Business-to-Business (B2B)

Marketing
 BUSINESS MARKETING
IS
• MARKETING OF GOODS AND SERVICES TO:
– Companies
– Government Bodies
– Institutions (i.e. hospitals)
– Non-Profit Organizations
FOR
• USE IN PRODUCING THEIR PRODUCTS AND/OR TO
FACILITATE THEIR OPERATIONS
 Sectors of the B2B Market
• Producers – includes all manufacturers and service
providers; buy goods to use in making other goods or
services
• Middlemen – buy goods for resale; includes all
retailers and wholesalers (distributors, vendors)
• Government – includes all central, state, and local
governments and govt. agencies
• Nonprofit – includes charities, schools and
universities, museums, etc.
 Marketing to Businesses
• The goal of B2B marketing is to convert prospects into
customers.
• The B2B marketing process is much more involved and
longer.
• It is important for a B2B company to focus on building
relationships, which also spread a positive word of
mouth
• B2B companies are focused on educating various
companies as they sell complicated products
• Marketing techniques such as newsletters, and product
or service coverage &customized & direct selling is used
 Marketing to Consumers

• The goal of B2C marketing is to convert shoppers

into buyers as consistently as possible
• B2C marketing campaigns are focused entirely on
transactions which are shorter in duration and
designed specifically to capture a potential
customers interest right away.
• B2C marketing strategies focuses more on
special deals, discounts or vouches in order to
attract customers.
 B2B versus B2C Marketing
• B2C=Business-to-Consumer Market= businesses sell products
and services to consumers for household or personal use
• B2B=Business-to-Business Market= businesses sell products
and services to other businesses for use in their daily
operations or for making other products and services
• B2B generally takes shorter & more direct channels of
communication
• B2B promotional budgets are lesser as compared to B2C
advertising
• B2C sale is to an individual whereas B2B sale is to an
organization
• B2B businesses include complexity of business products &
services & fewer customers buying larger volume
Characteristic Features of Industrial or
B2B Products

• Limited no. of buyers.

• Scale of purchase is greater.
• Complex nature of products.
• Buying is a group process.
• Suppliers Reputation
• Rational Buying Motive
• Emphasis is on personal selling
• Short Distribution channel.
B2B—The Products
 Classification of B2B Products

I. Materials & Parts

 Raw Materials (basic products to enter
production process with no alterations)
 Manufactured Materials & Component Parts
(subjected to some amount of processing eg:
acids, steel)
 Classification of B2B Products…
II. Capital Items
 Installations/ Heavy equipment (turbines,
generators, furnaces, special type of
machines)
 Accessories/Light equipment (small
electronic motors, type writers, computer
terminals)
 Plant & Buildings (real estate property of a
company)
 Classification of B2B Products…

III. Supplies & Services (support the operation of

the purchasing organization; treated as
operating expenses)
 Supplies (paints, soaps, oil, greases)
 Services (building maintenance services,
audit services, legal services)
 The Target Market
• Target market for B2B products is smaller
• Has more specialized & standardized needs
• Multiple influencers on the purchase decision
 Pricing
• Perception of the customers should be
satisfaction of their complex business
requirements
• Customers can be convinced to pay premium
prices
• Payment terms in line with the pricing
 Promotion
• Specific trade shows
• Industry analysts
• Publications
• Advertising
• Direct mail
 Place (Sales & Distribution)
• Selling takes place through direct sales force
• Important that the sales force is hands on
with the product
• Sales force should be knowledge, experienced
& should be focused on an informative
approach towards the clients
• Even for sales through distribution channels,
sales staff should be trained with the above
traits
 Is it a B2C or a B2B Transaction?
You buy a horn for your bike.
Hero Honda buys the same horns for its
bikes
TCS buys soft drinks for its cafeterias.
The Indian Railways buys…anything.
 B2B versus B2C Marketing
Characteristic B2B Market B2C Market
Sales volume Greater Smaller

