Business Marketing
Chapter 1
The business marketing environment in the modern world
DISCUSSION QUESTIONS
1. Differences Between B2B and B2C Markets and Growth in B2B Markets:
Business-to-Business (B2B) Market:
•
Involves transactions between businesses, where one business sells products
or services to another business.
•
Typically involves larger order sizes, longer sales cycles, and complex buying
processes.
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Decision-making is often done by a group or committee within the buying
organization.
•
Focus is on building strong relationships, providing value, and meeting
specific business needs.
Business-to-Consumer (B2C) Market:
•
Involves transactions between businesses and individual consumers, where
products or services are sold directly to end-users.
•
Generally features shorter sales cycles, smaller order sizes, and emotional
buying decisions.
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Decision-making is made by individual consumers, based on personal
preferences, needs, and emotions.
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Branding, advertising, and emotional connection play a significant role in B2C
marketing.
Reasons for Growth in B2B Markets:
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Technological advancements and digitalization have facilitated easier
communication and transactions between businesses.
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Globalization has expanded supply chains, leading to increased B2B trade
across borders.
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The rise of e-commerce and online marketplaces has made it more efficient
for businesses to source products and services from other businesses.
•
Specialization and outsourcing have led to the growth of B2B service
providers in various industries.
•
Increased complexity in products and services has driven the need for
specialized suppliers and partners.
2. Government Involvement in the Economy:
Government involvement in the economy is essential to address market failures,
ensure fairness, and promote public welfare. Forms of government involvement can
include:
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Regulation: To ensure fair competition, prevent monopolies, protect
consumers, and maintain industry standards.
•
Fiscal Policy: Governments use taxation and spending to manage economic
growth, control inflation, and address income inequality.
•
Monetary Policy: Central banks manage interest rates and money supply to
stabilize the economy and control inflation.
•
Social Welfare Programs: To provide a safety net for vulnerable populations
and reduce poverty.
•
Infrastructure Investment: Governments invest in public infrastructure to
support economic development.
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Environmental Regulation: To mitigate negative externalities and promote
sustainability.
3. Challenges for B2B Companies in the Third Millennium:
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Globalization: Expanding into international markets while dealing with
diverse regulations and cultural differences.
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Digital Transformation: Embracing technology for efficient operations, data
analytics, and customer engagement.
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Supply Chain Disruptions: Navigating disruptions caused by geopolitical
events, natural disasters, or pandemics.
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Sustainability and Ethics: Addressing environmental concerns, social
responsibility, and ethical practices in business operations.
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Changing Buyer Behavior: Adapting to evolving buying processes, including
increased online research and group decision-making.
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Competition and Innovation: Staying ahead in rapidly evolving industries
through innovation and differentiation.
4. Planned Market Economy vs. Free Market Economy:
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Planned Market Economy: The government plays a significant role in
directing economic activities, allocating resources, and making production
and distribution decisions. While it can ensure equitable resource
distribution, it might lead to inefficiencies and lack of innovation.
•
Free Market Economy: Economic decisions are driven by supply and demand
without significant government intervention. It encourages innovation and
efficiency but can result in income inequality and lack of social safety nets.
5. Government Intervention in Free Markets:
Governments intervene in free markets to address market failures, promote
fairness, and protect public interests. Examples include:
•
Antitrust Regulations: Preventing monopolies and promoting healthy
competition.
•
Consumer Protection Laws: Ensuring product safety and accurate
information for consumers.
•
Environmental Regulations: Reducing pollution and protecting natural
resources.
•
Financial Regulations: Preventing fraudulent practices and maintaining
financial stability.
6. Different Market Types and Examples:
•
Perfect Competition: Many small buyers and sellers with identical products
(agricultural markets).
•
Monopoly: Single seller dominating the market (local utility companies).
•
Oligopoly: Small number of large sellers (automobile industry).
•
Monopolistic Competition: Many sellers with differentiated products (fast
food chains).
7. B2B Marketing vs. B2C Marketing:
B2B marketing focuses on building relationships and delivering value, tailored to
the specific needs of the business. B2C marketing often involves emotional appeals
and branding to connect with individual consumers. Both approaches are valuable
but require different strategies.
Roles of Specific Organizations: (a) World Trade Organization (WTO): Regulates
international trade, enforces trade agreements, and resolves trade disputes. (b) UK
Competition Commission: Ensures fair competition and prevents anticompetitive
practices within the UK. (c) OFGEM (Office of Gas and Electricity Markets):
Regulates the gas and electricity markets in the UK to promote competition, protect
consumers, and ensure reliable supply.
8. Major Trading Blocs and Implications for B2B Companies:
•
European Union (EU): Facilitates trade among European countries, allowing
B2B companies to access a larger market.
•
North American Free Trade Agreement (NAFTA, now USMCA): Enhanced
trade between the US, Canada, and Mexico, benefiting B2B supply chains.
•
Asia-Pacific Economic Cooperation (APEC): Promotes trade and economic
cooperation in the Asia-Pacific region, opening opportunities for B2B growth.
9. B2B Organizational Categories and Approaches:
•
Manufacturers: Focus on quality, efficiency, and technical specifications.
•
Distributors: Emphasize logistics, supply chain efficiency, and customer
support.
•
Service Providers: Highlight expertise, customization, and value-added
services.
Global Differences in B2B Marketing: B2B marketing strategies need to adapt to
cultural nuances, business practices, and regulatory differences. An incorrect
approach can lead to misunderstandings or missed opportunities. For example,
using a direct and assertive approach might be acceptable in some cultures but
could be considered rude in others.
What is the business-to-business market?
The business-to-business (B2B) market is a type of market where businesses sell
products or services to other businesses. This is in contrast to the business-toconsumer (B2C) market, where businesses sell products or services to individual
consumers.
Some examples of B2B markets include:
•
•
•
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The manufacturing industry, where businesses sell raw materials and
components to other businesses
The technology industry, where businesses sell software and hardware to
other businesses
The healthcare industry, where businesses sell medical supplies and
equipment to other businesses
The construction industry, where businesses sell materials and labor to other
businesses
Why business-to-business marketing?
Business-to-business marketing is important because it helps businesses reach their
target customers and achieve their marketing goals. By understanding the needs
and wants of their target customers, businesses can develop marketing strategies
that will resonate with them and persuade them to buy their products or services.
Some of the benefits of business-to-business marketing include:
•
•
•
•
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Increased brand awareness
Lead generation
Sales growth
Improved customer relationships
Increased market share
CHAPTER TOPICS
Marketing definitions
There are many different definitions of marketing, but one common definition is
that marketing is the process of creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society at
large.
In the context of B2B marketing, marketing can be used to:
•
•
•
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Identify and understand target customers
Develop marketing strategies that meet the needs of target customers
Create and deliver marketing messages that resonate with target customers
Measure the results of marketing campaigns
Growth of business-to-business markets
The business-to-business market is growing rapidly. This is due to a number of
factors, including:
•
•
•
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The increasing globalization of the economy
The growth of e-commerce
The increasing complexity of products and services
The growing need for businesses to collaborate with each other
The growth of the B2B market presents opportunities for businesses that can
effectively market their products and services to other businesses.
Here are some additional examples of B2B marketing:
•
•
•
•
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A software company that sells its software to businesses
A consulting firm that provides consulting services to businesses
A marketing agency that helps businesses develop and execute marketing
campaigns
A distributor that distributes products to businesses
A wholesaler that buys products from manufacturers and sells them to
businesses
Harmonisation of laws in business markets
Harmonisation of laws in business markets refers to the process of making laws in
different countries more similar. This can be done through international
agreements or through unilateral action by individual countries.
There are a number of reasons why businesses might want to harmonize laws in
business markets. First, it can make it easier to do business across borders. If the
laws are the same in all countries, businesses do not have to worry about complying
with different regulations in each country. This can save businesses time and
money.
Second, harmonization of laws can help to reduce trade barriers. If the laws are the
same in all countries, it is less likely that governments will impose tariffs or other
trade restrictions on goods and services. This can make it easier for businesses to
export their products and services to other countries.
There are a number of challenges to harmonization of laws in business markets.
One challenge is that it can be difficult to get all countries to agree on the same
laws. Another challenge is that even if countries agree on the same laws, it can be
difficult to enforce those laws.
Barriers to trade
Barriers to trade are government policies that make it more difficult or expensive
for businesses to import or export goods and services. There are a number of
different types of barriers to trade, including:
•
Tariffs: Taxes imposed on imported goods.
•
Import quotas: Limits on the quantity of goods that can be imported.
•
Non-tariff barriers: Government regulations that make it more difficult or
expensive to import or export goods, such as technical standards or sanitary
regulations.
Barriers to trade can have a number of negative consequences. They can raise prices
for consumers, reduce competition, and make it more difficult for businesses to
export their products and services.
Economic systems
There are three main types of economic systems: planned economies, market
economies, and mixed economies.
•
Planned economies are economies in which the government controls the
production and distribution of goods and services. The government decides
what goods and services will be produced, how much they will cost, and who
will get them.
•
Market economies are economies in which the decisions about production
and distribution are made by businesses and consumers. Businesses decide
what goods and services to produce based on what they think consumers will
want to buy. Consumers decide what goods and services to buy based on
their income and preferences.
•
Mixed economies are economies that combine elements of planned and
market economies. The government may play a role in some aspects of the
economy, such as providing education and healthcare, while businesses play
a role in other aspects, such as producing goods and services.
The economic system of a country can have a significant impact on the business
environment. For example, businesses in planned economies may have less
freedom than businesses in market economies. They may also have to deal with
more government regulations.
Here are some examples of each type of economic system:
•
Planned economy: The former Soviet Union, China (before 1978)
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Market economy: The United States, United Kingdom, Japan
•
Mixed economy: France, Germany, Canada
Market classifications
• Regional markets for industrial goods and services are those that are
confined to a particular region, such as a continent, country, or state. For
example, the European Union is a regional market for industrial goods and
services.
•
National markets for industrial goods and services are those that are
confined to a particular country. For example, the United States is a national
market for industrial goods and services.
•
Global markets for industrial goods and services are those that are not
confined to any particular region or country. They are open to businesses
from all over the world. For example, the market for oil is a global market.
Here are some examples of industrial goods and services that are traded in each of
these market classifications:
•
Regional markets for industrial goods and services could include the trade of
agricultural products between countries in the European Union, or the trade of
machinery between countries in North America.
•
National markets for industrial goods and services could include the trade of
automobiles in the United States, or the trade of construction materials in China.
•
Global markets for industrial goods and services could include the trade of
oil between countries around the world, or the trade of electronics between
companies in different countries.
Marketing trading types refer to the different types of market conditions that exist
in business markets. These conditions are determined by the number of buyers and
sellers in the market, as well as the degree of competition between them.
The five types of marketing trading types are:
1. Monopolies or monopsonies are markets where there is only one buyer or
seller. For example, a government may be the only buyer of a particular type
of military equipment.
2. Controlled monopoly/monopsony markets are markets where there are a
few buyers or sellers who have a significant amount of control over the
market. For example, a few large oil companies may control the global oil
market.
3. Oligopoly or oligopsony markets are markets where there are a few buyers
or sellers who compete with each other. For example, the market for
automobiles is an oligopoly market.
