01 02 understanding b2bm

7/30/2019 01 02 Understanding B2BM

1/69

Understanding B2B Marketing

Rajan Arora


2/69

B2C vs B2B Market


3/69

Business Marketing

B2B Marketing, Business Marketing orIndustrial Marketing are used interchangeably

B2B transactions occur between 2 companies, instead

of involving a consumer in the process of transaction

50% of all business school graduates join firms that

directly compete in the business market

Because of interest in high-tech markets and the

size of industrial markets, increased attention isbeing paid to business marketing management

Business Marketers serve the largest market of all !


4/69

What is Business Marketing Management


5/69

Business Markets

Are markets for products and services fromlocal to international

Bought by: Businesses

Government bodies

Institutions

For: Incorporation

Consumption

Use

Resale


6/69

What Are Business Products?

Used to manufacture other products

Become part of another product

Aid in the normal operations of an

organization

Are acquired for resale without

change in form

A product purchased for personal use

is considered a consumer good

Key is the

products

intended

use


7/69

B2B Marketing is Huge

1. Business marketers serve the largest markets of all.

2. Money volume of the business market greatly

exceeds the consumer market.

3. A single B2B customer can account for enormouslevels of purchasing activity. GM purchases around $125 billion of products & services

annually

Recent news (July-2013) GOI to spend One Lac CroreRupees on e-Governance projects


8/69

Noticed an interesting comment from a

B2B Marketer in a Blog/Article

To date, companies operating under those conditions

are frustrated with marketing theory.95% of the

published marketing textbooks deal with consumer

marketing," Richard Morford, general manager for tireand rubber chemicals at Rhne-Poulenc S.A., told us.

"We have stopped sending our executives to business

school. It is frustrating to learn about the marketing of

Listerine mouthwash and have what is of primary

interest to us treated as an aside."


9/69

The Consumer Market (B2C) and the Business Market (B2B) at

B2B

Customers:

B2C

Individuals &

Households

Businesses

GlobalLarge corporations

Small & Medium

sized businesses

Institutions

HealthcareEducation

Government

FederalState

Local

Selected

Products:

PCs

PrintersConsumerElectronics

Simple Service

Agreements

PCs

Enterprise StorageServers

Complex Service Offerings

Dell Inc.

Dell - B2C & B2B Markets


10/69

That means:

For B2B vs. B2CWatch out

Nature of Customer

How that customer uses the product


11/69

Categories of Business Market

Customers

1. Commercial enterprises

2. Governmental organizations

3. Institutions


12/69

Business Marketers vs.

Consumer-Goods Marketers

Similarly:

Both marketers benefit by employing a market

orientation, i.e.:

They need to understand and satisfy customerneeds

They are both market driven


13/69

Customer vs Consumer

A customerpurchases and pays for a product or

service

A consumeris the ultimate user of the product or

service The consumer may not have paid for the product or

service to the seller organization directly!!


14/69

Customer vs ConsumerMarketing StrategyAn Example

A food manufacturing firm makes ready-to-eat meals for supermarkets:

From business perspective, the customer is the supermarket

The consumer is the individual who eats the meal

In terms of its marketing effort, who should the business above target?

Understand the needs and wants of both the customer and theconsumer.

Develop a strong understanding of the needs of the supermarkets interms of their requirements for ready meals (e.g. packaging, recipes,price & delivery).

Understand (perhaps with the help of supermarkets) needs & wants ofthe consumer. How are tastes changing? Are consumers happy with theSKUs/sizes/taste of the product? B2B Relationships/Collaboration!!

Will study more on these points later.


15/69

Class DiscussionB2B or B2C Marketer ?

Which markets do these organizationsprimarily cater to? B2C or B2B ?

1. Educational Inst

(say, IILM CMS)

2. Tata Steel

3. JCB

4. Big Bazaar

5. eBay / Flipkart

6. Google Inc.

7. Apple Inc.

8. Apollo Hospitals

9. Microsoft Corp

10. A Big Confectionary Shop


16/69

Here comes the first assignmentMarks/Weight: 4%

Brief write-up on the following organizations regardinghow/whether they cater to - B2C or B2B Markets?

