B2B marketing role &

scope
Session 2-3

Why do we need to understand the

scope of b2b?
To initiate the thinking process in the
mind of a b2b manager
There are several classifications of
products, competition and market
combinations that make up the business
environment.
Such understanding can assist the
marketer to understand various types of
customers, their perception of value and
how competitors will try to create superior
value.

Classifying
Goods for
the
Business
Market

Classifying industrial
goods by the following
questions:
How does the good or
service enter the
production process?
How does it enter the cost
structure of the firm?

Source: Adapted from Philip Kotler,

Marketing Management: Analysis,
Planning, and Control, 4th ed.
(Englewood Cliffs, N.J.: Prentice-Hall,
1980), p. 172, with permission of
Prentice-Hall, Inc.

Types of B2B customers OEMs

They purchase goods to incorporate them
into goods they produce and sell to the
customers.
Examples Maruti, Samsung, HP
Industrial marketers (suppliers to OEM )
spend the major part of their resources
approaching, learning about and targeting
these customers.

OEM suppliers also do B2C marketing

through their distribution channels for
replacement markets.

End Users
Manufacturers that purchase goods and
services for consumption, either as
supplies, capital goods or materials for
incorporation into their products such that
the identity of the purchased product is
lost.
Example Apollo Tyres for Tata Steel
OEMs / End users are attempting to place
some responsibility of the quality of their
products with their suppliers now.

Institutional Customers
Organizations that buy product and services
essentially for their internal consumption.
No conversion is done on the purchased product
and internal customers consume them.
There might be compromises in value-for-money
concepts.
Corporate offices, Hotels, Hospitals, Education
institutes etc.
Like staples in consumer markets, many items
like stationery, banking, computers, couriers have
become essential for institutional customers.

Government Units

Ministries
Central Government organizations
Defence sector
PSUs
State Government organizations
PDS
Government cooperatives
Specialized role of government and different
motives like social, disaster relief, defence,
education, political make B2G different from B2B
marketing considerations

Competition buyers
Selling of excess capacity to
competitors.
Selling of specialized technology /
patents to competitors.
Example Moser Baer, pharma
companies selling patented generics,
garment manufacturing companies etc.

Organized Retailers
Big volumes
Centralized decision making with
defined procedures
Disintermediation
Key account tie-ups.
Prices and all other Supply Chain
parameters are critical for such
dealings.

Cross-promotion customers
Companies buying lots of finished
products for helping their own promotions
such as:
Pharma
Liquor & Tobacco
Magazines
FMCG companies
Airlines
Customer similarity, strong brand rub-off,
customization and joint promotion are key
to such deals.

Types of B2B seller

organizations

Raw Material Producers

The basic raw materials are commodities.
Usually oligopolistic markets.
Selling directly to large end users.
Use of industrial distributors for smaller
customers.
Raw materials often lose their identity
when combined into the customers
products.

Component parts and manufactured

materials producers
These are generally used in as-is
condition. Usually retain their identity.
More easily differentiated from the
competition by value-addition to the
core product and their own brand
identity.
Example Intel microprocessor in
Compaq computers.

Capital goods
manufacturers
Capital goods are normally used to produce
output.
Big-ticket purchases with considerable risk for the
customer.
Lengthy process and sophisticated specifications.
Oligopolistic markets
Example machine tools, earth-moving equipment
etc.

Suppliers trustworthiness and track record are

key.

Finished goods suppliers

For institutional consumption
stationery, computers, dress
material, transport facility providers
etc.
Suppliers of packaging materials like
cartons, bags, pallets etc.
For the cross-promotion customers.
As suppliers to organized retailers.

Other auxiliary institutional

services

Logistics (3PL & 4PL services)

Financial services
Consultancies
Market Research & analysis
Courier
Medicare
Software development
Advertising & BTL agencies
More ?

