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Chapter 5

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Department
Business
Course
74-231
Professor
Alex Wellington
Semester
Winter

Description
Chapter 5: Think Business Marketing 2013-02-11 9:49 PM 1)#Learning#Objective#1:#describe#business#marketing# • Business!Marketing:!the!marketing!of!goods!and!services!to!individuals!and! organizations!for!purposes!other!than!personal!consumption# • Business!marketing!is!the!most!important!in!terms!of!volume# • More!goods!are!sold!businessTtoTbusiness!than!to!consumers# • Ex:!All!the!desks,!tables!and!chairs!in!this!classroom!were!sold!to!the!university!# • Organizational!use,!not!personal!use!# o I!could!be!using!a!Mac!book!for!personal!uses,!but!the!professor!could!be! using!a!Mac!book!from!the!university!for!organizational!use# • Business!products:!the!key!differentiator!between!consumer!products!and!business! products!is!intended!use,!as!opposed!to!physical!characteristics!in!the!former!case! o Are!used!to!manufacture!other!products! o Aid!the!normal!operations!of!an!organization! o Are!acquired!for!resale!without!change!in!form# • B2B!–!business!to!business!marketing# • B2C!–!business!to!consumers!marketing# • Three!primary!marketing!goals!of!business!marketers:!customer!acquisition,!creating! brand!awareness!and!customer!retention# • Major!categories!of!Business!Customers:# o Producers:!OEMs# o Resellers:!Wholesalers,!retailers# o Governments:!Federal,!municipal,!local# o Institutions:!Schools,!churches,!hospitals,!colleges,!fraternal!groups,!unions,! foundations,!civic!clubs,!non!business!organizations,!etc# • There!are!over!1!million!organizations!in!Canada!–!that’s!one!for!every!34!people!# • The!size!of!business!market!exceeds!that!of!the!consumer!market# # 2)#Learning#Objective#2:#describe#the#role#of#the#internet#in#business#marketing# • The!use!of!the!Internet!to!facilitate!activities!between!organizations!is!called!B2B!eT commerce!(business!to!business!electronic!commerce)# • Has!evolved!and!grown!rapidly# • Offers!tremendous!opportunities!for!firms!to:!increase!efficiency,!reduce!costs,! improve!customer!service,!create!one!to!one!relationships,!introduce!new!products! and!expand!markets# • Trends:!half!of!private!business!don’t!have!websites,!and!only!8%!sell!goods!online# • Internet!provides!a!good!platform!for:!conveying!information,!conducting! transactions,!delivering!innovative!services,!building!customer/supplier! relationships,!gathering!marketing!research!data,!reducing!costs,!integrating!the! entire!supply!chain# • Measuring!online!success:# o Recency!–!consumer!who!made!a!purchase!is!more!likely!to!purchase!again! in!the!near!future!than!those!who!haven’t!purchased!in!a!while# o Frequency!–!frequent!purchasers# o Monetary!value!–!important!because!big!spenders!can!be!the!most!profitable! customers# o Stickiness!=!Frequency!x!Duration!x!Site!Reach# • B2B!Internet!Trends:# o 90%!of!business!buyers!go!to!internet!at!some!point!during!the!buying! process,!and!over!50%!start!the!process!online# o RSS!feeds!not!used!as!much!as!they!should!be# o Evolved!from!just!having!a!website!to!having!a!store!that!attracts,!interests,! satisfies!and!retains!customers# o Disintermediation:!eliminating!intermediaries!such!as! wholesalers/distributors!from!a!marketing!channel!# " Ex:!Dell# " Has!occurred!less!frequently!than!expected!# # 3)#Learning#Objective#3:#discuss#the#role#of#relationship#marketing#and#strategic#alliances#in# business#marketing# • Relationship!marketing!involves!seeking!and!establishing!ongoing!partnerships!with! customers# • Loyal!customers!are!more!profitable!# • Strategic!alliance:!aka!strategic!partnership,!is!a!cooperative!agreement!between! business!companies# o Can!be!licensing/distribution!agreements,!joint!ventures,!research!and! development!consortia,!or!partnerships# o Combination!of!assets# o Ex:!Para!Paints!supplying!Lowes# o Ex:!DHL!and!UPS!teaming!up!in!times!of!rising!fuel!prices# o Sharing!call!centre!agents# o Relationship!commitment:!a!firm’s!belief!that!an!ongoing!relationship!with! another!firm!is!so!important!that!the!relationship!warrants!maximum!efforts! at!maintaining!it!indefinitely!# • Relationships!in!other!cultures:# o Businesses!in!Mexico,!China,!Japan,!Korea!and!Europe!rely!heavily!on! personal!relationships# o Amae:!feeling!of!nurturing!concern!for,!and!dependence!on!another!–! popular!in!Japan# o Heiretsu!–!a!network!of!interlocking!corporate!affiliates# o Need!to!build!personal!relationships!with!Asian!companies!in!order!to!do! business!with!them!