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MKTG Chapter 7 Notes

Marketing Management  (Jönköping University)

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Marketing Management Textbook Notes

Chapter 7, Business Marketing

LO1- What is Business Marketing?

● Marketing to individuals and organizations for all goods and services not related to
personal consumption.
● Marketing of products used to:
○ Make other products.
○ Become part of a product.
○ Help the normal operations of an organization.
● Physical characteristics of the product might be the same as those that are sold to private
consumers, but intended use is different.
● In most countries, the size of the business market exceeds that of the consumer market.
○ And often single customers can be giant.

LO2- Business Marketing on the Internet

● B2B e-commerce is the use of the internet to facilitate the flow of goods, money, and
information between businesses.
○ Way faster than traditional methods.
● B2B e-commerce has experienced explosive growth since the late 20th century.
● Large-scale movement of business online and overseas has made it more difficult to
select a target market and reach them in the best way possible.
● Companies don’t only use websites to market, but also blogs, social media accounts,
podcasts, videos, etc.
● Online marketing success can be measured in 3 ways:
○ Recency- customers who’ve recently made a purchase are likely to do so again in
the near future.
○ Frequency- helps marketers identify repeat customers.
○ Monetary value- how much business customers spend.
● Stickiness is a way to measure how engaging and effective a website is.
○ Frequency x Duration x Site reach.
○ Can help marketers measure how well a website change is received by customers,
or what needs to be tweaked to reach the desired stickiness level.
● Trends in B2B internet marketing include:
○ More and more companies are sourcing online.
○ Reintermediation.
○ Making websites more and more attractive and user-friendly.
○ RSS.
○ Customer-focused technology.

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○ Integrating online & traditional marketing.

○ Building relationships.
○ Lower costs.

LO3- Relationship Marketing and Strategic Alliances

● Relationship marketing is where companies seek to establish trusting, long-term,
mutually beneficial relationships with loyal customers.
○ Important business strategy as the competitive landscape becomes more fierce.
○ Retaining customers is easier than constantly recruiting new ones.
○ Loyal customers are typically more profitable as well.
○ Hard for competitors to copy.
○ Still rarely implemented.
● A strategic alliance is a cooperative partnership between firms.
○ Created in order to strengthen operations and better compete.
○ Can include:
■ Joint ventures.
■ Licensing/distribution agreements.
■ Partnerships.
■ R&D consortia.
○ Must be based on relationship commitment & trust.
● Businesses in many other cultures rely heavily on relationships, even if it may not be
explicitly named.
○ Best way for local companies to compete in foreign markets is often to form
strategic alliances with an established and/or native company in the foreign
market.

LO4- Major Categories of Business Customers

● Producers.
○ Also called original equipment manufacturers (OEMs).
○ Buy products to either make other products, use in their products, or facilitate
normal business operations.
● Resellers.
○ Buy finished goods and turn them for a profit.
○ Wholesalers sell to retailers, and retailers sell to consumers.
○ Business product distributors buy lots of business products and resell them to
business customers.
● Governments.
○ All governmental organizations at all levels.
○ Largest single market.
○ Usually buys based on bidding.

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● Institutions.
○ Organizations that do not seek to maximize market share and turn the most profit.

LO5- The North American Industry Classification System

● Used by the USA, Mexico, and Canada.
● Common industry classification system for NAFTA partners.
● Organizations numbered by production processes.
● Very useful for analyzing, segmenting, and targeting markets.

LO6- Business Versus Consumer Markets

● Basic marketing philosophy & principles are the same.
● Business markets have different characteristics than consumer ones, for example:
○ Business demand is derived, inelastic, joint, and fluctuating.
■ Derived FROM what customer orders.
■ The demand for a certain product is stable (inelastic) even with price
increases or decreases.
■ Sales of two products that go to the same product are linked, or joint.
■ Demand fluctuates and is less stable than for consumer markets.
○ Business clients often purchase much larger volumes.
○ Business marketers often have far fewer clients that they can give more personal
focus to.
○ Business customers all tend to be located in certain geographical hot spots.
○ Distribution channels are often shorter.
■ More direct channels and B2B.
○ More formal purchasing process.
○ More people involved in the purchasing process.
○ Negotiation is more common.
○ Reciprocity, or two firms buying and selling to one another, is common.
○ Businesses often lease very expensive items.

LO7- Types of Business Products

● 7 general categories:
○ Major equipment (capital goods, installations, expensive important items, affected
by depreciation, customized).
○ Accessory equipment (less important & cheaper goods, expense).
○ Raw materials (goods in their most natural state).
○ Component parts (either finished or almost-finished parts ready for assembly).
○ Processed materials (semi-processed products used directly in processing other
products).
○ Supplies (consumable items that do not become part of the final product).

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○ Business services (hiring outsiders like janitors, lawyers, consultants, etc.).

LO8- Business Buying Behaviour

● 5 important aspects to organizational purchasing behaviour:
○ Buying centers (everyone from the firm involved with the purchase).
■ Can fluctuate.
■ Isn’t officially on paper.
■ Has several roles.
■ Successful marketers identify who is in these centers, who is the most
important, and tailoring the sales presentation to them.
○ Evaluative criteria (how business clients evaluate an offering, in order).
■ Quality.
■ Service.
■ Price.
○ Buying situations.
■ Should firms manufacture in-house or outsource?
● If firms decide to buy from the outside, here are 3 different
scenarios:
○ New buy (first-time purchase of a specific type of product,
no relationships with suppliers yet).
○ Modified rebuy (adjustment to something they’ve already
been purchasing, can be negotiated with the current
supplier or opened up for bids for all).
○ Straight rebuy (just reordering the same thing from the
same supplier, often written in a contract.
○ Business ethics (most firms try to act ethically, have codes of ethics in relation to
purchasing and selling, and expect supplies to do the same).
○ Businesses demand high levels of customer service.
■ Especially important to pamper the most important and high-spending
business customers.
● Must be careful to avoid offending “lesser” business clients.

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