Business to Business Business to Business (B2B) and (B2B) and SME MarketingSME Marketing
Lecture 9Karen Knibbs
Marketing Practice – U14210 S2 08/09
Learning objectives
By the end of the session, you should be able to:
Understand a range of issues specific to the nature of marketing operations for:B2B (Business-to-business / Industrial)and SME (Small to medium sized
enterprises)
organisations
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Marketing in context (Lect 1)
Marketing is useful to ALL types of businessTextbooks often focus on large
“blue chip” companies, typically consumer oriented, American and globally operating
Let’s consider SME’s (account for
99.8% of all UK businesses – ONS, BERR 2006), B2B, NFP & Dotcoms
• Plus many SME’s are B2B!
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Setting the context… B2B SME
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Business 1: BMW Group AG
Business 2: Shell Group
Buys products and services from
Prolonged process of establishing centrally controlled formal buying procedures and policies, sending out tenders and comparing contracts, suppliers will be selected due to strategic fit with demographic, economic and geographic characteristics and relationship factors
Business 1: Goth Cloth, S’ton
Business 2: Actinic , Surrey
Only a handful of employees in the whole company, may be no formalised supplier selection and acquisition processes, relationships may be created through ad hoc networking, and choices made due to gut feel, comparison of promises, price quotes and payment terms. Purchases may be one-offs.
Buys products and services from
Influences Shaping Organisational Buying Behaviour
Baines, Fill & Page, (2008)
Membership of the B2B Decision Making Unit
Baines, Fill & Page, (2008)
N.B. This may be the format for a large MNE with centralised buying policies, but all of these roles may be performed by one owner-manager in a SME
POSSIBLE INFLUENCING FACTORS
EnvironmentalPESTEL
OrganisationalObjectives
Purchasing PoliciesResources
Buying Centre Structure
InterpersonalCooperation
ConflictPower Relationships
Business to Business buying process decisions
Problem Recognition
Develop Product Specs
Search for Products & Suppliers
Evaluate relative to
Specification
Select & Order
FEEDBACK
IndividualAge
Educational LevelJob statusPersonality
Income
Evaluate Performance
Dibb, Simkin, Pride & Ferrell (2006)
Business Business decision process & stimulidecision process & stimuli
Key Characteristics of Business Markets
Baines, Fill & Page, (2008)
Characteristics of organisational markets (from Principles)
FewerFewer buyers LargerLarger buyers CloserCloser supplier-
customer relationshipsrelationships
Geographically Geographically concentratedconcentrated buyers
DerivedDerived demand InelasticInelastic demand
FluctuatingFluctuating demand Professional Professional purchasing SeveralSeveral buying
influences DirectDirect purchasing ReciprocityReciprocity Leasing / Contractual
Agreements
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B2B Business B2B Business examplesexamples
IBM solutions
“Big Blue” = IBM•Used to be more consumer focussed when it owned PC / desktop business
–Sold this to Chinese firm Lenovo–Hard disk drives business sold to Japanese firm Hitachi
Selling to VARs, much of the marketing spend is on trade promotions
Now their focus is on those 90%+ of firms which are SME’s, offering “business solutions”
Volvo Group• Often considered as purely a car maker, focussing on automotive consumers
–But with Marine,Truck and Industrial vehicle/engine SBU’s, their major income is from selling to other businesses
Hence they have to consider both the derived demand of their intermediaries, and the consumer demand which affects all of the partners involved from supply, to production, to consumption
Volvo Group
The Concept of Value in B2B
Customers will choose between alternative offerings and select the one they perceive will offer them the best value
Customers are not interested in products and features, they want their needs met and satisfied
It is more profitable to a long term relationship between a company at its customers than to have a series of one-off transactions [and with suppliers = “partnering”]
Doyle, (2000), cited in Fill, (2005)
Attributes of Partnership
Communication Behaviour
Conflict Resolution Techniques
Commitment, Coordination, Trust and Interdependence
Quality, Information Sharing and Participation
Joint Problem Solving, Persuasion, Smoothing, Domination, Harsh Words and Arbitration
B2B Partnership Success Factors
Mohr and Spekman (1996), cited in Fill (2000)
Summary of Differences
Consumers often: Purchase goods and
services alone, which meet individual or family needs
Buy on impulse or switch supplier with minimal processes
Experience minor irritation if supply fails
