Business to Business Marketing
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This document provides an overview of business-to-business (B2B) marketing. It discusses key topics such as organizational buying behavior, relationship management, segmenting the B2B market, and managing products, services, price, channels, and communications for B2B. It also covers case studies and the differences between industrial and consumer marketing. The document is intended as an introduction and outline for the subject of B2B marketing.
Business to Business Marketing
- 1. Business to Business Marketing Yogesh Baviskar
- 2. Subject Outline:- B2B Marketing 1. Introduction to B2B Market 2 Organizational Buying Behavior 3 Relationship Management 4 Segmenting the Business Market 5 Managing Products & New Innovations Management in B2B Market 6 Managing Services in B2B Market 7 Price Management in B2B Market 8 Channel Management in B2B Market 9 E-Commerce in B2B Market 10 Business Marketing Communication 11 Case Studies & Further Discussion
- 4. Business to Business Marketing :- • Definition:- “Business Marketing is the practice of individuals, or organizations, including commercial businesses, governments and institutions, facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations”
- 5. Industrial Vs Consumer Marketing Areas of Difference B2B Market Consumer Market Market Characteristics Geographically Concentrated Geographically Disbursed Relatively Fewer Buyer Mass Market Product Characteristic Technical Complex Standardize Customized Service Characteristic Service , timely Availability extremely Important Somewhat Important Buying Behavior Involvement of Various functional area from both the ends Involvement of family members Purchase Decisions are performance based and rational Purchase decisions are mostly based on Physiological /social/psychological needs Technical Expertise Relatively less technical expertise is required Stable Interpersonal relationship Non- Personal relationship
- 6. Industrial Vs Consumer Marketing Areas of Difference Industrial Market Consumer Market Channel Characteristic More Direct Indirect Fewer Intermediaries Multiple layer of Intermediaries Promotional Characteristic Emphasis on Personal Selling Emphasis on Mass Media (Advertising) Price Characteristic Competitive Bidding and Negotiated Prices List Price or MRP List Price for Standard Products
- 7. B2B Distribution Channel Characteristics Manufacturer Company Sales Force Representative Agency Distribution Dealer Customer CustomerCustomer
- 8. Characteristics of B2B Demand • Derived Demand:- – The demand for a good or service that results from the demand for another good or service. – Ex.:- Pig Iron ---Steel ---Steel Sheets---Automotive part companies--Automobiles--End customer • Demand Elasticity:- • Joint Demand:- - Demand for product or services is interdependent on each other – Ex:- Coffee Powder, Sugar & Milk in Making Coffee – Ex:- Software- Operating System, Car & Fuel
- 9. 2:- Understanding B2B Market & Environment with Buyers Perspective B2B Customers B2B Products Marketing of industrial products to B2B Customers Purchasing of Industrial Products Goals of Purchasing Purchasing Orientations Buying Orientation Procurement Orientation Supply Chain Management Orientation Purchasing Practices of Industrial Customers Commercial Business Government Institutes Co-operative Environmental Analysis:- Types of Environment Influencing B2B Market
- 10. Understanding B2B Market & Environment with Buyers Perspective
- 11. 2.Understanding B2B Market & Environment with Buyers Perspective Supplies Services Lubricants, Fasteners, paints , Electrical Items Supplies & Services Iron ore, Crude oil, fruits, fish Material & Parts Capital items Light equipment/ Accessories Subassemblies Acids, Fuel oil, Steel , Chemicals Component Parts Gauges, TV tubes, Tyres, Plants & Building Installation or Heavy Equipments Hand tools, Dies, Jigs Exhaust Pipe in Motor Cycle Manufactured Materials Raw Materials Plants, Office Building Machine Tools, Furnaces Legal, Auditing, Advertising, Courier, Market Research
- 12. 2.Understanding B2B Market & Environment with Buyers Perspective Goals Of Purchasing Uninterrupted Flow Material Manage Inventory Improve Quality Developing and Managing Supplier relationships Achieve Lowest total cost Reduce Administrative cost Advance Firms Competitive Position
- 13. 2.Understanding B2B Market & Environment with Buyers Perspective Purchase Orientation – Buying Orientation – Procurement Orientation – Supply chain Management Orientation Applications of Purchase Orientation to Industrial Customers Industrial Customers Supply Chain Management Procurement Government as a Customer Buying Orientation Institutes Buying Orientation
- 14. 2.Understanding B2B Market & Environment with Buyers Perspective Purchasing Practices of B2B Customers Industrial customers Government Institutes Cooperative Environmental Analysis:- Ecological & Physical 1.Pollution & Conservation of Natural resources 2. Utilities, Manpower & Transportation
- 15. 2.Understanding B2B Market & Environment with Buyers Perspective Environment Analysis:- Internal Environment:- Company Location, R&D Facilities, Production Facilities Human Resource and Image of the company External Environment:- Micro Environment :- Customers & Competitors Suppliers Macro Environment:- Economic Technological Government/Political & Legal Cultural & Social Investors & NGO
- 16. • Organizational Buying Process • Organizational Buying Situations • Forces Shaping Organizational Buying Behavior -- Environmental Forces -- Organizational Forces -- Group Forces :- - Buying Center -Elements of Buying Center -- Individual Forces 3.The Nature of Industrial Buying and Buying Behavior
- 17. 3.The Nature of Industrial Buying and Buying Behavior Problem Recognition General Description of Need Product Specification Supplier Search Acquisition & Analysis of Proposal Supplier Selection Selection of Order Routine Performance Review