Purchase volume Greater Smaller

Number of buyers Fewer Many

Size of individual buyers Larger Smaller

Location of buyers Concentrated Diffuse

Buyer-seller relationship Closer More Impersonal

Nature of channel More direct Less direct

Buying influences Multiple Single/Multiple

Type of negotiations More complex Simpler

Key promotion method Direct Selling Advertising

Buying Decisions
 The Buyer Difference
• B2B vs. B2C marketing strategies also differ because of
the buyer.
• When it comes to the business buyer they are more
sophisticated,
• Better understanding of the product or service offered
• Exactly specifying what his want or need to buy a
particular product in order to help their company be
profitable, competitive and successful.
• Buying decisions are made by a number of people & a
collective step is taken forward
• B2C buyer able to adjust with substitutes & buying
decisions are individual/joint
 Factors Involved in Industrial Buyer’s
Decision Making Process
A. Continuous & Reliable Product Performance
• Product performing to customer’s satisfaction
• Concern is to maximize benefits from the product
• Parameters like MTBF (mean time between two
failures) & MTR (mean time to restore) in case of a
breakdown

B. Guaranteed Delivery
• Right product mix, in the right quantity as per the
committed schedule
• Essential for product delivery on time to the customer
Factors Involved in Industrial Buyer’s
Decision Making Process
C. Technology Fit
• Focus on hand-in-hand technology
integration between buyers & suppliers
D. Price
• B2B buyers look out for suppliers offering
them above 3 elements @ lowest price
• Supplier’s costs, credit terms, payment terms
& financial agreements also go in a long way
Factors Involved in Industrial Buyer’s
Decision Making Process
E. Service
• Not just repair & maintenance in shortest
time but also complaint management
F. Company Sales Force
• Should be knowledgeable, available & willing
to help to resolve problems
• Supplier’s operation teams can help explain
product features & resolve application
problems
 Factors Differentiating Organizational
Buyer from a Household buyer
A. Buying Motives
• Household Buyers buys for self consumption, whereas
B2B buyer buys for adding value to the product & then
sell it to other customers
• In this sense, the B2B demand is a derived demand (based
on end customer’s demand)
• Organizations may also buy products for their own use
like computers, faxes, furniture, etc.

B. Size of the Buyer

• Household Buyers are large in no. whereas B2B are few
• Annual purchase budget for B2B runs into lakhs of rupees
 Factors Differentiating Organizational
Buyer from a Household buyer…
C. Risks in Purchases
• Higher purchase risks for B2B
• Previous experience with supplier, vendor image
& supplier’s standing within the industry play a
role

D. Concentration of Buyers
• B2B are generally concentrated in a same
geographical area as compared to Household
Buyers spread across the country
 Factors Differentiating Organizational
Buyer from a Household buyer…
E. Organizational purchase decisions are joint & Household Buying
individuality may be prevalent
• B2B purchase decisions are rational, whereas Household Buying
purchase decisions are social/ psychological needs

F. Adherence to Specifications
• Rigid adherence to specification for B2B buyers
• Product quality, after sales service, market share are dependent on
supplier’s ability for adherence to specifications
• No deviations accepted from the laid down specifications
• Household Buyers willing to accept substitutes & brand switching is
relatively high
 Decision Making Process
1. Need Recognition (customer has a problem &
looking for acceptable solutions; exact
specifications of the product not defined)
2. Product Specification & Service Requirements
laid
3. Laying down qualifications -technical &
commercial, for Potential Vendors (way to
screen the vendors)
4. Inviting Proposals from Qualified Vendors
5. Evaluating the Proposals
 Decision Making Process…
6. Selecting the Vendor (vendors assessed on
competence to meet customer requirements;
single or multiple supplier; negotiations take
place)
7. Determination of Order size & Placement of
Order
8. Review & Feedback (buyer reviews performance
of vendors & obtains feedback from his
departments; result is repeating, reducing or
increasing his purchase)
 Three Kinds of
Organizational Purchases
• Straight rebuy
– a routine repurchase that may have been made many times
before
– Characterized by vendor loyalty, review & feedback

• Modified rebuy
– Happens due to product & quantity type specification
changes
– Happens when a new competitor enters the market offering
the product @ lower price & more favorable terms &
conditions than the existing vendor
– Customer goes through the process of vendor qualifications
to review & feedback in the Decision Making Stage
 Three Kinds of
Organizational Purchases
• New-task buy
– a firm has a new need and the buyer wants a great deal
of information
– Characterized by first time purchase of the products
– Involves considerable search for alternatives
– All eight buying phases come into play
 Step Activity of Purchase Process