4. Free competition is a market where there are many buyers and sellers who
compete with each other. For example, the market for agricultural products
is a free competition market.
5. Adulterated competition is a market where there is some competition, but
it is not as free as in a free competition market. For example, the market for
pharmaceuticals is an adulterated competition market.
B2B trading forms: organisational types
B2B trading refers to the sale of goods and services from one business to another.
The organizational types involved in B2B trading can be classified into three main
categories:
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Commercial enterprises or the private sector: This includes businesses that
are owned and operated for profit. They can be further classified into
different types, such as public liability companies (PLCs), private companies,
and partnerships. Overseer regulated industries (ORIs) are also included in
this category. ORIs are businesses that are regulated by a government agency,
such as the financial services industry or the healthcare industry.
•
National and local government: This includes government agencies that
provide goods and services to businesses and the public.
•
Not-for-profit organizations (NFP): This includes organizations that are not
driven by profit, but rather by a social or environmental mission. They can be
further classified into different types, such as charities, non-governmental
organizations (NGOs), and trade associations.
Benefits that commercial companies want from their suppliers
Commercial companies typically want the following benefits from their suppliers:
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Solution benefits to identified problems: They want suppliers who can help
them solve their business problems. This could involve providing new
products or services, or improving the existing ones.
•
Continuous knowledge and help on the right products and services: They
want suppliers who can provide them with ongoing support and advice on
the products and services they need. This could involve helping them choose
the right products and services for their needs, or providing training on how
to use them.
•
Advice on future product and service developments: They want suppliers
who can keep them informed about new product and service developments.
This could help them stay ahead of the competition and meet the needs of
their customers.
•
Quickness of service: They want suppliers who can deliver products and
services quickly and efficiently. This is important for businesses that need to
get their products and services to market quickly.
•
Continuity of service: They want suppliers who can provide them with a
consistent level of service. This is important for businesses that rely on their
suppliers to deliver products and services on time and in the right quantity.
•
Loyalty of service: They want suppliers who are committed to providing
them with a good level of service over the long term. This is important for
businesses that want to build strong relationships with their suppliers.
•
Flexibility of service: They want suppliers who are flexible and willing to
meet their needs. This could involve providing customized products and
services, or adjusting delivery schedules to meet the needs of the business.
•
After-sales service: They want suppliers who provide good after-sales
service. This could involve providing repairs and maintenance, or offering
technical support.
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Guarantee of quality: They want suppliers who can guarantee the quality of
their products and services. This is important for businesses that want to
avoid problems with defective products or services.
•
Price/cost/value: They want suppliers who can offer them good value for
money. This means that they want to get the best possible products and
services at a competitive price.
B2B selling in the not-for-profit sector
B2B selling in the not-for-profit sector is the process of selling goods and services
to businesses from not-for-profit organizations. Not-for-profit organizations can sell
a variety of goods and services, such as advertising space, event tickets, and
sponsorships. They can also sell products and services that are related to their
mission, such as educational materials or healthcare services.
B2B marketing in the not-for-profit sector
B2B marketing in the not-for-profit sector is the process of creating and executing
marketing strategies to sell goods and services to businesses from not-for-profit
organizations. Not-for-profit organizations can use a variety of marketing channels
to reach businesses, such as direct mail, email marketing, and social media
marketing. They can also attend trade shows and industry events to meet potential
customers.
The need to understand the behaviour of organisations- Internally, Externally
In order to be successful in B2B, it is important to understand the behavior of
organizations. This includes understanding their internal processes and procedures,
as well as their external environment.
•
Internally: Organizations are made up of people, and people behave in
different ways. It is important to understand the different roles and
responsibilities of people within an organization, as well as their motivations
and goals.
•
Externally: Organizations operate in an environment that is constantly
changing. It is important to understand the factors that influence the
behavior of organizations, such as the economic climate, the political
landscape, and the technological environment.
Chapter 2
Understanding environment influences affecting
organisational behaviour and markets
DISCUSSION QUESTIONS
Political and Economic Factors in B2B Marketing:
• Political Factors: These include government policies, regulations, and
political stability. For example, changes in import/export tariffs can
significantly impact the cost of goods for B2B buyers. If a government
enforces stricter environmental regulations, businesses might need to invest
in greener technologies or materials.
• Economic Factors: Economic conditions such as inflation, interest rates, and
economic growth can influence B2B marketing. For instance, during an
economic recession, businesses might cut back on purchases to save costs.
An example is the 2008 financial crisis, where many businesses reduced their
spending due to economic uncertainty.
Government's Role in Free Markets:
Governments play a critical role in setting the legal, social, and moral framework
for markets. They ensure fair competition, protect consumer rights, and address
externalities. Governments should strike a balance - too much intervention can
stifle innovation, while too little can lead to exploitation. For example, antitrust laws
prevent monopolies, ensuring fair competition. However, excessive regulations can
burden businesses and hinder growth.
Culture's Influence on Business Buyer Behavior:
Culture significantly influences business buyer behavior globally. Communication
styles, negotiation practices, and decision-making processes vary based on cultural
norms. For instance, in some cultures, building personal relationships before
business deals is crucial. As for its influence, while globalization and technology
have somewhat homogenized business practices, understanding and respecting
local cultures remain essential for success.
Dealing with Global Competition:
Businesses can combat global competition through innovation, differentiation, and
international expansion. They can develop unique value propositions, invest in
research and development, and expand into new markets. This competition can be
both positive and negative. It fosters innovation and drives companies to improve,
but it can also lead to pricing pressures and market saturation.
Technology's Impact on Business:
Technology has revolutionized business processes. The advent of e-commerce,
cloud computing, and data analytics transformed how businesses operate. For
example, Amazon's use of advanced algorithms for personalized recommendations.
Future developments might include widespread adoption of artificial intelligence,
Internet of Things (IoT) integration, and blockchain for secure transactions.
Home Market's Role in Global Presence:
Michael Porter's proposition suggests that a strong home market provides a
foundation for global success. For instance, companies like Apple and Microsoft
established dominance in their home markets before expanding globally. This
foundation provides resources, brand recognition, and expertise that facilitate
global expansion.
Organizational Corruption and Cronyism:
While eradicating corruption entirely may be challenging, significant progress can
be made through legal reforms, transparency measures, and strong institutions. It's
not that corruption can't be stopped, but rather, it requires consistent efforts and
international collaboration. Countries like Sweden and New Zealand are often cited
as having low corruption levels due to robust legal frameworks.
Understanding Demand Potential:
Understanding demand potential involves market research, segmentation, and
analyzing customer behavior. Businesses can use data analytics and consumer
surveys to identify trends and preferences across different markets. This insight
helps tailor marketing strategies, product offerings, and pricing strategies to meet
varying demand.
Factors Influencing Sales Demand:
Factors include economic conditions, market size, competitive landscape, consumer
preferences, and technological advancements. For example, a growing economy
might boost demand for luxury goods, while a recession might lead to increased
demand for value-oriented products.
Horizontal and Vertical Demand:
Horizontal demand refers to the demand for products and services that are
complementary to the main product. Vertical demand refers to the demand for
goods and services along the supply chain. Both have gained importance due to
increased focus on value chains and ecosystems. For instance, a smartphone
manufacturer's demand affects demand for components like processors (vertical)
and apps (horizontal).
Derived Demand and Sales Demand Forecasting:
Derived demand is when the demand for a product or service is based on the
demand for another product (e.g., automotive parts based on car demand).
Ignoring derived demand can lead to inaccurate forecasts and supply chain
inefficiencies. Businesses use quantitative methods like trend analysis and
qualitative methods like expert opinions for sales demand forecasting. Evaluating
these methods helps improve accuracy.
CHAPTER TOPICS
Part 1: Macro-environmental Factors Influencing B2B Organizational Behavior
Macro-environmental factors are external elements that impact an organization's
operations and decisions. These factors are beyond the immediate control of the
organization but can significantly shape its behavior and strategies. In the context
of B2B (business-to-business) organizational behavior, these factors play a crucial
role in determining how businesses interact, compete, and respond to changes.
Let's explore the specific factors you mentioned:
1. Political Factors: Political factors encompass government policies, regulations,
and political stability. These factors can have a substantial impact on B2B behavior.
For example, changes in import/export regulations or tax policies can affect the cost
structure of businesses and influence their decision to engage in international
trade. Political instability in a region might lead to supply chain disruptions, forcing
businesses to rethink their sourcing strategies.
Example: Consider a global electronics manufacturer that sources components
from multiple countries. If a new trade policy imposes tariffs on imported
components, the company's cost of production could increase, affecting its pricing
and competitiveness.
2. Independent Controlling Agencies: Independent controlling agencies, often
regulatory bodies, oversee specific industries and ensure compliance with
regulations. Their decisions and actions can significantly shape B2B behavior. For
instance, a regulatory agency might set standards for product safety or
environmental impact, requiring businesses to adapt their processes and offerings
to meet these standards.
Example: An energy company operating in the oil and gas sector may need to
adhere to stringent environmental regulations set by an independent agency. This
might necessitate investments in cleaner technologies or risk mitigation strategies.
3. Trade Unions: Trade unions represent workers' interests and can impact B2B
behavior by influencing labor relations and negotiations. Strikes, negotiations for
better working conditions, and wage agreements can affect production timelines,
costs, and supplier relationships.
Example: An automobile manufacturer's production could be disrupted if a trade
union representing its factory workers goes on strike. This could lead to delays in
supplying products to other businesses in the supply chain.
4. Economic Factors: Economic factors include conditions such as inflation, interest
rates, economic growth, and unemployment. These factors influence the
purchasing power of businesses and consumer demand for B2B products and
services.
Example: During an economic downturn, businesses might cut back on their
expenses, including purchases from suppliers. A recession could lead to reduced
demand for products and services across various industries, impacting B2B sales
and revenue.
Competitive Influences:
1. Competitive B2B Market Structures: Different market structures can impact
organizational behavior. For example, in an oligopolistic market where a few
large competitors dominate, companies might focus on strategic alliances to
gain a competitive edge. In a perfectly competitive market, price becomes a
key factor, leading to cost-efficiency strategies.
2. Knowledge of the Competitor: Understanding competitors' strengths,
weaknesses, and strategies is essential. For instance, Apple and Samsung
closely monitor each other's product releases and innovations in the
smartphone market. This knowledge helps them adjust their own strategies
to maintain a competitive position.
3. Competitive Intensity: The level of rivalry in a market influences behavior. In
industries with high competitive intensity, companies might emphasize
product differentiation to stand out. The soft drink industry, with brands like
Coca-Cola and Pepsi, experiences intense competition and frequent product
launches.
4. Dynamic Market Conditions: Rapidly changing markets require adaptability.
The technology sector, with its constant innovations, demands companies
like Google to regularly update products and services to remain competitive.
5. Competition in B2B and B2C Markets: The nature of competition differs
between B2B and B2C markets. B2B companies often focus on building longterm relationships due to the complex and interdependent nature of
business relationships. B2C companies, like clothing retailers, might focus
more on branding and consumer trends.
6. Global Competitiveness Influences: Companies need to consider global
competitiveness, especially in the era of globalization. For example, in the
automotive industry, Japanese car manufacturers like Toyota have
established a strong global presence through efficient production systems
and quality control.
Customers and Markets:
1. Customer and Market Types: The type of customers and markets served
shapes organizational behavior. For instance, serving businesses in the
healthcare sector requires companies to comply with strict regulations,
influencing their product development and marketing strategies.
2. Global Markets: Organizations operating in global markets face diverse
challenges. For instance, McDonald's adapts its menu to local preferences
while maintaining its core offerings, reflecting the influence of different
cultural tastes.
3. Dynamic vs. Stable Market Environments: Dynamic markets experience
frequent changes in customer preferences, technology, and regulations. A
software company operating in the tech industry must quickly adapt to new
software trends. In contrast, stable markets, like utilities, allow for more
predictable long-term planning.
4. Complex vs. Simple Market Environments: Complex markets involve
intricate customer needs and diverse stakeholders. Pharmaceutical
companies, for example, navigate complex regulatory landscapes and varying
medical practices across countries. Simple markets might involve
standardized products, like basic household goods.
Managing Demand and Derived Demand
Managing demand involves understanding and influencing customer demand for
products and services. Derived demand refers to the demand for one product or
service that arises as a result of the demand for another product or service. An
example of derived demand is the demand for steel, which arises from the
construction of buildings, bridges, and automobiles. If there's an increase in the
demand for construction projects, it leads to higher demand for steel.
Other Demand Categories
•
Horizontal Demand: This refers to the demand for complementary products
that are used together. For instance, the demand for smartphones drives the
demand for smartphone accessories like cases and screen protectors.
•
Vertical Demand: Vertical demand is the demand for products or services
along the supply chain. An example is the demand for raw materials used in
manufacturing processes.
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Inelastic Demand: Inelastic demand occurs when changes in price have a
relatively small impact on demand. Essential goods like medicines often
exhibit inelastic demand because people will continue buying them
regardless of price changes.
•
Joint Demand: Joint demand is when two or more goods are demanded
together. For example, if a person buys a printer, they'll likely need ink
cartridges as well.
•
Fluctuating Demand: This refers to demand that varies significantly over
time. For instance, demand for winter clothing spikes in cold months but
drops during summer.
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Demand for New, Improved Products and Services: When new and
improved products or services are introduced, they can create fresh demand.
The launch of a new iPhone model generates high demand as consumers
seek the latest features.
Trends and Shifts in Demand
Demand trends refer to long-term changes in consumer preferences, lifestyles, and
technological advancements that impact demand. Shifts in demand occur when the
entire demand curve moves due to changes in factors other than price. For instance,
the growing health-conscious trend has shifted demand towards organic foods and
plant-based products. Technological advancements might lead to increased
demand for electric vehicles.
Measuring the Level of Demand: Demand Potential and Analysis
•
Demand Potential: Demand potential refers to the maximum level of
demand that a market can generate for a specific product or service. It's
important for businesses to understand the upper limit of their market
before setting production targets. For example, a luxury car brand might
identify that the demand potential for their premium SUV in a specific region
is 10,000 units.
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Demand Analysis: Demand analysis involves studying factors that influence
customer behavior and purchasing decisions. It considers economic
conditions, consumer preferences, competitive landscape, and demographic
trends. A restaurant chain, for instance, might conduct demand analysis to
determine whether opening a new branch in a certain location is feasible
based on local population, income levels, and dining habits.
Market Potential
Market potential refers to the maximum level of sales that can be achieved within
a specific market under ideal conditions. It represents the upper limit of demand
for a particular product or service. Understanding market potential is crucial for
businesses when making strategic decisions, such as market entry, resource
allocation, and growth projections.
Industry and Market Life Cycles
Industry and market life cycles describe the stages that a product or industry goes
through, from its introduction to maturity and decline. Understanding these life
cycles helps businesses adjust their strategies to the changing dynamics of the
market.
1. Introduction Stage: In this stage, a new product or industry is introduced to
the market. Sales are typically low, and there might be high research and
development costs. Businesses focus on creating awareness and building a
customer base. For example, when electric cars were first introduced, sales
were limited, and companies like Tesla had to invest heavily in R&D.
2. Growth Stage: The product or industry gains traction, and sales start to grow
rapidly. Competitors enter the market, and companies work to differentiate
their offerings. This is a critical stage for establishing brand loyalty and market
share. A prime example is the smartphone industry, which saw explosive
growth as more people adopted smartphones for communication and other
tasks.
3. Maturity Stage: Sales growth slows down as the market becomes saturated.
Competition intensifies, leading to pricing pressures. Companies often
diversify their product lines or focus on cost-cutting to maintain profitability.
The personal computer industry reached maturity as PCs became
commonplace in households and businesses.
4. Decline Stage: Sales start to decline due to changing consumer preferences,
technological advancements, or other factors. Businesses might choose to
exit the market or focus on niche segments. The decline of traditional film
cameras as digital photography became dominant is a classic example.
Elaboration with Examples: Consider the bottled water industry:
•
Introduction: When bottled water was first introduced, it was marketed as a
convenient and healthy alternative to tap water. Companies invested in
advertising to educate consumers about the benefits of bottled water.
•
Growth: As health and wellness trends grew, the demand for bottled water
skyrocketed. Many players entered the market, offering various sizes, types
(spring, purified, mineral), and packaging options.
•
Maturity: With numerous brands and types available, the market reached
maturity. Companies focused on differentiation through unique packaging or
flavors. Price competition became fierce.
•
Decline: The bottled water market might decline as concerns about plastic
waste and environmental impact rise. Consumers might shift to reusable
bottles and filtration systems, causing a decline in bottled water sales.
Chapter 3
Understanding business marketing environments
DISCUSSION QUESTIONS
1. Discuss the value of information to the B2B decision-making process. What are
the problems associated with information overload?
Information is crucial for B2B decision-making as it helps companies understand
market trends, customer preferences, and competitors. It aids in identifying
opportunities and making informed choices. For instance, a manufacturing
company might use information about supplier reliability and costs to decide on the
best supplier for raw materials.
However, information overload can occur when there's an excessive amount of data
available, making it difficult to extract meaningful insights. This can lead to decision
paralysis and delays. For example, a technology company might receive an
overwhelming amount of market research reports, making it hard to prioritize
which insights to act upon.
2. Describe the marketing information system. What are its many uses?
A marketing information system (MIS) is a structured process of collecting, storing,
and analyzing data relevant to marketing decisions. Its uses include market analysis,
tracking customer behavior, evaluating marketing campaigns, and identifying
emerging trends. An example is a retail company using an MIS to track sales data
and customer demographics to tailor their promotions to specific customer
segments.
3. How might competitive advantage be gained by the use of marketing
intelligence?
Marketing intelligence involves gathering and analyzing information about the
market environment. It can provide insights into competitor strategies, consumer
preferences, and emerging trends. By using these insights to make informed
decisions, a company can position itself effectively, develop unique value
propositions, and stay ahead of competitors. For instance, a smartphone company
might use intelligence on competitor product features to design a phone with a
unique selling point.
4. What information in B2B markets might qualitative research obtain that
quantitative research might not? Give examples.
Qualitative research delves into the underlying motivations, attitudes, and
perceptions of B2B customers. It can uncover insights that quantitative research
might miss, such as the emotional aspects of decision-making. For example, a
software company might conduct qualitative interviews to understand why
potential clients are hesitant to adopt their product, revealing concerns that
quantitative surveys might not capture.
5. What do you consider the value of secondary research to be? Why is so much
now available, and what are the many sources?
Secondary research involves using existing data and sources. Its value lies in
providing a cost-effective way to gather information quickly. The rise of digital
technology has made a vast amount of information available online through sources
like industry reports, government databases, academic papers, and news articles.
6. How might a culture of information seeking be instilled into an organization?
What problems might be encountered?
Creating a culture of information seeking involves promoting curiosity, data-driven
decision-making, and knowledge-sharing. Companies can encourage this by
providing access to resources, recognizing employees who contribute valuable
insights, and integrating information-seeking into performance metrics. However,
challenges might include resistance to change, information overload, and ensuring
that sought-after information aligns with the company's goals.
7. Discuss the proposition that the ‘research must be used as an aid to decision
making and not a substitute’. What are the criticisms leveled by many at the value
or otherwise of research information?
Research should inform decisions, but decisions should not be solely reliant on
research. Research provides insights, but real-world complexities and dynamic
markets can't always be fully captured in data. Critics argue that research might lead
to overanalysis, delayed decisions, and a lack of innovation if it becomes a
substitute for entrepreneurial judgment.
8. Identify and analyze the differences and similarities with information gathering
between B2B and B2C. Give examples.
In B2B (business-to-business) contexts, information gathering often involves
building relationships with fewer, larger customers. This might include
understanding their complex needs and long-term goals. In B2C (business-toconsumer) settings, information is often collected from a larger customer base,
focusing on individual preferences and transaction histories. For example, a B2B
supplier might engage in detailed negotiations with a corporate client, while a B2C
retailer might analyze online shopping patterns to recommend products to
individual customers.
9. Describe and evaluate the differences between quantitative and qualitative
forecasting. Discuss the different methods used in each category.
Quantitative forecasting involves using numerical data and statistical models to
predict future trends. Examples include time series analysis and regression models.
Qualitative forecasting relies on expert opinions, market knowledge, and subjective
judgment. Methods include Delphi technique and scenario analysis. Each has its
strengths and weaknesses: quantitative methods can provide precise predictions
but might miss qualitative nuances, while qualitative methods can capture
contextual insights but might lack precision.
10. Discuss the differences between top-down and bottom-up ways of sales
forecasting. Do you think that sales forecasting can ever be accurate taking into
account the problems associated with looking into the future?
Top-down forecasting starts with an overall market forecast and then allocates it to
specific products or segments. Bottom-up forecasting involves estimating sales at a
detailed level and then aggregating to an overall forecast. Sales forecasting can be
accurate to some extent, especially with robust data and advanced models.
However, unforeseen events, market volatility, and changing customer behaviors
can make long-term accuracy challenging. The goal is to reduce uncertainty rather
than eliminate it entirely.
CHAPTER TOPICS
Part 1: Information for Understanding Strategic and Tactical Decision Making
1. Information is Power: Information is a valuable asset for businesses. It empowers
decision-makers by providing insights into market trends, consumer behavior,
competition, and more. With the right information, companies can make informed
strategic decisions that give them a competitive edge. For example, consider a car
manufacturer that analyzes market research data to identify a growing demand for
electric vehicles. This information empowers them to invest in research and
development to create electric car models, positioning themselves ahead of
competitors in the evolving market.
2. Information-Gathering Process: The information-gathering process involves
systematically collecting, organizing, and analyzing data to make effective decisions.
This process typically includes identifying information needs, determining data
sources, collecting relevant data, processing and analyzing the data, and finally,
interpreting and presenting the insights gained. For instance, a restaurant chain
planning to expand into a new region would engage in the information-gathering
process by researching demographics, local competition, and consumer
preferences in that area.
