Chapter 05 BusinesstoBusiness Marketing

Chapter 05 - Business-to-Business Marketing Chapter 05 Business-to-Business Marketing Multiple Choice Questions Business-to-business marketing involves transactions between: A firms that market goods and services and the ultimate consumers B local and federal governments and the consumers C firms that market goods and services and other businesses D firms that provide products and services and their employees E firms that market goods and services and their union members Business-to-business (B2B) marketing refers to the process of buying and selling goods or services to be used in the production of other goods and services, for consumption by the buying organization, or for resale by wholesalers and retailers Therefore, B2B marketing involves manufacturers, wholesalers, retailers, and service firms that market goods and services to other businesses but not to the ultimate consumer 5-1 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-01 B2B Markets Which of the following is an example of business-to-business marketing? A A travel agency offering services such as booking tickets and hotel accommodations to the ultimate consumers B eBay offering various online auction and other services to consumers C An Internet services company that offers access to software applications and other services and charges on a usage basis D Intel selling microprocessors to Dell E A neighbourhood store that sells newspapers, magazines, and other items of interest to the locals In this case, Intel selling microprocessors to Dell is an example of business-to-business (B2B) marketing B2B marketing refers to the process of buying and selling goods or services to be used in the production of other goods and services, for consumption by the buying organization, or for resale by wholesalers and retailers Therefore, B2B marketing involves manufacturers, wholesalers, retailers, and service firms that market goods and services to other businesses but not to the ultimate consumer Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-01 B2B Markets All the following companies are always operating in B2B markets, EXCEPT: A A marketing consulting firm B A point of sales service provider C An oil refinery D A wholesaler E A travel agency Travel agency could sell packages to both consumers and businesses The other statements always sell products/services to other businesses 5-2 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Difficult Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-01 B2B Markets A typical marketing channel consists of manufacturers, wholesalers, and retailers In a typical marketing channel what type(s) of transaction occurs? A B2B transactions B B2C transactions C C2C transactions D B2B and B2C transactions E B2C and C2C transactions Manufacturers and wholesalers involve in B2B transactions whereas retailers are engaged in B2C transactions Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-02 Manufacturers or Producers Which of the following statements is true about business-to-business (B2B) markets? A Institutions such as hospitals and prisons are excluded from conducting B2B transactions B Distributors in a B2B market are those which usually buy raw materials, components, and parts that allow them to manufacture their own goods C Usually, information about government buying can be obtained from Business Access Canada or from MERX D In a B2B market, resellers completely alter the form of the product before selling it E In most countries, the central government tends to be one of the smallest contributors to the purchase of goods and services Information about government buying can be obtained from Business Access Canada or from MERX MERX is the most complete source of Canadian public tenders, private tenders, U.S tenders, and private-sector construction news available in Canada 5-3 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-05 Government Which of the following makes it possible for businesses of any size to have easy and affordable access to billions of dollars in contracting opportunities with the Government of Canada, the U.S Government, and the private sector? A GPO B SIC C NAICS D NAFTA E MERX MERX makes it possible for businesses of any size to have easy and affordable access to billions of dollars in contracting opportunities with the Government of Canada, participating provincial and municipal governments, the U.S Government, state and local governments, and the private sector Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-05 Government Which of the following statements is NOT true of manufacturers? A They are marketing intermediaries that produce the product B They are usually producers of their own good and services C Wholesalers, and retailers, are their classic customers D They are usually engaged in B2B transactions E They are the only marketing intermediaries that not buy any product Manufacturers buy raw materials, components, and parts that allow them to manufacture their own goods 5-4 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-02 Manufacturers or Producers Which of the following marketing intermediaries resell manufactured products without significantly altering their form? A Gatekeepers B Producers C Buyers D Wholesalers E Users Resellers are marketing intermediaries that resell manufactured products without significantly altering their form For instance, wholesalers and distributors buy jeans from For All Mankind and sell them to retailers (a B2B transaction), and retailers in turn resell those same jeans to the ultimate consumer (a B2C transaction) Wholesalers, distributors, and retailers are all resellers Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-03 Resellers Which of the following is NOT true of retailers? A They are business customers for wholesalers and manufacturers B