This chapter discusses business-to-business markets and how organizations purchase goods and services. It describes key characteristics of B2B demand and customers. Business demand is often derived from consumer demand, inelastic, and fluctuating. Customers include producers, resellers, government agencies, and non-profits. Marketers classify industries using the North American Industry Classification System. The chapter also covers opportunities for using e-commerce, social media, and technologies like intranets in B2B contexts. Finally, it addresses different business buying situations and models of the organizational buying decision process.

1. Business-to-BusinessBusiness-to-Business
Markets:Markets:
How and Why Organizations BuyHow and Why Organizations Buy
Chapter SixChapter Six© 2012 Pearson Education, Inc. publishing as Prentice-Hall.

2. 6-2© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Chapter ObjectivesChapter Objectives
 Understand the characteristics ofUnderstand the characteristics of
business-to-business markets, business-business-to-business markets, business-
to-business market demand, and howto-business market demand, and how
marketers classify business-to-businessmarketers classify business-to-business
customerscustomers
 Appreciate opportunities for using e-Appreciate opportunities for using e-
commerce and social media in business-commerce and social media in business-
to-business settingsto-business settings
 Identify and describe the differentIdentify and describe the different
business buying situations and thebusiness buying situations and the
business buying decision processbusiness buying decision process

3. 6-3© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Real People, Real Choices:Real People, Real Choices:
Decision Time at NCR CorporationDecision Time at NCR Corporation
 Which option should NCR pursue inWhich option should NCR pursue in
order to market the new generation oforder to market the new generation of
point of sale workstations effectively?point of sale workstations effectively?
• Option 1:Option 1: Attend the trade show as inAttend the trade show as in
the pastthe past
• Option 2:Option 2: Skip the show this year andSkip the show this year and
reallocate resources to otherreallocate resources to other
alternativesalternatives
• Option 3:Option 3: Forego the show this year andForego the show this year and
find out if the venue and sponsorshipfind out if the venue and sponsorship
changes are realchanges are real

4. 6-4© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Markets: Buying and SellingBusiness Markets: Buying and Selling
When the Customer is Another FirmWhen the Customer is Another Firm
 Business-to-business marketingBusiness-to-business marketing
The marketing of goods and servicesThe marketing of goods and services
that businesses and otherthat businesses and other
organizations buy for purposes otherorganizations buy for purposes other
than personal consumptionthan personal consumption
• Business-to-business (organizational)Business-to-business (organizational)
markets include manufacturers,markets include manufacturers,
wholesalers, retailers, and otherwholesalers, retailers, and other
organizations such as hospitals, andorganizations such as hospitals, and
governmentgovernment

5. 6-5© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Factors That Make a DifferenceFactors That Make a Difference
in Business Marketsin Business Markets
 Business markets differ from consumerBusiness markets differ from consumer
markets in several ways:markets in several ways:
• Multiple buyers are involvedMultiple buyers are involved
• Fewer organizational customers existFewer organizational customers exist
• Order quantities and cost are muchOrder quantities and cost are much
largerlarger
• Business customers are moreBusiness customers are more
geographically concentrationgeographically concentration
 These differences make B2B marketingThese differences make B2B marketing
more complexmore complex

6. 6-6© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business-to-Business DemandBusiness-to-Business Demand
 Business-to-business demand differsBusiness-to-business demand differs
from consumer product demandfrom consumer product demand
 Demand is:Demand is:
• DerivedDerived
• InelasticInelastic
• FluctuatingFluctuating
• JointJoint

7. 6-7© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business-to-Business DemandBusiness-to-Business Demand
 Derived demand:Derived demand:
• Demand for organizational products isDemand for organizational products is
caused by demand for consumer goodscaused by demand for consumer goods
• Changes in consumer trends canChanges in consumer trends can
impact B2B salesimpact B2B sales
 Inelastic demand:Inelastic demand:
• Changes in price have little or no effectChanges in price have little or no effect
on the amount demandedon the amount demanded

8. 6-8© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business-to-Business DemandBusiness-to-Business Demand
 Fluctuating demand:Fluctuating demand:
• Small changes in consumer demandSmall changes in consumer demand
create large increases or decreases increate large increases or decreases in
business demandbusiness demand
• Life expectancy of the product canLife expectancy of the product can
cause fluctuating demandcause fluctuating demand
 Joint demand:Joint demand:
• Demand occurs for two or more goodsDemand occurs for two or more goods
that are used together to create athat are used together to create a
productproduct

9. 6-9© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Types of Business-to-BusinessTypes of Business-to-Business
CustomersCustomers
 Producers:Producers:
• Individuals or firms that purchaseIndividuals or firms that purchase
products for use in the production ofproducts for use in the production of
other goods and servicesother goods and services
Example:Example: Dell buys RAM chips forDell buys RAM chips for
integration into their PCsintegration into their PCs
 Resellers:Resellers:
• Individuals or firms that buy finishedIndividuals or firms that buy finished
goods for reselling, renting, or leasinggoods for reselling, renting, or leasing

