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К содержанию номера журнала: Вестник КАСУ №4 - 2007

Автор: Кабатова К. Г.

In today's marketplace, it takes more than good technology, product or competitive pricing to be successful. Companies need a business to business marketing strategy and business-to-business marketing prospects to reach their present and future goals.

While the term "marketing" usually conjures images of consumer packaged goods and advertising campaigns, business-to-business marketing is expected to dwarf the consumer side of the business in the next decade.

More important than its relative size, however, business-to-business marketing is a complex discipline that has become integral to selling products or services to business, industrial, institutional, or government buyers.

In the broadest sense, the practice of one purveyor of goods doing trade with another is as old as commerce itself. In his introduction to Fundamentals of Business Marketing Research [5], J. David Lichtenthal, professor of marketing at the City University of New York's Zicklin School of Business, notes that industrial marketing has been around since the mid-19th century, although the bulk of research on the discipline of business marketing has come about in the last 25 years.

Morris, Pitt and Honeycutt [4] point out that for many years business marketing took a back seat to consumer marketing, which entailed providers of goods or services selling directly to households through mass media and retail channels. This began to change in middle to late1970s. A variety of academic periodicals, such as the Journal of Business-to-Business Marketing and the Journal of Business & Industrial Marketing, now publish studies on the subject regularly, and professional conferences on business-to-business marketing are held every year. What's more, business marketing courses are commonplace at many universities today. In fact, more marketing majors begin their careers in business marketing today than in consumer marketing.

Business marketing, sometimes called business-to-business marketing or industrial marketing, involves those marketing activities and functions that are targeted toward organizational customers [6]. This type of marketing involves selling goods (and services) to organizations (public and private) to be used directly or indirectly in their own production or service-delivery operations. Some of the major industries that comprise the business market are construction, manufacturing, mining, transportation, public utilities, communications, and distribution. One of the key points that differentiates business from consumer marketing is the magnitude of the transactions. For example, in the mid-1990s, a Boeing 747 airliner, selling for about $155 million, could take up to four years to manufacture and deliver once the order was placed. Often, a major airline company will order several aircraft at one time, making the purchase price as high as a billion dollars.

In past decades, innovative products, great engineering, or great salesmanship alone might have been enough to close a business sale. But today’s shorter product life cycles and the intense pressures of global competition no longer allow the luxury of “build it and they will come” thinking.

Professors James C. Anderson of Northwestern University, and James C. Narus of Wake Forest University capture the essence of business-to-business market management in the title of their recent book, Business Market Management: Understanding, Creating, and Delivering Value [1]. They cut right to the heart of the business-marketing mission—creating and transferring value along the business value chain at a profit.

Understanding the total value chain is becoming more crucial to business marketers today. From basic raw materials down through the end game — including not only product use but also through recycling and safe product disposal — orchestrating the value delivered at each stage of the chain becomes the goal of business marketing.

Although not every firm can wield power downstream in its markets, many succeed by taking full responsibility for value delivery all the way to the end consumer. They deploy not only the special tools of the business marketer, but understand — and sometimes take the initiative to use — the tools of the consumer marketer as well.

Propelled by new marketing and communication technologies, business-to-business (B2B) and business-to-customer (B2C) are converging across many industries. The business marketer needs to understand how both play together to create and deliver value downstream. Business marketers focus on a few customers, with usually much larger, complex, technically oriented sales processes. Statistical tools, data mining techniques, and other sorts of research that work so well in the land of consumer marketing where data sets are huge, must be fine-tuned and specially applied in the practice of the business marketer.

The turbulent markets of the early 2000s lead people to joke that B2B now means “back to basics” and that B2C now refers to “back to cost.” But the real differences between marketing to businesses and marketing to consumers aren’t trivial. Although on the surface they may seem obvious, there are more subtle distinctions between the two with substantial ramifications.

Business-to-business marketing features:

- Transactions among and within value chains.

- Value primarily determined by business economic use.

- Small numbers of customers, many requiring personalized marketing, including customized products and prices.

- Large customers with formidable market power. (In B2B, your customers often are also your competitors.) Widely varying customer types and customer needs.

- Large-unit transactions.

- Complex and lengthy selling processes involving many players creating a demand decision chain.

- Deeper partnerships with members of the value chain, including customers.

- Channel management oriented up and down the supply chain.

- Sales focused on key account management, and multiple purchasing influencers (many of whom are not likely to be end users themselves).

Business-to-Consumer features:

- Transactions through the dealer to the end consumer.

- Value determined by end-consumer perception.

- Focus on brand management.

- Large number of generally similar consumers.

- Small transactions.

- Linear selling process, usually of short duration.

- Channel management oriented toward retail.

- Sales activity focused on the end user.

In a word, business marketing involves building profitable, value-oriented relationships between two businesses and many individuals within them.

