b2b basics

B2B-Marketing: Basics

Christian Lüthje

TU Hamburg-Harburg

Institute for Marketing and Innovation

www.imi.tu-harburg.de

http://www.imi.tu-harburg.de/



TUHH | IMI | Lüthje | B2B- Marketing | Winter term 2012/13

Lecture information

2

B2B – Marketing

Master internationaler Wirtschaftsingenieur

Master International Production Management

Time: Friday, 8.00h – 9.30h

Location: N – ES40, Room N 0.007


Lecture information

3

B2B - Marketing

Lecture materials:

Lecture script and literature will be available online.

(https://e-learning.tu-harburg.de/studip/)

Test exam:

During the last lecture (Friday, 2.2.2013, 8.00h – 9.30h)

Mandatory participation in a one-hour research experiment

December / January

Contact: Jan-Paul Lüdtke, [email protected]

mailto:[email protected]




Lecture information

4

Stud.IP

Source: https://e-learning.tu-harburg.de/studip/


Lecture information

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Stud.IP

Source: https://e-learning.tu-harburg.de/studip/


Lecture information

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Lecture topics

Basics:

■ What is B2B marketing and what are trends influencing most B2B markets?

■ How do organizations make buying decisions?

Marketing Strategy:

■ Which types of project-specific and general co-operations models are available?

■ What are successful strategies in international and global markets?

■ What impact does timing have on the introduction of new products?

Marketing Mix:

■ What is the role of advertising, fairs and other communication tools in B2B markets?

■ Which marketing activities may help suppliers operating in complex value chains?

■ Which types of distribution channels are available in B2B environments?


7

B. Organizational buying behavior

Buying center concept, Types of buying processes

C. Management process

I, Strategic marketing

Strategy 1: Cooperation (continuous and project-specific)

Strategy 2: Competition (generic competitive strategies, timing)

II. Marketing Mix

Pricing: Price theory, Price differentiation and rebates, Auctions

Communication: Emotional advertising, Fairs

Value Chain Marketing

Industrial Sales (if there is time): Distribution channels, Distribution organization

A. Basics

What is marketing?, Characteristics of B2B markets, market trends


Lecture contents

8

A. Basics of B2B-Marketing

1. Introduction

2. B2B-Marketing characteristics

3. Industrial goods

4. Trends

4.1 Competition

4.2 Markets


■ ... convincing customers to buy substandard products

■ ... just creating advertising material, brochures etc.

■ ... fulfilling all types of customer request without questioning

■ ... exclusively relevant for companies operating in consumer markets

What marketing is NOT.

What is marketing?

1. Introduction


Marketing is the activity, set of institutions, and

processes for creating, communicating, delivering,

and exchanging offerings that have value for

customers, clients, partners, and society at large.

1. Introduction

What marketing IS – the “official” definition.


1. Introduction

What marketing IS – marketing is a business “philosophy”.

■ Understanding customer needs and customer (buying)

behavior

■ Identifying cooperation partners that will play a critical

role in the delivery process

■ Determining appropriate (international) markets and

market segments

■ Determining how the company should act in the

competitive environment (e.g. when to enter the market)

■ Guiding activities for selling innovations successfully

■ Determining appropriate prices

■ Communicating the value of products to the market

■ Bringing the voice of the

customer into the firm

■ Creating value for

customers


■ Founded 1892 by Thomas Edison (and others)

■ Public company

■ Active in diverse fields such as appliances, aviation, consumer electronics, electrical

distribution, electric motors, energy, entertainment, finance, gas, healthcare, lighting,

locomotives, oil, software, water, weapons, wind turbines

■ Revenue US$ 150 billion (2010)

■ Net income US$ 12 billion (2010)

■ Employees 287,000 (2010)

The case of marketing at General Electric

GE is a large American multinational conglomerate corporation.

http://en.wikipedia.org/wiki/File:General_Electric_logo.svg


Interview with Beth Comstock, who took

over Marketing at GE in 2009

Usually, there are some general reasons.

■ High-tech background

■ Initial success factor = production or

breakthrough technological innovation

■ Major competence = technology

■ Value system and career advancement focus

on R&D and technology

■ “Marketing is what you do when your products

are not selling themselves”

For GE, marketing played no major role.

■ Why?

