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Business-to-Business Marketing

9. Business-to-Business Marketing. 9. Business-to-Business Marketing. Objectives. 1. Provide an overview of the buying process between business buyers and sellers. 2. Differentiate among the three types of business markets. 3. Identify the three distinctive features of business markets.

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Business-to-Business Marketing

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  1. 9 Business-to-BusinessMarketing

  2. 9 Business-to-Business Marketing Objectives 1. Provide an overview of the buying process between business buyers and sellers. 2. Differentiate among the three types of business markets. 3. Identify the three distinctive features of business markets. 4. Explain the characteristics of business market demand. 5. Identify the basic categories of business products. 6. Describe the nature and importance of government markets. 9-1

  3. 9 Business-to-Business Marketing Business-to-Business Market • Firms that produce or acquire goods and services to be used, directly or indirectly, in the production of other goods and services or to be resold. 9-2

  4. 9 Business-to-Business Marketing Distinctive Features of the Business Market 1. Geographic market concentration. 2. Small number of buyers. 3. Complex purchase decision process. 9-3

  5. 9 Business-to-Business Marketing Producers • Those who transform goods and services through production into other goods and services. 9-4

  6. 9 Business-to-Business Marketing Trade Industries • Organizations, such as retailers and wholesalers, that purchase for resale to others. 9-5

  7. 9 Business-to-Business Marketing Value Added • The increase in value of input material when transformed into semifinished or finished goods 9-6

  8. 9 Business-to-Business Marketing Table 9.1 Summary of Manufacturers by Province, 1996 MATERIALS AND TOTAL VALUE NUMBER OF TOTAL SUPPLIES USED ADDED PROVINCE ESTABLISHMENTS EMPLOYEES ($ MILLIONS) ($ MILLIONS) All Canada* 36239 1703734 232 872.8 164940.1 Newfoundland 323 10335 734.5 793.0 Prince Edward Island 143 4177 419.7 254.6 Nova Scotia 748 34402 3788.4 2293.5 New Brunswick 705 32069 5235.2 2780.4 Quebec 10603 484068 52261.2 42541.8 Ontario 14471 813504 124541.2 84495.5 Manitoba 1143 53114 4784.7 3949.9 Saskatchewan 800 22298 3155.6 1958.3 Alberta 2884 100746 18154.6 12334.4 British Columbia 4378 148528 19773.0 13517.4 NWT and Yukon 41 493 24.8 21.4 *There may be a discrepancy between figures for Canada and the total of all provinces due to varying sources of information. Source:Adapted from the Statistics Canada publication Market Research Handbook, 1999, Catalogue No. 63-224-XPB, 1999, p.180. Reprinted with permission of the Minister of Industry Canada. 9-7

  9. 9 Business-to-Business Marketing Business-to-Business Market Demand 1. Derived Demand 2. Joint Demand 3. Inventory Demand 4. Demand Variability 9-8

  10. 9 Business-to-Business Marketing Derived Demand • Demand for a product used by business derived (or linked to) demand for a consumer good. 9-9

  11. 9 Business-to-Business Marketing Joint Demand • Demand for an industrial product that is related to the demand for other industrial goods. 9-10

  12. 9 Business-to-Business Marketing Inventory Adjustments • Changes in the amounts of materials a manufacturer keeps on hand. 9-11

  13. 9 Business-to-Business Marketing Demand Variability • In the business market, the impact of derived demand on the demand for interrelated products used in producing consumer goods. 9-12

  14. 9 Business-to-Business Marketing Accelerator Principle • The disproportionate impact that changes in consumer demand have on business. 9-13

  15. 9 Business-to-Business Marketing Basic Categories of Business Products 1. Capital items 2. Expense items 9-14

  16. 9 Business-to-Business Marketing Capital Items • Long-lived business assets that must be depreciated over time. 9-15

  17. 9 Business-to-Business Marketing Depreciation • The accounting concept of charging a portion of the cost of a capital item as a deduction against the company’s annual revenue for purposes of determining its net income. 9-16

  18. 9 Business-to-Business Marketing Expense Items • Products and services that are used within a short period of time. 9-17

