Chapter Five: Business-to-Business Marketing TOOLS FOR INSTRUCTORS • Learning Objectives • Annotated Chapter Outline with Instructor’s Notes/Teaching Tips • Answers to End of Chapter Learning Aids Concept Review Marketing Application Questions Net Savvy Chapter Case Study • Video Activities Learning Objectives 1. Describe the nature and composition of B2B markets 2. Explain the key differences between B2B buying and B2C buying 3. Explain the ways B2B firms classify and segment their markets 4. Describe the B2B buying process 5. Identify the roles within the buying centre 6. Detail different buying situations Annotated Chapter Outline PowerPoint Slides Instructor’s Notes Chapter 5 focuses on Business-to-Business (B2B) Marketing. The chapter objectives are intended to help students understand the content to be discussed. Opening Vignette: RBC Royal Bank Not many people know that RBC Royal Bank spends over $5 billion a year buying goods and services. RBC uses a centralized, electronic purchasing system. To become a supplier to RBC, companies must not only provide high-quality goods and services but also meet its Green Sourcing Initiative, which employs environmental screening mechanisms to help select appropriate vendors. RBC is a great example of how B2B transactions & marketing works. Business-to-business (B2B) marketing refers to the process of buying and selling goods or services to be used in the production of other goods or services for consumption by the buying organization and/or resale by wholesalers and retailers. The key distinction between B2B and business-to-consumer (B2C) marketing is not necessarily the product or service but rather the ultimate user of that product or service. Students must understand the distinction between B2B and B2C. If the couple in the picture purchase lemons to make lemonade for themselves, they are engaging in a B2C transaction. If the boy buys them to make lemonade to sell to others, it is a B2B transaction. LO1: B2B Markets A wide range of businesses participate in B2B transactions. This slide can be used on its’ own or in conjunction with those that follow, adding more detail. I. Manufacturers or Producers Buy Raw Materials to Manufacture Goods. Manufacturers buy raw materials, components & parts that allow them to manufacture their own goods. Car companies are a great example of this. When a company like Volkswagen Group, the largest auto manufacturer in Europe, buys raw materials from various suppliers, to build their vehicles, they are engaging in a B2B transactions. When Volkswagen sells their vehicle to you, the consumer, via their dealerships, they are engaging in B2C transactions. Burt’s Bees is a great example of a company that engages in both B2B transactions as well as B2C transactions. II. Resellers Sell Manufactured Products Without Significantly Altering Their Form. Resellers perform an essential service: They aggregate goods from manufacturers and sell them to retailers or, in the case of retailers, they sell them to consumers. Thus, one reseller can represent many different manufacturers, which saves the manufacturers the trouble of finding retailers or consumers and gives retailers or consumers the ability to buy only the desired quantity from the reseller. Answer D; see page 142 III. Institutions Purchase a Variety of Goods and Services A. Hospitals. B. Education providers. C. Religions organizations. Group activity: Have students consider their university as a purchasing institution. What types of products and services must universities purchase? Case-in-Point Series This slide sets up the Case in point that follows. A major expense for any university is paper. Laurier has attempted to reduce the environmental impact of its paper usage. In doing so, it has also reduced expenses. Entrepreneurial Marketing 5.1 MappedIn This start-up company makes navigational systems to help visitors to malls, casinos, hospitals and even universities find their way around. A mobile app allows users to access the navigational system via their smartphones. Even though their solutions have cost-saving and ease of use benefits, the company is still faced with a long sell cycle due to the nature of the B2B market. Show the Dragons’ Den video that accompanies this box. Ask Students: How much easier would your first days and weeks on campus have been if you had a navigational system such as MappedIn? Possible answer: Depending on the size of the campus student answers will vary considerably. Some will say yes while others will say no. You could probe into the reasons why a university or college would invest in technology to help students and other visitors navigate the campus. Link this discussion back to the Need Recognition stage of the Buying Process. IV. Governments Are Often the Largest Purchasers of Goods and Services. Many firms sell exclusively to government entities and therefore are adept at meeting the unique needs of governmental buyers. For example, firms in the defence industry generally sell exclusively to governments. Key Challenges of Reaching B2B Clients a. Identify the right person in the buying organization b. Understand the buying process in the buying organization c. Identify the factors that influence the purchasing decision These are key considerations to ensure that the selling effort is targeted to the right persons, in the right way, and with a clear appreciation of the buying process, so that appropriate actions can be taken at the right time to make a sale. Answer C; see page 145 LO2: Differences between B2B and B2C Markets are grouped into four categories: market, product, buying process and marketing mix characteristics. Introductory slide which sets up the following slides, each of which provides more detail. 1. Market Characteristics – Demand for business products are derived – materials are purchased based on demand from final consumers for the final product; fewer customers, more geographically concentrated, larger orders; demand is more inelastic – less sensitive to price changes. 2. Product Characteristics – they are more technical, mainly raw material and finished goods, and heavy emphasis on delivery time, after sale service, financing, and technical assistance 3. Buying Process – more structured involving a buying centre – qualified, professionals following formal rules and procedures. Long-terms relationships and reciprocal buying arrangements common. Online buying is increasing. 