2011.2.07 Marketing

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  • Chapter 7 Business Marketing Marketing cannot be accomplished in isolation. Even though the marketing function resides with marketers, the concept of marketing must permeate the entire organization.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes: Business marketing is the marketing of goods and services to individuals and organizations for purposes other than personal consumption. The sale of a personal computer to a college is an example of business marketing. If that same computer is purchased for personal or family consumption or as a gift, it is a consumer good. The size of the business market in the U.S. and most countries substantially exceeds that of the consumer market.
  • Chapter 7 Business Marketing Notes: A product that is purchased for personal use is considered a consumer good. If the same product is purchased for use in a business, it is a business product. The key in classification as a business product is intended use.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes: It is hard to imagine that commercial use of the Internet began as recently as the mid-1990s. In 2007, there were over 1.24 billion Internet users worldwide. The use of the Internet to facilitate activities between organizations is called business-to-business electronic commerce. In 2006, the U.S. alone was expected to account for over $800 billion of B2B e-commerce.
  • Chapter 7 Business Marketing Notes: Marketers must be able to comprehend data stored in the log files generated by their Web servers. By evaluating this information, a marketer can fine-tune the marketing effort to maximize online success. For marketers today, three of the most important measurements of Web site hits are recency, frequency, and monetary value. Combining frequency with the length of time a visitor spends on the Web site and the number of pages viewed can provide a measure of a site’s stickiness factor.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes : This slide shows the Internet marketing strategies from the late 1990s to five that are currently being pursued. Disintermediation means eliminating intermediaries such as wholesalers or distributors from a marketing channel. Source Andrew J. Rohm and Fareena Sultan, “The Evolution of E-Business,” Marketing Management , January/February 2004, p. 35.
  • Chapter 7 Business Marketing Notes: Relationship marketing has become an important business marketing strategy as customers have become more demanding and competition has become more intense. Building long-term relationships with customers offers a way to build competitive advantage. Discussion/Team Activity: Go to FedEx’s Website at www.fedex.com. Review the different products available to meet varying customer needs, and discuss how these products/services can establish long-term relationships and customer loyalty for FedEx.
  • Chapter 7 Business Marketing Notes: Strategic alliances can take the form of licensing or distribution agreements, joint ventures, research and development consortia, and partnerships. Businesses form strategic alliances to leverage the assets they have (such as technology, financial resources, market access) by combining these assets with those of other firms. Another rationale behind the formation of strategic alliances is to achieve economies of scale.
  • Chapter 7 Business Marketing Notes: The concept of strategic alliances has been used in foreign cultures, such as Mexico, China, Japan, Korea, and much of Europe for a long time. For example, in Japan the basis of exchange between firms is personal relationships that are developed through indulgent dependency. Relationships between companies can develop into a keiretsu—a network of interlocking corporate affiliates. Members of a keiretsu trade with each other and often engage in joint product development, finance, and marketing activity. Many American firms have found the best way to compete in Asian countries is to form relationships with Asian firms.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes: Producers include profit-oriented organizations that use purchased goods and services to produce or incorporate into other products. Examples include construction, manufacturing, transportation, finance, real estate, and food service firms. The reseller market includes retail and wholesale businesses that buy finished goods to resell at a profit. Government organizations include thousands of federal, state, and local buying units. This may be the largest single market for goods and services in the world. The U.S. federal government, buying goods and services valued at over $590 billion a year, is the world’s largest customer. Institutions do not have the standard business goals of profit, market share, and return on investment. Includes schools, hospitals, colleges and universities, churches, labor unions, fraternal organizations, civic clubs, foundations, and other nonbusiness organizations. Discussion/Team Activity: Access the Web site http://www.cbd-net.com Discuss the information provided on this Web site that helps organizations do business with the federal government.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes: The North American Industry Classification Systems, introduced in 1997, is a joint development by the United States, Canada, and Mexico to provide a common industry classification system for NAFTA partners.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes: The information shown on this slide describes the usefulness of NAICS for marketers. For example, if a supplier understands the needs of a few firms within a classification, the needs can be projected to all firms in the category. This information can be converted into market potential, market share estimates, and sales forecasts. Discussion/Team Activity: Discuss how NAICS information can be used for other marketing applications.
  • Chapter 7 Business Marketing Notes: The basic marketing concepts are the same whether the customer is a business organization or a consumer. However, the characteristics of business markets and consumer markets are different.
