CHAPTER 7 Business Marketing This chapter begins with the learning outcome summaries, followed by a set of lesson plans for you to use to deliver the content in Chapter 7. • Lecture (for large sections) on page 3 • Company Clips (video) on page 4 • Group Work (for smaller sections) on page 5 Review and Assignments begin on page 7 • Review questions • Application questions • Application exercise • Ethics exercise • Video Assignment • Case assignment Great Ideas for Teaching Marketing from faculty around the country begin on page 17 LEARNING OUTCOMES 7-1 Describe business marketing Business marketing provides goods and services that are bought for use in business rather than for personal consumption. Intended use, not physical characteristics, distinguishes a business product from a consumer product. 7-2 Describe trends in B-to-B Internet marketing B-to-B companies use the Internet in three major ways. First, they use their Web sites to facilitate communication and orders. Second, they use digital marketing to increase brand awareness. Third, they use digital marketing—primarily in the form of content marketing—to position their businesses as thought leaders and therefore generate sales leads. Content marketing, a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content, has played an important role for B-to-B marketers. As they build reputations in their business areas, many B-to-B marketers use social media to share content, increase awareness, and build relationships and community. Some metrics that are particularly useful for increasing the success of a social media campaign are awareness, engagement, and conversion. 7-3 Discuss the role of relationship marketing and strategic alliances in business marketing Relationship marketing entails seeking and establishing long-term alliances or partnerships with customers. A strategic alliance is a cooperative agreement between business firms. Firms form alliances to leverage what they do well by partnering with others that have complementary skills. Although the concepts of relationship marketing and strategic alliances are relatively new to American marketers, these ideas have long been used by marketers in other cultures. 7-4 Identify the four major categories of business market customers Producer markets consist of for-profit individuals and organizations that buy products to use in producing other products, as components of other products, or in facilitating business operations. Reseller markets consist of wholesalers and retailers that buy finished products to resell for profit. Government markets include federal, state, county, and city governments that buy goods and services to support their own operations and serve the needs of citizens. Institutional markets consist of very diverse nonbusiness institutions whose main goals do not include profit. 7-5 Explain the North American Industry Classification System The North American Industry Classification System (NAICS) provides a way to identify, analyze, segment, and target business and government markets. Organizations can be identified and compared by a numeric code indicating business sector, subsector, industry group, industry, and industry subdivision. NAICS is a valuable tool for analyzing, segmenting, and targeting business markets. 7-6 Explain the major differences between business and consumer markets In business markets, demand is derived, inelastic, joint, and fluctuating. Purchase volume is much larger than in consumer markets, customers are fewer and more geographically concentrated, and distribution channels are more direct. Buying is approached more formally using professional purchasing agents, more people are involved in the buying process, negotiation is more complex, and reciprocity and leasing are more common. And, finally, selling strategy in business markets normally focuses on personal contact rather than on advertising. 7-7 Describe the seven types of business goods and services Major equipment includes capital goods such as heavy machinery. Accessory equipment is typically less expensive and shorter lived than major equipment. Raw materials are extractive or agricultural products that have not been processed. Component parts are finished or near-finished items to be used as parts of other products. Processed materials are used to manufacture other products. Supplies are consumable and not used as part of a final product. Business services are intangible products that many companies use in their operations. 7-8 Discuss the unique aspects of business buying behavior Business buying behavior is distinguished by five fundamental characteristics. First, buying is normally undertaken by a buying center consisting of many people who range widely in authority level. Second, business buyers typically evaluate alternative products and suppliers based on quality, service, and price—in that order. Third, business buying falls into three general categories: new buys, modified rebuys, and straight rebuys. Fourth, the ethics of business buyers and sellers are often scrutinized. Fifth, customer service before, during, and after the sale plays a big role in business purchase decisions. TERMS accessory equipment derived demand original equipment manufacturers (OEMs) business marketing (industrial, business-to-business, B-to-B, or B2B marketing) joint demand processed materials business product (industrial product) keiretsu raw materials business services major equipment (installations) reciprocity business-to-business online exchange modified rebuy relationship commitment buying center multiplier effect (accelerator principle) straight rebuy component parts new buy strategic alliance (strategic partnership) consumer product North American Industry Classification System (NAICS) supplies trust LESSON PLAN FOR LECTURE Brief Outline and Suggested PowerPoint Slides: Learning Outcomes and Topics PowerPoint Slides LO1 Describe business marketing 7-1 What Is Business Marketing? 1: Business Marketing 2: Learning Outcomes 3: Learning Outcomes 4: What Is Business Marketing? 5: What Is Business Marketing? 6: Business Products LO2 Describe the role of the Internet in business marketing 7-2 Business Marketing on the Internet 7: Trends in B-to-B Internet Marketing 8: Trends in B-to-B Internet Marketing 9: Trends in B-to-B Internet Marketing LO3 Discuss the role of relationship marketing and strategic alliances in business marketing 7-3 Relationship Marketing and Strategic Alliances 10: Relationship Marketing and Strategic Alliances 11: Relationship Marketing 12: Strategic Alliances 13: Relationships in Other Cultures LO4 Identify the four major categories of business market customers 7-4 Major Categories of Business Customers 14: Major Categories of Business Customers 15: Major Categories of Business Customers LO5 Explain the North American Industry Classification System 7-5 The North American Industry Classification System 16: North American Industry Classification System 17: North American Industry Classification System (NAICS) 18: Example of NAICS Hierarchy 19: NAICS LO6 Explain the major differences between business and consumer markets 7-6 Business versus Consumer Markets 20: Business versus Consumer Markets 21: Business versus Consumer Markets 22: Demand in Business Markets LO7 Describe the seven types of business goods and services 7-7 Types of Business Products 23: Types of Business Products 24: Types