Download WHAT IS BUSINESS MARKETING?

CHAPTER FIVE
BUSINESS MARKETING
Prepared by
Jack Gifford
Miami University (Ohio)
© 2001 South-Western
College Publishing
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BUSINESS MARKETS AND
ORGANIZATIONAL BUYING

From communications giants to small parts
manufacturers and systems consulting
groups, firms are forming partnerships to
achieve goals that would be too costly, timeconsuming, or difficult to accomplish on their
own.
© 2001 South-Western College
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BUSINESS MARKETS AND
ORGANIZATIONAL BUYING

They are also pursuing alliances to
encourage product innovation, reduce risk,
expand product portfolios, and provide
enhanced packages of customer services.
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WHAT IS BUSINESS MARKETING?

…the marketing of
goods and services to
individuals and
organizations for
purposes other than
personal consumption
•Products that are used
to manufacture other
products
•That become part of
another product
•Aid the normal
operations of an
organization
•Are acquired for resale
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BUSINESS MARKETING ON THE
INTERNET
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Over 95% of the Fortune 1,000
companies use the Internet
Businesses are expected to buy
over $200 billion worth of goods
and services online in 2001 - eight
times more than consumers.
Has increased the competitive
nature of the business market.
© 2001 South-Western College
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THE INTERNET AND BUSINESS-TOBUSINESS MARKETING
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Internet Web Sites
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Product & price
information
Technical documents
Communications
Logistics support
FAQs
Distribution of RFPs
Request For Proposals)
© 2001 South-Western College
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THE INTERNET AND BUSINESS-TOBUSINESS MARKETING

Internet Web Sites
(continued)
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On-line bidding
globally
Research
Scheduling
Video conferencing
Product inspection
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MAJOR CATEGORIES OF BUSINESS
CUSTOMERS
•Profit-oriented individuals and
organizations who:

Producers

Resellers
•purchases and services to
produce other products
Governments
•incorporate into other
products
Institutions
•facilitate the daily
operations of the
organization


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MAJOR CATEGORIES OF BUSINESS
CUSTOMERS

Producers

Resellers

Governments

Institutions
• Retail and wholesale
businesses that buy
finished goods and resell
them for a profit
©2001 South-Western College
Publishing
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MAJOR CATEGORIES OF BUSINESS
CUSTOMERS

Producers
Federal
State



Resellers
Local
Governments
•Largest single
market in the world
Institutions
•Often uses a
contractual bid
process
©2001 South-Western College
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MAJOR CATEGORIES OF BUSINESS
CUSTOMERS

Producers

Resellers

Governments

Institutions
•Schools
•Hospitals
•Universities
•Churches
•Clubs
•Foundations
•Labor unions
©2001 South-Western College
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CLASSIFYING BUSINESS MARKETS:
THE NAICS
NORTH AMERICAN INDUSTRY
CLASSIFICATION SYSTEM
REPLACES THE STANDARD INDUSTRIAL CLASSIFICATION
SYSTEM
DEVELOPED AS PART OF THE NORTH AMERICAN FREE
TRADE AGREEMENT
CREATES A MORE RELEVANT AND CURRENT INDUSTRIAL
DATABASE FOR THE UNITED STATES, CANADA, AND
MEXICO
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Classifying business markets: the
NAICS system
In a marked change from the old SIC
system, NAICS reflects the enormous
changes in technology and in the growth
and diversification of services that have
characterized recent decades.
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CLASSIFYING BUSINESS MARKETS:
THE NAICS SYSTEM

Firms involved in business-to-business marketing
use the NAICS to identify potential buyers and
sellers for their products and services and to
assist in discovering new markets and
opportunities. It is an essential tool of almost
every business-to-business marketer now and
into the 21st century.
© 2001 South-Western College
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CLASSIFYING BUSINESS MARKETS:
THE NAICS