- 18. 3.The Nature of Industrial Buying and Buying Behavior Organizational Buying Situations The buyer routinely re-orders the same product or service with out any modification The buyer purchase product or service for the first time The buyer wants to modify product specifications, price, service or supplier New Task Modify Rebuy Straight Rebuy
- 19. Forces Shaping Organizational Buying Behavior Environmental Forces Organizational Forces Group Forces Individual Forces 3.The Nature of Industrial Buying and Buying Behavior
- 20. Group Force – Buying Center “Buying Center can be defined as the body of all the individuals and groups participating in the buying decision process and who have interdependent objectives and share common risk”
- 21. 3.The Nature of Industrial Buying and Buying Behavior Roles of Buying Center Initiator :- Recognition of Problem or Need Buyer :- Obtains the quotation Supplier evaluation & Selection Processing purchase order Expediting deliveries Implement the purchasing policies of the organization User:- User of Product/ Services ( Could be Initiator) Influencer :- Individuals who could influence the purchasing decision ( Technical / Design Engineers / External consultants ) Gatekeepers:- Individuals who control the flow of information to the members of buying center Deciders:- Individuals or group of people who make the actual purchase decisions about the product or services
- 22. 3.The Nature of Industrial Buying and Buying Behavior B2B Buying Behavior Model
- 23. 4. Buyer Seller Relationship • Buyer Seller Relationship :- Establish , Develop & Maintain the meaningful relationship with the customer. • Types of Buyer – Seller Relationship • Transactional Exchange • Collaborative Exchange – Switching Cost
- 24. Managing Buyer Seller Relationship • Typical Characteristics of Buyer Seller Relationship based on Market Condition and Purchase Behavior Transactional Exchange Collaborative Exchange Availability of Alternative Many Alternative Few Supply Market Dynamism Stable Volatile Importance of Purchase Low High Complexity of Purchase Low High Information Exchange Low High Operational Linkage Limited Extensive
- 25. CRM Strategy • Determine which type of relationship matches the purchasing situation and supply-market conditions for a particular customer. • Develop a strategy that is appropriate for each strategy type.
- 26. Understanding Customer Profitability High Cost to Serve Low Cost to Serve Order Custom Products Order Standard Products Order Small Quantities Order Large Quantities Unpredictable Order arrivals Predictable order arrivals Customized delivery Standard Delivery Frequent Changes in delivery requirement No changes in delivery requirement Manual Processing Electronic Processing Large amount of presales support Little to no presales support Require company to hold inventory Replenish as produced Longer credit periods Payment on time Characteristics of High Vs Low Cost-to-Serve Customers
- 28. Creating a CRM Strategy Acquire the Right Customer Crafting the right value proposition for the customer Design the Best Process to deliver the product /services Motivating the Employees Retain the customer
- 29. Segmenting the Business Market Why Segmentation:- Criteria for the segmentation:- Measurable Assessable Substantial Computability Responsiveness Benefits of Segmentation:- Concentrate on unique needs of target segment, Focus on product development, Develop profitable pricing strategy Select the appropriate channel Develop communication and advertising strategy Variable of Business Market Segmentation:- Macro level segmentation Micro level Segmentation
- 30. Macro Segmentation Variable of Segmentation Breakdown of Segments Characteristics of Buying Behavior Size Small. Medium & Large ( Based on Sales or o. Of Employees Geographical location Region , Industrial zones Usage rate Non user, Light user, Moderate user, heavy user Structure of procurement Centralize , Decentralize Product/ Service Application End market serve As per Product/Service Value in use High , Low Characteristics of Purchasing Situations Types of buying situations New task, Modified task, Straight Rebuy Stage in purchase situation Early stages, late stages
- 31. Micro Segmentation Variable of Segmentation Breakdown of Segments Key Criteria Quality, Delivery, supplier reputation Purchase Strategies Optimizer, Satisfier Structure of decision making unit Importance of purchase High , Low Attitude towards vendor Favorable, unfavorable Organizational innovativeness Innovator, Follower Personal Characteristics of Top Management or Decision makers Demographics Age, Educational background Decision Style Normative , conservative, mixed mode Risk Risk taker, Risk avoider Confidence High, low Job responsibility Purchasing, production, engineering
- 32. Managing Products & New product develofor B2B Marketing
- 33. • Core competencies are embodied in the superior skills of employees--the technologies they have mastered, the unique ways in which these technologies are combined, and the market knowledge that has been accumulated. • They focus on the basics of what crates value from the customer’s perspective and include both technical and organizational skills. Core Competencies and Selected Products at Canon Developed by Cool Pictures and MultiMedia Presentations
- 34. • First, a core competence provides potential access to an array of markets. • Second, a core competence should make an important contribution to the perceived customer benefits of the firm’s end products. • Third, “a core competence should be difficult for competitors to imitate.” Three Tests to Identify the Core Competencies
- 35. • How rare is our competence? • How long will it take our competitors to develop the competence? • Can the source of our advantage be easily understood by our competitors? Sustaining the Lead . . . Three Questions
- 36. Quality Movement Stages • Stage one centered on conformance to standards or success in meeting specifications. • Stage two emphasized that quality was more than a technical specialty and that the pursuit of quality should drive the core processes of the entire business. • Stage three examines a firm’s quality performance relative to competitors and examines customer perceptions of the value of competing products.
