Marketing Applications and

Practices
B2B Marketing
B2B Marketing
 Organizational sales and purchases of goods
and services to support production of other
products, to facilitate daily company
operations, or for resale.
 What are these?
 Industrial markets
 All organizations that purchase goods and
services to use in the creation of their own
goods and services.
 Industrial marketing
 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.”
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
B2C versus B2B Marketing
 The B2B market is 5X as large as
the B2C market in the USA.
 Difference between B2B & B2C
Industrial Markets Consumer Markets
Structure Relatively fewer buyers Clustering Large number of customers
geographical concentration Mass markets

Products Complex, needing customization, allied Standardised for mass markets

services important
Buyer Functional involvement, rational Psychological motives, family
Behaviour motives, importance of relationships involvement

Decisions Distinct, observable stages Mental, not observable

Channels Shorter, more direct Indirect, multiple

Promotion Importance of personal selling Advertising important

Price Bidding and negotiations a norm; list List prices and standard discounts
prices for standard products of low
value
Difference between B2B & B2C
B2B Marketing B2C Marketing
Relationship driven Product driven

Maximize the value of relationship Maximize the value of the

transaction
Small, focused target market Large target market

Multi-step buying process, longer Single step buying process, shorter

sales cycle sales cycle
Brand identity created on personal Brand identity created through
relationship repetition and imagery
Education and awareness building Merchandising and point of
activities purchase activities
Rationale buying decision based on Emotional buying decision based on
business value status, desire or price
The Marketing Concept
1. Be
1. Becontextually
contextually
marketsensitive
market sensitive

2. Understand
2. Understandcustomer
customerneeds
needs

In Industrial marketing
scenario, to
successfully practice 3.Meet
3. Meetcustomer
customer
the marketing concept, needsin
needs inaaway
waythat
that provides
provides
it should: valueto
value tothe
thecustomer
customer

4.Meet
4. Meet organizational
organizationalgoals
goals
 The Value Chain and
Offering
Perceives
Infrastructure

M
Offering:

ar
Human resources

gi
n
th
Procurement

ro
u
Technology &

gh
technology development Product

va
lu
Support activities
Service Target
e
Added value
Direct activities Image Customers
ics es e al
u e Availability
it cs t l v
gi
s gi
s sa rvic gh Quantity
o s l o & e u
l n g rs ro
d io nd in th
bo
u n
er
a t
tb
o u
rk
et
to
m
e
rg
in Evaluated Price
I n p u a s a
O O M Cu M

Creates
COMPONENTS OF THE BUSINESS
MARKET
 Commercial market Individuals and firms
that acquire products to support, directly or
indirectly, production of other goods and
services.
 Trade industries Retailers or wholesalers
that purchase products for resale to others.
 Government.
 Public and Private Institutions
Types of Organizational Customers
Nonprofit and
Nonprofit and
Commercial
Commercial Government
Government Not-for-Profit
Not-for-Profit
Enterprises
Enterprises Units
Units Organizations
Organizations
Industrial Churches,
Distributors local,
state, and federal hospitals,
Value-Added government units colleges,
Resellers nursing homes,
etc.
Original
Equipment
Manufacturers
Users or End Users
Producer Types

Raw Accessory
Materials Equipment
Producers Suppliers

Component Parts
Capital
and Manufactured
Goods
Materials
Manufacturers
Producers
 Producer Types
Often compete in price sensitive markets

Seek value added positions

Raw
Materials
Producers Products lose identity once incorporated
into the customer’s product

Raw materials markets are often dominated

by a few very large producers
 Producer Types
Parts retain their same form when
incorporated.

Component Parts Usually retain identity even when

and Manufactured incorporated into the customer’s
Materials product.
Producers
More differentiated from direct
competition by the value added to
the customer’s product.

Mico Fuel pumps are an example.

 Producer Types
Capital goods involve large purchases
with considerable risk for the customer.

Involves the development of

Capital specifications to ensure that
Goods organizational needs are met.
Manufacturers
Adherence to specifications reduces
opportunities for differentiation.

