Marketing Applications and Practices

Rubina DMello

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
o All

organizations that purchase goods and services to use in the creation of their own goods and services. process of matching and combining the capabilities of the supplier with the desired outcomes of the customer to create value for the customers customer.

Industrial marketing
o The

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 Structure Relatively fewer buyers Clustering geographical concentration Consumer Markets Large number of customers Mass markets Standardised for mass markets Psychological motives, family involvement Mental, not observable Indirect, multiple Advertising important

Complex, needing customization, allied services important Buyer Functional involvement, rational Behaviour motives, importance of relationships Decisions Distinct, observable stages Channels Shorter, more direct

Products

Promotion Importance of personal selling 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
Relationship driven Maximize the value of relationship Small, focused target market Multi-step buying process, longer sales cycle Brand identity created on personal relationship Education and awareness building activities Rationale buying decision based on business value

B2C Marketing
Product driven Maximize the value of the transaction Large target market Single step buying process, shorter sales cycle Brand identity created through repetition and imagery Merchandising and point of purchase activities Emotional buying decision based on status, desire or price

The Marketing Concept

1. Be contextually market sensitive

2. Understand customer needs In Industrial marketing scenario, to successfully practice the marketing concept, it should:

3. Meet customer needs in a way that provides value to the customer

4. Meet organizational goals

The Value Chain and Offering

Perceives
Infrastructure Human resources Procurement Margin through value Technology & technology development Support activities

Offering: Product Service Image Availability Quantity Evaluated Price

Added value
Direct activities

Target Customers

Margin Inbound logistics Outbound logistics sales through value Marketing & Customer service Operations

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

Commercial Enterprises Industrial Distributors Value-Added Resellers Government Units local, state, and federal government units Nonprofit and Not-for-Profit Organizations Churches, hospitals, colleges, nursing homes, etc.

Original Equipment Manufacturers Users or End Users

Producer Types
Raw Materials Producers Accessory Equipment Suppliers

Component Parts and Manufactured Materials Producers

Capital Goods Manufacturers

Producer Types
Often compete in price sensitive markets Raw Materials Producers Seek value added positions Products lose identity once incorporated into the customers product Raw materials markets are often dominated by a few very large producers

Producer Types
Parts retain their same form when incorporated. Usually retain identity even when incorporated into the customers product. More differentiated from direct competition by the value added to the customers product. Mico Fuel pumps are an example.

Component Parts and Manufactured Materials Producers

Producer Types
Capital goods involve large purchases with considerable risk for the customer. Involves the development of specifications to ensure that organizational needs are met. Adherence to specifications reduces opportunities for differentiation. Customers expect an offering that includes installation, equipment, and accessories.

Capital Goods Manufacturers

Producer Types
Accessory equipment is equipment that works with some other offering. Accessory Equipment Suppliers Accessories can be added to a bundled offering by a channel intermediary. 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. Derived Demand

Joint Demand Volatile Demand

Inventory Adjustment Inelastic Demand

DERIVED DEMAND The linkage between demand for a companys 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 o a routine repurchase that may have been made many times before Modified rebuy o the in-between process where some review of the buying situation is donethough not as much as in new-task buying New-task buy o 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 Buying Center Gatekeepers Influencers

Deciders

SEGMENTING B2B MARKETS

Segmentation helps marketers develop the most appropriate strategy. SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS
o

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-tobusiness 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 product offered

By industry in which the customer participates

By geographic region

By size of the customers company

Common Bases for Segmentation

By size of account By technology used by the customer

By buying behavior

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 predicting future growth. Other issues include o Adaptability of market segments, o Existing relationships with the buying center members, and o Available customers budget

Market Attractiveness

Competitive Attractiveness
Competitive Attractiveness What is the likely existence or emergence of competition in the market segment? 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 can be adapted, it may serve the segment. When there is no suitable existing channel, a market view of competition may be necessary. o How is the existing need being met? o Will customers switch?

Channel Attractiveness

Internal Attractiveness

Internal Attractiveness

A segment is more attractive when the segments needs can be met by the firms core competencies. This is identified through environmental analysis.

Attractiveness Other Considerations

Other factors that might cause a segment to rated higher or lower include: o Public policy (excessive government regulation can cause a segment to be downgraded) o Organizational goals (market share goals may make firms more aggressive in targeting)

Attractiveness Other Considerations

THE BUSINESS BUYING PROCESS

More complex than the consumer decision process. Takes place within formal organizations budget, cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS

o o o o

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
Definition Selection

Result
Monthly rebuy of office supplies; office manager fills in the order form Minimal consideration; decided to use their regular supplier; order faxed to supplier

Deliver solution Supplier delivers order 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
Definition

Result
Recognised problem; analysed with help of consultant; supplier helps write specifications and RFP; suppliers submit proposals Discussions and negotiations with suppliers; supplier selected (the one who helped initially); contrat negotiated and signed

Selection

Deliver solution System delivered in modules; fested, user trained, 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 Ps of Marketing

Place

Product

The Marketing Mix

Price

Promotio n

Marketing Mix: Product

+ Core Product + Financing Terms + Delivery Options = Total Offering 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 units 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 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).

 There is no easy formula for pricing an industrial product or service. The decision is multidimensional. The each interactive variable assumes significance.

Key Components of the Industrial Pricing Process

Fig. 15.2

Types of Negotiating Situations in B2B Sales

Situation Stand-alone Transaction Effective bargaining styles Effective approach Balanced between Transaction and Relationship
Problem solving; Compromising Seek common interests

Competitive; Problem solving

Use of leverage

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.) Economic Utility Time Utility (having product available at useful times) 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 Emphasis is frequently on advertising. Communication with customers is often a monologue. Relationship is often brief. Industrial marketing Emphasis is frequently on personal selling. Communication with customers should be a dialogue. Relationship is often longlasting.

Factors in designing promotion mix strategies

The Decision Stages for Developing the Business-toBusiness 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