Business-to-business (B2B) marketing is a process that

involves selling a certain product manufactured by one

company to another. Also, it’s necessary for any
company that wants to offer its services to other
organizations. Usually, B2B marketing relies on the same
methods as B2C, but adds some additional approaches.

Often, B2B marketing is used by businesses that manufacture specific products,

such as plastic, steel, fabric or provide various services, including project
management or search engine optimization.

Although it may seem that the B2B sector is not that big, in reality, the B2B market is
the largest market. Research shows that IBM spends more than $60 million daily on
the goods necessary to support their business.

What is the Difference Between

B2B and B2C Marketing?
B2B B2C

Target audience Markets to other companies Markets to consumers

directly

Examples Ad agencies, office furniture Restaurants, hotels, retail

manufacturers, etc. stores, etc.

Communication Uses special industry jargon and Provides consumers with

terms easy-to-understand
information

Audience needs Audience is looking for professional Audience is looking for

expertise entertainment and a good
deal
Decision- Decision-making process can take Consumers don’t need a lot
making process a lot of time of time to make decision

Although B2B and B2C marketers often follow the same guidelines and practices,
there are some crucial differences between these terms.

As you can see, in B2B marketing, you work with specific individuals or small groups
of people within a given industry. Your main goal is to establish relations with office
managers or other higher-level employees of the business you want to cooperate
with. After all, these are the people that decide whether the company will purchase
your products.

Additionally, take into consideration that, as a rule, B2C customers want to get
valuable information about this or that service or product as quickly as possible.
When choosing a company, they rely on reviews and social proof.

At the same time, in B2B marketing, people learn more about the services or
products that interest them. As soon as they discover the potential benefits, they
start searching for more specific details about your company and compare it with
competitors. Also, these people may look for third-party reviews and similar products
provided by your competitors.

10 Reasons Why B2B Marketing is Special and

Different to Consumer Markets
We believe that there are ten key factors that make business-to-business markets
special and different to consumer markets.  These are described below:

1. B2B Markets Have A More Complex Decision-Making Unit

In most households, even the most complex of decisions is confined to the small
family unit while items such as clothes, food and cigarettes usually involve just one
person.  The decision making unit (DMU) in business-to-business markets is highly
complex or at least it has the potential to be so.

Ordering products of low value and low risk (such as the ubiquitous paper clip) may
well be the responsibility of the office junior.  However, the purchase of a new plant
that is vital to a business may involve a large team who makes their decision over a
protracted period.  The DMU at any one time is often ephemeral – specialists enter
and leave to make their different contributions and, of course, over time people leave
the company or change jobs far more frequently than they change family unit.

 
This complexity and dynamism has implications for business-to-business markets. 
The target audiences for B2B communications are amorphous, made up of groups of
constantly changing individuals with different interests and motivations.  Buyers seek
a good financial deal.  Production managers want high throughput.  Health and
safety executives want low risk.  And those are just their simple, functional needs. 
Each person who is party to the DMU will also bring their psychological and cultural
baggage to the decision and this can create interesting variations to the selection of
products and suppliers.

Figure 2 – The Risk-Value Purchasing Decision Matrix In Business-to-business Marketing

Figure 2 above divides business-to-business purchases into four categories

according to their financial value and the level of business risk associated with the
purchase.  Each of these categories gives rise to different purchasing behavior and
different complexities.

 Low-risk, low-value purchases are the least distinct from consumer purchases.  They
often involve just one, frequently junior person.  There is little financial or business risk
involved on getting the decision wrong, meaning that relatively little thought goes into
the decision.
 Low-risk, high-value items such as raw materials typically involve a mixture of technical
and purchasing personnel, and often very senior people such as board members.  This
complexity is necessary to ensure that price is minimized without impacting upon
quality.  Purchasing personnel would usually be the key decision makers on a
transaction-by-transaction basis, under the general guidance of more technical
employees, who would review suppliers periodically.
 Low-value, high-risk items such as office insurance would similarly involve a mixture of
specialists and purchasers.  As the ‘risk’ is in the product rather than the price, and as
each transaction is likely to be unique, an expert (in this case perhaps an in-house legal
expert) would tend to be the key decision maker every time a purchase takes place.
 High-value, high-risk purchases are the most distinct from consumer purchases, with a
large number of senior decision makers evaluating a large range of purchase criteria.  In
the case of plant equipment, we might expect a CFO, R&D Director, Production
 Director, Purchasing Director, Head of Legal Department, CEO and a number of upper-
management department heads to be involved.
 What does this mean for the business-to-business marketer?
Faced with a multifaceted and knowledgeable buyer, it is critical that the B2B
marketer demonstrates a high level of expertise in all of its interactions with the
target audience.  This refers not only to product knowledge, but also to the technical
and other back-up that the buyer

2. B2B Buyers Are More “Rational”

The description of business-to-business buyers as more ‘rational’ than their
consumer counterparts is perhaps controversial, but we believe true.  We may not
leave our emotions at home when we go to work, but most of us attach them to a
tight leash and try to keep them away from our colleagues.

Would the consumer who pays $3,000 for a leather jacket that is less warm and
durable than its $200 counterpart in the shop next door make a similar decision in
the workplace?  What about the person who spends $1,000 for a season ticket at a
football club that has just been relegated and frustrates them every Saturday, or
$6.50 on a packet of cigarettes that excludes them from indoor public places and
puts them at risk of serious disease – would the same person choose to buy, for
example, a computer that consistently infuriated them or an asbestos roof that risked
their own health and that of their colleagues?

The truth is that as consumers we are often less well-informed, less accountable to
others and far more susceptible to whims, indulgences, recklessness and showing
off than is the case when we are in the workplace.  We therefore have a tendency to
make purchasing decisions that a rational observer (a business-to-business buyer
that has to make a profit each month) would regard as ludicrous.  As consumers we
are far less likely to ask whether the product we are buying has an ROI (return on
investment).  We buy what we want, not what we need.
What does this mean for the business-to-business marketer?

