N-ABM 3

BUSINESS MARKETING
PREPARED BY: SHAYNE A. ALVEZ
Learning Objectives: Define Marketing

What is Business Marketing?

Business marketing is the practice of individuals or organizations (i.e., commercial

businesses, governments, and institutions) promoting and selling products and/or
services to other organizations. These organizations resell or use these products and
services to support their operations. Companies that act as suppliers or manufacturers
may also integrate other business products into their own product offering to improve
performance and functionality. Unlike a consumer, who makes a purchase based on
his or her individual needs and desires, businesses appoint individuals who act on
behalf of the organization.

Business Marketing Overview

Business marketing, also known as business-to-business marketing, occurs when a

business markets and sells its products or services to another business or organization.
The businesses that purchase these products may use them in manufacturing, to run
their businesses or for resale. In consumer marketing, advertising can be broad and
interaction with customers often takes place through large retailers. Business
marketing differs in that it relies on much more personal, direct relationships between
businesses.

Key Take aways

 Business marketing is often directed to individuals within an organization,

who act on behalf of the needs of the organization.
 Business-to-business marketing involves any products or services a company
purchases to resell, use as components in their own products or services, or to
support their daily operations.
 Any given business-to-business transaction can involve years of complex
marketing efforts, including online and offline promotions.

Key Terms

 white paper: A factual write-up of something, specifically devoid of the

appearance of marketing.
 customer relationship management: A widely implemented model for
managing a company’s interactions with customers, clients, and sales prospects.
It involves using technology to organize, automate, and synchronize business
processes—principally sales activities, but also those for marketing, customer
service, and technical support. Also known by the acronym “CRM. “
  trade show: An exhibition organized so that companies in a specific industry
can showcase and demonstrate their latest products and services, study activities
of rivals and examine recent market trends and opportunities.
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How Business Marketing Works

According to the American Marketing Association, an organization's marketing sales

force is largely responsible for generating and maintaining relationships with
customers. Business marketers typically work closely with their customers, so strong
customer service skills take a high priority. To reach other businesses, organizations
often use business marketing channels, such as trade magazines and direct mail.
According to the Business Marketing Association, business marketers increasingly
spend advertising revenue at trade shows and through electronic media.

B2B Promotional Mix

Like business-to-consumer (B2C) marketing, business-to-business (B2B) marketing,

or business marketing, relies on product, price, placement, and promotion to
competitively position the product offerings, promote the brand, and efficiently use
company resources. Similar to consumer marketers, business marketers must create an
integrated marketing communications strategy to ensure products and promotional
methods complement and support each other.

B2B marketing spans all types of businesses and industries. Because B2B sales tend
to be much larger than consumer purchases, business marketers use different channels
to reach their target audiences. Industry white papers, trade shows, corporate websites,
and webcasts are often used as promotional tactics to build brand awareness and
generate leads. A significant portion of B2B brands also employ social media,
including podcasts, social networking, and blogging sites, to drive web traffic to their
online channels and draw prospective customers to their brand.

Measuring B2B Marketing Success

Customer relationship management (CRM) systems are often used to assess

marketing performance in B2B organizations. B2B sales cycles can last more than
several months and involve numerous stages before the sale is completed. Therefore,
CRM systems help business marketers integrate metrics from different activities to
accurately assess how marketing directly contributed to the transaction. For example,
labels may be assigned to certain promotional elements (e.g., website, trade show) in
the system to indicate where and how prospects converted to customers.
B2B vs. Consumer Marketing: Similarities and Differences

B2B markets to individuals acting on behalf of organizations, while consumer

marketing targets single individuals who pay for their own transactions.

Learning Objectives: Describe the main similarities and differences between B2B
and B2C marketing

Key Take aways

 Whereas emotional factors play a large part in a consumer ‘s decision to

purchase a product, B2B purchasing decisions are less emotional and more task-
oriented.
 Lengthy and complex sales cycles help build strong B2B seller-buyer
relationships and brand loyalty compared to B2C marketing.
 Business marketing generally entails shorter and more direct distribution
channels to target audiences.
 B2C and B2B marketing objectives both reflect the fundamental principles of
the marketing mix.

Key Terms

 webcast: A video and or audio broadcast transmitted via the Internet.

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B2B versus Consumer Marketing: Similarities and Differences

Consumer marketing, or business-to-consumer (B2C) marketing, sales are made to

individuals who are the final decision makers, though they may be influenced by
family members or friends. A business marketing, or business-to-business (B2B)
marketing, sale is made to a business or firm.

Buyer Behavior

Whereas emotional factors play a large role in B2C purchases, B2B purchasing
decisions tend to be less emotional and more task-oriented than consumer buyer
markets. Business customers often look for specific product attributes such as
economy in cost and use, productivity, and quality. Additionally, B2B purchasers
generally spend more money, as the buying process tends to be more complex and
lengthy.

Buyer-Customer Relationship

While consumer marketing is aimed at large groups through mass media and retailers,
the negotiation process between the buyer and seller is more personal in business
marketing. Sales representatives and marketers are often assigned to market to
individuals who act as influencers or decision-makers in the customer organization.
The bulk of a consumer’s interaction with a brand typically happens via an
advertisement, promotion, or transaction. In contrast, B2B marketing can include
numerous meetings between the seller and buyer before a transaction occurs.

