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3.3.2 (2020 Scheme)
BUSINESS & SOCIAL
MARKETING
MODULE 1: INTRODUCTION TO BUSINESS
MARKETING 10 HOURS
Business Marketing Concept, Business vs. Consumer
Marketing, Types of Industrial Markets, Types of Business
Customers, Classifying Industrial Products & Services.
Organizational Buying Process: Types of purchases / buying
situations, Buying Centre Concept, Inter Personal Dynamics
of Business Buying Behaviour and Roles of Buying centre.
The Webster & Wind model of Organizational Buying
Behaviour, Ethics in Purchasing.
What is Business Marketing?
• Business marketing also referred to as “Industrial marketing” or
“B2B marketing” or “Organizational marketing”.
• Business marketing is the marketing of products & services to
business organizations.
• Business organizations include:
Manufacturing companies
Govt. undertakings
Private sector organizations
Educational institutions
Hospitals
Distributors / Dealers
Business organizations buy products
& services to satisfy many objectives
like production of other goods &
services, making profits, reducing
costs, & so on.
Consumer marketing is the marketing
of products & services to individuals,
families, & households. The
consumers buy products & services
for their own consumption.
NATURE OF THE BUSINESS MARKET
•Companies also buy services, such as legal, accounting,
office-cleaning, and other services.
• Some firms focus entirely on business markets.
• Example: Caterpillar, which makes construction and
mining
equipment.
• Diverse market, everything from a box of paper clips to
thousands of parts for an automobile manufacturer.
COMPONENTS OF THE BUSINESS MARKET
• Four main components:
•Commercial market Individuals and firms that acquire
products to support, directly or indirectly, production of
other goods and services.
• Largest segment of the business market.
•Trade industries Retailers or wholesalers that purchase
products for resale to others.
• Also called resellers, marketing intermediaries that
operate in the trade
sector.
•Government—all domestic levels (federal, state, local) and
foreign governments; also act as sellers—e.g., confiscated
goods.
•Public and private institutions, such as hospitals,
churches, colleges and universities, and museums.
B2B MARKETS: THE INTERNET CONNECTION
• More than 94 percent of all Internet sales are B2B
transactions.
• Opens up foreign markets to sellers.
• Largest segment of the business market.
DIFFERENCES IN FOREIGN BUSINESS MARKETS
•May differ due to variations in regulations and cultural
practices.
•Businesses must be willing to adapt to local customs and
business practices and research cultural preferences.
B2B
Customers:
B2C
Individuals &
Households
Businesses
Global
Large corporations
Small & Medium
sized businesses
Institutions
Healthcare
Education
Government
Federal
State
Local
Select
ed
Produ
cts:
PCs
Printers
Consumer
Electronics
Simple Service
Agreements
PCs
Enterprise Storage
Servers
Complex Service Offerings
The Consumer Market (B2C) and the Business Market (B2B) at
Dell, Inc.
B2C and B2B
The Supply Chain
Upstream Suppliers
(USX, Du Pont)
Suppliers of
manufactured
materials and
parts such as
sheet metal or
plastic resin
Direct Suppliers
(TRW, Johnson Controls)
Purchase input
used in creating
power-steering
systems (TRW) or
car seats (Johnson
Controls)
Auto Manufacturers
(Ford, General Motors)
Purchase input
used in creating
automobiles
Auto Buyers
(Consumers)
Purchase
automobiles
Business Marketing Business Marketing Consumer Marketing
(Individuals, Households)
and
Business Marketing
(Organisations such as
Fleet Buyers)
Source: Hutt, M.D. and Speh, T.W.(2004): Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 8th
Edition, p. 15.
8
Identify the fourmajor
categories of
business market customers
Major Categories of Business Customers
9
Major Categories of Business Customers
Producers
Resellers
Governments
Institutions
OEMs (Original Equipment
Manufacturers)
Wholesalers
Retailers
NationalParty
Municipal
Local
Colleges
Fraternal groups
Schools
Churches
Civic Clubs
Hospitals
Unions
Foundations
Nonbusiness organizations
10
Original
Equipment
Manufacturers
Producers
OEMs.
Individuals and organizations that buy
business goods and incorporate them
into the products that they produce
for eventual sale to other producers
or to consumers.
REVIEW LEARNING OUTCOME
Business Market Customers
Business Marketing
Institutions
Resellers
Wholesalers
Retailers
Producers
OEMs
Governments
Federal
State
Municipal
County
Unions
Civic
Clubs
Other
Churches
Foundations
Nonprofits
12
Explain the major differences
between business and
consumer markets
Business versus Consumer Markets
1. Nature of their markets
2. Market demand
3. Buyer behavior
4. Buyer-seller relationship
5. Environmental influences (competition,
political, legal) and
6. Market strategy
• Due to these differences, business marketers
need to understand how demand for industrial
products and services differs from consumer
demand.