of Business Products 25: Types of Business Goods and Services LO8 Discuss the unique aspects of business buying behavior 7-8 Business Buying Behavior 26: Business Buying Behavior 27: Business Buying Behavior 28: Buying Centers 29: Roles in Buying Centers 30: Evaluative Criteria 31: Buying Situations 32: Business Ethics 33: Customer Service 34: Chapter 7 Video Suggested Homework: • The end of this chapter contains assignments for the Zappos video and for the IBM case. • This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and other resources that can be assigned or used as the basis for longer investigations into marketing. LESSON PLAN FOR VIDEO Company Clips Segment Summary: Zappos Zappos, known for its outstanding customer service and speedy shipping, also gives away information about making organizational culture work for employees and the company. The program, Insights, offers companies assistance in building strong cultures around core values in a variety of ways, starting with free tours. Despite seeming like this would give away valuable competitive information, Zappos is expanding this service to help other companies deliver happiness to their customers. PRE-CLASS PREP FOR YOU: PRE-CLASS PREP FOR YOUR STUDENTS: • Preview the Company Clips video segment for Chapter 7. This exercise reviews concepts for LO2 and LO3. • Review your lesson plan. • Make sure you have all of the equipment needed to show the video to the class, including the DVD and a way to project the video. • You can also stream the video HERE • Have students familiarize themselves with the following terms and concepts: business marketing, four major categories of customers, business versus consumer markets, types of business products, and customer service. • Have students visit the Zappos Insights Web site: http://www.zapposinsights.com. As they browse, they should consider how zappos uses the above concepts on their Web site. VIDEO REVIEW EXERCISE ACTIVITY Warm Up • Begin by asking students “what is the difference between business and consumer markets?” See if they can give examples. In-class Preview • Review the definition for relationship marketing. • Ask students for their best explanation to the following statement from the textbook: “Building long-term relationships with customers offers companies a way to build competitive advantage that is hard for competitors to copy.” • While acknowledging salient points in students’ explanations, write the following points on the board: ○ Loyal customers are profitable = win ○ Loyalty earns customer rewards = win • Review the Company Clips questions with students. They should be prepared to answer them after viewing the video. Viewing (Solutions below.) 1. What benefit does Zappos receive from developing its Insights program? 2. In what ways does Zappos seek out business customers? In what ways does it build its relationships with its business customers? Follow-up Take-home-assignment: Have students take the Zappos virtual tour (http://www.zapposinsights.com/tours/virtual). have them write a paragraph discussing why other companies might want to visit Zappos and how the Zappos culture could be applied at other companies. Solutions for Viewing Activities: 1. What benefit does Zappos receive from developing its Insights program? Answer: According to the video, Zappos benefits by achieving its organizational goal of “Delivering Happiness.” Zappos also benefits by developing a network of organizations that share its values, making alliances possible should they be needed. 2. In what ways does Zappos seek out business customers? In what ways does it build its relationships with its business customers? Answer: Zappos uses word of mouth to encourage people to use Zappos Insights. This is through the culture book and companies completing boot camp spreading the word about Zappos Insights. People also “self-select” through the free tours and the culture book. LESSON PLAN FOR GROUP WORK In most cases, group activities should be completed after some chapter content has been covered, probably in the second or third session of the chapter coverage. (See “Lesson Plan for Lecture” above.) • For “Class Activity – Marketing to Distribution Channels,” divide the class into small groups of four or five people. Provide the information and the questions asked by the class activity • Applications questions 1, 2, and 8 lend themselves well to group work. For these activities, divide the class into small groups of four or five people. Each group should read the question and then use their textbooks, or any work that was completed previously, to perform the exercise. Then each group should discuss or present their work to the class. Class Activity – Marketing to Distribution Channels Ask your students to go to the Internet and locate Web sites that are targeted to business customers. Have them report on the information available at these Web sites that would be valuable to the business customer. Also have them report on the types of marketing appeals that are used to attract business customers. Have them evaluate the effectiveness of the website from a marketing and customer service perspective. REVIEW AND ASSIGNMENTS FOR CHAPTER 7 REVIEW QUESTIONS 1. Why is relationship or personal selling the best way to promote in business marketing? Answer: In most cases, business selling relies on long-term relationships and repeat buying. Close communication and ongoing dialog is essential to satisfying the customers. 2. Explain how a marketer could use the Web site http://www.census.gov/eos/www/naics/index.html to better understand the NAICS system. Answer: There is a link on the top of the NAICS Web page labeled “FAQs” that answers frequently asked questions about the NAICS, such as “What is NAICS and how is it used?” and “What is the NAICS structure and how many digits are in a NAICS code?” [http://www.census.gov/eos/www/naics/faqs/faqs.html] 3. How might derived demand affect the manufacturing of an automobile? Answer: The demand for new cars drives the demand for products such as tires, brake linings, windshields, wipers, and more. In turn, the demand for tires drives a large portion of the demand for rubber. So automobiles, with so many complex components, drive the demand for a great many products, hence the derived demand. 