Introduction to Business-to-Business (B2B) Marketing

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 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 What Distinguishes B2B from B2C?

B2B: goods or services are sold for any use other than personal consumption Note: It is not the nature of the product; it is the reason for the transaction. Is it a B2C or a B2B 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 buysanything. B2B versus B2C Marketing Characteristic B2B Market B2C Market Sales volume Greater Smaller Purchase volume

Greater Smaller Number of buyers Fewer Many Size of individual buyers Larger Smaller

Location of buyers Concentrated Diffuse Buyer-seller relationship Closer More Impersonal Nature of channel More direct

Less direct Buying influences Multiple Single/Multiple Type of negotiations More complex Simpler Use of reciprocity

Yes No Use of leasing Greater Less Key promotion method Personal Selling Advertising

BUSINESS TO BUSINESS: IT IS ALL ABOUT DEMAND DERIVED DEMAND The demand for a companys products comes from (derived) the demand for their customers products. Most demand comes from consumers. JOINT DEMAND Two products are used together and demanded together Both products are consumed at the same time Other Characteristics of Business Demand

Inelastic Demand Fluctuating 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, PCs, etc. Classifying Business Goods & Services Facilitating Products Supplies Any supplies necessary to maintain the organizations 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