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BUSINESS MARKET MANAGEMENT: GUIDING PRINCIPLES

LESSON 1

DEFINITION

Definition of Marketing General Marketing

Marketing is the process of discovering & translating consumer needs & wants into products and services specifications, creating demand for these products and services and then in turn expanding this demand.

Implies market segmentation, marketing research and so on, into specific product & service specification Implies effective promotion, appropriate channels of distribution and proper pricing

Inherent also proper after sales service to keep satisfied to encourage rebuy, to discourage switching to a competitor.

B2B Marketing

All marketing activities not directed at the household or the ultimate consumer. B2B marketing applies to the marketing (as general definition) of all goods and services to business and other organization for their use, directly or indirectly, in the goods and services that they, in turn, produce.

Therefore discovering and translating industrial customer wants, needs, expectations and requirements into products.

WHO ARE B2B CUSTOMERS?

All customers other than ultimate consumers Three groups, which, at times, may overlap

Commercial Enterprises Government Organizations Institutional Customers

Industrial Customers??
1.

Commercial Enterprises
Purchasing industrial goods and/or services for use other than selling directly to the ultimate consumer Basically, 3 types:
1.

OEM (Original Equipment Manufacturers)


Buys products & services to incorporate into the products that it, in turn, produces & sells either to industry or ultimate customers. Ex. Electronics Co. to Television Co., Intel to Computer manufacturing Co.

2.

USER CUSTOMERS: Purchases for use in producing, in turn, other goods/services Ex. Manufacturer (Lathe machine, Drilling machine, other machines)

In contrast to OEM, products purchased by user customers never end up in the final products being produced by the user customers. In purely economic sense, these products are called Capital Goods: Goods that are used to produce other goods/services.

INDUSTRIAL DISTRIBUTERS:

Basically middleman, produces from manufacturers or producers and sell these same (form) products as purchased to the distributors, OEMs or to the user customers.

These classification are not exclusively OEMs or Users or Distributors. Same company can be an OEM, a User and a Distributor at the same time, but normally not for the same supplier! It is of critical importance that any marketing manager in the industrial market know whether customers are OEMs, Users or Distributors to know the buying motivations predominant with each type of customer.

2. GOVERNMENT ORGANISATIONS: - Can range from small town or village of a country to Department of Defence. - Great variations occur among governmental customers in their buying patterns. - Ex. Railways, Highways, Hospitals, Police and other deptt.

3. INSTITUTIONAL CUSTOMERS - Those customers of industrial variety not falling into commercial or government classifications. -Ex.: Schools, colleges, universities, churches, hospitals, nursing homes, NGOs & other type of institutions, public or private.

Although all three types of industrial customers are dissimilar in many respects, they are generally considered to comprise the B2B market, because they all purchase goods and/or services to use either directly or indirectly in providing goods and/or services to their own customers.
They all differ from ultimate customer in that they all purchase goods & services only to satisfy the demand of their own customers, either directly or indirectly.

CLASSIFICATION OF INDUSTRIAL/ B2B PRODUCTS

Many types of products, they generally fit into following classification


Heavy Equipment: Capital Goods, Goods that are used to produce other goods. Lathe m/c, Hydraulic & mechanical cranes, Blast furnace etc.

1.

2.

Light Equipments: portable power tools like drills, grinders, measuring instruments etc.
Consumable Supplies: Soaps, cutting fluids, engine oils, welding rods, office paper etc.

3.

CLASSIFICATION OF INDUSTRIAL PRODUCTS continued


4.

Component Parts: Switches, transistors, motors, gears, nut bolts etc.


Raw Materials: Coal, Iron ore, crude oil, fish & other sea food Processed Materials: All types of processed materials, steel sheet, chemicals, glass, coke, plastics Services: Financial, advertisement, Consulting or Security.

5.

6.

7.

Basic Differences: B2B Vs Consumer Marketing

Differences may be classified in terms of following criteria: Related to market characteristics Related to the characteristics of Industrial Buyers Related to the characteristics of products involved Related to the characteristics of channel involved Related to the promotional characteristics Related to pricing characteristics

Related to Market Characteristics


Fewer buyers/ small number of customers Larger buyers Few buyers do most of purchasing

Ex: Aircraft engines, defence weapons

Large volume purchasing and also on repeated basis Geographically concentrated buyers Derived demand demand created from their consumers Close supplier and customer relationship

Related to Characteristics of B2B Buyers

Professional Buyers

Buying motives are more rational

Trained purchasing agents who must follow their organization's policies, constraints and requirements. Specifications, vendor analysis and cost effectiveness (as opposed to emotional or impulse buying) Multiple sales calls

Multiple buying influences

Buying Committee Very few women buyers in contrast to large amount of purchasing by women in consumer market Selects two or more supplier to buy same product Situation of reciprocity

Inelastic Demand

Often select suppliers who also buy from them

Related to the Characteristics of Products involved

More technical nature Purchased basically on the basis of specifications Packaging more protective in nature Tremendous emphasis on promptness and certainty of delivery of products. Industrial customers, sometimes produce what they need as raw material, this seldom happens in consumer market.

Related to the Characteristics of Channels involved

Shorter and more direct Often direct purchasing especially the items which are technically complex or expensive Greater expectation of sales effort on industrial channel Middleman are generally Industrial distributors or manufacturers representative.

Related to Promotional Characteristics

Emphasis on personal selling Salesmen are more like consultants and technical problem solvers Salesmen of more technical background Advertisement theme is more on technical data Advertisement media journal, direct mail etc. Sales promotion catalog and trade show

Related to Pricing Characteristics

Negotiated prices are very common Penalty clauses on non-performance often affect prices Prices are often based on competitive bidding Leasing instead of buying

ASSIGNMENT NO. 1 (FOR NEXT CLASS)


1. PREPARE A LIST OF 20 B2B COMPANIES, THEIR MAJOR PRODUCTS AND NAME OF THEIR CUSTOMERS

DO NOT INCLUDE PRODUCTS/ COMPANIES THAT ARE AVAILABLE/SOLD TO END CONSUMERS ALSO.

2. Choose one product used by both business organizations as well as end consumers.

Find its total production / consumption in India and its bifurcation between household/individual consumption and business market consumption.