6
CHAPTER
Business-to-Business (B2B)
Marketing
Chapter Objectives
1 Explain each of the
components of the
business-to-business
(B2B) market.
4 Discuss the decision to
make, lease, or buy.
7 Classify organizational
buying situations.
5 Describe the major
influences on business
buying behavior.
Explain the buying center
8 concept.
2 Describe the major
approaches to segmenting
6 Outline the steps in the
B2B markets.
organizational buying
process.
3 Identify the major
characteristics of the
business market and its
demand.
Discuss the challenges
9 and strategies for
marketing to government,
institutional, and
international buyers.
CHAPTER 6 Business-to-Business (B2B) Marketing
BUSINESS-TO-BUSINESS (B2B) MARKETING
• Business-to-business (B2B) market is significantly larger than the consumer
market.
• Business-to-business (B2B) marketing Organizational sales and purchases
of goods and services to support production of other products, to facilitate
daily company operations, or for resale.
CHAPTER 6 Business-to-Business (B2B) Marketing
NATURE OF THE BUSINESS MARKET
• Companies also buy services, such as legal, accounting, office-cleaning,
and other services.
• Some firms focus entirely on business markets.
• Example: Caterpillar, which makes construction and mining
equipment.
COMPONENTS OF THE BUSINESS MARKET
• Commercial market Individuals and firms that acquire products to
support, directly or indirectly, production of other goods and services.
• Trade industries Retailers or wholesalers that purchase products for resale
to others.
• Government.
• Public and private institutions.
CHAPTER 6 Business-to-Business (B2B) Marketing
B2B MARKETS: THE INTERNET CONNECTION
• More than 94 percent of all Internet sales are B2B transactions.
• Opens up foreign markets to sellers.
• Largest segment of the business market.
DIFFERENCES IN FOREIGN BUSINESS MARKETS
• May differ due to variations in regulations and cultural practices.
• Businesses must be willing to adapt to local customs and business practices
and research cultural preferences.
CHAPTER 6 Business-to-Business (B2B) Marketing
SEGMENTING B2B MARKETS
• Segmentation helps marketers develop the most appropriate strategy.
SEGMENTATION BY DEMOGRAPHIC
CHARACTERISTICS
• Grouping by size based on sales revenues or number of employees.
SEGMENTATION BY CUSTOMER TYPE
• Grouping in broad categories, such as by industry.
• Customer-based segmentation Dividing a business-to-business market
into homogeneous groups based on buyers’ product specifications.
• North American Industry Classification System Classification used by
NAFTA countries to categorize the business marketplace into detailed
market segments.
CHAPTER 6 Business-to-Business (B2B) Marketing
SEGMENTATION BY END-USE APPLICATION
• End-use application segmentation Segmenting a business-to-business
market based on how industrial purchasers will use the product.
SEGMENTATION BY PURCHASE CATEGORIES
• Segmenting according to organizational buyer characteristics.
CHAPTER 6 Business-to-Business (B2B) Marketing
CHARACTERISTICS OF THE B2B MARKET
GEOGRAPHIC MARKET CONCENTRATION
• Business market more concentrated than consumer market.
• Geographic concentration decreasing as Internet technology improves.
SIZES AND NUMBER OF BUYERS
• Business market has smaller number of buyers than consumer market.
• Many buyers are large organizations, such as Boeing, which buys jet
engines.
CHAPTER 6 Business-to-Business (B2B) Marketing
THE PURCHASE DECISION PROCESS
• Often involves multiple decision makers, is more formal, and may require
bidding and negotiations.
BUYER-SELLER RELATIONSHIPS
• Often more complex than in consumer market with a greater reliance on
relationship marketing.
EVALUATING INTERNATIONAL BUSINESS MARKETS
• Business purchasing patterns differ from country to country.
• Global sourcing Purchasing goods and services from suppliers worldwide.
CHAPTER 6 Business-to-Business (B2B) Marketing
BUSINESS MARKET DEMAND
• Demand characteristics vary from market to market.
DERIVED DEMAND
• The linkage between demand for a company’s output and its purchases of resources
such as machinery, components, supplies, and raw materials.
VOLATILE DEMAND
• Derived demand creates volatility; for example, demand for gasoline pumps may be
reduced if demand for gasoline slows.
JOINT DEMAND
• Demand for two products used in combination with each other.
INELASTIC DEMAND
• Demand not significantly influenced by price changes.
