ano

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dition
2002 E

Chapter 1
Introduction to Business-to-Business Marketing
1

The Marketing Mix:

The 4 Ps of Marketing
Place

Product

The
Marketing
Mix

Price

Promotion
2

Marketing Mix: Product

+ Core Product
+ Financing Terms
+ Delivery Options
= Total Offering

The total offering is created by a

partnership between the buying
organization and the marketing
organization.
The process creates an
augmented product that is specific
to the buying units needs and
maximizes the value creation
capabilities of the marketer.
3

Marketing Mix: Price

Price
is the mutually agreed-upon
amount that satisfies both
sides in an exchange.
often varies from fixed price,
with more special discounts
and allowances (in
comparison to consumer
markets).
may involve things other than
a one-time price payment
(such as commissions).

Price is the
measure of value
exchanged and is
determined by the
market (not by
costs).

Marketing Mix: Place

Place is about getting the product to the customer in
order to maximize economic utility.
Form Utility (having the product in the right
size package, quantity, etc.)
Economic
Utility

Time Utility (having product available at

useful times)
Place Utility (getting the product to the
customer where & when it is expected)
Possession Utility (making it easy to
transfer ownership to the buyer)

Marketing Mix: Promotion

Business-to-business marketing requires a different
emphasis on different parts of the promotional mix
Consumer marketing
Emphasis is
frequently on
advertising.
Communication with
customers is often a
monologue.
Relationship is often
brief.

Business-to-business
marketing
Emphasis is frequently on
personal selling.
Communication with
customers should be a
dialogue.
Relationship is often longlasting.
6

Business Markets and Business Marketing

Business markets
All organizations that purchase goods and
services to use in the creation of their own
goods and services.

Business marketing
The process of matching and combining
the capabilities of the supplier with the
desired outcomes of the customer to
create value for the customers customer.
7

The
Marketing
Concept

1. Be
Becontextually
contextually
1.
marketsensitive
sensitive
market

For a
business-to-business
organization to
successfully practice
the marketing concept,
it should:

2.Understand
Understandcustomer
customerneeds
needs
2.

3. Meet
Meetcustomer
customer
3.
needsin
inaa way
waythat
that provides
provides
needs
valueto
tothe
thecustomer
customer
value

4.Meet
Meet organizational
organizationalgoals
goals
4.
8

Consumer Demand and Derived Demand

Business demand is
derived from
consumer demand.
Trees are demanded to make wood pulp
because wood pulp is demanded to make paper
because paper is demanded to produce books
because the consumer demands books!

10

11

The Bullwhip Effect

1. Suppliers forecast
their production on
existing order rates.

2. But, if consumer
demand drops, the
order rate also drops.

3. Supply chain members are then likely to overcompensate the difference between the old and new
forecasts, because
A.
B.
C.
D.

Inventory levels can decline to fit new order rate,

Customers change orders frequently,
Minimum order quantities may exist, and/or
Trade promotions may influence buying patterns

(discontinuities of B2B demand add to the bullwhip effect)

12

B2B demand is discontinuous

it moves in large increments.
1. Consumers
increase their
demand for a
product.

2. To produce more, a consumer

goods manufacturer consumes
more raw materials, equipment,
and supplies.

3. Suppliers of raw materials,

equipment, and supplies are
pressured to expand capacity
and eventually do so.

4. Industry
capacity increases
in large
increments.

The industry capacity increases in a discontinuous manner.

13

Outsourcing
Outsourcing is the purchasing of part of the
companys continuing operations, such as
manufacturing, rather than producing the
same function internally.
Quantity Discounts
Complementary Products
Delivery Schedules
Outsourcing

Increasesthe
the
Increases
complexityof
of
complexity
business-to-business
business-to-business
marketing
marketing
14

Value Chain
The Value Chain
The chain of activities that creates
something of value for targeted customers.

The value chain

contains both
direct and
support
activities.

Directactivities
activities
Direct
contributedirectly
directly
contribute
tothe
theoffering.
offering.
to
Supportactivities
activities
Support
makesititpossible
possibleto
to
makes
perform the
thedirect
direct
perform
activities.
activities.

15

The Value Chain and Offering

Perceives
ar
M

Offering:

n
gi
ro
th
h
ug
e
lu
va

Infrastructure
Human resources
Procurement
Technology &
technology development
Support activities

Added value
Direct activities
u
al
ics
es e
v
l
t
s
s
sa rvic
gh
gi
gi
u
o
&
l
e
s
o
l
ro
n
g
rs
d
nd
io
th
in
t
e
t
n
u
a
u
e
o
in
m
rk
er
tb
to
bo
rg
p
a
u
s
n
a
I
O
M Cu
O
M
s
tic

Product
Service
Image
Availability
Quantity
Evaluated Price

Target
Customers

Creates

16

Implications of the Value Chain

The organization must understand its
prospective customers, what customers
perceive as valuable, and how prospects
might be persuaded to change their minds.
Not all customers are alike. Customers can
be segmented on the basis of what they seek
and can afford.
Direct and support activities are equally
important.

17

Trends and Changes in Business Marketing

Hypercompetition: the rapid emergence
of new competitors and industries.
Use of Internet technologies to reduce
costs and to improve communication
and customer service.
Time compression: an increase in the
speed of doing business.

18