A Business Marketing Perspective

Business Markets
Markets for products and services

Local to international Bought by Businesses Government bodies Institutions For consumption For use For resale

GE

Figure 1.2

The Consumer Market (B2C) and the Business Market (B2B) at Dell, Inc.
Dell, Inc.

B2C

B2B

Customers

Individuals & Households

Businesses Global Large corporations Small & Medium sized businesses

Institutions Healthcare Education

Government Federal State Local

Selected Products

PCs Printers Consumer Electronics Simple Service Agreements

PCs Enterprise Storage Servers Complex Service Offerings

A Market Driven Firm

Has: Market sensing capabilitycompanys ability to sense change and to anticipate customer responses Customer linkingthe ability to develop and manage close customer relationships Value : Economic, Technical & Social Value F Price F > Value a Price a

Business Market Characteristics

Derived demand Fluctuating demand Stimulating demand Price sensitivity/demand elasticity Global Market perspective Reciprocity Joint Demand Concentrated Functional Vs. Symbolic Attributes
GE

Relationship Marketing
All marketing activities directed toward establishing, developing, and maintaining successful exchanges with customers

The Supply Chain

Michael Porter and Victor Millar observed that to gain competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium (more value).

Business Market Customer Commercial Enterprises

Three categories: Users OEMs Dealers and distributors

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 PrenticeHall, Inc.

A Framework for Business Marketing Management

Business marketing strategy is formulated within the boundaries established by the corporate mission and objectives.

The Business Market:

Perspectives on the Organizational Buyer

Commercial Enterprises

Includes Manufacturers Construction Service firms Transportation Professional Resellers

Manufacturers:
-Concentration in geographies. - Centralized Purchasing

Purchasing Function Goals

Address the needs of business customers of all types. May have to juggle different, clashing objectives.

Purchasing

Goals

Total Cost Considerations of a

Product or Service
Factors that drive total cost.
Acquiring and managing costs. Quality, reliability over the life cycle. Value of product to firm/customers.

 Firms operate at different levels of development and emphasize different pathways to cost reduction and revenue enhancement.

Levels of Procurement Development and Pathways to Savings/Revenue Enhancement

Segmenting Purchase Categories

1st Point, each firm has a unique portfolio. 2nd Point, more attention on purchases having the greatest impact on revenue generation or the greatest risk to performance.

Segmenting the Buy

Criticals

Bottlenecks

Generics Leverage Items

Two Types of Contracts

1. Fixed-price contracts A price is agreed to before contract is awarded and payment is made at conclusion of work. Provides for the greatest profit potential. Poses greater risks. 2. Cost-reimbursement contracts Reimbursement for allowable costs may be allowed; sometimes cost-plus contracts allow costs and certain percentage of profit.

Government Procurement

1. U.S. Department of Defense (DOD)-said to be largest single enterprise in world. 2. Non-defense procurement administered by wide variety of agencies.

Two Procurement Strategies

1. Formal Advertisingthe government solicits bids from suppliers, and usually the lowest bidder is awarded the contract. 2. Negotiated Contractused to purchase products or services that are not differentiated on price alone, competition is common. 3. Terms : LI / TI, RC, BOOT, EMD, SD, PBG, Inspection

The Institutional Market

Schools, health care organizations, non-profit agencies. Similar to government buyers--political considerations and laws.

Similar to commercial buyers--often managed like corporations--broad range of purchase requirements.

Group purchasing quite common. Multiple Buying Influences

Organizational Buying Behavior

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1. Problem Recognition

2. General Description of Need

3. Product Specifications

4. Supplier Search

Organizational Buying Process

5. Acquisition and Analysis of Proposals

6. Supplier Selection

7. Selection of Order Routine

8. Performance Review
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Three Buying Situations

(slide 1 of 4)

1. New task 2. Modified rebuy 3. Straight rebuy

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Three Buying Situations

1. New Task (slide 2 of 4) New taskproblem or need totally different from previous experiences. Significant amount of information required Buyers operate in extensive problem solving stage Buyers lack well defined criteria. Lack strong predisposition toward solution

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Three Buying Situations

2. Modified Rebuy (slide 3 of 4) Modified rebuydecision makers feel benefits to be derived by reevaluating alternatives. Most likely to occur when buyers displeased with current suppliers performance Buyers operate in limited problem-solving stage. Buyers have well-defined criteria.

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Three Buying Situations

3. Straight rebuy (slide 4 of 4) Straight rebuyproblem or need is recurring or continuing requirement. Buyers have experience in area. Require little or no new information Buyers operate in routine problem-solving stage Electronic Purchasing Buy-side Requisitioning Process.
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Buying Decision Approaches

Casual purchasesinvolve no information search or analysis.

Routine low prioritydecisions more important and involve moderate amount of analysis.

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Forces Influencing Organizational Buying Behavior

Projected change in business conditions can drastically alter buying plan.

Environmental Forces

Economic Outlook: Domestic & Global Pace of Technological Change Global Trade Relations

Organizational Buying Behavior

Organizational Forces

Goals, Objectives, and Strategies Organizational Position of Purchasing Roles, relative influence, and patterns of interaction of buying decision participants Job function, past experience, and buying motives of individual decision participants28

Group Forces

Individual Forces

Strategic Priorities in Purchasing

Becoming Business Partners, Not Just Buyers Shift from administrative role to valuecreating function that serves internal stakeholders and provides competitive edge in market. Focus on suppliers capabilities, emphasizing business outcomes, total ownership costs, and potential for long-term value creation. Develop fewer and deeper relationships with strategic suppliers and involve them in decisionmaking processes, ranging from new product development to cost-reduction initiatives. Overcome hurdles imposed by geographical differences and seek out cost-effective suppliers around globe.

Exploring New Value Frontiers: Its Not Just About Price

Putting Suppliers Inside: The Best Value Chain Wins

Pursuing Los-Cost Sources: A World Worth Exploring

Source: Adapted from Marc Bourde, Charlie Hawker, and Theo Theocharides, Taking Center Stage: The 2005 Chief Procurement Officer Survey, (Somers NY: IBM Global Services, May 2005), pp. 1-14. Accessed at http://www.ibm.com/bcs on July 1, 2005. 29

Questions for the Industrial Salesperson when Assessing Group Forces 1. Which member takes part in the buying process? 2. What is each members relative influence in decision? 3. What criteria is important to each member in evaluation process?

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Members of the buying center assume different roles throughout the procurement process. 1. Isolate the Personal Stakeholders
Clues for Identifying Powerful Buying Center Members (Users, Influences, buyers, deciders, gate-keepers 2. Follow the Information Flow 3. Identify the Experts

4. Trace the Connections to the Top

5. Understand Purchasings Role
SOURCE: Adapted from John R. Ronchetto, Michael D. Hutt, and Peter H. Reingen, Embedded Influence Patterns in Organizational Buying Systems, Journal of Marketing 53 (October 1989), pp. 51-62.

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Selective Processes in Information Processing

Selective exposure. Selective attention. Selective perception. Selective retention.

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Perceived Risk Components

1. Uncertainty about decision outcomes. 2. Magnitude of consequences associated with making wrong selection.

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Major Elements of Organizational Buying Behavior

Organizational buyers behavior influenced by environmental, organizational, group, and individual factors.

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ONGC

Geopic Buying Seismic Simultation Equipment : Modified Rebuy / L2 or L3 Exploration : Scada Modi

Tech & Field Services : Drilling of well in Orissa Basin MR / L2

Offshore : Buying of Photocopiers for Mumbai High Office SR / L1 Infocomm : SAP Package for ERP : New Task / L4

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