Business marketing is trading products or services by individual or organisation including commercial business, institutions, governments to other organisation or business who use those as components in existing products, resell them or use them as support for their operation. This trade that take place between organizations have massive impact on economy and also benefits customer. As business sales to other business it is called B2B or Business to Business Marketing.
Two models of B2B:
There are two models of B2B. They are 1) Vertical B2B and 2) Middle B2B.
Vertical B2B: Vertical B2B is business oriented or for manufacturing. Vertical B2B can take two forms either upstream or downstream. In upstream model B2B starts from the manufacturer side from there it reaches up to commercial retailers. For example for Dell computers to sell their laptop they need to manufacture the laptops. For that they will need parts from manufacturer of those chips, mother boards, hard disks which is manufactured to be sold B2B. On the other side downstream B2B reaches from producer to distributor. For example Cisco selling its products and services to other business or commercial sectors.
Middle B2B Market: In an another marketing strategy Businesses 2 Business sale takes place via a middle stage arrangement. This business side and supply side trading occurs in a common place. For example internet based sites Alibaba.com, China websites works as a middleman in the B2B marketing.
B2B in Commercial Sector:
B2B marketing in commercial sector is often profit oriented and competitive. In commercial sector most of the buyers are known to each other and most of the time they have a long time business relation. Sales or trade deals are often shared among these businesses. Marketing between businesses are based on direct sales, telesales, direct mail etc. For example if Dell is selling 500 laptops to a retailer like Pc World it will contact the company via their channel and there will be exclusive offers only for Pc World. Sometimes businesses have to offer exclusivity to get extra business by channeling customers to a particular retailer.
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B2B in Not for Profit Sector:
Not for profit sector generally represents community services via corporate social responsibility. Every business has their responsibility towards the society in which they operate. B2B marketing in the not for profit sector deals with these responsibilities. For example: Dell as a part of their corporate social responsibilities runs recycle program where they would ask for bids to give their products at a concession rate. These type of marketing is most of the time open for participation. Communication channel is normally company website, newspapers etc.
B2B in Public Sector:
B2B in public sector deals with government or state owned institutes. Businesses manufacture products to sell to these institutes. Marketing for this will normally privately done or sometimes these business can bid for getting the deal. Public sector will include Central government, local authority, fire department, police and higher education institutes.
B2C Marketing:
B2C marketing is business to consumer marketing. This marketing deals with marketing products to consumer. Consumer here is buyer of the products which is not business related. B2C products are products and services like food, cloths, cars, phones, houses etc.
Difference between Business to Business and Consumer Marketing:
The divergence between business and consumer marketing may apparent but some pernicious difference with complications is seen. Consumer marketing focus on prominent group via retailers and mass media whereas business marketing involve lighter and more lineal channel of dispersion. In business marketing, negotiation process that take place between purchaser and seller become personal in compare to consumer marketing (Dwyer and Tanner,2006). In business marketing budget for product promotion through advertising is done by direct mail or journal. As because advertising is limited, it hardly helpful for achieve sales calls successfully (Hutt and Speh ,2004).
Some opines that there is no difference between consumer marketing and business to business marketing because main aim is marketing so it may be little matter to a person whether he/she choose consumer or business marketing. but the fact is that when a person buying a product for himself and when he purchasing products for his company is different. When marketing approaches are designed some fundamental factors appears.B2B rely on establishing relationship marketing exertion. If one wants to make B2B business focusing on consumer then it will cost money.
Figure : B2B vs B2C (Source: http://themarketingdirectors.wordpress.com/2010/02/15/b2b-vs-b2c-marketing-what-works-best-on-the-dance-floor/)
Important factors of Consumer marketing:
Consumer marketing have certain characteristics:
The value of trade is maximized.
Target market area is large.
Product determined.
Because of repeating and imaging, brand identity is established.
Product price, want for product and product status are major facts for making emotional buying decision.
Shorter sale cycle as because of one-step buying process.
Establish merchandising.
The aim of business to consumer marketing is to commute shoppers into buyers as sharply and systematically.B2C companies hire great deal of merchandising activities such as presentation, vouchers, store front and also proffer tempt the target market to purchase. As mentioned earlier Consumer marketing poses short sale cycle, for this reason it needs to captivate what customer wants. These agitate often proffer price reduction, special offer etc. Both in their shops and Internet. To make selling a company product faster and smoothly to its consumer, companies adopt online marketing. Through acquainting customer with company well organized website, they sale their products. Shopping chart and price are mentioned in this site and consumer can buy product through a single click.