  • Chapter 7 Business Marketing Notes: The main differences between business and consumer markets are summarized on this slide. The first characteristic demand is described on the next slide. Purchase volume: Business customers buy in larger quantities than consumers. Number of customers: Business marketers have fewer customers than consumer marketers. An advantage is that it is easier to identify buyers, monitor customer needs, and build personal relationships. A disadvantage is that each customer becomes crucial, especially for those manufacturers who have only one customer. Location of buyers: Business customers are more geographically concentrated than consumers. For example, many firms in the automobile manufacturing industry are clustered near Detroit. Distribution structure: Business products typically have shorter channels of distribution, and direct channels are common. On the other hand, consumer products pass through a distribution system that may include the producer, the wholesaler(s), and the retailers. Nature of buying: More people are involved in a business market purchase decision than in a consumer purchase. Representatives from quality control, marketing, finance, and purchasing may be grouped in a buying center. Type of negotiations: Consumers are used to negotiating price on items like real estate and automobiles, although in most cases, however, the sellers set the price and other conditions of sale. In contrast, negotiation is common in business marketing decisions and may take months to work out the final contracts. Use of reciprocity: Business purchasers often choose to buy from their own customers. It is not unethical or illegal unless the exchange is coerced. Use of leasing: Businesses commonly lease expensive equipment to reduce capital outflow, keep state of the art products, and gain tax advantages. Primary promotional method: Business marketers emphasize personal selling, especially for expensive, custom-designed products.
  • Chapter 7 Business Marketing Notes: Business demand is different from consumer demand in the following areas: The demand for business products is derived demand, meaning that organizations buy products to be used in producing customer products. As a result, business marketers must carefully monitor trends and patterns in final consumer markets as well as customers’ forecasts. For example, the industrial marketer (e.g. selling steel) may be just as concerned about the demand for the ultimate consumer product (e.g. the automobile). Inelastic demand is demand without regard to price. An increase or decrease in the product price will not significantly affect the demand for the product. Joint demand occurs when multiple items are used together in a final product. Consequently, a demand change for one product will affect the other products as well. For example, t he demand for razor blades may depend upon the number of razors in use; this is why razors have sometimes been sold as `loss leaders', to increase demand for the associated blades. Fluctuating demand: The demand for business products tends to be more unstable than the demand for consumer products. A small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and manufacturing equipment needed to make the consumer product. This is known as the multiplier effect. Discussion/Team Activity: 1. Discuss examples of products that describe each of the demand differences in business markets.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Online: Sysco What kind of business product does Sysco provide its customers? What do you think is Sysco’s largest category of business customers? Are there indications on the site that Sysco sells direct to customers? Notes: Major equipment: capital goods such as large or expensive machines, airplanes, buildings. Depreciated over time, often custom-designed. Personal selling is an important marketing strategy. Accessory equipment: Less expensive and shorter-lived than major equipment, includes fax machines, personal computers, power tools. Often charged as an expense. Often standardized and purchased by more customers. Advertising is an important promotional tool. Raw materials: Unprocessed products, such as minerals, timber, wheat, corn, fish. Become part of finished products. Personal selling is the marketing mix component used, distribution channels usually direct from producer to business user. Component parts: Finished items ready for assembly or that need very little processing. Examples are tires and electric motors. Two important markets for component parts: original equipment manufacturer (OEM) and replacement market. Processed materials are used directly in manufacturing other products. Sheet metals, chemicals, and lumber. Do not retain their identity in final products. Price and service are important factors in choosing a supplier. Supplies are consumable items that do not become part of the final product. Short lives and inexpensive. Generally fall into categories of maintenance, repair, or operating supplies (MRO), and include such items as detergents, pencils, paper, etc. Business services are expense items that do not become part of the final product. This includes janitorial, advertising, legal, management consulting, marketing research, and maintenance services.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Notes: Understanding how purchase decisions are made in organizations is a first step in developing a business selling strategy. Business buying behavior has five important aspects, as shown on this slide.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing Online Loctite Corporation What evidence do you see on Loctite’s Web site that its marketing efforts focus on engineers? Read some of its online literature. Notes: Several people may play a role in the business purchase decision: Initiator: the person who suggests the purchase. Influencers: help define specifications and provide information for evaluating options. Gatekeepers: group members who regulate the flow of information, often the purchasing agent. Decider: the person with the power to choose or approve the selection. Purchaser: the person who negotiates the purchase. Users: members of the organization who actually use the product.
  • Chapter 7 Business Marketing Notes: Business buyers evaluate products and suppliers against the criteria of quality, service, and price—in that order. Quality refers to technical suitability. Quality improvement should be part of every organization’s marketing strategy. Service includes prepurchase as well as postpurchase service, along with dependability of supply. Services that help sell the finished products are especially appropriate when the seller’s product is an identifiable part of the end product. Business buyers want to buy at low prices. However a buyer who pressures a supplier to cut prices to the point of money loss may force shortcuts on quality. It may force the supplier to quit selling to him/her.
