Business-to-Business Marketing

Session1-2 : Introduction to the

concepts
Faculty – Asif Zameer
 B2B Defined

• The management process responsible for

the facilitation of exchange between
producers of goods and services and their
organisational customers.
• B2B marketing and purchasing is a
complex and risky business involving a
number of different parties.
Flows within a B2B market
 What are B2B markets?

In one way or the other, almost all companies are engaged in the business
markets
In general
* * * ** * B2B
Supplier Manufacturer Distributor Retailer Consumer
market
** B2C
market

In industrial markets
* * * * *
Supplier Manufacturer Manufacturer Distributo Manufacturer Customer
1 2 r 3

B2B markets comprise of material and parts, capital items and supplier of
services (Kotler and
Waldemar 2006)
Differences between B2B and
consumer marketing (1 of 3)
Differences between B2B and
consumer marketing (2 of 3)
Differences between B2B and
consumer marketing (3 of 3)
 B2B is not equal to B2C

• Complexity: requires qualified experts on both sides; tend to be

individual solutions that require high levels of fine tuning; information
needs higher

• Demand: demand is generally derived pulled through the value chain as

a result of demand for the final end product.

• Internationality: industrial products are mostly similar across the world,

requiring much less adaption in cross-border transactions

• Organisational Buying: Fewer customers (but larger volumes) than

B2C: mostly Users, OEMs and Middlemen.

• Buying Situation: B2B markets looks at closer and longer lasting

supplier –customer relationships; Straight re-buy, modified re-buy, new
task
Basic Concepts – Business Markets

• Business Markets are firms, institutions, or

governments that acquire products and
services.

• Consist of all organizations that purchase goods

& services in order to create their own goods &
services.
 Business Markets
• Generally all the business firms are part of the
value chain which ends at general consumers
ultimately.
• This market has larger but fewer customers
than consumer markets.
• Purchases are of significantly large value
having complex economic, technical and
financial considerations.
 Business Markets
Markets for products and services
Local to international
– Bought by GE

• Businesses
• Government bodies
• Institutions
– For consumption
– For use
– For resale

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 The Consumer Market (B2C) and the Business Market (B2B) at
Dell, Inc.

Dell, Inc.

B2C B2B

Customers
Individuals & Businesses Institutions Government
Households Global Healthcare Federal
Large Education State
corporations Local
Small & Medium
sized businesses

Selected
Products PC’s PC’s
Printers Enterprise Storage
Consumer Electronics Servers
Simple Service Complex Service Offerings
Agreements
 A Market Driven Firm
Has:
Market sensing capability…company’s ability
to sense change and to anticipate customer
responses
Customer linking…the ability to develop and
manage close customer relationships
 Marketing’s Cross Functional Relationship

Business marketing planning must

be coordinated and synchronized
with corresponding planning efforts.

Developed by Cool Pictures and MultiMedia Presentations

 The Supply Chain

Michael Porter and Victor Millar observed that “to gain competitive
advantage over its rivals, a company must either perform these activities at
a lower cost or perform them in a way that leads to differentiation and a
premium (more value).”
 Basics of Business marketing
• It is the process of matching and combining
the capabilities of the supplier with the
desired outcomes of the institutional /
industrial customers.
• Aim is to create value for the ‘customer’s
customer’ and hence, for both the
organizations.
 Guiding Principles of Business Market Management

• Regard value as the cornerstone

• Focus on business market processes
• Accentuate working relationships and
business networks
 Marketing Management Matrix
Functions and Processes

Processes

Understanding Creating Value Delivering Value

Value

F
u Product
n
c Price
t
i Promotion
o
n Place
s
 Business Market Management
Processes and Sub-Processes

Processes

Understanding Creating Value Delivering Value

Value

Sub-Processes
Understanding Crafting Managing New Offering Business Sustaining Reseller Sustaining
Market Gaining
Firms as Customers Market Market Realization Channel Partnerships Customer
Sensing Customers
Offerings Offerings Management Relationships

1-19
4Ps of marketing in B2B framework
• Product – focus changes from just the core
product to total offering.
• Total offering – providing complete solution to
the buyer’s needs. Blending of product,
services, delivery, customization based on the
product category.
 …contd.
• Price – Rarely B2B deals happen on MRP or
company list prices.
• Normally price fixation is at the end of
complex negotiations. Much more dynamic
than in consumer marketing.
• May involve far more special discounts,
allowances, financing and flexible credit
terms.
 …contd.
• Place – Role of channel very different.
• Mostly direct relationships with less intermediaries
as volumes are significantly large, number of
customers is less and timing of delivery a crucial
factor.
• Channel more important in Institutional Supplies,
International Business, Government, Specialty
Markets etc.
 …contd.
• Promotions – different emphasis from CPG
marketing on the various tools of the promotion mix.
• In B2B marketing, the power of advertising can
seldom be leveraged.
• Two major differences between CPG and b2b
marketing are closeness and duration of relationship.
Hence personal selling and direct marketing are the
key efforts.
 B2B vs. Consumer marketing -
Differences

• Market structure
B2B Consumer

Geographically Fragmented and

concentrated dispersed
Relatively small in Mass markets
numbers
Oligopolistic Monopolistic
competition competition
 Differences condensed
• Products
B2B Consumer

Customized to user Standardized

preference

Service, delivery and Service, delivery and

availability crucial availability somewhat
important
Purchased for non- Purchased for personal
personal use use
 Differences contd.
• Buyer Behavior
B2B Consumer

Professionally trained Individual

purchasing personnel

Functional decision Family, other social and

influencers at many cultural influences
levels
Task motives Social / psychological
predominate motives
 Differences contd.
• Buyer-seller relationship
B2B Consumer

Technical expertise an Less technical

asset expertise
Interpersonal Non personal
relationships relationships
Significant info Little exchange, more
exchange one way flow
Stable, long term Short-term
relationships relationships leading to
encourage loyalty switching
 Differences contd.
• Channels, promotions, price
B2B Consumer

Shorter, more direct Indirect, longer channels

channels
Emphasis on personal Emphasis on advertising
selling, direct marketing and sales promotion
and PR
Competitive bidding or MRP or listed prices with
complex negotiations small shop based
bargaining
 Differences contd.
• Demand Pattern
B2B Consumer

Derived Direct

Inelastic (short run) Elastic

Volatile and Less volatile
discontinuous
 Explanation of derived demand
• Market or Consumer demand – is the total quantity
of goods or services desired to be bought under
given market conditions ( usually a function of the
price).
• Derived demand – is the demand experienced by the
chain of suppliers and produces that contribute to
the creation of a total offering. Without initial
consumer demand there is no demand on the chain
of suppliers.
 Derived demand
• Because of dependent nature, demand in b2b
markets is leveraged – greater swings occur
than in consumer markets – hence it is more
volatile.
• Also called as– Bullwhip effect.
• Another factor is discontinuous demand.
 Inelastic demand
• In the short run, a manufacturer who has
incorporated a supplier’s product into his design,
may not be able to substitute it easily.
• Specially if the supplier has a patent or a
technological edge on the competition.
• Switching costs can be high.
• In the long run, the manufacturer will look for
alternatives or eliminate the product in his next
generation design.
 Trends and changes in business markets

• Hyper competition – rapidly changing

technologies, emergence of new competition
and unproven methods and techniques.
• Formation of Partner Networks.
• Adoption of e-commerce.
• Supply chain management.
• Time compression – pace of working.
Earlier paradigm
Emerging paradigm