Overview
This lecture covers the fundamentals of Business-to-Business (B2B) markets, distinguishing them from Business-to-Consumer (B2C) markets, and examines the B2B buying process, types of B2B markets, and characteristics influencing organizational purchasing.
B2B vs. B2C Markets
- B2B markets are where businesses sell products/services to other organizations, not final consumers.
- B2C markets involve selling directly to end consumers.
- Organizational buyers include manufacturers, retailers, wholesalers, and government agencies purchasing for use or resale.
- B2B purchases are often large, technical, and involve fewer, specialized buyers.
- Demand in B2B is derived from consumer demand and is more inelastic (less sensitive to price changes).
Types of B2B Markets
- Manufacturers/Producers buy raw materials to produce other goods (e.g., auto manufacturers buying steel).
- Reseller markets include wholesalers and retailers reselling products without major alteration.
- Institutional markets consist of non-profits, hospitals, schools, and religious organizations purchasing goods/services to serve others.
- Government markets involve federal, provincial, and local agencies as significant purchasers.
Characteristics of B2B Buying
- Products often require technical specifications and post-sale support.
- The buying process is structured, with clear criteria, multiple decision makers, and long-term relationships common.
- Marketing relies on direct selling, technical advertising, negotiated pricing, and quantity discounts.
- Professional buyers (e.g., purchasing managers) handle purchases with formal policies.
The B2B Buying Process
- Six stages: Need recognition, Product specification, Request for Proposal (RFP), Proposal analysis & supplier selection, Order specification, Vendor performance assessment.
- Need recognition may involve make-buy decisions.
- Product specification details requirements for suppliers.
- RFP invites suppliers to bid; evaluation often uses both price and non-price criteria.
- Orders include detailed terms; performance is formally assessed post-purchase.
The Buying Centre and Organizational Culture
- The buying centre includes roles: initiator, influencer, decider, buyer, user, and gatekeeper.
- Organizational culture (values, traditions, customs) impacts purchasing decisions and group dynamics.
- Buying situations: new buy (first time), modified rebuy (changed specs), straight rebuy (repeat purchase).
Key Terms & Definitions
- B2B (Business-to-Business) — transactions between businesses rather than with end consumers.
- B2C (Business-to-Consumer) — transactions where companies sell directly to final consumers.
- Derived Demand — demand for B2B products driven by consumer demand for related goods.
- Buying Centre — group of employees involved in a purchasing decision.
- RFP (Request for Proposal) — invitation for suppliers to bid on fulfilling organizational needs.
Action Items / Next Steps
- Review NAICS codes and explore the classification of a common product online.
- Prepare to distinguish B2B vs. B2C cases and explain the six stages of the B2B buying process.
- Read Chapter 5 for detailed examples and process breakdown.