Chapter 2: Derived demand and buying

center

Chapter objectives

 Learn the factors influencing the demand of goods and services business to
business
 Understand the two key notions of sector and derived demand and measure
their importance in their implementation in B to B marketing approach
 Present the diversity of actors involved in the buying process within
customer organizations: buying center
 Measure the importance and nature of the risk on business to business
market within customer-supplier relationship framework
 Understand the supplier need to lead targeted marketing approaches with
the different members of the buying center
 Understand the relational dimension of the B to B business relationship.

1. Sector and derived demand

Beyond the specificities described in Chapter 1, the existence of a demand called
derived within the sector is, without any doubt, the most important distinction in
the business to business marketing applied to consumer market.

1.1. The sector concept

Demand from companies downstream in a sector determines the level of activity of

those situated upstream. This industrial chain is the basis of derived demand.

The success of a supplier's product is closely linked to the success of his customer.
An electronic component for example or a textile fiber is meaningful only in the
context of the anti-locking system of a car’s wheels or the undergarment into
which they are incorporated.
Thus demand for an industrial product or service depends on demand for the
product in which it is:

 Incorporated: ingredients, raw materials...,

 Assembled: components, spare parts..., or on the production for which it is,
 Consumed (lubricants, energy products...),
 Used (office equipment, machine-tools, transport vehicles...).

Chapter 2: Derived Demand and Buying center 1

If industrial demand naturally fluctuates as a function of the market, it proves to
be not very elastic (less sensitive to price changes than are consumers in consumer
market for instance).

The term sector comes from the vertical presentation often used to represent the
complete production chain and its interdependence, from basic materials to the
finished product (cf. figure 2.1).

Figure 2.1 - An example of a sector

This vertical vision presents teaching virtues, however, it must be moderated:

beyond this chaining, every actor involved is simultaneously in presence of several
interactions with many partners located upstream, downstream as well as
horizontal, at the same industrial level. Indeed, each actor is, within the sector,
dependent on peripheral furniture from other suppliers located outside of it: we
then talk about joint demand. It results from this context that the sector concept
is often close to business to business network. Interdependence is formed within
the sector (whose content remains very variable according to involved actors’
weight and culture) and true systems can influence buying processes, especially in
project mode (cf. Chap 5 and 10).

The supplier/customer chain has two main consequences: dependence on activities

situated downstream in the sector and the opportunity to take action at many
different levels.

Chapter 2: Derived Demand and Buying center 2

 1.2. Dependence on derived demand

This characteristic of business to business can be a hindrance and is often

perceived as unfair. The idea can be stated very simply: every manufacturer within
a sector, depends on his customer who in turn depends on his own customer. Thus
if activity slows down within a given sector, this can affect all of the suppliers
concerned.

In the automotive industry, a decrease in the miles driven by Europeans combined

with fewer purchases of new cars resulted in a slowdown of activity within the
whole sector. Thus, Michelin tires, in spite of its R&D strength and dominance in
terms of marketing and sales, underwent the after effects with a drop in sales of
original equipment tires for new cars and in renewal for cars already on the
market.

This dependence can be an even greater problem for medium sized specialized
suppliers, who generally only work for a few prime contractors. A limited customer
portfolio can be a sign of a strong partnership, a real commitment (risk-sharing),
and collaboration of new products design to services related to equipment supplies.
However, at the same time, sub-contractor status involves a high level of
dependence on the contractor. In fact, in an economic turndown, the trend is for
major contractors to reintegrate operations so as to avoid or minimize job cuts in
their own companies.

Unlike the consumer market, the supplier company is not in direct contact with the
final customer. As such it cannot react quickly by modifying its products or
services. The reactivity of the supplier depends on that of the actors downstream
in the sector.

1.3. A multilevel strategy with several levels of intervention

The interdependence of links within a sector does however have a positive

consequence: several levels of marketing actions can be envisaged.
The main idea in B to B marketing is that you must always reason in terms of your
customer but also:

 In relation to your customer's customer.

