chapter 6 business-to-business (b2b) markets: how and why organizations buy
TRANSCRIPT
Chapter 6Chapter 6
Business-to-Business (B2B) Markets:How and Why
Organizations Buy
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Chapter ObjectivesChapter Objectives1. Explain each of the components of the business
market.
2. Describe the major approaches to segmenting business-to-business (B2B) markets.
3. Identify the major ways the business market differs from the consumer market.
4. Classify organizational buying situations.
5. Discuss the Pro’s and Con’s of making products in-house versus Outsourcing
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B2B MARKETINGB2B MARKETING
B2B Marketing - Marketing of products either for use in producing a product or for usage in conducting business to:
1. Companies (ex: Paper to Office Depot or Winthrop University)
2. Government Organizations (ex: The Navy)3. Institutions (ex: CMC Hospitals)4. Non-Profit Organizations (ex: American Red
Cross)5. Retailers and Wholesalers (ex: Polo shirts)
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HOW BUSINESS TO BUSINESS (B2B) DIFFERS HOW BUSINESS TO BUSINESS (B2B) DIFFERS FROM BUSINESS TO CONSUMER (B2C)FROM BUSINESS TO CONSUMER (B2C)
1. Customers are Other Businesses, rather than consumers
2. A much smaller number of Larger customers
3. Stronger Buyer-seller Relationships (personal selling) THE MOST important aspect of B2B Marketing
4. Stricter performance standards for products demanded by businesses – the stakes are often higher! (ex: Software for airplanes vs. software for Madden 2010)
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HOW BUSINESS TO BUSINESS (B2B) DIFFERS HOW BUSINESS TO BUSINESS (B2B) DIFFERS FROM BUSINESS TO CONSUMER (B2C)FROM BUSINESS TO CONSUMER (B2C)
5. More complicated purchasing decisions – large # of buyers involved & longer time to make decisions
6. Success is dependent upon other companies’ ability to market (ex: Lucky Brand Jeans)
7. The demand for a company’s products comes from the demand for their customer’s products = “Derived Demand”Sony can’t sell Sony TV’s to Best Buy if
customers don’t want to buy their TV’s from Best Buy!
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B2B Derived DemandB2B Derived Demand
Demand for certain products is caused by demand for other products
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Advertising Aimed Mainly at Business Buyers May Often Appear to Be Consumer Advertising
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TYPICAL BUSINESS TO BUSINESS TYPICAL BUSINESS TO BUSINESS GOODS AND SERVICES INCLUDE:GOODS AND SERVICES INCLUDE:
RAW MATERIALS COMPONENT OR OEM PARTS (Part of a completed
product) ACCESSORY EQUIPMENT (Tools) CAPITAL EQUIPMENT (Machinery) MRO ITEMS (Operating supplies) FINISHED GOODS
Q. Provide an Example for each of these
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B2B and B2C….for SaltB2B and B2C….for Salt
Business marketing Business Marketing Consumer Marketing
McDonalds
Salt is added to fries
You
Salt mine Morton’s Salt Harris-Teeter
Salt is sold in
shakers
Salt is mined Salt is processed into food-grade or industrial grade salt
General Foods
Salt is added to
frozen dinners
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Business to Business (B2B) Marketing in Business to Business (B2B) Marketing in YOUR WORLDYOUR WORLD
For the last Fast Food restaurant you ate in….
Q1. Who was the Business to Consumer (B2C) marketer?
Q2. Who was the B2C Consumer?
Q3. What Business to Business (B2B) marketing may have taken place?
Q4. Who were the B2B customers?
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Business to Business (B2B) Marketing in Business to Business (B2B) Marketing in YOUR WORLDYOUR WORLD
For the shirt you are wearing today….
Q1. Who was the Business to Consumer (B2C) marketer?
Q2. Who was the B2C Consumer?
Q3. What Business to Business (B2B) marketing may have taken place?
Q4. Who were the B2B customers?
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Business to Business (B2B) Marketing in Business to Business (B2B) Marketing in YOUR WORLDYOUR WORLD
For the textbook you (hopefully) have sitting on your desk….
Q1. Who was the Business to Consumer (B2C) marketer?
Q2. Who was the B2C Consumer?
Q3. What Business to Business (B2B) marketing may have taken place?
Q4. Who were the B2B customers?
