Boone Kurtz - Expanded PPT - Ch07

Chapter 7
BUSINESS-
TO-BUSINESS
(B2B)
MARKETING
© 2014 Cengage Learning. All Rights Reserved. May

not be scanned, copied or duplicated, or posted to a
publicly accessible website, in whole or in part. 1
Chapter 7 Business-to-Business (B2B) Marketing
Objectives
1. Explain each of the components of the
business-to-business (B2B) market.
2. Describe the major approaches to segmenting
business-to-business (B2B) markets.
3. Identify the major characteristics of the
business market and its demand.
4. Discuss the decision to make, buy, or lease.
5. Describe the major influences on business
buying behavior.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
Objectives
6. Outline the steps in the organizational buying
process.
7. Classify organizational buying situations.
8. Explain the buying center concept.
9. Discuss the challenges of and strategies for
marketing to government, institutional, and
international buyers.
B2B Marketing
▮ Business-to-business (B2B) marketing –
Organizational sales and purchases of goods
and services
• To support production of other products
• To facilitate daily company operations
• For resale
Table 7.1 - Comparing Business-to-Business

Marketing and Consumer Marketing
Nature of the Business Market

▮ Firms sell fewer standardized products to
organizational buyers than to ultimate consumers
▮ Organizations purchase products to fill needs
▮ Companies buy services from other businesses
▮ Influences in B2B markets
• Environmental
• Organizational
• Interpersonal
▮ An organization’s goals must be considered in the
B2B buying process
Nature of the Business Market

▮ Some firms focus entirely on business
markets
• Example: Caterpillar which makes construction
and mining equipment
▮ Some firms sell to both consumer and
business markets
• Example: Knoll makes award-winning office
furniture as well as stylish furniture for homes
▮ The B2B market is diverse
Components of the Business Market

▮ Commercial market - Individuals and
firms that acquire products to support,
directly or indirectly, production of other
goods and services
▮ Trade industries - Retailers and
wholesalers that purchase products for
resale to others
• Resellers - Retailers and wholesalers
Components of the Business Market

▮ Government
• Federal
• State
• Local
• Foreign governments
▮ Public and private institutions
B2B Markets: The Internet Connection

▮ 91 percent of all Internet sales are B2B
transactions
▮ Marketers can connect with each other
online through affiliate marketing
▮ Internet opens up foreign markets to sellers
Differences in Foreign Business Markets

▮ May differ due to variations in regulations
and cultural practices
▮ Marketers must be willing to adapt to local
customs and business practices
Segmenting B2B Markets

▮ Segmentation helps marketers develop a
strategy that best suits a particular
segment’s needs
▮ Segmentation by demographic
characteristics
• Firms can be grouped by size, based on sales
revenues or number of employees

▮ Segmentation by customer type
• Customer-based segmentation - Dividing a
business-to-business market into homogeneous
groups based on buyers’ product specifications
▮ North American Industry Classification
System (NAICS) - Classification used by
NAFTA countries to categorize the business
marketplace into detailed market segments
Table 7.2 - NAICS Classification for Home

Furnishing Merchant Wholesalers

▮ Segmentation by end-use application
• Segmenting a business-to-business market
based on how industrial purchasers will use the
product

▮ Segmentation by purchase categories
• Segmenting according to organizational buyer
characteristics
• Consider whether the customer has made
previous purchases or this is the customer’s
first order

• CRM systems can help segment customers in
terms of the relationship between the business
and the customer
• Customer relationship management (CRM) -
Combination of strategies and tools that drives
relationship programs, reorienting the entire
organization to a concentrated focus on satisfying
customers
Characteristics of the B2B Market

▮ Geographic market concentration
• The U.S. business market is more concentrated
than the consumer market
• Certain industries locate in particular areas to
be close to customers
• Due to the Internet, business markets may
become less geographically concentrated

▮ Sizes and number of buyers
• Business market has limited number of buyers
• Many buyers in limited-buyer markets are large
organizations
• Trade associations and business publications
provide additional information on the business
market

▮ The purchase decision process
• Suppliers who serve B2B markets must work
with multiple buyers
• More formal and professional than the
consumer purchasing process
• Purchasers require a longer time frame
• B2B involves more complex decisions

▮ Buyer-seller relationships
• More complex than consumer relationships
• Require superior communication among the
organizations’ personnel
• Involve developing long-term, value-added
customer relationships
• Relationship with not-for-profit organizations
is important
Evaluating International Business Markets

▮ Business purchasing patterns differ from
one country to the next
▮ Global sourcing - Purchasing goods and
services from suppliers worldwide
• Requires companies to adopt a new mindset
• Some must even reorganize their operations
Figure 7.1 - Categories of Business Market

Demand
Derived Demand
▮ Linkage between demand for a company’s
output and its purchases of resources
• Example: Demand for computer microprocessor
chips is derived from demand for personal
computers
▮ Organizational buyers purchase:
• Capital items
• Expense items
Volatile Demand
▮ Derived demand creates volatility in
business market demand
• Example: Demand for gasoline pumps may be
reduced if demand for gasoline slows down
Joint Demand
▮ Demand for a product that depends on the
demand for another product used in
combination with it
• Example: If the supply of lumber falls, the drop
in housing construction will affect the demand
for concrete
Inelastic Demand
▮ Demand throughout an industry will not
change significantly due to a price change
• Example: If the price of lumber drops,
construction firms will not buy more lumber
unless the overall demand for housing also
increases
Inventory Adjustments
▮ Adjustments in inventory and inventory
policies can also affect business demand
▮ Just-in-time (JIT) inventory policies boost
efficiency by cutting inventory and
requiring vendors to deliver inputs as they
are needed by the production process
▮ JIT leads to sole sourcing, buying a firm’s
entire stock of a product from just one
vendor
Inventory Adjustments
▮ JIT II - Leads suppliers to place
representatives at the customer’s facility to
work as part of an integrated, on-site
customer-supplier team
• Latest inventory trend
▮ Inventory adjustments are vital to
wholesalers and retailers too
The Make, Buy, or Lease Decision

▮ Firms acquiring finished goods have three
options
• Make the good or provide the service in-house
• Purchase it from another organization
• Lease it from another organization
The Rise of Offshoring and Outsourcing

▮ Offshoring - Movement of high-wage jobs
from one country to lower-cost overseas
locations
▮ Nearshoring - Moving jobs to vendors in
countries close to the business’s home
country
• Canada and Mexico are attractive nearshoring
locations
The Rise of Offshoring and Outsourcing

▮ Outsourcing - Using outside vendors to
provide goods and services formerly
produced in-house
• Reasons for outsourcing:
• Cost reduction
• Quality and speed of software maintenance and
development
• Greater value
Problems with Offshoring and Outsourcing

▮ Cost savings are less than expected
▮ Can raise security concerns over proprietary
technology or customer data
▮ Can reduce company’s ability to respond
quickly to marketplace
▮ Can create conflicts between nonunion outside
workers and in-house union employees
▮ Can negatively affect employee morale and
loyalty
The Business Buying Process

▮ More complex than the consumer decision
process
▮ Takes place within a formal organization’s
budget, cost, and profit considerations
▮ Involves many people with complex
interactions among individuals and
organizational goals
Influences on Purchase Decisions

▮ Environmental factors
• Economic, political, regulatory, competitive, and
technological considerations influence business
buying decisions
• Natural disasters

▮ Organizational factors
• Marketers must understand their customers’
organizational structures, policies, and
purchasing systems
• Multiple sourcing - Purchasing from several
vendors

▮ Interpersonal influences
• Individuals and committees influence B2B
buying decisions
• Marketers must know the influencers and
understand their priorities
• Sales personnel must have a good technical
understanding of their products
The Role of Merchandisers and Category Advisors
▮ Merchandisers - Trade sector buyers who

secure needed products at the best possible
prices
▮ Functions of a merchandising unit
• Determining needs
• Locating and evaluating alternative suppliers
• Making purchase decisions
The Role of Merchandisers and Category Advisors
▮ Systems integration - Centralization of

procurement function within an internal
division or as a service of an external
supplier
▮ Category advisor or category captain -
Trade industry vendor who develops a
comprehensive procurement plan for a
retail buyer
Figure 7.2 - Stages in the B2B Buying Process
Stages in the B2B Buying Process

▮ Stage 1: Anticipate a
problem/need/opportunity and a general
solution
• Example: Needing to provide a good cup of coffee
to a firm’s employees
▮ Stage 2: Determine the characteristics and
quantity of a needed good or service
• Example: Offering a coffee system that brews one
cup of coffee at a time according to each
employee’s preference

▮ Stage 3: Describe characteristics and the
quantity of a needed good or service
• Example: Firms need a simple system for brewing
a good cup of coffee; quantity requirements can
be easily correlated to the number of coffee
drinkers
▮ Stage 4: Search for and qualify potential
sources
• Choice of supplier may be relatively
straightforward or very complex

▮ Stage 5: Acquire and analyze proposals
• May involve competitive bidding, especially if
the buyer is the government or a public agency
▮ Stage 6: Evaluate proposals and select
suppliers
• Buyers choose the proposal best suited to their
needs
• Final choice involves trade-offs

▮ Stage 7: Select an order routine
• Buyer and vendor work out the best way to
process future purchases
▮ Stage 8: Obtain feedback and evaluate
performance
• Buyers measure vendors’ performance
• Some firms rely on outside organizations to
gather quality feedback and summarize results
Classifying Organizational Buying Situations

▮ Straight rebuy
• A recurring purchase decision in which a
customer reorders a good or service that has
performed satisfactorily in the past
▮ Modified rebuy
• Situation in which a purchaser is willing to
reevaluate available options for repurchasing a
good or service
Classifying Organizational Buying Situations

▮ New-task rebuy
• First-time or unique purchase situation that
requires considerable effort by decision makers
▮ Reciprocity
• Buying from suppliers who are also customers
Analysis Tools
▮ Value analysis
• Systematic study of the components of a
purchase to determine the most cost-effective
approach
▮ Vendor analysis
• Assessment of supplier performance such as
price, back orders, timely delivery, and attention
to special requests
The Buying Center Concept

▮ Buying center - Participants in an
organizational buying decision
▮ Buying center roles
• Users are the people who will actually use the
good or service
• Gatekeepers control the information that all
buying center members will review
The Buying Center Concept

• Influencers affect the buying decision by
supplying information to guide evaluation of
alternatives or by setting buying specifications
• Deciders choose a good or service, although
another person may have the formal authority
to do so
• Buyers have the formal authority to select a
supplier and to implement the procedures for
securing the good or service
International Buying Centers

▮ Two distinct characteristics differentiate
international buying centers from domestic
ones
• Marketers have trouble identifying members of
foreign buying centers
• A buying center in a foreign company often
includes more participants than U.S. companies
involve
▮ International buying centers can change in
response to political and economic trends
Developing Effective
Business-to-Business Marketing Strategies
▮ Marketers must develop a strategy based on
a particular organization’s buying behavior
and on the buying situation
▮ Challenges of government markets
• Purchases typically involve dozens of interested
parties
• Purchases are influenced by social goals
• Contractual guidelines are an important
influence in selling to government markets
Developing Effective
Business-to-Business Marketing Strategies
▮ The government buys products under two
basic types of contracts
• Fixed-price contracts
• Cost-reimbursement contracts
Government Purchasing Procedures

▮ Many purchases go through
Government Services Agency, a central
management agency
▮ By law, most federal government purchases
must go through a complex bidding process
governed by the
Federal Acquisition Regulation
Online with the Federal Government

▮ Government procurement professionals
streamline purchasing procedures with new
technology
▮ Vendors can sell products to the federal
government through three electronic options
• Websites
• Federally issued credit cards
• Government-sponsored electronic ordering
systems
Challenges of Institutional Markets

▮ Institutional buyers - Schools, hospitals,
libraries, foundations, clinics, churches, and
not-for-profit agencies
• Widely diverse buying practices
• Multiple buying influences can affect buying
decisions
• Group purchasing is an important factor
• Diverse practices
Challenges of International Markets

▮ Marketers must consider buyers’ attitudes
and cultural patterns
▮ Local industries, economic conditions,
geographic characteristics, and legal
restrictions must be considered
▮ Remanufacturing – Efforts to restore older
products to like-new condition
▮ Foreign governments are an important
business market
Strategic Implications of Marketing in the 21st

Century
▮ Marketers must understand the buying
practices that govern the segment they are
targeting
▮ B2B marketers must identify people who
play the various roles in the buying decision
▮ Marketers must direct their marketing
efforts carefully
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Chapter 7

© 2014 Cengage Learning. All Rights Reserved. May

Table 7.1 - Comparing Business-to-Business

Nature of the Business Market

Nature of the Business Market

Components of the Business Market

Components of the Business Market

B2B Markets: The Internet Connection

Differences in Foreign Business Markets

Segmenting B2B Markets

Segmenting B2B Markets

Table 7.2 - NAICS Classification for Home

Segmenting B2B Markets

Segmenting B2B Markets

Segmenting B2B Markets

Characteristics of the B2B Market

Characteristics of the B2B Market

Characteristics of the B2B Market

Characteristics of the B2B Market

Evaluating International Business Markets

Figure 7.1 - Categories of Business Market

The Make, Buy, or Lease Decision

The Rise of Offshoring and Outsourcing

The Rise of Offshoring and Outsourcing

Problems with Offshoring and Outsourcing

The Business Buying Process

Influences on Purchase Decisions

Influences on Purchase Decisions

Influences on Purchase Decisions

The Role of Merchandisers and Category Advisors

▮ Merchandisers - Trade sector buyers who

The Role of Merchandisers and Category Advisors

▮ Systems integration - Centralization of

Figure 7.2 - Stages in the B2B Buying Process

Stages in the B2B Buying Process

Stages in the B2B Buying Process

Stages in the B2B Buying Process

Stages in the B2B Buying Process

Classifying Organizational Buying Situations

Classifying Organizational Buying Situations

The Buying Center Concept

The Buying Center Concept

International Buying Centers

Government Purchasing Procedures

Online with the Federal Government

Challenges of Institutional Markets

Challenges of International Markets

Strategic Implications of Marketing in the 21st

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