Business-to-Business (B2B) Marketing

What is this?

Why ?

How ?

Business-to-business (B2B) marketing Organizational sales and purchases of goods

and services to support production of other products, to facilitate daily company
operations, or for resale.
 NATURE OF THE BUSINESS MARKET
• Companies also buy services, such as legal, accounting, office-cleaning,
and other services.
• Some firms focus entirely on business markets.
• Example

Best B2B Marketplaces India
 
COMPONENTS OF THE BUSINESS MARKET
• Commercial market Individuals and firms that acquire products to support, directly or
indirectly, production of other goods and services.
• Trade industries Retailers or wholesalers that purchase products for resale to others.
• Government.
• Public and private institutions.
 SEGMENTING B2B MARKETS
Why ?
How to do this ?
• Segmenting Customers Based on Firmographics
Grouping by size based on sales revenues or number of employees.

• Segmenting Customers Based on Tiering

How well the customer matches the goals of your business

• Segmenting Customers Based on Needs

• End-use application segmentation
Segmenting a business-to-business market based on how industrial purchasers will
use the product.
• Segmentation by purchase categories
Segmenting according to organizational buyer characteristics.

SEGMENTATION BY CUSTOMER TYPE

 Grouping in broad categories, such as by industry.
• Customer-based segmentation Dividing a business-to-business market into
homogeneous groups based on buyers’ product specifications.
• Industry Classification System
BUSINESS MARKET DEMAND
• Demand characteristics vary from market to market.
DERIVED DEMAND
• The linkage between demand for a company’s output and its purchases of resources
such as machinery, components, supplies, and raw materials.
VOLATILE DEMAND
• Derived demand creates volatility; for example, demand for gasoline pumps may be
reduced if demand for gasoline slows.
JOINT DEMAND
• Demand for two products used in combination with each other.
INELASTIC DEMAND
• Demand not significantly influenced by price changes.
INVENTORY ADJUSTMENTS
• Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and
requiring vendors to deliver inputs as they are needed.
Buygrid Framework:

Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses),
Robinson & Associates,based on purchasing dynamics of packaging machine in Japan, 20 people including
production manager & staff,new product committee,company laboratory,marketing department,took decision in 121
days

Buyclasses

New Modified Straight

Task Rebuy Rebuy

1. Problem recognition Yes Maybe Yes

2. General need description Yes Maybe No

3. Product specification Yes Yes No

Buyphases 4. Supplier search Yes Maybe No

5. Proposal solicitation Yes Maybe No

6. Supplier selection Yes Maybe No

7. Order-routine specification Yes Maybe No

8. Performance review Yes Yes Yes

The Make, Buy, or Lease Decision ?

• Firms acquiring needed products can get them in one of three ways:
• Make the good or provide the service in-house.
• Purchase it from another organization.
• Lease it from another organization.
• Producing the item may be cheapest route, but most firms cannot make all of
the products they need.
• Many companies purchase many of the goods they need.
• Companies can spread out costs through leasing.
The Rise of Offshoring And Outsourcing
• Offshoring Movement of high-wage jobs from one country to lower-cost
overseas locations.
• Nearshoring Moving jobs to vendors in countries close to the business’s
home country.
• Outshoring Using outside vendors to provide goods and services formerly
produced in-house.

PROBLEMS WITH OFFSHORING AND OUTSOURCING

• Cost savings may be less than expected.
• Can raise security concerns over proprietary technology or customer data.
• Can reduce flexibility, create conflicts with unions, or negatively affect
employee morale and loyalty.
Major Influences on Business
Buyer Behavior
Business Buyer Behavior

Buyer Responses to Marketing Stimuli

• Product or service choice

• Supplier choice
• Order quantities
• Delivery
• Service
• Payment terms
 The Business Buying Process

• More complex than the consumer decision process.

• Takes place within formal organization’s budget, cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS

• Environmental factors—economic, political, regulatory, competitive, and
technological considerations influence business buying decisions.
• Organizational factors—structures, policies, and purchasing systems, which may
be centralized in one office or delegated to units throughout the organization.
• Interpersonal Influences of all organizational members involved in the buying
decision.
• Concerns and procedures of professional buyers who implement systematic
buying procedures.
Stages in the Business Buying Process
Business Buyer Behavior

A Model of Business Buyer Behavior

 Webster and Wind Model of
organizational buying behavior

Source: R.E. Webster, Jr and Y Wind, journal of Marketing, 36, pp 12-17, April, 1972.
 Sheth model of Organizational Buying

Sheth, J. N. (1973). A model of industrial buyer behavior. Journal of Marketing, 37(4), 50-56.

Sheth, J. N. (1973). A model of industrial buyer behavior. Journal of Marketing, 37(4), 50-56.
CLASSIFYING BUSINESS BUYING SITUATIONS
• Business buying behavior involves degree of effort involved in the decision
and the levels within the organization in which these decisions are made.

• Straight rebuying—recurring purchase decision in which a customer

reorders a product that has satisfied needs in the past.
• Modified rebuying—purchaser willing to reevaluate available options.
• New-Task Buying—first-time or unique purchase situations that require
considerable effort by the decision makers.
• Reciprocity—practice of buying from suppliers that are also customers.

