Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel...

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1

Lamb, Hair, McDaniel

CHAPTER 7

Business Marketing

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What Is Business Marketing?

The marketing of goods

and services to individuals

and organizations for

purposes other than

personal consumption.

BusinessMarketing

BusinessMarketing


Business Products

The key is intended use.

Business Products:

• Are used to manufacture other products

• Become part of another product

• Aid the normal operations of an organization

• Are acquired for resale without change in form


Relationship Marketing

• Loyal customers are more profitable than price-sensitive customers with little brand loyalty

• Long-term relationships build competitive advantage


Strategic Alliances

• Licensing or distribution agreements

• Joint ventures

• Research and development consortia

• Partnerships

Alliances succeed with commitment and trust.


Relationships in Other Cultures

Keiretsu relationships are highly integrated:

• Companies have executives sitting on each others’ boards

• Maintain dedicated trade efforts

• Joint development, finance, and marketing


Major Categories of Business Customers

Producers

Resellers

Governments

Institutions

• OEMs

• Wholesalers• Retailers

• Federal• State• Local

• Schools • Hospitals • Colleges• Churches • Unions • Fraternal • Civic Clubs • Foundations groups• Nonbusiness organizations


NAICS

NAICSNAICS A detailed numbering system

developed by the U.S.,

Canada, and Mexico to classify

North American business

establishments by their main

production processes.

North American Industry

Classification System


Example of NAICS Hierarchy

NAICS

LevelSector Subsector Industry

GroupIndustry Industry

Subdivision

NAICS

Code

51 513 5133 51332 513321

Description

Information Broadcasting and telecoms

Telecoms Wireless telecoms carriers, except satellite

Paging


Business versus Consumer Markets

CharacteristicCharacteristicCharacteristicCharacteristic

DemandDemand

VolumeVolume

# of Customers# of Customers

LocationLocation

DistributionDistribution

Nature of BuyingNature of Buying

Buy InfluenceBuy Influence

NegotiationsNegotiations

ReciprocityReciprocity

LeasingLeasing

PromotionPromotion

Business MarketBusiness MarketBusiness MarketBusiness Market

OrganizationalOrganizational

LargerLarger

FewerFewer

ConcentratedConcentrated

More DirectMore Direct

More ProfessionalMore Professional

MultipleMultiple

More ComplexMore Complex

YesYes

GreaterGreater

Personal SellingPersonal Selling

Consumer MarketConsumer MarketConsumer MarketConsumer Market

IndividualIndividual

SmallerSmaller

ManyMany

DispersedDispersed

More IndirectMore Indirect

More PersonalMore Personal

SingleSingle

SimplerSimpler

NoNo

LesserLesser

AdvertisingAdvertising


Demand in Business Markets

Demand is...Demand is...Demand is...Demand is... DescriptionDescriptionDescriptionDescription

DerivedDerived

InelasticInelastic

JointJoint

FluctuatingFluctuating

Demand for business products results from demand for consumer products.Demand for business products results from demand for consumer products.

A change in price will not significantly affect the demand for product.

Multiple items are used together in final product. Demand for one item affects all.

Demand for business products is more volatile than for consumer products.


Fluctuating Demand

Multiplier EffectMultiplier Effect

(Accelerator Principle)

(Accelerator Principle)

Phenomenon in which a small

increase or decrease in

consumer demand can

produce a much larger change

in demand for the facilities and

equipment needed to make the

consumer product.


Types of Business Products

Major Equipment Major Equipment

Accessory Equipment Accessory Equipment

Raw Materials Raw Materials

Component Parts Component Parts

Processed Materials Processed Materials

Supplies Supplies

Business Services Business Services

LO7


Types of Business Goods and Services

LO7


Intel Buys McAfee

• Intel creates nearly 80 percent of the microprocessors used in PCs and server systems.

• Intel’s purchase of security software maker McAfee will allow it to produce chips that are directly integrated with McAfee’s security products.