They are a form of resellers C They resell manufactured products without significantly altering their form D They are one of the largest purchasers of goods and services in most countries E They are selling products to end consumers Resellers are marketing intermediaries that resell manufactured products without significantly altering their form For instance, wholesalers and distributors buy jeans from For All Mankind and sell them to retailers (a B2B transaction), and retailers in turn resell those same jeans to the ultimate consumer (a B2C transaction) Wholesalers, distributors, and retailers are all resellers 5-5 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Difficult Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-03 Resellers 10 Which of the following is a marketing intermediary that deals with reselling a product without changing or modifying it notably? A Producer B Consumer C Distributor D Initiator E Gatekeeper Resellers are marketing intermediaries that resell manufactured products without significantly altering their form For instance, wholesalers and distributors buy jeans from For All Mankind and sell them to retailers (a B2B transaction), and retailers in turn resell those same jeans to the ultimate consumer (a B2C transaction) Wholesalers, distributors, and retailers are all resellers Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-03 Resellers 11 Terrance buys defective clothes that are stockpiled in warehouses of factories and sells them to retailers for a discount Terrance is a(n): A manufacturer B initiator C consumer D gatekeeper E reseller Resellers are marketing intermediaries that resell manufactured products without significantly altering their form In this case, Terrance is a reseller Wholesalers, distributors, and retailers are all resellers 5-6 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-03 Resellers 12 Perry Inc is a global digital education firm that sources its content from multiple authors and publishers, and packages its products attractively to capture the target audience Which of the following best describes Perry's role? A Consensus buying centre B Gatekeeper C User D Producer E Reseller Resellers are marketing intermediaries that resell manufactured products without significantly altering their form For instance, wholesalers and distributors buy jeans from For All Mankind and sell them to retailers (a B2B transaction), and retailers in turn resell those same jeans to the ultimate consumer (a B2C transaction) Wholesalers, distributors, and retailers are all resellers Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-03 Resellers 13 In B2B transactions, hospitals, schools, and religious organizations are usually examples of: A manufacturers B users C institutions D gatekeepers E resellers Hospitals, educational organizations, prisons, religious organizations and other non-profit organizations are examples of institutions 5-7 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-04 Institutions 14 In comparison with purchases made by government organizations, which of the following statements is true of institutional buyers? A They rarely disclose their purchase decisions and practices B They are subject to heavy public scrutiny C They are less likely to engage in reciprocal buying D They usually opt for a supplier that quotes the highest price E They traditionally make much larger purchases Institutional buyers, such as nursing homes and universities, tend to have relatively small budgets and therefore seek the best value when buying products and services for their organizations Governments consider a wide range of factors in their purchases and may not always purchase from the vendor with the lowest price Institutional organizations are not under such public scrutiny and rarely disclose their purchase decisions and practices, although they may try to make their buying processes transparent Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-04 Institutions 15 Which of the following is NOT an example of institution buyer? A University of Lethbridge B York Region District School Board C Hospital for Sick Children D St Peter's Roman Catholic Church E Regional Municipality of Waterloo Government category consists of federal government, provincial, regional and municipal governments Regional municipality of Waterloo is an example of government business customer 5-8 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-04 Institutions 16 Which of the following tends to be the largest group of purchasers of goods and services in most countries? A Central governments B Manufacturers C Wholesalers D Gatekeepers E Retailers In most countries, the central government tends to be one of the largest purchasers of goods and services Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-05 Government 17 Which of the following is the most complete source of Canadian public tenders, private tenders, U.S tenders, and private sector construction news available in Canada? A Statistics Canada B Business Exchange Magazine C NAFTA D MERX E Business Access Canada Information about government buying can be obtained from Business Access Canada or from MERX MERX is the most complete source of Canadian public tenders, private tenders, U.S tenders, and private-sector construction news available in Canada 5-9 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-05 Government 18 Government purchases differ from the purchases made by institutional organizations in that institutional organizations: A make relatively large purchases and consider a wide range of factors in their purchases B may not always purchase from the vendor with the lowest price C need to make purchases that comply with the policy guidelines and trade rules set by the World Trade Organization D have relatively small budgets and therefore seek the best value when buying products and services E have to disclose their purchase decisions and practices to the public Institutional buyers, such as nursing homes and universities, tend to have relatively small budgets and therefore seek the best value when buying products and services for their organizations Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-05 Government 19 The buying process of private-sector companies, such as manufacturers and resellers, differs from the buying process of governments in that private companies: A have relatively big budgets and seek the best value when buying products B are more likely to engage in reciprocal buying C always opt for a supplier with a strong brand equity regardless of the price they quote D must disclose their buying criteria and buying process to the public E make purchases that comply with the policy guidelines set by the WTO Private sector companies such as manufacturers, producers, and resellers are likely to engage in reciprocal buying, a situation where two companies agree to buy each other's products as appropriate 5-10 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-07 Differences Between B2B and B2C Markets 98 The buying effort in business-to-business markets is structured, and involves technically trained and qualified professionals TRUE Generally, for routine purchases or small dollar-value purchases, only one or a few individuals within a department or the company may be responsible for the buying decision However, for purchases of highly technical or complex products involving thousands or millions of dollars, the buying effort is much more structured, formalized, and professional Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-07 Differences Between B2B and B2C Markets 99 The salesperson is an integral component of all types of B2C transactions, particularly the fast-moving consumer goods FALSE In most B2B sales, the salesperson is an integral component of the transaction On the other hand, while salespeople are an important component of the communications mix for B2C transactions such as sales of real estate, insurance, jewellery, consumer electronics, and highend apparel, most fast-moving consumer goods (FMCG) found in grocery and discount stores are not sold with the aid of salespeople 5-54 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-07 Differences Between B2B and B2C Markets 100 The third digit of an North American Industry Classification System code represents the industry group FALSE The first two digits of North American Industry Classification System codes represent the sector in the economy; the third digit represents the subsector; the fourth digit represents the industry group; the fifth digit represents a specific subgroup within the industry; and the full six digits refer to the country-level or national industry Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-03 Explain the ways B2B firms classify and segment their markets Topic: 05-08 B2B Classification System and Segmentation 101 Account size is one of the criteria for segmentation of markets in business-to-business marketing TRUE In addition to NAICS, marketers may segment B2B markets in several other ways, including geographic location (e.g., by country, province, region, city), firm size (e.g., by the number of employees in the firm or by sales volume), account size (by small, medium, and large accounts or purchase size), and types of products purchased 5-55 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-03 Explain the ways B2B firms classify and segment their markets Topic: 05-08 B2B Classification System and Segmentation 102 The information search in the business-to-business process is more informal and less structured when compared to the business-to-consumer process FALSE The B2B buying process parallels the B2C process, though it differs in many ways Both start with need recognition, but the information search and alternative evaluation stages are more formal and structured in the B2B process Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-04 Describe the B2B buying process Topic: 05-09 The B2B Buying Process 103 All business-to-business purchases go through each stage of the buying process with the same intensity FALSE The B2B buying process parallels the B2C process, though it differs in many ways Both start with need recognition, but the information search and alternative evaluation stages are more formal and structured in the B2B process Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-04 Describe the B2B buying process Topic: 05-09 The B2B Buying Process 104 In the first stage of the business-to-business (B2B) buying process, organizations come up with potential specifications that suppliers might use to develop their proposals FALSE In the first stage of the B2B buying process, the buying organization recognizes, through either internal or external sources, that it has an unfilled need 5-56 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-04 Describe the B2B buying process Topic: 05-09 The B2B Buying Process 105 A gatekeeper is a buying centre participant who controls information or access to decision makers and influencers TRUE A gatekeeper is a person who controls information or access, or both, to decision makers and influencers Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-16 The Buying Centre 106 In a consensus buying centre, one person makes the decision, but he or she solicits input from others before doing so FALSE In a consensus buying centre, all members of the team must reach a collective agreement that they can support a particular purchase Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-16 The Buying Centre 107 In a modified rebuy, the buying organization buys additional units of the products that had previously been purchased FALSE In a modified rebuy, the buyer has