B2B Basics

B2B-Marketing: Basics
Christian Lthje TU Hamburg-Harburg Institute for Marketing and Innovation www.imi.tu-harburg.de
Lecture information
B2B Marketing
Master internationaler Wirtschaftsingenieur Master International Production Management
Time: Location:
Friday, 8.00h 9.30h N ES40, Room N 0.007
TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
Lecture information
B2B - Marketing
Lecture materials: Lecture script and literature will be available online. (https://e-learning.tu-harburg.de/studip/) Test exam: During the last lecture (Friday, 2.2.2013, 8.00h 9.30h) Mandatory participation in a one-hour research experiment December / January Contact: Jan-Paul Ldtke, luedtke@tu-harburg.de
Lecture information
Stud.IP
Source: https://e-learning.tu-harburg.de/studip/ TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
Lecture information
Stud.IP
Source: https://e-learning.tu-harburg.de/studip/ TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
Lecture information
Lecture topics
Basics:
What is B2B marketing and what are trends influencing most B2B markets? How do organizations make buying decisions?
Marketing Strategy: Which types of project-specific and general co-operations models are available? What are successful strategies in international and global markets? What impact does timing have on the introduction of new products?
Marketing Mix:
What is the role of advertising, fairs and other communication tools in B2B markets? Which marketing activities may help suppliers operating in complex value chains? Which types of distribution channels are available in B2B environments?
A. Basics What is marketing?, Characteristics of B2B markets, market trends B. Organizational buying behavior Buying center concept, Types of buying processes C. Management process I, Strategic marketing Strategy 1: Cooperation (continuous and project-specific) Strategy 2: Competition (generic competitive strategies, timing) II. Marketing Mix Pricing: Price theory, Price differentiation and rebates, Auctions Communication: Emotional advertising, Fairs Value Chain Marketing Industrial Sales (if there is time): Distribution channels, Distribution organization
Lecture contents
A. Basics of B2B-Marketing
1. Introduction
2. B2B-Marketing characteristics
3. Industrial goods 4. Trends 4.1 Competition 4.2 Markets
1. Introduction
What is marketing? What marketing is NOT. ... convincing customers to buy substandard products
... just creating advertising material, brochures etc.
... fulfilling all types of customer request without questioning
... exclusively relevant for companies operating in consumer markets
1. Introduction
What marketing IS the official definition.
Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
1. Introduction
What marketing IS marketing is a business philosophy.
Understanding customer needs and customer (buying) behavior Identifying cooperation partners that will play a critical role in the delivery process
Determining appropriate (international) markets and market segments

Determining how the company should act in the competitive environment (e.g. when to enter the market)
Bringing the voice of the customer into the firm
Creating value for customers
Guiding activities for selling innovations successfully

Determining appropriate prices Communicating the value of products to the market
The case of marketing at General Electric
GE is a large American multinational conglomerate corporation.
Founded 1892 by Thomas Edison (and others)
Public company
Active in diverse fields such as appliances, aviation, consumer electronics, electrical distribution, electric motors, energy, entertainment, finance, gas, healthcare, lighting, locomotives, oil, software, water, weapons, wind turbines
Revenue US$ 150 billion (2010)

Net income US$ 12 billion (2010) Employees 287,000 (2010)
The case of marketing at General Electric: Reasons for a lack of marketing focus
For GE, marketing played no major role.

Usually, there are some general reasons. High-tech background Initial success factor = production or breakthrough technological innovation Major competence = technology Value system and career advancement focus on R&D and technology Marketing is what you do when your products are not selling themselves
Why?
Interview with Beth Comstock, who took over Marketing at GE in 2009
1. Introduction
Industrial commodities, materials and parts are everywhere. End customers, however, hardly notice them example DSM.
DSM Nutritional prodcuts produces vitamins and UV filters fr use in the personal care industry
PeptoPro is a sports recovery ingredient that enables faster replenishment of muscle energy
DSM Composite Resins produces gel coats for use in glass reinforced plastics applications in the marine industry
Source: www.dsm.com TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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1. Introduction
Some prominent B2C companies market B2B products, since
capacity is rented out to competitors that would not be used otherwise.

Company B2C products
Coca Cola, Sprite, Fanta, Coca Cola Light,
B2B products
Bottling (Dr. Pepper, Campbells V8)
products in B2B- and B2C-markets have similar characteristics.

S-Class, Smart, SLK, EClass, etc.
B2B products
MB-Trucks, Freightliner, FUSO
different business units serve B2B and B2C customers.

LCD-TV, smartphones
B2B products
Construction machinery, Ships
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1. Introduction
The relative importance of big producing industries in Germany
Industry Mechanical engineering and plant manufacturing Electronics Vehicle manufacturing
Revenue 190 bn. 182 bn. 290 bn.
Employees 914.000 820.500 744.500
Food
Chemicals Construction Producing industries total
116 bn.
140 bn. 81 bn. 1570 bn.
408.600
419.300 714.000 5.200.000
Source: BWiM (Stand 2007) TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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1. Introduction
Distinguishing B2B-Marketing and B2C-Marketing in an explematory value chain.
3tier supplier Rio Tinto Australia
2tier supplier ThyssenKrupp Steel 1tier supplier Edscha roof systems

Manufacturer BMW AG Dealer BMW Dealer Hamburg End Customer / Consumer
B2B Marketing sphere
B2C Marketing sphere
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1. Introduction
Definition of B2B-Marketing Business Marketing involves those activities that facilitate involving products and customers in business markets. It includes all organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. Business-to-business customers include manufacturers, wholesalers, retailers, and other types of organizations such as hospitals, universities, and government units.
Source: Bingham/Gomes/Knowles, 2005, S. 3 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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2. B2B market characteristics
An introductory example
Case study LISTECO
Backhaus/Voeth, 2007, S.10f TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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1. Introduction
Semester homework: Scientific paper research

Your task: Find a scientific research paper, that studies an aspect of B2B-Marketing. Look for papers, that meet high scientific standards and appear to be highly relevant for B2B practioneers. Write a short 15-sentence note that outlines why the selected paper meets above criteria well. Every student receives credit for submitting a valid proposal, the best three proposals will present their papers in class and receive additional credit. You have to submit your proposals until December 24th 2012 at latest.
Why do we run this competition?

To show that research in B2B-Marketing is helpful, yet not trivial. To teach you the tools and skills to research scientific literature during your master studies.
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1. Introduction
Semester homework: Scientific paper research
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Lecture contents
1. Introduction
23
The customers on B2B markets demand goods for the generation of other goods and services.
B2C- Markets
B2B- Markets
Customers
Consumers End Customers
Manufacturing Firms, Service Providers, and other Organizational Buyers (e.g. state, hospitals) Generation of products and services Commodities, Capital Goods (e.g. machines), System Technologies, Industrial Services
Purpose of Demand
Consumption
Goods
Products and Services
Source: Kleinaltenkamp/Plinke, 2000 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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The specific characteristics of B2B markets influence how marketing is actually done.
Business-to-Business Markets Derived demand Organizations as customers Multiple buying influences Degree of individualization tends to be higher Degree of interaction tends to be higher Exemplary implications for the marketing function Value chain marketing Procurement guidelines Team Selling / Buying Center Cooperative new product development Key account management
Source: In Anlehnung an Backhaus/Voeth, 2004 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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Specifics of the Marketing Mix in B2B-Marketing
Product policy: Products are very complex in technical terms and need explanation Often individualized, custom-made products Close collaboration in the improvement and adaptation of the products Price policy: Prices are flexible and are therefore subject to negotiations The price building is often the central decision criterion in biddings The fixed price is only one of many components in pricing (e.g. rebates, price bundles) Communication policy: Non-personal communication forms are rarely used (e.g. advertising via mass media) Personal selling has an outstanding importance for communication Communication has bee addressed not only to direct but also to indirect customers Distribution policy: Shorter distribution channels (direct selling) Emphasis on personal selling
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B2B markets display higher degrees of individualized customer approaches
Direct selling
Personal communication Custom-made products Price negotiation Product related services Relevance of indivdiual terms Relevance of exhibitions Integration of external factors Object oriented communication Customized prices
0 5 10 15 20 25 30 35
# of mentions
The survey results show, that direct selling, personal communication and customization play important roles in B2B marketing
Source Backhaus/Voeth, 2004 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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Lecture contents
1. Introduction
28
3. Industrial goods
Typology of industrial goods
Industrial goods
Production goods
Capital goods
Systems
Services
Raw material Consumables Auxiliary supplies Operating materials Parts Energy carrier
Plants System components Machinery Subsystems Large specialized equipment such as ships, cranes, etc.
29
3. Industrial goods
Production goods
Raw materials
Extracted directly from natural sources
Consumables
Processed raw materials that are used in production processes.
Hilfsstoffe
Auxiliary supplies
Are used for the production of final products but contribute only marginally.
Betriebsstoffe
Operating materials Parts
Are required to uphold production and are consumed during the process. Are integrated into other products without loosing their key features and characteristcs. (They preserve their identity) Are needed in any kind of production process.
Teile Energietrger
Energy carrier
30
3. Industrial goods
Production goods: Important characteristics
Production goods often have substitutive or complementary relationships with other production factors
Substitution goods: Scrap - Iron, Oil - Coal - Gas, Copper - Aluminum Complementary goods: Petrol and motor oil
Installation and maintenance of integral quality is considered very important Occupancy rates of production goods may be increased by advancing process technologies
31
3. Industrial goods
Capital goods are the basis for industrial manufacturing and are not part of the production outcomes
Plants and infrastructure Marketing of multiple integrated goods. The goods may originate from serial production (Turbines, Silos, etc.) or customized manufacturing (Buildings). They are sold as ready-to-use unit or as a service.
Mechanical engineering Machinery is marketed individually
32
3. Industrial goods
Systems
Components of systems include Networks

