Business MarketingOverview

MKGT 550Dr. Dawne MartinAugust 25, 2011

Learning Objectives Review differences from consumer

marketing Understand the differences in

customer types and product types Understanding other unique issues

in business marketing

What Is Business Marketing?

Those activities that facilitate exchanges involving products and customers in business markets

A business transaction between a professional seller (representing a selling company) and a professional buyer (representing a buying company)

Activities in which goods or services are sold for any use other than personal consumption

Note: It is not the nature of the product; it’s the nature of the transaction.

Business Vs ConsumerCustomers

When is a customer considered a business?

When a consumer?

Good employment opportunities Growing importance of high-tech

business products Success of foreign competition Significance of international

interdependence of firms Importance of the service sector Dramatic changes in the B2B

environment

Why Study Business Marketing?

Overview of B2BRalph Oliva, Overview of Business-to-Business Marketing, www.marketingpower.com.

B2B requires a value-based approach to marketing

Transactions are among & within value chains Value primarily determined by business economic

use Small numbers of customers, requiring personalized

marketing and customized products and services Large customer with formidable market power Large unit transactions Complex, lengthy selling process involving many

players Deeper partnerships with members of the value

chain Channel management oriented up and down the

supply chain Sales focused on key accounts and multiply

purchasing influence (who may not be users) How do these differences effect marketing

planning, strategy formulation and implementation.

How the Business Market Differs from the Consumer Market

Characteristic

Sales volumePurchase volumeNumber of buyersSize of individual

buyersLocation of BuyersBuyer-seller

relationshipNature of channelNature of buyingNature of buying

influencesType of negotiationsUse of reciprocityUse of leasingPrimary promotion

method

Business Market

GreaterGreaterFewerLargerGeographically

concentratedCloserMore directMore professionalMultiple (buying center)More complexYesGreaterPersonal selling

Consumer Market

SmallerSmallerManySmallerDiffuseMore impersonalLess directMore personalSingleSimplerNoSmallerAdvertising

Exhibit 1-1

Derived Demand Inelastic Demand Fluctuating Demand – Acceleration

Principle Joint Demand -- two products used

together Value Creation

Competitive Advantage Value Chain

Characteristics of Business Demand

The Nature of Business Buying Behavior

Questions Asked by Typical Ultimate

ConsumersProduct

Questions Asked by Typical

Business UsersPersonal computers Will it increase office

efficiency?

What is its capital investment value?

Does it have special features that will help improve our company image?

Will it help my child learn?

Will it improve my correspondence?

Is a laptop worth the extra cost?

Exhibit 1-3 Evaluating Products

The Nature of Business Buying Behavior

Questions Asked by Typical Ultimate

ConsumersProduct

Questions Asked by Typical

Business Users

Automobiles How efficient is the vehicle to operate?

Would it be more economical to lease it or purchase it?

What is the expected working life span of the car?

How does it enhance my status?

What is its potential trade-in value?

Will I get reasonable gas mileage?

Exhibit 1-3 Evaluating Products

The Nature of Business Buying Behavior

Questions Asked by Typical Ultimate

ConsumersProduct

Questions Asked by Typical

Business Users

Telephones

Will expanded service lower the cost of communicating with our customers?

Should our intercom system be separate from or connected to the telephone system?

How long will it take to have one installed?

Can I get three jacks and two telephones?

Exhibit 1-3 Evaluating Products

Major Equipment

Exhibit 1-4

A Classification of Business Goods and Services

Type CharacteristicsOften referred to as “installations” Exhibit inelastic demand curve Usually involves direct distribution Requires close cooperation between buyers and sellers

ExamplesMachinery, machine tools, stamping machines, robots

Accessory Equipment

Used to facilitate production, administrative, clerical, or marketing activities Exhibits elastic demand curve Distribution channels often longer Standardized and less costly than major equipment

Office equipment, personal computers, desktop printers, hand tools, fire extinguishers

Process Materials

Generally bought per specifications prepared by the customer (user) Cannot be identified or regrouped in the finished product Most marketed to OEMs or to distributors who sell to the OEM market Considerable emphasis on price and service in the sales process

Chemicals, plastics, cement, asphalt

Why would marketing be different for each?

MRO Supplies

Exhibit 1-4

A Classification of Business Goods and Services

Type CharacteristicsFacilitate the production operation Short life and less expensive Usually standardized specifications Longer channels of distribution

ExamplesBrooms, paint, cleaning supplies, bearings, gears, filters, pens, greases, lubricating oils

Business Services Support organizational operations

Spectacular growth Specialized providers Cost effective

Banking, insurance, financial, advertising, marketing research, employment services, consulting

Fabricated and Component Parts

Become part of other product Identified and distinguished easily Consistent quality required Delivery schedules critical

Spark plugs, timing devices, switches

Raw Materials

Basic lifeblood of industry Become part of manufactured product Exhibit inelastic demand curve Usually bought in large quantities Long or short channels of distribution

Farm products, lumber, iron ore, resins

Matching Exercise Factory building A business buying toilet paper Banking and currency exchange Grain for bread production Intel pentium chips Computer printer

Capital equipment Accessory equipment MRO Supplies Services Raw materials Manufactured material OEM parts

Scope and Importance of Customers

350,000 manufacturers 300,000 business service providers 400,000 wholesalers, distributors,

agents 2.5 million retailers 80,000 government agencies

(federal, state, local) Plus nonprofits—hospitals, museums,

parks, universities, political parties

Business Customers Commercial Enterprises

Industrial Distributors & Indirect channel members and facilitators (VARS)

OEMs (original equipment manufacturers) User-customers

Governmental Organizations Federal State Local

Institutions Education Hospitals Non-Profits

Products Purchased

Conveyer Conveyer replacement

and maintenance materials

Components going down conveyer

Raw material and components of components

Assembly station magnifier

Power tool with blue cord

Assembly fixture Table and chair Trucks with

components on them

Floor cleaning systems

Lighting systems Heating/AC

systems Uniform vest Health insurance

Business Marketing Planning and Strategy Formulation

Includes: Analysis of changing environments Assessment of organization’s strengths

and weaknesses, opportunities and threats

Marketing planning Takes the best information it can get Analyzes it Generates alternatives Proposes a plan that best suits the firm,

now.

Friar Casing, LLC Friar casing makes steel cases to house

products used in difficult environments Situation:

Tiffany has 5 years of experience with Coca-Cola in event planning

Friar has had flat sales for 5 years, but pay for sales reps has gone up

Tiffany suggests moving small customers to the web and asking sales reps to bring in new customers

Her father believes that the relationship between customer and sales rep is too important

What should Friar do?

Summary Business Marketing is marketing

products to other businesses, government or institutions.

Types of Customers Types of Products

For Next Time Read Chapter 2 of text Prepare to address Case 2-1

(Market Failure or Management Breakdown?)