MSc Marketing/

MSc Management:
Marketing Contexts
Lecture: 30th January 2014
Business-to-Business (B2B)
Marketing: Part 1
Dr Gary Harden
28 January 2014

Warm-up exercise/ice breaker

Imagine you are working for a major blue chip company. Your job is
to organise the purchase (or leasing) of a fleet of company cars
for senior managers and sales staff.

Describe the stages in the process that you would go through in

making the purchase?
What particular issues will be important to you in making the
purchase?
What qualities or characteristics would you be looking for in
your preferred supplier?
Take a few minutes to consider your answers to the questions above and
then compare your views with your immediate neighbour(s).
28 January 2014

Overview of lecture

Developing an appreciation of the significance

of B2B for consumer markets
Understanding the key characteristics of B2B
markets and how these differ from consumer
markets
Aspects of the B2B decision making process
Building the case for studying B2B marketing

28 January 2014

Approaching B2B marketing

28 January 2014

Defining B2B marketing

B2B marketing is the management process responsible
for the facilitation of exchange between producers of
goods and services and their organisational customers.
Brassington and Pettitt (2005)

Business-to-business marketing is where one business

markets products or services to another business for use
in that business or to sell onto other businesses for their
own use.
Wright (2004)

28 January 2014

B2B relationships: Nintendo Wii

Maker of wireless LAN
and parts for controllers

Maker of AC adaptor

Small parts manufacturer

based in Osaka
28 January 2014

B2B in action: UPS Logistics

YouTube - UPS: We Logistics Commercial

28 January 2014

Consumer vs B2B markets

Consumer markets
- purchases by individuals for personal consumption

B2B markets
- products purchased by organisations either for resale
or use in production (and includes consumables)
industrial market
reseller market
government market
public sector market

28 January 2014

Supply/demand chain: cars

Suppliers of materials
(e.g. steel makers)
B2B
marketing

B2B
marketing

Purchasers of inputs
used in making parts
(e.g. engine makers)

Purchasers of inputs
used in making cars
(e.g. Ford, Toshiba)

B2B
marketing
B2B
(businesses)
and B2C
marketing
(individuals/
families)
28 January 2014

Car dealerships
(e.g. franchises or
independent showrooms)

End users of cars

(e.g. organisational customers
or consumers)

Upstream
suppliers
Direct
suppliers

Typical flow of
good between
organisations

Car
manufacturers
Car
distributors
Car
customers

Revisiting Porters value chain1

Support Activities
Firm infrastructure

M
A
R
G
I

Human resource management

Technology development
Procurement

Inbound
logistics

Operations Outbound
logistics

Marketing
& sales

N
M
A
R
G

Service
I
N

Primary Activities
28 January 2014

Revisiting Porters value chain2

The value chain offers a birds eye view of the organisation

and what it does. Competitive advantage arises out of the
way it uses inputs and transforms them into outputs that
customers are willing to pay for (i.e. value activities)
A firms value chain is connected to a larger value system
An organisation can secure competitive advantage by:

Inventing new or better ways to do things

Combining activities in new or better ways
Managing the linkages in its own value chain
Managing the linkages in the value system

28 January 2014

Why study B2B marketing?

B2B importance is recognised by key business thinkers

and practitioners (e.g. Kotler, Martha Rogers)
A detailed understanding of the demand/supply chains
for all products helps to ensure their efficient function
B2C has borrowed a lot from B2B
The majority of business students go on to work in
companies whose primary customers are other
organisations
(Ellis, 2011)

28 January 2014

Example of a typical B2B job

B2B Sales Executive/Account Manager (OTE 45K Uncapped)
Our client is a Microsoft Gold and Cisco certified partner specialising in
supporting IT networks for businesses. An opportunity has now arisen for a B2B
Sales Executive/Account Manager to head up their small, office-based account
management team. This position offers a challenging role and a genuinely
unique opportunity to be a key member of a small team.
As a B2B Sales Executive/Account Manager, your duties will include:
- Providing proactive management of existing customer accounts
- Building and maintaining strong working relationships with existing clients
- Identifying and closing opportunities for 'value added' services
- Issuing quotations/supporting documentation to existing customer accounts
- Providing solutions that meet client needs through IT recommendations
You must have B2B sales experience and demonstrable knowledge of Microsoft
applications as well as HP, Dell and Cisco products. You will also need to have
excellent communication skills and plenty of self-motivation.
28 January 2014

Significance of B2B markets

Source:
Ellis (2011)

Key B2B activities

are carried out
behind the scenes
of most B2C
experiences

Upstream
inter-organisational
trading supports
almost every
end-user market

Purchasing power of
private and public
sector
organisations
can be huge
28 January 2014

B2C marketers are

learning from B2B
marketing practices

Significance of
B2B markets

B2B activities make

a major contribution
to most national
economies

B2B exchanges have

a greater impact on
peoples lives
than B2C trading

Management paradoxes in B2B

Seeking opportunities
but facing limitations
Influencing others yet
being influenced
Controlling but never
being fully in control
Hkansson and Ford (2002)

28 January 2014

Managerial
certainty

Managerial
ambiguity

Characteristics of B2B markets

Fewer buyers
- there are fewer businesses than individuals
(3m vs. 60m UK)

