ASSIGNMENT

ON

5th UNIT

[BUSINESS 2 BUSINESS marketing]

SUBMITTED TO:- SUBMITTED BY:-

Prof. B. Jaykar Vishal Kumar
Reg.No.T-6137
Marketing - 1
PGDM- [2010-12]
 BUSINESS TO BUSINESS (B2B) MARKETING
Business Marketing is the practice of individuals, or organizations, including commercial
businesses, governments and institutions, facilitating the sale of their products or
services to other companies or organizations that in turn resell them, use them as
components in products or services they offer, or use them to support their operations.
Also known as industrial marketing, business marketing is also called business-to-
business marketing, or B2B marketing, for short. (Note that while marketing to
government entities shares some of the same dynamics of organizational marketing,
B2G Marketing is meaningfully different.)

Business to business (B2B) Marketing Strategies

B2B Branding

B2B Branding is different from B2C in some crucial ways, including the need to closely
align corporate brands, divisional brands and product/service brands and to apply your
brand standards to material often considered “informal” such as email and other
electronic correspondence. it is mainly of large scale when compared with B2C.

Product (or Service)

Because business customers are focused on creating shareholder value for

themselves, the cost-saving or revenue-producing benefits of products and services are
important to factor in throughout the product development and marketing cycles.

People (Target Market)

Quite often, the target market for a business product or service is smaller and has more
specialized needs reflective of a specific industry or niche. A B2B niche, a segment of
the market, can be described in terms of firm graphics which requires marketers to have
good business intelligence in order to increase response rates. Regardless of the size
of the target market, the business customer is making an organizational purchase
decision and the dynamics of this, both procedurally and in terms of how they value
what they are buying from you; differ dramatically from the consumer market. There
may be multiple influencers on the purchase decision, which may also have to be
marketed to, though they may not be members of the decision making unit.
Pricing

The business market can be convinced to pay premium prices more often than the
consumer market if you know how to structure your pricing and payment terms well.
This price premium is particularly achievable if you support it with a strong brand.

Promotion

Promotion planning is relatively easy when you know the media, information seeking
and decision making habits of your customer base, not to mention the vocabulary
unique to their segment. Specific trade shows, analysts, publications, blogs and
retail/wholesale outlets tend to be fairly common to each industry/product area. What
this means is that once you figure it out for your industry/product, the promotion plan
almost writes itself (depending on your budget) but figuring it out can be a special skill
and it takes time to build up experience in your specific field. Promotion techniques rely
heavily on marketing communications strategies.

Place (Sales and Distribution)

The importance of a knowledgeable, experienced and effective direct (inside or outside)

sales force is often critical in the business market. If you sell through distribution
channels also, the number and type of sales forces can vary tremendously and your
success as a marketer is highly dependent on their success.

B2B Marketing Communications Methodologies

The purpose of B2B marketing communications is to support the organizations' sales

effort and improve company profitability. B2B marketing communications tactics
generally include advertising, public relations, direct mail, trade show support, sales
collateral, branding, and interactive services such as website design and search engine
optimization. The Business Marketing Association is the trade organization that serves
B2B marketing professionals. It was founded in 1922 and offers certification programs,
research services, conferences, industry awards and training programs.

Positioning Statement

An important first step in business to business marketing is the development of your

positioning statement. This is a statement of what you do and how you do it differently
and better and more efficiently than your competitors.

Developing your messages

The next step is to develop your messages. There is usually a primary message that
conveys more strongly to your customers what you do and the benefit it offers to them,
supported by a number of secondary messages, each of which may have a number of
supporting arguments, facts and figures.

Building a campaign plan

Whatever form your B2B marketing campaign will take, build a comprehensive plan up
front to target resources where you believe they will deliver the best return on
investment, and make sure you have all the infrastructure in place to support each
stage of the marketing process - and that doesn't just include developing the lead -
make sure the entire organization is geared up to handle the inquiries appropriately.

Briefing an agency

A standard briefing document is usually a good idea for briefing an agency. As well as
focusing the agency on what's important to you and your campaign, it serves as a
checklist of all the important things to consider as part of your brief. Typical elements to
an agency brief are: Your objectives, target market, target audience, product, campaign
description, your product positioning, graphical considerations, corporate guidelines,
and any other supporting material and distribution.

