Business to Business Marketing

What is B2B Marketing

Business-to-business (B2B) marketing is about the marketing of goods and

services to commercial enterprises, governments and institutions,
 for incorporation (e.g. components)

 for consumption (e.g. processed materials, office supplies)

 for use (e.g. installation or equipment)

 or for resale

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 Products
in B2B Market

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Classification of Goods & Services in the Business Market & Cost Structure

Entering Goods Foundation Goods

Raw Materials Installations
– Farm Products – Buildings and Land Rights
– Natural Products – Fixed Equipment

Manufactured Materials and Parts Accessory Equipment

– Component Materials – Light Factory Equipment
– Component Parts – Office Equipment

Facilitating Goods

Supplies
– Operating supplies
– Repair & Maintenance

Business services
– Business advisory services

(Source: Kotler)
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 Type of
Customers in B2B Market

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 Organizational Buyers

Type of Business Market Customers

 Government

 Commercial Enterprises

 Institutions : For example – Educational Institutions, Religious Institutions etc.

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 B2B vs. B2C

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 Differentiators in Industrial Marketing

Based on External Linkage (Marketing function of producers and the end user)

Features Characteristics

Derived Demand Consumer preference, economic cycle , social trends etc

Complex buying selling • Formal organization system

process • Strategic importance as well as cost of the product/service
• Complexity of the need

Concentrated Customer Direct marketing and personal selling a viable option

Base

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 Differentiators in Industrial Marketing

Based on Internal Linkage (Marketing function of producers and the production function)

Features Characteristics

Role of Technology Performance, function and feature

High level of Inflexible technical requirement

customization

Made to order Job shop, low inventory of finished good, role of ERP

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 A Framework of Business to Business Marketing

Corporate Vision & Mission

Assess Market Opportunities:

Commercial Market || Government Market || Institutional Markets

Analyze Buying Evaluate alternative

Behavior
Select Target Market market segment

Develop Marketing Objectives & Strategies

Formulate Marketing Mix

Product/Service || Distribution Channel || Pricing || Communication

Implement Marketing Program

Track the Response from Market

Evaluate & Control

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Organizational Buying Behavior and Relationship
Management
 Evolution of Organizational Buying

 Economic view
 Rational economic factors
 Objective was to obtain minimum price or lowest total cost-in-use

 Reciprocal view
 Dyadic view

 Behavioral view (non-task view)

 Emotions & personal goals
 Organizational Buying Behavior

It includes all activities of organizational members

(buying center members) as they define a buying situation
and identify, evaluate and choose among alternative brands
and suppliers.

(Webster & Wind, 1972)

 Buying Center

It includes all members of the organization who are involved in the buying
process

Initiator

Gatekeeper

Influencers

Deciders

Buyers

Users

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 Buying Situation

Types Decision Approach Strategic Guidelines

New Task Judgmental and strategic in nature Value creation by means of

price, quality and allied services

Straight Rebuy A routine buying approach In-supplier approach

Modified Rebuy  Simple modified rebuy: long In-supplier approach vs.

term relationship could be Out-supplier approach
guiding factor

 Complex modified rebuy: Fresh

bidding could be an option

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 Buy Phases: Stages in the Industrial Buying Process

Problem Recognition

General Description of Need

Detailed Description of Product

Specification

Supplier Search

Acquisition and Analysis of Proposals

Supplier Selection

Selection of an Order Routine

Performance Review

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 Factors Affecting Industrial Buying Behavior

 Environmental Factors

 Organizational Factors

 Group Factors

 Individuals’ Behavioural Factors

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 Factors Affecting Industrial Buying Behavior

 Environmental Factors:

 Economic environment

 Physical environment

 Political environment

 Technological environment

 Legal environment

 Cultural environment

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 Factors Affecting Industrial Buying Behavior

 Organizational Factors:

 Various departments, who are part of a purchasing situation

 Goals, objective and strategy of different departments

 Organizational positioning of purchasing

 Selective exposure, selective attention and selective retention among

key decision makers

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 Factors Affecting Industrial Buying Behavior

 Group Factors:

 Role in a group

 Relative influence

 Interaction among the buying participants

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 Factors Affecting Industrial Buying Behavior

 Individuals’ Behavioural Factors

Task and Non-Task Motives

 First rationality (Task) then personal choice (Non-Task)

 Non-task motives are of two types:

Achievement motives
• Personal advancement
• Recognition
Risk-reduction motives
• Uncertainty avoidance

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 I. The Environment (environmental determinants of buying behavior)

Physical environment Economic environment

Technological environment Legal environment
Political environment Cultural environment

Trade Professional Other Other Social

Suppliers Customers Government Labor unions Associations Groups Business firms institutions

II. The Organization (organizational determinations of buying behavior)

Organizational Organizational Organizational Organizational

Technology Structure goals & tasks actors

Technology relevant Organization of the buying center Buying tasks Members of the
for purchasing and the purchasing functions buying centers
Technological
Group structure Group task Members
Constrains &
characteristics &
technology
goals leadership
available to the
group
III. The Buying Center
(interpersonal determinants of buying behavior)

