Understanding Business Markets

Overview

Contents

• To show the similarities and differences between business and consumer markets.

• To explain problems and uncertainties of customers, the solutions they seek and the offerings of suppliers.

• To explain the characteristics of business markets and explain the characteristics of business markets and business customers.

• To show that business marketing is the management of customer relationships.

• To explain how each relationship is part of a complex network of relationships.

How Companies and Consumers buy

• Both are affected by their previous experience.• Both will bear possible future purchases in mind.• Both will need reassurance.• Both will seek advice if the purchase is difficult or complex.• Both will agonize over some issues.• Both will face implicit issues.• Both will make many simple, repetitive purchases with little

evaluation.• Both will make purchases when their main concern is to

minimize time.

• More people involved in business purchases.

• Business purchases are often much more complex.

• The people involved in a business purchase are professional.

• A business purchase may take a long time.

• Each business customer is individually important.

• A business purchase is part of a complex relationship. between customer and supplier.

Differences between Consumer and Business purchases, Real or Not?

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.

A Definition of Business Marketing

OrganizationTechnologyStructureStrategy

IndividualAims

ExperienceSkills

Interaction Process

EnvironmentMarket structureDynamismInternationalisationChannel positionSocial system

AtmospherePower/dependenceCo-operationClosenessExpectations

Organization Technology Structure Strategy

Individual Aims Experience Skills

Long term relationshipsInstitutionalisation, Adaptations

Short term exchange episodes Products/services Information Financial Social

The Interaction Model - More

6Source: Adapted with permission from Håkansson (1982, p24)

IOR Marketing Supply/Demand Industrial Network Channel Chain

Upstream suppliers

Direct suppliers

Manu-facturers

Distributors

Customers

Supply network

Distribution network

Fig 5.2 – From IOR to channel to chain to network

• Whether or not it is critical to the company;• 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;

• Whether it is friendly or antagonistic, close or

distant, complex or simple.

A Business Relationship has to be managed by a Marketing Company:

Things to remember about

Business Marketing • Our unit of analysis isn’t a sale, project, or market,

but each relationship as part of a portfolio of relationships.

• We can only make sense of a single purchase by looking at the relationship of which it forms part.

• Business relationships are a company’s primary assets. Without them it cannot buy, sell, produce or deliver.

• The development of relationships requires investment of time, money and resources.

• Business relationships develop and exploit the skills, resources and technologies of both companies.  

• Relationships link the activities of companies, tie their resources and form bonds between individuals.

• Different relationships, have different actual and potential benefits to the supplier and to the customer.

• Business purchasing is a similar activity to Business marketing.

Things to remember about Business Marketing (continued)

The case for Close Relationships

• They enable customers and suppliers to learn and adapt to each other.

• They reduce uncertainties and costs of change.

The case against Close Relationships

• Learning and adapting take time and are expensive. Both customer and supplier may benefit more from shopping around

• Limiting relationship investment reduces a company’s dependence. It is also free to deal with other companies.

Question

Think of the different reasons a customer might not buy from a single supplier?

Problems and Concern……..

• Rationalisation

• Development

An Offering…..

• An offering consists of different proportions of the elements of physical product, service, advice, adaptation and logistics and the costs that it involves.

Some Implications…• An offering only has value as a solution to a specific customer problem. • A different offering for each customer, even if all include the same

physical product or service.• A business marketer can compete, even with an identical product by

differentiating any of other offering element.• Sometimes neither product nor service nor logistics are most important.

Instead, advice is critical • Other times adaptation may be important.• Buying an offering involves a range of costs for the customer, as well

as purchase price.• A supplier’s offering always depends on its relationships with others.• An offering may be developed jointly with a customer.

17

A Solution…

• A customer is only concerned with how effective an offering is as a solution to its problems.

A Marketer must………

• CONSIDER OFFERINGS AS SOLUTIONS FOR CUSTOMERS. NOT JUST THEIR SPECIFICATIONS.

• COMPARE HIS OFFERINGS WITH OTHER SOLUTIONS THROUGH THE EYES OF THE CUSTOMER.

• ADVISE CUSTOMERS ON THE CHOICE OF SOLUTIONS. • AN OFFERING IS OF NO VALUE, UNLESS IT IS

FULFILLED.• ACTUALLY FULFIL THE OFFERING FOR EACH

CUSTOMER, AT THE PROMISED TIME, PLACE, PERFORMANCE AND CONSISTENCY.

The success of a Solution also depends on the Customer….

• How clearly it can define and describe its problems.

• Its skill in building relationships with suppliers. • Its skills in developing an offering with a

supplier and ensuring it is fulfilled.• Its skill in integrating an offering with its own

operations.

Customer uncertainties

• Need - When the problem is difficult to determine.

• Market - When the range of possible solutions is wide or technology is changing rapidly.

• Transaction - When the concern is about fulfilment.

Supplier Abilities

• Problem solving ability - to design and develop an offering.

• Transfer abilities – to fulfil an offering.

Supplier Uncertainties

• Capacity - How much can we sell?

• Application – How can the offering be effectively used?

• Transaction - Will the customer actually buy what he says?

Customer’s abilities

• Demand ability – to advise on offering design and/or provide volume business.

• Transfer ability - reliability in providing orders and information.

Summary

• One company is only part of the network that provides a final consumer offering.

• Business marketing occurs between two active companies.

• Each business purchase is part of a relationship.

• Each relationship is part of a portfolio and a wider network.

You are welcome to contact Nigel Bairstow at B2B Whiteboard your source of B2B Asia / Pacific marketing advice

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