Above all, the limited number of buying units in business-to-business markets, and particularly the concentration of expenditure amongst a few of those buying units, presents both an opportunity and an expectation that the biggest spenders are provided with dedicated value-added services that reflect their importance. If you dont satisfy this expectation, someone else will! B2b markets have fewer Behavioural And needs-Based Segments Our experience of over 2,000 business-to-business studies shows that B2B markets typically have far fewer behavioural or needs-based segments than is the case with consumer markets. . Whereas it is not uncommon for an fmcg market to boast 10, 12 or more segments, the average business-to-business study typically produces 3. Part of the reason for this is the smaller target audience in business-to-business markets. . In a consumer market with tens of thousands of potential customers, it is practical and economical to divide the market into 10 or 12 distinguishable segments, even if several of the segments are only separated by small nuances of behaviour or need.
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you can fit most buyers of consumer products into a typical spend per month with a few heavy spenders and a few light spenders at the paper extremes. The range of spend between the largest and smallest buyer in a business-to-business universe is likely to be much, much larger agent than the range of spend between the largest and smallest buyers in consumer markets. . Small numbers of customers of widely different sizes and the presence of a few key accounts is a major distinguishing feature of business-to-business markets and this requires a completely different marketing approach to that required for consumer markets. What does this mean for the B2B marketer? Because such small numbers of customers dominate the lives of businesses, database management is a crucial part of business-to-business marketing. . Customer relationship management systems now allow databases to be kept up-to-date with personal details of members of the dmu together with every transactional and contact record. It is also critical that the business-to-business marketer be adept at key account management with all the manpower, proactivity and responsiveness that this entails. . key accounts not only require the product delivered to them when and in the quantities they need it; they also routinely require services such as swift problem resolution and technical advice. . Indeed, key business-to-business accounts are increasingly moving beyond requiring effective products and services and good prices; they are now looking for partnership. They are looking for suppliers that will hold stock on their behalf, provide technical consultancy, calculate product efficiency and added value, and offer long-term on-site support.
As a result, the B2B sale is often a technical database sale, meaning that salespeople in business-to-business markets are often extremely experienced and originate from a technical discipline within their organisation. . The success or otherwise of an entire business-to-business product line can be largely dependent on the abilities of a small team of salespeople. Limited Number Of buying Units In B2b markets Almost all business-to-business markets exhibit a customer distribution that confirms the pareto Principle or 80:20 rule. . A small number of customers dominate the sales ledger. . Nor are we talking thousands and millions of customers. . It is not unusual, even in the largest business-to-business companies, to have 100 or fewer customers that really make a difference to sales. Figure 4 a typical Pareto distribution For a business-to-business Company There is also a matter of scale. . In consumer markets there are reasonable limits to the amount that a single person can buy and use of any product. . Certainly there are heavy users of all consumer products but the difference between the light user and the heavy user is a matter of small degree compared with the scale of differences in business-to-business markets. .
Similarly, the buyer of a chocolate bar is likely to be far more interested in the fact that the item stops them feeling hungry and tastes nice than in the technology and ingredients that make. . As a result, consumer products are frequently marketed in ways that are superficial or even vacuous. Car manufacturers frequently completely ignore not only how a car performs, but often the fact that the car performs at all, and instead seek to apply non-physical attributes such as sex appeal to their products. . Business-to-business campaigns, on the other hand, seek to educate their target audience by providing specific factual information. . A corporate vehicle fleet buyer is unlikely to purchase a car for his salesforce on the basis of its colour or sex appeal. . Many target companies in business-to-business campaigns are already well-informed on the product area, in which case promotional material may have to go as far as offering product specifications. The key for the B2B marketer is to be fully informed in relation to the product or service being sold. . This understanding must cover not only the technical details of the offering, but also the extended offer including aftersales service, problem resolution, client management team, etc.
Where the purchase of a consumer product requires little expertise (perhaps nothing more than a whim the purchase of an industrial product frequently requires a qualified expert. . Where consumer products are largely standardised, industrial products are often bespoke and require high levels of fine-tuning. . even relatively complex consumer products tend to be chosen on fairly simple criteria. . A car might be chosen because it goes fast and looks nice, and a stereo might be purchased on the grounds that it is tremendously loud. Further reading, getting Concept Testing Right: even simpler industrial products, on the other hand, frequently have to be integrated into wider systems and as a result have very specific requirements and need intimate, expert examination and modification. . It is difficult to imagine a turbine manufacturer or commercial website design buyer having a look at three or four products and then choosing one simply because it looks nice. . The choice of turbine will involve a whole host of technical, productivity and safety issues, whilst the choice of website might be based on its integration into a wider B2B marketing campaign, its interactivity with users and the degree to which it draws potential clients. Buyers of consumer products are generally not interested in the technical details of what they are buying. . The vast majority of car buyers are far more interested in what speed the car will reach than in how it will reach that speed. .
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What about the person who spends 1,000 for a season ticket at a football club that has just been relegated and frustrates them every saturday,.50 on a packet of cigarettes that excludes them from indoor public places and puts them at risk. Further reading, current Trends in the world of B2b marketing: The truth is that as consumers we are often less well-informed, less accountable to others and far more susceptible to whims, indulgences, recklessness and showing off than rationalization is the case when we are in the. we therefore have a tendency to make purchasing decisions that a rational observer obamas (a business-to-business buyer that has to make a profit each month) would regard as ludicrous. . As consumers we are far less likely to ask whether the product we are buying has an roi (return on investment). . we buy what we want, not what we need. To some extent the fact that business-to-business buyers are relatively rational makes our job as B2B marketers easier all we need to do is design and manufacture good products, and deliver them on time and at a good price.
It would be disingenuous to claim that business-to-business buyers are entirely rational. . due to the accountability that constrains most B2B buyers, trust and security are key issues. . no b2B buyer wants to risk his or her livelihood or reputation buying an unreliable product and service. . This makes emotional issues such as trust and security absolutely critical. . This in turn places great emphasis on brand, reputation, case studies and other factors which convey reliability and consistency over the life of the product or service being purchased. B2B Products Are Often More complex. Just as the decision making unit is often complex in business-to-business markets, so too are B2B products themselves.
Purchasing personnel would usually be the key decision makers on a transaction-by-transaction basis, under the general guidance of more technical employees, who would review suppliers periodically. Low-value, high-risk items such as office insurance would similarly involve a mixture of specialists and purchasers. . As the risk is in the product rather than the price, and as each transaction is likely to be unique, an expert (in this case perhaps an in-house legal expert) would tend to be the key decision maker every time a purchase takes place. High-value, high-risk purchases are the most distinct from consumer purchases, with a large number of senior decision makers evaluating a large range of purchase criteria. . In the case of plant equipment, we might expect a cfo, r d director, Production Director, purchasing Director, head of Legal Department, ceo and a number of upper-management department heads to be involved. Figure 3 a typical Decision making Unit In a b2B Environment.
What does this mean for the business-to-business marketer? Faced with a multifaceted and knowledgeable buyer, it is critical that the B2B marketer demonstrates a high level of expertise in all of its interactions with the target audience. . This refers not only to product knowledge, but also to the technical and other back-up that the buyer will receive throughout the life of the purchase. Business-to-business marketers need to fully understand the different needs of decision makers often within the same customer. The marketer must also show diligence and patience when negotiating the decision making unit and assuaging the fears of finance, production, technical and other decision-makers. B2b buyers Are more rational. The description of business-to-business buyers as more rational than their consumer counterparts is perhaps controversial, but we believe true. . we may not leave our emotions at home when we go to work, but most of us attach them to a tight leash and try to keep them away from our colleagues. Would the consumer who pays 3,000 for a leather jacket that is less warm and durable than its 200 counterpart in the shop next door make a similar decision in the workplace? .
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Each person who is party to the dmu will also bring their psychological and cultural baggage to the decision and this can create interesting variations to the selection of products and suppliers. Figure 2 The risk-value purchasing Decision Matrix In Business-to-business Marketing. Figure 2 above divides business-to-business purchases into four categories according to their financial value and the level of business risk associated with the purchase. . Each of these categories gives rise to different purchasing behaviour and different complexities. Low-risk, low-value purchases are the least distinct from consumer purchases. . They often involve listing just one, frequently junior person. . There is little financial or business risk involved on getting the decision wrong, meaning that relatively little thought goes into the decision. Low-risk, high-value items such as raw materials typically involve a mixture of technical and purchasing personnel, and often very senior people such as board members. . This complexity is necessary to ensure that price is minimised without impacting upon quality. .
Ordering products of low value and philosophie low risk (such as the ubiquitous paper clip) may well be the responsibility of the office junior. . However, the purchase of a new plant that is vital to a business may involve a large team who makes their decision over a protracted period. . The dmu at any one time is often ephemeral specialists enter and leave to make their different contributions and, of course, over time people leave the company or change jobs far more frequently than they change family unit. Further reading, value marketing value selling In B2b markets: This complexity and dynamism has implications for business-to-business markets. . The target audiences for B2B communications are amorphous, made up of groups of constantly changing individuals with different interests and motivations. . buyers seek a good financial deal. . Production managers want high throughput. . health and safety executives want low risk. . And those are just their simple, functional needs. .
1 The Chain Of Derived Demand. B2B marketing is therefore about meeting the needs of other businesses, though ultimately the demand for the products made by these businesses is likely to be driven by consumers in their homes. Businesses buy products with the aim of adding value in order to move the products down the chain until they finally reach the general public. We believe that there are ten key factors that make business-to-business markets special and different to consumer markets. . These are described below:. B2b markets have a more complex Decision-making Unit. In most households, even the most complex of decisions is confined to the small family unit while items such as clothes, food and cigarettes usually involve just one person. . The decision making unit (DMU) in business-to-business markets is highly complex or at least it has the potential to.
What are business-to-business markets and what is B2B marketing? . to answer these questions it is useful to consider the value chain that starts with a consumer demand and from which dozens of business products or services are required. . take the example of the simple shirts that we buy. . They do not arrive in the shops by accident. . There is a value chain of enormous complexity that begins with cotton or some other fibre that must then be woven into cloth, which in turn is machined into a garment, packed and distributed through various levels until finally we pick it from the shelf. . This is illustrated in the diagram below. . we call this the chain of derived demand since everything to the left hand of the shirt is pulled through as a result of the demand for the product. . Businesses sell cotton to merchants who sell it to spinners who sell it to weavers who sell it to garment makers and. .professional
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Around the time of B2B Internationals inception in the 1990s, a key challenge the we faced was explaining to potential customers that our skills as business-to-business market researchers and marketers were unique. . There was a frequent dismissal of the idea that b2b marketing and therefore the techniques used to explore these markets were in any meaningful way distinct from consumer marketing. Over the past 20 years, however, b2b marketing has emerged as a discipline in its own right and divergences in marketing practice have been accentuated. . we feel it is worth reiterating the many differences between the two disciplines and, above all, pointing out the implications of these differences when it comes to implementing a business-to-business marketing strategy. What Is B2b marketing? What Are business-to-business Markets? As always, we must be clear about our definitions. .