- 37. What Value Means to Business Customers Customer Value Benefits Sacrifices Core Add-on Price Acquisition Costs Operations Costs Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,” Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.
- 38. 1. Proprietary or catalog products 2. Custom-built products 3. Custom-designed products 4. Industrial services Four Types of Industrial product Lines
- 39. Steps in the Product Positioning Process 1. Identify the relevant set of competitive products. 2. Identify the set of determinant attributes that customers use to differentiate among options and determine the preferred choice. 3. Collect information from a sample of existing and potential customers concerning their ratings of each product on the determinant attributes. 4. Determine the product’s current position versus competing offerings for each market segment. 5. Examine the fit between preferences of market segments and current position of product. 6. Select Positioning or Repositioning Strategy.
- 40. Successful brand management involves developing a promise of value for customers and then ensuring that the promise is kept through the way in which the product is developed, produced, sold, services, and promoted. How High-Tech Brands Build Equity
- 41. New Product Development Process Successful companies employ a high-quality new product development process--careful attention is given to the execution of the activities and decision points. Benchmarking characteristics: • The firms emphasized upfront market and technical assessments. • The process featured complete descriptions of the product concepts, product benefits, positioning, and target markets. • Tough project go/kill decision points were included in the process and the kill option was actually used. • The new product process is flexible.
- 42. Three ingredients were important here: 1. Top management committed the resources necessary to meet the firm’s objectives for the total product effort in the firm. 2. R&D budgets were adequate and aligned with the stated new product objectives. 3. The necessary personnel were assigned and were relieved from other duties. Resource Commitments
- 43. New Product Strategy Set aggressive new product performance goal as a basic corporate goal and communicate it to all employees.
- 44. Lead user projects are conducted by a cross-functional team that includes four to six managers from marketing and technical departments; one member serves as project leader.Team members typically spend 12 to 15 hours per week on the projects. The Lead User Method
- 45. Four Strategic Factors For New Product Success Product advantage refers to customer perceptions of product superiority with respect to quality, cost-performance ratio, or function relative to competitors. Marketing synergy represents the degree of fit between the needs of the project and the firm’s resources and skills in marketing. Technical synergy concerns the fit between the needs of the project and the firm’s R&D resources and competencies. International orientation--new products that are designed and developed to meet foreign requirements, and that are targeted at world or nearest- neighbor export markets.
- 47. • Innovators These are the people who are fundamentally committed to new technology on the grounds . • Early Adopters These are the true revolutionaries in business and government who want to use the discontinuity of any innovation to make a break with the past and start an entirely new future. Their expectation is that by being first to exploit the new capability they can achieve dramatic and insurmountable competitive advantage over the old order. • Early Majority These people make the bulk of all technology infrastructure purchases. They do not love technology for its own sake, so are different from the techies, whom they are careful, nonetheless, to employ. Moreover, they believe in evolution not revolution. they are interested in making their companies' systems work effectively and look to adopt innovations only after they have established a proven track record.
- 48. • Late Majority These consumers are pessimistic about their ability to gain any value from technology investments and undertake them only under duress -- typically because the remaining alternative is to let the rest of the world pass them by. They are very price-sensitive, highly skeptical, and very demanding. Rarely do their demands get met, in part because they are unwilling to pay for any extra services, all of which only reconfirms their sour views of high tech. • Laggards This group delight in challenging the hype and puffery of high-tech marketing. They are not so much potential customers as ever-present critics. As such, the goal of high-tech marketing is not to sell to them but rather to sell around them. • The Marketing Strategy With these customer segments in mind, the typical approach is to seed new products with the innovators so they can help educate the early adopters. When the early adopter's are interested, do everything that is possible to make them happy as they will then serve as references for the early majority which is the group where most of the money is made from a new product or service. Then leverage the success with this large group so that the product matures and stabilizes enough to be of interest to the late adopters. All the while, ignore the laggards and their skepticism.