Marketing Case

Chapter 2: Derived demand and buying center

Chapter objectives

* Learn the factors influencing the demand of goods and services business to business

* Understand the two key notions of sector and derived demand and measure their importance in their implementation in B to B marketing approach

* Present the diversity of actors involved in the buying process within customer organizations: buying center

* Measure the importance and nature of the risk on business to business market within customer-supplier relationship framework

* Understand the supplier need to lead targeted marketing approaches with the different members of the buying center

* Understand the relational dimension of the B to B business relationship.

1. Sector and derived demand

Beyond the specificities described in Chapter 1, the existence of a demand called derived within the sector is, without any doubt, the most important distinction in the business to business marketing applied to consumer market.

1.1. The sector concept

Demand from companies downstream in a sector determines the level of activity of those situated upstream. This industrial chain is the basis of derived demand.

The success of a supplier's product is closely linked to the success of his customer. An electronic component for example or a textile fiber is meaningful only in the context of the anti-locking system of a car's wheels or the undergarment into which they are incorporated.

Thus demand for an industrial product or service depends on demand for the product in which it is:

* Incorporated: ingredients, raw materials...,

* Assembled: components, spare parts..., or on the production for which it is,

* Consumed (lubricants, energy products...),

* Used (office equipment, machine-tools, transport vehicles...).

If industrial demand naturally fluctuates as a function of the market, it proves to be not very elastic (less sensitive to price changes than are consumers in consumer market for instance).

The term sector comes from the vertical presentation often used to represent the complete production chain and its interdependence, from basic materials to the finished product (cf. figure 2.1).

Figure 2.1 - An example of a sector

This