1. © 2013 by Cengage Learning Inc. All Rights Reserved.
Lamb, Hair, McDaniel
Chapter 7 Business Marketing
CHAPTER 7
Business Marketing
The key characteristic distinguishing business products from consumer products is intended use, not physical form.
© Sean Gallup/Getty Images
© 2013 by Cengage Learning Inc. All Rights Reserved.

2. Learning Outcomes Describe business marketing
Chapter 7 Business Marketing
Learning Outcomes 1
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 2 3 4

3. Chapter 7 Business Marketing
Learning Outcomes
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 5 6 7 8

4. Describe business marketing
Chapter 7 Business Marketing
What Is Business Marketing?
Describe business marketing 1

5. What Is Business Marketing?
Chapter 7 Business Marketing
What Is Business Marketing?
Business Marketing
…or
Industrial Marketing
The marketing of goods and services to individuals and organizations for purposes other than personal consumption.
Notes:
Business marketing is the marketing of goods and services to individuals and organizations for purposes other than personal consumption. The sale of a PC to a college or university is an example of business marketing. 1

6. Business Products… The key is the intended use of the product
Chapter 7 Business Marketing
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
Notes:
A product that is purchased for personal use is considered a consumer good. If the same product is purchased for use in a business, it is a business product. The key in classification as a business product is intended use.
The size of the business market in the U.S. and most other countries substantially exceeds that of the consumer market.
The key is the intended use of the product 1

7. Describe the role of the Internet in business marketing
Chapter 7 Business Marketing
Business Marketing on the Internet
Describe the role of the Internet in business marketing 2

8. Business-to-Business E-Commerce
Chapter 7 Business Marketing
Business-to-Business E-Commerce
The use of the Internet to facilitate the exchange of goods, services, and information between organizations.
From Ch. 5-“The Impact of the Internet”- Trends in B to B
Notes:
In 1995, the commercial Web sites that did exist were static.
In 2005, there were more than one billion Internet users worldwide.
Interactive spending by B-to-B marketers reached $2.3 billion in 2010—including SEO, marketing, viral videos, and webinars.
Social media is growing but still facing some hurdles among B-to-B marketers. The most used features are blogs, social networking sites, Twitter, video streaming sites, and mobile marketing.
Companies selling to business buyers face the same challenges as all marketers, including determining who, exactly, the market is and how best to reach them. 2

9. Measuring Online Success
Chapter 7 Business Marketing
Measuring Online Success
Stickiness
A measure of a Web site’s effectiveness; calculated by multiplying the frequency of visits by the duration of a visit by the number of pages viewed during each visit.
Notes:
For marketers today, three of the most important measurements of Web site hits are recency, frequency, and monetary value.
Combining frequency with the length of time a visitor spends on the Web site and the number of pages viewed during each visit can provide an analytical measure of a site’s stickiness factor.
Stickiness = Frequency x Duration x Site Reach 2

10. Internet Sites for Small Businesses
Chapter 7 Business Marketing
Internet Sites for Small Businesses
AllBusiness provides entrepreneurs with the knowledge and tools to start, manage, and grow their business. The site links to hundreds of how-to articles and provides expert answers to questions.
Microsoft Business offers small business solutions from security to enterprise content management to cloud services. The site also contains practical tips, advice, and links to how-to articles.
This site offers information on starting, running, and growing a small business. It also provides links to a variety of other Quicken sites that are useful to small-business owners and managers.

11. Evolution of E-Business Initiatives
Chapter 7 Business Marketing
Exhibit 7.2
Evolution of E-Business Initiatives
Notes:
This slide shows three major Internet marketing strategies from the late 1990s compared to five that are currently being pursued.
Disintermediation means eliminating intermediaries such as wholesalers or distributors from a marketing channel.
Reintermediation means the reintroduction of an intermediary between producers and users.