- Central element - Are responsible to collect and distribute information
System components
- Mainly peripheral products - Fulfill limited functions - If standards are available, they may be sourced from different suppliers
Subsystems
- May be used stand alone (CAD systems) or may be integrated in larger integrated systems (CAD supported manufacturing unit)
Network services
- Provided via public networks, ie. ISPs
33
3. Industrial goods
Important characteristics of system technologies
High degree of technical complexity Combination of subsystems, system components and system services Networks are the central element of system technologies Systems outputs are often achieved by using the peripheral devices High costs of integration; providers are required to use industry standards when developing systems
34
3. Industrial goods
Services: B2B-Outputs on their own
Consulting services (business consultants, IT, advertising agencies, auditors and tax advisors) Transport and logistic services Renting / leasing of property and machinery Insurances
35
Lecture contents
1. Introduction
36
4.1 Competition
Shortening of product lifecycles: Sinking product lifetime rising development time

8 7 6 Number of years 5 4 3 2 1 0 1978 1980 1982 1984 1986 1988 1990 1992 Time
Product lifetime
PD > P L
Product development time
Source: Bullinger/Wasserloos, 1990 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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4.1 Competition
Cost structure: Industry specific rises in fixed costs

50
20,5%
(-)1,6% 13,7% 28,6% 21,1%
% of overall costs
40
32,4%
90s 70s
30 ChemicalEngineering MechanicalEngineering PlantConstruction InformationEngineering ElektronicEngineering Vehicle Construction Source: Backhaus/Funke, 1996 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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Lecture contents
1. Introduction
39
4.2 Markets
E-Commerce
Globalisation
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4.2 Markets
More and more companies sell their supplies and conduct their customer business over virtual market places.
E-Commerce in Wester Europe ( EU15, Norway, Switzerland)
bn. Euro
Source: www.eito.com TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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4.2 Markets
U.S. Shipments, Sales, Revenues and E-commerce in B2B and B2C domains
Description
Value of shipment , Sale or Revenue*

2010 Total E-commerce 2009 Total E-commerce
Year to Year Percentage Change

Total E-commerce
Total *
25,599
4,129
23,982
3,545
6.7
16.5
B-to-B *
Manufacturing Merchant Wholesale B-to-C * Retail Selected Services
* in bn. dollars
10,690
4,917 5,773 14,908 3,842 11,067
3,705
2,283 1,422 424 169 255
9,577
4,420 5,158 14,404 3,628 10,777
3,161
1,892 1,269 385 145 239
11.6
11.2 11.9 3.5 5.9 2.7
17.2
20.7 12.0 10.3 16.3 6.6
Source: U.S. Census Bureau 2012 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
4.2 Markets
Electronic transaction mechanisms and -markets may differ based on the type and number of participants.
Customer
One One
EDI
Few
Many
Company specifc selling platform

Example: http://premier.dell.com
Supplier
Few
Comapny specific buying platform
Example: einkaufsplattform. bahn.de
Commerce platform / virtual-market place Collaborative buying platform
Collaborative selling platform Virtual market place (www.alibaba.com)
Many
Source: Backhaus 2003
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4.2 Markets
Short presentation
Alibaba.com
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4.2 Markets
E-Commerce
Globalisation
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4.2 Markets
Globalization especially impacts the global distribution of manufactured goods
Development of world-wide exports by goods segment from 1980 to 2011

