MKTG 8 8th Edition Lamb Solutions Manual

MKTG 8 8th Edition Lamb Solutions
Manual
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CHAPTER 7 Business Marketing
This chapter begins with the learning outcome summaries, followed by a set of lesson plans for you to use
to deliver the content in Chapter 7.
• Lecture (for large sections) on page 4
• Company Clips (video) on page 5
• Group Work (for smaller sections) on page 6
Review and Assignments begin on page 7
 Review questions
 Application questions
 Application exercise
 Ethics exercise
 Video Assignment
 Case assignment
Great Ideas for Teaching Marketing from faculty around the country begin on page 17
Chapter 7 ♦ Business Marketing 1

LEARNING OUTCOMES
7-1 Describe business marketing

Business marketing is the marketing of goods and services to individuals and organizations for purposes other than
personal consumption. Business products include those that are used to manufacture other products, that become part of
other products, that aid in the normal operations of an organization, or that are acquired for resale without any substantial
change in form. The key characteristic distinguishing business products from consumer products is intended use, not
physical characteristics.
7-2 Describe the role of the Internet in business marketing

The rapid expansion and adoption of the Internet have made business markets more competitive than ever before.
Businesses are integrating content marketing into their B-to-B marketing campaigns, and measurements such as a
Web site’s stickiness and metrics evaluating social media effectiveness are increasingly important to B-to-B
marketers. These trends help B-to-B marketers generate more valuable leads and pull customers into their Web sites.
7-3 Discuss the role of relationship marketing and strategic alliances in business marketing
Relationship marketing entails seeking and establishing long-term alliances or partnerships with customers. A strategic
alliance is a cooperative agreement between business firms. Firms form alliances to leverage what they do well by
partnering with others that have complementary skills.
7-4 Identify the four major categories of business market customers

Producer markets consist of for-profit individuals and organizations that buy products to use in producing other products,
as components of other products, or in facilitating business operations. Reseller markets consist of wholesalers and
retailers that buy finished products to resell for profit. Government markets include federal, state, county, and city
governments that buy goods and services to support their own operations and serve the needs of citizens. Institutional
markets consist of very diverse nonbusiness institutions whose main goals do not include profit.
7-5 Explain the North American Industry Classification System

The North American Industry Classification System, (NAICS) provides a way to identify, analyze, segment, and target
business and government markets. Organizations can be identified and compared by a numeric code indicating business
sector, subsector, industry group, industry, and industry subdivision. NAICS is a valuable tool for analyzing, segmenting,
and targeting business markets.
7-6 Explain the major differences between business and consumer markets
In business markets, demand is derived, inelastic, joint, and fluctuating. Purchase volume is much larger than in
consumer markets, customers are fewer in number and more geographically concentrated, and distribution channels are
more direct. Buying is approached more formally using professional purchasing agents, more people are involved in the
buying process, negotiation is more complex, and reciprocity and leasing are more common. And, finally, selling
strategy in business markets normally focuses on personal contact rather than on advertising.
7-7 Describe the seven types of business goods and services

Business products generally fall into one of the following seven categories, depending on how they are used.
Major equipment includes such capital goods as large or expensive machines, mainframe computers, blast furnaces,
generators, airplanes, and buildings. Such goods are often leased, custom-designed, sold direct, and depreciated over
time. Accessory equipment is generally less expensive, standardized, and shorter-lived than major equipment and
includes items such as power tools, word processors, and fax machines.
Raw materials are unprocessed extractive or agricultural products—such as mineral ore, logs, wheat, vegetables, or
fish—that become part of the final product. Component parts are either finished items ready for assembly or products
that need very little processing before they become part of some other product. Examples include spark plugs, tires, and
electric motors. There is also a replacement market for component parts.
2 Chapter 7 ♦ Business Marketing
Processed materials are used directly in the production of other products, but unlike raw materials, they have had
some processing. They do not retain their original identity in the final product. Examples include sheet metal, lumber,
chemicals, and plastics.
Supplies are inexpensive, standardized, consumable items that do not become part of the product. Examples include
lubricants, detergents, paper towels, pencils, and paper.
Business services are expense items that do not become part of a final product. Businesses retain outside providers to
perform such tasks as advertising, janitorial, legal, maintenance, or other services.
7-8 Discuss the unique aspects of business buying behavior

Business buying behavior is distinguished by five fundamental characteristics. First, buying is normally undertaken by a
buying center consisting of many people who range widely in authority level. Second, business buyers typically evaluate
alternative products and suppliers based on quality, service, and price—in that order. Third, business buying falls into
three general categories: new buy, modified rebuy, and straight rebuy. Fourth, the ethics of business buyers and sellers
are often scrutinized. Fifth, customer service before, during, and after the sale plays a big role in business purchase
decisions.
TERMS
accessory equipment keiretsu processed materials
business marketing (industrial major equipment (installations) raw materials
marketing)
business services modified rebuy reciprocity
business-to-business electronic multiplier effect (accelerator relationship commitment
commerce principle) stickiness
business-to-business online new buy straight rebuy
exchange
buying center North American Industry strategic alliance (strategic
component parts Classification System (NAIC) partnership)
derived demand original equipment manufacturers supplies
joint demand (OEMs) trust

LESSON PLAN FOR LECTURE
Brief Outline and Suggested PowerPoint Slides:
Learning Outcomes and Topics PowerPoint Slides

