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Chapter Objectives

Business-to-Business (B2B) Marketing. CHAPTER 6. Chapter Objectives. Explain each of the components of the business-to-business (B2B) market. Describe the major approaches to segmenting B2B markets. Identify the major characteristics of the business market and its demand.

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Chapter Objectives

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  1. Business-to-Business (B2B) Marketing CHAPTER6 Chapter Objectives Explain each of the components of the business-to-business (B2B) market. Describe the major approaches to segmenting B2B markets. Identify the major characteristics of the business market and its demand. Discuss the decision to make, lease, or buy. Describe the major influences on business buying behavior. Outline the steps in the organizational buying process. Classify organizational buying situations. Explain the buying center concept. Discuss the challenges and strategies for marketing to government, institutional, and international buyers. 4 7 1 5 8 2 9 6 3

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. THE BUYING CENTER CONCEPT • Buying center Participants in an organizational buying action. BUYING CENTER ROLES Decider Buyer Users Gatekeeper Influencer

  15. 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.

  16. DEVELOPING EFFECTIVE BUSINESS-TO-BUSINESS 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.

  17. 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.

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