Chapter 5-B2B - Brent Barr PDF

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CHAPTER 5: B2B B2B MARKETS  Focus efforts on serving specific types of custo markets to create value for those custo. Many firms find it productive to focus their efforts on key industries or market segments rather than on custo  Four org of B2B 1. Manufacturers or Producers 2. Resellers: marketing intermediaries that resell manufactured products without significantly altering their form - Wholesalers, distributors, and retailers are all resellers 3. Institutions: hops, prisons and religious org purchase all kinds of g/s for ppl they serve 4. Government Key Challenges of reaching B2B Clients  Must master three key challenges for each bus custo they want to serve 1. Marketers must identify right person or decision makers within the org who can authorize or influence purchases 2. Must understand the buying process of each potential client 3. They need to identify the factors that influence the buying process of potential clients  To address complexity of B2B markets, many companies have sales ppl or sales team dedicated to specific clients Characteristics of B2B Buying compared to B2C Buying Market Characteristics:  B2c consu buy goods to satisfy own indi or household needs and heavily influenced by price, personal tastes, brand reputation and personal recommendations of family  B2b demand for goods often derived from B2c sales in the same supply chain - Derived Demand: for comp’s output and its purchase of necessary inputs to manufacture or assemble that particular output  Ex. demand for raw denim used to make Levi’s jeans derived from sale of jeans to custo. Thus demand for raw material and semi finished goods purchased by bus firms tend to fluctuate more  B2b is the number of bus buyers is substantially fewer than in B2c markets and the bus buyers are more concentrated in big cities and industrial areas. Product Characteristics:  B2b markets, prod ordered primarily raw materials and semi finished goods that are processed or assembled into finished goods for the ultimate consumers  Ex. Dell orders all computer components from diff suppliers and then assembles computers before shipping to the final consumer  In certain B2b products are technical and sophisticated in nature and must conform to technical standards specified by buyer.  Orders must be delivered on the dates agreed to by both b/s  Technical and financing assistance imp to b2b buying bH Buying Process Characteristics:  For small-dollar value purchases only one or a few indi within department or the company may be responsible for the buying decision  For highly technical or complex products involving thousands or millions of dollars, the buying effort is much more structured, formalized and professional  Group of ppl involved in the buying decisions is often referred to as the buying centre which is described in detail  Most comp have formal policies and procedures to guide buying decisions—governing competitive bidding, negotiated pricing, complex financial arrangements, buying criteria Another major diff btwn b2b and b2c buying lies in nature of relationship btwn firm and its suppliers

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Buying decision based on negotiations which for complex purchases could be quite extended Negotiated contract covers range of concerns including price, delivery, warranty and technical specifications In b2b b/s strive to develop close relationships with each other and so will often provide help or advice to ensure a win-win situation for both parties

Marketing Mix Characteristics  Another difference is role of the salesperson  While salesperson imp component of communication mix for b2c transaction such as sales of real estate, insurance, jewelry and consu electronics are not with the aid of salesperson  While for b2b sales, salesperson is integral component of transaction. For ex. pharmaceutical manu rely on sales rep to promote their drugs to doctors B2B Classification System and Segmentation  NAICS useful to b2b marketers for segmenting and targeting markets  Marketers may segment b2b markets in several other ways including geographic location, firm size, account size, and types of product purchased THE B2B BUYING PROCESS  Both b2b and b2c buying process parallels but differ in many ways  Both start with need recognition but info search and alternatives evaluation stages are more formal and structured in b2b process. - B2b buyers specify their needs in writing and ask potential suppliers to submit formal proposals whereas b2c buying decisions made by indi or families and sometimes unplanned or impulsive - B2c buying situations, custo evaluate their purchase decisions and sometimes experience Postpurchase dissonance  Formal pF evaluations of the vendor and the products sold generally do not occur as they do in b2b setting  Process 1. Need Recognition: buying org recognizes through either internal or external sources that it has an unfilled need 2. Product Specification: listing the specifications that’s needed 3. RFP Process:  Request for proposals: process though which buying org invite alternative suppliers to bid on supplying their required components 4. Proposal Analysis and Supplier Selection: narrow to few suppliers and discuss terms such as price, quality, delivery etc. Then evaluate proposals on basis of amount of experience vendor has 5. Order Specification (Purchase): place order with preferred supplier, order will include detailed description of goods, prices, delivery dates and some penalties.  Supplier sends acknowledgment that it has received order and will fill it by specified date 6. Vendor pF Assessment Using Metrics  Firms analyze their vendors pF so they can make decisions about future purchases. Diff is that in B2B analysis is more formal and objective THE BUYING CENTRE  Six stage b2b process influenced by 3 factors within purchasing org: 1. Buying centre: group of ppl typically resp for buying decisions in large org. 2. Buying org’s philosophy or corporate culture 3. Buying Situation  6 different buying roles within typical buying centre 1. Initiator: buying centre participant who first suggests buying particular product/ service The Doctor: Doc takes initiates the buying process by determining products that will best address and treat illness. Doc will notify the hospital to schedule surgery and specifies brand of screws wants for surgery 2. Influencer: whose views influence other members of buying centre in making final decision - The Medical Device Supplier, the pharmacy: elbowed med is a screw comp that the doc believes has good value. Elbowed sales rep effectively influenced doc’s decision to use screw

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3. Decider: person who determines any part of or entire buying decision—whether to buy, what to buy, how to buy, where to buy The Hospital: although the doc requested elbowed med screws, hospital is resp for deciding whether to buy elbowed screws. Hosp weighs factors to determine whether the screw is best for patients and a reasonable cost 4. Buyer: who handles paperwork of actual purchase The Hospital’s Materials Manager: actual buyer of screw will be hosp manager whos charged with buying and maintaining inventory for hosp in most cost-effective manner 5. User: person who consumes product The Patient: buying process greatly affected user—if I am uncomfortable with the procedure you might not have the best treatment 6. Gatekeeper: who controls info or access to both decision makers and influencers The Purchasing Department: department might believe screws too expensive and that other screws deliver equally effective results.

Organizational Culture  Reflects set of values, traditions, and customs that guides firm’s emp bH. Often comprises set of unspoken guidelines that emp share w one another through work situations  Have a profound influence on purchasing decision and corporate buying centre culture might be divided into four general types:  Autocratic: one person makes decision alone though there may be multiple participants  Democratic: the majority rules in making decisions  Consultative: one makes the decisions but he solicits input from others before doing so  Consensus: all members of team must reach collective agreement that they can support particular purchase BUYING SITUATIONS  Also affects the B2B decision process and can be categorized into three types: 1. New buys: purchase of g/s for the first time, buying decision likely to be quite involved because buyer or buying org does not have any experience with item  Typically spend more time at each stage of B2B buying process similar to extended decision-making process 2. Modified Rebuys: buyer has purchased similar product in past but has decided to change some specifications such as desired price, quality level, customer service level and options.  Buyers spend less time at each stage 3. Straight Rebuy: buyer or buying org simply buys additional units of products that has previously been purchased  Buyer often the only member of buying centre involved in process and enables buyer to recognize firm’s need and go directly to fifth step in B2B...