Marketing Applications and Practices

B2B Marketing

B2B Marketing Organizational sales and purchases of

goods and services to support production of other products, to facilitate daily company operations, or for resale.

What are these?

Industrial markets All organizations that purchase goods and

services to use in the creation of their own goods and services.

Industrial marketing The process of matching and combining

the capabilities of the supplier with the desired outcomes of the customer to create value for the “customer’s customer.”

B2B versus B2C Marketing B2C=Business-to-Consumer Market=

businesses sell products and services to consumers for household or personal use

B2B=Business-to-Business Market= businesses sell products and services to other businesses for use in their daily operations or for making other products and services

B2C versus B2B Marketing

The B2B market is 5X as large as the B2C market in the USA.

Difference between B2B & B2C

Industrial Markets Consumer Markets

Structure Relatively fewer buyers Clustering geographical concentration

Large number of customersMass markets

Products Complex, needing customization, allied services important

Standardised for mass markets

Buyer Behaviour

Functional involvement, rational motives, importance of relationships

Psychological motives, family involvement

Decisions Distinct, observable stages Mental, not observable

Channels Shorter, more direct Indirect, multiple

Promotion Importance of personal selling Advertising important

Price Bidding and negotiations a norm; list prices for standard products of low value

List prices and standard discounts

Difference between B2B & B2C

B2B Marketing B2C Marketing

Relationship driven Product driven

Maximize the value of relationship

Maximize the value of the transaction

Small, focused target market Large target market

Multi-step buying process, longer sales cycle

Single step buying process, shorter sales cycle

Brand identity created on personal relationship

Brand identity created through repetition and imagery

Education and awareness building activities

Merchandising and point of purchase activities

Rationale buying decision based on business value

Emotional buying decision based on status, desire or price

3. Meet customer needs in a way that provides

value to the customer

3. Meet customer needs in a way that provides

value to the customer

4. Meet organizational goals4. Meet organizational goals

2. Understand customer needs2. Understand customer needs

1. Be contextually market sensitive

1. Be contextually market sensitive

In Industrial marketing scenario, to

successfully practicethe marketing concept,

it should:

The Marketing Concept

The Value Chain and Offering

Added value

Infrastructure

Human resources

ProcurementTechnology & technology development

Support activities

Mar

gin th

roug

h va

lueDirect activities

Custo

mer

serv

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Mar

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g & sa

les

Outbo

und

logist

ics

Opera

tions

Inbo

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logist

ics

Offering:

ProductServiceImage

AvailabilityQuantity

Evaluated Price

Target Customers

Creates

Perceives

Margin through value

COMPONENTS OF THE BUSINESS MARKET

Commercial market Individuals and firms that acquire products to support, directly or indirectly, production of other goods and services.

Trade industries Retailers or wholesalers that purchase products for resale to others.

Government. Public and Private Institutions

Types of Organizational Customers

Government Units

Government Units

Nonprofit and Not-for-Profit Organizations

Nonprofit and Not-for-Profit Organizations

Commercial Enterprises

Commercial Enterprises

Industrial Distributors

Value-AddedResellers

OriginalEquipmentManufacturers

Users or End Users

local, state, and federal government units

Churches, hospitals, colleges, nursing homes, etc.

Producer Types

Component Partsand Manufactured

MaterialsProducers

CapitalGoods

Manufacturers

AccessoryEquipmentSuppliers

RawMaterialsProducers

Producer TypesOften compete in price sensitive markets

Raw materials markets are often dominated by a few very large producers

Products lose identity once incorporatedinto the customer’s product

Seek value added positionsRaw

MaterialsProducers

Producer Types

More differentiated from direct competition by the value added to the customer’s product.

Usually retain identity even whenincorporated into the customer’s product.

Parts retain their same form when incorporated.

Mico Fuel pumps are an example.

Component Partsand Manufactured

MaterialsProducers

Producer Types

Adherence to specifications reducesopportunities for differentiation.