10. 6-10© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Types of Business-to-BusinessTypes of Business-to-Business
CustomersCustomers
 Organizations: Government markets:Organizations: Government markets:
• Federal, state, county, and local governmentsFederal, state, county, and local governments
that buy goods and services to carry outthat buy goods and services to carry out
public objectives, and support theirpublic objectives, and support their
operationsoperations
 Organizations: Not-for-profit firms:Organizations: Not-for-profit firms:
• Organizations with charitable, educational,Organizations with charitable, educational,
community, and other public service goalscommunity, and other public service goals
that buy goods and services to support theirthat buy goods and services to support their
functions and to attract and serve theirfunctions and to attract and serve their
membersmembers

11. 6-11© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
North American IndustryNorth American Industry
Classification SystemClassification System
 Marketers use the North AmericanMarketers use the North American
Industry Classification System (NAICS)Industry Classification System (NAICS)
to identify their customers and to findto identify their customers and to find
new customersnew customers
• NAICS is a numerical coding ofNAICS is a numerical coding of
industries in the United States, Canada,industries in the United States, Canada,
and Mexicoand Mexico

12. 6-12© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business-to-BusinessBusiness-to-Business
E-Commerce and Social MediaE-Commerce and Social Media
 B2B E-CommerceB2B E-Commerce
Internet exchanges between two or moreInternet exchanges between two or more
businesses:businesses:
• Includes exchanges of information, products,Includes exchanges of information, products,
services, and paymentsservices, and payments
• Allows business marketers to link toAllows business marketers to link to
suppliers, factories, distributors, and theirsuppliers, factories, distributors, and their
customerscustomers
• B2B Internet site provides technical support,B2B Internet site provides technical support,
item and order status information, anditem and order status information, and
customer servicecustomer service

13. 6-13© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Intranets, Extranets,Intranets, Extranets,
and Private Exchangesand Private Exchanges
 Intranets:Intranets:
• Link a firms’ departments, employees,Link a firms’ departments, employees,
and databasesand databases
 Extranets:Extranets:
• Allow authorized suppliers, customers,Allow authorized suppliers, customers,
and other outsiders to access the firm’sand other outsiders to access the firm’s
intranetintranet
 Private exchanges:Private exchanges:
• Link an invited group of suppliers andLink an invited group of suppliers and
partners over the Webpartners over the Web

14. 6-14© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Dark Side of B2B CommerceThe Dark Side of B2B Commerce
 Hackers threaten security:Hackers threaten security:
• Customer credit card number theftCustomer credit card number theft
• May destroy firm records or steal tradeMay destroy firm records or steal trade
secretssecrets
• Authenticating transactions is criticalAuthenticating transactions is critical
 Well-meaning employees can beWell-meaning employees can be
security threatssecurity threats
 Firewalls and encryption safeguardFirewalls and encryption safeguard
e-commerce transactionse-commerce transactions ``

15. 6-15© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
B2B and Social MediaB2B and Social Media
 Games generate buzz and drive brandGames generate buzz and drive brand
awarenessawareness
 B2B marketers use social networkingB2B marketers use social networking
sites to promote themselvessites to promote themselves
 Linked in is the most prominent socialLinked in is the most prominent social
networking site for B2B marketers andnetworking site for B2B marketers and
offers several advantagesoffers several advantages

16. 6-16© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Situations andBusiness Buying Situations and
the Buying Decision Processthe Buying Decision Process
 Buy class frameworkBuy class framework
• Identifies the degree of effort a firmIdentifies the degree of effort a firm
needs to collect information and make aneeds to collect information and make a
decisiondecision
 Three buy classes:Three buy classes:
• Straight rebuyStraight rebuy
• Modified rebuyModified rebuy
• New-task buyNew-task buy

17. 6-17© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Professional Buyers and BuyingProfessional Buyers and Buying
CentersCenters
 Trained professional buyers typicallyTrained professional buyers typically
carry out buying in business-to-carry out buying in business-to-
business markets:business markets:
• Purchasing agentsPurchasing agents
• Procurement officersProcurement officers
• Directors of materials managementDirectors of materials management

18. 6-18© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Buying CenterThe Buying Center
 The group of people in an organizationThe group of people in an organization
who participate in a buying decision:who participate in a buying decision:
• InitiatorInitiator
• UserUser
• GatekeeperGatekeeper
• InfluencerInfluencer
• DeciderDecider
• BuyerBuyer

19. 6-19© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Decision ProcessBusiness Buying Decision Process
Step 1: Problem RecognitionStep 1: Problem Recognition
 Factors prompting recognition vary byFactors prompting recognition vary by
buying situationbuying situation
 Actions resulting from problemActions resulting from problem
recognition include:recognition include:
• Initiation of a purchase requisition orInitiation of a purchase requisition or
requestrequest
• Formation of a buying center, if neededFormation of a buying center, if needed

