Chapter 6 Flashcards
business-to-business marketing
the marketing of products and services to companies, governments, or not-for-profit organizations for use in the creation of products and services that they can produce and market to others
Organizational buyers
manufacturers, wholesalers, retailers, and government agencies that buy products and services for their own use or for resale
Organizational markets
- Industrial
- Reseller
- Government
Industrial Markets
reprocess a product or service they buy before selling it again to the next buyer
-buying parts you are going to use in your product & then selling the product
Ex: Apple
Reseller Markets
wholesalers and retailers that buy physical products and resell them again without any reprocessing
-not doing anything to the product, just selling it
Ex: Best Buy selling computers
Government Markets
Federal, state, county, or local governments that buy goods and services to support their internal operations and provide products to their constituencies
Ex: NASA/military equipment
North American Industry Classification System (NAICS)
provides common industry definitions for Canada, Mexico, and the United States
-based on the major activity, good, or service provided
Key Features of Organizational Buying
1) Derived demand
2) size of the order/purchase
3) number of potential buyers
4) organizational buying objectives
5 organizational buying criteria
6) buyer -seller relationships & supply partnerships
derived demand
Business demand that ultimately comes from (derives from) the demand for consumer goods
Size of the Order or Purchase
the size of the purchase involved in organizational buying is typically much larger than that in consumer buying
Number of Potential Buyers
Firms marketing to organizations are often restricted to far fewer buyers
Organizational Buying Objectives
increase profits, increase efficiency, preserve the environment, buy from women/minority suppliers/vendors
Organizational Buying Criteria
the objective attributes of the supplier’s products and services and the capabilities of the supplier itself
supplier development
the deliberate 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
Buyer-Seller Relationships and Supply Partnerships
involves complex negotiations concerning delivery schedules, price, technical specifications, warranties, and claim policies
Reciprocity
industrial buying practice in which two organizations agree to purchase each other’s products and services
Ex: Gt advanced tech has a contract w/ Apple to supply material used in iPhone camera lenses
Supply partnerships
exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate consumer
Ex: Walmart has one with P&G for ordering/replenishing P&Gs products in its stores
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
The Buying Function in Orgs
Primarily responsible for facilitating the selection & purchase of products/services for the orgs own use or for resale to consumers
5 Stages in the Organizational Buying Process
- problem recognition
- information search
- alternative evaluation
- purchase decision
- post purchase behavior
Organizational Buying Process vs Consumer Purchase Process
Organizational Buying Process has same stages but…
-More people are involved, supplier capability becomes more important, post purchase evaluation behavior is more formal
The 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
buying committee
a highly formalized buying center for large multi-store chains
5 Roles in the Buying Center
- Users
- Influencers
- Buyers
- Deciders
- Gatekeepers
Users (Buying Center)
the people in the organization who actually use the product or service
Ex: secretary who will use a new word processor
Influencers (Buying Center)
affect the buying decision, usually by helping define the specifications for what is bought
Ex: IT manager would be a key influencer in the purchase of a new mainframe computer
Buyers (Buying Center)
have formal authority and responsibility to select the supplier and negotiate the terms of the contract
Ex: senior purchasing managers/ purchasing agents
Deciders (Buying Center)
have the formal or informal power to select or approve the supplier that receives the contract
Ex: in routine orders the decider is the buyer/purchasing manager
Gatekeeper (Buying Center)
control the flow of information in the buying center
Ex: secretaries/receptionist
buying classes
new buy
straight rebuy
modified rebuy
New Buy
the organization is a first-time buyer of the product or service
-greater potential risks, many people involved, long decision time
HIGH INVOLVEMENT
Ex: Starbucks changing to only organic coffee beans
Straight Rebuy
buyer routinely reorders something without any modifications
LOW INVOLVEMENT
Ex: Starbucks reordering cups
Modified Rebuy
Change of product specifications, price, delivery schedule, or supplier.
MODERATE INVOLVEMENT
-minor change/adaptation
Ex: Starbucks cuts back on how much coffee beans they need only for 2 weeks
value analysis
a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs
Ex: comparing lifetime costs of inkjet printers by purchase price, cartridge, pages per cartridge, etc
4 Types of Costs
1) Initial purchase
2) Switching costs
3) operating costs
4) life - cycle costs
initial purchase cost
what the buyer has to pay to acquire the product
-the price itself
switching costs
The cost a consumer incurs when moving from one product to another. It can involve actual money spent (e.g., buying a new product) as well as investments in time, any data loss, and so forth.
operating cost
the cost of operating a facility, such as a store or factory
Ex:warranty
life cycle cost
initial cost plus lifetime operating costs
- we need to think about the whole picture
3 Reasons Why Online Buying in Organizational Markets is Important
1) organizational buyers depend heavily on timely supplier info that’s conveyed quickly via digital tech
2) technology substantially reduces order processing costs
3) digital tech reduces marketing costs & broadens potential customer base
e-marketplace
online trading communities that bring together buyers and supplier organizations
B2B exchanges and e-hubs
Online communities that make possible the real-time exchange of info, money, products, serv
Independent emarket places
act as neutral third party, charge fees, exist when thousands of geo dispersed buyers and sellers, volatile prices caused by supply and demand, time sensitivity, easily comparable between variety of sellers
Ex: Amazon Business
2 types of auctions
1) traditional
2) reverse
traditional auction
a seller puts an item up for sale and would-be buyers are invited to bid in competition with each other
- ends when a single bidder remains & wins item w/ HIGHEST PRICE
-one seller & many buyers
reverse auction
a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other
- ends when a single bidder remains & wins the business w/ the LOWEST PRICE
-many sellers & one buyer
