Chapter 7
Business Markeng
This chapter begins with the learning outcome summaries followed by a set of lesson plans for
instructors to use to deliver the content.
Lecture (for large sections) on page 4
Company Clips (video) on page 6
Group Work (for smaller sections) on page 7
Review and Assignments begin on page 8
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 21
Learning Outcomes
7-1 Describe business marketing
Business marketing (also called industrial, business-to-business, B-to-B, or B2B marketing) is
the marketing of goods and services to individuals and organizations for purposes other than
personal consumption. A business product, or industrial product, is used to manufacture other
goods or services, to facilitate an organization’s operations, or to resell to other customers. A
consumer product is bought to satisfy an individual’s personal wants or needs. The key
characteristic distinguishing business products from consumer products is intended use, not
physical form.
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 websites 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 is a strategy that entails seeking and establishing ongoing partnerships
with customers. A strategic alliance, sometimes called a strategic partnership, is a cooperative
agreement between business firms. Business marketers form strategic alliances to strengthen
operations and better compete. Sometimes alliance partners are fierce competitors. Relationship
commitment means that a firm believes an ongoing relationship with some other firm is so
important that it warrants maximum efforts at maintaining it indefinitely. Trust exists when one
party has confidence in an exchange partner’s reliability and integrity. Relationships between
companies can develop into a keiretsu—a network of interlocking corporate affiliates.
7-4 Identify the four major categories of business market customers
The business market consists of four major categories of customers: producers, resellers,
governments, and institutions. The producer segment of the business market includes
profit-oriented individuals and organizations that use purchased goods and services to produce
other products, to incorporate into other products, or to facilitate the daily operations of the
organization. Producers are often called original equipment manufacturers, or OEMs. Reseller
markets consist of wholesalers and retailers that buy finished products and resell them for profit.
A third major segment of the business market is government. Government organizations include
thousands of federal, state, and local buying units. The fourth major segment of the business
market consists of institutions that seek to achieve goals other than the standard business goals of
profit, market share, and return on investment.
7-5 Explain the North American Industry Classification System
The North American Industry Classification System (NAICS) was introduced in 1997 to replace
the standard industrial classification system (SIC). NAICS is an extremely valuable tool for
business marketers engaged in analyzing, segmenting, and targeting business markets. NAICS
codes can help identify firms that may be prospective users of a supplier’s goods and services.
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, the
selling strategy in business markets normally focuses on personal contact rather than on
advertising. Consumers are used to negotiating price on automobiles and real estate. Buyers and
sellers negotiate product specifications, delivery dates, payment terms, and other pricing matters.
Business purchasers often choose to buy from their own customers, a practice known as
reciprocity. Leasing allows firms to reduce capital outflow, acquire a seller’s latest products,
receive better services, and gain tax advantages. Business marketers tend to emphasize personal
selling in their promotion efforts, especially for expensive items, custom-designed products,
large-volume purchases, and situations requiring negotiations.
7-7 Describe the seven types of business goods and services
Business products generally fall into one of the following seven categories, depending on their
use: major equipment, accessory equipment, raw materials, component parts, processed
materials, supplies, and business services. Major equipment includes capital goods such as large
or expensive machines, mainframe computers, blast furnaces, generators, airplanes, and
buildings. (These items are also commonly called installations.) Accessory equipment is
typically less expensive and shorter lived than major equipment. Raw materials are unprocessed
extractive or agricultural products —for example, mineral ore, timber, wheat, corn, fruits,
vegetables, and fish—that have not been processed. Component parts are either finished items
ready for assembly or products that need very little processing before becoming part of some
other product. Processed materials are products used directly in manufacturing other products.
Supplies are consumable items that do not become part of the final product—for example,
lubricants, detergents, paper towels, pencils, and paper. Business services are expense items that
do not become part of a final product. Businesses often retain outside providers to perform
janitorial, advertising, legal, management consulting, marketing research, maintenance, and other
services.
7-8 Discuss the unique aspects of business buying behavior
Understanding how purchase decisions are made in organizations is a first step in developing a
business selling strategy. Business buying behavior has five important aspects: buying centers,
evaluative criteria, buying situations, business ethics, and customer service. A buying center
includes all those people in an organization who become involved in the purchase decision. The
number of people involved in a buying center varies with the complexity and importance of a
purchase decision. As in family purchasing decisions, several people such as initiator,
influencers/evaluators, gatekeepers, decider, purchaser, and user may each play a role in the
business purchase process: Business buyers evaluate products and suppliers against three
important criteria: quality, service, and price. A new buy is a situation requiring the purchase of a
product for the first time. A modified rebuy is normally less critical and less time-consuming
than a new buy. A straight rebuy is a situation vendors prefer. Ethics refers to the moral
principles or values that generally govern the conduct of an individual or a group. Ethics can also
be viewed as the standard of behavior by which conduct is judged. Typically, more people are
involved in a single business purchase decision than in a consumer purchase.
Key Terms
Accessory equipment Derived demand Original equipment
manufacturers (OEMs)
Business marketing (industrial,
business-to-business, B-to-B, or
B2B marketing)
Joint demand
Proces
sed
materia
ls
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
Content marketing Trust
Lesson Plan for Lecture
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 Pre-class Prep for Your Students
Preview the Company Clips video segment
for Chapter 7. This exercise reviews
concepts for LO2 and LO3.
Review your lesson plan.
Stream the video HERE
Have students familiarize themselves with
the following terms and concepts: business
marketing, the four major categories of
customers, business versus consumer
markets, types of business products, and
customer service.
Have students visit the Zappos Insights
website: http://www.zapposinsights.com. As
they browse, they should consider how
Zappos uses the above concepts on their
website.
Video Review Exercise
Activity
Warm-up
Begin by asking students the following question: “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:
oLoyal customers are profitable = win
oLoyalty 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 tour
(https://www.zapposinsights.com/tours). 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 also benefits by developing a network of organizations that share its
values, making alliances possible should they be needed.
2. In what ways does Zappos seek out business customers? In what ways does it build its
relationships with its business customers?
Zappos uses word of mouth to encourage people to use Zappos Insights. This is through
the culture book and companies completing boot camp spreading the word about Zappos
Insights. People also “self-select” through the free tours and the culture book.
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.
Class Activity: Marketing to Distribution Channels
Ask your students to go to the Internet and locate websites that are targeted to business
customers. Have them report on the information available at these websites 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.