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Principles of Marketing, Chapter 7, Unit 3
Terms in this set (50)
North American Industry Classification System
A detailed numbering system developed by the US, Canada and Mexico to classify North American business establishments by their main production processes.
Stands for North American Industry Classification System and is a detailed numbering system developed by the US, Canada and Mexico to classify North American business establishments by their main production processes.
Under the North American Industry Classification System (NAICS) Goods
And service producing firms that use identical or similar production processes are grouped together.
NAICS is a valuable tool for business marketers
When they are engaged in analyzing, segmenting, and targeting markets.
Each classification group under NAICS is relatively homogeneous in terms of
Raw materials required, components used, manufacturing processes employed, and the problems faced.
Requirements can be projected for all firms in that category
If a supplier understands the needs and requirements of a few firms within a classification using NAICS
Information that can be converted to market potential estimates, share estimates and sales forecasts
The number, size, and geographic dispersion of firms, which can be identified using NAICS
NAICS codes can be used for identifying potential new customers and can help B2B firms
In identifying other firms that may be prospective users of a supplier's goods and services.
First two digits in NAICS
Designate a major economic sector such as agriculture (11) or manufacturing (31-33)
Third digit in NAICS
Designates an economic subsector such as crop production or apparel manufacturing.
Fourth digit in NAICs
Designates an industry group, such as grain and oil seed farming for fiber, yarn, and thread mills.
Fifth digit in NAICS
designates the NAICS industry, such as wheat farming or broad-woven fabric mills
Sixth digit in NAICS
When used, identifies subdivisions of NAICS industries that accommodate user needs in individual countries.
First two digits of NAICS
Third digit of NAICS
Fourth digit of NAICS
Fifth digit of NAICS
Subdivision of NAICS industries
Sixth digit of NAICS, when it is used.
Unlike Consumer Demand
Business demand is derived, inelastic, joint, and fluctuating
Organizations buy products to be used in producing their customers' products
Derived Demand Example
Number of drills, or lathes that a firm needs is based upon the demand for products that are produced by these machines.
Because demand is derived, business marketers
Must carefully monitor demand patterns and changing preferences in final consumer markets, even though their customers are not in those markets.
Business marketers must carefully monitor their customers' forecast
Because derived demand is based on expectations of future demand for those customers' products.
Some businesses try to influence final consumer demand
Along with monitoring the final consumer demand and customer forecast.
Aluminum Producers influencing final consumer demand
Used television and magazine ads to point out the convenience and recycling opportunities that it offers to consumers who can choose soft drinks in aluminum or plastic containers.
A feature of business demand that means that an increase or decrease in the price of the product will not significantly affect demand for the product.
Minor portion of the final product's total price
The price of a product used in the production of, or as a part of, a final product
Demand for the final consumer product is not affected
When business consumers have inelastic demand, because the price of production materials is only a minor portion of the final product's price.
The demand for two or more items used together in a final product.
Example of Joint Demand, memory chips
A decline in the availability of this will slow production of microcomputers which will in turn reduce the demand for disk drives.
Example of Joint Demand, Apple operating systems
This exists as long as there is demand for Apple computers. The sale of these two products are directly linked.
Phenomenon in which a small increase or decrease in consumer demand can produce a much larger change in demand for what's used to make the product. Also known as the accelerator principle.
Phenomenon in which a small increase or decrease in consumer demand can produce a much larger change in demand for what's used to make the product. Also known as the multiplier affect.
Purchase Volume, B2B
Business customers buy in much larger quantities than consumers.
Number of Consumers, B2B
Business marketers usually have far fewer than consumer marketers.
Advantage to having fewer customers in a B2B market
It's a lot easier to identify prospective buyers, monitor current customer needs/level of satisfaction, and personally attend to existing customers.
Disadvantage to having fewer customers in a B2B market
Each customer becomes crucial, especially for those manufacturers who only have one customer.
Number of Customers example, Pentagon
After 5 years of development, testing, and politicking they awarded Lockheed Martin a multidecade contract. Boeing Aircraft, the only other bidder, immediately announced plans for substantial layoffs.
Location of Buyers, B2B
Business customers tend to be much more geographically concentrated than consumers.
Distribution Structure, Consumers
Many many products pass through a distribution system that includes producer, wholesalers, and a retailer.
Distribution Structure, B2B
Typically shorter than in the consumer model with direct channels where manufacturers market directly to users.
Business-to-Business online Exchange
Electronic trading floor that provides companies with integrated links to their customers and suppliers.
Business-to-Business Online Exchanges facilitate
Direct channel relationships between producers and their customers.
Nature of Buying Influence, B2B
Typically, more people are involved in a single business purchase decision than in a consumer purchase.
The buying influence in B2B includes
Experts from fields as varied as quality control, marketing, and finance, as well as professional buyers and users, may be grouped in buying centers.
Type of Negotiations, B2B
This type of purchasing is common in business marketing.
Type of Negotiations, Consumers
In most cases, Americans expect sellers to set the price and other conditions like time of delivery and credit terms.
The practice of business purchasers choosing to buy from their own customers.
Example of Reciprocity
General Motors buy engines for use in automobiles and trucks from BorgWarner, who in turn buys many of the vehicles it needs from GM
Primary Promotional Method, B2B
Tend to emphasize personal selling, especially for expensive items, custom-designed projects, large-volume purchase, and situations requiring negotiations.
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