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • Chapter 7 Business Marketing
  • 2011.2.07 Marketing

    1. 1. Lamb, Hair, McDaniel CHAPTER 7 Business Marketing 2010-2011
    2. 2. LO 1 Describe business marketing LO 2 Describe the role of the Internet in business marketing LO 3 Discuss the role of relationship marketing and strategic alliances in business marketing LO 4 Identify the four major categories of business market customers Learning Outcomes
    3. 3. LO 5 Explain the North American Industry Classification System LO 6 Explain the major differences between business and consumer markets LO 7 Describe the seven types of business goods and services LO 8 Discuss the unique aspects of business buying behavior Learning Outcomes
    4. 4. What Is Business Marketing? Describe business marketing LO 1
    5. 5. What Is Business Marketing? Business Marketing LO 1 The marketing of goods and services to individuals and organizations for purposes other than personal consumption.
    6. 6. Business Products The key is intended use. <ul><li>Business Products: </li></ul><ul><li>Are used to manufacture other products </li></ul><ul><li>Become part of another product </li></ul><ul><li>Aid the normal operations of an organization </li></ul><ul><li>Are acquired for resale without change in form </li></ul>LO 1
    7. 7. Business Marketing LO 1 cupboards oven folder and pen Teddy bear CONSUMER BUSINESS cupboards Coffee pot oven folder and pen photocopier
    8. 8. Business Marketing on the Internet Describe the role of the Internet in business marketing LO 2
    9. 9. Measuring Online Success A measure of a Web site’s effectiveness; calculated by multiplying the frequency of visits times the duration of a visit times the number of pages viewed during each visit. Stickiness = Frequency x Duration x Site Reach LO 2 Stickiness
    10. 10. <ul><li>http://www.allbusiness.com AllBusiness provides entrepreneurs with the knowledge and tools to start, manage, and grow their business. The site links to hundreds of how-to articles and provides expert answers to questions. </li></ul><ul><li>http://www.bcentral.com Microsoft bCentral offers small business solutions such as assistance in establishing an online business presence, enhancing sales or services, or managing business operations. The site also contains practical tips, advice, and links to how-to articles. </li></ul><ul><li>http://office.com Office.com offers practical information on how to start or run a business and how to transform an existing company into an e-business. Users access over 500 databases for news that affects their companies or industries. Office.com is one of the ten most visited business Web sites on the Internet. </li></ul><ul><li>http://www.quicken.com/small_business This site offers information on starting, running, and growing a small business. It also provides links to a variety of other Quicken sites that are useful to small-business owners and managers. </li></ul>Beyond the Book Internet Sites for Small Businesses LO 2
    11. 11. Evolution of E-Business Initiatives Time LO 2 <ul><li>Revenue generation </li></ul><ul><li>Aggressive disintermediation initiatives </li></ul><ul><li>Basic marketing communication strategies </li></ul><ul><li>Reduce costs </li></ul><ul><li>Build channel partnerships and trust </li></ul><ul><li>Customer-focused technology and systems </li></ul><ul><li>Brand building and development </li></ul><ul><li>Integrate online and traditional media </li></ul>Past initiatives Present initiatives
    12. 12. Relationship Marketing and Strategic Alliances Discuss the role of relationship marketing and strategic alliances in business marketing LO 3
    13. 13. Relationship Marketing <ul><li>Loyal customers are more profitable than price-sensitive customers with little brand loyalty </li></ul><ul><li>Long-term relationships build competitive advantage </li></ul>LO 3
    14. 14. Strategic Alliances <ul><li>Licensing or distribution agreements </li></ul><ul><li>Joint ventures </li></ul><ul><li>Research and development consortia </li></ul><ul><li>Partnerships </li></ul><ul><li>Alliances succeed with commitment and trust. </li></ul>LO 3
    15. 15. Subway and Seattle’s Best <ul><li>Seattle’s Best doubles locations where its coffee is sold by signing a deal with Subway </li></ul><ul><ul><ul><li>Subway adds coffee to its menu, drawing customers to the shops for their new breakfast menu </li></ul></ul></ul><ul><ul><ul><li>Seattle’s Best has higher profile being sold in 9,000 Subway shops </li></ul></ul></ul><ul><ul><ul><ul><li>Can Subway move away from its pervasive “Five-Dollar Foot-Long” campaign? </li></ul></ul></ul></ul>Source: York, Emily Bryson. “Subway Breakfast Experience Not Exactly a Wake-Up Call,” Adage.com, November 10, 2009. LO 3