3. Marketing Information System: A Marketing Information System (MIS) is a
framework that businesses use to manage and analyze marketing-related
information. It helps gather, store, process, and distribute information to support
decision-making. The MIS incorporates people, processes, and technology to
ensure timely and accurate information flow. For example, an e-commerce
company might use an MIS to track website traffic, sales data, and customer
feedback to identify which products are popular and which areas need
improvement.
The Marketing Information System (MkIS) Process
- is a structured and integrated approach to gathering, storing, analyzing, and
disseminating information related to marketing decisions and strategies within an
organization. It assists marketers in making well-informed decisions by providing
timely and relevant data. The MkIS process consists of four key components:
internal information, marketing intelligence system, marketing research, and
information storage and analysis.
Internal Information: Internal information refers to data that originates from within
the organization itself. This includes information about sales, customer behavior,
inventory levels, production capabilities, financial data, and other relevant metrics.
This data is collected from various departments within the organization and is
crucial for assessing the current performance of marketing activities.
Example: A retail company gathers internal information from its point-of-sale (POS)
system, which tracks daily sales, customer preferences, and inventory levels. This
information helps the company understand which products are selling well, when
to restock items, and how to tailor promotions based on customer buying patterns.
Marketing Intelligence System: A marketing intelligence system involves the
continuous process of gathering information from external sources to monitor and
analyze the competitive environment, market trends, and other relevant factors
that can impact the organization's marketing strategies. This component helps
marketers stay updated on industry changes and competitive activities.
Example: An automotive company uses a marketing intelligence system to monitor
competitor pricing, new product launches, and customer reviews. By analyzing this
data, the company can adjust its pricing and marketing campaigns to remain
competitive in the market.
Marketing Research: Marketing research involves the systematic gathering,
analysis, and interpretation of data to gain insights into consumer preferences,
market trends, and other factors that influence marketing decisions. This process
often involves collecting data directly from consumers through surveys, focus
groups, observations, and other research methods.
Example: A food and beverage company conducts marketing research to
understand consumers' preferences for a new flavor of soft drink. They distribute
surveys to a sample of their target audience, asking about flavor preferences and
willingness to try new products. The research findings guide the company in
developing and marketing the new soft drink flavor effectively.
Information Storage and Analysis: The information storage and analysis
component involves organizing and storing the collected data in a structured
manner. This data is then analyzed to identify patterns, trends, and insights that can
guide marketing strategies and decision-making. Advanced analytical tools and
technologies are often used to extract meaningful insights from the data.
Example: A technology company collects data on website traffic, user engagement,
and social media interactions. By using data analytics tools, they discover that a
particular blog post has been generating a high level of engagement. This insight
prompts them to create more content related to the topic, as it resonates well with
their audience.
CRM in B2C markets compared to B2B
B2C CRM: In a B2C context, CRM primarily revolves around managing interactions
with individual consumers. B2C transactions are typically more transactional and
involve a larger customer base. Here are some key characteristics of B2C CRM:
1. Mass Marketing and Personalization: B2C CRM often involves mass
marketing efforts to reach a broad audience. However, personalization is
crucial. Companies gather data on consumer preferences, behaviors, and
purchase history to tailor marketing messages, offers, and recommendations.
For instance, e-commerce platforms use purchase history to suggest relevant
products to individual shoppers.
2. Shorter Sales Cycle: B2C transactions usually have a shorter sales cycle
compared to B2B. Consumers make purchasing decisions relatively quickly,
so CRM systems need to be responsive and efficient in capturing customer
information, processing orders, and providing post-purchase support.
3. Omni-Channel Engagement: B2C CRM needs to accommodate interactions
across various channels such as social media, email, mobile apps, and
physical stores. Ensuring a consistent and seamless experience across these
channels is essential to maintaining a strong customer relationship.
4. Loyalty Programs: B2C companies often use loyalty programs to incentivize
repeat purchases. CRM systems play a vital role in managing these programs,
tracking customer points, rewards, and engagement levels.
B2B CRM: In a B2B context, the relationships are more complex, involving
interactions between businesses rather than individual consumers. B2B
transactions are typically high-value and involve fewer but more significant clients.
Here are some key characteristics of B2B CRM:
➢
Relationship Building: B2B CRM is focused on building and nurturing longterm relationships with key accounts. Sales cycles are usually longer and
involve multiple touchpoints, negotiations, and decision-makers within the
client organization.
➢
Account-Based Marketing (ABM): B2B CRM often integrates with accountbased marketing strategies. Rather than targeting individual customers, B2B
companies target specific accounts and personalize interactions based on the
unique needs and challenges of those accounts.
➢
Customization and Complex Sales: B2B products and services are often more
complex and customizable. CRM systems in B2B settings must support
configuring and pricing tailored solutions, managing quotes, and handling
intricate sales processes.
➢
Cross-Selling and Upselling: In B2B relationships, there is often room for
cross-selling and upselling additional products or services to existing clients.
CRM systems help track client needs, preferences, and opportunities for
expansion.
➢
After-Sales Support: B2B CRM extends beyond the point of sale. It involves
ongoing support, service, and maintenance. Timely and effective support is
crucial for maintaining customer satisfaction and long-term relationships.
Part 2: The B2B Marketing Research Process
In the B2B (business-to-business) context, marketing research is a crucial process
that helps organizations understand their target markets, competitors, and industry
trends. This process involves several steps to gather, analyze, and interpret relevant
information. Let's delve into each of the topics you've mentioned:
Clear Marketing Objectives: Clear marketing objectives are the foundation of any
successful marketing research process. These objectives define what the
organization aims to achieve through their research efforts. They guide the entire
research process and ensure that the research findings are aligned with the
organization's goals.
Example: A manufacturing company wants to expand its market share in the
aerospace industry. Their marketing objective could be to identify key decisionmakers within aerospace companies and understand their preferences when it
comes to suppliers.
Secondary Research (Desk Research): Secondary research involves gathering
information from existing sources such as market reports, articles, websites, and
databases. This type of research provides a foundation of knowledge and can help
businesses understand the current state of the market and identify potential
opportunities and challenges.
Example: A software company looking to enter the healthcare IT sector starts by
gathering secondary data from industry reports, academic journals, and
government publications to understand the growth potential, regulatory landscape,
and technological trends in the healthcare industry.
B2B Primary Research: B2B primary research involves collecting new data directly
from the target audience through surveys, interviews, focus groups, and
observations. This type of research provides firsthand insights into the specific
needs, preferences, and behaviors of potential customers.
Example: An office furniture manufacturer conducts surveys among corporate
facilities managers to understand their preferences for ergonomic furniture
designs, price points, and service requirements. The data collected directly from
these decision-makers informs the manufacturer's product development and
marketing strategies.
B2B Research in International Markets: Conducting B2B research in international
markets adds an additional layer of complexity due to cultural, regulatory, and
market variations across different countries. Organizations need to adapt their
research methodologies to account for these differences.
Example: A technology company aiming to expand its business into a new country
needs to conduct B2B research that takes into consideration the local business
culture, legal requirements, and language preferences. They might use local
research firms to ensure accurate data collection and interpretation.
Strategic concerns with marketing research
Objectives
The first strategic concern is to define the objectives of the marketing research.
What do you want to achieve with the research? Do you want to understand the
needs of your customers? Do you want to test a new product concept? Do you want
to measure the effectiveness of your marketing campaigns? The objectives of the
research will help to determine the methodology and the budget for the research.
Costs
The second strategic concern is the cost of the marketing research. Marketing
research can be expensive, so it is important to carefully consider the budget before
embarking on a research project. There are a number of factors that can affect the
cost of marketing research, such as the size and complexity of the project, the
methodology used, and the sample size.
Time
The third strategic concern is the time required for the marketing research.
Marketing research can take a few weeks or even months to complete, depending
on the size and complexity of the project. It is important to factor in the time
required for the research when making decisions about the research process.
Security
The fourth strategic concern is the security of the data collected during the
marketing research. Marketing research data can be sensitive, so it is important to
take steps to protect the data from unauthorized access. This may involve using
encryption, password protection, and other security measures.
Accuracy
The fifth strategic concern is the accuracy of the marketing research findings. It is
important to use a reliable methodology and to collect data from a representative
sample of the population. This will help to ensure that the findings of the research
are accurate and reliable.
Here are some examples of how these strategic concerns can play out in practice:
•
A company that is developing a new product might want to conduct
marketing research to understand the needs of potential customers. The
company would need to carefully define the objectives of the research, such
as understanding the product features that are most important to customers,
or the price that customers are willing to pay. The company would also need
to consider the cost of the research, the time required for the research, the
security of the data, and the accuracy of the findings.
•
A company that is launching a new marketing campaign might want to
conduct marketing research to measure the effectiveness of the campaign.
The company would need to define the objectives of the research, such as
understanding how many people are aware of the campaign, or how many
people have taken action as a result of the campaign. The company would
also need to consider the cost of the research, the time required for the
research, the security of the data, and the accuracy of the findings.
Forecasting in B2B marketing
-is the process of predicting future demand for products or services. It is important
for B2B marketers to forecast demand so that they can make informed decisions
about pricing, production, and inventory.
There are a number of different forecasting methods that can be used in B2B
marketing. Some of the most common methods include:
•
Time series analysis: This method uses historical data to predict future
demand.
•
Trend analysis: This method identifies the underlying trend in historical data
and uses it to predict future demand.
•
Seasonal analysis: This method identifies the seasonal patterns in historical
data and uses them to predict future demand.
•
Competitor analysis: This method analyzes the sales and marketing activities
of competitors to predict future demand.
•
Surveys and interviews: This method involves surveying potential customers
or conducting interviews to get their insights on future demand.
The best forecasting method for a particular B2B marketer will depend on a number
of factors, such as the type of product or service being marketed, the availability of
historical data, and the budget.
Benefits of forecasting in B2B marketing:
•
Helps to improve decision-making: Forecasting can help marketers make
better decisions about pricing, production, and inventory. This can lead to
increased profits and reduced costs.
•
Helps to identify opportunities: Forecasting can help marketers identify new
opportunities for growth. For example, if a marketer forecasts that demand
for a particular product is going to increase, they can start planning to
increase production or marketing efforts.
•
Helps to manage risk: Forecasting can help marketers manage risk by
identifying potential problems early on. For example, if a marketer forecasts
that demand for a particular product is going to decrease, they can start
planning to reduce production or marketing efforts.
Challenges of forecasting in B2B marketing:
•
Lack of historical data: In some cases, there may not be enough historical
data to accurately forecast demand. This can be a challenge for new
businesses or businesses that are marketing new products or services.
•
Changes in the market: The market can change quickly, making it difficult to
accurately forecast demand. For example, a change in government
regulations or a new competitor entering the market can have a significant
impact on demand.
•
Uncertainty: There is always some uncertainty involved in forecasting. Even
if a marketer uses the best forecasting method available, there is no
guarantee that the forecast will be accurate.
Chapter 4
Decision making and segmenting business markets
DISCUSSION QUESTIONS
Describe the DMU, the DMP and the BDD and evaluate the differences between
consumer and business markets.
➢ DMU stands for Decision-Making Unit. It is the group of people who make
the buying decision for a business. The DMU can include people from
different departments, such as the purchasing department, the engineering
department, and the marketing department.
