BUSINESS TO BUSINESS

Your customers expect something different.

• Characteristics of the business markets, compared to consumer market:
- There is a smaller number of buyers (fewer potential customers)
- Geographic market concentration
- Purchase decisions are likely to involve more people than for consumer purchase. The
groups are likely to be formally defined.
- Buyer-seller relationships are typically more intense than with consumers. More frequent
and ongoing communication. Business purchaser expects attentions and more involvement
in the process.

• Business Market Demand:

1. Derived from consumer demand both capital purchases and expense purchases.
- Capital Purchases: long term assets (machines, trucks, buildings)
- Expense Purchases: for products that are resold or “used up” in a short period of time
2. Demand is inelastic (to price) in short-term: if the price increases and demand decreases,
then demand is elastic to price. If price increases, it has little or no effects on the demand,
then demand is inelastic to price. In the long-term, the business buyer will find substitutes
for the product that increased in price.
3. Changes in consumer demand cause greater changes in overall business demand.
Pen Manufacturer buys chemicals and parts for pens à sold to wholesalers à sold to
retailers à sold to final consumers. If you have a drop-in consumer purchase, the drop will
be higher and higher at every step up in that change.
4. The market is well informed

The business behavior is much more rational than consumer behavior because:
- The purchasing individual desires to improve his/her organizational standing.
- Improved organizational standing comes from improving the company’s position.

• Business buying process:

1. Problem recognition: It starts when there is a need recognized.

In the market the individual consumer who recognize is the decider.
In business instead is not the same person who takes the final decision of the purchase (decider)

2. Information gathering: Business buyers will have much more information, compared with the
individual buying process. The seller is expected to provide much more information.
The business buyer is expecting the business seller to provide him detailed info and even a
marketing proposal.
Marketing proposal: For products that will be used by the business buyer, but no resold, the
proposal will include performance information, cost/benefits information and details on how the
product will be used by the business.
For products the business customer will resell, the seller needs to provide information on how the
buyer can price, promote, and distribute the product.
3.Evaluating alternatives
Looking at the criteria they want, and then looking at the performance that they expect.
Characteristics compared to criteria. It may involve buying center.

4.Decision
It may involve the buying center. It includes a cost/benefits analysis.
Although the rationality, some benefits may be hard to quantify

5.Post purchase behavior

Evaluate and reformulate
Buyer’s remorse: we don’t have in the business because of the information and the decision-
making process. Business buyers rarely experience buyer’s remorse.
Follow-up from the selling company is essential for a continuing relationship between the business

• Types of buying situation

Almost all business purchases would be considered high involvement because of volume and
consequences.

a) Straight Re-buy
Many businesses make straight re-buy purchases from a “preferred providers list”.
A selling company will have one chance to get on the buyer’s preferred providers list and will stay
on that list for a designated period of time.
“A familiar product category, with frequent purchase and familiar sources.”

b) Modified rebuy
We do experiential issue. Company buys a familiar product category and now faces a new
available source.
Preferred providers lists can be formal or informal.
FORMAL: “official” and will stand for a designated period of time
INFORMAL: it is based on the purchasing company’s habits.
New sources or products options can be considered when they become available.
“ A familiar product category. New source available”.

c) New task buying

“Unfamiliar product category, infrequent/first-time purchase”
New task buying situations will not be made from a preferred providers list.
However, sellers with long-term relationship to the buyer may have an advantage in this situation

• Buying Centers
How people in the buying center differ from other into the buying decision? Need to target the
individuals in the. Buying center in order to better influence the final decision.

You have to convince someone in the b2b to buy your product, so you look at the
•• Roles in buying centers:
• INITIATOR: who recognizes something needs to be purchased. Not someone
• »INFLUENCER: They have an impact on the purchased product’s features or brand.
• DECIDER: makes the final choice of what purchase
 • GATEKEEPER (we don’t have an equivalent in the family): someone who controls the flows
of information into/or out of the buying center.
• BUYERS: are not important to the salesperson unless they play another role
• USER

The key to successful marketing to a buying center is to identify the roles people in the center
have, and the influence they have on the decision.

The level of influence someone has in the buying center is dependent on their source of “power”,
and the situation the center is.

- we want to have to know the level of power of

each center.
- We want to identify the overall circumstances.

•• Types of power members of a buying center might have:

1) Reinforcement power: give rewards and/or punishment to other members of the
center
2) Reference power: the personal characteristics the individual has, that other would like
to have, others will do what this person wants.
3) Legitimate power: comes from a job position. This is formal authority. People respond
respecting authority. This power is job-related
4) Expert power: comes from someone having knowledge related to the situation at hand.
Eg: someone from the IT dept. in a buyer center deciding on a new software system
5) Informational power: the gatekeepers’ power. Into, or out of, the center
6) Departmental power: comes from someone being from an “important” department in
the business

••• Situational variables determine which type of power is most influential:

1) Size of the buying center:

- LARGE (8 or more members):
1) Expert power
- SMALL
1) expert power
2) reinforcement

When a buying center gets smaller, people start to see more a closer relationship they have with
others.
 2) Compatibility of the center’s members: (how well do they get along)
- HIGH LEVEL OF COMPATIBILITY
1) expert power
- LOW LEVEL OF COMPATIBILITY
1) expert power
2) reinforcement power

3) The buying center is under considerable time pressure:

- HIGH
1) reinforcement power
2) expert power
- LOW
1) expert power

4) Effort exerted by member to influence the buying center

- OVERT EFFORT (The person pushes to get their way)
1) reinforcement power
- SUBTLE EFFORT
1) expert power
2) legitimate power

The combination of circumstances is not always clear.

 SEGMENTATION AND TARGETING
Types of markets
• Consumer products and Business products: determined by the ultimate user of the product
in its current form

• Market Segmentation
The process of dividing the total market for a product into smaller groups, such that members of
each group are similar with respect to factors that influence demand.
Similarities into the group that make target viable”

• Market Aggregation
The opposite of segmentation. The organization treats the total market as a single segment.
Aggregation leads to mass marketing which rarely leads to success

• Well defined segments:

1) Are homogeneous: the members having something in common with each other that
relates to the demand for the product
2) Are distinguishable: from the rest of the market. There is (are) characteristic(s) that
separate the segment from the market as a whole based on demand for the product as
well as how they can be reached.
3) Have a need: marketers cannot create need (they can create a want)
4) Have money to spend and are willing to spend them
5) Have to be large enough to be potentially profitable, and have growth potential
6) Are reachable: with penetration and with distribution, and they are able to reach your
business (communication)

• Steps in the segmentation process:

0. Divide business customers and consumers

1. Identify segmentation variable:
a) Geographic variables
- Based on the business’ scope and capabilities
- Consumers in different are relate to products differently
b) Demographic varibales
- age, gender, ethnic groups, life-cycle stage, household types, (traditional, single-
parent, married)
c) Psychographic variables
- lifestyle, needs, perceptions, attitudes, jobs, culture
Psychographics can be very good variables for identifying segments with a need but
can be very difficult to target without adding other variables.
d) Behavioral/product related variables:
- benefits: targeting people whose primary concern is convenience, cheapest price
- brand loyalty
2. Identify segment risks:
Market risk is related to growth strategy. It’s something that you as a business, can’t
control. Uncontrollable factors that may affect the segment and how the members of the
segment relate to the product.

Type of risks: Economic, Political, Technical, Legal, Cultural, Competition, The organization’s
capacity to meet demand

Competition is most likely going to come into or intensify in your market if you earn an
economic profit. Economic profit describes a return that’s higher than the average return
of a given level of risk.
Suppose the average successful restaurant earns a 10% return on investments (ROI).
A new style restaurant earns 15% ROI.
(15-10)%=5% economic profit
So, if a business generates an economic profit, new competition will move in quickly.
If you create demand that you cannot meet, competition will, unless there is some barrier
to them entering your market.