The case of marketing at General Electric: Reasons for a lack of marketing focus

http://en.wikipedia.org/wiki/File:General_Electric_logo.svg


1. Introduction

14

Industrial commodities, materials and parts are everywhere. End customers, however, hardly notice them – example DSM.

Source: www.dsm.com

DSM Nutritional prodcuts produces vitamins and UV filters für use in the personal care industry

PeptoPro is a sports recovery ingredient that enables faster replenishment of muscle energy DSM Composite Resins

produces gel coats for use in glass reinforced plastics applications in the marine industry


1. Introduction

15

Some prominent B2C companies market B2B products, since…

■ …capacity is rented out to competitors that would not be used otherwise.

■ …products in B2B- and B2C-markets have similar characteristics.

■ …different business units serve B2B and B2C customers.

Company B2C products B2B products

Coca Cola, Sprite, Fanta,

Coca Cola Light,

Bottling

(Dr. Pepper, Campbell‘s V8)


S-Class, Smart, SLK, E-

Class, etc.

MB-Trucks, Freightliner,

FUSO


LCD-TV, smartphones Construction machinery,

Ships


1. Introduction

16

The relative importance of big producing industries in Germany

Source: BWiM (Stand 2007)

Industry Revenue Employees

Mechanical engineering and plant

manufacturing 190 bn. € 914.000

Electronics 182 bn. € 820.500

Vehicle manufacturing 290 bn. € 744.500

Food 116 bn. € 408.600

Chemicals 140 bn. € 419.300

Construction 81 bn. € 714.000

Producing industries total 1570 bn. € 5.200.000


1. Introduction

17

Distinguishing B2B-Marketing and B2C-Marketing in an explematory value chain.

• 3tier supplier – Rio Tinto Australia

• 2tier supplier – ThyssenKrupp Steel

• 1tier supplier – Edscha roof systems

• Manufacturer – BMW AG

• Dealer – BMW Dealer Hamburg

• End Customer / Consumer

B2B

Marketing

sphere

B2C

Marketing

sphere


1. Introduction

18

Source: Bingham/Gomes/Knowles, 2005, S. 3

Definition of B2B-Marketing

„Business Marketing involves those activities that facilitate involving products and customers in business markets. It includes all organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. Business-to-business customers include manufacturers, wholesalers, retailers, and other types of organizations such as hospitals, universities, and government units.”


2. B2B market characteristics

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An introductory example

Backhaus/Voeth, 2007, S.10f

Case study „LISTECO“


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Semester homework: Scientific paper research

Your task:

Find a scientific research paper, that studies an aspect of B2B-Marketing.

Look for papers, that meet high scientific standards and appear to be highly relevant for B2B practioneers.

Write a short 15-sentence note that outlines why the selected paper meets above criteria well.

Every student receives credit for submitting a valid proposal, the best three proposals will present their papers in class and receive additional credit.

You have to submit your proposals until December 24th 2012 at latest.

Why do we run this competition?

To show that research in B2B-Marketing is helpful, yet not trivial.

To teach you the tools and skills to research scientific literature during your master studies.

1. Introduction


21

Semester homework: Scientific paper research

1. Introduction


Lecture contents

23


1. Introduction


3. Industrial goods

4. Trends

4.1 Competition

4.2 Markets



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The customers on B2B markets demand goods for the generation of other goods and services.

Source: Kleinaltenkamp/Plinke, 2000

B2C- Markets B2B- Markets

Customers Consumers

End Customers

Manufacturing Firms, Service Providers, and other Organizational Buyers (e.g. state, hospitals)

Purpose of

Demand Consumption

Generation of products and services

Goods Products and Services

Commodities, Capital Goods (e.g. machines), System Technologies, Industrial Services



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The specific characteristics of B2B markets influence how marketing is actually done.

