Business Marketing

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Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
 What Is Business Marketing?

Business organizations do not only sell; they also buy vast quantities of raw materials,
manufactured components, plant and equipment, supplies and business services.

Business
Business
Marketing
Marketing
The marketing of goods and services to
individuals and organizations for purposes
other than personal consumption.
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

…The key is intended use

 Major Industries–Business Market

• Agriculture
• More money and items change hands in
Forestry contrast to consumer goods.
• Fisheries
• Mining For eg. Selling a pair of leather shoes.
• Construction
Leather dealers -> Tanners -> Shoe
• Transportation Manufacturer-> Wholesaler-> Retailers ->
• Distribution Consumer
• Aircraft Manufacturers
• Tourism Industry
• Software Industry
• Automobile
 Business versus
Consumer Markets

Explain the major

differences between
business and
consumer markets
Business versus Consumer Markets
Characteristic
Characteristic Business
Business Market
Market Consumer
Consumer Market
Market
Demand
Demand Organizational
Organizational Individual
Individual
Volume
Volume Larger
Larger Smaller
Smaller
##of
ofCustomers
Customers Fewer
Fewer Many
Many
Location
Location Concentrated
Concentrated Dispersed
Dispersed
Distribution
Distribution More
MoreDirect
Direct More
MoreIndirect
Indirect
Nature
NatureofofBuying
Buying More
MoreProfessional
Professional More
MorePersonal
Personal
Buy
BuyInfluence
Influence Multiple
Multiple Single
Single
Negotiations
Negotiations More
MoreComplex
Complex Simpler
Simpler
Reciprocity
Reciprocity Yes
Yes No
No
Leasing
Leasing Greater
Greater Lesser
Lesser
Promotion
Promotion Personal
PersonalSelling
Selling Advertising
Advertising
 Fluctuating Demand

Phenomenon in which a small

Multiplier
MultiplierEffect
Effect
increase or decrease in
consumer demand can
produce a much larger change
(Accelerator in demand for the facilities and
(Accelerator
Principle)
Principle) equipment needed to make the
consumer product.

6
Cisco makes routers, which are specialized computers that enable computer networks to
work.

If Google uses five hundred routers and replaces 10 percent of them each year, that means
Google usually buys fifty routers in a given year. What happens if consumer demand for the
Internet falls by 10 percent?

Then Google needs only 450 routers. Google’s demand for Cisco’s routers therefore becomes
zero.

Suppose the following year the demand for the Internet returns to normal.

Google now needs to replace the fifty routers it didn’t buy in the first year plus the fifty it needs
to replace in the second year.

So in year two, Cisco’s sales go from zero to a hundred, or twice normal. Thus, Cisco
experiences a bullwhip effect, whereas Google’s sales vary only by 10 percent.
Business Buying Behavior

Buying
Buying Centers
Centers

Evaluative
Evaluative Criteria
Criteria
Aspects
Aspects of
of
Business
Business
Buying Buying
Buying Situations
Situations
Buying
Behavior
Behavior
Business
Business Ethics
Ethics

Customer
Customer Service
Service

8
 Buying Centers

All those people in an organization who

become involved in the purchase decision.

• Number of people • Buying centers do

involved varies with not appear on
each purchase decision formal organization
charts

8
Roles in Buying Centers

Influencers/
Influencers/
Initiator
Initiator Gatekeepers
Gatekeepers
Evaluators
Evaluators

Decider
Decider Purchaser
Purchaser Users
Users
• Initiator: the person who suggests the purchase

• Influencers/Evaluators: help define specifications and provide information

for evaluating options

• Gatekeepers: group members who regulate the flow of information

(Receptionists, secretaries, executive assistants)

• Decider: the person with the power to choose or approve the selection

• Purchaser: the person who negotiates the purchase

• Users: members of the organization who actually use the product

Purchase of Office 365 by a company

• Employees – Ease of Use, Functional parameters
• Managers – High productivity. Bug Free Software, Good services
• Top Management – Reliable, Low Cost
 Evaluative Criteria

1. Quality refers to technical suitability. Quality improvement should be part of every

organization’s marketing strategy.

2. Service includes pre-purchase as well as post-purchase service, along with

dependability of supply.

3. Business buyers want to buy at low prices. However, a buyer who pressures a
supplier to cut prices to the point of money loss may force shortcuts on quality. It may
force the supplier to quit selling to him/her.
 Buying Situations
Often, business firms, especially manufacturers, must decide whether to make something or
buy it from an outside supplier.

If a firm does decide to buy a product instead of making it, the purchase will be a new buy, a
modified rebuy, or a straight rebuy.

