Chapter 5: Business-to-Business Marketing and Organizational Buyers

Business-to-buisness marketing

marketing of products to organizational buyers that buy products for their own use or for resale

Industrial Firms

Companies that reprocess products before selling them to the next buyer

Resellers

Wholesalers and retailers that buy products and resell them without any reprocessing

Government Agencies

Units of federal, state, and local governments that buy products to serve their constituents

North American Industry Classification System (NAICS)

Provides common industry definitions for Canada, Mexico, and the United States making it post purchase easier to measure economic activity in the three member countries of the United States-Mexico-Canada Agreement (USMCA).

Market, Product, Buying Process, Marketing Mix

Key characteristics of organization buying/ business-to-business marketing

Derived Demand

Demand for industrial products that is driven by, or derived from, the demand for consumer products

Organizational Buying Criteria

Objective attributes of the supplier's products and the capabilities of the supplier itself

Supplier Development

Effort by organizational buyers to build relationships that shape suppliers' products, services, and capabilities to fit a buyer's needs and those of its customers

Reciprocal Arrangement

Agreement between two organizations to purchase each other's products

Supply Partnership

Adoption of mutually beneficial objectives, policies, and procedures—by a buyer and a supplier—for the purpose of lowering the cost or increasing the value of products to the ultimate consumer

Organizational Buying Behavior

The decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers

Buying Center

The group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a purchase decision

70%

Organizational buyers account for how much of the global dollar value of all online transactions

E-marketplaces (or B2B exhanges or hubs)

Online trading communities that bring together organizational buyers and suppliers to make possible the real-time exchange of information, money, products, and services

Independent e-marketplaces

act as a neutral third party and charge a fee for their service. Small businesses benefit from independent e-marketplaces

Private Exchanges

represent the interests of their owners. Connect the network of qualified suppliers and customers. Large companies favor private exchanges

Traditional auction

A seller puts an item up for sale and potential buyers are invited to bid in competition with each other, benefit organizational sellers by increasing the price of their products

Reverse Auction

A buyer communicates a need for a product and potential suppliers are invited to bid in competition with each other, benefit organizational buyers by reducing the cost of their purchases

Buyer

Person with the formal authority and responsibility to select the supplier and negotiate the terms of the contract—typically a purchasing manager or procurement manager

Influencer

Individual that affect the buying decision, usually by helping define the specifications for what is bought

Decider

Person with the formal or informal power to select or approve the supplier that receives the contract—typically the purchasing manager for routine orders and personnel from the relevant department for non-routine purchases

User

Person in the organization who actually uses the product

Gatekeeper

Individual that controls the flow of information in the buying center—typically, purchasing personnel, technical experts, and administrative assistants

Straight Rebuy

purchasing situation when a company reorders an existing product or service from the list of acceptable suppliers

Modified Rebuy

buying situation when users, influencers, or deciders in the buying center want to change the product specifications, price, delivery schedule, or supplier

New Buy

When an organization is a first-time buyer of the product

Market Characteristics

Demand for industrial products is derived from the demand for consumer goods. There are fewer customers than in consumer markets, but orders are larger

Product Characteristic

technical in nature and are purchased based on specifications. Many goods are purchased in raw or semi-finished states, and a heavy emphasis is placed on delivery time, technical assistance, and post-sale service

Buying Process

- Professional buyers follow established policies and procedures.

- Buying objectives and criteria are explicit, as are the procedures for evaluating sellers and their products.

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

- Reciprocal arrangements and supply partnerships are commonplace, and online buying is widespread

Marketing Mix Characteristics

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

- Price is often negotiated and quantity discounts are common. Price is evaluated as part of a broader set of criteria

Order Size

larger in organizational markets than in consumer markets

Number of potential buyers

customers is much smaller in organizational markets than in consumer markets

Organizational buying behavior

The decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers