Business Marketing is the practice of individuals, or organizations, including commercial businesses, governments and institutions, facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations. Also known as industrial marketing, business marketing is also called business-to-business marketing, or B2B marketing, for short.
Business marketing strategy is the single biggest factor which determines the success or failure of your business. It doesn't matter if you sell widgets from an office in your house, or run a multi-million dollar company. It is just that simple. Get it right and you prosper. Get it wrong and you go the way of many others who have failed before you. This is true on main street, and on the internet as well. No matter what you do, the proper business marketing strategy essentials remain the same, only the application of them has to adapt to the needs of your particular business. Do not confuse business marketing with simple advertising. Your business marketing strategy should affect every aspect of how you run your business. It is the heart and soul of a successful business.
B2B Marketing Strategies
B2B Branding is different from B2C in some crucial ways, including the need to closely align corporate brands, divisional brands and product/service brands and to apply your brand standards to material often considered “informal” such as email and other electronic correspondence.
Because business customers are focused on creating shareholder value for themselves, the cost-saving or revenue-producing benefits of products and services are important to factor in throughout the product development and marketing cycles.
Quite often, the target market for a business product or service is smaller and has more specialized needs reflective of a specific industry or niche. A B2B niche, a segment of the market, can be described in terms of firmographics which requires marketers to have good business intelligence in order to increase response rates. Regardless of the size of the target market, the business customer is making an organizational purchase decision and the dynamics of this, both procedurally and in terms of how they value what they are buying from you, differ dramatically from the consumer market. There may be multiple influencers on the purchase decision, which may also have to be marketed to, though they may not be members of the decision making unit.
The business market can be convinced to pay premium prices more often than the consumer market if you know how to structure your pricing and payment terms well. This price premium is particularly achievable if you support it with a strong brand.
Promotion planning is relatively easy when you know the media, information seeking and decision making habits of your customer base, not to mention the vocabulary unique to their segment. Specific trade shows, analysts, publications, blogs and retail/wholesale outlets tend to be fairly common to each industry/product area. What this means is that once you figure it out for your industry/product, the promotion plan almost writes itself (depending on your budget) but figuring it out can be a special skill and it takes time to build up experience in your specific field. Promotion techniques rely heavily on marketing communications strategies
The importance of a knowledgeable, experienced and effective direct (inside or outside) sales force is often critical in the business market. If you sell through distribution channels also, the number and type of sales forces can vary tremendously and your success as a marketer is highly dependent on their success.
Elements that characterize a market – driven organization.
Steps a firm might follow in becoming more market driven.
Using market knowledge to determine the corporate strategy of an organization. A market driven organization has a customer focus, together with awareness of competitors, and an understanding of the market.
From the different views on market orientation, (market orientation is defined to be a set of organizational characteristics)
• Market-driven organizations have a thorough understanding of customers and potential customers, including their changing needs
• A key activity for a market-driven organization is information gathering.
Market-driven organizations continuously gather data in all environmental sectors – competitive, cultural, political, economic, technological, human resources, physical resources and consumer.
• The market-driven concept is a managerial concept. Close attention must be given to business processes and activities. Emphasis must be placed on an organizations ability to respond to environmental changes.
· The market-driven concept is a cross functional concept, and affects organizational decision-making, organizational learning, and a review of internal competences. All aspects of the organization must be aware of and consider environmental changes.
• Market orientation’s impact on business performance emphasizes measurement issues. Organizations should appraise current process and activities against current business performance. Continuous process improvement is mandatory for a market-driven organization.
Creating the Market-Driven Organization:
Market-driven organizations put the customer first throughout the organization – the goals and objectives, the strategy, the culture, and the structure. Putting the customer first begins with the objectives, goals, and mission of the organization. The strategy defines on how these goals are going to be achieved. The culture of the organization must support the values and behaviors to “live” the strategy. The structure must also be designed to support the strategy and goals, and to reward the proper behavior of putting the customer first. The entire organization, its goals, strategy, culture, and structure must work together to provide maximum value to the customer.
Some steps a firm might follow to become more market driven:
· Establish a culture for the new entrepreneurship: Facilitate risk taking and new ideas by creating proper climate: providing R&D funds, doing customer- need research, allowing employees to voice contrary opinions.
· Create an organization to foster new service development: Assemble a cast: senior sponsor, who has authority; product champion, which provides continuity and enthusiasm.
· Test ideas in the market place: New ideas must weather the acid test of the marketplace because the service concept is intangible.
· Monitor results: Establish success measures and evaluate against these, track customer reaction.
· Reward risk-takers: Reward those taking good risks, even when they are not consistently successful.
Difference between sales forecast & market potential:
The sales forecastrepresents the firm’s best estimate of the expected sales revenue from a given marketing strategy. The forecast is usually less that sales potential. The firm may find that it is uneconomical to try to capture all available business. Strong competitors within certain segments may preclude the achievement of total potential sales. Like sales potential data, the sales forecast provides the marketing manager with a valuable gauge for allocating resources and measuring performance.
Market potentialis the maximum possible sales of all sellers of a given product in a defined market during a specified time period. Maximum sales opportunities for an individual company’s product are referred to as Sales potential.
Sales forecast differs from that of an estimate of market potential in various ways like:
Market potential estimates and sales forecast complement each other in the marketing planning process. Market potential estimates are vital to sales forecasting:
· They provide direction as to which opportunities the firm should pursue, and the sales forecast is generated once the level of resources to be applied to each opportunity has been determined.
· Market potential estimates are used to determine whether the firms attention should be focused, the total and relative levels of expenditure to apply to each opportunity, and the benchmarks for evaluating performance.
