Chapter 7 Business-to-Business (B2B) Marketing 165
CHAPTER 7
BUSINESS-TO-BUSINESS (B2B) MARKETING
CHAPTER OVERVIEW
The consumer marketplace is easy to see and define. We all act as consumers as we make purchases
every day—whether it’s a newspaper, a pack of gum, or a new convertible. But beyond the actual
purchase, we also become aware of products or services, consider the options, think about what we truly
need or what we merely want. And we can’t help noticing the barrage of marketing messages aimed at
us through a variety of media.
The same thing happens with business purchasers in their everyday considerations and decisions about
buying goods and services. And the business-to-business, or B2B, marketplace is much larger than the
consumer side of marketing.
U.S. companies pay more than $300 billion each year just for office and maintenance supplies.
Government agencies contribute to the business-to-business market even further. The Department of
Defense budget request for one recent year was almost $500 billion. U.S. business-to-business
commerce conducted over the Internet now totals over $550 billion.
Changes in the 17th Edition
The chapter has been updated and revised in several ways:
• The Opening Vignette and Evolution of a Brand illustrates how GE successfully uses social
media to find and generate new corporate business. The company is so enthusiastic about using
social media to reach its business-to-business (B2B) customers that it has even embraced the
• Solving an Ethical Controversy analyzes phone spoofing, a strategy that allows callers to
subvert caller ID by hiding behind someone else’s number. Although the Federal Trade
Commission (FTC) and (Federal Communications Commission (FCC) both prohibit telemarketers
from using phone spoofing services, which are inexpensive and legal, scammers are increasingly
using them for illegal purposes. Most major mobile carriers offer customers password-protection
166 Part 2 Understanding Buyers and Markets
for voice mail, which makes it more difficult for fraudsters to get in. It also addresses the important
question “Should mobile phone carriers be required to make it harder for crooks to use phone
spoofing?” More on the issue is discussed in “Making It Difficult for Phone Scammers.”
• Marketing Success highlights Foursquare is a free online service launched in 2009 that helps
users find out where friends are and what they’re doing. Its developers have been looking for
more ways to expand the services Foursquare can offer to businesses, especially retailers that
• Career Readiness provides advice on “How to Negotiate with Customers.” As the title suggests,
it gives some tried-and-true tips on how to use negotiation to interact with customers.
• Chapter Case 7.1 talks about W. W. Grainger. The company has such a good handle on who its
2 million business customers are that it recently redesigned its website to cater to two specific
types: buyers in the field who use any of Grainger’s more than 1.2 million maintenance and repair
• Collaborative Learning Exercises are provided in several areas related to business-to-business
marketing—The Business–to-Business Market, Business–to-Business Marketing Strategy, Buying
Versus Making, Outsourcing, and the Business Buying Process.
• Video Case 7.2 includes an overview of how Zappos conducts business-to-business marketing
through Zappos Insights.
LECTURE OUTLINE
Opening Vignette and Evolution of a Brand – “GE Goes Social for B2B” illustrates how GE has
been successfully using social media to find and generate new corporate business. How
important is social media in B2B marketing?
Chapter Objective 1: Explain the four components of the business–to–business (B2B)
market.
Key Terms: business to business (B2B) marketing, commercial market, trade industries,
resellers
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1. The business-to-business marketplace is significantly larger than
the consumer marketplace
a. U.S. companies pay more than $300 billion each year just
Table 7.1
Comparing
Business-to–
Business Marketing
and Consumer
Marketing. In which
ways do the two
types of marketing
differ? In which ways
2. Business-to-business or B2B marketing deals with organizational
3. To distinguish between consumer purchases B2B transactions,
ask yourself two questions:
a. Who is buying the good or service?
b. Why is the purchase being made?
