BUS203 Study Guide

Unit 3: Customers and Marketing Research

3a. Define business-to-business marketing strategies

  • What are the 5 characteristics that define organizational buying processes?
  • What different types of purchases are made by organizations?
  • What are the 4 different categories of business markets? How do they connect with their stakeholders?
  • What is the buying center? What are the roles of its members?
  • What are the steps in the business-to-business buying process?

Business-to-business activities are significantly different than business-to-consumer activities. In B2B, the process is focused on the relationships and connections between companies and their suppliers. Companies buy goods and services in large quantities, which makes the buying process much more complex than in the consumer market. Unlike consumer purchases, where only one person may be involved in the decision process, organizational buying behavior is characterized by having many people involved in the decision-making process. Also, in addition to having emotional connections to the decision, there are also quantitative factors that need to be considered including company goals, budgets, and directives. In some companies, there may technical reasons for making a particular purchase, and how the item fits with other elements of the product or service being manufactured. While the consumer process may take a short amount of time, business purchase decisions generally are determined over a long time span. Changes in the industry, the availability of other supplies, and corporate goals can all impact the decision process. Finally, organizations cannot be segmented in the same ways as consumers. Each organization operates independently, with characteristics that are unlike any other companies in the marketplace.

When a company makes a purchase, they face different purchase situations. These include the straight rebuy, where the company simply reorders goods and services they have purchased in the past. A modified rebuy is when a company may seek to make changes to an existing order, renegotiate the price, or change the specifications of the items they purchase. Finally, a new task will require a company to make a purchase for the first time, making it necessary for the company to seek out potential suppliers and their offerings.

Producers are companies that purchase goods and services to make other products. Resellers are companies that sell goods and services produced by other firms. They do not make any changes to these products. Business-to-government sales occur when companies sell to local, state, and federal government agencies. Institutional markets include various nonprofit agencies and organizations and represent large sales opportunities for the companies from whom goods and services are purchased. Consider companies and organizations in each category that you are familiar with. Think about the ways these entities market to their constituents and stakeholders and how that might differ from the activities connected to the consumer market.

Buying centers are groups of people within an organization who are responsible for making purchase decisions. The buying center includes:

  • Initiators: Those who first see a need for a product or service
  • Users: Those who will actually use the product
  • Influencers: Those who may or may not use the product but have some experience or expertise that can impact the purchase decision
  • Gatekeepers: Those who are in between the suppliers and the buying center
  • Decider: The person who is responsible for making the final purchase decision

The steps in the business-to-business buying process are very similar to that of the consumer buying process. These steps include:

  • Need recognition
  • Need description
  • Supplier search
  • Request for proposal (RFP)
  • Supplier selection
  • Order routine specification
  • Post-purchase evaluation

Consider all of the elements involved in business-to-business interactions. Think about companies you are familiar with, and how their relationships with other companies might differ from the relationships they have with their consumer base.

To review, read Organizational Buyer Behavior and Business Buying Behavior.

 

3b. Define business-to-consumer marketing strategies

  • What is the role of marketing channels?
  • What is the difference between marketing channels and the supply chain?
  • What kinds of marketing channel partners are available to manufacturers?

The marketing channel is the process used by a company to deliver their goods and services to the end-user. The channel members are those entities, also known as partners, that a company uses to transport those goods and services to the consumers. Strong channel members can be extremely profitable for an organization, while weak and ineffective partners can be detrimental to a product's success.

Generally, companies seek to streamline the marketing channel process and use the fewest number of intermediaries possible to bring their products to market. However, each member plays a valuable role in the process and can ultimately provide greater value to the company than they could achieve on their own.

While the marketing channel process explores those entities that can help bring a product from the manufacturer to the end-user, the supply chain process takes a greater look at all of the organizations that play a role in the creation and development of a product or service. This includes the suppliers of raw materials, transport, any technology used to produce a product, and the marketing strategies used to promote the product or service.

There are many avenues companies have available to them to connect their goods and services to the consumer. Wholesalers, or distributors, stock inventories, operate warehouses, offer credit to buyers, and deliver goods to customers. Brokers, or agents, represent one or more manufacturers and serve as negotiators between buyers and producers. Retailers are businesses that purchase products from manufacturers, wholesalers, agents, or distributors and then sell them to consumers.

Supermarkets (grocery stores) offer a wide range of food and household products to consumers. These stores can be in all different price ranges to meet the needs of consumers in their communities or those of niche markets. Consider Whole Foods, which offers organic foods at high price points, and compare this to Kroger in the mid-price range, or Aldi, which offers significant discount pricing.

Convenience stores offer a smaller selection of items than their supermarket counterparts and generally charge higher prices for easy availability.

Specialty stores sell one category of products, offering a wide range of items within that category. Jewelry stores such as Zales or Jared are good examples of this type of channel. High-volume retailers in the specialty store market can put smaller entries into this marketplace out of business and are known as category killers. However, even these large-volume stores are facing serious and significant competition from the online shopping environment.

Department stores, known for their wide variety of merchandise in many categories such as clothing, jewelry, and household items, are seeing tremendous changes in shopper habits that have become significant threats to their existence. As noted earlier, consumers are making more and more online purchases, and the department store model of retail is in danger of becoming extinct.

Superstores, such as large locations for Walmart or Target, are considered major threats, as well, to the traditional department store. Many types of unrelated services may be located in these stores such as nail salons, coffee shops, and restaurants, all with the goal of bringing in more shoppers and generating higher levels of sales.

Warehouse clubs such as Sam's or Costco, require shoppers to pay an annual fee for the privilege of buying goods and services in large quantities at quantity discount prices. However, some research shows that consumers actually spend more at these kinds of stores than they might when shopping at other kinds of retail outlets.