 Even in terms of the customer of your customer's customer

To win over a customer and keep his loyalty, the most effective method is often a
discussion about his own customer, to provide him with information and studies on
the demand for his own products (marketing studies). This proximity with
customers, this relational dimension proves to be at the heart of the B to B
marketing approach.

Both market studies and promotion should be used to target customers at two
levels.

Chapter 2: Derived Demand and Buying center 3

STUDYING YOUR CUSTOMER’S CUSTOMER  Faurecia has become one of the leading
suppliers of car seats in Europe by developing studies on their final customers,
drivers and simple passengers. There are two types of studies:

 Medical studies analyze back problems and fatigue suffered by people who
have to drive all the time for their jobs (taxi drivers, sales reps, etc.)

 Satisfaction and dissatisfaction studies on those same drivers regarding the

different seats currently available on the market.

Figure 2.2 - Studies carried out on end customers are an asset for the supplier in terms of his
industrial customer

Faurecia analyzes customer reactions to:

 Specific structures and shapes of seats: lateral reinforcement, bucket seats,

firmness of coverings, etc.
 Options such as different types of seat heating, position adjustments (angle
of back, squab), of user positions memorization, etc.

Thanks to driver specific studies, the supplier assists his customer with design,
choice of options, and equipment for future models. By making his customer aware
of end customer reactions to competing products, Faurecia also participates in
monitoring technological development. Suppliers that position themselves
upstream from the design process can get ahead of the competition.

INFLUENCING THE CUSTOMER’S CUSTOMER  Invista with Lycra, clearly illustrates

the different levels of marketing actions available to a supplier positioned
upstream in a sector, in terms of promotion.

2. Lycra case, Invista

International company specialized in polymers, fibers and intermediary products,
Invista has a wide brand portfolio (sold in 2004 by Du Pont de Nemours) including
Coolmax, Thermolite, Cordura, and Tactel. Concerning the Lycra brand, Invista

Chapter 2: Derived Demand and Buying center 4

implements a pull strategy, involving several levels of actions, which requires a
careful analysis of the respective roles of the different actors within the sector.

Figure 2.3 - The different levels of marketing intervention of Invista for its brand,
Lycra

2.1. First target: Manufacturers

The first level of intervention for Invista is his direct customer, reel producers and
hosiery manufacturers (Dim, Well, Le Bourget, Rosy) in the hosiery sector for
example. Obviously, if the latter don't choose Lycra, any other measures are
pointless.

What are the targets that Invista must identify within the manufacturer company?

 Production manager: if the hosiery production process does not allow use of
Lycra, owing to technical constraints, such as resistance of the fiber to
stretching or the required hygrometry conditions at the production site,
Lycra fiber will not be chosen.

 Research and Development, so as to intervene right from the design phase

of the new product. The ideal situation would be for the fiber in question
to be an integral part of the new specifications.

Chapter 2: Derived Demand and Buying center 5

  Marketing department, which works with R&D on choosing and perfecting
new products, and which could use its influence.

 Sales department, which is in contact with distributors of the finished

product.

 Functional technical departments, such as Quality, which above all are

concerned with the reliability of the different production processes.

 Purchasing department, which aim is to gather a maximum of information on

the different materials available on the market and the different competitors.

Obviously, the arguments highlighted will be different depending on the public

concerned (cf. Figure 2.5). In addition, Invista will choose in-house managers with
different backgrounds to best match the profiles of the people to be convinced.

Figure 2.4 - Adapting the arguments

2.2. Second target: Distributors

The second level of intervention is that of distribution, with mainly:

OPERATIONS TARGETING MAIN DECISION MAKERS  buyers, and working group

managers in the buying centers, as well as operational managers in the textile
departments, selected because they are considered as opinion leaders or work in
key points of sale.

 Provision of documents including studies on consumer behavior and trends

with references from other countries of comparable situations;
 Detailed action plans on the final target: media planning, copy of TV ads,
magazines…

MORE TRADITIONAL COMMUNICATION OPERATIONS IN TRADE MAGAZINES 

consumer oriented operations from the Lycra media-planning that shows different
finished products made with Lycra.

