1. Copyright ©2009 by Cengage Learning Inc. All rights reserved 1 Designed by Eric Brengle B-books, Ltd. CHAPTER 7 Business Marketing Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10

2. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 I LO 2 LO 3 LO 4

3. Copyright ©2009 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

4. Copyright ©2009 by Cengage Learning Inc. All rights reserved What Is Business Marketing? 4 Describe business marketing LO I

5. Copyright ©2009 by Cengage Learning Inc. All rights reserved What Is Business Marketing? 5 Business Marketing The marketing of goods and services to individuals and organizations for purposes other than personal consumption. LO I

6. Copyright ©2009 by Cengage Learning Inc. All rights reserved Business Products 6 LO I 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 The key is intended use.

7. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Business Marketing 7 LO I cupboards oven folder and pen Teddy bear CONSUMER BUSINESS cupboards Coffee pot oven folder and pen photocopier

8. Copyright ©2009 by Cengage Learning Inc. All rights reserved Business Marketing on the Internet 8 Describe the role of the Internet in business marketing LO 2

9. Copyright ©2009 by Cengage Learning Inc. All rights reserved Measuring Online Success 9 LO 2 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

10. Copyright ©2009 by Cengage Learning Inc. All rights reserved Evolution of E-Business Initiatives 10 LO 2 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

11. Copyright ©2009 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 Basic Marketing Communication Business Internet Uses and

12. Copyright ©2009 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

13. Copyright ©2009 by Cengage Learning Inc. All rights reserved Strategic Alliances 13 LO 3 Strategic Alliance A cooperative agreement between business firms (strategic partnership).

14. Copyright ©2009 by Cengage Learning Inc. All rights reserved Relationships in Other Cultures 14 LO 3 Keiretsu A network of interlocking corporate affiliates.

15. Copyright ©2009 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)

16. Copyright ©2009 by Cengage Learning Inc. All rights reserved Major Categories of Business Customers 16 Identify the four major categories of business market customers LO 4

17. Copyright ©2009 by Cengage Learning Inc. All rights reserved Major Categories of Business Customers 17 LO 4 Producers Resellers Governments Institutions OEMs Wholesalers Retailers Federal Municipal Local SchoolsHospitalsColleges ChurchesUnionsFraternal groups Civic ClubsFoundations Nonbusiness organizations

18. Copyright ©2009 by Cengage Learning Inc. All rights reserved Producers 18 LO 4 Original Equipment Manufacturers OEMs Individuals and organizations that buy business goods and incorporate them into the products that they produce for eventual sale to other producers or to consumers.

19. Copyright ©2009 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

20. Copyright ©2009 by Cengage Learning Inc. All rights reserved North American Industry Classification System 20 Explain the North American Industry Classification System LO 5

21. Copyright ©2009 by Cengage Learning Inc. All rights reserved NAICS 21 NAICS LO 5 A detailed numbering system developed by the United States, Canada, and Mexico to classify North American business establishments by their main production processes. North American Industry Classification System

22. Copyright ©2009 by Cengage Learning Inc. All rights reserved Example of NAICS Hierarchy NAICS Level SectorSubsectorIndustry Group U.S. Industry NAICS Code 31-333343346334611 Description ManufacturingComputer electronic product manufacturing Mfg. and reproduction of magnetic/ optical media Reproduction of software 22 LO 5

23. Copyright ©2009 by Cengage Learning Inc. All rights reserved NAICS 23 LO 5  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

24. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME North American Industry Classification System 24 LO 5

25. Copyright ©2009 by Cengage Learning Inc. All rights reserved Business versus Consumer Markets 25 Explain the major differences between business and consumer markets LO 6

26. Copyright ©2009 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 LO 6

27. Copyright ©2009 by Cengage Learning Inc. All rights reserved Demand in Business Markets 27 LO 6 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.

28. Copyright ©2009 by Cengage Learning Inc. All rights reserved Fluctuating Demand 28 Multiplier Effect (Accelerator Principle) LO 6 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.

29. Copyright ©2009 by Cengage Learning Inc. All rights reserved Types of Business Products 29 Describe the seven types of business goods and services LO 7

30. Copyright ©2009 by Cengage Learning Inc. All rights reserved Types of Business Products 30 LO 7 Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services

31. Copyright ©2009 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

32. Copyright ©2009 by Cengage Learning Inc. All rights reserved Business Buying Behavior 32 Discuss the unique aspects of business buying behavior LO 8

33. Copyright ©2009 by Cengage Learning Inc. All rights reserved Business Buying Behavior 33 LO 8 Customer Service Business Ethics Buying Situations Evaluative Criteria Buying Centers Aspects of Business Buying Behavior Aspects of Business Buying Behavior

34. Copyright ©2009 by Cengage Learning Inc. All rights reserved Buying Centers 34 Buying Center LO 8 All those persons in an organization who become involved in the purchase decision.

35. Copyright ©2009 by Cengage Learning Inc. All rights reserved Roles in the Buying Center 35 LO 8 Initiator Influencers Gatekeepers Decider Purchaser Users

36. Copyright ©2009 by Cengage Learning Inc. All rights reserved Evaluative Criteria 1.Quality 2.Service 3.Price 36 LO 8

37. Copyright ©2009 by Cengage Learning Inc. All rights reserved Buying Situations 37 LO 8 New Buy A situation requiring the purchase of a product for the first time. Modified Rebuy Modified Rebuy A situation in which 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.

38. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Service Divide customers into groups based on their value Create policies that govern how service will be allocated among groups 38 LO 8

39. Copyright ©2009 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