Chapter 7 ♦ Business Marketing 1
CHAPTER 7 Business Marketing
This chapter begins with the learning outcome summaries, followed by a set of lesson plans for you to use
to deliver the content in Chapter 7.
• Lecture (for large sections) on page 3
• Company Clips (video) on page 4
• Group Work (for smaller sections) on page 5
Review and Assignments begin on page 7
Review questions
Application questions
Application exercise
Ethics exercise
Video Assignment
Case assignment
Great Ideas for Teaching Marketing from faculty around the country begin on page 17
2 Chapter 7 ♦ Business Marketing
LEARNING OUTCOMES
7-1 Describe business marketing
Business marketing provides goods and services that are bought for use in business rather than for personal consumption.
Intended use, not physical characteristics, distinguishes a business product from a consumer product.
7-2 Describe trends in B–to-B Internet marketing
B-to-B companies use the Internet in three major ways. First, they use their Web sites to facilitate communication and
orders. Second, they use digital marketing to increase brand awareness. Third, they use digital marketing—primarily in
the form of content marketing—to position their businesses as thought leaders and therefore generate sales leads. Content
marketing, a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content,
has played an important role for B-to-B marketers. As they build reputations in their business areas, many B–to–B
marketers use social media to share content, increase awareness, and build relationships and community. Some metrics
that are particularly useful for increasing the success of a social media campaign are awareness, engagement, and
conversion.
7-3 Discuss the role of relationship marketing and strategic alliances in business marketing
Relationship marketing entails seeking and establishing long-term alliances or partnerships with customers. A strategic
alliance is a cooperative agreement between business firms. Firms form alliances to leverage what they do well by
partnering with others that have complementary skills. Although the concepts of relationship marketing and strategic
alliances are relatively new to American marketers, these ideas have long been used by marketers in other cultures.
7-4 Identify the four major categories of business market customers
Producer markets consist of for-profit individuals and organizations that buy products to use in producing other products,
as components of other products, or in facilitating business operations. Reseller markets consist of wholesalers and
retailers that buy finished products to resell for profit. Government markets include federal, state, county, and city
governments that buy goods and services to support their own operations and serve the needs of citizens. Institutional
markets consist of very diverse nonbusiness institutions whose main goals do not include profit.
7-5 Explain the North American Industry Classification System
The North American Industry Classification System (NAICS) provides a way to identify, analyze, segment, and target
business and government markets. Organizations can be identified and compared by a numeric code indicating business
sector, subsector, industry group, industry, and industry subdivision. NAICS is a valuable tool for analyzing, segmenting,
and targeting business markets.
7-6 Explain the major differences between business and consumer markets
In business markets, demand is derived, inelastic, joint, and fluctuating. Purchase volume is much larger than in
consumer markets, customers are fewer and more geographically concentrated, and distribution channels are more direct.
Buying is approached more formally using professional purchasing agents, more people are involved in the buying
process, negotiation is more complex, and reciprocity and leasing are more common. And, finally, selling strategy in
business markets normally focuses on personal contact rather than on advertising.
7-7 Describe the seven types of business goods and services
Major equipment includes capital goods such as heavy machinery. Accessory equipment is typically less expensive and
shorter lived than major equipment. Raw materials are extractive or agricultural products that have not been processed.
Component parts are finished or near-finished items to be used as parts of other products. Processed materials are used to
manufacture other products. Supplies are consumable and not used as part of a final product. Business services are
intangible products that many companies use in their operations.
7-8 Discuss the unique aspects of business buying behavior
Chapter 7 ♦ Business Marketing 3
Business buying behavior is distinguished by five fundamental characteristics. First, buying is normally undertaken by a
buying center consisting of many people who range widely in authority level. Second, business buyers typically evaluate
alternative products and suppliers based on quality, service, and price—in that order. Third, business buying falls into
three general categories: new buys, modified rebuys, and straight rebuys. Fourth, the ethics of business buyers and sellers
are often scrutinized. Fifth, customer service before, during, and after the sale plays a big role in business purchase
decisions.
TERMS
accessory equipment
derived demand
original equipment manufacturers
(OEMs)
business marketing (industrial, business-
to-business, B-to-B, or B2B marketing)
joint demand
processed
materials
business product (industrial product)
keiretsu
raw materials
business services
major equipment (installations)
reciprocity
business-to-business online exchange
modified rebuy
relationship commitment
buying center
multiplier effect (accelerator principle)
straight rebuy
component parts
new buy
strategic alliance (strategic
partnership)
consumer product
North American Industry
Classification System (NAICS)
supplies
trust
LESSON PLAN FOR LECTURE
Brief Outline and Suggested PowerPoint Slides:
Learning Outcomes and Topics
PowerPoint Slides
LO1 Describe business marketing
7-1 What Is Business Marketing?
