Business Marketing

B 2 B Marketing b
Industrial Marketing

What is Business
Marketing?
All FORMAL ORGANIZATIONS large or small, public

or private, for profit or not-for-profit participate in

EXCHANGE of Commercial / Industrial goods and
services, thus constituting Business Market.
BUSINESS MARKETS are the markets for products
and services bought by [B.I.G.] Businesses,
Institutions and Government bodies for:
Incorporation [ingredients, components etc]
Consumption [process material, office supplies / services etc]
Use [installation, equipment] OR
Resale

What is Business
Marketing?

The factors that distinguishes Business

Marketing from Consumer Marketing are:

The NATURE of the Customer ------------ and
How the Customer USES the product / service

The dollar volume of transactions in the

Industrial or Business Market significantly

exceeds that of ultimate Consumer Market.
Business Marketing = B-2-B Marketing = Industrial

Marketing

Business Marketing Management

Business Markets Vs Consumer Goods Markets
Distinctive Capabilities
Market Sensing capabilities
Customer Linkage capabilities

Managing Customers as Assets

Customer Relationship Management capabilities
Marketing Tasks
Partnering for Increased Value: Offering a

CUSTOMIZED BLEND of products & services and

ongoing Information Services, both before and after
sales.

Creating the Customer Value

Proposition
Market-driven firms attempt to match their resources,

skills, and capabilities with particular customers needs

that are not being adequately served.
A Customer Value Proposition captures the particular
set of benefits that a supplier offers to advance the
performance of the customer organization.
Best practice suppliers base their Value Proposition on
the few elements that matter the most to the target
customer, demonstrate the value of this superior
performance, and communicate it in a way that
conveys a SOPHOSTICATED understanding of the
customers business priorities.
POINTS OF PARITY
Vs
POINTS OF DIFFERENCE

Creating the Customer Value

Proposition
Marketings Cross-Functional
Relationships
Finance
Accounting

R&D
Business
Marketing
Planning

Logistics

Procurement
Manufacturing
Customer
Service

Formation of
Business
Strategy

Creating the Customer Value

Proposition
Marketings Cross-Functional
Relationships
Rather than operating in isolation from other
functional areas, the successful Business
Marketing Manager is an INTEGRATOR one
who understands manufacturing, research and
development [R&D], customer service etc and
who applies these strengths in developing
marketing strategies that respond to
Customer Needs.
Working Relationships: By building crossfunctional connections, the marketer is ideally

Creating the Customer Value

Proposition
Characteristics of Business Markets:

Consumer and Business marketing differ in nature of the

markets, market demand, buyer behavior, buyer-seller
relationships, environmental influences [economic, political,
legal]and market strategy.

Derived Demand: The demand for Industrial Products is

derived from the ultimate demand for Consumer Products.

Fluctuating Demand: Because the demand is derived,

the Business Marketer must carefully monitor demand
patterns and changing buying preferences in the household
consumer market. Changes in different indicators of
economy create immediate ripples which first hit the
Commercial / Industrial activities. Their impact on Consumer
markets are delayed and subdued.

Creating the Customer Value

Proposition
Stimulating Demand: Some Business Marketers
must not only monitor final consumer markets but also
develop a marketing / promotional program that reaches
the ultimate consumers directly.

Price Sensitivity: Demand is elastic when a given

percentage change in price brings about an even larger
percentage change in the quantity demanded. Final
consumer has a pervasive impact on the demand for the
products in the Business market.

A Global Perspective: A complete picture of Business

market must include a horizon that stretches beyond the
boundaries of local / national market. Similarly, an eye
must be kept on other non-local / foreign players who
can extend their reach to the local / national markets.

Business & Consumer Marketing: A

Contrast
Business Marketing Strategies differ from Consumer-goods
Marketing Strategies in the relative emphasis given to certain
elements of the marketing mix.
In an Organization, a variety of individuals influence the
purchase decision. One should know who they are and what is
their relative importance? What criteria does each apply to the
decision. Thus the Business Marketer must understand the
process an organization follows in purchasing a product and
identify which organizational members have roles in this
process.
Depending on the complexity of the purchase, this process
many span many weeks or months and may involve the
participation of several organization members. The Business
Marketer, who does not leave it to sales staff, and gets involved
in the purchase process early may have the greatest chance
for success.