For example, B2B marketers often present products and their benefits in private
presentations to key decision-makers. The B2B organization may also invite prospects
and customers to public or private events to facilitate further conversations. As a
result, confidence and trust are gradually built between the seller and buyer over a
period of time. Significant time and money are spent during the evaluation and
selection process, resulting in strong brand loyalty among B2B customers.

Communications Channels

Although on the surface the differences between business and consumer marketing
may seem obvious, there are more subtle distinctions between the two, with
substantial ramifications. The evaluation and selling process for B2B purchases are
longer and more complex than consumer purchases. However, business marketing
generally entails shorter and more direct channels of distribution to target audiences.
Different aspects of the promotional mix can be easily personalized due to the
relationship between a B2B salesperson and the individual buyer.

Most business marketers commit only a small part of their promotional budgets to
general advertising, usually through direct marketing efforts and trade publications.
For example, a business marketer may allocate spending to banner advertising or paid
search. Similar to consumer ads, these advertisements lead to landing pages, where
marketing messaging aims to convince web visitors to submit a form, download a
brochure, or register for a webcast. While business advertising is limited, it helps
generate leads that marketing can pass along to sales representatives.

Similarities between B2C and B2B Marketing

Marketing to a business and marketing to an individual are similar in terms of the

fundamental principles of marketing. Both B2C and B2B marketing objectives reflect
the fundamental principles of the marketing mix, and in both situations, the marketer
must always:

 Successfully match product or service strengths with the needs of a specific

target market
 Position and price products or services to align products and service offerings
with the market
 Communicate and sell products or services so that they effectively
demonstrate value to the target market
Types of Businesses

Primary ownership types of businesses include corporations, cooperatives, LLPs,

LLCs, and sole proprietorships.

Learning Objectives: List the most common ownership types and industry
classifications for organizations

Key Take aways

 Businesses vary depending on jurisdiction, ownership type, and industry or

sector.
 Among the different ownership types for businesses are sole proprietorship,
cooperatives, corporations, and partnerships.
 General classifications for businesses include: agriculture and mining,
financial services, manufacturing, information technology, real estate, retail,
distribution, transportation, and utilities.

Key Terms

 capital: Money and wealth. The means to acquire goods and services,
especially in a non-barter system.
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Types of Businesses

American economist Milton Friedman once famously proclaimed that “the business of
business is business. ” Capitalist economies such as the United States rely on
businesses to legally produce capital from the trading of goods and services. There are
many types of business entities defined in the legal systems of various countries.
Moreover, the types of businesses that exist today can vary by jurisdiction. Primary
ownership types of businesses include corporations, cooperatives, limited liability
partnerships (LLPs), limited liability companies (LLCs) and sole proprietorships.

Business Ownership Types

The type of business a group or individual creates will influence the legal and tax
structure of the entity. The following are some of the most common ownership types
for organizations:

 Sole proprietorship: A sole proprietorship is a business owned by one person

for- profit, though the owner may hire and manage employees. The business
owner has unlimited liability for the debts incurred by the business.
 Partnership: A partnership is a business owned by two or more people. In most
cases, each partner has unlimited liability for the debts incurred by the business.
The three typical classifications under for-profit partnerships are general
partnerships, limited partnerships, and limited liability partnerships.
  Corporation: A corporation is a government-owned, publicly-owned, or
privately- owned limited liability business that contains a separate legal
personality from its members. It can also be a for-profit or non-profit
corporation. Public for-profit corporations are owned by shareholders who elect
a board of directors to direct the corporation and hire its managerial staff.
 Cooperative: Often referred to as a “co-op”, a cooperative is a limited liability
business that can organize as for-profit or not-for-profit. A cooperative differs
from a for-profit corporation since members, as opposed to shareholders, share
decision-making authority. Cooperatives are typically classified as either
consumer cooperatives or worker cooperatives.

Business Industry Types

Businesses also vary by industry due to the wide variety of products and service they
offer to the market. The following industry classifications are usually applied to
businesses:

 Agriculture and mining businesses are concerned with the production of raw
material, such as plants or minerals.
 Financial businesses include banks and other companies that generate profit
through investment and management of capital.
 Information businesses generate profits primarily from the resale of
intellectual property. This includes movie studios, publishers, and packaged
software companies.
 Manufacturers create products from raw materials or component parts, which
they then sell at a profit. Companies that make physical goods such as
automobiles or pipes are considered manufacturers.
 Real estate businesses generate profit from the selling, renting, and
development of properties comprising land, residential homes, and other kinds
of buildings.
 Retailers and distributors such as consumer-oriented stores act as middlemen
in transporting manufactured goods to consumers. They make a profit by
providing sales or distribution services.
 Service businesses offer intangible goods or services and typically generate a
profit by charging for labor or other services provided to government, other
businesses, or consumers. Typical service businesses include consulting firms,
restaurants, and house decorators.
 Transportation businesses deliver goods and individuals from location to
location, generating a profit on the transportation costs.
 Utilities produce public services such as electricity or sewage treatment,
usually under a government charter.
Characteristics of Business-Customer Interactions

B2B customer interactions are influenced by what are typically long and complex
buying processes and tend to be more relationship-based.

