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Introduction to Business MarketingIntroduction to Business Marketing
Part 1
What is Business Marketing?
Products or services to other companies, government bodies, institutions, and other organizations
Also products and services that facilitate their operations
Purchases in industrialized countries account for more than half of the economic activity
Makes business marketing extremely important
Key Differences
Demand for industrial products driven by primary demand for consumer goods (derived demand)
Nature of buyer-seller relationships (more personal) Shorter distribution channels (many direct) Emphasis on personal selling Greater web integration (communication backbone) More customization More complex buying process Smaller customer bases
Business Marketing vs. Consumer Marketing
Buyer-Seller RelationshipsConsumer markets tend to have less personal relationships
between buyers and sellersBuyer relationships focus on Lifetime Value of the customer
Emphasis on Personal Selling Greater Web Integration
Other Key Differences
Demand for industrial products driven by primary demand for consumer goods (derived demand)
Nature of buyer-seller relationships (more personal) Shorter distribution channels (many direct) More customization More complex buying process Smaller customer bases
Business Customers
Users Original Equipment Manufacturers (OEMs) Industrial Distributors Government Institutions
Can you provide examples of each?
Business Markets
Original Equipment Manufacturers (OEM)—When a company purchases a product or service to be included in its own final product
General Motors, Bosch, IBM, Thyssen-Krupp Elevator
UsersThe final consumer Business can also be users
Classifying Goods for the Business Market
Entering Goods
-Raw Materials
- Manufactured Materials
- Component Parts
Foundation Products
- Accessory Equipment
-Capital Equipment or installations
Facilitating or
MRO Items
- Facilitating Supplies
- Business Services
Can you provide examples of each?
Demand
Business marketers must recognize derived demand:
Derived demand is the theory that demand for products and services is derived from the demand for their customers’ products and services
– For example, the demand for wood floor treatment from Bill’s Floors and More is derived from the demand for new homes, which puts down hardwood floors
Derived demand can cause demand to swing wildly, called volatility.
Demand (cont’d)
Demand elasticity—the percentage change in sales relative to the percentage change in price
As price goes up, consumers will look for alternatives, and sales will go down.
Inelastic demand—sales is not greatly affected by price
Myths about Marketing
More sales equals more profits Any customer is a good customer Build a better mousetrap and the world will buy it Macro markets are more profitable than niche
markets
Marketing Management & Planning
Marketing Management encompasses all the decisions involved in designing and executing marketing plans to implement the marketing concept.
What is the marketing concept?
Marketing Management & Planning
Environmental Analysis Competition - Customers Channels - Controls Company
Establish Objectives Strategy Tactics and Programs
Product - Price Promotion - Place
Implement, Control & EvaluateFeedback loops throughout the process
Think About It
How would marketing telephone services to businesses (for example to University of Toledo) be similar and different than marketing them to consumers?
The Character of Business The Character of Business MarketingMarketing
Chapter 2
Relationship MarketingCenters On:
Establishing, Developing and Maintaining successful exchanges with
customers.
What is Relationship Marketing?
Longer time horizon High switching costs Large investment (procedures & assets) Focus on technology or vendor as opposed to
product or person Higher importance: strategic, operational &
personal Collaborative exchange
Types of Relationships
One time market transaction market exchange with no expectation of future transactions with each
other Functional relationships
series of one time market exchanges linked together over time Relational partners
long term business relationship in which a buyer and seller have a close/trusting interpersonal relationship
Strategic partnerships long term business relationships in which partners make significant
investments to improve the profitability of both parties in the relationship
Type of Relationship Exercise
Think about a specific relationship that you have with a professor, a friend, a cousin, and an older relative who is not a parent.
For each relationship is it functional, relational or strategic?
How did this relationship get to be this quality?
Relationships
Transactional relationships (spot exchange) = one time exchange i.e.: a freight service offering standard boxcars to any shipper
Customer Relationship Management (CRM) Systems that focus on collecting and storing data to evaluate
customers and performance Makes sales reps’ jobs easier! Typically in software
http://www.netsuite.com/portal/home.shtml http://www.act.com/
Phases of Relationship Development
Awareness
The buyer and seller consider the other as an exchange party
No real interaction
Exploration
The interaction between buyers and sellers occurs Probing and testing
Initial purchases may take place at this stage This is where the bargaining and communication
take place
Expansion
During this phase, one party has made a request to alter some aspect Customization occurs Expectations and norms
are developed
The buyer usually becomes committed to this particular seller
Commitment
Contracts, agreements, or orders are signed The two organizations become business partners
and resolve any conflicts that may occur
Dissolution
Termination of the advanced relationship
Safeguarding Relationships
There are many ways to keep relationships healthy, safe, and profitable Supplier verification—efforts to obtain evidence of supplier
capabilities and commitment Dependence balancing—having relationships with other
exchange partners, (just in case…) Relational contracts—contracts that define continuous planning,
adjusting and resolving conflicts Vertical integration—bringing a function or technlology into the
firmi.e. buying out a supplier