Management and Organizational Studies 2320A/B Chapter Notes - Chapter 5: 7 For All Mankind, Business Marketing, Construction News
1 Oct 2018
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Chapter 5: Business to Business Marketing
B2B Marketing
• Business-to-business marketing refers to the process of buying and selling goods or
services to be used in the production of other goods and services, for consumption by the
buying organization, or for resale by wholesalers and retailers
• Involves manufacturers, wholesalers, retailers, and service firms that market goods and
services to other businesses, but not to the ultimate consumer
• The distinction b/w a B2B and B2C transaction is not the product or service itself; it is the
ultimate purchaser and user of that product or service
B2B Markets
• B2B firms focus their efforts on serving specific types of consumer markets to create value
for those customers
o I.e. RBC maintains a group of account executives to service its small business and
commercial banking clients
• Many firms find it more productive to focus their efforts on key industries or market
segments rather than on ultimate consumers
• Manufacturers, resellers, institutions, and governments are all involves in B2B transactions
Manufacturers or Producers
• Manufacturers buy raw materials, components, and parts that allow them to manufacture
their own goods
o I.e. Volkswagen communicates directly with suppliers to acquire parts and
components for its cars
• Many B2B companies today are demanding that suppliers demonstrate social responsibility
by putting in place policies and practices to reduce their carbon footprint
Resellers
• Resellers are marketing intermediaries that resell manufactured products without
significantly altering their form
o I.e. wholesalers and distributors buy jeans from 7 For All Mankind and sell them to
retailers (a B2B transaction)
• Wholesalers, distributors, and retailers are all resellers
• Institutions, such as hospitals, educational organizations, prisons, religious organizations,
and other non-profit organizations purchase all kinds of goods for the people they serve
o Public institutions engage in B2B relationships to fulfill their needs for capital
construction, equipment, supplies, food, and janitorial services
Government
• In most countries, the central government tends to be one of the largest purchasers of
goods and services
o I.e. academic, social, health sectors
• Information about government buying can be obtained from Business Access Canada or
from MERX
o MERX is the most complete source of Canadian public tenders, private tenders, US
tenders, and private-sector construction news available in Canada
o Makes it possible for businesses of any size to have easy and affordable access to
billions of dollars in contracting opportunities with the Government, participating in
provincial and municipal governments, the US government, and the private sector
Key Challenges of Reaching B2B Clients
• For marketers to be successful at B2B marketing, they must master 3 key challenges for
each business customer they want to serve
• First challenge is to identify the right person or decision markers within the organization who
can authorize or influence purchases
• Second, they must understand the buying process of each potential client
• Third, they must identify the factors that influence the buying process of potential clients
• B2B marketers differ in varying degrees on these 3 dimensions
o Thus, marketers must invest time and resources to understand these challenges
o I.e. institutional buyers, such as nursing homes and universities, tend to have
relatively small budgets, and therefore seek the best value when buying products
and services for their organizations
▪ If 2 suppliers are offering roughly similar products, they may opt for the
supplier with the lower price
o I.e. governments make much larger purchases, but their buying processes must not
only satisfy strict policy guidelines set by the government, but also meet
international trade rules set by the World Trade Organization or NAFTA
▪ Governments consider a wide range of factors in their purchases and may
not always purchase from the vendor with the lowest price
• Institutional organizations are not under such public scrutiny as the government, and rarely
disclose their purchase decisions and practices, though they try to make their processes
transparent
• Private sector companies, such as manufacturers, producers, and resellers rarely, if ever,
disclose their buying processes
o Likely to engage in reciprocal buying, where two companies agree to buy each
other’s products
• To address the complexity of B2B markets, many companies have salespeople or a sales
team dedicated to specific clients
o I.e. many companies wishing to sell to the government (i.e. Microsoft), have
business-government relations experts or departments
B2B vs B2C Markets
Market Characteristics
• In B2C markets, consumers buy goods to satisfy their own individual or household
needs and are heavily influenced by price, personal tastes, brand rep, or
recommendations of friends and family
o In B2B markets, the demand for goods and services is often derived from B2C
sales in the same supply chain
• Derived demand is the linkage between consumers’ demand for a company’s output
and its purchase of necessary inputs to manufacture or assemble that particular output
o I.e. the demand for raw denim used to make 7 For All Mankind jeans is derived
from the sale of the jeans to consumers
o Demand for raw material and semi-finished goods purchased by business firms
tend to fluctuate more, and more frequently
• The total demand for goods in many business markets is not affected much by price
changes in the short run
o I.e. a small increase in the price for raw denim will not cause a huge drop in the
demand for denim in the apparel industry in the short run
• The number of business buyers in B2B markets is substantially fewer than in B2C
markets, and the business buyers are more concentrated in big cities, towns, and
industrial areas
• The sizes of the orders are substantially larger than consumer purchases
Product Characteristics
• In B2B markets, the products ordered are primarily raw materials and semi-finished
goods that are process or assembled into finished goods for the consumer
o I.e. Dell orders all computer components from different suppliers and then
assembles the computers before shipping to customers
• In certain B2B markets (i.e. aerospace, medical, pharmaceutical, shipping), the
products are very technical and sophisticated in nature and must conform to technical
standards specified by the buyer
o Therefore, the components undergo rigorous testing before shipping
o Orders must be delivered on the dates agreed to by both buyers and sellers
• Technical services and financing assistance are important aspects of B2B buying
behaviour
o Companies often provide vendor financing—a process where a company
provides its consumer with a loan that is used to buy goods from the company
Buying Process Characteristics
• Generally, for routine purchases or small dollar-value purchases, only one or a few
individuals within a department or the company may be responsible for the buying
decision
• For purchases of highly technical or complex products involving thousands or millions of
dollars, the buying effort is much more structured, formalized, and professional
o More people are usually involved in complex buying decisions
▪ Usually trained and qualified professionals, and represent different
interests (i.e. managerial, technical, and departmental) within the
organization
• The group of people involved in the buying decision is often referred to as the buying
centre
• Most companies have formal policies and procedures to guide buying decisions that
must be closely followed by the people involved in the buying decisions
o I.e. rules governing competitive bidding, negotiated pricing, buying criteria
• B2B and B2C differ in terms of the relationship between the firm and its suppliers
o Generally, the buying decision is based on negotiations (which could be quite
extended for complex purchases)
o The negotiated contract normally covers a range of concerns- including price,
delivery, warranty, technical specifications, and claim policies
