B TO B MARKETING

Business-toBusiness-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or wholesaler, between a wholesaler and a retailer.

The management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers.

Business-to-business (B2B) market is significantly larger than the consumer market.

Example: U.S. companies spend more than $300 billion annually just for office and maintenance supplies. Example: Department of Defense budget in a recent year was $500 billion. Business-to-business (B2B) marketing Organizational sales and purchases of goods and services to support production of other products, to facilitate daily company operations, or for resale.

Business-to-Business Marketing

Consumer-Goods Marketing Standardized form, service important but less than for business products List prices Emphasis on advertising Product passes through a number of intermediate links en route to consumer Comparatively infrequent contact, relationship of relatively short duration Individual or household unit makes decision
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Product

Relatively technical in nature, exact form often variable, accompanying services very important Competitive bidding for unique items, list prices for standard items Emphasis on personal selling Relatively short, direct channels to market Relatively enduring and complex

Price Promotion Distribution

Customer Relations Decisionmaking process

Involvement of diverse group of organization members in decision

COMPONENTS OF THE BUSINESS MARKET

Four main components:

Commercial market Individuals and firms that acquire products to support, directly or indirectly, production of other goods and services. Largest segment of the business market. Trade industries Retailers or wholesalers that purchase products for resale to others. Also called resellers, marketing intermediaries that operate in the trade sector.

 Governmentall domestic levels (federal, state, local) Government and foreign governments; also act as sellerse.g., sellers confiscated goods. Public and private institutions, such as hospitals, institutions, churches, colleges and universities, and museums.

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 improves.

Certain industries locate in particular areas to be close to their customers For example, suppliers of automobile components and assemblies frequently build their plants close to their customers

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 Businesses must understand the dynamics of the organizational purchasing process. * B2B suppliers often must work with multiple buyers. * Decision-makers at several layers may influence final orders. Decision* Process is more formal and professional than with consumers.

BuyerBuyer-Seller Relationships
More intense than consumer relationships - Require better communication among the organizations personnel - Primary goal of B2B relationships is to provide advantages that no other seller can, for instance: LowerLower-prices Quicker delivery Better quality and reliability Customized product features

Evaluating International Business Markets Business purchasing patterns often differ from one country to the next - Companies must weigh quantitative and qualitative data - Global sourcing: purchasing goods and services from suppliers worldwide

Flows within a B2B market

Unit production model of buyer-seller contact in B2B markets

Source: Adapted from Johanson (1982), copyright 1982 John Wiley & Sons Limited. Reporoduced with permission.

Mass production model of buyer-seller contact in B2B markets

Source: Adapted from Johanson (1982), copyright 1982 John Wiley & Sons Limited. Reproduced with permission.

BUSINESS MARKET DEMAND

Demand characteristics vary from market to market.

DERIVED DEMAND
y

The linkage between demand for a companys output and its purchases of resources such as machinery, components, supplies, and raw materials. Example: Demand for computer microprocessor chips is derived from demand for personal computers. Organizational buyers purchase two types of items: Capital itemslong-lived business aspects that depreciate. Expense itemsitems consumed within short time periods.

y y

VOLATILE DEMAND
y y

Derived demand creates volatility. Example: Demand for gasoline pumps may be reduced if demand for gasoline slows.

JOINT DEMAND
y

Results when the demand for one business product is related to the demand for another business product used in combination with the first item. Example: If lumber supply falls, then decrease in construction will affect concrete market.

INELASTIC DEMAND
y

Demand throughout an industry will not change significantly due to a price change. Example: Construction firms will not necessarily buy more lumber if prices fall unless overall housing demand also increases.