Give logical reasoning and Primary revenue source / %age?

Handwritten submission. Be brief and to the point.

Do remember to refer your source book/URL, if any.

1. Tata Steel

2. JCB

3. Big Bazaar

4. eBay / Flipkart

5. Alibaba.com

6. Apple Inc.

7. Indiamart.com

8. Boeing Inc.

9. P&G

10. Facebook


17/69

Small ExerciseTo know the audience better

Write the following on a piece of paper in 5mins:

1.Name2.Educational background

3.Where do you want to see yourself in 5-7 years

from now

4.Hobbies/Interests


18/69


19/69

B2B vs B2C Marketing

More Food for thought


20/69


21/69

Rethinking the 4Ps for B2BM4Ps SAVE

1. Instead of PRODUCT, Focus on SOLUTION

2. Instead of PLACE, Focus on ACCESS

3. Instead of PRICE, Focus onVALUE

4. Instead of PROMOTION, Focus on EDUCATION

Reference: The ideas in this slide have been borrowed from an HBR Article Rethinking the4Ps by RichardEttenson, Eduardo Conrado and Jonathan Knowles.


22/69

Quick Recap

C t i f B i M k t


23/69

Categories of Business Market

Customers

1. Commercial enterprises

2. Governmental organizations

3. Institutions

i k


24/69

Business Market CustomerCommercial Enterprises as Consumers

Three categories of Commercial Customers:

Users OEMs

Dealers, Distributors, Facilitators etc.


25/69

Users

Users purchase industrial products or services toproduce other goods or services that are, in turn, sold

in the business or consumer markets.

Example: Toyota buys machines to produce cars that are

sold to consumers and businesses. Toyota is a user.

Machine/tools dont become part of their end product (car)

Use vs Consumption

E.g. Buy a machinery (or a printer) for use in manufacturing (orprinting) vs. Buy its refills like coolant/dies/lubricating oils (or

printers cartridges etc.) for consumption.

O i i l E i t M f t


26/69

Original Equipment Manufacturers

OEMs

An OEM manufactures products or components thatare purchased by another company and retailed under

that purchasing company's brand name. i.e. An OEM

refers to the company that originally manufactured the

product.

Contradictory definition: OEM refers to Individuals and

organizations that buy business goods and incorporatethem into the products that they produce for eventual

sale to other producers or to consumers.

O i i l E i t M f t


27/69

Original Equipment Manufacturers

OEMscontd.

Alternatives to contradictory or confusing use:

Instead of OEM, companies may label themselves

Resellers or VARs (Value-Added Resellers).

A Value-added Reseller(VAR) is a company that

adds features or services to an existing product,

then resells it (usually to end-users) as anintegrated product or complete "turn-key"solution.


28/69

Dealers, Distributors, Facilitators

Include commercial enterprises that purchase industrialgoods for resale (in basically the same form) to users

and VARs.

The distributor accumulates, stores and sells a large

assortment of goods to industrial users

Handling transactions of billions of dollars, industrial

distributors play a strategic role in business

markets!! Think of SCM, Inventory Control, Working Capital, Big

Exporters, Resellers, Indirect Channel Members and

Facilitators etc. for huge deals of B2B/industrial goods


29/69

Pause! Any questions so far?


30/69

1. Form Groups of 42. Requirements (Youll not be permitted to change later)

1. Choose a New Industrial Product

2. Amount (in Crores of Rupees) you plan to invest

3. B2B Marketing Plan

Ideas (Be innovative; Dont get biased; Special credit for

Out-of-the-box thinking):

You may choose a product from a SMB or a big enterprise too.

For information, check with friends/relatives employed in

MNCs/SMEs or doing own business producing industrial goods

or providing large-scale business services to B2B customers!