4. Marketing Mix – Direct and personal selling is the norm, physical distribution is often necessary, price is usually negotiated, and product are based on technical specifications. Ask Students: How do these four groups of B2B characteristics different in the B2C market. Ask for examples in each category. LO3: B2B Classification System and Segmentation Is Standardized 1. The North American Industrial Classification System (NAICS) categorizes all firms into a hierarchical set of six-digit numbers. 2. As the NAICS system has evolved, more categories have been added. Click http://www.statcan.gc.ca/subjects-sujets/standard-norme/naics-scian/2012/index-indexe-eng.htm to visit the NAICS site. Type in a common product (e.g. shoes) and walk students through the classification system. . LO4: The Business-to-Business Buying Process In parallel with the B2C process, the B2B buying process starts with need recognition, but its information search and alternative evaluation steps are more formal and structured. Although B2B and B2C buying processes are similar, this chapter highlights some key differences. This slide can be used on its own to present the B2B buying process or can be expanded on using the slides that follow. Stage 1: Need Recognition A. The buying organization recognizes, through either internal or external sources, that it has an unfilled need. B. Suppliers, salespeople, tradeshow demonstrations, ads in trade journals, Internet searches, and white papers provide awareness of the company’s evolving needs and wants. Just like the consumer buying process, the B2B process begins with need recognition. Needs arise from a variety of sources. For example, a salesperson from firm A attends a trade show and visits firm B’s booth, which features a demonstration of a new sorting process. Although firm A had been looking for ways to improve its efficiency, it had not yet considered the possibility of sorting efficiencies. Stage 2: Product Specification A. The organization considers alterative solutions to the recognized need and comes up with potential specifications. II. Buyers often work with suppliers to develop specifications based on their extensive expertise. After recognizing the need & considering alternative solutions, the firm will determine a list of potential specifications that vendors might use to develop their proposals. Firms & suppliers will often work collaboratively during this process. Stage 3: RFP Process A. During the request for proposal (RFP) process, buying organizations invite alternative suppliers to bid on the right to supply the necessary components. B. Suppliers can find out about the buyer’s needs and purchasing policies through the RFP process. Discussion Question Answer: Not only do RFPs enable the buyer to solicit pricing and other information from a variety of suppliers, but they also allow suppliers to learn about the buyer and its specific needs. The MERX site exists for any firm that wishes to bid on government contracts. Potential suppliers can view the products/services being sought as departments publicly advertise their requirements using the electronic tendering service. Stage 4: Proposal Analysis and Supplier Selection A. The buying organization and its key decision makers evaluate all proposals in response to an RFP. B. Different firms have different rules about which and how many suppliers may enter negotiations. Firms apply different strategies for vendor selection: Some always choose the lowest price, whereas others apply more complicated selection criteria. The government uses preferred contractor programs, designed to offer small and minority-owned firms greater opportunity. Answer A; see page 151 Stage 5: Order Specification (Purchase) A. The buyer places an order with its chosen supplier or suppliers. B. The order contains exact specifications. After a vendor is chosen, terms of the contract still need to be negotiated. When these terms have been agreed upon, the contract can be signed. Stage 6: Vendor Assessment Using Metrics A. Firms analyze their vendors’ performance to make decisions about future purchases. B. The buying team develops a list of issues it believes are important to consider in the evaluation of vendors. C. The buying team assigns an importance score to each issue, such that more important issues receive higher scores. D. The buying team assigns numbers that reflect its judgments about how well the vender has performed. E. The overall performance rating of the vender combines the rankings and importance weights of each issue. After the vendor has performed the service or delivered the order, the buyer conducts a vendor analysis to judge whether the vendor should provide future purchases. Go to the Toolkits on the OLC. Click vendor analysis. Work through one of the three problems provided. The other two could be assigned to students to do. LO5: Factors Affecting the Buying Process This slide sets up the slides to follow. The Buying Centre Consists of Various Participants A. These participants range from employees with a formal purchasing role to members of the design team. B. The initiator is the member who first suggests buying the particular product or service. C. An influencer is a member whose views influence other members in making the final decision. D. The decider ultimately determines either a portion of or the entire buying decision. E. A buyer handles the paperwork associated with the actual purchase. F. Users are those who consume or use the purchased product or service. G. The gatekeeper controls information and access to decision makers and influencers. Group activity: Have the students diagram a purchase situation that involves all of these roles. The book uses the example of a doctor/patient relationship, but many similar examples also exist. Answer C; see page 153 Organizational Culture Reflects the Values, Traditions, and Customs that Guide Employees’ Behaviour A. In an autocratic buying centre, though there may be multiple participants, one person makes the decision. B. In a democratic buying centre, the majority rules. C. Consultative buying centres mean one person makes the decision but solicits input from others. D. A consensus buying centre reaches a collective agreement among all members to support a particular purchase. Different firms assign different ultimate responsibility for purchase decisions. Even within a firm, different buying groups have unique buying styles. Marketers must understand the dynamics of the buying centre to succeed. Ask students: Assume your family or the household in which you live is a buying centre. Is it an autocratic, consultative, or consensus when making group buying decisions such as planning a vacation or shopping for groceries. LO6: Buying Situations Take Three Forms A. In a new buy situation, a customer purchases a good or service for the first time, so the buying decision is quite involved