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Marketing - Ch 7.docx

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Chapter 7: Business to Business Marketing Business to Business Marketing (B2B): 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 - Involves: manufacturers, retailers, wholesalers, service firms, just not the ultimate consumer - Difference between B2B and B2C (consumer) is: o The ultimate purchaser, the ultimate user of the product or service o Ultimate user is a business B2B Markets - 4 different organizations in the B2B Market o Resellers o Manufacturers o Institutions o Government Manufacturers/Producers - Buy raw materials, components, and parts to manufacture their own goods - Biggest B2B buyer Resellers - Marketing intermediaries that resell manufactured products without significantly altering their form - Includes wholesalers, distributors, and retailers - Wholesalers and distributors who buy from manufacturers and then sell to retailers - Resellers to Retailers (B2B transaction) - Retailer to Consumer (B2C transaction) Institutions - Hospitals, educational organizations, prisons, religious organizations, nonprofit organizations - Purchase goods for the people they serve Government - Central government one of the largest purchasers of goods and services - Close to 450 billion dollars in spending, by agencies, crown corporations - Treasury Board requires that Contracting policies of the Canadian government will be done in a manner that: o Stands the test of public scrutiny, increase access, encourage competition, reflect fairness o Comply with Canada’s trade obligations under NAFTA, World Trade Organization Agreement, Agreement on International Trade 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 - Developed by Canada, USA, and Mexico - To provide comparable statistics about business activity in all of North America - Groups economic activity into 20 sectors and 928 Canadian Industries - For the 6 digit code: o First 2 digits- represents the sector in the economy (eg. Wholesale) o 3 digit- represents the subsector (eg. Household goods wholesale) th o 4 digit- represents the industry group o 5 digit- specific subgroup within the industry o full 6digits represent country level or national industry - Used to analyze market shares, demand for goods and services, import competition for Canadians, segmenting and targeting markets - B2B firms also want to serve specific target market to create value for the customers - Segment B2B business consumers by: o Size of company o End use application on the way the business consumer’s customers use the product o Geographic location o Benefits sought by their customers Differences between B2B and B2C Markets Market Characteristics B2C B2B - Consumers buy goods to - Demand for goods is derived from B2C sales in the satisfy their own same supply chain individual/household - Derived Demand: the linkage between consumers’ needs and wants demand for a company’s output and its purchase - Influenced by price, of necessary inputs to manufacture or assemble personal tastes, brand rep, that particular output recommendations from - Based on how much consumers want, business family/friends must buy enough input to ensure that they can produce enough output - Demand for business is based on demand by individual consumers - Demand in business markets (ex.raw materials) is almost inelastic (total demand for goods not affected by price in short run) - There are a lot less number of B2B buyers than in B2C markets - B2B buyers are concentrated in big cities and industrial areas - Order sizes in B2B purchases are substantially larger than consumer purchases Product Characteristics B2C B2B - Consumers - Products are primarily raw materials and semi finished goods to be buy finished processed or assembled into finished goods for the ultimate consumers goods for - Some products must be very technical and sophisticated, thus have their own high standards, must go through rigorous quality testing personal - Orders must be delivered on dates when agreed (could mess up supply consumption chain) - Vendor financing Buying Process Characteristics B2C B2B - - For big purchases, have structured, formalized, professional process - Many people involved in complex buying decisions, - Follow formal policies and procedures to guide buying decision - Procedures about: competitive bidding, negotiated prices, financial arrangement, buying criteria - Relationship between firm and supplier, has negotiated contracts (price, delivery, specifications) - Buyers and sellers strive to have a close relationship to ensure a win- win situation for both parties - Reciprocal buying arrangements (2 firms agree to buy each other’s products/services) has pros and cons Marketing Mix Characteristics B2C B2B - salespeople’s importance - Sales people are integral to the transaction depends on product for sale. - Sales people really really important to make B2B - Ex. houses, jewlerry the sales transaction person is important, for grocery - Ex. pharmaceutical manufacturers rely on sales reps stores, not important to sell drugs to doctors The Business to Business Buying Process Differences in B2B Business Buying Process: - B2B buyers specify needs in writing and suppliers must submit proposals (B2C buyer just buys product, can be unplanned) - B2B decisions usually made by committees
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