B2B Marketing

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Contributed by: Parag Utekar

 

What is B2B Marketing? Meaning.

Business-to-Business (B2B) Marketing is the marketing and selling of goods, services or information to commercial enterprises, government and non-profit institutions.

B2B organizations sell goods and services used in the production of multiple other goods and services by other organizations. Major industries typically in the business-to-business market are agriculture, forestry, fisheries, mining, manufacturing, construction, transportation, communication, public utilities, wholesale banking, finance, distribution, insurance, and services.

There are 3 main situations in which commercial B2B transactions are taking place:

  • Companies that purchase materials for their primary manufacturing process (for example, a shoes company that purchases the leather and fabrics for producing shoes).
  • Companies that purchase the services of other companies to enable or support their activities (for example, a manufacturer who uses an accounting firm).
  • Companies that purchase and then resell goods or services to other business firms (for example, a company that purchases product and resells it under its own brand).

History of B2B Marketing

B2B Marketing is a relatively new term commonly being used for what used to be called "Industrial Marketing" in the past. Although the term B2B Marketing strictly speaking is somewhat broader because it encompasses more than just manufacturers using it.

The beginning of Industrial Marketing certainly established a temporal association between theory advancement and the overall business context. Following the history of the field of B2B Marketing below reveals its foundations and helps us interpret the past by identifying the reasons involved in relevant transitions.

History of B2B Marketing

The development of industrial/B2B marketing endeavours can be described across five main stages:

  1. Pre-marketing (before 1900)
  2. Foundation of the field (1900 - 1920)
  3. Shaping the field (1920 - 1950)
  4. Paradigm shift (1950 - 1980)
  5. Intensication of shift (1980 - present)

Here are some highlights of the development of Industrial Marketing (later called: B2B Marketing):

  • A first registered attempt to understand business customer relationships was proposed by Wanamaker in 1899.
  • Industrial Marketing received earliest attention from Melvin T. Copeland through his work "Marketing Problems" (1920) and "Cases in Marketing" (1930).
  • The first formal manuscript of Industrial Marketing was developed by John Fredrick and Robert Elder called "Industrial Marketing-A Century of Marketing" (1934) and "Fundamentals of Industrial Marketing" (1935).
  • The above textbooks influenced Leigh(1936), Lester(1936) and Lewis (1936) to publish articles on Industrial Marketing.
  • Another pioneer was Moore(1937) whose work was on selling industrial equipment.
  • Then further research was in behavioral theories, to understand marketing networks and relationships in a B2B context, conducted by Trynin (1940), Alderson and Cox (1948) and Alderson (1949).
  • This era (1930-1950) was led by hard-selling techniques.
  • The first university level course for Industrial Marketing was held at Harvard Business School in 1957 by Prof. E. Raymond Corey.
  • More researchers (Robinson, Faris & Winde, 1967; Webster & Wind, 1972) worked on creating contemporary foundations of B2B Marketing and Organizational Buying Behaviour.
  • During the 1970s, stronger criticism against the economic realm on a firms strategy allowed the development of B2B Marketing, working on issues such as mutual satisfaction, uncertainty and bounded rationality (Sheth,1970).
  • This era introduced research dedicated to Industrial Marketing - Industrial Marketing Management (IMM), there were also formal academic movements like the Institute for the Study of Business Markets (ISBM) at the University of Pennsylvania in 1983, conferences like Industrial Marketing and Purchasing group (IMP) at Manchester in 1984. There were journals like the Journal of Business and Industrial Marketing (JBIM), and Advances in Business Marketing and Purchasing (ABMP) in 1986 and later journals like the Journal of Business-to-Business Marketing and the Center for Business and Industrial Marketing (CBIM) in 1996.
  • Johnston and Lewin (1996) introduced two new concepts: Buyer-seller relationships and networks.
  • Over the 1990s and early 2000s, multiple topics in B2B Marketing came up including Sales Management, Channels and Distribution, Relationships, Innovation and New Product Development (NPD), Marketing Strategy etc.
  • Further, a B2B agenda developed by ISBM in 2012 led to two supplementary outputs: Wiersema (2013) and Lilien (2016).
  • B2B Marketing also emerged in developing economies through the establishment of Escole de Marketing Industrial (Sao Paulo, Brazil) in 2004 and Centro de Marketing Industrial of the University of Chile (Santiago, Chile) in 2010.
Stages of the B2B Buying Process

Stages in the B2B Buying-Decision Process

The figure at the right describes the eight general stages in a typical (industrial) business buying-decision process.

In certain cases, like a modified-rebuy or a straight-rebuy, a few of these stages could be shortened or bypassed completely.

All these stages at the buying side require appropriate marketing efforts at the seller's side.


Characteristics of B2B Marketing versus Consumer Marketing

  • Advertising is rarely used to create demand.
  • Pricing is usually geared to suit the customer needs and the competitive scenarios.
  • The commercial position of the product is based on functions and features rather than the style and look.
  • For sales, typically a direct sales approach is used rather than an indirect, distrubution channel approach.
  • This means a much bigger role for sales management and sales reps compared to consumer marketing.
  • Tends to emphasize technical development rather than customer research.
  • The emphasis in the early stages of the product life cycle is on market development.
  • Alliances are ways to buffer risks, share investments, and stay ahead of the market, but often managing them is problematic due to the lack of trust, clarity and clear division of responsibilities among the alliance partners.
  • Intense competition, coupled with the increasing sophistication of the customers makes product differentiation very hard to achieve in many mature B2B Markets.
  • Less focus on CSR, although B2B Markets are clearly moving beyond narrow profit-maximizing objectives and must increasingly also demonstrate how their business addresses societys needs.

Complexity of B2B Buying and Sales/Marketing Process

Compared to a consumer purchase, a B2B purchase is much more complex. This is caused by the more complex products and by the involvement of many buyers with various roles:

  • Initiators: Users or other members in the organization who request that something has to be purchased.
  • Users: Members of the buying organization who would be using the product (often, but not always the initiators of the buying process).
  • Influencers: People influencing the buying decision, in many cases technical personnel.
  • Decision-makers (Deciders): These are the people who ultimately decide on the product requirements and which product will be bought.
  • Approvers: Authorize (sign off) the proposed actions of the deciders or buyers. Often controllers, financial director.
  • Buyers: Gave the formal authority to choose amongst the suppliers and arrange purchase terms.
  • Gatekeepers: Have the power to prevent sellers or information from reaching the other buyers mentioned above.

Sources:
Kotler, P. & Keller, K. L. (2013), "Marketing Management", 2013, pp. 161-191
Rangan, V.K. & Isaacson B. (1994), What is industrial marketing?", Harvard Business School, 9-592-012
Bonoma, T.V. (2006), "Major Sales-Who Really Does the Buying?", Harvard Business Review, R0607P
Roberto, M.C., Wesley, J.J. (2017), "The Future of B2B Marketing Theory: A Historical and Prospective Analysis", J. Mack College of Business, Georgia State University, Atlanta, GA, USA, 0019-8501, Elsevier Inc.


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Parag Utekar
Student (MBA)

 

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