12. of relationship marketing and strategic alliances in
Chapter 7 Business Marketing
Relationship Marketing and Strategic Alliances
Discuss the role
of relationship marketing and strategic alliances in
business marketing
Notes:
Relationship marketing has become an important business marketing strategy as customers have become more demanding and competition has become more intense.
Building long-term relationships with customers offers a way to build competitive advantage.
Discussion/Team Activity:
Go to FedEx’s Website at Review the different products available to meet varying customer needs, and discuss how these products/services can establish long-term relationships and customer loyalty for FedEx. 3

13. Relationship Marketing
Chapter 7 Business Marketing
Relationship Marketing
Loyal customers are more profitable than price-sensitive customers with little brand loyalty
Long-term relationships build competitive advantage 3

14. Strategic Alliances & Partnerships
Chapter 7 Business Marketing
Strategic Alliances & Partnerships
Cooperative agreements between firms
Licensing or distribution agreements
Joint ventures
Used for R & D
Used to strengthen operations
Firms can compete better
Trust and commitment are essential
Notes:
Strategic alliances can take the form of licensing or distribution agreements, joint ventures, research and development consortia, and partnerships.
Businesses form strategic alliances to leverage the assets they have (such as technology, financial resources, market access) by combining these assets with those of other firms. Another rationale behind the formation of strategic alliances is to achieve economies of scale. 3

15. Relationships in Other Cultures
Chapter 7 Business Marketing
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
Forming relationships is the best way to compete
Notes:
The concept of strategic alliances has been used in foreign cultures, such as Mexico, China, Japan, Korea, and much of Europe for a long time.
For example, in Japan the basis of exchange between firms is personal relationships that are developed through indulgent dependency. Relationships between companies can develop into a keiretsu—a network of interlocking corporate affiliates.
Members of a keiretsu trade with each other and often engage in joint product development, finance, and marketing activity.
Many American firms have found the best way to compete in Asian countries is to form relationships with Asian firms. 3

16. Identify the four major categories of business market customers
Chapter 7 Business Marketing
Major Categories of Business Customers
Identify the four major
categories of business market customers 4

17. Major Categories of Business Customers
Chapter 7 Business Marketing
Major Categories of Business Customers
Producers
Resellers
Government
Institutions
• OEMs-Original Equip Manufacturers
• Wholesalers • Retailers
• Federal • State • Local
• Schools • Hospitals • Colleges • Churches • Unions • Fraternal • Civic Clubs • Foundations groups • Nonbusiness organizations
Notes:
The business market consists of four major categories of customers: producers, resellers, governments, and institutions.
Producers include profit-oriented organizations that use purchased goods and services to produce or incorporate into other products.
The reseller market includes retail and wholesale businesses that buy finished goods to resell at a profit.
Government organizations include thousands of federal, state, and local buying units. This may be the largest single market for goods and services in the world.
Institutions do not have the standard business goals of profit, market share, and return on investment. Includes schools, hospitals, colleges and universities, churches, labor unions, fraternal organizations, civic clubs, foundations, and other nonbusiness organizations.
Discussion/Team Activity:
Access the Web site
Discuss the information provided on this Web site that helps organizations do business with the federal government. 4

18. Explain the North American Industry Classification System
Chapter 7 Business Marketing
North American Industry Classification System
Explain the North American Industry Classification System 5

19. Industry Classification
Chapter 7 Business Marketing
NAICS
NAICS
North American
Industry Classification
System
A detailed numbering system developed by the U.S., Canada, and Mexico to classify North American business establishments by their main production processes.
Notes:
The North American Industry Classification Systems (NAICS), introduced in 1997, is a joint development by the United States, Canada, and Mexico to provide a common industry classification system for NAFTA partners. 5

20. Example of NAICS Hierarchy
Chapter 7 Business Marketing
Example of NAICS Hierarchy
NAICS
Level
Sector
Subsector
Industry Group
Industry
Industry Subdivision
Code 51
513
5133
51332
513321
Description
Information
Broadcasting and telecoms
Telecoms
Wireless telecoms carriers, except satellite
Paging 5

