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.
Introduction to Business Marketing Part 1
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