Involves the development of specifications to ensure that organizational needs are met.

Capital goods involve large purchases with considerable risk for the customer.

Customers expect an offering that includes installation, equipment, and accessories.

CapitalGoods

Manufacturers

Producer Types

Accessory equipment is usually produced by an independent supplier.

Accessories can be added to a bundled offering by a channel intermediary.

Accessory equipment is equipment that works with some other offering.

The key to providing value is to be compatible with industry standards for the primary offering.

AccessoryEquipmentSuppliers

Market Demand

Joint Demand

Derived Demand

VolatileDemand

InelasticDemand

InventoryAdjustment

• Demand characteristics vary from market to market.

DERIVED DEMAND The linkage between demand for a company’s output and its

purchases of resources such as machinery, components, supplies, and raw materials.

VOLATILE DEMAND Derived demand creates volatility; for example, demand for gasoline

pumps may be reduced if demand for gasoline slows.

JOINT DEMAND Demand for two products used in combination with each other.

INELASTIC DEMAND Demand not significantly influenced by price changes.

INVENTORY ADJUSTMENTS Just-in-time (JIT) inventory policies boost efficiency by cutting

inventory and requiring vendors to deliver inputs as they are needed.

Emotional or Rational Buyers?(Considerations of B2B Buyers)

Buyers must purchase according to a set of purchasing specifications

Focus on Quality Total costs to purchase and use Reliability Value in use Savings possible via e-commerce

Three Kinds of Organizational Purchases Straight rebuy

a routine repurchase that may have been made many times before

Modified rebuy the in-between process where some

review of the buying situation is done—though not as much as in new-task buying

New-task buy a firm has a new need and the buyer

wants a great deal of information

The “Buying Center” Business purchases often involve multiple

influence "Buying center"—all people who participate

in or influence a particular purchase Buying center varies from purchase to

purchase Does not appear on the "organizational

chart" Structure may be formal or informal

Multiple Roles in the Buying Center

BuyingCenter

Users

Buyers

Gatekeepers Deciders

Influencers

SEGMENTING B2B MARKETSSegmentation helps marketers develop the most

appropriate strategy.

SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS Grouping by size based on sales revenues or number of

employees.

SEGMENTATION BY CUSTOMER TYPE

Grouping in broad categories, such as by industry.

Customer-based segmentation Dividing a business-to-business market into homogeneous groups based on buyers’ product specifications.

SEGMENTATION BY END-USE APPLICATION

End-use application segmentation Segmenting a business-to-business market based on how industrial purchasers will use the product.

Example: A supplier of industrial gases that sells hydrogen to some companies and carbon dioxide to others.

SEGMENTATION BY PURCHASE CATEGORIES

Segmenting according to organizational buyer characteristics.

Example: Whether a company has a designated central purchasing department or each unit within the company handles its own purchasing.

Common Bases for Segmentation

By product offered

By industry in which the customer

participates

By size of the customer’s

company

By buying behavior

By technologyused by thecustomer

By size of account

By geographicregion

Attractiveness of Segments

Market Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

Market Attractiveness

Market Attractiveness

•Large and fast growing segments are more attractive than smaller and slow-growing segments•This necessitates accurately predicting future growth.•Other issues include

•Adaptability of market segments,•Existing relationships with the buying center members, and•Available customer’s budget

Competitive Attractiveness

Competitive Attractiveness

•What is the likely existence or emergence of competition in the market segment?•Are there barriers to entry facing competitors?•Does being first to market provide an advantage?

Channel Attractiveness

Channel Attractiveness

•It is preferable to target customers already served by well-established marketing channels, or if an existing channel can be adapted, it may serve the segment.•When there is no suitable existing channel, a market view of competition may be necessary.

•How is the existing need being met?•Will customers switch?