4. Intel Corporation supplies microprocessors to Compaq for use in their computers. Describe the buying situation in this relationship, keeping in mind the rapid advancement of technology in this industry. Answer: Students should address some of these points: The two companies do have a close and long-standing relationship, however the purchases are not simple rebuys. With the new technology, Compaq and Intel are constantly renegotiating and looking at new products and new contracts. Compaq has multiple product lines—laptops, desktops, and servers—and requires different chips for the products in each line. Depending on the power needs of an individual product, Compaq may need medium- or high-speed, or possibly multiple processors. Hence, the buying center for purchasing from Intel will be very complex. In the relationship between Intel Corporation and Compaq, the buying situation is characterized as a strategic partnership focused on long-term collaboration. Compaq relies on Intel for cutting-edge microprocessors, essential for maintaining competitive advantage in the rapidly evolving tech landscape. The buying situation is influenced by factors such as the need for high performance, compatibility, and innovation. Due to the fast-paced advancements in technology, Compaq must stay agile in its purchasing decisions to quickly integrate the latest Intel products, ensuring they meet consumer demands for speed and efficiency. This dynamic requires ongoing communication and adaptability from both parties to navigate the complexities of technology upgrades and market trends. APPLICATION QUESTIONS 1. As the marketing manager for Huggies diapers made by Kimberly-Clark, you are constantly going head-to-head with Pampers, produced by rival Procter & Gamble. You are considering unlocking the potential of the business market to increase your share of the disposable diaper market, but how? Write an outline of several ways you could transform this quintessentially consumer product into a successful business product as well. Answer: Students’ answers will vary and should identify not only new types of buyers, but new types of promotion and pricing as well. New packaging may also be required. Outline for Transforming Huggies Diapers into a Business Product 1. Targeted Marketing Strategies • B2B Marketing Campaigns: Develop tailored marketing campaigns targeting hospitals, daycare centers, and nursing homes. • Partnerships with Childcare Facilities: Collaborate with daycares to offer bulk purchasing agreements or exclusive deals. 2. Product Customization • Bulk Packaging Options: Offer larger, more cost-effective packaging tailored for businesses. • Specialized Diaper Variants: Create products designed for specific institutional needs (e.g., hypoallergenic options for sensitive skin). 3. Subscription Services • Business Subscription Plans: Introduce subscription services for childcare centers to ensure a consistent supply of diapers. • Volume Discounts: Provide incentives for businesses that commit to regular orders. 4. Educational Outreach • Workshops for Childcare Providers: Offer educational sessions on diapering best practices, reinforcing brand loyalty. • Informational Resources: Create materials that highlight the benefits of using Huggies in institutional settings. 5. Brand Positioning • Emphasize Quality and Reliability: Position Huggies as a trusted choice for businesses, highlighting durability and comfort. • Leverage Testimonials: Use endorsements from childcare professionals to build credibility in the B2B market. 6. Trade Shows and Networking • Participate in Industry Events: Attend childcare and healthcare expos to showcase Huggies and connect with potential business customers. • Networking with Influencers: Build relationships with industry influencers to promote Huggies in business contexts. By implementing these strategies, Huggies can effectively tap into the business market while maintaining its consumer brand strength. 2. How could use you use the Web site http://www.btobonline.com to help define a target market and develop a marketing plan? Answer: This Web site provides some services to organizations that wish to do business with other organizations. Links on the Web site include: services, resources, finance, tools, media kit, and access to the Business to Business magazine. To find a potential target market, the first area that potential marketers should use is the resources link. This link provides a list of various organizations—such as U.S. government agencies, international organizations, and magazines/newspapers—and provides links to these Web sites. If a company is considering targeting the U.S. government, for example, it can link to the U.S. government agency Web site and read all about it. That will provide some information on the needs of the target market and how it goes about accepting bids. The Web site is not very good at helping companies identify private enterprise target markets, as those would be too numerous to list. 3. Reconsider question 1. How could you use the Internet in your business marketing of Huggies diapers? Answer: Internet Marketing Strategies for Huggies Diapers 1. E-commerce • Launch a direct online store with subscriptions and discounts. • Partner with major e-commerce platforms for wider reach. 2. Social Media • Create engaging content and targeted ads on platforms like Instagram and Facebook. • Collaborate with parenting influencers for authentic promotions. 3. Online Communities • Engage in parenting forums to offer advice and promote Huggies. • Establish responsive online customer support. 4. Content Marketing • Develop a blog with parenting tips and product benefits to improve SEO. • Send email newsletters with updates and special offers. 5. Online Advertising • Use retargeting campaigns to encourage return visits. • Optimize for search engines to appear in relevant results. These strategies can effectively enhance Huggies' online presence and customer engagement. 3. Understanding businesses is the key to business marketing. Publications like Manufacturing Automation, Computer Weekly, Power Generation Technology & Markets, and Biotech Equipment Update can give you insights into many business marketing concepts. Research the industrial publications to find an article on a business marketer that interests you. Write a description of the company using as many concepts from the chapter as possible. What major category or categories of business market customers does this firm serve? Answer: Company Description: XYZ Biotech Solutions Overview: XYZ Biotech Solutions is a leading provider of innovative biotechnological equipment and services, primarily serving the healthcare and pharmaceutical industries. The company focuses on developing cutting-edge tools that enhance research and production efficiency. Business Marketing Concepts: 1. Target Market Segmentation: XYZ targets two main categories—healthcare providers (hospitals, clinics) and pharmaceutical companies (research and production). 2. Value Proposition: The company offers high-quality, reliable equipment that improves accuracy and reduces time-to-market for drug development. 3. Relationship Marketing: XYZ emphasizes building long-term relationships with customers through personalized service and ongoing support, ensuring customer loyalty. 4. Brand Positioning: Positioned as a premium provider in the biotech sector, XYZ highlights its commitment to innovation and quality. 5. Distribution Strategy: The firm uses a multi-channel distribution approach, including direct sales and partnerships with distributors, to reach a broader audience. 6. Marketing Communications: XYZ employs targeted marketing campaigns, utilizing industry publications, trade shows, and digital marketing to engage potential clients. Major Categories of Business Market Customers: • Healthcare Providers • Pharmaceutical Companies By leveraging these concepts, XYZ Biotech Solutions effectively meets the needs of its business market customers, driving growth and innovation in the biotech industry. 4. What do you have to do to get a government contract? Check out the Web sites http://www.fedbizopps.gov and http://www.governmentbids.com to find out. Does it seem worth the effort? Answer: To secure a government contract, you generally need to follow these steps: 1. Register Your Business: Sign up on the System for Award Management (SAM) at sam.gov, which is essential for doing business with the federal government. 