MKTG Ch 7
Describe trends in B-to-B Marketing
B-to-B Companies use the internet in 3 main ways: 1. they use their websites to facilitate communication and orders. 2. they use digital marketing to increase brand awareness. 3. they use digital marketing in the form of content marketing to position their business as thought leaders and therefore generate sales leads. Challenges faced: determining the target market. New applications are developed to provide additional info about customers. These applications lower costs, increase supply chain efficiency, or enhance customer retention, loyalty, and trust. Business customers expect suppliers to know them personally, monitor people's. movement within their company, and offer personal interaction thru social media. B2B marketers use technology like smartphones and tablets to facilitate orders and enhance customer experience. It was thought that the internet would eliminate distributors but it has not. they often perform important functions like providing credit, aggregating supplies from multiple sources, making deliveries, and processing returns. = many business customers depend on distributors for info and advice. Social media usage has been the most pervasive b2b marketing trend. Ex: companies use email marketing, search engine optimization, paid search and display advertising to pull in customers to their websites = require vigilant adjustments. Content marketing - a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content. The goal is to attract and retain a clearly defined audience and drive profitable customer action. This includes media such as videos, podcasts, webinars, blog posts, white papers, e-books, slide decks. Key is to gather leads and build company reputation. 2 most important goals for b-to-b marketers are to lead generation and sales. Most companies use content marketing to increase awareness and generate leads. Marketers use social media to increase awareness and build relationships and community. Awareness(number of followers), engagement(interaction between brand and audience), and conversion(action is taken like downloading or purchasing something) = Metrics used to increase social media campaign success like hashtags.
Explain the major difference between business and consumer markets.
Business demand is derived, inelastic, joint, and fluctuating. DERIVED- is the demand for business products. The demand It is derived because orgs buy products to be used in producing their customers' products. Ex: the demand for timber is derived from, or based on the demand for new construction houses. Because demand is derived business marketers must carefully monitor demand patterns and changing preferences in final consumer markets and consumer forecasts because derived demand is based on expectations of future demand for those customers products. However, Business MKTers also try to influence final consumer demand with television and magazine advertisements. Ex: aluminum producers advertise the convenience and recycling opportunities that aluminum offers. Inelastic demand- the demand for many business products is inelastic with regard to price. IT means that an increase or decrease in the price of the product will not significantly affect the demand for the product. Joint demand- Occurs when two or more items are used together in a final product. Ex: Apple operating systems exist only with the demand for Apple computers. Sales of the two product are directly linked. Fluctuating demand - the demand for business products, particularly new plant and equipment to make the products. It is very unstable. Increase or decrease in consumer demand can produce a large change in demand for facilities and equipment. Economics refers to this as the multiplier effect or accelerated principle. PURCHASING VOLUME- business customers tend to buy larger quantities. NUMBER OF CUSTOMERS- business customers have far less customers. Advantage: easier to identify prospective buyers, monitor current customers' needs and levels of satisfaction. Disadvantage: customers become crucial because some companies only have one customer, in many cases, it is a gov customer. CONCENTRATION OF CUSTOMERS- Tend to be more geographically concentrated. Most large metropolitan areas host large numbers of business customers. DISTRIBUTION STRUCTURE- Channels of distribution is much shorter compared to consumer products. Direct channels where manufacturers market directly to users are much more common. the use of direct channels have increased and has introduced various internet buying/selling schemes like the business to business online exchange = an electronic trading floor that provides companies with integrated links to their customers and suppliers. The goal of this online exchange is to simplify business purchasing and to make it more efficient. Ex: Alibaba.com allows companies from around the world to purchase good from Chinese suppliers. The mission is to allow suppliers to reach a global audience and help buyers quickly find the product and services they need. NATURE OF BUYING - Business buyers usually approach purchasing rather formally. they use professionally trained purchasing agents who sometimes become certified purchasing managers. TYPES OF NEGOTIATION - Common in business marketing. Buyers and sellers negotiate product specification, delivery dates, payment terms, and other pricing mattes. Negotiations occur during many meetings over several months and the final contract tends to be very long. USE OF RECIPROCITY - when business purchasers buy from their own customers. buying from firms that buy from you. USE OF LEASING - businesses commonly lease expensive equipment. This allows firms to reduce capital outflow, acquire a seller's latest products, receive better service, and gain tax advantages. The leasing firm may be the actual manufacturer or an independent firm. benefits of the person who is leasing their product include greater revenue. PRIMARY PROMOTIONAL METHOD- Business marketers tend to emphasize personal selling in their promotion efforts, especially for expensive items, custom designed products, large volume purchases, and situations requiring negotiation. These require a great deal of personal contact.
Describe business marketing
Business marketing provides goods and services that are bought for use in business rather than for personal consumption. Intended use, not physical characteristics, distinguishes a business product from a consumer product. Ex: sale of a PC to a university = business marketing. A business/industrial product is used to manufacture other goods or services, to facilitate orgs operations, or to resell to other customers. common items sold as booth business and consumer goods are pens, paper, and staple removers. The size of business marketing in the USA exceeds the consumer market because they tend to account for a huge number of purchases. Ex: IMB's spends more than $40 billion annually.
