Ch 5 Mkt

Business Marketing

-marketing products to organizational buyers

–Buyers purchase and lease large volumes of equipment, raw materials, manufactured parts, supplies, and business services

Organization buyers

buy goods and services for their own use or for resale

Organization buyers are divided into different markets:

1)Industrial

2)Resellers

3)Government

4)Non-profit

Industrial Markets

•reprocess a product or service they buy before selling it again to the next buyer

•primary industries (agriculture, fishing, mining, and forestry), utilities, manufacturers, and construction firms

Reseller Markets

 over 200,000 retailers and over 65,000 wholesalers

•Buy physical products and then sell them again without any reprocessing

Non-Profit Markets

•seek to provide goods and services for the good of society

•Hospitals, arts organizations, cultural groups, and some research institutes can be classified as non-profit organizations

Content Marketing

•Keeps potential customers engaged by ensuring that relevant and valuable content is available at various touch points

–Social media, e-newsletters, videos, and research reports

–Provides opportunity to share feedback and monitor discussions about products and services

Characteristics of Organizational Buying

Market characteristics  

•Demand for industrial products is derived.

•The number of business customers is typically small, and their purchase orders are typically large.

Product or service characteristics  

•Many goods purchased are raw or semi-finished.

•Heavy emphasis is placed on delivery time, technical assistance, and postsale service.

Buying process characteristics  

•Technically qualified and professional buyers follow established purchasing policies and procedures.

•There are multiple buying influences, and multiple parties participate in purchase decisions.

•There are reciprocal arrangements, and negotiation between buyers and sellers is commonplace.

•Online buying over the Internet is widespread.

 Marketing mix characteristics  

•Personal selling to organizational buyers is used extensively, and distribution is very important.

•Advertising and other forms of promotion are technical in nature.

•Price is often negotiated, evaluated as part of broader seller and product or service qualities, and frequently affected by quantity discounts.

Derived Demand

demand for industrial products and services is driven by demand for consumer products and services

Size of the Order or Purchase

-•Knowing how the size of the order affects buying practices is important in determining who participates in the purchase decision and makes the final decision, as well as the length of time required to arrive at a purchase agreement.

-Buyers must often get competitive bids from at least three prospective suppliers when the order is above a specific amount

-•Most organizations place constraints on buyers in the form of purchasing policies and procedures

Number of Potential Buyers

•firms selling to organizations are often restricted to far fewer buyers

Organizational Buying Objectives

-“Understanding buying objectives is a necessary first step in marketing to organizations”

•Increase profits through reducing costs or increasing sales

•Non-profit firms and government agencies need to meet the needs of the groups they serve

Organizational Buying Criteria

-detailed specifications for the product or services they want to buy and the characteristics of the supplier

-–price, quality, delivery schedules, technical capability, warranties and claims policies, past performance on previous contracts, and production facilities and capacity

Reverse Marketing

work with suppliers to make their products, services, and capabilities for the buyer’s needs

Fear in Organizational Buying Behaviour

•Fear drives B2B decisions

–Organizational risk (risk of working with a particular organization)

–Personal risk (risk of being reprimanded in some way for making the wrong decision)

Buyer-Seller Relationships and Supply Partnerships

•Organizational buying is more likely to involve complex and lengthy negotiations

-Reciprocal arrangements

-Supply partnership

Reciprocal arrangements

organizations agree to purchase each other’s products and services

Supply Partnership

buyer and its supplier adopt mutually beneficial objectives, policies, and procedures to lower the cost or increase the value

Organizational Buying Behaviour – decision-making process used to:

1)Establish the need

2)Identify, evaluate, and choose among alternative brands and suppliers

Stages in the Organizational
Buying Process

Problem recognition

BUSINESS: Marketing research and sales departments observe that competitors are improving the quality of cameras on their new models, which will be purchased from an outside supplier.  

Information search    

BUSINESS: Design and production engineers draft specifications for the camera. The purchasing department identifies suppliers of cameras.  

Evaluation of alternatives   

BUSINESS: Purchasing and engineering personnel visit with suppliers and assess facilities, capacity, quality control, and financial status. They drop any suppliers not satisfactory on these factors.  

Purchase decision  

BUSINESS: They use quality, price, delivery, and technical capability as key buying criteria to select a supplier. Then they negotiate terms and award a contract 

Post-purchase behaviour    

BUSINESS: They evaluate the supplier using a formal vendor-rating system and notify the supplier if the camera does not meet their quality standard. If the problem is not corrected, they drop the firm as a future supplier.  

Buying Centre

group of people who share common goals, risk, and knowledge important to the purchase decision

The Buying Centre

•Marketers need to answer the following:

1)Which individuals are in the buying centre for the product or service?

2)What is the relative influence of each member of the group?

3)What are the buying criteria of each member?

4)How does each member of the group perceive the potential supplier, its products and services, and its salespeople?

Roles in a Buying Centre

•Users are the people in the organization who actually use the product or service, such as office staff who will use new word-processing software.

•Influencers affect the buying decision, usually by helping define the specifications for what is bought.

-They usually have specialized knowledge.

-The information systems manager would be a key influencer in the purchase of a new computer network.

•Buyers have formal authority and responsibility to select the supplier and negotiate the terms of the contract.

-The purchasing manager probably would perform this role in the purchase of a computer network.

•Deciders have the formal or informal power to select or approve the supplier that receives the contract.

-Whereas in routine orders the decider is usually the buyer or purchasing manager, in important technical purchases it is more likely to be someone from R&D, engineering, or quality control.

•Gatekeepers control the flow of information in the buying centre.

•Purchasing personnel, technical experts, and office staff can all help or prevent salespeople (or information) from reaching people performing the other four roles.

Straight rebuy

-reorders existing product from list of acceptable suppliers without checking with the buying centre

-Office supplies and maintenance services

Modified rebuy

-•has experience purchasing but wants a change (product specifications, price, delivery schedule, or supplier.)

-•usually mean involving buying centre (requires more input)

New buy

-buying the product or service for the first time

–greater potential risk

–more complex

–buying centre is larger

B2B Market Segmentation

•Segmentation divides markets based on:

-Type of customer

-Size of customer

-Type of buying situation

-Customer location

-Benefits sought

Prominence of Online Buying in Organizational Markets

1)Buyers depend heavily on timely supplier information

2)Web-based technology reduces buyer order-processing costs

3)Web-based technology reduces marketing costs and broadens the customer base

E-Marketplaces

•online trading communities that bring together buyers and supplier organizations

–Independent – charge a fee for services provided

–Private – link the network of qualified suppliers and customers

Online Auctions in Organizational Markets

Traditional Auction

•Bidding is sequential

•Prospective buyers observe the bids of others and decide whether to increase the bid price

•One seller, many buyers

Reverse Auction

•Buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other

•Downward pressure on price

-Many sellers, one buyer