➢ DMP stands for Decision-Making Process. It is the steps that the DMU takes
to make a buying decision. The DMP typically includes the following steps:
• Problem recognition
• Information search
• Evaluation of alternatives
• Purchase decision
• Post-purchase evaluation
➢ BBD stands for Buying Behavior Dimensions. These are the factors that
influence the buying behavior of businesses. The BBD include the following:
• Organizational factors, such as the size of the company, the industry,
and the culture
• Environmental factors, such as the economic climate, the technological
environment, and the political environment
• Personal factors, such as the decision-makers' needs, wants, and
preferences
The main differences between consumer and business markets are:
•
Number of buyers: There are fewer buyers in business markets than in
consumer markets.
•
Size of purchases: Business purchases are typically larger than consumer
purchases.
•
Buying process: The buying process in business markets is more complex
than the buying process in consumer markets.
•
Decision-making criteria: Businesses make buying decisions based on
different criteria than consumers. Businesses are more likely to consider
factors such as quality, price, and reliability.
•
Influences on buying decisions: The buying decisions of businesses are
influenced by a wider range of factors than the buying decisions of
consumers. These factors include the economic climate, the technological
environment, and the political environment.
The overall differences between the consumer buying process and the
organizational buying process
The consumer buying process is a five-step process:
•
Problem recognition
•
Information search
•
Evaluation of alternatives
•
Purchase decision
•
Post-purchase evaluation
The organizational buying process is a more complex seven-step process:
•
Problem recognition
•
Determination of the product specifications
•
Identification of potential suppliers
•
Request for proposals
•
Evaluation of proposals
•
Selection of a supplier
•
Order placement
Here are some examples of the differences between the consumer buying process
and the organizational buying process:
•
In the consumer buying process, the problem recognition step is often
triggered by a need or want. In the organizational buying process, the
problem recognition step is often triggered by a change in the organization's
environment, such as a new regulation or a new competitor.
•
In the consumer buying process, the information search step is typically
conducted by the individual consumer. In the organizational buying process,
the information search step is typically conducted by a team of people from
different departments.
•
In the consumer buying process, the evaluation of alternatives step is
typically based on the consumer's personal preferences. In the organizational
buying process, the evaluation of alternatives step is typically based on a set
of objective criteria, such as quality, price, and delivery time.
•
In the consumer buying process, the purchase decision is typically made by
the individual consumer. In the organizational buying process, the purchase
decision is typically made by a group of people, such as a committee or a
board of directors.
The major differences between segmenting B2B markets and B2C markets are as
follows:
•
The number of buyers: There are fewer buyers in business markets than in
consumer markets. This means that businesses can often target a smaller
number of segments.
•
The size of purchases: Business purchases are typically larger than consumer
purchases. This means that businesses can often charge higher prices for
their products and services.
•
The buying process: The buying process in business markets is more complex
than the buying process in consumer markets. This means that businesses
need to understand the needs of their target segments in more detail.
•
The decision-making criteria: The decision-making criteria in business
markets are more complex than the decision-making criteria in consumer
markets. This means that businesses need to understand the factors that are
important to their target segments.
How might marketing research be most profitably used in segmenting B2B
markets? What differences might there be between research carried out in B2B
markets and research in B2C markets?
Marketing research can be most profitably used in segmenting B2B markets by
identifying the specific needs of different companies within a particular industry.
Research carried out in B2B markets tends to be more complex than research
carried out in B2C markets because there are more variables to consider. For
example, research in B2B markets may need to take into account factors such as
company size, industry type, and purchasing behavior 1.
The differences between research carried out in B2B markets and research in B2C
markets are as follows:
•
Target audience: The target audience for B2B research is usually smaller than
that for B2C research. In B2B studies, the target audience for a product may
be less than a hundred, while there may be several thousand responses to a
quantitative survey in B2C studies .
•
Decision-making process: In B2B markets, there are usually multiple
decision-makers involved in the purchasing process, while in B2C markets,
there is usually only one decision-maker 1.
•
Type of segmentation criteria: In B2B markets, segmentation criteria are
usually based on company size, industry type, and purchasing behavior. In
B2C markets, segmentation criteria are usually based on demographic factors
such as age, gender, income, and education level 1.
Question 5: Explain why entry into a particular market segment by an industrial
company might require a longer strategic commitment than a comparable
decision made by a fast moving consumer goods manufacturer like Sara Lee.
Entry into a market segment involves a company's decision to target a specific group
of customers with unique preferences, needs, and characteristics. The nature of the
market and the industry can significantly influence the time required for strategic
commitment, and this can vary between an industrial company and a fast-moving
consumer goods (FMCG) manufacturer like Sara Lee. Several factors contribute to
why entry into a market segment by an industrial company might necessitate a
longer strategic commitment compared to a decision made by an FMCG
manufacturer:
1. Complex Sales Cycles: Industrial products often have longer and more
complex sales cycles. This is due to the intricate nature of B2B relationships,
involving negotiations, customization, testing, and demonstration of the
product's value proposition. In contrast, FMCG products are typically sold
through simpler, shorter sales cycles in retail environments.
2. Customization and Tailoring: Industrial products are frequently tailored to
meet the specific needs of clients. This customization requires a deeper
understanding of the customer's requirements, potentially leading to a
prolonged commitment period as the company develops, tests, and refines
the product to align with client needs. FMCG products usually have
standardized offerings that can be mass-produced with relative ease.
3. Longer Adoption and Implementation: Industrial products often require
integration with existing systems and processes. The adoption and
implementation of such products can be time-consuming as companies need
to ensure compatibility, provide training, and manage any disruptions that
may arise. FMCG products, on the other hand, are designed for quick and
easy consumption without significant integration.
4. Higher Switching Costs: Industrial customers face higher switching costs
when changing suppliers or adopting new solutions. This can make them
more cautious and deliberate in their decision-making process, extending the
time it takes for an industrial company to gain their trust and secure a
commitment. FMCG customers, on the other hand, have lower switching
costs and can readily switch between products.
5. Relationship Building: The B2B nature of industrial markets places a
premium on building long-term relationships. Companies need to establish
trust, credibility, and reliability with their industrial clients, often requiring
ongoing engagement and relationship-building efforts. FMCG companies,
while also valuing customer relationships, may have a more transactional
nature due to the frequent and rapid purchases of their products.
6. Complex Value Chains: Industrial markets often involve complex value chains
and partnerships, with multiple intermediaries and stakeholders. Navigating
these complex networks and building mutually beneficial relationships takes
time and effort. FMCG manufacturers, while also operating within value
chains, generally have more straightforward distribution channels.
7. Technological Integration: Many industrial products involve cutting-edge
technologies that require careful integration into existing infrastructure. This
integration can lead to longer lead times for implementation compared to
the relatively straightforward integration of FMCG products.
Applying B2B Segmentation to a Charity like Oxfam:
B2B segmentation principles can be applied to a charity like Oxfam, even though it
operates in the not-for-profit sector. In this context, B2B segmentation would
involve categorizing and tailoring efforts towards different types of donors,
partners, and stakeholders. Factors to consider would include:
•
Donor Profiles: Segmenting donors based on their motivations, contribution
history, and preferences. For instance, Oxfam might categorize donors into
individual philanthropists, corporate donors, foundation grants, and
government funding.
•
Geographic Segmentation: Tailoring strategies based on the geographic
location of donors or regions they wish to support. Different regions might
have varying levels of engagement and causes they are interested in.
•
Corporate Partnerships: Segmenting potential corporate partners based on
their alignment with Oxfam's values, CSR initiatives, and capacity for
collaboration.
•
Engagement Channels: Segmenting based on preferred communication
channels. Some donors might prefer digital updates, while others might
appreciate personalized mailings.
B2B Factors in Market Segmentation:
Entering Another Country:
•
Regulatory Environment: Understanding legal and regulatory requirements
in the target country.
•
Cultural Differences: Tailoring strategies to fit local cultural norms and
preferences.
•
Distribution Channels: Identifying suitable distribution partners and logistics
in the new country.
Moving an Existing Product into a New Market:
•
Competitive Landscape: Evaluating existing competitors and their offerings in
the new market.
•
Customer Needs: Understanding if the product needs customization to
address local preferences or requirements.
•
Pricing Strategy: Determining optimal pricing considering local market
conditions.
Moving from One Industry to Another:
•
Industry Knowledge: Gaining understanding of the new industry's dynamics,
trends, and players.
•
Technology and Expertise: Assessing whether existing capabilities can be
adapted or new ones need to be developed.
•
Supply Chain Adaptation: Identifying necessary changes in the supply chain
to fit the requirements of the new industry.
Benefits and Dangers of B2B Segmentation:
Benefits:
•
Focused Marketing: Efficient allocation of resources for targeted marketing
efforts.
•
Customized Solutions: Tailoring products/services to meet specific needs,
leading to higher customer satisfaction.
•
Competitive Advantage: Gaining a competitive edge by addressing unique
needs of different segments.
Dangers:
•
Over-Complication: Over-segmentation leading to complex and costly
marketing strategies.
•
Neglected Segments: Focusing excessively on certain segments while
neglecting others.
•
Resource Drain: Managing multiple segments might strain resources and
operational efficiency.
Example of Successful Segmentation: Amazon Web Services (AWS) segments its
B2B customers based on factors such as company size, industry, and use case,
allowing them to offer targeted services and solutions.
Example of Unsuccessful Segmentation: PepsiCo's Tropicana rebranding in 2009,
where they changed packaging which led to a backlash from loyal customers who
preferred the old design, resulting in sales decline. This showed a lack of
understanding of customer segments.
Systematic Approach to B2B Market Segmentation:
•
Market Research: Gather data on industries, customer needs, and
competitors.
•
Segment Identification: Group customers based on common characteristics
and needs.
•
Segment Profiling: Develop detailed profiles of each segment, including their
behaviors, preferences, and pain points.
•
Segment Attractiveness: Assess the potential value and viability of each
segment.
•
Select Target Segments: Choose segments that align with the company's
capabilities and objectives.
•
Develop Marketing Mix: Tailor marketing strategies for each chosen
segment.
•
Implement and Monitor: Execute strategies and continuously monitor
segment performance.
B2B Market Segmentation Approaches:
•
Demographic Segmentation: Based on company size, industry, location, etc.
•
Behavioral Segmentation: Customer usage patterns, buying frequency,
loyalty, etc.
•
Psychographic Segmentation: Attitudes, values, motivations of the target
audience.
•
Needs-Based Segmentation: Addressing specific pain points or needs of
customers.
•
Geographic Segmentation: Differentiating markets based on geographic
factors.
•
Firmographics: Similar to demographics but focused on business
characteristics.
CHAPTER TOPICS
Part 1: Decision Making in B2B Organizations
Decision making in business-to-business (B2B) organizations involves a complex
interplay of factors and processes that influence how companies make choices
related to procurement, partnerships, and operations. Unlike consumer decisions,
B2B decisions often involve multiple stakeholders and a more rational and
systematic evaluation process.
Ethics in Business: Ethics play a crucial role in B2B decision making. Companies are
expected to uphold ethical standards in their interactions with suppliers, customers,
and partners. For example, a manufacturing company might prioritize sourcing
materials from suppliers that adhere to fair labor practices and environmental
sustainability.