Learning Objectives: Describe how B2B customer transactions differ from B2C
customer transactions

Key Take aways

 B2B customer relationships generally feature high brand loyalty due to the
amount of time and money invested during the sales cycle.
 During the selling process, B2B sellers may be required to meet with
prospects and customers numerous times before the transaction is complete.
 Industry trade shows, exhibitions, conferences, and online communities are
common places where B2B companies interact with both customers and
prospects.

Key Terms

 webcast: A video and or audio broadcast transmitted via the Internet.

 Request for Proposal: A solicitation made, often through a bidding process,
by an agency or company interested in procurement of a commodity or service,
to potential suppliers to submit business proposals.
 customer relationship management: A widely implemented model for
managing a company’s interactions with customers, clients, and sales prospects.
It involves using technology to organize, automate, and synchronize business
processes—principally sales activities, but also those for marketing, customer
service, and technical support. Also known by the acronym “CRM. “
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Characteristics of Business Customer Interactions

Business-customer interactions occur over a wide range of communication channels,

such as phone, email, web, and text. These exchanges also happen outside of
organizational control such as conversations on social media. Although business-to-
business (B2B) companies use many of the same communication channels as
business-to- consumer ( B2C ) companies, certain characteristics of B2B customer
interactions differentiate them within the marketplace.

B2B vs. B2C Interactions

Whereas the main interactions between businesses and consumers primarily occur
during the transaction stage of the buying process, relationships between
organizations and their business customers often move beyond the transactional
nature of the interaction. Because the sales cycle can extend much longer than in B2C
sales cycles, B2B companies seek long-term relationships with other business brands.
Consequently, brand loyalty is much higher than in the consumer goods market due to
amount of time invested during the B2B sales cycle. Whether the relationship is
between a manufacturer and wholesaler, or wholesaler and retailer, a B2B transaction
is perceived as riskier than B2C purchases due to the average value of each
transaction. Buying machinery can cost upwards of a million dollars or more. In
comparison, a tube of toothpaste may cost a consumer three or four dollars.

The investment amounts in B2B purchases are also much higher than in B2C
purchases. Since there are more people involved in the decision-making process and
technical details may have to be discussed in length, the decision-making process for
B2B products is usually much longer than in B2C interactions. Thus, purchasing the
wrong product or service, the wrong quantity, the wrong quality, or agreeing to
unfavorable payment terms may put an entire business at risk.

Business Customer Interaction: Conferences present opportunities for B2B

businesses to interact with customers.

Evaluation and Selection Process

The evaluation and selection process between businesses and customers can last for
several weeks, months, or even years depending on the level of cost and complexity
of the selling process. Often, B2B sellers must submit a Request for Proposal (RFP) to
be considered for projects involving high-priced items such as software systems,
financial services, or office equipment. The seller may be required to meet with the
buyer numerous times before the transaction is complete. In these meetings, B2B
sellers will often send sales representatives and executives to present and demonstrate
how their products and services are more competitive than similar brands. During this
evaluation period, the buyer may ask for prototypes, samples, and mock-ups of the
product. Such detailed assessment serves the purpose of eliminating the risk of buying
the wrong product or service.

Post-purchase B2B Interactions

The relationship between a business seller and its business customer does not end
after the transaction is finalized. Customer relationship management tactics are used
to monitor and encourage repeat business and customer referrals. B2B brands often
court customers with ongoing communications including newsletters, webcasts,
seminars, and other events that add value to the business-customer relationship. Also,
sales representatives responsible for overseeing customer accounts may offer
discounts or other promotions to facilitate repeat sales from existing customers.

B2B brands often have specific target markets that can be reached using direct online
and offline marketing activities. Industry trade shows, exhibitions, conferences, and
online communities are common places where B2B companies interact with both
customers and prospects. B2B brands also use these events as opportunities to meet
with customers face-to-face, hear concerns, and collect feedback for improving
products and services.
Customer Concerns

B2B companies typically implement client services or customer care processes to

address customer concerns and enhance customer satisfaction.

Learning Objectives:Give examples of the types of customer concerns faced by

B2B companies, and the common methods used to address these concerns

Key Take aways

 Customer concerns may arise due to issues over product quality and
functionality or a lack of corporate responsiveness to customer complaints.
 B2B companies may use customer care ticket systems, online blogs, or
extranets to better capture customer feedback and respond to customer demands.
 Merging customer feedback with customer service Key Performance
Indicators (KPIs) helps guide companies’ attention to areas where customer data
can make a positive impact.

Key Terms

 stakeholders: A person or organization with a legitimate interest in a given

situation, action or enterprise. It can range from employees and investors of a
company to the customers purchasing from the company.
 customer relationship management: A widely implemented model for
managing a company’s interactions with customers, clients, and sales prospects.
It involves using technology to organize, automate, and synchronize business
processes—principally sales activities, but also those for marketing, customer
service, and technical support. Also known by the acronym “CRM. “
 extranet: A private computer network that uses Internet protocols and can be
accessed by authorized individuals via the Internet.
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Concerns of Customers

Nearly every brand must have a client service or customer care process in place to
address customer concerns and enhance customer satisfaction. This is especially true
for business-to-business (B2B) companies where stakeholders often provide
constructive criticism to help marketing, sales, and technical departments adapt
product offerings to meet changing customer needs.
Customer Service Brainstorming: B2B companies usually have customer service
programs in place to quickly and adequately address customer concerns.

