Business-to-Business Markets: How and Why Organizations Buy Chapter Six

6-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives  Understand the characteristics of business-to-business markets, business- to-business market demand, and how marketers classify business-to-business customers  Appreciate opportunities for using e- commerce and social media in business- to-business settings  Identify and describe the different business buying situations and the business buying decision process

6-3 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Time at NCR Corporation  Which option should NCR pursue in order to market the new generation of point of sale workstations effectively? Option 1: Attend the trade show as in the past Option 1: Attend the trade show as in the past Option 2: Skip the show this year and reallocate resources to other alternatives Option 2: Skip the show this year and reallocate resources to other alternatives Option 3: Forego the show this year and find out if the venue and sponsorship changes diminish the event’s value Option 3: Forego the show this year and find out if the venue and sponsorship changes diminish the event’s value

6-4 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Markets: Buying and Selling When the Customer is Another Firm  Business-to-business marketing: The marketing of goods and services that businesses and other organizations buy for purposes other than personal consumption

6-5 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business-to-Business Advertising Learn more at b2badvertising.orgb2badvertising.org

6-6 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 6.1 Key Differences in Business Versus Consumers Markets

6-7 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 6.2 Derived Demand

6-8 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business-to-Business Demand  Business-to-business demand differs from consumer product demand  Demand is: Derived Derived Inelastic Inelastic Fluctuating Fluctuating Joint Joint

6-9 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business-to-Business Demand  Inelastic demand: Changes in price have little or no effect on the amount demanded Changes in price have little or no effect on the amount demanded  Fluctuating demand: Small changes in consumer demand create large increases or decreases in business demand Small changes in consumer demand create large increases or decreases in business demand Life expectancy of the product can cause fluctuating demand Life expectancy of the product can cause fluctuating demand

6-10 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business-to-Business Demand  Joint demand: Demand occurs for two or more goods that are used together to create a product Demand occurs for two or more goods that are used together to create a productExamples?

6-11 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. It’s Debatable Class Discussion Question Suppose that the price of a key component used in your product has unexpectedly tripled. Think about the pros and cons of each of the following potential actions. Where do you stand? 1) Pass the price increase onto the customer 2) Absorb the price increase 3) Change vendors and purchase a lower- priced alternative part instead

6-12 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 6.3 The Business Marketplace What are some examples?

6-13 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Table 6.2 North American Industry Classification System

6-14 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business-to-Business E-Commerce and Social Media  B2B E-Commerce: Internet exchanges between two or more businesses Facilitates exchanges Facilitates exchanges Links marketers to value chain members Links marketers to value chain members Web site is critically important Web site is critically important

6-15 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Intranets, Extranets, and Private Exchanges  Intranets Link a firms’ departments, employees, and databases Link a firms’ departments, employees, and databases  Extranets Allow authorized suppliers, customers, and other outsiders to access the firm’s intranet Allow authorized suppliers, customers, and other outsiders to access the firm’s intranet  Private exchanges Link an invited group of suppliers and partners over the Web Link an invited group of suppliers and partners over the Web

6-16 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Dark Side of B2B Commerce  Hackers threaten security Customer credit card number theft Customer credit card number theft May destroy firm records or steal trade secrets May destroy firm records or steal trade secrets Authenticating transactions is critical Authenticating transactions is critical  Well-meaning employees can be security threats  Firewalls and encryption safeguard e-commerce transactions`

6-17 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. B2B and Social Media  Games generate buzz and drive brand awareness  B2B marketers use social networking sites to promote themselves  Linked In is the most prominent social networking site for B2B marketers and offers several advantages SLOBs SLOBs – Office DepotLinked In

6-18 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 6.4 Elements of the Buy Class Framework

6-19 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Professional Buyers and Buying Centers  Trained professional buyers typically carry out buying in business-to- business markets: Purchasing agents Purchasing agents Procurement officers Procurement officers Directors of materials management Directors of materials management

6-20 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Table 6.3 Roles in the Buying Center

6-21 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. It’s Debatable Class Discussion Question Suppose your business school is buying equipment for a computer lab. Suppose your business school is buying equipment for a computer lab. What individuals/job positions might fulfill each role? What individuals/job positions might fulfill each role?