BUSINESS TO BUSINESS MARKETING

Over the past 15 years, however, business-to-business marketing has emerged as a discipline in
its own right and divergences in marketing practice have been accentuated.

What are business-to-business markets? To answer this question it is useful to consider the value
chain that starts with a consumer demand and from which dozens of business products or
services are required. Take the example of the simple shirts that we buy. They do not arrive in
the shops by accident. There is a value chain of enormous complexity that begins with cotton or
some other fiber that must then be woven into cloth, which in turn is machined into a garment,
packed and distributed through various levels until finally we pick it from the shelf. This is
illustrated in the diagram below.

Business-to-business marketing is therefore about meeting the needs of other businesses, though
ultimately the demand for the products made by these businesses is likely to be driven by
consumers in their homes.

Business-to-business (B2B) describes commerce transactions between businesses, such as

between a manufacturer and a wholesaler, or between a wholesaler and a retailer. Contrasting
terms are business-to-consumer (B2C) and business-to-government (B2G).
 Figure a Typical Decision Making Unit in A B2B Environment

CHALLENGES OF INTERNATIONAL MARKETS

• Marketers must consider buyers’ attitudes and cultural patterns.

• Local industries, economic conditions, geographic characteristics, and legal restrictions must
also be considered.

• Remanufacturing, or restoring worn-out products to like-new condition, can be an important

strategy in places that cannot afford new products.

• Foreign governments are also an important market.

CHARACTERISTICS OF THE B2B MARKET:-

GEOGRAPHIC MARKET CONCENTRATION

• Business market more concentrated than consumer market.

• Example: Companies that sell to the federal government are often located near Washington,

D.C.

• Businesses becoming less geographically concentrated as Internet technology improve.

SIZES AND NUMBER OF BUYERS

• Business market has smaller number of buyers than consumer market.

• Many buyers are large organizations, such as Boeing, which buys jet engines.

THE PURCHASE DECISION PROCESS

• Sellers must navigate organizational buying processes that often involve multiple decision
makers.

• Purchasing process usually more formal than in consumer market.

• Purchases may require bidding and negotiations.

BUYER-SELLER RELATIONSHIPS

• Often more complex than in consumer market.

• Greater reliance on relationship marketing.

EVALUATING INTERNATIONAL BUSINESS MARKETS

• Business purchasing patterns differ from country to country.

• Global sourcing Purchasing goods and services from suppliers worldwide.

• Can bring significant cost savings but requires adjustments.

CASH FLOW PLANNING

Cash flow planning refers to the process of identifying the major expenditures in future (both
short-term and long-term) and making planned investments so that the required amount is
accumulated within the required time frame.

BUYING CENTER:-
Buying Center can be defined as the body of all the individuals and groups participating in the
buying decision process and who have interdependent objectives and share common risk”

SEGMENTING B2B MARKETS:-

• Segmentation helps marketers develop the most appropriate strategy.

1) SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS

• Grouping by size based on sales revenues or number of employees.

2) SEGMENTATION BY CUSTOMER TYPE

• Grouping in broad categories, such as by industry.

• Customer-based segmentation dividing a business-to-business market into homogeneous

groups based on buyers’ product specifications.

3) SEGMENTATION BY END-USE APPLICATION

• End-use application segmentation Segmenting a business-to-business market based on how
industrial purchasers will use the product.

• Example: A supplier of industrial gases that sells hydrogen to some companies and carbon
dioxide to others.

4) SEGMENTATION BY PURCHASE CATEGORIES

• Segmenting according to organizational buyer characteristics.

• Example: Whether a company has a designated central purchasing department or each unit

Within the company handles its own purchasing.

• Businesses increasingly segment customers according to the stage in their relationship.

• Example: Whether a customer is new or a long-term partner.

GLOBALIZATION OF B2B MARKETS

Senior managers working in Business to Business (B2B) marketing face a number of key challenges
surrounding current global trends. Here, IMD’s Business Marketing  program Faculty offer some ideas
for effectively managing these pressing issues – making the trends work for you as opposed to against
you.

