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  Business markets present different types
of challenges and opportunities than
those presented by consumer markets.

› Relationships
› Value
› Buyer Decision

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  Business markets consists of all
organizations that purchase goods and
services to use in creation of their own
goods and services.

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  The process of matching and combining
the capabilities of the supplier with the
desired outcomes of the customer to
create value for the “customer’s
customer.”

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 Product

Place Price

Promotion

Marketing Mix
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 In general marketing theory , product refers
to a core product (or service) that can be
augmented by additional features and
options that will appeal to different buyers.

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 The total offering is created by a partnership
between the buying organization and the
marketing organization.

 The process creates an augmented product

that is specific to the buying unit’s needs
and maximizes the value creation
capabilities of the marketer.
Core Product
+ Financing Terms
+ Delivery Options
= “Total Offering”
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 The mutually agreed-upon amount that satisfies
both sides in an exchange.

 Price is the measure of value exchanged and is

determined by the market—not by costs.

 Price and nature of products

 Complex Product ?
 Standardized Product ?

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  May involve things other than a one-time
price payment (such as commissions.)

 Pricing Internationally may also be more

complex, particularly if the customer
company is multinational.

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 Place is about getting the product to the
customer in order to maximize economic utility.
Form

Possession Economic Time

Utility

Place

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 Business-to-business marketing requires a different
emphasis on different parts of the promotional mix

Consumer V.S. Business to Business

 Emphasis is frequently  Emphasis is frequently

on advertising. on personal selling.
 Communication with  Communication with
customers is often a customers should be a
monologue. dialogue.
 Relationship is often  Relationship is often
brief. long-lasting.

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 Configuration of four Ps ,whether in consumer
marketing or business-to-business marketing,
should be driven by the marketing concept.

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 Business
Consumer to
Business

Geographically Geographically
Dispersed Concentrated
Mass Market; Relatively Few
Many Buyers Buyers
Monopolistic Oligopolistic
Competition Competition

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 Business
Consumer to
Business

 Can be technically
complex
Standardized
 Customized to user
Service, delivery
preference
and availability only
 Service, delivery and
somewhat important
availability very
Purchased for
important
personal use
 Purchased for other
than personal use

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 Business
Consumer to
Business

 Professionally trained
 Individual purchasing
purchasing personnel
 Family involvement,
 Functional involvement at
influence
many levels
 Social or psychological
 Task motives
motives predominate
predominate

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 Business
Consumer to
Business

 Less technical  Technical expertise is an

expertise asset
 Nonpersonal  Interpersonal
relationships relationships between
 Little personal buyers and sellers
information exchanged  Significant personal info
 Changing, short-term exchanged
relationships  Stable, long-term
encourage switching relationships encourage
loyalty
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 Business
Consumer to
Business

 Indirect, multiple
 Shorter, more direct
relationships
 Organization
 Little or no customer
involvement as part of
supply chain
supply chain
involvement

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 Manufacturer
Consumer
Market
Company’s Sales Manufacturer’s
Force Representative

Wholesaler Wholesaler

Retailer Retailer Retailer Retailer

Consumer Consumer Consumer Consumer

 Manufacturer
Industrial
Market
Company’s Sales Manufacturer’s
Force Representative

Distributor/Dealer Distributor/Dealer

Customer Customer Customer Customer

 Business
Consumer to
Business

 Emphasis on personal
 Emphasis on advertising,
selling, dialogue
monologue
 Most communications
 Companies compete for
invisible to the consumer
visibility and awareness
 Consumer is seldom
of consumer market
aware of B2B brands and
companies

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 Business
Consumer to
Business

 Complex purchasing
 Usually list or process or
predetermined prices competitive bidding,
depending on
purchase type

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 Business
Consumer to
Business

 Direct  Derived
 Elastic  Inelastic (short run)

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 Derived Demand
› Demand for industrial goods and services
is derived from the ultimate demand for
consumer goods and services.

› Forecasts of ultimate consumer demand

determine the levels of demand throughout
the entire industrial pipeline.
 Joint demand
› Occurs when one product requires the
existence of others to be useful.
  Nothing happens unless consumer buys something
Acceleration Principle: “Bullwhip Effect”
1. Suppliers forecast 2. If consumer demand
production on existing drops, the order rate also
order rates. drops.

3. Supply chain members are then likely to overcompensate the

difference between the old and new forecasts, because:

A. Inventory levels can decline to fit new order rate

B. Customers change orders frequently
C. Minimum order quantities may exist
D. Trade promotions may influence buying patterns
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 It is the responsiveness of the sales of one product
to a price change in another.

 The demand for many industrial goods is influenced

by the price of other goods.

 Cross elasticity of demand for complementary

goods is always negative.

 Cross elasticity of demand for substitute goods is

always positive.
  Value is defined as sum of all of the benefits that a
customer receives in the process of buying and
using a product or services less the costs involved.

 Customers do not purchase products; they

purchase offerings that create solutions and
satisfaction.

 Value of an offering is not determined by the cost.

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  Value is often hard to quantify

 Evaluated price = Total cost of owning or

using a product
› Transportation, carrying costs, financing
costs, potential obsolescence, cost of failure,
installation, flexibility to upgrade, etc.

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  The puzzle of the B2B Consumer needs
“Total
Offering”

•Product
•Service
•Image
•Availability
•Quantity
•Evaluated
Price

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 A supply chain is a network between a company
and its suppliers to produce and distribute a
specific product, and the supply chain represents
the steps it takes to get the product or service to the
customer.

 The organizations that make up the supply chain are

“linked” together through physical flows and
information flows
 Value Chain: The chain of activities that
creates something of value for targeted
customers.

Direct Activities: Support Activities:

Make it possible to
Contribute directly to
perform the direct
the offering.
activities.

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 Perceives
Infrastructure
Human resources Offering:
Procurement
Technology &
technology development Product
Support activities Service Target
Added value
Direct activities Image Customers
Availability
Quantity
Evaluated Price

Creates

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 Value activities are therefore the discrete
building blocks of competitive advantage.
 Value chain uses a collection of inter-
dependent activities.
 Competitive advantage frequently obtains
from linkages among activities just as
does from the individual activities
themselves.