MOS 2320 Chapter 6 - Business to Business Marketing.docx

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Management and Organizational Studies
Management and Organizational Studies 2320A/B
Gail Leizerovici

Chapter 6: Business to Business Marketing Business to Business (B2B) Marketing: the 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 resale by wholesalers and retailers Difference between B2B and B2C transaction is not the product or service itself; rather, it is the ultimate purchaser and the user of that product or service B2B Markets Manufacturers or Producers - Manufacturers: buy raw materials, components and parts that allow them to manufacture their own goods - Many B2B companies demanding, as a condition of doing business, that suppliers demonstate social responsibility by reducing carbon footprint Resellers - Marketing intermediaries that resell manufactured products without significantly altering their form - Wholesalers, retailers, distributors are resellers Institutions - Such as hospitals, educational organizations, prisons, religious organizations, and other nonprofit organizations Governments - In most countries the central government tends to be one of the largest purchasers of goods and service Key Challenges of reaching B2B Clients (3 challenges) 1. Identify the right persons or decision markers within the organizations who can authorize or influence purchases 2. Marketers must understand the buying process of each of its potential clients 3. Identify the factors that influence the buying process of potential clients Institutions usually have lower budgets so they go for cheaper products Governments have higher budgets but their purchases have to satisfy policies and rules set under WTO and NAFTA Manufacturers (private sector) rarely if ever disclose their buying criteria - Usually engage in reciprocal buying  we buy your shit if you buy ours Differences Between B2B and B2C Markets Market Characteristics - B2C; consumers buy goods to satisfy their own individual needs or household needs o They are highly influences on price, personal tastes, brand reputation or personal recommendations - B2B; demand for g&s is derived from B2C sales in the same supply chain. o Derived demand: the linkage between consumers’ demand for a company’s output and its purchase of necessary inputs to manufacture or assemble that particular output Product Characteristics: - B2C; consumers buy finishes goods for their own personal consumption - B2B; products ordered are primarily raw materials or semifinished goods that are processed and assembled into finished goods for ultimate consumers o Technical services and financing assistance are important aspects of B2B Buying Process Characteristics - For small dollar or routine purchases only one or few individuals within a department are responsible for the buying decision o Can’t negotiate a price with a LuluLemon associate - Larger purchases; the buying is more structured, formalized and professional o contract based on negotiations Marketing Mix Characteristics - B2C; most fast moving consumer goods (FMCG) are not sold with the aid of sales people - B2B; sales person is an integral component of the transaction o Pharmaceutical manufactures rely on sales reps to promote their drugs to doctors B2B Classification System and Segmentation North American Industry Classification System (NAICS) codes - A classification scheme that categorizes all firms into a hierarchical set of six-digit codes - Canada, US & Mexico - First 2 digits; sector in the economy - 3 digit; subsector - 4 digit; industry group th - 5 digit; specific group within the industry The B2B Buying Process - Parallels the B2C process buy the information search and alternative evaluation stage are more formal and structures in the B2B process Step 1: Need recognition - Recognize through internal or external sources that it has an unfilled need Step 2: Product Specification - Organization then considers alternative solutions and comes up with potential specifications that
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