Chapter 6 Business-to-Business (B2B) Marketing Flashcards
Define B2B
Organizational sales and purchasing of goods and services
Business to Business Marketing
- Product
- Promotion
- Distribution
- Customer relations
- Decision making process
- Price
Product
Relatively technical in nature, exact form often variable, accompanying service very important
Promotion
Emphasis on personal selling
Distribution
Relatively technical in nature
Customer relations
Relatively enduring and complex
Decision making process
Diverse group of organization members make decision
Price
Competitive bidding for unique items and list prices for standard items
Influences in B2B markets
- Environmental
- Organization
- Interpersonal
Define Commercial Market
Individuals and firms that acquire products to support production
Define Trade Industries
Retailers and wholesalers that purchase for resale
Define Customer
Dividing a business-to-business market into homogenous groups based on buyers’ product specifications
Segmentation by End-Use
Based on how industrial purchasers will use the product
Segmentation by Purchasing Categories
Segmenting according to organizational buyers characteristics
Characteristics of the B2B market
- More concentrated than the consumer market
- Certain industries locate in particular areas to be close to customer
- Due to the internet, business markets may become less geographically concentrated
Categories of Business Market Demand
- Derived Demand
- Inventory Demand
- Volatile Demand
- Inelastic Demand
- Joint Demand
Define Derived Demand and provide an example
The linkage between demand for a company’s output and its purchases of resources
Example: Demand for computer microprocessor chips is derived from demand for personal computers
Define Volatile Demand and provide an example
Demand is more volatile in business markets; created by derived demand
Example: Demand for gas pumps may be reduced if demand for gas slows down
Define Joint Demand and provide an example
Demand for a product that depends on the demand for another product used in combination with it
Example: If the supply of lumber falls, the drop in housing construction will affect the demand for concrete
Define Inelastic Demand and provide and example
Derived throughout an industry; will not change significantly due to a price change
Example: Construction firms will not necessarily buy more lumber if prices fall unless the overall demand for housing increases
Define Global Sourcing
Purchasing goods and services from suppliers worldwide
Define Sole Sourcing
Buying entirely from just one vendor
Define Offshoring
Movement of high wage jobs from one country to low cost overseas locations
Define Nearshoring
Moving jobs to vendors in countries close to the business’ home country
Example: Canada is an attractive nearshoring location for U.S. firms
Define Outsourcing
Using outside vendors to provide goods and services formerly produced in house
Reasons for Outsourcing
- Cost reduction
- Quality and speed of software maintenance and development
- Greater value
Problems with Offshoring and Outsourcing
- Cost savings are less than expected
- Security concerns over proprietary technology or customer data
- Reduces company’s ability to respond quickly to marketplace
- Creates conflict between outside non-union and in house union workers
- Can negatively affect employee morale and loyalty
Influences on Purchase Decisions
- Environmental Factors
- Organizational Factors
- Interpersonal Factors
Environmental Factors
- Economic, political, regulatory, competitive and technological considerations influence business buying decisions
- Natural disasters
Organizational Factors
- Marketers must understand their customer’s organizational structures, policies and purchasing systems
- Many companies use multiple sourcing to avoid depending too much on a sole supplier
Interpersonal Infleunces
- People can influence B2B purchase decisions
- Sales personnel must have a good technical understanding of their products
Define Merchandisers
Trade sector buyers who secure needed products at the best prices
Define Systems Integration
Centralization of the procurement function within an internal division or as a service of an external supplier
Define Category Advisor
Trade industry vendor who develops a comprehensive procurement plan for a retailer to buy
Stages in the Business-to-Business Buying Process
- Recognize a problem and find a general solution
- Determine the characteristics and quantity of a needed good or service
- Describe characteristics and quantity of a needed good or service
- Search for and qualify potential sources
- Acquire and analyze proposals
- Evaluate proposals and select suppliers
- Select and order routine
- Obtain feedback and evaluate performance
