Business To Business Market B2b Marketing Essay

Exchange processes involve work. Sellers must search for buyers, identify their needs, design good products and services, promote them, and store and deliver them. Activities such as product development, research, communication, distribution, pricing and service are core marketing activities.

1.1.2 Business to Business market (B2B).

Business market consists of all the organizations that buy goods and services to use for producing other products and services that, in turn, are sold, rented or supplied to others. It also includes retailing and wholesaling firms that acquire goods for purpose of reselling or renting them to others at a profit. (1)

But this definition is still narrow as the viewpoint of Jim Blythe and Alan Zimmerman (Business to Business marketing management – a global perspective). The full Business market includes customers who are institutions like hospitals and charities and all levels of government. The business market not only includes physical products but services as well. In fact, as we can see, large institutions, governments and businesses buy virtually every product and service. (3)

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Business buyers generally buy to increase their profits, institutional buyers have the same concerns but they may be focused on providing an adequate surplus. There are only two basic ways to increase profits: boost sales or lower costs. These objectives may be achieved by increasing efficiency or purchasing lower-cost products/services. Sometimes business buyers also buy to avoid penalties from government regulators. Therefore, we can conclude that the most effective marketing programs directed at business buyers are always based on one of the following basic appeals:

1. Increasing sales.

2. Reducing costs.

3. Meeting government regulations.

1.1.3 Characteristics of B2B market

The market where businesses sell to other businesses is extremely large, the reason is many parts are manufactured and transacted by many steps before the completed consumer product are sold to the final consumer.

As the counting of Jim Blythe, in order to manufacture a simple product as electric hairdryer, there are about 18 transactions can be defined as business to business(B2B) category and only one final transaction belong to Business to Consumer (B2C). To make this hairdryer requires raw materials from oil, steel, aluminum and rubber producers, materials processors who process raw ores into usable products, manufacturers of parts and sub-assemblies who put together materials of various kinds and deliver serveral components to another firm who would be a final assembler. The final assembler the delivers the product to the distributor. This firm then sells the product to a wholesaler, who in turn sells to a retailer and only then the product is sold to the final consumer. Each party in this chain also buy many related goods and services. This example shows why there is more business buying than consumer buying – the number of business buyings were more bigger than that of consumer buyings. (3) (Jim Blyth and Alan Zimmerman)

Figure 1.1: Transactions belong to B2B and B2C (3)

Some typical characteristics of B2B market:

a, Market structure and Demand:

+ The buyers in this market are fewer in number but larger in term of volume and value in comparison with B2C market.

+ The market is geographically concentrated. For this characteristic, the customers who buy our equipment and materials locate mainly in Quang Ninh province, Northeast of Vietnam. The areas of coal mines are 04 centres including : Mao Khe – Uong Bi, Hon Gai, Cam Pha and Mong Duong- Khe Cham, therefore, the offices and physical infrastructure of mine also locate here.

+ Demand:

Business demand is derived demand. It derives from the demand of the other business or consumer demand.

The demand of coal from electricity, cement, chemical producer… increase will make the demand of coal exploring equipment increase due to the Coal-mine-companies want to invest to expand output and we expect to sell more equipment and materials to these businesses. In the recession of economy, the demand of electricity and cement drop and the sales of said exploring equipment will be, obviously, affected negatively.

Business demand is inelastic – The demand in consideration of the change in price. the change in price do not affect the demand in the short run. A decrease in price also do not make the demand of any equipment increases. The demand is often planned and fixed for short term. The decrease in price only makes the buying at a lower cost and the whole production more effective but do not change the demand.

Fluctuating demand: The demand in the business market for goods and services fluctuates more sharply than the demand in consumer market. A small percentage increase in demand of consumer goods and services can lead to big increases in demand of business market. In some cases, even only 10 percent increase in consumer demand can make the business demand increase as much as 200 percent during the next performance-period.

b, Nature of buying unit:

That is professional buying. Usually, the purchases of a business is done by well-trained and experienced buying staffs, who use their full working time in learning how to buy effectively. The more complicated the purchase, the more likely that the process of making decisions will include the participation of more people. Buying Units made up of technical experts and high-rank management are popular in the buying of primary goods. Moreover, some business may uses the support from consulting that make the marketing and negotiation even more difficult.

Therefore, sellers in business market must use well-trained salespeople to approach well-trained buyers.

c, Buying decision: Types and process.

+ Type of decision: the decisions of business buyers are more complex than that of consumer buyers. »¿Business buyers usually have to cope with more complex buying decisions than that the consumer buyers do.