2. Identify Opportunities: Use websites like FedBizOpps (now beta.SAM.gov) and GovernmentBids.com to find relevant contract opportunities that match your business capabilities. 3. Prepare Your Proposal: Develop a competitive proposal that outlines your qualifications, pricing, and how you meet the project requirements. 4. Comply with Regulations: Ensure you meet all federal regulations and standards, including certifications relevant to your industry. 5. Network and Build Relationships: Attend industry events and engage with government agencies to establish connections that may lead to contract opportunities. Worth the Effort? Yes, pursuing government contracts can be worthwhile, as they often provide substantial financial rewards, long-term partnerships, and a stable revenue stream. However, the process can be time-consuming and competitive, requiring careful preparation and adherence to regulations. 5. Pick a product and determine its NAICS code. How easy was it to trace the groups and sectors? Answer: Product: Organic Baby Food NAICS Code: 311930 (Fruit and Vegetable Canning) Tracing Groups and Sectors: Finding the NAICS code for organic baby food was relatively straightforward. I began by identifying the product category, then referred to the NAICS directory online. The directory is organized hierarchically, making it easy to navigate through sectors related to food manufacturing. The specific grouping for canned and packaged food products helped pinpoint the exact code quickly. Overall, the structure of the NAICS system facilitated an efficient search. 6. Your boss has just asked you, the company purchasing manager, to buy new computers for an entire department. Since you have just recently purchased a new home computer, you are well educated about the various products available. How will your buying process for the company differ from your recent purchase for yourself? Answer: As with family purchasing decisions, several people may play a role in the business purchase process. The boss is the initiator and may be the decider. The coworkers for whom the computers are being purchased will be the users, and you are the purchaser, but you may also be an influencer. Business buyers evaluate products on quality, service, and price—in that order. As a consumer, price may be your first priority in a computer purchase, and service may not even be an issue at all. Since you will be investing a large amount of capital resources in the new computer system, lengthy negotiations will most likely take place; this does not generally happen with consumer purchases of computers. Lastly, you may decide to lease the computers. In the business environment it is more critical to stay abreast of new technologies, necessitating more frequent upgrades than for home use. 7. In small groups brainstorm examples of companies that feature the products in the different business categories. (Avoid examples already listed in this chapter.) Compile a list of ten specific products and match up with another group. Have each group take turns naming a product and have the other group identify its appropriate category. Try to resolve all discrepancies by discussion. It is certainly possible that some identified products might appropriately fit into more than one category. Answer: Examples of Companies and Products by Business Categories 1. Caterpillar Inc. - Heavy Construction Equipment • Product: Excavator 2. IBM - Information Technology Services • Product: Cloud Computing Solutions 3. Grainger - Industrial Supply • Product: Safety Gloves 4. Thermo Fisher Scientific - Laboratory Equipment • Product: DNA Sequencer 5. Hewlett-Packard (HP) - Office Equipment • Product: Laser Printer 6. John Deere - Agricultural Machinery • Product: Tractor 7. Rockwell Automation - Manufacturing Automation • Product: Programmable Logic Controller (PLC) 8. Cisco Systems - Telecommunications • Product: Network Switch 9. Procter & Gamble - Consumer Goods • Product: Laundry Detergent 10. Nestlé - Food and Beverage • Product: Bottled Water Discussion Points: • Each product can fit into more than one category (e.g., HP’s laser printer can also be seen as a consumer electronics product). • Clarification on definitions may help resolve discrepancies between categories. • This exercise encourages understanding the diverse applications of products across various business sectors. 8. A colleague of yours has sent you an e-mail seeking your advice as he attempts to sell a new voice-mail system to a local business. Send him a return e-mail describing the various people who might influence the customer’s buying decision. Be sure to include suggestions for dealing with the needs of each. Answer: Students’ answers should address some of the following points: The initiator is the person who first suggests making a purchase. This could be a CEO or an office manager or someone else. Influencers or evaluators often define specifications for the purchase or provide information for evaluating options. You need to find out who these people are and make sure you meet their specifications. Gatekeepers regulate the flow of information about the purchase to the deciders and others. The decider is the person who possesses formal or informal power to choose or approve the selection of the supplier or brand, so this person needs full information on the product. The purchaser is the person who actually negotiates the purchase, and may be a separate function from the decider. Vendors need to identify and interact with the true decision makers. Other critical issues are each member’s relative influence and the evaluative criteria used by each member. Subject: Re: Selling the New Voice-Mail System Hi [Colleague's Name], When selling the voice-mail system, consider these key influencers in the customer’s buying decision: 1. Decision Maker: This is typically the owner or manager. Focus on showcasing the system’s ROI and efficiency improvements to address their bottom line. 2. IT Manager: They’ll evaluate technical compatibility and security. Provide detailed specs and offer a demo to address any technical concerns. 3. End Users: Employees who will use the system daily. Gather feedback on their needs and emphasize user-friendly features and benefits. 4. Finance Department: They’ll scrutinize budget and cost. Prepare a clear breakdown of costs and potential savings over time. 5. External Consultants: Sometimes businesses hire consultants for advice. Build rapport and provide them with comprehensive information to support your case. Addressing the specific needs and concerns of each group will enhance your chances of a successful sale. Best, [Your Name] APPLICATION EXERCISE Purchasing agents are often offered gifts and gratuities. Increasingly, though, companies are restricting the amount and value of gifts that their purchasing managers can accept from vendors. The idea is that purchasing managers should consider all qualified vendors during a buying decision instead of only those who pass out great event tickets. This exercise asks you to consider whether accepting various types of gifts is ethical. Activities 1. Review the following list of common types of gifts and favors. Put a checkmark next to the items that you think it would be acceptable for a purchasing manager to receive from a vendor. Advertising souvenirs Automobiles Clothing Dinners Discounts on personal purchases Food and liquor Golf outings Holiday gifts Large appliances Loans of money Lunches Small-value appliances Tickets (sports, theater, amusement parks, etc.) Trips to vendor plants Vacation trips 2. Now look at your list of acceptable gifts through various lenses. Would your list change if the purchasing manager’s buying decision involved a low-cost item (say, pens)? Why or why not? What if the decision involved a very expensive purchase (like a major installation)? 