b2b marketing - session 1 &2
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B2B Marketing
Prof. Rubina DMello
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B2B Marketing Organizational sales and purchases of goods
and services to support production of other
products, to facilitate daily companyoperations, or for resale.
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What are these? B2B markets
All organizations that purchase goods and
services to use in the creation of their owngoods and services.
B2B marketing The process of matching and combining the
capabilities of the supplier with the desiredoutcomes of the customer to create value forthe customers customer.
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B2B versus B2C Marketing B2C=Business-to-Consumer Market=
businesses sell products and services to
consumers for household or personal use B2B=Business-to-Business Market=
businesses sell products and services to otherbusinesses for use in their daily operations or
for making other products and services
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B2C versus B2B Marketing The B2B market is 5X as large as
the B2C market in the USA.
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Sectors of the B2B Market Producers
Middlemen
Government Units
Nonprofits
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Difference between B2B & B2CIndustrial Markets Consumer MarketsStructure Relatively fewer buyers Clustering
geographical concentration
Large number of customers
Mass markets
Products Complex, needing customization, alliedservices important
Standardised for mass markets
Buyer
Behaviour
Functional involvement, rational
motives, importance of relationships
Psychological motives, family
involvement
Decisions Distinct, observable stages Mental, not observable
Channels Shorter, more direct Indirect, multiple
Promotion Importance of personal selling Advertising important
Price Bidding and negotiations a norm; list
prices for standard products of low
value
List prices and standard discounts
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Difference between B2B & B2CB2B Marketing B2C Marketing
Relationship driven Product driven
Maximize the value of relationship Maximize the value of thetransaction
Small, focused target market Large target market
Multi-step buying process, longersales cycle
Single step buying process, shortersales cycle
Brand identity created on personalrelationship
Brand identity created throughrepetition and imagery
Education and awareness buildingactivities
Merchandising and point ofpurchase activities
Rationale buying decision based on
business value
Emotional buying decision based on
status, desire or price
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Sectors of the B2B Market Producers includes all manufacturers and
service providers; buy goods to use in makingother goods or services
Middlemen buy goods for resale; includesall retailers and wholesalers (distributors,vendors)
Government includes all federal, state, andlocal governments and govt. agencies
Nonprofit includes charities, schools anduniversities, museums, etc.
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B2B Marketing is Different! There are fewer customers and they
require dependable relationships and a
high level of service. Marketing tends to be done by personal
selling ( one-on-one) calls to thecustomer.
Specialized media such as tradejournals, sales brochures, web sites,trade shows are used rather than
traditional mass media.
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Three Kinds of
Organizational Purchases Straight rebuy
a routine repurchase that may have been mademany times before
Modified rebuy
the in-between process where some review ofthe buying situation is donethough not asmuch as in new-task buying
New-task buy
a firm has a new need and the buyer wants agreat deal of information
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The Buying Center Business purchases often involve multiple
influence
"Buying center"all people who participate inor influence a particular purchase
Buying center varies from purchase topurchase
Does not appear on the "organizational chart"
Structure may be formal or informal
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Multiple Roles in the
Buying Center
BuyingCenter
Users
Buyers
Gatekeepers Deciders
Influencers
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COMPONENTS OF THE BUSINESS
MARKET Commercial market Individuals and firms
that acquire products to support, directly or
indirectly, production of other goods andservices.
Trade industries Retailers or wholesalersthat purchase products for resale to others.
Government.
Public and Private Institutions
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Producer Types
Component Parts
and ManufacturedMaterials
Producers
CapitalGoods
Manufacturers
Accessory
Equipment
Suppliers
Raw
Materials
Producers
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Producer Types
More differentiated from direct
competition by the value added tothe customers product.
Usually retain identity even when
incorporated into the customers
product.
Parts retain their same form when
incorporated.
Component Partsand Manufactured
Materials
Producers
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Producer Types
Adherence to specificationsreduces
opportunities for differentiation.
Involves the development of
specifications to ensure that
organizational needs are met.
Capital goods involve large purchases
with considerable risk for the customer.
Customers expect an offering that
includes installation, equipment, and
accessories.
CapitalGoods
Manufacturers
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Producer Types
Accessory equipment is usually
produced by an independent
supplier.
Accessories can be added to a
bundled offering by a channelintermediary.
Accessory equipment is equipment that
works with some other offering.
The key to providing value is to be
compatible with industry standards for
the primary offering.
AccessoryEquipment
Suppliers
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Market Demand
JointDemand
DerivedDemand
VolatileDemand
InelasticDemand
InventoryAdjustment
Demand characteristics vary from market to market.
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DERIVED DEMAND The linkage between demand for a companys output and its purchases of
resources such as machinery, components, supplies, and raw materials.
VOLATILE DEMAND Derived demand creates volatility; for example, demand for gasoline pumps may
be reduced if demand for gasoline slows.
JOINT DEMAND Demand for two products used in combination with each other.
INELASTIC DEMAND Demand not significantly influenced by price changes.