Discuss the unique aspects of business buying behavior
Buying center- Includes all those people in an org eh become involved in a purchase decision. Membership and influence from company to company. Ex: an engineering firm's buying center may consist of engineers. The average buying center includes more than one person and up to 4 for purchase. the composition may change throughout the purchasing process. Roles in buying centers include: Initiator- division gen manager proposes to replace computers. Influencer- people who influence the buying decision. they help define specifications and provide info for evaluating options. Gatekeeper- usually a secretary, they are people who analyze the company's needs and recommend likely matches with potential vendors. They determine which vendors get an appointment with the buyer. Decider- they select the vendor the company will deal with the system it will buy. The purchaser- purchase agent negotiates terms for of sale. User- the people who will use the product. Implications of buying centers for the marketing manager- sellers must identify who is in the decision-making unit, the influence each member has in the buying decision, and each member's evaluative criteria. Successful selling strategies focus on determining the most important influences and tailoring presentations to the evaluative criteria (can be price, quality, and features) most important to these buying center members. Marketers must reach C-level executives because they have a big influence on buying decisions. Marketers who want to build C-level contracts must be involved in the buying process early on because this is where most executives get involved. However, executives look for 4 characteristics in sales rep: Ability to marshal resources, Understand the buyer's goal, responsiveness to request, willingness to be held accountable. Evaluative criteria- Quality- refers to technical suitability. It applies to the salesperson and sales person's firm. Quality improvement should be part of an orgs marketing strategy. Service- A purchase offers buyers opportunites for services. Types of evaluative service include- prepurchase service = can be a survey of the buyer's needs. after analyzing the survey, the vendor could prepare a report and recommendations in the form of a purchasing proposal. If a purchase results, a postpurchase service occurs, which consists of installing equipment and training those who will be using it. Postsale services include maintenance and repairs. Another service that buyers seek is dependability of supply. They must be able to count on delivery of what was ordered. buyers also welcome services that help them sell their products. Price- Buyers seek cheap prices, however, if this is enforced to the supplier, quality may not be good and this can fore the supplier to stop selling to the buyer. Buying situations- Business firms, especially manufacturers must decide whether to make something or to buy it from an outside supplier. The decision is essentially one of economics. If the firm does decide to buy from outside sources, the purchase may be a new buy, modified rebuy, or straight rebuy. rebuy- a situation requiring the purchase of a product for the first time. No longterm relationship has been established for the product, specifications may be somewhat fluid. If the item is a raw material or critical component part, Seller must deliver the product on time. Modified rebuy- less critical and time-consuming than new buy. In this situation, the purchaser wants some change in the original product. Here parties are familiar with each other and credibility has been established, so they focus on specifics and modifications. some modified rebuys are open to outside bids = new terms become competitive. A firm may open bidding to examine the price quality and service offerings of several suppliers. Straight rebuy- situation vendors prefer. Purchaser is not looking for new info or other suppliers. it is a routine order. One common instrument used in straight rebuy is the purchasing contract, often used for products bought in high volume= makes the buyer's decision making routine and promises salesperson a sure sale. The advantage of this contract= allows the buyer a quick confident decision. and for the salesperson reduce competition. Business ethics- moral principle or values that govern the conduct of an individual or group. can be view as the standard of behavior by which conduct is judged. Most companies follow ethical practices. Ex: lows offering code of ethics to employees. Customer service- High quality of customer service is an important basis for establishing competitive advantage and differentiating one's company from competitors.
Explain the North American Industry Classification System
NAICS- Pronounced makes, is an industry classification system introduced in 1997 to replace the standard industrial classification system (SIC). it is a system for classifying North American business establishments. developed jointly, it provides a common industry classification system for NAFTA. Goods or service-producing firms that use similar/identical production processes are grouped together. It is a valuable tool for marketers engaged in analyzing, segmenting, and targeting markets. Each classification group is homogeneous in terms of raw material, components used, manufacturing processes employed, and problems faced. This can help a supplier understand the needs and requirements of a few new firms within a classification. Info can be converted to market potential estimates, market share, and sales forecasts. can also be used to identify new customers.
Identify the four major categories of business market customers.