21. NAICS Provides a common industry classification system
Chapter 7 Business Marketing
NAICS
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
Notes:
The information shown on this slide describes the usefulness of NAICS for marketers.
If a supplier understands the needs of a few firms within a classification, the needs can be projected to all firms in the category. This information can be converted into market potential, market share estimates, and sales forecasts.
Discussion/Team Activity:
Discuss how NAICS information can be used for other marketing applications. 5

22. Explain the major differences between business and consumer markets
Chapter 7 Business Marketing
Business versus Consumer Markets
Explain the major differences between business and consumer markets
Notes:
The basic philosophy and practice of marketing are the same whether the customer is a business organization or a consumer. Business markets do, however, have characteristics different from consumer markets. 6

23. Business versus Consumer Markets
Chapter 7 Business Marketing
Business versus Consumer Markets
Characteristic
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
Notes:
The main differences between business and consumer markets are summarized on this slide.
The first characteristic demand is described on the next slide.
Purchase volume: Business customers buy in larger quantities than consumers.
Number of customers: Business marketers have fewer customers than consumer marketers. An advantage is that it is easier to identify buyers, monitor customer needs, and build personal relationships. A disadvantage is that each customer becomes crucial, especially for those manufacturers who have only one customer.
Location of buyers: Business customers are more geographically concentrated than consumers.
Distribution structure: Business products typically have shorter channels of distribution, and direct channels are common. On the other hand, consumer products pass through a distribution system that may include the producer, the wholesaler(s), and the retailers.
Nature of buying: More people are involved in a business market purchase decision than in a consumer purchase. Representatives from quality control, marketing, finance, and purchasing may be grouped in a buying center.
Nature of buying influence: Typically, more people are involved in a single business purchase decision than in a consumer purchase.
Type of negotiations: Negotiation is more common in business marketing decisions and may take months to work out the final contracts.
Use of reciprocity: Business purchasers often choose to buy from their own customers. It is not unethical or illegal unless the exchange is coerced.
Use of leasing: Businesses commonly lease expensive equipment to reduce capital outflow, keep state of the art products, and gain tax advantages.
Primary promotional method: Business marketers emphasize personal selling, especially for expensive, custom-designed products.
© 2013 by Cengage Learning Inc. All Rights Reserved.

24. Demand in Business Markets
Chapter 7 Business Marketing
Demand is...
Description
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.
Notes:
Business demand is different from consumer demand in the following areas:
The demand for business products is derived demand, meaning that organizations buy products to be used in producing customer products. As a result, business marketers must carefully monitor trends and patterns in final consumer markets as well as customers’ forecasts.
Inelastic demand is demand without regard to price. An increase or decrease in the product price will not significantly affect the demand for the product.
Joint demand occurs when multiple items are used together in a final product.
Fluctuating demand: The demand for business products tends to be more unstable than the demand for consumer products. A small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and manufacturing equipment needed to make the consumer product. This is known as the multiplier effect.
Discussion/Team Activity:
1. Discuss examples of products that describe each of the demand differences in business markets. 6

25. Describe the seven types of business goods and services
Chapter 7 Business Marketing
Types of Business Products
Describe the seven types of business goods and services 7

26. Types of Business Products
Chapter 7 Business Marketing
Types of Business Products
Major Equipment
Accessory Equipment
Raw Materials
Component Parts
Processed Materials
Supplies
Business Services
Notes:
Major equipment: capital goods such as large or expensive machines, mainframe computers, airplanes, and buildings. Depreciated over time, often custom-designed. Personal selling is an important marketing strategy.
Accessory equipment: Less expensive and shorter-lived than major equipment, includes fax machines, personal computers, power tools. Usually not depreciated. Often standardized and purchased by more customers. Advertising is an important promotional tool.
Raw materials: Unprocessed products, such as minerals, timber, wheat, corn, fish. Become part of finished products. Personal selling is the marketing mix component used, distribution channels usually direct from producer to business user.
Component parts: Finished items ready for assembly or that need very little processing. Two important markets for component parts: original equipment manufacturer (OEM) and replacement market.
Processed materials: Used directly in manufacturing other products. Sheet metals, chemicals, and lumber. Do not retain their identity in final products. Price and service are important factors in choosing a supplier.
Supplies: Consumable items that do not become part of the final product. Short lives and inexpensive. Generally fall into categories of maintenance, repair, or operating supplies (MRO).
Business services: Expense items that do not become part of the final product. This includes janitorial, advertising, legal, management consulting, marketing research, and maintenance services. 7