LO1 Describe business marketing 1: Business Marketing
7-1 What Is Business Marketing? 2: Learning Outcomes
3: Learning Outcomes
4: What Is Business Marketing?
5: What Is Business Marketing?
6: Business Products
LO2 Describe the role of the Internet in business marketing 7: Business Marketing on the Internet
7-2 Business Marketing on the Internet 8: Business-to-Business Electronic Commerce
9: Business-to-Business and Social Media
10: Measuring Online Success
11: Internet Sites for Small Businesses
LO3 Discuss the role of relationship marketing and strategic 12: Relationship Marketing and Strategic Alliances
alliances in business marketing 13: Relationship Marketing
7-3 Relationship Marketing and Strategic Alliances 14: Strategic Alliances
15: Relationships in Other Cultures
LO4 Identify the four major categories of business market 16: Major Categories of Business Customers
customers 17: Major Categories of Business Customers
7-4 Major Categories of Business Customers
LO5 Explain the North American Industry Classification 18: North American Industry Classification System
System 19: North American Industry Classification System
7-5 The North American Industry Classification 20: Example of NAICS Hierarchy
System 21: NAICS
LO6 Explain the major differences between business and 22: Business versus Consumer Markets
consumer markets 23: Business versus Consumer Markets
7-6 Business versus Consumer Markets 24: Demand in Business Markets
LO7 Describe the seven types of business goods and services 25: Types of Business Products
7-7 Types of Business Products 26: Types of Business Products
27: Types of Business Goods and Services
28: Intel Buys McAfee
LO8 Discuss the unique aspects of business buying behavior 29: Business Buying Behavior
7-8 Business Buying Behavior 30: Business Buying Behavior
31: Buying Centers
32: Roles in Buying Centers
33: Evaluative Criteria
34: Buying Situations
35: Customer Service
36: Chapter 7 Video
Suggested Homework:
• The end of this chapter contains assignments for the Zappos video and for the Pantone case.
• Each Chapter Prep Card contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.

LESSON PLAN FOR VIDEO
Company Clips
Segment Summary: Zappos
Zappos, known for its outstanding customer service and speedy shipping, also gives away information about making
organizational culture work for employees and the company. The program, Insights, offers companies assistance in
building strong cultures around core values in a variety of ways, starting with free tours. Despite seeming like this
would give away valuable competitive information, Zappos is expanding this service to help other companies
deliver happiness to their customers.
PRE-CLASS PREP FOR YOU: PRE-CLASS PREP FOR YOUR STUDENTS:

• Preview the Company Clips video segment for Chapter • Have students familiarize themselves with the
7. This exercise reviews concepts for LO2 and LO3. following terms and concepts: business marketing, four
• Review your lesson plan. major categories of customers, business versus
• Make sure you have all of the equipment needed to consumer markets, types of business products, and
show the video to the class, including the DVD and a customer service.
way to project the video. • Have students visit the Zappos Insights Web site:
• You can also stream the video HERE http://www.zapposinsights.com. As they browse,
they should consider how zappos uses the above
concepts on their Web site.
VIDEO REVIEW EXERCISE
ACTIVITY
• Begin by asking students “what is the difference between business and consumer markets?” See
if they can give examples.
Warm Up
• Review the definition for relationship marketing.

• Ask students for their best explanation to the following statement from the textbook: “Building
long-term relationships with customers offers companies a way to build competitive advantage
that is hard for competitors to copy.”
In-class • While acknowledging salient points in students’ explanations, write the following points on the
Preview board:
o Loyal customers are profitable = win
o Loyalty earns customer rewards = win
• Review the Company Clips questions with students. They should be prepared to answer them
after viewing the video.
1. What benefit does Zappos receive from developing its Insights program?
Viewing 2. In what ways does Zappos seek out business customers? In what ways does it build its
relationships with its business customers?
(Solutions
below.)
Take-home-assignment: Have students take the Zappos virtual tour

(http://www.zapposinsights.com/tours/virtual). have them write a paragraph discussing why other
Follow-up companies might want to visit Zappos and how the Zappos culture could be applied at other
companies.

Solutions for Viewing Activities:
1. What benefit does Zappos receive from developing its Insights program?
According to the video, Zappos benefits by achieving its organizational goal of “Delivering Happiness.” Zappos
also benefits by developing a network of organizations that share its values, making alliances possible should they
be needed.
2. In what ways does Zappos seek out business customers? In what ways does it build its relationships with its
business customers?
Zappos uses word of mouth to encourage people to use Zappos Insights. This is through the culture book and
companies completing boot camp spreading the word about Zappos Insights. People also “self-select” through the
free tours and the culture book.
LESSON PLAN FOR GROUP WORK
In most cases, group activities should be completed after some chapter content has been covered, probably in the second
or third session of the chapter coverage. (See “Lesson Plan for Lecture” above.)
• For “Class Activity – Marketing to Distribution Channels,” divide the class into small groups of four or five people.
Provide the information and the questions asked by the class activity
• Applications questions 1, 2, and 8 lend themselves well to group work. For these activities, divide the class into
small groups of four or five people. Each group should read the question and then use their textbooks, or any work
that was completed previously, to perform the exercise. Then each group should discuss or present their work to the
class.
Class Activity – Marketing to Distribution Channels

Ask your students to go to the Internet and locate Web sites that are targeted to business customers. Have them report on
the information available at these Web sites that would be valuable to the business customer. Also have them report on
the types of marketing appeals that are used to attract business customers. Have them evaluate the effectiveness of the
website from a marketing and customer service perspective.

REVIEW AND ASSIGNMENTS FOR CHAPTER 7
REVIEW QUESTIONS
1. Why is relationship or personal selling the best way to promote in business marketing?
In most cases, business selling relies on long-term relationships and repeat buying. Close communication and
ongoing dialog is essential to satisfying the customers.
2. Explain how a marketer could use the Web site http://www.census.gov/eos/www/naics/index.html to better
understand the NAICS system.
There is a link on the top of the NAICS Web page labeled “FAQs” that answers frequently asked questions about
the NAICS, such as “What is NAICS and how is it used?” and “What is the NAICS structure and how many digits
are in a NAICS code?” [http://www.census.gov/eos/www/naics/faqs/faqs.html]
3. How might derived demand affect the manufacturing of an automobile?
The demand for new cars drives the demand for products such as tires, brake linings, windshields, wipers, and more.
In turn, the demand for tires drives a large portion of the demand for rubber. So automobiles, with so many complex
components, drive the demand for a great many products, hence the derived demand.
4. Intel Corporation supplies microprocessors to Compaq for use in their computers. Describe the buying
situation in this relationship, keeping in mind the rapid advancement of technology in this industry.
Students should address some of these points:
The two companies do have a close and long-standing relationship, however the purchases are not simple rebuys.
With the new technology, Compaq and Intel are constantly renegotiating and looking at new products and new
contracts. Compaq has multiple product lines—laptops, desktops, and servers—and requires different chips for the
products in each line. Depending on the power needs of an individual product, Compaq may need medium- or high-
speed, or possibly multiple processors. Hence, the buying center for purchasing from Intel will be very complex.
APPLICATION QUESTIONS
1. As the marketing manager for Huggies diapers made by Kimberly-Clark, you are constantly going head-to-
head with Pampers, produced by rival Procter & Gamble. You are considering unlocking the potential of the
business market to increase your share of the disposable diaper market, but how? Write an outline of several
ways you could transform this quintessentially consumer product into a successful business product as well.
Students’ answers will vary and should identify not only new types of buyers, but new types of promotion and
pricing as well. New packaging may also be required.
2. How could use you use the Web site http://www.btobonline.com to help define a target market and develop a
marketing plan?
This Web site provides some services to organizations that wish to do business with other organizations. Links on
the Web site include: services, resources, finance, tools, media kit, and access to the Business to Business magazine.
To find a potential target market, the first area that potential marketers should use is the resources link. This link
provides a list of various organizations—such as U.S. government agencies, international organizations, and
magazines/newspapers—and provides links to these Web sites. If a company is considering targeting the U.S.
government, for example, it can link to the U.S. government agency Web site and read all about it. That will provide
some information on the needs of the target market and how it goes about accepting bids. The Web site is not very
good at helping companies identify private enterprise target markets, as those would be too numerous to list.
3. Reconsider question 1. How could you use the Internet in your business marketing of Huggies diapers?
Students’ answers will vary but should include ideas for all four Ps.
3. Understanding businesses is the key to business marketing. Publications like Manufacturing Automation,
Computer Weekly, Power Generation Technology & Markets, and Biotech Equipment Update can give you
insights into many business marketing concepts. Research the industrial publications to find an article on a
business marketer that interests you. Write a description of the company using as many concepts from the
chapter as possible. What major category or categories of business market customers does this firm serve?
Students’ answers will vary since they can select any business marketer.
4. What do you have to do to get a government contract? Check out the Web sites http://www.fedbizopps.gov
and http://www.governmentbids.com to find out. Does it seem worth the effort?
Students’ answers will vary.
5. Pick a product and determine its NAICS code. How easy was it to trace the groups and sectors?
Students’ answers will vary depending on the product selected.
6. Your boss has just asked you, the company purchasing manager, to buy new computers for an entire
department. Since you have just recently purchased a new home computer, you are well educated about the
various products available. How will your buying process for the company differ from your recent purchase
for yourself?
As with family purchasing decisions, several people may play a role in the business purchase process. The boss is
the initiator and may be the decider. The coworkers for whom the computers are being purchased will be the users,
and you are the purchaser, but you may also be an influencer. Business buyers evaluate products on quality, service,
and price—in that order. As a consumer, price may be your first priority in a computer purchase, and service may
not even be an issue at all. Since you will be investing a large amount of capital resources in the new computer
system, lengthy negotiations will most likely take place; this does not generally happen with consumer purchases of
computers. Lastly, you may decide to lease the computers. In the business environment it is more critical to stay
abreast of new technologies, necessitating more frequent upgrades than for home use.
7. In small groups brainstorm examples of companies that feature the products in the different business
categories. (Avoid examples already listed in this chapter.) Compile a list of ten specific products and match
up with another group. Have each group take turns naming a product and have the other group identify its
appropriate category. Try to resolve all discrepancies by discussion. It is certainly possible that some
identified products might appropriately fit into more than one category.
Students’ answers will vary widely by group.
8. A colleague of yours has sent you an e-mail seeking your advice as he attempts to sell a new voice-mail system
to a local business. Send him a return e-mail describing the various people who might influence the
customer’s buying decision. Be sure to include suggestions for dealing with the needs of each.
Students’ answers should address some of the following points:
The initiator is the person who first suggests making a purchase. This could be a CEO or an office manager or
someone else. Influencers or evaluators often define specifications for the purchase or provide information for
evaluating options. You need to find out who these people are and make sure you meet their specifications.
Gatekeepers regulate the flow of information about the purchase to the deciders and others.

The decider is the person who possesses formal or informal power to choose or approve the selection of the supplier
or brand, so this person needs full information on the product. The purchaser is the person who actually negotiates
the purchase, and may be a separate function from the decider.
Vendors need to identify and interact with the true decision makers. Other critical issues are each member’s relative
influence and the evaluative criteria used by each member.
APPLICATION EXERCISE
Purchasing agents are often offered gifts and gratuities. Increasingly, though, companies are restricting the amount and
value of gifts that their purchasing managers can accept from vendors. The idea is that purchasing managers should
consider all qualified vendors during a buying decision instead of only those who pass out great event tickets. This
exercise asks you to consider whether accepting various types of gifts is ethical.
Activities
1. Review the following list of common types of gifts and favors. Put a checkmark next to the items that you think
it would be acceptable for a purchasing manager to receive from a vendor.
Advertising souvenirs Automobiles
Clothing Dinners
Discounts on personal purchases Food and liquor
Golf outings Holiday gifts
Large appliances Loans of money
Lunches Small-value appliances
Tickets (sports, theater, amusement parks, etc.) Trips to vendor plants
Vacation trips
2. Now look at your list of acceptable gifts through various lenses. Would your list change if the purchasing
manager’s buying decision involved a low-cost item (say, pens)? Why or why not? What if the decision
involved a very expensive purchase (like a major installation)?
3. Form a team and compare your lists. Discuss (or debate) any discrepancies.
Purpose: This exercise helps students confront the gray areas in their own ethical perceptions.
Setting It Up: Distribute the checklist above. You can have students work individually, in pairs, or in groups to
complete it. Expect some debate, as differences over what students consider ethical are bound to arise. After students
have had adequate time to determine the gifts they find ethical, show them the grid on the next page. Discuss any
differences in perceptions.

