1 CHAPTER SIX BUSINESS MARKETING Prepared by Jack Gifford Miami University (Ohio) © 2000...

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CHAPTER SIX

BUSINESS MARKETING

Prepared byJack Gifford

Miami University (Ohio)

© 2000 South-Western College Publishing

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BUSINESS MARKETS AND ORGANIZATIONAL BUYING

From communications giants to small parts manufacturers and systems consulting groups, firms are forming partnerships to achieve goals that would be too costly, time-consuming, or difficult to accomplish on their own.


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They are also pursuing alliances to encourage product innovation, reduce risk, expand product portfolios, and provide enhanced packages of customer services.

BUSINESS MARKETS AND ORGANIZATIONAL BUYING


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WHAT IS BUSINESS MARKETING?

…the marketing of goods and services to individuals and organizations for purposes other than personal consumption

•Products that are used to manufacture other products

•That become part of another product

•Aid the normal operations of an organization

•Are acquired for resale


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BUSINESS MARKETING ON THE INTERNET

Over 95% of the Fortune 1,000 companies use the Internet

Businesses are expected to buy over $200 billion worth of goods and services online in 2001 - eight times more than consumers.

Has increased the competitive nature of the business market.


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THE INTERNET AND BUSINESS-TO-BUSINESS MARKETING

Internet Web Sites Product & price

information Technical documents Communications Logistics support FAQs

Distribution of RFPs

Request For Proposals)

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THE INTERNET AND BUSINESS-TO-BUSINESS MARKETING

Internet Web Sites (continued) On-line bidding

globally Research Scheduling Video conferencing Product inspection

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MAJOR CATEGORIES OF BUSINESS CUSTOMERS

Producers

Resellers

Governments

Institutions

•Profit-oriented individuals and organizations who:

•purchases and services to produce other products

•incorporate into other products

•facilitate the daily operations of the organization

©2000 South-Western College Publishing

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Producers

Resellers

Governments

Institutions

• Retail and wholesale businesses that buy finished goods and resell them for a profit


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Producers

Resellers

Governments

Institutions

Federal

State

Local

•Largest single market in the world

•Often uses a contractual bid process


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Producers

Resellers

Governments

Institutions

•Schools•Hospitals •Universities•Churches•Clubs•Foundations•Labor unions



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CLASSIFYING BUSINESS MARKETS: THE NAICS

NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTM

REPLACES THE STANDARD INDUSTRIAL CLASSIFICATION SYSTEM

DEVELOPED AS PART OF THE NORTH AMERICAN FREE TRADE AGREEMENT

CREATES A MORE RELEVANT AND CURRENT INDUSTRIAL DATABASE FOR THE UNITED STATES,

CANADA, AND MEXICO


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Classifying business markets: the NAICS system

In a marked change from the old SIC system, NAICS reflects the enormous changes in technology and in the growth and diversification of services that have characterized recent decades.


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CLASSIFYING BUSINESS MARKETS: THE NAICS SYSTEM

Firms involved in business-to-business marketing use the NAICS to identify potential buyers and sellers for their products and services and to assist in discovering new markets and opportunities. It is an essential tool of almost every business-to-business marketer now and into the 21st century.

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CLASSIFYING BUSINESS MARKETS: THE NAICS

Extremely valuable tool for business marketers in analyzing, segmenting, and targeting markets.

Is being implemented over time Integrated marketing data from Canada, USA & Mexico


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BUSINESS VERSUS CONSUMER MARKETS

The basic philosophy and practice of marketing is the same whether the customer is a business organization or a consumer. Business markets do, however, have characteristics different from consumer markets



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THE NATURE OF ORGANIZATIONAL DEMAND

The nature of the demand for goods and services in the multifaceted organizational marketplace differs greatly from the demand for most consumer goods!


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Generalizations about organizational demand

INCREASED AUTOMOTIVE

TRAVEL

DEMAND FOR BUSINESS CARS

DEMAND FOR SEATS & TIRES

DEMAND FOR LEATHER,

FABRIC AND RUBBER

INCREASED MINING

REQUIRED


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Generalizations about organizational demand Price inelastic

Pass along price/cost increases to the customer

Price of any one component is a small % of the total product cost

If the cost of paint increases, builders will not increase the cost of homes.


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Generalizations about organizational demand Joint Demand

Occurs when two or more items are used together in a final product

If the demand for computers goes up, so will the demand for mice and monitors


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Generalizations about organizational demand Fluctuating

demand Linked to the

economy’s ups and downs

Some products have long lives

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Business buyers usually buy in larger quantities than consumers

Far fewer prospective buyers Business buyers often geographically

clustered Channels of distribution are shorter Buying process is more formal


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More individuals involved in the purchase decision

Prices and terms are frequently negotiable Use of reciprocity (you buy from me and I’ll

buy from you) Non consumable business products are often

leased instead of purchased The principle promotional method used is

personal selling© 2000 South-Western College

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TYPES OF BUSINESS PRODUCTS

MAJOREQUIPMENT

ACCESSORY EQUIPMENT

RAW MATERIALS

COMPONENT PARTS

PROCESSED MATERIALS

SUPPLIES

BUSINESS SERVICES



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BUSINESS BUYING BEHAVIOR The buying decision-making process

The buyer of organizational goods and services, whether chemicals,machinery, steel, or maintenance services, usually go through a decision-making process similar to, but more complex than, the consumer decision-making process discussed in Chapter 5.


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The cross-functional buying center Buying Center

Informal & dynamic Cross-departmental Decision unit Primary objective

Acquisition of information

Dissemination of information

Processing of information

DATA INFORMATION

BUYING CENTER

BUYING

DECISION

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The cross-functional buying center: Roles

Roles of buying center individuals include…. Initiators Gatekeepers Influencers/evaluators Deciders Purchaser Users

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Understanding the buying situations

Understanding the types of buying situations and behavior found in organizations is extremely important for organizational marketers. Each buying situation suggests a different marketing mix -- an adjustment of the four major elements to fit particular circumstances.


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WHY DO ORGANIZATIONS BUY?

Rational reasons for buying Product quality (TQM & ISO

9000 and 14000) Related services

Training Repair Technical support

Prices Service

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THREE BUYING SITUATIONS

Straight rebuy Simple decision process

Modified rebuy More complex decision

process

New task buying Most complex decision

process

1 CHAPTER SIX BUSINESS MARKETING Prepared by Jack Gifford Miami University (Ohio) © 2000...

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