B2B Markets

B2B Marketing

 Business-to-business (B2B) marketing –

Organizational sales and purchases of goods and
services
 To support production of other products
 To facilitate daily company operations
 For resale

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 Nature of the Business Market

 Firms sell fewer standardized products to

organizational buyers than to ultimate consumers
 Organizations purchase products to fill needs
 Companies buy services from other businesses
 Influences in B2B markets
• Environmental
• Organizational
• Interpersonal
 An organization’s goals must be considered in the
B2B buying process
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 Nature of the Business Market

 Some firms focus entirely on business markets

 Example: Firm which makes construction and
mining equipment
 Some firms sell to both consumer and business
markets
 Example: Firm makes award-winning office
furniture as well as stylish furniture for homes
 The B2B market is diverse

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 Components of the Business
Market
 Commercial market - Individuals and firms that
acquire products to support, directly or indirectly,
production of other goods and services
 Trade industries - Retailers and wholesalers
that purchase products for resale to others
 Resellers - Retailers and wholesalers

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 Government Organizations
Include domestic units of federal, state,
local and foreign governments

 Institutions
Includes a wide variety of organizations,
both public and private, such as hospitals,
churches, universities, museums, and not-
for-profit agencies.

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Why Segmentation ?
1. Better matching of customer needs
2. Enhanced opportunity for growth
3. Retention of customer
4. Targeted IM Communications
5. Share of the Market Segment
6. Enhanced operational efficiency
7. Better share of customer wallet
 High-Growth
Companies
Succeed By:

 Selecting well- • Focusing

defined marketing
groups of resources on
potentially acquiring,
profitable developing,
customers. • Developing and retaining
distinctive profitable
value customers.
propositions.
Five Criteria for Evaluating Potential
Market Segments

• Measurability

• Accessibility

• Substantiality

• Differential

• Actionable
Criteria for effective Segmentation
Measurable Size , Purchasing Power, profiles of
segments can be measured

Substantial Segments must be large or

profitable enough to serve

Accessible Segments can be effectively

reached and served

Differential Segments must respond differently

to different marketing mix elements

Actionable Must be able to attract and serve

the segment
Bases for Segmenting Business Markets
 Macro segmentation

 Micro segmentation
 Business Marketing Segmentation
Geographic location

Customer Type / Industry

Macro-
segmentation Customer/company Size

Product Use
Business
Markets
Operating Variables

Purchasing Approach
Micro-
segmentation Situational Factors
Personal /organizational
Factors
MAJOR SEGMENTATION VARIABLES FOR
INDUSTRIAL MARKETS

MACRO
 Industry : which industries that buy this
product should we focus on ?
 Company size ; what size companies should
we focus on ?
 Location : what geographical areas should we
focus on ?
MAJOR SEGMENTATION VARIABLES FOR
INDUSTRIAL MARKETS

Operating Variables
 Technology : what customer technologies
should we focus on?
 User/non-user status : should we focus on
heavy, medium, light users or non-users?
 Customer capabilities : should we focus on
customers needing many services or few
services?
MAJOR SEGMENTATION VARIABLES FOR
INDUSTRIAL MARKETS

Purchasing Approaches
 Purchasing function organization : should we
focus on companies with highly centralized or
decentralized purchasing organizations?
 General purchase policies: should we focus
on companies that prefer leasing ? service
contracts? systems purchases? sealed
bidding?
 Purchasing criteria; should we focus on
companies that are seeking quality? service ?
price?
MAJOR SEGMENTATION VARIABLES FOR
INDUSTRIAL MARKETS

Situational Factors
 Urgency ;Should we focus on companies that
need quick and sudden delivery or service
 Size of order : Should we focus on large or
small orders
MAJOR SEGMENTATION VARIABLES FOR
INDUSTRIAL MARKETS

Organizational Factors (Personal )

 Buyer –Seller similarity : People and values
are similar to ours
 Attitudes toward risk : Risk taking or risk
avoiding customers
 Loyalty (or Attitude) : Should we focus on
companies that show high loyalty to their
suppliers
Survey of b2b in 1998…
 Simkin and Dibb (1998) surveyed The Times
1000
 Segmentation approaches in b2b not very
sophisticated
 Profitability, market growth and market size
were the three most heavily used criteria.
Criticisms of Segmentation

 Do segments really exist?

 Segment overlap
 Technique driven
 Based on attitudes but attitudes are not the
same as behaviour
Characteristics
 Market Characteristics
 Product or Service Characteristics
 Buying Process Characteristics
 Other Marketing Mix Characteristics
Market Characteristics
 Demand for industrial products and services
is derived. (Derived demand means that the
demand for industrial products and services
is driven by, or derived from, demand for
consumer products and services)
 Demand – fluctuating, stimulating
 Few customers typically exist, and their
purchase orders are large
Product or Service Characteristics
 Products or services are technical in nature
and purchased on the basis of specifications.
 There is a predominance of raw and semi-
finished goods purchased.
 Heavy emphasis is placed on delivery time,
technical assistance, postal service, and
financing assistance.
Buying Process Characteristics
 Technically qualified and professional buyers
exist and follow established purchasing
policies and procedures
 Buying objectives and criteria are typically
spelled out, as are procedures for evaluating
sellers and products (services).
 Multiple buying influences exist, and multiple
parties participate in purchase decisions.
 Reciprocal arrangements exist, and
negotiation between buyers and sellers is
commonplace.
Other Marketing Mix
Characteristics
 Direct selling to organizational buyers is the
rule, and physical distribution is very
important
 Advertising and other forms of promotion are
technical in nature.
 Price is often negotiated, evaluated as part of
broader seller and product (service) qualities,
typically inelastic owing to derived
demand, and frequently affected by trade and
quality, discounts.
Other Terminologies
 Reverse Marketing involves the deliberate effort
by organizational buyers to build relationships
that shape suppliers’ products, services, and
capabilities to fit a buyer’s needs and those of its
customers.
 Reciprocity is an industrial buying practice in
which two organizations agree to purchase each
other’s products and services.
 A supply partnership exists when a buyer and its
supplier adopt mutually beneficial objectives,
policies, and procedures for the purpose of
lowering the cost and/or increasing the value of
products and services delivered to the ultimate
consumer.
 Business-to-Business Marketing Consumer-Goods
Marketing

Product Relatively technical in nature, exact Standardized form, service

form often variable, accompanying important but less than for
services very important business products

Price Competitive bidding for unique items, List prices

list prices for standard items

Promotion Emphasis on personal selling Emphasis on advertising

Distribution Relatively short, direct channels to Product passes through a
market number of intermediate
links en route to consumer
Customer Relatively enduring and complex Comparatively infrequent
Relations contact, relationship of
relatively short duration
Decision- Involvement of diverse group of Individual or household unit
making process organization members in decision makes decision

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Classification of Goods for
Business Markets
 Entering goods and services – These are
products and services that become part of
other products - raw materials, component
parts and materials.
 From the accounting perspective, entering
goods and services are usually expensed
rather than capitalized.
Classification of Goods for
Business Markets
 Foundation goods and services – These
are products that are used to make other
products. This includes installations and
accessory equipment. The former are items
like offices and buildings and the latter are
machine tools. In contrast to entering goods
and services, foundation goods do not
become part of the end product. Majority of
them are capital items.
Classification of Goods for
Business Markets
 Facilitating goods and services – These
are products and services that help an
organization achieve its objectives. In other
words, they assist and support. Facilitating
goods also do not enter the product or even
the production process. Facilitating goods
and services are expenses. Examples include
market research services, cleaning supplies
and copiers. Facilitating goods can be divided
into supplies and business services.