Global trends affecting B2B marketing

Several global trends have emerged as significant to B2B marketing. These are:

- Decreasing brand appeal

-  Client made/designed products
-  Increasing importance of services
-  Changing role of Key Account Management
-  Growing prominence of Brazil, Russia, India, and China (BRIC)
-  Offerings need to be both more global and more local
-  Capabilities as the differentiator
-  Fleeting advantage from investment in innovation
-  Elusiveness of profitability
-  Fierce global competition
Approaches for dealing with these trends
No single solution will address all these trends –and all can have both positive and negative
implications, depending upon a B2B firm’s positioning and how its managers set their strategies.
The four approaches outlined below offer potentially useful ways to deal with particular trends.
All have a single common denominator: ‘creating client success’. B2B firms need to add value
and differentiate themselves beyond a traditional definition of the core product or service so as to
offer customers novel benefits – such as added productivity, reduced cost and improved
competitiveness – that boost their own success.

Advancing a product business into services

Products, even sophisticated ones, are increasingly being commoditized, particularly by nimble
challengers from BRIC countries. Services, however – where the expertise of the team is the
differentiator – are often easier to innovate and harder to copy. Ramping up the service
component of a business can therefore help firms remain competitive in traditionally stable
industries and in face of fierce competition. Service revenue might consist of replacement or
spare parts, service contracts to regularly maintain equipment or products, or consulting on how
to best utilize products.

This is a challenging organizational undertaking. Companies must decide between integrating the
service business into the regular product sales operation, or creating a separate organizational
service unit; define the boundary between warranty and service; and price different service
components.

The effort is worthwhile, however. Stocks from firms which score well on the American
Customer Satisfaction Index (ASCI) grew 144.5% from 2001 to 2006, while the S&P index,
reflecting the market as a whole, grew by only 38.7% in the same time period. The consistent
feature of firms with successful service businesses is a close customer connection: that is,
building service propositions, pricing, and delivery around aspects of clearly differentiated value
to paying clients.

Managing the increasing power of distribution

In most developed countries, three or four retailers control over 75% of the market for key
product categories. The increasing economic and brand power of such large retailers is turning
some traditional Business to Consumer (B2C) product firms into B2B firms that view their
market as the retailer more than the end consumer.

Such companies have developed various strategies for succeeding in this environment. Some
devote specific product efforts to the large retailers, while others actively pursue growing
channels such as hard discounters. Manufacturers and retailers are increasingly sharing product
and consumer data, leading to optimized planning and execution of product introductions,
promotions, and in-store placement, as well as customized ‘shop-in-shop’ areas. In a few cases,
manufacturers have even found that they can dispense with the retailer altogether and deal
directly with the consumer.
Creating advantage from data

Many firms have invested in information infrastructure for collecting, staging, and managing
data on client, sales, inventory, and corporate resources. However, getting the right data and
getting the data right remain a challenge. B2B firms must not only collect information on their
direct customers, but also on their customers’ operations and their customers’ customers.

A second challenge is gaining and communicating tangible insights from the collected data. This
requires analytics: sophisticated software that analyzes data to produce outputs that managers can
readily interpret and act on. Ideally, analytics will not only help a B2B firm sharpen its own
operations, but also provide useful outputs for its customers – thus making the firm a valuable
business partner that can bring tangible insight and value to its customers’ operations.

Creating a new “value space”

Firms facing a competitive commodity industry need to enhance their core offering in order to
differentiate and position it as a premium offering. Three general approaches have been
successful for this.

One is ‘targeted extension’, where value is added by stretching the firm’s core offer into more
segments to better meet customized needs. Under this strategy, the firm may decide to
simultaneously offer commodity core product to some clients, and targeted offerings to others.
Targeted offerings can bring greater flexibility in pricing, with more advanced applications
carrying a price premium over the undifferentiated core product.

The second is ‘system development’. Here, the firm develops a package of products and services
that offers the synergistic benefits of a “system”. Not all the bundled components need to be
produced by the firm; however, the finished package carries the company’s brand and
performance guarantees. The value for the client lies in the integration among the system’s
elements, making the bundle larger than the sum of its parts.

