Chapter 7 ♦ Business Marketing 7-1
CHAPTER 7 Business Marketing
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to analyze their personal experiences
with salespersons.
✓ Marketing Metrics
In order to determine who potential customers are and how to best
approach them, a software company must calculate the amount of
work that qualifying and closing sales leads will require. This will
allow them to determine how large a salesforce to employ to
maximize resources.
✓ Case Study
new advertisers. Cultivating those relationships is an important
component of making the company successful.
The Pantone Matching Systems have served as the industry standard
in color matching and identification. Over time, Pantone has added
additional supplemental color-matching systems for various
applications.
USING THIS MANUAL
Chapter seven includes eight learning outcomes that help students become more familiar with business marketing. The
chapter outline provides detailed analysis of these learning outcomes, listing PowerPoint slides and review questions as
LEARNING OUTCOMES
Conduct. The Code includes three key components: a culture of
integrity, our vision, and our values.
✓ Application Exercise
Students determine how ethical it is for purchasing managers to
accept certain gifts.
7-2 Chapter 7 ♦ Business Marketing
1 Describe business marketing
Business marketing is the marketing of goods and services that are bought for use in business rather than for personal
2 Describe the role of the Internet in business marketing
The rapid expansions and adoption of the Internet have made business markets more competitive than ever before. The
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
4 Identify the four major categories of business market customers
Producer markets consist of individuals and for-profit organizations that buy products for use in producing other
5 Explain the North American Industry Classification System
The NAICS provides a way to identify, analyze, segment, and target business and government markets. Organizations
6 Explain the major differences between business and consumer markets
In business markets, demand is derived, price-inelastic, joint, and fluctuating. Purchase volume is much larger than
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
8 Discuss the unique aspects of business buying behavior
Business buying behavior is distinguished by five fundamental characteristics. First, buying is normally undertaken by a
Chapter 7 ♦ Business Marketing 7-3
are often scrutinized. Fifth, customer service before, during, and after the sale plays a big role in business purchase
decisions.
CHAPTER OUTLINE
1 Describe business marketing
I. What Is Business Marketing?
PowerPoint 7-5:
Business Products
Review Question 1.1
Business marketing is the marketing of goods and services to individuals and
organizations for purposes other than personal consumption.
Business products include those that:
Review Question 2.1
Class Activity: Asks
students to go to business
oriented Web sites and
sites.
PowerPoint 7-9:
Measuring Online Success
2 Describe the role of the Internet in business marketing
II. Business Marketing on the Internet
The use of the Internet to facilitate activities between organizations is called
business-to-business electronic commerce (B–to-B or B2B e-commerce).
Companies selling to business buyers face the same challenges as all
A. Measuring Online Success
1. Stickiness is a measure of a Web site’s effectiveness
B. Trends in B2B Internet Marketing
1. The most significant trend in B2B marketing is the shift of sourcing
to the Net.
7-4 Chapter 7 ♦ Business Marketing
PowerPoint 7-10:
Evolution of E-Business
Initiatives
3. Over the last decade, marketers have become more and more
sophisticated in their use of the Internet.
Review Question 3.1
3 Discuss the role of relationship marketing and strategic
alliances in business marketing
III. Relationship Marketing and Strategic Alliances
Relationship marketing entails seeking and establishing strategic alliances or
PowerPoint 7–13:
Strategic Alliances
A. Strategic Alliances
1. A strategic alliance is a cooperative agreement between business
firms.
4. Relationship commitment is a firm’s belief that an ongoing
relationship with another firm is so important that it warrants
maximum efforts at maintaining it indefinitely.
PowerPoint 7-14:
Relationships in Other
Cultures
B. Relationships in Other Cultures
1. Although the terms relationship marketing and strategic alliances
are fairly new in American business, the concepts have long been
familiar in other cultures.
4 Identify the four major categories of business market
Chapter 7 ♦ Business Marketing 7-5
Review Question 4.1
customers
IV. Major Categories of Business Customers
PowerPoint 7-17:
Major Categories of
Business Consumers
Review Question 4.2
A. Producers
1. 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
B. Resellers
1. The reseller market consists of retail and wholesale businesses that
buy finished goods and resell them for a profit.
C. Governments
Government organizations include thousands of federal, state, and local
buying units and represent what is considered to be the largest single
market for goods and services in the world.
1. The Federal Government
a. The U.S. federal government is the world’s largest customer. It
2. State, County, and City Government
a. A business marketer may find over 82,000 state, county, and
D. Institutions
1. The fourth major segment of the business market consists of
institutions that seek to achieve goals different from such ordinary
business goals as profit, market share, and return on investment.
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Review Questions 5.1
5 Explain the North American Industry Classification
System
V. The North American Industry Classification System
The North American Industry Classification System (NAICS) is an
PowerPoint 7–21:
Example of NAICS
Hierarchy
PowerPoint 7–22:
It provides a common industry classification system for the NAFTA partners.
The NAICS is a valuable tool for business marketers in analyzing,
segmenting, and targeting markets. The hierarchical structure of NAICS
allows industry data to be summarized at several levels of detail:
1. The first two digits designate a major economic sector.
PowerPoint 7–24:
Business Versus
Consumer Markets
6 Explain the major differences between business and
consumer markets
VI. Business Versus Consumer Markets
Business markets have certain characteristics that are different from consumer
markets.
PowerPoint 7–25:
Demand in Business
Markets
Review Question 6.1
A. Demand
1. Derived demand is the demand for business products that results
from the demand for consumer products.
2. Inelastic demand means that an increase or a decrease in the price
of a product will not significantly affect demand for it.