Producers - includes profit oriented individuals and organizations that use purchased goods and services to produce other products, to incorporate into other products, or facilitate the daily operations of the org. Ex of producers includes construction, manufacturing transportation, finance, real estate, and food service firms. Producers are also called Original Equipment Manufactures because they are orgs that buy business goods and incorporate them into the products they produce to sell to other producers or consumers. Ex: Car part bought to build a car. Resellers- include retail and wholesale businesses that buy finished goods and resell them for a profit. Retailer = sells to final consumers and Whole sellers= sell to retailers and organizational customers. Ex: P&G (whole seller) Sells product to Kroger (retailer). Business product distributors - are wholesalers who buy business products and resell them to business customers. Ex: Going to buy 100 pounds of fertilizer from a local distributor instead of the actual distributor. Government- include thousands of federal, state, and local buying units. They account for the greatest volume of purchases of any customer category. MArketing to gov agencies can be an overwhelming undertaking but learning how the system works can bring rewarding contract victories and long lasting relationships. Contracts for government purchases are often put into a bid. This allows all potential suppliers a fair chance at winning gov contracts and helps ensure that public funds are spent wisely. Federal gov.- worlds largest customer. most of their buying is centralized. it is viewed as a combination of several large companies with overlapping responsibilities and thousands of small independent units. State, County, and city gov- Selling is less frustrating vs federal gov. paperwork is less stressful and more manageable. Some agencies include schools, hwy departments, and housing agencies. Institutions- seek to achieve goals other than the standard business goals of profit, market share, and return on investment. Includes schools, hospitals, colleges, frats, churches, labor unions, clubs, foundations, (nonbusiness orgs). some of these institutions when purchasing can act like gov institutions because they are administered by the gov. Others act like corporations.
discuss the role of relationship marketing and strategic alliances in business marketing.
Relationship marketing - seeks to establish an on. going partnership with customers. It is important as more business suppliers use social network sites like facebook/twitter to advertise themselves to businesses. This encourages businesses to search around for options for their needs = means that for many suppliers, retaining their current customers has become a primary focus as consumers are more demanding and competition is heavier. Maintaining a steady dialogue between the supplier and the customer is proven to gain repeat business. Strategic alliances/ partnership - is a corporate agreement between business firms. it can take the form of licensing or distribution agreements. Ex: ABC News partners up with Yahoo each by promoting the content of each other in their company. other alliances are formed between companies that operate in different industries. Ex: Caterpillar (construction industry) partnered with SunSelect (produce industry) to construct a hydroponic greenhouse. For an alliance to succeed, it must be built on commitment and trust. Relationship commitment means that a firm believes an ongoing relationship with some other firm is so important that it warrants maximum at maintaining it indefinitely. Trust- exists when one party has confidence in an exchange partner's reliability and integrity. Ex: Costco and American Express contract ended= Costco took different bids from visa and betrayed American Express. Relationships in other cultures like Japan depend mostly on personal relationship. This is developed thru amae(indulgent dependency) = is the feeling of nurturing concern for, and dependence on, another. These relationships between companies can develop into keiretsu = a network of interlocking corporate affiliates. Here, executives may sit on the boards of their customers or suppliers. Members usually trade with each other whenever possible and often engage in joint product development, finance, and marketing activity. To partner with an Asian frim, companies have found that forming a relationship is the best method.
Describe the seven types of business goods and services.
This sets scales for business. Types include: Major equipment- includes goods like large or expensive machines, mainframe computers, blast furnaces, generators, airplanes, and buildings. these items are depreciated over time and are custom designed. Personal selling is an important part of the marketing strategy for major equipment. Distribution channels are direct. Accessory equipment- is generally less expensive and shorter-lived. items include power drills, power tools, microcomputers, and computer software(office equipment). it is often charged ad as an expense int he year it is bought rather than depreciated over its useful life. they are often standardized instead of custom. local distributors (wholesalers) play an important role in marketing these items because businesses often buy from them. advertisement is more important also. customers are dispersed = all businesses buy microcomputers. Raw Materials- are unprocessed extractive or agricultural products. Items include mineral ore, timber, wheat, corn fruit, veggies, fish. These items become part of finished products. lumber mills and food canners often buy huge quantities of these items. because there is often a large number of small sellers of raw materials, none can greatly influence the price or supply. The market tends to do this. Promotion is often personal selling and distribution channels are often direct from producer to business user. Component parts- are either finished items ready for assembly or products that need very little processing before becoming part of some other product. Ex: items like tires or diesel engines are component parts. Component parts often retain their identity after becoming part of a final product. Some component items tend to need replacement. There are two markets for component parts = OEM market- key factor is meeting their products deadlines and the availability of a product. and the replacement market= is composed of orgs and individuals buying component parts for replacements. This market tends to demonstrate characteristics of a consumer market. Negotiations do not occur nor leasing is usually an issue. Processed materials - are products used directly in manufacturing other products. Unlike raw materials, processed materials have been processed. Items include sheet metals, chemicals, specialty steel, treated timber, corn syrup. Processed materials do not retain their identity. Most processed materials are marketed to the OEM or distributors servicing the OEM market. These items are bought according to customer specifications or to some industry standard. Price and service are important when choosing a vendor. Supplies - are consumable items that do not become part of the final product. Ex: pencils, paper towels, detergent, lubricants, and paper. They are normally standardized items. They have short lives and are inexpensive. These fall into 3 categories maintenance, repair, or operating supplies. This category is referred to as MRO. Competition here is intense. Business services are expense items that do not become part of a final product. Businesses often retain outside providers to perform services like maintenance, marketing research, and advertising. contracting an outside provider is cheap when they're needed for particular expertise.