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

CHAPTER 6 Business-to-Business (B2B) Marketing

• Business-to-business (B2B) market is significantly larger than the consumer market. • Example: U.S. companies spend more than $300 billion annually just for office and maintenance supplies. • Example: Department of Defense budget in a recent year was $500 billion. • 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


• Some firms focus entirely on business markets. • Example: Caterpillar. accounting.CHAPTER 6 Business-to-Business (B2B) Marketing NATURE OF THE BUSINESS MARKET • Companies also buy services. office-cleaning. . such as legal. everything from a box of paper clips to thousands of parts for an automobile manufacturer. which makes construction and mining equipment. and other services. • Diverse market.

• Public and private institutions. directly or indirectly.CHAPTER 6 Business-to-Business (B2B) Marketing COMPONENTS OF THE BUSINESS MARKET • Four main components: • Commercial market Individuals and firms that acquire products to support. • Also called resellers. churches. confiscated goods. and museums. production of other goods and services. such as hospitals. • Largest segment of the business market. .. also act as sellers—e. colleges and universities. • Government—all domestic levels (federal. • Trade industries Retailers or wholesalers that purchase products for resale to others.g. local) and foreign governments. marketing intermediaries that operate in the trade sector. state.

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. • Businesses must be willing to adapt to local customs and business practices and research cultural preferences. DIFFERENCES IN FOREIGN BUSINESS MARKETS • May differ due to variations in regulations and cultural practices.

SEGMENTATION BY CUSTOMER TYPE • Grouping in broad categories. SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS • Grouping by size based on sales revenues or number of employees. • Customer-based segmentation Dividing a business-to-business market into homogeneous groups based on buyers’ product specifications.CHAPTER 6 Business-to-Business (B2B) Marketing SEGMENTING B2B MARKETS • Segmentation helps marketers develop the most appropriate strategy. such as by industry. .

• Replaced by NAICS with implementation of NAFTA. . • 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 North American Industry Classification System (NAICS) • Federal government developed Standard Industrial Classification in 1930s to subdivide business market into detailed segments.

SEGMENTATION BY PURCHASE CATEGORIES • Segmenting according to organizational buyer characteristics. • Example: Whether a customer is new or a long-term partner. . • Businesses increasingly segment customers according to the stage in their relationship. • Example: Whether a company has a designated central purchasing department or each unit within the company handles its own purchasing.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. • Example: A supplier of industrial gases that sells hydrogen to some companies and carbon dioxide to others.

. • Example: Companies that sell to the federal government are often located near Washington. • Businesses becoming less geographically concentrated as Internet technology improves.C. which buys jet engines. such as Boeing.CHAPTER 6 Business-to-Business (B2B) Marketing CHARACTERISTICS OF THE B2B MARKET GEOGRAPHIC MARKET CONCENTRATION • Business market more concentrated than consumer market. • Many buyers are large organizations. SIZES AND NUMBER OF BUYERS • Business market has smaller number of buyers than consumer market. D.

. BUYER-SELLER RELATIONSHIPS • Often more complex than in consumer market. EVALUATING INTERNATIONAL BUSINESS MARKETS • Business purchasing patterns differ from country to country. • Can bring significant cost savings but requires adjustments. • Purchases may require bidding and negotiations.CHAPTER 6 Business-to-Business (B2B) Marketing THE PURCHASE DECISION PROCESS • Sellers must navigate organizational buying processes that often involve multiple decision makers. • Greater reliance on relationship marketing. • Purchasing process usually more formal than in consumer market. • 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. .

. • Example: Demand for computer microprocessor chips is derived from demand for personal computers. • Expense items—items consumed within short time periods.CHAPTER 6 Business-to-Business (B2B) Marketing DERIVED DEMAND • The linkage between demand for a company’s output and its purchases of resources such as machinery. VOLATILE DEMAND • Derived demand creates volatility. • Organizational buyers purchase two types of items: • Capital items—long-lived business aspects that depreciate. and raw materials. • Example: Demand for gasoline pumps may be reduced if demand for gasoline slows. supplies. components.