Group Project

G id li f R t


31/69

Guidelines for ReportNot limited to

Company backdrop/history

Current Product Portfolio

Objective of New Product (and/or Setting up the company)

The Key Opportunities in the Market Environment

The New Product Description/Details The Target Audience (STP)

Assessing Market Demand and Sales Forecasting

The Marketing Challenges and Strategies adopted

Implementation and control of their B2B plan

The Future Scenario

Your learning and suggestions


32/69

1. Stage-1: Submit Product Name (and if possible,

Company Name too) by 19/Aug/2013

2. Stage-2: Submit Contents of your Marketing Plan by22/Aug/2013

1. What all you will study and analyze

3. Stage-3: Submission of Project Report by 30/Aug/2013

4. Stage-4: Presentation and Viva -TBP

Group ProjectTimelines


33/69

1. A set of values and beliefs that places customersinterests first

2. An ability to generate, disseminate, and

productively use superior information about

customers and competitors

3. The coordinated use of interfunctional resources

(e.g., research and development, manufacturing)

Market-Driven Firms Demonstrate


34/69

Market-Driven Firms

Market sensing capability:A companys

ability to sense change and to anticipatecustomer responses

Customer linking:The ability to develop

and manage close customer relationships

Have distinctive capabilities:


35/69

Market-Driven Companies

View their customer as an asset, thus:

1.Marketing expenditures, once consideredexpenses, are now considered investments.

2.Therefore, marketers need to measureperformance such as ROI on their investments.


36/69

Meeting Performance Standards

Develop and nurture customer relationship

management (CRM) capabilities by:

a. Identifying,

b. Initiating,

c. Developing,

d. and Maintaining profitable customer relationships.


37/69

Professional Marketing Managers

Employ Customer Relations Management (CRM)tools for:

Identifying and categorizing customer segments

Determining customers present and potentialneeds

Visiting customers to learn about applications ofproducts

Developing and executing individualcomponents of marketing to include:

Sales, advertising, promotions, serviceprograms, etc.


38/69

Professional Marketers:

Focus on Profitability Understand forces that affect profitability

Align resource allocation to revenues and profits that

will be secured by future business

Partner with Customers Marketers dont just sell to customers; they develop

a form of partnership for the purpose of serving and

adding value for their consumer This strategy can result in becoming a preferred

vendor


39/69

Market-Driven Companies

Deliver Value Propositions

Create programs that include products, services,

ideas and solutions to problems that offer value

and provide opportunities for their customers.

Marketings Cross-Functional


40/69

Marketing s Cross-Functional

Relationships

Professional business marketers act as an integratorbetween various functional areas within a company

Functional areas include:

Manufacturing Research & Development (R&D)

Customer Service

Accounting

Logistics

Procurement

M k ti C F ti l R l ti hi


41/69

Marketings Cross Functional Relationship

Business marketing planning must

be coordinated and synchronized

with corresponding planning efforts.


42/69



43/69

Business Market Characteristics

Business marketing and consumer-goods marketingare different

Even though both markets share:

Common body of knowledge, principles and theory

They vary in that:

Business buyers and markets function very differentlyfrom consumer markets

Business and Consumer Marketing


44/69

Business and Consumer Marketing

Differs In:

1. Nature of their markets2. Market demand

3. Buyer behavior

4. Buyer-seller relationship

5. Environmental influences (competition, political, legal)

and

6. Market strategy

Due to these differences, business marketers need to

understand how demand for industrial products and

services differs from consumer demand.

Business Market Demand


45/69

Business Market Demand

Characteristics

Derived demand

Fluctuating demand

Stimulating demand

Price sensitivity / demand elasticity


46/69

Derived Demand

The demand for business products is called deriveddemand because the demand for industrial productsis derived from the ultimate demand for consumer

products.

As a result, business marketers must carefullymonitor fluctuating trends and patterns in consumer

markets.


47/69

Derived Demand

Demand for education

Derived demand - textbooks

Derived demand - paper

Derived demand - pulp

Derived demand -

forestry products


48/69

Side Learning

Save Paper Save Trees Save Environment !!


49/69

Fluctuating Demand

Because demand is derived, an increase or decrease inconsumer demand can create a fluctuating demand formany industrial products.

