6

CHAPTER Business-to-Business (B2B)

Marketing

Chapter Objectives
1 Explain each of the 4 Discuss the decision to 7 Classify organizational
components of the make, lease, or buy. buying situations.
business-to-business
(B2B) market. 5 Describe the major Explain the buying center
influences on business 8 concept.
2 Describe the major buying behavior.
Discuss the challenges
approaches to segmenting
B2B markets. 6 Outline the steps in the 9 and strategies for
organizational buying marketing to government,
3 Identify the major process. institutional, and
characteristics of the international buyers.
business market and its
demand.
 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 companys 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 businesss
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 organizations budget, cost, and profit
considerations.

INFLUENCES ON PURCHASE DECISIONS

Environmental factorseconomic, political, regulatory, competitive, and
technological considerations influence business buying decisions.
Organizational factorsstructures, 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 rebuyingrecurring purchase decision in which a customer
reorders a product that has satisfied needs in the past.
Modified rebuyingpurchaser willing to reevaluate available options.
New-Task Buyingfirst-time or unique purchase situations that require
considerable effort by the decision makers.
Reciprocitypractice of buying from suppliers that are also customers.

ANALYSIS TOOLS
Value analysisexamines each component of a purchase in an attempt to
either delete the item or replace it with a more cost-effective substitute.
Vendor analysisongoing evaluation of a suppliers 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 firms own supply network in the sales
situation.
 CHAPTER 6 Business-to-Business (B2B) Marketing

DEVELOPING EFFECTIVE BUSINESS-TO-

BUSINESS MARKETING STRATEGIES
Marketer must develop strategy based on particular organizations 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.