Introduction to Business-to-Business (B2B) Marketing

What Is Marketing? the process of planning and executing the conception (product), pricing, promotion, and distribution of ideas, goods, and services to create relationships that satisfy individual and organizational objectives.”

BUSINESS TO BUSINESS IS NOT BUSINESS TO CONSUMER Do Not Serve Same Types of Customers Do Not Serve the Same Number of Customers Do Require Strong Buyer-seller Relationships Do Depend on Strong Buyer Demand for their Customer’s Products

BUSINESS MARKETING IS MARKETING OF GOODS AND SERVICES TO: –Companies –Government Bodies –Institutions (i.e. hospitals) –Non-Profit Organizations (i.e. American Red Cross) FOR USE IN PRODUCING THEIR PRODUCTS AND/OR TO FACILITATE THEIR OPERATIONS

Those activities that facilitate exchanges involving products and customers in business markets Activities in which goods or services are sold for any use other than personal consumption not transactionNote: It is not the nature of the product ; it is the reason for the transaction. What Is Business Marketing?

Is it a consumer transaction or a business transaction?  You buy a gear to fix your mountain bike.  Ford buys the same gear to fix a machine.  Xerox buys soft drinks for its cafeterias.  You start a landscaping business and purchase a lawnmower.  The U.S. government buys…anything. What Is Business Marketing?

B2B versus B2C Marketing CharacteristicB2B MarketB2C Market Sales volumeGreaterSmaller Purchase volumeGreaterSmaller Number of buyersFewerMany Size of individual buyersLargerSmaller Location of buyersConcentratedDiffuse Buyer-seller relationshipCloserMore Impersonal Nature of channelMore directLess direct Buying influencesMultipleSingle/Multiple Type of negotiationsMore complexSimpler Use of reciprocityYesNo Use of leasingGreaterLess Key promotion methodPersonal SellingAdvertising

BUSINESS TO BUSINESS: IT IS ALL ABOUT DEMAND DERIVED DEMAND –The demand for a company’s products comes from (derived) the demand for their customer’s products. –Most demand comes from consumers. JOINT DEMAND –Two products are used together and demanded together – Both products are consumed at the same time

Inelastic Demand Fluctuating Demand Other Characteristics of Business Demand

Major Uses of B2B Products  For additional production (e.g., components are combined into subassemblies and become part of the finished product)  For use in operations, but not part of the finished product  For resale

Classifying Business Goods & Services 3 Main Categories of Products  Entering Goods Become part of the finished product Cost assigned to the manufacturing process  Foundation Goods Capital Items Typically depreciated over time  Facilitating Products Support organizational operations Handled as overhead expenses

Classifying Business Goods & Services Entering Goods  Raw Materials Farm products & natural products Only processed as necessary for handling & transport Require extensive processing  Manufactured Materials & Parts Any product that has undergone extensive processing prior to purchase Component Materials require additional processing Component Parts generally do not require additional processing

Classifying Business Goods & Services Foundation Goods  Installations Major long-term investment items Buildings, land, fixed equipment, etc.  Accessory Equipment Less expensive & short-lived Not considered part of fixed plant Portable tools, PC’s, etc.

Classifying Business Goods & Services Facilitating Products  Supplies Any supplies necessary to maintain the organization’s operations  Services Maintenance & Repair support Advisory support Logistical support

Categories of B2B Customers Commercial enterprises –Indirect channel members and facilitators –OEMs (original equipment manufacturers) –Users = customers Governmental organizations Institutions