purchased a similar product in the past but has decided to change some specifications, such as the desired price, quality level, customer service level, and options 5-57 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-06 Detail different buying situations Topic: 05-19 Buying Situations 108 In the context of building business-to-business (B2B) relationships, a good white paper is one that provides information about the industry solely for promotional purposes FALSE A good white paper provides information about the industry and its challenges in an educational context, rather than a promotional sense, to avoid seeming like simply propaganda Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-18 Building B2B Relationships 109 Post purchase stage in consumer purchase decision is similar to vendor performance assessment in business buying process in that both customers evaluate the supplier for the future purchases TRUE Both business customers and consumers evaluate the products they purchase Satisfied customers (both business and consumers) will be more likely to re-purchase the product Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-18 Building B2B Relationships 5-58 Chapter 05 - Business-to-Business Marketing Short Answer Questions 110 What is business-to-business (B2B) marketing? Business-to-business marketing refers to the process of buying and selling goods or services to be used in the production of other goods and services, for consumption by the buying organization, or for resale by wholesalers and retailers Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-01 B2B Markets 111 Compare B2B and B2C markets on market, product, buying process, and marketing mix characteristics Provide examples to support your answer Market characteristics: In B2C markets, end consumer buy products to satisfy their individual or household needs In B2B markets, demand for products is derived from B2C sales Student examples will vary Product characteristics: in B2B markets, the products ordered are primarily raw materials and semi-finished goods In some B2B markets, the products are very technical and sophisticated in nature Customization is also very common in B2B markets Whereas in B2C markets, the products sold are mostly finished Buying process characteristics: purchasing process is more complex in B2B markets and more people are involved compared to B2C markets More negotiation happens in B2B markets compare to B2C and reciprocal buying arrangement is not uncommon in B2B markets Marketing mix characteristics: In B2C markets, majority of consumer goods are sold at retailers without the aid of salespeople In most B2B sales, the salesperson is an integral component of the transaction 5-59 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Difficult Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-07 Differences Between B2B and B2C Markets 112 What are the key challenges faced by marketers in business-to-business (B2B) markets? The first challenge is to identify the right persons or decision makers within the organizations who can authorize or influence purchases Second, marketers must understand the buying process of each of their company's potential clients The third challenge is to identify the factors that influence the buying process of potential clients Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Easy Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-06 Key Challenges of Reaching B2B Clients 113 What is derived demand? Provide one example Derived demand is the linkage between consumers' demand for a company's output and its purchase of necessary inputs to manufacture or assemble that particular output For instance, the demand for raw denim used to make For All Mankind jeans is derived from the sale of the jeans to consumers Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Easy Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-07 Differences Between B2B and B2C Markets 114 What are the typical characteristics of products available in business-to-business (B2B) markets? In B2B markets, the products ordered are primarily raw materials and semifinished goods In certain B2B markets, the products are very technical and sophisticated in nature and must conform to technical standards specified by the buyer Thus, the raw materials, components, and semifinished goods undergo rigorous testing before shipping Heavy emphasis is placed on delivery time, technical assistance, after-sale service, and financing assistance 5-60 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-07 Differences Between B2B and B2C Markets 115 How does business-to-business (B2B) buying behaviour differ from B2C buying behaviour in marketing? Support your answer with examples In B2B markets: · direct selling is the primary form of selling and physical distribution is often essential · advertising is technical in nature, and promotions emphasize personal selling · price is often negotiated, inelastic, frequently affected by trade and quantity discounts, and usually includes a service or maintenance component Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-09 The B2B Buying Process 116 Your educational institution is planning to purchase 2000 new computers to equip the labs Discuss the buying process it would go through to make such a purchase Students answer will vary The steps of B2B buying process should be discussed: 1) Need recognition: labs not have computer (or computers are too old) 2) Product specification: after the need recognition, the institution would write a list of specifications on computer capabilities (screen size, processor, speed, software required, warranty, etc) 3) RFP: The institution invite computer companies to bid on supplying the required computers 4) Each proposal would be evaluated based on decision criteria Some institutions only consider a few vendors (e.g Apple, Dell, and Lenovo) due to existing relationships 5) Order specification (purchase): the institution selects the supplier and makes the order with detailed description of required computers 6) Vendor performance assessment using metrics: the institution analyze the vendor's performance for future purchases 5-61 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 05-04 Describe the B2B buying process Topic: 05-09 The B2B Buying Process 117 Graelona Stores receives a number of responses to its request for proposal (RFP) On what basis will Graelona Stores choose a particular supplier from all the proposals it receives in response to its RFP? Graelona Stores, in conjunction with its critical decision makers, will evaluate all the proposals it receives in response to its RFP It is likely to narrow the process to a few suppliers, often those with which it has existing relationships, and discuss key terms of the sale, such as price, quality, delivery, and financing If Graelona stores has a policy that requires it to negotiate with several suppliers, particularly if the product or service represents a critical component or aspect of its business, the company will that Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Moderate Learning Objective: 05-04 Describe the B2B buying process Topic: 05-13 Stage 4: Proposal Analysis and Supplier Selection 118 What is a buying centre? The group of people typically responsible for the buying decisions in large organizations 5-62 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-16 The Buying Centre 119 What is organizational culture? How does it influence purchasing decisions in businessto-business (B2B) markets? A firm's organizational culture reflects the set of values, traditions, and customs that guides its managers' and employees' behaviour Organizational culture can have a profound influence on purchasing decisions Knowing which buying centre culture is prevalent in a given organization helps the seller decide how to approach that particular client, how and to whom to deliver pertinent information, and to whom to make the sales presentations Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-17 Organizational Culture 120 What is the significance of white papers in B2B markets? The majority of business-to-business (B2B) marketers use white papers for their marketing efforts, and 71 percent of B2B buyers regularly read them prior to making a purchase When executives confront an unfulfilled business need, they normally turn to white papers Their B2B partner may have a technologically advanced solution, but buyers have to understand the solution before they can consider a purchase A good white paper provides information about the industry and its challenges in an educational context, rather than a promotional sense, to avoid seeming like simply propaganda That is, the goal of white papers is to provide valuable information that a businessperson can easily understand and that will help the company address its problems with new solutions 5-63 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-18 Building B2B Relationships 121 What are differences between a new buy, a straight rebuy, and a modified rebuy? The varied types of buying situations call for very different marketing and selling strategies The most complex and difficult is the new buy because it requires the buying organization to make changes in its current practices and purchases As a result, several members of the buying centre will likely become involved, and the level of their involvement will be more intense than in the case of modified and straight rebuys In new buying situations, buying centre members also typically spend more time at each stage of the business-to-business (B2B) buying process, similar to the extended decision-making process that consumers use in the B2C process In comparison, in modified rebuys, the buyers spend less time at each stage of the B2B buying process, similar to limited decision making in the B2C process Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-06 Detail different buying situations Topic: 05-19 Buying Situations 122 How government purchases differ from the purchases made by institutional organizations in business-to-business (B2B) markets? Governments make much larger purchases, and their buying processes must not only satisfy strict policy guidelines and directives set by the government, but also meet international trade rules set by the World Trade Organization (WTO) or the North American Free Trade Agreement (NAFTA) Additionally, government purchases are subject to public scrutiny and can be subjected to legal challenges or be cancelled or modified Governments consider a wide range of factors in their purchases and may not always purchase from the vendor with the lowest price Institutional buyers, on the other hand, tend to have relatively small budgets and therefore seek the best value when buying products and services for their organizations That is, if two suppliers are offering roughly similar products, they may opt for the supplier with the lower price Institutional organizations are not under public scrutiny and rarely disclose their purchase decisions and practices, although they may try to make their buying processes transparent 5-64 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-01 Describe the nature and composition of B2B markets Topic: 05-05 Government 123 Differentiate between business-to-business (B2B) and business-to-consumer (B2C) buying in terms of the nature of the buying process In B2B markets, generally, for routine purchases or small-dollar-value purchases, only one or a few individuals within a department or the company may be responsible for the buying decision However, for purchases of highly technical or complex products involving thousands or millions of dollars, the buying