Source: In Anlehnung an Backhaus/Voeth, 2004

Derived demand

Organizations as customers

Multiple buying influences

Degree of individualization tends to be higher

Degree of interaction tends to be higher

Business-to-Business Markets

Value chain marketing

Procurement guidelines

Team Selling / Buying Center

Cooperative new product development

Key account management

Exemplary implications for the marketing function



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Specifics of the Marketing Mix in B2B-Marketing

Product policy:

Products are very complex in technical terms and need explanation

Often individualized, custom-made products

Close collaboration in the improvement and adaptation of the products

Price policy:

Prices are flexible and are therefore subject to negotiations

The price building is often the central decision criterion in biddings

The fixed price is only one of many components in pricing (e.g. rebates, price bundles)

Communication policy:

Non-personal communication forms are rarely used (e.g. advertising via mass media)

Personal selling has an outstanding importance for communication

Communication has bee addressed not only to direct but also to indirect customers

Distribution policy:

Shorter distribution channels (direct selling)

Emphasis on personal selling



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B2B markets display higher degrees of individualized customer approaches

Source Backhaus/Voeth, 2004

The survey results show, that direct selling, personal

communication and customization play important roles in B2B

marketing

0 5 10 15 20 25 30 35

Customized prices

Object oriented communication

Integration of external factors

Relevance of exhibitions

Relevance of indivdiual terms

Product related services

Price negotiation

Custom-made products

Personal communication

Direct selling

# of mentions


Lecture contents

28


1. Introduction


3. Industrial goods

4. Trends

4.1 Competition

4.2 Markets


3. Industrial goods

29

Typology of industrial goods


■ Raw material

■ Consumables

■ Auxiliary supplies

■ Operating

materials

■ Parts

■ Energy carrier

■ Plants

■ Machinery

■ Large specialized

equipment such

as ships, cranes,

etc.

■ System components

■ Subsystems

Industrial goods

Production goods Capital goods Systems Services


3. Industrial goods

30

Production goods


Raw materials ■ Extracted directly from natural sources

Consumables ■ Processed raw materials that are used in production processes.

Auxiliary supplies ■ Are used for the production of final products but contribute only marginally.

Hilfsstoffe

Operating materials ■ Are required to uphold production and are consumed during the process.

Betriebs-

stoffe

Parts ■ Are integrated into other products without loosing their key features and

characteristcs. (They preserve their identity) Teile

Energy carrier ■ Are needed in any kind of production process.

Energie-

träger


3. Industrial goods

31


Production goods: Important characteristics

■ Production goods often have substitutive or complementary relationships with

other production factors

Substitution goods: Scrap - Iron, Oil - Coal - Gas, Copper - Aluminum

Complementary goods: Petrol and motor oil

■ Installation and maintenance of „integral quality“ is considered very important

■ Occupancy rates of production goods may be increased by advancing process

technologies


■ Mechanical engineering

Machinery is marketed individually

■ Plants and infrastructure

Marketing of multiple integrated goods. The goods may originate from serial

production (Turbines, Silos, etc.) or customized manufacturing (Buildings). They are

sold as ready-to-use unit or as a service.

3. Industrial goods

32


Capital goods are the basis for industrial manufacturing and are not part of the production outcomes


3. Industrial goods

33


Systems

Components of systems include

■ Networks

- Central element

- Are responsible to collect and distribute information

■ System components

- Mainly peripheral products

- Fulfill limited functions

- If standards are available, they may be sourced from different suppliers

■ Subsystems

- May be used „stand alone“ (CAD systems) or may be integrated in larger integrated systems (CAD supported manufacturing unit)

■ Network services

- Provided via public networks, ie. ISPs


3. Industrial goods

34

Important characteristics of system technologies

■ High degree of technical complexity

■ Combination of subsystems, system components and system services

■ Networks are the central element of system technologies

■ Systems outputs are often achieved by using the peripheral devices

■ High costs of integration; providers are required to use industry standards when developing systems


3. Industrial goods

35


Services: B2B-Outputs on their own

■ Consulting services (business consultants, IT, advertising agencies, auditors and tax advisors)

■ Transport and logistic services

■ Renting / leasing of property and machinery

■ Insurances


Lecture contents

36


1. Introduction


3. Industrial goods

4. Trends

4.1 Competition

4.2 Markets


4.1 Competition

37

Shortening of product lifecycles: Sinking product lifetime – rising development time

Source: Bullinger/Wasserloos, 1990

0

1

2

3

4

5

6

7

8

1978 1980 1982 1984 1986 1988 1990 1992

Nu

mb

er

of

ye

ars

Time

Product lifetime

Product developmenttime

PD > PL


4.1 Competition

38

Cost structure: Industry specific rises in fixed costs

Source: Backhaus/Funke, 1996

30

40

50

Chemical-Engineering

Mechanical-Engineering

Plant-Construction

Information-Engineering

Elektronic-Engineering

VehicleConstruction

% o

f o

vera

ll c

osts

90s

70s

20,5%

28,6%

32,4%

21,1%

13,7%

(-)1,6%


Lecture contents

39


1. Introduction


3. Industrial goods

4. Trends

4.1 Competition

4.2 Markets


4.2 Markets

40

E-Commerce

Globalisation


4.2 Markets

41

More and more companies sell their supplies and conduct their customer business over virtual market places.