Important factors of Business To Business Marketing:
Business to Business marketing emphasize on the following factors:
Focus on relationship
Value of the relationship is maximized.
Target market is less focused.
Because of multi-stair buying process, offer lengthy sales cycle
Personal relationship is an important factor to stabiles brand identity.
intellectual business decisiveness on the basis of business value.
ensure educational and establish cognizance.
The aim of B2B marketing commute expectation into customer. For this reason this process is long.B2B company always focus on establishing relationship with customer through marketing activities and foster the relationship with its customer throughout the sales cycle. For example, if an organization to agitate through e-mail, then the company must need to make people understand about their product through their website. The product marketing involve telemarketing, Website, Newspaper. Here sales representative talk over business prerequisite through media.
Critical Analysis of B2B and B2C marketing:
B2B markets are small, niche sized comprised of thousand sales prospects but B2C markets are larger in size where there are millions of consumers as sales prospect
Purchasing process also varies. Purchasing timeframe for B2B is typically months and often takes additional time to complete the whole purchasing process. B2C sales are for shorter period. This can be as short as minutes ( for example impulse buy). Purchasing process is simpler compared to B2B.
Sales process for B2B is normally consultative selling. The process works in this way. First the business understands clients’ needs and then develops a trust worthy relationship. Sometimes there are 2 level sales force related first is sellers sales force and second distribution sales force. B2C sales on the other hand is directly done to the customer or via a retailer. Selling process is much traditional ‘convincing the consumer’ that they need to have the product or service that needs to be sold.
B2B sales are higher ticket purchase that range from thousand pounds to millions. B2C sales are typically less and limited to thousand pounds except: car, home etc.
The B2B sales decision determined by client need and budget in hand so the decision that comes out tends to be rational. B2C decision is mostly emotional so the need for budget or need is secondary.
Brand identity also differs in its characteristics. Brand identity is created through personal relationships and consultative selling through the channel. Using social media and advertising brand identity is created in B2C market.
Lifetime customer valuation is higher in B2B as because the sales volume is higher and there will be possibility of repeat sales to the same business or its associates. In case of B2C its less because of lower cost for shifting the product and repeat sales are fewer in numbers.
These critical factor are important for a business to create its marketing strategy and tactics. These helps to identify target audience and develop appropriate marketing message.
Task 2
Before going through the impact macro economic change on an organization’s B2B marketing we need to know macro marketing environment.
Macro marketing Environment:
Macro marketing environment incorporates all elements that regulate an organization, macro marketing environment forces can be divided into six part such as: economic, political, socio-cultural, technological, environmental and legal.
Economic environment incorporate pricing scheme, credit curve, salary. All these make an impact on customer buying ability.
Political environment amalgamate governing agencies, law and order to bound organization.
Socio-cultural environment is very important factor because it includes behaviour, evaluation, orientation which make an impact on taking marketing decisiveness.
Technological environment indicates the catalyst that create new products, new opportunity.
legal environment is a key environment factor which is necessary to take any decision. Become a part of trade organization really help to make decision legally.
Figure : Macro Environment
Because of globalization market environment is frequently changing. Such low barrier poses greater threat to the new products that are coming in the pipeline to the existing one. Though market environment is not acquainted with external macro environment but still what they can do is to analyse market environment carefully. They should observe economic change very carefully and then should make decision to explore their capability.
In order to perform external environmental analysis, organizations should check the following factors:
analyse future threat, opportunities i.e needs to perform SWOT analysis.
Appraisal of the type of the environment.
scrutinize environmental determines.
Identify their competitive position.
trace out main component of environmental forces.
Less consumer mean little demand and when demand is less than mean more effort to accelerate demand. To accelerate demand, marketing is essential(Wormer,Bes thorn and Keefe 2007). But the fact is that if people purchase less product then advertiser will spend less amount. Because of economic downtown in USA in 2001,advertising dropped by 9%,and Internet advertising by 27%. this possessed serious impact on B2B marketing as because of the consumers spending slowdown, the investment of business also slow down.
because of the deceleration of branding and other marketing contour, there is a tendency of rising direct marketing. measurement of marketing ROI eliminated with the elimination reduction of budget. Investment bank Cowen and company overview last six economic recession and found an increasing trend in direct marketing.
However, during economic recession in 2011,online marketing was beguiled by the breakdown of Internet world wide.in 2008 ,US online marketing reduced of about $25.8 billion. Approximately 7% decrement from previous estimation. The main consideration is that it is 23% greater than 2007 (Economic., & Journal. 2007).We can say that because of economic slowdown macro environment is decreasing in B2B marketing and it is increasing. that mean it will make diminution on mass advertising that convey a product feature to its customer. We see relationship-oriented approach such as e-mail, online community, search marketing etc.
