1 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall Dr. Dawne Martin Business Marketing: MKTG 550 August 23, 2012

 Gain an appreciation of the differences between consumer marketing and business- to-business marketing  Understanding the marketing concept and its implications for B2B marketing  Understand the meaning of value in B2B markets and how that affects B2B offerings  Obtain a sense of the changing nature of B2B environments and markets 1-2 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Groups formed on Tuesday  Assignment: › Read chapters 1 & 2 of text › Be prepared to discuss the questions 1, 2, 3, 9 & 10 from “Questions for Review & Discussion” at the end of chapter Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 The process of matching and combining the capabilities of the supplier with the desired outcomes of the customer to create value for the “customer’s customer.”  Entrepreneurial Marketing: Conducted in a way that involves innovation, acting proactively and taking calculated risks. 4 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Good employment opportunities  Growing importance of high-tech business products  Success of foreign competition  Significance of international interdependence of firms  Importance of the service sector  Dramatic changes in the B2B environment

 When is a customer considered a business?  When a consumer?

Characteristic Sales volume Purchase volume Number of buyers Size of individual buyers Location of Buyers Buyer-seller relationship Nature of channel Nature of buying Nature of buying influences Type of negotiations Use of reciprocity Use of leasing Primary promotion method Business Market Greater Fewer Larger Geographically concentrated Closer More direct More professional Multiple (buying center) More complex Yes Greater Personal selling Consumer Market Smaller Many Smaller Diffuse More impersonal Less direct More personal Single Simpler No Smaller Advertising

The Marketing Concept  Understand customer needs  Meet those needs with a coordinated set of activities  In a way that meets organizational goals 8

Marketing Mix Promotion Place Price Product 9 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 The total offering is created by a partnership between the buying organization and the marketing organization.  The process creates an augmented product that is specific to the buying unit’s needs and maximizes the value creation capabilities of the marketer. Core Product + Financing Terms + Delivery Options = “Total Offering” 10 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 The mutually agreed-upon amount that satisfies both sides in an exchange.  Often varies from fixed price, with more special discounts and allowances (in comparison to consumer markets.)  May involve things other than a one-time price payment (such as commissions.) Price is the measure of value exchanged and is determined by the market—not by costs. 11 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Place is about getting the product to the customer in order to maximize economic utility. Economic Utility Form Time Place Possession 12 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Emphasis is frequently on advertising.  Communication with customers is often a monologue.  Relationship is often brief.  Emphasis is frequently on personal selling.  Communication with customers should be a dialogue.  Relationship is often long-lasting. Consumer V.S. Business to Business Business-to-business marketing requires a different emphasis on different parts of the promotional mix 13 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Geographically Concentrated  Relatively Few Buyers  Oligopolistic Competition  Geographically Dispersed  Mass Market; Many Buyers  Monopolistic Competition Consumer Business to Business 14 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Can be technically complex  Customized to user preference  Service, delivery and availability very important  Purchased for other than personal use  Standardized  Service, delivery and availability only somewhat important  Purchased for personal use Consumer Business to Business 15 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Professionally trained purchasing personnel  Functional involvement at many levels  Task motives predominate  Individual purchasing  Family involvement, influence  Social or psychological motives predominate Consumer Business to Business 16 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Technical expertise is an asset  Interpersonal relationships between buyers and sellers  Significant personal info exchanged  Stable, long-term relationships encourage loyalty  Less technical expertise  Nonpersonal relationships  Little personal information exchanged  Changing, short-term relationships encourage switching Consumer Business to Business 17 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Shorter, more direct  Organization involvement as part of supply chain  Indirect, multiple relationships  Little or no customer supply chain involvement Consumer Business to Business 18 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Emphasis on personal selling, dialogue  Most communications invisible to the consumer  Consumer is seldom aware of B2B brands and companies  Emphasis on advertising, monologue  Companies compete for visibility and awareness of consumer market Consumer Business to Business 19 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Complex purchasing process or competitive bidding, depending on purchase type  Usually list or predetermined prices Consumer Business to Business 20 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Direct  Elastic  Less volatile  Derived  Inelastic (short run)  Volatile (leveraged)  Discontinuous Consumer Business to Business 21 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Nothing happens unless consumer buys something Suppliers forecast production on existing order rates. 2. If consumer demand drops, the order rate also drops. 3. Supply chain members are then likely to overcompensate the difference between the old and new forecasts, because: A.Inventory levels can decline to fit new order rate B.Customers change orders frequently C.Minimum order quantities may exist D.Trade promotions may influence buying patterns Acceleration Principle: “Bullwhip Effect” Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

International Standards Organizations (ISO)  Define technical performance for manufacturing and quality systems  Compliance of suppliers to these standards is required by global firms  Industries that are targeted: › Steel, Plastic, Pulp and Paper Products, Chemicals and Electronics 23 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Total cost of owning or using a product › Transportation, carrying costs, financing costs, potential obsolescence, cost of failure, installation, flexibility to upgrade, etc.  Consumers have same considerations but are attracted to “Deals” 24 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 The puzzle of the B2B Consumer needs “Total Offering” Product Service Image Availability Quantity Evaluated Price 25 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

Value Chain: The chain of activities that creates something of value for targeted customers. Direct Activities: Contribute directly to the offering. Support Activities: Make it possible to perform the direct activities. 26 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

Value Chain: Suppliers From Exhibit 1-5: Value Enabling activities include infrastructure, human resources, procurement and technology/technology development. Value Creating activities include inbound and outbound logistics, operations, marketing and sales and customer service. Value Activities Value Enabling Value Creating Value Activities Value Enabling Value Creating Value Activities Value Enabling Value Creating 27 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

Target Customers Target Customers Added value Infrastructure Human resources Procurement Technology & technology development Support activities Margin through value Direct activities Customer service Marketing & sales Outbound logistics Operations Inbound logistics Offering: Product Service Image Availability Quantity Evaluated Price Creates Perceives Margin through value 28 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Hyper-competition  Formation of partner networks  Adoption of technology and the internet  Supply Chain Management  Time Compression 29 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall

 Given all of the differences between consumer and business to business marketing, what would you say is the key reason why customer relationships are so important in B2B market?  Why would a customer remain with a particular supplier even though low cost substitutes may be available? 1-30 Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall