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BUSINESS MARKETING
The Nature of Business Marketing

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Chapter Questions
What is business marketing? What is customer value in business markets? What are the differences between business and consumer marketing? How planning is done in business marketing? What are the concepts of industrial demand?

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What is Business Marketing?

Business marketing is marketing of products and services to business customers, such as privatesector and government organizations, institutions like hospital, hotels, and educational. Business customers buy products and services to produce other goods and services, make profits, reduce costs, and so on.

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Customer Value in Business Markets

Value or Customer Value is the economic, technical,
service, and social benefits received by a customer firm in exchange for the price paid for a product or service offering. Value=Benefits divided by costs, or Benefits less costs.

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Business Vs Consumer Marketing Similarity is in basic tasks, viz.:

Deciding target markets.
Finding target customers needs / wants Developing products / services requirements of target markets. to meet

Evolving and implementing marketing plan to satisfy target customers better than competitors.

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Differences : Business Vs Consumer Marketing

Characteristics of business markets contrast with those of consumer markets.
Characteristics Market Business Markets Geographically concentrated Fewer buyers Technically complex Product Customized Very important Service Buyer Behaviour Functional involvement Rational motives Technical expertise Interpersonal relationships Consumer Markets Geographically dispersed Mass Markets No technical complexity Standardized Somewhat important Family involvement Social / psychological motives Less technical expertise Non-personal relationship

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Differences : Business Vs Consumer Marketing

(Continued)
Characteristics
Channel

Business Markets
More direct Fewer channel levels Importance to personal selling Competitive / negotiated prices List prices for standard products

Consumer Markets
Indirect Multiple channel levels Importance to advertising List prices or Maximum retail price (MRP)

Promotion Price

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Planning in Business Marketing

Compared to consumer marketing, planning in business marketing requires: 1)Closer relationship to corporate strategy, involving capital investment and company wide implications. 2)More functional interdependence, or other functions support including cross-functional teams.

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Concepts in Industrial Demand

Derived Demand
Demand for business goods is derived from the demand for consumer goods.

Fluctuating / Volatile demand / Acceleration effect

Demand for business goods / services is more fluctuating or volatile than the demand for consumer goods / services.

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Joint Demand
It occurs when one industrial product is useful or needed if other product also exists.

Cross Elasticity of Demand

It is the reaction or response of sales of one product to a price change in another product.

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Reverse Elasticity of Demand

In this, a price increase can cause an increase in demand and a price decrease would be followed by a decrease in demand. These short-term reactions are opposite from what we would normally expect from business buyers.

Bull - Whip Effect

It is the tendency of buyers of a product in short supply to buy more than immediate need.