    16. 16. Relationships in Other Cultures <ul><li>Keiretsu relationships are highly integrated: </li></ul><ul><ul><ul><li>Companies sit on each others’ boards </li></ul></ul></ul><ul><ul><ul><li>Maintain dedicated trade efforts </li></ul></ul></ul><ul><ul><ul><li>Joint development, finance, and marketing </li></ul></ul></ul>LO 3
    17. 17. Major Categories of Business Customers Identify the four major categories of business market customers LO 4
    18. 18. Major Categories of Business Customers LO 4 Producers Resellers Governments Institutions • OEMs • Wholesalers • Retailers • Federal • Municipal • Local • Schools • Hospitals • Colleges • Churches • Unions • Fraternal • Civic Clubs • Foundations groups • Nonbusiness organizations
    19. 19. Business Market Customers LO 4 Business Marketing Institutions Resellers Wholesalers Retailers Producers OEMs Governments Federal State Municipal County Unions Civic Clubs Other Churches Foundations Nonprofits
    20. 20. North American Industry Classification System Explain the North American Industry Classification System LO 5
    21. 21. NAICS 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 LO 5 NAICS
    22. 22. Example of NAICS Hierarchy LO 5 NAICS Level Sector Subsector Industry Group U.S. Industry NAICS Code 31-33 334 3346 334611 Description Manufacturing Computer electronic product manufacturing Mfg. and reproduction of magnetic/ optical media Reproduction of software
    23. 23. NAICS <ul><li>Provides a common industry classification system </li></ul><ul><li>Valuable tool for marketers in analyzing, segmenting, and targeting markets </li></ul><ul><li>Data can be used to determine: </li></ul><ul><ul><li>Number, size, and geographic dispersion of firms </li></ul></ul><ul><ul><li>Market potential / market share estimates </li></ul></ul><ul><ul><li>Sales forecasts </li></ul></ul><ul><ul><li>New customer identification </li></ul></ul>LO 5
    24. 24. Business versus Consumer Markets Explain the major differences between business and consumer markets LO 6
    25. 25. Business versus Consumer Markets LO 6 Characteristic Demand Volume # of Customers Location Distribution Nature of Buy Buy Influence Negotiations Reciprocity Leasing Promotion Business Market Organizational Larger Fewer Concentrated More Direct More Professional Multiple More Complex Yes Greater Personal Selling Consumer Market Individual Smaller Many Dispersed More Indirect More Personal Single Simpler No Lesser Advertising
    26. 26. Demand in Business Markets Demand is... Description Derived Inelastic Joint Fluctuating 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. LO 6
    27. 27. Fluctuating Demand LO 6 Multiplier Effect (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.
    28. 28. Types of Business Products Describe the seven types of business goods and services LO 7
    29. 29. Types of Business Products Online http://www.sysco.com LO 7 Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services
    30. 30. Types of Business Goods and Services LO 7 Aluminum ore: raw material Extruded metal: processed material Propeller blade: component part Extruding machine: major equipment Tool cart: accessory equipment Uniforms: contracted service Paper: supply
    31. 31. Business Buying Behavior Discuss the unique aspects of business buying behavior LO 8
    32. 32. LO 8 Business Buying Behavior Customer Service Business Ethics Buying Situations Evaluative Criteria Buying Centers Aspects of Business Buying Behavior
    33. 33. Buying Center <ul><li>Number of people involved varies with each purchase decision </li></ul><ul><li>Buying centers do not appear on formal organization charts </li></ul>LO 8 Buying Centers All those persons in an organization who become involved in the purchase decision.
    34. 34. LO 8 Roles in Buying Centers Initiator Influencers Gatekeepers Decider Purchaser Users Online http://www.loctite.com
    35. 35. <ul><li>Quality </li></ul><ul><li>Service </li></ul><ul><li>Price </li></ul>Evaluative Criteria LO 8
    36. 36. LO 8 Buying Situations New Buy A situation requiring the purchase of a product for the first time. Modified Rebuy A situation where the purchaser wants some change in the original good or service. Straight Rebuy A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.
    37. 37. <ul><li>Divide customers into groups based on their value </li></ul><ul><li>Create policies that govern how service will be allocated among groups </li></ul>Customer Service LO 8
    38. 38. Business Buying Behavior LO 8 Customer service Initiator Influencer Decider Gatekeeper Purchaser User Buying Center <ul><li>Quality </li></ul><ul><li>Service </li></ul><ul><li>Price </li></ul>Evaluative Criteria Buying Situations New buy Straight rebuy Modified rebuy

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