MKTG #300 - Chapter 7 Material

B2B markets diagram?

• Resellers

• Instituions

• Government

• Manufacturers/Service providers

Business to Business (B2B) Markets?

• Manufacturer → Manufacturer

• Manufacturer → Reseller

• Manufacturer → Government and institutions

• Reseller → other businesses, government and institutions

• Service provider → other businesses, government and institutions

B2C vs. B2B: Which is bigger?

• While B2C dominates in terms of the number of customers and transactions, the B2B market is significantly larger in terms of total revenue and transaction value.

While B2C dominates in terms of the number of customers and transactions, the B2B market is significantly larger in terms of?

• Total revenue and transaction value

Government?

• In most countries, government is one of the largest purchasers of goods and services.

• Local, state, and federal governments.

The U.S. government spends over how much annually? The government spending has grown fast.

• 6 trillion

The B2B process?

• Need Recognition

• Product Specification

• RFP Process

• Proposal analysis/Vendor negotiation/Selection

• Order specification 

• Vendor performance assessment using metrics

The B2B buying process could be shorter and simpler depending on these buying situations?

• New buy

• Modified buy

• Straight buy

New buy?

• Most likely when purchasing for the first time.

• Usually quite involved.

• The buying center will probably use all six steps in the buying process and it involves many people in the buying decision.

Modified buy?

• Purchasing a similar product but changing specifications such as price, quality level, customer service level, options, etc.

• Current vendors have an advantage.

• Often skips RFP (Request For Proposal) and vendor selection (steps 3 & 4).

Straight buy?

• Buying additional units of products that have been previously purchased.

• Most B2B purchases fall into this category.

• Usually, the buyer is the only member of the buying center involved.

• Skips first 4 steps

Stage 1: Need Recognition?

• The B2B process begins with need recognition.

• Can be generated internally or externally.

Stage 2: Product Specification?

• After recognizing the need and considering alternative solutions, create a list of potential specifications.

• Used by suppliers/ vendors to develop proposals.

Stage 3: Request for Proposal process?

• Vendors or suppliers are invited to bid on supplying required components and services.

• Purchasing company may simply post its RFP needs on its website, work through various B2B web portals, or inform their preferred vendors directly.

Stage 4: Proposal Analysis, Vendor Negotiation, and Selection?

• The buying organization evaluates all the proposals received in response to an RFP.

• Selection of B2B purchase usually follows compensatory rule.

• Pricing becomes an important compensatory factor.

• The government uses preferred contractor programs, designed to offer small and minority-owned firms' greater opportunity.

Stage 5: Order Specification?

• Firm places the order with its preferred supplier (or suppliers).

• It is known as PO (Purchase Order)

• The exact details of the purchase are specified, including penalties for noncompliance.

• All terms are detailed including payment.

Stage 6: Vendor Performance Assessment Using Metrics?

• Just as in the consumer buying process, firms analyze their vendors’ performance so they can make decisions about their future purchases.

• The difference is that in a B2B setting, this analysis is typically more formal and objective.

The buying center - Initiator?

• First suggests buying the product.

The buying center - Influencer?

• Influences other members in buying decisions.

The buying center - Decider?

• Ultimately determines the buying.

The buying center - Buyer?

• Handles the paperwork of the actual purchase

The buying center - User?

• Consumes or uses the product.

The buying center - Gatekeeper?

• Controls information or access to decision makers and influencers.

Example of Buying Center Roles for a Hospital?

• Influencer: Hospital pharmacy

• Decider: Hospital financial officer

• Buyer: Materials manager

• User: Patient

• Gatekeeper: Insurance company

Organizational Buying Culture - Autocratic?

• One person makes the buying decision alone even though there may be multiple participants (e.g., small private company owned by one person).

Organizational Buying Culture - Democratic?

• The majority rules (e.g., public institutions).

Organizational Buying Culture - Consultive?

• One person makes the decision but solicits input from others (e.g., large corporations).

Organizational Buying Culture - Consensus?

• All members of buying center should agree to buy (e.g., some cooperatives).

B2B buying process for a new buy follows the following process?

• Need Recognition -->

• Product specification -->

• RFP -->

• Proposal analysis and selection -->

• Purchase order-->

• Vendor performance assessment

B2B buying process is shortest when the buying situation is?

• Straight buy

Who is the person who controls information or access, or both, to decision makers and influencers?

• Gatekeeper

The manager for a Kroger supermarket considers re-ordering items for his store. He will negotiate price concession and quality improvements. The manager is engaging in a(n)__________ situation?

• Modified buy

The customer whom Jemma is calling on today has a(n) ______________ buying center culture. This means that the decision process will involve reaching agreement among all members of the buying center?

• Consensus