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Business 2 business marketing

Business markets have grown significantly in

size and scope in recent times in developedeconomies

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Are used to manufacture other

products

Become part of another product

Aid the normal operations of

an organization Are acquired for resale

without change in form

Business Products

Key isKey isintendedintended

useuse

What is Business Marketing?Marketing of goods & services to individuals & organizations for purposes other

than personal consumption

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Categories of Business CustomersCategories of Business Customers

CategoriesCategoriesof Businessof Business

CustomersCustomers

Producers

Resellers

Governments

Institutions

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What is Business Marketing (B2B)

Business Marketing is marketing of goods and services to:

Companies

Government Bodies

Institutions (i.e. hospitals)

Non-Profit Organizations (i.e. China Red Cross)

These products and services are purchased for:

Use in producing their products (i.e. raw materials, components,

tools and machinery) Facilitate their operations (i.e. copy papers, fax machine, desktops)

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Types of Business Customers

Original Equipment Manufacturers (OEMs) purchasers of products to beincluded in its own final product

Users when purchasing products/services to be consumed in support of thefirms operation

Government Agencies the largest, single purchaser of products and services

Institutions the college or university

Industrial distributors similar to the wholesaler/retailer serving the consumermarket

As compared to individual consumers, business customers are:

1) Larger buying in large quantities2) Fewer in number

3) More geographically concentrated

4) Globally oriented

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Types of Products in Business Markets

Raw materials e.g., gold purchased by AT&T

Manufacturing materials raw materials which have been further processed ortransformed to make them suitable for specific applications

Component or OEM parts - part of a completed product; parts that may beassembled into a final product without further processing

Accessory equipment (tools) e.g., computers used to guide/control themanufacturing operations in a firm

Capital equipment (machinery) large, expensive items directly used in theproduction process

MRO items (operating supplies) products purchased for use in the firms operations,maintenance, repair, and operations products. Other names are facilitating suppliesor facilitating services, such as the hiring of an advertising agency

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Differences between B2B vs. B2C

Varying buyer-seller relationship

Shorter distribution channels

Greater emphasis on personal selling

The small number of large, geographically concentrated buyers in this market makesshorter channels and long-term relationships feasible/necessary. Both of thesefactors favor personal selling.

Greater web integration

The web is a perfect tool to speed communications required for effectivecoordination between partners who trust each other.

Unique promotional strategies

E.g., trade show, public relations

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Unique Nature of B2B

BUSINESS TO BUSINESS DEPENDS ON: Close Business and Personal Relationships

Because of

Shorter Distribution Channels

Leads to

Emphasis on Personal Selling

Through

Dependence on WEB Integration

and

Unique Promotional Strategies

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Types of Business ProductsTypes of Business Products

Major Equipment

Accessory Equipment

Raw Materials

Component Parts

Processed Materials

Supplies

Business Services

MajorMajor

CategoriesCategoriesof Businessof Business

ProductsProducts

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Business markets in order to succeed

needs to be fully abreast of

Market structure and demand Nature of buying units

Types of decision

The decision process involved

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Relationship marketing

Developing long term relations

Cost effective

Mutually beneficial relationship with customers(could bring out desired result for the business in the

days ahead)

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Organizational buying is the decision

making process by which formalorganization establish the need for

Purchasing products and services

Identify

Evaluate and choose amongst alternative brandsand suppliers

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Business mkt consist of all the orgnl that acquire goods

and services used in the production of others

products and services that are sold,rented or

supplied to others

As compared to consumer market ,business market

generally have fewer and larger buyers,a closer

customer-supplier relationship &more geographically

concentrated buyers

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Demand in the business market is derived from demand

in the consumer market and fluctuates with the business

cycle

Business market needs to be aware of:

The role of professional purchasers & their influences. The need for multiple sales calls

Importance of direct purchasing reciprocity and

leasing

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The buyers center is the decision-making unit of a

buying organisation. It consists of:

Initiators

Users

Influencers

Deciders

Approvers Buyers

gatekeepers

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To influence these parties, marketers

must be aware of;

Environmental Organizational

Interpersonal

Individual factors

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Buying SituationsBuying Situations

New BuyNew BuyNew BuyNew Buy

Product is

purchased forthe first time

ModifiedModified

RebuyRebuy

Changes are desired

in the original product

ModifiedModified

RebuyRebuy

Changes are desired

in the original product

StraightStraight

RebuyRebuy

Original product is

reordered

StraightStraight

RebuyRebuy

Original product is

reordered

Back

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The buying process consists of eight stages

called Buy-stages

Problem recognition

General need description

Product specification Suppliers search

Proposal solicitation

Suppliers selection

Order routine specification

Performance review

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Problem recognition

The buy process begins when someone in the

company recognizes a problem or need that can be

met by acquiring a good or a service

The recognizion can be triggered by internal or

external stimuili

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General need description

( for complex items)the buyers will work withother engineers user- to define characteristics like

(for standard item's) the buyers determine the

needed item's general characteristic Reliability

Durability or price

Business marketers can help by describing how theirproducts meet or even exceed the buyers needs

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Product specification

Product value analysis(p.v.a) is an approach to cost

reduction

In which component are studied to determine if they

can be redesigned or standardized or made by

cheaper methods of production

The pva team will examine the high-cost components

in a given products

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Suppliers search

The buyers tries to identify the most appropriate suppliers

through

TRADE DIRECTORIESCONTACT WITH OTHER COMPANIES.

