Business Marketing is a marketing practice of individuals or organizations (including
commercial businesses, governments and institutions). It allows them to sell
products or services to other companies or organizations that resell them, use
them in their products or services or use them to support their operations.
Business marketing is also
known as industrial marketing or business-to-business (B2B) marketing. Despite
sharing dynamics of organizational marketing with marketing to governments,
business-to-government marketing is different.
Origins
Broadly speaking, the practice
of a purveyor of goods trading with another is as old as commerce itself. In
relation to marketing today, its history is more recent. Michael Morris,
Leyland Pitt and Earl Dwight Honeycutt say that for several years business
marketing took "a back seat" to consumer marketing. This entailed
providers of goods or services selling directly to households through mass
media and retail channels. J. David Lichtenthal (professor of marketing at Zicklin
School of Business) notes that business marketing has existed since the
mid-19th century. He adds that the bulk of research on business marketing has come
in the last 25 years.
This began to change in the
middle to late 1970s. Academic periodicals, including the Journal of
Business-to-Business Marketing and the Journal of Business &
Industrial Marketing now publish studies on the subject regularly. Professional
conferences on business marketing are held every year and courses are
commonplace at many universities today. Robert Dwyer and John Tanner point out that
more marketing major begin their careers in business marketing today than in
consumer marketing.
Business and Consumer Markets
Business markets have a
derived demand – a demand in them exists because of demand in the consumer
market. An example would be the Indian government wishing to purchase equipment
for a nuclear power plant. The underlying consumer demand that has triggered
this is that people of India are consuming more electricity (by using more
household devices such as washing machines and computers). Business markets do
not exist in isolation.
A single consumer market
demand can give rise to hundreds of business market demands. The demand for
cars in India creates demands for castings, forgings, plastic components, steel
and tires. In turn, this creates demands for casting sand, forging machines,
mining materials, polymers, rubber. Each of these growing demands has triggered
more demands.
As the spending power of
citizens increases, countries generally sees an upward wave in their economy.
Cities or countries with growing consumption are generally growing business
markets.
Business Marketing vs. Consumer Marketing
Despite the differences
between business and consumer marketing from a surface perspective being
seemingly obvious, there are more subtle distinctions between the two with
substantial ramifications. Dwyer and Tanner (2006) note that business marketing
generally entails shorter and more direct channels of distribution.
While consumer marketing is
aimed at large groups through mass media and retailers, the negotiation process
between the buyer and seller is more personal in business marketing. According
to Hutt and Speh (2004), most business marketers commit only a small part of
their promotional budgets to advertising, and that is usually through direct
mail efforts and trade journals. While advertising is limited, it often helps
the business marketer set up successful sales calls.
Marketing to a business is
trying to make a profit (business-to-business marketing) as opposed to an
individual for personal use (Business-to-Consumer, or B2C marketing) is similar
in terms of the fundamental principles of marketing. In B2C, B2B and B2G
marketing situations, the marketer must always:
- Successfully match the product or service strengths with the needs of a definable target market.
- Position and price to align the product or service with its market, often an intricate balance.
- Communicate and sell it in the fashion that demonstrates its value effectively to the target market.
These are the fundamental
principles of the 4 Ps of marketing (the marketing mix) first documented by E.
Jerome McCarthy in 1960.
While "other
businesses" might seem like the simple answer, Dwyer and Tanner (2006) say
business customers fall into four broad categories: companies that consume
products or services, government agencies, institutions and resellers.
The first category includes original
equipment manufacturers, such as large auto-makers who buy gauges to put in
their cars and also small firms owned by 1-2 individuals who purchase products
to run their business. The second category - government agencies, is the
biggest. In fact, the U.S. government is the biggest single purchaser of
products and services in the country, spending more than $300 billion annually.
But this category also includes state and local governments. The third
category, institutions, includes schools, hospitals and nursing homes, churches
and charities. Finally, resellers consist of wholesalers, brokers and
industrial distributors.
