Transcript PPT

Business-to-Business
Markets: How and Why
Organizations Buy
Chapter Objectives
• Describe the general characteristics of business-tobusiness 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
• 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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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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Business Markets: Buying and Selling
When Stakes Are High
• Business-to-business marketing: the marketing
of goods and services that businesses and other
organizations buy for purposes other than
personal consumption
• Business-to-business (organizational) markets
include manufacturers, wholesalers, retailers,
and other organizations
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Characteristics That Make a Difference
in Business Markets
•
•
•
•
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.
• 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
• Joint demand: demand for two
or more goods used together
to create a product
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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:



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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Types of Business-to-Business 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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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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North American Industry
Classification System
• NAICS: a numerical coding of industries in
the United States, Canada, and Mexico
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
 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 typically carry
out buying in business-to-business
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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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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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 and suppliers
• Develops product specifications -- a
written description of the quality, size,
weight, color -- for the purchase
• Identifies potential suppliers and obtains
proposals
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Step 3: Evaluation of Alternatives
• Buying center assesses
proposals
• Evaluations include
discount policies, returnedgoods policies, cost of
repair, terms of
maintenance, cost of
financing, etc.
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Discussion
• Should companies always give their
business to the lowest bidder?
 Why or why not?
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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 in-house
• Crowdsourcing: firms use expertise from
around the globe to solve a problem
• Reverse marketing: buyers try to find
capable suppliers and “sell” their purchase
to the suppliers
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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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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 two or more
businesses
• Include exchanges of information,
products, services, and payments
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Intranets, Extranets,
and Private Exchanges
• Intranets link employees in a private
corporate computer network.
• Extranets allow authorized suppliers,
customers, and other outsiders to access
the firm’s intranet.
• 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 wellmeaning employees who give out passwords
• Firewall: Hardware and software that ensures
only authorized individuals gain entry to a
computer system
• 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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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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