IV. The individual Participants

Buying
Task Non-Task Decision

Motivations, cognitive structure, personality, learning process, perceived roles

(Source: Webster and Wind 1972)

 The Relationship Spectrum

 Focus shifts from

getting the customer to
 Focus is on timely keeping the customer  Close information
exchange || standard  Sellers ought to  Social and process
product || competitive understand changing linkage
pricing needs of customers  Joint problem
 Customers must be solving
 Negotiation and terms provided incentives  Long-term benefits
& conditions are  Key account selling || in sight
important factors Customer value  Shared incentives
proposition  Commitment & Trust

12-Feb-18 (Source: Day, 2000) 23

 Procurement Organizations

Factor Decentralization Centralization

Nature of Varying requirements, difficult to High commonality of use,
Requirement standardize predictable requirement

Nature of  Varying production schedule  Stabilized schedule

Operation / making it difficult to match  Long term availability a
Volume demand with supply concern
 Need to have bargaining
 Small quantities needed with power and negotiated prices
unpredictable pattern
Nature of supply When small suppliers are the only Large supplier are available
environment available options

Nature of The intended product/service is not When specialized purchasing

product/service very complex in nature skills are required

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 Segmentation &
Assessment of Market Opportunities
 Market Segmentation

“A market segment is a group of present and potential customers with

some common characteristics which is relevant in explaining (and
predicting) their response to a supplier’s marketing stimuli.”

(Hutt & Speh)

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 Market Segmentation & Requirements

 Requirements:

 Measurability

 Accessibility

 Substantiality

 Compatibility

 Responsiveness

 Goal: Greater amount of difference between groups (segments) and high

similarities within them

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 Nested Approach of Market Segmentation

 Demographics: Industry/ Company Size/ Location etc.

 Operating Variables: Company Technology/ Product Usage/ Company

Capabilities etc.

 Purchasing Approach: Purchasing Function Organization/ Power Structure/

Purchasing Polices/ Buyer-Seller Relationship etc.

 Situational Factors: Product Application/ Size of the Order etc.

 Personal Characteristics: Risk Averse/ Risk Takers etc.

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 Macro vs. Micro Segmentation Approach

 A Two Stage Approach:

 Macro-Segmentation

 Micro-Segmentation

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 A two-stage approach: Macrosegmentatiion and Microsegmentation
Selected Macrolevel Bases of Segmentation
Variables Illustrative Breakdown
Characteristics of Buying Organizations
Size (the scale of operations of the Small, medium, large; based on the sales or the number of
organization) employees

Geographic Location USA, Asia pacific, Europe, Middle East, Africa etc.

Usage Rate Non-user, light user, moderate user, heavy user

Structure of procurement Centralized, decentralized

Product/Service application
End market served based on industry Varies by product or service
classification

Value in use (economic value) High, low

Characteristics of Purchasing Situation

Type of buying situation / Stage in New task, modified rebuy, straight rebuy / Early stage, late
purchase decision process stage

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 A two-stage approach: Macrosegmentatiion and Microsegmentation

Selected Microlevel Bases of Segmentation

Variables Illustrative Breakdown
Key criteria Functionality, Quality, Delivery, Supplier reputation
Purchasing strategies Single source, multiple source

Structure of decision making unit Major decision participants

Importance of purchase High importance, low importance

Organizational innovativeness Innovator……follower

Personal characteristics:
Demographics Age, educational background
Decision style Normative, conservative, mixed mode

Risk Risk taker, risk avoider

Confidence High, low

Job responsibility Purchasing, production….

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 Customer Asset Management
(Senn, Thoma & Yip, 2013 : California Management Review)
Depth
Depth ofofCustomer
Low
(Sales Perspective)
Value Focus Current share of wallet
and predicted growth
Value Identification Account review with
Scope of Customer Asset Management
Value Creation
procurement - quarterly
Value Specification Account plan internally
developed and agreed
upon
Value Realization
Hand-off to operations/
fulfilment
Risk Focus Current share of wallet
Risk Management
Risk Assessment Information on
competitive encroachment
Risk Reduction Extended contracts,
preferred pricings,
executive outreach
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Customer Asset
AssetManagement
Management
Medium
(Relationship Perspective)
Future share of wallet and
customer lifetime value
Consulting probing – an
ongoing process
Value proposition crafted for
and offered to the customer
Value adding oversight
regarding operational
execution
Customer relationship and
its lifetime value
Comprehensive analysis of
the future trends
Higher switching cost due to
higher integration, top to
top engagement
High
(Network Perspective)
Wallet dynamics of
extended value network
Joint ongoing strategic
dialogue across the
network
Business case jointly
developed and validated
Marshalling resources
and managing activities
internally and externally
Total value network
dynamics
Joint and transparent
examination of
vulnerable points
Shared governance over
intervention measures
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 How to Succeed at Key Account Management?
(Lynette Ryals, 2012, Harvard Business Review)

