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Dept. of Business Management, Methodist College of Engg & Tech., Abids, Hyderabad

To understand: The nature and scope of the B2B market. The components that make up the B2B market. The characteristics of the business market demand. The determinants of the business market demand. The buying motives, buying processes, and buying patterns in business markets.

Nature and Scope of B2B Market

The business (B2B) market consists of organizations that buy goods and services:
To make other goods and services. To resell to business users or to consumers. To be used in the operations of the organizations.

Nature and Scope of the B2B Market

Huge in sales volume. Significant in terms of the number of firms involved. Largely behind the scenes.

Components of the Business Market

Manufacturers Resellers Government agencies Service companies Agriculture Not-for-profit organizations

International Dimension
30% of Canadas GDP is exported.
A major portion conducted on a B2B basis.

Continuing to rise due to use of Internet. It is important to understand the values, customs, and business practices and standards of the foreign-based customer.

Characteristics of B2B Market Demand

Derived from demand. Demand is inelastic. Demand is widely fluctuating.

Buyers are well-informed.

Determinants of B2B Demand

The business market is quite different from the consumer market in a number of ways:
Number and types of business users Purchasing power of business customers Buying motives and expectations Buying habits

Business Buying Behaviour

An important part of a strategy because: 1. Companies are making less and buying more. 2. Firms are under intense quality and time pressures. 3. Firms are concentrating their purchases with fewer suppliers and developing long term partnering relationships to get what they need.

Buying-Decision Process in Business

1. 2. 3. 4. 5. 6. Need recognition Choice of involvement level Identification of alternatives Evaluation of alternatives Purchase decision Consumption experience

Business Buying Motives

Business buyers are motivated by both organizational and personal goals. Most B2B relationships are a combination of functional and emotional motives.

Types of Buying Decisions

New Task Buy Straight Rebuy Modified Rebuy

Multiple Buying Influences

One of the greatest challenges Determine which individuals in the organization play various buying roles.
Users those who will use the product/service Influencers often set specifications to follow Deciders make the actual decision to buy Gatekeepers control the flow of information Buyers actually process the purchasing order

Business Buying Patterns

Differs significantly from consumer behaviour.
Direct purchase Internet purchase Nature of the relationship Frequency of purchase

Business Buying Patterns

Size of order Period of negotiation Demand for service Dependability of supply Leasing instead of buying

Bases for B2B Segmentation

Can use some of the same bases as used to segment B2C markets. Unique to B2B:
Type of customer Size of customer Type of buying situation

Basics of Industrial Marketing

Industrial marketing/business marketing is to market the products and services to business organizations: manufacturing companies, government undertakings, private sector organisations, educational institutions, hospitals, distributors, and dealers.

Basics of Industrial Marketing

The business organizations, buy products and services to satisfy many objectives like production of goods and services, making profits, reducing costs, and, so on.

An industrial marketer should probe & study:

How are my customers markets changing? Who are the key members in decision making in customer firms. When should marketing research be performed & how much should be spent on that. What should be the subject of research.

Are there more effective ways to segment my markets? Should we focus on industry as a whole , organizations or specific inside organizations. What is the profit maximizing level for each target segment & for how long that can be sustained. Which products should be dropped, Are long term contracts in our interest. Should we go for increased advertising. How should we evaluate the effectiveness of trade shows.


MYTH: New technology & the right product sells itself. REALITY: Many technically superior products fail while many technologically obsolete products continued to be purchased. Further one must have the right product at the right time & its benefits must be communicated to the right people.


MYTH: We can not waste time on marketing, we dont have the product designed as yet. REALITY: Failure to perform market research throughout the product development process is likely to result in exaggerated estimates of market potential & in setting prices that are either too high or too low.

MYTH: Low price is customers main concern. REALITY:
Price is often a secondary concern in industrial marketing They will pay more for quality & reliability along with back up support

Purchasing behavior is economically rational.

Experience , judgments & personal motives guide the behavior of decision makers.


TECHNOLOGICAL ENVIRONMENT ---- Product & service innovation ---- Changes in ways of production ---- New methods of distribution COPMETITIVE ENVIRONMENT ----- New forms of competition ----- Barriers to entry ----- Threat of substitutes ----- Changes in market structure

Environment continued
ECONOMIC ENVIRONMENT ---- Interest rates ---- Inflation or Recession ---- Rates of monetary exchange MACRO ENVIRONMENT ---- Social change ---- Ethical & Cultural issues

RESOURCE ENVIRONMENT ---- Raw material availability ---- Union & labor problems LEGAL & REGULATORY ENVIRONMENT ---- Govt policies , taxes , restrictions ---- Safety rules in the work place