To some extent the fact that business-to-business buyers are relatively rational
makes our job as B2B marketers easier – all we need to do is design and
manufacture good products, and deliver them on time and at a good price.

Not quite.  It would be disingenuous to claim that business-to-business buyers

are entirely rational.  Due to the accountability that constrains most B2B buyers, trust
and security are key issues.  No B2B buyer wants to risk his or her livelihood or
reputation buying an unreliable product and service.  This makes emotional issues
such as trust and security absolutely critical.  This in turn places great emphasis on
brand, reputation, case studies and other factors which convey reliability and
consistency over the life of the product or service being purchased.

3. B2B Products Are Often More Complex

Just as the decision making unit is often complex in business-to-business markets,
so too are B2B products themselves.

Where the purchase of a consumer product requires little expertise (perhaps nothing
more than a whim), the purchase of an industrial product frequently requires a
qualified expert.  Where consumer products are largely standardized, industrial
products are often bespoke and require high levels of fine-tuning.  Even relatively
complex consumer products tend to be chosen on fairly simple criteria.  A car might
be chosen because it goes fast and looks nice, and a stereo might be purchased on
the grounds that it is tremendously loud.

Even simpler industrial products, on the other hand, frequently have to be integrated
into wider systems and as a result have very specific requirements and need
intimate, expert examination and modification.  It is difficult to imagine a turbine
manufacturer or commercial website design buyer having a look at three or four
products and then choosing one simply because it looks nice.  The choice of turbine
will involve a whole host of technical, productivity and safety issues, whilst the choice
of website might be based on its integration into a wider B2B marketing campaign,
its interactivity with users and the degree to which it draws potential clients via
search engines.

Buyers of consumer products are generally not interested in the technical details of
what they are buying.  The vast majority of car buyers are far more interested in what
speed the car will reach than in how it will reach that speed.  Similarly, the buyer of a
chocolate bar is likely to be far more interested in the fact that the item stops them
feeling hungry and tastes nice than in the technology and ingredients that make it
so.  As a result, consumer products are frequently marketed in ways that are
superficial or even vacuous.

Car manufacturers frequently completely ignore not only how a car performs, but
often the fact that the car performs at all, and instead seek to apply non-physical
attributes such as sex appeal to their products.  Business-to-business campaigns, on
the other hand, seek to educate their target audience by providing specific factual
information.  A corporate vehicle fleet buyer is unlikely to purchase a car for his
salesforce on the basis of its color or sex appeal.  Many target companies in
business-to-business campaigns are already well-informed on the product area, in
which case promotional material may have to go as far as offering product
specifications.

What does this mean for the business-to-business marketer?

The key for the B2B marketer is to be fully informed in relation to the product or
service being sold.  This understanding must cover not only the ‘technical’ details of
the offering, but also the extended offer including aftersales service, problem
resolution, client management team, etc. As a result, the B2B sale is often a
‘technical sale’, meaning that salespeople in business-to-business markets are often
extremely experienced and originate from a technical discipline within their
company.  The success or otherwise of an entire business-to-business product line
can be largely dependent on the abilities of a small team of salespeople.

4. Limited Number Of Buying Units In B2B Markets

Almost all business-to-business markets exhibit a customer distribution that confirms
the Pareto Principle or 80:20 rule.  A small number of customers dominate the sales
ledger.  Nor are we talking thousands and millions of customers.  It is not unusual,
even in the largest business-to-business companies, to have 100 or fewer customers

There is also a matter of scale.  In consumer markets there are reasonable limits to
the amount that a single person can buy and use of any product.  Certainly there are
heavy users of all consumer products but the difference between the light user and
the heavy user is a matter of small degree compared with the scale of differences in
business-to-business markets.  You can fit most buyers of consumer products into a
“typical spend per month” with a few heavy spenders and a few light spenders at the
extremes. The range of spend between the largest and smallest buyer in a business-
to-business universe is likely to be much, much larger than the range of spend
between the largest and smallest buyers in consumer markets.  Small numbers of
customers of widely different sizes – and the presence of a few key accounts – is a
major distinguishing feature of business-to-business markets and this requires a
completely different marketing approach to that required for consumer markets.

What does this mean for the B2B marketer?

Because such small numbers of customers dominate the lives of businesses,

database management is a crucial part of business-to-business marketing. 
Customer relationship management systems now allow databases to be kept up-to-
date with personal details of members of the DMU together with every transactional
and contact record.

It is also critical that the business-to-business marketer be adept at key account

management with all the manpower, proactivity and responsiveness that this entails. 
Key accounts not only require the product delivered to them when and in the
quantities they need it; they also routinely require services such as swift problem
resolution and technical advice.  Indeed, key business-to-business accounts are
increasingly moving beyond requiring effective products and services and good
prices; they are now looking for partnership. They are looking for suppliers that will
hold stock on their behalf, provide technical consultancy, calculate product efficiency
and added value, and offer long-term on-site support.

Above all, the limited number of buying units in business-to-business markets, and
particularly the concentration of expenditure among a few of those buying units,
presents both an opportunity and an expectation that the biggest spenders are
provided with dedicated value-added services that reflect their importance to the
supplier.  If you don’t satisfy this expectation, someone else will!

5. B2B Markets Have Fewer Behavioral And Needs-Based Segments

Our experience of over 2,000 business-to-business studies shows that B2B markets
typically have far fewer behavioral or needs-based segments than is the case with
consumer markets.  Whereas it is not uncommon for an FMCG market to boast 10,
12 or more segments, the average business-to-business study typically produces 3
or 4.

