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CHAPTER SIX
BUSINESS MARKETING
Prepared byJack Gifford
Miami University (Ohio)
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BUSINESS MARKETS AND ORGANIZATIONAL BUYING
From communications giants to small parts manufacturers and systems consulting groups, firms are forming partnerships to achieve goals that would be too costly, time-consuming, or difficult to accomplish on their own.
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They are also pursuing alliances to encourage product innovation, reduce risk, expand product portfolios, and provide enhanced packages of customer services.
BUSINESS MARKETS AND ORGANIZATIONAL BUYING
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WHAT IS BUSINESS MARKETING?
…the marketing of goods and services to individuals and organizations for purposes other than personal consumption
•Products that are used to manufacture other products
•That become part of another product
•Aid the normal operations of an organization
•Are acquired for resale
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BUSINESS MARKETING ON THE INTERNET
Over 95% of the Fortune 1,000 companies use the Internet
Businesses are expected to buy over $200 billion worth of goods and services online in 2001 - eight times more than consumers.
Has increased the competitive nature of the business market.
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THE INTERNET AND BUSINESS-TO-BUSINESS MARKETING
Internet Web Sites Product & price
information Technical documents Communications Logistics support FAQs
Distribution of RFPs
Request For Proposals)
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THE INTERNET AND BUSINESS-TO-BUSINESS MARKETING
Internet Web Sites (continued) On-line bidding
globally Research Scheduling Video conferencing Product inspection
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MAJOR CATEGORIES OF BUSINESS CUSTOMERS
Producers
Resellers
Governments
Institutions
•Profit-oriented individuals and organizations who:
•purchases and services to produce other products
•incorporate into other products
•facilitate the daily operations of the organization
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MAJOR CATEGORIES OF BUSINESS CUSTOMERS
Producers
Resellers
Governments
Institutions
• Retail and wholesale businesses that buy finished goods and resell them for a profit
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MAJOR CATEGORIES OF BUSINESS CUSTOMERS
Producers
Resellers
Governments
Institutions
Federal
State
Local
•Largest single market in the world
•Often uses a contractual bid process
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MAJOR CATEGORIES OF BUSINESS CUSTOMERS
Producers
Resellers
Governments
Institutions
•Schools•Hospitals •Universities•Churches•Clubs•Foundations•Labor unions
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CLASSIFYING BUSINESS MARKETS: THE NAICS
NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTM
REPLACES THE STANDARD INDUSTRIAL CLASSIFICATION SYSTEM
DEVELOPED AS PART OF THE NORTH AMERICAN FREE TRADE AGREEMENT
CREATES A MORE RELEVANT AND CURRENT INDUSTRIAL DATABASE FOR THE UNITED STATES,
CANADA, AND MEXICO
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Classifying business markets: the NAICS system
In a marked change from the old SIC system, NAICS reflects the enormous changes in technology and in the growth and diversification of services that have characterized recent decades.
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CLASSIFYING BUSINESS MARKETS: THE NAICS SYSTEM
Firms involved in business-to-business marketing use the NAICS to identify potential buyers and sellers for their products and services and to assist in discovering new markets and opportunities. It is an essential tool of almost every business-to-business marketer now and into the 21st century.
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CLASSIFYING BUSINESS MARKETS: THE NAICS
Extremely valuable tool for business marketers in analyzing, segmenting, and targeting markets.
Is being implemented over time Integrated marketing data from Canada, USA & Mexico
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BUSINESS VERSUS CONSUMER MARKETS
The basic philosophy and practice of marketing is the same whether the customer is a business organization or a consumer. Business markets do, however, have characteristics different from consumer markets
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THE NATURE OF ORGANIZATIONAL DEMAND
The nature of the demand for goods and services in the multifaceted organizational marketplace differs greatly from the demand for most consumer goods!
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THE NATURE OF ORGANIZATIONAL DEMAND
Generalizations about organizational demand
INCREASED AUTOMOTIVE
TRAVEL
DEMAND FOR BUSINESS CARS
DEMAND FOR SEATS & TIRES
DEMAND FOR LEATHER,
FABRIC AND RUBBER
INCREASED MINING
REQUIRED
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THE NATURE OF ORGANIZATIONAL DEMAND
Generalizations about organizational demand Price inelastic
Pass along price/cost increases to the customer
Price of any one component is a small % of the total product cost
If the cost of paint increases, builders will not increase the cost of homes.
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THE NATURE OF ORGANIZATIONAL DEMAND
Generalizations about organizational demand Joint Demand
Occurs when two or more items are used together in a final product
If the demand for computers goes up, so will the demand for mice and monitors
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THE NATURE OF ORGANIZATIONAL DEMAND
Generalizations about organizational demand Fluctuating
demand Linked to the
economy’s ups and downs
Some products have long lives
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THE NATURE OF ORGANIZATIONAL DEMAND
Business buyers usually buy in larger quantities than consumers
Far fewer prospective buyers Business buyers often geographically
clustered Channels of distribution are shorter Buying process is more formal
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THE NATURE OF ORGANIZATIONAL DEMAND
More individuals involved in the purchase decision
Prices and terms are frequently negotiable Use of reciprocity (you buy from me and I’ll
buy from you) Non consumable business products are often
leased instead of purchased The principle promotional method used is
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TYPES OF BUSINESS PRODUCTS
MAJOREQUIPMENT
ACCESSORY EQUIPMENT
RAW MATERIALS
COMPONENT PARTS
PROCESSED MATERIALS
SUPPLIES
BUSINESS SERVICES
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BUSINESS BUYING BEHAVIOR The buying decision-making process
The buyer of organizational goods and services, whether chemicals,machinery, steel, or maintenance services, usually go through a decision-making process similar to, but more complex than, the consumer decision-making process discussed in Chapter 5.
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The cross-functional buying center Buying Center
Informal & dynamic Cross-departmental Decision unit Primary objective
Acquisition of information
Dissemination of information
Processing of information
DATA INFORMATION
BUYING CENTER
BUYING
DECISION
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The cross-functional buying center: Roles
Roles of buying center individuals include…. Initiators Gatekeepers Influencers/evaluators Deciders Purchaser Users
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Understanding the buying situations
Understanding the types of buying situations and behavior found in organizations is extremely important for organizational marketers. Each buying situation suggests a different marketing mix -- an adjustment of the four major elements to fit particular circumstances.
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WHY DO ORGANIZATIONS BUY?
Rational reasons for buying Product quality (TQM & ISO
9000 and 14000) Related services
Training Repair Technical support
Prices Service
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THREE BUYING SITUATIONS
Straight rebuy Simple decision process
Modified rebuy More complex decision
process
New task buying Most complex decision
process