4. Nature of the business market
a. Firms usually sell fewer standardized products to
organizational buyers than to ultimate consumers
b. B2B transactions require greater customization, more
decision making, and usually more decision makers
c. Buying and selling become more complex and often
involving teams
k. Companies also buy services from other businesses
l. Environmental, organizational, and interpersonal factors
are among the many influences in B2B markets
m. Budget, cost, and profit considerations all play parts in
business buying decisions
n. The business buying process typically involves complex
interactions among many people
o. An organization’s goals must also be considered in the
B2B buying process
p. Firms may focus entirely on business markets or sell to
both consumer and business markets
q. Marketing strategies developed in consumer marketing
5. Components of the business market
a. The commercial market is the largest segment of the
business market
i. It includes all individuals and firms that acquire
products to support, directly or indirectly,
b. The second segment of the organizational market, trade
industries, includes retailers and wholesalers, known as
resellers, who operate in this sector
i. Most resale products are finished goods that
buyers sell to final consumers; in other cases, the
buyers may purchase complete some processing
or repackaging before reselling the product
ii. In addition to resale products, trade industries buy
products needed to operate their businesses
d. Institutions, both public and private, are the fourth
component of the business market
i. This category includes a wide range of
organizations such as hospitals, churches, skilled
care and rehabilitation centers, colleges and
6. B2B markets: The Internet connection
Chapter 7 Business-to-Business (B2B) Marketing 169
a. About 91 percent of all Internet sales are B2B transactions
i. Many B2B marketers have set up private portals
that allow their customers to buy needed items
ii. Service and customized pages are accessed
through passwords provided by B2B marketers
iii. Online auctions and virtual marketplaces offer
sellers
7. Differences in foreign business markets
a. Business marketers must be willing to adapt to local
customs and business practices when operating abroad
b. They should also research cultural preferences
Assessment check questions
1.1. Define B2B marketing. Business-to-business, or B2B, marketing
1.2. What is the commercial market? The commercial market consists of
individuals and firms that acquire products to be used, directly or
indirectly, to produce other goods and services.
Chapter Objective 2: Describe the major approaches to segmenting business–to–business
(B2B) markets.
Key Terms: customer-based segmentation, North American Industrial Classification System
(NAICS), end-use application segmentation, customer relationship management (CRM)
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1. Segmenting B2B markets
a. By applying market segmentation concepts to groups of
business customers, a firm’s marketers can develop a
2. Segmentation by demographic characteristics
a. For example, firms can be grouped by size, based on
3. Segmentation by customer type
a. For example, marketers can group customers by broad
categories—manufacturer, service provider, government
agency, not-for-profit organization, wholesaler, or
retailer—and by industry
b. Customer-based segmentation, an approach that divides a
B2B market into homogeneous groups based on buyers’
product specifications, is often used
i. Organizational buyers tend to have much more
precise—and complex—requirements for goods
c. North American Industry Classification System (NAICS)
i. The Standard Industrial Classification (SIC) system
standardized efforts to collect and report
information on U.S. industrial activity
ii. SIC codes divided firms into broad industry
categories
vi. The system, however, became outdated with
implementation of the North American Free Trade
Agreement (NAFTA)
vii. Each NAFTA member—the United States,
Canada, and Mexico—had its own system for
measuring business activity
viii. NAFTA required a joint classification system that
Table 7.2 NAICS
Home Furnishing
Merchant
Wholesalers. What
do the various
classification
numbers tell you
technical services
xii. The NAICS uses six digits
xiii. The first five digits are fixed among the members of
NAFTA
xiv. The sixth digit can vary among U.S., Canadian,
and Mexican data; the sixth digit accounts for
4. Segmentation by end-use application
a. End-use application segmentation focuses on the precise
way in which a business purchaser will use a product
b. Each end use of the same equipment may dictate unique
specifications for performance, design, and price
5. Segmentation by purchase categories
a. Firms have different structures for their purchasing
functions, and B2B marketers must adapt their strategies
according to those organizational buyer characteristics
i. Some companies designate centralized purchasing
departments to serve the entire firm; others allow
each unit to handle its own buying
b. When the buying situation is important to marketers, they
typically consider whether the customer has made
previous purchases or this is the customer’s first order,
offering special rates or programs for valued clients
Assessment check questions
2.1. What are the four major ways marketers segment business
markets? Business markets can be segmented by (1) demographics, (2)
172 Part 2 Understanding Buyers and Markets
customer type, (3) end-use application, and (4) purchasing situation.