Business and Consumer Marketing Differs In:
Characteristic Business Market Consumer Market
Demand Organizational Individual
Volume Larger Smaller
# of Customers Fewer Many
Location Concentrated Dispersed
Distribution More Direct More Indirect
Nature of Buy More Professional More Personal
Buy Influence Multiple Single
Negotiations More Complex Simpler
Reciprocity Yes No
Leasing Greater Lesser
Promotion Personal Selling Advertising
Business versus Consumer Markets
B2B Marketing vs. Consumer Marketing
Areas Industrial Markets Consumer Markets
1. Market characteristics • Geographically concentrated
• Relatively fewer buyers
• Geographically distributed
• Mass markets
2. Product characteristics • Technical complexity
• Customized
• Standardized
3. Service characteristics •Service, timely delivery &
availability is very important
•Service, timely delivery &
availability is somewhat
important
4. Buying behavior •Involvement of various
functional areas in both buyer
& supplier firms
•Purchase decisions are mainly
made on rational/performance
basis
•Technical expertise
•Stable interpersonal
relationship between buyers &
sellers
•Involvement of family
members
•Purchase decisions are
mostly made on physiological
/ social / psychological needs
• Less technical expertise
• Non-personal relationship
New Work
Areas Industrial Markets Consumer Markets
5. Channel characteristics • More direct
• Fewer intermediaries
• Indirect
•Multiple layers of
intermediaries
6. Promotional
characteristics
• Emphasis on personal selling • Emphasis on advertising
7. Price characteristics •Competitive bidding &
negotiated prices
• List prices for standard
products
•List prices or maximum retail
price (MRP)
B2B Marketing vs. Consumer Marketing
Major Equipment
Accessory Equipment
Raw Materials
Component Parts
Processed Materials
Supplies
Business Services
Types of Business Products
Online
http://www.zzzzz.com
18
Types of Business Products (Cont.)
Major Equipment
Accessory Equipment
Raw Materials
Component Parts
Processed Materials
Supplies
Business Services
Major
Categories
of Business
Products
Classifying industrial goods by
the following questions:
How does the good or service
enter the production process?
How does it enter the cost
structure of the firm?
Classifying
Goods for
the Business
Market
Source: Adapted from Philip Kotler,
Marketing Management: Analysis,
Planning, and Control, 4th ed.
(Englewood Cliffs, N.J.: Prentice-Hall,
1980), p. 172, with permission of
Prentice-Hall, Inc.
Classifying Business Goods & Services
3 Main Categories of Products
Entering Goods
Become part of the finished product
Cost assigned to the manufacturing process
Foundation Goods
Capital Items
Typically depreciated over time
Facilitating Products
Support organizational operations
Handled as overhead expenses
Classifying Business Goods & Services
Entering Goods
 Raw Materials
 Farm products & natural products
 Only processed as necessary for handling & transport
 Require extensive processing
 Manufactured Materials & Parts
 Any product that has undergone extensive processing prior to
purchase
 Component Materials require additional processing
 Component Parts generally do not require additional processing
Classifying Business Goods & Services
Foundation Goods
Installations
Major long-term investment items
Buildings, land, fixed equipment, etc.
Accessory Equipment
Less expensive & short-lived
Not considered part of fixed plant
Portable tools, PC’s, etc.
Classifying Business Goods & Services
Facilitating Products
Supplies
Any supplies necessary to maintain the
organization’s operations
Services
Maintenance & Repair support
Advisory support
Logistical support
REVIEW LEARNING OUTCOME
Types of Business Goods and Services
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
The Nature of Industrial buying
• In industrial marketing the purchasing
managers must coordinate with numerous
people with diverse organizational
responsibilities who apply different
criteria to purchasing decision.
• Developing effective marketing strategies
to reach organizational buyers rests on
the industrial marketer‘s understanding
of the nature of industrial buying.
Organizational buying activities
• Organizational buying activities center on the
level of experience and information that firms
have in purchasing certain product or services.
• Depending on the type of buying situations,
whether it is routine or new, these phases will
vary in their degree of importance.
• Effective IMS requires that marketers focus
their attention on the type of buying situation
a firm is facing, where it is in its decision-
making process and what criteria various
influencers will emphasize in the purchasing
decisions.
The BUYGRID MODEL
• organizational buying behaviour is easier
if it is divided into the various phases
and these phases are analyzed under
difft. Buying situation.
