Business Marketing Basics

8/7/2019 Business Marketing Basics

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Business Marketing

Perspective

November 10, 2010


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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


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Business Markets

Local to Global

Bought by

Businesses

Government bodies

Institutions

For consumption

For use

For resale

Markets for products and services


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The Consumer Market (B2C) and the Business

Market (B2B) at Dell, Inc.

B2B

Customers

B2C

Individuals &

Households

Businesses

GlobalLarge corporations

Small & Medium

sized businesses

Institutions

HealthcareEducation

Government

FederalState

Local

Selected

Products

PCs

PrintersConsumer Electronics

Simple Service

Agreements

PCs

Enterprise StorageServers

Complex Service Offerings

Dell, Inc.


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A Market Driven Firm

demonstrates:

1. Customer Orientation

2. Ability to track customers and competitors

3. Co-ordinated use of interfunctional resources


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Marketings Cross Functional Relationship

Business marketing planning must be

coordinated and synchronized with

corresponding planning efforts.


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Major Categories of Business Customers

Producers

Resellers

Government Central Govt.

State, District, City Municipality

Institutions


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Business Market Characteristics

Demand is Derived Demand is Inelastic

Demand

Fluctuations

Buyers

Well Informed

Business

Customers


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An Example: Aircraft Purchase

Derived demand The demand for the planes is derivedfrom the demand for air travel in Asia. Singapore Airlinesspecified Trent engines made by Rolls-Royce. Thus, thedemand 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. AirbusIndustry of Europe, the other major bidder, gets nothing

Buyers are well informed There were only two potentialsuppliers, Boeing and Airbus, and the negotiations went onfor nearly a year.


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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


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Types of Business Products

Major equipment (installations)

Accessories

Raw materials Component parts

Processed materials

Supplies Business services


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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?

Classifying

Goods for the

Business

Market


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Relationship Marketing

All marketing activities directed toward

establishing, developing, and maintaining

successful exchanges with customers


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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).

The Supply Chain


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B2B Virtual space

Business marketing on the Internet holdstremendous 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


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Strategic Alliances

Strategic Alliance (Partnership) is a

cooperative agreement between business

firms.

Licensing

Distribution agreements

Joint ventures

Research and development consortia

Partnerships


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Model of Business Buying Behavior

Session - II


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It is individuals, not organizations,

make purchasing decisions.


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Business Buying Terminology

Buying Centre

Buy Phases

Buy Classes

Buy Grid

The people involved in the buying decision

process.

The stages in the organisational buying

process

Variations in the application of the stages

Buy Phases x Buy Classes


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Business Buying Centres

Buying

Centre

Buyers

Users

Gatekeepers

Deciders

Influencers


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Roles in Business Buying Centres

Different roles can be performed

by the same person.

More than one person may

perform the same role.

Compare with family decision-

making?

Initiator

Influencer

Specifier

Approver

Decider

Buyer

User

Gatekeeper


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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 whoinfluence 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 formalauthority in the selection of suppliers

Gatekeepers: Those organizational members who control the flow ofinformation into the buying center


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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?


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Buy Grid Framework


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Major Types of Buying Situations

The buyer routinely reorderssomething without any

modifications.

Straight Re-buy

Modified Re-buy

New Task

The buyer wants to modifyproduct specifications,

prices, terms, or suppliers.

The buyer purchases aproduct or service for the

first time.


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Buy Classes

New Task Modified Re-buy Straight Re-buy

Low-involvementdecisions

Made by a single

person in the

organisation

Decision requires that buyerorganisation expends more

effort and includes more

people because of an

important modification to the

product, delivery, price or

terms and conditions

First time buy

Lots of individuals

influencing and

involved with

decision-making

process


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Buying Situations in Industrial

Market

Straight Re-buy Modified Re-buy New Task

Fewer

Low

Low

Several

High

High

Number of decisions taken

Degree of risk involved

Degree of complexity


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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 everdeveloped in Industrial Buying.

Tested by Anderson, Chu and Weitz, (Journal

of Marketing, July, 1987) and largely

supported.


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The Buy GridNew Task Modified Rebuy Straight Rebuy

Anticipation &recognition of problem

Always Always Never

Elaboration of desired

attributes of productAlways Sometimes Never

Determination of

quantity needed

Always Always Never

Search for potential

suppliersAlways Sometimes Never

Acquisition & initial

analysis of the offeringAlways Sometimes Never

Evaluations of offeringsand supplier selection Always Sometimes Never

Selection of an order

routineAlways Sometimes Never

Performance, feedback

& evaluationAlways Always Always


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Implications

The framework defines the target for the

marketers efforts - the steps through which

s/he must respond to the buyers needs for

information

But problems need not be solved through

purchasing.


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Implications

Communications Where to provide information?

What information to provide?

How to provide information?

Product What features matter?

Distribution

Narrow or broad

Price Extent to which

comparisons are made


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Buying Situations & Supplier Tactics


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Objectives in Industrial Buying

It is critical for suppliers to understand the various criteria thatindustrial buyers use in evaluating potential suppliers


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Major Influences on Business Buyer

Behavior


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ThankYou!

Documents

Business Marketing Basics