Business to Business Marketing (B2B) Flashcards
Characteristics of the B2B Market:
- The biggest market
- Purchases are often much larger
- Stakes (enjeu/investissement) are much higher
- Decisions are more complicated
- Markets are more specialized
What goes in to making a pair of trousers?
Technically speaking the same marketing principles apply:
- Come up with a competitive advantage for the target segments needs
- Develop a marketing mix strategy for product, price, place and promotion
- Develop a communication strategy
- Evaluate and revise
So what are the differences?
Size and scale: Large buyers:
■ You aren’t satisfying individual needs, but collective needs
■ There must be consensus in the firm
■ Many of these are not the end users
-> Thus the company selling university furniture must satisfy several needs: students, faculty administrators, teachers, campus planners, financial controllers, government safety standards.
Number of customers
B2C:
■ There are 510 million people in the eu
■ The field of “Business demography” tells us there are 26 million active enterprises
The number of companies is only 5.1% of the number of individual consumers in the EU
B2B:
A B2B business can have only 2-3 customers (or even 1) in very specialized sectors
Size of purchases:
■ So a family may go through a bottle of washing detergent every two weeks or so, perhaps more
■ The volumes consumed by a laundry company are enormous.
Geographic concentration:
■ Businesses are often located in one area, rather than spread out
■ This means it becomes possible to concentrate sales efforts
Characteristics of B2B demand:
■ Derived
■ Inelastic
■ Fluctuating
■ Joint
Derived demand:
■ Businesses don’t purchase goods and services to satisfy own needs, but the needs of others
■ So if SAS buys airplanes off Airbus, then this demand for planes is ultimately an expression of demand for air travel among the end consumers
Inelastic demand:
■ It doesn’t matter if the price of a b2b product goes up or down, the company buys the same amount.
■ This is often the case for complicated products. For instance: aeroplanes have 1000s of parts. If the price of one small component doubles or triples it doesn’t affect the demand for the plane.
Fluctuating demand:
Businesses often buy machines and other equipment that lasts for many years. Thus one large order spurs demand while the intervening years demand drops.
Joint demand:
■ Various essential components fit together to make the final product
■ A baker may need eggs, flour, yeast and butter to make a cake
■ The availability of yeast may be limited, thus limiting demand on eggs, flour and butter.
Types of B2B markets:
- Producers
- Resellers
- Organisations
Producers:
■ These purchase products for the production of other goods and services that other use in their production
■ Raw materials, energy, services, component parts etc
(e.g. those selling flour to bakers bought unprocessed wheat)
Resellers:
Wholesalers and distributors buy finished goods to as to resell to other businesses
Organisations:
■ Governments (local and national)
■ NGOs
■ Institutions
Business Buying Introduction:
■The b2b marketer needs to understand how customers (businesses make decisions)
■Like regular customers, businesses spend more time on some decisions rather than others
■The ‘Buy Class’ framework identifies the degree of effort required by the firm to collect information and make the decision
Different Business Buying decision making:
- Straight Re-buy
- Modified Re-buy
- New-task buy
Straight Re-buy:
■ Routine purchase on a regular basis
■ So, airlines may regularly purchase single serving milk for inflight coffee
Habitual Decision Process
Modified Re-buy:
■ A firm wants to shop around for suppliers with better prices, quality or delivery options
■ A marketing department purchasing a new and better laptop for a researcher: specialised needs
Limited Decision Process
New-task buy:
■ Uncertainty and risk escalate
■ Start from scratch
■ Gather information
■ Example: Beginning a new SBU…. Universities start a distance learning unit (Strategic Business Unit)
Extended Decision Process
Business Buying Decision Process
Suppliers:
One of the most important decisions for a buyer is how many suppliers can best serve the firm’s needs. Sometimes one supplier is more beneficial to the organization than multiple suppliers.
Sourcing:
- Single sourcing, in which a buyer and seller work quite closely, is particularly important when a firm needs frequent deliveries or specialized products.
- Multiple sourcing means buying a product from several different suppliers. Under this system, suppliers are more likely to remain price competitive.
- Outsourcing occurs when firms obtain outside vendors to provide goods or services that might otherwise be supplied in-house.
- Crowd sourcing may occur when a company finds that it’s both cost-efficient and productive to call on outsiders from around the world to solve problems their own scientists can’t handle.
- Reverse marketing occurs when buyers try to find suppliers capable of producing specific needed products and then attempt to “sell” the idea to the suppliers.
Can you think of how marketing can be crowd sourced?
Who in the company can help make/influence the buying decision?
The DMU: decision-making unit
“Often in buying situations several people work together to reach a decision. Depending on what they need to purchase, these participants may be production workers, supervisors, engineers, secretaries, shipping clerks or financial controllers. In a small organisation, everyone may have a voice in the decision”
Roles in the Buying Center:
The Professional Buyer:
The marketer must understand who does the purchasing:
AKA ‘The purchasing manager’, ‘purchasing director’, or ‘head of purchasing’
Responsible for making decisions based on knowledge about price, quality, delivery, maintenance etc.
