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MSc Marketing/

MSc Management:
Marketing Contexts
Lecture: 30th January 2014
Business-to-Business (B2B)
Marketing: Part 1
Dr Gary Harden
28 January 2014

Warm-up exercise/ice breaker


Imagine you are working for a major blue chip company. Your job is
to organise the purchase (or leasing) of a fleet of company cars
for senior managers and sales staff.




Describe the stages in the process that you would go through in


making the purchase?
What particular issues will be important to you in making the
purchase?
What qualities or characteristics would you be looking for in
your preferred supplier?
Take a few minutes to consider your answers to the questions above and
then compare your views with your immediate neighbour(s).
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Overview of lecture





Developing an appreciation of the significance


of B2B for consumer markets
Understanding the key characteristics of B2B
markets and how these differ from consumer
markets
Aspects of the B2B decision making process
Building the case for studying B2B marketing

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Approaching B2B marketing

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Defining B2B marketing


B2B marketing is the management process responsible
for the facilitation of exchange between producers of
goods and services and their organisational customers.
Brassington and Pettitt (2005)

Business-to-business marketing is where one business


markets products or services to another business for use
in that business or to sell onto other businesses for their
own use.
Wright (2004)

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B2B relationships: Nintendo Wii


Maker of wireless LAN
and parts for controllers

Maker of AC adaptor

Small parts manufacturer


based in Osaka
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B2B in action: UPS Logistics

YouTube - UPS: We Logistics Commercial


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Consumer vs B2B markets

Consumer markets
- purchases by individuals for personal consumption

B2B markets
- products purchased by organisations either for resale
or use in production (and includes consumables)
industrial market
reseller market
government market
public sector market

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Supply/demand chain: cars


Suppliers of materials
(e.g. steel makers)
B2B
marketing

B2B
marketing

Purchasers of inputs
used in making parts
(e.g. engine makers)

Purchasers of inputs
used in making cars
(e.g. Ford, Toshiba)

B2B
marketing
B2B
(businesses)
and B2C
marketing
(individuals/
families)
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Car dealerships
(e.g. franchises or
independent showrooms)

End users of cars


(e.g. organisational customers
or consumers)

Upstream
suppliers
Direct
suppliers

Typical flow of
good between
organisations

Car
manufacturers
Car
distributors
Car
customers

Revisiting Porters value chain1


Support Activities
Firm infrastructure

M
A
R
G
I

Human resource management


Technology development
Procurement

Inbound
logistics

Operations Outbound
logistics

Marketing
& sales

N
M
A
R
G

Service
I
N

Primary Activities
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Revisiting Porters value chain2




The value chain offers a birds eye view of the organisation


and what it does. Competitive advantage arises out of the
way it uses inputs and transforms them into outputs that
customers are willing to pay for (i.e. value activities)
A firms value chain is connected to a larger value system
An organisation can secure competitive advantage by:




Inventing new or better ways to do things


Combining activities in new or better ways
Managing the linkages in its own value chain
Managing the linkages in the value system

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Why study B2B marketing?







B2B importance is recognised by key business thinkers


and practitioners (e.g. Kotler, Martha Rogers)
A detailed understanding of the demand/supply chains
for all products helps to ensure their efficient function
B2C has borrowed a lot from B2B
The majority of business students go on to work in
companies whose primary customers are other
organisations
(Ellis, 2011)

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Example of a typical B2B job


B2B Sales Executive/Account Manager (OTE 45K Uncapped)
Our client is a Microsoft Gold and Cisco certified partner specialising in
supporting IT networks for businesses. An opportunity has now arisen for a B2B
Sales Executive/Account Manager to head up their small, office-based account
management team. This position offers a challenging role and a genuinely
unique opportunity to be a key member of a small team.
As a B2B Sales Executive/Account Manager, your duties will include:
- Providing proactive management of existing customer accounts
- Building and maintaining strong working relationships with existing clients
- Identifying and closing opportunities for 'value added' services
- Issuing quotations/supporting documentation to existing customer accounts
- Providing solutions that meet client needs through IT recommendations
You must have B2B sales experience and demonstrable knowledge of Microsoft
applications as well as HP, Dell and Cisco products. You will also need to have
excellent communication skills and plenty of self-motivation.
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Significance of B2B markets


Source:
Ellis (2011)

Key B2B activities


are carried out
behind the scenes
of most B2C
experiences

Upstream
inter-organisational
trading supports
almost every
end-user market

Purchasing power of
private and public
sector
organisations
can be huge
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B2C marketers are


learning from B2B
marketing practices

Significance of
B2B markets

B2B activities make


a major contribution
to most national
economies

B2B exchanges have


a greater impact on
peoples lives
than B2C trading

Management paradoxes in B2B

Seeking opportunities
but facing limitations
Influencing others yet
being influenced
Controlling but never
being fully in control
Hkansson and Ford (2002)

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Managerial
certainty

Managerial
ambiguity

Characteristics of B2B markets

Fewer buyers
- there are fewer businesses than individuals
(3m vs. 60m UK)

