L5 Marketing Management – Business marketing – B2B

Business marketing (industrial marketing, B2B):

Involves marketing (selling) goods and services to individuals and organizations for purposes that are not for personal use. Which contrasts with consumer marketing since these products are bought to satisfy the individual´s personal wants or needs.

- E.g. when a person buys a computer for their homes it´s consumer marketing but when a company buys computers for its employees to use fore works, or buys materials for production it is business marketing.

Difference between business and consumer products:

Business products: Used to manufacture other products, facilitate (make it easier) an organization´s operations or are bought to be resold to other customers.

Consumer products: Bought for personal wants or needs.

The nature of demand in business markets, how demand works in these markets (characteristics of business demand):

- The demand can be derived

- Inelastic

- Joint demand

- Fluctuating

The demand can be derived

- Meaning if people want to buy more of a final product, businesses that supply the parts for that product will also see an increase in their demand.

o For example, the demand for components used in Nike shoes depends on the consumer demand for Nike shoes. However, producers of goods must rely on information from vendors to understand this derived demand. With proper IT support, synchronizing systems between buyer and seller can mitigate the weakness of derived demand.

Inelastic

- If price changes the demand might not change much.

o Even if the cost of production increases, companies may continue to produce to avoid halting production, which could lead to idle employees and angry customers

o Can occur when the cost of stopping and restarting production or the potential for dissatisfaction outweighs the cost savings from reduced orders

Joint demand

- A situation where the demand for one product/service generates demand for another related product or service e.g printers need ink to function.

Fluctuating

- Business demand can fluctuate more up and down than consumer demand. Short-term effects, such as tariffs, can have dramatic impacts on business demand.

Key differences between business and consumer markets 1:5

- Demand for business market is organizational and not individuals.

- Volume is larger in business markets rather than smaller.

- No of customers are fewer in business markets due to fewer contracts, long term loyal relationships with companies rather than many customers.

- The location is more concentrated in business market, meaning it´s happening in a small specific area and not dispersed (spread out) as in consumer market.

- The distribution is direct and not indirect.

Key differences between business and consumer markets 2:5

- The nature of buying is more formal in business market since it´s professional rather than informal.

- The buying influence is many in business market, meaning there are many people influencing the decision of purchasing e.g. organizational, technological and data driven factors rather than single buying influence.

- Negotiation in business market is common and rare in consumer market.

- Reciprocity is in the business market where the companies are making a deal with equal and mutual benefit.

- Promotion in business market is personal selling meaning direct communication between salesperson and potential customers which is important since large sum of money is involved rather than advertising in consumer market.

1:4 Trends in B2B internet marketing

- Businesses use websites to communicate and take orders.

- They use digital marketing to build brand awareness and establish themselves as experts to generate sales leads.

- New technologies provide more info about customers which helps lower costs, improve supply chains and increase customer loyalty and trust.

- B2B marketers use smartphones and tablets to make orders easier and to improve customer experience.

2:4 Trends in B2B internet marketing

- Social media is used to attract customers to websites through methods like email marketing, search engine optimization, paid search and display advertising. But to use social media it needs constant monitoring and evaluation to ensure that it benefits its customers.

- The use of social media, such as LinkedIn, has increased in building business relationships.

- The ability to track goods and access a wealth of information is important for professional buyers to reduce uncertainty.

- Businesses are also increasingly using omni-channels, integrating multiple ways of purchasing (phone, computer, physical store). Search engines also play a role in business purchasing. However, vigilant adjustment and constant evaluation of new applications and platforms are necessary to determine their benefits

Relationship marketing

Important due to more demanding customers which increases competition and the use of social networking by suppliers. To keep a repeated business and loyal relationship a consistent dialogue is necessary with the customers.

Strategic alliance

Is a cooperative agreement, long term collaborations between business firms to achieve mutual goals and benefits by sharing resources or undertake a mutually beneficial project. These are formed to strengthen operations and better compete. These form sustainable growth and innovations in the business world.

Types of strategic alliance agreements:

- Licensing and distribution agreements: Licensing are about giving permission to use and sell a product or intellectual property while distribution deal with selling and distributing goods as a supplier´s authorized seller.

- Joint ventures: Companies launching products or services together through collaborations e.g. Sony and Philips.

- Research and development consortia: Actively engaged in collaborative projects with researchers and industry.

- Partnerships: Relationships between 2 or more people to do trade or business whnere each contributes money, property, labor or skills and shares in the profits and losses of the business.

Relationship commitment

Means a company believes a long term relationship is crucial and will put in maximum effort to maintain it.

Trust

Exists when one party has confidence in the other´s reliability and honesty.

Business exchange in other cultures:

- In Japan business exchange is often based on personal relationships built on mutual dependence, where these relationships can develop into a keiretsu which is a network of interconnected companies. Forming relationships with Asian firms is often best way to compete in Asian countries.

The major categories of business customers include:

- Producers: Firms in industries like construction, manufacturing, transportation, finance, real estate, and food service.

o Original equipment manufacturers (OEMs) are a type of producer who buy business goods and incorporate them into their own products.

- Resellers: Wholesalers and retailers.

- Governments: Federal, state and local buying units.

- Institutions: Educational institutions, hospitals, churches, labor unions, and other non-profit organizations.

Buying center

Includes all the individuals within an organization who are involved in a purchase decision and play different roles:

- Initiator: The person who first suggests the purchase.

- Influencer/evaluator: People who provide information and evaluate options.

- Gatekeeper: Those who control the flow of information.

- Decider: The person who ultimately makes the purchasing decision.

- Purchaser: The one who makes the actual purchase.

- User: The people who will use the product or service.

Business buyers evaluate potential purchases based on several criteria:

- Quality: How well the product meets technical requirements.

- Service: Includes support before and after the sale, as well as the reliability of supply. For example, a university purchasing a printer will consider reliable service and alerts for malfunctions, unlike a home user focused mainly on price. Servicing a commercial truck also requires understanding its specific usage

- Price: Business buyers aim to purchase at low prices

There are different buying situations in business markets:

- New buy: Purchasing a product for the first time.

- Modified rebuy: A repeat purchase where some changes are made to the original order.

- Straight rebuy: Repurchasing the same goods or services without seeking new information or considering other suppliers

Business ethics

Most companies implement ethical practices, offer ethics training and have codes of ethics to guide which minimize risk of employees or customers going to the dark side of bribery.

Beneficial for companies to have a:

-formal system that can monitor customers opinions and their perceptions of the quality of customer service.

To ensure the superior service firms must-

-Divide customers into groups, segments based on their value

-Create policies that govern how service will be allocated among groups - e.g. servicing a business truck must be based on the customer´s specific need.

Content marketing

Strategy and business process that uses valuable and relevant digital assets like text, images, and video to attract and retain a clearly defined audience.

Component parts

Raw materials and sub-assemblies used in the manufacture of finished goods.Raw materials and sub-assemblies used in the manufacture of finished goods.

North American Industry Classification System (NAICS):

Standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.

Multiplier effect (accelerator principle):

Explain the dynamics of economic growth and the relationship between investment and output. While the multiplier stretches out the effects of initial spending increments, the accelerator highlights the sensitivity of investment to changes in demand

Business-to-business online exchange:

Involving the exchange of products, services or information between businesses, rather than from a business to consumer (B2C). A B2B transaction is conducted between two companies, such as a wholesaler and an online retailer

Major equipment (installations):

Large, expensive, and critical machinery or apparatus used in the production or delivery of a product.

Accessory equipment

Supplementary items or tools that enhance the functionality or performance of a primary product.