3. Joint demand occurs when two or more items are used together in
Chapter 7 ♦ Business Marketing 7-7
PowerPoint 7–26:
Fluctuating Demand
4. Fluctuating Demand occurs when the demand for business products
tends to be more volatile than the demand for consumer products.
A small increase or decrease in consumer demand produces a much
B. Purchase Volume
Business customers buy in much larger quantities than consumers do.
C. Number of Customers
Business marketers typically have far fewer customers than consumer
marketers.
Review Question 6.2
2. The reduced number of customers can also be a disadvantage, because each
customer is so overwhelmingly important to the business.
D. Location of Buyers
Business customers tend to be much more geographically concentrated
Many consumer products pass through a distribution system that includes the
producer, one or more wholesalers, and a retailer. Direct channels are much more
common in business marketing than in consumer marketing.
F. Nature of Buying
G. Nature of Buying Influence
H. Type of Negotiations
7-8 Chapter 7 ♦ Business Marketing
I. Use of Reciprocity
J. Use of Leasing
Consumers normally buy products rather than lease them. But businesses
K. Primary Promotional Method
Personal selling tends to be emphasized by business marketers in their
Marketing Metrics
Business Market Product Launch and Sales Force Size
In order to determine who potential customers are and how to best approach them,
a software company must calculate the amount of work that qualifying and closing
7 Describe the seven types of business goods and
services
VII. Types of Business Products
PowerPoint 7–29:
Types of Business
A. Major Equipment
1. Major equipment is also called an installation.
2. Major equipment always depreciates over time.
B. Accessory Equipment
Accessory equipment is generally less expensive and shorter-lived than
Chapter 7 ♦ Business Marketing 7-9
C. Raw Materials
Raw materials are unprocessed extractive or agricultural products, such
D. Component Parts
E. Processed Materials
Processed materials are used directly in manufacturing other products;
unlike raw materials, they have had some processing. Examples include
sheet metal, lumber, chemicals, corn syrup, and plastics.
F. Supplies
PowerPoint 7–32:
Business Buying Behavior
8 Discuss the unique aspects of business buying behavior
VIII. Business Buying Behavior
A. Buying Centers
A buying center includes all those persons in an organization who
become involved in the purchase decision.
PowerPoint 7–33:
Roles in the Buying
Center
1. Roles in the Buying Center
a. The initiator is the person who first suggests making a
purchase.
7-10 Chapter 7 ♦ Business Marketing
c. Gatekeepers regulate the flow of information about the
purchase to the deciders and others.
use the product.
2. Implications of Buying Centers for the Marketing Manager
Vendors need to identify and interact with the true decision makers.
PowerPoint 7–34:
Evaluative Criteria
PowerPoint 7–35:
Buying Situations
Review Question 8.2
B. Evaluative Criteria
The three most important and commonly used criteria are quality,
service, and price—in that order.
1. Quality refers to technical suitability. Evaluation of quality also
C. Buying Situations
Often business firms must decide whether to make a certain item or to
buy it from an outside supplier. Essentially, this is an economic decision
concerning price and use of company resources.
If a firm chooses to purchase a product, it will do so under one of the
three following conditions: new buy, modified rebuy, or straight rebuy.
1. A new buy situation requires the purchase of a product for the
first time.
2. A modified rebuy is a situation where the purchaser wants some
change in the original good or service.
3. In a straight rebuy, the purchaser reorders the same goods or
services without looking for new information or investigating other
suppliers.
Chapter 7 ♦ Business Marketing 7-11
PowerPoint 7–36:
Customer Service
D. Business Ethics
Ethics refers to the moral principles or values that generally govern the
conduct of an individual or a group. It can also be viewed as the standard
of behavior by which conduct is judged.
Ethics in Marketing
Code of Ethics at Lockheed Martin
Lockheed Martin’s Board of Directors has adopted the booklet, Setting the Standard as
the company’s Code of Ethics and Business Conduct. The Code includes three key
components: a culture of integrity, our vision, and our values.
E. Customer Service
1. Business marketers are increasingly recognizing the benefits of
developing a formal system to monitor customer opinions and
perceptions of the quality of customer service.
TERMS
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
7-12 Chapter 7 ♦ Business Marketing
REVIEW AND APPLICATIONS
1.1 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.
2.1 How could use you use the Web site 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 the Web site include: services, resources, finance, tools, media kit, and access to Business to Business
2.2 Reconsider question 1.1. How could you use the Internet in your business marketing of Huggies diapers?
3.1 Why is relationship or personal selling the best way to promote in business marketing?
In most cases, business selling relies on a long-term relationships and repeat buying. Close communication and
ongoing dialog is essential to satisfying the customers.
4.1 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?
4.2 What do you have to do to get a government contract? Check out the Web sites www.fedbizopps.gov and
www.governmentbids.com to find out. Does it seem worth the effort?
5.1 Pick a product and determine its NAICS code. How easy was it to trace the groups and sectors?
6.1 How might derived demand affect the manufacturing of an automobile?
Chapter 7 ♦ Business Marketing 7-13
The demand for new cars drives the demand for products such as tires, brake linings, windshields, wipers, and
6.2 Your boss has just asked you, the company purchasing manager, to buy new computers for an entire
department. As 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
7.1 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 including
at least one in each category. Then, match them up with another group. Have each group take turns naming
a product have the other group identify its appropriate category. Try to resolve all discrepancies by
discussion. Some identified products might appropriately fit into more than one category.
8.1 A colleague 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 of these individuals.
Students’ answers should address some of these points:
8.2 Intel Corporation supplies microprocessors to Hewlett-Packard 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:
The two companies do have a close and long-standing relationship, however the purchases are not simple rebuys.
Supplemental Exercise: Group Work
Review and Applications
Review and Applications Questions 1.1, 2.1, and 7.1 lend themselves well to group work. For these activities, divide the