because the buyer lacks experience with the item. B. During a modified rebuy, the buyer has purchased a similar product in the past but decided to change some specifications. C. Straight rebuys occur when the buyer simply buys additional units of products it previously purchased. Usually straight rebuys do not require the involvement of the entire buying centre. As in B2C, different B2B buying situations require different levels of effort and the involvement of various parties. The effort required by each situation varies. This slide can be used on its own or the following slides can be used to elaborate on the topic. Ask Students: Suppose you represented a private label manufacturer of women’s apparel that was selling to Target. Think about the differences in the three buying situation? Which would be the easiest option for the apparel salesperson to accomplish? Which would be the hardest? Why? Answer D; see page 158 Concept Review Generally, the concept questions are designed to achieve a single purpose – to encourage students to test their knowledge and understanding of the theoretical content of the chapter. These questions encourage recall and reflection, which will better prepare students to answer the marketing applications questions based on their understanding of the theory. 1. Explain how marketers may use NAICS Codes to segment B2B markets. List two other ways marketers may use to segment B2B markets. Support your answer with appropriate examples. Answer: The NAICS groups economic activity into different sectors and industries. Following the prescribed coding marketers can use the six digit codes to identify and analyse data about market share, demand, import competition and other measures. There are many other different ways to segment B2B markets though, and companies should use a method that makes sense for their reporting needs. Some companies may choose to segment based on end user, like Home Use, Small/Medium Business Use, and Corporate Use. Other companies may choose to segment based on geography, like North America, South America, Europe and Asia. 2. List and discuss the unique characteristics of B2B markets relative to B2C markets. Answer: B2B Markets Market Characteristics • Demand for business products is derived • Fewer customers, more geographically concentrated, and orders are larger • Demand is more inelastic, fluctuates more, and more frequently Product Characteristics • Products are technical in nature and purchased based on specifications • Mainly raw and semi-finished goods are purchased • Heavy emphasis is placed on delivery time, technical assistance, after sale service, and financing assistance Buying Process Characteristics • Buying decision is more complex • Buying may involve competitive bidding, negotiated pricing, and complex financial arrangements • Qualified, professional buyers who follow a more formalised buying process • Buying criteria and objective are specified as are procedures for evaluating and selecting vendors and products • Multiple people with varied interests participate in purchase decisions • Reciprocal arrangements exists and negotiations between buyers and sellers are common • Buyers and sellers usually work closely to build close long-term relationships • Online buying over the Internet is common Marketing Mix Characteristics • Direct selling is primary form of selling and physical distribution is often essential • Advertising are technical in nature and promotions emphasize personal selling • Price is often negotiated, inelastic, frequently affected by trade and quantity discounts. Price usually includes a service or maintenance component 3. What are the major differences between the consumer buying process discussed in Chapter 4 and the B2B buying process discussed in this chapter? Answer: Compared with the consumer buying process, the B2B buying process tends to be much more formalized, involves more people in the actual decision, evaluates alternatives more extensively and often over a longer time period, and rarely contains any impulse or habitual behaviour component. 4. Explain why all B2B purchases may not go through all the stages of the B2B buying decision process and why some may go through the process in a more systematic and rigorous manner. Give examples of buying situations to support your answer. Answer: In a corporate or business environment it may not always be efficient to revisit all the steps for each purchase, especially if care is taken the first time a purchase is made. For example, if stationery suppliers are compared and contrasted thoroughly the first time a supply order is made, then each subsequent purchase there need not be Request for Proposals, proposal and vendor analysis and selection, or even vendor analysis. Policies can be in place to periodically review these areas, but they need not be performed each time an order is placed. Conversely, any significant purchases will likely visit all the steps in order to justify the cash outlay. For example, buying new office furniture for the entire staff would be a major purchase decision as would replacing the company sales car fleet. 5. What are the key bases for distinguishing between new buy, modify buy, and straight rebuy? Support your answer with three clear examples. Answer: New buy: the purchase has never occurred before, or in a long period of time. This decision requires a high level of involvement. An example here is buying a new state-of-the-art printer for a print ad company. Modified buy: Similar purchases have been made before, but the circumstances or specifications have changed. The decision requires a moderate level of involvement, but previously selected vendors may have an advantage. An example of a modified buy here is choosing to source printers and server materials from your computer supplier. Straight rebuy: Purchases of this type are common, frequent or routine. Most purchase choices fall into this category. A low level of involvement is required since the order can simply be placed again. Reordering car manufacturing parts for an assembly line, or ordering fabric for a clothing manufacturer, is an example of a rebuy. 6. List five specific ways in which the Internet has enhanced B2B buying and decision-making. Answer: Specific ways the Internet has helped B2B buying and decision-making are: 1) Faster transmission of information thereby speeding decision-making, 2) electronic procurement systems between vendors and buyers eliminates paperwork, 3) Buyer/seller involvement in the design of new products helps to better meet needs, 4) the advent of the electronic auction has helped to drive down prices for some arenas, 5) ability to track more information for market research and statistical analysis, 6) increase the overall efficiency of the process, 7) saves time and money, and 8) encourage closer collaborative relationships among suppliers and manufacturers. 