Types of Customer Concerns

Customer concerns may arise due to issues over product quality or functionality. Mass
product recalls are examples of company efforts to limit liability or avoid costly legal
penalties due to corporate negligence. In addition to addressing customer concerns
over product quality and functionality, B2B companies such as manufacturing firms
must reassure customers they can handle the high cost of incidents at their factories
and in their supply chains. These include responding to customer and public concerns
over sudden plant shutdowns, employee strikes, explosions, toxic spills, and other
unplanned occurrences. Similar to business-to-consumer (B2C) companies, B2B
brands must have quality control and crisis management programs in place to respond
to events that can result in a loss of customers and revenue.

Corporate responsiveness and sensitivity to customer complaints also impact brand

image. Account or sales managers are often a B2B company’s first line of defense
when it comes to flagging and responding to customer complaints regarding service
disruptions or product malfunctions. B2B brands often assign cross-functional teams
– sales representatives, developers, product specialists, and call center professionals –
to oversee individual client accounts. This is especially true for large business
accounts that generate significant revenue for the company. Reassuring customers that
their needs and concerns are the company’s top priority is reflective of B2B brands
that use a customer-driven approach to ascertaining customer demands.

Methods for Addressing Customer Concerns

The Internet era has presented challenges in maintaining and enhancing the personal
customer experience, while making use of the efficiencies of online commerce. B2B
companies such as software firms may implement online ticket systems, which allow
business customers to submit electronic tickets that are automatically routed to
customer care professionals. Business customers are then assigned a ticket number
that allows the company to track the entire history of the customer problem and
determine whether the issue was satisfactorily resolved. It also allows customer care
professionals to properly escalate customer issues to appropriate channels such as the
sales or research and development team.

B2B brands are increasingly using web and social media channels such as community
blogs, online forums, and extranets to capture customer feedback. These
communication channels give customers the ability to give detailed explanations of
both negative and positive experiences with an organization. Sales methodologies
applied to customer relationship management (CRM) systems allow B2B
organizations to accurately monitor, track, and measure this information. Merging this
data with customer service Key Performance Indicators (KPIs) also helps direct the
company’s attention to areas where customer feedback can make a positive impact
(e.g., cost savings, service improvement) on the overall organization.
Purchase Behavior

Business customers – as compared to consumers – tend to be more rational, are more

concerned with quality, and look to make lasting relationships.

Learning Objectives:Identify the unique characteristics of B2B purchase

behavior and how it influences B2B marketing tactics

Key Take aways

 Notable differences exist in the purchase behavior of B2B versus consumer

marketing due to the length and complexity of B2B transactions.
 Business customers are more cautious and rational in their purchasing
decisions than mass market consumers.
 Though challenging due to the complexity of the industrial market, purchase
behavior analytics also allow B2B companies to segment target audiences.

Key Terms

 supply side: In a market trade, the side where the supply comes from.
 marketing mix: A business tool used in marketing products; often crucial
when determining a product or brand’s unique selling point. Often synonymous
with the four Ps: price, product, promotion, and place.
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Purchase Behavior

Business-to-business or B2B marketing targets markets where the end users or

customers are the purchasers of goods and services. These customers are individuals,
companies, organizations or governments, and consume industrial rather than mass
market goods. Business customers also purchase a wide variety of different services,
depending on their business needs.

Purchase Behavior: Lengthy and complex sales cycles influence B2B purchase
behavior.

Notable differences exist in the purchase behavior of B2B versus consumer marketing
due to the length and complexity of B2B transactions. However, like consumer
markets, business marketers monitor and analyze customer purchase behavior to
develop segmentation strategies and customer intelligence.

Characteristics of B2B Purchase Behavior

Because B2B sales cycles can extend over months and even a few years, the business
customers are more cautious and rational in their purchasing decisions than day-to-
day consumers. Construction materials, office equipment or accounting services can
cost organizations tens or even hundreds of thousands of dollars. Commitment times
are also longer, as B2B buyer-seller relationships can extend over the lifetime of the
product or service delivery period. For example, a company that purchases software
products may also buy installation and training services to facilitate to help employees
adopt the technology. The entire customer experience can extend from the close of the
transaction to the expiration date of the service contract.

Some of the behavior characteristics unique to B2B purchase behavior:

 A trend towards more rational, rather than “impulse” buying behavior

 Greater value attributed to product or service features such as quality and cost-
effectiveness
 Preference for partnering with reliable, cooperative and reputable
organizations

B2B Customer Segmentation

Predicting customer purchase behavior also allows B2B companies to segment

industrial markets. Companies and organizations face challenges in business market
segmentation since B2B markets face greater complexity in buying processes, buying
criteria and actual products and services. Additionally, measuring strategic data
relevant to the buyer’s target audience and overall marketing strategy is challenging
due to the long and complicated progress of doing B2B transactions.
Nevertheless, companies that segment groups of potential customers with similar
wants and demands are able to customize a marketing mix that works for different
audiences. B2B companies also potentially work with different suppliers. The goal for
every industrial market segmentation scheme is to identify the most significant
differences among current and potential customers and/or suppliers that will influence
their purchase decisions or buying behavior, while keeping the segmentation approach
as simple as possible. Thus, segmenting the supply side of an organization can also
prove value to companies.
Purchase Influences

Purchase influences of B2B customers differ from those of the consumer market due
to the high time and cost investments of B2B transactions.

