Description
This is pdf explaning the concept of "Business-to-business marketing (B2B)": the process of buying and selling goods or services to be used inthe production of other goods and services, for consumption by the buying organization, and/or resealby wholesalers and retailers
ADM2320C Chapter 7 - Business-to-Business Marketing
October-03-11 11:30 AM
Business-to-business marketing (B2B): the process of buying and selling goods or services to be used in the production of other goods and services, for consumption by the buying organization, and/or reseal by wholesalers and retailers B2B Markets y Manufacturers or producers o Buy raw materials, components or parts o Manufacture their own goods y Resellers: marketing intermediaries that resell manufactured products without significantly altering their form y Institutions: schools, museums, and religious organizations involved in marketing and B2B transactions y Government: o Canadian government spends $240 billion buying goods & services o Provincial and local governments also make significant purchases o Firms specialize in selling to government y B2B classification system and segmentation o North American Industry Classification System (NAICS) codes: a classification scheme that categorizes all firms into hierarchical set of six-digit codes Differences between B2B and B2C Markets y Bigger market/quantity y Buying decision involves multiple people (buying centre) 1. Market characteristics: o Demand for business products is derived o Fewer customers, more geographically concentrated, and orders are larger o Demand is more inelastic, fluctuates more, and more frequently o Demand doesn't depend on price o Derived demand: the linkage between consumers' demand for a company's output and its purchase of necessary inputs to manufacture or assemble that particular output 2. Product characteristics: o Products technical in nature, purchased based on specifications o Mainly raw and semi-finished goods o Heavy emphasis on delivery time, technical assistance, after sale service, financing o Buying decisions more complex o Competitive bidding, negotiated pricing, complex financial arrangements 3. Buying process characteristics: o Qualified professional buyers - more formalised buying process o Buying criteria and objective specified o Multiple participants in purchase decisions o Reciprocal arrangements common o Close long-term relationships o Online buying common 4. Marketing mix characteristics:
o o o
Direct selling and physical distribution often essential Advertising more technical, promotions emphasize personal selling Price often negotiated, inelastic, affected by trade/quantity discounts
The Business-to-Business Buying Process 1. Stage 1: Need Recognition a. Can be generated internally or externally b. Sources for recognizing new needs: i. Suppliers, salespeople, competitors 2. Stage 2: Product Specifications a. Suppliers use to develop proposals b. Can be done collaboratively with suppliers 3. Stage 3: RFP (Request for proposal) Process a. A common process through which buying organizations invite alternative suppliers to bid on supplying their required components 4. Stage 4: Proposal Analysis, Vendor Negotiation, and Supplier Selection a. Often several vendors are negotiating against each other b. Considerations other than price play a role in final selection 5. Stage 5: Order Specification a. Firm places the order b. The exact details of the purchase are specified c. All terms are detailed including payment 6. Stage 6: Vendor Analysis a. Buying team develops a list of issues that it believes are important to consider in the evaluation of the vendor b. To determine how important each of these issues (in column 1) is, they buying team assigns an importance score to each (column 2) c. In the third column, the buying team assigns numbers that reflect its judgements about how well the vendor performs d. To get the overall performance of the vendor, in the fourth column, the team combines the importance of each issue and the vendor's performance scores by multiplying them together Factors affecting the buying process y The buying centre: the group of people typically responsible for the buying decisions in large organizations o Initiator: person who first suggests buying the particular product or service o Influencer: the participant whose views influence other members of the buying centre in making the final decision o Decider: participant who ultimately determines any part of or the entire buying decision whether to buy, what to buy, how to buy, or where to buy o Buyer: participant who handles the paperwork of the actual purchase o User: the person who consumes or uses the product or service purchased by the buying centre o Gatekeeper: participant who controls information or access to decision makers and influencers y Organizational culture: reflects the set of values, traditions, and customs that guide a firm's employees' behaviour
y
Autocratic buying centre: on person decides on final decision Democratic buying centre: majority rules Consultative buying centre: one person, but solicits inputs from others Consensus buying centre: all members reach an agreement Buying situations o New buy: purchasing for the first time y Likely to be quite involved y The buying centre will probably use all six steps in the buying process o Modified rebuy: purchase a similar product but changing specifications y Current vendors have an advantage o Straight rebuy: buying additional units or products that have been previously purchased y Most B2B purchases fall into this category
o o o o
Role of the Internet in the B2B Marketing y Private exchange: occurs when a specific firm, either buyer or seller, invites others to join to participate in online information exchanges and transactions; can help streamline procurement or distribution processes y English auction: goods and services are simply sold to the highest bidder y Reverse rebuy: the buyer provides specifications to a group of sellers, who then bid down the price until the buyer accepts a specific bid
doc_346411129.pdf
