Business (B2B) MarketingIFMR PGDM II Yr. (2009-10)

Module 1Overview of Business marketingS.BalachandranJuly 2009

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Learning ObjectivesWhat is Business Marketing?Classification of B2B Products/Services, Markets & CustomersDifferences between Consumer & Business Markets & MarketingB2B Buying Orientations & Characteristics

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July 2009 S.BalachandranBusiness Enterprises : Activities

OutputsServicesGoods

InputsMaterialsComponentsConsumablesServices

ResourcesEquipmentFacilitiesSystemsLandHuman

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B2B Goods & ServicesJuly 2009 S.Balachandran* of 37

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Industrial Production CategoriesJuly 2009 S.Balachandran* of 37

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Business ServicesJuly 2009 S.Balachandran* of 37

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B2B Markets & CustomersCommercial EnterprisesUsersOEMsResellersService ProvidersInstitutions : Profit/Non-ProfitEducational, Healthcare, NGOsGovernment / Quasi-Govt. BodiesCentral, State, Local, PSUs, Defence

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Some Indian B2B EnterprisesBHEL / NTPCECC (L&T) / Hindustan ConstructionTCS / Infosys / WIPRO / CTSORG Marg / R K Swamy BBDOSAIL / Tata SteelMICO / Sundaram Clayton / Bharat Forge / Bimetal Bearings / Delphi TVSONGC/ Neyveli Lignite Corp. / Bharat Coking CoalIPCL / Gujarat Alkalis / Tata ChemicalsShipping Corporation of India / TVS Logistics

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July 2009 S.BalachandranValue Equation Product or Service satisfies a need or want by providing value.Attributes/FeaturesBENEFITSVALUENETT VALUE = BENEFITS - COSTS* of 37

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July 2009 S.BalachandranValue Creation & Delivery* of 37

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Marketing StrategyJuly 2009 S.Balachandran* of 37Unique to each distinct Product-Market segmentFive Main ElementsSegmentationTargetingPositioningDifferentiationMarketing MixCapabilities Required Market Sensing Customer Linking

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July 2009 S.BalachandranValue Creation & Delivery SystemProvide the valueCommunicate the valueUnderstand Value Desires Select Targets Define Benefits/ PriceUnderstand & Create the Value Market Research Customer Behaviour Product- Market Segments Position Differentiation Product Management* of 37

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July 2009 S.BalachandranProviding the ValueCommu-nicate the valueChoose the valueProvide the ValueTechnology Design ProductDistributeServicePrice Procure, Manu-facture Source Sophisti- cation Patents Process ChoiceFunction Physical charact- eristics Aesthetic Quality Integration Raw Mtl. Capacity Location Part Prodn. Assembly Channels Integration Inventory Ware- housing Transport MRP Negotiation Discount Combo Financing Other Costs Warranty Speed Captive/ Indepen- dent Parts* of 37

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July 2009 S.BalachandranCommunicating the ValueChoose the ValueProvide the ValueCommunicate the ValueINTEGRATED MARKETING Direct Sales Force Distribution Channel Partners Brochures, Website, Email Advertising & Promotions Physical Evidence Employees Processes* of 37

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Value ExpectationsJuly 2009 S.Balachandran* of 37

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July 2009 S.Balachandran* of 37Value Hierarchy Product Levels

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Framework for B2B MarketingJuly 2009 S.Balachandran* of 37

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Key Differences:B2B vs Consumer Marketing July 2009 S.Balachandran* of 37

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Nature of B2B DemandDerived FluctuatingNecessity to monitor changes in Demand Patterns of Customers CustomersStimulation of Primary Demand & popularising new applicationsPrice Sensitivity/Demand Elasticity in B2BDepends on B2COpportunities of Global Markets & Impact of Global Competition : much more in B2B than B2CJuly 2009 S.Balachandran* of 37

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Complexity of Buying ProcessStrategic Importance of itemSenior Management InvolvementCost : High, Medium, LowDifferent Buying ProcessesRelative Importance of financial ApprovalsComplexity of need servicedLevel of Customisation & Service requiredMulti-functional ScrutinyComplexity of Buying OrganisationCentralised vs Decentralised AuthorityJuly 2009 S.Balachandran* of 37

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Concentrated Customer BaseDirect sellingMore EconomicalCustomer ExpectationBuyer Bargaining Power Competitor Influence on BuyerManagement of Short Term setbacksClose RelationshipsMonitor happenings @ Customer endExpectations of C, Q, D, S, R1 & R2

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Emphasis on TechnologyConstant pressure to improve/ upgrade/ innovateCollaborative Design & DevelopmentProduct Performance OrientationPerformance to Price RatioExpected to provide SolutionUnderstanding of Customer Business Selling : Technical / Multi-Functional Skills

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High Level of CustomisationInflexible technical SpecificationsSometimes necessary for manufacturer to redesign / re-layout operations facilitiesEven standard products: Installation, Configuration, Service & Support may have to be highly customised

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Differences in Emphasis : B2B vs B2CJuly 2009 S.Balachandran* of 37

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Nature of Products B2B MarketingManufactured Materials & PartsCustom-made partsPersonal selling & CRMDesign & Supply Chain capabilitiesStandardised PartsContractual Purchase, Large quantitiesPrice, Delivery, Support serviceResellers used

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Nature of Products B2B Marketing (Contd.)InstallationsProduct, Technology, Service CapabilitiesPersonal Selling & Account ManagementLess Costly, More StandardisedMarketing IntermediariesCostly, more involvedClose relationshipsLong negotiationsSeveral Executives of buyer organisation involvedJuly 2009 S.Balachandran* of 37

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Nature of Products B2B Marketing (Contd.)SuppliesLarge Users: Direct MarketingSmaller Users: Marketing IntermediariesStrong eProcurement tendenciesLess Personal SellingMore of Catalogue approachPrice & Range criticalJuly 2009 S.Balachandran* of 37

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Distinctive Capabilities for B2B MarketingJuly 2009 S.Balachandran* of 37

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Goals of PurchasingJuly 2009 S.Balachandran* of 37

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Total Cost of OwnershipJuly 2009 S.BalachandranFactors that drive total cost.Acquiring and managing costs.Quality, reliability over the life cycle.Value of product to firm/customers.* of 37

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Procurement DevelopmentJuly 2009 S.Balachandran* of 37

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Segmenting the BuyJuly 2009 S.Balachandran* of 37

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Procurement ProcessesSource ApprovalContract (annual) / Non-contractInventory Control SystemseProcurementReverse Auction eBiddingTiered Structure (Ex. Fig 1.5, p15)

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Government ProcurementJuly 2009 S.BalachandranCompliance - requires government contractors maintain affirmative action programs.Reservation - a percentage of the contract is set aside for small minority businesses.* of 37

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Govt. ContractsJuly 2009 S.BalachandranFixed-price contractsPrice agreed to before contract awardPayment made at conclusion of workProvides for the greatest profit potentialPoses greater risksCost-reimbursement contractsReimbursement of allowable costsPrice = Cost + Profit%Disclosure of Cost Structure* of 37

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Govt. ProcurementAgenciesDefence BodiesDGS&DPSUsCommitteesProcessTenderingApproved Supply sourcesNegotiationJuly 2009 S.Balachandran* of 37

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Institutional ProcurementSchools, health care organizations, non-profit agenciesSimilar to government buyersPolitical considerations and lawsSimilar to commercial buyersOften managed like corporationsBroad range of purchase requirementsGroup purchasing quite commonJuly 2009 S.Balachandran* of 37

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