B2B marketing – role & scope

Session 2-3
 Why do we need to understand the scope of
b2b?
• To initiate the thinking process in the mind of a b2b
manager
• There are several classifications of products, competition
and market combinations that make up the business
environment.
• Such understanding can assist the marketer to understand
various types of customers, their perception of value and
how competitors will try to create superior value.
Classifying
Goods for
the
Business
Market

Classifying industrial
goods by the following
questions:
Source: Adapted from Philip Kotler,
Marketing Management: Analysis,

How does the good or Planning, and Control, 4th ed.

(Englewood Cliffs, N.J.: Prentice-Hall,
1980), p. 172, with permission of

service enter the Prentice-Hall, Inc.

production process?
How does it enter the cost
structure of the firm?
 Types of B2B customers - OEMs
• They purchase goods to incorporate them into goods they
produce and sell to the customers.
• Examples – Maruti, Samsung, HP
• Industrial marketers (suppliers to OEM ) spend the major
part of their resources approaching, learning about and
targeting these customers.

OEM suppliers also do B2C marketing through their

distribution channels for replacement markets.
 End Users
• Manufacturers that purchase goods and services for
consumption, either as supplies, capital goods or
materials for incorporation into their products such that
the identity of the purchased product is lost.
• Example – Apollo Tyres for Tata Steel

OEMs / End users are attempting to place some

responsibility of the quality of their products with their
suppliers now.
 Institutional Customers
• Organizations that buy product and services essentially for their
internal consumption.
• No conversion is done on the purchased product and internal
customers’ consume them.
• There might be compromises in value-for-money concepts.
• Corporate offices, Hotels, Hospitals, Education institutes etc.

Like ‘staples’ in consumer markets, many items like stationery,

banking, computers, couriers have become essential for institutional
customers.
 Government Units
• Ministries
• Central Government organizations
• Defence sector
• PSUs
• State Government organizations
• PDS
• Government cooperatives

Specialized role of government and different motives like social,

disaster relief, defence, education, political make B2G different from
B2B marketing considerations
 Competition buyers
• Selling of excess capacity to competitors.
• Selling of specialized technology / patents to
competitors.

Example – Moser Baer, pharma companies

selling patented generics, garment
manufacturing companies etc.
 Organized Retailers
• Big volumes
• Centralized decision making with defined
procedures
• Disintermediation
• Key account tie-ups.

Prices and all other Supply Chain parameters

are critical for such dealings.
 Cross-promotion customers
• Companies buying lots of finished products for helping
their own promotions such as:
• Pharma
• Liquor & Tobacco
• Magazines
• FMCG companies
• Airlines

Customer similarity, strong brand rub-off, customization

and joint promotion are key to such deals.
 Types of B2B seller organizations
• Raw Material Producers
• The basic raw materials are commodities.
• Usually oligopolistic markets.
• Selling directly to large end users.
• Use of industrial distributors for smaller customers.

Raw materials often lose their identity when combined

into the customer’s products.
 Component parts and manufactured materials
producers
• These are generally used in ‘as-is’ condition.
Usually retain their identity.
• More easily differentiated from the
competition by value-addition to the core
product and their own brand identity.
Example – Intel microprocessor in Compaq
computers.
 Capital goods manufacturers
• Capital goods are normally used to produce output.
• Big-ticket purchases with considerable risk for the customer.
• Lengthy process and sophisticated specifications.
• Oligopolistic markets
Example – machine tools, earth-moving equipment etc.

Supplier’s trustworthiness and track record are key.

 Finished goods suppliers
• For institutional consumption – stationery,
computers, dress material, transport facility
providers etc.
• Suppliers of packaging materials like cartons,
bags, pallets etc.
• For the cross-promotion customers.
• As suppliers to organized retailers.
 Other auxiliary institutional services
• Logistics (3PL & 4PL services)
• Financial services
• Consultancies
• Market Research & analysis
• Courier
• Medicare
• Software development
• Advertising & BTL agencies
• More …?
 New intermediaries
• FedEx – outsourced partners redefining their
roles
– Supplier of Dell: tracking, monitoring, procuring
parts
– Integrator for Dell
– Distributor for Nat-Semi: distributed products
through FedEx DC in Singapore
– Assembler for Cisco: Assemble parts at Cisco’s
customer-site
 Types of organizational channels
• Industrial Distributors – Companies use them to reach
customers whose purchase volumes do not justify direct
sales.
• Hence their role is significant in 2 cases –
• 1. If the customer is small.
• 2. If the value of item being sold is low .