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Business to Business (B2B) Marketing in Business to Business (B2B) Marketing in YOUR WORLDYOUR WORLD
For the car you or someone you know bought….
Q1. Who was the Business to Consumer (B2C) marketer?
Q2. Who was the B2C Consumer?
Q3. What Business to Business (B2B) marketing may have taken place?
Q4. Who were the B2B customers?
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One More Big Reason to Care about B2B One More Big Reason to Care about B2B MarketingMarketing
College students generally land jobs in B2C marketing while….
College GRADUATES generally land jobs in B2B marketing…Greater skill requirements (marketing,
analytical, and people skills) + Greater responsibility ($/sale and total sales) =
Greater challenge and Greater PAY!
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B2B Marketing B2C MarketingProduct Relatively technical in nature,
accompanying services very important. Often is a product eventually marketed B2C
Service important but less than in B2B
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. Most important aspect of B2B Marketing
Important, but comparatively less contact & relationship generally shorter
Decision-making process
Involvement of diverse group of organization members in decision
Individual or household unit makes decision
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Figure 6.1Figure 6.1Differences Between Organizational and Differences Between Organizational and
Consumer MarketsConsumer Markets
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North American Industry North American Industry Classification SystemClassification System
Marketers use the North American Industry Classification System (NAICS) to identify their customers and to find new customersNAICS is a numerical coding of industries
in the United States, Canada, and Mexico
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Figure 6.4Figure 6.4North American Industry Classification SystemNorth American Industry Classification System
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Classifying Business Buying Classifying Business Buying SituationsSituations
1.1. Straight Rebuy - Straight Rebuy - Recurring purchase decision in which a customer repurchases a good or service that has performed satisfactorily in the past
2.2. Modified Rebuy- Modified Rebuy- ppurchase decision in which a purchaser is willing to reevaluate available options for repurchasing a good or service (the competition is given another shot) Bidding
3.3. New-Task Buying New-Task Buying - f- first-time or unique purchase situation that requires considerable effort by the decision Makers Bidding
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OfficeMax.comPromoting a straight rebuy
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Purchasing a business jet: a new task buy
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It’s DebatableIt’s DebatableClass Discussion QuestionClass Discussion Question
Suppose that the price of a key component used in your product has unexpectedly tripled. Think about the pros and cons of each of the following potential actions. Where do you stand?
1) Pass the price increase onto the customer
2) Absorb the price increase
3) Change vendors and purchase a lower-priced alternative part instead
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Figure Figure 6.66.6
Steps in Steps in the the
Business Business Buying Buying ProcessProcess
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Business Buying Decision Process Business Buying Decision Process Step Step 1: Recognize the Problem1: Recognize the Problem
Recognition often stems from A need to replace outdated equipmentChanges in technology Marketing communications spur action
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Business Buying Decision Process Business Buying Decision Process Step Step 2: Search for Information2: Search for Information
In this stage, buyers:Search for information about products and
suppliersDevelop product specifications - Written
descriptions of the quality, size, weight, color of the item to be purchased
Identify potential suppliers and obtain proposals
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Business Buying Decision Process Business Buying Decision Process Step Step 3: Evaluate the Alternatives3: Evaluate the Alternatives
Price is a primary considerationEvaluations include discount policies,
returned-goods policies, cost of repair, terms of maintenance, and cost of financing
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
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Business Buying Decision Process Business Buying Decision Process Step 4: Select the Product & SupplierStep 4: Select the Product & Supplier
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
Produce In-House or Outsource??
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In-House or Outsource?In-House or Outsource?
OutsourcingOutsourcing: using outside vendors to produce goods and services rather than produce them in-house
Q. What are the Advantages and Disadvantages of making products yourself vs. outsourcing?
Q. What are the Advantages and Disadvantages of outsourcing?
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Advantages of OutsourcingMay be cost effectiveAllows a firm to obtain specialized
technological expertiseFrees up the company to focus on its
core competencies
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Disadvantages of OutsourcingMany companies discover their cost
savings to be less than half the figure promised by vendors
Potential problems with suppliers who fail to deliver goods properly or provide required services
Risk of losing touch with customers
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Business Buying Decision Process Business Buying Decision Process Step Step 5: Evaluate Postpurchase5: Evaluate Postpurchase
Organizational buyers assess whether the performance of the product and the supplier live up to expectationsUsers are surveyed to determine satisfactionProducers may also research end-user
satisfaction with the final productChanges in demand are analyzed