7. Explain the concept of the buying centre. What factors may influence the behaviour of the buying centre? What is the role of gatekeepers in buying centres and how do they influence the buying decision? Answer: The buying centre is simply the group of individuals responsible for purchase decisions in B2B markets, and may include one or more of the following roles: initiator, influencer, decider, buyer, user and gatekeeper. The size of the buying centre may vary depending on the nature of the buying decision, the size of the organisation, and the organisation buying processes and procedures. The factors that influence the buying centre behaviour includes organisational objectives, policies, structure, and systems, interpersonal relationships among buying centre members (e.g., person’s status, authority and persuasiveness), and individual characteristics (e.g., education level, experience, job position, and personality). The gatekeeper is the role that controls access to information, or access to the decision makers and influencers. The gatekeeper role should not be underestimated because their decision to allow the flow of information, like letting a new supplier contact the buyer, can have great influence on a purchase decision. 8. Explain how understanding the role, structure, and behaviour of a buying centre may help a marketer to sell to B2B buyers. Answer: Understanding the roles, structure and behaviour of a buying centre may help a marketer sell to a B2B buyer because they will better understand the functioning of the buying centre and could therefore target their marketing efforts to those individuals with the most influence. This improved understanding could help marketers develop better marketing communication strategies to reach and present important information to the influencers, gatekeepers, and deciders, to get samples or prototypes in the hands of the user so they can experience the benefits; and ensure to ensure an opportunity for a sale is not missed. 9. In the text, it is claimed that the 6-step B2B buying process is similar to the 5-step B2C buying process. How would you go about reclassifying the B2B process to fit the B2C process? Answer: In order to fit the 6-stages of the B2 B buying process into the 5-stage B2C buying process, it would be necessary to combine the Product specifications step with the Request for proposals. As consumers, we may indeed consider the Product specifications but not with the same zeal or detail required in the B2B world. 10. How does understanding the organisational culture and buying centre’s culture of a potential B2B customer help a salesperson trying who is targeting that organisation? Answer: Buying centre cultures can be divided into 4 types: autocratic, democratic, consultative, and consensus. Know which buying centre culture is prevalent in the organisation helps the salesperson decides how to approach that particular client, how and to whom to deliver pertinent information, and to who to make the sales presentations. In autocratic buying centre cultures, one person makes the decision. In democratic buying centre cultures, the majority rule. In consultative buying centre cultures one person makes the decision but solicits input from others before making it and in consensus buying centre cultures, all members of the team must reach a collective agreement that can support a particular purchase. Marketing Applications 1. Provide an example of each of the four key types of B2B organizations. Instructor’s Notes: In providing a representative example of each type, students demonstrate their understanding of B2B organizations. Example answers: ○ Manufacturer/producer: Ford Motor Co. ○ Reseller: Target ○ Institution: Dalhousie University ○ Government: Canadian federal government, provincial governments, municipal governments Sure! Here are examples of the four key types of B2B organizations: 1. Manufacturers: General Electric - Produces machinery and equipment for other businesses. 2. Wholesalers: Sysco - Distributes food and food-related products to restaurants and institutions. 3. Distributors: Grainger - Supplies industrial equipment and tools to various businesses. 4. Service Providers: IBM - Offers IT consulting and technology services to other companies. 2. Mazda is trying to assess the performance of two manufacturers that could supply music systems for its vehicles. Using the following information, determine which manufacturer Mazda should use: Performance Evaluation of Brands Issues Importance Weights Manufacturer A Performance Manufacturer B Performance Sound 0.4 5 3 Cost 0.3 2 4 Delivery time 0.1 2 2 Brand cache 0.2 5 1 Total 1 Notes: Performance is rated on a scale of 1–5, where 1 = poor and 5 = excellent. Instructor’s Notes: This exercise challenges students to complete a vendor analysis matrix and evaluate which vendor would be the better choice. To complete this task, they must multiply the importance weights and performance scores for each criterion for each vendor, and then add those scores to determine which vendor earns the highest overall score. Example answers: Based upon the overall (importance × performance) score for each manufacturer, Mazda should choose Manufacturer A. Issues Importance Weights Mfr A Performance Mfr A Imp × Perf Mfr B Performance Mfr B Imp × Perf Sound 0.4 5 2.0 3 1.2 Cost 0.3 2 0.6 4 1.2 Delivery Time 0.1 2 0.2 2 0.2 Brand Cache 0.2 5 1.0 1 0.2 Total 1 3.8 2.8 3. Assume you have written this textbook and are going to attempt to sell it to your school. Identify the six members of the buying center. What role would each play in the decision process? Rank them in terms of how much influence they would have on the decision, with 1 being most influential and 6 being least influential. Will this ranking differ in other situations? Instructor’s Notes: In large organizations, several people typically are responsible for buying decisions. By taking the role of an author selling a book to an educational institution, students must think through the potentially involved parties to determine how best to approach the buying centre. Although the question asks students to rank the six members, they should understand that all members must agree to the purchase. Example answers: 1. Decider: The marketing professor who decides to use this textbook for his or her classroom instruction. 2. Initiator: The author or sales rep, who suggests the school purchase this textbook. 