Business Marketing and Market Segmentation Strategies

Primary Promotional Method

Business marketers tend to emphasize personal selling in their promotion efforts, especially for expensive items, custom-designed products, large-volume purchases, and situations requiring negotiations.

Number of Customers

Business marketers usually have far fewer customers than consumer marketers.

Types of Business Products

Business products generally fall into one of seven categories: major equipment, accessory equipment, raw materials, component parts, processed materials, supplies, and business services.

Use of Leasing

Businesses commonly lease expensive equipment, which allows firms to reduce capital outflow, acquire a seller's latest products, receive better services, and gain tax advantages.

Retailers

Businesses that sell mainly to final consumers.

Wholesalers

Businesses that sell mostly to retailers and other organizational customers.

Negotiation Details

Buyers and sellers negotiate product specifications, delivery dates, payment terms, and other pricing matters, which often results in long and detailed final contracts.

Distribution Structure

Channels of distribution are typically shorter, and direct channels, where manufacturers market directly to users, are much more common.

Research and development consortia

Collaborative agreements between multiple organizations to conduct research and development activities.

Partnerships

Collaborative relationships between two or more parties to achieve mutual goals.

MRO Market Competition

Competition in the MRO market is intense.

Component Parts Identity

Component parts often retain their identity after becoming part of the final product.

Institutions

Consists of institutions that seek to achieve goals other than the standard business goals of profit, market share, and return on investment.

Supplies

Consumable items that do not become part of the final product.

Business Services Justification

Contracting an outside service provider makes sense when it costs less than hiring or assigning an employee to perform the task, when an outside provider is needed for particular expertise, or when the need is infrequent.

Distribution agreements

Contracts that outline the terms under which one party can distribute the products of another party.

Relationship marketing

A strategy that entails seeking and establishing ongoing partnerships with customers.

Distribution Agreement

A type of strategic alliance focused on the distribution of products.

Licensing Agreement

A type of strategic alliance where one firm allows another to use its intellectual property.

Accessory Equipment Characteristics

Accessories are more often standardized and are usually bought by more customers.

Accessory Equipment Accounting

Accessory equipment is often charged as an expense in the year it is bought rather than depreciated over its useful life.

Responsive actions

Actions taken by customers in response to marketing efforts, such as making a purchase.

Common Benefits of Alliances

Advantages shared among proposed alliances, such as resource sharing and risk reduction.

Strategic Alliances

Agreements between firms to pursue a set of agreed-upon objectives while remaining independent organizations.

Buying center

All the people in an organization who become involved in the purchase decision.

Business-to-business online exchanges

An electronic trading floor that provides companies with integrated links to their customers and suppliers.

Group Activity 1

An exercise involving forming a group to discuss and propose strategic alliances between firms.

Accessory Equipment Distribution

Local industrial distributors (wholesalers) play an important role in the marketing of accessory equipment because business buyers often purchase accessories from them.

Ongoing partnerships

Long-term collaborative relationships between businesses and their customers.

Major Equipment

Major equipment (installations) includes capital goods such as large or expensive machines, mainframe computers, blast furnaces, generators, airplanes, and buildings.

Depreciation of Major Equipment

Major equipment is depreciated over time rather than charged as an expense in the year it is purchased.

Customization of Major Equipment

Major equipment is often custom designed for each customer.

Concentration of Customers

Manufacturing operations in the United States tend to be more geographically concentrated in large metropolitan areas than consumer markets.

Dependence on distributors

Many business customers, especially small firms, depend on knowledgeable distributors for information and advice that is not available to them online.

Use of technology in B-to-B marketing

Marketers use technology like smartphones and tablets to facilitate orders and enhance customer experiences.

Social media campaigns

Marketing efforts that utilize social media platforms to promote products or services.

B-to-B Internet Marketing

Marketing strategies focused on businesses selling to other businesses via the internet.

Advantage of Fewer Customers

Much easier to identify prospective buyers, monitor current customers' needs and levels of satisfaction, and personally attend to existing customers.

Prospective Users

NAICS can be used for identifying potential new customers (prospective users of a supplier's goods and services).

Use of Reciprocity

Reciprocity is a practice whereby business purchasers choose to buy from their own customers.

Processed Materials Specifications

Processed materials are generally bought according to customer specifications or to some industry standard.

Processed Materials

Products used directly in manufacturing other products.

Original Equipment Producers

Profit-oriented individuals and organizations that use purchased goods and services to produce other products.

Raw Materials Promotion

Promotion is almost always via personal selling.

Metrics

Quantitative measures used to assess the effectiveness of marketing strategies.

Conversions

Responsive actions that include everything from downloading a piece of content (like a white paper) to actually making a purchase.

Resellers

Retail and wholesale businesses that buy finished goods and resell them for a profit.

