Business to Business Marketing

What is B2B Marketing

Business-to-business (B2B) marketing is about the marketing of goods and

services to commercial enterprises, governments and institutions,
➢ for incorporation (e.g. components)

➢ for consumption (e.g. processed materials, office supplies)

➢ for use (e.g. installation or equipment)

➢ or for resale

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 Products
in B2B Market

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Classification of Goods & Services in the Business Market & Cost Structure

Entering Goods Foundation Goods

Raw Materials Installations
– Farm Products – Buildings and Land Rights
– Natural Products – Fixed Equipment

Manufactured Materials and Parts Accessory Equipment

– Component Materials – Light Factory Equipment
– Component Parts – Office Equipment

Facilitating Goods

Supplies
– Operating supplies
– Repair & Maintenance

Business services
– Business advisory services

(Source: Kotler)
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 Categories of Products in B2B Market and Characteristics
Category Salient Features / Requirements

Major Equipment Usually complex and long sales process. Firms use hired or dedicated sales
force depending on the condition

Minor Equipment Mass marketing techniques, distributors as channels

Low in quality differentiation, price a major factor, cost efficiency a main

Raw Materials issue hence low-cost intermediaries and sometimes spot transaction is
preferred

Processed Materials Differentiation possible due to value addition

Components Close technical match - needs close relationship with buyers

Systems Such as MIS, where overall solution is of prime importance

Consumable Supplies Ease of availability is main criteria

Industrial Services Ranges from engineering services to management consulting and so on

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 Type of
Customers in B2B Market

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 Organizational Buyers

Type of Business Market Customers

❑ Government

❑ Commercial Enterprises

❑ Institutions : For example – Educational Institutions, Religious Institutions etc.

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 Government Organizations : Procurement

❑ Characterized by contractual and legal nature of procurement

❑ Procurement process in Government organizations:

➢ Open Tender (OT)

➢ Limited Tender (LT)

➢ Single Tender (ST)

❑ Normally a two-bid tendering system

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 E-Procurement

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 E-Procurement Process

Select
Conduct Develop Complete Suppliers &
Market Category Supplier Negotiate Supply Pay
Analysis Strategy Evaluation Agreement

• Reverse
High value buying • e-documents:
• e-Invoice
• e-Requisition Auction • Ship status
• e-Credit/Debit
• e-Approval • e-PO • Receipt
• RFQ, RFP • e-Release • Supplier web
• Tenders • e-Changes report card
• e-Confirm

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Source: IBM Corporation
 E-Procurement Benefits

Value Drivers Pain Points Mitigation/Savings Estimates

• Long lead times due Purchase requisition process-

1 Improved Process Efficiency to high manual processing, ing time reduction of 70%-80%;
1/3 time spent reviewing averaging a week faster
manual requisitions

• High transaction costs Purchase requisition process-

2 Reduced Product/Process • Long supplier negotiations ing expense reduction up to
Costs • Non contract compliance 73%; price of goods 5%-10%
drives up price less on average

• Fragmented data Data integrity is improved

through contract compliance,
3 Improved Compliance
• Unreliable/inaccurate data strengthening a company’s
supplier negotiation leverage

• Rampant off-contract spend

Reduced Maverick (approximately 27% of Maverick spending decreases
4
Purchasing indirect spend) up to 51%

• Long lead times result in

5 Reduced Inventory Costs purchase of large safety Inventory expense reduction
stocks between 25% - 50%

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Source: IBM Corporation

 Reverse Auction

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 Reverse Auction

(Source: Chen & Baily, 2017)

❑ As the Internet has grown, reverse auctions have evolved as an efficient and structured way to
conduct online negotiations with suppliers.

❑ Unlike traditional auctions, the winner is not chosen based solely on the amount of their bid
rather the buyer selects a winner from the available bids based on their own criteria, which
might include price, qualifications, delivery time, vendor reputation, etc.

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 Process Flow for Reverse Auction

11-Jul-22(Source: https://www.hpw.qld.gov.au/__data/assets/pdf_file/0015/3354/procurementguidereverseauctions.pdf)
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 Reverse Auction

(Source: Tassabehji et al., 2006)

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 Benefits of Reverse Auction

❑ Compliance

✓ Helps organizations to fight corruption, reduces back room negotiations, and brings
transparency.

✓ By facilitating a structured and automated negotiation, reverse auctions provide a clear

and documented process for reaching an agreement on pricing for different types of
goods and services.

✓ The process preserves bidder anonymity and provides suppliers with real time pricing
feedback. It provides suppliers an understanding where do they stand in relation to other
bidders.