For Example:

An increase in interest rates can quickly stifle new homesales. This slows down the need for new householdproducts. Businesses react by decreasing their inventoryof materials or putting off buying new machinery.

This action explains why the demand for many industrialproducts tends to fluctuate more than the demand forconsumer products.

A decrease in interest rates has the opposite influence.


50/69

Stimulating Demand

Sometimes, business marketers need to stimulate

demand for consumer goods which either

incorporate their products or are used to make

consumer products.

o

Sometimes manufacturers offer deep price discounts thatinfluence members of the supply chain to lower their

prices, in the hope of influencing the ultimate consumer to

buy their product.

o Pharmaceutical manufacturers advertise on television by

presenting various ailments followed by offering their new

products as solution to the ultimate consumer. (Ask your

doctor if XYZ is right for you!)


51/69

Inelastic Demand

Inelastic demand is demand without regard to price.

An increase or decrease in the product price will

not significantly affect the demand for the product.

Example: Price for gasoline / petrol / diesel


52/69

Elasticity of Demand

Elast ic Demand Curve

D

D

Quantity

Price

D

D

Quantity

Price

Inelast ic Demand Curve


53/69

Global Market Perspective

Marketers must have a global perspective:

They need to look beyond borders.

The demand for industrial products in countries such

as Germany, Japan, and Korea is growing rapidly.

Enormous growth in developing countries such as

Brazil, China, Russia, and India offer huge opportunities

for both large and small businesses Emerging Markets !!

Consumer Product or Business


54/69

Consumer Product or Business

Product?

As mentioned earlier, the intended use determines

whether or not a product is a consumer product or a

business product

Some Consumer Products


55/69

Some Consumer Products

Become Industrial Products

J.M. Smucker Company sells their jellies and jams to

ultimate consumers as household food products but

also markets them as fillings and yogurt additives for

other companys products.

Many companies successfully sell to both consumer

and business markets.


56/69



57/69

The Supply Chain

Business Marketing is an important influence in

the supply chain.

The Supply Chain


58/69

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).

pp y


59/69

Supply Chain Management

This is a technique of linking a manufacturersoperation with suppliers, key intermediaries andcustomers to enhance efficiencies and effectiveness.

The Internet is playing an extensive role by allowingjoint planning and execution in real time.

Managing Relationships in the


60/69

g g p

Supply Chain

As important as it is to gain customers, it is just as

important for manufacturers to develop strong

relationships with suppliers.

Companies such as IBM and Toyota develop strategies

to create suppliers who provide new ideas and who

are loyal.


61/69

Governments

Municipal, State and Central Government

Generally use the bidding approach to purchase

goods and services


62/69

Institutions

Market includes universities, hospitals, schools,civic clubs, foundations, etc.

This includes the nonprofit segment of the marketthat does not seek to achieve normal businessgoals such as ROI, %share of market or profit


63/69

Classifying Business Goods & Services

3 Main Categories of Products

Entering Goods

Become part of the finished product

Cost assigned to the manufacturing process

Foundation Goods

Capital Items

Typically depreciated over time

Facilitating Products

Support organizational operations

Handled as overhead expenses


64/69


Entering Goods

Raw Materials

Farm products & natural products

Only processed as necessary for handling & transport Require extensive processing

Manufactured Materials & Parts

Any product that has undergone extensive processing prior to

purchase Component Materials require additional processing

Component Parts generally do not require additional

processing


65/69


Foundation GoodsInstallations

Major long-term investment items

Buildings, land, fixed equipment, etc.

Accessory Equipment

Less expensive & short-lived

Not considered part of fixed plant

Portable tools, PCs, etc.


66/69


Facilitating Products

Supplies

Any supplies necessary to maintain the

organizations operations

Services

Maintenance & Repair supportAdvisory support

Logistical support

Cl if i G d f th B i M k t


67/69

Classify industrial goods

by asking the following:

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

A Framework for Business Marketing Management


68/69

A Framework for Business Marketing Management

Business marketing strategy

is formulated within the

boundaries establishedby the corporate

mission and

objectives.


69/69

Any questions so far?

01 02 understanding b2bm

Documents