MKT- 601, Business to

Business Marketing
Prof.Shailesh Pandey

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Consumer Product or Business Product?

• When a self-employed consultant buys a new mobile phone, the phone

is a

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Consumer Product or Business Product?

• But when the same person buys the same phone for private use,
it is a

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Definition

• B2b / Industrial / Organizational / Institutional Marketing is the

process of creating, identifying and satisfying the needs of an
organization for the company better than the competitors at a profit.

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Definition

B2b / Industrial / Organizational / Institutional Marketing consists of all

activities involved in marketing products / services to organizations companies
(profit / non profit), Government, VARs, institutions who use these products &
services for running the operations of their respective organizations.
Consists of all organizations that acquire goods / services that are sold / rented /
leased / supplied to others

Marketing as a process
Acknowledges ‘organizational needs’ as the underlying rationale.
Satisfaction of needs / wants is through an exchange process

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Nature and Scope of B2B Market
• The business (B2B) market consists of organizations that buy goods
and services:
• To make other goods and services.
• To resell to business users or to consumers.
• To be used in the operations of the organizations.
• 50% of all B school graduates join firms that directly compete in the business
market

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Nature and Scope of B2B Market
• Huge in sales volume.

• Significant in terms of the number of firms involved.

• Largely behind the scenes.

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Business Markets
• Are markets for products and services from local to
international
Bought by:
• Businesses
• Government bodies
• Institutions
For:
• Incorporation
• Consumption
• Use
• Resale

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Business Markets
• Products such as fighter jets, printing presses and speciality chemicals
are clearly developed for business applications

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What Are Business Products?

• Used to manufacture
other products
• Become part of another product Key is the
• Aid in the normal operations of product’s
an organization intended
• Are acquired for resale use
without change in form
• A product purchased for personal use is considered a
consumer good
Business to Business (B2B) Marketing is Huge

1. Business marketers serve the largest markets of all.

2. Rupee volume of the business market greatly exceeds the
consumer market.
3. Few big customers can account for enormous levels of
purchasing activity. (India’s 100 largest Manufacturing
companies purchase more than Re. 50 Lakh Crore worth of
goods and services annually.)

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Product Characteristics
 Goods are sold / produced to make some other goods and not for
personal consumption
 High emphasis on customer requirements / product specification
 Focus on Augmented / Desired Product – higher marks for service,
support and SLA variables
 Timeliness and Certainty of delivery as important as quality
 Goods are sold first and manufactured later
 Requires a high degree of customization

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Buyer Characteristics
 Buyers are knowledgeable, professionally trained, technically sound
 Purchase is on rational factors & some irrational factors
- specifications, product performance, cost, dependability, rather than social or
psychological or emotional factors

 Selling cycles are high

 Stable long term relationships
- developed over time, relationships are close, changes are few & difficult
- Cost of wrong choice of vendor is high
- exit costs are also high.

 High level of buyer seller interface

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B2B customers
• B2B customers can be categorised into three groups: commercial
enterprises, government agencies and institutions. Each of these
three groups of B2B customer has its own characteristics and should be
approached differently by vendors.

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Commercial enterprises
• There are three types of commercial enterprise: users, original
equipment manufacturers and resellers.

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Users
• Users purchase business products or services to produce their own
products or services that are sold to business customers and/or
consumers.
• Users purchase these products to set up or support their manufacturing
processes; for instance,Volkswagen buys photocopiers, computers,
office supplies and automated manufacturing systems to manufacture
cars.
• These products do not become part of the car, but are used to
manufacture them.

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Original equipment manufacturers (OEMs)
• (OEMs) buy B2B products to incorporate them in their own products,
which are subsequently sold on business or consumer markets.
• Volkswagen, for instance, buys suspension and steering parts, seating
systems, brakes, door handles and thousands of other parts to
manufacture cars with the familiar Volkswagen brand.
• All these products become part of the end product that is sold to
consumers and business customers.

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Resellers
• Resellers purchase business products and sell them to B2B customers.
They do not really change the physical product but may add value by
bundling products into systems and by offering several support
services (such as advice, installation,maintenance and training).

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Government agencies
• A significant number of B2B products and services are bought by
government agencies.
• This includes various agencies at both central and local government
levels.

• Indian Council for Agricultural Research

• National Dairy Research Institute

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Institutions
• A third group of B2B customers encompasses the numerous
institutions purchasing B2B products to perform their function. This
includes hospitals, nursing homes, blood banks, schools, universities,
political parties, museums, labour unions, trade organisations and
churches

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B2B products
• The diversity of B2B markets is also reflected in the broad
range of B2B products, varying from office supplies,
lubricants and electronic tools to welding robots, printing
presses and roller-coasters.

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Raw and processed materials
• Raw materials are farm and natural products that are used by customers
with little or no alteration, such as corn, wheat, milk, iron, oil, copper,
chemicals, natural gas and compressed air.