Learning Objectives:Differentiate between business-to-business customer

influences versus consumer market purchase influences

Key Take aways

 Customer retention, customer relationship management, personalization,

customization, and one-to-one marketing programs are instrumental in
encouraging new and repeat purchases in B2B companies.
 Unlike consumer buyer markets, business customers are less emotional and
more task-oriented during the buying and decision-making process.
 Quality, price, and delivery mechanisms heavily influence B2B buyer
decisions.

Key Terms

 lead: Potential opportunity for a sale or transaction, a potential customer.

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Purchase Influences

Similar to consumers, B2B purchase influences encompass different variables that

affect business customers’ buying behavior. The purchase influences of business-to-
business (B2B) customers differ from those of the consumer market due to the high
time and cost investments of B2B transactions. Customer behavior study, which is
based on consumer behavior, is helpful in analyzing how B2B sales and marketing
activities reinforce the purchasing behavior of B2B customers.

Influential Assets in B2B Purchase Behavior

Customer retention, customer relationship management, personalization,

customization, and one-to-one marketing programs are instrumental in encouraging
new and repeat purchases in B2B companies. For example, sales and marketing
professionals may implement promotional initiatives such as appreciation events,
product discounts, and free upgrades to prompt word-of-mouth referrals. Depending
on the industry, customer referrals can generate significant leads for B2B businesses.

Personalized customer service and marketing programs are also influential during the
B2B evaluation and selection process. Brands can incorporate personalization features
with communication tools including product brochures, email newsletters, and social
media to help prospects and existing customers evaluate product offerings.
Service Delivery: Delivery of goods or service may not be enough to allow a
business to recognize revenue on a sale if there is doubt that the customer will
pay what is owed.

The option of a straight “re-buy” can help to encourage customer retention. A straight
“re-buy” occurs when a customer buys the same product, in the same quantity, from
the same vendor.

Unlike consumer buyer markets, business customers are less emotional and more
task-oriented during the buying and decision-making process. The potential risks that
can result from a poorly executed B2B transaction often produce lengthy and complex
sales cycles. To facilitate the evaluation and selection process, B2B customers
specifically look for product attributes such as economy in cost and use, productivity,
and functionality. Often, these variables are assessed during face-to-face, online
meetings, or demonstrations with sales professionals.

Ultimately, B2B customers seek to partner with reliable, fair, consistent, responsive,
and cooperative businesses. Quality, price, and delivery mechanisms, rather than
emotional motives, tend to dominate the purchase decisions of B2B buyers. Customer
testimonials, trade reviews, and industry analyst firms are all resources B2B buyers
use to determine whether these factors are in line with the reputation and performance
of B2B sellers.
Negotiating

B2B buyers and sellers use negotiating tactics to agree upon terms and pricing that
benefit both the customer and the seller.

Learning ObjectivesDiscuss the primary purpose of negotiation in B2B

organizations

Key Take aways

 Typically, many departments and roles are involved in the decision-making

process for business purchases.
 Client concerns and modification requests are often addressed during the
contract stage to help guide the buyer-seller relationship throughout the life of
the contract.
 Due to globalization and evolving business trends, more companies are
adopting negotiation teams in order to take advantage of cross-departmental and
cross-functional knowledge during the negotiation process.

Key Terms

 B2B: Acronym for commerce transactions between businesses, such as

between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
 information silos: A management system incapable of reciprocal operation
with other, related information systems.
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Negotiating

Negotiation is a dialogue between two or more parties, intended to reach an

understanding, resolve differences, or gain advantages. It is also used to agree upon
courses of action, bargain for individual or collective advantages, and satisfy the
various interests of people or parties involved in the negotiation. “Negotiation”
originates from the Latin expression negotiatus, the past participle of negotiare, which
means “to carry on business. ”

Relevance of Negotiation in B2B Organizations

The negotiation process is an important step during the business-to-business (B2B)

buying process. Both buyers and sellers use negotiating tactics to agree upon terms
and pricing that will benefit both the customer and service provider. Typically, many
departments and roles are involved in the decision-making process for business
purchases. This is particularly true at the contract stage, where client concerns and
modification requests are addressed to help guide the buyer-seller relationship
throughout the life of the contract. Buyers may be interested in modifying their
purchase via enhanced product features, price adjustments, or other customer benefits.
Management, sales, marketing, quality control, and legal personnel may all play a part
in negotiating buyer-seller contracts and agreements.
Evolution of Negotiation Tactics

Due to globalization and evolving business trends, more companies are now using
negotiation teams. Teams can effectively collaborate, pool resources, and brainstorm
solutions to break down and manage complex negotiations. More knowledge and
wisdom can be harnessed in cross-departmental and cross-functional teams than with
individuals operating in information silos. Writing and noting customer specifications,
listening to buyer concerns, and communicating specific actions are roles team
members must satisfy during the negotiation process. The capacity base of a
negotiation team can also reduce errors and strengthen the long-term buyer-seller
relationship because of the improved accuracy and wider range of knowledge that can
be brought to the negotiation.

