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