Business buyings often involve large amount of money, complicated technical specifications and complex economic circumstances, also interactions of different people at different order-levels in the buyer’s organisation structure. Because the purchases are more complicated, business buyers have to take longer time to give their decisions. For example, when a mine decide to buy a main water pump station, it often takes about one year for the fulfilment of the bid package because the only manufacturing period may last for 06 months. It also could involve hundreds of technical issues, many legal procedures, a large amount of money and many people from members of Board of directors to on-site equipment operators.

+ Process of decision: »¿

The buying process in a business are more formalized than the buying procedures of the consumer market. Big technical purchases of business often require detailed specifications of the product, formal purchase orders, careful searching for suppliers and formal approval. Especially, the buying process in the state-owned companies or government’s organisations require a strict procedures that must be complied with regulations.

In the buying process of business, buyer and seller are usually more dependent on each other. In consumer market, sellers are often at a long distance from the buyers in the buying process. In contrast, in business market the sellers may stay by the buyers’ side and work together with their buyers in all steps of the buying process – from defining problems, to finding solutions or supporting after-sales operations.

Some other characteristics:

Out of some mentioned characteristics, business market also have some case such as: directly buying, leasing, reciprocity.

1.2 How the customer buy in B2B market:

To master the buying behaviour of business will be the decisive factor of success for salespeople. In order to understand how business customer buy we will find the answers for the 04 questions hereunder:

What decisions do business buyers make in buying process?

Who are the participants in the buying process of business ?

What are the main influencing factors to affect buyers?

How do business buyers make decisions in the buying process?

1.2.1 What decisions do business buyer make in the buying process?

+ There are 03 situations of buying: straight rebuy, modified rebuy and new task. Also called buyer’s techniques. (1) (Philip Kotler)

– Situation 1: Straight rebuy: the situation when the buyer reorders without any change in required specifications, prices, quantity and other conditions of the previours contract. In this case, purchasing department simply select from the offerings by the regulary suppliers. In many cases the buyer establishes an electronic data interchange (EDI) link with a supplier or establishes automatic buying procedures through Internet and orders are handled without any human interface. In general, these types of buying are applied in the cases that the product is of minor importance, or represents a low commitment in terms of finance or risk. Regulary sellers try to keep their fame and good relationship by good quality of goods and services. The strange sellers, step by step, try to persuade the buyer that their quality of goods and services are better than that of other and their price is more competitve. They first try to get small order and then to enlarge their share as much as possible over time.

– Situation 2 :Modified rebuy: the buyer bases on the actual requirements of work to buy with some modifications on technical specifications, time of delivery, price or other conditions. Even the supplier may be changed. Sometimes theses changes come about as a result of environmental scanning, in which the buyer has become aware of a better alternative than the one currently employed, or sometimes the changes come about because of marketing activities by the current suppliers’ competitors. The drawback of this approach, however, is that it often results in damaging the relationship with existing suppliers that may have been built up over many years.

– Situation 3: New task: the business buyers buy goods or services for the first time and this is quite an open opportunity to every sellers. Past experience is therefore no guide and current suppliers may not be able to help either. Thus the buyer is faced with a complex decision process. The risks for buyers involved in switching suppliers are often too great unless there is a very real and clear advantage in doing so: such an advantage is likely to be difficult to prove in practice. The new-task situation can be seen as the seller’s greatest opportunity and also the greatest challenge. The seller not only tries to put influencing factors as many as possible, but he also tries to support and provide useful information.

+ System buying and selling:

In some cases, based on the specific requirements of the project or work the business prefer buying a packaged solution for settling a problem from one single supplier. This is called System buying. Instead of buying equipment and services in different stages and in separated package of components, the business call for the bids that the supplier could supply the full set of solutions and all equipment for the project.

For example: the EPC bids (Engineering, Procurement and Construction), in which the supplier must realise works from engineering, supplying equipment and materials, construction and installation, operation and transfering to the buyer.

The sellers have recognized that business buyers prefer this method of buying, therefore the sellers have adopted and considered systems selling as a effective marketing tool. Systems selling process has two steps. Firstly, the seller sells a group of products that are inter-dependent: for example, when we sell not only coal mine proping system but also emulsion, pump and valves. Second, we sell the design for production, spare parts and other inventories, and other services to ensure that the system the buyer has bought operating smoothly. (1)

Systems selling nowadays is developed as a key marketing strategy in business market for obtaining and holding customers. The contracts often goes to the firm that provide the most complete system that meet customer’s needs.

1.2.2 Who are the participants in the buying process of business?

There are very few cases where industrial buying decisions are made by only one person. Even in small businesses it is likely that several people would expect to have some influence or input into purchase decisions. Because of this, the decision – making process often becomes formalized, with specific areas of interest being expressed by members of the decision – making unit (DMU) and with roles and resposibilities being shared. This group which cannot be fixed and identified on any company organization chart, also called the BUYING CENTER, varies in size and make-up from one buying situation to another, from one type of products or services to another. Individuals may participate for a brief time only, or be part of the group from conception to conclusion.

According to Webster & Wind (1972), the DMC includes 06 categories of member: Initiators, Gatekeepers, Buyers, Diciders, Users and Influencers. (2)

According to Philip Kotler in Principles of Marketing in B2B, the DMC includes 05 members who play 05 roles in the buying decision making process. These categories are not mutually exclusive. A User might also be an Influencer or a Buyer might also be a Decider. (1)

In general, members of a Decision – making Unit tend to be more risk-averse than consumers. This is because the DMU’s members have more to lose in the event of a wrong decision: for consumers, the main risk is financial and even that is limited since most retailers will replace or refund goods purchased in error. For industrial buyers, however, a serious purchasing mistake can result in major negative consequences for business as well as loss of face at work, in shattered promotion dreams, or even in dismissal in serious cases. The professional persona of industrial buyers is liable to be compromised by purchasing errors, which in turn means that buyers will feel a loss of self-esteem.

1.2.3 What are the main influencing factors to affect buyers?

When business buyers make buying decisions they often rely on many influences. Some sellers assume that are economic influences. They think that business buyers will choose the supplier offering lowest price or the best quality product. They concentrate on offering only favorable economic advantages to buyers. However, both economic and personal factors are the business buyers’ concerns. The business buyers are human that are effected by not only rational evaluation but also by emotional effects.

When the business buyers receive similar offers, their rational evaluation is little. Because offers from any seller can meet their organisation’s objectives, buyers then can let personal factors to make the decisive role in their buying process. However, when competing products are largely different, business buyers tend to be affected by the economic factors.

There are 04 main groups of influences on business buyers: environmental, organisational, interpersonal, and individual.

+ Environmental influences: (3)

Figure 1.2 and its explanatory notes, shows why business buyers are likely to be affected by some or all of the following environmental influences. (4) (Loudon and Della Bitta, 1993),

Economic influences: The macroeconomic environment is concerned with the level of demand in the economy and with the current taxation regime within buyer’s country. These conditions affect buyers’ abilities to buy goods as well as their need to buy raw materials: if demand for their product is low, the demand for raw materials to manufacture them will also be low. The macroeconomic climate affects business buyers’ confidence in the same way as it affects consumer confidence. For example, a widespread belief that the national economy is about to go into a decline will almost certainly make buyers reluctant to commit to major investment in stock, equipment and machinery. At the microeconomic level, companies experiencing a boom in business will have a greater ability to pay for goods and a greater level of confidence.

Political influences: Laws issued by the Government frequently will affect the operation of businesses. A change in the structure of the government or a new policy will lead to direct impact on the economic circumstances, and this then lead to changes in the method of buying in organizations ultimately.

Legal influences: laws often lay down specific standards, which affect buyers’ decisions. Often, suppliers can obtain competitive advantage by anticipating changes in the law.

Physical influences: the location of purchasing companies relative to their suppliers may be decisive, since many companies prefer to deal with people from the same cultureal background or they wish to support local suppliers.

Technological influences: the level of technological development available among suppliers will affect what buyers can obtain. The technology of buyers and sellers must also be compatible, especially in technical standards.

Cultural influences: culture establishes the values, attitudes, customary behavior, language, religion and art of a given group of people. Beyond the national culture is the corporate culture, sometimes defined as “the way we do things round here”.

Ethical influences: in general, buyers are expected to act at all times for the benefit of the organization, not for personal gain. This means that, in most cultures, the buyers are expected not to accept bribes, for example. However, in some cultures bribery is the normal way of doing business, which leaves suppliers with a major ethical problem – refusing to give a bribe is likely to lose the business, but giving a bribe is probably unethical or illegal in the company’s home country.

Competition influences : Today’s business environment is more and more competitive. So when a competitor lauch a new product or they by somehow to get competitive advantage, the business, of course, have to change their operation in the new situation and the buying method will change accordingly.

+ Organizational influences:

More than the external factors, it’s the internal factors of the organization that influence the business buying. The organizational factors may come from the corporate culture, as well as from the strategic decisions made by senior management within the company. Organizational policies, procedures, structure, rewards policy, authority, status and communication systems will all affect the ways buyers relate to salespeople.

Some examples of strategies and policies in buying organizations has had a considerable impact on buying decisions of the buyers: the emergence of just-in-time (JIT) production systems, purchasing performance evaluation, upgraded purchasing, long-term contracts… all that the business marketers must know as thoroughly as possible to match and catch the development and changes in B2B market. (1)

+ Interpersonal factors:

The DMU usually consists of different participants who have affects on each other. The seller in business market usually find difficult to define what kinds of interpersonal factors take part in the buying process. As an author notes: ‘Managers does not wear tag that quote “decision maker” or “unimportant person”. The power are often invisible, at least to salespeople. It is not the participants who are member of DMU always have the most influence corresponding to their rank in the business. Participants can influence on the buying process because they are responsible for rewarding and punishing policy. Or someone who has special expertise, or may affect the process with their special relationship with decision makers or top management. Interpersonal factors are usually very sensible and subtle. Whenever possible, sellers in business market should understand these factors deeply and develop strategies that take them into consideration . (1)

+ Individual influences:

»¿Each participant in the business buying process has his own personal motives, perceptions and priorities. These factors are influenced by individual characteristics such as personality, age, income, education, professional and attitudes towards gains and loss and risk. Moreover, buyers have different buying preferences, some may be technical style who analyzes in details of competitive offers before choosing a most suitable while others may be intuitive negotiators who make the best buying decisions based on the fair competition of sellers against one another . (1)

+ Situational Factors

We also could not ignore the other situational factors which can influence buying decisions of business buyers.

Time: Sometimes, business don’t have enough time to apply full steps of buying procedure. In case of sudden broken-down of a machine, the business have to replace the parts for the continuity of production process, it may decide to make an order with some available existing suppliers.

Current Financial Situation: If the business is short of cash at certain point of time, it may decide to make order with the seller who have most favorable credit condition offers. Also, if the budget of a business is limited for a certain purchase, it may negotiate with the seller who offers cheaper that fits to the business’s budget.

Availability: Depends on plan of each business, Some can allow long time delivery while others cannot, therefore if the supplier are unable to prepare the goods for delivery by the desired delivery date, the business buyers may shift to an other new supplier.

Special Offers: A supplier can give some special offers that may also be influenced by one of the situational factors and lead to the buying decision being affected.

As a supplier in the business market, now we have already known what factors can influence business buyers, we can build up the suitable sales strategies to this B2B market to master business buying activities and therefore win more value-contracts for our business.

1.2.4 How do business buyers make decisions in buying process?

Business buying can be seen as a series of decision, each of which leads to a further problem about which a decision must be made. From the viewpoint of the business marketer, it is possible to diagnose problems by examining the sequence of decisions, provided, the decision is known to the marketer. Marketers can identify the stage at which the firm is currently making decisions and can tailor the approach accordingly.

The most complex buying situation is New-task which involve the largest number of decision makers and buying influences. This is because New Task require the greatest amount of effort in seeking information and formulating appropriate solutions, but will also require the greatest involvement of individuals at all levels of the organization, each with their own plan. Buyers in situation of modified re-buy and straight rebuys may ignore some of the stages. (Appendix No. 1: Buygrid Framework) (3)

Recognizing a problem: the first step in buying process of business in which someone in the business finds out or be aware of a problem that can be settled by acquiring a product or service. Problem recognition can come from internal or external requirements. Internally, the business may decide to develop a new product and a new production line and materials may be in need. Or a machine may break down and need new parts…. In contrast, the buyer may be affected by external factors such as: an advertisement or an offer from a salesperson with better product but more competitive price.

Description of characteristic and quantity of product in need: the sencond step in buying process is that the business describes the general characteristics and quantity of required product. If the product are standardized, this stage is simply. But for the product with specific and complicated features, the buyer then have to consulting to opinions of other people such as: field users, engineers, consultants, financial officer… for determining the product. This group may rank the order of importance for price, availability, reliability, durability and other criteria desired in the product. In this period, a good salesperson can work with the buyers to define their requirement and he can supply information about the different product for buyer’s choice.

Determination of characteristics and quantity of needed item: the third step in the buying process is that the business decides and specifies the most suitable technical characteristics of the product that they need.

Search for and evaluation of sources: the forth step in the buying process is that the buyer tries to search for best suppliers. The buyer sort out a shortlist of qualified suppliers by reviewing trade directories, searching on Internet or consulting other partners for recommendations. The Internet popularization is really a great opportunity for small suppliers to fairly compete in the market with the same advantage as the larger suppliers.

Aquisition and analysis of proposals: in this fifth step the buyer invites the qualified suppliers to hand in offers. Some suppliers will fax only a quotation or send a salesperson. However, when the purchase is complicated or expensive, the buyer will often require detailed formal presentations from each supplier in the shortlist. Seller in the business market must be good at and experienced in preparing proposals and presenting them to meet the buyer’s requirement of complicated proposals. Proposals should be marketing documents, should not just express technical aspects. The presentations of salespeople must show the confidence of the seller and make the seller outstanding from other competitors.

Evaluation of proposals and selection of supplier (s): the step in buying porocess in which buyers evaluate proposals and choose a suitable supplier. During the selection, DMU will make up a list of required criteria and their ralative levels of importance. The members of DMU will rate the suppliers with their attributes and determine best suppliers. (Appendix No.2 illustrates some of the ways in which buyers can assess potential suppliers) (3)

Today, buyers tend to use the less number of suppliers. These buyers prefer suppliers to work closely with them in developing and producing goods and they will highly evaluate the useful suggestions from suppliers.

Selection an order routine: in this stage of process, the buyer send final order to the chosen supplier/suppliers, require a list of technical specifications, quantity, expected time of delivery, maintainence and warranties conditions. For the machine or equipment arising maintenance, repair and warranty, buyer are more and more using blanket orders than periodic purchase orders. In a blanket order, the seller always want to maintain a long-term relationship with buyers in which the seller will ensure to re-supply the buyer at any time needed on the basis of mutually agreed prices in a determined period. The seller keeps inventories and will supply to the the buyer if the buyer needs. Signing a blanket order will make the buyer free from reserving large inventories and bearing costs, this also minimizes administrative expenses of processing frequent similar purchasing orders.

Feedback and evaluation: the last step of buying process is that the buyer assesses the satisfaction with seller’s products and services, then they decide if they will continue, adjust or shift to others. The buyer may ask the user to give his opinion about their satisfaction. The seller also considers and evaluates the same factors and cirteria applied by the buyer for being sure of that he also is giving satisfaction as expected. (Appendix No. 3: Evaluation approaches) (3)

All above methods and steps involve some degree of subjectivity, in other words each method requires buyers to make judgments about the suppliers. The fact that the credibility of outcomes for each method are small: those involved in evaluations should be excercised periodically and the criteria used by the various individuals involved needs to be checked.

1.3 The role of Personal selling in B2B marketing.

1.3.1 Definition:

Among the five main elements of integrated marketing communications – IMC (advertising, sales promotion, public relation, direct marketing) , personal selling is used as the most effective method in B2B marketing.

+ Definition of salesperson: an individual acting for a company by performing one or more of the following activities: prospecting, communicating, servicing and information gathering. Salesperson is someone who may stand behind the counter or whose job demands the creative selling of products and services (industrial equipment, insurance and consulting services…) or just builds a goodwill or educates buyers. (1)p810

+ Definition of Personal selling – is any form of personal presentation by the firm’s sales force for purpose of making sales and building customer relationships.(3)

Some tools applied in Personal selling including: sales presentations, fairs and trade shows, and incentive programmes.

Personal selling can be used most effectively in any certain stages of the buying process of business, particularly in building up buyers’ preferences, persuasion and actions. Compared to advertising, personal selling has several unique qualities: (3)

It relates to the interaction personally of different people, and therefore each person can see needs and characteristics of the other and then adjust accordingly.

Personal selling allows relationships of many kinds to interact, ranging from a simply related selling relationship to a deeper personal friendship. The effective salesperson who keeps the customer’s interests in his heart for building a long-term relationship.

Personal selling make the buyer usually have a bigger need to listen and react, even if the reaction is a polite refuse: ‘No, thank you’.

However, these unique qualities of Personal selling result some costs. A longer-term commitment are needed but the advertising are not- advertising can be easily turned on and off with no cost, but it is difficult for sales force to change. Personal selling is also the business’s most expensive tool of promotion.

1.3.2 The role of personal selling:

+ The relative importance of personal selling in B2B market: we can take the comparison made by Philip Kotler in his book “Principles of Marketing” to see the importance of different promotional tools varies between consumer and business markets (see Figure 1.3). Businesses who sell consumer goods usually spare more part of their funds to advertise, the next is sales promotion, after that is personal selling and final is public relations. Advertising is relatively more important in consumer markets due to the number of buyers is larger, buyings seem to be routine, and emotions play a more important role in making buying decision process.

In contrast, the suppliers of industrial goods use most of their»¿ buget in Personal selling, the next order are sales promotion, advertising and then public relations. Generally, personal selling is used mainly with risky and expensive buying, and mainly in business markets with fewer and larger buyers.

+ The role of sales force in personal selling: