Chapter 7: Business Marketing Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning Inc. All Rights Reserved1

Learning Outcomes 2 Describe business marketing Describe the role of the Internet in business marketing Discuss the role of relationship marketing and strategic alliances in business marketing Identify the four major categories of business market customers LO 1 LO 2 LO 3 LO 4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Learning Outcomes 3 Explain the North American Industry Classification System Explain the major differences between business and consumer markets Describe the seven types of business goods and services Discuss the unique aspects of business buying behavior LO 5 LO 6 LO 7 LO 8 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

What is Business Marketing? 4 Describe business marketing. LO 1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

What is Business Marketing? 5 The marketing of goods and services to individuals and organizations for purposes other than personal consumption. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business Products 6 Business Products:  Are used to manufacture other products  Become part of another product  Aid the normal operations of an organization The key is intended use. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Business Marketing 7 LO 1 cupboards oven folder and pen Teddy bear CONSUMER BUSINESS cupboards Coffee pot oven folder and pen photocopier Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business Marketing on the Internet 8 Describe the role of the internet in business marketing. LO 2 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Measuring Online Success 9 Stickiness- A measure of a Web site’s effectiveness; calculated by multiplying the frequency of visits times the duration of a visit times the number of pages viewed during each visit. Stickiness= Frequency x Duration x Site Reach Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Evolution of E-Business Initiatives 10 Revenue generation Aggressive disintermediation initiatives Basic marketing communication strategies Reduce costs Build channel partnerships and trust Customer-focused technology and systems Brand building and development Integrate online and traditional media Past initiativesPresent initiatives Time Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome The Internet in Business Marketing 11 LO 2 THEN NOW Reduce costs Build partnerships and alliances Build and support branding Develop customer-focused technology and systems Integrate online and traditional media Revenue Generation Aggressive Disintermediation Initiatives Basic Marketing Communication Business Internet Uses and Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Relationship Marketing and Strategic Alliances 12 Discuss the role of relationship marketing and strategic alliances in business marketing. LO 3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Strategic Alliances 13 A cooperative agreement between business firms (strategic partnerships). Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Relationships in Other Cultures 14 Keiretsu- A network of interlocking corporate affiliates. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Relationship Marketing and Strategic Alliances 15 LO 3 Supplier (e.g. Intel) Supplier Company (e.g. Dell) Company 1 (e.g. Starbucks) Company 2 (e.g. Jim Beam) Company (e.g UPS) Customer/ Distributor (e.g. Ford) Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Major Categories of Business Customers 16 Identify the four major categories of business market customers. LO 4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Major Categories of Business Customers 17 Producers Resellers Governments Institutions OEMs Wholesalers Retailers Federal Municipal Local SchoolsHospitalsColleges ChurchesUnionsFraternal groups Civic ClubsFoundations Nonbusiness organizations Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Producers 18 Original Equipment Manufacturer’s- OEMs Individuals and organizations that buy business goods and incorporate them into the products that they produce for external sale to other producers or to consumers. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Business Market Customers 19 LO 4 Business Marketing Institutions Resellers Wholesalers Retailers Producers OEMs Governments Federal State Municipal County Unions Civic Clubs Other Churches Foundations Nonprofits Copyright 2010 by Cengage Learning Inc. All Rights Reserved

North American Industry Classification System 20 Explain the North American Industry Classification System. LO 5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

NAICS 21 NAICS (North American Industry Classification System)- A detailed numbering system developed by the United States, Canada, and Mexico to classify North American business establishments by their main production processes. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Example of NAICS Hierarchy NAICS Level SectorSubsectorIndustry Group U.S. Industry NAICS Code Description ManufacturingComputer electronic product manufacturing Mfg. and reproduction of magnetic/ optical media Reproduction of software 22 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

NAICS 23  Provides a common industry classification system  Valuable tool for marketers in analyzing, segmenting, and targeting markets  Data can be used to determine: –Number, size, and geographic dispersion of firms –Market potential / market share estimates –Sales forecasts –New customer identification Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome North American Industry Classification System 24 LO 5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business versus Consumer Markets 25 Explain the major differences between business and consumer markets. LO 6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business versus Consumer Markets 26CharacteristicCharacteristic Demand Volume # of Customers Location Distribution Nature of Buy 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Demand in Business Markets 27 Demand is... DescriptionDescription Derived Demand for business products results from demand for consumer products. Inelastic A change in price will not significantly affect the demand for product. Joint Multiple items are used together in final product. Demand for one item affects all. Fluctuating Demand for business products is more volatile than for consumer products. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Fluctuating Demand 28 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. Multiplier Effect (Accelerator Principle) - Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Types of Business Products 29 Describe the seven types of business goods and services. LO 7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Types of Business Products 30 Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Types of Business Goods and Services 31 LO 7 Aluminum ore: raw material Extruded metal: processed material Propeller blade: component part Extruding machine: major equipment Tool cart: accessory equipment Uniforms: contracted service Paper: supply Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business Buying Behavior 32 Discuss the unique aspects of business buying behavior. LO 8 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business Buying Behavior 33 Customer Service Business Ethics Buying Situations Evaluative Criteria Buying Centers Aspects of Business Buying Behavior Aspects of Business Buying Behavior Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Buying Centers 34 All those persons in an organization who become involved in the purchase decision. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Roles in the Buying Center 35 Initiator Influencers Gatekeepers Decider Purchaser Users Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Evaluative Criteria 1.Quality 2.Service 3.Price 36 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Buying Situations 37 New buy – A situation requiring the purchase of a product for the first time. Modified Rebuy – A situation in which the purchaser wants some change in the original good or service. Straight Rebuy – A situation in which the purchaser reorders the same goods or services without looking for new information or investigation other suppliers. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Customer Service 38 Divide customers into groups based on their value Create policies that govern how service will be allocated among groups Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Business Buying Behavior 39 LO 8 Customer service Initiator Influencer Decider Gatekeeper Purchaser User Buying Center  Quality  Service  Price Evaluative Criteria Buying Situations New buy Straight rebuy Modified rebuy Copyright 2010 by Cengage Learning Inc. All Rights Reserved