Internal Attractiveness

Internal Attractiveness

•A segment is more attractive when the segment’s needs can be met by the firm’s core competencies.•This is identified through environmental analysis.

Attractiveness – Other Considerations

Attractiveness – OtherConsiderations

•Other factors that might cause a segment to rated higher or lower include:

•Public policy (excessive government regulation can cause a segment to be downgraded)•Organizational goals (market share goals may make firms more aggressive in targeting)

THE BUSINESS BUYING PROCESS

More complex than the consumer decision process. Takes place within formal organization’s budget,

cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS Environmental factors Organizational factors Social Factors Personal Factors

Stages of Organizational Buying Process

Problem Recognition General Description of need Product specifications Supplier search Acquisition and analysis of proposals Supplier selection Selection of order routine Performance review

Straight rebuy example : buying office supplies

Stage Result

Definition Monthly rebuy of office supplies; office manager fills in the order form

Selection Minimal consideration; decided to use their regular supplier; order faxed to supplier

Deliver solution

Supplier delivers order

End game Supplies used; invoice arrives and is paid; supplier calls to check on satisfaction

New Task example : acquiring automated sales and customer management system

Stage Result

Definition Recognised problem; analysed with help of consultant; supplier helps write specifications and RFP; suppliers submit proposals

Selection Discussions and negotiations with suppliers; supplier selected (the one who helped initially); contrat negotiated and signed

Deliver solution

System delivered in modules; fested, user trained, system modified as needed

End game System operated; result observed and analysed; discussions begin with supplier for acquisition of new modules and upgrades

The Marketing Mix: The “4 P’s” of Marketing

Product Price

Promotion

Place

TheMarketing

Mix

Marketing Mix: Product

+ Core Product+ Financing Terms+ Delivery Options= “Total Offering”

The total offering is created by a partnership between the buying organization and the marketing organization.

The process creates an augmented product that is specific to the buying unit’s needs and maximizes the value creation capabilities of the marketer.

Marketing Mix: Price

Price…•is the mutually agreed-upon amount that satisfies both sides in an exchange.•often varies from fixed price, with more special discounts and allowances (in comparison to consumer markets).•may involve things other than a one-time price payment (such as commissions).

Price is the measure of value exchanged and is determined by the market (not by costs).

Fig. 15.2

Key Components of the Industrial Pricing Process

There is no easy formula for pricing an industrial product or service. The decision is multidimensional.The each interactive variable assumes significance.

Types of Negotiating Situations in B2B Sales

Situation

Stand-aloneTransaction

Balanced between Transaction and Relationship

Effective bargaining styles

Competitive; Problem solving

Problem solving; Compromising

Effective approach

Use of leverage

Seek common interests

Marketing Mix: Place

Place is about getting the product to the customer in order to maximize economic utility.

Economic Utility

Form Utility (having the product in the right size package, quantity, etc.)

Time Utility (having product available at useful times)

Place Utility (getting the product to the customer where & when it is expected)

Possession Utility (making it easy to transfer ownership to the buyer)

Marketing Mix: Promotion

Consumer marketing•Emphasis is frequently on advertising.•Communication with customers is often a monologue.•Relationship is often brief.

Industrial marketing•Emphasis is frequently on personal selling.•Communication with customers should be a dialogue.•Relationship is often long-lasting.

Business-to-business marketing requires a different emphasis on different parts of the promotional mix

Factors in designing promotion mix strategies

Advertising is only one aspect of the entire marketing strategy.

The advertising decision process begins with the formulation of advertising objectives.

Equally important is the evaluation and selection of the media.

The Decision Stages for Developing the Business-to-

Business Advertising Program

B2B Selling Characteristics

1. Repeated, ongoing relationships

2. Solution-oriented, total system effort

3. Long time period before selling effort pays off

4. Continuous adjustment of needs

5. Creativity in problem solving often demanded by buyer of seller

The Product Life Cycle

The Technology Adoption Life Cycle