Chapter 2: Derived Demand and Buying center 6

OPERATIONS TARGETING THOSE IN CHARGE OF DISTRIBUTOR BRANDS  with the
aim of convincing them to require from their manufacturers to use Lycra and make
it visible to end customers on packaging in order to legitimate the distributor
brand.

A practical guide distributed by DuPont to answer questions about elastane in general and
Lycra in particular.

Figure 2.5 - Second target: distributors, supporting the differentiation policy of Lycra

2.3. Third target: Consumers

The third possible level of intervention is the end consumer. How should the
latter be convinced of the qualities of Lycra? What arguments should be made to
allow him/her to distinguish between Lycra and other competing fibers?

MEANS USED  The first channel of information is the product itself and its
packaging. The Marketing department will try to obtain the presence of the
Lycra logo on the packaging, next to the logo of the manufacturer brand. The
presence of the logo, the size of letters, their color and position relative to other
printed information will be negotiated with the product manager.
Other vectors for informing the consumer include traditional media forms such as
women’s magazines, billboards and television, essentially for Invista.

Chapter 2: Derived Demand and Buying center 7

 POSSIBLE REACTIONS OF THE MARKETING DEPARTMENT OF THE CUSTOMER
MANUFACTURER 

 Desire to use allied marketing: Apart from the technical qualities of Lycra
bought from Invista, the manufacturer-customer will seek to take advantage
of the different marketing actions related to Lycra brand, which will in turn
strengthen his own marketing strategy.

 Fear that his own product will become banal: The manufacturer might be
afraid that consumers will confuse the intrinsic qualities of his products with
those of Lycra. Exclusivity is not possible on a competitive market such as
hosiery. Isn’t there a genuine risk that the image of the customer will be
absorbed by that of Lycra? The consumer will find Dim-Lycra, Well-Lycra,
Chesterfield-Lycra hosiery at the same sales outlet...

The consumer might end up thinking that the most important thing is for the
pantyhose to contain Lycra and that ultimately the different brands are all about
the same since they all contain Lycra. The risk comes from a reduction of the
perceived difference between brands, products become banal.

One of the difficulties of the B to B marketing can be analyzed using this

example. The Invista marketing department must identify how far it can go in
promoting Lycra without being perceived as a major risk of “banalization” for its
customers’ products. The action plans of suppliers must consider this risk and
offer enough advantages and innovations to compensate.

THE STRATEGIES AVAILABLE TO INVISTA  In order to continue to highlight its

industrial brand, the supplier has a possible range of actions. Some of the actions
which are described in the following do not necessarily apply to the Lycra case
but are used on neighbour markets.

Action 1: The first advantage that a supplier can propose in the framework of a
new product launch is to be the first to have an upstream innovation. The
industrial customer who is the first to choose a particular process or material of
the supplier contributes to the latter being adopted by other manufacturers, and
therefore to its development. In exchange, the supplier can agree to an
exclusivity guarantee, generally limited to six months or a year. Thus the
customer manufacturer will be the first to use the process and depending on the
effectiveness of his marketing strategy, the end customer will associate his
product with a new advantage, thus strengthening his brand value. Other brands
will be perceived as followers rather than leaders or even as imitations.

Action 2: The second advantage lies in the convergence of information contained

in advertising. If we imagine that Lycra highlights the following in its ad
campaign:

 better resistance to wrinkling and sagging,

 reduced risk of catching on things,
 excellent elasticity,

Chapter 2: Derived Demand and Buying center 8

  comfort and performance,
 freedom of movement,
 easier to hang out for ready-to-wear.

Nothing prevents the customer-manufacturer, Dim for example, from using one
or more of these arguments. The two campaigns reinforce each other, increasing
coverage and the frequency with which the consumer perceives the brand of the
end product.

