chapter 6 business-to-business (b2b) marketing the make, buy, or lease decision firms acquiring...

CHAPTER 6 Business-to-Business (B2B) Marketing

THE MAKE, BUY, OR LEASE DECISION• Firms acquiring needed products can get them in one of three ways:

• Make the good or provide the service in-house.

• Purchase it from another organization.

• Lease it from another organization.

• Producing the item may be cheapest route, but most firms cannot make all of the products they need.

• Many companies purchase many of the goods they need.

• Companies can spread out costs through leasing.


THE RISE OF OFFSHORING AND OUTSOURCING

• Offshoring Movement of high-wage jobs from one country to lower-cost overseas locations.

• Example: China makes two-thirds of the world’s copiers, microwaves, DVD players, and shoes, and virtually all of the world’s toys.

• Allows firms to concentrate their resources on their core business and access specialized talent or expertise.

• Nearshoring Moving jobs to vendors in countries close to the business’s home country.

• U.S. firms often nearshore in Canada or Mexico.

• Outshoring Using outside vendors to provide goods and services formerly produced in-house.

• Commonly outshore for three reasons: cost reduction, quality and speed of software maintenance and development, and greater value.


PROBLEMS WITH OFFSHORING AND OUTSOURCING

• Many companies discover their cost savings are less than expected.

• Can raise security concerns over proprietary technology or customer data.

• Can reduce flexibility to respond quickly to marketplace.

• Can create conflicts with unions, even leading to shutdowns and strikes.

• Can negatively affect employee morale and loyalty.


THE BUSINESS BUYING PROCESS• More complex than the consumer decision process.

• Takes place within formal organization’s budget, cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS

Environmental Factors

• Economic, political, regulatory, competitive, and technological considerations influence business buying decisions.

• Example: Law freezing cable rates or introduction of new product

by a competitor will affect demand.

• Natural disasters, such as Hurricane Katrina.

• Example: Rising fuel prices prompted Viking Energy Management to lock in fuel prices.


Organizational Factors

• Successful marketers understand their customers’ organizational structures, policies, and purchasing systems.

• Some firms have centralized procurement, others delegate it throughout the units.

• Many companies use multiple sourcing to avoid depending too heavily on a sole supplier.

Interpersonal Influences

• Many different people influence B2B buying decisions, sometimes as individuals and sometimes as part of a committee.

• Marketers must know who the influencers are and understand their priorities.

• Sales personnel must be flexible and have a good technical understanding of their products.


The Role of the Professional Buyer

• Many organizations rely on professionals, often called merchandisers, who implement systematic buying procedures.

• Firms usually buy expense items with little delay but carefully consider capital purchases.

• May rely on systems integration, centralization of the procurement function.

• Corporate buyers often use the Internet to identify sources of supplies.


MODEL OF THE ORGANIZATIONAL BUYING PROCESS


Stage 1: Anticipate a Problem/Need/Opportunity and a General Solution

• Example: Need to provide employees with a good cup of coffee to enhance productivity.

Stage 2: Determine the Characteristics and Quantity of a Needed Good or Service

• Example: Offering a coffee system that brews one cup of coffee at a time according to each employee’s preference.

Stage 3: Describe Characteristics and the Quantity of a Needed Good or Service

• Example: Firms need a simple system for brewing a good cup of coffee; quantity requirements are easily correlated to the number of coffee drinkers.


Stage 4: Search for and Qualify Potential Sources

• Choice of supplier may be fairly straightforward or very complex.

Stage 5: Acquire and Analyze Proposals

• May involve competitive bidding, especially if the buyer is the government or a public agency.

Stage 6: Evaluate Proposals and Select Suppliers

• Buyers choose proposal best suited to their needs.

• Final choice may involve trade-offs between feature such as price, reliability, quality, and order accuracy.


Stage 7: Select an Order Routine

• Buyer and vendor work out best way to process future purchases.

Stage 8: Obtain Feedback and Evaluate Performance

• Buyers measure vendors’ performance.

• Larger firms are more likely to use formal evaluation procedures.

• Some firms rely on outside organizations to gather quality feedback and summarize results.

• Example: J. D. Power and Associates


CLASSIFYING BUSINESS BUYING SITUATIONS

• Business buying behavior involves degree of effort involved in the decision and the levels within the organization in which these decisions are made.

Straight Rebuying

• A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past.

• Purchaser see little reason to assess competing options.

• Marketers who maintain good relationships with customers can go a long way toward ensuring straight rebuys.

• High-quality products.

• Superior service.

• Prompt delivery.


Modified Rebuying

• Purchaser willing to reevaluate available options.

• May occur if supplier has let a rebuy circumstance deteriorate because of poor service or delivery performance.

New-Task Buying

• First-time or unique purchase situations that require considerable effort by the decision makers.

• Most complex category of business buying.

• Often requires purchaser to consider alternative offerings and vendors.


Reciprocity

• Practice of buying from suppliers that are also customers.

• In U.S., Department of Justice and the Federal Trade Commission view reciprocity as an attempt to reduce competition.

ANALYSIS TOOLS

• Value analysis—examines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute.

• Vendor analysis—an ongoing evaluation of a supplier’s performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.


THE BUYING CENTER CONCEPT

• Buying center Participants in an organizational buying action.

BUYING CENTER ROLES


INTERNATIONAL BUYING CENTERS

• Marketers may have difficulty identifying members of foreign buying centers.

• Foreign buying centers often include more participants than those in U.S.

• Marketers who can quickly identify decision makers have an advantage over competition.

TEAM SELLING

• Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision.

• May include members of the seller firm’s own supply network in the sales situation.

• Example: Reseller of specialized computer applications whose clients require access to training.


DEVELOPING EFFECTIVE BUSINESS-TO-BUSINESS MARKETING STRATEGIES• Marketer must develop strategy based on particular organization’s buying behavior and on the buying situation.

CHALLENGES OF GOVERNMENT MARKETS

• Government agencies make up the largest customer group in the U.S.

• More than 85,000 government units buy products.

• Purchases typically involve dozens of interested parties.

• Influenced by social goals, such as minority subcontracting programs.

• Can have either fixed-price contracts or cost-reimbursement contracts.


Government Purchasing Procedures

• Many purchases go through Government Services Agency, a central management agency.

• By law, most federal government purchases must go through a complex bidding process governed by the Federal Acquisition Regulation.

• Recent reforms have sped purchasing and increased flexibility.

• State and local governments follow procedures similar to federal government.

Online with the Federal Government

• Government buyers often rely on electronic commerce.

• GSA Advantage allows government buyers to make purchases online at preferred government prices.

• Many government units lag behind the private sector in electronic procurement procedures.


CHALLENGES OF INSTITUTIONAL MARKETS

• Institutional buyers include schools, hospitals, libraries, foundations, and others.

• Have widely diverse buying practices among, and even within, institutions.

• Multiple buying influences can affect buying decisions, such as conflicts between professional staff and purchasing departments.

CHALLENGES OF INTERNATIONAL MARKETS

• Marketers must consider buyers’ attitudes and cultural patterns.

• Local industries, economic conditions, geographic characteristics, and legal restrictions must also be considered.

• Remanufacturing, or restoring worn-out products to like-new condition, can be an important strategy in places that cannot afford new products.

• Foreign governments are also an important market.

chapter 6 business-to-business (b2b) marketing the make, buy, or lease decision firms acquiring...

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