3. Form a team and compare your lists. Discuss (or debate) any discrepancies. Purpose: This exercise helps students confront the gray areas in their own ethical perceptions. Setting It Up: Distribute the checklist above. You can have students work individually, in pairs, or in groups to complete it. Expect some debate, as differences over what students consider ethical are bound to arise. After students have had adequate time to determine the gifts they find ethical, show them the grid on the next page. Discuss any differences in perceptions. This exercise was inspired by the following Great Idea in Teaching Marketing: Gregory B. Turner, College of Charleston STUDENT ETHICS VERSUS PRACTITIONER ETHICS This exercise can be used during a logistics or ethics segment in a basic Marketing class. The students find it quite enjoyable and it helps promote student participation in the classroom. I have developed a standard list of gifts and gratuities that are offered to purchasing agents. This list was developed based on personal research as well as other current research in this area. I distribute the list along with a scenario that places the students in the roles of purchasing agents. The students are asked to then indicate the acceptability of the gifts and gratuities to them. The class then computes the averages and compares the results to previous outcomes of practitioners. The results typically generate some spirited discussion. TYPE OF GIFT/FAVOR A B C D E F G H Advertising Souvenirs 29 19 69 30 54 80 73 92 Automobiles 0 0 — 0 — — 1 1 Clothing 5 0 6 16 0 — 7 3 Dinners 38 10 22 79 8 — 48 70 Discounts on Personal Purchases 11 5 9 18 15 — 11 21 Food & Liquor 31 5 49 40 0 36 30 29 Golf Outings 26 5 2 57 0 — 28 47 Holiday Gifts 27 17 29 56 0 — 43 30 Large Appliances 0 0 — 0 — 2 1 1 Loans of Money 0 0 — 0 — — 1 1 Lunches 47 24 36 93 23 80 68 90 Small Value Appliances 2 5 0 6 0 6 6 6 Tickets (Sports, Theater, etc.) 28 5 13 59 0 42 37 60 Trips to Vendor Plants 39 11 42 48 0 — 31 51 Vacation Trips 0 0 0 2 0 4 2 2 A = 1995 - 1997 NAPM National Meetings (Turner et al. 1998) B = 1994 State of South Carolina (Turner et al. 1995) C = 1994 State of Alabama (Turner et al. 1995) D = 1992 NAPM C-V Region Survey (Turner et al. 1992) E = 1990 State of Arizona (Forker 1990) F = 1990 Purchasing World Readers Poll (Modic 1990) G = 1988 NAPM and Ernst & Whinney Survey (Janson 1988) H = 1979 NAPM and Illinois Institute of Technology Survey (Anjou 1979) ETHICS EXERCISE Cameron Stock, purchasing manager for a sports equipment manufacturer, is responsible for buying $5 million of supplies every year. He has a preferred list of certified suppliers who are awarded a large percentage of his business. Cameron has been offered a paid weekend for two in Las Vegas as a Christmas present from a supplier with whom he has done business for a decade and built a very good relationship. Questions 1. Would it be legal and ethical for Cameron Stock to accept this gift? Answer: It may be legal to accept the gift in certain states, but it would not be ethical. Although Cameron has built a strong relationship with the supplier over the years, accepting such a lavish gift would entangle the business and personal relationships. One alternative might be for Cameron to accompany the supplier on the trip, but to pay his own way. 2. How is this addressed in the AMA Code of Ethics? Go to the AMA Web site at http://www.marketingpower.com and reread the Code of Ethics. Write a brief paragraph summarizing where the AMA stands on the issue of supplier gifts. Answer: There is no specific paragraph in the code regarding supplier gifts. There is, however, a rule against exercising coercion in the marketing channel. The acceptance of the gift could be construed as exercising coercion in the marketing channel, since the supplier would be implicitly trying to give a reason for Cameron to continue to purchase parts and materials from him, rather than switching to another supplier, who may offer a lower price, better terms, and so forth. VIDEO ASSIGNMENT Zappos Zappos, known for its outstanding customer service and speedy shipping, also gives away information about making organizational culture work for employees and the company. The program, Insights, offers companies assistance in building strong cultures around core values in a variety of ways, starting with free tours. Despite seeming like this would give away valuable competitive information, Zappos is expanding this service to help other companies deliver happiness to their customers. 1. Zappos Insights is an example of: A. Business supplies B. B-to-B e-commerce C. Business service D. An accessory for businesses Answer: C Zappos Insights is a business service: it is an expense item (consulting) that does not appear in the final product. 2. When Zappos started charging for certain training events, they were worried that people would not pay. However, they have paid, which indicates what about the Insights program? A. The insights program has great service, just like zappos. B. The Insights program is a high quality program that offers great service for a price that is acceptable to businesses. C. The insights program is priced low enough to be acceptable for management consulting services. D. That the buying center agreed on using the Zappos program. Answer: B While this is partially true, the Insights program would meet all three criteria for it to be a successful business-to-business program. 3. Zappos primary customers are consumers, however, Zappos Insights experiences very different customers, including: A. All members from the buying center. B. OEMS, raw materials handlers, and other B-to-B providers. C. Resellers, Producers, and Institutions. D. members of strategic alliances. Answer: C Zappos Insights customers are businesses, such as resellers, producers, and institutions. 4. Zappos wants to deliver happiness to the highest number of people, which has driven the company’s commitment to work with other companies to help them develop a culture promoting happy employees. This could be considered A. a joint demand for happy employees. B. a derived demand for joy into the supply chain. C. a strategic alliance for culture building. D. the multiplier effect of happiness. Answer: C Companies ask Zappos to help them develop a strong organizational culture, forming a cooperative agreement between the two companies (a strategic alliance) for culture building. 5. Zappos Insights is expanding to work onsite with companies like Google to develop even stronger organizational cultures and connecting culture to customer service. This relationship is a keiretsu. A. True B. False Answer: B Zappos Insights is providing a business service to companies like Google. Zappos does not sit on the board or develop a true network of corporate affiliates through its Insights program, though it does engender goodwill! 