MARKETING Real People Real Choices CHAPTER 6 BusinesstoBusiness

MARKETING Real People, Real Choices CHAPTER 6 Business-to-Business Markets: How & Why Organizations Buy

Chapter Objectives • Describe the general characteristics of business-to-business markets • Explain the unique characteristics of business demand • Describe how business or organizational markets are classified • Explain the business buying situation and describe business buyers 2

Chapter Objectives • Explain the roles in the business buying center • Understand the stages in the business buying decision process • Understand the growing role of B 2 B ecommerce 3

Business-to-Business Marketing • Marketing of goods & services that businesses & organizations buy for purposes other than personal consumption – Manufacturers – Wholesalers – Retailers – Government agencies – Hospitals 4

Business Markets • Generally, the same principles hold for business & consumer customers • There are characteristics that make B 2 B buying more complex – Multiple Buyers – Number of customers – Size of purchases – Geographic concentration 5

B 2 B Demand Characteristics • Derived Demand • Inelastic Demand • Fluctuating Demand • Joint Demand 6

Derived Demand • A business’ demand for goods & services comes from consumer demand – Can be direct or indirect – For example, demand for education impacts demand forestry products 7

Inelastic Demand • Inelastic demand means that business customers buy the same quantity whether the price goes up or down • Example: A BMW Z 4 Roadster 3. 0 i has a list price starting at just over $55, 000. If the price of tires, batteries, or stereos goes up or down, BMW still must buy enough to meet consumer demand for the Z 4 8

Fluctuating Demand • Small changes in consumer demand can create large increases or decreases in business demand • Acceleration principles (multiplier effect) means that changes in consumer behavior have a ripple effect through several related businesses 9

Joint Demand • Joint demand occurs when two or more goods are necessary to create a product • Companies try to avoid dependence on specific suppliers by dealing with multiple suppliers whenever possible 10

B 2 B Classifications • Producers – purchase products to produce others • Resellers – purchase finished goods for resale • Governments – competitive bids/proposals • Not-for-profit organizations 11

The Nature of Business Buying • The Buying Situation • The Professional Buyer • The Buying Center 12

The Buying Situation • A buy class framework identifies the degree of effort required of the firm’s personnel to collect information & make a purchase decision • Straight rebuy • Modified rebuy • New task buying 13

The Professional Buyer • Titles: purchasing agents, procurement officers, director of materials management • Focus on economic factors beyond the initial price of a product, including transportation & delivery charges, accessory products or supplies, maintenance, disposal costs, etc. • Large firms practice centralized purchasing one department does all buying 14

The Buying Center • Group of people in the organization who participate in the decision-making process • May include production workers, supervisors, engineers, secretaries, shipping clerks, & financial officers 15

Roles in the Buying Center • Initiator begins the buying process • User needs the product • Gatekeeper controls the flow of information to other members • Influencer dispenses advice/expertise • Decider makes the final decision • Buyer executes the purchase 16

Considerations in Supplier Selection • On-time deliveries – JIT delivery • Single sourcing vs. multiple sourcing – Number of suppliers for a product • Outsourcing • Reverse marketing – Buyer searches for suppliers who will produce according to specifications 17

Electronic B 2 B Commerce • Internet exchanges between two or more businesses or organizations • Allows marketers to link directly to suppliers, factories, distributors, and their customers – Walmart: Electronic Data Interchange • Reduces time necessary to order and deliver goods, track sales, and get feedback 18