4MD3 Business to Business Marketing

Steve Howse

January 12, 2009

Business Marketing 4MD3

• intro to Instructor• Course overview / structure• The marks• The project

• www.business.mcmaster.ca/courses/com4MD3

Steve Howse, Adjunct Professor•  B of Commerce 1988• 16 years corporate• 4th year consulting• Office hours Monday 5:30 to 7:00pm

• Derek Weidl (derek.weidl@gmail.com)

• Who are you?

Course Overview

• Lecture, case study, video, guest speakers• 1 Hand-in case• Large team project• Mid term exam• Participation

• This course will utilize your previous learning's

 

Components and Weights

• Individual Worko Class Participation 15%o Term Exam 25%

• Small Group Worko Hand-in case 15%

• Large Group Worko Written report 35%o Project Presentation 10%

The Project

• Work with a real company • Examine current marketing mix• Internal / External SWOT• Make a recommendation

• You are consultants

• Pick a team• Choose a company• Prepare a project proposal

o Team, company, reason, products, focus, Gant Chart  

• Preliminary / Secondary research• Write your report (page 8.9)

o Executive Summaryo Introductiono Current Marketing Strategy & Mix

(cont)

o Internal analysiso Macroenviromental Analysiso Competitive Analysiso Customer Analysiso Recommended Marketing objectiveso Recommended Marketing strategy and mixo Implementation plan and budgeto Referenceso Appendices

Mark Breakdown (pg 10)

• 30% research• 30% analysis• 30% objectives, recommendations, implementation

plan• 10% format• Self and peer evaluation

Presentation – to the class and client (page

11)• Introduction• Marketing Audit• Analysis of current situation• Your marketing objectives /

recommendation• Q&A

Preview – Nature Of Business Marketing

BM transaction definition other names for BM who buys from business marketers? what do they buy? why do they buy? the BM process  differences between business marketers and

consumer marketers   

Business Marketing Transactions

• Any transaction involving the purchase by an organization …of a product or service ultimately used by an organization (i.e. business to business) All transactions in an organizational-product channel

are included Certain early transactions in a consumer-product

channel

Two terms NOT used in Business Marketing:

1. Consumers

2. Retailers

Other Names For Business Marketing

1. Business-to-Business Marketing (B2B)

2. Industrial Marketing

3. Organizational Marketing

WHAT KINDS OF ORGANIZATIONS BUY?

• commercial enterpriseso users  o OEMs o industrial distributors

 • government agencies

 • institutions

 

WHAT THE ORGANIZATIONS BUY

• the business marketer’s total “offering”• the product itself•product-support services•delivery arrangements•adaptation of products, processes, plant,

and people to customer needs

• an infinite number of offerings is possible

PRODUCT CATEGORIES BOUGHT BY THE

ORGANIZATIONS • entering goodso raw materials  o manufactured materials o component parts

• foundation goodso accessory equipment o capital equipment

 • facilitating products 

o MRO goods o services

 

Why Organizations Buy Our Products

• To satisfy their organizational & personal needs

1. Organizational needs are mainly rational and related to producing their own product

increase their product’s quality reduce their product’s cost differentiate their product

2. Personal needs are mainly irrational or subjective

Business Marketing Process Segmentation

  Targeting

   Positioning

   Programming ( the 4Ps) 

BM/CM Differences - Marketers

1. Must interact more with other departments (multiple buying influences or stakeholders) 

2. Must have enough technical capability to understand:

Their own products Non-marketing functions in their own organization

Customer processes (cont’d) 

  

BM/CM Differences – Marketers (Continued)

•  3. Less able to switch to a different industry

 4. Less tempted to communicate unethically 

 5. Require more legal knowledge

 6. Require better negotiating skills

7. Face greater international competition

BM/CM Differences - General

• We’ll cover BM/CM differences in many areas …

• Why?

• So you can identify the differences between typical BM and CM situations

Remember - There will always be exceptions!

Lecture 2

INTRO TO BUSINESS BUYER BEHAVIOUR

• we’ll be looking at BBB for three full weeks!

o BM/CM differenceso relationshipso theories

• why is knowledge of BBB so important?  

  

24

INTRO TO BBB (CONT’D)• who are the buyers in BBB? 

o organizationso individuals in them, acting alone or in

groups

• purchase motivation thus very complex

PREVIEW OF BM/CM DIFFERENCES

• demand• buyer purchase criteria• buyer behaviour• buyers

BM/CM DIFFERENCES – DEMAND

• all business demand ultimately derived from consumer demand

• joint demand more common  

• elasticity lower at industry level  

• but elasticity same at company level owing equal ease of switching suppliers (cont’d)

FACTOR AIDING SWITCHING - LOWER

PRODUCT DIFFERENTIATION • less processing

• higher design input by customers• more industry design codes• products less “styled” • less packaging

FACTORS OPPOSING SWITCHING

o strong customer relationship with supplier

o high cost to customer of switching

DEMAND (CONT’D)

• business demand more cyclic • so prices more cyclic

 • as is the buyer-seller power balance (Gov’t year

end) 

BM/CM DIFFERENCES - BUYER PURCHASE

CRITERIA• more stress on product function • thus different response to failure• also more stress on product quality• and on custom design of the product• and on product delivery

• less stress on price (cont’d)  

31

BUYER PURCHASE CRITERIA (CONT’D)

• written contracts more often required• heavier penalties for “non-performance”• more concern about tax implications • more stress on reciprocity

BM/CM DIFFERENCES BUYER BEHAVIOUR

• more people involved • not spending own money • behaviour more rational • behaviour more formal • purchase process longer• want closer relationships

(cont’d)  

BUYER BEHAVIOUR (CONT’D)

• more loyalty to the "in" suppliers • repeat purchases more common• "multiple sourcing" more common 

• "make" option more feasible • purchases larger but less frequent • in-store buying rare  

BM/CM DIFFERENCES - BUYERS

• far better informed and trained • use sophisticated purchasing software• often experts in your product • often teach suppliers • fewer in number• but each bigger on average• more concentrated geographically

 

BUSINESS BUYER BEHAVIOUR

CEs vs. NPIs/GOVERNMENTS

• different organizational objective

• implication for business marketers

• implications for buying behaviour

DIFFERENT BUYING OBJECTIVES FOR NPIs/GOVERNMENTS

• satisfy political goals • increase employment• implement policy • develop personnel• maintain budget allocation • please other governments

FOR NPIs/GOVERNMENTS(Con’t)

• domestic suppliers favoured • more caution in general• more price-sensitivity • more bureaucracy • responsiveness to political

donations

Preparing a Case• Read it once• Read the questions• Read again with a hi-liter• Write out the question• Prepare bullet talking points• Check them off as you go• Make memory jogger notes so you can listen

effectively• Read your notes if you have too• Jump start, add and relate, contradict or

direction change, summarize with a conclusion