Negotiating: Negotiating tactics in B2B transactions involve taking buyer and

seller interests into account.
Leasing

In B2B transactions, leasing serves as an alternative financing method for customers

looking to use high-priced products and services.

Learning Objectives: Discuss the advantages and disadvantages of leasing in

business-to-business transactions

Key Take aways

 One of the major benefits of business leasing is the ability for organizations to
quickly take advantage of new products available on the market.
 Leasing can also help organizations manage their annual budgets, avoid
dealing with depreciated and unusable equipment, and take advantage of the
latest technologies available on the market.
 Some of the major disadvantages to leasing products include loss of control
over the product, limited flexibility in contract modifications, and hidden fees
and penalties for damaged products.

Key Terms

 depreciation: The measurement of the decline in value of assets. Not to be

confused with impairment, which is the measurement of the unplanned,
extraordinary decline in value of assets.
 lessee: An individual or a corporation who has the right of use of something of
value, gained through a lease agreement with the real owner of the property.
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Leasing

Leasing is a process by which a firm can obtain the use of certain fixed assets for
which it must pay a series of contractual, periodic, or tax deductible payments. In
business-to-business ( B2B ) transactions, leasing serves as an alternative method for
customers looking to use high-priced products and services. For example, customers
often lease software products. The process works similar to leasing a car, where
customers pay a fee over time to use the technology without owning the equipment.
At the end of the lease, the hardware is returned or purchased at a fair market price.

Leasing Sign: Leasing products is often a viable alternative for cash-strapped

organizations.

Benefits Of Leasing

One of the major benefits of leasing is the ability for organizations to quickly take
advantage of new products available on the market. Organizations such as schools and
universities, which often rely on bonds to fund new hardware and software purchases,
frequently take advantage of leasing programs. This keeps the hardware in schools
current, and ensures that students are using the latest technology.
Leased Locomotive: A locomotive that Union Pacific Railroad leases. The
locomotive is an ex-Long Island Railroad unit.

Business products also tend to depreciate quickly and have little value at the end of its
life. Leasing allows organizations to avoid dealing with the depreciation of outdated
products. When a piece of technology has reached the end of its life, the equipment is
usually sent back to the vendor for disposal, saving the customer time and money.
Organizations with smaller cash flows can also obtain technology at lower costs by
leasing products rather than purchasing them.

Leasing can also help organizations manage their annual budgets. Depending on the
organization, lease agreements are easier to administer and approve than purchasing
agreements, since the cost of the equipment is spread out over the course of the lease.
In contrast, organizational purchases require the availability of large sums of money
within a single fiscal year. Leasing business products not only significantly reduces
the length of the approval process for obtaining products, but makes it easier for
organizations to balance their annual budget.

Additional advantages of B2B leasing agreements include flexible lease-to-own

programs. A lease can be structured to allow the purchase of equipment at the end of
the lease for fair market value of the hardware. Furthermore, lease agreements can be
structured to include maintenance, installation, software, and other professional
services. This can save the district time and money in the long run.

Potential Disadvantages Of Leasing

Without owning a product, organizations also lack full control over what can be done
with the equipment. Whereas customers who purchase equipment wield influence
over future product updates and modifications, leasing customers may have limited
say in how products evolve for future releases.

Lease agreements are also set for a definite period of time, which locks organizations
with certain vendors and equipment. If the needs of the lessee suddenly change, it
might be difficult to modify the terms of the lease. However, some leases will allow
product upgrades before the end of the lease.

In addition, lessees might not be able to return damaged products depending on the
leasing conditions. Leasing terms sometimes include hidden fees and penalties at the
conclusion of the lease, all of which can cost the organization extra money.
Accounting and purchasing departments must be aware of both the pros and cons of
the lease to avoid larger problems over the lifetime of the leasing contract.
Promotional Methods

B2B marketers use industry or trade publications, trade shows, private events, and
social media to generate awareness about their products and services.

Learning Objectives:Differentiate between the promotional methods and tools

used in B2B versus B2C marketing

Key Take aways

 Business marketers generally avoid mass market broadcasts, preferring instead

communication channels aimed at specific industries and business audiences.
 B2B marketing promotional methods differ from B2C brands due to the
specific needs and variables comprising the industrial business market.
 Social media is fast becoming a promotional tool used to position B2B brands
in the digital sphere.

Key Terms

 white paper: A factual write-up of something, specifically devoid of the

appearance of marketing.
-------------------------------------------------------------------------------------------------

Promotional Methods

Promotional methods in business-to-business (B2B) marketing differ from those of

business-to- consumer (B2C) brands due to the specific needs and variables
comprising the industrial business market. Since B2B customers are other companies
and organizations, B2B brands avoid mass market broadcasts. Likewise, they
generally use communication channels aimed at specific industries and business
audiences. B2B companies also ensure their brands are represented at industry events
where potential customers meet B2B sellers. Extensive research and budget analysis
are conducted to determine if specific promotional elements will achieve short-term
or long-term marketing goals and contribute to the financial performance of the
organization.

Promotional Tools Used in the B2B Marketing Mix

B2B businesses use promotional methods unique to the industrial business market.
For instance, marketers and sales professionals use white papers and product
brochures to educate prospects and customers about products or services. These
publications are also placed in industry and trade media to produce favorable publicity.
If done strategically, media placement enforces messaging behind specific marketing
activities across multiple communication channels.