Business & Consumer Marketing: A

Contrast
A Relationship Emphasis:
Relationships in Business Market are often close and

enduring. Rather than constituting an end result, a

sale signals the beginning of relationship.
To maintain this relationship, the Business Marketer
must develop an intimate knowledge of the
Customers operations and other plans, strategies etc
and contribute unique value to the Customers
business.
Relationship Marketing centers on all marketing
activities directed towards establishing, developing,
and maintaining successful exchanges with
customers. Building One-to-One relationships with
customers is the heart of Business Marketing.

The Supply Chain

UPSTREAM
SUPPLIERS
Suppliers of
manufactured
materials and
parts such as
sheet metal
or plastic
resin

DIRECT
AUTO
AUTO
[SPARE
MANUFACTURE BUYERS
PARTS ]
RS
Purchase
SUPPLIERS
Purchase inputs automobiles
Purchase
[Spare parts]
inputs used
used in creating
in creating
automobiles
systems, car
seats, other
parts
Business Marketing
Business Marketing
Consumer
Marketing
Each organization in this chain is involved in
And
the creation of a product, marketing process
Business
[including delivery] , and support services after
Marketing
sales.

The Supply Chain

Supply Chain Management: It is a technique for
LINKING a manufacturers operations with all of its
strategic suppliers and its key intermediaries and
consumers to ENHANCE efficiency and
effectiveness.
The goal of supply chain strategy is to improve the
SPEED, PRECISION, and EFFICIENCY of manufacturing
through strong supplier relationship.
The goal is achieved thru info sharing, joint
planning, shared technology, and shared benefits.
The focus shifts from PRICE to VALUE & from
PRODUCTS to SOLUTIONS.

The Supply Chain

Managing Relationships in the Supply
Chain: Customers in the Business Market
place a premium on the Business Marketers
supply chain management capabilities. They
actively seek supplier partners that will
contribute fresh ideas, responsive service, and
leading-edge technology to attract buyers for
future products.

The Supply Chain

KAIZEN:

CONSISTENT
REASONING:

- Commitment to
continuously improve
performance.
- Willingness to analyze
root cause of all
problems and correct
them

- A factual basis for all

decisions.
- Deep understanding of
the reasons behind each
product design decision.

CROSS-FUNCTIONAL
TEAMING:
-A team-based working
culture.
-The involvement of
management in all
operational matters

SHARING OF INFO &

KNOWLEDGE:
-Willingness to share
details on costs, quality,
and technology.
-Transparency &
openness in all
discussions.

RESPONSIVENESS:
-Prompt reply to al
requests
-Reliable delivery of
whatever promised.

The Supply Chain

Commercial Enterprises as Consumers:
Commercial Enterprises can be divided into
three categories; namely (1) Users, (2)
Original Equipment manufacturers [OEM], and
(3) Dealers & Distributors.
USERS: They purchase industrial products
/services to produce other goods / services
that are, in-turn, sold in the Business or
Consumer Markets.
OEMs: The OEM purchases industrial goods to
incorporate into other products it sells in the
Business or Ultimate Consumer Markets.

The Supply Chain

THE DEALERS & DISTRIBUTORS: Dealers &
Distributors include Commercial Enterprises
that purchase industrial goods for sale [in
basically the same form] to Users and OEMs.
The Distributor accumulates, stores, and sells
a large assortment of goods to industrial
users, assuming the title to the goods it
purchases.
OVERLAP OF CATEGORIES: The three categories
of Commercial Enterprises are not mutually
exclusive. One Organization can be a User as
well as OEM.

The Supply Chain

UNDERSTANDING BUYING MOTIVATIONS: Each

category of Commercial Buyers views the
product differently because each purchases
the product for a different reason. An
industrial distributor is most interested in
matching the capability of the product to the
needs of its customers in a specific
geographical market.

Classifying Goods for the

Business Market
One method of classifying industrial goods is
to find out how the industrial good or service
enter the production process, and how does it
enter the cost structure of the firm.
In general, industrial goods can be classified
into three broad categories: Entering Goods,
Foundation Goods and Facilitating Goods.

Classifying Goods for the

Business Market
ENTERING GOODS: Entering goods become part
of the finished product. This category of goods
consists of raw materials and manufactured
materials and parts. Their cost is an expense
item assigned to the manufacturing process.
Raw Materials: Include both farm produce and
natural products. RMs are processed only to
the level required for economic handling and
transport; they basically enter the buying
organizations production process in their
natural state.