The third approach is ‘solution innovation’, where value creation takes an ambitious turn away
from the core business and addresses specific client problems with specific solutions. Firms
planning to enter the solutions business – which promises attractive margins – need to be
innovative and re-invent what the industry has traditionally defined as value.

Business to business marketing is becoming one of the most complex environments that
managers face today. However, by thinking in terms of creating client success - matching a
differentiated offering to customer needs – managers can convert complexity into profitability.

MARKET SEGMENTATION IN B2B MARKETS

Satisfying people’s needs and making a profit along the way is the purpose of marketing. However,
people’s needs differ and therefore satisfying them may require different approaches. Identifying needs
and recognizing differences between groups of customers is at the heart of marketing.

Segmentation Challenges In Business-To-Business Markets

Business-to-business markets are characterised in a number of ways that makes them very
different to their consumer cousins. Below we summarise the main differences between
consumer and business-to-business markets, and set out the implications for segmentation:

1) B2B markets have a more complex decision-making unit:

In most households, even the most complex and expensive of purchases are confined to the small
family unit, while the purchase of items such as food, clothes and cigarettes usually involves just
one person. Other than low-value, low-risk items such as paperclips, the decision-making unit in
businesses is far more complicated. The purchase of a piece of plant equipment may involve
technical experts, purchasing experts, board members, production managers and health and
safety experts, each of these participants having their own set of (not always evident) priorities.

Segmenting a target audience that is at once multifaceted, complex, oblique and ephemeral is an
extremely demanding task. Do we segment the companies in which these decision makers work,
or do we segment the decision makers themselves? Do we identify one key decision maker per
company, and segment the key decision makers. In short, who exactly is the target audience and
who should we be segmenting?

2) B2B buyers are more ‘rational’:

The view that b2b buyers are more rational than consumer buyers is perhaps controversial, but
we believe true. Would the consumer who spends $3,000 on a leather jacket that is less warm
and durable than the $300 jacket next-door make a similar decision in the workplace? Consumers
tend to buy what they want; b2b buyers generally buy what they need.

It perhaps therefore follows that segmenting a business audience based on needs should be easier
than segmenting a consumer audience. In business-to-business markets it is critical to identify
the drivers of customer needs. These often boil down to relatively simple identifiers such as
company size, volume purchased or job function. These identifiers often enable needs and
therefore segments to be quite accurately predicted.

3) B2B products are often more complex:

Just as the decision-making unit is often complex in business-to-business markets, so too are b2b
products themselves. Even complex consumer purchases such as cars and stereos tend to be
chosen on the basis of fairly simple criteria. Conversely, even the simplest of b2b products might
have to be integrated into a larger system, making the involvement of a qualified expert
necessary. Whereas consumer products are usually standardized, b2b purchases are frequently
tailored.

This raises the question as to whether segmentation is possible in such markets – if every
customer has complex and completely different needs, it could be argued that we have a separate
segment for every single customer. In most business-to-business markets, a small number of key
customers are so important that they ‘rise above ‘ the segmentation and are regarded as segments
in their own right, with a dedicated account manager. Beneath these key customers, however, lies
an array of companies that have similar and modest enough requirements to be grouped into
segments.

4) B2B target audiences are smaller than consumer target audiences:

Almost all business-to-business markets exhibit a customer distribution that confirms the Pareto
Principle or 80:20 rule. A small number of customers dominate the sales ledger. Nor are we
talking thousands and millions of customers. It is not unusual, even in the largest business-to-
business companies, to have 100 or fewer customers that really make a difference to sales. One
implication is that b2b markets generally have fewer needs-based segments than consumer
segments – the volume of data is such that achieving enough granularity for more than 3 or 4
segments is often impossible.

5) Personal relationships are more important in b2b markets:

A small customer base that buys regularly from the business-to-business supplier is relatively
easy to talk to. Sales and technical representatives visit the customers. People are on first-name
terms. Personal relationships and trust develop. It is not unusual for a business-to-business
supplier to have customers that have been loyal and committed for many years.