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Component parts
• Fabricated products that become part of the customer’s end product are
component parts. They are identifiable products of varying complexity
and include items such as integrated circuits, switches, motors, sensors,
displays, monitors and tyres.
• Sometimes, these component parts are visible to the user of the end
product and branded by the supplier; for instance, a car contains
branded tyres (Michelin,Pirelli), sparking plugs (Bosch, Champion)
and a battery (Varta, Hoppecke).

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MRO (maintenance, repair and operating)supplies
• All organisations need numerous products to make their organisations
and manufacturing processes run smoothly.
• These so-called maintenance, repair and operating (MRO) supplies
include paints, coatings, sealants, chemicals, lubricants, paper, office
supplies, spare parts, packaging's, lamps, uniforms, cleaners,
degreasers, cutting fluids, adhesives and fasteners.
• Spare parts are usually supplied by the equipment manufacturer, but
many other MRO items can be bought in supermarkets and hardware
stores or from specialised distributors.

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 Capital goods
• This category includes all facilities and fixed equipment that are used by
customers to conduct their business.
• Capital goods are generally depreciated over a number of years and include
buildings, HVAC installations, elevators, telephone exchanges, computer
servers and printing presses.
• Capital goods are not primarily sold on price, but on special services, delivery
schedules and offered options to finance the deal.

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Tools and accessories
• The tools and accessories bought by B2B customers are used for similar
purposes as capital goods. The difference is that tools and accessories are
generally less expensive and bought in larger quantities. While a B2B
customer needs only one telephone exchange, they may require dozens of
personal computers.
• This category of B2B products includes generators, pumps, trucks, portable
drills, cement mixers, personal computers, desks and fi ling cabinets.
• Purchasers and users are the most important decision-makers when it
comes to buying tools and accessories, with quality and price being the key
buying motives.

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Services
• B2B services are all activities performed by third parties on a
contractual basis; for example, management consultancy, advertising,
insurance, communication, web design, legal advice, financial services,
market research, design, catering, gardening, security and cleaning.

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Differences between Industrial and Consumer Marketing

Parameter Consumer Marketing Industrial Marketing

Customers Normally individuals / families Organizations / Governments

Customer Base Large except for high value durables Small

& luxury goods
Knowledgeable customers Not so much Very knowledgeable

Bases of Segmentation Demographics, psychographic & Industrial Demographics,

lifestyle parameters, geographic application, technology,
segmentation geographic segmentation
Purchase Decision Rational + Impulse Normally rational, need based

Buying Process Normally Short except for fashion Normally long except for
goods, high value durables and commodities and regular use
luxury goods items

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Differences between Industrial and Consumer Marketing

Parameter Consumer Marketing Industrial Marketing

Value of Order Normally small, except for irregular Vary from small to large to very large
purchases like durables / real estate
Key Influencers Peer Groups, Opinion Leaders, Market Leaders, R&D, Technical
Icons, parents, children, Consultants, JV partners,
advertisements Collaborators
No. of Transactions High Low

Product Manufactured first, sold later Sold first, manufactured later

Aesthetics Very important Not so important

Choice of channel partner Very wide Restricted

Sales Promotions Very Important Not at all important

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Differences between Industrial and Consumer Marketing

Parameter Consumer Marketing Industrial Marketing

Factory / site Visits Not essential except for real estate Very important

Role of Personal Selling Low Very Important

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Concluding the Difference
• A consumer market has large number of buyers ,often with similar
wants, while business markets typically have fewer customers, and
many of theses customers expect a customized product application, or
price.

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Creating value for customers
• Business marketing is helping your customers to be successful by
delivering superior customer value. It is not about selling products, but
about helping your customers to succeed.
• After all, B2B customers do not need products, but they do need the
value offered by these products to produce their own products and
services.

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What a value proposition is
• A value proposition is a clear statement about the outcomes that an
individual or an organization can realize from using your product,
service or solution.

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What a value proposition is
• Statement 1: We provide air conditioners.

• "So what," says the customer? There are scores of companies to choose from.

• Statement 2: An air conditioner that cleans your air and improves your indoor
environment.

• "Mmmmm…. Now, you are talking. Tell me more," your customer is likely to
say.

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Creating value for customers
• Value is defined as the benefits minus costs that customers receive in
exchange for the purchase price.

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Creating value for customers
• Every customer will assess whether the net benefits offered by the vendor
outweigh the purchase price that has to be paid to enjoy them.
• Thus, successful B2B marketing depends on a vendor’s detailed
understanding of what customers value.
• Successful B2B vendors understand the key success factors of their
customers and are always looking for better ways to contribute to their
success.

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Creating value for customers
• B2B customers buy B2B products and services to create value for their
own
customers.

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Creating Value
• A manufacturer of golf carts, for example, needs a large number of
products to manufacture them, such as engines, shock absorbers, batteries,
chassis, braking systems, steering assemblies, wheels, body panels and
transmissions, but also machinery for welding, roll forming, automatic
assembly and painting.
• Numerous vendors offer the various components and manufacturing
machinery that are needed to manufacture golf carts.

