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
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
Business Marketing vs. ConsumerMarketing 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
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
Business Customers Users Original Equipment Manufacturers (OEMs) Industrial Distributors Government Institutions Can you provide examples of each?
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
Classifying Goods forthe 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
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.
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
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
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?
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
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?
Relationship MarketingCenters On: Establishing, Developing and Maintaining successful exchanges with customers.
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
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
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?
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/
Awareness The buyer and seller consider the other as an exchange party No real interaction
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
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
Commitment Contracts, agreements, or orders are signed The two organizations become business partners and resolve any conflicts that may occur
Dissolution Termination of the advanced relationship
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