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LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What is organizational buying?
2. What buying situations do business buyers face?
3. Who participates in the business-to-business buying process?
4. How do business buyers make their decisions?
5. In what ways can business-to-business companies develop effective marketing
programs?
6. How can companies build strong loyalty relationships with business customers?
7. How do institutional buyers and government agencies do their buying?
CHAPTER SUMMARY
1. Organizational buying is the decision-making process by which formal organizations
establish the need for purchased products and services, then identify, evaluate, and
2. Compared with consumer markets, business markets generally have fewer and larger
buyers, a closer customer supplier relationship, and more geographically concentrated
3. The buying center is the decision-making unit of a buying organization. It consists of
4. The buying process consists of eight stages called buyphases: (1) problem recognition,
(2) general need description, (3) product specification, (4) supplier search, (5)
5. Business marketers are strengthening their brands and using technology and other
C H A P T E R
7
ANALYZING BUSINESS
MARKETS
6. Business marketers must form strong bonds and relationships with their customers.
Some customers, however, may prefer a transactional relationship.
7. The institutional market consists of schools, hospitals, nursing homes, prisons, and
OPENING THOUGHT
Students unfamiliar with business and business operations will have a difficult time
understanding the concept of organizational buying. The major differences between the
consumer market and the B2B market lie in the complexity of the decision process and
the amount of people involved in the final purchasing decision.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
2. Students should compare and contrast the complexity of that buying process to the
ones noted in Chapter 6—Analyzing Consumer Markets. How and where are the major
points of differences between the two markets in their purchase intensions? Can a firm
market its products to both the industrial and consumer markets with one strategy? Are
3. Sonic Smartphone Marketing Plan: Business-to-business marketers have to
understand their markets and the behavior of members of the buying center in order to
• What specific types of businesses appear to fit the business market definition used at
Sonic?
• What needs could Sonic’s Smartphone address for these businesses?
• Who would participate in and influence the purchase of Smartphoness for use in these
businesses?
ASSIGNMENTS
Ad Age recently reported on a study done by B2B which talks about how much of the
Have each of the students read Bob Donath’s “Emotions Play Key Role in Biz Brand
Appeal,” Marketing News, June 1, 2006, p. 7 and comment on their perception of how
effective “biz” is in their lives and in their purchasing of products.
Contact your local Pearson Higher Education sales representative and ask him/her to
make a presentation to the class on how he/she sells to your college or university.
In small groups (five students suggested as the maximum), have the students visit your
college or university’s Central Purchasing or Procurement department (you may have to
clear this with your administration before assigning). Have the students conduct
the needs of their hospital customers by the design of this Web site? Where and what is
GE doing right, what is GE doing wrong, and where can GE improve?
Small businesses have been described as the “lifeblood” of the economy. Students, who
have after school jobs in small business, should be assigned to interview their employers,
managers, or purchasing departments to understand how small businesses purchase goods
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—How Different Is Business-to-Business Marketing?
Some business-to-business marketing executives lament the challenges of business-to-
business marketing, maintaining that many traditional marketing concepts and principles
do not apply and that selling products and services to a company is fundamentally
different from selling to individuals. Others disagree, claiming that marketing theory is
still valid and only involves some adaptation in the marketing tactics.
Finally, the other major difference between consumer and business-to-business marketing
usually involves the amount of people involved in the sale: from both the sellers firm and
the purchasing firm. In consumer selling, the user is generally the purchaser. In the
business-to-business, marketing both the selling firm and the buying firm includes
MARKETING DISCUSSION: Applying B-to-C Concepts to B-to-B
Consider some of the consumer behavior topics for business-to-consumer (B-to-C)
marketing from Chapter 6. How might you apply them to business-to-business (B-to-B)
settings? For example, how might noncompensatory models of choice work? Mental
accounting?
Suggested Response:
From Chapter 6 we have learned that consumer behavior is influenced by cultural factors,
social factors, and personal factors. These are individual considerations that apply to the
business-to-business market as well as to the consumer market. The difference is that all
of the members of the buying center will possess different sets of these considerations
and that the business-to-business marketer must try to appeal to all of these
simultaneously.
Marketing Excellence: ACCENTURE
1) How does Accenture target to its B-to-B audience so effectively?
2) Evaluate Accenture’s history of branding campaigns. What remains consistent
throughout?
Suggested Answer: Student opinions will vary, but they should recognize the importance of
the initial name selection, which has remained consistent throughout the branding campaign.
Marketing Excellence: GE
1) Discuss GE’s B-to-B marketing strategy. Why has the company been so
successful over the years at targeting such a large business audience?
Suggested Answer: B2B marketing is critical to GE because “General Electric (GE) is
made up of five major divisions that operate in a wide range of industries: Energy
2) Have “Ecomagination,” and “Healthymagination” successfully communicated
GE’s focus on its newer endeavors? Why or why not?