Choosing a Supplier: Selecting the right suppliers is critical for B2B organizations to
ensure quality, cost-effectiveness, and reliability of the inputs they receive. For
instance, an automobile manufacturer choosing a tire supplier must consider
factors like product quality, pricing, delivery schedules, and the supplier's financial
stability.
The Decision-Making Unit (DMU): The DMU consists of individuals or groups within
a B2B organization who are involved in the decision-making process. These
stakeholders have different roles and perspectives. For example, in the purchase of
new software for a company, the DMU might include IT managers, department
heads, and top executives who evaluate the software's technical, operational, and
financial aspects.
The B2B Decision-Making Process (DMP): The B2B decision-making process is a
series of steps that organizations go through when making procurement or
partnership decisions. This process typically involves stages such as problem
recognition, information search, evaluation of alternatives, supplier selection, and
post-purchase evaluation. For instance, a pharmaceutical company seeking a
contract research organization for clinical trials would follow a structured DMP to
ensure the best fit.
The Buying Decision Difficulty (BDD): The BDD refers to the level of complexity and
uncertainty associated with a B2B purchasing decision. It is influenced by factors
such as the novelty of the product or service, the financial and strategic impact of
the decision, and the number of stakeholders involved. For example, adopting a
new and innovative technology solution might have a high BDD due to uncertainties
about its long-term impact and integration challenges.
Part 2: Business-to-business segmentation
Why segment business markets?
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Clearly identify disparate customer needs.
Plan strategic and tactical approaches that match each and every customer
need.
Develop a portfolio of products and services that match customer needs.
Focus management and worker attention across every department on
customers’ needs.
Build and maintain competitive advantage.
Give continuous superior customer satisfaction.
Identify new opportunities in existing markets.
Identify new opportunities in non-served markets.
Help bring sales, profits and organisational success.
Prepare all company members for the likelihood of change.
Overall, make the company more competitive.
Market Segmentation: Strategic Importance of Segmentation
Market segmentation involves dividing a heterogeneous market into smaller, more
manageable segments with similar characteristics, needs, and behaviors. This
strategic process is vital for several reasons:
•
Targeted Marketing: Segmentation allows companies to tailor their
marketing efforts to specific customer groups. By understanding the unique
needs and preferences of each segment, businesses can create more relevant
and compelling marketing messages. For example, a technology solutions
provider might segment its B2B customers based on industry needs, enabling
them to craft targeted campaigns that resonate with each industry's pain
points.
•
Resource Allocation: Segmentation enables efficient allocation of resources.
Companies can focus their efforts on the segments that offer the greatest
potential for profitability. This prevents wastage of resources on customers
who might not be the best fit for the company's offerings. For instance, a
construction equipment manufacturer might focus its marketing resources
on segments that have a strong demand for their specialized machinery.
•
Product Customization: Understanding the needs of different segments
allows businesses to customize their products or services to meet those
needs more effectively. This can lead to higher customer satisfaction and
loyalty. An example could be a software company that offers different
versions of its product, each tailored to the specific needs of different
segments like healthcare, finance, and manufacturing.
•
Market Expansion: Segmentation can reveal underserved or overlooked
segments in the market. Identifying these opportunities can lead to
expansion into new markets that were previously unrecognized. For instance,
a shipping and logistics company might realize through segmentation that
there's a growing need for specialized shipping solutions in the e-commerce
sector, prompting them to tailor their services to meet this demand.
Information, marketing research and segmentation
Segmenting Existing B2B Markets:
•
Information Gathering: Begin by collecting data on your existing customer
base. This might involve analyzing past purchasing behavior, demographics,
industry types, company sizes, geographic locations, and any other relevant
data points.
•
Market Research: Conduct surveys, interviews, and data analysis to identify
common patterns and characteristics among your existing B2B customers.
Explore their pain points, preferences, and needs.
•
Segmentation Criteria: Based on the information gathered, establish
segmentation criteria that make sense for your business. For instance, you
might segment by industry, company size, purchasing frequency, or
geographic region.
•
Data Analysis: Use statistical tools and techniques to analyze the collected
data and identify distinct segments. Clustering methods like K-means or
hierarchical clustering can be useful for this purpose.
•
Segment Profiling: Once segments are identified, create detailed profiles for
each segment. Describe their unique attributes, needs, challenges, and
preferences.
Segmenting B2B New Markets:
•
Market Research: Start with thorough research on the new market you
intend to enter. Understand its industry dynamics, competitive landscape,
customer preferences, regulatory environment, and economic conditions.
•
Customer Analysis: Identify potential customer segments within the new
market. This might involve analyzing existing companies, their sizes, and their
specific needs that align with your products/services.
•
Market Entry Strategy: Choose a market entry strategy based on your
research. Will you target a niche segment or a broader market? Is there a gap
in the market that your offerings can fill?
•
Pilot Testing: Before fully committing, consider pilot testing your offerings
with a smaller subset of the identified segments. This helps validate your
assumptions and gather feedback.
Segmenting Different B2B Markets:
•
Market Analysis: When transitioning from one industry to another, conduct
a comprehensive analysis of the new industry. Understand its structure, key
players, trends, and customer profiles.
•
Competitor Analysis: Identify the main competitors in the new industry and
their market positioning. This helps you understand how your offerings can
stand out.
•
Customer Needs Assessment: Research the specific needs and pain points of
customers in the new industry. You might find that their requirements differ
significantly from those in your previous industry.
•
Segment Identification: Based on the new industry's characteristics, identify
potential segments that align with your capabilities. These segments might
be based on size, function, or other relevant factors.
•
Customization and Positioning: Tailor your products/services to address the
unique needs of the identified segments within the new industry. Position
your offerings as solutions that cater to their specific challenges.
In all these scenarios, effective marketing research and segmentation require a
systematic approach:
•
Data Collection: Gather relevant data from internal sources, market reports,
surveys, and other data collection methods.
•
Data Analysis: Use statistical analysis tools and techniques to uncover
patterns, correlations, and insights within the data.
•
Segmentation Strategy: Define clear segmentation criteria based on the
identified patterns and characteristics.
•
Segment Profiling: Create detailed profiles for each segment, including
demographics, behaviors, preferences, and pain points.
•
Test and Validate: Before fully implementing your segmentation strategy,
consider pilot testing or validation to ensure that your assumptions align with
reality.
Viability of Segmentation
When considering market segmentation, several factors determine its viability:
•
Matching Organizational Objectives: Segmentation should align with the
company's overall goals. For instance, if an IT consulting firm's objective is to
expand globally, segmenting its market based on regions would support this
goal.
•
Profitability: Segments must be large enough to generate sufficient revenue
and profit. A manufacturer of industrial machinery must evaluate whether
smaller niche segments can sustain their business.
•
Market Measurement: Segments should be measurable and accessible. A
B2B software company should be able to identify and reach decision-makers
within specific industries.
•
Resource Capabilities: The company's resources, including marketing budget
and manpower, should align with the chosen segmentation strategy. A startup might struggle to serve multiple segments simultaneously due to limited
resources.
•
Ethical and Moral Perspective: Segmentation decisions should align with
ethical values. For example, a pharmaceutical company should avoid
segmenting markets in a way that unfairly exploits vulnerable populations.
•
Legal Considerations: Segmentation efforts must adhere to legal regulations.
Discriminatory or exclusionary practices can lead to legal consequences. An
HR software provider must ensure its segmentation doesn't lead to biased
hiring practices.
Segmentation Methods in Business-to-Business Markets
Macro Segmentation: Macro segmentation
It makes sense to identify the macro methods of market segmentation and once
the broader markets have been broken down, examined and high potential areas
selected, then to move into the micro, smaller areas. We begin by looking at the
macro environment. The macro segmentation process is as follows:
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Industrial and/or consumer markets
Geographic segmentation
Manufacturing, service or agricultural industries
Segmenting by public, private or not-for-profit sector
Segmenting by small, medium or large company
Segmenting by products and services offered.
Micro Segmentation: Micro segmentation takes the segmentation process a step
further by breaking down the broader macro segments into smaller, more specific
groups based on deeper characteristics.
Segmenting B2B by organisation buying behaviour:
All organisations exhibit distinct ways of behaving and these will be discussed in
more detail in later chapters. Below are some of the major forms of business
behaviour that could have an important impact on the buying situation and the
needs of benefit segmentation:
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Present, past, or non-user
Heavy, medium, or light user
Centralised or decentralised buying
Single source or multiple source user
National accounts
Partnering and non-partnering relationships
Reciprocal relationships
Product benefits
One-off buyer
Repeat purchaser
Payment record.
Changing Importance of Segmentation Factors in B2B Markets:
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Market Trends and Technological Advances:
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As new technologies emerge, certain factors may gain importance. For
instance, the rise of artificial intelligence could make factors like data
integration capabilities and automation support more significant.
Economic Shifts:
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Economic fluctuations can influence segmentation factors. During
economic downturns, cost-effectiveness and ROI might become more
crucial, while during prosperous times, scalability and innovation
might take the forefront.
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Societal and Environmental Changes:
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Regulatory and Compliance Changes:
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The strategies of competitors can influence segmentation factors. If a
new player emphasizes a certain feature, other companies might need
to adjust their priorities to remain competitive.
Industry-Specific Influences:
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Evolving customer preferences can shift segmentation factors. For
example, as remote work becomes more common, software solutions
with strong remote collaboration features might gain importance.
Competitive Landscape:
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Companies entering new international markets might prioritize factors
like cultural adaptability and localization capabilities to effectively
serve diverse customer bases.
Customer Preferences and Expectations:
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Alterations in regulations or compliance requirements can reshape
segmentation priorities. Companies may need to focus on factors
related to meeting new standards or avoiding penalties.
Globalization and Market Expansion:
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Changes in societal values, such as a growing emphasis on
sustainability, could elevate factors like eco-friendly practices and
energy efficiency in various industries.
Industry dynamics can alter segmentation importance. For instance, in
the healthcare sector, factors related to patient data security and
interoperability could become paramount.
Technological Adoption Rates:
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As certain technologies become more widely adopted, their related
segmentation factors might gain prominence. For instance, as more
businesses use mobile devices, mobile compatibility might become a
key factor.
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Customer Feedback and Market Research:
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Direct feedback from customers and ongoing market research can
highlight emerging needs, causing certain factors to rise in importance
over time.
Part 4: Market Segmentation Process
The market segmentation process is a crucial aspect of marketing strategy that
involves breaking down a heterogeneous market into smaller, more manageable
segments based on shared characteristics and preferences. This allows businesses
to tailor their marketing efforts and offerings to specific customer groups,
increasing the likelihood of success. The process typically consists of six stages:
1. Identify the Basis for Market Segmentation:
•
This is the foundation of the segmentation process.
•
It involves selecting criteria to divide the market into meaningful
groups.
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Examples: Demographic factors (age, gender), geographic factors
(location), psychographic factors (lifestyle), behavioral factors
(purchase history).
2. Determine the Important Characteristics of Each Segment:
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Define key attributes that differentiate each segment.
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Create profiles that include demographic, psychographic, and
behavioral data.
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Example: Segmenting an outdoor gear market into "Adventure
Seekers" (young, thrill-seekers) and "Family Campers" (middle-aged,
family-oriented).
