Business Marketing
Overview
MKGT 550
Dr. Dawne Martin
August 25, 2011
Learning Objectives



Review differences from consumer
marketing
Understand the differences in customer
types and product types
Understanding other unique issues in
business marketing
What Is Business Marketing?



Those activities that facilitate exchanges
involving products and customers in business
markets
A business transaction between a professional
seller (representing a selling company) and a
professional buyer (representing a buying
company)
Activities in which goods or services are sold for
any use other than personal consumption
Note: It is not the nature of the product; it’s the
nature of the transaction.
Business Vs Consumer
Customers


When is a customer
considered a
business?
When a consumer?
Why Study Business
Marketing?






Good employment opportunities
Growing importance of high-tech business
products
Success of foreign competition
Significance of international
interdependence of firms
Importance of the service sector
Dramatic changes in the B2B environment
Overview of B2B
Ralph Oliva, Overview of Business-to-Business
Marketing, www.marketingpower.com.

B2B requires a value-based approach to marketing










Transactions are among & within value chains
Value primarily determined by business economic use
Small numbers of customers, requiring personalized
marketing and customized products and services
Large customer with formidable market power
Large unit transactions
Complex, lengthy selling process involving many players
Deeper partnerships with members of the value chain
Channel management oriented up and down the supply
chain
Sales focused on key accounts and multiply purchasing
influence (who may not be users)
How do these differences effect marketing planning,
strategy formulation and implementation.
How the Business Market Differs
from the Consumer Market
Exhibit 1-1
Characteristic
Business Market
Consumer Market
Sales volume
Purchase volume
Number of buyers
Size of individual buyers
Location of Buyers
Buyer-seller relationship
Nature of channel
Nature of buying
Nature of buying
influences
Type of negotiations
Use of reciprocity
Use of leasing
Primary promotion method
Greater
Greater
Fewer
Larger
Geographically concentrated
Closer
More direct
More professional
Multiple (buying center)
More complex
Yes
Greater
Personal selling
Smaller
Smaller
Many
Smaller
Diffuse
More impersonal
Less direct
More personal
Single
Simpler
No
Smaller
Advertising
Characteristics of Business
Demand

Derived Demand

Inelastic Demand


Fluctuating Demand – Acceleration Principle
Joint Demand -- two products used together

Value Creation


Competitive Advantage
Value Chain
The Nature of Business
Buying
Behavior
Exhibit 1-3
Evaluating Products
Product
Personal
computers
Questions Asked
by Typical
Business Users
Questions Asked by
Typical Ultimate
Consumers
Will it increase office
efficiency?
Will it help my child
learn?
What is its capital
investment value?
Will it improve my
correspondence?
Does it have special
features that will help
improve our company
image?
Is a laptop worth the
extra cost?
The Nature of Business
Buying
Behavior
Exhibit 1-3
Evaluating Products
Product
Automobiles
Questions Asked
by Typical
Business Users
Questions Asked by
Typical Ultimate
Consumers
How efficient is the vehicle
to operate?
How does it enhance my
status?
Would it be more
economical to lease it or
purchase it?
What is its potential tradein value?
What is the expected
working life span of the
car?
Will I get reasonable gas
mileage?
The Nature of Business
Buying Behavior
Exhibit 1-3
Evaluating Products
Product
Questions Asked
by Typical
Business Users
Questions Asked by
Typical Ultimate
Consumers
Telephones
Will expanded service
lower the cost of
communicating with our
customers?
Should our intercom
system be separate from
or connected to the
telephone system?
How long will it take to
have one installed?
Can I get three jacks and
two telephones?
A Classification of Business
Goods and Services
Exhibit 1-4
Type
Characteristics
Examples
Major
Equipment
Often referred to as “installations”
 Exhibit inelastic demand curve
 Usually involves direct distribution
 Requires close cooperation between
buyers and sellers
Machinery, machine tools,
stamping machines, robots
Accessory
Equipment
Used to facilitate production,
administrative, clerical, or marketing
activities  Exhibits elastic demand curve
 Distribution channels often longer
 Standardized and less costly than major
equipment
Office equipment, personal
computers, desktop printers,
hand tools, fire extinguishers
Process
Materials
Generally bought per specifications
prepared by the customer (user)
 Cannot be identified or regrouped in the
finished product  Most marketed to
OEMs or to distributors who sell to the
OEM market  Considerable emphasis on
price and service in the sales process
Chemicals, plastics, cement,
asphalt
Why would
marketing be
different for
each?
A Classification of Business
Goods and Services
Exhibit 1-4
Type
Characteristics
MRO
Supplies
Facilitate the production operation
 Short life and less expensive  Usually
standardized specifications  Longer
channels of distribution
Support organizational operations
 Spectacular growth  Specialized
providers  Cost effective
Brooms, paint, cleaning supplies,
bearings, gears, filters, pens,
greases, lubricating oils
Fabricated
and
Component
Parts
Become part of other product  Identified
and distinguished easily  Consistent
quality required  Delivery schedules
critical
Spark plugs, timing devices,
switches
Raw
Materials
Basic lifeblood of industry  Become part
of manufactured product  Exhibit
inelastic demand curve  Usually bought
in large quantities  Long or short
channels of distribution
Farm products, lumber, iron ore,
resins
Business
Services
Examples
Banking, insurance, financial,
advertising, marketing research,
employment services, consulting
Matching Exercise






Factory building
A business buying
toilet paper
Banking and
currency exchange
Grain for bread
production
Intel pentium chips
Computer printer







Capital equipment
Accessory
equipment
MRO Supplies
Services
Raw materials
Manufactured
material
OEM parts
Scope and Importance of
Customers






350,000 manufacturers
300,000 business service providers
400,000 wholesalers, distributors, agents
2.5 million retailers
80,000 government agencies (federal,
state, local)
Plus nonprofits—hospitals, museums,
parks, universities, political parties
Business Customers

Commercial Enterprises




Governmental Organizations




Industrial Distributors & Indirect channel members and
facilitators (VARS)
OEMs (original equipment manufacturers)
User-customers
Federal
State
Local
Institutions



Education
Hospitals
Non-Profits
Products Purchased






Conveyer
Conveyer replacement and
maintenance materials
Components going down
conveyer
Raw material and
components of
components
Assembly station magnifier
Power tool with blue cord








Assembly fixture
Table and chair
Trucks with
components on them
Floor cleaning
systems
Lighting systems
Heating/AC systems
Uniform vest
Health insurance
Business Marketing Planning
and Strategy Formulation

Includes:



Analysis of changing environments
Assessment of organization’s strengths and
weaknesses, opportunities and threats
Marketing planning




Takes the best information it can get
Analyzes it
Generates alternatives
Proposes a plan that best suits the firm, now.
Friar Casing, LLC


Friar casing makes steel cases to house products
used in difficult environments
Situation:





Tiffany has 5 years of experience with Coca-Cola in event
planning
Friar has had flat sales for 5 years, but pay for sales reps
has gone up
Tiffany suggests moving small customers to the web and
asking sales reps to bring in new customers
Her father believes that the relationship between customer
and sales rep is too important
What should Friar do?
Summary



Business Marketing is marketing
products to other businesses,
government or institutions.
Types of Customers
Types of Products
For Next Time


Read Chapter 2 of text
Prepare to address Case 2-1 (Market
Failure or Management Breakdown?)