(bn. US $ at current valuation)
14000
12000
10000
Agricultural products
Fuels and mining products Manufactures
8000
6000 4000 2000 0
Source: World Trade Organisation TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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4.2 Markets
Today, succesful manufacturers of industrial goods are manufacturing and distributing their goods globally.
Founded 1834 in Winterthur (CH) Today active in plant manufacturing and engeneering with 120 branches around the world. Its divisions are worldleading in their specific industries.
Source: www.sulzer.com TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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4.2 Markets
Global markets integrate globale communication networks. Global companies have to communicate worldwide and consider locals characterstics
Source: www.youtube.com, Thyssenkrupp AG Image Video 2006 TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13
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Short presentation
The case of the Boeing Dreamliner
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Summary
B2B-Marketing incorporates all sales process directed towards companies and other organizations. The marketed good is not consumed but invested or used in production processes. Industrial goods are products that are sold to other business entities. They are either sold on or used in consequtive production processes. There are four main types of industrial goods: Production goods, capital goods, systems and services. Changes in market environment and competition require companies to constantly adapt their strategies in B2B markets. Among the continuing trends of the last decade are electronic markets, technology convergence and the need to do business globally. Many opportunities in B2B markets emerge from uniting technology domains that have not been directly related in the past. Festo shows, how biology and mechanical engineering can create new industrial products that are marketed successfully. B2B marketing has to consider global trends on many frontiers. Dealing with foreign customers requires specific behavior. Selling major products such as the Dreamliner sometimes requires sourcing out manufacturing to the clients countries of origin. Global markets increase B2Bmarketing complexity.
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Literature questions
Bingham, F., Gomes, R., Knowles, P. (2005). Business Marketing. New York, McGraw-Hill, 3. Auflage, S. 4-8. What are the main differences between B2B- and B2C-customers? Morris, M., Pitt, L., Honeycutt, E. (2001). Business-to-Business Marketing. New York, Sage Publishing, 3. Auflage, S. 15-21. Describe the five factors, that characterize the B2B-Marketing environment?
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B2B-Marketing: Basics

Christian Lthje TU Hamburg-Harburg Institute for Marketing and Innovation www.imi.tu-harburg.de

Friday, 8.00h 9.30h N ES40, Room N 0.007

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

... just creating advertising material, brochures etc.

... fulfilling all types of customer request without questioning

... exclusively relevant for companies operating in consumer markets

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

What marketing IS the official definition.

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

What marketing IS marketing is a business philosophy.

Determining appropriate (international) markets and market segments

Bringing the voice of the customer into the firm

Creating value for customers

Guiding activities for selling innovations successfully

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

The case of marketing at General Electric

GE is a large American multinational conglomerate corporation.

Founded 1892 by Thomas Edison (and others)

Revenue US$ 150 billion (2010)

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

For GE, marketing played no major role.

Interview with Beth Comstock, who took over Marketing at GE in 2009

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

Some prominent B2C companies market B2B products, since

capacity is rented out to competitors that would not be used otherwise.

products in B2B- and B2C-markets have similar characteristics.

different business units serve B2B and B2C customers.

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

The relative importance of big producing industries in Germany

Industry Mechanical engineering and plant manufacturing Electronics Vehicle manufacturing

Revenue 190 bn. 182 bn. 290 bn.

Employees 914.000 820.500 744.500

Distinguishing B2B-Marketing and B2C-Marketing in an explematory value chain.

3tier supplier Rio Tinto Australia

2tier supplier ThyssenKrupp Steel 1tier supplier Edscha roof systems

B2C Marketing sphere

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

2. B2B market characteristics

Case study LISTECO

Semester homework: Scientific paper research

Why do we run this competition?

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

Semester homework: Scientific paper research

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

2. B2B market characteristics

Consumers End Customers

Products and Services

2. B2B market characteristics

2. B2B market characteristics

Specifics of the Marketing Mix in B2B-Marketing

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

2. B2B market characteristics

B2B markets display higher degrees of individualized customer approaches

TUHH | IMI | Lthje | B2B- Marketing | Winter term 2012/13

Typology of industrial goods

Processed raw materials that are used in production processes.

Operating materials Parts