2.2. What is the NAICS? The North American Industry Classification
System (NAICS) is a unified system for Mexico, Canada, and the United
States to classify B2B market segments and analyze trade.
Chapter Objective 3: Identify the major characteristics of the business market and its
demand.
Key Terms: global sourcing, derived demand, joint demand, inelastic demand, just-in-time (JIT)
inventory, sole sourcing, JIT II
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1. Characteristics of the B2B market
a. Characteristics that distinguish the business market from
2. Geographic market concentration
a. The U.S. business market is more geographically
concentrated than the consumer market
b. Manufacturers converge in certain regions of the country,
making these areas prime targets for business marketers
c. Certain industries locate in particular areas in order to be
3. Sizes and numbers of buyers
a. The business market features a limited number of buyers
b. Marketers can draw on a wealth of statistical information to
estimate the sizes and characteristics of business markets
i. The federal government is the largest single source
of such statistics
ii. It conducts an Annual Survey of Manufactures
(ASM) and a Census of Retailing and Wholesaling,
c. Many buyers in limited-buyer markets are large
organizations
Chapter 7 Business-to-Business (B2B) Marketing 173
d. Trade associations and business publications provide
additional information on business markets
4. The purchase decision process
a. To market effectively to other organizations, businesses
must understand the dynamics of the organizational
purchase process
b. Suppliers who serve in B2B markets must work with
multiple buyers, especially when selling to larger
customers
c. Decision makers at several levels may influence final
orders
5. Buyer-seller relationships
a. Buyer-seller relationships are in B2B marketing are often
more complex than consumer relationships, and they
require superior communication among the organizations’
personnel
b. A primary goal of B2B relationships is to provide
advantages that no other vendor can provide:
i. Lower prices
ii. Quicker delivery
iii. Better quality and reliability
iv. Customized product features
6. Evaluating international business markets
a. Business purchasing practices differ from one country to
174 Part 2 Understanding Buyers and Markets
Figure 7.1
Categories of
Business Market
Demand. Choose
one type of demand
and give examples
the next
b. Researching these markets poses a particular problem for
B2B marketers
c. Companies must assess quantitative data (such as the
size of the potential market) and qualitative features (such
as cultural values, work styles, and the best ways to enter
overseas market in general)
7. Business market demand
a. Like market characteristics, demand characteristics also
8. Derived demand
a. Derived demand refers to the linkage between demand for
a company’s output and its purchases of resources such
as machinery, components, supplies, and raw materials
b. For example: The demand for computer microprocessor
c. Organizational buyers purchase two general categories of
business products that are ultimately affected by derived
demand:
i. Capital items: Long-lived business assets that must
be depreciated over time; depreciation is an
accounting term that refers to charging a portion of
a capital item’s cost as a deduction against the
9. Volatile demand
a. Derived demand creates volatility in business market
demand
b. For example: Assume the sales volume for a gasoline
retailer is increasing at an annual rate of 5 percent
c. Now suppose the demand for this gasoline brand slows to
10. Joint demand
a. Joint demand results when the demand for one business
product is related to the demand for another business
product used in combination with the first item
11. Inelastic demand
a. Inelastic demand means that demand throughout an
industry will not change significantly due to a price change
12. Inventory adjustments
a. Adjustments in inventory and inventory policies can also
affect business demand
b. For example: Assume manufacturers in a particular
industry consider a 60-day supply of raw materials at the
optimal inventory level
e. Just-in-time (JIT) inventory policies seek to boost
efficiency by cutting inventories to absolute minimum
levels and by requiring vendors to deliver inputs as the
production process needs them
i. JIT allows companies to better predict which
supplies they will require and the timing for when
they will need them, markedly reducing their costs
for production and storage
176 Part 2 Understanding Buyers and Markets
iii. Firms that practice JIT tend to order from relatively
few suppliers
Assessment check questions
3.1. Why is geographic segmentation important in the B2B market?
3.2. In what ways is the buyer-seller relationship important in B2B
marketing? Buyer–seller relationships often are more complex than
3.3. What is global sourcing? Global sourcing involves contracting to
3.4. How does derived demand create volatile demand? Business
3.5. Give an example of joint demand. Both lumber and concrete are
3.6. How might JIT II strengthen marketing relationships? Under JIT II,
suppliers place representatives at the customer’s facility to work as part
of an integrated, on-site customer–supplier team. Suppliers plan and
take orders in consultation with the customer. This streamlining of the
inventory process improves control of the flow of goods.
Chapter Objective 4: Discuss the decision to make, buy, or lease goods and services.
Key Terms: offshoring, nearshoring, outsourcing
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1. The make, buy, or lease decision
Chapter 7 Business-to-Business (B2B) Marketing 177
a. Before a company can decide what to buy, it should
decide whether to buy at all
b. A firm considering the acquisition of a finished good,
component part, or service has three basic options:
i. Make the good or provide the service in-house
d. Most firms cannot make all the business goods they need;
often it would be too costly to maintain the necessary
equipment, staff, and supplies
i. As a result purchasing from an outside vendor is
the most common choice; companies can also look
outside their own plants for goods and services
formerly produced in-house, a practice called
outsourcing
2. The rise of offshoring and outsourcing
a. In recent years, U.S. jobs have been moved to lower-cost
overseas locations, a business practice referred to as
offshoring
i. This relocation of business processes to a lower-
cost location can involve production offshoring
(China has emerged as the preferred destination)
c. Outsourcing, using outside vendors to produce goods and
services formerly produced in-house, is a trend that
continues to rise
d. Businesses outsource for several reasons:
i. They need to reduce costs to remain competitive
ii. They need to improve the quality and speed of
drug research, technical research and development
(R&D), and film animation
g. Although most outsourcing is done by North America–
based companies, the practice is rapidly becoming
commonplace in Asia, Europe, and Central America
and perhaps at a lower cost than could be achieved by the
company itself
k. Successful outsourcing requires companies to carefully
oversee contracts and manage relationships
l. Problems with offshoring and outsourcing
v. In some cases, a company’s ability to respond
quickly to the market place may be reduced
vi. They can slow efforts in bringing new products to
market
vii. Suppliers that fail to deliver goods promptly or
Chapter 7 Business-to-Business (B2B) Marketing 179
ix. Management initiatives to outsource jobs can lead
to strikes and plant shutdowns; even if they do not
lead to disruption in the workplace, they can have a
negative impact on employee morale and loyalty
Assessment check questions
4.1. Identify two potential benefits of outsourcing. Outsourcing allows
4.2. Identify two potential problems with outsourcing. Many companies
discover that their cost savings are less than vendors sometimes
promise. Also, companies that sign multiyear contracts may find their
savings drop after a year or two.
Chapter Objective 5: Describe the major influences on business buying behavior.
