Chapter 7

1. Chapter 7 Why Organizations Buy: Business-to-Business Markets and B2B E-Commerce Marketing: Real People, Real Choices 3rd edition

2. Chapter Objectives_1 • Describe the general characteristics of business-to-business markets and business buying practices • Tell how marketers classify business and organizational markets Marketing: Real People, Real Choices 3rd edition

3. Chapter Objectives _2 • Explain the business buying situation and describe business buyers • Understand the stages of the business buying decision process • Understand the growing role of B2B E-Commerce Marketing: Real People, Real Choices 3rd edition

4. Business-to-Business Marketing • Marketing of goods and services that businesses and organizations buy for purposes other than personal consumption • Also called organizational markets Marketing: Real People, Real Choices 3rd edition

5. Characteristics of B2B Markets • Generally, the same principles are true for business and consumer customers • There are characteristics that make B2B buying more complex • Multiple buyers • Number of customers • Size of purchases • Geographic concentration Marketing: Real People, Real Choices 3rd edition

6. B2B Demand Characteristics • Derived Demand • Inelastic Demand • Fluctuating Demand • Joint Demand Marketing: Real People, Real Choices 3rd edition

7. Derived Demand • B2B demand is derived demand because a business’s demand for goods and services comes either directly or indirectly from consumers’ demands Marketing: Real People, Real Choices 3rd edition

8. Inelastic Demand • Inelastic demand means that business customers buy the same quantity whether the price goes up or down • Example: A BMW Z3 Roadster 2.5i has a list price starting at just over $30,000. If the price of tires, batteries, or stereos goes up or down, BMW still must buy enough to meet consumer demand for the Z3. Marketing: Real People, Real Choices 3rd edition

9. Fluctuating Demand • Small changes in consumer demand can create large increases or decreases in business demand • Acceleration principles (multiplier effect) means that changes in consumer behavior has a ripple effect through several related businesses Marketing: Real People, Real Choices 3rd edition

10. Joint Demand • Joint demand occurs when two or more goods are necessary to create a product • Companies try to avoid dependence on specific suppliers by dealing with multiple suppliers whenever possible Marketing: Real People, Real Choices 3rd edition

11. B2B Classifications • Producers • Resellers • Governments • Government contracts often require competitive bids • Requests for proposals (RFPs) are posted in the Commerce Business Daily • Not-for-profit organizations Marketing: Real People, Real Choices 3rd edition

12. North American Industry Classification System (NAICS) • Replaced the SIC system in 1997 • Reports the number of firms, total dollar amount of sales, number of employees, growth rate for industries, broken down by geographic region • Can be used to assess potential markets and to determine how well a firm is doing compared to their industry group Marketing: Real People, Real Choices 3rd edition

13. The Nature of Business Buying • The Buying Situation • The Professional Buyer • The Buying Center Marketing: Real People, Real Choices 3rd edition

14. The Buying Situation • A buy class framework identifies the degree of effort required of the firm’s personnel to collect information and make a purchase decision • Straight rebuy • Modified rebuy • New task buying Marketing: Real People, Real Choices 3rd edition

15. The Professional Buyer • Titles: purchasing agents, procurement officers, director of materials management • Focus on economic factors beyond the initial price of a product including transportation and delivery charges, accessory products or supplies, maintenance, disposal costs, etc. • Large firms practice centralized purchasing - one department does all buying Marketing: Real People, Real Choices 3rd edition

16. The Buying Center • The group of people in the organization who participate in the decision-making process • May include production workers, supervisors, engineers, secretaries, shipping clerks, and financial officers Marketing: Real People, Real Choices 3rd edition

17. Roles in the Buying Center • Initiator begins the buying process • User needs the product • Gatekeeper controls the flow of information to other members • Influencer dispenses advice or shares expertise • Decider makes the final decision • Buyer executes the purchase Marketing: Real People, Real Choices 3rd edition

18. Electronic B2B Commerce • Internet exchanges between two or more businesses or organizations • Allows marketers to link directly to suppliers, factories, distributors, and their customers • Reduces time necessary to order and deliver goods, track sales, and get feedback Marketing: Real People, Real Choices 3rd edition

19. Intranets, Extranets, and Private Exchanges • An intranet is an internal corporate computer network that uses Internet technology to link company departments, employees, and databases • An extranet allows outsiders to the organization to access its intranet • A private exchange links invited groups of suppliers and partners over the Web Marketing: Real People, Real Choices 3rd edition