BMR3154

Business to Business Marketing

Lecture 1:
Introduction
Brief Course Description 2

• Course BMR3154 aims to develop an

understanding of business markets, the business
marketing environment and the application of
marketing theory to business-to-business
markets.
Brief Course Description 3

• Business-to-Business Marketing, which is also

known as Industrial, Organizational or Business
Marketing, represents over 50 percent of the
world’s business activity.

• Business-to-Business marketing is becoming

increasingly dynamic and complex in the face of
growing globalization of business.
 4

LET’S START
Learning Objectives for This Lecture 5

1. To identify the dynamic nature of the business marketing

environment
2. To highlight the essential differences between business markets
and consumer goods markets
3. To develop an effective understanding of business marketing
management, understand the demand for industrial goods
4. To explain the characteristics of business market customers
and the nature of supply chain
5. To discuss the classification of goods in the business market
and provide a framework for B2B marketing
A Business Marketing Perspective 6

Markets for products and services

bought by business, Government, or
institutions

Business
Markets
Products to be incorporated into
other products, used, consumed, or
resold
A Business Marketing Perspective 7

Process of determining needs and

developing marketing mixes for
organizations

Business
Marketing
The nature of the customer and how
the product used distinguishes
business and consumer goods
marketing
Business markets VS Consumer goods markets 8

Business customers
For incorporation
Businesses
For consumption
Business Product &
Government
Markets Services For use
Institutions
For re-sale

Consumer For personal use

Product &
goods Individual customer
Services For personal
Markets consumption
Difference between consumer goods and 9

business goods marketing

Consumer goods marketing Business goods marketing

Numerous, widely dispersed

Consumers Few, concentrated geographically
geographically
Buying Group decisions
Individual decisions
behaviour Many buying influences
Very close working relationships
Buyer/Seller Very litter close contact
Interact in product design and problem solving
Complex; technical; detailed specifications
Product Standardized
Accompanying bundle of services important
Negotiated, bidding process
Price Fixed
List price for standardized items

Promotion Heavily oriented to mass advertising Primary role given to personal selling

Indirect, many intermediaries at each

Channels Direct, fewer intermediaries at each level
level
The consumer market (B2C) and the 10

business market (B2B) at DELL

Dell, Inc.

B2C B2B

Customers Individuals & Businesses Institutions Government

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

Selected
PC’s PC’s
Products
Printers Enterprise Storage
Consumer Servers
Electronics Complex Service Offerings
Simple Service
Agreements
Business Marketing Management 11

• Becoming Market Orientated

• Designing Customer Solution

• Marketing’s Cross-Functional Relationship

• Understanding Characteristics of Business

Markets

• Understanding Buying Motivation

Becoming Market Orientated 12

• Distinctive Capabilities
(market sensing capabilities --- company’s ability to sense change and to
anticipate customer responses
customer-linking capabilities --- the ability to develop and manage close
customer relationships)

• Managing Customers as Assets

• Marketing Tasks: What Managers Do
• Partnering for Increased Value
• Creating the Value Proposition
Cross functional relationship of marketing 13
Business Market Characteristics 14

• Derived demand
Business demand is derived from consumer demand for the final
product which they become a part
• Fluctuating demand
Since demand is derived, the business markets must monitor
and forecast demand in final consumer markets
• Stimulating demand
Some firms develop marketing programs to reach the ultimate
consumer (Boeing & Intel)
Business Market Characteristics 15

• Price sensitivity/demand elasticity

The derived nature of demand also affects the elasticity of
demand for business products
• Demand on a global scale
Most business products are sold on an international scale, and
assessment of competition from all international fronts is
required
Business firms will have to focus on markets whose needs they
can satisfy and whose competitors they can handle
Characteristics of business market customers 16

Characteristic
• Business market customers are composed of
commercial enterprises, institutions, and
governments.
• A single purchase by a business customer is
far larger than that of an individual consumer.
• The demand for industrial products is derived
from the ultimate demand for consumer
products.
• Relationships between business marketers
tend to be close and enduring.
Example
• Among Dell’s customers are Boeing, the
University of Newcastle, and numerous state and
local government units.
• An individual may buy one unit of a software
package upgrade from Microsoft while
Commonwealth Bank purchases 10,000.
• New home purchases stimulate the demand for
carpeting, appliances, cabinets, lumber, and a
wealth of other products.
• IBM’s relationship with some key customers
spans decades.

• Buying decisions by business customers often • A cross-functional team at P&G evaluates

involve multiple buying influences, rather than a alternative laptop personal computers and selects
single decision maker. IBM.
• While serving different types of customers, • Job titles include marketing manager, product
business marketers and consumer-goods manager, sales manager, account manager.
marketers share the same job titles.
Distinguishing characteristics of 17

business marketing

1. Emphasis on personal selling

2. The service components of the product offering plays a key role

3. Protracted price negotiations for individual products are common

4. Business marketers typically sell direct to large accounts

5. Relational emphasis

a. Often requires synchronizing operations closely with customers

b. Building a long-term relationship is the goal

Business market customers 18

Commercial enterprises

1. Users

2. Original equipment manufacturers

3. Dealers and distributors

4. Understanding the classifications provides

guidelines for effective strategy formulation
Supply Chain 19
Classifying Goods for the Business Market 20

Entering Goods Foundation Goods

Raw Materials Installations
- Farm Products (e.g. wheat) - Building & Land Rights (e.g. offices)
- Natural Products (e.g. iron ore, lumber) - Fixed Equipment (e.g. computers, elevators)

Manufactured Materials & Parts Accessory Equipment

- Component Materials (e.g. steel) - Light Factory Equipment (e.g. lift trucks)
- Component Parts (e.g. tires, microchips) - Office Equipment (e.g. desks, pc’s)

Facilitating Goods
Supplies
- Operating Supplies (e.g. lubricants, paper)
- Maintenance & Repair Items (e.g. paint, screws)

Business Services
- Maintenance & Repair Services (e.g. computer repair)
- Business Advisory Services (e.g. legal, advertising, consulting)
Key Words
Business Markets
Business Marketing
Distinctive Capabilities
• Market sensing capabilities
• Customer-linking capabilities
Value Proposition
Cross Functional Relationship of
Marketing
Supply Chain
21
Demand for Industrial Goods
• Derived demand
• Fluctuating demand
• Stimulating demand
Price sensitivity/demand elasticity
OEM (Original equipment
manufacturers)
Classifying Business Goods
• Entering goods
• Foundation goods
• Facilitating goods
DISCUSSION