Business to Business Marketing Session 1: Introduction: Business Marketing

Dr Young-Ah Kim

Lecturer

2014-2015 AutumnUG module, 09/10/2014

On successful completion of the module, you should be able to:

Understand the nature of business markets, firms as customers, the

marketing environment, strategy and organisational buyer behaviour,

relationship marketing (RM), supply chain management (SCM)

Understand a managerial treatment of business marketing

Become aware of the theoretical approaches to market orientation in

business markets, development and delivery of product and service

portfolios and managing business channels

Learning Outcomes (Autumn Term)

2

Sessions

3

1. Introduction to Business-to-Business Marketing

2. Organisational Buying Behaviour

3. Customer Relationship Management Strategies for Business Markets:

Relationship Marketing

4. Business Market Segmentation

5. Business Marketing Planning

6. Managing Products for Business Markets

7. Managing Services for Business Markets

8. Managing Business Marketing Channels

9. Summary

Introduction to

Business to Business Marketing

(Text Book Chapter 1)

Session 1

4

By the end of this lecture, you will understand:

1. The dynamic nature of the business marketing environment

2. The basic similarities and differences between consumer and business

markets

3. The underlying factors that influence the demand for products and services

bought by organisational customers

4. The nature of buyer-seller relationships in a product’s supply chain

5. The types of customers in B2B markets

6. The basic characteristics of industrial products and services

Learning Objectives

5

“Business Marketing” or “Industrial Marketing” are used interchangeably

50% of all business school graduates join firms in the business market

Because of interest in high-tech markets and the size of industrial markets,

increased attention is being paid to business marketing management

Business to Business (B2B) Marketing is Huge!!

Business marketers serve the largest markets of all

Dollar volume of the business market greatly exceeds the consumer

market

A single organisational customer can account for enormous levels of

purchasing activity

For example, GM’s 1,350 business buyers each purchase more than

$50 million annually

Business Marketing

6

markets for products and services from local to internationalBought by: organisations

Businesses

Government bodies

Institutions

For:

Incorporation

Consumption

Use

Resale

Business Markets are…

7

Used to manufacture other products

Become part of another product

Aid in the normal operations of an organization

Are acquired for resale without change in form

The intended use determines whether or not a product is a consumer

product or a business product

If Mr. Clean is used by the ultimate consumer to clean his/her house?

it is a consumer product

If Mr. Clean is being used to clean a hospital or a university?

it is a business product

Business Products are…

8

Key is the

product’s

intended

use

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

Customers & Products in B2C & B2B

9

B2B

Customers:

B2C

Individuals & Households

BusinessesGlobalLarge corporationsSmall & Medium sized businesses

InstitutionsHealthcareEducation

GovernmentFederalStateLocal

SelectedProducts:

PCsPrintersConsumer ElectronicsSimple Service Agreements

PCsEnterprise StorageServersComplex Service Offerings

http://www.youtube.com/watch?v=PtsqMVvCJ8Yhttp://www.youtube.com/watch?v=E03UV7IMsLA

Types of Business Market Customers

10

Commercial Customers Institutional Customers Governmental customers

Manufacturers

Service firms

Selected professional groups

Wholesalers

Retailers

Schools, colleges, universities

Library

Foundations

Art galleries

Clinics

Federal government

State government

Local government

(cities/towns)

Example: IBM

http://www.youtube.com/watch?v=CRidfTHXM7c

http://www.youtube.com/watch?v=TuxL3yzXxJo

http://www.youtube.com/watch?v=PVIlqUTfg5E

Both marketers benefit by employing a market orientation, i.e.:

They need to understand and satisfy customer needs

They are both market driven

Similarity of Consumer and Business Marketers

11

Demonstrate…

A set of values and beliefs that places customers’ interests first

The ability to generate, disseminate, and productively use superior

information about customers and competitors

The coordinated use of interfunctional resources (e.g., R&D,

manufacturing)

Have distinctive capabilities:

Market sensing capability: A company’s ability to sense change and to

anticipate customer responses

Customer linking: The ability to develop and manage close customer

relationships

Market-Driven Firms (1)

12

View their customer as an asset, thus:

Marketing expenditures are considered investments (not expenses)

Firms must develop and nurture customer relationship management (CRM)

capabilities by:

a. Identifying,

b. Initiating,

c. Developing,

d. and Maintaining profitable customer relationships

Market-Driven Firms (2)

13

Deliver “Value Propositions”

Create programs that include products, services, ideas and solutions to

problems that offer value and provide opportunities for their customers

Market-Driven Firms (3)

14

Business marketing and consumer-goods marketing are different even though both markets share common body of knowledge, principles and theory

WHAT/ HOW DIFFERENT?