1) Recognize that KAM is an organizational change, not a sales technique

2) Get high-level buy-in

3) Appoint a KAM champion

4) Identify your key accounts - carefully

5) Appoint and train your key account managers

6) Set the right metrics

7) Benchmark and build

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 Service Quality
(Ziethmal et al., 2006)

 Reliability

 Responsiveness

 Assurance

 Empathy

 Tangibility

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Pricing Approaches
 Pricing Strategies/ Methods (Noble & Gruca, 1999)

Strategy Description Related Strategy

New Product Pricing Situation

Price Skimming We set the initial price high and then Premium Pricing,
systematically reduce it over time. Value-in-Use Pricing

Penetration We initially set the price low to accelerate

Pricing product adoption.
Experience Curve We set the price low to build volume and reduce costs Learning Curve Pricing
Pricing through accumulated experience.

Competitive Pricing Situation

Leader Pricing We initiate a price change and expect the other Umbrella Pricing,
firms to follow. Signaling
Parity Pricing We match the price set by the overall market or Neutral Pricing,
the price leader. Follower Pricing
Low-Price Supplier We always strive to have the low price in the Adaptive Pricing,
market. Opportunistic Pricing

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 Pricing Strategies/ Methods (Noble & Gruca, 1999)

Strategy Description Related Strategy

Cost-based Pricing Situation

Cost-Plus Pricing We establish the price of the product at a Contribution Pricing,
point that gives us a specified percentage Target Return Pricing,
profit margin over our costs. Mark-up Pricing

Product Line Pricing Situation

Complementary We price the core product low when Razor-and-Blade Pricing
Product Pricing complementary items such as accessories,
supplies, spare parts, services, etc. can be
priced with a higher premium.
Price Bundling We offer this product as part of a bundle of System Pricing
several products, usually at a total price that
gives our customers an attractive savings over
the sum of individual prices.
Customer Value We price one version of our product at very Economy Pricing
Pricing competitive levels, offering fewer features
than are available on other versions.
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Buying Process at Northern Paper Mill
Papermaking Industry

• High tech, capital intensive , energy intensive automated

processes
• Sharp focus on cost control and production efficiency
• Most operations were automated

Involvement of Departments in
Buying Process
Buying process
1. Engineering department:
Technical evaluation, changes in
Determination of best specifications
Identification of need Sending of RFQ supplier &
for change (Request for quotation) Evaluation by different 2. Finance department: Fund
departments
allocation
3. Operations department:
Approval of changes
Definition of required
changes in automation
Funding request
process
Price agreement 4. Purchasing department:
system
Commercial terms of proposal
5. Mill management team :
Profitability review
Investigation of project
cost and cost-benefit
Asking suppliers for
budget proposals /tech
Appointment of project 6. Project manager :
manager
analysis specification Implementation
Direct Selling Approach at Boise Automation
 Boise Automation: Sales Process

Pursue
Opportunity No Update CRM
Opportunity
Assessment (Close Opportunity)
Y/N?

Yes

Investigate and Submit

No Update CRM
Develop Action Proposal
Plan (Close Opportunity)
Y/N?

Yes

Develop and Win Update CRM

Present Proposal. No
Contract (Complete Loss Review
Implement Win-
Actions. Y/N? Report)

Yes

Develop
Implementation Plan
with Customer
 Opportunity Assessment

1. Do we understand customer’s need & requirements?

2. How strong is our knowledge and relationship with the customer

3. How big is the opportunity ?

4. When is the proposal due ?

5. What is the expected start & completion time of the project ?

6. Is there a compelling event driving the customer’s timeline?

7. Is the project funding approved ?

8. Do we have industry /process/technical expertise required?

 Investigate and Develop Action Plan

1. Technical plan
a) Do we have a solution to the customer’s request ?
b) Do we have any insight beyond the RFQ ?

2. Customer relationship plan

a) Do we understand the customer’s decision/selection/approval process?
b) What is our customer relationship status with each person in DMU?
c) What is the customer’s financial stability?

3. Differentiate advantage plan

a) What competitive offers do we expect ?
b) What is our differentiated advantage ?

4. Resource plan
a) Do we have the sales resources to close ?
b) Do we have the project resources to implement ?
c) Does the customer have a project management plan ?
 Develop and Present Proposal

Implement Win-Actions

1. Update customer decision process flow chart & identify every customer
influencer and decision maker.

2. Contact every influencer and decision make to discover/confirm top 3 decision

criteria.

3. Assign Boise representative for each customer contact.

4. Develop action to become preferred supplier with each influencer and decision
maker.

5. Conduct internal review meetings to identify obstacles and refine action plan.
 Some Observations

 A Good Homework is needed

 Knowledge of Human Behavior : a combination of Hunter and Farmer

attributes may help

 Learn when to negotiate

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 Negotiation Style
(Source: S Sarin)

 Compromising or Accommodating

 Bargaining

 Coercion

 Emotional Blackmailing

 Logical Reasoning

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 Thank You

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