Business Marketing

Perspective

November 10, 2010

 Business Marketing
• Business marketing is the marketing of goods
and services to individuals and organizations
for purposes other than personal
consumption.
– For manufacture of products
– Become part of other products
– Aid in the operations of an organization
– Acquired for resale without any substantial change
in form
 Business Markets
Markets for products and services
Local to Global
– Bought by
• Businesses
• Government bodies
• Institutions
– For consumption
– For use
– For resale
 The Consumer Market (B2C) and the Business
Market (B2B) at Dell, Inc.
Dell, Inc.

B2C B2B

Customers Individuals & Businesses Institutions Government

Households Global Healthcare Federal
Large corporations Education State
Small & Medium Local
sized businesses

Selected
PC’s PC’s
Products
Printers Enterprise Storage
Consumer Electronics Servers
Simple Service Complex Service Offerings
Agreements
 A Market Driven Firm
demonstrates:

1. Customer Orientation

2. Ability to track customers and competitors

3. Co-ordinated use of interfunctional resources

 Marketing’s Cross Functional Relationship

Business marketing planning must be

coordinated and synchronized with
corresponding planning efforts.
 Major Categories of Business Customers

• Producers
• Resellers
• Government
– Central Govt.
– State, District, City Municipality
• Institutions
 Business Market Characteristics

Demand is Derived Demand is Inelastic

Business
Customers

Demand Buyers
Fluctuations Well Informed
 An Example: Aircraft Purchase
• Derived demand — The demand for the planes is derived
from the demand for air travel in Asia. Singapore Airlines
specified Trent engines made by Rolls-Royce. Thus, the
demand for the engines is derived from the demand for the
planes. [Spicejet orders 30 Boeing 737-800]
• Demand is widely fluctuating — This is a large order that may
eventually amount to 77 planes and $12 billion. Airbus
Industry of Europe, the other major bidder, gets nothing
• Buyers are well informed — There were only two potential
suppliers, Boeing and Airbus, and the negotiations went on
for nearly a year.
 Business Versus Consumer Markets
• Business
– Derived demand
– Purchase large volumes
– Few customers
– Geographically concentrated
buyers
– More direct distribution
– Professional buying
– Multiple buying influences
– More complex negotiations
– Use reciprocity
– Greater use of leasing
– Personal selling
• Consumer
– Individual demand
– Purchase small volumes
– Many customers
– Dispersed buyers
– More indirect distribution
– Personal buying
– Single buying influences
– Simpler negotiations
– No reciprocity
– Minimal use of leasing
– Advertising
 Types of Business Products
• Major equipment (installations)
• Accessories
• Raw materials
• Component parts
• Processed materials
• Supplies
• Business services
Classifying
Goods for the
Business
Market

Classifying industrial goods by

the following questions:
How does the good or service
enter the production process?
How does it enter the cost
structure of the firm?
 Relationship Marketing
• All marketing activities directed toward
establishing, developing, and maintaining
successful exchanges with customers
 The Supply Chain

Michael Porter and Victor Millar observed that “to gain competitive advantage
over its rivals, a company must either perform these activities at a lower cost or
perform them in a way that leads to differentiation and a premium (more value).”
 B2B Virtual space
• Business marketing on the Internet holds
tremendous opportunities/benefits:
– Lower prices/costs
– Greater selection of goods and services
(numerous vendors)
– Access to customer and product sales data
(develop customer lists and most popular
products)
– Around the clock ordering and customer service
– Customized products
 Strategic Alliances
• Strategic Alliance (Partnership) is a
cooperative agreement between business
firms.
– Licensing
– Distribution agreements
– Joint ventures
– Research and development consortia
– Partnerships
Model of Business Buying Behavior

Session - II
It is individuals, not organizations,
make purchasing decisions.
 Business Buying Terminology

• Buying Centre • The people involved in the buying decision

process.