This is pdf explaning the concept of "Business-to-business marketing (B2B)": the process of buying and selling goods or services to be used inthe production of other goods and services, for consumption by the buying organization, and/or resealby wholesalers and retailers
ADM2320C Chapter 7 - Business-to-Business Marketing
October-03-11 11:30 AM
Business-to-business marketing (B2B): the process of buying and selling goods or services to be used in the production of other goods and services, for consumption by the buying organization, and/or reseal by wholesalers and retailers B2B Markets y Manufacturers or producers o Buy raw materials, components or parts o Manufacture their own goods y Resellers: marketing intermediaries that resell manufactured products without significantly altering their form y Institutions: schools, museums, and religious organizations involved in marketing and B2B transactions y Government: o Canadian government spends $240 billion buying goods & services o Provincial and local governments also make significant purchases o Firms specialize in selling to government y B2B classification system and segmentation o North American Industry Classification System (NAICS) codes: a classification scheme that categorizes all firms into hierarchical set of six-digit codes Differences between B2B and B2C Markets y Bigger market/quantity y Buying decision involves multiple people (buying centre) 1. Market characteristics: o Demand for business products is derived o Fewer customers, more geographically concentrated, and orders are larger o Demand is more inelastic, fluctuates more, and more frequently o Demand doesn't depend on price o Derived demand: the linkage between consumers' demand for a company's output and its purchase of necessary inputs to manufacture or assemble that particular output 2. Product characteristics: o Products technical in nature, purchased based on specifications o Mainly raw and semi-finished goods o Heavy emphasis on delivery time, technical assistance, after sale service, financing o Buying decisions more complex o Competitive bidding, negotiated pricing, complex financial arrangements 3. Buying process characteristics: o Qualified professional buyers - more formalised buying process o Buying criteria and objective specified o Multiple participants in purchase decisions o Reciprocal arrangements common o Close long-term relationships o Online buying common 4. Marketing mix characteristics:
o o o
Direct selling and physical distribution often essential Advertising more technical, promotions emphasize personal selling Price often negotiated, inelastic, affected by trade/quantity discounts
The Business-to-Business Buying Process 1. Stage 1: Need Recognition a. Can be generated internally or externally b. Sources for recognizing new needs: i. Suppliers, salespeople, competitors 2. Stage 2: Product Specifications a. Suppliers use to develop proposals b. Can be done collaboratively with suppliers 3. Stage 3: RFP (Request for proposal) Process a. A common process through which buying organizations invite alternative suppliers to bid on supplying their required components 4. Stage 4: Proposal Analysis, Vendor Negotiation, and Supplier Selection a. Often several vendors are negotiating against each other b. Considerations other than price play a role in final selection 5. Stage 5: Order Specification a. Firm places the order b. The exact details of the purchase are specified c. All terms are detailed including payment 6. Stage 6: Vendor Analysis a. Buying team develops a list of issues that it believes are important to consider in the evaluation of the vendor b. To determine how important each of these issues (in column 1) is, they buying team assigns an importance score to each (column 2) c. In the third column, the buying team assigns numbers that reflect its judgements about how well the vendor performs d. To get the overall performance of the vendor, in the fourth column, the team combines the importance of each issue and the vendor's performance scores by multiplying them together Factors affecting the buying process y The buying centre: the group of people typically responsible for the buying decisions in large organizations o Initiator: person who first suggests buying the particular product or service o Influencer: the participant whose views influence other members of the buying centre in making the final decision o Decider: participant who ultimately determines any part of or the entire buying decision whether to buy, what to buy, how to buy, or where to buy o Buyer: participant who handles the paperwork of the actual purchase o User: the person who consumes or uses the product or service purchased by the buying centre o Gatekeeper: participant who controls information or access to decision makers and influencers y Organizational culture: reflects the set of values, traditions, and customs that guide a firm's employees' behaviour
y
Autocratic buying centre: on person decides on final decision Democratic buying centre: majority rules Consultative buying centre: one person, but solicits inputs from others Consensus buying centre: all members reach an agreement Buying situations o New buy: purchasing for the first time y Likely to be quite involved y The buying centre will probably use all six steps in the buying process o Modified rebuy: purchase a similar product but changing specifications y Current vendors have an advantage o Straight rebuy: buying additional units or products that have been previously purchased y Most B2B purchases fall into this category
o o o o
Role of the Internet in the B2B Marketing y Private exchange: occurs when a specific firm, either buyer or seller, invites others to join to participate in online information exchanges and transactions; can help streamline procurement or distribution processes y English auction: goods and services are simply sold to the highest bidder y Reverse rebuy: the buyer provides specifications to a group of sellers, who then bid down the price until the buyer accepts a specific bid
doc_346411129.pdf