This exercise was inspired by the following Great Idea in Teaching Marketing:
Gregory B. Turner, College of Charleston
STUDENT ETHICS VERSUS PRACTITIONER ETHICS
This exercise can be used during a logistics or ethics segment in a basic Marketing class. The students find it quite
enjoyable and it helps promote student participation in the classroom. I have developed a standard list of gifts and
gratuities that are offered to purchasing agents. This list was developed based on personal research as well as other
current research in this area. I distribute the list along with a scenario that places the students in the roles of purchasing
agents. The students are asked to then indicate the acceptability of the gifts and gratuities to them. The class then
computes the averages and compares the results to previous outcomes of practitioners. The results typically generate
some spirited discussion.
TYPE OF GIFT/FAVOR A B C D E F G H
Advertising Souvenirs 29 19 69 30 54 80 73 92
Automobiles 0 0 — 0 — — 1 1
Clothing 5 0 6 16 0 — 7 3
Dinners 38 10 22 79 8 — 48 70
Discounts on Personal Purchases 11 5 9 18 15 — 11 21
Food & Liquor 31 5 49 40 0 36 30 29
Golf Outings 26 5 2 57 0 — 28 47
Holiday Gifts 27 17 29 56 0 — 43 30
Large Appliances 0 0 — 0 — 2 1 1
Loans of Money 0 0 — 0 — — 1 1
Lunches 47 24 36 93 23 80 68 90
Small Value Appliances 2 5 0 6 0 6 6 6
Tickets (Sports, Theater, etc.) 28 5 13 59 0 42 37 60
Trips to Vendor Plants 39 11 42 48 0 — 31 51
Vacation Trips 0 0 0 2 0 4 2 2
A = 1995 - 1997 NAPM National Meetings (Turner et al. 1998)

B = 1994 State of South Carolina (Turner et al. 1995)
C = 1994 State of Alabama (Turner et al. 1995)
D = 1992 NAPM C-V Region Survey (Turner et al. 1992)
E = 1990 State of Arizona (Forker 1990)
F = 1990 Purchasing World Readers Poll (Modic 1990)
G = 1988 NAPM and Ernst & Whinney Survey (Janson 1988)
H = 1979 NAPM and Illinois Institute of Technology Survey (Anjou 1979)

ETHICS EXERCISE
Cameron Stock, purchasing manager for a sports equipment manufacturer, is responsible for buying $5 million of
supplies every year. He has a preferred list of certified suppliers who are awarded a large percentage of his business.
Cameron has been offered a paid weekend for two in Las Vegas as a Christmas present from a supplier with whom he
has done business for a decade and built a very good relationship.
Questions
1. Would it be legal and ethical for Cameron Stock to accept this gift?
It may be legal to accept the gift in certain states, but it would not be ethical. Although Cameron has built a strong
relationship with the supplier over the years, accepting such a lavish gift would entangle the business and personal
relationships. One alternative might be for Cameron to accompany the supplier on the trip, but to pay his own way.
2. How is this addressed in the AMA Code of Ethics? Go to the AMA Web site at
http://www.marketingpower.com and reread the Code of Ethics. Write a brief paragraph summarizing
where the AMA stands on the issue of supplier gifts.
There is no specific paragraph in the code regarding supplier gifts. There is, however, a rule against exercising
coercion in the marketing channel. The acceptance of the gift could be construed as exercising coercion in the
marketing channel, since the supplier would be implicitly trying to give a reason for Cameron to continue to
purchase parts and materials from him, rather than switching to another supplier, who may offer a lower price, better
terms, and so forth.
VIDEO ASSIGNMENT
Zappos
Zappos, known for its outstanding customer service and speedy shipping, also gives away information
about making organizational culture work for employees and the company. The program, Insights, offers
companies assistance in building strong cultures around core values in a variety of ways, starting with
free tours. Despite seeming like this would give away valuable competitive information, Zappos is
expanding this service to help other companies deliver happiness to their customers.
1. Zappos Insights is an example of:

a. Business supplies
b. B-to-B e-commerce
c. Business service
d. An accessory for businesses
ANS: C
Zappos Insights is a business service: it is an expense item (consulting) that does not appear in the final product.
2. When Zappos started charging for certain training events, they were worried that people would not pay.
However, they have paid, which indicates what about the Insights program?
a. The insights program has great service, just like zappos.
b. The Insights program is a high quality program that offers great service for a price that is acceptable to
businesses.
c. The insights program is priced low enough to be acceptable for management consulting services.
d. That the buying center agreed on using the Zappos program.
ANS: B
While this is partially true, the Insights program would meet all three criteria for it to be a successful business-
to-business program.
3. Zappos primary customers are consumers, however, Zappos Insights experiences very different customers,
including:
a. All members from the buying center.
b. OEMS, raw materials handlers, and other B-to-B providers.
c. Resellers, Producers, and Institutions.
d. members of strategic alliances.
ANS: C
Zappos Insights customers are businesses, such as resellers, producers, and institutions.
4. Zappos wants to deliver happiness to the highest number of people, which has driven the company’s
commitment to work with other companies to help them develop a culture promoting happy employees. This
could be considered
a. a joint demand for happy employees.
b. a derived demand for joy into the supply chain.
c. a strategic alliance for culture building.
d. the multiplier effect of happiness.
ANS: C
Companies ask Zappos to help them develop a strong organizational culture, forming a cooperative agreement
between the two companies (a strategic alliance) for culture building.
5. Zappos Insights is expanding to work onsite with companies like Google to develop even stronger
organizational cultures and connecting culture to customer service. This relationship is a keiretsu.
a. True
b. False
ANS: B
Zappos Insights is providing a business service to companies like Google. Zappos does not sit on the board or
develop a true network of corporate affiliates through its Insights program, though it does engender goodwill!
6. Zappos Insights is an example of relationship commitment to other businesses.