TRADE ADVERTISEMENT AND TRADESHOWS Business marketers also put products ,prices and other information on

the internet

The move to internet purchasing has far reaching implication for

suppliers and will change the shape of purchasing for years to come

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e-procurement(web sites are organized around two typesof e-hub)

Vertical hub centered around

plastics,steel,chemical.papers

Functional hubs

logistics,media buyers,advertising,energy mngt

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Cond..

Direct extranet links supplied by the company to its

major suppliers Buying alliances

Several companies joined forces to form a buying

alliance called Transora

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Transora

It is to use their combined leverage to obtain lowerprices for raw material

They also share data on less expensive ways to ship

products and track inventory

Companys buying sites (R.F.Ps ) request for proposal

rade process network through increased negotiations

terms and place orders

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Proposal solicitation

The buyers invites qualified suppliers to submit proposals

If the item is complex or expensive the buyers will require a

detail written proposal(qualified suppliers)

After evaluating the proposals,the buyers will invite a fewsuppliers to make formal presentation

Business marketers must be skilled in researching, written and

presentation proposals

Written proposals should be marketing documents that

describes value and benefits in customer terms

Oral presenation should inspire confidence and position the

companys capability and resources so that they stand out from

the competition

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Suppliers selection

Before selecting a supplier a buying center willspecify desired supplier attributes and indicate their

relative importance

Business marketers need to do a better job of

understanding how business buyers arrive at the

valuation

The choice and importance of different attributes

varies with he type of buyingsituation,delivery,reliability, price and suppliers

reputation are important for routine- order products

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For procedural problem product, such as a

copying machine, the three most important

attribute are

Technical services

Suppliers flexibility Product reliability

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Price suppliers reputation

product reliability

service reliability

supplier repuation

For political problem product that stir rivalry in the

organizational (such as the choice of a computer

system) the most important attributes are

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Order routine-specification

After selecting the buyers negotiates the final order,listing the technical specification the quality needed,

the expected time of delivery return policies,

warranties and so on

Many industrial buyers lease heavy equipment likemachinery and trucks

The lessee gains a number of advantages

Conserving capital, getting the latest product,receiving beer services & some tax advantage

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Cont..

The lessor often ends up with a larger net income andthe chance to sell to customers who could not affordoutright purchase

In case of maintenance repair and operating items,

buyers are moving towards blanket contracts ratherthan periodic purchase order

A blanket contract establishes a long term relationshipin which the suppliers promises to resupply the buyers

as needed a agreed upon prices over a specificperiod of time because the stock is held by the sellerblanket contract are sometimes called stocklesspurchase plans

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The buyers become dissatisfied with the in suppliers

,price, quality or service

Companies that fear a shortage of key material are

willing to buy and hold large with suppliers to ensure

a steady flow of materials

The business marketers are using the internet to setup extranet with important customers to facilitate the

lower cost of transaction

The customers enter order directly on the computer

and these order are automatically transmitted to the

suppliers

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Some companies go further and shift the ordering

responsibility to their suppliers in system called vendor

manage inventory

These suppliers are privy to the customers inventory

level and take responsibility to replenish, it

automatically through continuous replenishmentprogrammes

OTIFINE(summarises the desirable outcome of b2b

tranction)

OT- delivery on time

IF-in full

NE- no errors

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Performance review(the buyers periodicallyreviews the performance of the chosen suppliers)

Three methods are commonly used

The buyers may contact the end users and ask for

the evaluation, the buyers may rate the suppliers onseveral criteria using a weighted score method or

buyers might aggregate the cost of poor

performance to come up with adjusted costs of

purchase including price

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The performance review may lead the buyer to

continue,modify or end a suppliers relationship

Many companies have set up incentive systems to reward

purchasing managers for goods buying performance in muchthe same way that sales personnel's receives bonuses for good

selling performance

These system are leading purchasing managers to increase

pressure on sellers for he best term

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Business marketers must form strong bonds

And relationship with their customers and provide them with their

customers and provide them with their customers and provide themadded value some customers ,however may prefer more of a

transactional relationship

The institutional market consists of schools, hospitals ,nursing

homes ,prisons and other institutional hat provide goods andservices to people in their case

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Buyers for government organizations tend to require

a great deal of paperwork from their vendors and

to favour open bidding and domestic

companies,suppliers must be prepared to adopt

their offers to the special needs and proceduresfound in institutional and government market