Part of the reason for this is the smaller target audience in business-to-business
markets.  In a consumer market with tens of thousands of potential customers, it is
practical and economical to divide the market into 10 or 12 distinguishable
segments, even if several of the segments are only separated by small nuances of
behavior or need. This is patently not the case when the target audience consists of
a couple of hundred business buyers.

The main reason for the smaller number of segments, however, is simply that a
business audience’s behavior or needs vary less than that of a (less rational)
consumer audience.  Whims, insecurities, indulgences and so on are far less likely to
come to the buyer’s mind when the purchase is for a place of work rather than for
oneself or a close family member.  And the numerous colleagues that get involved in
a B2B buying decision, and the workplace norms established over time, filter out
many of the extremes of behavior that may otherwise manifest themselves if the
decision were left to one person with no accountability to others.

It is noticeable that the behavioral and needs-based segments that emerge in

business-to-business markets are frequently similar across different industries. 
Needs-based segments in a typical business-to business market often resemble the
following:

 A price-focused segment, which has a transactional outlook to doing business and

does not seek any ‘extras’.  Companies in this segment are often small, working to low
margins and regard the product/service in question as of low strategic importance to
their business.
 A quality and brand-focused segment, which wants the best possible product and is
prepared to pay for it.  Companies in this segment often work to high margins, are
medium-sized or large, and regard the product/service as of high strategic importance.
 A service-focused segment, which has high requirements in terms of product quality
and range, but also in terms of aftersales, delivery, etc.  These companies tend to work
in time-critical industries and can be small, medium or large.  They are usually
purchasing relatively high volumes.
 A partnership-focused segment, usually consisting of key accounts, which seeks trust
and reliability and regards the supplier as a strategic partner.  Such companies tend to
be large, operate on relatively high margins, and regard the product or service in
question as strategically important.

What does this mean for the business-to-business marketer?

The fact that business-to-business markets have relatively few segments makes the
job of the B2B marketer easier than it might otherwise be.  Nevertheless, skills in
recognizing which customers fit which segments, and how to appeal to each of these
segments, are not easy to come by.  Key challenges in establishing a behavioral or
needs-based segmentation are as follows:

 Obtaining a consensus on exactly what the segments are, and what characterizes them,
usually requires investment in quantitative market research.
 Once a segmentation has been achieved, identifying which companies are in which
segment is extremely difficult.  Behavioral and needs-based segments usually
transcend ‘firmographic’ segments, meaning that there are often no immediately
manifest indicators (such as country, industry sector) of the segment to which a
company belongs.
 Training sales teams, marketing teams, customer relationship and other departments
must implement the segmentation by adjusting their approach to often intangible
criteria.  This requires huge effort and investment horizontally and vertically within a
business.
Given the limited size of business-to-business target audiences, many marketers find
the most simple approach is to tier the target audience by size and split it by
geography, with accounts receiving the attention they ‘deserve’ according to their
strategic value to the supplier.
6. Personal Relationships Are More Important In B2B Markets
An important distinguishing feature of business-to-business markets is the
importance of the personal relationship.  A small customer base that buys regularly
from the business-to-business supplier is relatively easy to talk to.  Sales and
technical representatives visit the customers.  People are on first-name terms. 
Personal relationships and trust develop.  It is not unusual for a business-to-business
supplier to have customers that have been loyal and committed for many years.

The importance of personal relationships is particularly pronounced in emerging

markets such as China and Russia, which have little culture of free information,
historic quality problems with local suppliers, and – in markets where the concept of
branding is still emerging – little other than their trust in the salesperson on which
they can judge the provenance of the product or service they are buying.

What does this mean for the business-to-business marketer?

The consequences of this emphasis on relationships for marketing budgets are a

relatively high expenditure on people (sales and technical support) and a more
modest expenditure on other forms of promotion.  Advertising budgets for business
marketers are usually measured in thousands of pounds (or Euros or dollars) and
not millions.  The B2B salesperson is also a different animal to the consumer
salesperson, in that the focus is on listening and cultivating a limited number of
relationships rather than the more quantity-driven and transactional approach seen
in consumer markets.  This places emphasis on face-to-face contact and, as already
mentioned, this salesperson must have an in-depth technical understanding of
whatever he or she is selling.  Trade shows therefore become far more important in
B2B markets – indeed, they are the number one promotional tool of American
business-to-business companies ($17.3 billion per annum spent, Source: Business
Marketing Association).

7. B2B Buyers Are Longer-Term Buyers

Whilst consumers do buy items such as houses and cars which are long-term
purchases, these incidences are relatively rare.  Long-term purchases – or at least
purchases which are expected to be repeated over a long period of time – are more
common in business-to-business markets, where capital machinery, components
and continually used consumables are prevalent.

Furthermore, the long-term products and services required by businesses are more
likely to require service back-up from the supplier than is the case in consumer
markets.  A computer network, a new item of machinery, a photocopier or a fleet of
vehicles usually require far more extensive aftersales service than a house or the
single vehicle purchased by a consumer.  Businesses’ repeat purchases (machine
parts, office consumables, for example) will also require ongoing expertise and
services in terms of delivery, implementation/installation advice, etc that are less
likely to be demanded by consumers.

Finally, business customers tend to be regarded as long-term customers more than

consumers do for the simple reason that there are fewer business customers about,
and the ones that do exist are more valuable!  The benefits of retaining a B2B
customer are often enormous, and the consequences of losing them very serious.
What does this mean for the business-to-business marketer?

The longer-term focus in business-to-business markets reiterates two key points for
the B2B marketer to bear in mind: first the importance of relationship-building in
business-to-business markets, particularly with key customers; and second the
importance of a technically focused sales team.

