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Chapter Six: Business-to-Business Marketing Chapter Objectives Describe the nature and composition of B2B markets Explain the key differences between B2B buying and B2C buying Explain the ways B2B firms classify and segment their markets Describe the B2B buying process Describe the factors that influence the B2B buying process Summarize how the Internet has enhanced B2B marketing Annotated Chapter Outline PowerPoint Slides Instructor’s Notes The chapter objectives and roadmap 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 about $3 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. 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 women 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. Topic One: 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. Manufacturers or Producers Buy Raw Materials to Manufacture Goods. When a company like Airbus buys raw materials to build their planes, it is a B2B. When they sell the plane to United, it is a B2B. When United sells a seat to you it is a B2C. 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 A. Institutions Purchase a Variety of Goods and Services Hospitals. Education providers. 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. 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. a. Key Challenges of Reaching B2B Clients Identify the right person in the buying organization Understand the buying process in the buying organization 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. 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. 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. 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 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. 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. The B2B Classification System Is Standardized The North American Industrial Classification System (NAICS) categorizes all firms into a hierarchical set of six-digit numbers. As the NAICS system has evolved, more categories have been added. Click http://www.census.gov/epcd/www/naics.html to visit the NAICS site. Type in a common product (e.g. shoes) and walk students through the classification system. . Topic Two: 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. A. Stage 1: Need Recognition. The buying organization recognizes, through either internal or external sources, that it has an unfilled need. 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. I. Stage 2: Product Specification The organization considers alterative solutions to the recognized need and comes up with potential specifications. Buyers often work with suppliers to develop specifications based on their extensive expertise. 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. A. Stage 3: RFP Process During the request for proposal (RFP) process, buying organizations invite alternative suppliers to bid on the right to supply the necessary components. 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 (http://contractscanada.gc.ca/en/tender-e.htm) 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. The buying organization and its key decision makers evaluate all proposals in response to an RFP. 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 Stage 5: Order Specification (Purchase) The buyer places an order with its chosen supplier or suppliers. 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 Firms analyze their vendors’ performance to make decisions about future purchases. The buying team develops a list of issues it believes are important to consider in the evaluation of vendors. The buying team assigns an importance score to each issue, such that more important issues receive higher scores. The buying team assigns numbers that reflect its judgments about how well the vender has performed. 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. Topic Three: Factors Affecting the Buying Process This slide sets up the slides to follow. The Buying Centre Consists of Various Participants These participants range from employees with a formal purchasing role to members of the design team. The initiator is the member who first suggests buying the particular product or service. An influencer is a member whose views influence other members in making the final decision. The decider ultimately determines either a portion of or the entire buying decision. A buyer handles the paperwork associated with the actual purchase. Users are those who consume or use the purchased product or service. 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 Organizational Culture Reflects the Values, Traditions, and Customs that Guide Employees’ Behaviour In an autocratic buying centre, though there may be multiple participants, one person makes the decision. In a democratic buying centre, the majority rules. Consultative buying centres mean one person makes the decision but solicits input from others. 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. Buying Situations Take Three Forms 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. During a modified rebuy, the buyer has purchased a similar product in the past but decided to change some specifications. 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 Topic Three: The Role of the Internet in B2B Marketing The Internet Enables Private Exchange. A specific firm invites other to join. Private exchanges help streamline procurement and distribution processes. The Internet has increased the frequency of both private electronic exchanges and auctions. Although the specific analysis of e-commerce appears later in the text, throughout the semester, you should ask students to consider how technology has changed marketing as a whole. Case-in-Point Series This slide introduces the Case in Point Criminals have become quite proficient at inserting counterfeit goods into legitimate distribution channels, costing consumers millions of dollars and endangering them in areas such as pharmaceuticals. Consumers think they are taking one drug but may wind up ingesting something that could kill them. New technology attempts to ensure the safety of a distribution system. RFID (Radio Frequency Identification) Tiny computer chips that automatically transmit to a special scanner all the information about a container’s contents or individual products. Instructor Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9780071320382, 9780070984929
