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Lecture

ECON344 Lecture Notes - Franchising, Alcon, Personal Selling


Department
Economics
Course Code
ECON344
Professor
Brent Barr

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Chapter 7 Business-to-Business 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 form
- Manufacturers sell to wholesalers/retailers (B2B transaction), then retailers sell to ultimate
consumers (B2C transaction)
o Wholesalers, Distributors, Retailers are all resellers
Institutions: hospitals, educational organizations, prisons, and other non-profit organizations
- Purchase goods and services for people they serve
Government: largest purchasers of goods and services
Differences between B2B and B2C Markets (About B2B)
Market Characteristics
- Demand for business products is derived
- Fewer customers, more geographically concentrated, orders are larger
- Demand is more inelastic, fluctuates more, and more frequently
Product Characteristics
- Products are technical in nature, purchased based on specifications
- Main 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 more complex
- Buying may involve competitive bidding, negotiated pricing, complex financial arrangements
- Qualified, professional buyers who follow more formalized buying processes
- 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/sellers are common

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- Buyers/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
Business-to-Business Buying Process
Step 1: Need Recognition
- Recognized either internally or externally
- Internal: design teams, development teams
- External: customers complaints, suppliers
Step 2: Product Specifications
- Considers alternative solutions
- Comes up with potential specifications that suppliers might use to develop their proposals to
supply the product
Step 3: RFP Process
- Request 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 Selection
- Evaluates all proposals it receives in response to its RFP
- Narrows process to few suppliers, often with existing relationships
o Discusses terms of sale (i.e. price, quality, delivery, financing)
o Firms may have policy to deal with several suppliers to create flexibility on switching to
better supplier as alternative
Need Recognition Product
Specification RFP Process
Proposal Analysis,
Vendor
Negotiation,
Supplier Selection
Order
Specification Vendor Analysis

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Step 5: Order Specifications
- Places order with preferred supplier(s)
o Includes description of goods, prices, delivery dates, penalties
- Supplier will send acknowledgement after order has been received
Step 6: Vendor Analysis
- Analyzes vendors’ performance about future purchases (more formal and objective)
Factors Affecting the Buying Process
Buying Centre group of people typically responsible for buying decisions in large organizations
Initiator Buying centre participant who first suggested buying particular product or service
Influencer Buying centre participant whose views influence other members in making final decision
Decider Buying centre participant who ultimately determines buying decision (what, how, where)
Buyer Buying centre participant who handles paperwork of actual purchase
User Person who consumers product or service purchased by buying centre
Gatekeeper Buying centre participant who controls information or access to decision-makers and
influencers
Organizational Culture Reflects set of values, traditions, and customs that guide a firm’s employee’s
behaviour
Autocratic Buying Centre One person makes decision alone, though there may be multiple participants
Democratic Buying Centre Majority rules in making decisions
Consultative Buying Centre One person makes decision but s/he solicits input from others beforehand
Consensus Buying Centre All members of team must reach collective agreement that they can support
a particular purchase
Buying Situations
Straight Rebuy buying the same product repeatedly (buying the same red pen)
Modified Rebuy buying modified product (specs, prices, terms, or suppliers) (i.e. buying a blue pen
instead of a red pen)
New Buy a new purchase (first time buying a red pen)
- Designers and engineers can absolutely alter the buying decision (looking for specific specs, that
only certain firms can offer)
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