3. Select the segments to target à creating a marketing mix to use on that segment
4. Select a marketing approach
- undifferentiated: one product or line to all customers.
- differentiate: many products or variations, to many markets, using many marketing mixes
- concentrate: a single segment with a single product or limited products.
- niche: an intentionally small segment with a using a product that large companies cannot
produce economically.
-micromarketing: targeting very small segments, or individual businesses or consumers.
5. Determine the position you want
Establishing where you are in the “mind” of the market (relative to competitors).
6. Develop specific ways to position and implement the process
Ways to position:
- attack the leader
- acknowledge the leader, and fight for another spot
- change how the market thinks about the product category
Position with:
- price
- differentiation (quality, utility, service, promotion)
7. Evaluate and adjusting
 PRODUCTS

• Classifications of business goods:

1) Raw materials are used, manufactured and reformed.

2) Components parts are used by assembling companies to become part of a finished product.
3) Installations: long-term equipment used by the business.
4) Accessory equipment: equipment used with installations.
5) Operating supplies: these are “used up” by the business in conducting the business.

• Classifications of consumer goods:

1. Convenience goods: consumers do not feel these products are worth spending much shopping
effort to find.
Consumer perception is what put a product in a certain category. It’s important to recognize
the perception of the consumer regarding each product.
a) Staples goods are frequently purchased and regularly consumed (e.g. items in a grocery
store)
b) Impulse goods (inconvenience) are product that consumers are aware of, but generally are
not shopping for as their primary items.
c) Emergency goods are products consumers feel they need very quickly when the unmet
need is realized.
2. Shopping goods: consumers feel are worth spending some time and effort to compare choices.
a) Homogenous shopping goods: brands are perceived as undifferentiated.
Products need enough exposure to facilitate comparison.
Many producers of appliances try to convince consumers they are heterogenous.
b) Heterogeneous shopping goods: Brands are perceived as differentiated.
Products need exposure in major shopping districts, where other brands are found.
3. Specialty goods: particular brands of products customers feel are worth much effort to obtain.
Limit distribution and consider a high relative price.

𝑣𝑎𝑙𝑢𝑒 → → 𝑓𝑜𝑐𝑢𝑠 𝑜𝑛 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒 𝑏𝑦 𝑑𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑡𝑖𝑎𝑡𝑖𝑜𝑛

𝑐𝑜𝑠𝑡 (𝑝𝑟𝑖𝑐𝑒) → → 𝑡ℎ𝑖𝑠 𝑖𝑠 𝑠𝑒𝑡 ℎ𝑖𝑔ℎ𝑒𝑟 𝑡ℎ𝑎𝑛 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑜𝑟𝑠
Shopping goods ß-------------------------àspecialty goods
Homo hetero specialty goods

4. Unsought goods: Customers do not know these are available. Distribute near compatible
products.

Product Line: A group of closely related products.

The concept of product line applies to manufacturers, wholesalers, retailers, and service providers.
Product line depth: the number of variations of each product in a line.
Product Mix Width: The number of product lines.
Product Mix: The set of all product lines and individual items/products that a particular seller has
for sale.
Both product adoption and diffusion start with a new product.
Product Adoption: the process an individual goes through when considering the purchase of a new
product.
Product Diffusion: how a society as a whole adopts a new product

• Steps of the individual adoption process:

1. Awareness: the individual learns of the new product’s existence

2. Interest: if the individual has a need they think to be able to fulfill it with this product
3. Evaluation:
• Information gathering
• Comparing the new product to what they currently use
• Deciding to try it (•trial) or not (•stop)
4. Trial
5. Adoption: if the trial results in satisfaction
6. Post adoption confirmation

• Adopter Categories

Different people will try new products under different circumstances and through different
information and decision processes, based on personal characteristics and experiences.
All markets have members from each adopter category.
The percentages of the members in each category depends on the target market.