a. True
b. False
ANS: B
Zappos insights is an example of relationship marketing. Relationship commitment means that a company
believes maintaining a relationship with another firm is so important, it warrants maximum effort.
7. Zappos found that the Insights program has elastic demand, because when they began charging for the
workshops, demand for them did not change.
a. True
b. False
ANS: B
The demand was inelastic because the change in price did not change the demand.
8. When Zappos vendors visited the company headquarters and wanted to know more about how the business was
run, they were expecting:
a. installations.
b. reciprocity
c. e-commerce training
d. relationship marketing
ANS: B
The vendors work with Zappos to sell their products, and were expecting to be shown how the company works
in return; they were expecting reciprocity.
9. Zappos Insights is committed to helping other companies improve which of the following criteria?
a. Quality
b. Service
c. Price
d. Commitment
ANS: B

Zappos excels at customer service and promises to help other companies build service that customers love.
10. Zappos would agree with the statement that “some customers are more valuable than others,” which is why it is
expanding its Zappos insights program.
a. True
b. False
ANS: B
Zappos prides itself on excellent customer service, and strives to WOW every customer. It is expanding the
Insights program because of the demand for creating great organizational cultures.
CASE ASSIG NMENT: IBM
Created by IBM in 2011, Watson is a supercomputer with a unique capability—it can understand and respond to natural
language. IBM showcased this amazing computing ability on the game show Jeopardy, where Watson faced Ken
Jennings, the holder of the longest winning streak in Jeopardy history, and Brad Rutter, who holds the record for the
most amount of money won on Jeopardy. It was no contest—Watson won the two-day contest by a landslide.
IBM has its sights set on two areas for Watson: healthcare and investment. In healthcare, Watson can access
millions of recent research and journal articles. What would take a doctor endless hours to read and comprehend, Watson
can do in a matter of minutes. Watson is capable of parsing patient and family histories, clinical data, and drug treatment
options, making it an invaluable asset not only when diagnosing a patient, but also in understanding the full range of
treatments available.
Citigroup became the first company to purchase Watson for financial services. Citigroup will use Watson to
analyze customer’s needs so that it can facilitate their interactions with the company’s automated banking system.
According to Citigroup executives, Watson will be deployed to present a “customer interaction solution,” which will
“assist decision makers in identifying opportunities, evaluating risks, and exploring alternatives.”
Within IBM, hopes are quite high for Watson. By strategically deploying its vast computing power, company
leaders hope that Watson will contribute a significant portion to the company’s $16 billion of revenues in analytics.
Industry analysts at CLSA, meanwhile, estimate that by 2015 Watson will contribute $2.65 billion in revenue through the
services it provides to other companies.
Doug Henschen, “IBM’s Watson Could Be Healthcare Game Changer,” InformationWeek, February 11, 2013,
www.informationweek.com/software/business-intelligence/ibms-watson-could-be-healthcare-game-cha/240148273
(Accessed March 26, 2013); Mark Hachman, “IBM’s Watson Hired by Citigroup,” PC Magazine, March 6, 2012,
www.pcmag.com/article2/0,2817,2401203,00.asp (Accessed March 26, 2013); Rachel King, “IBM’s Watson Being Put
to the Test in Healthcare,” ZDNet, September 24, 2012, www.zdnet.com/ibms-watson-being-put-to-the-test-in-

healthcare-7000004725 (Accessed March 26, 2013); Steve Lohr, “I.B.M.’s Watson Goes to Medical School,” New York
Times, October 30, 2012, http://bits.blogs.nytimes.com/2012/10/30/i-b-m-s-watson-goes-to-medical-school (Accessed
March 26, 2013).
TRUE/FALSE
1. IBM’s Watson is most likely to be sold as a consumer product.
ANS: F
Based on the case examples, Watson is most likely to be purchased for use in a business environment.
PTS: 1 OBJ: LO: 7-1 TOP: AACSB: Reflective Thinking

KEY: CB&E Model: Customer MSC: BLOOMS: Level I Knowledge
2. Maintaining a steady dialogue between IBM and customers like Citigroup is a proven way to gain repeat business.
ANS: T PTS: 1 OBJ: LO: 7-3 TOP: AACSB: Reflective Thinking

KEY: CB&E Model: Customer MSC: BLOOMS: Level I Knowledge
3. IBM is a producer, a category that encompasses more than 13 million firms in the United States.
ANS: T PTS: 1 OBJ: LO: 7-4

TOP: AACSB: Reflective Thinking KEY: CB&E Model: Customer
MSC: BLOOMS: Level I Knowledge
4. IBM should expect to have far fewer customers for Watson than for its consumer-grade line of microprocessors.

KEY: CB&E Model: Strategy MSC: BLOOMS: Level I Knowledge
5. If IBM switched its financial services provider to Citigroup in return for Citigroup purchasing the Watson computer, this
would exemplify reciprocity.

