Business to Business Marketing

Yogesh Baviskar
 Subject Outline:- B2B Marketing

1. Introduction to B2B Market

2 Organizational Buying Behavior
3 Relationship Management
4 Segmenting the Business Market
5 Managing Products & New Innovations Management in B2B Market
6 Managing Services in B2B Market
7 Price Management in B2B Market
8 Channel Management in B2B Market
9 E-Commerce in B2B Market
10 Business Marketing Communication
11 Case Studies & Further Discussion
Top B2B Brands:-
 Business to Business Marketing :-

• Definition:-
“Business Marketing is the practice of individuals, or organizations, including
commercial businesses, governments and institutions, facilitating the sale of their
products or services to other companies or organizations that in turn resell them,
use them as components in products or services they offer, or use them to support
their operations”
 Industrial Vs Consumer Marketing
Areas of Difference B2B Market Consumer Market
Market Characteristics Geographically Concentrated Geographically Disbursed

Relatively Fewer Buyer Mass Market

Product Characteristic Technical Complex Standardize

Customized

Service Characteristic Service , timely Availability Somewhat Important

extremely Important

Buying Behavior Involvement of Various functional Involvement of family members

area from both the ends
Purchase Decisions are performance Purchase decisions are mostly based
based and rational on Physiological
/social/psychological needs
Technical Expertise Relatively less technical expertise is
required
Stable Interpersonal relationship Non- Personal relationship
 Industrial Vs Consumer Marketing

Areas of Difference Industrial Market Consumer Market

Channel Characteristic More Direct Indirect

Fewer Intermediaries Multiple layer of Intermediaries

Promotional Characteristic Emphasis on Personal Selling Emphasis on Mass Media

(Advertising)

Price Characteristic Competitive Bidding and Negotiated List Price or MRP

Prices
List Price for Standard Products
 B2B Distribution Channel Characteristics

Manufacturer

Company Sales Representative

Force Agency

Distribution Dealer

Customer Customer Customer

 Characteristics of B2B Demand

• Derived Demand:-
– The demand for a good or service that results from the demand for another good or service.
– Ex.:- Pig Iron ---Steel ---Steel Sheets---Automotive part companies--Automobiles--End customer

• Demand Elasticity:-

• Joint Demand:-
- Demand for product or services is interdependent on each other
– Ex:- Coffee Powder, Sugar & Milk in Making Coffee
– Ex:- Software- Operating System, Car & Fuel
2:- Understanding B2B Market & Environment with Buyers Perspective

B2B Customers
B2B Products
Marketing of industrial products to B2B Customers
Purchasing of Industrial Products
Goals of Purchasing
Purchasing Orientations
Buying Orientation
Procurement Orientation
Supply Chain Management Orientation
Purchasing Practices of Industrial Customers
Commercial Business
Government
Institutes
Co-operative
Environmental Analysis:-
Types of Environment Influencing B2B Market
Understanding B2B Market & Environment with Buyers
Perspective
2.Understanding B2B Market
& Environment with Buyers Raw Materials Iron ore, Crude oil, fruits, fish
Perspective
Manufactured Acids, Fuel oil, Steel ,
Materials Chemicals
Material & Parts
Component Parts Gauges, TV tubes, Tyres,

Subassemblies Exhaust Pipe in Motor Cycle

Light equipment/
Hand tools, Dies, Jigs
Accessories

Installation or Heavy
Capital items Machine Tools, Furnaces
Equipments

Plants & Building Plants, Office Building

Lubricants, Fasteners, paints

Supplies
, Electrical Items

Supplies & Services

Legal, Auditing, Advertising,
Services
Courier, Market Research
2.Understanding B2B Market & Environment with Buyers Perspective

Goals Of Purchasing
Uninterrupted Flow Material
Manage Inventory
Improve Quality
Developing and Managing Supplier relationships
Achieve Lowest total cost
Reduce Administrative cost
Advance Firms Competitive Position
 2.Understanding B2B Market & Environment with Buyers
Perspective
Purchase Orientation
– Buying Orientation
– Procurement Orientation
– Supply chain Management Orientation
Applications of Purchase Orientation to Industrial Customers
Industrial Customers
Supply Chain Management
Procurement
Government as a Customer
Buying Orientation

Institutes
Buying Orientation
2.Understanding B2B Market & Environment with Buyers Perspective

Purchasing Practices of B2B Customers

Industrial customers
Government
Institutes
Cooperative

Environmental Analysis:-

Ecological & Physical

1.Pollution & Conservation of Natural resources

2. Utilities, Manpower & Transportation
2.Understanding B2B Market & Environment with Buyers Perspective

Environment Analysis:-
Internal Environment:-
Company Location, R&D Facilities, Production Facilities Human
Resource and Image of the company
External Environment:-
Micro Environment :-
Customers & Competitors
Suppliers
Macro Environment:-
Economic
Technological
Government/Political & Legal
Cultural & Social
Investors & NGO
 3.The Nature of Industrial Buying and Buying Behavior

