Chapter One

Introduction to Business/Industrial Marketing

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 Objectives

1. Define Business (B2B) market.

2. Identify the major characteristics of the business
market and its demand.
3. Make comparison between Business and Consumer
Market

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 What is a business Marketing ?
 Business marketing is an activity directed towards satisfying
need and wants of professional buyers and other individuals
influencing purchases in business organization, public
organizations, and not for profit institutions of all kinds, large
or small, through the process of exchange.
 Business marketing deals with business buyers and provides
goods/ services which satisfy their needs and wants.
 Business marketing describes all marketing activity not
directed towards the household or ultimate consumer.

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 Business marketing is the marketing of products
and services to organizations rather than to
households or ultimate consumers. The purchase is
made, not for self gratification, but rather to
achieve organizational objectives.
 Business marketing is also called business to
business marketing (B2B), industrial marketing,
commercial marketing, institutional marketing,
governmental marketing or organizational
marketing.

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 A business buyer is an industrial or business
purchaser who buys for reasons other than self-
gratification. Typically, the purchase or rental is
made for one of three reasons.
 To incorporate the product or service into the products or
services that the organization produces
 To facilitate the operation of the organization (E.g. Gondar
university purchases service buses for its employees).
 To resell the product or services (E.g. Showa supermarket
purchases packed food products to resell immediately, without
any modifications to consumers).

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The business market consists of all the organizations
that acquire goods and services used in the
production of other products or services that are
sold, rented, supplied to others.
The major industries making up business markets are:
agriculture, transportation, manufacturing, mining,
construction, communication, banking, finance,
insurance, public utilities, distribution and services.

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 Who are business customers?
 Business customers are all customers other than ultimate consumers. They are classified into
three groups, which at times, may overlap. These three classifications are the following.
 Commercial enterprises/profit making organizations: this group
includes commercial business enterprises purchasing business
goods and services for use other than selling directly to ultimate
customers.
 Government agencies/ organizations: these includes the federal
state or local agencies that buy goods and services for the
constitutions they serve government agencies are the largest
purchasers of business goods and services in any country.
 Institutional customers: - these are organizations not falling to
commercial or government classifications. They lye somewhere
between commercial enterprises and government agencies.
Examples are universities, colleges, hospitals, churches, not for
profit foundations etc.
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 Institutional and Governments Markets
Prisons

Government
agencies

Schools

Hospitals
©2003 Prentice Hall, Inc. Chapter 3_ Analyzing Business Market & Buying Behavior Slide 5 in Chapter 7
 Characteristics of the B2B
Market
Geographic market concentration
 business market is more concentrated than the consumer
market
 Certain industries locate in particular areas to be close to
customers

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Sizes and number of buyers
Fewer buyer: the business markets normally deals
with far fewer buyers than the consumer
marketer does.
 Business market has limited number of buyers
Larger buyer: a few large buyers do most of the
purchasing in such industries as aircraft engines
and defense weapons.
 Many buyers in limited-buyer markets are large organizations

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The business purchase decision process
 More formal and professional than the consumer
purchasing process
 Purchasers require a longer time frame
 More complex than the consumer decision process
 Takes place within a formal organization’s budget, cost,
and profit considerations
 Involves many people with complex interactions among
individuals and organizational goals
 Suppliers who serve B2B markets must work with
multiple buyers
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Close supplier-customer relationship
 Because of the smaller customer base and importance of and
the power of the larger customers, supplier are frequently
expected to customize their offerings to individual business
customer needs.
 More complex than consumer relationships
 Require superior communication among the organizations’
personnel
 Involve developing long-term, value-added customer
relationships
 Relationship with not-for-profit organizations is important

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 Professional purchasing

Business goods are purchased by trained

purchasing agents, who must follow their
organization’s purchasing policies,
constraints, and requirements.

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 Several buying influences

 In business Market, More people typically

influence business buying decisions.
 Buying committees consisting of technical
experts and even senior management are
common in the purchase of major goods.

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 Multiple sale calls

Because more people are involved in the

selling process, it takes multiple sales calls
to win most business order and some sales
cycles can take years.

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 Direct Purchasing
 Business buyers often buy directly from
manufacturers rather than through
intermediaries, especially items that are
technically complex or expensive (such as
mainframes or aircraft).

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 Reciprocity

 Business buyers often select suppliers who

also buy from them.

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 Leasing

 Many industrial buyers lease instead of buy heavy

equipment like machinery and trucks.
 The lessee gain a number of advantages:
conserving capital, getting the latest products,
receiving better services, and gaining some tax
advantages.

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 Business Market
Vs.
Consumer Market

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 Sales volume
 Purchase volume
 Number of buyers
 Size of individual buyers
 Location of buyers
 Buyer-seller relationship
 Nature of channel
 Buying influences
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 Product
 Promotion
 Distribution
 Price
 Decision making process

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Table 1.1 - Comparing Business-to-
Business and Consumer Marketing

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 Typical B2B Goods and Services
Include:

 Raw materials
 Manufactured Materials (transformed from Raw
material
 Component /OEM parts (part of a completed product)
 Accessory equipments (Tools)
 Capital Equipment (Machinery)
 MRO items( Maintenance, Repair and Operation
Products )

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