# # LO 4 Review Learning Outcome 4)#Learning#Objective#4:#identify#the#Business Market Customersiness#market#customers# • See!figure:!Business!Marketing# Business Marketing Producers Resellers Governments Institutions OEMs Wholesalers Federal Unions Churches Civic Retailers Provincial Clubs Foundations Territorial Other Nonprofits M.A.S.H. CCoop©22Neellssoomiitteedd.. AAllll rriig3hhttss rreesseerrvveedd.. • Producers:# o Includes!profit!oriented!individuals!and!organizations!that!use!goods!to! produce!more!products# o Ex:!construction,!manufacturing,!transportation,!real!estate,!finance,!food! service# o OEM:!original!equipment!manufacturer!–!a!company!that!buys!business! goods,!which!it!then!incorporates!into!the!products!it!produces!for!eventual! sale!to!other!producers!or!to!consumers.!An!example!is!GM,!who!buys!steel,! paint,!tires!and!batteries!in!order!to!make!cars# # • Resellers:# o Includes!retail!and!wholesale!businesses!that!buy!finished!goods!and!resell! them!for!a!profit# o Retailer!sells!mainly!to!final!consumers!while!wholesalers!sell!mostly!to! retailers!and!other!organizational!customers# o Business!product!distributors:!wholesalers!that!buy!business!products!and! resell!them!to!business!customers.!They!often!carry!lots!of!stock!and!have! sales!forces# • Governments:# o Senior!government!organizations!are!represented!by!one!federal,!ten! provincial!and!three!territorial!units# o MASH!sector!(Municipal,!Academic,!Social,!Hospitals)!includes!around!6000! buying!units!# " Selling!to!this!sector!can!be!less!frustrating;!paperwork!is!typically! simpler!as!its!not!under!the!AIT!usually# o Make!up!the!largest!single!market!for!goods!and!services# o Use!open!tendering,!which!allows!them!to!predetermine!the!terms!of! engagement!with!potential!suppliers,!set!out!requirements!and!terms!of!the! potential!deal!and!bind!competing!suppliers!to!their!offers!for!a!time!while! competing!offers!are!compared!# o Purchases!subject!to!the!AIT,!Agreement!on!Internal!Trade# o Most!of!the!federal!government’s!buying!is!centralized,!however!no!single! agency!contracts!for!all!of!its!requirements# • Institutions:!# o Seek!to!achieve!goals!other!than!profit,!market!share!and!return!on! investment# o Excludes!MASH!sector,!includes!churches,!labour!unions,!fraternal! organizations,!civic!clubs,!foundations!and!non!for!profit!organizations# # 5)#Learning#Objective#5:#explain#the#North#American#Industry#Classification#System# • NAICS:!a!detailed!numbering!system!developed!by!Canada,!the!United!States,!and! Mexico!to!classify!North!American!business!establishments!by!their!main!production! processes.!Introduced!in!1997# • This!system!iExample of NAICS Hierarchyelves# • Example!of!NAICS!hierarchy:!see!figure# NAICS Sector Subsector Industry Industry Level Group Services NAICS 31-33 334 3346 334611 Code DescriptionanufacturComputer Mfg. and Software electronic reproductreproducing product magnetic/ manufacturioptical media # • NAICS:# LO 5 CCoo©22Neellssoomiitteedd.. AAllll rriig5hhttss rreesseerrvveedd.. o Provides!a!common!industry!classification!system# o Valuable!tool!for!marketers!in!analyzing,!segmenting,!and!targeting!markets# o Data!can!be!used!to!determine:# " Number,!size!and!geographic!dispersion!of!firms! " Market!potential/market!share!estimates! " Sales!forecasts! " New!customer!identification# o Each!classification!group!is!relatively!homogenous!with!respect!to!the!raw! materials!required,!components!used,!manufacturing!processes!employed,! and!problems!faced# o More!digits!in!code!=!more!homogenous# o First!2!digits:!major!economic!sector# o Third!digit:!economic!subsector!(ex:!crop!production)# o Fourth!digit:!designates!an!industry!group!(yarn,!thread!mills,!fiber,!for! example)# o Fifth!digit:!designate!the!NAICS!industry,!such!as!wheat!farming# o Sixth!digit:!sometimes!used,!identifies!subdivisions!of!NAICS!industries!that! accommodate!user!needs!in!individual!countries# ! 6)#Learning#Objective#6:#explain#the#major#differences#between#business#and#consumer# markets! • Business!and!consumer!markets!have!a!lot!of!similarities,!but!there!are!key! differences!as!well!in!their!behaviour# • See!figure!(Business!vs.!Consumer!Markets)# Demand Organizational Individual Volume Larger Smaller # of CustomersFewer Many Location Concentrated Dispersed Distribution More Direct More Indirect Nature of Buy More Professional More Personal Buy Influence Multiple Single Negotiations More Complex Simpler Reciprocity Yes No Leasing Greater Lesser Promotion Personal Selling Advertising # LO 6 CCooppyyrriigghhtt ©©22001112 NNeellsso6nn EEdduuccaattiioonn LLiimmiitteedd.. AAllll rriigghhttss rreess
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