Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

7. Business and
   Organizational Customers
   and Their Buying Behavior

Text © The McGraw−Hill

Companies, 2002

You can see that there are many different B2B e-commerce sites that are help-

ing sellers find interested buyers and vice versa. Until recently, much of the

attention was on providing information to drive down the purchase price for specific

transactions. Yet as we’ve said from the start, business customers are usually inter-

ested in the total cost of working with a supplier and the value of a supplier’s

marketing mix—not just in the product price. When everything else is the same,

a buyer would obviously prefer low prices. But “everything else” is not always the

same. We considered many examples of this earlier when we reviewed why a buyer

might prefer closer relationships with fewer sellers. So it is important to see that

Internet tools that focus primarily on lowering purchase prices do not necessarily

lower total purchasing costs or apply to all types of purchases.

On the other hand, great strides are being made in developing websites and Inter-

net-based software tools that help both buyers and sellers work together in more

efficient and effective relationships. National Semiconductor’s website is a good

example. It is designed to create easy links between its customers, products, and dis-

tributors. Its large customers get special services, like access to a secure website that

shows specific purchase histories and production or shipping status of their orders.

Smaller customers can get all the product information they need and then link

directly to the order page for the distributor that serves them. This system does not

go as far as some, but it does illustrate how shared information and cooperation over

the Internet is helping to create better relationships in business markets.^20

We’ve been discussing ways in which buyers and sellers use the Web. But

e-commerce computer systems now automaticallyhandle a large portion of routine

order-placing. Buyers program decision rules that tell the computer how to order

GE Lights the Way for E-Commerce

General Electric is a true pioneer in e-commerce —

and its successes provide evidence of what is

possible. Even so, some of its early efforts didn’t

work. When it first tried to solicit bids from vendors

over the Internet, it only focused on price. So it got a

lot of lowball quotes from firms that didn’t have the

ability to fill orders. By 1995 GE was on a smarter

track. It developed an Internet-based system called

the Trading Process Network (TPN) that eliminated

the delays of traditional purchasing approaches still

using paper documents and snail mail. With TPN, a

buyer for GE’s lighting division could search the Net

to find possible suppliers for the custom-made

machine tools it needed. To e liminate the paper shuf-

fle, electronic blueprints could be sent with a bid

request via e-mail. As a GE purchasing manager put

it, they could “simply point and click and send out a

bid package to suppliers around the world.” Suppliers

could respond quickly, too. So a bid process that pre-

viously took about a month could be reduced to only

days, or even hours.

When GE executives saw how e-commerce was

improving their purchasing, they decided to offer the

TPN service to outside companies. A small firm could

try the TPN Web (www.getradeweb.com) for a fee of

only $65 a month. However, the monthly fee for a

large company was $70,000. That pricing gives a hint

of the kind of savings big purchasers could reap —

and why GE’s Global eXchange Services (GXS)

division pushed to develop a full-service Internet por-

tal (www.gegxs.com). GSX now operates one of the

largest B2B e-commerce networks in the world. It has

more than 100,000 trading partners. The network han-

dles 1 billion transactions a year for goods and

services worth $1 trillion.

GE has continued to drive down its own purchas-

ing costs with e-commerce. In the first six months

that it used real-time, online competitive bidding, GE

saved $480 million. However, even GE does not pur-

chase everything this way. Its current target is to do

about 30 percent of purchases online. And even with

online competitive bidding it does not always select

the lowest bid. A supplier with a higher bid may get

the business when it offers service or other value that

GE needs.^19

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E-commerce order

systems are common

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More progress

is needed