Business marketing bims-1 & 2 module
-
Upload
ashish-sahu -
Category
Marketing
-
view
470 -
download
5
description
Transcript of Business marketing bims-1 & 2 module
BUSINESS MARKETINGDr. S. MANJUNATH
Module 1 and 2
What is Business Marketing?• Business marketing also referred to as “Industrial marketing” or
“B2B marketing” or “Organizational marketing”.
• Business marketing is the marketing of products & services to
business organizations.
• Business organizations include:
Manufacturing companies
Govt. undertakings
Private sector organizations
Educational institutions
Hospitals
Distributors / Dealers
Business organizations buy products & services to satisfy many objectives like production of other goods & services, making profits, reducing costs, & so on.
Consumer marketing is the marketing of products & services to individuals, families, & households. The consumers buy products & services for their own consumption.
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: Caterpillar, which makes construction and
mining equipment.
• Diverse market, everything from a box of paper clips to
thousands of parts for an automobile manufacturer.
COMPONENTS OF THE BUSINESS MARKET
• Four main components:
• Commercial market Individuals and firms that acquire
products to support, directly or indirectly, production of other goods and services.
• Largest segment of the business market.
• Trade industries Retailers or wholesalers that purchase
products for resale to others.
• Also called resellers, marketing intermediaries that
operate in the trade sector.
• Government—all domestic levels (federal, state, local) and foreign governments; also act as sellers—e.g., confiscated
goods.
• Public and private institutions, such as hospitals,
churches, colleges and universities, and museums.
B2B MARKETS: THE INTERNET CONNECTION
• More than 94 percent of all Internet sales are B2B
transactions.
• Opens up foreign markets to sellers.
• Largest segment of the business market.
DIFFERENCES IN FOREIGN BUSINESS MARKETS
• May differ due to variations in regulations and cultural
practices.
• Businesses must be willing to adapt to local customs and
business practices and research cultural preferences.
The Consumer Market (B2C) and the Business Market (B2B) at
B2B
Customers:
B2C
Individuals &
HouseholdsBusinesses
Global
Large corporations
Small & Medium
sized businesses
Institutions
Healthcare
Education
Government
Federal
State
Local
Selected
Products:
PCs
Printers
Consumer Electronics
Simple Service
Agreements
PCs
Enterprise Storage
Servers
Complex Service Offerings
Dell, Inc.
B2C and B2B
The Supply Chain
Source: Hutt, M.D. and Speh, T.W. (2004): Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 8th Edition, p. 15.
Upstream Suppliers(USX, Du Pont)
Suppliers of
manufactured
materials and
parts such as
sheet metal or
plastic resin
Direct Suppliers(TRW, Johnson Controls)
Purchase input
used in creating
power-steering
systems (TRW) or
car seats (Johnson
Controls)
Auto Manufacturers(Ford, General Motors)
Purchase input
used in creating
automobiles
Auto Buyers(Consumers)
Purchase
automobiles
Business Marketing Business Marketing Consumer Marketing(Individuals, Households)
and
Business Marketing(Organisations such as
Fleet Buyers)
8
Identify the four majorcategories of
business market customers
Major Categories of Business Customers
9
Major Categories of Business Customers
Producers
Resellers
Governments
Institutions
OEMs (Original Equipment Manufacturers)
WholesalersRetailers
National PartyMunicipalLocal
Schools Hospitals Colleges
Churches Unions Fraternal groups
Civic Clubs Foundations
Nonbusiness organizations
10
OriginalEquipment
Manufacturers
Producers
OEMs.
Individuals and organizations that buy
business goods and incorporate them
into the products that they produce
for eventual sale to other producers
or to consumers.
REVIEW LEARNING OUTCOMEBusiness Market Customers
Business Marketing
InstitutionsResellers
Wholesalers
Retailers
Producers
OEMs
Governments
Federal
State
Municipal
County
Unions
CivicClubs
Other
Churches
Foundations
Nonprofits
12
Explain the major differences between business and
consumer markets
Business versus Consumer Markets
1. Nature of their markets
2. Market demand
3. Buyer behavior
4. Buyer-seller relationship
5. Environmental influences (competition, political, legal) and
6. Market strategy
• Due to these differences, business marketers need to understand how demand for industrial products and services differs from consumer demand.