• This enables the marketer to identify
critical decision phases, the infn. needs
of the purchasing orgn. Etc.
• A conceptual model, referred to as the
Buygrid, is quite useful in analyzing the
purchasing decision process over various
buying situations.
The Buygrid incorporates three types of buying situations:
1. The ‗new task‘
2. The ‗straight rebuy &
3. The ‗modified rebuy‘
And as well as eight phases in the buying decision process.
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.
Buying Situations
Eight phases in the purchasing
Decision Process
1. Anticipation or Recognition of a
problem(Need)
2. Determination of the characteristic and
quantity of needed item
3. Description of the characteristic and
quantity of the needed item
4. Search for and qualification of potential
Sources
5. Acquisition and analysis of proposals
6. Evaluation of proposals and selection of
suppliers
7. Selection of an Order Routine
8. Performance Feedback and Evaluation.
Overview of the Buygrid/ Concept of
buying decision making
It is the decision-making process that is
the subject of analysis.
1. Creeping Commitment
2. Center of Gravity
Phases of affecting marketing strategy / appropriate
marketing strategies over various buying situations
and phases.
The most important phases of affecting
marketing strategy are of five:
1. Problem recognition
2. Determining solution characteristics
3. Characteristics / Quantity of needed
item
4. Searching for and quality suppliers
5. Acquiring and analyzing proposals
Buying centers and multiple buying
influencers
A major task for industrial marketers is
identifying those individuals who are in any
way involved in the purchasing decision
process, that is decision-making unit.
A decision-making unit may consists of one
person or a group of individuals.
A team of decision-making unit will consists of
fifteen to twenty individuals or sometime more
than 50 people. These decision makers are
refered to as the buying center.
Identifying Buying Center Members
Buying Center is ―an informal, cross-
departmental decision unit in which the
primary objective is the acquisition,
impartation, and processing of relevant
purchasing-related information‖. These
members can be:
1. Marketing
2. Manufacturing
3. Research and development
4. General management
5. Purchasing
Buying Center Roles
Primary Roles:
Deciders
Influencers
Secondary Roles:
Users
Buyers
Gatekeepers
Influence pattern vary from member to member.
Hence one have to identify key buying
influencers.
THE BUYING CENTER CONCEPT
•Buying center Participants in an organizational buying
action.
BUYING CENTER ROLES
A model for determining the composition of
the Orgnal. Buying Center
Mattson has developed a model, which assists
marketers in analyzing and predicting
buying center membership and influence.
These factors are:
1. Environment and mission
2. Purchase Needs
3. Buy class / Buy Phase
4. Dollar value and complexity
5. Time commitment and life cycle
6. Buying center membership, procurement, and
other members
A model for determining the composition of
the Orgnal. Buying Center
Buyer Mission
Purchase needs
Dollar value &
complexity
Time Commitment &
Life cycle
Buy Class
1. New task
2. Modified
3.Straight rebuy
Buy Phase
Need recognition
Post purchase
Procurement
BC Membership
Other members
Transaction
Objectives in Orgnal. buying
While industrial buying tends to reflect
organizational goals, organizational
members are influenced by both Task and
Nontask objectives.
1. Task –oriented objectives involves
pragmatic consideration like:
Price
Services
Quality
Assurance of supply
Reciprocity.
Non Task –oriented objectives involves
personal factors such as desire for job
security, recognition, promotion and salary
increases.
It has been found that major factors that
influence the purchasing decision are
social consideration, such as friendship,
reputation, and mutually beneficial
interactions.
The Interpersonal dynamics of
Industrial Buying Behavior
• Effective and responsive industrial
marketing strategy rests on the industrial
marketer‘s knowledge of how organizational
buying behavior is affected by forces
within the organization.
• Purchases are also affected by a complex
set of decisions made by the several
individuals in buying decision.
• For mkg. Strategy to be successful the
industrial marketer must have a clear
understanding of how orgnal groups
interact, the amount of influence the
various group members may possess.
Purchasing’s influence on buyer
behavior
• International material strategies,
skyrocketing cost of materials and energy
brought about a recognition of the
importance of the purchasing function.
• The average IF spends approximately 60% of
its sales dollars on materials, services,
and capital equipment.
• Purchasing is now being viewed as ―asset-
management through asset-utilization and
inventory control.‖
The growing status of purchasing is the realization that
efficient and effective purchasing, through the use of
material requirement planning and Just in time inventory
control system is a key factor in maintaining profits.
Techniques used in industrial buying
Material Requirement Planning
Just in time Purchasing
Centralized purchasing
Buyer Technology
A supplier requires a computer system for MRP and JIT to
constantly monitor product quality and delivery capability.