6. Zappos Insights is an example of relationship commitment to other businesses. A. True B. False Answer: B Zappos insights is an example of relationship marketing. Relationship commitment means that a company believes maintaining a relationship with another firm is so important, it warrants maximum effort. 7. Zappos found that the Insights program has elastic demand, because when they began charging for the workshops, demand for them did not change. A. True B. False Answer: B The demand was inelastic because the change in price did not change the demand. 8. When Zappos vendors visited the company headquarters and wanted to know more about how the business was run, they were expecting: A. installations. B. reciprocity C. e-commerce training D. relationship marketing Answer: B The vendors work with Zappos to sell their products, and were expecting to be shown how the company works in return; they were expecting reciprocity. 9. Zappos Insights is committed to helping other companies improve which of the following criteria? A. Quality B. Service C. Price D. Commitment Answer: B Zappos excels at customer service and promises to help other companies build service that customers love. 10. Zappos would agree with the statement that “some customers are more valuable than others,” which is why it is expanding its Zappos insights program. A. True B. False Answer: B Zappos prides itself on excellent customer service, and strives to WOW every customer. It is expanding the Insights program because of the demand for creating great organizational cultures. CASE ASSIGNMENT: IBM Created by IBM in 2011, Watson is a supercomputer with a unique capability—it can understand and respond to natural language. IBM showcased this amazing computing ability on the game show Jeopardy, where Watson faced Ken Jennings, the holder of the longest winning streak in Jeopardy history, and Brad Rutter, who holds the record for the most amount of money won on Jeopardy. It was no contest—Watson won the two-day contest by a landslide. IBM has its sights set on two areas for Watson: healthcare and investment. In healthcare, Watson can access millions of recent research and journal articles. What would take a doctor endless hours to read and comprehend, Watson can do in a matter of minutes. Watson is capable of parsing patient and family histories, clinical data, and drug treatment options, making it an invaluable asset not only when diagnosing a patient, but also in understanding the full range of treatments available. Citigroup became the first company to purchase Watson for financial services. Citigroup will use Watson to analyze customer’s needs so that it can facilitate their interactions with the company’s automated banking system. According to Citigroup executives, Watson will be deployed to present a “customer interaction solution,” which will “assist decision makers in identifying opportunities, evaluating risks, and exploring alternatives.” Within IBM, hopes are quite high for Watson. By strategically deploying its vast computing power, company leaders hope that Watson will contribute a significant portion to the company’s $16 billion of revenues in analytics. Industry analysts at CLSA, meanwhile, estimate that by 2015 Watson will contribute $2.65 billion in revenue through the services it provides to other companies. Doug Henschen, “IBM’s Watson Could Be Healthcare Game Changer,” InformationWeek, February 11, 2013, www.informationweek.com/software/business-intelligence/ibms-watson-could-be-healthcare-game-cha/240148273 (Accessed March 26, 2013); Mark Hachman, “IBM’s Watson Hired by Citigroup,” PC Magazine, March 6, 2012, www.pcmag.com/article2/0,2817,2401203,00.asp (Accessed March 26, 2013); Rachel King, “IBM’s Watson Being Put to the Test in Healthcare,” ZDNet, September 24, 2012, www.zdnet.com/ibms-watson-being-put-to-the-test-in-healthcare-7000004725 (Accessed March 26, 2013); Steve Lohr, “I.B.M.’s Watson Goes to Medical School,” New York Times, October 30, 2012, http://bits.blogs.nytimes.com/2012/10/30/i-b-m-s-watson-goes-to-medical-school (Accessed March 26, 2013). TRUE/FALSE 1. IBM’s Watson is most likely to be sold as a consumer product. Answer: False Based on the case examples, Watson is most likely to be purchased for use in a business environment. 2. Maintaining a steady dialogue between IBM and customers like Citigroup is a proven way to gain repeat business. Answer: True 3. IBM is a producer, a category that encompasses more than 13 million firms in the United States. Answer: True 4. IBM should expect to have far fewer customers for Watson than for its consumer-grade line of microprocessors. Answer: True 5. If IBM switched its financial services provider to Citigroup in return for Citigroup purchasing the Watson computer, this would exemplify reciprocity. Answer: True MULTIPLE CHOICE 1. Under what circumstances would Watson be considered a consumer product? A. The nonprofit Bill & Melinda Gates Foundation purchasing Watson to analyze global Malaria outbreaks. B. IBM releasing a lower-cost version of Watson with less computational power for smaller insurance firms. C. Billionaire Richard Branson purchasing Watson to install in his home for one-on-one games of Jeopardy. D. Watson being brought to a health services trade show to demonstrate its computational abilities. E. None of these—Watson is and always will be a business product. Answer: C The key characteristic distinguishing business products from consumer products is intended use, not physical characteristics. 2. As the world’s largest customer—buying goods and services valued at more than $875 billion per year—this is a viable target for IBM’s Watson marketing: A. Procter & Gamble. B. The European Union. C. Microsoft. D. The U.S. federal government. E. None of these. Answer: D The U.S. federal government buys goods and services valued at more than $875 billion per year, making it the world’s largest customer. 3. Suppose that a hurricane damages a silicon processing plant in China, slowing the production of the microprocessors used in Watson. This in turn delayed the production of several Watson units, exemplifying this type of demand: A. Derived. B. Inelastic. C. Joint. D. Fluctuating. E. None of these. Answer: C Joint demand occurs when two or more items are used together in a final product. 4. Among the seven categories of business products, Watson is best described as: A. Major equipment. B. Accessory Equipment. C. A raw material. D. A component part. E. A business service. Answer: A Major equipment includes capital goods such as large or expensive machines, mainframe computers, blast furnaces, generators, airplanes, and buildings. 