There are a number of segmentation implications here. First, while the degree of relationship
focus may vary from one segmentation to another, most segments in most b2b markets demand a
level of personal service. This raises an issue at the core of segmentation – everyone may want a
personal relationship, but who is willing to pay for it? This is where the supplier must make firm
choices, deciding to offer a relationship only to those who will pay the appropriate premium for
it. On a practical level, it also means that market research must be conducted to provide a full
understanding of exactly what ‘relationship’ comprises. To a premium segment, it may consist of
regular face-to-face visits, whilst to a price-conscious segment a quarterly phone call may be
adequate.

6) B2B buyers are longer-term buyers:

Whilst consumers do buy items such as houses and cars which are long-term purchases, these
incidences are relatively rare. Long-term purchases – or at least purchases which are expected to
be repeated over a long period of time – are more common in business-to-business markets,
where capital machinery, components and continually used consumables are prevalent. In
addition, the long-term products and services required by businesses are more likely to require
service back-up from the supplier than is the case in consumer markets. A computer network, a
new item of machinery, a photocopier or a fleet of vehicles usually require far more extensive
aftersales service than a house or the single vehicle purchased by a consumer. Businesses’ repeat
purchases (machine parts, office consumables, for example) will also require ongoing expertise
and services in terms of delivery, implementation/installation advice, etc that are less likely to be
demanded by consumers.

In one sense this makes life easier in terms of segmentation. Segments tend to be less subject to
whim or rapid change, meaning that once an accurate segmentation has been established, it
evolves relatively slowly and is therefore a durable strategic tool. The risk of this, and something
which is evident in many industrial companies, is that business-to-business marketers can be
complacent and pay inadequate attention to the changing needs and characteristics of customers
over time. This can have grave consequences in terms of the profitability of a segment, as
customers are faced with out-of-date messages or benefits that they are not paying for.

7) B2B markets drive innovation less than consumer markets:

B2B companies that innovate usually do so as a response to an innovation that has happened
further upstream. In contrast with FMCG companies, they have the comparative luxury of
responding to trends rather than having to predict or even drive them. In other words, B2B
companies have the time to continually re-evaluate their segments and CVPs and respond
promptly to the evolving needs of their clients.

8) B2B markets have fewer behavioural and needs-based segments:

The small number of segments typical to b2b markets is in itself a key distinguishing factor of
business-to-business markets. Our experience of over 2,500 business-to-business studies shows
that B2B markets typically have far fewer behavioural or needs-based segments than is the case
with consumer markets. Whereas it is not uncommon for an FMCG market to boast 10, 12 or
more segments, the average business-to-business study typically produces 3 or 4.

The main reason for the smaller number of segments, however, is simply that a business
audience’s behaviour or needs vary less than that of a (less rational) consumer audience. Whims,
insecurities, indulgences and so on are far less likely to come to the buyer’s mind when the
purchase is for a place of work rather than for oneself or a close family member. And the
numerous colleagues that get involved in a B2B buying decision, and the workplace norms
established over time, filter out many of the extremes of behaviour that may otherwise manifest
themselves if the decision were left to one person with no accountability to others.

It is noticeable that the behavioural and needs-based segments that emerge in business-to-
business markets are frequently similar across different industries. Needs-based segments in a
typical business-to business market often resemble the following:
 A price-focused segment, which has a transactional outlook to doing business and does
not seek any ‘extras’. Companies in this segment are often small, working to low margins
and regard the product/service in question as of low strategic importance to their
business.
 A quality and brand-focused segment, which wants the best possible product and is
prepared to pay for it. Companies in this segment often work to high margins, are
medium-sized or large, and regard the product/service as of high strategic importance.
 A service-focused segment, which has high requirements in terms of product quality and
range, but also in terms of after sales, delivery, etc. These companies tend to work in
time-critical industries and can be small, medium or large. They are usually purchasing
relatively high volumes.
 A partnership-focused segment, usually consisting of key accounts, which seeks trust and
reliability and regards the supplier as a strategic partner. Such companies tend to be large,
operate on relatively high margins, and regard the product or service in question as
strategically important.