KEY: CB&E Model: Strategy MSC: BLOOMS: Level I Knowledge
MULTIPLE CHOICE
1. Under what circumstances would Watson be considered a consumer product?

a. The nonprofit Bill & Melinda Gates Foundation purchasing Watson to analyze global Malaria
outbreaks.
b. IBM releasing a lower-cost version of Watson with less computational power for smaller insurance
firms.
c. Billionaire Richard Branson purchasing Watson to install in his home for one-on-one games of
Jeopardy.
d. Watson being brought to a health services trade show to demonstrate its computational abilities.
e. None of these—Watson is and always will be a business product.
ANS: C
The key characteristic distinguishing business products from consumer products is intended use, not physical
characteristics.

KEY: CB&E Model: Customer MSC: BLOOMS: Level II Comprehension
2. As the world’s largest customer—buying goods and services valued at more than $875 billion per year—this is a viable
target for IBM’s Watson marketing:
a. Procter & Gamble.
b. The European Union.
c. Microsoft.
d. The U.S. federal government.
e. None of these.
ANS: D
The U.S. federal government buys goods and services valued at more than $875 billion per year, making it the world’s
largest customer.

KEY: CB&E Model: Strategy MSC: BLOOMS: Level II Comprehension
3. Suppose that a hurricane damages a silicon processing plant in China, slowing the production of the microprocessors
used in Watson. This in turn delayed the production of several Watson units, exemplifying this type of demand:
a. Derived.
b. Inelastic.
c. Joint.
d. Fluctuating.
e. None of these.
ANS: C
Joint demand occurs when two or more items are used together in a final product.

4. Among the seven categories of business products, Watson is best described as:
a. Major equipment.
b. Accessory Equipment.
c. A raw material.
d. A component part.
e. A business service.
ANS: A
Major equipment includes capital goods such as large or expensive machines, mainframe computers, blast furnaces,
generators, airplanes, and buildings.

KEY: CB&E Model: Promotion MSC: BLOOMS: Level III Application
5. At this point, all of IBM’s Watson sales represent this buying situation:
a. New buy.
b. Old buy.
c. Straight rebuy .
d. Modified rebuy.
e. None of these.
ANS: A
A new buy is a situation requiring the purchase of a product for the first time.


GREAT IDEAS FOR TEACHING CHAPTER 7
James S. Cleveland, Sage College of Albany
DISCUSSION BOARD TOPICS TO ENCOURAGE PARTICIPATION
Discussion board questions provided to students to encourage them to engage in thinking and writing about the content
of the Principles of Marketing course usually take the form of a provocative statement to which students are asked to
respond. An example of this would be “All PR is good PR.”
Discussion topics such as this one are abstract and often require that the instructor provide an initial reply to show
students what is expected of them in their own replies. For students with limited work experience, this approach may be
quite appropriate. For adult students with extensive experience as employees and consumers, however, the abstract
nature of such topics can be frustrating.
I have developed, therefore, a series of discussion board questions to use with experienced, adult students. These
questions are designed to encourage them to use their experiences as employees and consumers as doorways to better
understand the course material, and to make their own responses more interesting to themselves and to the other students
in the class who will read and comment on them.
Each question has three parts:

1. First, there is a sentence or two from the students’ textbook introducing the topic. By using the text author’s
own words, students are enabled to locate relevant material in the text more easily, the text content is
reinforced, and confusion resulting from use of variant terms or expressions is minimized.
2. Second, there is a reference to text pages the student should review before proceeding. Since the goal of the
exercise is for students to apply the course content to their own experiences, reviewing the content first is
important.
3. Third, there is a request for the student to think about or remember some specific situation in their experience to
which they can apply the text material, and a question or questions for them to address in their reply.
Here are additional such discussion board questions developed for Chapter 7 of MKTG7. Each is written to fit the same
text cited above but could easily be rewritten and revised to fit another text.
Series A
1. The business market consists of four major categories of customers: producers, resellers, government, and
institutions.
2. Review these categories in section 7-4 of your text and the types of business products in section 7-7 of your
text.
3. Then describe which category your employer falls into and what sort of products it buys.
Series B
1. Business buyers behave differently from consumers. A buying center includes those persons in an organization
who become involved in the purchase decisions.
2. Review the material on buying centers and the roles in buying centers in section 7-8 of your text.
3. Then describe how you have been involved in a buying center for your employer and what role or roles you
played.

Elizabeth J. Wilson, Louisiana State University
A DECISION-MAKING EXERCISE FOR BUSINESS MARKETING
This exercise is designed to introduce undergraduate students to decision making in the context of organizational buying.
Several distinctions of organizational buying, compared to consumer buying, can be made by using this exercise. For
example, differences in decision criteria are highlighted, and individual versus group decision making can be
demonstrated.
Procedure
The three decision evaluations represent different product categories in organizational buying—office copiers, accessory
goods that do not become part of the final product; painted sheet metal, component parts; and an industrial boiler system,
major equipment or a capital installation (Lamb, Hair, and McDaniel 1992). Use of these three decisions illustrates the
wide range of products that may be procured by a buyer or purchasing agent.
Each exercise is designed so that there is no right or wrong answer. The “suppliers,” represented by the attribute
combinations, represent a pool of vendors from which the buyer can chose. The display of the nine suppliers is a
fractional factorial design that has each of the four decision variables (price, quality, delivery, service) represented in
orthogonal combinations. The expression of these attributes varies in order to be decision specific. For example, quality
for the boiler system is expressed in terms of pollution control, while quality for copiers is expressed as the number of
features available.
Part A: Individual Evaluation – A helpful class exercise is to have students role-play as organizational buyers to work
through these decisions individually. Students are instructed to read the decision context statement and then examine the
nine “vendors” described by each block. For example, in the copier decision, vendor N offers a copier that is priced at
$3,500, has the A-level feature package (see bottom of decision), requires two hours of maintenance (downtime) per
month, and can be delivered in two weeks. Students then should cross out any vendors that are not acceptable—for
whatever reason. Of the acceptable vendors, students divide 100 points to represent how they want to source the
decision. For example, one copier vendor could be given all 100 points, or the buyer (student) can use a multiple
sourcing strategy by dividing the points among several (50/50, 70/30, 40/40/20, etc.).
At this point, the decision evaluations illustrate the concepts and variables that organizational buyers use in selecting
suppliers. After completing the decision individually, students can be asked to offer their “solutions” to the buying
decision. Since there is no right or wrong way to complete the exercise, students will differ in their solutions. Discussion
of several of their solutions illustrates the concept of trade-offs in buying and the fact that organizational buyers have
different levels of expectations in buying. What is important to one buyer may not be as important to another. In
addition, evaluation of decisions in a systematic, “rational” way is sometimes different from consumer buying (e.g.,
impulse purchases).
Part B: Group Evaluation – The second part of the exercise involves group decision making. Arrange students in
groups of two to four persons and have them evaluate these decisions again, but this time they all must agree on the point
allocations among suppliers. In discussing group solutions, the instructor may ask if there was any conflict and if so, how
it was resolved. If the group’s decision was very different from an individual’s original evaluation, the students may
discuss the dynamics of the decision-making process in how preferences were changed. This part of the exercise
illustrates concepts such as a buying center, roles of members in group decisions, and conflict management and
resolution.
REFERENCE: Charles W. Lamb, Joseph F. Hair, and Carl McDaniel (1992), Principles of Marketing, Cincinnati, OH:
Southwestern Publishing.

BUYING DECISION FOR OFFICE COPIERS
Decision Context: Your firm needs a new copier to supplement current copiers already in place. Moderate volume use
(25,000 copies per month) is expected.
N ____ pts. D ____ pts. J ____ pts.

Price: $3,500 Price: $4,400 Price: $5,000
Feature Package: A Feature Package: C Feature Package: B
Maintenance Hours per Month: Maintenance Hours per Month: Maintenance Hours per Month:
2 hrs. 2 hrs. 2 hrs.
Delivery Lead Time: 2 weeks Delivery Lead Time: Immediate Delivery Lead Time: 6 weeks
C ____ pts. W ____ pts. T ____ pts.

Feature Package: B Feature Package: A Feature Package: C
Delivery Lead Time: Immediate Delivery Lead Time: 6 weeks Delivery Lead Time: 2 weeks
A ____ pts. G ____ pts. L ____ pts.

Feature Package: C Feature Package: B Feature Package: A
Delivery Lead Time: 6 weeks Delivery Lead Time: 2 weeks Delivery Lead Time: Immediate
Feature Package Key:

A. Reduction/Enlargement, 11  17 oversized documents, toner flow control.
B. Package A features plus automatic document feeder, oversized paper tray.
C. Package B features plus document sorter, automatic two-sided copying.

BUYING DECISION FOR PAINTED SHEET METAL
Decision Context: Your firm needs to consider vendors for awarding annual purchase agreements. The contract to supply
the annual requirement of painted sheet metal may be awarded to one of several vendors described below.
L ____ pts. T ____ pts. P ____ pts.

Quality of Paint Work*: 92% Quality of Paint Work*: 95% Quality of Paint Work*: 99%
Lead Time per Order: 8 weeks Lead Time per Order: 8 weeks Lead Time per Order: 8 weeks
In-House Vendor Service In-House Vendor Service In-House Vendor Service
Rating: A+ Rating: A Rating: B
Price per piece: $25 Price per piece: $20 Price per piece: $14
F ____ pts. M ____ pts. S ____ pts.

Rating: A Rating: B Rating: A+
W ____ pts. G ____ pts. B ____ pts.

Rating: B Rating: A+ Rating: A
* Percentage of pieces usable per truckload.

BUYING DECISION FOR AN INDUSTRIAL BOILER SYSTEM
Decision Context: Your company needs a boiler system for a new office building. Evaluate the alternatives in terms
of making recommendations to senior management about which vendor(s) would best meet your company’s needs.
G ____ pts. T ____ pts. P ____ pts.

Pollution Control (% Sulfer Pollution Control (% Sulfer Pollution Control (% Sulfer
retained): retained): retained):
6 hours 8 hrs 12 hours
Price: $750,000 Price: $1,000,000 Price: $1,500,000
Manufacturing and Delivery Manufacturing and Delivery Manufacturing and Delivery
Lead Time: 12 months Lead Time: 6 months Lead Time: 9 months
R ____ pts. J ____ pts. F ____ pts.

Pollution Control (% Sulfer Pollution Control (% Sulfer Pollution Control (% Sulfer
B ____ pts. M ____ pts. W ____ pts.

Pollution Control (% Sulfer Pollution Control (%Sulfer Pollution Control (%Sulfer

Richard Turshen, Pace University
BUSINESS DOCUMENT VERSUS ACADEMIC TREATISE
The Dilemma: In order to demonstrate their knowledge of marketing principles on two learning levels—comprehension
and application—students are often asked to prepare a marketing plan for a new product. Traditionally, they are required
to produce a business document and an academic treatise simultaneously within the same written report. This
dichotomous intellectual responsibility not only creates a dilemma for the student relative to preparation, but also for the
instructor relative to evaluation.
The Solution: In order to separate the two distinct requirements, a supplemental reporting component is added to the
assignment; in effect, the plan is subdivided into two sections:
1. A “B” section provides the practical BUSINESS document that explicitly presents the “what and when” of
the strategic plan. Two requisites are prescribed; section B must be capable of standing alone as a
marketing plan, and a visual, graphic communication style needs to employed.
2. An “A” section provides the complimentary theoretical ACADEMIC manual that essentially explains the
“why” behind the strategy decisions presented in section B. Two requisites are prescribed; sources and
derivations of all B section material must be included, and an efficient cross reference system between the
sections needs to be utilized.
Summary: The following comparative summary is supplied to the students:
Business Subdivision Academic Subdivision

Vs.
(Marketing Plan) (Explanatory Manual)
Business presentation for your boss Vs. Academic presentation for your professor
Present the elements of the plan; information, Vs. Present the rationale behind the strategies;
data, and strategy decisions sources, derivations and explanations
Project the plan in terns of what, how, when, Vs. Project the plan in terms of why
where, and who
Specific decisions; the result of thinking Vs. Corresponding rationale; the process of thinking
Conclusion: The tested technique of subdivision avoids the muddled mix of applied strategic marketing decision making
and corresponding theoretical supporting rationale in a single report. Both parties, the student and instructor,
consequently gain a clearer mindset for the preparation and evaluation of the business and academic requirements of the
marketing plan assignment.

Shirine Mafi, Otterbein College
RESEARCHING A CORPORATION
Students are divided into teams of three to five members. Each team works together throughout the quarter. Teams each
select a corporation and research that company for all project assignments. The final project grade is based partially on
peer evaluations.
PROJECT ASSIGNMENT I
Through a 10–12 page paper, students become familiar with the company and the environmental forces that shape the
company and its industry. The report also entails a marketing opportunity analysis.
PROJECT ASSIGNMENT II
Based upon the findings of the marketing opportunity analysis, teams recommend one of the following options and
produce a marketing plan accordingly:
• A new marketing mix targeted to a new market
• A current marketing mix extended to a new target market
• A new or improved product/service targeted to the current market
• A combination of any of these
Each team will produce a marketing plan that includes:

• Customer and competitive situation analysis
• Marketing objectives
• Marketing strategies
• Control/evaluation procedures
Group Presentation: Each team presents its project to the class. All members participate equally. The team not only
presents its findings, but must be able to defend its plan to the class. Use of visual aids is encouraged.
Group Competition: In addition to the instructor’s evaluation, class members vote for the best group presentation. The
winning team members earn bonus points.

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Chapter 7 ♦ Business Marketing 1

7-1 Describe business marketing

7-2 Describe the role of the Internet in business marketing

7-4 Identify the four major categories of business market customers

7-5 Explain the North American Industry Classification System

7-7 Describe the seven types of business goods and services

7-8 Discuss the unique aspects of business buying behavior

Chapter 7 ♦ Business Marketing 3

Learning Outcomes and Topics PowerPoint Slides

4 Chapter 7 ♦ Business Marketing

PRE-CLASS PREP FOR YOU: PRE-CLASS PREP FOR YOUR STUDENTS:

• Review the definition for relationship marketing.

Take-home-assignment: Have students take the Zappos virtual tour

Chapter 7 ♦ Business Marketing 5

LESSON PLAN FOR GROUP WORK

Class Activity – Marketing to Distribution Channels

6 Chapter 7 ♦ Business Marketing

3. How might derived demand affect the manufacturing of an automobile?

Students should address some of these points:

Students’ answers will vary.

Students’ answers will vary depending on the product selected.

Students’ answers will vary widely by group.

Students’ answers should address some of the following points:

8 Chapter 7 ♦ Business Marketing

Chapter 7 ♦ Business Marketing 9

Gregory B. Turner, College of Charleston

STUDENT ETHICS VERSUS PRACTITIONER ETHICS

A = 1995 - 1997 NAPM National Meetings (Turner et al. 1998)

10 Chapter 7 ♦ Business Marketing

1. Zappos Insights is an example of:

6. Zappos Insights is an example of relationship commitment to other businesses.

12 Chapter 7 ♦ Business Marketing

CASE ASSIG NMENT: IBM

services it provides to other companies.

to the Test in Healthcare,” ZDNet, September 24, 2012, www.zdnet.com/ibms-watson-being-put-to-the-test-in-

Chapter 7 ♦ Business Marketing 13

Times, October 30, 2012, http://bits.blogs.nytimes.com/2012/10/30/i-b-m-s-watson-goes-to-medical-school (Accessed

March 26, 2013).

1. IBM’s Watson is most likely to be sold as a consumer product.

PTS: 1 OBJ: LO: 7-1 TOP: AACSB: Reflective Thinking

ANS: T PTS: 1 OBJ: LO: 7-3 TOP: AACSB: Reflective Thinking

ANS: T PTS: 1 OBJ: LO: 7-4

ANS: T PTS: 1 OBJ: LO: 7-6 TOP: AACSB: Reflective Thinking

ANS: T PTS: 1 OBJ: LO: 7-6 TOP: AACSB: Reflective Thinking

1. Under what circumstances would Watson be considered a consumer product?

14 Chapter 7 ♦ Business Marketing

PTS: 1 OBJ: LO: 7-4 TOP: AACSB: Reflective Thinking

PTS: 1 OBJ: LO: 1-4 TOP: AACSB: Reflective Thinking

PTS: 1 OBJ: LO: 7-7 TOP: AACSB: Reflective Thinking

PTS: 1 OBJ: LO: 7-8 TOP: AACSB: Reflective Thinking

16 Chapter 7 ♦ Business Marketing

DISCUSSION BOARD TOPICS TO ENCOURAGE PARTICIPATION

Each question has three parts:

Chapter 7 ♦ Business Marketing 17

A DECISION-MAKING EXERCISE FOR BUSINESS MARKETING

18 Chapter 7 ♦ Business Marketing

N ____ pts. D ____ pts. J ____ pts.

C ____ pts. W ____ pts. T ____ pts.

A ____ pts. G ____ pts. L ____ pts.

Feature Package Key:

Chapter 7 ♦ Business Marketing 19

L ____ pts. T ____ pts. P ____ pts.

N pts. D pts. J pts.

C pts. W pts. T pts.

A pts. G pts. L pts.

L pts. T pts. P pts.

F pts. M pts. S pts.

W pts. G pts. B pts.

G pts. T pts. P pts.

R pts. J pts. F pts.

B pts. M pts. W pts.