ANALYSIS TOOLS

• Value analysis—examines each component of a purchase in an attempt to

either delete the item or replace it with a more cost-effective substitute.
• Vendor analysis—ongoing evaluation of a supplier’s performance in a
variety of areas.
 An Example of Vendor (Supplier) Analysis

Attributes Rating Scale

Importance Poor Fair Good Excellent

Weights (1) (2) (3) (4)
Price .30 x

Supplier reputation .20 x

Product reliability .30 x

Service reliability .10 x

Supplier Flexibility .10 x

Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5

 Categorical Method Example

Vendor Cost Quality SpeedTotal

A Good(+) Unsatisf(-) Neutral(0) 0
B Neutral(0) Good(+) Good(+) ++
C Neutral(0) Unsatisf(-) Neutral(0) -
Weighted Point Plan Example: Quality (factor 40)

Lots Lots Lots % Acc. * Quality

Vendor Received Accepted Rejected Factor Rating
A 60 54 6 90.0 * 40 36.0
B 60 56 4
93.3 * 40 37.3
C 20 16 4
80.0 * 40 32.0
Weighted Point Plan Example:Price(factor 35)
Low / Net % * Factor Rate
Unit - Tran
Vendor Price Dis + Chg Net
.93 0.93 100% 35 35.0
A 1.00 10% 0.90 .03 .93

B 1.25 15% 1.06 .06 1.12 .93 1.12 83% 35 29.1

C 1.50 20% 1.20 .03 1.23 .93 1.23 76% 35 26.6

Weighted Point Plan Example: Service (factor 25)

Promises Service Service

Vendor Kept Factor Rating
A 90% 25 22.5

B 95% 25 23.8

C 100% 25 25.0
Weighted Point Plan Example: Composite Total

Rating Vendor A Vendor B Vendor C

Quality 36.0 37.3 32.0
Price 35.0 29.1 26.6
Service 22.5 23.8 25.0

Total 93.5 90.2 83.6

THE BUYING CENTER CONCEPT
• Buying center Participants in an organizational buying action.

BUYING CENTER ROLES

Decider
Buyer
Users
Gatekeeper
Influencer
INTERNATIONAL BUYING CENTERS
• Marketers may have difficulty identifying members of foreign buying
centers.
• Marketers who can quickly identify decision makers have an advantage
over competition.

TEAM SELLING
• Combining several sales associates or other staff to help the lead account
representative reach all those who influence the purchase decision.
• May include members of the seller firm’s own supply network in the sales
situation.
CHALLENGES OF INSTITUTIONAL MARKETS
• Include schools, hospitals, libraries, foundations, and others.
• Multiple buying influences can affect buying decisions, such as conflicts
between professional staff and purchasing departments.

CHALLENGES OF INTERNATIONAL MARKETS

• Marketers must consider buyers’ attitudes and cultural patterns.
• Local industries, economic conditions, geographic characteristics, and legal
restrictions must all be considered.
• Foreign governments are also an important market.
4 Ps of B2B Marketing. They are:

1. Prospect – The customer’s need that is creating opportunity.

2. Promise – The factual/intimacy argument for why you are superior.
3. Product – The rubber meets the road. Delivering what was promised.
4. Position – The sum total advantage that is created over your competition by doing
GO Building a Healthy and Sustainable
Relationship

× Try-out
KAM and other sales approaches
Seeking Mutual Gains through Negotiation

#1. PREPARE EFFECTIVELY

#2. CREATE VALUE

#3. DISTRIBUTE VALUE

#4. FOLLOW THROUGH

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50

TOUGH
NEGOTIATION
BEHAVIOR
Asking Questions Asks few questions, mostly
About Others rhetorical
Giving Information provides information mainly Provides information about
as demands, sometimes as interests, may reveal own
threats bottom line
Brainstorming Tends to present options as
(Inventing Options) “take it or leave it”
demands
Trading doesn't want to trade
Using Fair Standards more interested in gain
than in fairness
NEGOTIATION STYLE
Soft SMART
asks many questions
asks some questions
clarifying "what" others
interests are and "why" they
are important
provides information about
interests but not bottom
line
creates/explores many
open to other's options, may
"what if" options meeting
suggest some others
everyone's needs
trades things less important
willing to give up a lot in
in order to get things more
trades to preserve
important
relationship
Seeks agreement on
may settle for an outcome
standards that seem fair to
that seems more fair to
self and others
others than to self
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You ALWAYS want to be SMART; When can you be tougher? Softer?
 What’s more important?
– Ongoing Relationship  softer and smart
– Outcome of this particular negotiation  tougher and smart
 What’s your BATNA? (Best Alternative to a Negotiated Agreement)?
– Your BATNA is bad  softer and smart
– Your BATNA is great  tougher and smart
 How much joint gain may be possible?
– Lots of joint gain possible  softer and smart
– Not much joint gain possible  tougher and smart
 Who is your negotiating partner?
– Tough  tougher and smart
– Softer  softer and smart

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A Guide for SMART Behavior: The Strategic Compass
Communication
Relationship

Interests

Options

Criteria

If “No” If “Yes”
Alternatives Commitment

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 Possible Negotiating Strategies
Your needs satisfied
HIGH
Win-Win
Win-Lose You Command/ Collaborate/ This is our goal!
My way or highway Win-Win
Your apparent win

Compromise

Lose-Lose Avoid, don’t You Give In/ Lose-Win

negotiate Need Any Deal
LOW
HIGH
Other side’s apparent win
Counterpart’s needs satisfied
 Possible Negotiating Strategies
Winner’s Circle!
Your needs satisfied
HIGH
Win-Win
Win-Lose You Command/ Collaborate/ This is our goal!
My way or highway Win-Win
Your apparent win

Compromise

Avoid, don’t You Give In/ Lose-Win

Lose-Lose negotiate Need Any Deal
LOW
HIGH
Other side’s apparent win
Counterpart’s needs satisfied