11

Introduction to the Introduction to the Business Marketing Business Marketing

EnvironmentEnvironment

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

1-1-22

AgendaAgenda

Business Marketing: An OverviewBusiness Marketing: An Overview Why Study Business Marketing?Why Study Business Marketing? How the Business Market Differs from the How the Business Market Differs from the

Consumer MarketConsumer Market Characteristics of Business DemandCharacteristics of Business Demand The Nature of Business Buying BehaviorThe Nature of Business Buying Behavior A Classification of Business Goods and A Classification of Business Goods and

ServicesServices Business CustomersBusiness Customers Business Marketing Planning and StrategyBusiness Marketing Planning and Strategy

1-1-33

Business Marketing: An OverviewBusiness Marketing: An Overview

What is Business Marketing?What is Business Marketing?

• What Is Marketing?What Is Marketing?

One Definition: “The process of One Definition: “The process of planning and executing the conception planning and executing the conception (product), pricing, promotion, and (product), pricing, promotion, and distribution of want-satisfying ideas, distribution of want-satisfying ideas, goods, and services to individuals and goods, and services to individuals and organizations.”organizations.”

1-1-44

Business Marketing: An OverviewBusiness Marketing: An Overview

What Is What Is BusinessBusiness Marketing? Marketing?• Those activities that facilitate exchanges involving Those activities that facilitate exchanges involving

products and customers in business marketsproducts and customers in business markets

• A business transaction between a professional seller A business transaction between a professional seller (representing a selling company) and a professional (representing a selling company) and a professional buyer (representing a buying company) buyer (representing a buying company)

• Activities in which goods or services are sold for Activities in which goods or services are sold for any any use other than personal consumptionuse other than personal consumption

• Note: It is not the nature of the product; Note: It is not the nature of the product; it’s the nature it’s the nature of the transaction.of the transaction.

1-1-55

Which of the Following is Business Which of the Following is Business Marketing? Marketing? • You buy a gear to fix your mountain bike.You buy a gear to fix your mountain bike.• Ford buys the same gear to fix a machine.Ford buys the same gear to fix a machine.• Xerox buys soft drinks for its cafeterias.Xerox buys soft drinks for its cafeterias.• You start a landscaping business and You start a landscaping business and

purchase a lawnmower. purchase a lawnmower. • Coke buys TV ad time or sugar.Coke buys TV ad time or sugar.• The U.S. government buys…anything.The U.S. government buys…anything.

Business Marketing: An OverviewBusiness Marketing: An Overview

1-1-66

Good employment opportunitiesGood employment opportunities Growing importance of high-tech business Growing importance of high-tech business

productsproducts Success of foreign competitionSuccess of foreign competition Significance of international Significance of international

interdependence of firmsinterdependence of firms Importance of the service sectorImportance of the service sector Dramatic changes in the B2B environment Dramatic changes in the B2B environment

Why Study Business Marketing?Why Study Business Marketing?

1-1-77

How the Business Market Differs How the Business Market Differs from the Consumer Marketfrom the Consumer Market

CharacteristicCharacteristic

Sales volumeSales volumePurchase volumePurchase volumeNumber of buyersNumber of buyersSize of individual buyersSize of individual buyersLocation of BuyersLocation of BuyersBuyer-seller relationshipBuyer-seller relationshipNature of channelNature of channelNature of buyingNature of buyingNature of buying influencesNature of buying influencesType of negotiationsType of negotiationsUse of reciprocityUse of reciprocityUse of leasingUse of leasingPrimary promotion methodPrimary promotion method

Business MarketBusiness Market Consumer MarketConsumer MarketExhibit 1-1Exhibit 1-1

1-1-99

Derived DemandDerived Demand

““Derived demand” says that demand for a business product is Derived demand” says that demand for a business product is linked to demand for a consumer good. This means consumer linked to demand for a consumer good. This means consumer demand affects business marketing up a vast network of demand affects business marketing up a vast network of channels. channels.

For example, when OfficeMax experiences increased demand For example, when OfficeMax experiences increased demand for paper clips, the effect is felt by its suppliers, paper clip for paper clips, the effect is felt by its suppliers, paper clip manufacturers, and their suppliers.manufacturers, and their suppliers.

Inelastic DemandInelastic Demand

Fluctuating DemandFluctuating Demand

Joint DemandJoint Demand

Characteristics of Business DemandCharacteristics of Business Demand

1-1-1010

The Nature of Business The Nature of Business Buying BehaviorBuying Behavior

Questions Asked by Typical Ultimate

ConsumersProduct

Questions Asked by Typical

Business Users

Personal computers

Will it increase office efficiency?

What is its capital investment value?

Does it have special features that will help improve our company image?

Will it help my child learn?

Will it improve my correspondence?

Is a laptop worth the extra cost?

Exhibit 1-3 Exhibit 1-3 Evaluating ProductsEvaluating Products

1-1-1111

The Nature of Business The Nature of Business Buying BehaviorBuying Behavior

Questions Asked by Typical Ultimate

ConsumersProduct

Questions Asked by Typical

Business Users

AutomobilesHow efficient is the vehicle to operate?

