MarketiWeek 7 - Business to Business Marketing

These flashcards encompass key vocabulary and concepts related to Business to Business Marketing, covering definitions and significant characteristics of B2B dynamics.

Business to Business Marketing (B2B)

Buying & selling goods or services to be used in the production of other goods & services, for consumption by the buying firm, or for resale by wholesalers and retailers.

B2B vs B2C

B2B focuses on transactions between businesses, whereas B2C involves transactions between businesses and individual consumers.

Manufacturers or Producers

Buy raw materials, components or parts

Manufacture their own goods

Resellers

Marketing intermediaries that resell manufactured products without significantly altering their form.

Institutions

• Schools

  • McMaster

• Museums

• Religious Organisations

• Hospitals

• Prisons

• Non profits

Derived Demand

The linkage between consumers’ demand for a company’s output and its purchase of necessary inputs to manufacture or assemble that output.

Differences Between B2B and B2C Markets

Market Characteristics, Product Characteristics, Buying Process characteristics, Marketing Mix Characteristics

Market Characteristic:

• Demand for business products is derived, fluctuates more and more frequently

• Fewer customers, more geographically concentrated & orders are larger

• Demand is more inelastic

Product Characteristics

• Products technical in nature, purchased based on specifications

• Mainly raw & semi-finished goods

• Heavy emphasis on delivery time, technical assistance, after sale servicing, financing assistance

Buying Process Characteristics:

• Buying decisions more complex

• Competitive bidding, negotiated pricing, complex financial arrangements

• Qualified, professional buyers – more formalized buying process

• Buying criteria and objective specified, as are procedures for evaluating and selecting vendors and products

• Multiple participants in purchase decisions

• Reciprocal arrangements common

• Close long-term relationships

• Online buying common

Marketing Mix Characteristics

• Direct selling & physical distribution often essential

• Advertising more technical, promotions emphasize personal selling

• Price often negotiated, inelastic, affected by trade/quantity discounts

Key Challenges of Reaching B2B Clients

• Identify decision makers in organization who authorize or influence purchases

• Understand the buying process of each potential client

• Identify factors that influence the buying process of potential clients

MERX

most complete source of tenders available in Canada

Stage 1: Need Recognition

• Can be generated internally or externally

• Sources for recognizing new needs:

  • Suppliers

  • Salespeople

  • Competitors

Stage 2: Product Specification

• Suppliers use to develop proposals

• Can be done collaboratively

Stage 3: Request for Proposal (RFP) Process

• Buying organizations invite alternative suppliers to bid on supplying their required components or specifications

• Some firms require negotiation with several suppliers

Stage 4: Proposal Analysis & Supplier Selection

• Often several vendors are negotiating against each other

• Considerations other than price play a role in final selection

Stage 5: Order Specifications (Purchase)

• Firm places the order

• The exact details of the purchase are specified

• All terms are detailed including payment

Stage 6: Vendor Performance Assessment Using Metrics

1. Buying team develops a list of issues that it believes are important

2. The buying team assigns an importance score (must add up to 1)

3. Assigns numbers that reflects its judgements about how well the vendor performs, using a five point scale

4. Overall performance = importance score x performance score

RFP (Request for Proposal) Process

When buying organizations invite alternative suppliers to bid on supplying required components or specifications.

Buying Centre

The group of people typically responsible for the buying decisions in large organizations.

Participants in the Buying Centre

Initiator, Influencer, Decider, Buyer, User, Gatekeeper

Initiator

The buying centre participant who first suggests buying the particular product or service.

Doctor

Influencer

The buying centre participant whose views influence other members of the buying centre in making the final decision.

Medical device supplier (pharmacy)

Decider

The buying centre participant who ultimately determines any part of or the entire buying decision—whether to buy, what to buy, how to buy, or where to buy.

hospital

Buyer

The buying centre participant who handles the paperwork of the actual purchase.

Hospitals materials manager

User

The person who consumes or uses the product or service purchased by the buying centre.

patient

Gatekeeper

The buying centre participant who controls information or access to decision makers and influencers.

Purchasing department

Types of Buying Cultures

Autocratic, Democratic, Consensus, Consultative

Autocratic Buying Culture

A team where one person makes the final buying decision, though there may be multiple participants.