In addition to trade shows and public conferences, seminars and workshops may also
be held for potential and existing customers. Relationship building is a key aspect in
B2B marketing, as brand loyalty and commitment tend to be higher among business
customers compared to consumers. Hosting these seminars creates an aura of
exclusivity and presents an intimate forum where individuals from B2B organizations
can voice concerns, submit feedback, and view product demonstrations.

Trade Show Exhibitors: B2B companies usually conduct research and assess
budgetary requirements before taking part in trade shows.

Social media is fast becoming a promotional tool used to position B2B brands in the
digital sphere. Although B2B organizations tend to be more cautious than B2C brands
in using social media, more and more B2B companies are using sites such as
Facebook and LinkedIn to connect to customers. Moreover, B2B organizations also
use social media for internal communications to increase collaboration and
productivity among workers. Internal and external communications via social media
can also work concurrently, as employees often share information on events, product
releases, and industry developments with other colleagues.
Identifying Potential Business Customers

Market segmentation involves identifying the particular groups of people /

organizations that benefit from your product and then selling to them.

Learning Objectives:List the characteristics that marketers use to segment

organizations

Key Take aways

 Organizations can be segmented by industry, size, function, level, and type of

individuals within the organization.
 Industry classifications can assist in determining what specific industries
potential customers are in.
 Preliminary research always saves time. Failing to analyze a prospect is the
main reason for a great deal of wasted prospecting time spent on a customer who
should have been promptly discarded after due research.

Key Terms

 market segmentation: The process of dividing a broad target market into

subsets of consumers who have common needs or desires, as well as common
applications for the relevant goods and services.
 channel: A distribution channel.
----------------------------------------------------------------------------------------------------

Identifying your customer begins with formulating a value proposition. You have to
be able to answer this question: “To whom is this proposition of value? ” When trying
to answer this question, it helps to simplify matters by breaking the market down into
components. The role of the marketing team is to understand everything there is to
know about given target groups, ensuring that needs are being identified and filled.

There are three broad categories of customers who could buy your product:
individuals, channels (intermediaries), and organizations. Each of these categories can
be further broken down into smaller segments. This is called market segmentation –
picking out the particular groups of people or organizations that benefit from your
product, so you can better sell to them. Organizations can be segmented by:

 Industry
 Size
 Function
 Level
 Type of individuals within the organization
Many segmentation schemes are combinations of the above list. For example, let’s
say a venture developing an innovative digital storage product decides to sell only to
organizations, not individuals. It segments its potential market by size of organization,
size of data storage requirements, and need for speed of retrieval. This would occur
during the periods of market analysis and customer research in the product
development cycle. That leads, for example, to a focus on large financial institutions
and large medical centers. Within those targeted organizations, the importance and
cost of the purchase dictates that the venture focuses on selling only to “C-level”
executives, such as the CIO or CFO. Finally, as the technology is very new, the
venture team chooses to target the executives who are technology enthusiasts—people
who love new technology for its own sake and are often willing to look at it in its
preliminary form.

Product Innovation Approach: In the product development cycle, the market

analysis and consumer research phases are used to identify customers.

Industry classifications can assist in determining market segmentation. The North

American Industry Classification System (NAICS) is used by business and
government to classify business establishments according to its primary type of
economic activity (process of production) in Canada, Mexico, and the United States.
Thus, if a company identifies a potential customer but is uncertain what industry that
customer belongs to, using the industrial classification from the NAICS can provide
more detailed information on the specific business activities of that potential customer.

Having decided on a specific market, the salesperson should try to limit his
prospecting to remain within that market. The ideal customer who will buy as soon as
the salesperson talks to him is probably nonexistent. Nonetheless, the closer a
salesperson’s prospect matches that ideal customer, the fewer sales objections will be
placed in his way. It therefore makes sense to ensure that his prospects at least
resemble the specification as accurately as they can. This means identifying the
potential of a prospect at the very outset.
In particular, the salesperson should know the requirements that a potential customer
has set for his future, his priorities, and in all probability, his financial resources.
Failing to analyze a prospect is the main reason for a great deal of wasted prospecting
time spent on a customer who should have been promptly discarded after due research.
Good prospecting does not necessarily dismiss those whose business appears to be
static, but it is certainly improves the ability to select and concentrate one’s efforts
where one is more likely to secure immediate success.
Estimating the Addressable Market

Total addressable market (TAM) is a term that is typically used to reference the
revenue opportunity available for a product or service.

Learning Objectives:Define total addressable market (TAM)

Key Take aways

 TAM helps to prioritize business opportunities by serving as a quick metric of

the underlying potential of a given opportunity.
 TAM can be defined as a global total (even if a specific company could not
reach some of it) or, more commonly, as a market that one specific company
could serve (within realistic expansion scenarios).
 The market can be categorized into separate groups called segments.

Key Terms

 TAM: A term that is typically used to reference the revenue opportunity

available for a product or service.
 market share: The percentage of some market held by a company.
 SAM: The percentage of the market that is already being served, either by that
company or all providers.
-------------------------------------------------------------------------------------------------------

Total Addressable Market

Total addressable market (TAM), also called total available market, is a term that is
typically used to reference the revenue opportunity available for a product or service.
The market consists of all prospective customers for a given product, service, or idea.
Customers can be purchasers who intend to resell the product or end users who intend
to use or consume the product.