8. B2B Markets Drive Innovation Less Than Consumer Markets

A look at the derived demand diagram (Figure 1) demonstrates that most innovation
is driven by consumer markets.  B2B companies that innovate usually do so as a
response to an innovation that has already happened further upstream.  B2C
businesses tend to be less risk averse, as they have to predict and respond to the
whims and irrational behavior of consumers rather than the more calculated
decision-making of businesses.  B2B companies have the comparative luxury of
responding to trends rather than seeking to predict or even drive them.

This is not to say, of course, that companies in B2B markets are ‘worse’ innovators
than those in consumer markets.  Indeed, the opposite is repeatedly the case, as
innovations are often more carefully planned and successfully commercialized in the
B2B world, in which audiences are more clearly defined and trends more easily
identified.

What does this mean for the business-to-business marketer?

Business-to-business marketers have both the time and the indicative data from
upstream to carefully assess their options before making a decision.  As competitors
are in the same position, this makes gathering good quality intelligence absolutely
critical.  B2B marketers are advised to undertake detailed market research,
combining this with upstream information in order to build up a complete market
intelligence picture.
9. Consumer Markets Rely Far More On Packaging
There has been a huge growth in the packaging of consumer products in recent
years, as marketers seek not only to protect and preserve their products, but also to
use the packaging as a vehicle through which aspirations and desires are
transmitted to the customer.  Consumers being less rational than business-to-
business buyers, this approach has proved enormously successful at adding
perceived value to products.

Adding value through packaging – making packaging a key part of the extended offer
– is far more difficult to achieve in business-to-business markets, where product is
judged primarily on technical criteria and the extended offer is built around
relationships rather than dreams, aspirations or appearances.

What does this mean for the business-to-business marketer?

The implications for business-to-business marketers are clear – packaging, like

product, plays a primarily functional role.  Resources are far better directed towards
developing relationships and expertise.

10. Sub-Brands Are Less Effective In B2B Markets

We have frequently argued that the most neglected B2B marketing opportunity is the
building of a strong brand.  In a world where it is becoming increasingly difficult to
distinguish one product from another, it is even more important to have the support
of a powerful brand.

The role of brand in the B2B buying decision is thought to have increased over the
past decade (it used to be said that its influence was 5% of the B2B buying decision
against 30-40% of the consumer buying decision) and there is plenty of scope for
B2B companies to differentiate themselves further through effective branding
strategies.

It must be said, however, that B2B companies are generally far worse at both
developing and implementing branding strategies than are B2C companies.  B2B
companies tend to be bad at recognizing that branding strategy should envelop
every customer touchpoint and aspect of the business – an unknowledgeable
technical sales-team can undo the work of a branding communications campaign
instantly.
In their rush to embrace branding strategy, many B2B companies have over-
compensated and developed huge numbers of sub-brands for every aspect of their
product range.  This kind of approach can be effective in consumer markets, where
diversified companies such as Unilever recognize the need to build relationships with
segments and sub-segments of numerous target audiences.  In business-to-
business markets, however, target audiences are smaller and as explained above
place more emphasis on relationships than brand when it comes to making the
purchase decision.  Most importantly, business-to-business buyers are generally
more informed than consumers and tend to regard multiple brands and sub-brands
as pointless and confusing, perhaps even insulting.

What does this mean for the business-to-business marketer?

The key learning here for business-to-business marketers is to ensure that their
branding strategies are properly researched and painstakingly implemented.  Brand
strategy research should encompass every customer touchpoint within the business,
and beyond, acting as a framework through which the company’s values are
transmitted.  Above all, business-to-business marketers should recognize that ‘less
is more’ when it comes to branding – far better to have one coherent brand which
customers, stakeholders and employees alike can relate to, rather than a confusing
raft of sub-brands, which hinder rather than promote meaningful choice and amount
to little more than product identifiers.

Characteristics of Business Market

Some of the characteristics of business markets are given below, we’ll
discuss them one by one. Here it follows;
1.Market Structure and Demand
Business markets contain fewer but larger buyers. When it comes to the
customers in the business market, then it has very few customers. Those
business buyers won’t buy your product or service in small quantities.
They’ll buy in large quantities, their orders are big.
Business customers are more geographically concentrated. Our mind is
accustomed to the consumer market, where there’ll be shops in the market.
People would visit the shop or the market and they’d buy stuff. But the
business market doesn’t work that way, business customers and buyers
are concentrated at vast geographical distances.
Business buyers demand is derived from final consumer demand. The only
reason one business would buy the products and service from the other
business, it is because its final products are selling in the market. Once the
final products stop selling in the market; then the business stops buying the
products.
Demand in many business markets is more inelastic – not affected as much in
the short run by price changes. The good thing about the demand in the
business market; that the prices don’t usually affect the demands. Prices
don’t much change.
Demand in business markets fluctuates more quickly.  Businesses usually
prefer to buy products at a very low price, because they have to add a value
in it to make the final product for the end consumers. When the prices get
higher because of number of reasons, the business would stop buying the
products. It’s because they know that the final product would be costly.
High product price won’t sell in the market.
2.Nature of the Buying Unit
Business purchases involve more buyers. When it comes to the purchases of
business, then a business buys and sells at the same time to other
businesses.
Business buying involves a more professional purchasing effort. The
purchasing process of the business market is very detail-oriented.
Businesses prefer to buy products from those businesses who deliver them
the required product. It usually involves many technical professionals who
check the sustainability of the product, once they approve, then the
company purchases the product. 
3. Kind of Decisions & the Decision Process
Business buyers usually face more complex buying decisions. Business buying
decisions aren’t really simple, because they’re usually long terms based.
The company makes sure that the person they’re going to be in business
with, they should be the right people. Businesses check the backgrounds
and histories of each other business before signing the deal.
The business buying process is more formalized. Businesses usually follow
the complete chain of command and the protocol of their organization
before making the final decision. Having said before that it’s a long term
relationship, that’s why both businesses make sure that all sides are
covered.
Buyers and sellers work more closely to build a close long-run run
relationship. When both companies know that they can be a good buyer-
seller after verifying each other’s backgrounds, then they prefer to
collaborate to make the final decision. It’s because they both know that it’s
in their interest to work together.
Types of Business Markets with Examples
Whether it’s a product business or service, business always sells
something to keep things flowing. Here are some of the types of business
markets in terms of selling, which are as follows;

Business-to-Consumer Market
Business-to-Consumer is the type of market where businesses and
marketers advertise their products or services by using different media
channels to reach a large audience. B2C is one of the biggest types of
market because it targets the mass audience across at every level.

