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  The process of matching and combining
the capabilities of the supplier with the
desired outcomes of the customer to
create value for the “customer’s
customer.”

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 Product

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 The total offering is created by a
partnership between the buying
organization and the marketing
organization.
 The process creates an augmented
product that is specific to the buying
unit’s needs and maximizes the value
creation capabilities of the marketer.
Core Product
+ Financing Terms
+ Delivery Options
= “Total Offering”
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 The mutually agreed-upon amount that
satisfies both sides in an exchange.
 Often varies from fixed price, with more
special discounts and allowances (in
comparison to consumer markets.)
 May involve things other than a one-time
price payment (such as commissions.)
Price is the measure
of value exchanged
and is determined
by the market—not
by costs.
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 Place is about getting the product to the
customer in order to maximize economic utility.

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 Business-to-business marketing requires a
different emphasis on different parts of the
promotional mix
Consumer V.S. Business to Business

 Emphasis is frequently  Emphasis is frequently

on advertising. on personal selling.
 Communication with  Communication with
customers is often a customers should be a
monologue. dialogue.
 Relationship is often  Relationship is often
brief. long-lasting.

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 Business
Consumer to
Business

 Geographically  Geographically
Dispersed Concentrated
 Mass Market;  Relatively Few
Many Buyers Buyers
 Monopolistic  Oligopolistic
Competition Competition

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 Business
Consumer to
Business

 Can be technically
Standardized complex
 Customized to user
Service, delivery and
preference
availability only  Service, delivery and
somewhat important
Purchased for availability very
important
personal use  Purchased for other
than personal use

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 Business
Consumer to
Business

 Professionally trained
 Individual purchasing
Family involvement, purchasing personnel
 Functional involvement at
influence
Social or psychological many levels
 Task motives
motives predominate
predominate

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 Business
Consumer to
Business

 Less technical Technical expertise is an

expertise asset
 Nonpersonal Interpersonal
relationships relationships between
 Little personal buyers and sellers
information exchanged Significant personal info
 Changing, short-term exchanged
relationships Stable, long-term
encourage switching relationships encourage
loyalty
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 Business
Consumer to
Business

 Indirect, multiple
 Shorter, more direct
relationships
Organization
 Little or no customer
involvement as part of
supply chain
supply chain
involvement

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 Business
Consumer to
Business

Emphasis on personal
Emphasis on advertising,
selling, dialogue
monologue
Most communications
Companies compete for
invisible to the consumer
visibility and awareness of
Consumer is seldom
consumer market
aware of BtB brands and
companies

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 Business
Consumer to
Business

 Usually list or Complex purchasing

predetermined prices process or competitive
bidding, depending on
purchase type

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 Business
Consumer to
Business

 Derived
 Direct
 Inelastic (short run)
 Elastic
 Volatile (leveraged)
 Less volatile
 Discontinuous

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  Nothing happens unless consumer buys something
Acceleration Principle: “Bullwhip Effect”
1. Suppliers forecast 2. If consumer demand
production on existing drops, the order rate
order rates. also drops.

3. Supply chain members are then likely to overcompensate the

difference between the old and new forecasts, because:

A. Inventory levels can decline to fit new order rate

B. Customers change orders frequently
C. Minimum order quantities may exist
D. Trade promotions may influence buying patterns
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 Exhibit 1-3: Networked versus Integrated Supply
1990 Ford 2008 2007 2007 2008 2007
2008 Ford 2009 BMW
Component Crown Toyota Saturn Volvo Honda Lincoln
Taurus X6
Victoria Corolla Sky S80 Accord Navigator
Autoliv/
Takata,
Airbags-Various TRW, Key Takata TRW
TRW
Safety
Brakes/ Calipers, TI, Honeywell, Honeywell, Federal-
Ford (1) TI, PBR Continental Honeywell
Components, etc Honeywell ITT, Hitachi Mogul
Bumpers/Fascias Ford Omnium Omnium Plastal Decoma
Engine Bosch, Bosch,
Ford Visteon Visteon
Management Delphi Denso
Pilkington,
Glass Ford (1) Sekurit
AGC
Half Shafts/Drive Haldex Haldex
NTN GKN NTN
Shafts AWD AWD
Headlamps Hella Zizala Stanley
HVAC Ford (1) Visteon Air Intern'l Preh Behr
ZF Visteon,
Steering System Ford, TRW Continental
Lenksys. ZF
Panasonic,
premium audio Harman/ Alpine/
Ford (1) Harada, Delphi (2) Alpine Clarion
components Becker Mitsubishi
etc.
Seats Ford Lear Faurecia Lear
Seat Belts Takata Takata
Shock
ZF, Cosma
Absorbers/Struts, ArvinMeritor, Thyssen- Mubea, SKD,
Ford Intn'l, , Tenneco
Chassis Mubea Krupp Dana NHK
Sachs
Components
Steering wheel Ford (1) Autoliv Autoliv Takata
Auto
Taillamps Ford Visteon Hella Stanley Lighting
Visteon
Transmission/
Ford ZF
Transaxle
Thyssen- Thyssen-
Camshafts Ford (1) Mahle
Krupp Krupp
Draexi-
Wiring Yazaki Yazaki Yazaki Yazaki Yazaki
maier
(1) The Ford divisions that supplied these components have been spun off into Visteon, an independent company.

(2) Delphi is the name of the supply organization created when GM spun off their various supply divisions.
Source: Automotive News Car Cutaways, Secondary Research, Author conversations.

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 International Standards Organizations (ISO)
 Define technical performance for
manufacturing and quality systems
 Compliance of suppliers to these standards
is required by global firms
 Industries that are targeted:

› Steel, Plastic, Pulp and Paper Products,

Chemicals and Electronics

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  Total cost of owning or using a product
› Transportation, carrying costs, financing
costs, potential obsolescence, cost of failure,
installation, flexibility to upgrade, etc.
 Consumers have same considerations
but are attracted to “Deals”

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  The puzzle of the B2B Consumer needs
“Total
Offering”

•Product
•Service
•Image
•Availability
•Quantity
•Evaluated
Price

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Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall 21
 Value Chain: Suppliers

Value Value Value

Activities Activities
Value Value
Activities
Value Value Value Value
Enabling Creating Enabling Creating Enabling Creating

From Exhibit 1-5: Value Enabling activities

include infrastructure, human resources,
procurement and technology/technology
development. Value Creating activities include
inbound and outbound logistics, operations,
marketing and sales and customer service.

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 Perceives
Infrastructure

M
Offering:
ar
gi
Human resources

n
th
Procurement

ro
ug
Technology &
Product
h
technology development

va
lu
Support activities Service Target

e
Added value
Direct activities Image Customers
s l ue Availability
cs tic es va
ti s sa
l ce
gi
s i vi gh Quantity
og & er u
lo ns l g rs ro
d io nd in th
un ra
t
bo
u
rk
e t e
om rgi
n Evaluated Price
n bo pe u t a s t
a
I O O M Cu M
Creates

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  Hyper-competition
 Formation of partner networks
 Adoption of technology and the internet
 Supply Chain Management
 Time Compression

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