Action 3: The third advantage for the manufacturer-customer is the Lycra media
planning, in other words:

 the choice of media (women’s magazines, etc.) and supports (Elle, Biba…)
 the calendar for magazine or television ads
 Thus if the manufacturer is flexible and attentive in his own media
planning, he will be able to strengthen his own launch by the juxtaposition
of his own campaign with that of his supplier in Lycra fiber.

Example taken from a women’s magazine. Invista presents nine creations in very wide
ranging areas: from furniture to jewelry and even shoes. This gives a little boost to a
selection of his customers, while inciting greater creativity.

Figure 2.6 - Third target: consumers, “Lycra: a medley of ideas” 

Chapter 2: Derived Demand and Buying center 9

 Action 4: A fourth means of collaboration between Lycra and the manufacturer
customer could involve the presence of the customer product in the supplier’s
advertising. The latter will choose a product that is remarkable in terms of its
innovation or aesthetic, especially manufactured with the material or process
that he wants to feature in his own campaign.
This choice constitutes a nudge in the right direction to selected customers, in
the same time, it is a stimulation for the others, an incentive to a bigger
creativity.

Presentation of the consumer campaign to show the synergy effect of Lycra for the different
professional actors, manufacturers and distributors

Figure 2.7 - Visual of the Lycra campaign in magazines

Action 5: The fifth advantage offered by the supplier does not directly concern
Marketing. In fact, technical assistance can be provided to the technical,
functional and production departments to ensure the first productions including
the material or the new process. Depending on the case, a middle sized
manufacturer customer can greatly value technical assistance, especially when
acquiring new know-how.

Action 6: the sixth advantage is a consequence of the supply agreement. When

the agreement concerns a material supply, there can be financial participation
in common actions: it is sometimes the case on promotions with the organization
of “special display”, an animation day at distributors’ place.

Chapter 2: Derived Demand and Buying center 10

By addressing to its customers’ customers, Lycra contributes to the commercial
performance of its industrial customer by aiming to stimulate even stronger
derived demand. To be able to offer this type of commercial partnership, Lycra
develops oriented technical partnerships, especially at the design level.

This example illustrates the multiple possibilities of actions to be taken in the B to

B marketing relative to the different actors within a sector and a brand strategy
perceived as facilitating performance by its industrial customers. Invista pursues
the same strategy for other products, for example with Cordura or Thermolite
brands for sportswear.

3. The buying center

The concept of the buying center as we now understand it originated in the 1970s,
and includes all the functional and operational managers who take part in the final
buying decision, rather than merely the buying department. This notion is also
known as “decisional chain” or “decision spectrum”.

The various interactions between participants as well as their respective social roles
have been investigated by several authors including Robinson, Faris and Wind.
From a theoretical point of view, the buying center structure has a lateral and
vertical dimension:

 The lateral dimension (or "width") of the buying center refers to the number
of departments concerned by the decision;
 The vertical dimension (or "depth") deals with the number of levels within the
hierarchy concerned by the decision.

The greater the risk for product quality and company profitability, the larger the
"width" and "depth."

The realization that many participants play a role in the buying decision has
undermined the belief that rationality is the only guiding factor in the process.

3.1. Business to business buying behavior

For a long time, the buying process and the act of industrial buying have been
thought of as rational compared to the more emotionally dictated behavior of
individual consumers.

This view comes from the economic reasoning underlying the act of buying in
industry and in particular, the search for minimum cost, the production
organization (Material Requirements Planning system, MRP, Materials
Management) etc. However, this attitude clearly varies depending on the
situation. For example, tailor-made goods for a company, those sold to other
companies, or those sold directly to the public as well as companies, will not be
evaluated by buyers in the same way.

Chapter 2: Derived Demand and Buying center 11

As a general rule, a professional buyer is mainly looking for:

 Contributing to performance improvement of the company.

 Satisfying the expectations of buying center members.

The buyer must therefore offer his own judgments on buying decisions, taking into
account the opinions of the buying center members. Generally speaking, the
latter use the same evaluation criteria but not the same weighting. It must be said
that such detailed evaluation systems represent a great advantage for the supplier
who is already on the books and who gives complete satisfaction: the unknown
supplier does not have such convincing arguments to allow comparisons to be
made.