• The stages in the organisational buying

• Buy Phases process

• Variations in the application of the stages

• Buy Classes

• Buy Phases x Buy Classes

• Buy Grid
Business Buying Centres
Influencers

Deciders
Buying Users
Centre

Gatekeepers Buyers
 Roles in Business Buying Centres

• Different roles can be performed • Initiator

by the same person. • Influencer
• More than one person may • Specifier
perform the same role. • Approver
• Compare with family decision- • Decider
making? • Buyer
• User
• Gatekeeper
Buying Center Roles
• Primary Roles
– Deciders: Those people who have formal or informal authority who
actually make the buying decision
– Influencers: Those individuals inside or outside the organization who
influence the decision process (directly or indirectly) by providing
information on criteria for evaluating buying alternatives
• Secondary Roles
– Users: Those organization members who use the products &
services
– Buyers: Buyers are organizational members who have formal
authority in the selection of suppliers
– Gatekeepers: Those organizational members who control the flow
of information into the buying center
 Understanding the Buying Center

1. Which individuals are in the buying center for the product

or service?
2. What is the relative influence of each member of the group.
3. What are the buying criteria of each member?
4. How does each member of the group perceive our firm, our
products and services, and our salespeople?
 Buyer Orientations
• Buying orientation – Focus is short term and
tactical
• Procurement orientation – Buyers seek
quality improvements and cost reductions
• Supply Chain Management Orientation –
More strategic, value adding operation –
building seamless supply chain management
system
Buy Grid Framework
The Buy Phases

• Problem Recognition
• Development of Specifications
• Search for solutions: Qualify sources and
acquire proposals
• Evaluation of Proposals
• Choice of product & supplier: order placed
• Evaluation of performance
The Business Buying Process
 Major Types of Buying Situations

Straight Re-buy The buyer routinely reorders

something without any
modifications.

The buyer wants to modify

Modified Re-buy product specifications,
prices, terms, or suppliers.

The buyer purchases a

New Task product or service for the
first time.
 Buy Classes

New Task Modified Re-buy Straight Re-buy

First time buy Decision requires that buyer Low-involvement

organisation expends more decisions
Lots of individuals effort and includes more
influencing and people because of an Made by a single
involved with important modification to the person in the
decision-making product, delivery, price or organisation
process terms and conditions
 Buying Situations in Industrial
Market
Straight Re-buy Modified Re-buy New Task

Fewer Several
Number of decisions taken

Low High
Degree of risk involved

Low High
Degree of complexity
The Buy Grid Framework
Robinson, Faris and Wind (1967)

• Based on in-depth observation of two large

companies over two years.
• “One of the most useful frameworks ever
developed in Industrial Buying.”
• Tested by Anderson, Chu and Weitz, (Journal
of Marketing, July, 1987) and largely
supported.
The Buy Grid
New Task Modified Rebuy Straight Rebuy
Anticipation &
Always Always Never
recognition of problem
Elaboration of desired
Always Sometimes Never
attributes of product
Determination of
Always Always Never
quantity needed
Search for potential
Always Sometimes Never
suppliers
Acquisition & initial
Always Sometimes Never
analysis of the offering
Evaluations of offerings
Always Sometimes Never
and supplier selection
Selection of an order
Always Sometimes Never
routine
Performance, feedback
Always Always Always
& evaluation
Implications

• The framework defines the target for the

marketer’s efforts - the steps through which
s/he must respond to the buyer’s needs for
information

• But… problems need not be solved through

purchasing.
 Implications

• Communications • Distribution
– Where to provide information?
– Narrow or broad
– What information to provide?
– How to provide information?

• Product
– What features matter? • Price
– Extent to which
comparisons are made
Buying Situations & Supplier Tactics
Objectives in Industrial Buying

It is critical for suppliers to understand the various criteria that

industrial buyers use in evaluating potential suppliers
Major Influences on Business Buyer
Behavior
Thank
You!