• Organizational Buying Process

• Organizational Buying Situations
• Forces Shaping Organizational Buying Behavior
-- Environmental Forces
-- Organizational Forces
-- Group Forces :-
- Buying Center
-Elements of Buying Center
-- Individual Forces
3.The Nature of Industrial Buying and Buying Behavior

Problem Recognition

General Description
of Need

Product Specification

Supplier Search

Acquisition &
Analysis of Proposal

Supplier Selection

Selection of Order
Routine

Performance Review
 3.The Nature of Industrial Buying and Buying Behavior

Organizational Buying Situations

The buyer routinely re-orders the

Straight Rebuy same product or service with out any
modification

The buyer wants to modify product

Modify Rebuy specifications, price, service or
supplier

The buyer purchase product or

New Task
service for the first time
 3.The Nature of Industrial Buying and Buying Behavior
Forces Shaping Organizational Buying Behavior
Environmental Forces

Organizational Forces

Group Forces

Individual Forces
 Group Force – Buying Center
“Buying Center can be defined as the body of all the individuals and groups
participating in the buying decision process and who have interdependent objectives
and share common risk”
 3.The Nature of Industrial Buying and Buying Behavior
Roles of Buying Center
Initiator :- Recognition of Problem or Need

Buyer :- Obtains the quotation

Supplier evaluation & Selection
Processing purchase order
Expediting deliveries
Implement the purchasing policies of the organization
User:- User of Product/ Services ( Could be Initiator)

Influencer :- Individuals who could influence the purchasing decision

( Technical / Design Engineers / External consultants )
Gatekeepers:- Individuals who control the flow of information to the
members of buying center
Deciders:- Individuals or group of people who make the actual purchase
decisions about the product or services
3.The Nature of Industrial Buying and Buying Behavior

B2B Buying Behavior Model

 4. Buyer Seller Relationship

• Buyer Seller Relationship :- Establish , Develop & Maintain the meaningful

relationship with the customer.

• Types of Buyer – Seller Relationship

• Transactional Exchange
• Collaborative Exchange
– Switching Cost
 Managing Buyer Seller Relationship

• Typical Characteristics of Buyer Seller Relationship based on Market

Condition and Purchase Behavior

Transactional Exchange Collaborative Exchange

Availability of Alternative Many Alternative Few

Supply Market Dynamism Stable Volatile

Importance of Purchase Low High

Complexity of Purchase Low High

Information Exchange Low High

Operational Linkage Limited Extensive

 CRM Strategy

• Determine which type of relationship matches the

purchasing situation and supply-market conditions for a
particular customer.
• Develop a strategy that is appropriate for each strategy
type.
 Understanding Customer Profitability

Characteristics of High Vs Low Cost-to-Serve Customers

High Cost to Serve Low Cost to Serve

Order Custom Products Order Standard Products
Order Small Quantities Order Large Quantities
Unpredictable Order arrivals Predictable order arrivals
Customized delivery Standard Delivery
Frequent Changes in delivery No changes in delivery requirement
requirement
Manual Processing Electronic Processing
Large amount of presales support Little to no presales support
Require company to hold inventory Replenish as produced
Longer credit periods Payment on time
Creating a CRM Strategy

Acquire the Right Customer

Crafting the right value

proposition for the customer

Design the Best Process to

deliver the product /services

Motivating the Employees

Retain the customer

 Segmenting the Business Market
Why Segmentation:-
Criteria for the segmentation:-
Measurable
Assessable
Substantial
Computability
Responsiveness
Benefits of Segmentation:-
Concentrate on unique needs of target segment,
Focus on product development,
Develop profitable pricing strategy
Select the appropriate channel
Develop communication and advertising strategy

Variable of Business Market Segmentation :-

Macro level segmentation
Micro level Segmentation
 Macro Segmentation
Variable of Segmentation Breakdown of Segments
Characteristics of Buying Behavior
Size Small. Medium & Large ( Based on Sales or
o. Of Employees
Geographical location Region , Industrial zones
Usage rate Non user, Light user, Moderate user, heavy
user
Structure of procurement Centralize , Decentralize

Product/ Service Application

End market serve As per Product/Service
Value in use High , Low

Characteristics of Purchasing Situations

Types of buying situations New task, Modified task, Straight Rebuy
Stage in purchase situation Early stages, late stages
 Micro Segmentation
Variable of Segmentation Breakdown of Segments
Key Criteria Quality, Delivery, supplier reputation
Purchase Strategies Optimizer, Satisfier

Structure of decision making unit

Importance of purchase High , Low

Attitude towards vendor Favorable, unfavorable

Organizational innovativeness Innovator, Follower
Personal Characteristics of Top
Management or Decision makers
Demographics Age, Educational background
Decision Style Normative , conservative, mixed mode
Risk Risk taker, Risk avoider
Confidence High, low
Job responsibility Purchasing, production, engineering
Managing Products & New product develofor B2B Marketing
 Core Competencies and Selected Products at Canon

• Core competencies are

embodied in the superior
skills of employees--the
technologies they have
mastered, the unique
ways in which these
technologies are
combined, and the
market knowledge that
has been accumulated.
• They focus on the basics
of what crates value from
the customer’s
perspective and include
both technical and
organizational skills.