1: Business Marketing
2: Learning Outcomes
3: Learning Outcomes
4: What Is Business Marketing?
5: What Is Business Marketing?
6: Business Products
LO2 Describe the role of the Internet in business marketing
7-2 Business Marketing on the Internet
7: Trends in B-to-B Internet Marketing
8: Trends in B-to-B Internet Marketing
9: Trends in B-to–B Internet Marketing
LO3 Discuss the role of relationship marketing and strategic
alliances in business marketing
7-3 Relationship Marketing and Strategic Alliances
10: Relationship Marketing and Strategic Alliances
11: Relationship Marketing
12: Strategic Alliances
13: Relationships in Other Cultures
LO4 Identify the four major categories of business market
customers
7-4 Major Categories of Business Customers
14: Major Categories of Business Customers
15: Major Categories of Business Customers
4 Chapter 7 ♦ Business Marketing
Learning Outcomes and Topics
PowerPoint Slides
LO5 Explain the North American Industry Classification
System
7-5 The North American Industry Classification
System
16: North American Industry Classification System
17: North American Industry Classification System
(NAICS)
18: Example of NAICS Hierarchy
19: NAICS
LO6 Explain the major differences between business and
consumer markets
7-6 Business versus Consumer Markets
20: Business versus Consumer Markets
21: Business versus Consumer Markets
22: Demand in Business Markets
LO7 Describe the seven types of business goods and services
7-7 Types of Business Products
23: Types of Business Products
24: Types of Business Products
25: Types of Business Goods and Services
LO8 Discuss the unique aspects of business buying behavior
7-8 Business Buying Behavior
26: Business Buying Behavior
27: Business Buying Behavior
28: Buying Centers
29: Roles in Buying Centers
30: Evaluative Criteria
31: Buying Situations
32: Business Ethics
33: Customer Service
34: Chapter 7 Video
Suggested Homework:
• The end of this chapter contains assignments for the Zappos video and for the IBM case.
• This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and other resources that can
be assigned or used as the basis for longer investigations into marketing.
LESSON PLAN FOR VIDEO
Company Clips
Segment Summary: Zappos
Zappos, known for its outstanding customer service and speedy shipping, also gives away information about making
organizational culture work for employees and the company. The program, Insights, offers companies assistance in
building strong cultures around core values in a variety of ways, starting with free tours. Despite seeming like this
would give away valuable competitive information, Zappos is expanding this service to help other companies
deliver happiness to their customers.
PRE-CLASS PREP FOR YOU:
• Preview the Company Clips video segment for Chapter
7. This exercise reviews concepts for LO2 and LO3.
• Review your lesson plan.
• Make sure you have all of the equipment needed to
show the video to the class, including the DVD and a
way to project the video.
• You can also stream the video HERE
VIDEO REVIEW EXERCISE
Chapter 7 ♦ Business Marketing 5
ACTIVITY
Warm Up
• Begin by asking students “what is the difference between business and consumer markets?” See
if they can give examples.
In-class
Preview
• Review the definition for relationship marketing.
• Ask students for their best explanation to the following statement from the textbook: “Building
long-term relationships with customers offers companies a way to build competitive advantage
that is hard for competitors to copy.”
• While acknowledging salient points in students’ explanations, write the following points on the
board:
o Loyal customers are profitable = win
o Loyalty earns customer rewards = win
• Review the Company Clips questions with students. They should be prepared to answer them
after viewing the video.
Viewing
(Solutions
below.)
1. What benefit does Zappos receive from developing its Insights program?
2. In what ways does Zappos seek out business customers? In what ways does it build its
relationships with its business customers?
Follow-up
Take-home-assignment: Have students take the Zappos virtual tour
(http://www.zapposinsights.com/tours/virtual). have them write a paragraph discussing why other
companies might want to visit Zappos and how the Zappos culture could be applied at other
companies.
Solutions for Viewing Activities:
1. What benefit does Zappos receive from developing its Insights program?
According to the video, Zappos benefits by achieving its organizational goal of “Delivering Happiness.” Zappos
2. In what ways does Zappos seek out business customers? In what ways does it build its relationships with its
business customers?
LESSON PLAN FOR GROUP WORK
In most cases, group activities should be completed after some chapter content has been covered, probably in the second
or third session of the chapter coverage. (See “Lesson Plan for Lecture” above.)
• For “Class Activity – Marketing to Distribution Channels,” divide the class into small groups of four or five people.
Provide the information and the questions asked by the class activity
• Applications questions 1, 2, and 8 lend themselves well to group work. For these activities, divide the class into
small groups of four or five people. Each group should read the question and then use their textbooks, or any work
that was completed previously, to perform the exercise. Then each group should discuss or present their work to the
class.
6 Chapter 7 ♦ Business Marketing
Class Activity – Marketing to Distribution Channels
Ask your students to go to the Internet and locate Web sites that are targeted to business customers. Have them report on
the information available at these Web sites that would be valuable to the business customer. Also have them report on
the types of marketing appeals that are used to attract business customers. Have them evaluate the effectiveness of the
website from a marketing and customer service perspective.
Chapter 7 ♦ Business Marketing 7
REVIEW AND ASSIGNMENTS FOR CHAPTER 7
REVIEW QUESTIONS
1. Why is relationship or personal selling the best way to promote in business marketing?
2. Explain how a marketer could use the Web site http://www.census.gov/eos/www/naics/index.html to better
understand the NAICS system.
There is a link on the top of the NAICS Web page labeled “FAQs” that answers frequently asked questions about
3. How might derived demand affect the manufacturing of an automobile?
The demand for new cars drives the demand for products such as tires, brake linings, windshields, wipers, and more.
4. Intel Corporation supplies microprocessors to Compaq for use in their computers. Describe the buying
situation in this relationship, keeping in mind the rapid advancement of technology in this industry.
Students should address some of these points:
APPLICATION QUESTIONS
1. As the marketing manager for Huggies diapers made by Kimberly-Clark, you are constantly going head-to–
head with Pampers, produced by rival Procter & Gamble. You are considering unlocking the potential of the
business market to increase your share of the disposable diaper market, but how? Write an outline of several
ways you could transform this quintessentially consumer product into a successful business product as well.
2. How could use you use the Web site http://www.btobonline.com to help define a target market and develop a
marketing plan?
This Web site provides some services to organizations that wish to do business with other organizations. Links on
8 Chapter 7 ♦ Business Marketing
some information on the needs of the target market and how it goes about accepting bids. The Web site is not very
good at helping companies identify private enterprise target markets, as those would be too numerous to list.
3. Reconsider question 1. How could you use the Internet in your business marketing of Huggies diapers?
3. Understanding businesses is the key to business marketing. Publications like Manufacturing Automation,
Computer Weekly, Power Generation Technology & Markets, and Biotech Equipment Update can give you
insights into many business marketing concepts. Research the industrial publications to find an article on a
business marketer that interests you. Write a description of the company using as many concepts from the
chapter as possible. What major category or categories of business market customers does this firm serve?
4. What do you have to do to get a government contract? Check out the Web sites http://www.fedbizopps.gov
and http://www.governmentbids.com to find out. Does it seem worth the effort?
Students’ answers will vary.
5. Pick a product and determine its NAICS code. How easy was it to trace the groups and sectors?
6. Your boss has just asked you, the company purchasing manager, to buy new computers for an entire
department. Since you have just recently purchased a new home computer, you are well educated about the
various products available. How will your buying process for the company differ from your recent purchase
for yourself?
As with family purchasing decisions, several people may play a role in the business purchase process. The boss is
7. In small groups brainstorm examples of companies that feature the products in the different business
categories. (Avoid examples already listed in this chapter.) Compile a list of ten specific products and match
up with another group. Have each group take turns naming a product and have the other group identify its
appropriate category. Try to resolve all discrepancies by discussion. It is certainly possible that some
identified products might appropriately fit into more than one category.
Students’ answers will vary widely by group.
8. A colleague of yours has sent you an e-mail seeking your advice as he attempts to sell a new voice-mail system
to a local business. Send him a return e-mail describing the various people who might influence the
customer’s buying decision. Be sure to include suggestions for dealing with the needs of each.
Students’ answers should address some of the following points:
The initiator is the person who first suggests making a purchase. This could be a CEO or an office manager or
Chapter 7 ♦ Business Marketing 9
APPLICATION EXERCISE
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.
Activities
1. Review the following list of common types of gifts and favors. Put a checkmark next to the items that you think
it would be acceptable for a purchasing manager to receive from a vendor.
Advertising souvenirs Automobiles
Clothing Dinners
Discounts on personal purchases Food and liquor
Golf outings Holiday gifts
Large appliances Loans of money
Lunches Small-value appliances
Tickets (sports, theater, amusement parks, etc.) Trips to vendor plants
Vacation trips
2. 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)?
3. Form a team and compare your lists. Discuss (or debate) any discrepancies.
Purpose: This exercise helps students confront the gray areas in their own ethical perceptions.