Outlet stores started out as the place to purchase items that did not sell in the main locations for those retailers. Over time, their popularity has resulted in outlets selling merchandise that is manufactured only for those locations but at prices that are lower than their mall or shopping center counterparts.

Pop-up stores have enjoyed increasing popularity. These are temporary stores that may use a kiosk or an actual store location to feature their goods and services for a limited time. The goal is to generate awareness and excitement, but then move on to other marketing channels to connect with consumers. As an example, Caspar, a company that sells mattresses online, has intermittently opened up pop-up stores to meet consumers' needs to sample a mattress before making a purchase.

As mentioned earlier, the growth of online shopping has had a significant impact on all business-to-consumer marketing and sales activities. The convenience of shopping online, coupled with the large variety of merchandise at all price points, has made this an attractive option for many consumers. As a result, businesses will need to continue to seek ways to enhance their online presence to meet the demands of consumers worldwide.

To review, read Using Marketing Channels to Create Value for Customers.

 

3c. Explain how marketers use demographics

  • Which demographic factors define consumers?
  • How do gender, age, and stage of life influence purchase decisions?

Demographics include variables such as income, education, gender, age, marital status, culture, and life cycle.

While there are dangers in making generalizations about any segment of the population, some generalities do exist, making it possible for marketers to better target their efforts. For example, men and women tend to have different habits and approaches to shopping, with women being responsible for two-thirds of most household products. Men, on the other hand, account for three-quarters of all alcoholic beverage purchases. Understanding these and other shopping behavior habits can enable marketers to better target their products, services, and promotions to meet consumer and organizational needs.

As people age, and enter different stages of life, their needs and wants change, as well. Purchases made by single people in their 20s and 30s will vary greatly from purchases made by those with families or those who have retired and now have more free time.

Recognizing the impact of these demographic factors can help companies better serve the public's needs, while also ensuring that company operations are profitable.

To review, read How People Make Buying Decisions.

 

3d. Define and identify research procedures

  • What is the difference between primary research and secondary research? What are some sources that would be examples of each?
  • What happens during each step in the marketing research process?

Primary research is new and original research that is conducted by an organization or individual. Methods for conducting primary research include surveys (phone, in-person, and online), focus groups, interviews, observations, and experiments. This kind of research can result in valuable information that can enable companies to make decisions based on up-to-date and relevant information. The downside to this approach is that it is quite time-consuming and can be expensive.

Secondary research involves gathering data that has already been gathered by other companies or agencies. Sources of secondary data include newspapers and magazines, organizational publications, government publications, and materials created for other business purposes. These are valuable resources that can be quickly accessed sometimes for little or no cost. However, the information may not be current and may not relate to the issue the company is seeking to resolve.

In any research endeavor, it is important to follow each step in the process to ensure that the right issues are being addressed. The steps in the research process include:

  • Define the problem
  • Design the research
  • Design the data collection format
  • Specify the sample population of respondents
  • Collect the data
  • Analyze the data
  • Write the report

Prior to conducting any research, however, it is important to ensure that the right issues and questions are being addressed. For example, if a research project is undertaken based on faulty information or incorrect perceptions about the issue, then the resulting data will be inaccurate and unusable. A good example of this is when the Coca-Cola company introduced New Coke based on research about what kind of taste consumers wanted in their cola beverages. The research was conducted as a result of the Pepsi Challenge, which showed that consumers preferred Pepsi over Coke in blind taste tests. Coke just assumed that consumers would want a cola that tasted more like Pepsi and conducted their research into a new product based on this assumption. Ultimately, New Coke was a disaster and consumers were irate. The company did not consider the connection consumers had with the brand, and while they taste-tested new formulas, they never actually asked consumers if they wanted a new version of Coke.

Consider a problem you might have encountered in the workplace. How would you uncover the data you need to resolve your problem by applying the steps in the marketing research process?

To review, read Marketing Research and Market Intelligence.

 

3e. Understand the importance of a value proposition

  • What are the components of a value proposition?
  • Why might a company develop multiple value propositions?

A value proposition explains the key benefits customers will receive from a company's products or services. This statement can also be used to demonstrate a potential employee's benefits to an organization, or why people should make donations to an organization.

The value proposition answers the question of "why?".

While a value proposition may lead to profits for an organization, no mention of these profits is generally included in the statement. The focus is on the benefits to the external market and stakeholders.

Since companies may have different target markets for various products and services, they will likely have different value propositions that are focused on the specific needs of those groups. The value propositions for each group will identify the factors that are most important to those individuals, or groups, and explain the benefits they will receive from buying the company's product or service.

Once a value proposition has been created, the company will then develop strategies that support the proposition. It serves as the guide for how the company will deliver on its promises and meet consumer and organizational needs and objectives.

To review, read Strategic Planning.

 

Unit 3 Vocabulary

This vocabulary list includes terms that might help you with the review items above and some terms you should be familiar with to be successful in completing the final exam for the course.

Try to think of the reason why each term is included.

  • business-to-government sales
  • buying centers
  • consumer buying behavior
  • convenience stores
  • decider
  • demographics
  • department stores
  • gatekeepers
  • influencers
  • initiators
  • institutional markets
  • marketing channels
  • marketing research process
  • modified rebuy
  • need description
  • need recognition
  • new task
  • online shopping
  • order routine specification
  • organizational buying process
  • outlet stores
  • pop-up stores
  • post-purchase evaluation
  • primary research
  • producers
  • request for proposal
  • resellers
  • secondary research
  • specialty stores
  • straight rebuy
  • supermarkets
  • superstores
  • supplier search
  • supplier selection
  • supply chain
  • users
  • value proposition
  • warehouse clubs