New intermediaries
FedEx outsourced partners
redefining their roles
Supplier of Dell: tracking, monitoring,
procuring parts
Integrator for Dell
Distributor for Nat-Semi: distributed
products through FedEx DC in Singapore
Assembler for Cisco: Assemble parts at
Ciscos customer-site

Types of organizational
channels
Industrial Distributors Companies use
them to reach customers whose purchase
volumes do not justify direct sales.
Hence their role is significant in 2 cases
1. If the customer is small.
2. If the value of item being sold is low .
They provide time, place, assortment and
possession utilities to the customers.
Major industry Stationery, FMCG, MRO,
chemicals

MRO suppliers
Maintenance
Repairs
Operations
Major industry computers, OA,
electrical, civil, plumbing, security,
lubricants, tooling, house keeping, auto
hire, auto repairs & maintenance etc.

Value-Added Resellers
VAR draws on goods & services from many
manufacturers to create customized solutions,
often developing unique expertise in the
integration of many different products.
VAR provides systems to an organization tailored
to a particular customers needs.
They lead to creation of value networks and
supplier partnerships for customers.
Major industry - computer software and hardware
integrators, communication systems, gifts &
mementos

Telecommunication supply network

Application
Developers

Applications provide
access to content

Content must meet

customer needs

Network Operators
need applications

Network
Operators

Infrastructure
supports
applications

Infrastructure facilitates
network management

Infrastructure
Provider

Content
Providers
Content sites must
promote brand

Consumer service contract

VAR
intermediaries

Device must gain network

access

Air interface
compatibility

End-User
Consumer

Retail /VAR

VARs sell devices as

middleman

Users must be able to operate device

Device
Manufacturers

Exchanges Between Links

-----

Information
Partnership
Cash-flow
Exchange

Industrial agents
Generally used for international b2b
When the business is big ticket but
infrequent
When the company requires specialized
knowledge or connections at the customer
level
Examples arms & ammunition deals with
government forces, aviation sector, power
sector, infrastructural projects

Specialty product/market
suppliers
Customized products & services to:
Defence
Hotels
Hospitals
Libraries
Research Organizations
Educational sector
Railways

Do organized retailers do B2B

business?

Yes
Cash-n-carry format
Examples from the world?
Examples from India?

Use of e-commerce in B2B

The Internet can help in generating

leads
Using the Internet to Promote
Products/Services
Executing Instant Information
Fulfillment on the Net
Generating Orders
Obtaining Payments
Enhancing Customer Relationships

A major B2B potential area: Ecommerce interface providers

At every stage e-commerce avoids the
need to translate computer files into
paper documents, a process that
generally involves errors, delay and
costly clerical personnel. (Lucking-Reiley
and Spulber 2000)

Cost Efficiencies
The potential cost savings in this area are
substantial. Processing a purchase order
manually, including paperwork, data entry,
phone calls, faxes and approval requests,
can be quite expensive, so online
transactions might easily reduce costs by a
factor of five or ten or more. LuckingReiley and Spulber 2000

How are costs

compressed?
B2B e-commerce can save or make money for a
company. Some ways companies have
benefited from B2B e-commerce include.

Managing inventory more efficiently

Adjusting more quickly to customer demand
Getting products to market faster
Cutting the cost of paperwork
Obtaining lower prices on supplies (e-bidding)

Cost Efficiencies
Examples:
British Telecom has reduced external
procurement costs from $113 to $8 per
transaction
Mastercard costs of processing purchase
orders has fallen from $125 to 40, number
of days from 4 to 1.25 days
Lehman Brothers financial transactions
are $1.27 for teller, $.27 for ATM, $.01
online
Source:Dr. Mary Wolfinbarger

Growth of Reintermediation
The process of using the Internet to
reassemble sellers, buyers & business partners
in new ways
Disintermediated players can regroup and fight
back.
Emergence of new IT-based intermediaries
between customers and suppliers to provide
info based services like source search and
evaluation, price comparisons etc.
Growth of virtual marketplaces & communities

