Chapter 1 The Unique Nature of Industrial Marketing

2 Industrial Marketing Also called: Business-to-Business (B2B) and Organizational Marketing. Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers. Customer can be private firm, public agency, or nonprofit organization.

3 The Marketing Concept Creating value for customers with goods and services that address organizational needs and objectives.

4 Marketing Concept Three major components: All company activities should begin with, and be based on, the recognition of a fundamental customer need. A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D. Customer satisfaction is viewed as the means to long-term profitability goals.

5 Follower Interact Isolate Shaper Customer Focus Low Technology Focus High High Low Strategic Focus Grid

6 Market Orientation Acquire intelligence from the external environment. Disseminate that intelligence throughout the organization. Respond to the intelligence: take action. (Kohli and Jaworski 1990, Journal of Marketing)

7 Marketing Mission Statement State in terms of meeting customer needs, not in terms of products or technologies. Marketing Myopia (Levitt 1960 HBR)

8 Marketing Activities Identify customer needs Research customer behavior Divide market into manageable segments Develop new products/services Establish/negotiate prices Deliver, install, service products Ensure adequate and timely supply of products at correct place Allocate resources across product lines Communicate with customers Evaluate/control marketing programs

9 Marketing Mix Limited number of variables under Marketing’s control to create position that is attractive to the target market segment. Four Ps Product Price Promotion Place (Distribution)

10 External Environment Characterized by: Degree of Stability Complexity Diversity Hostility

11 External Environment Six Environments Technological Economic Social/Cultural (Customer) Political/Legal Natural/Climatic Competitive

12 So what’s different about B2B? Marketing Concept Marketing Mix Market Segmentation Product Life Cycle All apply in both B2C and B2B.

13 So what’s different about B2B? The technical characteristics of the product are important. These products directly affect the operations and economic health of the customer. The customer is an organization rather than an individual consumer, or family.

14 Five Major Differences Between B2B and B2C Products/Services being marketed Nature of demand How the customer buys Communication process Economic/Financial factors

15 Products/Services More complex Functional vs. Symbolic Attributes Large unit dollar value/Large quantities Custom/Tailored Various Stages from raw material to finished goods. Foundation, Entering, Facilitating Goods

16 Raw Material Extraction Material Processing Manufacturing Parts/Subassembly Assembly Distribution Wholesale/Retail Trade Final Consumers Facilitators Firms in Production Chain

17 Nature of Demand Derived Joint/Shared Concentrated Inelastic

18 How Customer Buys Group Process Formal Lengthy Loyal Decisions based on risk and opportunity

19 Communication Personal selling more important than mass paid advertising Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW. Message focused on technical, factual, and descriptive content. Multiple audience members.

20 Economic/Financial Factors Competition oligopolistic Power/Dependency relationships Reciprocity:Doing business with companies that do business with them. Economic variables: interest rates, inflation, business cycle