Larger buyers
- customers in public sector typically account for one third
of public spending or 5-8% of GDP
- Accenture (Anderson Consulting) rebranded at a cost of
$175m in advertising expenditure alone
(Ellis, 2011)

28 January 2014

Characteristics of B2B markets

Closer relationships
- buyers and sellers are normally highly reliant upon
each other and promiscuity is frowned on

Use of legally binding contracts

Professional purchasing
- buyers are often trained and tend to be experts in
their field

28 January 2014

Characteristics of B2B markets

Derived demand
- suppliers in B2B markets must wait for demand to
trickle back through the stages in the supply chain

Relatively inelastic demand

- overall demand in business markets is not heavily
influenced by supplier price fluctuations. However,
these may impact intra-market demand

28 January 2014

Characteristics of B2B markets

Multiple buying influences

- although the buyer ultimately makes the purchase, there may
be many other factors that determine choice:

28 January 2014

Customer specification
Product/service quality
Legal requirements
Consumer preference
Decision making unit (DMU)

The DMU
(Decision Making Unit)

Users (staff or managers)

Influencers (designers or
technicians)

Deciders (ultimate decision maker)

Approvers (authorisers)
Buyers (purchasing function)
Gatekeepers (ad hoc impeders or
facilitators)

28 January 2014

Characteristics of the B2B DMU

Complex structure
Many people involved
Long time to make decisions
Buying for the organisation
Mainly rational reasons for purchase
High value goods/services being purchased
Seller might know DMU members over long period
DMU members can change
End-user probably not the decision maker
Wright (2004)

28 January 2014

Contextualising the B2B DMU

ENVIRONMENTAL

Adapted from Webster and Wind (1972)

Levels of demand
Economic prospects
Interest rates
The pace of technological change
Political and legal structures
Competitive structures

ORGANISATIONAL
Objectives
Policies
Structures
Systems & degree of centralisation
Processes and procedures
Managerial attitudes to risk
Financial l resource
Previous experiences

28 January 2014

BUYING
DECISION

BUYING CENTRE

INDIVIDUAL

Roles in DMU
Group processes
Interpersonal
interactions

Personal objectives
Job position
Attitude to risk
Previous experiences
Technical knowledge
Motivation

B2B buying behaviour

28 January 2014

Classifying B2B purchases

Plant and
equipment
Components

28 January 2014

Products and
services

Materials

Types of B2B buying situation

New task
- organisation buys product/service for the first time. This may entail
the development of a detailed technical specification and evaluation
of a range of potential suppliers

Modified rebuy
- organisation makes repeat purchase but requires changes to the
original specification. This may require a degree of negotiation

Straight rebuy
- repeat purchase is made with no alteration to the original
specification. This would normally be handled by a junior buyer

28 January 2014

B2B decision making process

Recognition of a problem/need
Determination of specification and quantity of item needed
Search for and qualification of potential suppliers
Acquisition and analysis of tender proposals
Evaluation of proposals and selection of supplier(s)

Placing of the order

Performance feedback and evaluation

28 January 2014

Comparing consumer and B2B

buyer behaviour
BUSINESS

Commercial profit

Expert purchasers

Few

High value purchases

Concentrated (?)

Negotiated

28 January 2014

CONSUMER

Personal pleasure

Amateur purchasers

Many

Small value purchases

Scattered

Impulse

Overview of the B2B

marketing mix

28 January 2014

How to approach B2B marketing

What do business customers value?

How do executives rank supplier capabilities?
See Anderson, J.C., and Narus, J. A. (1998) Business
marketing: understand what customers value, Harvard
Business Review, Nov-Dec., pp. 53-64.

28 January 2014

What business customers value

1. Core product quality
2. Low prices
3. Technological capability
4. Delivery performance
5. Rapid introduction of new products
6. Product support/service
7. Accommodating volume changes
8. Enhanced product features

28 January 2014

B2B marketing mix

Product/service - unique features, product trials,

after sales service, problem solving, quality, availability
of spares, operator training

Price - value for money, discounting, negotiated

prices

28 January 2014

B2B marketing mix

Promotion -

personal selling (soft sell), well

trained/empathetic salespeople, exhibitions, quality
printed material to build confidence and reputation

Place (Distribution) - rapid and/or reliable delivery,

specialist transport, high calibre agents/distributors,
close relationships (more of which in the next lecture!)

28 January 2014

Summary of main points

B2B marketing is defined as exchange activities between

organisations
The concepts of supply chain, demand chain and value
chain are inter-related in B2B marketing
The B2B DMU is complex and dynamic
B2B decisions are influenced by a huge number of
macro, micro and individual factors
Despite clear differences there are many similarities
between B2B and B2C markets
Relationships are important in B2B (more about this in the
next lecture...)

28 January 2014

References

Anderson, J.C. and Narus, J. A. (1998) Business marketing:

understand what customers value, Harvard Business Review,
Nov-Dec., pp. 53-64.
Brassington, F. and Pettitt, S. (2005) Principles of Marketing,
Pearson Education: Harlow.
Ellis, N. (2011) Business-to-Business Marketing: Relationships,
Networks & Strategies, Oxford University Press: Oxford
Hkansson, H. and Ford, G. (2002) How should companies
interact?, Journal of Business Research, Vol. 55, No. 2, pp.
133-139.
Wright, R. (2004) Business-to-Business Marketing: a Step by
Step Guide, Pearson Education: Harlow.

28 January 2014