Among the criteria generally taken into account, it is possible to cite some
examples of arguments and classify them as to their ‘rationality’.

Table 2.1 - Main rational and non rational criteria informing the buying decision

However, the dividing line between rational and non rational reasoning is not
always as clear. For example, in terms of geographical location, the proximity of a
supplier can be at the same time a rational and non rational factor whether he
represents a potentially better service (quicker and less expensive) or has
“cultural” affinities with the buyer (regional economy).

Involving several managers, rational arguments are worthy so that all decisions
must be justified. The weight of non-rational arguments is greater in companies
where the buying department manager is alone or has a certain standing.

In reality, decision making depends on corporate culture and on the confidence

accorded to the purchase manager: the corporate culture is based not only on its
particular sector of activity and background, but also on managers’ training.

The work of Cardozo and Cagley, as well as that of Cunningham and White,
demonstrates that economic reasoning is not the sole determining factor in the

Chapter 2: Derived Demand and Buying center 12

buying act, and that previous experience with the retained supplier is one of the
main criteria along with his reputation, product quality and delivery time. Corey
observes that the value of the offer is often taken into account rather than the
price. Dickson has shown that industrial buyers give preference to suppliers
depending on:

 Their capacity to respect established specifications,

 Their ability to supply the company at the right time,
 The proposed price level (for non differentiated goods, this is more important
than the two first criteria).

3.2. The perceived risk criterion

The notion of perceived risk occupies an important and ambiguous place in the
buying behavior analysis. This can be explained through perceived risks for:

 The company concerning supplies security or in terms of protection against

exchange rate fluctuations,
 The buyer himself contesting the final choice of other departments,
suggestions that he took the easy way out, favoritism, etc.

Figure 2.8 - The main components of the perceived risk in an individual buying situation

The decision style of buyers depends on their behavior towards risks, behavior
which is dependent on individual characteristics, previous experiences and risk’s
perception.

According to Choffray’s perceived risk analysis model, the buying department

establishes a hierarchy of risks and procedures corresponding to the estimated
level of risk. For example when the degree of uncertainty is high and the choice
made has important consequences, the perceived risk is at a maximum. In this
case, the buying department will alert the company and the buying process will be
made in several phases as it will be explained later on.

3.3. Composition of the buying center

The members of the buying center can be grouped into four main blocks.

Chapter 2: Derived Demand and Buying center 13

The decision makers

Person or persons who make the final decision. A look at large companies shows
that most decisions are made collectively, i.e. even a CEO who is strongly involved
in technical decisions will prefer the decision to gat a collective vote from the
management board committee instead of unilaterally imposing it. Only after the
different propositions have been studied and the analysis of the different
opinions, both in-house and external, will the final decision be made.

Actually, in terms of complex buying, the importance of decision makers has been
strongly reduced when there is a consensus within the buying center. However,
they remain important in case of non consensus. Then, they can have an influence
on the final choice, impose to the buying center members to gat a consensus, or
take two suppliers for the same purchase. This choice generally leads to
additional cost of maintenance and training but commercial pressure can be
maintained on the two selected suppliers.

In a small or medium sized business, the director often makes the decision aided
by a manager, seen as trustworthy and competent for that particular project.

The buyers

This is basically the buying department, which in general yields its prerogatives to
the profit of various prescribers for the purchase of goods and complex services.
Their main functions are:

 To collect information concerning the different market solutions available to

the company, taking into account in-house constraints such as technical
know-how and financial constraints,
 To make a list of the different national, European and overseas suppliers who
could be appropriate for the company’s needs.

This dual function necessitates close, wide-ranging contacts with the market
above and beyond the suppliers used and known by the company.