. • Example: Construction firms will not necessarily buy more lumber if prices fall unless overall housing demand also increases. then decrease in construction will affect concrete market.CHAPTER 6 Business-to-Business (B2B) Marketing JOINT DEMAND • Results when the demand for one business product is related to the demand for another business product used in combination with the first item. • Example: If lumber supply falls. INELASTIC DEMAND • Demand throughout an industry will not change significantly due to a price change.

CHAPTER 6 Business-to-Business (B2B) Marketing INVENTORY ADJUSTMENTS • Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and requiring vendors to deliver inputs as they are needed. buying a firm’s entire stock of a product from just one supplier. suppliers to place representatives at the customer’s facility to work as part of an integrated. • Latest inventory trend: JIT II. on-site customer–supplier team. . • Inventory adjustments are also vital to wholesalers and retailers. • Often use sole sourcing.

. • Many companies purchase many of the goods they need. • Producing the item may be cheapest route. • Purchase it from another organization.CHAPTER 6 Business-to-Business (B2B) Marketing THE MAKE. but most firms cannot make all of the products they need. OR LEASE DECISION • Firms acquiring needed products can get them in one of three ways: • Make the good or provide the service in-house. • Lease it from another organization. BUY. • Companies can spread out costs through leasing.

• Example: China makes two-thirds of the world’s copiers. and greater value. • U. and shoes. and virtually all of the world’s toys. • Outshoring Using outside vendors to provide goods and services formerly produced in-house. firms often nearshore in Canada or Mexico. .S.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. microwaves. • Commonly outshore for three reasons: cost reduction. quality and speed of software maintenance and development. DVD players. • Allows firms to concentrate their resources on their core business and access specialized talent or expertise. • Nearshoring Moving jobs to vendors in countries close to the business’s home country.

• Can negatively affect employee morale and loyalty. even leading to shutdowns and strikes. • Can create conflicts with unions.CHAPTER 6 Business-to-Business (B2B) Marketing PROBLEMS WITH OFFSHORING AND OUTSOURCING • Many companies discover their cost savings are less than expected. • Can raise security concerns over proprietary technology or customer data. . • Can reduce flexibility to respond quickly to marketplace.

such as Hurricane Katrina. • Example: Law freezing cable rates or introduction of new product by a competitor will affect demand. • Takes place within formal organization’s budget.CHAPTER 6 Business-to-Business (B2B) Marketing THE BUSINESS BUYING PROCESS • More complex than the consumer decision process. political. regulatory. and profit considerations. . INFLUENCES ON PURCHASE DECISIONS Environmental Factors • Economic. cost. competitive. • Example: Rising fuel prices prompted Viking Energy Management to lock in fuel prices. and technological considerations influence business buying decisions. • Natural disasters.

• Some firms have centralized procurement. sometimes as individuals and sometimes as part of a committee. • Sales personnel must be flexible and have a good technical understanding of their products. • Marketers must know who the influencers are and understand their priorities. • Many companies use multiple sourcing to avoid depending too heavily on a sole supplier. Interpersonal Influences • Many different people influence B2B buying decisions.CHAPTER 6 Business-to-Business (B2B) Marketing Organizational Factors • Successful marketers understand their customers’ organizational structures. policies. and purchasing systems. . others delegate it throughout the units.

. who implement systematic buying procedures. centralization of the procurement function. • Corporate buyers often use the Internet to identify sources of supplies. • Firms usually buy expense items with little delay but carefully consider capital purchases.CHAPTER 6 Business-to-Business (B2B) Marketing The Role of the Professional Buyer • Many organizations rely on professionals. • May rely on systems integration. often called merchandisers.


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 employee’s preference. 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 are easily correlated to the number of coffee drinkers.CHAPTER 6 Business-to-Business (B2B) Marketing Stage 1: Anticipate a Problem/Need/Opportunity and a General Solution • Example: Need to provide employees with a good cup of coffee to enhance productivity.

