Business (B2B) Marketing

IFMR PGDM II Yr. (2009-10)

Module 1
Overview of Business marketing

S.Balachandran
July 2009

Learning Objectives
What is Business Marketing?
Classification of B2B Products/Services,
Markets & Customers

Differences between Consumer &

Business Markets & Marketing
B2B Buying Orientations & Characteristics

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Business Enterprises : Activities

Inputs
Inputs

Either
Either part
part of
of Output
Output OR
OR
facilitating
facilitating the
the
Transformation
Transformation

Materials
Materials
Components
Components
Consumables
Consumables
Services
Services

Resources
Resources

Equipment
Equipment
Facilities
Facilities
Systems
Systems
Land
Land
Human
Human

B2B
Transformation
Processes
1

Outputs
Outputs

3
5

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Services
Services
Goods
Goods

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For
For Consumption
Consumption
For
For Use
Use
For
Resale
For Resale

Consumer
or B2B
Markets
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B2B Goods & Services

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Industrial Production Categories

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Business Services

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B2B Markets & Customers

Commercial Enterprises
Users
OEMs
Resellers
Service Providers

Institutions : Profit/Non-Profit
Educational, Healthcare, NGOs

Government / Quasi-Govt. Bodies

Central, State, Local, PSUs, Defence
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Some Indian B2B Enterprises

BHEL / NTPC
ECC (L&T) / Hindustan Construction
TCS / Infosys / WIPRO / CTS
ORG Marg / R K Swamy BBDO
SAIL / Tata Steel
MICO / Sundaram Clayton / Bharat Forge /
Bimetal Bearings / Delphi TVS
ONGC/ Neyveli Lignite Corp. / Bharat Coking
Coal
IPCL / Gujarat Alkalis / Tata Chemicals
Shipping Corporation of India / TVS Logistics
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Value Equation
Product or Service satisfies a need or
want by providing value.
Attributes/
Attributes/
Features
Features

BENEFITS
BENEFITS

VALUE
VALUE

NETT VALUE = BENEFITS - COSTS

VALUE
DELIVERY SYSTEM
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Value Creation & Delivery

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Marketing Strategy

RECAP

Unique to each distinct Product-Market segment

Five Main Elements

Segmentation
Targeting
Positioning
Differentiation
Marketing Mix

Capabilities Required
Differentiation

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Market Sensing
Customer Linking

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Value Creation & Delivery System

Understand & Create the Value

Understand
Value
Desires

Market
Market

Research
Research
Customer
Customer
Behaviour
Behaviour

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Select
Targets

ProductProduct-

Market
Market
Segments
Segments
Position
Position

Define
Benefits/
Price

Provide the Communicate

value
the value

Differentiation
Differentiation
Product
Product
Management
Management

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Providing the Value

Choose
the
value

Provide the Value

Design
Technology Produ
ct

Source
Source
SophistiSophistication
cation
Patents
Patents
Process
Process
Choice
Choice

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Function
Function
Physical
Physical
charactcharacteristics
eristics
Aesthetic
Aesthetic
Quality
Quality

Procure,
Manufacture

Integration
Integration
Raw
Raw Mtl.
Mtl.
Capacity
Capacity
Location
Location
Part
Part Prodn.
Prodn.
Assembly
Assembly

Distribute
Channels
Channels
Integration
Integration
Inventory
Inventory
WareWarehousing
housing
Transport
Transport

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Service Price
Warranty
Warranty
Speed
Speed
Captive/
Captive/
IndepenIndependent
dent
Parts
Parts

Communicate
the
value

MRP
MRP
Negotiation
Negotiation
Discount
Discount
Combo
Combo
Financing
Financing
Other
Other Costs
Costs

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Communicating the Value

Choose
the
Value

Provide the Value

Communicate the Value

INTEGRATED
INTEGRATED MARKETING
MARKETING
Direct
Direct Sales
Sales Force
Force
Distribution
Distribution Channel
Channel Partners
Partners
Brochures,
Brochures, Website,
Website, Email
Email
Advertising
Advertising && Promotions
Promotions
Physical
Physical Evidence
Evidence
Employees
Employees
Processes
Processes

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Value Expectations
Consumer Markets
Monetary Benefits
Look/Feel Better
Aesthetics/
Psychological Benefits
Social Benefits
Convenience Place/Time
Quick Service

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B2B Markets
Economic Benefits
Cost of Procurement/
Transport/ Storage/
Ownership/ Usage/
Maintenance/
Modification/ Disposal
Help in Maintenance/
Service/ Repair/ Upgradation/
Performance Improvement

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Value Hierarchy Product Levels