The other main function consists of taking in charge the pre-selection (make a
short-list) and then participating to the final selection of competing suppliers.
Having picked out the acceptable and possible solutions, it is then a question of
selection and acceptance of the best solution for the company. The purchases
often represent more than 60% of the turnover of industrial companies: it is the
case for Air Liquid which is the third industrial buyer in France of electricity
behind Alcan and Arcelor. The buying post has greatly evolved these years in
companies, taking a more strategic dimension because of:

 The increased search for competitiveness (competitive advantage at

buying);
 The speed in the globalization of supply (sourcing);

Chapter 2: Derived Demand and Buying center 14

  The reinforced professionalization of the job with more specialized training
(legal, international negotiations, management of profit center),
 The ethical dimension of purchase and strategic orientations taken by many
industrialists in the durable development
 The set up and exploitation of new buying management tools
(marketplaces, e-procurement, Supplier Relationship Management – SRM…).

These trends allowed Buying Departments to be more important in companies

(board of management committee member, strategic decision taking…).

Focus 2.1
Ethics in purchase at the Suez Group

The Suez Group defined an ethical Charter of buying. Indeed, the buyer conveys
the company image: his personal ethics, his integrity, his professionalism and his
firmness prove the efficiency of his actions. These are some principles:

 The active and loyal participation of the different representatives during

preparation and implementation the buying politics (among work groups);
 The transparency in the communication of relevant information;
 The mutual respect of buying activities done by the different organizations
within the group (entities, branches, Group).

Among these obligations, the buyer must justify the decisions he has taken and
respect the confidentiality level of information passed on. The Charter also applies
to all colleague likely to influence the buying act (the other members of the buying
center). Suppliers relationship must be outstanding by integrity, honesty,
impartiality, equity, courtesy, loyalty and respect of interlocutors and agreements.
The buyer’s position is exposed to suppliers’ entreaties and pressures, in the forms
of gifts, invitations, fringe benefits as well as complex and subtle emotional
blackmail… in order to influence his decision. It is then recalled on the Charter that
operation rules for all Suez colleagues in order to avoid situations of interest
conflict or rigging:

 Gifts offered courteously and with low value are accepted only if they are
exceptional and linked to justified occasions (end of the year for instance) or
cultural practices in certain countries.

 Invitations to cultural, sports and alike events must be authorised by the

hierarchy, be of an exceptional nature and do not involve extravagant
expenditure.

 Invitations to journeys or congresses may be authorised by the hierarchy if

they are collective invitations for professional reasons: travelling and
housing expenses are the responsibility of the buying company.

Chapter 2: Derived Demand and Buying center 15

  Every other advantage in nature (products or services of the supplier that
might be offered or discounted for the buyer) must be refused except with
the permission of the hierarchy, after checking the absence of interest
conflict.

Finally, the group looks after not abusing of its position, by putting an economic
actor in a situation of dependence, by imposing leonine conditions or by practicing
discriminatory or excessive prices. The buyer must avoid actions that can be
considered as a pressure by the supplier (reciprocity commitment, entreaties for
sponsoring sports clubs or cultural events, to participate to sweepstakes…).

Suez integrates environmental and community concerns in buying procedures:

specifications include this type of selection criteria of suppliers and products
(security, well-being of workers, children protection, no form of discrimination,
corruption, respect of the environment). The “Guiding principles of the OECD to
Multinational Companies” or SA8000 norms, ISO14000 are then appreciated in the
presented offers.

The influencers

The influencers in fact make up the contact group which, from one company to
another, varies the most according to the different sectors and the different types
of company culture. Two types of influencers can be distinguished, in-house and
external.

 Influencers in fact have a positive role. The example of the city of Toulouse
which launched a competition for the construction of a library illustrates
the latter’s role. Thus six architects were in competition including Mr. X
who recommended a domed roof made of glass in one piece without any
soddering. However, only Saint-Gobain the company could provide this
product, given the expertise and patents involved. Similarly, Alcan was the
only company able to provide the required structure that holds the dome. If
Mr. X won the competition, the two companies would have won the future
call for tender. They could then congratulate themselves on their upstream
collaboration (cf. The project marketing approach presented in Ch.5) with
the winning architect who could benefit from the information network of
the two companies.