Business and Consumer Marketing Differs In:
Characteristic
Demand
Volume
# of Customers
Location
Distribution
Nature of Buy
Buy Influence
Negotiations
Reciprocity
Leasing
Promotion
Business Market
Organizational
Larger
Fewer
Concentrated
More Direct
More Professional
Multiple
More Complex
Yes
Greater
Personal Selling
Consumer Market
Individual
Smaller
Many
Dispersed
More Indirect
More Personal
Single
Simpler
No
Lesser
Advertising
Business versus Consumer Markets
B2B Marketing vs. Consumer Marketing
Areas Industrial Markets Consumer Markets
1. Market characteristics • Geographically concentrated• Relatively fewer buyers
• Geographically distributed• Mass markets
2. Product characteristics • Technical complexity• Customized
• Standardized
3. Service characteristics • Service, timely delivery & availability is very important
• Service, timely delivery & availability is somewhat important
4. Buying behavior • Involvement of various functional areas in both buyer & supplier firms• Purchase decisions are mainly made on rational/performance basis•Technical expertise• Stable interpersonal relationship between buyers & sellers
• Involvement of family members
• Purchase decisions are mostly made on physiological / social / psychological needs• Less technical expertise• Non-personal relationship
New Work
Areas Industrial Markets Consumer Markets
5. Channel characteristics • More direct• Fewer intermediaries
• Indirect• Multiple layers of intermediaries
6. Promotional characteristics
• Emphasis on personal selling • Emphasis on advertising
7. Price characteristics • Competitive bidding & negotiated prices• List prices for standard products
• List prices or maximum retail price (MRP)
B2B Marketing vs. Consumer Marketing
Major Equipment
Accessory Equipment
Raw Materials
Component Parts
Processed Materials
Supplies
Business Services
Types of Business Products
Online
http://www.zzzzz.com
18
Types of Business Products (Cont.)
Major Equipment
Accessory Equipment
Raw Materials
Component Parts
Processed Materials
Supplies
Business Services
MajorCategories of Business
Products
Classifying industrial goods by the following questions:
How does the good or service enter the production process?
How does it enter the cost structure of the firm?
Classifying Goods for the Business Market
Source: Adapted from Philip Kotler, Marketing Management: Analysis, Planning, and Control,4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 172, with permission of Prentice-Hall, Inc.
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
REVIEW LEARNING OUTCOMETypes of Business Goods and Services
Aluminum ore:raw material
Extruded metal:processedmaterial
Propeller blade:component part
Extruding machine:
major equipmentTool cart:accessoryequipment
Uniforms:contracted
service
Paper:supply
Evaluative Criteria
1. Quality
2. Service
3. Price
New BuyA situation requiring the purchase of a product for the first time.
ModifiedRebuy
A situation where the purchaser wants some change in the original good or service.
StraightRebuy
A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers.
Buying Situations
27
What is market segmentation?
Market segmentation is the partitioning of themarket into groups of customers (segments)
with similar needs and/or characteristics whoare likely to exhibit similar purchase behaviour.
Source: Weinstein, A. (1994) Market Segmentation, Chicago: Probus Publishing Company.
28
Why market segmentation?
• To identify customer needs ( information).
• To cluster customers into groups to more efficiently and effectively satisfy their needs ( decision).
• To tailor the marketing strategy to the customers’ needs and thus to efficiently allocate marketing resources ( action).
Source:Hutt, Michael D. and Speh, Thomas W. (2004): Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 8th Edition, p. 177-8.
29
Macro- and micro-segmentation
Source: Wind, Y. and Cardozo, R. (1974) Industrial Market Segmentation, Industrial Marketing Management, Vol. 3, March, p. 156.
Relevant market
Macro-SegmentationBasis: industry, region, size, etc.
Macro-segment1 Macro-segment2 ...
...
Micro-SegmentationBasis: buying centre structure, etc.
Micro-segment 1 Micro-segment 2
Level 1
Level 2/3
30
Source:Hutt, Michael D. and Speh, Thomas W. (2004): Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 8th Edition, p. 180.
Bases for Macro-segmentation
31
Source:Hutt, Michael D. and Speh, Thomas W. (2004): Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 8th Edition, p. 184.
Bases for Micro-segmentation
32
Quantitative Evaluation of Segments
• sales per segment
• turnover / profit per segment
• price (margin) per unit
• market share within the segment
• number of customers
• segment specific costs
Source: Guenter, Bernd (1990) Marktsegmentierung, TV Lehrbrief, Berlin, p. 28.
33
Qualitative Evaluation of Segments
• growth potential (internal and external to the segment)
• domination by competitors
• entry barriers
• degree of customer retention
• know-how transfer
• innovation potential
Source: Hlavacek, J. D. and Reddy, N. M. (1986) Identifying Industrial Market Segments, European Journal of Marketing, Vol. 20, No. 2, p. 18.