Setting It Up: Distribute the checklist above. You can have students work individually, in pairs, or in groups to
complete it. Expect some debate, as differences over what students consider ethical are bound to arise. After students
have had adequate time to determine the gifts they find ethical, show them the grid on the next page. Discuss any
differences in perceptions.
10 Chapter 7 ♦ Business Marketing
This exercise was inspired by the following Great Idea in Teaching Marketing:
Gregory B. Turner, College of Charleston
STUDENT ETHICS VERSUS PRACTITIONER ETHICS
This exercise can be used during a logistics or ethics segment in a basic Marketing class. The students find it quite
enjoyable and it helps promote student participation in the classroom. I have developed a standard list of gifts and
gratuities that are offered to purchasing agents. This list was developed based on personal research as well as other
current research in this area. I distribute the list along with a scenario that places the students in the roles of purchasing
agents. The students are asked to then indicate the acceptability of the gifts and gratuities to them. The class then
computes the averages and compares the results to previous outcomes of practitioners. The results typically generate
some spirited discussion.
TYPE OF GIFT/FAVOR
A
B
C
D
E
F
G
H
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
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
A = 1995 – 1997 NAPM National Meetings (Turner et al. 1998)
B = 1994 State of South Carolina (Turner et al. 1995)
C = 1994 State of Alabama (Turner et al. 1995)
D = 1992 NAPM C-V Region Survey (Turner et al. 1992)
E = 1990 State of Arizona (Forker 1990)
F = 1990 Purchasing World Readers Poll (Modic 1990)
G = 1988 NAPM and Ernst & Whinney Survey (Janson 1988)
H = 1979 NAPM and Illinois Institute of Technology Survey (Anjou 1979)
ETHICS EXERCISE
Cameron Stock, purchasing manager for a sports equipment manufacturer, is responsible for buying $5 million of
supplies every year. He has a preferred list of certified suppliers who are awarded a large percentage of his business.
Cameron has been offered a paid weekend for two in Las Vegas as a Christmas present from a supplier with whom he
has done business for a decade and built a very good relationship.
Questions
1. Would it be legal and ethical for Cameron Stock to accept this gift?
It may be legal to accept the gift in certain states, but it would not be ethical. Although Cameron has built a strong
2. How is this addressed in the AMA Code of Ethics? Go to the AMA Web site at
http://www.marketingpower.com and reread the Code of Ethics. Write a brief paragraph summarizing
where the AMA stands on the issue of supplier gifts.
There is no specific paragraph in the code regarding supplier gifts. There is, however, a rule against exercising
VIDEO ASSIGNMENT
Zappos
Zappos, known for its outstanding customer service and speedy shipping, also gives away information
about making organizational culture work for employees and the company. The program, Insights, offers
companies assistance in building strong cultures around core values in a variety of ways, starting with
free tours. Despite seeming like this would give away valuable competitive information, Zappos is
expanding this service to help other companies deliver happiness to their customers.
1. Zappos Insights is an example of:
a. Business supplies
b. B-to-B e-commerce
c. Business service
d. An accessory for businesses
2. When Zappos started charging for certain training events, they were worried that people would not pay.
However, they have paid, which indicates what about the Insights program?
a. The insights program has great service, just like zappos.
b. The Insights program is a high quality program that offers great service for a price that is acceptable to
businesses.
c. The insights program is priced low enough to be acceptable for management consulting services.
d. That the buying center agreed on using the Zappos program.
3. Zappos primary customers are consumers, however, Zappos Insights experiences very different customers,
including:
a. All members from the buying center.
b. OEMS, raw materials handlers, and other B–to-B providers.
c. Resellers, Producers, and Institutions.
d. members of strategic alliances.
4. Zappos wants to deliver happiness to the highest number of people, which has driven the company’s
commitment to work with other companies to help them develop a culture promoting happy employees. This
could be considered
a. a joint demand for happy employees.
b. a derived demand for joy into the supply chain.
c. a strategic alliance for culture building.
d. the multiplier effect of happiness.
5. Zappos Insights is expanding to work onsite with companies like Google to develop even stronger
organizational cultures and connecting culture to customer service. This relationship is a keiretsu.
a. True
b. False
6. Zappos Insights is an example of relationship commitment to other businesses.
a. True
b. False
7. Zappos found that the Insights program has elastic demand, because when they began charging for the
workshops, demand for them did not change.
a. True
b. False
8. When Zappos vendors visited the company headquarters and wanted to know more about how the business was
run, they were expecting:
a. installations.
b. reciprocity
c. e-commerce training
d. relationship marketing
9. Zappos Insights is committed to helping other companies improve which of the following criteria?
a. Quality
b. Service
c. Price
d. Commitment