Business-to-Business Marketing

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Business-to-BusinessMarketing

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Objectives1. Provide an overview of the buying process between

business buyers and sellers.

2. Differentiate among the three types of business markets.

3. Identify the three distinctive features of business markets.

4. Explain the characteristics of business market demand.

5. Identify the basic categories of business products.

6. Describe the nature and importance of government markets.

9Business-to-Business Marketing

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Business-to-Business Market

• Firms that produce or acquire goods and services to be used, directly or indirectly, in the production of other goods and services or to be resold.


9-2

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Distinctive Features of the Business Market1. Geographic market concentration.

2. Small number of buyers.

3. Complex purchase decision process.


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Producers

• Those who transform goods and services through production into other goods and services.


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Trade Industries

• Organizations, such as retailers and wholesalers, that purchase for resale to others.


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Value Added

• The increase in value of input material when transformed into semifinished or finished goods


9-6

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Summary of Manufacturers by Province, 1996


Table 9.1

9-7

MATERIALS AND TOTAL VALUE NUMBER OF TOTAL SUPPLIES USED ADDED PROVINCE ESTABLISHMENTS EMPLOYEES ($ MILLIONS)

($ MILLIONS)

All Canada* 36239 1703734 232 872.8 164940.1 Newfoundland 323 10335 734.5 793.0 Prince Edward Island 143 4177 419.7 254.6Nova Scotia 748 34402 3788.4 2293.5 New Brunswick 705 32069 5235.2 2780.4 Quebec 10603 484068 52261.2 42541.8 Ontario 14471 813504 124541.2 84495.5 Manitoba 1143 53114 4784.7 3949.9 Saskatchewan 800 22298 3155.6 1958.3 Alberta 2884 100746 18154.6 12334.4

British Columbia 4378 148528 19773.0 13517.4

NWT and Yukon 41 493 24.821.4

*There may be a discrepancy between figures for Canada and the total of all provinces due to varying sources of information.Source:Adapted from the Statistics Canada publication Market Research Handbook, 1999, Catalogue No. 63-224-XPB,

1999, p.180. Reprinted with permission of the Minister of Industry Canada.

Chapter

Business-to-Business Market Demand

1. Derived Demand

2. Joint Demand

3. Inventory Demand

4. Demand Variability


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Derived Demand

• Demand for a product used by business derived (or linked to) demand for a consumer good.


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Joint Demand

• Demand for an industrial product that is related to the demand for other industrial goods.


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Inventory Adjustments

• Changes in the amounts of materials a manufacturer keeps on hand.


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Demand Variability

• In the business market, the impact of derived demand on the demand for interrelated products used in producing consumer goods.


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Accelerator Principle

• The disproportionate impact that changes in consumer demand have on business.


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Basic Categories of Business Products

1. Capital items

2. Expense items


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Capital Items

• Long-lived business assets that must be depreciated over time.


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Depreciation

• The accounting concept of charging a portion of the cost of a capital item as a deduction against the company’s annual revenue for purposes of determining its net income.


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Expense Items

• Products and services that are used within a short period of time.


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Business Purchasing Situations

1. Straight Rebuy

2. Modified Rebuy

3. New Task Buying


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Straight Rebuy

• A recurring purchase decision involving an item that has performed satisfactorily and is therefore purchased again by a customer.

Business-to-Business Marketing 9

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New Task Buying

• First-time or unique purchase situations that require considerable effort on the part of the decision makers.


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Buying Centre

• The key individuals who participate in a buying decision.


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Roles of Buying Group Members

1. Users

2. Gatekeepers

3. Influencers

4. Deciders

5. Buyers


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A Model of the Business Buying Process

Business-to-Business Marketing 9Figure 9.2

Delineation of suppliers

Information search

Need recognition

Sales demonstration/proposal

Review of internal proposals

Final decision

•Advertisements•Technical articles•Word of mouth

Personal and interpersonal influences

Organizational and environment influences

Triggering event

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RFP (Request for Proposal) or RFQ (Request for Quotation)• Common procedure used by firms to

get information on alternatives and prices.


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Reciprocity

• Extending purchasing preference to suppliers who are also customers.


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North American Industrial Classification System (NAICS)• A coding system used to categorize

different types of businesses and products (formerly the Standard Industrial Classification, or SIC).


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Table 9.4

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North American Industrial Classifications

Chapter

NAICS Examples (1 of 2)

Division 31-33 - Manufacturing

Group 311 Food manufacturing

Class 3111 Animal food manufacturing31111 Animal food manufacturing311111 Dog and cat food manufacturing311119 Other animal food manufacturing

Class 3112 Grain and oilseed milling31121 Flour milling and malt manufacturing311211 Flour milling311214 Rice milling and malt manufacturing

Business-to-Business Marketing 9Table 9.5

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NAICS Examples (2 of 2)

Division 52 - Finance and Insurance

Group 521 Monetary authorities - Central Bank

Class 5211 Monetary authorities - Central Bank

52111 Monetary authorities - Central Bank

Group 522 Credit intermediation and related activities

Class 5221 Depository credit information

52211 Banking

522111 Personal and commercial banking industry

522112 Corporate and institutional banking


9-28b

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The Basics of Selling to Governments

1. Selling directly to government departments and agencies.

2. Accessing MERXTM, the electronic tendering services.

3. Registering online as a supplier.


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Electronic Exchange Network

• A single point of access to suppliers and consumers through the Internet.


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e-commerce

• Commerce conducted via the Internet.


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B2B e-commerce

• Doing business online through Internet-enabled marketplaces.


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Electronic Exchange

• An organized group of buyers and sellers from a specific industry linked together electronically.


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Vertical Web Community

• A site that acts as a comprehensive source of information and dialogue for a particular vertical market.


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The Three Primary Business Models for Online Exchanges


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Description Example

1. Third-Party Exchange is owned and operated by Ventro Exchange a third-party that is not considered to (formerly Chemdex)

be a trading partner, often a B2B startup.

2. Consortia-Led Exchange ownership is shared GM/DaimlerChrysler/ Exchange between industry-leaders and a Ford exchange, Covisint

technology partner.

3. Private/ Exchange is owned and operated Wal-Mart’s RetailLink Proprietory by a single large firm. Exchange

Source: Steve Butler, “The Three Primary Business Models for Online Exchanges,” eMarketer, www.emarketer.com, June 19, 2000. Reprinted with permission.

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