Larger buyers
- customers in public sector typically account for one third
of public spending or 5-8% of GDP
- Accenture (Anderson Consulting) rebranded at a cost of
$175m in advertising expenditure alone
(Ellis, 2011)

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Characteristics of B2B markets

Closer relationships
- buyers and sellers are normally highly reliant upon
each other and promiscuity is frowned on

Use of legally binding contracts


Professional purchasing
- buyers are often trained and tend to be experts in
their field

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Characteristics of B2B markets

Derived demand
- suppliers in B2B markets must wait for demand to
trickle back through the stages in the supply chain

Relatively inelastic demand


- overall demand in business markets is not heavily
influenced by supplier price fluctuations. However,
these may impact intra-market demand

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Characteristics of B2B markets

Multiple buying influences


- although the buyer ultimately makes the purchase, there may
be many other factors that determine choice:

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Customer specification
Product/service quality
Legal requirements
Consumer preference
Decision making unit (DMU)

The DMU
(Decision Making Unit)

Users (staff or managers)


Influencers (designers or
technicians)

Deciders (ultimate decision maker)


Approvers (authorisers)
Buyers (purchasing function)
Gatekeepers (ad hoc impeders or
facilitators)

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Characteristics of the B2B DMU












Complex structure
Many people involved
Long time to make decisions
Buying for the organisation
Mainly rational reasons for purchase
High value goods/services being purchased
Seller might know DMU members over long period
DMU members can change
End-user probably not the decision maker
Wright (2004)

28 January 2014

Contextualising the B2B DMU


ENVIRONMENTAL

Adapted from Webster and Wind (1972)

Levels of demand
Economic prospects
Interest rates
The pace of technological change
Political and legal structures
Competitive structures

ORGANISATIONAL
Objectives
Policies
Structures
Systems & degree of centralisation
Processes and procedures
Managerial attitudes to risk
Financial l resource
Previous experiences

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BUYING
DECISION

BUYING CENTRE

INDIVIDUAL

Roles in DMU
Group processes
Interpersonal
interactions

Personal objectives
Job position
Attitude to risk
Previous experiences
Technical knowledge
Motivation

B2B buying behaviour

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Classifying B2B purchases


Plant and
equipment
Components

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Products and
services

Materials

Types of B2B buying situation

New task
- organisation buys product/service for the first time. This may entail
the development of a detailed technical specification and evaluation
of a range of potential suppliers

Modified rebuy
- organisation makes repeat purchase but requires changes to the
original specification. This may require a degree of negotiation

Straight rebuy
- repeat purchase is made with no alteration to the original
specification. This would normally be handled by a junior buyer

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B2B decision making process


Recognition of a problem/need
Determination of specification and quantity of item needed
Search for and qualification of potential suppliers
Acquisition and analysis of tender proposals
Evaluation of proposals and selection of supplier(s)

Placing of the order

Performance feedback and evaluation


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Comparing consumer and B2B


buyer behaviour
BUSINESS
 Commercial profit
 Expert purchasers
 Few
 High value purchases
 Concentrated (?)
 Negotiated

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CONSUMER
 Personal pleasure
 Amateur purchasers
 Many
 Small value purchases
 Scattered
 Impulse

Overview of the B2B


marketing mix

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How to approach B2B marketing





What do business customers value?


How do executives rank supplier capabilities?
See Anderson, J.C., and Narus, J. A. (1998) Business
marketing: understand what customers value, Harvard
Business Review, Nov-Dec., pp. 53-64.

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What business customers value


1. Core product quality
2. Low prices
3. Technological capability
4. Delivery performance
5. Rapid introduction of new products
6. Product support/service
7. Accommodating volume changes
8. Enhanced product features

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B2B marketing mix

Product/service - unique features, product trials,


after sales service, problem solving, quality, availability
of spares, operator training

Price - value for money, discounting, negotiated


prices

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B2B marketing mix


Promotion -

personal selling (soft sell), well


trained/empathetic salespeople, exhibitions, quality
printed material to build confidence and reputation

Place (Distribution) - rapid and/or reliable delivery,


specialist transport, high calibre agents/distributors,
close relationships (more of which in the next lecture!)

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Summary of main points









B2B marketing is defined as exchange activities between


organisations
The concepts of supply chain, demand chain and value
chain are inter-related in B2B marketing
The B2B DMU is complex and dynamic
B2B decisions are influenced by a huge number of
macro, micro and individual factors
Despite clear differences there are many similarities
between B2B and B2C markets
Relationships are important in B2B (more about this in the
next lecture...)

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References






Anderson, J.C. and Narus, J. A. (1998) Business marketing:


understand what customers value, Harvard Business Review,
Nov-Dec., pp. 53-64.
Brassington, F. and Pettitt, S. (2005) Principles of Marketing,
Pearson Education: Harlow.
Ellis, N. (2011) Business-to-Business Marketing: Relationships,
Networks & Strategies, Oxford University Press: Oxford
Hkansson, H. and Ford, G. (2002) How should companies
interact?, Journal of Business Research, Vol. 55, No. 2, pp.
133-139.
Wright, R. (2004) Business-to-Business Marketing: a Step by
Step Guide, Pearson Education: Harlow.

28 January 2014