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Chapter Summaries 7,9-17 Summarized notes from the textbook. Includes definitions!

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ECON 344
Brent Barr

Chapter 7BusinesstoBusiness Marketing Definition Process of buying and selling goods or services to be used in the production of other goods and services for consumption by the buying organization or for resale by wholesalers and retailers B2B Markets Manufacturers buy raw materials that allow them to manufacture their own goods Resellers Marketing intermediaries that resell manufactured products without significantly altering their formManufacturers sell to wholesalersretailers B2B transaction then retailers sell to ultimate consumers B2C transaction o Wholesalers Distributors Retailers are all resellers Institutions hospitals educational organizations prisons and other nonprofit organizationsPurchase goods and services for people they serve Government largest purchasers of goods and services Differences between B2B and B2C Markets About B2B Market CharacteristicsDemand for business products is derivedFewer customers more geographically concentrated orders are largerDemand is more inelastic fluctuates more and more frequently Product CharacteristicsProducts are technical in nature purchased based on specificationsMain raw and semifinished goods are purchasedHeavy emphasis is placed on delivery time technical assistance after sale service and financing assistance Buying Process CharacteristicsBuying decision more complexBuying may involve competitive bidding negotiated pricing complex financial arrangementsQualified professional buyers who follow more formalized buying processesBuying criteria and objective are specified as are procedures for evaluating and selecting vendors and productsMultiple people with varied interests participate in purchase decisionsReciprocal arrangements exists and negotiations between buyerssellers are commonBuyerssellers usually work closely to build close longterm relationshipsOnline buying over the Internet is common Marketing Mix CharacteristicsDirect selling is primary form of selling and physical distribution is often essentialAdvertising are technical in nature and promotions emphasize personal sellingPrice is often negotiated inelastic frequently affected by trade and quantity discountsPrice usually includes a service or maintenance component BusinesstoBusiness Buying Process Proposal Analysis Product Order Vendor Need Recognition RFP Process Vendor Analysis Negotiation Specification Specification Supplier SelectionStep 1 Need RecognitionRecognized either internally or externallyInternal design teams development teamsExternal customers complaints suppliers Step 2 Product SpecificationsConsiders alternative solutionsComes up with potential specifications that suppliers might use to develop their proposals to supply the product Step 3 RFP ProcessRequest for Proposals common process through which buying organizations invite alternative suppliers to bid on supplying their required components Step 4 Proposal Analysis Vendor Negotiation Supplier SelectionEvaluates all proposals it receives in response to its RFPNarrows process to few suppliers often with existing relationships o Discusses terms of sale ie price quality delivery financing o Firms may have policy to deal with several suppliers to create flexibility on switching to better supplier as alternative Step 5 Order SpecificationsPlaces order with preferred suppliers o Includes description of goods prices delivery dates penaltiesSupplier will send acknowledgement after order has been received Step 6 Vendor AnalysisAnalyzes vendors performance about future purchases more formal and objective Factors Affecting the Buying Process Buying Centregroup of people typically responsible for buying decisions in large organizations InitiatorBuying centre participant who first suggested buying particular product or service InfluencerBuying centre participant whose views influence other members in making final decision DeciderBuying centre participant who ultimately determines buying decision what how where BuyerBuying centre participant who handles paperwork of actual purchase UserPerson who consumers product or service purchased by buying centre GatekeeperBuying centre participant who controls information or access to decisionmakers and influencers Organizational CultureReflects set of values traditions and customs that guide a firms employees behaviour Autocratic Buying CentreOne person makes decision alone though there may be multiple participants Democratic Buying CentreMajority rules in making decisions Consultative Buying CentreOne person makes decision but she solicits input from others beforehand Consensus Buying CentreAll members of team must reach collective agreement that they can support a particular purchase Buying Situations Straight Rebuybuying the same product repeatedly buying the same red penModified Rebuybuying modified product specs prices terms or suppliers ie buying a blue pen instead of a red penNew Buya new purchase first time buying a red penDesigners and engineers can absolutely alter the buying decision looking for specific specs that only certain firms can offer
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