Buying center involvement and
interaction patterns
• Industrial marketers must not only address
the question of who participate in the
decision process, they must also
―understand the involvement and interaction
of organizational members,…the leadership
pattern, and the formal and informal
network of communication among the center‘s
members.‖
• An Industrial marketer should be aware of
models of organizational buying behavior.
Models of Organizational / Industrial
Buying Behavior
There are two important frameworks/models
available to explain organizational buying
behavior:
1. Webster and Wind Model
2. Sheth Model of industrial buyer behaviour.
Webster and Wind Model of OBB
This model is comprehensive and identifies many key variables
while developing marketing strategies.
The model considers four sets of variables, which affect the buying
decision-making process in a firm, namely:
1. Environmental
2. Organizational - Objectives, goals, organization structures,
purchasing policies and procedures, degree of centralization,
evaluation and reward system are included in organizational
variables
3.Buying center - The functioning of buying center is influenced
by the organizational, environmental, and individual variables
4. Individual: Personal goals, education, experience, life style,
income etc
Webster and Wind Model of OBB
Environmental Variables
 Physical
 Technological
 Economic
 Culture
Orgnal Variables
•Objectives
•Structure
•Evaluation & Rewards
•Decentralization
Buying Center Variables:
Authority
Size
Key influencers
communication
Individual Variables:
• Personal goals
 education,
 experience,
 life style,
 income
Orgnal Buying Decisions:
Choice of suppliers
Delay decisions
Make or lease,
Do not buy
Professor Jagdish N Sheth developed the Sheth model in 1973.
It emphasizes the joint decision making by two or more
individuals and the psychological aspects of the decision
making individuals in IBB.
The model focuses on the complex relationship involved in
joint decision making. The factors considered are:
a. The conditions that precipitate joint decision-making
b. The psychological factors influencing individuals D
making
c. The conflict and resolution in Joint Decision Making.
Sheth Model of industrial buyer
behavior
Sheth Model of industrial buyer behavior
Variables that
determine if buying
Decision is joint:
•Product specific
Time pressure,
Perceived ris,
Type of purchase
•Company Specific:
Co soze
Co Orientation’
Degree of
centralization
Differences among
individuals buyer
Caused by factors:
•Background of the
Individuals
•Information sources
•Role oreintaion
Methods used
in conflict resolution
in JDM
Component 1 Component 2
Component 3 Situational
Factors
Supplier or
Brand Choice
a. Joint decision-making
The number of organization members involved in a
buying decision depends on.
a. The size and organization characteristics of the
firm- The size of the BC and the aount of
interaction between those involved is dependent
upon:
Vertical Involvement
Lateral Involvement
Extensivety
Connectedness
b. Type of purchasing situation
c. Perceived importance of the product( risk
involved)
d. Available resources for handling the purchase
(degree of centralization)
Sheth refers to these areas in his model as company
specific(1,4) and product specific factors (2,3)
b. The psychological factors influencing
individuals D making
Difference in Role Orientation
Differences in Information Exposure
Perceived Risk in the Vendor Selection
Process:
The following strategies are adopted to
minimizes or avoid perceived risk:
1. Reduce uncertainty
2. Play the odds
3. Spread the risk
C. The conflict and resolution in Joint Decision
Making.
Conflict Resolution Strategies:
1. Competing
2. Accommodating
3. Collaborating
4. Avoiding
5. Compromising
Coalition: Here individuals within the
formation attempt to cooperate with
specific other group members to enhance
their competitive position with respect to
the entire group.
Power in conflict Resolution
The use of power in resolving conflict is common
in industrial buying.
Sources or bases of power:
1. Reward Power
2. Coercive power
3. Legitimate power
4. Personality Power
5. Expertise power
Effective marketing strategy rests on the ability
to
determine which individual hold and utilize
various
decisions, or if coalition of power existing.
The Buying Committee
Buying Committee is ,most formalized buying center is used
extensively in the reseller‘s market and by many industrial
organizations, particularly when purchasinf is centralized.
Here the marketer should identify those individuals in a
committee having more influencing power.
Ethics in purchasing
Ethics is a rules and regulation that guide the purchasing
personnel on their daily job
Ethics in marketing helps marketers distinguish between right
and wrong behavior.
Adherence to ethics is essential in industrial markets as
mutual trust among buyers and sellers is the key to long-term
success.
Marketing has evolved from a production-centric approach to a
societal marketing approach that lays greater emphasis on the
ethical issues in marketing.
Both buyers and sellers need to adhere to honesty and trust
and attempt to act in a manner that is mutually beneficial.
They must fulfill their contractual obligations and verbal
agreements
Many marketers, however, fail to follow ethical norms of
behavior. This has led to unethical practices in the bidding
process, cartelization, and forced reciprocity.