Examples. Clothing, fashion, grocery stores, and food items are some of the
common examples of B2C market where businesses target the large
audience, who ultimately consume the product or service.
Business-to-Business market
Business-to-business is the type of market where businesses sell their
products or services to other businesses.

Examples. Sale of raw material to the construction company where one

business sells products to the other business; office furniture, and an
accounting firm is providing services to different businesses.

Organizational Buyer Behavior

Individual consumers are not the only buyers in a market. Companies and other
organizations also need goods and services to operate, run their businesses, and
produce the offerings they provide to one another and to consumers. These
organizations, which include producers, resellers, government and nonprofit groups,
buy a huge variety of products including equipment, raw materials, finished goods,
labor, and other services. Some organizations sell exclusively to other organizations
and never come into contact with consumer buyers.

B2B markets have their and decision-making dynamics that are important to
understand for two major reasons. First, when you are a member of an organization,
it’s helpful to appreciate how and why organization buying decisions are different
from the decisions you make as an individual consumer. Second, many marketing
roles focus on B2B rather than B2C marketing, or they may be a combination of the
two. If you have opportunities to work in B2B marketing, you need to recognize how
the decision-making process differs in order to create effective marketing for B2B
customers and target segments.

Who Are the Organizational Buyers?

Unlike the consumer buying process, multiple individuals are usually involved in

making B2B buying decisions. A purchasing agent or procurement team (also called
a buying center) may also be involved to help move the decision through
the organization’s decision process and to negotiate advantageous terms of sale.

Organizations define and enforce rules for making buying decisions with purchasing
policies, processes, and systems designed to ensure the right people have oversight
and final approval of these decisions. Typically, more levels of consideration, review,
and approval are required for more expensive purchases.

For anyone involved in B2B marketing or selling, it is important to know:

 Who will take part in the buying process?

 What criteria does each person use to evaluate prospective suppliers?
 What level of influence does each member of the process have?
 What interpersonal, psychological, or other factors about the decision team might
influence this buying process?
 How well do the individuals work together as a group?
  Who makes the final decision to buy?

Because every organization is unique, the answers to these questions will be

different for every organization and every sale. Marketers should understand their
target segments well enough to identify commonalities where they exist and then
create effective marketing to address the common roles and decision makers
identified.

For example, a technology company selling a travel- and expense-management

system should expect decision makers from several departments to be involved in
the purchasing decision: the HR department (to ensure the system is user-friendly
for employees and compatible with company travel policies), the
accounting department (to ensure the system is a good complement to the
company’s accounting and finance systems), and the IT department (to ensure the
system is compatible with the other systems and technologies the company uses).
Marketers should focus first on managers in the group most responsible for travel
and expense policy—typically the HR department. As the company generates
serious interest and leads, marketing and sales staff should take the time to learn
about decision dynamics within each organization considering the system. Marketing
and sales support activities can focus on getting each of the essential decision
makers acquainted with the product and then convincing them to make it their final
selection.

B2B Buying Situations

Who makes the buying decision depends, in part, on the situation. Common types of
buying situations include the straight rebuy, the modified rebuy, and the new task.

The straight rebuy is the simplest situation: the organization reorders a good or

service without any modifications. These transactions are usually routine and may
handled entirely by the purchasing department because the initial selection of the
product and supplier already took place. With the modified rebuy, the buyer wants
to reorder a product but with some modification to the product specifications, prices,
or other aspects of the order. In this situation, a purchasing agent may be involved in
negotiating the terms for the new order, and several other participants who will use
the product may participate in the buying decision.
The buying situation is a new task when an organization considers buying a product
for the first time. The number of participants and the amount of information sought
tend to increase with the cost and risks associated with the transaction. For
marketers, the new task is the best opportunity for winning new business because
there is no need to displace another supplier (which would be the case for the rebuy
situations).
For sales opportunities that are new tasks, there may be an opportunity for
a solution sale (sometimes called system selling). In these opportunities, the buyer
may be interested in a provider that offers a complete package or solution for the
business problem, rather than individual components that address separate
aspects of the problem. Providers win these opportunities by being the company that
has both the vision and the capability to provide combination of products,
technologies, and services that address the problem–and to make everything work
together smoothly. Solution sales are particularly common in the technology industry.

Characteristics of Organizational Buying

B2B purchasing decisions include levels of complexity that are unique to

organizations and the environments in which they operate.

Timing Complexity

The organizational decision process frequently spans a long period of time, which
creates a significant lag between the marketer’s initial contact with the customer and
the purchasing decision. In some situations, organizational buying can move very
quickly, but it is more likely to be slow. When personnel change, go on leave, or get
reassigned to other projects, the decision process can take even longer as new
players and new priorities or requirements are introduced. Since a variety of factors
can enter the picture during the longer decision cycles of B2B transactions, the
marketer’s ability to monitor and adjust to these changes is critical.

Technical Complexity

Organizational buying decisions frequently involve a range of complex technical

dimensions. These could be complex technical specifications of the physical
products, or complex technical specifications associated with services, timing, and
terms of delivery and payment. Purchases need to fit into the broader supply chain
an organization uses to operate and produce its own products, and the payment
schedule needs to align with the organization’s budget and fiscal plans. For
example, a purchasing agent for Volvo automobiles must consider a number of
technical factors before ordering a radio to be installed in a new vehicle model. The
electronic system, the acoustics of the interior, and the shape of the dashboard are a
few of these considerations.

