Business to Business Marketing (B2B) Flashcards
(29 cards)
Characteristics of the B2B Market:
- The biggest market
- Purchases are often much larger
- Stakes (enjeu/investissement) are much higher
- Decisions are more complicated
- Markets are more specialized
What goes in to making a pair of trousers?
Technically speaking the same marketing principles apply:
- Come up with a competitive advantage for the target segments needs
- Develop a marketing mix strategy for product, price, place and promotion
- Develop a communication strategy
- Evaluate and revise
So what are the differences?
Size and scale: Large buyers:
■ You aren’t satisfying individual needs, but collective needs
■ There must be consensus in the firm
■ Many of these are not the end users
-> Thus the company selling university furniture must satisfy several needs: students, faculty administrators, teachers, campus planners, financial controllers, government safety standards.
Number of customers
B2C:
■ There are 510 million people in the eu
■ The field of “Business demography” tells us there are 26 million active enterprises
The number of companies is only 5.1% of the number of individual consumers in the EU
B2B:
A B2B business can have only 2-3 customers (or even 1) in very specialized sectors
Size of purchases:
■ So a family may go through a bottle of washing detergent every two weeks or so, perhaps more
■ The volumes consumed by a laundry company are enormous.
Geographic concentration:
■ Businesses are often located in one area, rather than spread out
■ This means it becomes possible to concentrate sales efforts
Characteristics of B2B demand:
■ Derived
■ Inelastic
■ Fluctuating
■ Joint
Derived demand:
■ Businesses don’t purchase goods and services to satisfy own needs, but the needs of others
■ So if SAS buys airplanes off Airbus, then this demand for planes is ultimately an expression of demand for air travel among the end consumers
Inelastic demand:
■ It doesn’t matter if the price of a b2b product goes up or down, the company buys the same amount.
■ This is often the case for complicated products. For instance: aeroplanes have 1000s of parts. If the price of one small component doubles or triples it doesn’t affect the demand for the plane.
Fluctuating demand:
Businesses often buy machines and other equipment that lasts for many years. Thus one large order spurs demand while the intervening years demand drops.
Joint demand:
■ Various essential components fit together to make the final product
■ A baker may need eggs, flour, yeast and butter to make a cake
■ The availability of yeast may be limited, thus limiting demand on eggs, flour and butter.
Types of B2B markets:
- Producers
- Resellers
- Organisations
Producers:
■ These purchase products for the production of other goods and services that other use in their production
■ Raw materials, energy, services, component parts etc
(e.g. those selling flour to bakers bought unprocessed wheat)
Resellers:
Wholesalers and distributors buy finished goods to as to resell to other businesses
Organisations:
■ Governments (local and national)
■ NGOs
■ Institutions
Business Buying Introduction:
■The b2b marketer needs to understand how customers (businesses make decisions)
■Like regular customers, businesses spend more time on some decisions rather than others
■The ‘Buy Class’ framework identifies the degree of effort required by the firm to collect information and make the decision
Different Business Buying decision making:
- Straight Re-buy
- Modified Re-buy
- New-task buy
Straight Re-buy:
■ Routine purchase on a regular basis
■ So, airlines may regularly purchase single serving milk for inflight coffee
Habitual Decision Process
Modified Re-buy:
■ A firm wants to shop around for suppliers with better prices, quality or delivery options
■ A marketing department purchasing a new and better laptop for a researcher: specialised needs
Limited Decision Process
New-task buy:
■ Uncertainty and risk escalate
■ Start from scratch
■ Gather information
■ Example: Beginning a new SBU…. Universities start a distance learning unit (Strategic Business Unit)
Extended Decision Process
Business Buying Decision Process
Suppliers:
One of the most important decisions for a buyer is how many suppliers can best serve the firm’s needs. Sometimes one supplier is more beneficial to the organization than multiple suppliers.
Sourcing:
- Single sourcing, in which a buyer and seller work quite closely, is particularly important when a firm needs frequent deliveries or specialized products.
- Multiple sourcing means buying a product from several different suppliers. Under this system, suppliers are more likely to remain price competitive.
- Outsourcing occurs when firms obtain outside vendors to provide goods or services that might otherwise be supplied in-house.
- Crowd sourcing may occur when a company finds that it’s both cost-efficient and productive to call on outsiders from around the world to solve problems their own scientists can’t handle.
- Reverse marketing occurs when buyers try to find suppliers capable of producing specific needed products and then attempt to “sell” the idea to the suppliers.