  19. 9 Business-to-Business Marketing Business Purchasing Situations 1. Straight Rebuy 2. Modified Rebuy 3. New Task Buying 9-18

  20. 9 Business-to-Business Marketing Straight Rebuy • A recurring purchase decision involving an item that has performed satisfactorily and is therefore purchased again by a customer. 9-19

  21. 9 Business-to-Business Marketing New Task Buying • First-time or unique purchase situations that require considerable effort on the part of the decision makers. 9-20

  22. 9 Business-to-Business Marketing Buying Centre • The key individuals who participate in a buying decision. 9-21

  23. 9 Business-to-Business Marketing Roles of Buying Group Members 1. Users 2. Gatekeepers 3. Influencers 4. Deciders 5. Buyers 9-22

  24. 9 Business-to-Business Marketing Figure 9.2 A Model of the Business Buying Process Need recognition Triggering event Information search Delineation of suppliers Sales demonstration/ proposal • Advertisements • Technical articles • Word of mouth Organizational and environment influences Review of internal proposals Personal and interpersonal influences Final decision 9-23

  25. 9 Business-to-Business Marketing RFP (Request for Proposal) or RFQ (Request for Quotation) • Common procedure used by firms to get information on alternatives and prices. 9-24

  26. 9 Business-to-Business Marketing Reciprocity • Extending purchasing preference to suppliers who are also customers. 9-25

  27. 9 Business-to-Business Marketing North American Industrial Classification System (NAICS) • A coding system used to categorize different types of businesses and products (formerly the Standard Industrial Classification, or SIC). 9-26

  28. 9 Business-to-Business Marketing Table 9.4 North American Industrial Classifications 9-27

  29. 9 Business-to-Business Marketing Table 9.5 NAICS Examples (1 of 2) Division 31-33 - Manufacturing Group 311 Food manufacturing Class 3111 Animal food manufacturing 31111 Animal food manufacturing 311111 Dog and cat food manufacturing 311119 Other animal food manufacturing Class 3112 Grain and oilseed milling 31121 Flour milling and malt manufacturing 311211 Flour milling 311214 Rice milling and malt manufacturing 9-28a

  30. 9 Business-to-Business Marketing Table 9.5 NAICS Examples (2 of 2) Division 52 - Finance and Insurance Group 521 Monetary authorities - Central Bank Class 5211 Monetary authorities - Central Bank 52111 Monetary authorities - Central Bank Group 522 Credit intermediation and related activities Class 5221 Depository credit information 52211 Banking 522111 Personal and commercial banking industry 522112 Corporate and institutional banking 9-28b

  31. 9 Business-to-Business Marketing The Basics of Selling to Governments 1. Selling directly to government departments and agencies. 2. Accessing MERXTM, the electronic tendering services. 3. Registering online as a supplier. 9-29

  32. 9 Business-to-Business Marketing Electronic Exchange Network • A single point of access to suppliers and consumers through the Internet. 9-30

  33. 9 Business-to-Business Marketing e-commerce • Commerce conducted via the Internet. 9-31

  34. 9 Business-to-Business Marketing B2B e-commerce • Doing business online through Internet-enabled marketplaces. 9-32

  35. 9 Business-to-Business Marketing Electronic Exchange • An organized group of buyers and sellers from a specific industry linked together electronically. 9-34

  36. 9 Business-to-Business Marketing Vertical Web Community • A site that acts as a comprehensive source of information and dialogue for a particular vertical market. 9-35

  37. 9 Business-to-Business Marketing Table 9.6 The Three Primary Business Models for Online Exchanges Description Example 1. Third-Party Exchange is owned and operated by Ventro Exchange a third-party that is not considered to (formerly Chemdex) be a trading partner, often a B2B startup. 2. Consortia-Led Exchange ownership is shared GM/DaimlerChrysler/ Exchange between industry-leaders and a Ford exchange, Covisint technology partner. 3. Private/ Exchange is owned and operated Wal-Mart’s RetailLink Proprietory by a single large firm. Exchange Source: Steve Butler, “The Three Primary Business Models for Online Exchanges,” eMarketer, www.emarketer.com, June 19, 2000. Reprinted with permission. 9-36

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