Chapter 1-4

Business Marketing
Marketing products/services to other companies, government
bodies, institutions, and other organization
Magnitude: account for large economic activities in industrialized
countries
Mass marketing is not applicable in business marketing
Characteristics of business market
Buyer-seller interdependence
Channel of distribution is shorter
More direct: personal selling and negotiation (due to direct
communication and complex buying procedures)
Unique promotional strategies
o vary from the department that salesperson is dealing with
(e.g. low cost strategy for finance department)
o using trade shows and expositions
Types of business customers
o Companies that consume (Original equipment
manufacturer & Users)
o Gov. Agencies
o Institutions
o Resellers (wholesalers, brokers, industrial distributors)
Purchasing standards and process
o Strict performance standards (e.g. design specification,
cost constraints, delivery window)
o Complex purchasing processes deal with organizational
controls of professional purchasers

Nature of Demand
Derived demand
o Demand for business goods is derived from demand of
consumer goods (downstream demand)
Inelastic Demand
o Not affected by price changes (e.g. price discount)
o More substitutes for some industrial products
o Elasticity also driven by derived demand
Fluctuating Demand
o Demand for business products and services tend to be
more volatile unexpected increase/decrease (e.g.
accelerate effect)
Joint demand
Typical buying situation
1. Straight rebuy
buyer reorders supplies from current suppliers
in-supplier
o never be complacent in order to compete with alternatives
in market maintains product/service quality to secure
the repeat purchase decision
o reinforce positive customer experience
o add value to customers
out-supplier may offer something new to exploit dissatisfaction
2. Modified rebuy

3. New

buyer decides to change product specifications, prices, supplier

service requirement
in-supplier may lose part of the current supply, while out-supplier
sees an opportunity to gain new business
out-supplier should understand customers needs and identify
how the in-suppliers product helps them to add value
formulate unique proposition
Task
buyer has no experience with the product/service and must
become educated about the product/service in order to make a
purchase

Organizational Buyer Behavior

Organizational buying: decision making process by which formal
organizations establish the need for purchased products/services,
and identify, evaluate, and choose among alternative brands and
suppliers.
Behavior choice theory
Buyers decide what type of situation they are in selforientation/company-orientation
Evaluate person relevance
Buyer assesses action alternatives and requirements
Selection of strategy
o Offensive strategies: strategies designed to maximize gain
o Defensive strategies: strategies designed to minimize loss
Roles
Suggest people behave within a set of norms/expectations of
others due to the role in which they have been placed
Autonomous: person makes a purchase decision alone for an
organization
Buying center/decision-making unit (DMU): group of participants
that make purchase decision for an organization, and who share
some common goals as well as risks arising from the decision
Roles in buying center/DMU

initiator starts the purchasing process by recognizing the needs,

deciders are the one who may vote on the final decision
controller sets budget
influencers are those individual who can affect the decision
makers final decision through recommendations of which
vendors to include or which product are best suited to solve
organizations needs
Gatekeepers control info into/out of the buying group or between
members
Purchasing stages
Recognition of need
Definition of product/service need
Establishment of specifications
Search for suppliers
Proposal acquisition and analysis
Supplier evaluation and selection
Selection of an order procedure
Implementation and evaluation of performance
Buying determinants theory
Environmental factors
o Economy, technology, political, social factors
Market factors
o Numbers and relative size of competitors/customers
Organizational factors
o Rewards systems, corporate cultures, policies
Individual factors

o Experiences, demographics, psychological

o Selective processes: selective exposure, selective
attention, selective perception, and selective retention
Buyer-supplier relationship
Depends on availability of alternatives, criticality of supply,
complexity of supply and supply market dynamism
Manage B2B customer relationship
o Supply chain management
o Early supplier involvement
o Purchasing alliances
o Care about customers stakeholders (e.g. customers
customer)
o Build trust by:
Provide info transparently
Deliver quality expectations
Help partners learn/grow
Align incentives to meet customer needs
Involve customer in product/service design
Market segmentation
Process of grouping current and potential customers who have a
similar set of needs and wants, and share the similar
characteristic (traits, buying patterns, information needs, benefit
sought, psychographic profiles, product experiences, industry
participation etc.)
Practical value enable business to succeed in that market
o Formulate and address marketing strategies to them
accordingly
o Promotional resources are more focus

o In depth understanding about customers

(loyal/new/potential/previous/rejected)
strengthen our relationship with current customers
o identify market opportunities and competitive threats
enable targeting to maximize return
Prioritization to optimize return
o Compete with a better positioning and tailored offering
Strategic Market Segmentation Process
Company business goals
Market definition
o Re-define market segmentation
o Current customers/potential customers
Segmentation bases Consider segmentation variable:

o usually driven by nature of the business/dependent to the

availability of primary data
Analysis
Evaluation, selection and prioritization
Marketing implementation

Challenges of market segmentation process

Data availability
Workload and timeliness

Time available and analytical resources

Organization commitment

Segmentation criteria
Measurable
Impactful
Accessibility
Differentiable
Actionable
Strategic application of market segmentation
Mass marketing
Segment marketing
Niche marketing
Individual marketing