✓ There is real time visibility into the negotiation. The structure and the transparent
process makes reverse auctions an unique way to comply with fair purchasing policies,
laws, or regulations.

11-Jul-22 Source: https://www.epiqtech.com/government-reverse-auctions.htm 16

 Benefits of Reverse Auction
❑ Price

✓ Helps in price negotiation. Especially, in the case of government buying process when they
have a pool of qualified suppliers willing to participate in a reverse auction, the power of
competitive bidding and price disclosure will drive the price lower.

✓ Reverse auctions are most effective for lowering purchase prices when they are used for
purchases that are more transactional in nature rather than for more strategic purchases.

❑ Cycle Times

✓ The traditional buying process includes locating qualified suppliers, contacting each of these
suppliers, obtaining pricing, negotiating with these suppliers and then awarding the business
– making it an overall time consuming process.

✓ Reverse auctions offer a way to reduce the complexity and obtain pricing in a quick and
structured manner encouraging lower bids from suppliers within a given time line. The time
element of reverse auctions along with a well defined start and end date make the
negotiation efficient and helps complete the price negotiation by the end of the event.

11-Jul-22 Source: https://www.epiqtech.com/government-reverse-auctions.htm 17

 Benefits of Reverse Auction
❑ Transparency

✓ Transparency is essential, especially in government purchases and reverse auction helps in

ensuring the same. It helps in reducing corruption and have better control over the process.

✓ The price disclosure function brings clarity to the bidding process and also preserves bidder
anonymity at the same time.

✓ It also helps in documenting the entire process that can be a good source of decision making
as well as for auditing process.

❑ Participation

✓ When conducted efficiently, reverse auctions may boost participation in the buying process
as it is more convenient, provides real time feedback on many factors and reduces cycle time.

✓ Its access through Internet provides a global access to a large pool of vendors.

11-Jul-22 Source: https://www.epiqtech.com/government-reverse-auctions.htm 18

Organizational Buying Behavior and Relationship
Management
 Evolution of Organizational Buying

❑ Economic view
▪ Rational economic factors
▪ Objective was to obtain minimum price or lowest total cost-in-use

❑ Reciprocal view
▪ Dyadic view

❑ Behavioral view (non-task view)

▪ Emotions & personal goals
Evolution of Organizational Buying Process

(Source: Steward et al., 2019, IMM)

Evolution of Organizational Buying Process

(Source: Steward et al., 2019, IMM)

 Organizational Buying Behavior

It includes all activities of organizational members

(buying center members) as they define a buying situation
and identify, evaluate and choose among alternative brands
and suppliers.

(Webster & Wind, 1972)

 Buying Center

It includes all members of the organization who are involved in the buying
process

Initiator

Gatekeeper

Influencers

Deciders

Buyers

Users

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 Buying Situation

Types Decision Approach Strategic Guidelines

New Task Judgmental and strategic in nature Value creation by means of

price, quality and allied services

Straight Rebuy A routine buying approach In-supplier approach

Modified Rebuy ✓ Simple modified rebuy: long In-supplier approach vs.

term relationship could be Out-supplier approach
guiding factor

✓ Complex modified rebuy: Fresh

bidding could be an option

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 Buy Phases: Stages in the Industrial Buying Process

Problem Recognition

General Description of Need

Detailed Description of Product

Specification

Supplier Search

Acquisition and Analysis of Proposals

Supplier Selection

Selection of an Order Routine

Performance Review

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 Factors Affecting Industrial Buying Behavior

❑ Environmental Factors

❑ Organizational Factors

❑ Group Factors

❑ Individuals’ Behavioural Factors

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 Factors Affecting Industrial Buying Behavior

❑ Environmental Factors:

✓ Economic environment

✓ Physical environment

✓ Political environment

✓ Technological environment

✓ Legal environment

✓ Cultural environment

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 Factors Affecting Industrial Buying Behavior

❑ Organizational Factors:

✓ Various departments, who are part of a purchasing situation

✓ Goals, objective and strategy of different departments

✓ Organizational positioning of purchasing

✓ Selective exposure, selective attention and selective retention among

key decision makers

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 Factors Affecting Industrial Buying Behavior

❑ Group Factors:

✓ Role in a group

✓ Relative influence

✓ Interaction among the buying participants

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 Factors Affecting Industrial Buying Behavior

❑ Individuals’ Behavioural Factors

Task and Non-Task Motives

✓ First rationality (Task) then personal choice (Non-Task)

✓ Non-task motives are of two types:

Achievement motives
• Personal advancement
• Recognition
Risk-reduction motives
• Uncertainty avoidance

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 I. The Environment (environmental determinants of buying behavior)

Physical environment Economic environment

Technological environment Legal environment
Political environment Cultural environment

Trade Professional Other Other Social

Suppliers Customers Government Labor unions Associations Groups Business firms institutions

II. The Organization (organizational determinations of buying behavior)

Organizational Organizational Organizational Organizational

Technology Structure goals & tasks actors

Technology relevant Organization of the buying center Buying tasks Members of the
for purchasing and the purchasing functions buying centers
Technological
Group structure Group task Members
Constraints &
characteristics &
technology
goals leadership
available to the
group
III. The Buying Center
(interpersonal determinants of buying behavior)

IV. The individual Participants

Buying
Task Non-Task Decision

Motivations, cognitive structure, personality, learning process, perceived roles

(Source: Webster and Wind 1972)

The Dynamic process of B2B buying unit social media information search
and knowledge information

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 The Relationship Spectrum

✓ Focus shifts from

getting the customer to
✓ Focus is on timely keeping the customer ✓ Close information
exchange || standard ✓ Sellers ought to ✓ Social and process
product || competitive understand changing linkage
pricing needs of customers ✓ Joint problem
✓ Customers must be solving
✓ Negotiation and terms provided incentives ✓ Long-term benefits
& conditions are ✓ Key account selling || in sight
important factors Customer value ✓ Shared incentives
proposition ✓ Commitment & Trust

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 Procurement Organizations

Factor Decentralization Centralization

Nature of Varying requirements, difficult to High commonality of use,
Requirement standardize predictable requirement

Nature of ✓ Varying production schedule ✓ Stabilized schedule

Operation / making it difficult to match ✓ Long term availability a
Volume demand with supply concern
✓ Need to have bargaining
✓ Small quantities needed with power and negotiated prices
unpredictable pattern
Nature of supply When small suppliers are the only Large supplier are available
environment available options

Nature of The intended product/service is not When specialized purchasing

product/service very complex in nature skills are required

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 Segmentation &
Assessment of Market Opportunities
 Market Segmentation

“A market segment is a group of present and potential customers with

some common characteristics which is relevant in explaining (and
predicting) their response to a supplier’s marketing stimuli.”

(Hutt & Speh)

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 Market Segmentation & Requirements

❑ Requirements:

✓ Measurability

✓ Accessibility

✓ Substantiality

✓ Compatibility

✓ Responsiveness

❑ Goal: Greater amount of difference between groups (segments) and high

similarities within them

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 Nested Approach of Market Segmentation

❑ Demographics: Industry/ Company Size/ Location etc.

❑ Operating Variables: Company Technology/ Product Usage/ Company

Capabilities etc.

❑ Purchasing Approach: Purchasing Function Organization/ Power Structure/

Purchasing Polices/ Buyer-Seller Relationship etc.

❑ Situational Factors: Product Application/ Size of the Order etc.

❑ Personal Characteristics: Risk Averse/ Risk Takers etc.

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 Macro vs. Micro Segmentation Approach

❑ A Two Stage Approach:

➢ Macro-Segmentation

➢ Micro-Segmentation

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 A two-stage approach: Macrosegmentatiion and Microsegmentation
(Source: Hut & Speh)
Selected Macrolevel Bases of Segmentation
Variables Illustrative Breakdown
Characteristics of Buying Organizations
Size (the scale of operations of the Small, medium, large; based on the sales or the number of
organization) employees

Geographic Location USA, Asia pacific, Europe, Middle East, Africa etc.

Usage Rate Non-user, light user, moderate user, heavy user

Structure of procurement Centralized, decentralized

Product/Service application
End market served based on industry Varies by product or service
classification

Value in use (economic value) High, low

Characteristics of Purchasing Situation

Type of buying situation / Stage in New task, modified rebuy, straight rebuy / Early stage, late
purchase decision process stage

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 A two-stage approach: Macrosegmentatiion and Microsegmentation
(Source: Hut & Speh)

Selected Microlevel Bases of Segmentation

Variables Illustrative Breakdown
Key criteria Functionality, Quality, Delivery, Supplier reputation
Purchasing strategies Single source, multiple source

Structure of decision making unit Major decision participants

Importance of purchase High importance, low importance

Organizational innovativeness Innovator……follower

Personal characteristics:
Demographics Age, educational background
Decision style Normative, conservative, mixed mode

Risk Risk taker, risk avoider

Confidence High, low

Job responsibility Purchasing, production….

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 Thank You

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