Understanding Business Markets

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Introduction to business marketing and the importance of managing relationships within a wider network.

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  • Fig 5.1
  • Fig 5.2 new (tidied)
  • Understanding Business Markets

    1. 1. Understanding Business Markets Overview
    2. 2. Contents <ul><ul><ul><li>To show the similarities and differences between business and consumer markets. </li></ul></ul></ul><ul><ul><ul><li>To explain problems and uncertainties of customers, the solutions they seek and the offerings of suppliers. </li></ul></ul></ul><ul><ul><ul><li>To explain the characteristics of business markets and explain the characteristics of business markets and business customers. </li></ul></ul></ul><ul><ul><ul><li>To show that business marketing is the management of customer relationships. </li></ul></ul></ul><ul><ul><ul><li>To explain how each relationship is part of a complex network of relationships. </li></ul></ul></ul>
    3. 3. How Companies and Consumers buy <ul><li>Both are affected by their previous experience. </li></ul><ul><li>Both will bear possible future purchases in mind. </li></ul><ul><li>Both will need reassurance. </li></ul><ul><li>Both will seek advice if the purchase is difficult or complex. </li></ul><ul><li>Both will agonize over some issues. </li></ul><ul><li>Both will face implicit issues. </li></ul><ul><li>Both will make many simple, repetitive purchases with little evaluation. </li></ul><ul><li>Both will make purchases when their main concern is to minimize time . </li></ul>
    4. 4. <ul><li>More people involved in business purchases. </li></ul><ul><li>Business purchases are often much more complex. </li></ul><ul><li>The people involved in a business purchase are professional. </li></ul><ul><li>A business purchase may take a long time. </li></ul><ul><li>Each business customer is individually important. </li></ul><ul><li>A business purchase is part of a complex relationship. between customer and supplier. </li></ul>Differences between Consumer and Business purchases, Real or Not?
    5. 5. <ul><li>Business Marketing - is the task of selecting, developing and managing customer relationships for the advantage of both customer and supplier, with regard to their respective skills, resources, technologies, strategies and objectives. </li></ul>A Definition of Business Marketing
    6. 6. The Interaction Model - More Organization Technology Structure Strategy Individual Aims Experience Skills Interaction Process Environment Market structure Dynamism Internationalisation Channel position Social system Atmosphere Power/dependence Co-operation Closeness Expectations Organization Technology Structure Strategy Individual Aims Experience Skills Long term relationships Institutionalisation, Adaptations Short term exchange episodes Products/services Information Financial Social Source: Adapted with permission from Håkansson (1982, p24)
    7. 7. Fig 5.2 – From IOR to channel to chain to network IOR Marketing Supply/Demand Industrial Network Channel Chain Upstream suppliers Direct suppliers Manu-facturers Distributors Customers Supply network Distribution network
    8. 8. <ul><li>Whether or not it is critical to the company; </li></ul><ul><li>Whether it accounts for a major part of the company’s sales or purchases or whether it is only one of thousands of similar relationships; </li></ul><ul><li>Whether it is friendly or antagonistic, close or distant, complex or simple. </li></ul>A Business Relationship has to be managed by a Marketing Company:
    9. 9. Things to remember about Business Marketing <ul><li>Our unit of analysis isn’t a sale, project, or market, but each relationship as part of a portfolio of relationships. </li></ul><ul><li>We can only make sense of a single purchase by looking at the relationship of which it forms part. </li></ul><ul><li>Business relationships are a company’s primary assets. Without them it cannot buy, sell, produce or deliver. </li></ul><ul><li>The development of relationships requires investment of time, money and resources. </li></ul>
    10. 10. <ul><li>Business relationships develop and exploit the skills, resources and technologies of both companies.   </li></ul><ul><li>Relationships link the activities of companies, tie their resources and form bonds between individuals. </li></ul><ul><li>Different relationships, have different actual and potential benefits to the supplier and to the customer. </li></ul><ul><li>Business purchasing is a similar activity to Business marketing. </li></ul>Things to remember about Business Marketing (continued)