Economic downtown can create chance for effective company that can convert marketing investment into revenue, as of little competition.
I have performed a case study on Costco Wholesale Corporation to observe impact of the macro economy on B2B marketing. It is a warehouse club that offer wide range of merchandising. It was awarded 5th biggest retailer in USA.
Company reaction at the time of economic recession:
When economic recession occurs company reduce the price or they deduct cost. Following factors come into light during economic downtown. A brief description is given below:
Inertia:
When an organization gone through economic recession, they don’t look to weaken market advertise and remain completely reactive (samli,2001).this approach is really harmful for an organization because in this situation, customer search for better option. As economic rescission take place organizational competitiveness increase to allure their customer. To do so they need to spend money but they can’t because of recession. So as a result it downtown company revenue.
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Price degradation:
At the time of economic downtown, demand become less and customer not willing to invest a lot money to purchase a product. So company slowdown their price.it seems organizational congestion to meet up small demand. But at the same time manufacturing cost remain same to maintain better quality. Degradation of product price is a good way to accelerate sale (Charan,2009).But it continue, it will hamper internal organizational behaviour as revenue will be decrease. Employee satisfaction will be less achieved and also will make an impact on recruitment new employee. It was estimated that In 1991 ,1% fall in product price caused 5% declination of profit in European company(Hart,Tindal 2009). If we gone Costco, then we will see it employs approx 142,000 full time and part-time employee and their selling amount is $88.915 billion with a net profit $1.462 billion Zacks( Investment Research -, p. 12). It sells their product at a low price. This feature looks good in well economic condition. Costco does’t adopt multiple brand. They just reduce marketing cost. But as we discussed earlier, it will not be neither effective nor productive during recession because then several company will stand in the same line and customer will chose not better one but the best one. So to promote their product in this situation will need a little more marketing.
Cutting Cost:
Recession in 1991 causes profit slowdown by 65% (Blanchard, O. 1993).that shows because of recession companies are forced to reduce cost in order to maintain cash. At the time of economic slowdown, companies product promotional activity eliminated first because they fail to show quick result that is alluring customers. On the other hand downsizing of customer service, lengthy product delivery procedure may degrade is acceptance. On the other hand organization may not agree to make their brand value by reducing the cost of the product(Charan,2009).Such lowering price can cause disastrous move.to avoid this proactive marketing is required which result productive instead of the loss of market output.
Opportunities and Threat from Credit Crunch for Costco
Not all the business suffer during economic downfall. Big businesses can still take advantage of their size and market relationship to attract customers even in this challenging situation. Opportunities that can turn things around for Costco are listed below:
Keeping calm: In economic downtime it is better for the companies to increase PR networking. Additional support will come from aggressive marketing strategy. PR with a hard marketing will ensure no client is lost to other businesses. Costco can still perform at its best by keeping existing contacts and pushing them to buy their stock.
Adding Value: Add additional value to the existing products or services. This will help buyers to realize they are getting more value for their money. Costco can work along with the manufacturers to grab good deals for B2B consumers.
Service: With a limited capital it is best to work on world class B2B consumer service. This will enable businesses to give repeat order. For a large organization like Costco it is a fairly easy task. If they can guarantee that their customers are happy to have them as a supplier that would mean their competitors will feel the pressure not Costco.
Threats that Costo will have during economic crisis are listed below:
Less cash flow: During this period often business struggle with cash flow from business operations. First businesses will spend money considering recession and try to hold to cash. Businesses may have to get loan from lenders of which the interest might limit their size of ordering or operation.
Layoff and Unemployment: One of the major issues that businesses have is to get rid of employees to cut cost. While this can be minimum for Costco but yet there will be tendency of saving.
Global and Local Perspective:
Costo though based in US has also establishments in cross border. While US market will face the most of economic crisis but yet that will have severe impact on UK operations. But for a B2B business like Costco it can always capitalize on its plus points. From the US operations it can learn what sales and what not in this scenarios. Not necessarily that will be same in UK market but yet that will give an idea. Strategy building up will be the next stage where working strategies are made to counter all the negatives surrounding the market. Close look should be given at other competitors. Communication is key here. PR departments can work on to building up relations and leads where marketing and sales department can capitalize on that. UK market might get tougher with several similar competition so adding value with services will improve business.
Conclusion:
From the above discussion it has been clearly identified B2B businesses have both advantage and disadvantage due to change in macro environment. A solid marketing strategy helps a business to standout and still perform at its best during toughest period of business.
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