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Instructor’s Manual
Chapter 1
Business Marketing Management
CHAPTER
1
THE BUSINESS MARKETING ENVIRONMENT
LEARNING OBJECTIVES
After reading this chapter, the student should be able to:
 Explain why we study business marketing.
 Discuss the differences between business and consumer marketing.
 Describe the characteristics of business demand.
 Understand the nature of business buying behavior.
 Distinguish among the basic types of business goods and services.
 Differentiate among the various kinds of business customers.
 Explain the pivotal importance of planning and strategy formulation to the business marketing effort.
CHAPTER OVERVIEW
Business marketing can be defined as those activities that facilitate exchanges involving business
products and customers in business marketing. A business marketing transaction takes place whenever a
good or service is sold for any use other than personal consumption.
Differences between business and consumer marketing are many and varied. Business marketing, as
opposed to consumer marketing, is characterized by greater total sales volume, larger volume purchases,
fewer buyers, larger buyers, geographically concentrated buyers, a close supplier-customer relationship,
more direct channels of distribution, professional buying, multiple buying influence, complex
negotiation, reciprocity, leasing, and an emphasis on personal selling.
The demand for business goods is derived from the demand for consumer goods and services.
Business demand is relatively inelastic, because demand is not likely to change significantly in the short
run but tends to be more volatile than the demand for consumer goods and services. There is a joint
demand for some business products when two or more items are used in combination to produce a
product.
It is generally thought that business buyers tend to be more cautious than are final consumers.
However, they are not totally rational in their buying behavior. Selling to business buyers is frequently a
personality-oriented sales situation, as it true in consumer transactions.
Business goods can be classified in a number of ways. One major classification system uses the
categories of major equipment, accessory equipment, fabricated and component parts, process materials,
MRO supplies, raw materials, and business services. Business customers are usually classified into three
broad categories: commercial enterprises that include indirect channel members, original equipment
manufacturers, and user customers; governmental organizations; and nonbusiness and not-for-profit
organizations.
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Instructor’s Manual
Chapter 1
Business Marketing Management
LECTURE OUTLINE
BUSINESS MARKETING: AN OVERVIEW
The Business Market
WHY STUDY BUSINESS MARKETING?
HOW THE BUSINESS MARKET DIFFERS FROM THE CONSUMER MARKET
Greater Total Sales Volume
Larger-Volume Purchases
Fewer Buyers
Larger Buyers
Geographically Concentrated Buyers
Close Supplier-Customer Relationships
More Direct Channels of Distribution
Professional Buying
Multiple Buying Influences
Complex Negotiations
Reciprocity
Leasing
Emphasis on Professional Selling
CHARACTERISTICS OF BUSINESS DEMAND
Derived Demand
Inelastic Demand
Fluctuating Demand
Joint Demand
THE NATURE OF BUSINESS BUYING BEHAVIOR
A CLASSIFICATION OF BUSINESS GOODS AND SERVICES
BUSINESS CUSTOMERS
Commercial Enterprises
Indirect Channel Members
Original Equipment Manufacturers (OEMs)
User-Customers
Overlap of Categories
Governmental Organizations
Institutions
BUSINESS MARKETING PLANNING AND STRATEGY FORMULATION
FORMAT OF THIS TEXT`
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Instructor’s Manual
Chapter 1
Business Marketing Management
TEACHING SUGGESTIONS
The major importance of this chapter is in distinguishing between business and consumer markets
and in identifying major types of business goods, services, and customers. It would be very helpful to
provide an example of both a business customer and a final consumer to help the student see these
differences. The use of PowerPoint, transparencies or simply the chalkboard to chart such differences
would also be useful. Business Marketing in Action - Damage Resistant Plastic Bumpers supports
Chapter 1 by having students explore an engineered polymers company web site. The exposure to an
actual business site also serves as an example while covering Chapter 1 topics (e.g., classification of
products, classification of customers, derived demand, etc.). Business Marketing in Action Automotive Megamergers Mean Changes for Suppliers can be used to expose students to the idea that
business markets are dynamic. What Would You Do? - Basic Ethical Considerations for Business
Marketing Professionals can be used to get students to ponder the concept of professional ethics. Case
1-1 The Relationship of Mission and Marketing can be used to give students a review of the concept of
mission and its relationship to the marketing function. Case 1-2 Researching the Duties of Actual
Marketing Professionals can be used to encourage student to be more aware of what marketing
professional do in their day-to-day work.
ANSWERS TO REVIEW QUESTIONS
1. How is business marketing defined? What constitutes a business marketing transaction?
Business marketing can be defined as those activities that facilitate exchanges involving
business products and customers in business markets. A business market transaction
takes place whenever a good or service is sold for any use other than personal
consumption.
2. What are the reasons for studying business marketing? Prepare a profile of the contemporary U.S.
business sector.
Numerous employment opportunities, the growing importance of high technology
business products, the success of foreign competition, and the increasing size of the
business market are important reasons for studying business marketing. The business
market has been described as growing, diverse in scope and nature, technologically
complex, internationally involved, and ripe with career opportunities.