They provide time, place, assortment and possession

utilities to the customers.
Major industry – Stationery, FMCG, MRO, chemicals
 MRO suppliers
• Maintenance
• Repairs
• Operations

Major industry – computers, OA, electrical,

civil, plumbing, security, lubricants, tooling,
house keeping, auto hire, auto repairs &
maintenance etc.
 Value-Added Resellers
• VAR draws on goods & services from many manufacturers to create
customized solutions, often developing unique expertise in the
integration of many different products.

• VAR provides systems to an organization tailored to a particular

customer’s needs.

They lead to creation of value networks and supplier partnerships for

customers.
Major industry - computer software and hardware integrators,
communication systems, gifts & mementos
 Telecommunication supply network
Applications provide
access to content
Application Content
Developers Providers
Content must meet
customer needs Content sites must
promote brand
Network Operators
need applications

Consumer service contract

Infrastructure Network End-User
supports
applications Operators Consumer
VAR
intermediaries
VARs sell devices as
middleman
Infrastructure facilitates Retail /VAR
network management Device must gain network
access
Users must be able to operate device
Infrastructure Device
Exchanges Between Links
Provider Air interface Manufacturers
compatibility Information
----- Partnership
Cash-flow
Exchange
 Industrial agents
• Generally used for international b2b
• When the business is big ticket but infrequent
• When the company requires specialized knowledge
or connections at the customer level
Examples – arms & ammunition deals with
government forces, aviation sector, power sector,
infrastructural projects
Specialty product/market suppliers
Customized products & services to:
• Defence
• Hotels
• Hospitals
• Libraries
• Research Organizations
• Educational sector
• Railways
 Do organized retailers do B2B
business?
• Yes
• Cash-n-carry format
• Examples from the world?
• Examples from India?
 Use of e-commerce in B2B
• The Internet can help in generating leads
• Using the Internet to Promote
Products/Services
• Executing Instant Information Fulfillment on
the Net
• Generating Orders
• Obtaining Payments
• Enhancing Customer Relationships
 A major B2B potential area: E-commerce
interface providers
“At every stage e-commerce avoids the need to translate
computer files into paper documents, a process that
generally involves errors, delay and costly clerical
personnel.” (Lucking-Reiley and Spulber 2000)
 Cost Efficiencies
“The potential cost savings in this area are substantial.
Processing a purchase order manually, including paperwork,
data entry, phone calls, faxes and approval requests, can be
quite expensive, so online transactions might easily reduce
costs by a factor of five or ten or more.” – Lucking-Reiley
and Spulber 2000
 How are costs compressed?
B2B e-commerce can save or make money for a company.
Some ways companies have benefited from B2B e-
commerce include.
• Managing inventory more efficiently
• Adjusting more quickly to customer demand
• Getting products to market faster
• Cutting the cost of paperwork
• Obtaining lower prices on supplies (e-bidding)
 Cost Efficiencies
Examples:
• British Telecom has reduced external procurement costs
from $113 to $8 per transaction
• Mastercard costs of processing purchase orders has fallen
from $125 to 40, number of days from 4 to 1.25 days
• Lehman Brothers financial transactions are $1.27 for
teller, $.27 for ATM, $.01 online
Source:Dr. Mary Wolfinbarger
 Growth of Reintermediation
• The process of using the Internet to reassemble
sellers, buyers & business partners in new ways
• Disintermediated players can regroup and fight
back.
• Emergence of new IT-based intermediaries
between customers and suppliers to provide info
based services like source search and evaluation,
price comparisons etc.
• Growth of virtual marketplaces & communities
 Efficiency Gains from
Re-intermediation
“Online markets have been established for aircraft parts,
agriculture, apparel automotive parts, chemicals,
computers and electronics, energy, financial instruments,
food and beverages, health care, intellectual property,
freelance services, laboratory supplies, industrial
machinery, advertising, metals, office supplies, plastics,
paper, printing services, telecommunications, shipping,
and travel services.” –Lucking-Reiley and Spulber, 2000
 Direct Marketing and B2B
• Internet-based direct marketing can be used
in combination with postal mail and telephone
• Similar to direct mail, on web we can combine
graphics and text
• Micro-segmentation
 Illustration - Hewlett Packard closes
the
Payment Gap in B2B E-Commerce
• HP payment solution—seamless electronic B2B
payment
– Two components are preintegrated and provide end-to-end
automation
• Embedded options that establish rules to facilitate direct
debit payment options
– Buyer accounts
– Purchasing limits
– Corporate discounting
• The system connects all these accounts with their online
financial institutions
 Hewlett Packard Closes the Payment Gap
in B2B E-Commerce (cont.)
• HP payment solution
– The integrated system reduces cost of:
• Order processing
• Contract administration
• Customer service
– Captures and analyzes information that allows
company to offer unique purchasing experience
• Customers—best value online experience
• Partners—handle complex transactions quickly and securely
• Employees—reduce cost and time for processing
 Web Hosting and Other Services

