Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 7 Business Marketing © iStockphoto.com/YinYang

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 What Is Business Marketing? The marketing of goods and services to individuals and organizations for purposes other than personal consumption. Business Marketing  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 Business Products The key is intended use. Business Products: Are used to manufacture other products Become part of another product Aid the normal operations of an organization Are acquired for resale without change in form  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 Relationship Marketing Loyal customers are more profitable than price-sensitive customers with little brand loyalty Long-term relationships build competitive advantage  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 Strategic Alliances Licensing or distribution agreements Joint ventures Research and development consortia Partnerships Alliances succeed with commitment and trust.  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Relationships in Other Cultures Keiretsu relationships are highly integrated: Companies have executives sitting on each others’ boards Maintain dedicated trade efforts Joint development, finance, and marketing  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 Major Categories of Business Customers Producers Resellers Governments Institutions OEMs Wholesalers Retailers Federal State Local Schools Hospitals Colleges Churches Unions Fraternal Civic Clubs Foundations groups Nonbusiness organizations  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 NAICS A detailed numbering system developed by the U.S., Canada, and Mexico to classify North American business establishments by their main production processes. North American Industry Classification System  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Example of NAICS Hierarchy NAICS Level SectorSubsectorIndustry Group IndustryIndustry Subdivision NAICS Code Descript ion InformationBroadcasting and telecoms TelecomsWireless telecoms carriers, except satellite Paging  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Business versus Consumer MarketsCharacteristicCharacteristic Demand Volume # of Customers Location Distribution Nature of Buying Buy Influence Negotiations Reciprocity Leasing Promotion Business Market Organizational Larger Fewer Concentrated More Direct More Professional Multiple More Complex Yes Greater Personal Selling Consumer Market Individual Smaller Many Dispersed More Indirect More Personal Single Simpler No Lesser Advertising  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Demand in Business Markets Demand is... DescriptionDescription Derived Inelastic Joint Fluctuating Demand for business products results from demand for consumer products. A change in price will not significantly affect the demand for product. Multiple items are used together in final product. Demand for one item affects all. Demand for business products is more volatile than for consumer products.  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Fluctuating Demand Multiplier Effect (Accelerator Principle) Phenomenon in which a small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and equipment needed to make the consumer product.  

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Types of Business Products Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 Types of Business Goods and Services LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Intel Buys McAfee Intel creates nearly 80 percent of the microprocessors used in PCs and server systems. Intel’s purchase of security software maker McAfee will allow it to produce chips that are directly integrated with McAfee’s security products. What kinds of business products were Intel and McAfee producing, and what kinds of products will they be producing together? Source: Thomas Catan, Nathan Becker and Jerry A. DiColo, "Intel Bets Its Chips on McAfee: Tech Giant Strikes $7.68 Billion Deal for Security- Software Maker, Drawing Mixed Reaction," Wall Street Journal Online. August 19, 2010, Beyond the Book LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Customer Service Business Ethics Buying Situations Evaluative Criteria Buying Centers Aspects of Business Buying Behavior Aspects of Business Buying Behavior LO 8 Business Buying Behavior

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Buying Center All those people in an organization who become involved in the purchase decision. Number of people involved varies with each purchase decision Buying centers do not appear on formal organization charts LO 8 Buying Centers

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Initiator Influencers Gatekeepers Decider Purchaser Users LO 8 Roles in Buying Centers

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Evaluative Criteria  Quality  Service  Price LO 8

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 New Buy A situation requiring the purchase of a product for the first time. A situation requiring the purchase of a product for the first time. Modified Rebuy Modified Rebuy A situation where the purchaser wants some change in the original good or service. A situation where the purchaser wants some change in the original good or service. Straight Rebuy Straight Rebuy A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers. A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers. LO 8 Buying Situations

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Customer Service  Divide customers into groups based on their value  Create policies that govern how service will be allocated among groups LO 8

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 In-Class Assignment Case  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.

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 List of Possible Items —Advertising souvenirs —Automobiles —Clothing —Dinners —Discounts on personal purchases —Food and liquor —Golf outings Case Put a checkmark next to the items that you think it would be acceptable for a purchasing manager to receive from a vendor. —Holiday gifts —Large appliances —Loans of money —Lunches —Small-value appliances —Tickets (sports, theater, amusement parks, etc.) —Trips to vendor plants —Vacation trips

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Discuss In groups of 4-5, discuss any discrepancies between your lists. 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)? Case

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Prior Research Findings TYPE OF GIFT/FAVOR Advertising Souvenirs Automobiles00 — 0 —— 11 Clothing — 73 Dinners Discounts on Personal Purchases — 1121 Food & Liquor Golf Outings — 2847 Case

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Prior Research Findings Case TYPE OF GIFT/FAVOR Holiday gifts — 4330 Large Appliances00 — 0 — 211 Loans of Money00 — 0 —— 11 Lunches Small Value Appliances Tickets (Sports, Theater, Etc.) Trips to Vendor Plants — 3151 Vacation Trips