1. Part One Business Markets and Business Marketing

2. Part One Business Markets and Business Marketing Orients you to some of the unique phenomena and players in business markets: Chapter 1 – What is B2B? Chapter 2 - The buyer-seller relationship Chapter 3 - The purchasing Function Chapter 4 - Organizational Buyer Behavior

3. Chapter 1 What is Business Marketing

4. 1-4 Learning Objectives The aim is to introduce and explore the characteristics and dimensions of business-to-business marketing Define and explain the nature of business markets Identify the different types of organizational customers and categorize the goods and services that are sold and bought in business markets Explore the characteristics of B2B marketing Discuss the nature of demand for business products and services

5. 1-5 What is Business Marketing (B2B) Business Marketing is marketing of goods and services to: Companies Government Bodies Institutions ( i.e. hospitals ) Non-Profit Organizations ( i.e. China Red Cross ) These products and services are purchased for: Use in producing their products ( i.e. raw materials, components, tools and machinery ) Facilitate their operations ( i.e. copy papers, fax machine, desktops )

6. 1-6 Business marketingBusiness MarketingConsumer Marketing McDonalds Salt is added to fries You Salt mineMorton’s SaltKroger Salt is sold in shakers Salt is minedSalt is processed into food-grade or industrial grade salt General Foods Salt is added to frozen dinners Example: How Salt is Distributed (Video)

7. 1-7 Types of Business Customers Original Equipment Manufacturers (OEMs) – purchasers of products to be included in its own final product Users – when purchasing products/services to be consumed in support of the firm’s operation Government Agencies – the largest, single purchaser of products and services Institutions – the college or university Industrial distributors – similar to the wholesaler/retailer serving the consumer market As compared to individual consumers, business customers are: 1)Larger – buying in large quantities 2)Fewer in number 3)More geographically concentrated 4)Globally oriented

8. 1-8 Types of Products in Business Markets Raw materials – e.g., gold purchased by AT&T Manufacturing materials – raw materials which have been further processed or transformed to make them suitable for specific applications Component or OEM parts - part of a completed product; parts that may be assembled into a final product without further processing Accessory equipment (tools) – e.g., computers used to guide/control the manufacturing operations in a firm Capital equipment (machinery) – large, expensive items directly used in the production process MRO items (operating supplies ) – products purchased for use in the firm’s operations, maintenance, repair, and operations products. Other names are facilitating supplies or facilitating services, such as the hiring of an advertising agency

9. 1-9 Differences between B2B vs. B2C Varying buyer-seller relationship Shorter distribution channels Greater emphasis on personal selling The small number of large, geographically concentrated buyers in this market makes shorter channels and long-term relationships feasible/necessary. Both of these factors favor personal selling. Greater web integration The web is a perfect tool to speed communications required for effective coordination between partners who trust each other. Unique promotional strategies E.g., trade show, public relations

10. 1-10 Unique Nature of B2B BUSINESS TO BUSINESS DEPENDS ON: Close Business and Personal Relationships Shorter Distribution Channels Emphasis on Personal Selling Dependence on WEB Integration and Unique Promotional Strategies Because of Leads to Through

11. 1-11 IBM Components Raw materials Assemblies OEM Capital equipment Accessory equipment Facilitating services and products Maintenance, repair, and operations supplies Components Raw materials Manufactured materials Supply houses Value- added resellers Integrated solutions vendors Maintenance repair, and operations supplies Distributors Original equipment products Users OEM parts Manufactured materials Subassemblies Customer Focused Team Structure

12. 1-12 Business Markets Challenges The size and location of customers – bigger, fewer, and concentrated Strict performance standards for products by customers - organizational purchasing have strict performance standards for products: cost constraints; design specifications; delivery windows and durability requirements Complicated purchasing decisions – Involvement and time: a large number of people involved require a longer time to negotiate

13. 1-13 Business Market Face Derived Demand Derived Demand - The reality that business demand for products & services is shaped by the requirements of the products and services demanded by their customers - Most demand comes from consumers Joint Demand - Situations in which two products are used together and demanded together - The demand for each is significantly affected by changes in the demand for the other

14. 1-14 Example: Derived Demand Simplified You can make headlamp assemblies for autos – Auto company’s demand for headlamp is affected by the consumers’ demand for cars. Consumers want more cars Automobile manufacturers need more components and steel Need more of your company’s headlamp assemblies Consumers stop buying cars Automobile manufacturers stop making cars You can’t sell headlamp assemblies

15. 1-15 Transported via facilitating services Raw Materials Manufactured materials Sub- assembly Assembly Component parts Finished car Purchase order printed—facilitating product Amount and type of car determined by research—facilitating service The Entire Systems

16. 1-16 Understanding the Market Three critical questions for a successful B2B program A business must determine: 1. Who Are Its Customers? (Target markets) 2. What Do Its Customers Want? (Identify) 3. How Do Its Buyers Make Their Buying Decisions? (Identify)