Accept the stated price
BusinessesBusinesses often: Purchase goods and
services, as part of a team, to meet specific business needs
Use formalised, lengthy purchasing policies and processes
Find switching supplier difficult
Experience major problems if supply fails
Negotiate on price
SME business examples
One-off restaurants Legal services firms Independent Financial Advisors Tradespeople: Plumbers, Electricians,
Carpenters, Mechanics“the most contented people I know, they are their own boss, they decide when
they want to take a job on, they earn highly per hour, and take holidays when it suits them…”
Specialised/niche product manufacturers E.g. small applications software
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SME CharacteristicsSME’s do not often have the same levels of: Resources - in terms of cash flow, investment finding, equipment, technical
equipment, premises, time etc. Numbers of staff (1-250), Skill sets / competencies Numbers of customers and recruit these via ad hoc networks Market share or brand awareness (regional only) Influence over their micro or macro environments
as compared to larger MNE’s
As a consequence, their employees often: Are generalists in terms of company operations, but specialists in their
market knowledge, benefit from reduced bureaucracy Are owner-manager opportunistic “entrepreneurs” whose actions are not
always conformist! (e.g. Richard Branson, Anita Roddick)
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SME Marketing in practice
SME’s operate through: Relationship building, in much the same way as larger B2B
organisations, but increased likelihood of face-to-face, personalised meetings and communication
Treating all stakeholders as “partners” Generating business via “networking” Taking a reactive stance: formalised planning is secondary as it takes
focus and time away from current activity
“…decision making occurs in a haphazard and apparently chaotic way, according to personal and business priorities at any given point in time
(Scase and Goffee, 1980)
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Gilmore, Carson and Grant (2001)
Marketing Planning for Marketing Planning for Small Businesses (SME)Small Businesses (SME)
Brassington & Pettitt, (2006)
BUT,SME Marketing authors/researchers consistently state the need for effective marketing analysis and research: Chaston, (2000), Hunt & Morgan, (1996) and Mintzberg and Waters, (1982).
SME Marketing in practice
“Where a manager depends mainly on social networks, decisions are likely to be based on incomplete information and will rely
more on intuition. As the owner/manager gathers more business contacts and networking becomes more strategic, his
decision making will become more rigorous… increased experiential knowledge [means] having made certain decisions before in the past, the manager will have learned from previous mistakes and will approach the task in a more structured way.
Such a realisation allows for a speculation that networking can networking can be harnessed into a proactive marketing infrastructurebe harnessed into a proactive marketing infrastructure.”
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Gilmore, Carson and Grant (2001)
SME Characteristics
However there are advantages to being an SME: Research evidence indicates staff are more loyal, have a harmonious
workplace, “team” attitude and socialise more Closeness to customers through small customer base and personalised,
shorter lines of communication, which can lead to increased loyalty and decisions based on experience rather than purely on price
Increased speed and flexibility in dealing with customer need changes and environmental forces
Opportunity focussed – externally aware, decision making is quicker Able to focus on smaller, profitable niches (e.g. Farmer’s markets) information
through closer customer and competitive links Informal, easy access to market
as compared to larger MNE’s
Marketing Practice S2 200819Carson, Cromie, McGowan & Hill (1995)
Summary
Reviewed:CharacteristicsChallengesDMU’s
of B2B and SME marketing• Useful to compare these to “standard” /
consumer oriented and multinational marketing
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Youtube funny!
Further reading suggestions:Journals: Gilmore, A., Carson, D., & Grant, K. (2001). SME marketing in practice.
Marketing intelligence and planning. 19, (1), 6-11.Texts: Carson, Cromie, McGowan & Hill (1995). Marketing and
entrepreneurship in SMEs: an innovative approach. Harlow: Prentice Hall.
Chaston & Mangles (2002). Small business marketing management. Basingstoke:Palgrave.
Ford, Gadde, Hakansson & Snehota (2003). Managing Business Relationships. (2e). Websites:
• www.impgroup.org = IMO: Industrial Marketing and Purchasing• http://www.ibm.com/us/ = IBM Business Solutions dedicated
pages