 “Gatekeepers”, or filters, play a negative role; this might be the quality

manager who obtains the agreement of the management committee to
require ISO 9000 certification of the future supplier for a particular service,
thereby eliminating the candidate company which does not have this
certification. For instance, an operator or a secretary can play this role if
he/she does not transmit a phone mail or does not facilitate the search of a
person.

Chapter 2: Derived Demand and Buying center 16

 The problem with this presentation lies in the subjectivity of recommended
influencers. Favorable for company A, might be unfavorable for company B;
that is why it is better to distinguish between internal and external
influencers.

 Internal influencers: These are functional managers who positively or

negatively influence other members of the buying center regarding the
product or service offering of a specific supplier. The main internal
influencers are:

 The quality department,

 The maintenance department,
 The research and development department,
 The marketing department,
 The sales department.

In the Lycra case (cf. Chap. 1), the R&D, Maintenance, Quality, Marketing as
well as Sales department managers were involved. Indeed the latter acted
as an influencer on the Marketing department.

 External influencers also have an effect on the members of the buying

center. These include customers, professional experts (engineering firms,
design offices, architects) and journalists.

In the Lycra case (cf. Chap. 1), external influencers included:

 The designer Jean-Paul Gaulthier who accepted to work for Lycra for
the organization of a fashion show (supply of new materials). He in turn
influenced the prêt-à-porter industry which aligns itself with the trends
set by the great fashion houses.

 Women’s magazines from Biba to Cosmo, via traditional advertising,

advertising co-financed by Lycra, as well as articles developed by
journalists.

 The marketing managers of leading retailers such as Galeries Lafayette,

Carrefour …: the latter gradually integrated the technical specifications
of Lycra into the specifications of their products in distributor brands.

As with other intellectual professions (professors, doctors, journalists etc.),

collaboration is often a touchy issue, in particular in France because of the
state of mind which is not especially favorable to business culture. These
professions put a high value on their independence and do not like to feel
that they are being influenced. An example of collaboration can be found at
Technal with two types of architects:

 A « star » architect already well known and employed by the company.

In exchange, he participated in improving the design of products and
accessories as well as designing the stand for major shows such as

Chapter 2: Derived Demand and Buying center 17

 Batimat. In addition, he accepted to be present at events organized by
the marketing department such as dinner debates, conferences, etc.

 Architects just starting out in their careers were offered a contribution

to their travelling expenses to participate to a competition. If the
architect wins a prize, the company adds on to the financial reward. In
exchange, their name can be used in company documents regarding
their services.

Customers can also play an essential influential role. Thus, an old customer
could accept that new prospective customers visit his installation either
during or after the work has been completed; this practice is especially
common in the building and public works sector. The collaboration of this
reference customer is sometimes obtained via a price reduction, similar to
the practice found in the aeronautics sector with “launching companies”.

Let us suppose that city A has a project for an underground parking lot
downtown: the interested supplier could invite the managers of the
technical departments of city A to visit their homologues in city B, for
which a similar project has already been carried out.

 The managers of the « prospective » city cannot help but accept the
invitation especially in light of the difficulty of making the right choice
in terms of technological solutions for such problems as smoke
extraction in case of a fire, the closing system of safety barriers, the
installation of surveillance systems (cf. Chap. 5).

 The managers of the city that is already a customer will accept: at the
personal level, the manager in question will show his boss that his past
choices have been good ones and that the project has become a
reference. On the collective level, the city and possibly the municipal
team will be able to show the local population that their choices have
been responsible ones and that public funds have been put to good use.

To optimize the influence strategy, it is best to find a reference that is as

similar as possible to the target project (cf. Chap. 18). Other external
influencers can be used, especially consulting firms in industrial engineering
when customer companies have decided to outsource their decisions,
including for strategic investments.

The users

The importance granted to users varies considerably depending on:

 The prestige of the user: a surgeon rather than nurses, engineers rather
than technicians, pilots rather than bus drivers, etc.