AAsituation
situationrequiring
requiringthethepurchase
purchaseof
of
New
NewBuy
Buy aaproduct
productforforthe
thefirst
firsttime.
time.

AAsituation
situationwhere
wherethe
thepurchaser
purchaser
Modified
Modified wants
Rebuy wantssome
somechange
changeininthe
theoriginal
original
Rebuy good
goodororservice.
service.

AAsituation
situationin
inwhich
whichthe
thepurchaser
purchaser
Straight
Straight reorders
reordersthe
thesame
samegoods
goodsor orservices
services
Rebuy without
withoutlooking
lookingfor
fornew
newinformation
information
Rebuy or
orinvestigating
investigatingother
othersuppliers.
suppliers.
8
 Customer Service

 Divide customers into groups based on their value

 Create policies that govern how service will be

allocated among groups

Business Ethics
 Does it play a role?
Decision Support Systems and
Marketing Research

© iStockphoto.com/Zonecreative
 Marketing Decision
Support Systems

The creation of a large

Database
Database computerized file of customers’
Marketing
Marketing and potential customers’ profiles
and purchase patterns.

1
 Data Brings
Bringsdata
datatogether.
together.Stores
Storesdata
data
Data from
Warehousing fromvarious
varioussources
sourcesinto
intoaasingle
single
Warehousing locations.
locations.

Automated
Automatedanalysis
analysisof
oflarge
largedata
datatoto
Data
Data find
findpatterns,
patterns,unearth
unearthand
andutilize
utilize
Mining information
informationtotomeet
meetspecific
specificneeds
needsof of
Mining the
themarketer.
marketer.
 The Role of
Marketing Research

Marketing
Marketing
Research
Research

The process of
planning, collecting, and
analyzing data relevant
to a marketing decision.
 The Role of
Marketing Research
Gathering and presenting
Descriptive factual statements

Diagnostic Explaining data

Predictive Address “what if” questions

2
Management Uses of Marketing Research

 Improve the quality of decision making

 Trace problems
 Focus on keeping existing customers
 Understand the marketplace
 Gauge the value of goods and services, and the level of customer
satisfaction
Toyota – gathered information on channel
practices of car firms in India
Special attention to Maruti Dealer network
What aspects would have been covered by Toyota?

Territory definition

Timing and frequency of orders

Margins and incentives

Mode of sales, Extent of downpayment

Details of advertising / sales promotions / offers / support by manufacturer

Manufacturer expectations & support with respect to infrastructure

Training of personnel / No. of staff

 Scope of Marketing Research
Behavior, change in tastes,
preferences, profiles, brand
preference, loyalty, customer
feedback etc

Customer
analyzing selling
problems, sales Market size, potential, growth,
Sales profile, market share,
territory, Market /
seasonal trends etc
effectiveness of Method Demand
sales force etc.

MR
Ad campaigns,
Advertising/ Product/
assessing their
effectiveness Promotion Brand
product line, design,
features, quality, brand
image, preference, new
product testing etc

competitor pricing,
price elasticity of
demand
Price Competition competitor analysis
(products, prices,
promotion, sales
channel satisfaction, Distribution network
channel incentives,
channel patronage etc.
 Steps in a Marketing
Research Project

Describe the
steps involved
in conducting
a marketing
research project
 The Marketing Research
Process
1
Define
Define
Problem
Problem
2
Plan
PlanDesign/
Design/ 3 Specify
Primary
PrimaryData
Data Specify
Sampling
Sampling
Procedure
Procedure 4
Collect
Collect
Data
Data
5
Analyze
Analyze
Data
Data
6 Prepare/
Prepare/
Present
Present
7 Report
Report
Follow
FollowUp
Up
The Marketing Research Project

Marketing
Marketing Determining
Determiningwhatwhatinformation
informationisisneeded
neededand
and
Research
Research how
howthat
thatinformation
informationcan
canbebeobtained
obtained
Problem
Problem efficiently
efficientlyand
andeffectively.
effectively.

Marketing The
Thespecific
specificinformation
informationneeded
neededto tosolve
solveaa
Marketing marketing
Research marketingresearch
researchproblem;
problem;thetheobjective
objective
Research should
shouldbe
beto
toprovide
provideinsightful
insightfuldecision-
decision-
Objective
Objective making
makinginformation.
information.

3
 Planning the
Research Design

Which research How and when

questions will data be

?
must be answered? gathered?

How will
the data
be analyzed?