INVENTORY ADJUSTMENTS
• Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and
requiring vendors to deliver inputs as they are needed.
CHAPTER 6 Business-to-Business (B2B) Marketing
THE MAKE, BUY, OR LEASE DECISION
• Firms acquiring needed products can get them in one of three ways:
• Make the good or provide the service in-house.
• Purchase it from another organization.
• Lease it from another organization.
• Producing the item may be cheapest route, but most firms cannot make all
of the products they need.
• Many companies purchase many of the goods they need.
• Companies can spread out costs through leasing.
CHAPTER 6 Business-to-Business (B2B) Marketing
THE RISE OF OFFSHORING AND OUTSOURCING
• Offshoring Movement of high-wage jobs from one country to lower-cost
overseas locations.
• Nearshoring Moving jobs to vendors in countries close to the business’s
home country.
• Outshoring Using outside vendors to provide goods and services formerly
produced in-house.
PROBLEMS WITH OFFSHORING AND OUTSOURCING
• Cost savings may be less than expected.
• Can raise security concerns over proprietary technology or customer data.
• Can reduce flexibility, create conflicts with unions, or negatively affect
employee morale and loyalty.
CHAPTER 6 Business-to-Business (B2B) Marketing
THE BUSINESS BUYING PROCESS
• More complex than the consumer decision process.
• Takes place within formal organization’s budget, cost, and profit
considerations.
INFLUENCES ON PURCHASE DECISIONS
• Environmental factors—economic, political, regulatory, competitive, and
technological considerations influence business buying decisions.
• Organizational factors—structures, policies, and purchasing systems,
which may be centralized in one office or delegated to units throughout the
organization.
• Interpersonal Influences of all organizational members involved in the
buying decision.
• Concerns and procedures of professional buyers who implement systematic
buying procedures.
CHAPTER 6 Business-to-Business (B2B) Marketing
CLASSIFYING BUSINESS BUYING SITUATIONS
• Business buying behavior involves degree of effort involved in the decision
and the levels within the organization in which these decisions are made.
• Straight rebuying—recurring purchase decision in which a customer
reorders a product that has satisfied needs in the past.
• Modified rebuying—purchaser willing to reevaluate available options.
• New-Task Buying—first-time or unique purchase situations that require
considerable effort by the decision makers.
• Reciprocity—practice of buying from suppliers that are also customers.
ANALYSIS TOOLS
• Value analysis—examines each component of a purchase in an attempt to
either delete the item or replace it with a more cost-effective substitute.
• Vendor analysis—ongoing evaluation of a supplier’s performance in a
variety of areas.
CHAPTER 6 Business-to-Business (B2B) Marketing
THE BUYING CENTER CONCEPT
• Buying center Participants in an organizational buying action.
BUYING CENTER ROLES
Decider
Buyer
Users
Gatekeeper
Influencer
CHAPTER 6 Business-to-Business (B2B) Marketing
INTERNATIONAL BUYING CENTERS
• Marketers may have difficulty identifying members of foreign buying
centers.
• Marketers who can quickly identify decision makers have an advantage
over competition.
TEAM SELLING
• Combining several sales associates or other staff to help the lead account
representative reach all those who influence the purchase decision.
• May include members of the seller firm’s own supply network in the sales
situation.
CHAPTER 6 Business-to-Business (B2B) Marketing
DEVELOPING EFFECTIVE BUSINESS-TOBUSINESS MARKETING STRATEGIES
• Marketer must develop strategy based on particular organization’s buying
behavior and on the buying situation.
CHALLENGES OF GOVERNMENT MARKETS
• Purchases typically involve dozens of interested parties and may be
influenced by social goals.
• Most federal government purchases must go through a complex bidding
process governed by the Federal Acquisition Regulation.
• GSA Advantage allows government buyers to make purchases online at
preferred government prices.
CHAPTER 6 Business-to-Business (B2B) Marketing
CHALLENGES OF INSTITUTIONAL MARKETS
• Include schools, hospitals, libraries, foundations, and others.
• Multiple buying influences can affect buying decisions, such as conflicts
between professional staff and purchasing departments.
CHALLENGES OF INTERNATIONAL MARKETS
• Marketers must consider buyers’ attitudes and cultural patterns.
• Local industries, economic conditions, geographic characteristics, and legal
restrictions must all be considered.
• Foreign governments are also an important market.