A B2C sale is to a
"Consumer" i.e. to a single person who pays for the transaction. A
B2B sale is to a "Business" i.e. organization or firm. Given the
complexity of organizational structure, B2B
sales typically involve multiple decision makers. The marketing mix is affected
by the B2B uniqueness which include complexity of business products and
services, diversity of demand and the differing nature of the sales itself
(including fewer customers buying larger volumes) Because there are some
important subtleties to the B2B sale, the issues are broken down beyond just
the original 4 Ps of marketing developed by McCarthy.
Business to Business (B2B) Marketing Strategies
B2B Branding
B2B Branding is different from
B2C in some crucial ways, including the need to closely align corporate brands,
divisional brands and product/service brands and to apply your brand standards
to material often considered “informal” such as email and other electronic
correspondence. it is mainly of large scale when compared with B2C.
Product (or Service)
Due to the fact that business
customers are focused on creating shareholder value for themselves, the
cost-saving or revenue-producing benefits of products and services are
important to factor in throughout the product development and marketing cycles.
Target Market
Quite often, the target market
for a business product or service is smaller and has more specialized needs
reflective of a specific industry or niche. A B2B niche, a segment of the
market, can be described in terms of firmographics which requires marketers to
have good business intelligence in order to increase response rates. Regardless
of the size of the target market, the business customer is making an
organizational purchase decision and the dynamics of this, both procedurally
and in terms of how they value the product offered, differ dramatically from
the consumer market. There may be multiple influencers on the purchase
decision, which may also have to be marketed to, though they may not be members
of the decision making unit. In addition the research and decision making
process a B2B buyer undertakes will be more extensive. Finally the purchase
information that buyers are researching changes as they go through the buying
process.
Pricing
The business market can be
convinced to pay premium prices more often than the consumer market if you know
how to structure your pricing and payment terms well. This pricing premium is
particularly achievable if you support it with a strong brand.
Promotion
Promotion planning is
relatively easy when you know the decision making habits of your customer base
and what they are looking for, not to mention the vocabulary unique to their
segment. Specific trade shows, analysts, publications, blogs and
retail/wholesale outlets tend to be fairly common to each industry/product
area. What this means is that once you figure it out for your industry/product,
the promotion plan almost writes itself (depending on your budget) but figuring
it out can be a special skill and it takes time to build up experience in your
specific field. Promotion techniques rely heavily on marketing communications
strategies.
Sales and Distribution
The importance of a
knowledgeable, experienced and effective direct (inside or outside) sales force
is often critical in the business market. If you sell through distribution
channels also, the number and type of sales forces can vary tremendously and
your success as a marketer is highly dependent on their success.
B2B Marketing Communications Methodologies
The purpose of B2B marketing
communications is to support the organizations' sales effort and improve
company profitability. B2B marketing communications tactics generally include
advertising, public relations, direct mail, trade show support, sales
collateral, branding, and interactive services such as website design and search
engine optimization. The Business Marketing Association is the trade
organization that serves B2B marketing professionals. It was founded in 1922
and offers certification programs, research services, conferences, industry
awards and training programs.
Positioning Statement
An important first step in
business to business marketing is the development of your positioning
statement. This is a statement of what you do and how you do it differently, as
well as how it will be better and more efficient than your competitors.
Developing Messages
The next step is to develop
your messages. There is usually a primary message that conveys more strongly to
your customers, what you do and the benefit it offers to them. This is often
supported by a number of secondary messages, each of which may have a number of
supporting arguments, facts and figures.
Campaign Plans
Doesn't matter which form the
B2B marketing campaign will take, you need to build a comprehensive plan up
front to target resources where you believe they will deliver the best return
on investment, and make sure you have all the infrastructure in place to
support each stage of the marketing process - and that doesn't just include
developing the lead - make sure the entire organization is geared up to handle
the inquiries appropriately.
Briefing an Agency
A standard briefing document
is usually a good idea for briefing an agency. As well as focusing the agency
on what's important to you and your campaign. It serves as a checklist of all
the important things to consider as part of your brief. Typical elements to an
agency brief are: Your objectives, target market, target audience, product,
campaign description, your product positioning, graphical considerations,
corporate guidelines, and any other supporting material and distribution.