34
The Market Segmentation Process
Identify the relevant market
Identify macro-segments based on
important organisational criteria
Evaluate acceptable macro-segments
and judge whether the are homogenous
in responding to marketing measures
Identify micro-segments based on
important buying centre criteria within
macro-segments
No
Evaluate and select the most attractive
micro-segments
Stop!
macro-segments =
market segments
Evaluate and select
the most attractive
macro-segments
Yes
Source: According to Wind, Y. and Cardozo, R. (1974) Industrial Market Segmentation, Industrial Marketing Management, Vol. 3, March, p. 156.
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.
• Example: Demand for computer microprocessor chips is
derived from demand for personal computers.
• Organizational buyers purchase two types of items:
• Capital items—long-lived business aspects that
depreciate.
• Expense items—items consumed within short time periods.
VOLATILE DEMAND
• Derived demand creates volatility.
• Example: Demand for gasoline pumps may be reduced if
demand for gasoline slows.
JOINT DEMAND
• Results when the demand for one business product is related
to the demand for another business product used in combination with the first item.
• Example: If lumber supply falls, then decrease in
construction will affect concrete market.
INELASTIC DEMAND
• Demand throughout an industry will not change significantly
due to a price change.
• Example: Construction firms will not necessarily buy
more lumber if prices fall unless overall housing demand also increases.
INVENTORY ADJUSTMENTS
• Just-in-time (JIT) inventory policies boost efficiency by
cutting inventory and requiring vendors to deliver inputs as they are needed.
• Often use sole sourcing, buying a firm’s entire stock of a
product from just one supplier.
• Latest inventory trend: JIT II, suppliers to place representatives at the customer’s facility to work as part of an integrated, on-site customer–supplier team.
• Inventory adjustments are also vital to wholesalers and
retailers.
NEW WORK
Derived Demand
The demand for industrial products & services does not exist
by itself. It is derived from the ultimate demand for
consumer goods & services.
Industrial customers buy goods & services for use in
producing other goods & services.
Joint Demand
Joint demand occurs when one industrial product is useful if
other product also exists.Demand for pen
Demand for ink
Cross-Elasticity Demand
Demand is „elastic‟ if the %age change in quantity demanded
is more than the %age change in price.
Cross elasticity of demand is the responsiveness of the sales
of one product to a price change in another product.
Demand for wood
Demand for
furniture
Demand for new homes
Price of Tea
Back
INDUSTRIAL DEMAND
Industrial Market & EnvironmentB
usi
ne
ss /
Ind
ust
rial
cu
sto
me
rs
Co
mm
erci
al
ente
rpri
seG
ovt
. cu
sto
mer
sIn
stit
uti
on
al
cust
om
ers
Co
op
erat
ive
soci
etie
s
Industrial distributors / dealers
Original equipment manufacturers
Users
Public sector units
Govt. undertakings
Public institutions
Private institutions
Manufacturing units
Non-manufacturing units
Intermediaries / middlemen, reselling to OEMs, users, Govt. firms
For Exide (battery manufacturer), Telco, is an OEM
For HMT, TVS-Suzuki is the ‘user’
BHEL, ONGC, IOL
Indian Railways, Defence units, State Elec. Boards
Govt. hospitals, prisons
Schools, colleges
Maharashtra Sugar Cooperative Society
Cooperative banks, housing cooperative societies
Ind
ust
rial
pro
du
cts
& s
erv
ice
s
Mat
eria
ls &
p
arts
Cap
ital
it
ems
Sup
plie
rs &
se
rvic
es
Raw materials
Manufactured materials
Component parts
Subassemblies
Light equipment or accessories
Installations or heavy equipment
Plant & building
Supplies
Services
Basic products like iron ore, crude oil, fish, fruits, vegetables
Acids, fuel oil, steel, chemicals
Semi-finished parts like bearings, tyres, small motors, batteries
Semi-finished goods like exhaust pipe in motorcycle
Hand tools, dies, computer terminals
Furnaces, machines, turbines
Offices, plants, warehouses, parking lots, real estate property
Operating & maintenance suppliers like fuels, packaging materials, lubricants, paints, elec. items
Legal, auditing, advertising, courier, marketing research agency
Industrial Market & Environment
Materials & Parts products, for large OEMs or users, selling is done directly from a
seller organization to a buyer organization.
For smaller volume OEMs & users, standard raw materials or components are sold
through industrial dealers or distributors as it is cost effective.
If the components are custom-made, considerable interaction takes place between
technical & commercial persons from both buyer & seller organizations. Selling is
direct.
Industrial salesman remain in close touch with various departments like purchase,
finance, R&D, marketing, production & quality of buyer organizations as they
influence the buying or payment releasing decisions.