Suggested Answer: Student answers will differ but good students will note both
campaigns evolved from its “Imagination at Work” initiative, which communicated a
focus on innovation and new technology. The specific campaigns focused on innovations
in two specific areas: reducing the environmental harm associated with consumption of
its products and innovative, affordable health care solutions.
DETAILED CHAPTER OUTLINE
Opening vignette: Business organizations sell and they buy vast quantities of raw
materials, manufactured components, plant and equipment, supplies, and business
services. To create and capture value, sellers such as Cisco must understand
organizations’ needs, resources, policies, and buying procedures. Some of the world’s
most valuable brands belong to business marketers: ABB, Caterpillar, DuPont, FedEx,
GE, Hewlett-Packard, IBM, Intel, and Siemens, to name a few. They face some unique
considerations in selling to other businesses.
I. What Is Organizational Buying?
A. Organizational buying is the decision-making process by which formal
organizations establish the need for purchased products and services and
identify, evaluate, and choose among alternative brands and suppliers
B. The Business Market versus the Consumer Market
i. The business market consists of all the organizations that acquire
goods and services used in the production of other products or services
1. Commoditization eats away margins and weakens customer
loyalty
2. Commoditization can be overcome only if target customers are
3. A critical step in business-to-business marketing is to create
and communicate relevant differentiation from competitors.
v. Business marketers face many of the same challenges as consumer
marketers, especially understanding their customers and what they
value
vi. Three biggest hurdles for B-to-B marketing are:
2. building stronger innovation-marketing interfaces
3. extracting and leveraging more granular customer and market
knowledge
vii. Four additional imperatives are:
2. engaging more deeply with customers and customers’
customers
4. finding and grooming marketing talent and competencies
viii. Business marketers contrast sharply with consumer markets in some
ways, however. They have:
1. Fewer, larger buyers
3. Professional purchasing
5. Multiple sales calls
7. Inelastic demand
9. Geographically concentrated buyers
10. Direct purchasing
II. Buying Situations
A. The number of decisions faced by a business buyer depends on the complexity
of the problem being solved, newness of the buying requirement, number of
people involved, and time required.
B. Three types of buying situations are the straight rebuy, modified rebuy, and
new task
i. Straight rebuy: the purchasing department reorders items like office
supplies and bulk chemicals on a routine basis and chooses from
suppliers on an approved list
ii. Modified rebuy: the buyer in a modified rebuy wants to change
product specifications, prices, delivery requirements, or other terms.
This usually requires additional participants on both sides.
iii. New task: A new-task purchaser buys a product or service for the first
C. The buying process passes through several stages: awareness, interest,
evaluation, trial, and adoption
i. Mass media can be most important during the initial awareness stage
ii. Salespeople often have their greatest impact at the interest stage
iii. Technical sources can be most important during evaluation
iv. Online selling efforts may be useful at all stages
D. In the new-task situation, the buyer must determine product specifications,
price limits, delivery terms and times, service terms, payment terms, order
quantities, acceptable suppliers, and the selected supplier.
III. Participants in the Business Buying Process
A. Who buys the trillions of dollars’ worth of goods and services needed by
business organizations?
i. Purchasing agents are influential in straight-rebuy and modified-rebuy
situations, whereas other employees are more influential in new-buy
situations
ii. Engineers are usually influential in selecting product components, and
purchasing agents dominate in selecting suppliers
iii. The buying center is the decision-making unit of a buying organization
1. “All those individuals and groups who participate in the
3. Users: Those who will use the product or service.
4. Influencers: People who influence the buying decision, often
6. Approvers: People who authorize the proposed actions of
deciders or buyers
8. Gatekeepers: People who have the power to prevent sellers or
information from reaching members of the buying center. For
9. Several people can occupy a given role such as user or
influencer, and one person may play multiple roles
10. A buying center typically has five or six members and
sometimes dozens.
iv. Buying Center Influences
1. Participants with differing interests, authority, status,
2. Business buyers also have personal motivations, perceptions,
4. Businesspeople are buying solutions to two problems: the
organization’s economic and strategic problem and their own
personal need for achievement and reward.
B. Targeting Firms and Buying Centers
i. Business marketers may divide the marketplace in many different
ways to choose the types of firms to which they will sell
ii. Finding the sectors with the greatest growth prospects, most profitable
1. Small sellers concentrate on reaching the key buying
influencers
3. Companies must rely more heavily on their communications
programs to reach hidden buying influences and keep current
customers informed
IV. The Purchasing/Procurement Process
A. In principle, business buyers seek the highest benefit package (economic,
technical, service, and social) in relationship to a market offering’s costs.
