Differences between B2B and B2C Marketing

This assignment explores how business-to-business (B2B) marketing differs from business-to-consumer marketing. It will define marketing for the purposes of this assignment and then explore how it is approached generally. From there, this assignment will consider how B2B marketing is differentiated from consumer marketing, and finally it will investigate the similarities between the two marketing approaches.

Baines, et al, (2008:5) cite The Chartered Institute of Marketing (CIM 2001) definition of marketing as “the management process of anticipating, identifying and satisfying customer requirements profitably”. Marketing is often thought of as a three stage process of identifying the market segments, choosing a segment to target and the establishing a market position relative to competitors in the same market (Jackson, 2015). However, it is helpful to think of the customer as not necessarily being the ultimate consumer, since in order for a consumer transaction to take place, numerous business-to-business transactions will have taken place prior to this (Brennan et al, 2014). Business-to-business (B2B) marketing is, therefore, focused on satisfying the requirements of other businesses within the supply chain. And thus, firstly, one needs to consider how to segment the business market.

These businesses can be classified by type of organisational customers. For example, global or national; public or private sector; small, medium or large enterprises (Macfarlane, 2002) or broadly into commercial, governmental and institutional organisations (Baines et al, 2008). Commercial organisations can be further divided into: distributors, original manufacturers, users and retailers. Each of these make purchases in different ways. For example, distributors’ priorities are the smooth progress of products along the marketing channel from manufacturer to consumer. Thus, they can buy in bulk and then break down the goods into relatively small quantities for re-distribution in the market place, providing both storage space and buyer power whereas users purchase goods or services for immediate consumption within its production processes (Baines, 2008). Manufacturers buy parts, be they finished or unfinished and rebrand them into their own products whereas retailers purchase products to sell directly to consumers.

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Thus, organisational buying is more likely to be highly cost-sensitive: for the ultimate business to maximise their profits, they will want to source the most suitable supplier for their needs, whereas the consumer is more likely to be influenced by image and product appearance (Jackson, 2015). Of more considerable importance, B2B marketing is concerned with creating long-term mutually beneficial relationships between the two businesses. This act as a brake on adversarial competitive behaviour, particularly when the ultimate consumer becomes more sophisticated and familiar with the products or services. This happens as markets become more competitive and this in turn affects the organisational buying behaviour (Swinder and Seshadri, 2001).

Organisational buying behaviour is the defined as the “the purchase of product or service to satisfy organisational rather than individual goals” (Parkinson and Baker, 1994:6). Thus marketing to other businesses requires the marketer to adopt processes which take into account the needs of several people rather than just a single individual. However, an alternative approach is supplied by Webster and Wind (1972:2) who define organisational buying as “the decision-making process by which formal organisation establish the need for purchased products and services, and identify, evaluate and choose among alternative brands and suppliers”. From this perspective, the B2B marketer is concerned with the processes of buying, and as such buying is not considered a one-off isolated event to satisfy wants.

The phrase ‘Buyphases’, devised by Robinson et al (1967), refers to the sequential activities that organisations engage in when purchasing products. First, the organisation identifies the need for a product or service, or there is some notion of recognising a problem. There is a gap between the benefits it is receiving now and the benefits it would like to have in future. As a result of this, thought is given to the product specification – the characteristics of the product needed to resolve the problem. Following this, there an active search for information to find products which meet the specification and some assessment of its performance standards, which are then formerly evaluated and then a product or service is selected.

However, some of these stages may be ignored or compressed according to the ‘buy-class’ of the products and services being sought. The ‘buy-class’ is the term used to describe how the nature of the product or service, the frequency of purchase and its relative value and strategic impact (if any) can vary (Baines et al, 2008). “New Task” purchases refer to a first-time buying situation, with higher risks as there is little collective experience of the suppliers/products. “Modified Rebuys” refers to lower risks with some experience and “Straight Rebuy” are routine, familiar purchases. The higher the “buy-class”, the greater the range of people who may be involved in the process, unlike with the ultimate consumer, who is more likely to decide unilaterally. Within an organisation, those who initiate the decision-making process may not be the ultimate decision-makers nor indeed users of the product. In high-value, high risk purchasing, influencers may help set the technical parameters, and from a marketer’s perspective, how to target, and indeed to who to target, may be constrained by gatekeepers who have the potential to control the type and flow of information within the organisation (Fill and Fill, 2005).

Taking into account the above, it can be seen that B2B marketing is about its role within the supply chain, and therefore constitutes a potential source of competitive advantage for the ultimate seller. For example, cost advantages can be obtained for those with high buying power, as they are able to benefit from greater discounts that can be obtained for the purchaser and which can then be passed on to the ultimate consumer (Jackson, 1985).

From a marketing perspective, therefore, B2B marketing is about the trading relationship between two businesses, and organisational buying may involve more complex decision-making processes – particularly when there are low levels of familiarity of the product/service being sought.

Thus, it can be said that organisational buying behaviour is context-specific and varies according to what is being bought and the number of people involved in the process. However, it must also be situated within the dynamics of the environment the organisation operates within (Fill and Fill, 2005). Organisations vary in their purchasing behaviour, for example, decentralised purchasing will emphasise the geographical importance, but highly centralised purchasing departments will focus on tighter controls, reduction in costs and greater consistency (Baines et al, 2008). The external influences are those forces outside of the organisation’s control, for example an economic change affects exchange rates, encouraging or discouraging the purchase of commodities from one country to the next, or a political disruption can affect the distribution channels. At other times it can be social changes, for example consumer preferences for ‘fair-trade’ and an increasing focus on corporate social responsibility can affect organisation decision making (Nichols, 1993).

These influences are depicted below:

Source: Fill and Fill (2005)

They key issue for the B2B marketer, therefore, is they must be knowledgeable not just about the products and services they proffer from a technical perspective, but also have a great deal of specialist knowledge of their customer’s influences and how that affects buying behaviour. It stresses the importance of careful management of the customer both prior to, during and after the sale has been completed. The investment of time and energy to establish and maintain the relationship between the two businesses forms a process described as the ‘key account relationship cycle’ (Millman and Wilson, 1995). This relationship, particularly in large organisations, emphasis a great deal of care and interaction between the two organisations so it is not unusual to have entire teams dedicated to providing services and support to the client (Ojasalo, 2001).

Therefore it can be said that, in practice, that B2B customers are much fewer in number but wield much greater buying power than found in ordinary consumer markets, although this is not always the case, it does stress to the marketer the importance of the supplier and customer relationship (Brennan et al, 2014).

From the analysis above, it demonstrates a number of key differences between the B2B and B2C buying characteristics, which are summarised in the table below (Baine, 2008:660).

Although there are many differences between the two sectors, there is some convergence too. All markets have a consumer orientation that emphasises customer needs, and both require the marketer to gather, process and use information about customers and competitors in order to successfully compete (Baines et al, 2008). In addition to this, both types of supplier desire positive relationships with the customers – the profits of all organisations is linked to the mutually beneficial rewards obtained. Wilson (2000) also argues that the belief that organisational decision-making is more rational, and consumer decision-making is more emotional, is a fallacy. For example, consumers also use a wide-range of inputs, discussing buying decisions with others, and seeking out extensive information searches, especially now that Internet-buying permits so much more comparison between products and services, and thus the group buying dynamics are not atypical. Furthermore, the rationality ascribed to organisational buying is overstated, but rather organisational culture dictates adherence to due diligence and other such similar bureaucratic procedures.

It is often said that branding is of less significance in B2B marketing than it is in consumer markets (Baines et al, 2008), however, Zimmerman and Blythe (2013) argue that it is becoming increasingly difficult to distinguish between products. More importantly, organisations do not buy products, but rather people do, so although the type of media selected to communicate the products may differ – the need for strong branding is imperative irrespective of the market. As in consumer markets a strong brand can be a source of competitive advantage. Furthermore, ingredient branding (e.g Intel Inside, or trading logos such as the Red Tractor) which promote the suppliers of the product are themselves becoming sources of marketing (Bengtsson and Servais, 2005).

Perhaps, therefore, the two most distinguishing differences between B2B and B2C marketing is the approach to segmenting the market. In B2C marketing, the approach is more frequently top-down: beginning with a mass of possible customers and then breaking them down to into groups, usually with reference to the psychological, geographical, demographical or behavioural dimensions (Jackson, 2015), and then the marketing mix of ‘place, product, price and means of promotion’ devised once target markets have been determined.

However in B2B marketing, the process is more bottom-up with a much greater emphasis of the characteristics of the organisations already known to the marketers, and then aggregating them into segments which is more likely to emphasis the behaviour dimension above any other (Zimmerman and Blythe, 2013). As a result of this, organisation marketing is more likely to explore the customer portfolio matrix to determine where best to allocate their marketing resources. The customer portfolio matrix assesses the potential attractiveness of a group of customers to the strength of relationships relative to competitors, as the grid below demonstrates:

Customer attractiveness/potential

Source: Baines et al, (2008:654)

To conclude, therefore, consumer marketing and business marketing differ in some buying behaviours and the approach of marketing towards is the significant difference, although the principles of marketing are largely similar. This assignment has found there is significant convergence between the two groups but that business-to-business buyers are more demanding and require a strong emphasis on relationship building, and to a lesser extent branding.

References

Baines, P, Fill, C and Page, K (2008) Marketing, Oxford: Oxford University Press.

Brennan, R, Canning, L. E and McDowell, R (2014) Business to business marketing, London:Sage

Bengtsson, A and Servais, P. (2005) Co-branding in industrial markets, Industrial Marketing Management, Vol. 34 (7), p 706 -13.

Fill, C and Fill, K. E (2005) Business to Business Marketing, Harlow: Prentice-Hall.

Jackson, J. (2015) Marketing, E-book Partnership.

Jackson, B. (1985) Build customer relationships that last, Harvard Business Review, Vol 63 (6) page 120 – 128.

Macfarlane, P (2002) Structuring and measuring the size of business markets, International Journal of Market Research, Vol 44 (1), p 7 – 31.

Millman, T and Wilson, K (1995) From key account selling to key account management, Journal of Marketing Practice, Applied Marketing Science, Vol 1 (1) p 9 – 21.

Nichols, M (1993) Third-World Families at Work, Child labor or child care? Harvard Business Review, January – February, p 2 – 10

Ojasalo, J (2001) Key account management in the business-to-business field: the key accounts point of view, Journal of Selling and Sales Management, Vol 17 (4) p 17- 26.

Parkinson, S. T and Baker, M (1994) Organizational Buying Behaviour, Purchasing and Marketing Management Implications, London: MacMillan Press.

Robinson, P.J, Faris, C.W and Wind, Y (1967) Industrial buying and creative marketing, Boston: Allyn and Bacon.

Swinder, J. and Seshadri, S (2001) The influence of purchasing strategies on performance, Journal of Business and Industrial Marketing, Vol 16 (4), p 297 – 306.

Webster, F. E and Wind, Y (1972) Organizational Buying Behaviour, Englewood Cliffs: Prentice-Hall.

Wilson, D.F (2000) Why divide consumer and organisational buyer behaviour? European Journal of Marketing, Vol 34 (4), p 780 – 796.

Zimmerman, A and Blyth, J (2013) Business to Business Marketing Management, Abdingdon: Thomas Learning.