Efficiency Gains from

Re-intermediation
Online markets have been established for
aircraft parts, agriculture, apparel
automotive parts, chemicals, computers
and electronics, energy, financial
instruments, food and beverages, health
care, intellectual property, freelance
services, laboratory supplies, industrial
machinery, advertising, metals, office
supplies, plastics, paper, printing services,
telecommunications, shipping, and travel
services. Lucking-Reiley and Spulber, 2000

Direct Marketing and B2B

Internet-based direct marketing can
be used in combination with postal
mail and telephone
Similar to direct mail, on web we can
combine graphics and text
Micro-segmentation

Illustration - Hewlett Packard

closes the
Payment Gap in B2B EHP payment Commerce
solutionseamless
electronic B2B payment
Two components are preintegrated and provide
end-to-end automation
Embedded options that establish rules to
facilitate direct debit payment options
Buyer accounts
Purchasing limits
Corporate discounting

The system connects all these accounts with

their online financial institutions

Hewlett Packard Closes the Payment Gap

in B2B E-Commerce (cont.)

HP payment solution
The integrated system reduces cost of:
Order processing
Contract administration
Customer service

Captures and analyzes information that allows

company to offer unique purchasing experience
Customersbest value online experience
Partnershandle complex transactions quickly and
securely
Employeesreduce cost and time for processing

Web Hosting and Other

Services
Business hostinghosting is popular
for SMEs; large businesses need more
advanced services
Dedicated serverassigned for
specific purpose or customer
Free Web hosting is an attractive
option for small start-ups
Provider company inserts a banner ad on
their site
Starting point for small company
minimize start-up costs

Financial B2B Services

Payments
Electronic letters of credit
Benefits to seller
Credit risk reduced
Payment highly assured
Political/country risk reduced

Benefits to the buyer

Allows negotiation of lower purchase price
Expansion of supply sources
Payment received after document
inspected by issuing bank

Order Fulfillment, Logistics,

and Supply Chain Services
Illustration : UPS Logistics Group
Supply chain
management
Reengineering &
managing complex
supply chains
Supplier
Manufacturer
Distributor
Customer

Transportation
services
Manages complex
deliveries
Transportation
networks
Dedicated fleets
Carriers
Multimodal
transportation

Order Fulfillment, Logistics,

and Supply Chain Services
(cont.)
Parts distribution
Comprehensive
return-and-repair
Parts distributions
operations

Logistics technologies
Integration of
logistics information
systems
Services to provide
supply chain
visibility

EC solutions

Logistics services
Web-based
businesses
worldwide

Global services
Logistics facilities
Staffing
Expertise about
global commerce

Order Fulfillment, Logistics,

and Supply Chain Services
(cont.)

Call center services

Customer care
Communications (call
center services to EC
capabilities)

Financial servicesfull
range of financial
services that
complement:
Logistics
Transporting
Additional business
needs

Solutions for EC
initiatives

Tracking systems
Product return systems
Shipping solutions
E-document exchange
Customization
EC software/providers
E-services/partners

Marketing and
Advertisement
Communication methods
used by offline marketers
Specialty trade shows
Ads in industry magazines
Salespeople call on:
Existing customers
Potential buyers

Digital advertisers
Ad server network provider
Electronic wholesalers

Online Data Mining

Services
Clickstream datadata collected by
monitoring what people do online
Analyzed and mined to produce useful
knowledge used to improve:
Services
Marketing efforts

Firms use these services to extend

their ability to execute a successful EC
strategy
NetTracker
WebTrends

Directory Services &

Search Engines
Directory services

B2Business.net
B2BToday.com
Communityb2b.com
A2zofb2b.com
I-stores.co.uk
Websteronline.com
Thomasregister.com
Bocal.com
B2b.yahoo.com

Search engines and

news aggregators
(Infomediary
business)
Moreover.com
Google.com
Ientry.com

E- Newsletters

Other B2B Services

Trust services
Trust Trademark
and domain names
Digital photos
Global business
communities
Client matching

E-business rating
sites
Promotion programs
Encryption sites
Web research
services
Coupon-generating
sites