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3. Detail the major differences between business and consumer marketing. Create examples to show
your understanding of derived demand, fluctuating demand, inelastic demand, and joint demand.
Distinguishing between business and consumer markets:
Characteristics
Business Market
Consumer Market
Sales volume
Greater
Smaller
Purchase volume
Larger
Smaller
Number of buyers
Fewer
Many
Size of individual buyers
Larger
Smaller
Location of buyers Geographically concentrated
Diffuse
Buyer-seller relationship
Closer
Not close
Nature of channel
More direct
More indirect
Nature of buying influence
More professional
More personal
Type of negotiations
Multiple
Single
Use of reciprocity
More complex
Simpler
Use of leasing
Yes
No
Primary promotional
Greater
Smaller
material
Personal selling
Advertising
.
An example of derived demand would be a steel distributor that forecasts demand
partially based on projected consumer demand for automobiles during a particular
period. The production of some pieces of contemporary machinery requires the use of
transistors, and regardless of whether the price of transistors is high, moderate, or low,
they must nevertheless be utilized. This is an example of inelastic demand. Fluctuating
demand is exemplified by the following: if there is a five percent increase in consumer
demand for automobiles, there typically will be a much greater increase in business
demand for component parts that go into those automobiles. An example of joint
demand would be that if there were an increase in the consumer demand for flashlights,
there would be an accompanying increase in the demand for both batteries and
aluminum. This would be true because both of these must be used in the production of
flashlights.
4. Why is business buying behavior not purely rational in nature? Give an example of a situation in
which a business buyer might be more influenced by a marketer’s use of emotional appeals.
Business buyers are not totally rational in their buying behavior because of the simple
fact that business buyers are human beings. In fact, according to many marketing
practitioners, selling to business buyers is very frequently a personality-oriented sales
situation, as is true in final consumer transactions. For example, salespeople will
frequently appeal to business buyers’ desire for personal status or image in selling them
innovative and expensive products.
5. Identify and define five major categories of business goods and services. Is there an alternate
classification system that can be used? If so, what are the major categories included in such a
classification system?
Major categories of business goods and services are as follows:
a. Major equipment – includes machinery, computers, machine tools, stamping
machines, and robots. Characterized by an inelastic demand and changed to a
capital account.
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b. Accessory equipment – used to facilitate production, administrative, clerical, or
marketing activities. Includes calculators, office equipment, and fire extinguishers.
Tends to be standardized and less costly than major equipment. Lower in price than
major equipment, distribution channels are usually much longer, require less
technical service, and are often considered routine purchases. Characterized by an
elastic demand curve.
c. Process materials – most of these cannot be identified or regrouped in the finished
product. Include chemicals, plastics, cement, asphalt, and steel bar stock.
Considerable emphasis on price and service and bought by predetermined
specifications or common industry standards.
d. Maintenance, repair, and operating (MRO) supplies – part of the finished product
but do not get used up in the production process. Facilitate the production process,
have a relatively short life, and are generally less expensive than most business
goods. Usually standardized, involve longer channels of distribution, expose the
seller to fewer buying influences, and exhibit a more elastic demand curve than even
accessory equipment. Include nails, paint, gears, filters, pencils, and lubricating
oils.
e. Business services – expense items having a multiple buying influence. Support the
operations of the firm. Include CPAs, advertising agencies, and management
consulting firms.
f. Fabricated and component parts – purchased for inclusion into the final product.
Include spark plugs, timing devices, and switches. Purchased by predetermined
specifications or standards commonly accepted in an industry. Should have
consistent quality and be delivered on time.
g. Raw materials – basic lifeblood of industry and supplied primarily by the
agriculture, limber, mining, and fishing industries. Generally bought in large
quantities and by grade designations or sets of specifications, exhibit an inelastic
demand curve, and have long or short channels of distribution. Characterized by
multiple buying influences in the initial stages of the procurement cycle.
6. What are the three fundamental types of business customers? Identify three types of commercial
enterprises. How can these categories overlap?
Three types of business customers include commercial enterprises, governmental
organizations, and institutions. Commercial enterprises include indirect channel
members, original equipment manufacturers (OEMs), and user-customers. These
categories can overlap. For example, a manufacturer of machinery can be a user
purchasing raw materials to support a production process, or an OEM purchasing gear
assemblies to incorporate into the machinery being manufactured,
7. Why is it important for the business marketer to know and utilize an organization’s strengths and
weaknesses in marketing planning and strategy formulation?
Marketing planning and strategy begin with the analysis of the changing environment.
Central to this first step is an assessment of an organization’s strengths and weaknesses
in relation to the competition, along with a matching of the strengths with unsatisfied
customer needs in the marketplace. Effective business marketing strategy must
continually monitor the elements of the marketing mix, making sure that all are
consistent with one another, and that there is “synergy,” wherein the impact of the
whole is different than the sum of the parts.
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