But, some firms have begun to adopt ethical practices like
environmentally responsible buying, green packaging, and
establishing green factories.
*******************
REVIEW LEARNING OUTCOME
Business Buying Behavior
Customer service
Gatekeeper
Initiator
Influencer
Decider
Purchaser
User
Buying
Center
 Quality
 Service
 Price
Evaluative
Criteria
Buying
Situations
New buy
Straight rebuy
Modified rebuy
business marketing module 1.pdf

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business marketing module 1.pdf

  • 1. 3.3.2 (2020 Scheme) BUSINESS & SOCIAL MARKETING MODULE 1: INTRODUCTION TO BUSINESS MARKETING 10 HOURS Business Marketing Concept, Business vs. Consumer Marketing, Types of Industrial Markets, Types of Business Customers, Classifying Industrial Products & Services. Organizational Buying Process: Types of purchases / buying situations, Buying Centre Concept, Inter Personal Dynamics of Business Buying Behaviour and Roles of Buying centre. The Webster & Wind model of Organizational Buying Behaviour, Ethics in Purchasing.
  • 2. What is Business Marketing? • Business marketing also referred to as “Industrial marketing” or “B2B marketing” or “Organizational marketing”. • Business marketing is the marketing of products & services to business organizations. • Business organizations include: Manufacturing companies Govt. undertakings Private sector organizations Educational institutions Hospitals Distributors / Dealers Business organizations buy products & services to satisfy many objectives like production of other goods & services, making profits, reducing costs, & so on. Consumer marketing is the marketing of products & services to individuals, families, & households. The consumers buy products & services for their own consumption.
  • 3. NATURE OF THE BUSINESS MARKET •Companies also buy services, such as legal, accounting, office-cleaning, and other services. • Some firms focus entirely on business markets. • Example: Caterpillar, which makes construction and mining equipment. • Diverse market, everything from a box of paper clips to thousands of parts for an automobile manufacturer.
  • 4. COMPONENTS OF THE BUSINESS MARKET • Four main components: •Commercial market Individuals and firms that acquire products to support, directly or indirectly, production of other goods and services. • Largest segment of the business market. •Trade industries Retailers or wholesalers that purchase products for resale to others. • Also called resellers, marketing intermediaries that operate in the trade sector. •Government—all domestic levels (federal, state, local) and foreign governments; also act as sellers—e.g., confiscated goods. •Public and private institutions, such as hospitals, churches, colleges and universities, and museums.
  • 5. B2B MARKETS: THE INTERNET CONNECTION • More than 94 percent of all Internet sales are B2B transactions. • Opens up foreign markets to sellers. • Largest segment of the business market. DIFFERENCES IN FOREIGN BUSINESS MARKETS •May differ due to variations in regulations and cultural practices. •Businesses must be willing to adapt to local customs and business practices and research cultural preferences.
  • 6. B2B Customers: B2C Individuals & Households Businesses Global Large corporations Small & Medium sized businesses Institutions Healthcare Education Government Federal State Local Select ed Produ cts: PCs Printers Consumer Electronics Simple Service Agreements PCs Enterprise Storage Servers Complex Service Offerings The Consumer Market (B2C) and the Business Market (B2B) at Dell, Inc. B2C and B2B
  • 7. The Supply Chain Upstream Suppliers (USX, Du Pont) Suppliers of manufactured materials and parts such as sheet metal or plastic resin Direct Suppliers (TRW, Johnson Controls) Purchase input used in creating power-steering systems (TRW) or car seats (Johnson Controls) Auto Manufacturers (Ford, General Motors) Purchase input used in creating automobiles Auto Buyers (Consumers) Purchase automobiles Business Marketing Business Marketing Consumer Marketing (Individuals, Households) and Business Marketing (Organisations such as Fleet Buyers) Source: Hutt, M.D. and Speh, T.W.(2004): Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 8th Edition, p. 15.
  • 8. 8 Identify the fourmajor categories of business market customers Major Categories of Business Customers
  • 9. 9 Major Categories of Business Customers Producers Resellers Governments Institutions OEMs (Original Equipment Manufacturers) Wholesalers Retailers NationalParty Municipal Local Colleges Fraternal groups Schools Churches Civic Clubs Hospitals Unions Foundations Nonbusiness organizations
  • 10. 10 Original Equipment Manufacturers Producers OEMs. Individuals and organizations that buy business goods and incorporate them into the products that they produce for eventual sale to other producers or to consumers.
  • 11. REVIEW LEARNING OUTCOME Business Market Customers Business Marketing Institutions Resellers Wholesalers Retailers Producers OEMs Governments Federal State Municipal County Unions Civic Clubs Other Churches Foundations Nonprofits
  • 12. 12 Explain the major differences between business and consumer markets Business versus Consumer Markets
  • 13. 1. Nature of their markets 2. Market demand 3. Buyer behavior 4. Buyer-seller relationship 5. Environmental influences (competition, political, legal) and 6. Market strategy • Due to these differences, business marketers need to understand how demand for industrial products and services differs from consumer demand. Business and Consumer Marketing Differs In:
  • 14. Characteristic Business Market Consumer Market Demand Organizational Individual Volume Larger Smaller # of Customers Fewer Many Location Concentrated Dispersed Distribution More Direct More Indirect Nature of Buy More Professional More Personal Buy Influence Multiple Single Negotiations More Complex Simpler Reciprocity Yes No Leasing Greater Lesser Promotion Personal Selling Advertising Business versus Consumer Markets
  • 15. B2B Marketing vs. Consumer Marketing Areas Industrial Markets Consumer Markets 1. Market characteristics • Geographically concentrated • Relatively fewer buyers • Geographically distributed • Mass markets 2. Product characteristics • Technical complexity • Customized • Standardized 3. Service characteristics •Service, timely delivery & availability is very important •Service, timely delivery & availability is somewhat important 4. Buying behavior •Involvement of various functional areas in both buyer & supplier firms •Purchase decisions are mainly made on rational/performance basis •Technical expertise •Stable interpersonal relationship between buyers & sellers •Involvement of family members •Purchase decisions are mostly made on physiological / social / psychological needs • Less technical expertise • Non-personal relationship
  • 16. New Work Areas Industrial Markets Consumer Markets 5. Channel characteristics • More direct • Fewer intermediaries • Indirect •Multiple layers of intermediaries 6. Promotional characteristics • Emphasis on personal selling • Emphasis on advertising 7. Price characteristics •Competitive bidding & negotiated prices • List prices for standard products •List prices or maximum retail price (MRP) B2B Marketing vs. Consumer Marketing
  • 17. Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services Types of Business Products Online http://www.zzzzz.com
  • 18. 18 Types of Business Products (Cont.) Major Equipment Accessory Equipment Raw Materials Component Parts Processed Materials Supplies Business Services Major Categories of Business Products
  • 19. Classifying industrial goods by the following questions: How does the good or service enter the production process? How does it enter the cost structure of the firm? Classifying Goods for the Business Market Source: Adapted from Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 172, with permission of Prentice-Hall, Inc.
  • 20. Classifying Business Goods & Services 3 Main Categories of Products Entering Goods Become part of the finished product Cost assigned to the manufacturing process Foundation Goods Capital Items Typically depreciated over time Facilitating Products Support organizational operations Handled as overhead expenses
  • 21. Classifying Business Goods & Services Entering Goods  Raw Materials  Farm products & natural products  Only processed as necessary for handling & transport  Require extensive processing  Manufactured Materials & Parts  Any product that has undergone extensive processing prior to purchase  Component Materials require additional processing  Component Parts generally do not require additional processing
  • 22. Classifying Business Goods & Services Foundation Goods Installations Major long-term investment items Buildings, land, fixed equipment, etc. Accessory Equipment Less expensive & short-lived Not considered part of fixed plant Portable tools, PC’s, etc.
  • 23. Classifying Business Goods & Services Facilitating Products Supplies Any supplies necessary to maintain the organization’s operations Services Maintenance & Repair support Advisory support Logistical support
  • 24. REVIEW LEARNING OUTCOME Types of Business Goods and Services 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
  • 25. The Nature of Industrial buying • In industrial marketing the purchasing managers must coordinate with numerous people with diverse organizational responsibilities who apply different criteria to purchasing decision. • Developing effective marketing strategies to reach organizational buyers rests on the industrial marketer‘s understanding of the nature of industrial buying.
  • 26. Organizational buying activities • Organizational buying activities center on the level of experience and information that firms have in purchasing certain product or services. • Depending on the type of buying situations, whether it is routine or new, these phases will vary in their degree of importance. • Effective IMS requires that marketers focus their attention on the type of buying situation a firm is facing, where it is in its decision- making process and what criteria various influencers will emphasize in the purchasing decisions.
  • 27. The BUYGRID MODEL • organizational buying behaviour is easier if it is divided into the various phases and these phases are analyzed under difft. Buying situation. • This enables the marketer to identify critical decision phases, the infn. needs of the purchasing orgn. Etc. • A conceptual model, referred to as the Buygrid, is quite useful in analyzing the purchasing decision process over various buying situations.
