Presentation on theme: "Business-to-Business Markets: How and Why"— Presentation transcript:
1Business-to-Business Markets: How and Why Organizations Buy
2business-to-business (B2B)markets business demand Chapter Objectivesbusiness-to-business (B2B)marketsDefine & explainbusiness demandexplainclassifying business or organizational markets
3buying decision process growing role of B2B e-commerce Chapter Objectivesbuying situationbuyersbuying centerbuying decision processgrowing role of B2B e-commerce
4Business Markets: Buying and Selling When Stakes Are High Business-to-business marketing:the marketing of goods & servicesthat businesses & other organizations buyfor purposesother than personal consumption
5Business Markets: Buying and Selling When Stakes Are High B2B (organizational) markets include:manufacturers,wholesalers,retailers,other organizations
6B2B Characteristics Multiple buyers Number of customers Size of purchasesGeographic concentrationEaton Video
7Business-to-Business Demand Derived demand:Caused by demand for consumer goods or services.Figure 6.2
8Business-to-Business Demand Inelastic demand:Occurs when changes in pricehave little or no effecton the amount demanded.Figure 6.2
9Business-to-Business Demand (cont’d) Fluctuating demand:Small changes in consumer demandcreate large increases or decreases in business demand;life expectancy of product can cause fluctuating demand
10Business-to-Business Demand (cont’d) Joint demand:demand for two or more goodsused togetherto create a product
11Types of B2B Markets Producers: Resellers: Organizations for production of other goods and servicesResellers:for reselling, renting or leasingOrganizationsGovernment marketsNot-for-profit institutionsFEDBIZOPPS.GOV
15The Buying Situation“Buy” class framework:identifies degree of effort firm needsto collect information andmake a purchase decision
16The re-Buying Situation Straight rebuy:Routine purchases that require minimal decision-makingModified rebuy:Previous purchases that require some change and limited decision-making.New-task buy:New and complex or risky purchases that require extensive decision-making.
17The Professional Buyer Trained professional buyerscarry out buying in B2B markets:Purchasing agentsProcurement officersDirectors of materials management
18The Buying CenterThe group of people in an organization who participate in a purchasing decisionInitiatorUserGatekeeperInfluencerDeciderBuyer
21Step 1: Problem Recognition Someone sees that a purchase can solve a problem
22Step 2: Information Search Buying centersearches for information about products & suppliersDevelops product specifications –a written descriptionof quality, size, weight, color, etc.Identifies potential suppliersobtains proposals
23Step 3: Evaluation of Alternatives Buying center assesses proposalsEvaluations includediscount policies,returned-goods policies,cost of repair,terms of maintenance,cost of financing, etc.
24Step 4: Product and Supplier Selection Single sourcing:relying on a single supplier.Multiple sourcing:buying from several different suppliers.Reciprocity:“I’ll buy from you, andyou’ll buy from me.”
25Step 4: Product and Supplier Selection (cont’d) Outsourcing:firms obtain outside vendorsto provide goods/servicesthat might otherwise be supplied in-house
26Step 4: Product and Supplier Selection (cont’d) Crowd sourcing:firms use expertisefrom around the globeto solve a problem
27Step 4: Product and Supplier Selection Reverse marketing:buyers try to find capable suppliersand “sell” their purchase to the suppliers?? Divertive buying???
28Step 5: Postpurchase Evaluation Assess whether the performance of the productand the supplieris living up to expectations
29Business-to-Business E-Commerce Internet exchanges between 2+ businessesInclude exchanges of information, products, services, and paymentsEDI, JIT…Going on much longer than B2C
30Intranets, Extranets, and Private Exchanges link employeesin a private corporatecomputer network.
31Intranets, Extranets, and Private Exchanges allow authorizedsuppliers, customers, & other outsidersto access the firm’s intranet.
32Intranets, Extranets, and Private Exchanges link an invited groupof suppliers and partnersover the Web.
33Security threats Security Threats come from hackers and well-meaning employeeswho give out passwordsCREDITCARDS.COM
34Security Threats Firewall: Hardware and software that ensures only authorized individualsgain entry to a computer systemCREDITCARDS.COM
35Security Threats Encryption: Software that scrambles a message so only another individual (or computer)with the right keycan unscramble itCREDITCARDS.COM
37Discussion/Individual Activity You’re the marketing manager for a small securities firm (a firm that sells stocks and bonds) whose customers are primarily businesses and other organizations. Your company is considering using the Internet to provide information and service to its customers.Outline the pros and cons of this move, the risks your firm would face, and your recommendations.
38Real People, Real Choices PPG Industries (Vicki Holt)Vicki chose Option 3: continue with Intercept brand IGU, but invest directly in IGU manufacturing to provide an alternative to CardinalThe move has been wellreceived by all except thelarge independent IGUmanufacturer
39Marketing Plan Exercise Pick a product you often buy in the grocery storeWhat key elements of the organizational market (the grocer) must the product’s manufacturer plan for, to market to the grocer successfully?How do the elements you identified in question 1 differ from those the store uses in marketing to you as an end user?Which market for the product is more important (the grocer or you), and why?
40Marketing in Action Case: You Make the Call What is the decision facing Airbus?What factors are important in understanding this decision situation?What are the alternatives?What decision(s) do you recommend?What are some ways to implement your recommendation?
41Keeping It Real: Fast Forward to Next Class Decision Time at Reebok Meet Que Gaskins, VP of global marketing for the RBK division of ReebokAllen Iverson’s endorsement changed Reebok’s image, but it was still number 2.The decision: How could Reebok capture the pulse of youth culture in the long run?
42Real People, Real Choices PPG Industries (Vicki Holt)How to react to competitor Cardinal’s strategy?Option 1: continue with current strategyOption 2: acquire an independent IGU manufacturerOption 3: continue with Intercept brand IGU, invest in IGU manufacturingPPG INDUSTRIES
43DiscussionAs director of purchasing for a motorcycle manufacturer, you’ve been notified that the price of an important part used in the manufacture of the bikes has nearly doubled…you see your company having three choices:Pass the cost on to the customerAbsorb the increase in costBuy a lower-priced partDiscuss the pros and cons of each
44DiscussionMany critics of government say strict engineering and other manufacturing requirements for products governments purchase increase prices unreasonably, and taxpayers end up paying too much because of such policiesWhat are the advantages and disadvantages of such purchase restrictions?Should governments loosen restrictions on their purchases?
45DiscussionThe gatekeeper determines which possible sellers are heard and which are notDoes the gatekeeper have too much power?What policies might the firm implement to make sure all possible sellers are treated fairly?
46DiscussionShould companies always give their business to the lowest bidder?Why or why not?
47Group ActivitySome critics complain that outsourcing sends much-needed jobs to competitors overseas while depriving U.S. workers of opportunities.Break into small groups and take a side in this controversial argument. Present your arguments in a debate format