5. At this point, all of IBM’s Watson sales represent this buying situation: A. New buy. B. Old buy. C. Straight rebuy . D. Modified rebuy. E. None of these. Answer: A A new buy is a situation requiring the purchase of a product for the first time. GREAT IDEAS FOR TEACHING CHAPTER 7 James S. Cleveland, Sage College of Albany DISCUSSION BOARD TOPICS TO ENCOURAGE PARTICIPATION Discussion board questions provided to students to encourage them to engage in thinking and writing about the content of the Principles of Marketing course usually take the form of a provocative statement to which students are asked to respond. An example of this would be “All PR is good PR.” Discussion topics such as this one are abstract and often require that the instructor provide an initial reply to show students what is expected of them in their own replies. For students with limited work experience, this approach may be quite appropriate. For adult students with extensive experience as employees and consumers, however, the abstract nature of such topics can be frustrating. I have developed, therefore, a series of discussion board questions to use with experienced, adult students. These questions are designed to encourage them to use their experiences as employees and consumers as doorways to better understand the course material, and to make their own responses more interesting to themselves and to the other students in the class who will read and comment on them. Each question has three parts: 1. First, there is a sentence or two from the students’ textbook introducing the topic. By using the text author’s own words, students are enabled to locate relevant material in the text more easily, the text content is reinforced, and confusion resulting from use of variant terms or expressions is minimized. 2. Second, there is a reference to text pages the student should review before proceeding. Since the goal of the exercise is for students to apply the course content to their own experiences, reviewing the content first is important. 3. Third, there is a request for the student to think about or remember some specific situation in their experience to which they can apply the text material, and a question or questions for them to address in their reply. Here are additional such discussion board questions developed for Chapter 7 of MKTG10. Each is written to fit the same text cited above but could easily be rewritten and revised to fit another text. Series A 1. The business market consists of four major categories of customers: producers, resellers, government, and institutions. 2. Review these categories in section 7-4 of your text and the types of business products in section 7-7 of your text. 3. Then describe which category your employer falls into and what sort of products it buys. Series B 1. Business buyers behave differently from consumers. A buying center includes those persons in an organization who become involved in the purchase decisions. 2. Review the material on buying centers and the roles in buying centers in section 7-8 of your text. 3. Then describe how you have been involved in a buying center for your employer and what role or roles you played. Elizabeth J. Wilson, Louisiana State University A DECISION-MAKING EXERCISE FOR BUSINESS MARKETING This exercise is designed to introduce undergraduate students to decision making in the context of organizational buying. Several distinctions of organizational buying, compared to consumer buying, can be made by using this exercise. For example, differences in decision criteria are highlighted, and individual versus group decision making can be demonstrated. Procedure The three decision evaluations represent different product categories in organizational buying—office copiers, accessory goods that do not become part of the final product; painted sheet metal, component parts; and an industrial boiler system, major equipment or a capital installation (Lamb, Hair, and McDaniel 1992). Use of these three decisions illustrates the wide range of products that may be procured by a buyer or purchasing agent. Each exercise is designed so that there is no right or wrong answer. The “suppliers,” represented by the attribute combinations, represent a pool of vendors from which the buyer can chose. The display of the nine suppliers is a fractional factorial design that has each of the four decision variables (price, quality, delivery, service) represented in orthogonal combinations. The expression of these attributes varies in order to be decision specific. For example, quality for the boiler system is expressed in terms of pollution control, while quality for copiers is expressed as the number of features available. Part A: Individual Evaluation – A helpful class exercise is to have students role-play as organizational buyers to work through these decisions individually. Students are instructed to read the decision context statement and then examine the nine “vendors” described by each block. For example, in the copier decision, vendor N offers a copier that is priced at $3,500, has the A-level feature package (see bottom of decision), requires two hours of maintenance (downtime) per month, and can be delivered in two weeks. Students then should cross out any vendors that are not acceptable—for whatever reason. Of the acceptable vendors, students divide 100 points to represent how they want to source the decision. For example, one copier vendor could be given all 100 points, or the buyer (student) can use a multiple sourcing strategy by dividing the points among several (50/50, 70/30, 40/40/20, etc.). At this point, the decision evaluations illustrate the concepts and variables that organizational buyers use in selecting suppliers. After completing the decision individually, students can be asked to offer their “solutions” to the buying decision. Since there is no right or wrong way to complete the exercise, students will differ in their solutions. Discussion of several of their solutions illustrates the concept of trade-offs in buying and the fact that organizational buyers have different levels of expectations in buying. What is important to one buyer may not be as important to another. In addition, evaluation of decisions in a systematic, “rational” way is sometimes different from consumer buying (e.g., impulse purchases). Part B: Group Evaluation – The second part of the exercise involves group decision making. Arrange students in groups of two to four persons and have them evaluate these decisions again, but this time they all must agree on the point allocations among suppliers. In discussing group solutions, the instructor may ask if there was any conflict and if so, how it was resolved. If the group’s decision was very different from an individual’s original evaluation, the students may discuss the dynamics of the decision-making process in how preferences were changed. This part of the exercise illustrates concepts such as a buying center, roles of members in group decisions, and conflict management and resolution. REFERENCE: Charles W. Lamb, Joseph F. Hair, and Carl McDaniel (1992), Principles of Marketing, Cincinnati, OH: Southwestern Publishing. BUYING DECISION FOR OFFICE COPIERS Decision Context: Your firm needs a new copier to supplement current copiers already in place. Moderate volume use (25,000 copies per month) is expected. N ____ pts. D ____ pts. J ____ pts. Price: $3,500 Price: $4,400 Price: $5,000 Feature Package: A Feature Package: C Feature Package: B Maintenance Hours per Month: 2 hrs. Maintenance Hours per Month: 2 hrs. Maintenance Hours per Month: 2 hrs. Delivery Lead Time: 2 weeks Delivery Lead Time: Immediate Delivery Lead Time: 6 weeks C ____ pts. W ____ pts. T ____ pts. Price: $3,500 Price: $4,400 Price: $5,000 Feature Package: B Feature Package: A Feature Package: C Maintenance Hours per Month: 5 hrs. Maintenance Hours per Month: 5 hrs. Maintenance Hours per Month: 5 hrs. Delivery Lead Time: Immediate Delivery Lead Time: 6 weeks Delivery Lead Time: 2 weeks A ____ pts. G ____ pts. L ____ pts. Price: $3,500 Price: $4,400 Price: $5,000 Feature Package: C Feature Package: B Feature Package: A Maintenance Hours per Month: 8 hrs. Maintenance Hours per Month: 8 hrs. Maintenance