CHAPTER 6Business-to-Business Markets:

How & Why Organizations Buy

M A R K E T I N GReal People, Real Choices

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Chapter Objectives

• Describe the general characteristics of business-to-business markets

• Explain the unique characteristics of business demand

• Describe how business or organizational markets are classified

• Explain the business buying situation and describe business buyers

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Chapter Objectives

• Explain the roles in the business buying center

• Understand the stages in the business buying decision process

• Understand the growing role of B2B e-commerce

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Business-to-Business Marketing

• Marketing of goods & services that businesses & organizations buy for purposes other than personal consumption– Manufacturers– Wholesalers– Retailers– Government agencies– Hospitals

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Business Markets

• Generally, the same principles hold for business & consumer customers

• There are characteristics that make B2B buying more complex

– Multiple Buyers

– Number of customers

– Size of purchases

– Geographic concentration

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B2B Demand Characteristics

• Derived Demand

• Inelastic Demand

• Fluctuating Demand

• Joint Demand

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Derived Demand

• A business’ demand for goods & services comes from consumer demand

– Can be direct or indirect

– For example, demand for education impacts demand for forestry products

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Inelastic Demand

• Inelastic demand means that business customers buy the same quantity whether the price goes up or down

• Example: A BMW Z4 Roadster 3.0i has a list price starting at just over $55,000. If the price of tires, batteries, or stereos goes up or down, BMW still must buy enough to meet consumer demand for the Z4

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Fluctuating Demand

• Small changes in consumer demand can create large increases or decreases in business demand

• Acceleration principles (multiplier effect) means that changes in consumer behavior have a ripple effect through several related businesses

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Joint Demand

• Joint demand occurs when two or more goods are necessary to create a product

• Companies try to avoid dependence on specific suppliers by dealing with multiple suppliers whenever possible

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B2B Classifications

• Producers

– purchase products to produce others

• Resellers

– purchase finished goods for resale

• Governments

– competitive bids/proposals

• Not-for-profit organizations

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The Nature of Business Buying

• The Buying Situation

• The Professional Buyer

• The Buying Center

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The Buying Situation

• A buy class framework identifies the degree of effort required of the firm’s personnel to collect information & make a purchase decision

• Straight rebuy

• Modified rebuy

• New task buying

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The Professional Buyer

• Titles: purchasing agents, procurement officers, director of materials management

• Focus on economic factors beyond the initial price of a product, including transportation & delivery charges, accessory products or supplies, maintenance, disposal costs, etc.

• Large firms practice centralized purchasing - one department does all buying

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The Buying Center

• Group of people in the organization who participate in the decision-making process

• May include production workers, supervisors, engineers, secretaries, shipping clerks, & financial officers

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Roles in the Buying Center

• Initiator begins the buying process

• User needs the product

• Gatekeeper controls the flow of information to other members

• Influencer dispenses advice/expertise

• Decider makes the final decision

• Buyer executes the purchase

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Considerations in Supplier Selection

• On-time deliveries

– JIT delivery

• Single sourcing vs. multiple sourcing

– Number of suppliers for a product

• Outsourcing

• Reverse marketing

– Buyer searches for suppliers who will produce according to specifications

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Electronic B2B Commerce

• Internet exchanges between two or more businesses or organizations

• Allows marketers to link directly to suppliers, factories, distributors, and their customers

– Walmart: Electronic Data Interchange

• Reduces time necessary to order and deliver goods, track sales, and get feedback