3. Influencer: Other marketing professors who might be aware of the quality of previous work by the author. 4. Buyer: The head of textbook procurement or the bookstore, who fills out the paperwork needed to make the textbook purchase. 5. Gatekeeper: The school’s administrative assistant or course coordinators, who could prevent the author or sales rep from seeing or talking to the other members of the buying centre. 6. User: Students in the marketing class who will actually read and use the textbook. Note: The influence ranking may vary depending on specific circumstances and needs. 4. Provide an example of the three types of buying situations that the bookstore at your school might face when buying textbooks. Instructor’s Notes: Instead of taking the role of the author selling a book, this exercise asks students to put themselves in the shoes of the school’s textbook procurement manager. Example answers: • New buy: The bookstore purchases textbooks it has never purchased before or never purchased from a particular supplier. • Modified rebuy: The bookstore buys textbooks it has ordered before but wants to change something about the order, such as the service quality, return policy, or price. • Straight rebuy: The bookstore simply orders more copies of a textbook it has ordered before, with no change in anything but the quantity ordered. Here are examples of the three types of buying situations the bookstore might face when buying textbooks: 1. Straight Rebuy: Reordering a popular textbook from a previous semester with no changes. 2. Modified Rebuy: Purchasing a new edition of a textbook previously used, or switching to a different publisher. 3. New Task: Acquiring a textbook for a newly introduced course or subject not previously covered. 5. Describe the organisational culture at your school or job. How is it different than the last school you attended or the last job you had? Instructor’s Notes: A firm or school’s organisational culture often comprises a set of unspoken guidelines that employees or students share in various situations. By comparing two different cultures, students should gain an understanding of how different cultures can influence what people care about, how they act, when they act, and who they involve in important decisions. Example answers: The organizational culture of this school is fairly conservative and collaborative, with a strong sense of entrepreneurial spirit and tradition. The culture at my summer job, in contrast, was more liberal in attitude but more structured in its approach and processes. At my school or job, the organizational culture emphasizes collaboration, innovation, and support for professional development. There is a focus on open communication and a flexible work environment. In contrast, the last school I attended or job I had might have had a more traditional or hierarchical culture, with less emphasis on flexibility and a stronger focus on established procedures and formal communication channels. 6. Nike manufactures shoes and sportswear. How has the Internet changed the way this company communicates with its suppliers and retail customers? Instructor’s Notes: This question asks students to consider how the advent of the Internet has changed the way a major company like Nike communicates and does business. Example answers: The Internet has allowed Nike to open up more lines of communication with both its suppliers and its customers. Using e-mail, suppliers can verify the receipt of orders, notify Nike of changes in orders or products, and follow up quickly when problems occur; Nike can do the same for its retail customers. Nike’s website gives suppliers a way to manage their relationship with the company and provides retail customers with information about the latest products and promotions. It also provides a forum for suggestions, questions, compliments, or complaints. Overall, the Internet has allowed Nike to streamline its operations and cut costs while cementing stronger relationships with both suppliers and retail customers. The Internet has transformed Nike's communication with suppliers and retail customers by enabling real-time data sharing, streamlined order processing, and direct interaction. For suppliers, it facilitates quicker updates on inventory and production schedules. For retail customers, it allows for personalized marketing, direct engagement through social media, and online shopping experiences, enhancing convenience and customer feedback. 7. You have just started to work in the purchasing office of a major oil processing firm. The purchasing manager has asked you to assist in writing an RFP for a major purchase. The manager gives you a sheet detailing the specifications for the RFP. While reading the specifications, you realize they have been written to be extremely favourable toward one bidder. How should you handle this situation? Instructor’s Notes: This ethical scenario forces students to determine any violations of their own ethical standards of fairness and business transparency. Using the ethical decision-making framework from Chapter Eighteen, students can evaluate the ethical implications of this work situation and determine an appropriate course of action. Example answers: According to the ethical decision-making framework: • “Have you thought broadly of any ethical issues associated with the decision to be made?” I have concerns about how fair the overall bidding process will be if the RFP specifications are written to favour one particular bidder, which might cause the firm to enter a less-than-optimal agreement. I also have considered how the lack of transparency in the process could damage the reputations of both my company and the bidder, which would cause us to lose face and run the risk of possible lawsuits. • “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, no one is aware of my concerns. I have not yet approached my boss or any members of the management team, nor have I approached the bidder to see if the specification came directly from that company. • “Does this decision respect the rights and dignity of the stakeholders?” My company’s management might not be aware of the situation, other bidders will not get a fair judgment, and I would compromise my beliefs if I go along with this specification as it stands. • “Does this decision produce the most good and the least harm to the relevant stakeholders?” No, because the company likely to get the contract might not deserve it, and then my company would not receive the quality of work it wants at the most reasonable and fair price. • “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for fair bidding procedures. Most people will likely think this situation is rigged to favour the bidder as part of some larger scheme. • “Can you live with this decision alternative?” If the decision alternative is to discuss my concerns about the fairness of the process with my management team, then yes, I can live with that. Therefore, I will approach the management team about my concerns and advocate that the RFP specification be written to avoid favouring one bidder over the others. You should raise your concerns with the purchasing manager, highlighting that the specifications might unfairly favor one bidder. Suggest revising the RFP to ensure it is fair and objective, promoting a competitive and transparent selection process. 