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Business Marketing, a.k.a. Industrial Marketing

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marketing of goods and services to individuals, and organizations for purposes other than personal consumption.

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B -to-B Marketing

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the distinguishing characteristic is the intended use, not the physical characteristics of the product.

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B-toB Market Size

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is much bigger than the consumer market. Not in terms of potential customers, but in terms of the total of their purchases.

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Business-to-business electronic commerce, a.k.a. B2B e commerce

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the use of the internet to facilitate the exchange of goods, services and information between organizations.

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Companies look to bypass expensive off-line tactics and use more measurable online tactics.

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Growth in internet usage for marketing B-to-B has grown tremendously. Common tactics include: Blogs Social Networking sites Twitter Video Streaming Sites E newsletters Mobile marketing Search Engine Optimization Online ads / banners Search key words Webinars

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Measuring Online Success

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General Measures: Recency, Frequency, monetary value of purchases

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Mixed Social Media reviews

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Some businesses use social media to generate quality leads, e.g. potential prospects / customers, for their salespeople to follow up on.

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B -to-B electronic portals should have these characteristics:

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1. Simple, uncluttered design 2. Use bold colors, large text 3. Layout 960 pixels wide, work well in variety of screen resolutions 4. A separate top section 5. Solid areas of screen real estate 6. strong visual hierarchy.

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Stickiness = Frequency x Duration x Site Reach

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a measure of a website's effectiveness calculated by multiplying the frequency of visits by the duration of a visit by the number of pages viewed during each visit (site reach).

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Strategic Alliance, a.k.a. strategic partnership

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cooperative agreement between firms. Can include licensing, distribution agreements, joint ventures, research and development consortia and partnerships.

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Strategic Alliances achieve

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Access to markets and technology Economies of scale - combining R , manufacturing or marketing Faster entry of new products to markets Sharing of Risk

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Strategic Alliances are more common in other cultures

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China, Japan, Korea, Mexico, much of Europe

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Relationship Commitment

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firm's belief that an ongoing relationship with another firm is so important that the relationship warrants maximum efforts at maintaining it indefinitely.

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Trust

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the condition that exists when one party has confidence in an exchange partner's reliability and integrity.

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keiretsu

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A network of interlocking corporate affiliates.

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Amae

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Is the feeling of nurturing concern for, and dependency upon, another.

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Four Major Categories of Business Customers

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1. Producers - use purchased goods / services to produce other products. e.g., 13 million in US 2. Resellers - retail & wholesale businesses that buy finished goods and sell them for a profit. 3. Governments - federal, state, local; together account for the greatest volume of purchases of any customer category in the U.S. 4. Institutions - Other than for profit; schools, hospitals, universities, churches, labor unions, etc.

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Producers manufacture things so they buy:

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1. To produce other products 2. To incorporate into other products (OEMs) 3. To facilitate daily operations

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Resellers

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Retailers - e.g., Walmart, ToysRUs; They buy to resell to the consumer market. Wholesalers - they buy to resell to retailers

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Governments

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Biggest market - Federal, State, Local

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Institutions

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nursing homes, schools, hospitals, etc.

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N.A.I.C.S. - North American Industry Classification System, 1997

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Due to NAFTA - North American Free Trade Agreement. Detailed numbering system developed by the U.S., Canada and Mexico to classify North American business establishments by their main production processes. NAICS Level: Sector - digits 1 & 2; Subsector - digit 3; Industry group - digit 4; Industry - digit 5; Industry subdivision - digit 6; So for our example the NAICS code would then be 123456. It is a 6 level code from general to specific. Replaced Standard Industrial Classification System.

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Derived Demand

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The demand for business products. Organizations buy products to be used in producing their customers' products. Without demand from the end user, there's no demand for the B-to-B good.

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Inelastic Demand

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means that an increase or decrease in the price of the product will not significantly affect demand for the product.

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Joint Demand

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the demand for two or more items used together in a final product; e.g., a decline in the availability of memory chips will slow production of microcomputers...so the demand for disk drives is reduced also.

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Fluctuating Demand

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the demand for business products, particularly new plants and equipment, tend to be less stable than the demand for consumer products.See Multiplier Effect.

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Multiplier Effect, a.k.a. accelerator principle

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phenomenon in which a small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and equipment needed to make the consumer product.

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Purchase Volume

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Business customers tend to buy in large quantities.

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Number of Customers

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Business marketers usually have far fewer customers than consumer marketers. The advantage is that its easier to identify prospective buyers, monitor current customer's needs and levels of satisfaction and personally attend to existing customers.

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Location of Buyers, a.k.a., concentration of customers

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business customers tend to be much more geographically concentrated than ultimate consumers.

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Distribution Structure

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Channels of distribution are typically shorter with fewer middlemen, if any at all in the business market.

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Original Equipment Manufacturers, a.k.a. OEM's

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individuals and organizations that buy business goods and incorporate them into the products they produce for eventual sale to other producers or consumers.

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Business-to-business online exchange

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an electronic trading floor that provides companies with integrated links to their customers and suppliers. The goal is to simplify business purchasing and make it more efficient.

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Reciprocity

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a practice whereby business purchasers choose to buy from their own customers. This only become illegal when one party coerces the other and the result is unfair competition.

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Major equipment - installations

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capital goods, such as large or expensive machines, mainframe computers, blast furnaces, generators, airplanes, and buildings.

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Nature of Buying

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Unlike consumers, business buyers tend to approach purchasing rather formally and use purchasing agents.

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Nature of Buying Influence

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Typically, more people are involved in a single purchase decision than in a consumer purchase.

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Negotiating

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This is common in business marketing, but consumers tend to only negotiate prices on houses and cars.