• Final choice may involve trade-offs between feature such as price. Stage 6: Evaluate Proposals and Select Suppliers • Buyers choose proposal best suited to their needs. . and order accuracy. reliability. quality. especially if the buyer is the government or a public agency. Stage 5: Acquire and Analyze Proposals • May involve competitive bidding.CHAPTER 6 Business-to-Business (B2B) Marketing Stage 4: Search for and Qualify Potential Sources • Choice of supplier may be fairly straightforward or very complex.

• Example: J. Power and Associates . D. • Larger firms are more likely to use formal evaluation procedures. • Some firms rely on outside organizations to gather quality feedback and summarize results.CHAPTER 6 Business-to-Business (B2B) Marketing Stage 7: Select an Order Routine • Buyer and vendor work out best way to process future purchases. Stage 8: Obtain Feedback and Evaluate Performance • Buyers measure vendors’ performance.

• Superior service. • Marketers who maintain good relationships with customers can go a long way toward ensuring straight rebuys. . • Purchaser see little reason to assess competing options. • Prompt delivery.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 Rebuying • A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. • High-quality products.

• Often requires purchaser to consider alternative offerings and vendors. New-Task Buying • First-time or unique purchase situations that require considerable effort by the decision makers. • Most complex category of business buying. • May occur if supplier has let a rebuy circumstance deteriorate because of poor service or delivery performance.CHAPTER 6 Business-to-Business (B2B) Marketing Modified Rebuying • Purchaser willing to reevaluate available options. .

delivery times. back orders.. and attention to special requests. . • In U.CHAPTER 6 Business-to-Business (B2B) Marketing 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.S. • Vendor analysis—an ongoing evaluation of a supplier’s performance in categories such as price. Department of Justice and the Federal Trade Commission view reciprocity as an attempt to reduce competition. liability insurance. EDI capability.

BUYING CENTER ROLES .CHAPTER 6 Business-to-Business (B2B) Marketing THE BUYING CENTER CONCEPT • Buying center Participants in an organizational buying action.

• May include members of the seller firm’s own supply network in the sales situation. • Marketers who can quickly identify decision makers have an advantage over competition. • Foreign buying centers often include more participants than those in U. TEAM SELLING • Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision.S. . • Example: Reseller of specialized computer applications whose clients require access to training.CHAPTER 6 Business-to-Business (B2B) Marketing INTERNATIONAL BUYING CENTERS • Marketers may have difficulty identifying members of foreign buying centers.

such as minority subcontracting programs.S. . • More than 85. • Influenced by social goals.000 government units buy products. • Purchases typically involve dozens of interested parties. CHALLENGES OF GOVERNMENT MARKETS • Government agencies make up the largest customer group in the U. • Can have either fixed-price contracts or cost-reimbursement contracts.CHAPTER 6 Business-to-Business (B2B) Marketing DEVELOPING EFFECTIVE BUSINESS-TOBUSINESS MARKETING STRATEGIES • Marketer must develop strategy based on particular organization’s buying behavior and on the buying situation.

• Recent reforms have sped purchasing and increased flexibility.CHAPTER 6 Business-to-Business (B2B) Marketing Government Purchasing Procedures • Many purchases go through Government Services Agency. • By law. • State and local governments follow procedures similar to federal government. • GSA Advantage allows government buyers to make purchases online at preferred government prices. . • Many government units lag behind the private sector in electronic procurement procedures. Online with the Federal Government • Government buyers often rely on electronic commerce. a central management agency. most federal government purchases must go through a complex bidding process governed by the Federal Acquisition Regulation.

CHALLENGES OF INTERNATIONAL MARKETS • Marketers must consider buyers’ attitudes and cultural patterns. institutions. • Multiple buying influences can affect buying decisions. foundations. • Have widely diverse buying practices among. can be an important strategy in places that cannot afford new products. economic conditions. such as conflicts between professional staff and purchasing departments. and even within. geographic characteristics. or restoring worn-out products to like-new condition. and others. hospitals. . libraries. and legal restrictions must also be considered. • Local industries. • Foreign governments are also an important market.CHAPTER 6 Business-to-Business (B2B) Marketing CHALLENGES OF INSTITUTIONAL MARKETS • Institutional buyers include schools. • Remanufacturing.

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