6-22 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 6.5 Steps in the Buying Process

6-23 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Buying Decision Process Step 1: Problem Recognition  Factors prompting recognition vary by buying situation  Actions resulting from problem recognition include: Initiation of a purchase requisition or request Initiation of a purchase requisition or request Formation of a buying center, if needed Formation of a buying center, if needed

6-24 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Buying Decision Process Step 2: Information Search  In this stage, buying center members: Search for information about products and suppliers Search for information about products and suppliers Develop product (or service) specifications Develop product (or service) specifications Identify potential suppliers and obtain proposals (or bids) Identify potential suppliers and obtain proposals (or bids)

6-25 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business-to-Business Services To facilitate the buying center’s information search, marketers must provide information where and when business buyers need it This ad sells expense monitoring services

6-26 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Buying Decision Process Step 3: Evaluate the Alternatives  The buying center assesses proposals Price is a primary consideration Price is a primary consideration Other factors may be considered, such as extra services or other perks Other factors may be considered, such as extra services or other perks Customer reference programs, product demos, and presentations can help sell the marketer’s products to firms Customer reference programs, product demos, and presentations can help sell the marketer’s products to firms

6-27 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. It’s Debatable Class Discussion Question What factors should be evaluated besides price? When would price NOT be the most important factor?

6-28 © 2012 Pearson Education, Inc. publishing as Prentice-Hall.  Single sourcing: Business practice of buying a particular product from only one supplier Business practice of buying a particular product from only one supplier  Multiple sourcing: Buying from several different suppliers Buying from several different suppliers  Reciprocity: Trading partnership in which two firms agree to buy from one another Trading partnership in which two firms agree to buy from one another Business Buying Decision Process Step 4: Select the Product and Supplier

6-29 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Buying Decision Process Step 4: Select the Product and Supplier  Outsourcing: Obtaining vendors to provide goods / services that might otherwise be supplied in-house Obtaining vendors to provide goods / services that might otherwise be supplied in-house  Crowdsourcing: Pulling together expertise from around the globe to work on solving a problem Pulling together expertise from around the globe to work on solving a problem  Reverse marketing: Buyers try to find capable suppliers and “sell” their purchase to the suppliers Buyers try to find capable suppliers and “sell” their purchase to the suppliers

6-30 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Crowdsourcing Kluster.com (Brainstorming) Namethis.com (Brand names) Redesignme.com (Product redesign) 99designs.com (Logo design)

6-31 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Buying Decision Process Step 5: Evaluate Postpurchase  Organizational buyers assess whether the performance of the product and the supplier live up to expectations Users are surveyed to determine satisfaction Users are surveyed to determine satisfaction Producers may also research ultimate consumer satisfaction with the final product Producers may also research ultimate consumer satisfaction with the final product Changes in demand are analyzed Changes in demand are analyzed Supplier performance is documented Supplier performance is documented

6-32 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Buying Decision Process Step 5: Evaluate Postpurchase  Metrics used by organizational buyers Satisfaction Satisfaction Quality Quality Customer engagement Customer engagement Purchase intentions Purchase intentions Promptness and effectiveness of problem resolution Promptness and effectiveness of problem resolution

6-33 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Made at NCR Corporation  Brad chose option 2 Why do you think that Brad passed on the trade show and reallocated its resources to two smaller events? Why do you think that Brad passed on the trade show and reallocated its resources to two smaller events?

6-34 © 2012 Pearson Education, Inc. publishing as Prentice-Hall.  Meet Jim Multari, director of research at PBS Kids Sprout  Sprout is an emerging cable network that attempts to foster parent and preschooler interaction  The decision to be made: Should the network target current viewers, nonviewers, or both for its first ever brand awareness campaign? Keeping It Real: Fast-Forward to Next Class Decision for PBS KIDS Sprout

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