effort is much more structured, formalized, and professional More people are usually involved in complex buying decisions They are usually technically trained and qualified professionals, and they represent different interests within the organization The group of people involved in the buying decision is often referred to as the buying centre Most companies have formal policies and procedures to guide buying decisions that must be closely followed by the people involved in the buying decisions Examples of such procedures include rules governing competitive bidding, negotiated pricing, complex financial arrangements, buying criteria, and objectives, as well as procedures for evaluating competitive bids Another major difference between B2B and B2C buying lies in the nature of the relationship between the firm and its suppliers Generally, the buying decision is based on negotiations, which for complex purchases could be quite extended The negotiated contract normally covers a range of concerns, including price, delivery, warranty, technical specifications, and claim policies In B2B markets, buyers and sellers strive to develop close relationships with each other and so will often provide help or advice to ensure a win-win situation for both parties 5-65 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-02 Explain the key differences between B2B buying and B2C buying Topic: 05-07 Differences Between B2B and B2C Markets 124 Annie is asked to a performance analysis for a vendor who supplies raw materials to her construction company What are the steps that Annie is likely to adopt while doing the performance analysis? Annie is likely to use the following steps in performance analysis: She will develop a list of issues that the company believes are important to consider in the evaluation of the vendor To determine how important each of these issues is, she will assign an importance score to each The more important the issue, the higher a score it will receive, but the importance scores must add up to For example, Annie might feel that product quality and price are most important, whereas meeting the delivery dates and the ease of ordering are less important Then Annie will assign numbers that reflect her judgments about how well the vendor performs Using a 5-point scale, where equals "Poor Performance" and equals "Excellent Performance," she might decide that the vendor has fairly high performance on all issues except ease of ordering To get the overall performance of the vendor, Annie will combine the importance of each issue and the vendor's performance scores by multiplying them together The sum of all these values will indicate the performance of the vendor on a 5-point scale 5-66 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 05-04 Describe the B2B buying process Topic: 05-15 Stage 6: Vendor Performance Assessment Using Metrics 125 John is an initiator, Harry is an influencer, Mary is the buyer, Cecilia is the decider, Sara is a user, and Smith is the gatekeeper Describe their buying roles in a typical buying centre Buying roles are categorized into six different types in a typical buying centre: John the initiator: A person who first suggests buying the particular product or service Harry the influencer: A person whose views influence other members of the buying centre in making the final decision Mary the buyer: A person who handles the paperwork of the actual purchase Cecilia the decider: A person who ultimately determines any part of or the entire buying decision—whether to buy, what to buy, how to buy, or where to buy Sara the user: The person who consumes or uses the product or service purchased by the buying centre Smith the gatekeeper: A person who controls information or access to decision makers and influencers 5-67 Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Moderate Learning Objective: 05-05 Identify the roles within the buying centre Topic: 05-16 The Buying Centre 126 Explain the different types of buying situations Provide one example for each situation Most business-to-business (B2B) buying situations can be categorized into three types: new buys, modified rebuys, and straight rebuys In a new buy situation, a customer purchases a good or service for the first time, which means the buying decision is likely to be quite involved because the buyer or the buying organization does not have any experience with the item In the B2B context, the buying centre is likely to proceed through all six steps in the buying process and involve many people in the buying decision Typical new buys might range from capital equipment to components that the firm previously made itself but now has decided to purchase instead In a modified rebuy, the buyer has purchased a similar product in the past but has decided to change some specifications, such as the desired price, quality level, customer service level, and options Current vendors are likely to have an advantage in acquiring the sale in a modified rebuy situation, as long as the reason for the modification is not dissatisfaction with the vendor or its products A straight rebuy occurs when the buyer or buying organization simply buys additional units of products that had previously been purchased A tremendous amount of B2B purchases are likely to fall in the straight rebuy category Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 05-06 Detail different buying situations Topic: 05-19 Buying Situations 5-68 ... Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05- 05 Identify the roles within the buying centre Topic: 05- 16... Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05- 05 Identify the roles within the buying centre Topic: 05- 16... Chapter 05 - Business-to-Business Marketing Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 05- 05 Identify the roles within the buying centre Topic: 05- 16