3. Evaluate the Market Attractiveness of Each Segment:
•
Assess the potential of each segment in terms of size, growth, and
profit potential.
•
Consider competition, barriers to entry, and market trends.
•
Example: A software company evaluates segments based on the size
of the target industry and the level of existing competition.
4. Segment Selection:
•
Choose the segments that align with the company's resources and
objectives.
•
Focus on segments that offer the greatest potential for success.
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Example: An airline targeting both business travelers and budgetconscious tourists selects the "Business Class" and "Economy Class"
segments.
5. B2B Corporate/Product Positioning:
•
Determine how the company wants to be perceived by the selected
segments.
•
Create a unique value proposition that resonates with each segment's
needs.
•
Example: A technology provider positions itself as an innovative
solution for "Small Businesses" and a reliable partner for "Enterprise
Clients."
6. Develop a Marketing Mix Strategy for Each Targeted Segment:
•
Tailor the marketing mix (product, price, place, promotion) to address
the specific preferences and needs of each segment.
•
Example: A cosmetics company offers premium skincare products with
personalized packaging and higher prices for the "Luxury Beauty
Enthusiast" segment, while providing affordable options for the
"Budget Shoppers" segment.
Determine the important characteristics of each segment
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Country characteristics: political support for a market economy, economic
growth, interest rates, whether in or out of the euro, infrastructure, industrial
laws and regulations, pressure group activity, etc.
B2B market structures: monopolies/monopsonies, oligopolies/oligopsonies,
competitive.
Market sector: growth, maturity and decline, forecast demand levels.
Supply chain: structures and relationships along the supply chain, horizontal
relationships.
Competition: level of competitive activity across all relative markets, market
share, product portfolio, products.
Size of buying organisations: small, medium and large, classifications and
numbers.
Number of buying organisations: buying patterns, buying needs, products
and services purchased.
Business competition: numbers, sizes, market share in the small business
market.
Evaluate the market attractiveness of each segment
Market segment attractiveness
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Government regulations
Economic stability
Size of the market segment
Growth
Profitability
Barriers to entry
Competitive intensity
Channel structures
Number of buying organisations
Number of selling organisations
Price levels and profitability potential.
Marketing strength (ability to compete in the segment)
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Marketing research databases
Products and service attractiveness
Overall portfolio fit
Product portfolio selection on offer
Costs
Distribution contract opportunities
Extensive, selective or concentrated distribution opportunities
Concentrated distribution
Management skills
Technical skills
Marketing and sales skills
Promotion experiences
Ability to control.
Market attractiveness assessment helps businesses identify which segments are
worth pursuing based on their potential for growth, profitability, and alignment
with the company's resources and objectives.
•
Segment Size: Determine the size of the target segment in terms of potential
customers or revenue. Example: A company considering entering the electric
vehicle market evaluates the size of the segment by analyzing the number of
potential buyers and their preferences.
•
Growth Potential: Evaluate the projected growth rate of the segment over a
certain period. Example: A tech company assessing the cloud computing
segment looks at industry reports indicating a double-digit growth rate due
to increasing demand for remote data storage.
•
Competitive Intensity: Analyze the level of competition within each
segment. Example: A new entrant in the online streaming industry examines
the number of established players and their market share to understand the
competitive landscape.
•
Profitability: Estimate the potential profitability of serving the segment
considering factors like pricing, costs, and potential upsell opportunities.
Example: A luxury fashion brand examines the high-margin potential of
targeting affluent customers in the premium accessories segment.
•
Market Trends: Consider the current and emerging trends that could impact
the segment's attractiveness. Example: A health food company explores the
growing trend of plant-based diets and its potential impact on the market for
meat alternatives.
Segment Selection
Segmentation involves dividing a broader market into smaller, distinct groups of
customers with similar characteristics, needs, and preferences.
•
Demographic Segmentation: Grouping customers based on demographic
factors like age, gender, income, and education. Example: An insurance
company tailors policies for seniors by considering their retirement income
and health needs.
•
Psychographic Segmentation: Categorizing customers based on lifestyle,
values, beliefs, and interests. Example: A travel agency targets adventure
enthusiasts who prefer offbeat destinations and unique experiences.
•
Geographic Segmentation: Segmenting customers by their geographic
location, such as country, region, or climate. Example: A beverage company
offers different products for tropical regions with hot climates and colder
regions with milder temperatures.
•
Behavioral Segmentation: Creating segments based on customers'
purchasing behavior, usage patterns, and brand loyalty. Example: An ecommerce site offers personalized recommendations based on a customer's
previous purchase history and browsing behavior.
B2B Corporate/Product Positioning
Positioning involves how a company or product is perceived in the minds of
customers relative to competitors.
•
Problem-Solution Positioning: Positioning a product as the solution to a
specific problem faced by B2B customers. Example: A cybersecurity company
positions its software as the ultimate defense against data breaches for
businesses concerned about online security.
•
Quality and Reliability Positioning: Emphasizing the high quality and
reliability of a B2B product to attract risk-averse customers. Example: A
manufacturer of industrial machinery positions its products as durable and
dependable, minimizing downtime for clients.
•
Innovation and Technology Positioning: Positioning a B2B product as cuttingedge and technologically advanced. Example: A software company positions
its new project management tool as the latest innovation in streamlining
corporate workflows.
Develop a Marketing Mix Strategy for Each Targeted Segment
The marketing mix comprises the set of tactical decisions a company makes to
promote its products or services effectively.
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Product: Customize the product or service to meet the specific needs and
preferences of each segment. Example: A cosmetic company offers a range
of skincare products tailored to different skin types, such as dry, oily, or
sensitive.
•
Price: Set prices that align with the perceived value of the product in each
segment. Example: A software company offers tiered pricing for its project
management software, with higher prices for advanced features suited for
larger businesses.
•
Promotion: Create targeted marketing campaigns that address the unique
concerns and interests of each segment. Example: An educational institution
promotes its MBA programs differently to working professionals seeking
career advancement and recent graduates aiming to boost their
employability.
•
Place: Choose distribution channels that are convenient and accessible to
each segment. Example: A gourmet food producer focuses on selling its
premium products through high-end supermarkets and online platforms
frequented by food enthusiasts.
Topics given by Shahid Sir
Derived Demand in Different Industries and Strategies for Different Types of
Business Markets:
Derived demand refers to the demand for one product or service that arises from
the demand for another. It is often associated with business-to-business (B2B)
markets where the demand for a particular good or service is dependent on the
demand for the final product.
Example: Consider the demand for steel in the construction industry. The demand
for steel is derived from the demand for construction projects. If the construction
industry is booming, the demand for steel will increase.
Strategies for Different Business Markets:
Consumer Goods: Businesses in this market should focus on building strong brands,
creating emotional connections with consumers, and investing in advertising and
promotions. For example, Apple's marketing strategy for its iPhones emphasizes
sleek design and user experience.
Industrial Goods: Companies in this sector should focus on building relationships
with other businesses, providing efficient and reliable products, and emphasizing
the long-term cost savings of their products. For instance, a company that sells
manufacturing equipment might offer training and maintenance services.
Commodity Goods: In markets where products are considered commodities,
businesses often compete on price. Cost leadership strategies, efficient production,
and economies of scale are crucial. An example is the competition among generic
pharmaceutical companies that often focus on offering lower-priced alternatives to
branded drugs.
Internal and External Environmental Factors and Their Influence on Business
Marketing:
Internal Factors
• Organizational Culture: The values and beliefs within a company can
influence marketing strategies. For example, a company with a culture
emphasizing innovation may focus on cutting-edge product development.
• Resources: The availability of financial, human, and technological resources
can impact marketing capabilities. A company with robust financial resources
may invest more in marketing research and development.
External Factors
• Economic Conditions: The overall economic climate, including factors like
inflation and unemployment, can influence consumer purchasing power and,
consequently, marketing strategies. In a recession, consumers may be more
price-conscious.
• Technological Trends: Advances in technology can create new marketing
opportunities. For instance, the rise of social media has transformed how
companies engage with consumers.
• Legal and Regulatory Environment: Laws and regulations can affect
marketing strategies. For example, restrictions on advertising certain
products, such as tobacco, can shape how companies promote their
offerings.
Types of Business Markets and Competitive Advantage on Different Types of
Products:
Types of Business Markets:
• Consumer Goods Market: Involves products and services purchased by
individual consumers for personal use. Examples include clothing,
electronics, and food.
• Industrial Goods Market: Involves products used in the production of other
goods and services. Examples include machinery, raw materials, and
components.
• Reseller Market: Involves intermediaries that buy finished goods and resell
them to consumers. Wholesalers and retailers are examples.
Competitive Advantage:
• Low-Cost Products: Achieving cost leadership through efficient production
processes, economies of scale, and cost-effective supply chain management.
For example, Walmart is known for its low-cost strategy in retail.
• Service Products: Building a competitive advantage through excellent
customer service, personalized experiences, and responsiveness. Companies
like Zappos differentiate themselves through exceptional customer service.
• Industrial Products: Providing value through durability, reliability, and aftersales services. For instance, a manufacturer of industrial machinery may offer
maintenance contracts and technical support.
How to Gain Competitive Advantages:
Innovation: Introducing new and unique features or products that set the company
apart.
Quality: Consistently delivering high-quality products or services to build a positive
reputation.
Marketing and Branding: Effectively promoting the brand and creating a strong
brand image in the minds of consumers.
Customer Focus: Understanding and meeting the specific needs and preferences of
customers to create loyalty.
Cost Leadership: Being the low-cost producer in the industry, which can lead to
competitive pricing and increased market share.
Marketing Information System in B2B Context:
In a B2B (business-to-business) context, a Marketing Information System (MIS)
refers to a structured process for collecting, analyzing, storing, and disseminating
information related to marketing decisions. Unlike B2C (business-to-consumer)
settings, B2B marketing involves transactions between businesses, where the
buying decision is often complex and involves multiple stakeholders.
Description: The Marketing Information System in a B2B context plays a crucial role
in providing relevant and timely information to support decision-making
throughout the marketing process. It typically involves gathering data about the
market, competitors, customers, and the broader business environment.
Example: For instance, a company operating in the B2B space might use its MIS to
collect data on the buying behavior of its business customers, market trends, and
competitors' pricing strategies. This information can then be analyzed to formulate
effective marketing strategies, optimize product offerings, and enhance customer
relationships.
Comparison between Consumer and Business Market: Characteristics of Business
Market:
Description: Consumer markets and business markets differ in terms of their
participants, buying processes, and decision-making factors. While consumer
markets involve transactions between a business and individual consumers,
business markets involve transactions between businesses.
Characteristics of Business Market:
•
Nature of the Buying Unit: Business markets often involve a more
complex buying unit, with multiple individuals or departments
participating in the decision-making process.
•
Size of Purchases: Business markets typically involve larger transaction
sizes compared to consumer markets.
•
Geographic Concentration: Business markets may be more geographically
concentrated, especially when dealing with industrial goods and raw
materials.
•
Rational Decision-Making: Business buyers tend to make more rational
and logical purchase decisions, considering factors like ROI, efficiency, and
long-term benefits.