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Extremely valuable tool for business marketers in
analyzing, segmenting, and targeting markets.
Is being implemented over time
Integrated marketing data from Canada, USA & Mexico
© 2001 South-Western College
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BUSINESS VERSUS CONSUMER
MARKETS

The basic philosophy and practice of
marketing is the same whether the customer
is a business organization or a consumer.
Business markets do, however, have
characteristics different from consumer
markets
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THE NATURE OF ORGANIZATIONAL
DEMAND

The nature of the demand for goods and
services in the multifaceted organizational
marketplace differs greatly from the demand
for most consumer goods!
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THE NATURE OF ORGANIZATIONAL
DEMAND

Generalizations about
organizational demand
INCREASED
AUTOMOTIVE
TRAVEL
DEMAND FOR
BUSINESS CARS
DEMAND FOR
SEATS & TIRES
DEMAND FOR
LEATHER,
FABRIC AND
RUBBER
INCREASED
MINING
REQUIRED
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THE NATURE OF ORGANIZATIONAL
DEMAND

Generalizations about
organizational demand

Price inelastic


Pass along price/cost
increases to the
customer
Price of any one
component is a small %
of the total product cost
© 2001 South-Western College
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If the cost of paint
increases, builders will not
increase the cost of
homes.
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THE NATURE OF ORGANIZATIONAL
DEMAND

Generalizations about
organizational demand

Joint Demand

Occurs when two or
more items are used
together in a final
product
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If the demand for
computers goes up, so will
the demand for mice and
monitors
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THE NATURE OF ORGANIZATIONAL
DEMAND

Generalizations about
organizational demand
 Fluctuating
demand


Linked to the
economy’s ups and
downs
Some products
have long lives
© 2001 South-Western College
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THE NATURE OF ORGANIZATIONAL
DEMAND
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Business buyers usually buy in larger
quantities than consumers
Far fewer prospective buyers
Business buyers often geographically
clustered
Channels of distribution are shorter
Buying process is more formal
© 2001 South-Western College
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THE NATURE OF ORGANIZATIONAL
DEMAND
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More individuals involved in the purchase
decision
Prices and terms are frequently negotiable
Use of reciprocity (you buy from me and I’ll
buy from you)
Non consumable business products are often
leased instead of purchased
The principle promotional method used is
personal selling
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TYPES OF BUSINESS PRODUCTS
MAJOR
EQUIPMENT
ACCESSORY
EQUIPMENT
RAW
MATERIALS
PROCESSED
MATERIALS
SUPPLIES
BUSINESS
SERVICES
COMPONENT
PARTS
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BUSINESS BUYING BEHAVIOR
The buying decision-making process
The buyer of organizational goods and
services, whether chemicals,machinery,
steel, or maintenance services, usually
go through a decision-making process
similar to, but more complex than, the
consumer decision-making process
discussed in Chapter 4.
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The cross-functional buying center
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Buying Center
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Informal & dynamic
Cross-departmental
Decision unit
Primary objective
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Acquisition of
information
Dissemination of
information
Processing of
information
DATA
INFORMATION
BUYING
BUYING CENTER
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DECISION
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The cross-functional buying center:
Roles
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Roles of buying center
individuals include….
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Initiators
Gatekeepers
Influencers/evaluators
Deciders
Purchaser
Users
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Understanding the buying situations

Understanding the types of buying situations
and behavior found in organizations is
extremely important for organizational
marketers. Each buying situation suggests a
different marketing mix -- an adjustment of
the four major elements to fit particular
circumstances.
© 2001 South-Western College
Publishing
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WHY DO ORGANIZATIONS BUY?
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Rational reasons for buying
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Product quality (TQM & ISO
9000 and 14000)
Related services
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Training
Repair
Technical support
Prices
Service
© 2001 South-Western College
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THREE BUYING SITUATIONS
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Straight rebuy
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Modified rebuy
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Simple decision process
More complex decision
process
New task buying

Most complex decision
process
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