8. You have recently been hired by Cognos, as a salesperson for its suite of business intelligence applications. Pick one prospective company you plan to sell to and explain how you would go about identifying the persons in the different roles in the buying centre for the chosen company. How would you try to target the needs of the different members in the buying centre? Instructor’s Notes: This question is designed to get students to think about the different roles in the buying centre, the information needs of each member of the buying centre and how they can initiate contact with these members. Most students will find this challenging since many will not have experience in B2B selling. Example answers: Students can pick any company they are familiar with but a large company may be a better example to work with because they may more likely use and benefit from BI software and tools. Take a medium-sized clothing retailer that is independently-owned and sells merchandise both online and in physical store. The roles of the buying centre members are: decider, initiator, influencer, buyer, gatekeeper, and user. The decider will need information on how the BI tools will improve the operational efficiency, sales revenues, profitability, quality of customer service, and speed decision-making while keeping costs low. The decider will also need information on how the BI application would change current organisational procedures and processes as well the level of training required for employees and users – organisational impact. The initiator and the influencer would need information about the capabilities of the product, its performance, who is using it, and customer reviews, and after-sale service and technical assistance. They would also need information on the technical requirements of the BI application as well as the cost. The buyer would need information about the cost and the procedures for ordering, delivery, and installation of the product. The user would need information about the ease of using the new product, the usefulness of the new product, how it will change – improve or worsen their jobs i.e. make it simpler or increase the complexity and workload, and what support and training will be offered. The gatekeeper will need as much information as possible about the product and the company including new modules, updates, service contracts, re-ordering, competing products, contact information of technical and service reps, etc. Prospective Company: XYZ Corp. Identifying Roles: 1. Decision Maker: Research who makes final decisions on software purchases (e.g., Chief Information Officer). 2. Influencer: Identify key users or department heads who provide input on business intelligence needs (e.g., IT Managers, Data Analysts). 3. Gatekeeper: Locate the person controlling access to decision-makers (e.g., Executive Assistant). 4. Buyer: Find out who handles procurement processes (e.g., Procurement Manager). 5. User: Engage with potential end-users to understand their requirements (e.g., Business Analysts). 6. Evaluator: Identify who assesses the effectiveness of business intelligence solutions (e.g., Business Intelligence Director). Targeting Needs: • Decision Maker: Highlight ROI and strategic benefits. • Influencer: Demonstrate how the solution meets technical and operational needs. • Gatekeeper: Ensure clear, accessible information. • Buyer: Provide detailed pricing and procurement options. • User: Focus on usability and integration with existing systems. • Evaluator: Emphasize performance metrics and case studies. 9. Cognos has developed a new business intelligence application that they would like to sell to some of their existing customers. You are part of the sales team. How would your approach to selling to an existing customer be different than selling to a brand new customer? Instructor’s Notes: This question forces students to think about the approach to personal selling in two quite different B2B contexts – a new customer versus an existing customer. Here the focus is on knowledge of the buying decision process in an organization where they know the buying process (an existing customer) versus and organization where they do not know the buying process (the new business customer). Example answers: In the existing customer organisation, the salesperson would know more about the buying process such as the rules and procedures, buying centre members, the buying centre culture, the roles played by the different buying centre members, and the requirements to make a strong sales presentation. Essentially, who to target with what information and how that information is to be presented. Here the salesperson can emphasise their ongoing and beneficial relationships as well as being in a better position to negotiate with the buying centre. Thus, they can better target their information to the relevant buying centre members based on the buying centre cultures of the organisation. With the new customer organisation, the salesperson will first have to learn about the new customer’s buying process, rules and procedures, organisational and buying centre’s culture, buying centre members, their individual roles, negotiation strategies, etc before developing and targeting them with the most appropriate information. Since the salesperson is new to the customer organisation, it will likely take some time to learn their procedures, understand their culture and earn their trust. Selling to Existing Customers: • Leverage Existing Relationship: Use established trust and understanding of their needs to introduce the new application. • Focus on Integration: Emphasize how the new application complements or enhances their current systems. • Offer Tailored Solutions: Provide customized demonstrations based on their specific use cases and past feedback. Selling to New Customers: • Build Awareness: Educate them about Cognos and the value of the new application from scratch. • Highlight Differentiators: Clearly communicate unique