A Business Marketing Perspective

Business MarketsLocal to internationalBought byBusinessesGovernment bodiesInstitutionsFor consumptionFor useFor resaleGEMarkets for products and services

Figure 1.2 The Consumer Market (B2C) and the Business Market (B2B) at Dell, Inc.Dell, Inc.

A Market Driven FirmMarket sensing capabilitycompanys ability to sense change and to anticipate customer responsesCustomer linkingthe ability to develop and manage close customer relationshipsValue : Economic, Technical & SocialValue F Price F > Value a Price aHas:

Business Market CharacteristicsDerived demandFluctuating demandStimulating demandPrice sensitivity/demand elasticityGlobal Market perspectiveReciprocityJoint DemandConcentrated Functional Vs. Symbolic AttributesGE

Relationship MarketingAll marketing activities directed toward establishing, developing, and maintaining successful exchanges with customers

Michael Porter and Victor Millar observed that to gain competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium (more value).The Supply Chain

Business Market CustomerCommercial EnterprisesThree categories:UsersOEMsDealers and distributors

Classifying industrial goods by the following questions:How does the good or service enter the production process?How does it enter the cost structure of the firm?Classifying Goods for the Business MarketSource: Adapted from Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 172, with permission of Prentice-Hall, Inc.

A Framework for Business Marketing ManagementBusiness marketing strategy is formulated within the boundaries established by the corporatemission andobjectives.

The Business Market: Perspectives on the Organizational Buyer

Commercial EnterprisesManufacturersConstructionService firmsTransportation ProfessionalResellersIncludesManufacturers:Concentration in geographies. Centralized Purchasing

Purchasing Function GoalsAddress the needs of business customers of all types.May have to juggle different, clashing objectives. PurchasingGoals

Total Cost Considerations of a Product or ServiceFactors that drive total cost.Acquiring and managing costs.Quality, reliability over the life cycle.Value of product to firm/customers.

Firms operate at different levels of development and emphasize different pathways to cost reduction and revenue enhancement.Levels of Procurement Development and Pathways to Savings/Revenue Enhancement

Segmenting Purchase Categories1st Point, each firm has a unique portfolio.2nd Point, more attention on purchases having the greatest impact on revenue generation or the greatest risk to performance.Segmenting the BuyBottlenecksCriticalsGenericsLeverage Items

Two Types of ContractsFixed-price contractsA price is agreed to before contract is awarded and payment is made at conclusion of work.Provides for the greatest profit potential.Poses greater risks.Cost-reimbursement contractsReimbursement for allowable costs may be allowed; sometimes cost-plus contracts allow costs and certain percentage of profit.

Government ProcurementU.S. Department of Defense (DOD)-said to be largest single enterprise in world.

2. Non-defense procurement administered by wide variety of agencies.

Two Procurement StrategiesFormal Advertisingthe government solicits bids from suppliers, and usually the lowest bidder is awarded the contract.Negotiated Contractused to purchase products or services that are not differentiated on price alone, competition is common.Terms : LI / TI, RC, BOOT, EMD, SD, PBG, Inspection

The Institutional Market

Schools, health care organizations, non-profit agencies.

Similar to government buyers--political considerations and laws.

Similar to commercial buyers--often managed like corporations--broad range of purchase requirements.

Group purchasing quite common.

Multiple Buying Influences

*Organizational Buying Behavior

*Organizational Buying Process1. Problem Recognition2. General Description of Need3. Product Specifications4. Supplier Search5. Acquisition and Analysis of Proposals6. Supplier Selection7. Selection of Order Routine8. Performance Review

*Three Buying Situations (slide 1 of 4)New taskModified rebuyStraight rebuy

*Three Buying Situations1. New Task (slide 2 of 4)New taskproblem or need totally different from previous experiences.Significant amount of information requiredBuyers operate in extensive problem solving stageBuyers lack well defined criteria.Lack strong predisposition toward solution

*Three Buying Situations2. Modified Rebuy (slide 3 of 4)Modified rebuydecision makers feel benefits to be derived by reevaluating alternatives.Most likely to occur when buyers displeased with current suppliers performanceBuyers operate in limited problem-solving stage.Buyers have well-defined criteria.

*Three Buying Situations3. Straight rebuy (slide 4 of 4)Straight rebuyproblem or need is recurring or continuing requirement.Buyers have experience in area.Require little or no new informationBuyers operate in routine problem-solving stageElectronic PurchasingBuy-side Requisitioning Process.

*Buying Decision ApproachesCasual purchasesinvolve no information search or analysis.Routine low prioritydecisions more important and involve moderate amount of analysis.

*Forces Influencing Organizational Buying BehaviorEnvironmental ForcesOrganizational ForcesGroup ForcesIndividual ForcesOrganizational Buying BehaviorEconomic Outlook: Domestic & GlobalPace of Technological ChangeGlobal Trade RelationsGoals, Objectives, and StrategiesOrganizational Position of PurchasingRoles, relative influence, and patterns of interaction of buying decision participantsJob function, past experience, and buying motives of individual decision participantsProjected change in business conditions can drastically alter buying plan.

*Strategic Priorities in PurchasingBecoming Business Partners,Not Just Buyers

Exploring New Value Frontiers:Its Not Just About Price

Putting Suppliers Inside:The Best Value Chain Wins

Pursuing Los-Cost Sources:A World Worth ExploringShift from administrative role to value-creating function that serves internal stakeholdersand provides competitive edge in market.

Focus on suppliers capabilities, emphasizingbusiness outcomes, total ownership costs, andpotential for long-term value creation.

Develop fewer and deeper relationships withstrategic suppliers and involve them in decision-making processes, ranging from new productdevelopment to cost-reduction initiatives.

Overcome hurdles imposed by geographicaldifferences and seek out cost-effective suppliersaround globe.Source: Adapted from Marc Bourde, Charlie Hawker, and Theo Theocharides, Taking Center Stage: The 2005 ChiefProcurement Officer Survey, (Somers NY: IBM Global Services, May 2005), pp. 1-14. Accessed at http://www.ibm.com/bcson July 1, 2005.

*Questions for the Industrial Salesperson when Assessing Group ForcesWhich member takes part in the buying process?What is each members relative influence in decision?What criteria is important to each member in evaluation process?

*Members of the buying center assume different roles throughout the procurement process.Clues for Identifying Powerful Buying Center Members(Users, Influences, buyers, deciders, gate-keepersIsolate the Personal StakeholdersFollow the Information FlowIdentify the ExpertsTrace the Connections to the TopUnderstand Purchasings Role

SOURCE: Adapted from John R. Ronchetto, Michael D. Hutt, and Peter H. Reingen, Embedded Influence Patterns in Organizational Buying Systems, Journal of Marketing 53 (October 1989), pp. 51-62.

*Selective Processes in Information ProcessingSelective exposure.Selective attention.Selective perception.Selective retention.

*Perceived Risk ComponentsUncertainty about decision outcomes.Magnitude of consequences associated with making wrong selection.

*Organizational buyers behavior influenced by environmental, organizational, group, and individual factors.Major Elements of Organizational Buying Behavior

ONGC*Geopic Buying Seismic Simultation Equipment : Modified Rebuy / L2 or L3

Exploration : Scada Modi

Tech & Field Services : Drilling of well in Orissa Basin MR / L2

Offshore : Buying of Photocopiers for Mumbai High Office SR / L1

Infocomm : SAP Package for ERP : New Task / L4

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