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Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
Lamb, Hair, McDaniel
CHAPTER 7
Business Marketing
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Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
What Is Business Marketing?
The marketing of goods
and services to individuals
and organizations for
purposes other than
personal consumption.
BusinessMarketing
BusinessMarketing
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3
Business Products
The key is intended use.
Business Products:
• Are used to manufacture other products
• Become part of another product
• Aid the normal operations of an organization
• Are acquired for resale without change in form
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4
Relationship Marketing
• Loyal customers are more profitable than price-sensitive customers with little brand loyalty
• Long-term relationships build competitive advantage
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5
Strategic Alliances
• Licensing or distribution agreements
• Joint ventures
• Research and development consortia
• Partnerships
Alliances succeed with commitment and trust.
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6
Relationships in Other Cultures
Keiretsu relationships are highly integrated:
• Companies have executives sitting on each others’ boards
• Maintain dedicated trade efforts
• Joint development, finance, and marketing
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7
Major Categories of Business Customers
Producers
Resellers
Governments
Institutions
• OEMs
• Wholesalers• Retailers
• Federal• State• Local
• Schools • Hospitals • Colleges• Churches • Unions • Fraternal • Civic Clubs • Foundations groups• Nonbusiness organizations
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8
NAICS
NAICSNAICS 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
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9
Example of NAICS Hierarchy
NAICS
LevelSector Subsector Industry
GroupIndustry Industry
Subdivision
NAICS
Code
51 513 5133 51332 513321
Description
Information Broadcasting and telecoms
Telecoms Wireless telecoms carriers, except satellite
Paging
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10
Business versus Consumer Markets
CharacteristicCharacteristicCharacteristicCharacteristic
DemandDemand
VolumeVolume
# of Customers# of Customers
LocationLocation
DistributionDistribution
Nature of BuyingNature of Buying
Buy InfluenceBuy Influence
NegotiationsNegotiations
ReciprocityReciprocity
LeasingLeasing
PromotionPromotion
Business MarketBusiness MarketBusiness MarketBusiness Market
OrganizationalOrganizational
LargerLarger
FewerFewer
ConcentratedConcentrated
More DirectMore Direct
More ProfessionalMore Professional
MultipleMultiple
More ComplexMore Complex
YesYes
GreaterGreater
Personal SellingPersonal Selling
Consumer MarketConsumer MarketConsumer MarketConsumer Market
IndividualIndividual
SmallerSmaller
ManyMany
DispersedDispersed
More IndirectMore Indirect
More PersonalMore Personal
SingleSingle
SimplerSimpler
NoNo
LesserLesser
AdvertisingAdvertising
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11
Demand in Business Markets
Demand is...Demand is...Demand is...Demand is... DescriptionDescriptionDescriptionDescription
DerivedDerived
InelasticInelastic
JointJoint
FluctuatingFluctuating
Demand for business products results from demand for consumer products.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.
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12
Fluctuating Demand
Multiplier EffectMultiplier Effect
(Accelerator Principle)
(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.
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13
Types of Business Products
Major Equipment Major Equipment
Accessory Equipment Accessory Equipment
Raw Materials Raw Materials
Component Parts Component Parts
Processed Materials Processed Materials
Supplies Supplies
Business Services Business Services
LO7
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14
Types of Business Goods and Services
LO7
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15
Intel Buys McAfee
• Intel creates nearly 80 percent of the microprocessors used in PCs and server systems.
• Intel’s purchase of security software maker McAfee will allow it to produce chips that are directly integrated with McAfee’s security products.
• What kinds of business products were Intel and McAfee producing, and what kinds of products will they be producing together?
Source: Thomas Catan, Nathan Becker and Jerry A. DiColo, "Intel Bets Its Chips on McAfee: Tech Giant Strikes $7.68 Billion Deal for Security-Software Maker, Drawing Mixed Reaction," Wall Street Journal Online. August 19, 2010, http://online.wsj.com/article/SB10001424052748704476104575439180665843938.html.
Beyo
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LO7
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16
Customer ServiceCustomer Service
Business EthicsBusiness Ethics
Buying SituationsBuying Situations
Evaluative CriteriaEvaluative Criteria
Buying CentersBuying Centers
Aspects of Business
BuyingBehavior
Aspects of Business
BuyingBehavior
LO8
Business Buying Behavior
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17
Buying CenterBuying Center All those people in an
organization who
become involved in the
purchase decision.• Number of people
involved varies with each purchase decision
• Buying centers do not appear on formal organization chartsLO8
Buying Centers
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18
InitiatorInitiator InfluencersInfluencers GatekeepersGatekeepers
DeciderDecider PurchaserPurchaser UsersUsers
LO8
Roles in Buying Centers
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19
Evaluative Criteria
Quality
Service
Price
LO8
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20
New BuyNew Buy A situation requiring the purchase of a product for the first time.
A situation requiring the purchase of a product for the first time.
ModifiedRebuy
ModifiedRebuy
A situation where the purchaser wants some change in the original good or service.
A situation where the purchaser wants some change in the original good or service.
StraightRebuy
StraightRebuy
A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.
A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.
LO8
Buying Situations
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21
Customer Service
Divide customers into groups based on their value
Create policies that govern how service will be allocated among groups
LO8
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22
In-Class Assignment
Case
Purchasing agents are often offered gifts and gratuities. Increasingly, though, companies are restricting the amount and value of gifts that their purchasing managers can accept from vendors. The idea is that purchasing managers should consider all qualified vendors during a buying decision instead of only those who pass out great event tickets. This exercise asks you to consider whether accepting various types of gifts is ethical.
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23
List of Possible Items
—Advertising souvenirs —Automobiles—Clothing —Dinners—Discounts on personal
purchases —Food and liquor—Golf outings
Case
Put a checkmark next to the items that you think it would be acceptable for a purchasing manager to receive from a vendor.
—Holiday gifts
—Large appliances
—Loans of money
—Lunches
—Small-value appliances
—Tickets (sports, theater, amusement parks, etc.)
—Trips to vendor plants
—Vacation trips
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24
Discuss• In groups of 4-5, discuss any
discrepancies between your lists.• Now look at your list of acceptable gifts
through various lenses. – Would your list change if the purchasing
manager’s buying decision involved a low-cost item (say, pens)? Why or why not?
– What if the decision involved a very expensive purchase (like a major installation)?
Case
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25
Prior Research FindingsTYPE OF
GIFT/FAVOR79 88 90 90 92 94 94 95-7
Advertising Souvenirs 29 19 69 30 54 80 73 92
Automobiles 0 0 — 0 — — 1 1
Clothing 5 0 6 16 0 — 7 3
Dinners 38 10 22 79 8 - 48 70
Discounts on Personal Purchases
11 5 9 18 15 — 11 21
Food & Liquor 31 5 49 40 0 36 30 29
Golf Outings 26 5 2 57 0 — 28 47
Case
Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26
Prior Research Findings
Case
TYPE OF GIFT/FAVOR 79 88 90 90 92 94 94 95-7
Holiday gifts 27 17 29 56 0 — 43 30
Large Appliances 0 0 — 0 — 2 1 1
Loans of Money 0 0 — 0 — — 1 1
Lunches 47 24 36 93 23 80 68 90
Small Value Appliances 2 5 0 6 0 6 6 6
Tickets (Sports, Theater, Etc.)
28 5 13 59 0 42 37 60
Trips to Vendor Plants 39 11 42 48 0 — 31 51
Vacation Trips 0 0 0 2 0 4 2 2