20. 6-20© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Decision ProcessBusiness Buying Decision Process
Step 2: Information SearchStep 2: Information Search
 In this stage, buying center members:In this stage, buying center members:
• Search for information about products andSearch for information about products and
supplierssuppliers
Marketers must provide information where andMarketers must provide information where and
when business buyers need itwhen business buyers need it
• Develop product specificationsDevelop product specifications
Written descriptions of the quality, size, weight,Written descriptions of the quality, size, weight,
color of the item to be purchasedcolor of the item to be purchased
• Identify potential suppliers and obtainIdentify potential suppliers and obtain
proposals (or bids)proposals (or bids)

21. 6-21© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Decision ProcessBusiness Buying Decision Process
Step 3: Evaluate theStep 3: Evaluate the AlternativesAlternatives
 The buying center assesses proposals:The buying center assesses proposals:
• Price is a primary considerationPrice is a primary consideration
• Other factors may be considered, suchOther factors may be considered, such
as extra services or other perksas extra services or other perks
• Customer reference programs, productCustomer reference programs, product
demos, and presentations can help selldemos, and presentations can help sell
the marketer’s products to firmsthe marketer’s products to firms

22. 6-22© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
 Single sourcing:Single sourcing:
• Business practice of buying a particularBusiness practice of buying a particular
product from only one supplierproduct from only one supplier
 Multiple sourcing:Multiple sourcing:
• Buying from several different suppliersBuying from several different suppliers
 Reciprocity:Reciprocity:
• Trading partnership in which two firmsTrading partnership in which two firms
agree to buy from one anotheragree to buy from one another
Business Buying Decision ProcessBusiness Buying Decision Process
Step 4: Select the Product andStep 4: Select the Product and
SupplierSupplier

23. 6-23© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Decision ProcessBusiness Buying Decision Process
Step 4: Select the Product andStep 4: Select the Product and
SupplierSupplier
 Outsourcing:Outsourcing:
• Obtaining vendors to provide goods /Obtaining vendors to provide goods /
services that might otherwise beservices that might otherwise be
supplied in-housesupplied in-house
 Crowdsourcing:Crowdsourcing:
• Pulling together expertise from aroundPulling together expertise from around
the globe to work on solving a problemthe globe to work on solving a problem
 Reverse marketing:Reverse marketing:
• Buyers try to find capable suppliers andBuyers try to find capable suppliers and
“sell” their purchase to the suppliers“sell” their purchase to the suppliers

24. 6-24© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Decision ProcessBusiness Buying Decision Process
Step 5: Evaluate PostpurchaseStep 5: Evaluate Postpurchase
 Organizational buyers assess whetherOrganizational buyers assess whether
the performance of the product and thethe performance of the product and the
supplier live up to expectations:supplier live up to expectations:
• Users are surveyed to determineUsers are surveyed to determine
satisfactionsatisfaction
• Producers may also research ultimateProducers may also research ultimate
consumer satisfaction with the finalconsumer satisfaction with the final
productproduct
• Changes in demand are analyzedChanges in demand are analyzed
• Supplier performance is documentedSupplier performance is documented

25. 6-25© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Business Buying Decision ProcessBusiness Buying Decision Process
Step 5: Evaluate PostpurchaseStep 5: Evaluate Postpurchase
 Metrics used by organizational buyersMetrics used by organizational buyers
include:include:
• SatisfactionSatisfaction
• QualityQuality
• Customer engagementCustomer engagement
• Purchase intentionsPurchase intentions
• Promptness and effectiveness ofPromptness and effectiveness of
problem resolutionproblem resolution

26. 6-26© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Real People, Real Choices:Real People, Real Choices:
Decision Made at NCR CorporationDecision Made at NCR Corporation
 Brad chose option 2Brad chose option 2
• Why do you think that Brad passed onWhy do you think that Brad passed on
the trade show and reallocated itsthe trade show and reallocated its
resources to two smaller events?resources to two smaller events?

27. 6-27© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
 Meet Jim Multari, director of researchMeet Jim Multari, director of research
at PBS Kids Sproutat PBS Kids Sprout
 Sprout is an emerging cable networkSprout is an emerging cable network
that attempts to foster parent andthat attempts to foster parent and
preschooler interactionpreschooler interaction
 The decision to be made:The decision to be made:
Should the network target currentShould the network target current
viewers, nonviewers, or both for itsviewers, nonviewers, or both for its
first ever brand awareness campaign?first ever brand awareness campaign?
Keeping It Real:Keeping It Real: Fast-Forward to NextFast-Forward to Next
Class Decision for PBS KIDS SproutClass Decision for PBS KIDS Sprout