Introduction to the course Business Marketing

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Course outline
Lecturer: Rangan Mohan Number of lectures: 20 Evaluation
Class Participation / Attendance Mid Term End Term Assignments Quizzes 10% 30% 40% 10% 10%

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Contact details
Rangan Mohan rangan.mohan@gmail.com Mobile 98450 28426 Classes on Friday mornings and Saturday mornings Available on Friday evenings and Saturday mornings

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Course objectives
To understand what business marketing is in the networked economy. To evaluate theories and concepts for managing business markets. To apply business marketing models for managing business relationships. To successfully carry out Business Marketing To understand the implications of technology and the Internet for business marketing.
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Learning objectives
Understand the characteristics of business markets and business customers. Explain the nature of business marketing, business solutions and uncertainties of both customers and suppliers. Illustrate the inter-connected nature of business relationships and networks of relationships. To explain how each relationship is part of a complex network of relationships. Understand ways of offering solutions and dealing with uncertainties.
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Definition
Business marketing is the task of selecting, developing and managing customer relationships for the advantage of both customer and supplier, with regard to their respective skills, resources, technologies, strategies and objectives (Ford et al. 2002).

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Differences between consumer & business purchases - real or not?

Fewer Customers, larger deeper longer relationships More people involved in business purchases. Business purchases are often much more complex. Application of the 4Ps / 7Ps would be different The people involved in a business purchase are professional. A business purchase may take a long time. Each business customer is individually important. A business purchase is part of a complex relationship between customer and supplier.
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Business Markets
Local to international
Bought by
Businesses
End Users OEMs Distributors, Dealers and VARs

Government bodies Institutions

For consumption For use For resale
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A Market Driven Firm has :

Market sensing capability companies ability to sense change and to anticipate customer responses. Customer linking capability the ability to develop and manage close customer relationships..
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Marketings Cross Functional Relationship

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Business marketing planning must be coordinated and synchronized with corresponding planning efforts.

Business Market Characteristics

Derived demand the Bullwhip Effect Fluctuating demand Stimulating demand Price sensitivity/demand elasticity Global Market perspective

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A Framework for Business Marketing Management

Business marketing strategy is formulated within the boundaries established by the corporate mission and objectives.

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Types of Goods
Entry Goods
Raw Materials
Farm Products Natural Products

Manufactured Materials and Parts

Component Materials Component Parts

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Types of Goods - contd

Foundation Goods
Installations
Building and Land Fixed Equipment

Ancillary Equipment
Light Factory Equipment Office Equipment

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Types of Goods - contd

Facilitating Goods
Supplies
Operating Supplies Maintanence and Repair Items

Business Services
Maintanence and Repair Services Business Advisory Services

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Classifying Goods for the Business Market

Classifying industrial goods by the following questions: How does the good or service enter the production process? How does it enter the cost structure of the firm?
Source: Adapted from Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 172, with permission of PrenticeHall, Inc.

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Things to remember
1. Our unit of analysis isnt a sale, project or market, but each relationship as part of a portfolio of relationships. 2. We can only make sense of a single purchase by looking at the relationship of which it forms part. 3. Business relationships are a companys primary assets. Without them it cannot buy, sell, produce or deliver. 4. The development of relationships requires investment of time, money and resources.
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Relationship Marketing
All marketing activities directed toward establishing, developing, and maintaining successful exchanges with customers.

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Business relationships are ways to obtain resources

Business relationships develop and exploit the skills, resources and technologies of both companies. Relationships link the activities of companies, tie their resources and form bonds between individuals. Different relationships, have different actual and potential benefits to the supplier and to the customer.
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Problem solving in businessto-business relationships

Through offering developed jointly with a customer: An offering only has value as a solution to a specific customer problem. A different marketer can compete, even with an identical product by differentiating any of other offering element. Sometimes neither product nor service nor logistics are most important. Instead advice is critical. Buying an offering involves a range of costs for the customer, as well as purchase price.
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Supplier viewpoint
An offering A package consisting of different proportions of the elements of physical product, service, advice, adaptation and logistics and the costs that it involves.
The package = Product + Service + Ideas + Solutions

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A Solution
A customer is only concerned with how effective an offering is as a solution to its problems. Same Product different solutions

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Offerings and solutions

Consider offerings as solutions for customers, not just their specifications. Compare offerings with other solutions through the eyes of the customer. Advise customers on the choice of solutions. An offering is of no value, unless it is fulfilled. Actually fulfil the offering for each customer, at the promised time, place, performance and consistency.
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Customers role in successful solutions

Customer is an active participant in developing a successful solution Clear problem definition. Use the right tools in building relationships. Skills in developing an offering with a supplier and ensuring that it is fulfilled. Skills in integrating an offering with its own offering.

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Uncertainties in business relationships

Supplier uncertainties Capacity how much can we sell? Application how can the offering be effectively used? Transaction will the customer actually buy what it says? Customer uncertainties Need when the problem is difficult to determine. Market when the range of possible solutions is wide or technology is changing rapidly. Transaction when the concern is about fulfilment.

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Abilities
Customer abilities Supplier abilities Demand ability Problem solving to advise on ability to design offering design and develop an and/or provide offering. volume of business. Transfer abilities Transfer ability to fulfil an offering reliability in providing orders and information.
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Conclusion
Business relationships require development and management. Both supplier and customer are active parties in a business relationship. Business relationships are ways to access resources. Offerings and solutions are jointly developed in the face of uncertainties. Matching capabilities between supplier and customer is critical in transfer of business solutions.
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Keys to Cross Functional Working Relationships

1. 2. 3. 4. Communications Perspective taking Responsive behavior Compatibility

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The Supply Chain

Michael Porter and Victor Millar observed that to gain competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium (more value).
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Procurement Trends
Longer term and closer relationships. Closer interactions among multiple functions. Supplier proximity considerations.

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A Framework for Business Marketing Management

Business marketing strategy is formulated within the boundaries established by the corporate mission and objectives.

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Two Types of Contracts

1. Fixed-price contracts
A price is agreed to before contract is awarded and payment is made at conclusion of work. Provides for the greatest profit potential. Poses greater risks.

2. Cost-reimbursement contracts
Reimbursement for allowable costs may be allowed and sometimes a number of dollars above costs as profit is allowed.

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Government Procurement
1. Defense - said to be the largest enterprise in the world (DOD). 2. Non-defense procurement is administered by world wide variety of agencies.

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Two Procurement Strategies

1. Formal Advertisingthe government solicits bids from suppliers, and usually the lowest bidder is awarded the contract. 2. Negotiated Contractused to purchase products or services that are not differentiated on price alone, competition is common.
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