Raw materials
-Major equipment
-Accessory equipment
-Component parts
Component parts
-Finished items ready for assembly, or products that need very little processing before they become a part of some other product
-The two important markets for component parts are the original equipment market and the replacement market
-Roller belts that are purchased by vacuum manufactures
Processed materials
-Products that have had some processing are used directly in the producing of other products, and do not retain their identity in the final product
-Rice and flour for a No glut company, they are used to directly manufacture other products
Component parts vs processed materials
-Component parts retain their identity in the final products, processed materials do not
Supplies
-Are consumable, inexpensive, and often standardized items that do not become part of the final product
-Another name for business supplies like pens, paper, and file folders is MRO, stands for maintenance, repair, or operating supplies
Business services
-Are expensive items that do not become part of a final product, such as janitorial, advertising, or legal services
-Are functions performed by outside providers
Buying center
-The set of all persons in an organization who become involved in the purchasing process
-Is not a formal, well defined group. It is simply all the people who become involved in the purchasing process within the company, no matter what their department or position
-Refers to all those organizational members who become involved in the purchasing process
-Membership and influence in a buying center vary from company to company
-Can have more than five members.
-They are not shown on organizational charts.
-One person may assume all of the buying central roles.
-The number of people involves doing a buying center varies with the complexity and importance of the preached decision
Roles of the buying center
-Initiator, influences/evaluators, gatekeepers, decider, purchaser, and users
Gatekeeper
-The member of the buying center who regulates the flow of information
-This person can regulate who gets an appointment to meet with the other members of the buying center
Decider
-The person who has the formal or informal power to approve the buying decision
-In complex situations, it is often difficult to determine who makes the final decision
Criteria for Business to business purchases
-Quality is the most important criterion, followed by service and price
New buy
-A situation requiring the purchase of a product for the first time
-Purchase of a product or service when a new demand arises
-New need, new demand
Modified rebuy
-The situation is normally less critical and less time consuming than a new buy situation, but does require some change in the original good or service
-Normally less critical and less time consuming than a new buy, as well as a situation where the purchasers want some change in the original good or service
-The purchase of three large screen computer monitors to replace smaller monitors
Straight rebuy
-A routine purchasing situation in which the purchaser is not looking for new information or other supplies
-Leo buys coffee weekly for his espresso shop
-Purchasing contracts
Customer service
-Becoming increasingly more important business marketing strategy

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