B2B Marketing

Prof. Rubina DMello

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?

B2B markets

All organizations that purchase goods and services to use in the creation of their own goods and services. The process of matching and combining the capabilities of the supplier with the desired outcomes of the customer to create value for the customers customer.

B2B marketing

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.

Sectors of the B2B Market

Producers Middlemen Government Units Nonprofits

Difference between B2B & B2C

Industrial Markets Consumer Markets

Structure

Relatively fewer buyers Clustering geographical concentration

Complex, needing customization, allied services important

Large number of customers Mass markets

Standardised for mass markets

Products

Buyer Behaviour
Decisions

Functional involvement, rational motives, importance of relationships

Distinct, observable stages

Psychological motives, family involvement

Mental, not observable

Channels
Promotion Price

Shorter, more direct

Importance of personal selling Bidding and negotiations a norm; list prices for standard products of low value

Indirect, multiple
Advertising important List prices and standard discounts

Difference between B2B & B2C

B2B Marketing
Relationship driven Maximize the value of relationship Small, focused target market

B2C Marketing
Product driven Maximize the value of the transaction Large target market

Multi-step buying process, longer sales cycle

Brand identity created on personal relationship Education and awareness building activities Rationale buying decision based on business value

Single step buying process, shorter sales cycle

Brand identity created through repetition and imagery Merchandising and point of purchase activities Emotional buying decision based on status, desire or price

Sectors of the B2B Market

Producers includes all manufacturers and service providers; buy goods to use in making other goods or services Middlemen buy goods for resale; includes all retailers and wholesalers (distributors, vendors) Government includes all federal, state, and local governments and govt. agencies Nonprofit includes charities, schools and universities, museums, etc.

B2B Marketing is Different!

There are fewer customers and they require dependable relationships and a high level of service. Marketing tends to be done by personal selling ( one-on-one) calls to the customer. Specialized media such as trade journals, sales brochures, web sites, trade shows are used rather than traditional mass media.

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 donethough 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

Buyers
Users Buying Center

Influencers

Gatekeepers

Deciders

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

Commercial Enterprises
Industrial Distributors Value-Added Resellers

Government Units 85,000 local, state, and federal government units

Nonprofit and Not-for-Profit Organizations Churches, hospitals, colleges, nursing homes, etc.

Original Equipment Manufacturers

Users or End Users

Producer Types
Raw Materials Producers Accessory Equipment Suppliers

Component Parts and Manufactured Materials Producers

Capital Goods Manufacturers

Producer Types
Parts retain their same form when incorporated.
Component Parts and Manufactured Materials Producers Usually retain identity even when incorporated into the customers product. More differentiated from direct competition by the value added to the customers product.

Producer Types
Capital goods involve large purchases with considerable risk for the customer.
Capital Goods Manufacturers Involves the development of specifications to ensure that organizational needs are met. Adherence to specifications reduces opportunities for differentiation. Customers expect an offering that includes installation, equipment, and accessories.

Producer Types
Accessory equipment is equipment that works with some other offering. Accessory Equipment Suppliers Accessories can be added to a bundled offering by a channel intermediary. Accessory equipment is usually produced by an independent supplier. The key to providing value is to be compatible with industry standards for the primary offering.

Market Demand
Demand characteristics vary from market to market.
Joint Demand Volatile Demand Inelastic Demand Derived Demand

Inventory Adjustment

DERIVED DEMAND The linkage between demand for a companys 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.

THE BUSINESS BUYING PROCESS

More complex than the consumer decision process. Takes place within formal organizations budget, cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS

Environmental factors Organizational factors Social Factors Personal Factors

SEGMENTING B2B MARKETS

Segmentation 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-tobusiness 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.

Segmentation Benefits

First, the marketer to become more attuned to the unique needs of customer segments. Second, focus product development efforts, develop profitable pricing strategies, select appropriate channels of distribution. Third, provides guidelines that are of significant value in allocating marketing resources.

High-Growth Companies Succeed By

Selecting a well-defined group of potentially profitable customers.
Focusing marketing resources on acquiring, developing, and retaining profitable customers.

Developing a distinctive value proposition.

Five Criteria for Evaluating Potential Market Segments

1. Measurability
2. Accessibility 3. Substantiality 4. Compatibility 5. Responsiveness

By industry in which the customer participates

By product offered By geographic region

By size of the customers company

Common Bases for Segmentation

By size of account By technology used by the customer

By buying behavior

Measureability

Can we understand the size and needs of the market segment? Can we communicate with the segment so that serving the segment is possible? Does the segment desire that values that an offering presents? Can we create a competitive advantage with respect to the needs of the segment?

Accessibility

Substantiality

Actionability

Analytic Approach to Segmentation

Analytic approaches need two sets of data:
1)

2)

Information about segment size and growth Information about each targeted segments needs and buying behavior.

Technological Environment Assessment

1. Product technologythe set of ideas embodied in the product or service.
2. Process technologythe set of ideas or steps involved in the production of a product or service. 3. Management technologythe management procedures associated with selling the product.

Bases for Segmenting Business Markets

Macro Segmentation. Micro Segmentation.

Selected Macrolevel Bases of Segmentation

Developed by Cool Pictures and MultiMedia Presentations

Macrolevel bases of segmentation are concerned with general characteristics of the buying organization, the nature of the product application, and the characteristics of the buying situation.

Copyright 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Selected Microlevel Bases of Segmentation

Developed by Cool Pictures and MultiMedia Presentations

The marketer often finds it useful to divide each macro segment into smaller micro segments on the basis of the similarities and differences between decision-making units.
Copyright 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Purchasing Strategies Classifications

1.

2.

Satisficers approach a given purchasing requirement by contacting familiar suppliers and placing the order with the first supplier to satisfy product and delivery requirements. Optimizers consider numerous suppliers, familiar and unfamiliar, solicit bids, and examine all alternative proposals carefully before selecting a supplier.

Attractiveness of Segments
Market Attractiveness Competitive Attractiveness Channel Attractiveness

Internal Attractiveness
Attractiveness Other Considerations

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 customers budget

Market Attractiveness

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
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?

Channel Attractiveness

Internal Attractiveness

Internal Attractiveness

A segment is more attractive when the segments needs can be met by the firms core competencies. This is identified through environmental analysis.

Attractiveness Other Considerations

Other factors that might cause a segment to rated higher or lower include: Public policy (excessive Attractiveness Other government regulation can Considerations cause a segment to be downgraded) Organizational goals (market share goals may make firms more aggressive in targeting)