Measuring Results
The real value in results
measurement is in tying the marketing campaign back to business results. After
all, you’re not in the business of developing marketing campaigns for marketing
sake. So always put metrics in place to measure your campaigns, and if at all
possible, measure your impact upon your desired objectives, be it Cost Per
Acquisition, Cost per Lead or tangible changes in customer perception.
Size of Business Marketing
Hutt and Speh (2001) note that
"business marketers serve the largest market of all; the dollar volume of
transactions in the industrial or business market significantly exceeds that of
the ultimate consumer market." For example, they note that companies such
as GE, DuPont and IBM spend more than $60 million a day on purchases to support
their operations.
Dwyer and Tanner (2006) say
the purchases made by companies, government agencies and institutions
"account for more than half of the economic activity in industrialized
countries such as the United States, Canada and France."
A 2003 study sponsored by the Business
Marketing Association estimated that business-to-business marketers in the
United States spend about $85 billion a year to promote their goods and
services.
Growth of B2B Marketing
The tremendous growth and
change that business marketing is experiencing is largely due to three
"revolutions" occurring around the world today, according to Morris,
Pitt and Honeycutt (2001).
First is the technological revolution.
Technology is changing at an unprecedented pace, and these changes are speeding
up the pace of new product and service development. A large part of that has to
do with the Internet, which is discussed in more detail below.
Technology and business
strategy go hand in hand. Both are correlated. While technology supports
forming organization strategy, the business strategy is also helpful in technology
development. Both play a great role in business marketing.
Second is the entrepreneurial
revolution. To stay competitive, many companies have downsized and reinvented
themselves. Adaptability, flexibility, speed, aggressiveness and innovativeness
are the keys to remaining competitive today. Marketing is taking the
entrepreneurial lead by finding market segments, untapped needs and new uses
for existing products, and by creating new processes for sales, distribution
and customer service.
The third revolution is one
occurring within marketing itself. Companies are looking beyond traditional
assumptions and they are adopting new frameworks, theories, models and
concepts. They are also moving away from the mass market and the preoccupation
with the transaction. Relationships, partnerships and alliances are what define
marketing today. The cookie-cutter approach is out. Companies are customizing
marketing programs to individual accounts.
The Impact of the Internet
The Internet has become an
integral component of the customer relationship management strategy for
business marketers. Dwyer and Tanner (2006) note that business marketers not
only use the Internet to improve customer service but also to gain
opportunities with distributors.
According to Anderson and
Narus (2004), two new types of resellers have emerged as by-products of the
Internet: infomediaries and metamediaries. Infomediaries, such as Google and Yahoo, are search engine
companies that also function as brokers, or middlemen, in the business
marketing world. They charge companies fees to find information on the Web as
well as for banner and pop-up ads and search engine optimization services.
Metamediaries are companies with robust Internet sites that furnish customers
with multiproduct, multivendor and multiservice marketspace in return for
commissions on sales.
With the advent of b-to-b
exchanges, the Internet ushered in an enthusiasm for collaboration that never
existed before—and in fact might have even seemed ludicrous 10 years ago. For
example, a decade ago who would have imagined Ford, General
Motors and DaimlerChrysler entering into a joint venture? That's
exactly what happened after all three of the Big Three began moving their
purchases online in the late 1990s. All three companies were pursuing their own
initiatives when they realized the economies of scale they could achieve by
pooling their efforts. Thus was born what then was the world's largest Internet
business when Ford's Auto-Xchange and GM's TradeXchange merged, with
DaimlerChrysler representing the third partner.
While this exchange did not
stand the test of time, others have, including Agentrics, which was formed in
2005 with the merger of WorldWide Retail Exchange and GlobalNetXchange, or GNX.
Agentrics serves more 50 retailers around the world and more than 300
customers, and its members have combined sales of about $1 trillion. Hutt and
Speh (2001) note that such virtual marketplaces enable companies and their
suppliers to conduct business in real time as well as simplify purchase
processes and cut costs.
e-mail : pratheepvasudev@gmail.com