Customers expect an offering that

includes installation, equipment, and
accessories.
Producer Types
Accessory equipment is equipment that
works with some other offering.
Accessories can be added to a
Accessory bundled offering by a channel
Equipment intermediary.
Suppliers Accessory equipment is usually
produced by an independent
supplier.
The key to providing value is to be
compatible with industry standards for
the primary offering.
Market Demand
• Demand characteristics vary from market to market.

Joint Derived
Demand Demand

Volatile
Inventory
Demand
Adjustment

Inelastic
Demand
DERIVED DEMAND
 The linkage between demand for a company’s output and its purchases of
resources such as machinery, components, supplies, and raw materials.

VOLATILE DEMAND
 Derived demand creates volatility; for example, demand for gasoline pumps may
be reduced if demand for gasoline slows.

JOINT DEMAND
 Demand for two products used in combination with each other.

INELASTIC DEMAND
 Demand not significantly influenced by price changes.

INVENTORY ADJUSTMENTS
 Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and
requiring vendors to deliver inputs as they are needed.
Emotional or Rational Buyers?
(Considerations of B2B Buyers)

 Buyers must purchase according to a

set of purchasing specifications
 Focus on Quality
 Total costs to purchase and use
 Reliability
 Value in use
 Savings possible via e-commerce
Three Kinds of
Organizational Purchases
 Straight rebuy
 a routine repurchase that may have been made

many times before

 Modified rebuy
 the in-between process where some review of

the buying situation is done—though not as

much as in new-task buying
 New-task buy
 a firm has a new need and the buyer wants a

great deal of information

The “Buying Center”
 Business purchases often involve multiple
influence
 "Buying center"—all people who participate in
or influence a particular purchase
 Buying center varies from purchase to
purchase
 Does not appear on the "organizational chart"
 Structure may be formal or informal
Multiple Roles in the
Buying Center
Buyers
Users Influencers
Buying
Center

Gatekeepers Deciders
SEGMENTING B2B
MARKETS
Segmentation helps marketers develop the most appropriate
strategy.

 SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS

 Grouping by size based on sales revenues or number of
employees.

 SEGMENTATION BY CUSTOMER TYPE

 Grouping in broad categories, such as by industry.

 Customer-based segmentation Dividing a business-to-business

market into homogeneous groups based on buyers’ product
specifications.
 SEGMENTATION BY END-USE APPLICATION

 End-use application segmentation Segmenting a business-to-

business market based on how industrial purchasers will use the
product.
 Example: A supplier of industrial gases that sells hydrogen to some
companies and carbon dioxide to others.

 SEGMENTATION BY PURCHASE CATEGORIES

 Segmenting according to organizational buyer characteristics.

 Example: Whether a company has a designated central purchasing
department or each unit within the company handles its own
purchasing.
 By industry in
which the customer
participates
By product By geographic
offered region

Common
Bases for
Segmentation
By size of By size
the customer’s of account
company

By technology
By buying
used by the
behavior
customer
Attractiveness of Segments
Market
Attractiveness

Competitive
Attractiveness

Channel
Attractiveness

Internal
Attractiveness

Attractiveness – Other
Considerations
Market Attractiveness
•Large and fast growing segments
are more attractive than smaller
and slow-growing segments
•This necessitates accurately
Market predicting future growth.
Attractiveness •Other issues include
•Adaptability of market
segments,
•Existing relationships with the
buying center members, and
•Available customer’s budget
Competitive Attractiveness
•What is the likely existence or
emergence of competition in
Competitive the market segment?
Attractiveness •Are there barriers to entry
facing competitors?
•Does being first to market
provide an advantage?
 Channel Attractiveness
•It is preferable to target
customers already served by
well-established marketing
channels, or if an existing
Channel channel can be adapted, it may
Attractiveness serve the segment.
•When there is no suitable
existing channel, a market view
of competition may be
necessary.
•How is the existing need
being met?
•Will customers switch?
Internal Attractiveness

•A segment is more attractive

when the segment’s needs can
Internal be met by the firm’s core
Attractiveness competencies.
•This is identified through
environmental analysis.
 Attractiveness – Other
Considerations
•Other factors that might cause
a segment to rated higher or
lower include:
Attractiveness – Other •Public policy (excessive
Considerations government regulation can
cause a segment to be
downgraded)
•Organizational goals
(market share goals may
make firms more
aggressive in targeting)
 THE BUSINESS BUYING
PROCESS
 More complex than the consumer decision process.
 Takes place within formal organization’s budget, cost,
and profit considerations.

