Marketing Notes Chapter 6.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2320A/B
Kenneth Bowlby

Marketing Notes Chapter 6 Business-to-Business Marketing Business to business marketing – process of buying or selling goods and services to be used in the production of other goods and services, for consumption by the buying organization, or resale by wholesalers or retailers Difference between B2C and B2B is the ultimate purchaser and user of the product or service B2B Markets B2B focus their efforts on serving specific types of customer markets to create value for those customers Many firms find it more productive to focus their efforts in key industries or market segments rather than on ultimate consumers Manufacturers or Producers Usually purchase raw materials, components, and parts that allow them to manufacture their own goods They work with corporate partners such as transporters, to facilitate the movement of raw materials to the factory, and retailers to move finished products to the stores They demand social responsibility of their suppliers (environmental) Resellers Resellers – marketing intermediaries that resell manufactured products without significantly alter their form Institutions Examples: Hospitals, educational organizations prisons, religious organizations, and non-for profits Government Largest purchaser of goods and services Key Challenges Of Reaching B2B Clients 1. Identify right person who can authorize/influence organizational purchases 2. Understand buying process of potential clients 3. Identify influential factors of buying process of potential clients Governments don’t always purchase from the vendor with the lowest price Institutional organizations are not under scrutiny and rarely expose purchase decisions Private sector rarely, if ever exposes their buying criteria B2B Markets usually have sales teams dedicated to specific clients Differences Between B2B and B2C Markets Characteristics of B2B buying as compared with B2C buying: Market Characteristics B2C Consumers buy goods to satisfy individual/household needs Influenced by price, tastes, brand reputation, recommendations B2B Demand for goods and services is derived from B2C sales in the supply chain Derived Demand – Linkage between consumers demand for a company’s output and its purchase of necessary inputs to manufacture or assemble that particular output Demand is inelastic (total demand is not affected by price in the short run) Fewer buyers than in B2C markets Sizes of orders are larger than B2C Product Characteristics B2B Products ordered are primarily raw materials or semi finished goods that are processed into finished goods Products are very technical and sophisticated (must conform to specifications) Goods undergo rigorous testing before shipping Goods delivered on pre-determined dates B2C Consumer buys finished goods for consumption Buying Process Characteristics B2B Small purchases – few individuals responsible for buying decisions Technical/complex/expensive purchases – buying effort is much more structured, formalized, and professional Many people involved (usually trained and represent different interests) Referred to as buying center Most companies have formal policies and procedures Nature of relationship between firm and supplier Buying contract based off negotiations (price, delivery, warranty, technical specifications, claim policies) B2B focus on developing long-term relationship’s with suppliers Reciprocal buying – some firms agree to buy each others products Consequences are (1) excludes other vendors and (2) limits firms to each other products Marketing Mix Characteristics Major difference between B2B and B2C is the role of the salesperson Most fast moving consumer goods (FMCG) don’t require a sales person B2B a sales person is crucial B2B Classification System And Segmentation North American Industry Classification System (NAICS) Codes – classifies all firms into a hierarchal set of 6-digit codes Digit Represents First and Second Economy sector Third Subsector Fourth Industry Group Fifth Specific subgroup within the industry Sixth Country level or national industry Example: Economic activity divided into 20 sectors and 928 industries NAICS replaced Standard Industrial Classification (SIC) NAICS is useful for targeting and segmenting markets Marketers may segment B2B markets via geographic location, firm size, account size, and types of products purchased The B2B Buying Process Step 1: Need Recognition The buying organization recognizes a need through internal or external sources Through supplier’s salespeople, tradeshows, ads in trade journals, Internet searches, and white papers Step 2: Product Specification Organization considers alternative solutions and comes up with potential specifications that suppliers might use to develop their proposals to supply the product Step 3: Request For Proposals (RFP) Process
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