Business Buying Processes and the Role of Different Members: Strategy of Buying
Business Product:
Description: The business buying process involves a series of steps that
organizations go through when making purchasing decisions for products or
services. It is typically more complex and involves multiple individuals or
departments. The strategy for buying business products is formulated based on the
specific needs and goals of the organization.
Role of Different Members:
•
Initiators: Those who recognize the need for a product or service and
initiate the buying process.
•
Influencers: Individuals or groups that provide information or
recommendations during the decision-making process.
•
Decision-Makers: Those with the authority to make the final decision on
the purchase.
•
Buyers: Individuals responsible for the actual purchasing transaction.
•
Users: Those who will use the product or service once purchased.
Strategy of Buying Business Product:
•
Needs Assessment:
requirements.
Understand
the
organization's
needs
and
•
Supplier Identification: Identify potential suppliers and assess their
capabilities.
•
Proposal Solicitation: Request proposals from selected suppliers.
•
Evaluation and Selection: Evaluate proposals and select the most suitable
supplier.
•
Order Placement: Negotiate terms and place the order.
•
Post-Purchase Evaluation: Assess the performance and satisfaction with
the purchased product or service.
Example: A manufacturing company looking to upgrade its machinery may involve
engineers (initiators), procurement specialists (buyers), production managers
(users), and finance executives (decision-makers) in the business buying process.
The strategy may include detailed assessments of technical specifications, costbenefit analyses, and supplier evaluations.
Customer Relationship Management (CRM) in B2B Context:
Description: Customer Relationship Management (CRM) in a B2B context refers to
the strategic approach and practices that businesses employ to manage and nurture
relationships with their business customers or clients. Unlike B2C (Business-toConsumer) CRM, which focuses on individual consumers, B2B CRM involves dealing
with other businesses as customers. The goal is to enhance customer satisfaction,
loyalty, and ultimately drive long-term profitability through effective relationship
building.
Elaboration: In B2B CRM, businesses often deal with a smaller, more concentrated
customer base, and relationships are typically more complex due to the intricate
nature of B2B transactions. CRM systems are crucial in this context, as they help
organizations track interactions, manage communications, and analyze data to
better understand and meet the needs of their B2B clients. Effective B2B CRM
involves personalized communication, understanding the unique needs of each
business client, and providing solutions that contribute to their success.
Example: A manufacturing company that supplies components to an automotive
assembly plant might implement a B2B CRM system to track the plant's ordering
patterns, provide timely updates on inventory, and anticipate future demand. The
CRM system could also facilitate personalized communication, such as offering
customized product recommendations or addressing specific concerns raised by the
automotive plant.
Forecasting and Assessment of Demand Potential:
Description: Forecasting and assessment of demand potential involve analyzing
market trends, customer behavior, and various external factors to predict future
demand for a product or service. In a business context, this process is crucial for
effective inventory management, resource allocation, and overall business
planning.
Elaboration: Businesses use various methods such as statistical models, historical
data analysis, and market research to forecast demand. The assessment of demand
potential extends beyond mere prediction; it involves understanding the factors
that influence demand and evaluating the market's capacity to absorb a product or
service. This process helps businesses make informed decisions regarding
production volumes, pricing strategies, and marketing initiatives.
Example: A smartphone manufacturer might use forecasting and demand
assessment to anticipate the market demand for the next iteration of their product.
By analyzing trends in consumer preferences, technological advancements, and
economic factors, the company can adjust production levels, optimize supply
chains, and tailor marketing campaigns to meet the expected demand.
B2B Marketing in Non-Profit Organizations and in the Service Industry:
Description: B2B marketing in non-profit organizations and the service industry
involves the application of business-to-business marketing principles to entities
that operate in sectors focused on providing services rather than tangible products.
Non-profit organizations, in particular, engage in B2B marketing to secure
partnerships, funding, and support for their social or environmental causes.
Elaboration: In the service industry, B2B marketing revolves around promoting and
selling intangible services. This could include anything from consulting services to
software as a service (SaaS) solutions. Effective B2B marketing in these contexts
often requires building strong relationships, emphasizing the value of the services
offered, and demonstrating how these services can address the specific needs or
challenges faced by other businesses or non-profit entities.
Example: A non-profit organization focused on environmental conservation may
engage in B2B marketing to secure partnerships with corporate entities that share
a commitment to sustainability. The marketing efforts could include showcasing the
positive impact of the organization's initiatives, emphasizing shared values, and
illustrating how the corporate partner's support contributes to broader
environmental goals. In the service industry, a B2B marketing campaign for a
software company might highlight the efficiency gains and cost savings that
businesses can achieve by adopting their cloud-based collaboration tools.
Research Processes in B2B Marketing:
Description: In B2B (Business-to-Business) marketing, research processes are
crucial for understanding and meeting the needs of business customers. These
processes involve systematic investigations and analysis to gather relevant
information about the market, competitors, and potential clients.
Elaboration:
•
Market Analysis: This involves studying the overall market dynamics,
including trends, size, and growth potential.
•
Competitor Analysis: Understanding the strengths and weaknesses of
competitors helps in positioning a product or service effectively.
•
Customer Profiling: Creating detailed profiles of target business customers
helps in tailoring marketing strategies.
•
Product Research: Evaluating the demand and reception of products or
services within the B2B market is essential.
Example: For instance, a company planning to introduce a new software solution
for project management in the B2B sector might conduct research to identify
competitor offerings, assess market demand, and understand the specific needs of
businesses in various industries.
Micro and Macro Segmentation in B2B Market:
Description: Segmentation in the B2B market involves dividing a broad market into
smaller, more manageable segments for targeted marketing. Micro and macro
segmentation represent different levels of granularity in this process.
Elaboration:
•
Micro Segmentation: Involves dividing the market into very specific
segments based on detailed criteria like company size, industry, or
geographical location.
•
Macro Segmentation: Focuses on broader categorizations such as the overall
industry, regional markets, or large-scale demographic factors.
Example: Consider a company offering industrial machinery. Micro segmentation
might involve targeting small and medium-sized enterprises (SMEs) in a specific
region that has shown a high demand for such machinery. Macro segmentation, on
the other hand, could involve targeting the broader manufacturing industry across
different regions.
Segmentation Process, Challenges, Limitations, and Benefits in Business Customer
Segmentation:
Description: Segmentation in business customer segmentation is the process of
dividing a heterogeneous market into smaller, more homogeneous segments based
on certain characteristics, such as industry, company size, or purchasing behavior.
Elaboration:
•
Segmentation Process: Involves market research, identification of key
characteristics, grouping similar entities, and developing marketing strategies
tailored to each segment.
•
Challenges: Challenges may include obtaining accurate data, ensuring
relevance of chosen segmentation criteria, and adapting strategies to
dynamic market changes.
•
Limitations: Segmentation may oversimplify diversity within segments, and
there's a risk of overlooking emerging trends or niche markets.
•
Benefits: Enables more targeted marketing efforts, customization of
products/services, and better understanding of customer needs.
Example: Consider a software company providing cloud services. By segmenting its
business customers based on their industry and specific software needs, the
company can create tailored marketing campaigns and develop features that cater
to the unique requirements of each segment, enhancing overall customer
satisfaction and loyalty.
Types of B2B Products and Services:
Description: Business-to-business (B2B) products and services are those that are
sold from one business to another, rather than being sold directly to consumers.
There is a wide variety of B2B offerings, catering to different industries and needs.
Elaboration:
•
Raw Materials and Components: These are products that businesses use as
inputs to produce their own goods. For example, a car manufacturer
purchasing steel for production.
•
Finished Goods: Some businesses sell finished products to other businesses.
For instance, a wholesaler selling electronic gadgets to a retailer.
•
Services: B2B services can include consulting, legal services, marketing, and
more. Businesses often rely on specialized services to improve their
operations.
Examples:
•
Cisco Systems: Provides networking hardware,
telecommunications equipment to other businesses.
software,
and
•
Accenture: Offers consulting and professional services to improve business
operations.
•
3M: Sells a range of products, from office supplies to healthcare solutions,
targeting other businesses.
Branding Process and Business Process of Services:
Description: The branding process for services involves creating a unique and
compelling identity for a service-based business. This includes developing a brand
strategy, designing brand elements, and establishing a consistent brand message.
The business process of services encompasses the operational aspects of delivering
services efficiently.
Elaboration:
•
•
Branding Process:
•
Brand Strategy: Defining the unique value proposition and positioning
of the service.
•
Brand Identity: Creating logos, taglines, and visual elements that
represent the brand.
•
Brand Communication: Developing a consistent message and tone
across all communication channels.
Business Process of Services:
•
Service Design: Planning and organizing the delivery of services to
meet customer expectations.
•
Service Delivery: Implementing the service according to established
standards and procedures.
•
Quality Control: Monitoring and ensuring the quality of service
delivery.
Examples:
•
FedEx: Known for reliable and timely delivery services, their brand reflects
speed and efficiency.
•
Starbucks: Beyond selling coffee, they've built a brand around the experience
of their cafes.
•
Amazon Web Services (AWS): A leader in cloud services, known for reliability
and innovation in the tech industry.
Value Creation of Household Goods and Automated Products in DIY Conditions:
Description: Value creation in the context of household goods and automated
products in do-it-yourself (DIY) conditions refers to empowering consumers to
independently use, assemble, or repair products, adding value through
convenience and cost savings.
Elaboration:
•
Ease of Use: Products designed for easy assembly or installation without
professional assistance enhance user experience.
•
Cost Savings: DIY products often reduce the need for hiring professionals,
providing economic benefits to consumers.
•
Customization: Products allowing personalization or customization
contribute to a sense of ownership and satisfaction.
Examples:
•
IKEA Furniture: Known for flat-pack, self-assembly furniture that customers
can easily put together at home.
•
Smart Home Devices (e.g., Nest Thermostat): Designed for easy installation,
enabling homeowners to automate their climate control.
•
DIY Home Improvement Kits: Kits for installing shelves, cabinets, or flooring
that empower consumers to enhance their homes without professional help.
Strategic Approach for USP and Strategies in Business Products:
Description: A Unique Selling Proposition (USP) is a distinctive feature or benefit
that sets a product apart from its competitors. A strategic approach to USP involves
identifying and promoting these unique aspects effectively. Business product
strategies encompass plans and actions to market and sell products to other
businesses.
Elaboration:
•
•
Strategic USP Approach:
•
Market Analysis: Identifying gaps in the market and understanding
competitors' offerings.
•
Value Proposition: Clearly defining what makes the product unique
and valuable to customers.
•
Communication Strategy: Effectively communicating the USP through
marketing channels.
Business Product Strategies:
•
Targeted Marketing: Tailoring marketing efforts to specific business
needs and industries.
•
Relationship Building: Focusing on building long-term relationships
with business clients.
•
Innovation: Constantly evolving products to stay ahead of the
competition.
Examples:
•
Apple: Known for innovation and design, Apple's USP is often centered
around aesthetics and user experience.
•
Salesforce: A leader in customer relationship management (CRM), their USP
lies in cloud-based, customizable solutions.
•
Coca-Cola: While traditionally a B2C example, Coca-Cola also sells syrups and
concentrates to other businesses, emphasizing brand recognition as a USP.