i. The strength of their incentive to purchase will be a function of the
B. New, more strategically oriented purchasing departments have a mission to
seek the best value from fewer and better suppliers
V. Stages in the Buying Process: Eight buyphases, buygrid framework
A. Problem recognition
i. Triggered by internal or external stimuli
ii. Business marketers can stimulate
B. General need description
C. Product specification
D. Supplier Search
i. Includes electronic marketplaces like catalog sites, vertical markets,
1. Vertical hubs centered on industries (plastics, steel, chemicals,
paper)
3. Set up direct extranet links to major suppliers
5. Set up company buying sites
v. Lead generation: the right balance between the quantity and quality of
leads
1. Internal engineering assessment
3. Focus-group value assessment
5. Conjoint analysis
7. Compositional approach
8. Importance ratings
iii. Specify the customer value proposition, following a number of
important principles
1. Clearly substantiate value claims by concretely specifying the
2. Document the value delivered by creating written accounts of
3. Make sure the method of creating a customer value proposition
is well implemented within the company, and train and reward
employees for developing a compelling one.
iv. The choice of attributes and their relative importance vary with the
buying situation.
v. Marketers can counter requests for a lower price in a number of ways,
including framing as noted above
2. Cite the value of the services the buyer now receives,
especially if it is superior to that offered by competitors
3. Research shows that service support and personal interactions,
5. Set a lower price but establishing restrictive conditions: (1)
6. Solution selling can also alleviate price pressure and comes in
different forms
7. Risk and gain sharing can offset price reductions customers
request
vi. Companies are increasingly reducing the number of their suppliers
1. Trend toward single sourcing, though companies that use
2. May also fear single suppliers will become too comfortable in
the relationship and lose their competitive edge
G. Order-Routine Specification: negotiation of the final order, listing the
technical specifications, the quantity needed, the expected time of delivery,
return policies, warranties, etc.
H. Performance Review: periodic reviews the performance of the chosen
supplier(s) using one of three methods
i. Contact end users and ask for their evaluations
ii. Rate the supplier on several criteria using a weighted-score method
iii. Aggregate the cost of poor performance to come up with adjusted
costs of purchase, including price
VI. Developing effective business-to-business marketing programs
A. Business-to-business marketers are embracing systems selling and adding
valuable services to their product offerings and employing customer reference
programs and a wide variety of online and offline communication and
branding activities
i. Business marketers are increasingly recognizing the importance of
their brand, which is often associated with many of the company’s
products.
iv. Peer-to-peer interaction can assist a potential buyer
1. Establish a formal, organized customer reference program
3. Use an experienced executive as the leader of the reference
program
5. Revolutionize your customer value proposition
6. Find customers who want to be advocates because of their
passion for the company and not as the result of any financial
inducement.
B. Systems Buying and Selling
i. Systems buying originated with government purchases of major
weapons and communications systems
1. Prime contractors traditionally provided a turnkey solution, so-
2. Sellers have increasingly recognized that buyers like to
purchase in this way, and many have adopted systems selling
2. Customer benefits from reduced procurement and management
costs and from price protection over the term of the contract
3. Seller achieves lower operating costs thanks to steady demand
and reduced paperwork
C. Services play an increasing strategic and financial role for many business-to-
business firms selling primarily products.
i. Adding high-quality services to their product offerings allows them to
provide greater value and establish closer ties with customers.
VII. Managing Business-to-Business Customer Relationships
A. Loyalty is driven in part by supply chain management, early supplier
involvement, and purchasing alliances
B. Business-to-business marketers are avoiding “spray and pray” approaches to
attracting and retaining customers in favor of honing in on their targets and
developing one-to-one marketing approaches
C. The Benefits of Vertical Coordination
i. Building trust is one prerequisite to enjoying healthy long-term
relationships
2. Provide employee incentives aligned to meet customer needs</
4. Offer valid comparisons with competitive products
ii. Four relevant ones ways to develop relationship are availability of
iii. Buyer–supplier relationships are categorized into eight categories
1. Basic buying and selling - simple, routine exchanges with
moderate levels of cooperation and information exchange
3. Contractual transaction - defined by formal contract and
generally have low levels of trust, cooperation, and interaction
4. Customer supply - In this traditional supply situation,
5. Cooperative systems - The partners in cooperative systems are
7. Mutually adaptive - Buyers and sellers make many
8. Customer is king - In this close, cooperative relationship, the
seller adapts to meet the customer’s needs without expecting
much adaptation or change in exchange
iv. Closest relationships between customers and suppliers arose when
supply was important to the customer and there were procurement
obstacles, such as complex purchase requirements and few alternate
suppliers
D. Risks and Opportunism in Business Relationships
i. Establishing a customer–supplier relationship creates tension between
safeguarding (ensuring predictable solutions) and adapting (allowing
for flexibility for unanticipated events).
1. Vertical coordination can facilitate stronger customer–seller
2. Specific investments entail considerable risk to both customer
and supplier.
3. Opportunism is “some form of cheating or undersupply relative
to an implicit or explicit contract
ii. The presence of a significant future time horizon and/or strong
solidarity norms typically causes customers and suppliers to strive for
VIII. Institutional and Government Markets
A. The institutional market consists of schools, hospitals, nursing homes, prisons,
and other institutions that must provide goods and services to people in their
care.
i. Many of these organizations are characterized by low budgets and