 National culture: Scandinavian countries and Japan have a long time taken
into account the opinion of future users of machine tools, cars, etc. This is
not exactly the case in Southern countries and even in the USA (with the

Chapter 2: Derived Demand and Buying center 18

 exception of users of complex goods). In France, user opinions are regularly
taken into consideration assuming they allow improving the company ethos
based upon final customers’ satisfaction.

 The size of companies: statistically, big companies have developed more

tools for integrating users in decision making processes.

Industrial buying is the result of a collective decision made by a varying number of

people, who are more or less involved and not very homogenous (in terms of
experience, educational background, responsibilities and level of confidence).

In order to better position themselves and negotiate, it is in the interest of

supplier companies to know as much information as possible concerning the
different in-house contacts within the customer company (exact role, motivations,
actual position, previous post, education, other personal information).They must
also identify the actual buying phase of the customer company (cf. Chap 3).

CHAPTER SUMMARY

The aim of this chapter is the deepening of business to business characteristics by

presenting additional concepts essential to the professional context understanding
and to the elaboration of relevant marketing approaches.

A B to B marketing manager must be able to perfectly analyze his company sector

in order to identify the influencing factors at the demand level. The latter which
depends on the upstream demand is called derived demand. He also has to
recognize along with the sales force the power and role of the actors, including the
buyer of the customer company or prospect. For example, it is mandatory to
understand the organization mode of the latter and the exact attribution of the
buying department. At the time of the approach of a potential customer company,
the supplier is vis-à-vis an anxious buyer who wants to make a conform purchase to
the different requirements of his company. The latter is subject to several internal
and external pressures made by the buying center members to modify his
recommendations or position in the negotiation phase. This buying center, informal
entity, is composed by more or less highly involved people in the buying decision.
Besides, it also includes different internal prescribers (or influencers) extremely
linked to the purchase and external prescribers (experts, referenced customers,
journalists, specialists…), users (their importance varies according structures and
cultures) and decision makers (whose role is to confirm choices made or to
arbitrate in case of internal non consensus). The industrial buying results from a
collective decision taken by a varying number of people more or less involved in
the buying and not very homogeneous (in terms of experience, education
background, responsibilities and level of confidence). The understanding of the
position, motivations, weight, role and interactions of each buying center member
is essential for every supplier. The described characteristics in this chapter allow
sales and marketing managers to build from the one hand, a questioning and
analysis screen of the buying center, and from the other hand, to exploit these
results in order to define the approach strategy. The key element in the business to

Chapter 2: Derived Demand and Buying center 19

business marketing is the customer-supplier relationship in which there are
influences and interactions.

Questions and exercises

1. Why does the derived demand represent an essential notion for B to B

marketing managers?

2. How can a packaging manufacturer for cosmetics set up a pull strategy in

order to increase sales?

3. What incidence can the centralization of buying on the head office or its
decentralization on business units have on buying and decision process?

4. A company wants to acquire a complete CRM information system.

According to you, who are the involved buying center members? Does their role
evolve during the buying process? Up to what point and why?

5. “The weight and role of the buyer are highly reinforced when the
purchase is about high risk products or services”. Do you share this opinion?
Why?

6. What are the factors that allow to determine if a purchase is a matter of

collective process or individual process at the customer?

7. “The understanding of the buying center allows to be more efficient in

the marketing influence approach”. Explain. Give some examples at the sales
level and in terms of communication.

8. Concerning incorporable products sold to an intermediary integrator who

is going to resell them to a private individual as a final customer, what are the
possible marketing strategies that you may recommend?

9. Why does the sole acquaintance of the buying department not enough to
establish an efficient relationship with the customer company?

10. How can we develop an interpersonal communication with the main

members of the buying center in case of a strategic product sale as a tool-
machine or an essential ingredient and which cost is important in the cost
price?

11. Can you use information obtained from other customers to convince your
interlocutors that your offer is the most adequate? What are the conditions
that must be respected?

Chapter 2: Derived Demand and Buying center 20