In B2C marketing, marketers often capitalize on the anticipation of positive emotion by appealing to aspirational feelings such as desire. In contrast, the strongest B2B brands capitalize on the avoidance of negative emotions. This is because there is an asymmetry between the upside and downside of B2B purchases: the buyer does not experience the full benefit of the solution directly and may or not be rewarded for making a good purchase, but a bad purchase can destroy the buyer's reputation and damage job security.

Business-to-business marketing professionals are faced with challenges similar to their consumer marketer counterparts. Gone are the days of business as usual. Competition has heightened, niches have emerged and business resources have been reduced in response to economic conditions. As a result, companies are losing market share, profit margins are declining and there is increasing demand for critical business to business marketing data, B2B marketing research and small business marketing research.

Business customers, also known as industrial customers, purchase products or services to use in the production of other products [6]. Such industries include agriculture, manufacturing, construction, transportation, and communication, among others. They differ from consumer markets in several respects. Because the customers are organizations, the market tends to have fewer and larger buyers than consumer markets. This often results in closer buyer-seller relationships, because those who operate in a market must depend more significantly on one another for supply and revenue.

Business customers also are more concentrated; for instance, in the United States more than half of the country's business buyers are concentrated in only seven states. Demand for business goods is derived demand, which means it is driven by a demand for consumer goods. Therefore, demand for business goods is more volatile, because variations in consumer demand can have a significant impact on business-goods demand. Business markets are also distinctive in that buyers are professional purchasers who are highly skilled in negotiating contracts and maximizing efficiency. In addition, several individuals within the business usually have direct or indirect influence on the purchasing process.

Customer for industrial goods can be divided into three groups: user customers, original-equipment manufacturers, and resellers. User customers make use of the goods they purchase in their own businesses. An automobile manufacturer, for example, might purchase a metal-stamping press to produce parts for its vehicles. Original-equipment manufacturers incorporate the purchased goods into their final products, which are then sold to final consumers (e.g., the manufacturer of television receivers buys tubes and transistors). Industrial resellers are middlemen - essentially wholesalers but in some cases retailers - who distribute goods to user customers, to original-equipment manufacturers, and to other middlemen. Industrial-goods wholesalers include mill-supply houses, steel warehouses, machine-tool dealers, paper jobbers, and chemical distributors.

Although business customers are affected by the same cultural, social, personal, and psychological factors that influence consumer customers, the business arena imposes other factors that can be even more influential. First, there is the economic environment, which is characterized by such factors as primary demand, economic forecast, political and regulatory developments, and the type of competition in the market. In a highly competitive market such as airline travel, firms may be concerned about price and therefore make purchases with a focus on saving money. In markets where there is more differentiation among competitors - e.g., in the hotel industry - many firms may make purchases with a focus on quality rather than on price.

Second, there are organizational factors, which include the objectives, policies, procedures, structures, and systems that characterize any particular company. Some companies are structured in such a way that purchases must pass through a complex system of checks and balances, while other companies allow purchasing managers to make more individual decisions. Interpersonal factors are more salient among business customers, because the participants in the buying process - perhaps representing several departments within a company - often have different interests, authority, and persuasiveness. Furthermore, the factors that affect an individual in the business buying process are related to the participant's role in the organization. These factors include job position, risk attitudes, and income.

Hutt and Speh [3] note that "business marketers serve the largest market of all; the dollar volume of transactions in the industrial or business market significantly exceeds that of the ultimate consumer market." For example, they note that companies such as GE, DuPont and IBM spend more than $60 million a day on purchases to support their operations.

Dwyer and Tanner say the purchases made by companies, government agencies and institutions "account for more than half of the economic activity in industrialized countries such as the United States, Canada and France."

A 2003 study sponsored by the Business Marketing Association (BMA) [2] estimated that business-to-business marketers in the United States spend about $85 billion a year to promote their goods and services. The BMA study breaks that spending out as follows (figures are in billions of dollars):

- Trade Shows/Events -- $17.3

- Internet/Electronic Media -- $12.5

- Promotion/Market Support -- $10.9

- Magazine Advertising -- $10.8

- Publicity/Public Relations -- $10.5

- Direct Mail -- $9.4

- Dealer/Distributor Materials -- $5.2

- Market Research -- $3.8

- Telemarketing -- $2.4

- Directories -- $1.4

- Other -- $5.1

The fact that there is such a thing as the Business Marketing Association speaks to the size and credibility of the industry. BMA traces its origins to 1922 with the formation of the National Industrial Advertising Association. Today, BMA, headquartered in Chicago, boasts more than 2,000 members in 19 chapters across the country. Among its members are a new breed of marketing communications agencies that are largely or exclusively business-to-business-oriented.