• Business hosting—hosting is popular for SMEs;

large businesses need more advanced services
– Dedicated server—assigned for specific purpose or
customer
– Free Web hosting is an attractive option for small
start-ups
• Provider company inserts a banner ad on their site
• Starting point for small company—minimize start-up
costs
 Financial B2B Services

• Payments
– Electronic letters of credit
• Benefits to seller
– Credit risk reduced
– Payment highly assured
– Political/country risk reduced
• Benefits to the buyer
– Allows negotiation of lower purchase price
– Expansion of supply sources
– Payment received after document inspected by issuing
bank
 Order Fulfillment, Logistics,
and Supply Chain Services
Illustration : UPS Logistics Group
• Transportation services
• Supply chain management
– Manages complex
– Reengineering & managing deliveries
complex supply chains • Transportation
• Supplier networks
• Manufacturer • Dedicated fleets
• Distributor • Carriers
• Customer • Multimodal
transportation
 Order Fulfillment, Logistics,
and Supply Chain Services (cont.)
• Parts distribution • EC solutions
– Comprehensive return- – Logistics services
and-repair – Web-based businesses
– Parts distributions worldwide
operations
• Global services
• Logistics technologies
– Logistics facilities
– Integration of logistics
information systems – Staffing
– Services to provide – Expertise about global
supply chain visibility commerce
 Order Fulfillment, Logistics,
and Supply Chain Services (cont.)
• Call center services • Solutions for EC initiatives
– Customer care – Tracking systems
– Communications (call center – Product return systems
services to EC capabilities)
– Shipping solutions
• Financial services—full range
– E-document exchange
of financial services that
– Customization
complement:
• EC software/providers
– Logistics
– Transporting • E-services/partners
– Additional business needs
Marketing and Advertisement

• Communication methods used by

offline marketers
– Specialty trade shows
– Ads in industry magazines
– Salespeople call on:
• Existing customers
• Potential buyers
• Digital advertisers
– Ad server network provider
– Electronic wholesalers
 Online Data Mining Services

• Clickstream data—data collected by

monitoring what people do online
• Analyzed and mined to produce useful
knowledge used to improve:
– Services
– Marketing efforts
• Firms use these services to extend their
ability to execute a successful EC strategy
– NetTracker
– WebTrends
 Directory Services &
Search Engines
• Directory services • Search engines and news
– B2Business.net aggregators (Infomediary
– B2BToday.com business)
– Communityb2b.com – Moreover.com
– A2zofb2b.com – Google.com
– I-stores.co.uk – Ientry.com
– Websteronline.com • E- Newsletters
– Thomasregister.com
– Bocal.com
– B2b.yahoo.com
 Other B2B Services

• E-business rating sites

• Trust services
• Promotion programs
• Trust Trademark and
• Encryption sites
domain names
• Web research services
• Digital photos
• Coupon-generating
• Global business sites
communities
• Client matching