 INFLUENCES ON PURCHASE DECISIONS

 Environmental factors
 Organizational factors
 Social Factors
 Personal Factors
Stages of Organizational Buying
Process
 Problem Recognition
 General Description of need
 Product specifications
 Supplier search
 Acquisition and analysis of proposals
 Supplier selection
 Selection of order routine
 Performance review
 Straight rebuy example :
buying office supplies
Stage Result

Definition Monthly rebuy of office supplies; office manager fills

in the order form

Selection Minimal consideration; decided to use their regular

supplier; order faxed to supplier

Deliver Supplier delivers order

solution

End game Supplies used; invoice arrives and is paid; supplier

calls to check on satisfaction
 New Task example : acquiring automated
sales and customer management system

Stage Result

Definition Recognised problem; analysed with help of

consultant; supplier helps write specifications and
RFP; suppliers submit proposals
Selection Discussions and negotiations with suppliers; supplier
selected (the one who helped initially); contrat
negotiated and signed
Deliver System delivered in modules; fested, user trained,
solution system modified as needed

End game System operated; result observed and analysed;

discussions begin with supplier for acquisition of
new modules and upgrades
 The Marketing Mix:
The “4 P’s” of Marketing

Place

The
Product Marketing Price
Mix

Promotion
 Marketing Mix: Product
The total offering is created by a
partnership between the buying
+ Core Product
organization and the marketing
+ Financing Terms
organization.
+ Delivery Options
= “Total Offering”
The process creates an
augmented product that is specific
to the buying unit’s needs and
maximizes the value creation
capabilities of the marketer.
 Marketing Mix: Price
Price…
•is the mutually agreed-upon
amount that satisfies both sides in Price is the
an exchange. measure of value
•often varies from fixed price, with exchanged and is
more special discounts and determined by the
allowances (in comparison to market (not by
consumer markets). costs).
•may involve things other than
a one-time price payment
(such as commissions).
 Key Components of the Industrial
Pricing Process
There is no easy formula for
pricing an industrial product or
service.
The decision is multidimensional.

The each interactive variable

assumes significance. Fig. 15.2

 Types of Negotiating Situations in
B2B Sales
Situation
Stand-alone Balanced between
Transaction Transaction and
Relationship
Effective
Competitive; Problem solving;
bargaining
Problem solving Compromising
styles
Effective Seek common
Use of leverage
approach interests
 Marketing Mix: Place
Place is about getting the product to the customer in
order to maximize economic utility.

Form Utility (having the product in the right

size package, quantity, etc.)
Time Utility (having product available at
Economic useful times)
Utility Place Utility (getting the product to the
customer where & when it is expected)
Possession Utility (making it easy to
transfer ownership to the buyer)
 Marketing Mix: Promotion
Business-to-business marketing requires a different
emphasis on different parts of the promotional mix

Consumer marketing Industrial marketing

•Emphasis is •Emphasis is frequently on
frequently on personal selling.
advertising. •Communication with
•Communication with customers should be a
customers is often a dialogue.
monologue. •Relationship is often long-
•Relationship is often lasting.
brief.
Factors in designing
promotion mix strategies
 The Decision Stages for
Developing the Business-to-
Business Advertising Program
 Advertising is only one
aspect of the entire
marketing strategy.
 The advertising decision
process begins with the
formulation of
advertising objectives.
 Equally important is the
evaluation and selection
of the media.
 B2B Selling Characteristics
1. Repeated, ongoing relationships

2. Solution-oriented, total system effort

3. Long time period before

selling effort pays off

4. Continuous adjustment of needs

5. Creativity in problem solving often

demanded by buyer of seller
The Product Life Cycle
The Technology Adoption Life
Cycle