Chapter 7

BUSINESS-TO-
BUSINESS
(B2B)
MARKETING

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 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.

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 Chapter 7 Business-to-Business (B2B) Marketing

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.

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Table 7.1 - Comparing Business-to-Business

Marketing and Consumer Marketing

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 Chapter 7 Business-to-Business (B2B) 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 organizations goals must be considered in
the B2B buying process

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Components of the Business Market

Government
Federal
State
Local
Foreign governments
Public and private institutions

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Segmenting B2B Markets

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Segmenting B2B Markets

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Table 7.2 - NAICS Classification for Home

Furnishing Merchant Wholesalers

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 Chapter 7 Business-to-Business (B2B) Marketing

Segmenting B2B Markets

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Segmenting B2B Markets

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Segmenting B2B Markets

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Characteristics of the B2B Market

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Characteristics of the B2B 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

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 Chapter 7 Business-to-Business (B2B) Marketing

Characteristics of the B2B Market

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Figure 7.1 - Categories of Business Market

Demand

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 Chapter 7 Business-to-Business (B2B) Marketing

Derived Demand
Linkage between demand for a companys
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

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 Chapter 7 Business-to-Business (B2B) Marketing

Volatile Demand
Derived demand creates volatility in
business market demand
Example: Demand for gasoline pumps may be
reduced if demand for gasoline slows down

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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 firms
entire stock of a product from just one
vendor

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 Chapter 7 Business-to-Business (B2B) Marketing

Inventory Adjustments
JIT II - Leads suppliers to place
representatives at the customers 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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 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
Canada and Mexico are attractive nearshoring
locations

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Problems with Offshoring and Outsourcing

Cost savings are less than expected
Can raise security concerns over proprietary
technology or customer data
Can reduce companys 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

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 Chapter 7 Business-to-Business (B2B) Marketing

The Business Buying Process

More complex than the consumer decision
process
Takes place within a formal organizations
budget, cost, and profit considerations
Involves many people with complex
interactions among individuals and
organizational goals

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 Chapter 7 Business-to-Business (B2B) Marketing

Influences on Purchase Decisions

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Influences on Purchase Decisions

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Influences on Purchase Decisions

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Figure 7.2 - Stages in the B2B Buying

Process

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 Chapter 7 Business-to-Business (B2B) Marketing

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 firms 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
employees preference

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 Chapter 7 Business-to-Business (B2B) Marketing

Stages in the B2B Buying Process

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Stages in the B2B Buying Process

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Stages in the B2B Buying Process

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

Developing Effective
Business-to-Business Marketing Strategies
Marketers must develop a strategy based on
a particular organizations 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

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 Chapter 7 Business-to-Business (B2B) Marketing

Developing Effective
Business-to-Business Marketing Strategies
The government buys products under two
basic types of contracts
Fixed-price contracts
Cost-reimbursement contracts

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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

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 Chapter 7 Business-to-Business (B2B) Marketing

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 Business-to-Business (B2B) Marketing

Zappos Video

http://www.cengage.com/marketing/book_content/boone_9781133628460
/videos/ch07.html

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