International Business to BusinessMarketing

Lecture Notes

Autumn 2004

Course Objectives

• Insight into theories explaining business to business marketing and supply chain activities

• Exposure to tools and models supporting business to business marketing and supply chain decisions– Conventional tools and models– Internet and e-market place

• Awareness of the international settings of business to business marketing and supply chain strategies

Three Theoretical Perspectives

• Conventional marketing• Need for integration of b2b marketing and supply

chain management theories

• Network Perspective• Strategic partnership

• Social construction• Relationship marketing• Buyer-Seller interactions

Dominant Characteristics of the ConventionalApproach to B2B Marketing

• Vendor-focused • Transaction-oriented

– Complexity of purchase decisions– Frequency of purchases– Volume– Product service range

Auctions

• Standardized products• Known technology• Standardized quality measures

• High volume• High frequency of usage• Price as important marketing parameter

The Purchaser Perspective to B2B Marketing

• Purchasing officers have different profiles and do not think like sales people– Strategic Importance of the product/solution– Cost savings vs. Solution enhancing purchases

• Firm size influences purchasing behaviour of firms

Product Value Analysis

• Does the use of the item contribute value?• Is its cost proportionate to its usefulness?• Does it need all its features?• Is there anything better foor its intended use?• Can a usable part be made by a lower-cost method?• Can a standard product be found that will be usable?• Is the product made on proper tooling, considering the

quantities that are used?• Will another dependable supplier provide it for less?• Is anyone buying it for less?

Key Features of B2B Products

• Fewer users and larger purchases• Derived demand - esp. for raw materials and components• Fluctuating demand – 10% change in consumer demand

can lead to more than 10% change in the demand for inputs• Rational buying decision process

– quality, --- technical, perceived– dependability– performance and service

Classification of Organizational Buyers

• Producers– Manufacturers– Service firms

• Intermediate customers• Public Sectors

– Institutions– Projects

• Non-Government Organisations

Key Characteristics of Business to Business Customers

• Use other peoples’ money• Professional buyers – usually rational • Collective decison process - buying centre • Key managers are usually involved• Relatively fewer in number• Purchases are usually substantial in volume and

value

International Dimensions of Business to Business Marketing

• Transnationality of Business Activities• Growing need for cross-national inter-firm collaborative

arrangements– Contract Production– Out-sourcing of inputs– Strategic Alliances

• Increasing demand for technology capacity enhancement packages in the emerging market economies

• Governments and international organizations as target markets

Conventional Concepts and Models in B2B Marketing

• The Buy Grid Model – Consists of 3 dimensionsConsists of 3 dimensions• Buy Situation

– New task – Modified Rebuy– Straight rebuy

• Buying Phases• Buying Centre

Two Dimensions of the Buygrid Model

• Task dimensions of the model• Buying situations/tasks, • Buying phases • Buying centre

• Non-task dimensions• The individual• The group• Organisation

Bunn’s Version BtB Buying Situations

PurchaseImportanace

Task Uncertainty

AlternativesAvailable

Buying Activities

Strategic New task

Very important Moderately uncertain

Limited choice Detailed search & analysis

Judgemental New Task

Quite important Great deal of uncertainty

Limited choice Moderate search & analysis

Simplemodified re-buy

Quite important Little uncertainty

Limited choice Moderate search & analysis

Complexmodified re-buy

Quite important Little uncertainty

Much choice Detailed search & analysis

Routine low priority

Somewhat important

Little uncertainty

Much choice Moderate search & analysis

Casual occasional purchases

Of minor importance

Little uncertainty

Much choice No search and analysis

Buying Phases

• Problem recognition• General need description• Product/service specification• Supplier search• Proposal solicitation• Supplier selection• Order-routine specification• Performance Review

Role of the Buying Centre

• Users• Influencers

– Define specifications and provide information for evaluating alternatives

• Deciders– Decide on product requirements and/or on suppliers

• Approvers– Authorise proposed action

• Buyers– Selects suppliers and arranges terms of purchase

• Gatekeepers– Prevents information from reaching members of the buying centre

Contribution to Purchase Decisions by Buying Centre Members

• Who originates the initial decision?• Who surveys alternatives and determines the basic characteristics of the

product required?• Who identifies potential suppliers?• Who collects tenders/information from suppliers?• Who evaluates products offered?• Who authorises the purchase?• Who finally chooses the supplier?• Who monitors and evaluates the performance of both the product and the

supplier?• Who is most likely to initiate decisions to change supplier?• Who finally decides on a change in supplier and selects the new supplier?

Buying Centre Analysis

• Buying centre members selectively participate in purchasing decision processes

• They have different choice criteria• They possess different levels of purchase knowledge• Their degree of involvement shift with the phases of the

buying process • Their influence and authority shift from one buying

activity to the other

Strategic Implications of Buying Centre

Analysis• Identification of key decision-makers/influencers at each

stage of the purchase decision process.• Assessment of buying centre members' decision variables• Assessment of buying centre members' information about/

attitude to one's firm and competitors• Reinforcing positive opinion about one's firm• Legitimacy-seeking strategies

• Reduce uncertainty about the expected quality of one's performance.– endorsement tactics,– Level, nature and intensity of interaction

International Perspectives on the Buy Grid Model

• Countries differ in terms of their notions of logic and decision making procedures

• Countries differ in terms of their degree of uncertainty avoidance

• Countries differ in terms of their degree of individualism and consensus seeking

• Countries and organisations differ in terms of respect for hierarchical positions

Some Strategic Implications

• Influence those whose money is being used (e.g. voters)• Adoption of customer retention strategies• Customized/Direct Marketing – E.g. Internet• Long term marketing strategies• Combination of rational arguments and persuasive

negotiation• Stimulating demand for potential customer products• Send high powered salespeople