The tremendous growth and change that business marketing is experiencing is due in large part to three "revolutions" occurring around the world today, according to Morris, Pitt and Honeycutt [4].

First is the technological revolution. Technology is changing at an unprecedented pace, and these changes are speeding up the pace of new product and service development. A large part of that has to do with the Internet.

Second is the entrepreneurial revolution. To stay competitive, many companies have downsized and reinvented themselves. Adaptability, flexibility, speed, aggressiveness and innovativeness are the keys to remaining competitive today. Marketing is taking the entrepreneurial lead by finding market segments, untapped needs and new uses for existing products, and by creating new processes for sales, distribution and customer service.

The third revolution is one occurring within marketing itself. Companies are looking beyond traditional assumptions and adopting new frameworks, theories, models and concepts. They're also moving away from the mass market and the preoccupation with the transaction. Relationships, partnerships and alliances are what define marketing today. Companies are customizing marketing programs to individual accounts.

Marketing in the business-to-business arena is unlike anything the creators of the trade magazine advertisement/personal sales relationship model ever anticipated. With the growth of the Internet, and the exponential increase in the information available online, the business-to-business model resembles the business-to-customer model much more closely than ever before.

The Internet has become an integral component of the customer relationship management strategy for business marketers. Dwyer and Tanner [3] note that business marketers not only use the Internet to improve customer service but also to improve opportunities with distributors.

According to Anderson and Narus [1], two new types of resellers have emerged as by-products of the Internet: infomediaries and metamediaries. Infomediaries, such as Google and Yahoo, are search engine companies that also function as brokers, or middlemen, in the business marketing world. They charge companies fees to find information on the Web as well as for banner and pop-up ads and search engine optimization services. Metamediaries, such as W.W. Grainger, are companies with robust Internet sites that furnish customers with multiproduct, multivendor and multiservice marketspace in return for commissions on sales.

With the advent of business-to-business exchanges, the Internet ushered in an enthusiasm for collaboration that never existed before--and in fact might have even seemed ludicrous 10 years ago. For example, a decade ago who would have imagined Ford, General Motors and DaimlerChrysler entering into a joint venture? That's exactly what happened after all three of the Big Three began moving their purchases online in the late 1990s. All three companies were pursuing their own initiatives when they realized the economies of scale they could achieve by pooling their efforts. Thus was born what then was the world's largest Internet business when Ford's Auto-Xchange and GM's TradeXchange merged, with DaimlerChrysler representing the third partner.

While this exchange did not stand the test of time, others have, including Agentrics, LLC, which was formed last year with the merger of WorldWide Retail Exchange and GlobalNetXchange, or GNX. Agentrics serves more 50 retailers around the world and more than 300 customers, and its members have combined sales of about $1 trillion. Hutt and Speh [3] note that such virtual marketplaces enable companies and their suppliers to conduct business in real time as well as simplify purchase processes and cut costs.

The new tools and techniques of the digital era will enable us to understand, create, and deliver value with even greater efficiency and effectiveness. New channels for communication, supply chain integration, demand forecasting, and transaction management will be possible. Innovative market experiments are underway as aggregators, portals, price discovery, reverse auctions, and other e-business dynamics come into play.

Although consumer-oriented online commerce captures more of the headlines — good and bad — B2B is the realm promising the most e-business activity. The size and frequency of individual transactions and the large dollar value of supplier-buyer relationships make B2B fertile ground for information automation.

Digital technologies enable us to tap storehouses of technical knowledge and move them into complex offerings. Custom extranets enable virtual integration of a firm’s competencies up and down its value chain and provide new dimensions in sales support.

A greater understanding is required of business-to-business marketing as its development dynamics is impressive and may soon dwarf significance of consumer marketing.

REFERENCES

1. Anderson, James C., and Narus, James A. (2004) Business Market Management: Understanding, Creating, and Delivering Value, 2nd Edition, 2004, Pearson Education, Inc.

2. Business Marketing Association (2003) "Marketing Reality Survey"

3. Dwyer, F. Robert, Tanner, John F. (2006) Business Marketing: Connecting Strategy, Relationships, and Learning, 3rd Edition, McGraw-Hill/Irwin

4. Hutt, Michael D., Speh, Thomas W. (2001) Business Marketing Management: A Strategic View of Industrial and Organizational Markets, 7th Edition, Harcourt Inc.

5. Morris, Michael H., Pitt, Leyland F., and Honeycutt, Earl Dwight (2001) Business-to-Business Marketing: A Strategic Approach, Sage Publications Inc.

6. Reid, David A., and Plank, Richard E. (2004) Fundamentals of Business Marketing Research, Best Business Books, an Imprint of The Haworth Press, Inc.

7. Retrieved from Britannica 2001 Standard Edition CD-ROM.

8. http://en.wikipedia.org/wiki/



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