2. What is Business Marketing?
Products or services to other companies,
government bodies, institutions, and other
organizations
Also products and services that facilitate their operations
Purchases in industrialized countries account for
more than half of the economic activity
Makes business marketing extremely important
3. Key Differences
Demand for industrial products driven by primary demand
for consumer goods (derived demand)
Nature of buyer-seller relationships (more personal)
Shorter distribution channels (many direct)
Emphasis on personal selling
Greater web integration (communication backbone)
More customization
More complex buying process
Smaller customer bases
4. Business Marketing vs. Consumer
Marketing
Buyer-Seller Relationships
Consumer markets tend to have less personal relationships
between buyers and sellers
Buyer relationships focus on Lifetime Value of the customer
Emphasis on Personal Selling
Greater Web Integration
5. Other Key Differences
Demand for industrial products driven by primary demand
for consumer goods (derived demand)
Nature of buyer-seller relationships (more personal)
Shorter distribution channels (many direct)
More customization
More complex buying process
Smaller customer bases
6. Business Customers
Users
Original Equipment Manufacturers (OEMs)
Industrial Distributors
Government
Institutions
Can you provide examples of each?
7. Business Markets
Original Equipment Manufacturers (OEM)—When
a company purchases a product or service to be
included in its own final product
General Motors, Bosch, IBM, Thyssen-Krupp Elevator
Users
The final consumer
Business can also be users
8. Classifying Goods for
the Business Market
Entering Goods Foundation Products
-Raw Materials - Accessory
Equipment
- Manufactured
Materials -Capital Equipment or
installations
- Component Parts
Facilitating or
MRO Items Can you provide examples
of each?
- Facilitating
Supplies
- Business Services
9. Demand
Business marketers must recognize derived
demand:
Derived demand is the theory that demand for products and
services is derived from the demand for their customers’
products and services
– For example, the demand for wood floor treatment from Bill’s
Floors and More is derived from the demand for new homes,
which puts down hardwood floors
Derived demand can cause demand to swing wildly, called
volatility.
10. Demand (cont’d)
Demand elasticity—the percentage change in sales
relative to the percentage change in price
As price goes up, consumers will look for alternatives, and
sales will go down.
Inelastic demand—sales is not greatly affected by
price
11. Myths about Marketing
More sales equals more profits
Any customer is a good customer
Build a better mousetrap and the world will buy it
Macro markets are more profitable than niche
markets
12. Marketing Management & Planning
Marketing Management encompasses all the
decisions involved in designing and executing
marketing plans to implement the marketing
concept.
What is the marketing concept?
13. Marketing Management & Planning
Environmental Analysis
a Competition - Customers
a Channels - Controls
a Company
Establish Objectives
Strategy
Tactics and Programs
r Product - Price
r Promotion - Place
Implement, Control & Evaluate
Feedback loops throughout the process
14. Think About It
How would marketing telephone services to
businesses (for example to University of Toledo) be
similar and different than marketing them to
consumers?
17. What is Relationship Marketing?
Longer time horizon
High switching costs
Large investment (procedures & assets)
Focus on technology or vendor as opposed to
product or person
Higher importance: strategic, operational &
personal
Collaborative exchange
18. Types of Relationships
One time market transaction
t market exchange with no expectation of future transactions with
each other
Functional relationships
i series of one time market exchanges linked together over time
Relational partners
e long term business relationship in which a buyer and seller have a
close/trusting interpersonal relationship
Strategic partnerships
r long term business relationships in which partners make significant
investments to improve the profitability of both parties in the
relationship
19. Type of Relationship Exercise
Think about a specific relationship that you have
with a professor, a friend, a cousin, and an older
relative who is not a parent.
For each relationship is it functional, relational or
strategic?
How did this relationship get to be this quality?
20. Relationships
Transactional relationships (spot exchange) = one time
exchange
l i.e.: a freight service offering standard boxcars to any shipper
Customer Relationship Management (CRM)
n Systems that focus on collecting and storing data to evaluate
customers and performance
r Makes sales reps’ jobs easier!
’ Typically in software
http://www.netsuite.com/portal/home.shtml
http://www.act.com/
22. Awareness
The buyer and seller consider the other as an
exchange party
No real interaction
23. Exploration
The interaction between buyers and sellers occurs
b Probing and testing
Initial purchases may take place at this stage
This is where the bargaining and communication
take place
24. Expansion
During this phase, one
party has made a request
to alter some aspect
p Customization occurs
c Expectations and norms
are developed
The buyer usually
becomes committed to
this particular seller
25. Commitment
Contracts, agreements, or orders are signed
The two organizations become business partners
and resolve any conflicts that may occur
26. Dissolution
Termination of the advanced relationship
27. Safeguarding Relationships
There are many ways to keep relationships healthy, safe, and
profitable
a Supplier verification—efforts to obtain evidence of supplier
capabilities and commitment
Dependence balancing—having relationships with other
exchange partners, (just in case…)
s Relational contracts—contracts that define continuous planning,
adjusting and resolving conflicts
s Vertical integration—bringing a function or technlology into the
firm
i.e. buying out a supplier
Notas do Editor
For example, if you market to a school or college, they buy a plethora of things in order to keep the institution operating. Note, that business marketing is NOT the same as consumer marketing. They differ in many areas, including the channels of distribution, web integration, and complexity of buying processes.
It is absolutely important for relationships to be strong in Business Marketing. Without the ability for the seller to know the buyer, it is impossible to design customized products and services that enhance the LTV. This is rarely the case in Consumer Markets. Remember that in the end there is ultimately, (well for the most part, we guess), an end consumer that uses a particular product or service. Therefore, all products designed to every business along the way must ultimately follow the demand of the end consumer.
Note, although the user is the consumer of a product, it may be a company (GM) that uses the product in another business process
Take a look at the derived demand section in your book.
It is very common for many organizations to fall into some of these traps. For example, is GM trying to “catch the mouse,” or are they trying to build a better mousetrap?
Relationship Marketing is an interesting because in a sense, the way that we do marketing today, especially in the business-to-business domain, is essentially almost exclusively relationship marketing. In other words, one needs to question the meaningfulness of the concept, if it’s almost synonymous with marketing. Can you think of any examples where there is NO relationship? Firms want repeat business, customers buy because they have familiarity with the product brand so they feel connected to it … by definition these have some component of relationship. It is only the PURE transaction that has no relationship: no prior knowledge, history, and no expectation of any future interaction at all. Yet, it is very valuable to spend some time thinking about relationship marketing because it does reflect our orientation today … it changes the fundamental nature of marketing if we want the customer to come to us with some prior knowledge, some idea of what to expect, if we want to assure that we have a possibility for future interaction.
Relationship Marketing assumes that we are working toward an on-going interaction with our customer. If we are trying to establish a longer time horizon then we need to determine which customers we are willing to invest in. In true relationship with customers, we may find that we become so dependent on one another that we it would be harder to change to another customer, or for the customer to another supplier. This happens because there has been investment in one another and often this is determined on the basis of the technology or the vendor’s overall capability rather than the individual product or a particular personal relationship. When this happens, these relationships become strategically important, as well as operationally and personally important to those involved. The nature needs to be win-win or collaborative or the relationship won’t be sustainable. For example, take a look at Land’s End as a customer. Land’s End is a business and it works very closely with it’s suppliers. Suppliers who want to market their products to Land’s End must meet certain requirements. First, Land’s End needs certain capability and specifications. Next, Land’s End requires all of its suppliers to use a common technology that provides for inventory interface, tracking and so forth. However, Land’s End is willing to invest in the suppliers … if a it wants a particular supplier it may help to support the start up costs of the technological platform. The supplier has to be willing to invest the time and change in process to get the new system up to speed. This example can show how the exchange has to be viewed as longer in time horizon, bigger investment, a focus on the total vendor and the technology, and higher importance.
There are really three types of relationships. One time market transaction is where there is no relationship and represents one extreme anchor on a continuum from no relationship to complete immersion, which might be anchored by vertical integration. In between we can flow from functional relationship to strategic partnership in varying degrees. Let’s take the Schmidt School of Professional Sales as an example. The Schmidt School partners with businesses to benefit both, and has a variety of different types of relationships. Let’s look at Marathon. The Schmidt School has provided a number of students to Marathon over a number of years. Marathon continues to come and recruit our students, and the Schmidt School is delighted to have students placed in internships and full time positions with Marathon. However, we maintain a functional relationship with Marathon. It exists for a series of transactions over time, but there is no further relationship development. Sales faculty don’t know its recruiters and they don’t know us. There is no investment, financially or otherwise, between the two firms. Contrast this to 3M. At one time 3M was much like Marathon. Yet the recruiter was so impressed with our students that he sought the faculty out to find out more about what we were doing. We began to have lunch when he would be in town and meet him occasionally at conferences. He offered to speak in classes. We moved to relational partners. Then one day at lunch, he said to two of us, “we need to figure out how to move UT from this functional relationship with our higher ups to a strategic relationship.” We began to plan. The director went to HQ in Minneapolis. 3M gave us some scholarship money. We eventually advanced to where we are today with UT being a 3M Frontier Partner and 3M supporting a room in the new building and being a corporate partner in the Schmidt School.
Try to think about the questions above.
Relationships between buyers and sellers are at the center of modern sales theories. By building relationships with customers, as a seller, you can move away from one-time, transactional marketing and towards business on a consistent basis, which will make you more profitable as a marketer and as a salesperson. Strategic partnerships are becoming more and more popular as organization work together in more research and development efforts to come out with the latest and greatest technologies around the world.
Your text includes a great discussion of the stages that business firms tend to go through. There is no requirement that firms continue along the continuum. A firm may stop at awareness or expansion or commitment and stay there indefinitely. Make sure to take a special look at exhibit 2-4 on page 43 of your text.
Remember that a relationship can end or stay in a current stage indefinitely
Many relationships continue for long amounts of time. For example, it is doubtful that the relationship between McDonalds and Coca-Cola will dissolve anytime soon. Coca-Cola products are the only beverages sold in most McDonalds
Relationships between buyers and sellers are necessary in today’s world. Although it is nice to be able to trust your business partner, these are ways of preventing the relationship from going south and maintaining profitability.