Characteristics of Business Markets

15

1.Nature of their markets

2.Market demand

3.Buyer behaviour

4.Buyer-seller relationship

5.Environmental influences (competition, political, legal) and

6.Market strategy

� Therefore, business marketers need to understand

how demand for industrial products and services differs from consumer

demand

Business and Consumer Marketing Differ in..

16

Derived demand

Fluctuating demand

Stimulating demand

Price sensitivity / demand elasticity

Global market perspective

Business Market Demand Characteristics

17

The demand for business products is called derived demand because the demand for industrial products is derived from the ultimate demand for consumer products

As a result, business marketers must carefully monitor fluctuating trends and patterns in consumer markets

Derived Demand

18

Consumer demand can create a fluctuating demand for many industrial products.

Example:

An increase in mortgage rates can quickly stifle new home sales.

This slows down the need for new household products.

Businesses react by decreasing their inventory of materials or putting off buying new machinery.

This action explains why the demand for many industrial products tends to fluctuate more than the demand for consumer products.

Fluctuating Demand

19

Sometimes, business marketers need to stimulate demand for consumer goods which either incorporate their products or are used to make consumer products

Sometimes manufacturers offer deep price discounts that influence members of the supply chain to lower their prices, in the hope of influencing the ultimate consumer to buy their products.

Stimulating Demand

20

Inelastic demand is demand without regard to price.

An increase or decrease in the product price will not significantly affect the

demand for the product.

Example: Price for the main food

Demand Elasticity

21

Elastic Demand CurveD

D

Quantity

Pri

ce

D

D

Quantity

Pri

ce

Inelastic Demand Curve

Marketers must have a global perspective:

They need to look beyond the UK

Enormous growth in developing countries such as Brazil, Russia, India and China (BRICs) offer huge opportunities for both large and small businesses

Global Market Perspective

22

Characteristics of Business Market Customers

23

Characteristic Example

•Business market customers are comprised

of commercial enterprises, institutions, and

governments.

•A single purchase by a business customer is

far larger than that of an individual consumer.

•The demand for industrial products is derived

from the ultimate demand for consumer products.

•Relationships between business marketers

tend to be close and enduring.

•Buying decisions by business customers often

involve multiple buying influences rather than a

single decision maker.

•While serving different types of customers,

business marketers and consumer marketers share

the same job titles.

•Dell’s customers are Boeing,

University of Essex, and numerous

local government units.

•An individual may buy one unit of a software

package upgrade from Microsoft while

Citigroup purchases 10,000.

•New home purchases stimulate the demand for

carpeting, appliances, cabinets, lumber, and a

wealth of other products.

•IBM’s relationship with some key customers

spans decades.

•A cross-functional team at Procter & Gamble

(P&G) evaluates alternative laptop PCs and selects

Hewlett-Packard.

•Job titles include marketing manager, product

manager, sales manager, or account manager.

Business Marketing is an important influence in the supply chain

Managing relationships with suppliers in the Supply Chain

Companies such as IBM and Toyota develop strategies to create suppliers

who provide new ideas and who are loyal

The Supply Chain

24

Classifying Goods for the Business Market

25

A Framework for Business Marketing Management

26

Lecture 1

Lecture 2-4

Lecture 5

Lecture 6-8

Week 1:

We consider differences between consumer and business markets

Week 2-3:

We will examine the organization buying process and discuss

Relationship Marketing (RM) management strategies

Week 4:

We will investigates selecting target segments and measuring their

responses

Week 5-8:

We will focuses on designing market driven strategies

B2B marketing planning: strategic perspectives

Managing products and services for business markets

Managing business marketing channels

Overview of This Term

27