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Chapter 6

Chapter 6 BU352.docx

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Dave Ashberry

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BU352 Chapter 6 – Business-to-Business Marketing Week 4 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 for resale by wholesalers and retailers B2B Markets -Firms focus their efforts on serving specific types of customer markets to create value for those customers -Many firms find is more productive to focus their efforts on key industries or market segments rather than on ultimate consumers Manufacturers or Producers -Some of the biggest B2B buyers are manufacturers and producers -Today, many B2B companies are demanding, as a condition for doing business, that suppliers demonstrate social responsibility by putting in place policies and practices to reduce their carbon footprint Resellers -Resellers- marketing intermediaries that resell manufactured products without significantly altering their form Institutions -Institutions such as hospitals or schools also purchase all kinds of goods and services for the people they serve Government -In most countries, the central government tends to be one of the largest purchasers of goods and services Key Challenges of Reaching B2B Clients -The first challenge is to identify the right persons r decision makers within the organizations who can authorize or influence purchases -Second, marketers must understand the bying process of each of its potential clients -The third challenge is to identify the factors that influence the buying process of each of its potential clients -If two suppliers are offering roughly similar products, they may opt for the supplier with the lowest price -To address the complexity of B2B markets, many companies have salespeople or a sales team dedicated to specific clients – Ex. The Office Differences Between B2B and B2C Markets Market Characteristics -Demand for business products is derived -Fewer customers, more geographically concentrated, and orders are larger -Demand is more inelastic, fluctuates more, and more frequently Product Characteristics -Products are technical in nature and purchased based on specifications -Mainly 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 is more complex -Buying may involve competitive bidding, negotiated pricing and complex financial arrangements -Buying involves qualified, professional buyers who follow a more formulized buying process BU352 Chapter 6 – Business-to-Business Marketing Week 4 -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 exist, and negotiations between buyers and sellers are common -Buyers and sellers usually work closely to build close long-term relationships -Online buying over the Internet is common Marketing Mix Characteristics -Direct selling is the primary form of selling and physical distribution is often essential -Advertising is 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 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 -The NAICS system can be quite useful to B2B marketers for segmenting and targeting markets -Marketers may segment B2B markets in several other ways, including geographic location, firm size, account size, and types of products purchased The B2B Buying Process Stage 1: Need Recognition -The buying organization recognizes, through either internal or external sources, that it has an unfulfilled need Stage 2: Product Specification -After recognizing the need, the organization considers alternative solutions and comes up with potential specifications that suppliers might use to develop their proposals to supply the product Stage 3: RFP Process -Request for proposals (RFP) – a process through which buying organizations invite alternative suppliers to bid on supplying their required components Stage 4: Proposal Analysis and Supplier Selection -The buying organization evaluates all the proposals it receives in response to its RFP -Firms are likely to narrow the process to a few suppliers, often those with which they have existing relationships, and discuss key terms of the sale, such as price, quality, delivery, and financing Stage 5: Order Specification (Purchase) -The firm places its order with its preferred supplier -The order will include a detailed description of the goods, prices, delivery data, and, in some cases, penalties if the order is not filed on time Stage 6: Vendor Performance Assessment Usi
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