INVENTORY ADJUSTMENTS Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and
requiring vendors to deliver inputs as they are needed.
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THE BUSINESS BUYINGPROCESS
More complex than the consumer decision process.
Takes place within formal organizations budget, cost,and profit considerations.
INFLUENCES ON PURCHASE DECISIONS
Environmental factors
Organizational factors Social Factors
Personal Factors
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SEGMENTING B2BMARKETS
Segmentation helps marketers develop the most appropriatestrategy.
SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS Grouping by size based on sales revenues or number of
employees.
SEGMENTATION BY CUSTOMER TYPE
Grouping in broad categories, such as by industry.
Customer-based segmentation Dividing a business-to-businessmarket into homogeneous groups based on buyers productspecifications.
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SEGMENTATION BY END-USE APPLICATION
End-use application segmentation Segmenting a business-to-business market based on how industrial purchasers will use the
product. Example: A supplier of industrial gases that sells hydrogen to some
companies and carbon dioxide to others.
SEGMENTATION BY PURCHASE CATEGORIES
Segmenting according to organizational buyer characteristics. Example: Whether a company has a designated central purchasing
department or each unit within the company handles its ownpurchasing.
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Segmentation Benefits
First, the marketer to become moreattuned to the unique needs of customer
segments. Second, focus product development
efforts, develop profitable pricingstrategies, select appropriate channels of
distribution.
Third, provides guidelines that are ofsignificant value in allocating marketing
resources.
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Selecting awell-definedgroup ofpotentiallyprofitablecustomers.
High-Growth
CompaniesSucceed By
Focusingmarketingresources onacquiring,developing,and retaining
profitablecustomers.
Developing a
distinctivevalueproposition.
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Five Criteria for EvaluatingPotential Market Segments
1.Measurability
2.Accessibility
3.Substantiality
4.Compatibility
5.Responsiveness
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Common
Bases forSegmentation
By productoffered
By industry in
which the customer
participates
By size of
the customers
company
By buying
behavior
By technology
used by the
customer
By size
of account
By geographicregion
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MeasureabilityCan we understand thesize and needs of the
market segment?
AccessibilityCan we communicate withthe segment so that servingthe segment is possible?
SubstantialityDoes the segment desirethat values that an offeringpresents?
Actionability
Can we create a competitiveadvantage with respect to theneeds of the segment?
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Analytic Approach to Segmentation
Analytic approaches need twosets of data:
1) Information about segment size and
growth2) Information about each targeted segments
needs and buying behavior.
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Technological EnvironmentAssessment
1. Product technologythe set of ideas embodied inthe product or service.
2. Process technologythe set of ideas or stepsinvolved in the production of a product or service.
3. Management technologythe managementprocedures associated with selling the product.
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Bases for Segmenting BusinessMarkets
Macro Segmentation.
Micro Segmentation.
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Macrolevel bases of segmentation are concernedwith general characteristics of the buyingorganization, the nature of the product
application, and the characteristics of the buyingsituation.
Selected Macrolevel Bases of Segmentation
Copyright 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations
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The marketer often finds it useful todivide each macro segment into smallermicro segments on the basis of thesimilarities and differences between
decision-making units.
Selected Microlevel Bases of Segmentation
Copyright 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations
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Purchasing Strategies Classifications
1. Satisficers approach a given purchasingrequirement by contacting familiar suppliers
and placing the order with the first supplier tosatisfy product and delivery requirements.
2. Optimizers consider numerous suppliers,familiar and unfamiliar, solicit bids, and
examine all alternative proposals carefullybefore selecting a supplier.
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Attractiveness of SegmentsMarket
Attractiveness
Competitive
Attractiveness
Channel
Attractiveness
Internal
Attractiveness
Attractiveness Other
Considerations
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Market Attractiveness
MarketAttractiveness
Large and fast growing segmentsare more attractive than smallerand slow-growing segments
This necessitates accuratelypredicting future growth.Other issues include
Adaptability of marketsegments,Existing relationships with thebuying center members, andAvailable customers budget
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Competitive Attractiveness
Competitive
Attractiveness
What is the likely existence oremergence of competition inthe market segment?Are there barriers to entryfacing competitors?Does being first to marketprovide an advantage?
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Channel Attractiveness
ChannelAttractiveness
It is preferable to targetcustomers already served bywell-established marketing
channels, or if an existingchannel can be adapted, it mayserve the segment.When there is no suitableexisting channel, a market viewof competition may benecessary.
How is the existing needbeing met?
Will customers switch?
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Internal Attractiveness
InternalAttractiveness
A segment is more attractivewhen the segments needs can
be met by the firms core
competencies.This is identified throughenvironmental analysis.
O h
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Attractiveness OtherConsiderations
Attractiveness OtherConsiderations
Other factors that might causea segment to rated higher orlower include:
Public policy (excessivegovernment regulation cancause a segment to bedowngraded)
Organizational goals(market share goals maymake firms moreaggressive in targeting)