    11. 11. The case for Close Relationships <ul><li>They enable customers and suppliers to learn and adapt to each other. </li></ul><ul><li>They reduce uncertainties and costs of change. </li></ul>
    12. 12. The case against Close Relationships <ul><li>Learning and adapting take time and are expensive. Both customer and supplier may benefit more from shopping around </li></ul><ul><li>Limiting relationship investment reduces a company’s dependence. It is also free to deal with other companies. </li></ul>
    13. 13. Question <ul><li>Think of the different reasons a customer might not buy from a single supplier? </li></ul>
    14. 14. Problems and Concern…….. <ul><li>Rationalisation </li></ul><ul><li>Development </li></ul>
    15. 15. An Offering….. <ul><li>An offering consists of different proportions of the elements of physical product, service, advice, adaptation and logistics and the costs that it involves. </li></ul>
    16. 16. Some Implications… <ul><li>An offering only has value as a solution to a specific customer problem. </li></ul><ul><li>A different offering for each customer, even if all include the same physical product or service. </li></ul><ul><li>A business marketer can compete, even with an identical product by differentiating any of other offering element. </li></ul><ul><li>Sometimes neither product nor service nor logistics are most important. Instead, advice is critical </li></ul><ul><li>Other times adaptation may be important. </li></ul><ul><li>Buying an offering involves a range of costs for the customer, as well as purchase price. </li></ul><ul><li>A supplier’s offering always depends on its relationships with others. </li></ul><ul><li>An offering may be developed jointly with a customer. </li></ul>
    17. 17. A Solution… <ul><li>A customer is only concerned with how effective an offering is as a solution to its problems. </li></ul>
    18. 18. A Marketer must……… <ul><li>CONSIDER OFFERINGS AS SOLUTIONS FOR CUSTOMERS. NOT JUST THEIR SPECIFICATIONS. </li></ul><ul><li>COMPARE HIS OFFERINGS WITH OTHER SOLUTIONS THROUGH THE EYES OF THE CUSTOMER . </li></ul><ul><li>ADVISE CUSTOMERS ON THE CHOICE OF SOLUTIONS. </li></ul><ul><li>AN OFFERING IS OF NO VALUE, UNLESS IT IS FULFILLED. </li></ul><ul><li>ACTUALLY FULFIL THE OFFERING FOR EACH CUSTOMER, AT THE PROMISED TIME, PLACE, PERFORMANCE AND CONSISTENCY . </li></ul>
    19. 19. The success of a Solution also depends on the Customer…. <ul><li>How clearly it can define and describe its problems. </li></ul><ul><li>Its skill in building relationships with suppliers. </li></ul><ul><li>Its skills in developing an offering with a supplier and ensuring it is fulfilled. </li></ul><ul><li>Its skill in integrating an offering with its own operations. </li></ul>
    20. 20. Customer uncertainties <ul><li>Need - When the problem is difficult to determine. </li></ul><ul><li>Market - When the range of possible solutions is wide or technology is changing rapidly. </li></ul><ul><li>Transaction - When the concern is about fulfilment. </li></ul>
    21. 21. Supplier Abilities <ul><li>Problem solving ability - to design and develop an offering. </li></ul><ul><li>Transfer abilities – to fulfil an offering. </li></ul>
    22. 22. Supplier Uncertainties <ul><li>Capacity - How much can we sell? </li></ul><ul><li>Application – How can the offering be effectively used? </li></ul><ul><li>Transaction - Will the customer actually buy what he says? </li></ul>
    23. 23. Customer’s abilities <ul><li>Demand ability – to advise on offering design and/or provide volume business. </li></ul><ul><li>Transfer ability - reliability in providing orders and information. </li></ul>
    24. 24. Summary <ul><li>One company is only part of the network that provides a final consumer offering. </li></ul><ul><li>Business marketing occurs between two active companies. </li></ul><ul><li>Each business purchase is part of a relationship. </li></ul><ul><li>Each relationship is part of a portfolio and a wider network. </li></ul>
    25. 25. <ul><li>You are welcome to contact Nigel Bairstow at B2B Whiteboard your source of B2B Asia / Pacific marketing advice </li></ul><ul><li>http://www.linkedin.com/pub/nigel-bairstow/6/41b/726 </li></ul>http://twitter.com/#!/b2bwhiteboard

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