Awareness

The attention that social media attracts, such as the number of followers or fans.

Trust

The condition that exists when one party has confidence in an exchange partner's reliability and integrity.

Stability of Demand

The demand for business products tends to be less stable.

Derived Demand

The demand for business products.

Inelastic Demand

The demand for many business products is inelastic with regard to price.

Joint Demand

The demand for two or more items used together in a final product.

Customer demands

The expectations and requirements that customers have for products and services.

Attention

The focus or interest that individuals give to a particular brand or message.

Key characteristic of business products

The intended use distinguishes business products from consumer products, not physical form.

Engagement

The interactions between the brand and the audience, such as comments, reposts, shares, and searches.

Business marketing

The marketing of goods and services to individuals and organizations for purposes other than personal consumption.

Buying center composition

The number of people involved in a buying center typically varies between one and four, depending on the complexity and importance of a purchase decision.

Business buying behavior

The process involving five important aspects: buying centers, evaluative criteria, buying situations, business ethics, and customer service.

Digital marketing

The promotion of products or brands via one or more forms of electronic media.

Competition

The rivalry between businesses to attract customers and gain market share.

U.S. Federal Government

The world's largest customer, buying goods and services valued at more than $650 billion per year.

Raw Materials Market Structure

There is often a large number of relatively small sellers of raw materials, and none can greatly influence price or supply.

Popular Alliance Formats

Types or formats of alliances that are more frequently proposed in discussions.

Nature of Buying Influence

Typically, more experts from a variety of fields are involved in a single business purchase decision than in a consumer purchase.

Raw Materials

Unprocessed extractive or agricultural products, such as mineral ore, lumber, wheat, corn, fruits, vegetables, and fish.

NAICS Usage

Valuable tool for business marketers engaged in analyzing, segmenting, and targeting markets.

Nature of Buying

Business buyers—typically professionally trained purchasing agents—usually approach purchasing rather formally.

Purchase Volume

Business customers tend to buy in large quantities.

New applications in B-to-B marketing

Developments that provide additional information about customers, lower costs, increase supply chain efficiency, or enhance customer retention, loyalty, and trust.

Raw Materials Distribution

Distribution channels are usually direct from producer to business user.

Accessory Equipment

Goods, such as portable tools and office equipment, that are less expensive and shorter-lived than major equipment.

Content marketing

A strategic marketing approach that focuses on creating and distributing content that is valuable, relevant, and consistent.

Amae

A Japanese concept referring to indulgent dependency and personal relationships that contribute to business exchanges.

Joint ventures

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

Joint Venture

A business arrangement where two or more parties agree to pool their resources for a specific task.

Strategic alliance

A cooperative agreement between business firms.

Strategic partnership

A cooperative agreement between business firms.

North American Industry Classification System (NAICS)

A detailed numbering system developed by the United States, Canada, and Mexico to classify North American business establishments by their main production processes.

Relationship commitment

A firm's belief that an ongoing relationship with another firm is so important that the relationship warrants maximum efforts at maintaining it indefinitely.

Partnership

A formal arrangement in which two or more parties agree to manage and operate a business together.

Keiretsu

A network of interlocking corporate affiliates in Japan.

Consumer product

A product bought to satisfy an individual's personal wants or needs.

Business product

A product used to manufacture other goods or services, to facilitate an organization's operations, or to resell to other customers.

Disadvantage of Fewer Customers

Each customer becomes crucial to success.

Component Parts

Either finished items ready for assembly or products that need very little processing before becoming part of some other product.

Business Services

Expense items that do not become part of a final product.

Examples of Institutions

Includes schools, hospitals, colleges and universities, churches, labor unions, fraternal organizations, civic clubs, foundations, and other so-called nonbusiness organizations.

Governments

Includes thousands of federal, state, and local buying units.

Trends in B-to-B Internet Marketing

Increased leverage of the internet as an effective sales and promotion platform.

Manufacturers (OEMs)

Individuals and organizations that buy business goods and incorporate them into the products they produce for eventual sale.

Market Potential Estimates

Information from NAICS can be converted to market potential estimates, market share estimates, and sales forecasts.

Type of Negotiations

Negotiating is common in business marketing.

Multiplier Effect

Phenomenon in which a small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and equipment needed to make the consumer product.

Social networking sites

Platforms that allow users to create content, share ideas, and connect with others.

Repeat business

Sales made to customers who have previously purchased from the business.

Supplies Characteristics

Standardized supplies typically have relatively short lives and are inexpensive compared to other business goods.

Supplies Categories

Supplies generally fall into one of three categories—maintenance, repair, or operating—which is why this category is often referred to as MRO items.

Business Product Distributors

Wholesalers that buy business products and resell them to business customers.