  • 28. The Buygrid incorporates three types of buying situations: 1. The ‗new task‘ 2. The ‗straight rebuy & 3. The ‗modified rebuy‘ And as well as eight phases in the buying decision process.
  • 29. 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. Buying Situations
  • 30. Eight phases in the purchasing Decision Process 1. Anticipation or Recognition of a problem(Need) 2. Determination of the characteristic and quantity of needed item 3. Description of the characteristic and quantity of the needed item 4. Search for and qualification of potential Sources 5. Acquisition and analysis of proposals 6. Evaluation of proposals and selection of suppliers 7. Selection of an Order Routine 8. Performance Feedback and Evaluation.
  • 31. Overview of the Buygrid/ Concept of buying decision making It is the decision-making process that is the subject of analysis. 1. Creeping Commitment 2. Center of Gravity
  • 32. Phases of affecting marketing strategy / appropriate marketing strategies over various buying situations and phases. The most important phases of affecting marketing strategy are of five: 1. Problem recognition 2. Determining solution characteristics 3. Characteristics / Quantity of needed item 4. Searching for and quality suppliers 5. Acquiring and analyzing proposals
  • 33. Buying centers and multiple buying influencers A major task for industrial marketers is identifying those individuals who are in any way involved in the purchasing decision process, that is decision-making unit. A decision-making unit may consists of one person or a group of individuals. A team of decision-making unit will consists of fifteen to twenty individuals or sometime more than 50 people. These decision makers are refered to as the buying center.
  • 34. Identifying Buying Center Members Buying Center is ―an informal, cross- departmental decision unit in which the primary objective is the acquisition, impartation, and processing of relevant purchasing-related information‖. These members can be: 1. Marketing 2. Manufacturing 3. Research and development 4. General management 5. Purchasing
  • 35. Buying Center Roles Primary Roles: Deciders Influencers Secondary Roles: Users Buyers Gatekeepers Influence pattern vary from member to member. Hence one have to identify key buying influencers.
  • 36. THE BUYING CENTER CONCEPT •Buying center Participants in an organizational buying action. BUYING CENTER ROLES
  • 37. A model for determining the composition of the Orgnal. Buying Center Mattson has developed a model, which assists marketers in analyzing and predicting buying center membership and influence. These factors are: 1. Environment and mission 2. Purchase Needs 3. Buy class / Buy Phase 4. Dollar value and complexity 5. Time commitment and life cycle 6. Buying center membership, procurement, and other members
  • 38. A model for determining the composition of the Orgnal. Buying Center Buyer Mission Purchase needs Dollar value & complexity Time Commitment & Life cycle Buy Class 1. New task 2. Modified 3.Straight rebuy Buy Phase Need recognition Post purchase Procurement BC Membership Other members Transaction
  • 39. Objectives in Orgnal. buying While industrial buying tends to reflect organizational goals, organizational members are influenced by both Task and Nontask objectives. 1. Task –oriented objectives involves pragmatic consideration like: Price Services Quality Assurance of supply Reciprocity.
  • 40. Non Task –oriented objectives involves personal factors such as desire for job security, recognition, promotion and salary increases. It has been found that major factors that influence the purchasing decision are social consideration, such as friendship, reputation, and mutually beneficial interactions.
  • 41. The Interpersonal dynamics of Industrial Buying Behavior • Effective and responsive industrial marketing strategy rests on the industrial marketer‘s knowledge of how organizational buying behavior is affected by forces within the organization. • Purchases are also affected by a complex set of decisions made by the several individuals in buying decision. • For mkg. Strategy to be successful the industrial marketer must have a clear understanding of how orgnal groups interact, the amount of influence the various group members may possess.
  • 42. Purchasing’s influence on buyer behavior • International material strategies, skyrocketing cost of materials and energy brought about a recognition of the importance of the purchasing function. • The average IF spends approximately 60% of its sales dollars on materials, services, and capital equipment. • Purchasing is now being viewed as ―asset- management through asset-utilization and inventory control.‖
  • 43. The growing status of purchasing is the realization that efficient and effective purchasing, through the use of material requirement planning and Just in time inventory control system is a key factor in maintaining profits.
  • 44. Techniques used in industrial buying Material Requirement Planning Just in time Purchasing Centralized purchasing Buyer Technology A supplier requires a computer system for MRP and JIT to constantly monitor product quality and delivery capability.
  • 45. Buying center involvement and interaction patterns • Industrial marketers must not only address the question of who participate in the decision process, they must also ―understand the involvement and interaction of organizational members,…the leadership pattern, and the formal and informal network of communication among the center‘s members.‖ • An Industrial marketer should be aware of models of organizational buying behavior.
