Chapter 7 Business Marketing Business marketing aka industrial marketing the marketing of goods and services to individuals and organizations for purposes other than personal consumption The key characteristic to distinguish business products from consumer products is intended use not physical characteristics 7 2 Business Marketing on the Internet Business to business electronic commerce the use of the internet to facilitate the exchange of goods services and information between organizations Hard to decide who the market is and how to best reach it because the business market has rapidly moved online Content marketing is based on the idea of developing valuable content for interest audience members through videos email newsletters blog posts and then using email marketing search engine optimization paid search and display advertising to pull customers to the site Important measurements of online success recency frequency monetary value Conversion task is the behavior that the marketer wants the visitor to take such as signing up for emails watching a video calling for more information this sets up the conversion rate Conversion rate is defined as a ratio of the number of people who visited the site to the number of people who went on tot complete the desired action Stickiness a measure of a web site s effectiveness calculated by multiplying the frequency of visits by the duration of a visit by the number of pages viewed during each visit Disintermediation the elimination of intermediaries such as wholesalers or distributors from a marketing channel Reintermediation the reintroduction of an intermediary between producers and users 7 3 Relationship Marketing and Strategic Alliances Relationship marketing is a strategy that entails seeking and establishing ongoing partnerships with customers Strategic alliance aka strategic partnership a cooperative agreement between business firms licensing or distributing agreements joint ventures R D consortia partnerships Relationship commitment a firm s belief that an ongoing relationship with another firm is so important that the relationship warrants maximum efforts at maintaining it indefinitely Trust the condition that exists when one party has confidence in an exchange partner s reliability and integrity Japan o Exchange between firms is based on personal relationships that are developed through amae indulgent dependency o Amae is the feeling of nurturing concern for and dependence upon another reciprocity and personal relationships contribute to amae o Keiretsu a network of interlocking corporate affiliates 7 4 Major Categories of Business Customers 4 major categories of customers producers resellers governments institutions Producers Resellers Governments Institutions o Original equipment manufacturers OEMs individuals and organizations that buy business goods and incorporate them into the products they produce for eventual sale to other producers or to consumers o Includes retail and wholesale businesses that buy finished goods and resell them for a profit o Largest single market for goods and services o Seek to achieve goals other than the standard business goals of profit market share and return on investment o Schools hospitals colleges churches labor unions frats 7 5 The North American Industry Classification System North American Industry Classification System NAICS a detailed numbering system developed by the US Canada and Mexico to classify North American business establishments by their main production processes valuable tool for marketers engaged in analyzing segmenting and targeting markets 7 6 Business Versus Consumer Markets Consumer demand is different from demand in the business market o Business demand is derived inelastic joint and fluctuating Derived demand the demand for business products Inelastic demand means that an increase or decrease in the price of the product will not significantly affect demand for the product Joint demand the demand for 2 or more items used together in a final product Fluctuating demand 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 Larger purchase volumes Fewer customers Customers are more geographically concentrated Channels of distribution are shorter o Business to business online exchange an electronic trading floor that provides companies with integrated links to their customers and suppliers Businesses use professionally trained purchasing agents More people are involved in a purchase decision Negotiating is common Use reciprocity a practice whereby business purchasers choose to buy from their own customers I buy from you you buy from me Use of leasing Business marketers emphasize personal selling in their promotion efforts 7 7 Types of Business Products Fall into one of the 7 categories depending on their use Major equipment capital goods such as large or expensive machines mainframe computers blast furnaces generators airplanes and buildings aka installations o Depreciated over time rather than charged as an expense for the year Accessory equipment goods such as portable tools and office equipment that are less expensive and shorter lived than major equipment o Often charged as an expense for the year o More often standardized and are usually bought by more customers o Advertising is important Raw materials unprocessed extractive or agricultural products such as mineral ore lumber wheat corn fruits veggies and fish Component parts either finished items ready for assembly or products that need very little processing before becoming part of some other product o Can wear out so two markets the original equipment manufacturer and the replacement market think of tires o Difference between unit costs and selling prices is small but profit can Processed materials products used directly in manufacturing other be big because of volume buying o Retain identity products o Do not retain identity Supplies consumable items that do not become part of the final product o Inexpensive short lives standardized items Business services expense items that do not become part of a final product o Advertising contracting someone else 7 8 Business Buying Behavior Five important aspects 1 Buying centers all those people in an organization who become involved o Roles in the buying center initiator influencers gatekeepers decider in the
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