Estimating TAM

TAM helps to prioritize business opportunities by serving as a quick metric of the

underlying potential of a given opportunity. Few organizations track market share
even though it is an important metric. Though absolute sales might grow in an
expanding market, a firm’s share of the market can decrease which would bode ill for
future sales when the market starts to drop. Where such market share is tracked, there
may be a number of aspects that will be followed:

 Overall market share

 Share of a target segment
 Relative share in relation to the market leaders
 Annual fluctuation rate of market share
  An estimation of how much of the market you can gain if there were no
competitors
 An estimation of the market size that could theoretically be served with a
specific product or service

TAM can be defined as a global total (even if a specific company could not reach
some of it) or, more commonly, as a market that one specific company could serve
(within realistic expansion scenarios). This focuses strategic marketing and sales
efforts and addresses actual customer needs. Including competition and distribution
issues then frames the strategy within realistic boundaries and allows a company to
gauge served market share ( SAM ), the percentage of the market that is already being
served, either by that company or all providers. The North American Industry
Classification (NAICS) categorizes businesses and collects data within specific
economic activities, thus assisting in measuring the SAM.

The market can be categorized into separate groups called segments. Any discrete
variable is a segmentation. For instance, customers might be segmented by gender
(“male” or “female”) or attitudes (“progressive” or “conservative”). Numeric
variables may be used to create segments, such as age (“over 30” or “under 30”) or
income (“The 99%” or “The 1%”).

Competitor Profiling: The folio plot visualizes the relative market share of a
portfolio of products versus the growth of their market. The circles differ in size by
their sales volume.
Market Segmentation

Segments can be obtained by any number of approaches. Minimally, an existing

discrete variable may be chosen as a segmentation, also called “a priori” segmentation.
At the other extreme, a research project may be commissioned to collect data on many
attributes that would then be used to conduct statistical analysis to derive a
segmentation, also called “post-hoc” segmentation.

Qualitative knowledge of the market based on experience may also be used to identify
divisions that are likely to be useful. When a producer appeals to a market or market
segment, the producer must take into account the distinction between the end user or
consumer and the purchaser or decision maker. This is especially true in B2B models.
The market may be individuals or organizations that are able to purchase the
organization’s product. Each entity in the delivery chain will have different needs, so
a complete market needs analysis must include all potential segments and all entities
within each segment.
Categories of Business Products

Business-to-business (B2B) transactions involve many classifications of business

products.

Learning Objectives:List the different categories for business products

Key Take aways

 Some categories of business products are products used to create other

products (e.g., raw materials, component parts).
 Other categories of business products include products used to facilitate the
creation of the products, but are not included in the product (e.g., equipment,
services ).
 Both the United States and Europe have lists which provide divisions and
subdivisions of businesses.
 Manufacturers produce products, from raw materials to component parts,
which they then sell at a profit. Companies that make physical goods, such as
cars or pipes, are considered manufacturers.

Key Terms

 business-to-business: Of businesses selling to other businesses.

 North American Industry Classification System: A system used by
businesses and government to classify business establishments according to type
of economic activity (process of production) in Canada, Mexico, and the United
States.
 intangible: Incorporeal property that is saleable though not material, such as
bank deposits, stocks, bonds, and promissory notes.
 business analysis: A research discipline of identifying needs and determining
solutions to problems facing firms.
 raw material: Manufacturing inputs in its unprocessed, natural state.
---------------------------------------------------------------------------------------------------

Business-to-business ( B2B ) describes commerce transactions between businesses,

such as between a manufacturer and a wholesaler or a wholesaler and a retailer. B2B
transactions involve many classifications of business products, including the
following:

 Raw Materials: A raw material is the basic material from which a product is
manufactured or made. Agriculture and mining businesses are concerned with
the production of raw materials, such as plants or minerals. Additional examples
include latex, iron ore, logs, and crude oil.
Collecting Raw Materials: Latex is a raw material that’s collected from rubber
trees and used to manufacture other products.
 Component Parts: Manufacturers produce products, from raw materials to
component parts, which they then sell at a profit. Companies that make physical
goods, such as cars or pipes, are considered manufacturers.
 Equipment: Equipment includes products used in production activities and
operational activities. Equipment includes large buildings that serve as places of
business for other companies. Real estate businesses generate profit from the
selling, renting, and development such of properties.
 Processed Materials: These products are created from raw materials and are
used in the production of another product. Examples include food preservatives
and industrial glue.
 Business Services: Service businesses offer intangible goods or services and
typically generate a profit by charging for labor or other services provided to
government, other businesses, or consumers. Organizations including house
decorators, repair services, consulting firms, restaurants, financial businesses,
janitorial services, and even entertainers are types of service businesses. ( )
 Supplies: These products facilitate both production and operations, but are not
part of the final product. Examples include paper, pens, and cleaning agents.
These items can be purchased from retailers and distributors and delivered by
transportation businesses.
There are many other divisions and subdivisions of businesses. The authoritative list
of business types for North America is generally considered to be the North American
Industry Classification System (NAICS; pronounced “nakes”). The equivalent
European Union list is the Statistical Classification of Economic Activities in the
European Community (NACE).

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