1. User dept issues a purchase requisition (PR)

2. Check if material in stock, if yes materials
issued to the dept. if no step (3)
3. Identify the potential suppliers, get
quotations, negotiate, select supplier, issue
purchase order (PO)
4. Vendor acknowledges PO & sends the
material
Step Activity of Purchase Process…
5. The material is dispatched along with dispatch
details like invoice & lorry receipt number &
date, invoice value & transporter name
6. On receipt of material, the material is
checked(quantity & quality with quality control
measures)
7. Purchase department issues supplier invoice to
accounts dept for payment
8. Payment done by accounts dept
 Purchasing in Government Units

1. Get the name of the company & products

registered with govt units
2. Inspection by the govt inspector
3. For standard products & services, tender
notices are given in national newspapers
4. Suppliers required to submit tender offers
5. Based on the lowest prices quoted, orders
are given to one or multiple suppliers
Webster Wind Model
The Sheth Model of Industrial Buying
Behavior
Situational
Factors
(economic Supplier or Brand
factors, labor Choice
disputes,
M&A)
 Managing Channel Members
A. Selecting Intermediaries
 Continuous evaluation process
 Criteria depends on industrial firm’s
product/experience; qualification of supplier

B. Motivating Middlemen
 Vendor managed inventory system
 Reasonable discounts & commissions
 Commission should be in line with industry
norms
 Managing Channel Members …

C. Controlling channel conflicts

 The manufacturer feels that distributor may
not be giving adequate attention to
company's products
 Manufacturer wants a dealer to carry higher
inventory
 Distributor feels that commission offered by
manufacturer is not attractive
 Managing Channel Members …
D. Evaluating Channel Members
 Sales achieved vs sales quota
 Average inventory levels
 Support for new products
 New customers generated
 Customer complaints
 Buying center
• Role keepers have different tasks – not
mandatory

• User
• Buyer
• Influencer
• Gatekeeper
• Decider

Mag. Maria Peer 38

 User
• Person working with the product
• Generally ‘shopfloor individuals‘
• Interested in benefits and unobstructed
function of the product & hassle free
production
• Large knowhow and preconceived opinion
• Lay down the product specifications

Mag. Maria Peer 39

 Buyer

• Formal authority to sign contracts

• Member of purchasing department
• Influences the vendor selection
• Not in technical details
• Main criteria: price + terms and conditions of
the contract

Mag. Maria Peer 40

 Influencer

• A person with high technical knowledge and

practical experience
• May be or may not be in the organization
• Outsiders, like consultants play a significant
role

Mag. Maria Peer 41

 Gatekeeper

• facilitates flow of information within the

organization
• Role could be played by receptionist or a
secretary
• Important source of information
• Technical parameters are not all that
important

Mag. Maria Peer 42

 Decider

• Right to say yes or no

• Mightiest person
• Considers both technical & economic factors
along with price, payment options & delivery
schedules

Mag. Maria Peer 43

 BUSINESS TO BUSINESS:
IT IS ALL ABOUT DEMAND

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

• INELASTIC DEMAND
– Increase in price does not necessarily lowers the
demand
What’s Driving Growth in B2B Marketing

• 3 “revolutions” majorly responsible

I. Technological Revolution
 changing @ an unprecedented faster pace
 technology & business strategy go hand in
hand
II.Entrepreneurial Revolution
 adaptability, flexibility, aggressiveness &
innovation
What’s Driving Growth in B2B Marketing…

III. Market Itself

 competitive than ever before
 companies moving beyond traditional sets
of framework
 relationships, partnerships & alliances
define the market today
 marketers taking care of untapped needs
 Types of E-Commerce Sites
• Search Tool Sites
• Collaboration Hubs
• Communities
• Seller’s Sites (provide info and take orders)
• Catalog Sites
 References
• Marketing Management (Rajan Saxena)
• Industrial Marketing (Krishna K Havaldar)
THANK YOU