• What kinds of business products were Intel and McAfee producing, and what kinds of products will they be producing together?

Source: Thomas Catan, Nathan Becker and Jerry A. DiColo, "Intel Bets Its Chips on McAfee: Tech Giant Strikes $7.68 Billion Deal for Security-Software Maker, Drawing Mixed Reaction," Wall Street Journal Online. August 19, 2010, http://online.wsj.com/article/SB10001424052748704476104575439180665843938.html.

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LO7


Customer ServiceCustomer Service

Business EthicsBusiness Ethics

Buying SituationsBuying Situations

Evaluative CriteriaEvaluative Criteria

Buying CentersBuying Centers

Aspects of Business

BuyingBehavior

Aspects of Business

BuyingBehavior

LO8

Business Buying Behavior


Buying CenterBuying Center All those people in an

organization who

become involved in the

purchase decision.• Number of people

involved varies with each purchase decision

• Buying centers do not appear on formal organization chartsLO8

Buying Centers


InitiatorInitiator InfluencersInfluencers GatekeepersGatekeepers

DeciderDecider PurchaserPurchaser UsersUsers

LO8

Roles in Buying Centers


Evaluative Criteria

Quality

Service

Price

LO8


New BuyNew Buy A situation requiring the purchase of a product for the first time.

A situation requiring the purchase of a product for the first time.

ModifiedRebuy

ModifiedRebuy

A situation where the purchaser wants some change in the original good or service.

A situation where the purchaser wants some change in the original good or service.

StraightRebuy

StraightRebuy

A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.

A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.

LO8

Buying Situations


Customer Service

Divide customers into groups based on their value

Create policies that govern how service will be allocated among groups

LO8


In-Class Assignment

Case

Purchasing agents are often offered gifts and gratuities. Increasingly, though, companies are restricting the amount and value of gifts that their purchasing managers can accept from vendors. The idea is that purchasing managers should consider all qualified vendors during a buying decision instead of only those who pass out great event tickets. This exercise asks you to consider whether accepting various types of gifts is ethical.


List of Possible Items

—Advertising souvenirs —Automobiles—Clothing —Dinners—Discounts on personal

purchases —Food and liquor—Golf outings

Case

Put a checkmark next to the items that you think it would be acceptable for a purchasing manager to receive from a vendor.

—Holiday gifts

—Large appliances

—Loans of money

—Lunches

—Small-value appliances

—Tickets (sports, theater, amusement parks, etc.)

—Trips to vendor plants

—Vacation trips


Discuss• In groups of 4-5, discuss any

discrepancies between your lists.• Now look at your list of acceptable gifts

through various lenses. – Would your list change if the purchasing

manager’s buying decision involved a low-cost item (say, pens)? Why or why not?

– What if the decision involved a very expensive purchase (like a major installation)?

Case


Prior Research FindingsTYPE OF

GIFT/FAVOR79 88 90 90 92 94 94 95-7

Advertising Souvenirs 29 19 69 30 54 80 73 92

Automobiles 0 0 — 0 — — 1 1

Clothing 5 0 6 16 0 — 7 3

Dinners 38 10 22 79 8 - 48 70

Discounts on Personal Purchases

11 5 9 18 15 — 11 21

Food & Liquor 31 5 49 40 0 36 30 29

Golf Outings 26 5 2 57 0 — 28 47

Case


Prior Research Findings

Case

TYPE OF GIFT/FAVOR 79 88 90 90 92 94 94 95-7

Holiday gifts 27 17 29 56 0 — 43 30

Large Appliances 0 0 — 0 — 2 1 1

Loans of Money 0 0 — 0 — — 1 1

Lunches 47 24 36 93 23 80 68 90

Small Value Appliances 2 5 0 6 0 6 6 6

Tickets (Sports, Theater, Etc.)

28 5 13 59 0 42 37 60

Trips to Vendor Plants 39 11 42 48 0 — 31 51

Vacation Trips 0 0 0 2 0 4 2 2

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel...

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