Source: www.eito.com

E-Commerce in Wester Europe ( EU15, Norway, Switzerland)

bn. Euro


U.S. Shipments, Sales, Revenues and E-commerce in B2B and B2C domains

Source: U.S. Census Bureau 2012

Description Value of shipment , Sale or Revenue* Year to Year

Percentage Change 2010 2009

Total E-commerce Total E-commerce Total

E-commerce

Total * 25,599 4,129 23,982 3,545 6.7 16.5

B-to-B * 10,690 3,705 9,577 3,161 11.6 17.2

Manufacturing 4,917 2,283 4,420 1,892 11.2 20.7

Merchant Wholesale 5,773 1,422 5,158 1,269 11.9 12.0

B-to-C * 14,908 424 14,404 385 3.5 10.3

Retail 3,842 169 3,628 145 5.9 16.3

Selected Services 11,067 255 10,777 239 2.7 6.6

* in bn. dollars

4.2 Markets


4.2 Markets

43

Electronic transaction mechanisms and -markets may differ based on the type and number of participants.

Source: Backhaus 2003

Customer

One Few Many

Supplie

r

One

EDI Company specifc selling platform

Example: http://premier.dell.com

Few

Comapny specific

buying platform Example:

einkaufsplattform.

bahn.de

Commerce platform

/ virtual-market

place

Collaborative

selling platform

Many Collaborative buying

platform

Virtual market

place

(www.alibaba.com)


4.2 Markets

44

Short presentation

Alibaba.com


4.2 Markets

45

E-Commerce

Globalisation


4.2 Markets

46

Globalization especially impacts the global distribution of manufactured goods

Source: World Trade Organisation

0

2000

4000

6000

8000

10000

12000

14000

Agricultural products

Fuels and miningproducts

Manufactures

Development of world-wide exports by goods segment from 1980 to 2011 (bn. US $ at current valuation)


4.2 Markets

47

Today, succesful manufacturers of industrial goods are manufacturing and distributing their goods globally.

Source: www.sulzer.com

■ Founded 1834 in

Winterthur (CH)

■ Today active in plant

manufacturing and

engeneering with 120

branches around the

world.

■ It‘s divisions are world-

leading in their specific

industries.


4.2 Markets

48

Global markets integrate globale communication networks. Global companies have to communicate worldwide and consider locals characterstics

Source: www.youtube.com, Thyssenkrupp AG Image Video 2006

http://www.youtube.com/


49

Short presentation

The case of the Boeing

Dreamliner


Summary

50

B2B-Marketing incorporates all sales process directed towards companies and other organizations. The marketed good is not consumed but invested or used in production processes.

Industrial goods are products that are sold to other business entities. They are either sold on or used in consequtive production processes. There are four main types of industrial goods: Production goods, capital goods, systems and services.

Changes in market environment and competition require companies to constantly adapt their strategies in B2B markets. Among the continuing trends of the last decade are electronic markets, technology convergence and the need to do business globally.

B2B marketing has to consider global trends on many frontiers. Dealing with foreign customers requires specific behavior. Selling major products such as the “Dreamliner” sometimes requires sourcing out manufacturing to the client’s countries of origin. Global markets increase B2B-marketing complexity.

Many opportunities in B2B markets emerge from uniting technology domains that have not been directly related in the past. Festo shows, how biology and mechanical engineering can create new industrial products that are marketed successfully.


Literature questions

51

Bingham, F., Gomes, R., Knowles, P. (2005). Business Marketing. New York, McGraw-Hill, 3. Auflage, S. 4-8.

What are the main differences between B2B- and B2C-customers? Morris, M., Pitt, L., Honeycutt, E. (2001). Business-to-Business Marketing. New York, Sage Publishing, 3. Auflage, S. 15-21.

Describe the five factors, that characterize the B2B-Marketing environment?

b2b basics

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