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Creating Value
• These vendors use a value perspective on B2B marketing: they create
value for their customers by helping them to offer superior value to the
customers’ customers.
• Thus, a vendor of components and systems for golf carts understands the
needs and requirements of golfers (the downstream customers), and thus
what makes golf cart manufacturers (the immediate customers) successful,
and translates these insights into superior value offered to golf cart
manufacturers.

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Customer Value Proposition
• A customer value proposition captures the particular set of benefits
that a supplier offers to advance the performance of the customer
organization.
• Rather than merely attempting to list more benefits than competitors,
“best practice suppliers base their value proposition on the few
elements that matter most to target customers, demonstrate the value of
this superior performance, and communicate it in a way that conveys a
sophisticated understanding of the customer’s business priorities.

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Creating Successful Value Proposition
• Points of parity—the value elements with essentially the same
performance characteristics as the next best alternative;

• Points of difference—the value elements that render the supplier’s

offering either superior or inferior to the next best alternative.

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CVP
• Sonoco, a global packaging supplier headquartered in South Carolina,
approached a large European customer, a producer of consumer goods,
about redesigning the packaging for one of its successful product lines.
• Although the redesigned packaging provided several favourable points
of difference relative to the next best alternative, Sonoco executives
decided to place special emphasis on one point of parity and two points
of difference in the customer value proposition: The redesigned
packaging will deliver significantly greater manufacturing efficiency in
the customer’s fill lines, through higher-speed closing, and provide a
distinctive look that customers will find more appealing—all for the
same price as the present packaging.

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What Matters Most?
• A point of parity was included in the value proposition because key buying
influential (those who have power in the buying process) within the customer
organization would not even consider a packaging redesign if the price
increased.
• The first point of difference in the value proposition (increased efficiency)
delivered cost savings, allowing the customer to dramatically streamline its
production schedule.
• The second point of difference (more distinctive customer packaging) enhanced
the firm’s market position and appeal to its customers, allowing it to realize
meaningful growth in its revenues and profit. While the other favourable points
of difference were certainly mentioned in discussions with the customer
organization, Sonoco executives chose to emphasize those points that mattered
most to the customer.
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UNBRIDLED DIVERSIFICATION BECAUSE OF A VAGUE
BUSINESS DEFINITION
• Blue Circle Industries PLC, the British company that used to be one of the world’s leading
producers of cement, decided in the early 1980s to branch out from its core business. Blue
Circle diversified into a variety of other businesses: property management, brick production,
waste management, industrial minerals, gas cookers, bathroom furnishings and even
lawnmowers!
• The driving logic behind all this diversification was grounded in management’s perception of
the business they were in. According to one senior executive: ‘We started out believing that our
business was not just the cement business but the supply of building materials, one of which is
cement.
• This led us into the brick business and then soon after that into cooking appliances and central
heating boilers – after all, these are all products you need when you build your house with our
bricks and cement. The culmination of this strategy was our move into lawnmowers, based on
the logic that you need a lawnmower for your garden, which is after all next to the house which
our materials built!’ This strategy proved to be unsuccessful. In 2001,the company was bought
by the French company Lafarge, which thus became the world’s largest cement manufacturer.

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Value Proposition by Airbus
• Airbus, for example, talks about ‘product families’, such as the A320 family and
the A330/A340 family, consisting of a series of airplanes with a similar range and
similar number of seats.
• The Airbus aircraft families offer a high degree of commonality amongst
airframes, on-board systems, cockpits, handling qualities and training. The
customer benefits of this strategy are significant: high flexibility for flight crews,
highly efficient operations and reduced costs, as pilots, cabin crews and
maintenance engineers do not need extensive amounts of training to transfer from
one aircraft type to another.
• All members of the Airbus single-aisle A320 family share the same pilot type
rating, enabling crews to fly any of them with a single licence endorsement.
• The larger A330 and A340 widebodies share the same basic handling qualities and
common cockpit layout as the other Airbus fly-by-wire aircraft, so a pilot qualified
on any of the A320 family aircraft can easily transition to the A330/A340, and vice
versa.
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CVP
• Recent developments in IT allow vendors of medical equipment, elevators,
copiers, building control systems and industrial equipment to establish an
online connection with their products so that they can monitor product
performance from a distance and schedule preventive maintenance.
• By using specialised chips embedded in the product and device relationship
management software, maintenance workers collect detailed information
about the product’s functioning which increases the efficiency of a
maintenance visit.
• Vendors may thus save up to $500 per emergency maintenance visit.
Swedish bearings manufacturer SKF helps its customers to extend the
service life of their equipment by using a secure electronic monitoring tool to
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CVP
• enable off-site access. For instance, vibration-analysis data provide early
warning about potential product failure and allow the company to perform
preventive maintenance during routine maintenance visits. Some firms use
the data from remote monitoring to ask the customer’s personnel to make
adjustments on their own, while others connect remotely to a customer’s
equipment and make changes from their off-site locations, thus saving time
and money.
• The benefits for customers of remote equipment management are numerous
and include increased product uptime, reduced costs of ownership, faster
diagnosis, faster mean time to repair, early detection of problems, automated
software deployment and preventive maintenance based on actual usage.

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