Chapter 1

The Unique Nature of Industrial Marketing

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Industrial Marketing

Also called: Business-to-Business (B2B) and Organizational Marketing.

Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers.

Customer can be private firm, public agency, or nonprofit organization.

3

The Marketing Concept

Creating value for customers with goods and services that address organizational needs and objectives.

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Marketing Concept

Three major components:All company activities should begin with,

and be based on, the recognition of a fundamental customer need.

A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D.

Customer satisfaction is viewed as the means to long-term profitability goals.

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Follower Interact

Isolate Shaper

Customer Focus

Low Technology Focus High

High

Low

Strategic Focus Grid

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Market Orientation

Acquire intelligence from the external environment.

Disseminate that intelligence throughout the organization.

Respond to the intelligence: take action.(Kohli and Jaworski 1990, Journal of Marketing)

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Marketing Mission Statement

State in terms of meeting customer needs, not in terms of products or technologies.

Marketing Myopia (Levitt 1960 HBR)

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Marketing Activities

Identify customer needsResearch customer behaviorDivide market into manageable segmentsDevelop new products/servicesEstablish/negotiate pricesDeliver, install, service productsEnsure adequate and timely supply of products

at correct placeAllocate resources across product linesCommunicate with customersEvaluate/control marketing programs

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Marketing Mix

Limited number of variables under Marketing’s control to create position that is attractive to the target market segment.

Four PsProductPricePromotionPlace (Distribution)

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External Environment

Characterized by:Degree of StabilityComplexityDiversityHostility

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External Environment

Six EnvironmentsTechnologicalEconomicSocial/Cultural (Customer)Political/LegalNatural/ClimaticCompetitive

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So what’s different about B2B?

Marketing ConceptMarketing MixMarket SegmentationProduct Life Cycle

All apply in both B2C and B2B.

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So what’s different about B2B?The technical characteristics of the

product are important.

These products directly affect the operations and economic health of the customer.

The customer is an organization rather than an individual consumer, or family.

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Five Major DifferencesBetween B2B and B2C

Products/Services being marketedNature of demandHow the customer buysCommunication processEconomic/Financial factors

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Products/Services

More complexFunctional vs. Symbolic AttributesLarge unit dollar value/Large quantitiesCustom/TailoredVarious Stages from raw material to

finished goods.Foundation, Entering, Facilitating Goods

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Raw Material Extraction

Material Processing

Manufacturing Parts/Subassembly

Assembly

Distribution

Wholesale/Retail Trade

Final Consumers

Facilitators

Firms in Production Chain

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Nature of Demand

Derived

Joint/Shared

Concentrated

Inelastic

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How Customer Buys

Group Process

Formal

Lengthy

Loyal

Decisions based on risk and opportunity

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Communication

Personal selling more important than mass paid advertising

Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW.

Message focused on technical, factual, and descriptive content.

Multiple audience members.

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Economic/Financial Factors

Competition oligopolisticPower/Dependency relationshipsReciprocity:Doing business with

companies that do business with them.Economic variables: interest rates,

inflation, business cycle