Chapter 1

Business Markets
and
Business Marketing
BUSINESS MARKETING

• THE MARKETING OF GOODS AND

SERVICES TO:
• Companies that consume
• Government Agencies
• Resellers (i.e. wholesalers)
• Institutions (i.e. hospitals)
• Non-Profit Organizations (i.e. American Red
Cross)
FOR USE IN PRODUCING THEIR PRODUCTS
AND/OR TO FACILITATE OPERATIONS
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A typical example:

B2B B2B B2C

Fabric
 B2B vs B2C
B2B B2C
Close relationship with customers Impersonal, Mass communication
Few customers Many customers
Derived demand Demand stimulated by marketing
Value sensitive Price sensitive
Consultative selling Convincing selling
Size of order: large Size of order: small
Risk involved: medium to high Risk involved: low to medium
Complexity of decision: medium to high Complexity of decision: low to medium
Information search: long Information search: short
Market structure: few players Market structure: many players
 BUSINESS MARKETING IS UNIQUE
• BUYER-SELLER RELATIONSHIPS
➢ Strong personal and business relationships exist
➢ Personal selling & after sales services are given highest importance
➢ Form alliance to create better final products and end-user experience (e.g. BASF-GM)
• SHORTER DISTRIBUTION CHANNELS
➢ In most cases, distribution channels do not include anyone between the manufacturer and the customer
who uses
➢ Shorter channel: no or a very few middlemen
➢ Buyers can have more direct input into the product planning process
• EMPHASIZES PERSONAL SELLING AND NEGOTIATION
➢ Stronger relationships and shorter channels lead to a greater emphasis on personal selling
➢ Complex buying procedures involving many members of the buying organization also require personal
selling
• GREATER WEB INTEGRATION IN COMMUNICATION
➢ The Web becomes the backbone of a supplier/customer communication network
➢ A password-protected “customer login” page
➢ It enables customers to see the current offers, bid online, order product, track shipment information, terms of
sales & return, and access other account information that helps manage the entire supply-chain process.

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 BUSINESS MARKETING IS UNIQUE
• UNIQUE PROMOTIONAL STRATEGIES
➢ When an organization makes a purchase, personnel from several different departments will
together determine what the organization needs
➢ Rational demonstration is more required than emotional appeals
➢ Industrial exhibitions, trade shows are more effective

• CONSUMPTION
• KNOWLEDGE OF CUSTOMER’S CUSTOMER
• MARKETING RESEARCH

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Types of Business Customers
1. Companies that consume
1.a) Original Equipment Manufacturers
• When a company purchases a product or service to be included in its own final product
• Example: when Toyota buys tires from Dunlop to make its final products
1.b) Users
• When Toyota purchases copier paper from Xerox
• When Toyota purchases machine tools used to assemble cars
2. Government Agencies
• Government is probably the only buyer of tanks and other armored weapon systems
• Govt. is the only customer for telephone switching equipment (BTRC)
• Govt. only buys products for public utilities, like DESA, DESCO, PDB, BIWTC etc.
Types of Business Customers
3. Institutions
• Hospitals
• Schools, colleges, and universities
• For example: Smart Tech BD. has separate sales team for universities and hospitals
4. Resellers
• Wholesalers
• Brokers
• Industrial distributors
Types of B2B goods or services:
Products are generally classified on the basis of the type of organization purchasing
the products and for what purpose.

1. Raw materials
• Products used in the final product
• Mikhailovsky Mine in Russia sells raw iron to Tata steel India
2. Manufactured materials
• Transformed from raw materials
• Tata sells steel sheets to Toyota
3. Component parts
• Parts assembled into the final product without further transformation
• Apple buys display from Samsung and camera lenses from Sony

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Types of B2B goods or services:
4. Accessory equipment
• They facilitate the company’s achievement of its objectives
• But are not part of the final product
• For example: PC, printers, other hand tools

5. Capital equipment
• Refers to large equipment used in the production process that requires significant
financial investment
• Examples: industrial robots, power generator, boiler etc.
• Capital equipment is much more expensive, and its purchase may involve more
members of the organization than purchase of accessory equipment.

6. MRO items (Maintenance, repair and operation products)

• Products sold to users for use in the company’s operations are often labeled MRO
• Banking services, marketing research services, advertising services, and transportation
services fall into this category

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BUSINESS TO BUSINESS
CHALLENGES

1. The size and location of customers – bigger,

fewer, and concentrated
2. Strict performance standards for products
by customers
3. Complicated purchasing decisions –
Involvement and time

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Types of B2B Demand:

• DERIVED DEMAND
• The demand for a company’s products comes from
(derived) the demand for their customer’s products.
• Most demand originates with consumers.

• JOINT DEMAND
• Two products are used together and demanded
together
• Both products are consumed at the same time

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BUSINESS TO BUSINESS
DERIVED DEMAND SIMPLIFIED
YOU MAKE HEADLAMP ASSEMBLIES FOR GM
Consumers
Automobile
want more You sell more
manufacturers
cars of your
produce more cars
company’s
headlamp
Consumers assemblies
Automobile
stop buying
manufacturers You sell fewer
cars
stop making headlamp
cars assemblies
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MARKET DRIVEN MEANS:
• ALL EMPLOYEES FOCUS ON CUSTOMER
SATISFACTION
• CONSTANTLY SEEKING OPERATIONAL
EFFICIENCY
• BUILDING EFFECTIVE EMPLOYEE TERMS
• CONSTANTLY IMPROVING SERVICE/SUPPORT
TO CUSTOMERS
• BEING INNOVATIVE
• DEVELOPING APPROACHES TO OPEN NEW
MARKETS
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BUSINESS TO BUSINESS:
IT IS ALL ABOUT RELATIONSHIPS
BUSINESS TO BUSINESS DEPENDS ON:
• Close Business and Personal Relationships
Because of . . . .
• Shorter Distribution Channels
Leads to . . . .
• Emphasis on Personal Selling
Through . . . .
• Dependence on WEB Integration
and
• Unique Promotional Strategies
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 CREATING VALUE
VALUE IS THE PERCEPTION OF A PRODUCT’S
BENEFIT BEYOND ITS PRICE
VALUE HAS THREE PARTS:
1. VALUE RECEIVED FROM THE PRODUCT
2. VALUE RECEIVED FROM SELLER’S SERVICES
3. VALUE RECEIVED FROM RELATIONSHIP WITH
SELLER

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BUSINESS TO BUSINESS: THREE
CRITICAL QUESTIONS FOR A SUCCESSFUL
BUSINESS-TO-BUSINESS PROGRAM

A BUSINESS MUST DETERMINE:

1. WHO ARE ITS CUSTOMERS?

2. WHAT DO ITS CUSTOMERS WANT?

3. HOW DO ITS BUYERS MAKE THEIR

BUYING DECISIONS?

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