Would it be more economical to lease it or purchase it?

What is the expected working life span of the car?

How does it enhance my status?

What is its potential trade-in value?

Will I get reasonable gas mileage?

Exhibit 1-3 Exhibit 1-3 Evaluating ProductsEvaluating Products

1-1-1212

The Nature of Business The Nature of Business Buying BehaviorBuying Behavior

Questions Asked by Typical Ultimate

ConsumersProduct

Questions Asked by Typical

Business Users

TelephonesWill expanded service lower the cost of communicating with our customers?

Should our intercom system be separate from or connected to the telephone system?

How long will it take to have one installed?

Can I get three jacks and two telephones?

Exhibit 1-3 Exhibit 1-3 Evaluating ProductsEvaluating Products

1-1-1313

A Classification of Business A Classification of Business Goods and ServicesGoods and Services

Major EquipmentMajor Equipment Accessory EquipmentAccessory Equipment Process MaterialsProcess Materials MRO (maintenance, repair, MRO (maintenance, repair,

operating) supplies operating) supplies Business ServicesBusiness Services Fabricated and Component PartsFabricated and Component Parts Raw MaterialsRaw Materials

1-1-1414

Business CustomersBusiness Customers

Commercial EnterprisesCommercial Enterprises• Indirect channel members and facilitatorsIndirect channel members and facilitators• OEMs (original equipment manufacturers)OEMs (original equipment manufacturers)• User-customersUser-customers

Governmental OrganizationsGovernmental Organizations InstitutionsInstitutions

1-1-1515

Business Marketing Planning Business Marketing Planning and Strategy Formulationand Strategy Formulation

Includes:Includes:• Analysis of changing environmentsAnalysis of changing environments• Assessment of organization’s strengths and Assessment of organization’s strengths and

weaknesses, opportunities and threatsweaknesses, opportunities and threats• Understanding of customer needs Understanding of customer needs

(“positioning”)(“positioning”) Marketing planningMarketing planning

• Takes the best information it can getTakes the best information it can get• Analyzes itAnalyzes it• Generates alternativesGenerates alternatives• Proposes a plan that works within constraints Proposes a plan that works within constraints

of the firm, now.of the firm, now.

1-1-1616

Business Marketing View Business Marketing View of a Consumer Productof a Consumer Product

What did purchasing buy?What did purchasing buy?

1-1-1717

The picture suggests quantities The picture suggests quantities of the following were purchased:of the following were purchased:

ConveyerConveyer Conveyer replacement and Conveyer replacement and

maintenance materialsmaintenance materials Components going down Components going down

conveyerconveyer Raw material and Raw material and

components of componentscomponents of components Assembly station magnifierAssembly station magnifier Power tool with blue cordPower tool with blue cord

Assembly fixture Assembly fixture Table and chairTable and chair Trucks with Trucks with

components on themcomponents on them Floor cleaning Floor cleaning

systemssystems Lighting systemsLighting systems Heating/AC systemsHeating/AC systems Uniform vestUniform vest Health insuranceHealth insurance

1-1-1818

How Do They Buy It?How Do They Buy It?

Items made from:Items made from:• SteelSteel• WoodWood• PlasticPlastic• ChemicalsChemicals• Printed formsPrinted forms• TransportationTransportation• ElectronicsElectronics

How do you pick How do you pick one supplier from one supplier from the thousands out the thousands out there? there?

How do you get How do you get them to purchase them to purchase products from your products from your company?company?

1-1-1919

Remember What Remember What Business Marketers DoBusiness Marketers Do

Identify customers.Identify customers. Identify customer needs and sell benefits.Identify customer needs and sell benefits. Communicate with customers (contact personally, Communicate with customers (contact personally,

reach through media, build relationships, sell benefits).reach through media, build relationships, sell benefits). Communicate internally, build relationships, sell Communicate internally, build relationships, sell

benefits.benefits. Analyze buyer behavior, identify key buying center Analyze buyer behavior, identify key buying center

influencers and their roles.influencers and their roles. Develop products and services (complete packages of Develop products and services (complete packages of

attributes).attributes). Study the market and competitive environment Study the market and competitive environment

(economic, legal, technological).(economic, legal, technological).

1-1-2020

Remember What Remember What Business Marketers Do Business Marketers Do

Set prices and terms, negotiate, sell benefits.Set prices and terms, negotiate, sell benefits. Make products available at the right time, in the right place, Make products available at the right time, in the right place,

in the right quantity, in the right condition.in the right quantity, in the right condition. Allocate resources across products.Allocate resources across products. Create, implement, monitor, control, and continuously Create, implement, monitor, control, and continuously

evaluate the marketing mix and strategic program to optimize evaluate the marketing mix and strategic program to optimize customer satisfaction and meet profit objectives. customer satisfaction and meet profit objectives.

Be a solution to customer problems, sell benefits.Be a solution to customer problems, sell benefits. Be challenged—Use business judgment—Make decisions—Be challenged—Use business judgment—Make decisions—

Make decisions—Make decisions.Make decisions—Make decisions.