Introduction toBusiness-to-Business

(B2B) Marketing

What Is Marketing?

• the process of planning and executing

• the conception (product), pricing, promotion, and distribution

• of ideas, goods, and services • to create relationships • that satisfy individual and

organizational objectives.”

BUSINESS MARKETING

IS• MARKETING OF GOODS AND SERVICES TO:

– Companies

– Government Bodies

– Institutions (i.e. hospitals)

– Non-Profit Organizations (i.e. American Red Cross)

FOR• USE IN PRODUCING THEIR PRODUCTS

AND/OR TO FACILITATE THEIR OPERATIONS

• B2B: goods or services are sold for any use other than personal consumption

• Note: It is notnot the nature of the product; it is the reason for the

transactiontransaction.

What Distinguishes B2B from B2C?

B2B versus B2C MarketingCharacteristic B2B Market B2C Market

Sales volume Greater Smaller

Purchase volume Greater Smaller

Number of buyers Fewer Many

Size of individual buyers Larger Smaller

Location of buyers Concentrated Diffuse

Buyer-seller relationship Closer More Impersonal

Nature of channel More direct Less direct

Buying influences Multiple Single/Multiple

Type of negotiations More complex Simpler

Use of reciprocity Yes No

Use of leasing Greater Less

Key promotion method Personal Selling Advertising

BUSINESS TO BUSINESS: IT IS ALL ABOUT DEMAND

• DERIVED DEMAND– The demand for a company’s products comes

from (derived) the demand for their customer’s products.

– Most demand comes from consumers.

• JOINT DEMAND– Two products are used together and demanded

together – Both products are consumed at the same time

• Inelastic Demand

• Fluctuating Demand

Other Characteristics of Business Demand

Major Uses of B2B Products

For additional production (e.g., components are combined into subassemblies and become part of the finished product)

For use in operations, but not part of the finished product

For resale

Classifying Business Goods & Services

3 Main Categories of ProductsEntering Goods

Become part of the finished productCost assigned to the manufacturing process

Foundation GoodsCapital ItemsTypically depreciated over time

Facilitating ProductsSupport organizational operationsHandled as overhead expenses

Classifying Business Goods & Services

Entering Goods Raw Materials

Farm products & natural productsOnly processed as necessary for handling & transportRequire extensive processing

Manufactured Materials & PartsAny product that has undergone extensive processing prior

to purchaseComponent Materials require additional processingComponent Parts generally do not require additional

processing

Classifying Business Goods & Services

Foundation GoodsInstallations

Major long-term investment itemsBuildings, land, fixed equipment, etc.

Accessory EquipmentLess expensive & short-livedNot considered part of fixed plantPortable tools, PC’s, etc.

Classifying Business Goods & Services

Facilitating ProductsSupplies

Any supplies necessary to maintain the organization’s operations

ServicesMaintenance & Repair supportAdvisory supportLogistical support

Categories of B2B Customers

• Commercial enterprises–Indirect channel members and

facilitators

–OEMs (original equipment manufacturers)

–Users = customers

• Governmental organizations

• Institutions