  • 46. Models of Organizational / Industrial Buying Behavior There are two important frameworks/models available to explain organizational buying behavior: 1. Webster and Wind Model 2. Sheth Model of industrial buyer behaviour.
  • 47. Webster and Wind Model of OBB This model is comprehensive and identifies many key variables while developing marketing strategies. The model considers four sets of variables, which affect the buying decision-making process in a firm, namely: 1. Environmental 2. Organizational - Objectives, goals, organization structures, purchasing policies and procedures, degree of centralization, evaluation and reward system are included in organizational variables 3.Buying center - The functioning of buying center is influenced by the organizational, environmental, and individual variables 4. Individual: Personal goals, education, experience, life style, income etc
  • 48. Webster and Wind Model of OBB Environmental Variables  Physical  Technological  Economic  Culture Orgnal Variables •Objectives •Structure •Evaluation & Rewards •Decentralization Buying Center Variables: Authority Size Key influencers communication Individual Variables: • Personal goals  education,  experience,  life style,  income Orgnal Buying Decisions: Choice of suppliers Delay decisions Make or lease, Do not buy
  • 49. Professor Jagdish N Sheth developed the Sheth model in 1973. It emphasizes the joint decision making by two or more individuals and the psychological aspects of the decision making individuals in IBB. The model focuses on the complex relationship involved in joint decision making. The factors considered are: a. The conditions that precipitate joint decision-making b. The psychological factors influencing individuals D making c. The conflict and resolution in Joint Decision Making. Sheth Model of industrial buyer behavior
  • 50. Sheth Model of industrial buyer behavior Variables that determine if buying Decision is joint: •Product specific Time pressure, Perceived ris, Type of purchase •Company Specific: Co soze Co Orientation’ Degree of centralization Differences among individuals buyer Caused by factors: •Background of the Individuals •Information sources •Role oreintaion Methods used in conflict resolution in JDM Component 1 Component 2 Component 3 Situational Factors Supplier or Brand Choice
  • 51. a. Joint decision-making The number of organization members involved in a buying decision depends on. a. The size and organization characteristics of the firm- The size of the BC and the aount of interaction between those involved is dependent upon: Vertical Involvement Lateral Involvement Extensivety Connectedness b. Type of purchasing situation c. Perceived importance of the product( risk involved) d. Available resources for handling the purchase (degree of centralization) Sheth refers to these areas in his model as company specific(1,4) and product specific factors (2,3)
  • 52. b. The psychological factors influencing individuals D making Difference in Role Orientation Differences in Information Exposure Perceived Risk in the Vendor Selection Process: The following strategies are adopted to minimizes or avoid perceived risk: 1. Reduce uncertainty 2. Play the odds 3. Spread the risk
  • 53. C. The conflict and resolution in Joint Decision Making. Conflict Resolution Strategies: 1. Competing 2. Accommodating 3. Collaborating 4. Avoiding 5. Compromising Coalition: Here individuals within the formation attempt to cooperate with specific other group members to enhance their competitive position with respect to the entire group.
  • 54. Power in conflict Resolution The use of power in resolving conflict is common in industrial buying. Sources or bases of power: 1. Reward Power 2. Coercive power 3. Legitimate power 4. Personality Power 5. Expertise power Effective marketing strategy rests on the ability to determine which individual hold and utilize various decisions, or if coalition of power existing.
  • 55. The Buying Committee Buying Committee is ,most formalized buying center is used extensively in the reseller‘s market and by many industrial organizations, particularly when purchasinf is centralized. Here the marketer should identify those individuals in a committee having more influencing power.
  • 56. Ethics in purchasing Ethics is a rules and regulation that guide the purchasing personnel on their daily job Ethics in marketing helps marketers distinguish between right and wrong behavior. Adherence to ethics is essential in industrial markets as mutual trust among buyers and sellers is the key to long-term success. Marketing has evolved from a production-centric approach to a societal marketing approach that lays greater emphasis on the ethical issues in marketing.
  • 57. Both buyers and sellers need to adhere to honesty and trust and attempt to act in a manner that is mutually beneficial. They must fulfill their contractual obligations and verbal agreements Many marketers, however, fail to follow ethical norms of behavior. This has led to unethical practices in the bidding process, cartelization, and forced reciprocity. But, some firms have begun to adopt ethical practices like environmentally responsible buying, green packaging, and establishing green factories. *******************
  • 58. REVIEW LEARNING OUTCOME Business Buying Behavior Customer service Gatekeeper Initiator Influencer Decider Purchaser User Buying Center  Quality  Service  Price Evaluative Criteria Buying Situations New buy Straight rebuy Modified rebuy