CORE BENEFIT
Fundemental Benefit customer is
really buying

BASIC PRODUCT
Built around Core Benefit

EXPECTED PRODUCT
Attribute & conditions buyers
Normally expect

AUGMENTED PRODUCT
Exceeds Customer Expectations

POTENTIAL PRODUCT
All possible augmentations &
Transformations product might
Undergo in future
Customer Delight !
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Framework for B2B Marketing

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Key Differences:B2B vs Consumer

Marketing
External Environment
Internal Environment

External
Linkage

CUSTOMER

Internal
Linkage

MARKETING

Derived Demand
Complex Buying Process
Concentrated Customer Base

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MANUFACTURING

Emphasis on Technology
High Level of Customisation
Made to Order

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Nature of B2B Demand

Derived Fluctuating
Necessity to monitor changes in Demand
Patterns of Customers Customers

Stimulation of Primary Demand &

popularising new applications
Price Sensitivity/Demand Elasticity in B2B
Depends on B2C

Opportunities of Global Markets & Impact

of Global Competition : much more in B2B
than B2C
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Complexity of Buying Process

Strategic Importance of item
Senior Management Involvement

Cost : High, Medium, Low

Different Buying Processes
Relative Importance of financial Approvals

Complexity of need serviced

Level of Customisation & Service required
Multi-functional Scrutiny

Complexity of Buying Organisation

Centralised vs Decentralised Authority
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Concentrated Customer Base

Direct selling
More Economical
Customer Expectation

Buyer Bargaining Power

Competitor Influence on Buyer
Management of Short Term setbacks

Close Relationships
Monitor happenings @ Customer end
Expectations of C, Q, D, S, R1 & R2
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Emphasis on Technology
Constant pressure to improve/ upgrade/
innovate
Collaborative Design & Development
Product Performance Orientation
Performance to Price Ratio

Expected to provide Solution

Understanding of Customer Business

Selling : Technical / Multi-Functional Skills

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High Level of Customisation

Inflexible technical Specifications
Sometimes necessary for manufacturer
to redesign / re-layout operations
facilities
Even standard products: Installation,
Configuration, Service & Support may
have to be highly customised

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Differences in Emphasis : B2B vs B2C

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Nature of Products B2B Marketing

Manufactured Materials & Parts
Custom-made parts
Personal selling & CRM
Design & Supply Chain capabilities

Standardised Parts

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Contractual Purchase, Large quantities

Price, Delivery, Support service
Resellers used

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Nature of Products B2B Marketing (Contd.)

Installations
Product, Technology, Service Capabilities
Personal Selling & Account Management
Less Costly, More Standardised
Marketing Intermediaries

Costly, more involved

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Close relationships
Long negotiations
Several Executives of buyer organisation involved

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Nature of Products B2B Marketing (Contd.)

Supplies
Large Users: Direct Marketing
Smaller Users: Marketing Intermediaries
Strong eProcurement tendencies
Less Personal Selling
More of Catalogue approach
Price & Range critical

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Distinctive Capabilities for B2B Marketing

Mgmt. of
Strategic
Alliances

Mgmt. of
Hybrid
Channels

Supply Chain
Management

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Goals of Purchasing

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Total Cost of Ownership

Factors that drive total cost.

Acquiring and managing costs.

Quality, reliability over the life cycle.
Value of product to firm/customers.

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Procurement Development

Source
Negotiate

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Manage Info &

Logistics

Value Analysis &

Complexity mgmt.

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Strategic
Partnership

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Segmenting the Buy

KSFs
Demonstrated Capabilities
Skilled Personal selling

Cost & Range

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Strategic
Partnership

Efficient Management of
Info & Logistics

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Procurement Processes

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Source Approval
Contract (annual) / Non-contract
Inventory Control Systems
eProcurement
Reverse Auction eBidding
Tiered Structure (Ex. Fig 1.5, p15)

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Government Procurement
Compliance
Compliance -- requires
requires government
government contractors
contractors maintain
maintain
affirmative
affirmative action
action programs.
programs.
Reservation
Reservation -- aa percentage
percentage of
of the
the contract
contract is
is set
set aside
aside
for
for small
small minority
minority businesses.
businesses.
Minority-subcontracting - may require major
contractors subcontract a certain percentage of the
contract to minority firms.

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Govt. Contracts
1. Fixed-price contracts

Price agreed to before contract award

Payment made at conclusion of work
Provides for the greatest profit potential
Poses greater risks

2. Cost-reimbursement contracts

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Reimbursement of allowable costs

Price = Cost + Profit%
Disclosure of Cost Structure
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Govt. Procurement
Agencies
Defence Bodies
DGS&D
PSUs
Committees

Process
Tendering
Approved Supply sources
Negotiation
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Institutional Procurement
Schools, health care organizations, nonprofit agencies
Similar to government buyers
Political considerations and laws

Similar to commercial buyers

Often managed like corporations
Broad range of purchase requirements

Group purchasing quite common

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