Classifying Goods for the

Business Market
Manufactured Materials and Parts: In contrast

to RMs, these undergo more initial processing.

Component material such as textile, or steel
sheets have been processed before reaching a
clothing manufacturer or automaker but must
be processed further before becoming part of
finished consumer product [Examples: Small
motors, tires, batteries, etc].

Classifying Goods for the

Business Market
FOUNDATION GOODS: They are CAPITAL items,
whose depreciation costs become a part of
manufacturing costs.
Installations: Major long-term investment
items that underlie the manufacturing
process, such as building, fixed equipment
etc.
Accessory Equipment: Less expensive and
short lived compared to installations and not
considered part of fixed plant [Examples;
Portable drill, PCs, Fax machines, etc].

Classifying Goods for the

Business Market
FACILITATING GOODS: Supplies & services that support
the organizational operations. Because these goods do
not enter the production process or become part of the
finished product, their costs are handled as Expense
items.
Supplies: Operating supplies like printer cartridges,
paper, business forms, maintenance & repair items, etc.
Services: Service sector has grown to embrace 80% of
all US employment. To capture the skills of specialists
and to focus their attention to their core business, many
firms are shifting or OUTSOURCING selected service
functions to outside suppliers like IT/Web/ Computer
support, payroll processing, logistics, food operations,
equipment maintenance, security, cleanliness, etc.

Business Marketing
Strategy
The physical nature of the industrial good and its
intended use by the Organizational Customer dictate
to an important degree the marketing programs
requirements. Some Strategy highlights being:
Manufactured Materials /Parts: Whether a part is
standardized or customized often the dictator custom
made parts, personal selling and customer relationship
management activities assume a critical role in
marketing strategy. The Value Proposition centers on
providing a product that advances customers
competitive position. The Business Marketer must
demonstrate strong Supply Chain Capabilities.

Business Marketing
Strategy
Standardized parts are typically purchased in large

quantities on a contractual basis, and the marketing

strategy centers on providing competitive price,
reliable delivery, and supporting services.
Frequently, Industrial Distributors are used to
provide responsive delivery service to small
accounts.
For manufactured materials and parts, the
Marketers challenge is to LOCATE & accurately
DEFINE the unique needs of diverse customers,
UNCOVER key buying influentials, and CREATE
SOLUTIONS to SERVE these customers profitably.

Business Marketing
Strategy
Installations: Here the product / technology itself, along

with the service capabilities of the firm, are the central

factors in the marketing strategy, and direct Manufactureto-User channels of distribution are the norm.
Negotiations can span several months and involve the top
executive in the buying organization. The focal points for
the marketing of installations include
1) a strong Customer Relationship
Management effort,
2) effective
Engineering & Product Design support, and 3) the
ability to offer a product / technology solution that provides
higher Return on Investment than its competition.

Business Marketing
Strategy

Supplies: The facilitating goods / supplies reach a broad market

of organizational customers from many different industries.
Although some large users are serviced directly, a wide variety
of marketing intermediaries are required to cover this broad and
diverse market adequately.
The goal of the Business Marketer is to secure a place on the
purchasing departments list of preferred or preapproved
suppliers.
For Supplies, the Marketers promotional mix includes catalog
listing, advertising, and, to a lesser extent personal selling. Price
may be critical in the marketing strategy b/c many supply items
are undifferentiated.
By providing the right Product Assortment, Timely and Reliable
Delivery, and Customized Service, the Business Marketer may
be able to provide distinctive value to the customer and develop
long term , profitable relationship.

A Framework of Business Marketing

Management
Corporate
Mission &
Objectives
Assess Market Opportunities
Commercial
Markets

Plan for
acquirin
g
Marketin
g

Analyze
Organizational
Buying Behavior

Select
Target
Market
Segments

Institutional
Markets

Evaluate
Alternative
Market Segments

Marketing
Objectives
Strategy
Development

Informatio
n

Product
or
Service

Government
Markets

Channels
of
Distributio
n

Pricin
g

Personal
Selling

Marketing Program
Response of

Adver
ting

Sales
Promotio
n

Monitor &
Predict
Environment
al Influences
DOMESTIC &
INTL

Interfunctional
R&D
Coordination
Production
Customer
InIiI
Service
Procureme
nt