Business to business marketing also known as Industrial marketing is the marketing of goods & services to organizations including commercial enterprises, government and other profit & non-profit institutions for use in the goods & services they in turn produce for resale to other customers or to facilitate the operation of their enterprise (Reeder, & Brierty, 2002). Business to business market is characterized by few customers who buy in very large quantities and are geographically concentrated. The customers are professional and rational in their purchase approach. The nature of demand is derived demand, which is usually customized.
The channels of distribution are shorter and there is more emphasis on personal face-to-face communication. In this era of globalization the business environment is characterized by intense competition. To sustain and grow in such a competitive economic environment, business organizations are under tremendous pressure to manufacture a product or provide a service that is of optimum quality, is customized to individual customer requirements and is delivered on time at minimum possible price. The role of the suppliers is crucial in helping the business organizations to achieve this objective.
To succeed and grow in such business to business markets business marketers need to understand the Business Buyer Behavior and evolve close, enduring and long-term relationships. Business Buyer Behavior Understanding the dynamics of business buying behavior including the types of buying situations, the composition of the buying center and the motives and the roles played by each member of the buying center is crucial for business marketers to identify profitable market segments, locate buying influences within these segments and reaching these buyers efficiently and effectively with product or service offerings that satisfy their needs.
Types of Buying Situations There are basically three major types of buying situations, namely the straight rebuy, modified rebuy and new-task buy. In a straight rebuy situation the buyer reorders a product or service without any modifications on a routine basis through the purchase department. In a modified rebuy situation the buyer may wish a modification in product/service specifications, prices, terms of supply etc. This situation usually involves more number of participants in the buying decision process. In a new task buying situation the company is buying a product or service for the first time.
In such a situation the organization buying process is more complex and involves many more number of participants from different departments in the organization. The buying company also needs to decide on the product/service specifications, prices, delivery terms, order quantities, service terms etc. Buying Center It is the decision-making unit of a buying organization and comprises of all members of the organization who are involved in the buying decision process. The members of the buying center will change depending on the product/service being purchased and the buying situation in which it is being purchased.
The buying center members may play any one or a combination of the five roles namely, users, influencers, buyers, deciders and gatekeepers. Users are the members who will actually use the product being offered. Influencers are members who influence the purchase. Buyers are members who have the formal authority to make the purchase. Deciders are members who have formal or informal power to select/approve the final suppliers. Gatekeepers are members who control the flow of information from the seller to other members of the buying center.
The buying motives/objectives of each member of the buying center through which the members evaluate potential suppliers may differ. The motives may include task oriented objectives such as price, quality, service and Return on Investment and non-task oriented objectives such as recognition, promotion, increments and job security. Companies involved in business to business marketing need to clearly identify the buying situation, the composition of the buying center, the role played by each member of the buying center and the criteria on which they evaluate the suppliers for each individual customer.
Based on such an understanding they should evolve suitable marketing strategies for success. For example Dell Computers has evolved a web marketing strategy through its web site www. dell. com to cater to all its target segments in different buying situations. Relationship emphasis in Business to Business Marketing In the highly competitive environment that is prevalent today, suppliers have evolved into business partners. There is a major emphasis on close and long-term relationships in the business to business markets. To maintain the relationships, business markets must develop an intimate knowledge of the customers and add value to it.
Relationship marketing centers on all marketing activities directed towards establishing, developing and maintaining successful exchanges with customers (Morgan, & Hunt, 1994). A strong relationship between the buyer and the seller is a win-win situation for both. The seller will have a competitive advantage over his competition and the buyer will have effective business solutions to his problem. The relationships between the buyer and the seller in the business to business setup are positioned on a spectrum with transactional exchanges on one end and collaborative exchanges at the other extreme with value-added exchanges in the middle.
Transactional Exchanges focus on timely exchange of a product/service for a competitive price. Economy and necessity are the main motivational factors of such exchanges with little interest on the part of the buyer or the seller to extend the relationship. Such types of exchanges may be preferred by the buying organization when the purchase decision is not complex, the purchase is considered to be less significant to the achievement of its objectives, many suppliers are available and the supply market is stable.
Here the business marketer need not make any specialized investment in building relationships. For example the supply of office stationery and cleaning services may call for a transactional relationship. Value added exchanges focus on complete understanding of the present and future needs of the customer and meeting those needs better than the competitor. For example Intel Corporation has introduced a new chip to lower the huge electricity bills for electricity consumption of its corporate customers like Google that maintain thousands of servers world wide (Edwards, 2006)
Collaborative Exchanges focus on building a strong social, economic, service and technical ties over a long period of time for mutual benefit through reduced costs and increased value. For example Asin is the sole supplier to Toyota for “p-valve”, a critical brake part used in all Toyota vehicles worldwide. Aisin works in close collaboration with Toyota to keep up with the innovations and meet the JIT production of Toyota (Liker, 2004). Business Marketers have to decide on the type of relationships to adopt with individual customers depending on price of product/service being sold and its significance to the buying organization.
Conclusion Business to business markets are growing in volume as compared to consumer markets. The characteristics of the Business to business markets call for closer relationships. Companies operating in the Business to business markets should cleanly study the organizational buyer behavior with respect to the product or service they offer. They should decide on the type of relationship, ranging from transactional exchange to collaborative exchange, which they should adopt with each customer to gain competitive advantage in the intensively competitive business environment.