Why Organizations Buy: Business-to-Business Markets and B2B E-Commerce

1
Chapter 7

• Why Organizations Buy Business-to-Business
  Markets and B2B E-Commerce

2
Chapter Objectives_1

• Describe the general characteristics of
  business-to-business markets and business buying
  practices
• Tell how marketers classify business and
  organizational markets

3
Chapter Objectives _2

• Explain the business buying situation and
  describe business buyers
• Understand the stages of the business buying
  decision process
• Understand the growing role of B2B E-Commerce

4
Business-to-Business Marketing

• Marketing of goods and services that businesses
  and organizations buy for purposes other than
  personal consumption
• Also called organizational markets

5
Characteristics of B2B Markets

• Generally, the same principles are true for
  business and consumer customers
• There are characteristics that make B2B buying
  more complex
• Multiple buyers
• Number of customers
• Size of purchases
• Geographic concentration

6
B2B Demand Characteristics

• Derived Demand
• Inelastic Demand
• Fluctuating Demand
• Joint Demand

7
Derived Demand

• B2B demand is derived demand because a businesss
  demand for goods and services comes either
  directly or indirectly from consumers demands

8
Inelastic Demand

• Inelastic demand means that business customers
  buy the same quantity whether the price goes up
  or down
• Example A BMW Z3 Roadster 2.5i has a list price
  starting at just over 30,000. If the price of
  tires, batteries, or stereos goes up or down, BMW
  still must buy enough to meet consumer demand for
  the Z3.

9
Fluctuating Demand

• Small changes in consumer demand can create large
  increases or decreases in business demand
• Acceleration principles (multiplier effect) means
  that changes in consumer behavior has a ripple
  effect through several related businesses

10
Joint Demand

• Joint demand occurs when two or more goods are
  necessary to create a product
• Companies try to avoid dependence on specific
  suppliers by dealing with multiple suppliers
  whenever possible

11
B2B Classifications

• Producers
• Resellers
• Governments
• Government contracts often require competitive
  bids
• Requests for proposals (RFPs) are posted in the
  Commerce Business Daily
• Not-for-profit organizations

12
North American Industry Classification System
(NAICS)

• Replaced the SIC system in 1997
• Reports the number of firms, total dollar amount
  of sales, number of employees, growth rate for
  industries, broken down by geographic region
• Can be used to assess potential markets and to
  determine how well a firm is doing compared to
  their industry group

13
The Nature of Business Buying

• The Buying Situation
• The Professional Buyer
• The Buying Center

14
The Buying Situation

• A buy class framework identifies the degree of
  effort required of the firms personnel to
  collect information and make a purchase decision
• Straight rebuy
• Modified rebuy
• New task buying

15
The Professional Buyer

• Titles purchasing agents, procurement officers,
  director of materials management
• Focus on economic factors beyond the initial
  price of a product including transportation and
  delivery charges, accessory products or supplies,
  maintenance, disposal costs, etc.
• Large firms practice centralized purchasing - one
  department does all buying

16
The Buying Center

• The group of people in the organization who
  participate in the decision-making process
• May include production workers, supervisors,
  engineers, secretaries, shipping clerks, and
  financial officers

17
Roles in the Buying Center

• Initiator begins the buying process
• User needs the product
• Gatekeeper controls the flow of information to
  other members
• Influencer dispenses advice or shares expertise
• Decider makes the final decision
• Buyer executes the purchase

18
Electronic B2B Commerce

• Internet exchanges between two or more businesses
  or organizations
• Allows marketers to link directly to suppliers,
  factories, distributors, and their customers
• Reduces time necessary to order and deliver
  goods, track sales, and get feedback

19
Intranets, Extranets, and Private Exchanges

• An intranet is an internal corporate computer
  network that uses Internet technology to link
  company departments, employees, and databases
• An extranet allows outsiders to the organization
  to access its intranet
• A private exchange links invited groups of
  suppliers and partners over the Web