Key Terms: multiple sourcing, merchandisers, systems integration, category advisor or category
captain
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1. The business buying process
a. Before even approaching suppliers, a company must
analyze its needs, determine goals its project should
accomplish, develop technical specifications, and set a
2. Influences on purchase decisions
a. Environmental factors
i. Environmental conditions such as economic,
political, regulatory, competitive, technological
considerations, and natural disasters influence
Customers.”
purchasing decisions to divisional or geographic
units
iii. Centralized buying tends to emphasize long-term
relationships, whereas, decentralized buying
focuses more on short-term results
deliver on schedule
vii. However, dealing with many sellers can be
counterproductive and take too much time
c. Interpersonal influences
i. Many people may influence B2B purchases, and
biases
v. Business marketers should know who in an
organization will influence buying decisions for their
products and should know each of their priorities
employing professional buyers
ii. In trade industries these buyers, often referred to
as merchandisers, secure needed products at the
best possible prices
iii. Purchase decisions for capital items vary
handle all purchasing; another firm may choose to
designate a major supplier as the systems
integrator
vii. This vendor then assumes responsibility for dealing
with all of the suppliers for a project and for
presenting the entire package to the buyer; in trade
industries, this vendor is sometimes called a
Assessment check questions
5.1. Identify the three major factors that influence purchase decisions. In
addition to product-specific factors such as purchase price, installation,
5.2. What are the advantages and disadvantages of multiple sourcing?
Spreading orders ensures against shortages if one vendor cannot deliver
Chapter Objective 6: Outline the eight steps in the organizational buying process.
Key Terms: None
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Figure 7.2 Stages in
the B2B Buying
Process. Choose
one stage and
1. Model of the organizational buying process
a. An organizational buying situation takes place through a
sequence of activities
b. Not every buying situation requires all the eight steps
illustrated in Figure 7.2
182 Part 2 Understanding Buyers and Markets
discuss how it would
affect the purchasing
decision of a
particular product.
i. Stage 1: Anticipate or recognize a
problem/need/opportunity and a general solution
ii. Stage 2: Determine the characteristics and quantity
of a needed good or service
Assessment check questions
6.1. Why does the organizational buying process contain more steps
than the consumer buying process? The additional steps arise because
6.2. List the steps in the organizational buying process. The steps in
organizational buying are (1) anticipate or recognize a
problem/need/opportunity and a general solution, (2) determine
Chapter Objective 7: Describe the three organizational buying situations.
Key Terms: straight rebuying, modified rebuying, new-task buying, reciprocity, value analysis,
vendor analysis
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1. Classifying business buying situations
a. Like consumer behavior, marketers can classify B2B
buying situations into three general categories, ranging
from least to most complex: (1) straight rebuying, (2)
modified rebuying, and (3) new-task buying
options and so follows a routine repurchase format
iv. A straight rebuy is the business market equivalent
of routinized response behavior in the consumer
market
d. Modified rebuying
i. In a modified rebuy, a purchaser is willing to
reevaluate available options
ii. Purchasers might take this step if their current
supplier has let a rebuy situation deteriorate
because of poor service or delivery performance
e. New-task buying
i. The most complex category of business buying is
new-task buying—first-time or unique purchase
situations that require considerable effort by the
decision makers
ii. It often requires a purchaser to carefully consider
alternative offerings and vendors
f. Reciprocity
i. Reciprocity—a practice of buying from suppliers
who are also customers—is a controversial
practice in a number of procurement situations
ii. It has been common in industries featuring
homogeneous products with similar prices such as
the chemical, paint, petroleum, rubber, and steel
industries
184 Part 2 Understanding Buyers and Markets
v. Although buyers and sellers enter into reciprocal
2. Analysis tools
a. Two tools that help professional buyers improve purchase
decisions are value analysis and vendor analysis
b. Value analysis examines each component of a purchase
in an attempt to either delete the item or replace it with a
Assessment check questions
7.1. What are the four classifications of business buying situations? The
7.2. Differentiate between value analysis and vendor analysis. Value
analysis examines each component of a purchase in an attempt either to
delete the item or replace it with a more cost-effective substitute. Vendor
Chapter Objective 8: Explain the buying center concept.
Key Terms: buying center, users, gatekeepers, influencers, decider, buyer
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1. The buying center concept
a. A company’s buying center encompasses everyone
2. Buying center roles
a. Buying center participants play different roles in the