Democratic Buying Culture

Buying committee, every person in committee gets a vote (faculty voting at mcmaster) (A buying centre in which the majority rules in making decisions.)

Consensus

A buying centre in which all members of the team must reach a collective agreement through which they can support a particular purchase.

Consultative

A buying centre in which one person makes the decision, but they solicit input from others before doing so.

Buying Situations

Includes New Buy, Straight Rebuy, and Modified Rebuy based on the complexity of the purchase.

New Buy

Purchasing for the first time

Likely to be quite involved

The buying centre will probably use all six steps in the buying process

Straight Rebuy

Buying additional units or products that have been previously purchased

Most B2B purchases fall into this category

Modified Rebuy

Purchasing a similar product but changing specifications

Current vendors have an advantage

Service-Product Continuum

The range from tangible goods to intangible services that illustrate the central role of services.

Economic importance of service

• Household maintenance activities have become quite specialized

• It is generally less expensive for firms to manufacture their products in less-developed countries.

• People place a high value on convenience and leisure

Unique characteristics of service marketing

Services are intangible, Inventory (perishable), Inconsistent ( variable,) and inseparable from their production. These characteristics create unique challenges in marketing services compared to physical goods.

Intangible

• Cannot be touched, tasted or seen

• Requires using cues to aid customers

• Atmosphere is important to convey value

• Images are used to convey benefit of value

Inseparable Production & Consumption 

• Production & consumption are simultaneous

• Little opportunity to test a service before use → Makes services feel risky to the consumer

• Lower risk by offering guarantees or warranties

Inconsistent

quality may vary because it is provided by humans

• Training & standardization

• Customized services to meet specific needs

• Bundled packages

• Replace people with machines

• Self-service technology

• The internet  (internet enabled kiosks)

3 ways to reduce variability

1. Internet Enabled Kiosks

2. Training and Standardization

3. Replace people with machines

Inventory - Perishable

you cannot hoard services, disney example (low demand cheaper prices)

Service Gap

Occurs when a service fails to meet customer expectations.

The GAPS Model

Knowledge Gap, Standards Gap, Delivery Gap, Communication Gap

Knowledge Gap

The difference between customers’ expectations and the firm's perception of those expectations.

To minimize knowledge gap:

• Understanding what customers want

• Evaluating service quality by using well-established marketing metrics

• Marketing Research: Understanding customers

Understanding Customer Expectations

• Expectations are based on knowledge and experience

• Expectations vary according to type of service

• Expectations vary depending on the situation

Zone of Tolerance

The area between customers’ desired service and the minimum acceptable service level.

Evaluating Service Quality:

Reliability, Responsiveness, Assurance, Empathy, Tangibles

Service Quality

Customers’ perceptions of how well a service meets or exceeds their expectations.

Delivery Gap

The difference between the firm's service standards and the actual service provided.

Methods to reduce delivery gap

Empower employees, use tech, provide support and incentives

Empowerment in Services

Allowing employees to make decisions about how service is provided to customers.

Voice-of-Customer (VOC) Program

An ongoing research system that collects customer insights to influence business decisions.

The Standards Gap:

Pertains to the difference between the firm’s perceptions of customers’ expectations and the service standards it sets.

Achieve service goals through training

Commitment to service quality

Constant investments in training an moderating

The Communication Gap

Refers to the difference between the actual service provided to customers and the service that the firm’s promotion program promises.

Service Recovery

Listen to the customer, resolve problems quickly, Provide a fair solution

Distributive Fairness

Refers to the perceived fairness of the outcome received by customers after a service failure.

Procedural Fairness

Refers to the perceived fairness of the processes that lead to outcomes.

Market Characteristics of B2B

B2B demand is often derived, fluctuates frequently, and consists of larger orders.

Stages of B2B Buying Process

Includes need recognition, product specification, RFP process, proposal analysis, order specifications, and performance assessment.

Factors in Vendor Selection

Considerations beyond price, such as quality and delivery time, play roles in selecting vendors.

Automation in Service Delivery

Use of technology to automate certain service processes, reducing human error.