Transcript Marketing
6 CHAPTER Business-to-Business (B2B) Marketing Chapter Objectives 1 Explain each of the components of the business-to-business (B2B) market. 4 Discuss the decision to make, lease, or buy. 7 Classify organizational buying situations. 5 Describe the major influences on business buying behavior. Explain the buying center 8 concept. 2 Describe the major approaches to segmenting 6 Outline the steps in the B2B markets. organizational buying process. 3 Identify the major characteristics of the business market and its demand. Discuss the challenges 9 and strategies for marketing to government, institutional, and international buyers. CHAPTER 6 Business-to-Business (B2B) Marketing BUSINESS-TO-BUSINESS (B2B) MARKETING • Business-to-business (B2B) market is significantly larger than the consumer market. • Business-to-business (B2B) marketing Organizational sales and purchases of goods and services to support production of other products, to facilitate daily company operations, or for resale. CHAPTER 6 Business-to-Business (B2B) Marketing NATURE OF THE BUSINESS MARKET • Companies also buy services, such as legal, accounting, office-cleaning, and other services. • Some firms focus entirely on business markets. • Example: Caterpillar, which makes construction and mining equipment. 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 or wholesalers that purchase products for resale to others. • Government. • Public and private institutions. CHAPTER 6 Business-to-Business (B2B) Marketing B2B MARKETS: THE INTERNET CONNECTION • More than 94 percent of all Internet sales are B2B transactions. • Opens up foreign markets to sellers. • Largest segment of the business market. DIFFERENCES IN FOREIGN BUSINESS MARKETS • May differ due to variations in regulations and cultural practices. • Businesses must be willing to adapt to local customs and business practices and research cultural preferences. CHAPTER 6 Business-to-Business (B2B) Marketing SEGMENTING B2B MARKETS • Segmentation helps marketers develop the most appropriate strategy. SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS • Grouping by size based on sales revenues or number of employees. SEGMENTATION BY CUSTOMER TYPE • Grouping in broad categories, such as by industry. • Customer-based segmentation Dividing a business-to-business market into homogeneous groups based on buyers’ product specifications. • North American Industry Classification System Classification used by NAFTA countries to categorize the business marketplace into detailed market segments. CHAPTER 6 Business-to-Business (B2B) Marketing SEGMENTATION BY END-USE APPLICATION • End-use application segmentation 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. CHAPTER 6 Business-to-Business (B2B) Marketing CHARACTERISTICS OF THE B2B MARKET GEOGRAPHIC MARKET CONCENTRATION • Business market more concentrated than consumer market. • Geographic concentration decreasing as Internet technology improves. SIZES AND NUMBER OF BUYERS • Business market has smaller number of buyers than consumer market. • Many buyers are large organizations, such as Boeing, which buys jet engines. CHAPTER 6 Business-to-Business (B2B) Marketing THE PURCHASE DECISION PROCESS • Often involves multiple decision makers, is more formal, and may require bidding and negotiations. BUYER-SELLER RELATIONSHIPS • Often more complex than in consumer market with a greater reliance on relationship marketing. EVALUATING INTERNATIONAL BUSINESS MARKETS • Business purchasing patterns differ from country to country. • Global sourcing Purchasing goods and services from suppliers worldwide. CHAPTER 6 Business-to-Business (B2B) Marketing BUSINESS MARKET DEMAND • Demand characteristics vary from market to market. DERIVED DEMAND • The linkage between demand for a company’s output and its purchases of resources such as machinery, components, supplies, and raw materials. VOLATILE DEMAND • Derived demand creates volatility; for example, demand for gasoline pumps may be reduced if demand for gasoline slows. JOINT DEMAND • Demand for two products used in combination with each other. INELASTIC DEMAND • Demand not significantly influenced by price changes. INVENTORY ADJUSTMENTS • Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and requiring vendors to deliver inputs as they are needed. CHAPTER 6 Business-to-Business (B2B) Marketing THE MAKE, BUY, OR LEASE DECISION • Firms acquiring needed products can get them in one of three ways: • Make the good or provide the service in-house. • Purchase it from another organization. • Lease it from another organization. • Producing the item may be cheapest route, but most firms cannot make all of the products they need. • Many companies purchase many of the goods they need. • Companies can spread out costs through leasing. CHAPTER 6 Business-to-Business (B2B) Marketing 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. • Outshoring Using outside vendors to provide goods and services formerly produced in-house. PROBLEMS WITH OFFSHORING AND OUTSOURCING • Cost savings may be less than expected. • Can raise security concerns over proprietary technology or customer data. • Can reduce flexibility, create conflicts with unions, or negatively affect employee morale and loyalty. CHAPTER 6 Business-to-Business (B2B) Marketing THE BUSINESS BUYING PROCESS • More complex than the consumer decision process. • Takes place within formal organization’s budget, cost, and profit considerations. INFLUENCES ON PURCHASE DECISIONS • Environmental factors—economic, political, regulatory, competitive, and technological considerations influence business buying decisions. • Organizational factors—structures, policies, and purchasing systems, which may be centralized in one office or delegated to units throughout the organization. • Interpersonal Influences of all organizational members involved in the buying decision. • Concerns and procedures of professional buyers who implement systematic buying procedures. CHAPTER 6 Business-to-Business (B2B) Marketing CLASSIFYING BUSINESS BUYING SITUATIONS • Business buying behavior involves degree of effort involved in the decision and the levels within the organization in which these decisions are made. • Straight rebuying—recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. • Modified rebuying—purchaser willing to reevaluate available options. • New-Task Buying—first-time or unique purchase situations that require considerable effort by the decision makers. • Reciprocity—practice of buying from suppliers that are also customers. ANALYSIS TOOLS • Value analysis—examines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute. • Vendor analysis—ongoing evaluation of a supplier’s performance in a variety of areas. CHAPTER 6 Business-to-Business (B2B) Marketing THE BUYING CENTER CONCEPT • Buying center Participants in an organizational buying action. BUYING CENTER ROLES Decider Buyer Users Gatekeeper Influencer CHAPTER 6 Business-to-Business (B2B) Marketing INTERNATIONAL BUYING CENTERS • Marketers may have difficulty identifying members of foreign buying centers. • Marketers who can quickly identify decision makers have an advantage over competition. TEAM SELLING • Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision. • May include members of the seller firm’s own supply network in the sales situation. CHAPTER 6 Business-to-Business (B2B) Marketing DEVELOPING EFFECTIVE BUSINESS-TOBUSINESS MARKETING STRATEGIES • Marketer must develop strategy based on particular organization’s buying behavior and on the buying situation. CHALLENGES OF GOVERNMENT MARKETS • Purchases typically involve dozens of interested parties and may be influenced by social goals. • Most federal government purchases must go through a complex bidding process governed by the Federal Acquisition Regulation. • GSA Advantage allows government buyers to make purchases online at preferred government prices. CHAPTER 6 Business-to-Business (B2B) Marketing CHALLENGES OF INSTITUTIONAL MARKETS • Include schools, hospitals, libraries, foundations, and others. • Multiple buying influences can affect buying decisions, such as conflicts between professional staff and purchasing departments. CHALLENGES OF INTERNATIONAL MARKETS • Marketers must consider buyers’ attitudes and cultural patterns. • Local industries, economic conditions, geographic characteristics, and legal restrictions must all be considered. • Foreign governments are also an important market.