27. Types of Business Goods and Services
Chapter 7 Business Marketing
Types of Business Goods and Services
© 2013 by Cengage Learning Inc. All Rights Reserved.

28. Discuss the unique aspects of business buying behavior
Chapter 7 Business Marketing
Business Buying Behavior
Discuss the unique aspects of business buying behavior 8

29. Business Buying Behavior
Chapter 7 Business Marketing
Business Buying Behavior
5-Customer Service
4-Business Ethics
3-Buying Situations
2-Evaluative Criteria
1-Buying Centers
Aspects of Business Buying
Behavior
Notes:
Understanding how purchase decisions are made in organizations is a first step in developing a business selling strategy. Business buying behavior has five important aspects, as shown on this slide. 8

30. Chapter 7 Business Marketing
1-Buying Centers
All those people in an organization who become involved in the purchase decision.
Number of people involved varies with each purchase decision
Buying centers may not appear on formal organization charts 8

31. Roles in Buying Centers
Chapter 7 Business Marketing
Roles in Buying Centers
Initiator
Influencers
Gatekeepers
Decider
Purchaser
Users
Notes:
Several people may play a role in the business purchase decision:
Initiator: the person who suggests the purchase.
Influencers/Evaluators: help define specifications and provide information for evaluating options.
Gatekeepers: group members who regulate the flow of information, often the purchasing agent.
Decider: the person with the power to choose or approve the selection.
Purchaser: the person who negotiates the purchase.
Users: members of the organization who actually use the product.
Jim Sinegal, Chief Executive Officer of Costco Wholesale 8

32. 2-Evaluative Criteria Quality Service Price 8
Chapter 7 Business Marketing
2-Evaluative Criteria
Quality
Service
Price
Notes:
Business buyers evaluate products and suppliers against the criteria of quality, service, and price—in that order.
Quality refers to technical suitability. Quality improvement should be part of every organization’s marketing strategy.
Service includes prepurchase as well as postpurchase service, along with dependability of supply. Services that help sell the finished products are especially appropriate when the seller’s product is an identifiable part of the end product.
Business buyers want to buy at low prices. However, a buyer who pressures a supplier to cut prices to the point of money loss may force shortcuts on quality. It may force the supplier to quit selling to him/her. 8

33. 3-Buying Situations New Buy Modified Rebuy Straight Rebuy
Chapter 7 Business Marketing
3-Buying Situations
New Buy
A situation requiring the purchase of
a product for the first time.
Modified
Rebuy
A situation where the purchaser
wants some change in the original
good or service.
Notes:
Often, business firms, especially manufacturers, must decide whether to make something or buy it from an outside supplier.
If a firm does decide to buy a product instead of making it, the purchase will be a new buy, a modified rebuy, or a 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. 8

34. 4-Business Ethics Ethics Training Corporate Code of Ethics
Chapter 7 Business Marketing
4-Business Ethics
Ethics Training
Corporate Code of Ethics
Standard of Behavior
Employees
Suppliers
Notes:
Business marketers are increasingly recognizing the benefits of developing a formal system to monitor customer opinions and perceptions of the quality of customer service. 8

35. 5-Customer Service Develop measures for their target markets
Chapter 7 Business Marketing
5-Customer Service
Develop measures for their target markets
Divide customers into groups based on their value
Create policies that govern how service will be allocated among groups
Notes:
Business marketers are increasingly recognizing the benefits of developing a formal system to monitor customer opinions and perceptions of the quality of customer service. 8