Personal contacts, product leaflets/brochures help as industrial marketer in
communicating product & other information.
For standard products, the factors which influence buying decisions are:
Marketing Implications for Different Customer & Product Types
Product quality & performance
Delivery dependability
Price
Payment terms
Customer service
Customer rapport
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.
• Example: Law freezing cable rates or introduction
of new product by a competitor will affect demand.
• Natural disasters, such as Hurricane Katrina.
• Example: Rising fuel prices prompted Viking Energy
Management to lock in fuel prices.
Organizational Factors
• Successful marketers understand their customers’
organizational structures, policies, and purchasing systems.
• Some firms have centralized procurement, others delegate it
throughout the units.
• Many companies use multiple sourcing to avoid depending too
heavily on a sole supplier.
Interpersonal Influences
• Many different people influence B2B buying decisions,
sometimes as individuals and sometimes as part of a committee.
• Marketers must know who the influencers are and understand
their priorities.
• Sales personnel must be flexible and have a good technical
understanding of their products.
The Role of the Professional Buyer
• Many organizations rely on professionals, often called
merchandisers, who implement systematic buying procedures.
• Firms usually buy expense items with little delay but
carefully consider capital purchases.
• May rely on systems integration, centralization of the
procurement function.
• Corporate buyers often use the Internet to identify sources
of supplies.
MODEL OF THE ORGANIZATIONAL BUYING PROCESS
Stage 1: Anticipate a Problem/Need/Opportunity and a General Solution
• Example: Need to provide employees with a good cup of
coffee to enhance productivity.
Stage 2: Determine the Characteristics and Quantity of a Needed Good or Service
• Example: Offering a coffee system that brews one cup of coffee at a time according to each employee’s preference.
Stage 3: Describe Characteristics and the Quantity of a Needed Good or Service
• Example: Firms need a simple system for
brewing a good cup of coffee; quantity requirements are easily correlated to the number of coffee drinkers.
Stage 4: Search for and Qualify Potential Sources
• Choice of supplier may be fairly straightforward or very
complex.
Stage 5: Acquire and Analyze Proposals
• May involve competitive bidding, especially if the buyer is
the government or a public agency.
Stage 6: Evaluate Proposals and Select Suppliers
• Buyers choose proposal best suited to their needs.
• Final choice may involve trade-offs between feature
such as price, reliability, quality, and order accuracy.
Stage 7: Select an Order Routine
• Buyer and vendor work out best way to process future
purchases.
Stage 8: Obtain Feedback and Evaluate Performance
• Buyers measure vendors’ performance.
• Larger firms are more likely to use formal evaluation
procedures.
• Some firms rely on outside organizations to gather quality
feedback and summarize results.
• Example: J. D. Power and Associates
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
• A recurring purchase decision in which a customer reorders
a product that has satisfied needs in the past.
• Purchaser see little reason to assess competing options.
• Marketers who maintain good relationships with customers
can go a long way toward ensuring straight rebuys.
• High-quality products.
• Superior service.
• Prompt delivery.
Modified Rebuying
• Purchaser willing to reevaluate available options.
• May occur if supplier has let a rebuy circumstance
deteriorate because of poor service or delivery performance.
New-Task Buying
• First-time or unique purchase situations that require
considerable effort by the decision makers.
• Most complex category of business buying.
• Often requires purchaser to consider alternative offerings
and vendors.
Reciprocity
• Practice of buying from suppliers that are also customers.
• In U.S., Department of Justice and the Federal Trade
Commission view reciprocity as an attempt to reduce competition.
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—an ongoing evaluation of a supplier’s
performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.
THE BUYING CENTER CONCEPT
• Buying center Participants in an organizational buying
action.
BUYING CENTER ROLES
REVIEW LEARNING OUTCOMEBusiness Buying Behavior
Customer service
InitiatorInfluencerDecider GatekeeperPurchaserUser
Buying Center
Quality Service Price
EvaluativeCriteria
Buying Situations
New buyStraight rebuyModified rebuy
Environmental Analysis in Business MarketingEn
viro
nm
en
t
Ecological & Physical
Internal
External
Air & water pollution, solid waste disposal, conserving natural resources
Water, power, skilled manpower, low-cost labor, transportation
Company location, R&D facilities, production facilities, HR, Financial resources, marketing effectiveness, reputation or image of the company
Micro
Macro
• Economic• Technological• Govt. & political, & legal• Cultural & social• Public-press, institutional investors,
shareholders, banks, public interest groups
• Customers & competitors• Suppliers
Strength & weaknesses analysis
Opportunity & threat analysis
Affects all firms
Affect a particular firm