Business Marketing Session 1

Dr.R.Satish Kumar

Introduction to Business-to-Business (B2B) Marketing

What Is Marketing? The process of planning and executing the conception (product), pricing, promotion, and distribution of ideas, goods, and services to create relationships that satisfy individual and organizational objectives.

Business Marketing
Business Marketing is marketing products or services to other companies, government bodies, institutions such as hospitals, and other organizations. Also includes the marketing of products and services that facilitate their operations.

What Distinguishes B2B from B2C?

B2B: goods or services are sold for any use other than personal consumption Note: It is not the nature of the product; it is the reason for the transaction.

B2B versus B2C Marketing

Characteristic
Sales volume Purchase volume

B2B Market
Greater Greater

B2C Market
Smaller Smaller

Number of buyers
Size of individual buyers Location of buyers Buyer-seller relationship Nature of channel Buying influences

Fewer
Larger Concentrated Closer More direct Multiple

Many
Smaller Diffuse More Impersonal Less direct Single/Multiple

Type of negotiations
Use of reciprocity Use of leasing Key promotion method

More complex
Yes Greater Personal Selling

Simpler
No Less Advertising

BUSINESS TO BUSINESS: IT IS ALL ABOUT DEMAND

DERIVED DEMAND
The demand for a companys products comes from (derived) the demand for their customers products. Most demand comes from consumers.

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

Other Characteristics of Business Demand

Inelastic Demand Fluctuating Demand

Major Uses of B2B Products For additional production (e.g., components are combined into subassemblies and become part of the finished product) For use in operations, but not part of the finished product For resale

Classifying Business Goods & Services

3 Main Categories of Products Entering Goods
Become part of the finished product Cost assigned to the manufacturing process

Foundation Goods
Capital Items Typically depreciated over time

Facilitating Products
Support organizational operations Handled as overhead expenses

Classifying Business Goods & Services

Entering Goods Raw Materials
Farm products & natural products Only processed as necessary for handling & transport Require extensive processing

Manufactured Materials & Parts

Any product that has undergone extensive processing prior to purchase Component Materials require additional processing Component Parts generally do not require additional processing

Classifying Business Goods & Services

Foundation Goods Installations
Major long-term investment items Buildings, land, fixed equipment, etc.

Accessory Equipment
Less expensive & short-lived Not considered part of fixed plant Portable tools, PCs, etc.

Classifying Business Goods & Services

Facilitating Products Supplies
Any supplies necessary to maintain the organizations operations

Services
Maintenance & Repair support Advisory support Logistical support

Categories of B2B Customers

Commercial enterprises
Indirect channel members and facilitators OEMs (original equipment manufacturers) Users = customers

Governmental organizations Institutions

Nature of Business Market

Business-to-business (B2B) market is significantly larger than the consumer market. Example: U.S. companies spend more than $300 billion annually just for office and maintenance supplies.

Example: Department of defense budget in a recent year was $500 billion.

Business-to-business (B2B) marketing Organizational sales and purchases of goods and services to support production of other products, to facilitate daily company operations, or for resale.

NATURE OF THE BUSINESS MARKET

NATURE OF THE BUSINESS MARKET

Companies also buy services, such as legal, accounting, office-cleaning, and other services. Some firms focus entirely on business markets. Example: Caterpillar, which makes construction and mining equipment. Diverse market, everything from a box of paper clips to thousands of parts for an automobile manufacturer.

COMPONENTS OF THE BUSINESS MARKET

Four main components: 1. Commercial market Individuals and firms that acquire products to support, directly or indirectly, production of other goods and services. Largest segment of the business market. 2. Trade industries Retailers or wholesalers that purchase products for resale to others.

Also called resellers, marketing intermediaries that operate in the trade sector.

3.Governmentall domestic levels (federal, state, local) and foreign governments; also act as sellerse.g., confiscated goods. 4. Public and private institutions, such as hospitals, churches, colleges and universities, and museums.

B2B MARKETS: THE INTERNET CONNECTION

More than 94 percent of all Internet sales are B2B transactions. Opens up foreign markets to sellers. Largest segment of the business market. DIFFERENCES IN FOREIGN BUSINESS MARKETS May differ due to variations in regulations and cultural practices. Businesses must be willing to adapt to local customs and business practices and research cultural preferences.