Organizational Complexity

Because every organization is unique, it is nearly impossible to group them into

precise categories with regard to dynamics of buying decisions. Each organization
has a characteristic way of functioning, as well as a personality and unique culture.
Each organization has its own business philosophy that guides its actions in
resolving conflicts, handling uncertainty and risk, searching for solutions, and
adapting to change. Marketing and sales staff need to learn about each customer or
prospect and how to work with them to effectively navigate the product selection
process.

Unique Factors Influencing B2B Buying Behavior

Because organizations are made up of individual people, many of the same

influencing factors discussed earlier in this module apply in B2B settings: situational,
personal, psychological, and social factors. At the same time, B2B purchasing
decisions are influenced by a variety of factors that are unique to organizations, the
people they employ, and the broader business environment.

Individual Factors

B2B decisions are influenced by characteristics of the individuals involved in the

selection process. A person’s job position, tenure, and level in the organization may
all play a role influencing a purchasing decision. Additionally, a decision
maker’s relationships with peers and managers could lead them to exert more–or
less–influence over the final selection. Individuals’ professional motives, personal
style, and credibility as a colleague, manager, or leader may play a role. To illustrate,
a new department head might want to introduce an updated technology system to
help her organization work more productively. However, her short time in the role
and rivalry from other department heads could slow down a buying decision until she
has proven her leadership capability and made a strong case for investment in the
new technology.

Organizational Factors

Purchasing decisions, especially big-ticket expenditures, may be influenced by the

organization’s strategies, priorities, and performance. Generally the decision makers
and the providers competing for the business must present a compelling explanation
for how the new purchase will help the organization become more effective at
achieving its mission and goals. If a company goes through a quarter with poor sales
performance, for example, the management team might slow down or halt
purchasing decisions until performance improves. As suggested above,
organizational structure plays a central role determining who participates in the
buying process and what that process entails. Internal organizational politics and
culture may also impact who the decision makers are, what power they exert in the
decision, the pace of the buying process, and so forth. An organization’s existing
systems, products, or technology might also influence the buying process when new
purchases need to be compatible with whatever is already in place.

Business Environment

B2B purchasing is also influenced by factors in the external business environment.

The health of the economy and the company’s industry may determine whether an
organization chooses to move ahead with a significant purchase or hold off until
economic indicators improve. Competitive pressures can create a strong sense of
urgency around organizational decision making and purchasing. For instance, if a
leading competitor introduces a compelling new product feature that causes your
organization to lose business, managers might be anxious to move forward with a
project or purchase that can help them regain a competitive edge. When new
technology becomes available that can improve products, services, processes, or
efficiency, it can create demand and sales opportunities among companies that want
the new technology in order to compete more effectively.
Government and the regulatory environment can also influence purchasing
decisions. Governmental organizations often have very strict, highly regulated
purchasing processes to prevent corruption, and companies must comply with these
regulations in order to win government contracts and business. Similarly, lawmakers
or governmental agencies might create new laws and regulations that require
organizations to alter how they do business—or face penalties. In these situations,
organizations tend to be highly motivated to do whatever it takes, including
purchasing new products or altering how they operate, in order to comply.

The Organizational Buying Process

Making B2B Buying Decisions

The organizational buying process contains eight stages, which are listed in the
figure below. Although these stages parallel those of the consumer buying process,
there are important differences that have a direct bearing on the marketing strategy.
The complete process occurs only in the case of a new task. In virtually all situations,
the organizational buying process is more formal than the consumer buying process.

It is also worth noting that B2B buying decisions tend to be more information-
intensive than consumer buying decisions. As the marketing opportunity progresses,
buyers seek detailed information to guide their choices. It is unlikely that a B2B buyer
—in contrast to a consumer—would ever make a final buying decision based solely
on the information they see in a standard advertisement.

The organization buying process stages are described below.

Problem Recognition

The process begins when someone in the organization recognizes a problem or

need that can be met by acquiring a good or service. Problem recognition can occur
as a result of internal or external stimuli. Internal stimuli can be a business problem
or need that surfaces through internal operations or the actions of managers or
employees. External stimuli can be a presentation by a salesperson, an ad,
information picked up at a trade show, or a new competitive development.

General Need Description

Once they recognize that a need exists, the buyers must describe it thoroughly to
make sure that everyone understands both the need and the nature of solution the
organization should seek. Working with engineers, users, purchasing agents, and
others, the buyer identifies and prioritizes important product characteristics. Armed
with knowledge, this buyer understands virtually all the product-related concerns of a
typical customer.

From a marketing strategy perspective, there is opportunity to influence purchasing

decisions at this stage by providing information about the nature of the solution you
can provide to address the the organization’s problems. Trade advertising can help
potential customers become aware of what you offer. Web sites, content marketing,
and direct marketing techniques like toll-free numbers and online sales support are
all useful ways to build awareness and help potential customers understand what
you offer and why it is worth exploring. Public relations may play a significant role by
placing stories about your successful customers and innovative achievements in
various trade journals. (Note that the AirCanada video you just watched is an
example of this. The video was created by IBM and is offered as one of many “IBM
client stories.”)

Product Specification

Technical specifications come next in the process. This is usually the responsibility
of the engineering department. Engineers design several alternatives, with detailed
specifications about what the organization requires. These specifications align with
the priority list established earlier.

Supplier Search

The buyer now tries to identify the most appropriate supplier (also called the vendor).
The buyer conducts a standard search to identify which providers offer what they
need, and which ones have a reputation for good quality, good partnership, and
good value for the money. This step virtually always involves using the Internet to
research providers and sift through product and company reviews. Buyers may
consult trade directories and publications, look at published case studies (written or
video), seek out guidance from opinion leaders, and contact peers or colleagues
from other companies for recommendations.

Marketers can participate in this stage by maintaining well-designed Web sites with
useful information and case studies, working with opinion leaders to make
advantageous information available, using content marketing strategies to make
credible information available in sources the buyer is likely to consult, and publishing
case studies about customers using your products successfully. Consultative
selling (also called personal selling) plays a major role as marketers or sales
personnel learn more about the organization’s goals, priorities, and product
specifications and provide helpful information to the buyer about the offerings under
consideration.
Proposal Solicitation

During the next stage of the process, qualified suppliers are invited to submit
proposals. Depending on the nature of the purchase, some suppliers send only a
catalog or a sales representative. More complex purchases typically require
submission of a detailed proposal outlining what the provider can offer to address the
buyer’s needs, along with product specifications, timing, and pricing. Proposal
development requires extensive research, skilled writing, and presentation. For very
large, complex purchasing decisions, such as the solution sale described above, the
delivery of a proposal could be comparable to a complete marketing strategy
targeting an individual customer. Organizations that respond to many proposals
typically have a dedicated proposal-writing team working closely with sales and
marketing personnel to deliver compelling, well-crafted proposals.

Supplier Selection

At this stage, the buyer screens the proposals and makes a choice. A significant part
of this selection involves evaluating the vendors under consideration. The selection
process involves thorough review of the proposals submitted, as well as
consideration of vendor capabilities, reputation, customer references, warranties,
and so on. Proposals may be scored by different decision makers using a common
set of criteria. Often the selection process narrows down vendors to a short list of
highest-scoring proposals. Then the short-listed vendors are invited to meet with the
buyer(s) virtually or in person to discuss the proposal and address any questions,
concerns, or gaps. At this stage, the buy may attempt to negotiate final,
advantageous terms with each of the short-listed vendors. Negotiation points may
cover product quantity, specifications, pricing, timing, delivery, and other terms of
sale. Ultimately the decision makers finalize their selection and communicate it
internally and to the vendors who submitted proposals.

Consultative selling and related marketing support are important during this stage.
While there may be procurement rules limiting contact with buyers during the
selection process, it can be helpful to check in periodically with key contacts and
offer any additional information that may be helpful during the selection process. This
phase is an opportunity for companies to demonstrate their responsiveness to
buyers and their needs. Being attentive during this stage can set a positive tone for
how you will conduct future business.

Order-Routine Specification

The buyer now writes the final order with the chosen supplier, listing the technical
specifications, the quantity needed, the warranty, and so on. At this stage, the
supplier typically works closely with the buyer to manage inventories and deliver on
agreement terms.

Performance Review

In this final stage, the buyer reviews the supplier’s performance and provides
feedback. This may be a very simple or a very complex process, and it may be
initiated by either party, or both. The performance review may lead to changes in
how the organizations work together to improve efficiency, quality, customer
satisfaction, or other aspects of the relationship.

From a marketing perspective this stage provides essential information about how
well the product is meeting customer needs and how to improve delivery in order to
strengthen customer satisfaction and brand loyalty. Happy, successful customers
may be great candidates for published case studies, testimonials, and references for
future customers. Dissatisfied customers provide an excellent opportunity to learn
what isn’t working, demonstrate your responsiveness, and improve.
 Organizational Market Segmentation

Organizational markets can be segmented according to the characteristics of the

organization. This is sometimes referred to as the macro level. Factors that would be
analyses at this level would be:

 Industry sector:Standard industry classification codes (SIC codes) will identify an

organization’s primary business activity. Different industry sectors may have
unique needs from product or service. In the computer hardware and software
market the needs of retailers, financial services companies and local government
will be different.
 Size of the organization:This can be judged using several variables such as the
number of employees, volume of shipments and market share. This method of
segmentation has to be used with caution – just because an organization is large
does not mean that it will be a large purchaser of your product. However, larger
organizations will differ from smaller companies by having more formalized
buying systems and increased specialization of functions.
 Geographic location:Traditional industries can tend to cluster geographically, an
example being the car industry in Detroit,USA. However, even emerging
technologies show a tendency to locate in the same geographical area. The UK
computer industry has clusters in central Scotland (‘SiliconGlen’) and along the
M4 motorway in southern England. Internationally there may well be different
regional variations in purchasing behavior, for example between Western and
Eastern Europe.
 End use application:The way in which a product or service is used by a company
has an important effect on the way the organization views its value. A truck used
twelve hours a day by a quarrying company may represent great value. But for a
construction company that only uses the same piece of equipment for two hours
a day it may represent a much lower value-for-money purchase. Establishing end-
use application can help establish the perception of value that will be used in
particular segments.
Organizational markets can also be segmented according to the characteristics of the
decision-making unit; this is sometimes called micro segmentation. The factors used
include:

 The structure of the decision-making unit:This is directly related to the models

covered earlier in this chapter on organizational buyer behavior. The type of
individuals involved in the DMU of an organization will vary, as will its size and
complexity.
 The decision-making process:This can be short and straightforward or complex
and time-consuming. This will largely be dependent on the size and complexity of
the DMU.
 Structure of the buying function:The buying function can be centralized or
decentralized. Centralized buying allowsan individual buyer to specialize in
purchasing particular types of product categories.An individual is responsible for
buying much larger volumes per purchase than under a decentralized structure.
This allows them to negotiate larger discounts. In centralized structures the
professional buyer has much greater influence within the DMU over technical
advisers compared with buyers in decentralized systems.
 Attitude towards innovation:There may be specific characteristics that mark out
innovative companies. Identifying companies that exhibit this profile will allow a
segment to be established at which new products can be initially targeted. There
are organizations that are followers and only try product once innovators have
already adopted it. Identifying these companies can also be useful to a marketer.
 Key criteria used in reaching decision on a purchase:These can include product
quality, price, technical support,supply continuity and reliability of prompt
deliveries.
 Personal characteristics of decision makers:Factors such as age, educational
background, attitude toward risk and style of decision making can potentially be
used to segment the market. summarizes macro and micro segmentation.

TYPES OF ORGANIZATION MARKETS

Organizational markets are markets in which companies and individuals purchase

goods for purposes other than personal consumption. These markets are
characterized by having fewer buyers, but larger purchase volumes, than consumer
markets do. Their marketing is focused on corporate goals, return on investment
and technical suitability, rather than the styles, fads and perceived values found in
consumer markets. The main organizational market types are producers, resellers
and institutions.

One of the first tasks of marketing is to segment the market so that sellers can
apply marketing strategies that are appropriate and most effective for a particular
segment. Examining the type of organization is one way to segment non-consumer
markets. Producers, resellers and institutions require different approaches, while
organizations within one of these three segments have much in common. This
segmentation allows marketers to develop particular approaches to a potential
customer in government, while handling a wholesale company in a completely
different manner.

Producers

Producers buy raw materials and machinery, often from other producers but
sometimes from resellers. Marketing to producers requires technical expertise and
a knowledge of the producer's operations. Typical marketing strategies involve
identifying problems in the producer's industry or particular operations and
proposing solutions that are cost-effective. Producers have a long-term view of
markets since their needs change slowly. As a result, marketing to producers is
usually based on long-term relationships.

Resellers

Resellers include wholesale companies and retailers, as well as niche suppliers

that specialize in particular areas where they have expertise. The key factor for
marketing to resellers is to be aware of their added-value proposition. If the reseller
is a wholesale company offering low prices for high volume, marketers must
develop proposals that address this characteristic. If the company buys specialized
equipment according to specifications and re-sells it to customers based on high
quality and reliability, the marketing will be different.

Institutions

The institutional market includes governments and non-profits. Marketing to these

organizations is highly specialized, with marketers relying on long-term
relationships as well as large, one-time opportunities. The purchasing process for
governments tends to be highly bureaucratic, and a familiarity with government
procedures is a prerequisite. Where the idea of value in the other two market
segments tends toward the economic, value for these institutions exists more in
terms of benefits rather than economics. Marketers must structure proposals
keeping this in mind.

GOVT. AS A CUSTOMER

Government contracts not only provide financial benefits but also demonstrates your
ability to support and supply a customer that is expecting a high standard.
Many businesses consider working with government to grow and build a sustainable
revenue base. However, a large number also shy away from tendering for these
contracts because they are unsure the government will engage with them.
Maybe they don’t think they are big enough to support government? Or are unaware
of the opportunities that are available? Is it the perception that government
customers can be difficult to work with?
Maybe it’s time to re-evaluate. Government customers can be extremely lucrative
and an excellent opportunity to develop your business. But you need to be ready to
invest your time, resources and focus in order to make the most of any opportunities
you are successful with for the long term.
Here’s our top 5 reasons to consider government as a customer:
GOVERNMENT CONTRACTS OFFER NEW OPPORTUNITIES
Government work comes in all shapes and sizes and most importantly provides
interesting and varied work that is not available in the private sector. This can
provide you a competitive advantage in your industry, opening a whole range of
opportunities.
It is a common misconception that “government wouldn’t be interested in what I do”,
which is often not true. There are many facets to government, and they are a
massive consumer of all types of products and services.
tHEY’RE NOT ALWAYS AFTER THE CHEAPEST OPTION
There is a difference between cost and value, and often you’ll find that government
customers are after the latter. In fact, government often see prices that are too low
as a risk. That’s because they have a vested interest in your sustainability and if it
seems like your margins are too low there’s a good chance that your cash flow is
under some serious pressure, which could jeopardise your ability to supply them.
Government are great payers
Unlike the private sector and commercial work where you may experience long
payment terms, government have a policy that invoices must be paid within 30 days.
They often award longer term multi-year contracts, providing a steady cash flow
stream that’s guaranteed to be paid, taking the pressure off cash flow and supporting
your long-term growth strategy.
It can lead to big opportunities
There’s an old adage – the hardest government contract to win is your first. If you do
a good job, it’s very likely you’ll be invited back. Usually your contract will grow over
its life, and new work is frequently offered whilst you’re already supplying them,
especially if you have a focus on adding value to their needs.

Commercial enterprises
Commercial enterprise means any for-profit activity formed for the ongoing conduct
of lawful business including, but not limited to, a sole proprietorship, partnership
(whether limited or general), holding company, joint venture, corporation, business
trust, or other entity which may be publicly or privately owned.
Institutional customer means any corporation, partnership, limited li- ability company,
trust or other non- natural person that has, or is con- trolled by a non-natural person.
Institutions

Institutional markets include nonprofit organizations such as the American Red

Cross, churches, hospitals, charitable organizations, private colleges, civic clubs,
and so on. Like government and for-profit organizations, they buy a huge quantity of
products and services. Holding costs down is especially important to them. The
lower their costs are, the more people they can provide their services to.

McDonald’s, for example, buys a lot of toilet paper, napkins, bags, employee
uniforms, and so forth.

Institutional markets involve selling nonprofit organizations. Think of it as selling

products to institutions like schools, hospitals, nursing homes, corporations like the
American Red Cross. This usually involves massive supply issues – like how many
rolls of toilet paper does a school need each month, etc. It applies to anything an
institution might need – paper clips, food supplies, etc. A good example is cafeterias
in the US and local government buildings, schools and universities, prisons,
hospitals, or similar organizations. These B2B buyers are interested in buying local
food and other products leading to lucrative marketing and sales opportunities for
medium to large-scale firms.