B2B Basics

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Definition

The term business marketing is used to describe the marketing activities of any kind of organisation which has exchange relationshups with other organisations or businesses (Turnbull 1994 in Ellis)

Company orientation - see ppt

Types of organisational markets (Ellis, 2011)

Commercial

- distributors

- OEMs

- User organisations

- retailers

Institutional

- govt related (hospitals/universities)

- Not for profit (charities/churches)

Governmental

- health/education/military/transport/civil service

Significance of B2B sector

Organisational customers have massive buying power

long history based on relationships

monetary volume of transactions in business markets exceeds that of consumer markets

contribution to national economies

upstream inter-organisational trading supports many end-user markets

Differences between B2B and consumer markets

International aspects

Importance of relationships & networks

Market structure

- fewer but large buyers (concentration of buyers)

- demand more inelastic and fluctuating

- demand is derived

Nature of buying unit

- more decision participants and more professional purchasing efforts

-> buying centre: the group of people in an organisation who are involved in making business to business purchasing decisions

Decision process

More complex, more formalised

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Supply chain

business system represented by a series of inter-organisational set up to support the buying/selling of goods

Supply chain for a car:

1) Suppliers of materials e.g. steel makers - UPSTREAM SUPPLIERS

2) purchases of inputs used in making car parts e.g. engine makers - DIRECT SUPPLIERS

3) purchase of inputs used in making finished cars e.g. Toyota, Ford - CAR MANUFACTURERS

4) Car dealerships (franchisers/independent) - CAR DISTRIBUTORS

5) end users i.e. organisations/consumers - CAR CUSTOMERS

many suppliers involved in the supply chain especially in complex industries e.g. Aerospace - Airbus

Major influences on business buyers

External

- socio-economic

- globalisation of business

- customer power

- market stagnation

- process mentality

Internal

- nature of firm's business

- structure of purchasing

- purchasing policy/ethics

- systems & tech

Individual

- authority/status

- empathy

- persuasiveness

Relational

- relationship approaches to inter-form relationships

- transactional approaches to inter-form relationships

E-procurement

Reverse auction - firm puts their purchasing request online and invites suppliers to bid

online trading exchanges e.g. Alibaba was initially a B2B portal to connect chinese manufacturers with overseas buyers

Benefits

- reduces transaction costs

- more efficient purchasing

- reduces time between order and delivery

- finding better supply sources

- working with suppliers to reduce costs and develop new products

Problems

- security risks

- confidential interactions

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Importance of relationships/networks in B2B marketing

"to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by mutual exchange and fulfilment of promises" (Gronroos, 1997)

Different to transaction marketing

Characteristics of RM

- long term orientation

- commitment and fulfilment of promises

- customer share, not market share

- two way dialogue

- customisation

Networks

networking considers the relationships that an organisation has not only with its customers but also with its suppliers, and beyond that with agencies, governments, banks, etc

Grönroos 1997:

A relational approach to marketing can be expected to be successful only if the firm adopts a true relational intent and the customer is in a relational mode

Firm must evaluate if the relational aspect would be profitable

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Zimmerman and Blythe - reading

The business market has been defined to include organisations that buy products and services for use in the production of other products and services that are sold/rented/supplied to others. But the full B2B market includes customers who are institutions like hospitals/charities and all levels of government. Business buyers generally buy to increase their company's profits. Institutional buyers have the same concerns but they may be focused on providing an adequate surplus. These objectives to boost sales or lower costs can be achieved by:

increasing efficiency

purchasing lower cost products/services

Consumer markets consist of millions of individuals

B2B markets - fewer customers make up a large percentage of all the business in a particular segment.

e.g. providers of jet engines only have a few customers that build airplanes (i.e. Boeing/Airbus).

In business markets, the decision making unit or buying centre is key

A vital part of success in business marketing is the development and maintenance of customer relationships. Instead of looking at a series of transactions between a customer and a supplier, the successful marketer attempts to establish a relationship

- not always long term but the interchange is seen as more as just a simple transaction

Marketing = "to establish, maintain, enhance and commercialise customer relationships so that the objective of the parties involved are met. This is done by mutual exchange and fulfilment of promises" (Grönroos, 1990).

Seller gives promises related to products, services, financing, admin, info, social contracts etc

Buyer gives promises related to payment and use of product

When promises are kept on both sides both parties gain benefits and the relationship is enhanced. Once past promises are fulfilled, new sets of promises can be made on both sides to continue the building of the relationship (Calonious, 1988)

Service dominant logic presents an interesting review of human economic history, showing that "services are the beginning, middle and end" of all economic activity. SDL has 11 FPs, but main axioms are:

1) Service is the fundamental basis of exchange (can only understand the product by what service it provides)

2) Value is co-created by multiple actors, always including the beneficiary

3) All social and economic actors are resource integrators

4) Value is always unique and phenomenologically determined by the beneficiary (what exactly each of these products is/what they can do can only be determined by the perception of the specific beneficiary)

5) Value co-creation is coordinated through actor-generated institutions and institutional arrangements.

These let us see all products as service - tangible and intangible

Value can only be created through the interactions of multiple actors, which include and go beyond the obvious direct customer and the service provider

Any service is only made possible by all the actors providing resources for it, not only the service provider

The co-creation of value only occurs through the coordination of human-created institutions and institutional arrangements