Defining the business.
The business market has been defined to incorporate organizations That Buy Products And Services For Use In The Production Of Other Products And Services That Are Sold, Rented Or Supplied To Others. It Also Includes Retailing And Wholesaling Firms That Acquire Goods For The Aim Of Reselling Or Renting To Others (kotler And Armstrong, 2001). But This Definition Is Way Too Narrow For Our Purposes.
The Complete B2b Market Includes Customers Who Are Institutions Like Hospitals And Charities And All Levels Of Government. This Is Often Especially True Across The Globe Where Quasi-government Operations Like The Mexican Oil Supplier Pemex May Be The Biggest Customer In A Country. The Business Market Not Only Includes Physical Products But It Includes Services Also .
In Fact, As We'll See, Large Institutions, Governments, And Businesses Buy Virtually Every Sort Of Product And Service. Business Buyers Generally Buy To Extend Their Company’s Profits. Institutional Buyers Have the same Concerns But May Specialise In Providing An Adequate Surplus. There Are Only Two Basic Ways To Extend Profits (or Surplus): Boost Sales Or Lower Costs.
These Objectives Could Also Be Achieved By Increasing Efficiency Or Purchasing Lower-cost Products/services. Sometimes B2b Buyers Also Buy To Avoid Penalties From Government Regulators Or Negative Publicity From Activist Groups. The Foremost Effective Marketing Programs Directed At Business Buyers Are Always Based On One Of The Following three Basic Appeals:
Especially When Taking A Marketing Strategy From A Domestic To A World Setting, Experience Shows That The Appeal Must Be Simple To Elucidate . Appeals That Don't Fall Into One Of The Three Basics Above Often Fail When Translated To Foreign Markets.
Exhibit 1.1 Is A Billboard Which Clearly Shows How The Use Of A Rather Uninteresting-looking Product Can Improve Company Productivity. The Message Is Straightforward And Can Easily Be Translated Into Any Number Of Languages.
Trapping Vs Substances.
As Is Illustrated By The Point Below, Many B2b Firms Appear To Adopt The Marketing Concept, But More Often Than Not They're Stuck In What Has Been Called The “rugged Engineering Trap.” This Is Often A Warmed-over Version Of Production Orientation Where A Firm Is Convinced (usually By Its Engineers) That If “we Build A Better Widget, The Planet Will Beat A Path To Our Door.
” These Firms Are Only Giving Hypocrisy To The Marketing Concept, Especially Where Technology Is Emphasized Over Customer Needs. This Disease Is Chronic In B2b Marketing And Continues Among Many Firms As You Read These Words.
Michael Porter (2001) Wrote That Some Companies “have Used Internet Technology To Shift The Idea Of Competition Away From Quality Features And Service Toward Price” Because They Forgot To Satisfy Customers. Many B2b Firms Adopt What Appears To Be A Marketing Orientation, But they Are Simply Using The “trappings” Of Marketing Rather Than The Substance. Trappings Include activities Like:
The Diagram Above Shows What Percentage Possible Transactions There Are From The Original Gathering Of The Raw Materials To The Final Sale To The Consumer. We Will Count 18 Transactions Which Fall Into The B2b Category As Compared To One Final Transaction To The Consumer.
To form this Simple Electric Hairdryer Requires Raw Materials From Oil, Steel, Aluminum And Rubber Producers, Materials Processors who Turn The raw ores nto usable products, Manufacturers Of Parts, And Sub-assemblies Who Put Together Materials Of Varied Kinds And Deliver Several Components To Another Firm Who Would Be a Final Assembler. During This Case, We've Assumed The Final Assembler Is In Taiwan.
The Ultimate Assembler Then Delivers The Product To The Distributor, A Personal Brander Who May Be A Firm Like Clairol. This Firm Then Sells The Merchandise To A Wholesaler, Who Successively Sells To A Retailer And Only Then Does The Consumer Have The Opportunity To Purchase It.
Impact Of The Web .
The Advent Of The Internet Is Fundamentally Changing The Way Firms Address Their Production Or Supply Chain. IBM Buys 95 Percent Of Its Requirements Using E-procurement. In 2000, Daimler Chrysler, Ford, And General Motors Launched A Joint Procurement Service. The Service, Now Called Covisint, Grew Rapidly From About 22,000 Users At The Top Of 2001 To Over 77,000 Users At The Top Of 2002.
It Had Been Divested In 2004, But By 2012 Covisint Had Become Cloud-based, Had Over 500 Global Customers With 22 Million Users Worldwide, And Was Processing Over 1 Billion Transactions Once A Year (Covisint, 2012). Both IBM And Ford Report Many Millions Of Dollars In Savings By Using E-procurement Methods.
Both Within The Us And In Europe Some Firms Have Fully Adopted E-procurement While Others Have Not. A Study Of Corporate Facilities Managers Shows They're Far More Willing To Purchase Low-risk Products Like Supplies Than Expensive Capital Items Via The Internet. This Study Shows, On The Average, Only 3 Percent Of Capital Items But 10 Percent Of Maintenance And Repair Supplies Were Purchased By These Buyers Over The Web (tellefsen And Zimmerman, 2004).
The Study Also Showed That Buyers Are More Likely To Use The Web For Data Gathering Than Order Placement. Recent Proprietary Research Conducted By One Among The Authors Confirms This Finding. Architects And Specifiers Overwhelmingly Use Manufacturer’s Websites To Collect General Product Information Or Specific Specifications. Most Of The Respondents To Those Studies Begin Their Search With A Product Or Manufacturer Or Brand Name.
Size Of The Market As We Will See From The Number Of Transactions That Take Place To Provide Our Simple Hairdryer, The B2b Market Is Way Larger Than The Consumer Market. The Purchases Of Governments Alone Dwarf The Purchases Of Any Collection Of Companies And Consumers. For Instance , In 2010 The Us Department Of Defense Alone Spent $365.9 Billion On Purchasing Goods And Services.
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