Transcript Consumers Rule - Lampung University

Business-to-Business
Markets: How and Why
Organizations Buy
Chapter Objectives
• business-to-business (B2B)markets
Define & explain
• business demand
explain
• classifying business or organizational
markets
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Chapter Objectives
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buying situation
buyers
buying center
buying decision process
growing role of B2B e-commerce
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Business Markets:
Buying and Selling When Stakes Are High
• Business-to-business marketing:
• the marketing of goods & services
that businesses & other organizations buy
• for purposes
other than personal consumption
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Business Markets:
Buying and Selling When Stakes Are High
• B2B (organizational) markets include:
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manufacturers,
wholesalers,
retailers,
other organizations
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B2B Characteristics
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Multiple buyers
Number of customers
Size of purchases
Geographic
concentration
Eaton Video
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Business-to-Business Demand
• Derived
demand:
• Caused by demand
for consumer
goods or services.
Figure 6.2
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Business-to-Business Demand
• Inelastic demand:
• Occurs when changes in
price
• have little or no effect
• on the amount
demanded.
Figure 6.2
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Business-to-Business Demand (cont’d)
• Fluctuating demand:
• Small changes in consumer
demand
• create large increases or
decreases in business demand;
• life expectancy of product can
cause fluctuating demand
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Business-to-Business Demand (cont’d)
• Joint demand:
• demand for two or
more goods
• used together
• to create a product
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Types of B2B Markets
• Producers:
for production of other goods and services
• Resellers:
for reselling, renting or leasing
• Organizations
 Government markets
 Not-for-profit institutions
FEDBIZOPPS.GOV
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Figure 6.3: The Business Marketplace
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North American Industry
Classification System
• NAICS:
• a numerical coding of industries
• in the United States, Canada, and Mexico
• Replaced SIC codes
NAICS
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Figure 6.4: NAICS
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The Buying Situation
• “Buy” class framework:
• identifies degree of effort firm needs
• to collect information and
• make a purchase decision
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The re-Buying Situation
• Straight rebuy:
Routine purchases that require minimal
decision-making
• Modified rebuy:
Previous purchases that require some
change and limited decision-making.
• New-task buy:
New and complex or risky purchases that
require extensive decision-making.
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The Professional Buyer
• Trained professional buyers
• carry out buying in B2B markets:
Purchasing agents
 Procurement officers
 Directors of materials management

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The Buying Center
• The group of people in an organization
who participate in a purchasing decision
 Initiator
 User
 Gatekeeper
 Influencer
 Decider
 Buyer
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Figure 6.5: Roles in the Buying Center
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The Business Buying Decision Process
Figure 6.6
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Step 1: Problem Recognition
• Someone sees
that a purchase
can solve a
problem
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Step 2: Information Search
• Buying center
 searches for information about products &
suppliers
• Develops product specifications –
 a written description
 of quality, size, weight, color, etc.
• Identifies potential suppliers
• obtains proposals
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Step 3: Evaluation of Alternatives
• Buying center assesses proposals
• Evaluations include
discount policies,
returned-goods policies,
cost of repair,
 terms of maintenance,
cost of financing, etc.
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Step 4: Product and Supplier Selection
• Single sourcing:
relying on a single supplier.
• Multiple sourcing:
buying from several different
suppliers.
• Reciprocity:
“I’ll buy from you, and
you’ll buy from me.”
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Step 4: Product and Supplier Selection
(cont’d)
• Outsourcing:
firms obtain outside vendors
to provide goods/services
that might otherwise be supplied inhouse
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Step 4: Product and Supplier Selection
(cont’d)
• Crowd sourcing:
firms use expertise
from around the globe
to solve a problem
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Step 4: Product and Supplier Selection
• Reverse marketing:
buyers try to find capable suppliers
and “sell” their purchase to the suppliers
?? Divertive buying???
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Step 5: Postpurchase Evaluation
• Assess whether the
performance of the
product
• and the supplier
• is living up to
expectations
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Business-to-Business E-Commerce
• Internet exchanges between 2+
businesses
• Include exchanges of information,
products, services, and payments
 EDI, JIT…
• Going on much longer than B2C
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Intranets, Extranets,
and Private Exchanges
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Intranets
link employees
in a private corporate
computer network.
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Intranets, Extranets,
and Private Exchanges
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Extranets
allow authorized
suppliers, customers, & other outsiders
to access the firm’s intranet.
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Intranets, Extranets,
and Private Exchanges
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Private exchanges
link an invited group
of suppliers and partners
over the Web.
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Security Threats
• Security threats
• come from hackers and
• well-meaning employees
• who give out passwords
CREDITCARDS.COM
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Security Threats
• Firewall:
Hardware and software
that ensures only authorized individuals
gain entry to a computer system
CREDITCARDS.COM
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Security Threats
• Encryption:
Software that scrambles a message
so only another individual (or computer)
with the right key
can unscramble it
CREDITCARDS.COM
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The end
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Discussion/Individual Activity
• You’re the marketing manager for a small
securities firm (a firm that sells stocks and
bonds) whose customers are primarily
businesses and other organizations. Your
company is considering using the Internet to
provide information and service to its customers.
• Outline the pros and cons of this move, the risks
your firm would face, and your
recommendations.
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Real People, Real Choices
• PPG Industries (Vicki Holt)
• Vicki chose Option 3: continue with Intercept
brand IGU, but invest directly in IGU
manufacturing to provide an alternative to
Cardinal
• The move has been well
received by all except the
large independent IGU
manufacturer
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Marketing Plan Exercise
• Pick a product you often buy in the grocery
store
 What key elements of the organizational market (the
grocer) must the product’s manufacturer plan for, to
market to the grocer successfully?
 How do the elements you identified in question 1
differ from those the store uses in marketing to you as
an end user?
 Which market for the product is more important (the
grocer or you), and why?
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Marketing in Action Case:
You Make the Call
• What is the decision facing Airbus?
• What factors are important in
understanding this decision situation?
• What are the alternatives?
• What decision(s) do you recommend?
• What are some ways to implement your
recommendation?
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Keeping It Real: Fast Forward to Next
Class Decision Time at Reebok
• Meet Que Gaskins, VP of global marketing
for the RBK division of Reebok
• Allen Iverson’s endorsement changed
Reebok’s image, but it was still number 2.
• The decision: How could Reebok capture
the pulse of youth culture in the long run?
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Real People, Real Choices
• PPG Industries (Vicki Holt)
• How to react to competitor Cardinal’s
strategy?
 Option 1: continue with current strategy
 Option 2: acquire an independent IGU manufacturer
 Option 3: continue with Intercept brand IGU, invest in
IGU manufacturing
PPG INDUSTRIES
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Discussion
• As director of purchasing for a motorcycle
manufacturer, you’ve been notified that the price
of an important part used in the manufacture of
the bikes has nearly doubled…you see your
company having three choices:
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Pass the cost on to the customer
Absorb the increase in cost
Buy a lower-priced part
• Discuss the pros and cons of each
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Discussion
• Many critics of government
say strict engineering and
other manufacturing
requirements for products
governments purchase
increase prices
unreasonably, and taxpayers
end up paying too much
because of such policies
 What are the advantages and
disadvantages of such purchase
restrictions?
 Should governments loosen
restrictions on their purchases?
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Discussion
• The gatekeeper determines which
possible sellers are heard and which are
not
 Does the gatekeeper have too much power?
 What policies might the firm implement to make sure
all possible sellers are treated fairly?
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Discussion
• Should companies always give their
business to the lowest bidder?
 Why or why not?
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Group Activity
• Some critics complain that outsourcing sends
much-needed jobs to competitors overseas
while depriving U.S. workers of opportunities.
 Break into small groups and take a side in this controversial
argument. Present your arguments in a debate format
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