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Buying vs. Leasing

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Consumers normally buy products rather than lease them. Businesses commonly lease expensive equipment such as computers, construction equipment and vehicles.

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Primary Promotional Method

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Personal Selling is used much more often in business marketing than in the consumer market - fewer customers, bigger purchases, etc.

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Types of Business Products

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1. Major Equipment, a.k.a. installations - capital goods 2. Accessory Equipment - less expensive, shorter lived 3. Raw Materials - unprocessed, extracted or agricultural 4. Component Parts - either finished or near finished part of another product

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Raw Materials

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NaturalRaw Materials - found in nature, e.g., iron ore, minerals, etc. Farmed Raw Materials - intentionally produced on an ongoing basis; e.g. catfish farms, fruit, veggies, etc.

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Component Parts

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Items either ready or mostly ready for assembly into a product being produced; e.g., motor or breaks for auto assembly.

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Processed Materials

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Products used directly in manufacturing other products that have had some processing but are not ready for assembly; e.g., sheet metal to be stamped into car parts.

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Supplies

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Consumable items, not part of the final product. 3 Major Types, MRO Supplies: Maintenance Supplies - necessary to maintain equipment Repair Supplies - necessary to repair equipment Operating Supplies - Necessary to operate the business, e.g., TP, copier paper,

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Business Services

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Expense items that do not become part of the final product. e.g., janitorial services, advertising, etc.

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Buying Center

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All people in an organization who become involved in the purchase decision: I, I, G, D, P, U Initiator - suggests purchase Influencers / evaluators - those that influence the purchase Gatekeepers - regulate the flow of information Decision maker - decider - has power to approve purchase Purchaser - person who negotiates the purchase Users - Members of the organization who will use product.

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Product Life Cycle

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Four Stages: Introduction, Growth, Maturity, Sales Decline On a graph - Vertical axis = Sales Revenue Horizontal axis = Time Industry Sales line start at O point. Industry Profit line starts below zero point on vertical axis - in the red. Profit peaks earlier than sales. This is due to competition bringing the cost down.

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4 Characteristics in Sales Representatives

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1. Ability to marshal resources 2. An understanding of the buyer's business goal 3. Responsiveness to requests 4. Willingness to be held accountable

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Business Buyers Evaluate Products

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1. Quality 2. Service 3. Delivery 4. Price - Matters, not sole determinant

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Buying Situation

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1. New Buy - more information - High involvement 2. Modified Buy - different language to make sale - Medium involvement 3. Straight Rebuy - More often - Less involvement

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Negotiation

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Common in B-to-B goods

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Services

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Intangible activities or benefits that an organization provides to consumers.

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Characteristics of Services - The Four I's of Service

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1. Intangibility - can't see, touch, smell good service 2. Inconsistency - inevitable difference in performance 3. Inseparability - can't separate service from provider 4. Inventory - both person and supplies required

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Intangibility

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Why consumers look for reassuring signs when purchasing services- e.g. Prudential Insurance using the Rock of Gibraltar with "Get a piece of the rock." as its slogan.

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Inventory Carrying Costs

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Include both the cost of paying the person used to provide the service along with any needed equipment at times when there is no demand for the services.

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Service Perishability

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Means a firm can't store its services - use it or lose it (like unoccupied hotel rooms, airline seats, etc.)

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Capacity Management

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when organizations adjust their services to match demand.

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1. Good or Product-Dominated Services

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a tangible product accompanied by supporting services, e.g., buy a computer and get free telephone support for two years. Embodying the inclusion of a service with the purchase of a physical good.

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2. Equipment or Facility-Based Services

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businesses that rely on expensive equipment or facilities and skilled personnel to deliver a service, e.g., hospitals, restaurants, amusement parks, car washes, health clubs, etc.

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Service Disintermediation

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This process removes the inconsistency of an employee; e.g., self service gas instead of full service gas; self checkout at grocery stores; ATM machines; self-checkin at the airport.

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3. People Based Services

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Rely on selling the individual supplier of the service.

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Equipment or Facility Based Services have to be concerned with the following important factors:

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1. Operational Factors - Have minimal waiting Have good signage / instruction 2. Location Factors - Important for frequent services, e.g., banking, dry cleaning 3. Environmental Factors - Must be attractive to lure customers

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Operational Factors

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Technologies must move customers smoothly through the service. Clear signs and other guidelines must show customers how to use the service. Firms need to minimize waiting times.

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Locational Factors

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especially important for frequently purchased services such as dry cleaning or banking that are obtained at a fixed location. Location Matters.

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Environmental Factors

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Managers with storefronts realize they must create an attractive environment to lure customers

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Facility Atmosphere

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Lighting, signage, smell - it's all important

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Providing Quality Service

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Providing the most innovative product, equipment or people based service isn't worth a hill of beans if it's not done or delivered well.

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Judging Service Quality

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Satisfaction / dissatisfaction is more than a reaction to the actual performance quality of a product o service. It is influenced by prior expectation regarding the level of quality. When an offering is as expected we may not think much about it. If it fails to live up to expectations, we will not be happy.

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Measuring Service Quality

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Measuring positive and negative service experiences is critical in the service industry. Methods include: Mystery Shoppers Speak to lost customers to find out what turned them off. Gap analysis - difference between expectations of service quality and what actually occurred. Critical Incident Technique - Analyze very specific customer complaints to identify critical incidents. Specific contacts between service providers and consumers that result in dissatisfaction.

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Undersell and Over-deliver

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Market your service, but don't sell to the point that the customer is disappointed with the service provided after the sale.

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Task Utility

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Delivers satisfaction when the service has been performed.

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