Hours per Month: 8 hrs. Delivery Lead Time: 6 weeks Delivery Lead Time: 2 weeks Delivery Lead Time: Immediate Feature Package Key: A. Reduction/Enlargement, 11 17 oversized documents, toner flow control. B. Package A features plus automatic document feeder, oversized paper tray. C. Package B features plus document sorter, automatic two-sided copying. BUYING DECISION FOR PAINTED SHEET METAL Decision Context: Your firm needs to consider vendors for awarding annual purchase agreements. The contract to supply the annual requirement of painted sheet metal may be awarded to one of several vendors described below. L ____ pts. T ____ pts. P ____ pts. Quality of Paint Work*: 92% Quality of Paint Work*: 95% Quality of Paint Work*: 99% Lead Time per Order: 8 weeks Lead Time per Order: 8 weeks Lead Time per Order: 8 weeks In-House Vendor Service Rating: A+ In-House Vendor Service Rating: A In-House Vendor Service Rating: B Price per piece: $25 Price per piece: $20 Price per piece: $14 F ____ pts. M ____ pts. S ____ pts. Quality of Paint Work*: 92% Quality of Paint Work*: 95% Quality of Paint Work*: 99% Lead Time per Order: 6 weeks Lead Time per Order: 6 weeks Lead Time per Order: 6 weeks In-House Vendor Service Rating: A In-House Vendor Service Rating: B In-House Vendor Service Rating: A+ Price per piece: $14 Price per piece: $25 Price per piece: $20 W ____ pts. G ____ pts. B ____ pts. Quality of Paint Work*: 92% Quality of Paint Work*: 95% Quality of Paint Work*: 99% Lead Time per Order: 3 weeks Lead Time per Order: 3 weeks Lead Time per Order: 3 weeks In-House Vendor Service Rating: B In-House Vendor Service Rating: A+ In-House Vendor Service Rating: A Price per piece: $20 Price per piece: $14 Price per piece: $25 * Percentage of pieces usable per truckload. BUYING DECISION FOR AN INDUSTRIAL BOILER SYSTEM Decision Context: Your company needs a boiler system for a new office building. Evaluate the alternatives in terms of making recommendations to senior management about which vendor(s) would best meet your company’s needs. G ____ pts. T ____ pts. P ____ pts. Pollution Control (% Sulfer retained): Pollution Control (% Sulfer retained): Pollution Control (% Sulfer retained): Maintenance Hours per Month: 6 hours Maintenance Hours per Month: 8 hrs Maintenance Hours per Month: 12 hours Price: $750,000 Price: $1,000,000 Price: $1,500,000 Manufacturing and Delivery Lead Time: 12 months Manufacturing and Delivery Lead Time: 6 months Manufacturing and Delivery Lead Time: 9 months R ____ pts. J ____ pts. F ____ pts. Pollution Control (% Sulfer retained): Pollution Control (% Sulfer retained): Pollution Control (% Sulfer retained): Maintenance Hours per Month: 6 hours Maintenance Hours per Month: 8 hrs Maintenance Hours per Month: 12 hours Price: $750,000 Price: $1,000,000 Price: $1,500,000 Manufacturing and Delivery Lead Time: 12 months Manufacturing and Delivery Lead Time: 6 months Manufacturing and Delivery Lead Time: 9 months B ____ pts. M ____ pts. W ____ pts. Pollution Control (% Sulfer retained): Pollution Control (%Sulfer retained): Pollution Control (%Sulfer retained): Maintenance Hours per Month: 6 hours Maintenance Hours per Month: 8 hrs Maintenance Hours per Month: 12 hours Price: $750,000 Price: $1,000,000 Price: $1,500,000 Manufacturing and Delivery Lead Time: 12 months Manufacturing and Delivery Lead Time: 6 months Manufacturing and Delivery Lead Time: 9 months Richard Turshen, Pace University BUSINESS DOCUMENT VERSUS ACADEMIC TREATISE The Dilemma: In order to demonstrate their knowledge of marketing principles on two learning levels—comprehension and application—students are often asked to prepare a marketing plan for a new product. Traditionally, they are required to produce a business document and an academic treatise simultaneously within the same written report. This dichotomous intellectual responsibility not only creates a dilemma for the student relative to preparation, but also for the instructor relative to evaluation. The Solution: In order to separate the two distinct requirements, a supplemental reporting component is added to the assignment; in effect, the plan is subdivided into two sections: 1. A “B” section provides the practical BUSINESS document that explicitly presents the “what and when” of the strategic plan. Two requisites are prescribed; section B must be capable of standing alone as a marketing plan, and a visual, graphic communication style needs to employed. 2. An “A” section provides the complimentary theoretical ACADEMIC manual that essentially explains the “why” behind the strategy decisions presented in section B. Two requisites are prescribed; sources and derivations of all B section material must be included, and an efficient cross reference system between the sections needs to be utilized. Summary: The following comparative summary is supplied to the students: Business Subdivision (Marketing Plan) Vs. Academic Subdivision (Explanatory Manual) Business presentation for your boss Vs. Academic presentation for your professor Present the elements of the plan; information, data, and strategy decisions Vs. Present the rationale behind the strategies; sources, derivations and explanations Project the plan in terms of what, how, when, where, and who Vs. Project the plan in terms of why Specific decisions; the result of thinking Vs. Corresponding rationale; the process of thinking Conclusion: The tested technique of subdivision avoids the muddled mix of applied strategic marketing decision making and corresponding theoretical supporting rationale in a single report. Both parties, the student and instructor, consequently gain a clearer mindset for the preparation and evaluation of the business and academic requirements of the marketing plan assignment. Shirine Mafi, Otterbein College RESEARCHING A CORPORATION Students are divided into teams of three to five members. Each team works together throughout the quarter. Teams each select a corporation and research that company for all project assignments. The final project grade is based partially on peer evaluations. PROJECT ASSIGNMENT I Through a 10–12 page paper, students become familiar with the company and the environmental forces that shape the company and its industry. The report also entails a marketing opportunity analysis. PROJECT ASSIGNMENT II Based upon the findings of the marketing opportunity analysis, teams recommend one of the following options and produce a marketing plan accordingly: • A new marketing mix targeted to a new market • A current marketing mix extended to a new target market • A new or improved product/service targeted to the current market • A combination of any of these Each team will produce a marketing plan that includes: • Customer and competitive situation analysis • Marketing objectives • Marketing strategies • Control/evaluation procedures Group Presentation: Each team presents its project to the class. All members participate equally. The team not only presents its findings, but must be able to defend its plan to the class. Use of visual aids is encouraged. Group Competition: In addition to the instructor’s evaluation, class members vote for the best group presentation. The winning team members earn bonus points. Solution Manual for MKTG: Principles of Marketing Charles W. Lamb, Joe F. Hair, Carl McDaniel 9781305631823, 9781285860145, 9781337116800
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