features and benefits of the application. • Establish Credibility: Use case studies and testimonials to build trust and show proven success. In both cases, understanding the customer’s needs and pain points is crucial for a successful sale. 10. You are the owner of a mid-sized company (about 450 employees) that has a call centre that specialises in providing 24 hours a day technical support for individual computer owners. On day a sales rep from either Dell, HP or Lenovo approaches you with a business proposal that goes something like this: If you buy all your computer supplies from us, we will make you our exclusive call centre operator for all of Ontario and Quebec. Assume that all the conditions of the offer made to you are favourable. Will you accept the offer? Do you think that accepting such and offer is ethical? Instructor’s Notes: This scenario encourages students to think about a common issue in B2B markets – reciprocal buying and the extent to which reciprocity is an ethical business practice. Example answers: Reciprocal buying or reciprocity is as described in the question, a situation where two organisations agree to buy each other’s products as a condition of doing business. Depending on the student’s perspective, they may or may not see any ethical issue. Some may argue that it is purely a business decision while other may argue that such an arrangement excludes other suppliers and does not create a level paying field for other companies providing similar services. Also, in such cases, neither company can guarantee that they are getting the best value for their money over the long-term. Decision: Accepting the offer could be beneficial if the conditions are favorable and align with your business goals. However, carefully evaluate the long-term impact on your company’s independence and customer relationships. Ethical Considerations: Ensure that accepting the offer does not compromise fair competition or lead to conflicts of interest. It is ethical if the offer is transparent, does not involve unethical practices, and provides value to both parties without exploiting customers or limiting fair market practices. Net Savvy 1. Browse Public Works and Government Services Canada website (http://www.pwgsc.gc.ca) to learn more about the how you may sell goods and services to the federal government. Using the information on the website, describe the buying process used by the federal government and explain how the electronic tendering system supports buying and selling between Canadian companies and the government of Canada. Instructor’s Notes: Students must go online to explore how the Government of Canada MERX system (electronic tendering system) works and how buyers and sellers may use it to transact business i.e. obtain information and bid on government contracts. Example answer: The Government Electronic Tendering Service (GETS) is an on-line system that advertises government contracting opportunities to potential bidders. GETS is operated by MERX. All federal departments must use MERX to advertise all competitive opportunities subject to Trade Agreements the Government of Canada has signed with other countries such as NAFTA. MERX is accessible from any location and suppliers free access to basic services that include viewing notices on the MERX site, ordering bid documents electronically, and creating a single profile for your company for the MERX Opportunity Matching Service. This profile will ensure you received electronic notification when opportunities that match your profile are posted. Buying Process: 1. Requirement Identification: Government departments identify their needs for goods or services. 2. Tendering: A Request for Proposal (RFP) or Request for Quotation (RFQ) is issued through the federal procurement system. 3. Bidding: Suppliers submit their bids or proposals in response to the RFP/RFQ. 4. Evaluation: Bids are assessed based on criteria such as price, quality, and compliance. 5. Award: The contract is awarded to the successful bidder. Electronic Tendering System: • Supports: The system (Buyandsell.gc.ca) allows suppliers to view and respond to tenders online, streamlines bid submissions, and ensures transparency. • Benefits: Simplifies access to procurement opportunities, provides real-time updates, and enhances efficiency in the procurement process. 2. Mark’s, a Canadian company that currently operates mainly in the B2C market, has hired you as their government-business relations officer with the primary task of helping the company move into the B2B marketplace selling its merchandise primarily to government departments. Explain how you would go about getting Mark’s ready to do business with the Canadian government. Hint: you will find tons of helpful information on the website of Public Works and Government Services Canada (http://www.pwgsc.gc.ca), Business Access Canada http://contractscanada.gc.ca), and Strategis Canada (http://strategis.ic.gc.ca/). Instructor’s Notes: This question would be very challenging for most students but they could learn quite a lot about how private companies do business with the largest single buyer in the country – the Government of Canada. Many will find this process to be much different from what they expect – a real eye opener. Example answer: First you must register Mark’s with the Supplier Registration Information (SRI), so that it becomes available as a supplier on various searchable database systems such as Vendor Information Management (VIM) system and SELECT system. You must also register Mark’s with MERX and constantly monitor Merx to view business opportunities. Registration alone does not automatically guarantee a contract. You must actively promote your company’s goods and services through key contacts in government departments – this could get your name as a potential supplier; identify your special selling features , qualities and uniqueness of your products/services from competing products/suppliers. Research government markets and focus your efforts on key people such as the material managers in the various government departments. Steps to Prepare Mark’s for B2B with the Canadian Government: 1. Understand Requirements: Review procurement guidelines and requirements on Public Works and Government Services Canada (PWGSC) and Business Access Canada websites. 2. Register: Ensure Mark’s is registered in the federal procurement system and obtain a vendor number. 3. Compliance: Familiarize with and comply with government regulations, including standards and certifications needed for government contracts. 4. Create a Proposal: Develop competitive proposals and bids following the formats and criteria outlined on the PWGSC and Business Access Canada sites. 