a) Innovators: actively seek new products

about 3% of population, risk takers, young, mobile, well educated
DON’T NEED TO BE TARGETED
b) Early adopters: will try new products in a product category they are interested in, but do not
actively seek them out.
They will have fewer, but closer, friends in their social net than innovators.
They are many times opinion leaders and want to keep that position.
about 13% of population, young, mobile, opinion leaders, smaller social net
NEED TO BE MADE AWARE THE PRODUCT EXIST
c) Early majority: need much more information before trying new products
They seek information from informal resources before trying the new products.
They need some pre-purchase confirmation before trying something new (brand’s reputation,
warranties, reviews).
About 34% of population, cautious
THE MARKETING MIX IS DEVELOPED FOR THEM
d) Late majority: need proof from other’s experiences, about 34% of population, suspicious, older
1. Hesitation to purchase because of the awareness of less time to “make up” for a mistake.
2. They have more experiences in purchasing the wrong product
THE MARKETING MIX IS DEVELOPED FOR THEM
e) Laggards/non adopters: ARE NOT AN ISSUE FOR THE MARKET
about 16% of population, very suspicious, lower incomes, less educated, hard to reach
• Product Characteristics Affecting Adoption Rate
How quickly individuals will become aware of the products, try the product and adopt the product.
This determines how quickly the product diffuses through the market.
In the early stages of introduction these contribute greatly to the potential of success for the
product in the market.

1. Relative advantage: How much better does this product satisfy the customers’ needs than
ehat they are currently using.
Higher à faster adoption
2. Compatibility: Can the new product be used with the other products that it will replace
uses?
Higher à faster adoption
3. Ease of trial: Can the customer try the product before purchasing it?
Higher à faster adoption
4. Ease of observation: Can the potential customer see others using the product? This works
best for products that are publicly consumed
Higher à faster adoption
5. Complexity: – to set up – to learn – continue using
Higher à slower adoption

• Product Life-Cycle
The total demand for all brands of a generic product category from its introduction into the
market, until it is no longer produced.

•• Stages
1. Introduction: incredibly risky
Many failures, high costs, total sales low, intense learning time
Competing by promoting primary demand, limiting distribution
- Primary demand is for the generic product (not your brand) category. Promoting is that
this type of thing exists.
- Limit distribution: you want to learn on a small scale. Because there are things to change
very quickly, and large scale need a lot of money investments. No so costly the correction
you made
Decision is to enter now or later:
- now: greater potential market share
- later: less risk
2. Growth:
Sales and profits rise, overall profits peak at end of stage, competition increases, margins drop.
Competing by increasing distribution (increasing costs), promoting secondary demand (increasing costs).
- Secondary demand is for your brand, differentiate it from other
3. Maturity:
Sales increase, but at decreasing rate.
Profits drop, price competition intensifies, more variations of product appear.
Compete by increased promotion, product differentiation, lower costs to keep up with
lower prices, develop new variations, find new uses for the product, find new markets.
 4. Decline:
Demand drops, some competition withdraws.
Compete by cost control, reduce promotion, low margin versions .
Strategies: run-out the product, drop the product, revitalize the product.
- Run out the product: you continue to produce, distribute the product, but you don’t do no
more product research or promotion and eventually drop the product where you find a
better use for your resources.
- Revitalize the product: find a new use through promotion generating new interest.

A new product is introduced into

the market that starts to replace
the current product category

• Branding Considerations
Brand: a name, term, symbol, and/or design, used to identify a product.
Brands identify the goods and services of a seller and differentiates them from those of
competitors. Brand Name: words and/or letters.
Brand Mark: visual part that is not words of letters. Trademark: legally registered

• Branding Benefits
Consumers Society Sellers
Provides info about quality More consistent quality Focuses attention on new products
Increase in shopping efficiency Increase innovation Differentiates your products from competitors
Focuses attention on new products Increases competition Avenue for creating customer loyalty
Provides image utility àbetter use of resources

• Family Brand Options

Individual: each product has its own brand name
Blanket: all products are branded the same (canned vegetables)
Combination: blanket + individual brand fort their products (cars)