Ch.

2: Business to
Business Environment:
Customers,
Organizations and
Markets

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Education, Inc., publishing as

Types of Organizational Customers

Commercial
Commercial
Enterprises
Enterprises
Industrial
Distributors
Resellers

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

Original
Equipment
Manufacturers
Users or End Users

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

Commercial
Commercial
Enterprises
Enterprises

Industrial Distributors

Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users

Provide economic utilities

of form, time, place, and
possession to
manufacturers
Creates assortments of
products from many
manufacturers
Particularly useful for
reaching customers too
small to justify direct sales
efforts
3

 Value-Added Resellers
Commercial
Commercial
Enterprises
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users

More than just a

distributor or wholesaler.
Provides unique offering
enhancements tailored to
a customers needs by
combining
products/services from
other manufacturers.
Creates a value network
at the user level.
4

Commercial
Commercial
Enterprises
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users

Original Equipment
Manufacturers (OEMs)
Purchase products
and incorporate those
products into their
products.
Usually the largest-volume
users of goods and
services.
Ex: Intel is a supplier to
many computer
manufacturers.
5

Commercial
Commercial
Enterprises
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers

Users or End Users

(E/U)
A manufacturer that
purchases goods or
services for consumption/
incorporation into their
products in such a way
that the identity of the
purchased product is
lost.

Users or End Users

6

Producer Types

Raw
Materials
Producers

Component Parts
and Manufactured
Materials
Producers

Accessory
Equipment
Suppliers

Capital
Goods
Manufacturers
7

Producer Types
Raw Materials Producers
Often compete in price sensitive markets

Raw
Materials
Producers

Seek value added positions

Products lose identity once incorporated
into the customers product

Raw materials markets are often dominated

by a few very large producers
8

Producer Types
Components Parts and Manufactured Materials Producers
Parts retain their same form when
incorporated.
Component Parts
and Manufactured
Materials
Producers

Usually retain identity even when

incorporated into the customers
product.

Producer Types
Capital Goods Manufacturers
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
10
accessories.

Producer Types
Accessory Equipment Suppliers
Accessory equipment is equipment that
works with some other offering.
Accessory
Equipment
Suppliers

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.
11

Purchasing

Selling in industrial market is complicated

Commercial enterprises give buying responsibility to individuals

(knowledgeable, realistic)

Select suppliers who provide the greatest value

For formulating successful industrial marketing strategy lies in

knowing how the buying function is administered

12

Purchasing
Purchasing in Commercial Enterprises

Multiple influencers
Technical sophistication
Value analysis

Purchasing in Government Units

Widely dispersed markets

Complicated procurement laws
Understanding government contracts

Institutional Purchasing
Purchasing in the Resellers Market

13

Value Analysis

Value analysis involves systemized techniques for reducing costs,

and improving the performance value of materials, components, and
manufacturing processes.

Value Analysis Process

14

An Adaptation
An Adaptation of the Value
Chain
of the
Value Chain

15

Multinational Value Network

16

Perceives
ar
M

Infrastructure
Human resources
Procurement
Technology &
technology development

n
gi

Offering:

h
ug
ro
th
e
lu
va

Support activities

Added value
Direct activities
u
s
al
ic
es e
v
l
t
is
sa rvic
is
gh
g
g
u
o
&
s
e
l
o
lo
s
n
d
ng er
hr
d
io
n
i
t
t
t
n
u
a
e
n
m
ou
er
bo
rk sto
gi
t
b
r
p
a
u
a
O
In
M Cu
O
M
s
tic

Product
Service
Image
Availability
Quantity
Evaluated Price

Target
Customers

Creates

Copyright 2011 Pearson Education, Inc., publishing as Prentice Hall

17

The organization must understand its

prospective customers, what customers
perceive as valuable, and how prospects
might be persuaded to change their minds.
Not all customers are alike. Customers can
be segmented on the basis of what they seek
and can afford.
Direct and support activities are equally
important.

18

If you were an executive in HP (printers

manufacturing unit) and were asked to
propose at least four strategies which will
increase consumer satisfaction. What are
those four strategies that you are going to
implement in the value chain which will
increase the value of the product being
offered. Note: You must state 2 strategies in
direct activities and 2 in indirect activities.

Copyright 2011 Pearson Education, Inc., publishing as Prentice Hall

1-19

The Industrial Marketing Environment

Buyer- seller
interface

Publics
Macro-Environment

Government

20

Financial
Financial
Publics
Publics

Public Interest
Interest
Public
Groups
Groups

Communities of interested parties who are not direct participants in a

market as customers, channel members, suppliers, or competitors .

Publics
Independent
Independent
Press
Press

Internal
Internal Publics
Publics
21

The Macroenvironment
Demographic
influences
Environment
value
creation.
Competitive
Environment

Economic
Environment

Technological
Environment

Sociocultural
Environment

Natural
Environment
22

Forms of Competition in B2B Markets

Pure Competition
No single entity dominates the market or
has much of an influence on price.
Most common in commodity industries.
Little product differentiation price is a
major component of the marketing mix.

23

Forms of Competition in B2B Markets

Monopolistic Competition
Many buyers, many sellers.
Product is differentiable can vary in
quality, features, and style
A range of prices is possible.
Promotion and branding are important to
product differentiation.
24

Forms of Competition in B2B Markets

Oligoplistic Competition
Market consists of a few sellers that are
sensitive of each others strategy.
Barriers limit entry of new competitors.
Prices are aimed at maintaining market
stability.
Key is building relationships with large
volume customers.
25

Forms of Competition in B2B Markets

Pure Monopoly
Only one primary seller.
Competitors that do exist are small niche
players.

26

Hyper-competition
Formation of partner networks
Adoption of technology and the internet
Supply Chain Management
Time Compression

Copyright 2011 Pearson Education, Inc., publishing as Prentice Hall

27

Outsourcing is the purchasing of part of the

companys continuing operations, such as
manufacturing, rather than producing the
same function internally.
Quantity Discounts
Complementary Products
Delivery Schedules

Increasesthe
the
Increases
complexityof
of
complexity
business-to-business
business-to-business
marketing
marketing

Outsourcing
28