5. Network: Attend government procurement events and connect with government procurement officers to build relationships. 6. Monitor Opportunities: Use the electronic tendering system to track and respond to relevant government tenders and contracts. Resources: • PWGSC: Provides information on government procurement processes. • Business Access Canada: Offers details on how to access and bid on government contracts. • Strategis Canada: Provides insights on market opportunities and business information. End-of-Chapter Case UPS: From Shipping to Supply Chain Questions: 1. Describe how you would expect firms to interact with UPS. Use the steps in the B2B buying process discussed in the chapter to facilitate your discussion. Instructor’s Notes: Students must apply the differences outlined in the chapter to the B2B buying process described in this case. Example answers: UPS can work with firms to provide an array of services, from fulfilling basic shipping needs to acting as a third party logistics provider. The majority of UPS’s business is conducted in the B2B context rather than the B2C context. The B2B buying process for firms looking to work with UPS might look something like the following: Need recognition: Firm discovers a need for transportation services Product specification: Firm decides that it wants to use a global delivery services company RFP process: Firm solicits proposals from companies like UPS, USPS, FedEx, and DHL Proposal analysis: Firm analyzes proposals and decides to go with UPS Order specification: Firm meets with UPS and specifies the business relationship Steps in the B2B Buying Process for Firms Interacting with UPS: 1. Problem Recognition: Firms identify a need for reliable shipping and logistics solutions. 2. Information Search: Firms research UPS’s services, capabilities, and pricing through their website, customer service, and industry reviews. 3. Evaluation of Alternatives: Firms compare UPS with other logistics providers based on factors like cost, service quality, delivery options, and technology integration. 4. Purchase Decision: Firms select UPS and negotiate terms, such as pricing and service levels, to meet their shipping needs. 5. Post-Purchase Evaluation: Firms monitor UPS’s performance, reviewing delivery reliability, customer service, and overall satisfaction to ensure the provider meets their expectations and adjust the relationship as needed. Interaction: • Firms communicate their logistics needs and requirements to UPS. • UPS provides tailored solutions and proposals. • Firms and UPS engage in ongoing feedback and adjustments to optimize service. 2. Manufacturers, resellers, government, and auctioneers on eBay all have alternative delivery options. Describe some ways that UPS provides greater value to these various types of customers than its competitors can. (You may want to review its website at http://www.UPS.com.) Instructor’s Notes: This question asks students to apply their knowledge of B2B processes to the specific situation of this case – providing delivery of goods – and think about how UPS adds value to companies. Example answers: "UPS is a global company with one of the most recognized and admired brands in the world. We have become the world's largest package delivery company and a leading global provider of specialized transportation and logistics services. Every day, we manage the flow of goods, funds, and information in more than 200 countries and territories worldwide." (http://www.ups.com/content/us/en/about/index.html) UPS is able to handle a vast array of its client company’s operations, including storage, assembly, and repair of merchandise. It even provides customer service functions that demand minimal client involvement. UPS Value Proposition for Different Customer Types: 1. Manufacturers: • Supply Chain Solutions: UPS offers integrated logistics services, including warehousing, inventory management, and supply chain optimization. • Global Reach: Reliable international shipping capabilities ensure timely delivery across global markets. 2. Resellers: • Shipping Flexibility: Multiple shipping options, including express and ground services, to meet varied customer demands. • Tracking and Visibility: Advanced tracking systems provide real-time updates on shipments. 3. Government: • Secure Shipping: Adherence to strict security protocols and compliance with government regulations. • Customized Solutions: Tailored logistics solutions for handling sensitive and high-volume shipments. 4. Auctioneers on eBay: • Cost-Effective Shipping: Competitive rates and options for discounted shipping services. • Integration: Seamless integration with eBay for easy label creation and shipment tracking. UPS differentiates itself through its comprehensive service offerings, advanced technology, and global infrastructure, providing tailored solutions to meet the diverse needs of these customer segments. Video Activities Video: MappedIn – Mapping your Way (CBC’s Dragons’ Den) Learning Objective: LO2, LO4 Description: This video provides a real world pitch by two entrepreneurs on CBC’s Dragons’ Den. Hongwei Liu and Desmond Choi attracted the interest of all the Dragons with their navigational solution for hospitals, malls, casinos and university campuses. Although the video clip ends with them making a deal with three of the Dragons, MappedIn owners were able to sign a deal with a large partner in the US and so backed away from the deal offered on the show. The video introduces some of the complexities involved with B2B buying and contrast them with consumer markets. Key Words: B2B buying process; need recognition; product specification; RFP process; proposal analysis and supplier selection; order specification; vendor performance analysis. Activity: Ask students to view the video and consider how much easier their first days and weeks on campus have been if they had a navigational system such as MappedIn. Ask them to consider the B2B buying process and ask what they think it would take to have a MappedIn solution implemented on their campus. Have them compare the B2B buying process described to that of the consumer buying process, particularly with respect to the buying process characteristics described in Exhibit 5.2 and then develop a list of specifications they think would be important. Students could also be asked to make a list of the factors that influence the buying process as this could be an interesting segue to discuss the factors affecting the buying process. Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9781259030659, 9781259104312
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