· The sales forecast in contrast, typically provides direction for making short-run, tactical decisions and for monitoring quarterly and annual performance. · Estimates of actual sales over the next year guide management in planning production, estimating purchasing requirements, setting inventory levels, scheduling transportation and the warehouse workforce, estimating working capital requirements, and planning short-term expenditures on promotion and advertising.
· Two to five year projection of sales help guide decision making about plant and warehouse facilities, capital requirements, channel strategy and structure.
· Sales forecasts are critical to the smooth operation of the entire supply chain. When timely sales forecast information is available to all firms in the supply chain, plans can be tightly coordinated and all parties share in the benefits. Sales forecast data is used to distribute inventory in the supply chain, manage stock levels in each link and schedule resources for all the members of the supply chain that provide, materials, components and services to a manufacture.
· Accurate forecasts go hand in hand with good business practices and effective management policies in directing the entire supply-chain process.
· In summary, market potential provides guidelines for the general direction the firm will take and for budget allocations to those opportunities. Sales forecast directs the timing of short range tactical expenditures and long term capital spending.
The impact of the Internet
The Internet has become an integral component of the customer relationship management strategy for business marketers. Business marketers not only use the Internet to improve customer service but also to improve opportunities with distributors.
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 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 b-to-b exchanges, the Internet ushered in an enthusiasm for collaboration that never existed before--and in fact might have even seemed ludicrous 10 years ago.
The internet is a powerful tool when used properly, and the advantages are significant in terms of more effectively serving customers, communicating useful information, and lowering the cost of doing business. As an important new technology, many executives, entrepreneurs and investors assumed that the internet would change everything and render many of the old rules about competition obsolete. Internet is an enabling technology—a powerful set of tools that complements, rather than replaces, traditional ways of competing. Successful companies integrate Internet initiatives directly into established operations than setting strategies apart in a specialized e-commerce unit.
Internet is a useful tool in the supply chain in many ways:
· The internet allows companies to electronically link far-lung constituencies, including customers, suppliers, intermediaries, and alliance partners, in spite of organizational, geographical and functional boundaries.
· All the supply chain participants can be linked by a common database that is shared over the Internet, making the entire value-adding process seamless and more efficient.· The key to effective supply chain operations is sharing of vital information: sales forecasts, production plans and delivery schedules, tracking of finished product shipments through the distribution network, inventory levels at various points in the supply chain, final sales versus planned sales, and the like.
· QAD, Inc. is the developer of total eCommerce Solution, which provides a menu of software and services that help companies more consistently integrate global partners into their back-end systems. The total eCommerce Solution lets users extend supply chain processes to partners, providing the ultimate in business integration. QAD’s services include capabilities for communications, translation, application integration, business process management, and business activity management.
· This proves how recent technologies of internet are useful for supply chain management operations.
Procurement: Centralization and De-centralization:
Centralization and decentralization procurement differ substantially. Brunswick Corporation has its procurement decisions Centralized. Centralization leads to specialization. Purchasing specialists for selected items develop comprehensive knowledge of supply and demand conditions, vendor options, supplier cost factors, and other relevant information. This knowledge and the significant volume of business that specialist’s control enhances their buying strength and supplier options. The priority given to selected buying criteria is also influenced by centralization or decentralization. By identifying the buyer’s organizational domain, the marketer can generally identify the purchasing manager’s objectives. Brunswick is centralized and such purchasing units place more weight on strategic considerations such as long term supply availability and the development of a healthy supplier complex. Decentralized buyers may emphasize more tactical concerns such as short-term cost efficiency and profit considerations. Organizational buying behavior is greatly influenced by the monitoring system that measures the performance of the unit.
Personal selling skills and the brand differences of users influence purchasing decisions more at user locations than at centralized buying locations. Differing priorities between central buyers and local users often lead to conflict. In situating demand at the user level, the marketer should assess the potential for conflict and attempt to develop a strategy to resolve any differences between two organizational units.
The organization of the marketers selling strategy should parallel the organization of the purchasing function of key accounts. To avoid disjointed selling activities and internal conflict in the sales organization, and to serve the special needs of important customers, Brunswick should develop key account management programs to establish a close working relationship.
General procurement strategies employed by the federal government (1) formal advertising and (2) negotiated contract:
Business marketers can identify the current needs of government buyers by consulting FedBizOpps (FBO). The FBO, published by the department of Commerce, lists all government procurement proposals, subcontracting leads, contract awards, and sales of surplus property. A potential supplier has at least 30days of respond before the bid opening. Once a procurement need is documented and publicly announced, the government follows one of the two general procurement strategies: Formal advertising (also known as open bid) or negotiated contract.
Formal advertising:It means the government solicits bids from appropriate suppliers, usually; the lowest bidder is awarded the contract.
Negotiated contract:A negotiated contract is used to purchase products and services that cannot be differentiated on the basis of price alone or when there are few suppliers. Some of the features and differences between the 2 procurement strategies are:
· In formal advertising price is the most important factor, the lowest bidder wins. Whereas in negotiated contract price alone is not the basis to purchase product or services.
· Unlike negotiated contract, formal strategy is followed when the product is standardized and the specifications straightforward.
· In negotiated contract competitions are observed as the contracting office can conduct negotiations with several suppliers simultaneously.
· Negotiated contract is a much more flexible government procurement procedure.
· Personal judgment is a part of both procurement strategies.
· In negotiated contract: Procurement is based on more subjective factors of performance and quality, as well as on price.
· In formal advertising: The interested supplier must gain a place on a bidders list. Then, each time the government requests bids for a particular product, the supplier receives an invitation to bid.