3
 Primary Data
Information collected for the first time. Used for
solving the particular problem under investigation.

Advantages:
 Answers a specific research question
 Data are current
 Source of data is known
 Secrecy can be maintained

3
 Primary Sources of Competitor Information
Live projects,
Issues within company etc.
Investment
Bankers
Consultants/
Specialized
Firms Sales Force

From other companies, Primary

Personal checks Data

Suppliers
Employees

Customers

t critical yet underutilized source. Observation, customer feedback, ma

und level, competition tactics, price changes, customer service
 Secondary Sources
Competitor analysis Within the company Plant set ups,
Paid reports/projects new players

ndustry specific Customer Internal

Auto, photography
Communications Sources Local
etc Submitted to SEBI
Consultants Newspapers

Annual
Reports
Trade Press

10K statements
Secondary data
Internet

Patent Filings

Promotional
Literature Business
Press
Ads, pamphlets, leaflets News/Press Government
Gives an idea about positioning
Prod. Differentiation, marketing Releases Business magazines
Strategy etc Journals, newspapers
 Survey Research

Survey
SurveyResearch
Research

The most popular technique for

gathering primary data, in
which a researcher interacts
with people to obtain facts,
opinions, and attitudes.
 Forms of
Survey Research

In-Home
In-Home Interviews
Interviews Mail
Mail Surveys
Surveys

Mall
Mall Intercept
Intercept Interviews
Interviews Executive
Executive Interviews
Interviews

Telephone
Telephone Interviews
Interviews Focus
Focus Groups
Groups

3
1. In-home personal interviews: Provide high-quality information, but are expensive
because of travel time and mileage costs for the interviewer. Not a popular survey tool in
the U.S. and Europe.

2. Mall Intercept interviews: Conducted in shopping malls or in a marketing research

office in the mall. Surveys must be brief. It is hard to get a representative sample of the
population.

3. Telephone interviews: Cost less and provide one of the best samples of any traditional
survey procedure. Many facilities for telephone interviews utilize computer-assisted
interviewing, where information is directly input into a computer application.

4. Mail Surveys: Benefits are the low cost, elimination of interviews, centralized control,
and anonymity for respondents. However, mail questionnaires usually produce low
response rates.

5. Executive interviews: Involves interviewing businesspeople at their offices regarding

industrial products or services. This type of interviewing is expensive, due to the process
of finding, qualifying, and interviewing respondents.

6. Focus groups: A type of personal interviewing, characterized by seven to ten people

gathered in a meeting place. Usually offered incentive. A moderator leads the group
discussion.

Around 6L focus groups are conducted each year in the world.

 Questionnaire Design
An
An interview
interview question
question that
that encourages
encourages
Open-Ended
Open-Ended an
an answer
answer phrased
phrased in
in the
the respondent’s
respondent’s
Question
Question own
own words.
words.

An
An interview
interview question
question thatthat asks
asks
Closed-Ended
Closed-Ended the
the respondent
respondent to to make
make aa selection
selection
Question
Question from
from aa limited
limited list
list of
of responses.
responses.

Scaled-
Scaled- AA closed-ended
closed-ended question
question
Response
Response designed
designed to to measure
measure the
the intensity
intensity
Question
Question of
of aa respondent’s
respondent’s answer.
answer.
Observation Research

Observation
Observation
Research
Research

A research method that relies on

four types of observation:
 people watching people
 people watching an activity
 machines watching people
 machines watching an activity
Observational Situations
 Observational Research

Mystery
Mystery Researchers
Researchersposing
posingas
ascustomers
customerswho
whogather
gather
Shoppers
Shoppers observational
observationaldata
dataabout
aboutaastore.
store.

AAform
formof
ofobservation
observationmarketing
marketingresearch
researchthat
that
Behavioral
Behavioral uses data mining coupled with identifying Web
Targeting (BT) uses data mining coupled with identifying Web
Targeting (BT) surfers
surfersby
bythe
theIP
IPaddresses.(cookie
addresses.(cookietracking)
tracking)

3
Sampling Procedure

Universe Sample

Probability
Probability
Samples
Samples
Non-Probability
Non-Probability
Samples
Samples

3
 Types of Samples
Probability
Probability Non-Probability
Non-Probability
Samples
Samples Samples
Samples

Simple
SimpleRandom
Random Convenience
Convenience
Sample
Sample Sample
Sample
Stratified
Stratified Judgment
Judgment
Sample
Sample Sample
Sample
Cluster
Cluster Quota
Quota
Sample
Sample Sample
Sample
Systematic
Systematic Snowball
Snowball
Sample
Sample Sample
Sample
 Preparing and
Presenting the Report

 Concise statement of the research

objectives

 Explanation of research design

 Summary of major findings

 Conclusion with recommendations

3
 Following Up

• Were the recommendations followed?

• Was sufficient decision-making

information included in the report?

• What could have been done to make

the report more useful to
management?