Chapter 7 Business-to-Business Marketing PDF

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Professor: Victor Piscitello...

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Chapter 7

MKTG 361

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Business-to-Business Marketing KEY TERMS Business-to-Business Marketing: Refers to the process of buying and selling goods or services to be used in the production of other goods and services for consumption by the buying organization and/or resale by wholesalers and retailers Derived Demand: Reflects the link between consumers’ demand for a company’s output and the company’s purchase or necessary inputs to manufacture or assemble that particular output Resellers: Marketing intermediaries that resell manufactured products without significantly altering their form Wholesalers: Firms engaged in buying, taking title to, often storing, and physically handling goods in large quantities, then reselling the goods (usually in smaller quantities) to retailers or industrial or business users Distributors: A type of reseller or marketing intermediary that resells manufactured products without significantly altering their form. Distributors often buy from manufacturers and sell to other businesses like retailers in a B2B transaction Requests for Proposals (RFP): A process through which buying organizations invite alternative suppliers to bid on supplying their required components Web Portal: An Internet site whose purpose is to be a major starting point for users when they connect to the web Buying Center: The group of people typically responsible for the buying decisions in large organizations Initiator: The buying center participant who first suggests buying the particular product or service Influencer: The buying center participant whose views influence other members of the buying center in making the final decision Decider: The buying center participant who ultimately determines any part of or the entire buying decision–whether to buy, what to buy, how to buy, or where to buy Buyer: The buying center participant who handles the paperwork of the actual purchases

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User: The person who consumes or uses the product or service purchased by the buying center Gatekeeper: The buying center participant who controls information or access to decision makers and influencers Organizational Culture: Reflects the set of values, traditions, and customers that guide a firm’s employees’ behavior Autocratic Buying Center: A buying center in which one person makes the decision alone, although there may be multiple participants Democratic Buying Center: A buying center in which the majority rules in making decisions Consultative Buying Centers: A buying center in which one person makes the decision but he or she solicits input from others before doing so Consensus Buying Center: A buying center in which all members of the team must reach a collective agreement that they can support a particular purchase New Buy: In a B2B setting, a purchase of a good or service for the first time; the buying decision is likely to be quite involved because the buyer or the buying organization does not have any experience with the item Modified Rebuy: Refers to when the buyer has purchased a similar product in the past but has decided to change some specifications, such as the desired price, quality level, customer service level, options, or so forth Straight Rebuys: Refers to when the buyer or buying organization simply buys additional units of products that have previously been purchased QUIZ-YOURSELF QUESTIONS Q: Compared to the B2C process, the information search and alternative evaluation steps in the B2B process are: A: More formal and structured Q: After need recognition and product specification, many firms using the B2B buying process: A: Issue a request for proposals from invited suppliers B2B MARKETS

Chapter 7

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Book Notes

o B2B vs. B2C  Distinctions:  The user of the product/service  B2B transactions:  Are more complex  Involve multiple members from both buying and selling sides o Derived Demand  Demand for B2C sales derived fro B2C sales  Reflects link between consumer demand for company outputs and the company’s purchase for necessary inputs o Misc. Fact:  The average large corporation has over 175 social media accounts o Types of B2B Markets  Manufacturers and Service Providers  Resellers  Institutions  Governments o Manufacturers and Service Providers  Buy raw materials/components/parts to make their own goods/services  Examples:  Volkswagen Group  IBM o Resellers  Marketing intermediaries  Resell manufactured products without significantly altering them  Includes wholesalers and distributors and retailers  Sell to retailers and can include retailers o Institutions  Includes:  Hospitals  Educational organizations, schools  Religious organizations  Fulfill needs such as:  Construction  Equipment  Supplies  Food  Janitorial services o Government  One of the largest purchasers of goods/services in most countries

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U.S. Government spends about $3.7 TRILLION ANUALLY on procuring goods and services  Not including state and local governments  Pentagon alone spent $526.6 BILLION in 2014

THE B2B BUYING PROCESS o Steps in the B2B Buying Process:  1. Need Recognition  2. Product Specification  3. RFP Process  4. Proposal Analysis, Vendor Negotiation, and Selection  5. Order Specification  6. Vendor/Performance Assessment Using Metrics o Stage 1: Need Recognition  Buying Center recognizes an unfilled need  Through internal or external sources o Stage 2: Product Specification  Write list of potential specifications that vendors might use to develop their proposals  E.g. product attributes, functionality requirements, length of contract, servicing requirements, delivery date, etc.  After need has been recognized and alternative solutions have been considered o Stage 3: RFP Process  Organizations invite alternative vendors/suppliers to bid on supplying their required components/specifications  May be posted on its website or through various B2B web portals to inform preferred vendors directly  Web Portals  Internet site  Purpose is to be a major starting points for users when they connect to the web  Better for small companies who lack the ability to attract broad attention to their requests  There are general portals (Yahoo, MSN, etc.) and specific niche portals (Guru.com)  Guru.com has over 1 million professionals list offerings and over 30,000 companies regularly visit the site to post work orders  Guru.com helps professionals/companies find each other, dispute resolution, escrow for payments, and have a means to rate freelancer quality  Can provide tremendous cost savings  They eliminate periodic negotiations and routine paperwork

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Book Notes

Offer the means to form a supply chain that can respond quickly to buyer’s needs  Help streamline procurement or distribution processes o Stage 4: Proposal Analysis, Vendor Negotiation, and Selection  The Buying Center and all its critical decision makers evaluate all the proposals received in response to the RFP  Often narrow process to a few suppliers  Often those they have existing relationships with  Discuss key terms of sale with the supplier(s)  Price  Quality  Delivery  Financing  Etc. o Stage 5: Order Specification  Firm places order with preferred supplier(s)  Order includes a detailed description of:  Goods  Prices  Delivery Dates  Penalties for noncompliance (in some cases)  Supplier sends acknowledgement it received order and fulfills it by the specified date o Stage 6: Vendor/Performance Assessment Using Metrics  Formal and objective  Assign importance scores/weights to key factors/issues and rate each 

THE BUYING CENTER o Buying Center Roles:  Initiator  Influencer  Decider  Buyer  User  Gatekeeper  *NOTE: One or more people may take on a role or one person may take on more than one role o Organizational Culture  Set of unspoken guidelines that employees share with one another through various work situations  Can influence purchasing decisions  Divided into four types:

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 Autocratic  Democratic  Consultative  Consensus o Building B2B Relationships  LinkedIn  Professional networking in B2B marketplace  1 million members weekly  Over 200 million members total  19 languages in more than 200 countries  Entails key groups such as: customers and prospective customers, investors, suppliers, employees and potential employees, and analysts  Twitter  Valuable for B2B marketers  Can communicate with other businesses as often as they want  White Papers  Used by the majority of B2B marketers and B2B buyers  Provides info about the industries and challenges in an educational context  Goal is to provide valuable information that a businessperson can easily understand and that will help the company address its problem with new solutions THE BUYING SITUATION o Three Types of Buying Situations  New Buys  Modified Rebuys  Straight Rebuys...