Developed by Cool Pictures and MultiMedia Presentations

 Three Tests to Identify the
Core Competencies
• First, a core competence provides potential
access to an array of markets.
• Second, a core competence should make an
important contribution to the perceived customer
benefits of the firm’s end products.
• Third, “a core competence should be difficult for
competitors to imitate.”
Sustaining the Lead . . . Three Questions

• How rare is our competence?

• How long will it take our competitors to develop
the competence?
• Can the source of our advantage be easily
understood by our competitors?
 Quality Movement Stages
• Stage one centered on conformance to standards
or success in meeting specifications.
• Stage two emphasized that quality was more
than a technical specialty and that the pursuit of
quality should drive the core processes of the
entire business.
• Stage three examines a firm’s quality
performance relative to competitors and examines
customer perceptions of the value of competing
products.
 What Value Means to Business Customers

Core
Benefits
Add-on

Customer Value
Price

Sacrifices Acquisition
Costs

Operations
Costs

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,”
Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.
1. Proprietary or 2. Custom-built
catalog products products

Four Types of Industrial product Lines

3. Custom-designed 4. Industrial
products services
 Steps in the Product Positioning Process

1. Identify the relevant set of competitive products.

2. Identify the set of determinant attributes that customers use to differentiate

among options and determine the preferred choice.

3. Collect information from a sample of existing and potential customers concerning

their ratings of each product on the determinant attributes.

4. Determine the product’s current position versus competing offerings for each
market segment.

5. Examine the fit between preferences of market segments and current position of
product.

6. Select Positioning or Repositioning Strategy.

Successful brand management involves developing a promise of value for
customers and then ensuring that the promise is kept through the way in which
the product is developed, produced, sold, services, and promoted.

How High-Tech Brands Build Equity

New Product Development Process
Successful companies employ a high-quality new product
development process--careful attention is given to the execution of
the activities and decision points. Benchmarking characteristics:
• The firms emphasized upfront market and technical
assessments.
• The process featured complete descriptions of the product
concepts, product benefits, positioning, and target markets.
• Tough project go/kill decision points were included in the
process and the kill option was actually used.
• The new product process is flexible.
Resource Commitments
Three ingredients were
important here:
1. Top management
committed the resources necessary to meet the firm’s objectives for the total product effort in the firm.
2. R&D budgets were
adequate and aligned with the stated new product objectives.
3. The necessary personnel
were assigned and were relieved from other duties.
 New Product Strategy

Set aggressive new product performance goal as

a basic corporate goal and communicate it to all
employees.
Lead user projects are conducted by a cross-functional team that includes four to six
managers from marketing and technical departments; one member serves as project
leader.Team members typically spend 12 to 15 hours per week on the projects.

The Lead
User
Method
Product advantage refers to Marketing synergy represents
customer perceptions of the degree of fit between the
product superiority with respect needs of the project and the
to quality, cost-performance firm’s resources and skills in
ratio, or function relative to marketing.
competitors.

Four Strategic Factors

For New Product Success
Technical synergy concerns International orientation--new
the fit between the needs of the products that are designed and
project and the firm’s R&D developed to meet foreign
resources and competencies. requirements, and that are
targeted at world or nearest-
neighbor export markets.
Technology Adoption Cycle
• Innovators
These are the people who are fundamentally committed to new technology on the grounds .
• Early Adopters
These are the true revolutionaries in business and government who want to use the
discontinuity of any innovation to make a break with the past and start an entirely new
future. Their expectation is that by being first to exploit the new capability they can achieve
dramatic and insurmountable competitive advantage over the old order.
• Early Majority
These people make the bulk of all technology infrastructure purchases. They do not love
technology for its own sake, so are different from the techies, whom they are careful,
nonetheless, to employ. Moreover, they believe in evolution not revolution. they are
interested in making their companies' systems work effectively and look to adopt innovations
only after they have established a proven track record.
• Late Majority
These consumers are pessimistic about their ability to gain any value from technology
investments and undertake them only under duress -- typically because the remaining
alternative is to let the rest of the world pass them by. They are very price-sensitive, highly
skeptical, and very demanding. Rarely do their demands get met, in part because they are
unwilling to pay for any extra services, all of which only reconfirms their sour views of high
tech.
• Laggards
This group delight in challenging the hype and puffery of high-tech marketing. They are not
so much potential customers as ever-present critics. As such, the goal of high-tech marketing
is not to sell to them but rather to sell around them.
• The Marketing Strategy
With these customer segments in mind, the typical approach is to seed new products with
the innovators so they can help educate the early adopters. When the early adopter's are
interested, do everything that is possible to make them happy as they will then serve as
references for the early majority which is the group where most of the money is made from a
new product or service. Then leverage the success with this large group so that the product
matures and stabilizes enough to be of interest to the late adopters. All the while, ignore the
laggards and their skepticism.