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CHAPTER 6 Business-to-Business Markets: How & Why Organizations Buy

M A R K E T I N G. Real People, Real Choices. CHAPTER 6 Business-to-Business Markets: How & Why Organizations Buy. Chapter Objectives. Describe the general characteristics of business-to-business markets Explain the unique characteristics of business demand

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CHAPTER 6 Business-to-Business Markets: How & Why Organizations Buy

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  1. M A R K E T I N G Real People, Real Choices CHAPTER 6Business-to-Business Markets: How & Why Organizations Buy

  2. Chapter Objectives • Describe the general characteristics of business-to-business markets • Explain the unique characteristics of business demand • Describe how business or organizational markets are classified • Explain the business buying situation and describe business buyers

  3. Chapter Objectives • Explain the roles in the business buying center • Understand the stages in the business buying decision process • Understand the growing role of B2B e-commerce

  4. Business-to-Business Marketing • Marketing of goods & services that businesses & organizations buy for purposes other than personal consumption • Manufacturers • Wholesalers • Retailers • Government agencies • Hospitals

  5. Business Markets • Generally, the same principles hold for business & consumer customers • There are characteristics that make B2B buying more complex • Multiple Buyers • Number of customers • Size of purchases • Geographic concentration

  6. B2B Demand Characteristics • Derived Demand • Inelastic Demand • Fluctuating Demand • Joint Demand

  7. Derived Demand • A business’ demand for goods & services comes from consumer demand • Can be direct or indirect • For example, demand for education impacts demand for forestry products

  8. Inelastic Demand • Inelastic demand means that business customers buy the same quantity whether the price goes up or down • Example: A BMW Z4 Roadster 3.0i has a list price starting at just over $55,000. If the price of tires, batteries, or stereos goes up or down, BMW still must buy enough to meet consumer demand for the Z4

  9. Fluctuating Demand • Small changes in consumer demand can create large increases or decreases in business demand • Acceleration principles (multiplier effect) means that changes in consumer behavior have a ripple effect through several related businesses

  10. Joint Demand • Joint demand occurs when two or more goods are necessary to create a product • Companies try to avoid dependence on specific suppliers by dealing with multiple suppliers whenever possible

  11. B2B Classifications • Producers • purchase products to produce others • Resellers • purchase finished goods for resale • Governments • competitive bids/proposals • Not-for-profit organizations

  12. The Nature of Business Buying • The Buying Situation • The Professional Buyer • The Buying Center

  13. The Buying Situation • A buy class framework identifies the degree of effort required of the firm’s personnel to collect information & make a purchase decision • Straight rebuy • Modified rebuy • New task buying

  14. The Professional Buyer • Titles: purchasing agents, procurement officers, director of materials management • Focus on economic factors beyond the initial price of a product, including transportation & delivery charges, accessory products or supplies, maintenance, disposal costs, etc. • Large firms practice centralized purchasing - one department does all buying

  15. The Buying Center • Group of people in the organization who participate in the decision-making process • May include production workers, supervisors, engineers, secretaries, shipping clerks, & financial officers

  16. Roles in the Buying Center • Initiator begins the buying process • User needs the product • Gatekeeper controls the flow of information to other members • Influencer dispenses advice/expertise • Decider makes the final decision • Buyer executes the purchase

  17. Considerations in Supplier Selection • On-time deliveries • JIT delivery • Single sourcing vs. multiple sourcing • Number of suppliers for a product • Outsourcing • Reverse marketing • Buyer searches for suppliers who will produce according to specifications

  18. Electronic B2B Commerce • Internet exchanges between two or more businesses or organizations • Allows marketers to link directly to suppliers, factories, distributors, and their customers • Walmart: Electronic Data Interchange • Reduces time necessary to order and deliver goods, track sales, and get feedback

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