Concepts and principles of business to business marketing

Concepts and principles of business to business marketing The purpose of this paper is to discuss business-to-business marketing requires a special, unique set of marketing concepts and principles versus business-to-business marketing is really not that different and the basic marketing concepts and principles apply. The basic concepts and principles for business-to-consumer have been studied and the researcher agreed that the basic marketing and principles do apply. However, the application and implementation of the marketing strategy may need to be attuned to the nature of business-to-business activity. Business-to-business (B2B) can be explained as business that sells products or provides services to other businesses. These organisations in turn, may re-sell the products and services to final consumers; or they may use the products or services as an input for manufacturing of final consumer goods; or use it provide services to final consumers; or government that use these products and services to serve the society. While B2B activity may exist in both traditional form and online, the acronym B2B is commonly refer to the online variety (Jobber, 2007, p. 19). Whereas Business-to-Consumer (B2C) is defined as business that sells products or provide services to final consumers. These consumers can be either individuals or family units and these products or services is purchased for own consumption purposes. Although B2C activity may exist in both traditional form and online, the acronym B2C is generally refer to the online variety (McDaniel, et al., 2006, p. 196). Modern marketing concept can be defined as identifying and meeting targeted consumer needs and wants better than the competitor, for the benefit of the organisation and its stakeholders. Therefore, the function of marketing management will include formulating and implementing a suitable marketing strategy to achieve organisation goals; through satisfied customers (Kotler Keller, 2009, p. 45). To understand the marketing function, marketer needs to understand the core marketing concepts: the production concepts, the product concepts, the selling concepts, the marketing concepts, holistic concepts and societal marketing concepts. 1 In order to satisfy the targeted consumers, the marketer needs to understand the market environment and the consumer. Based on this understanding, a company will work out a Marketing mix and develop suitable marketing activities and deliver the value to the consumer. The traditional marketing mix consists of four elements: product, price, promotion and place (4-Ps). However, marketing in todays business world has evolved. It is important for todays marketer to include three additional Ps: people, process and physical evidence (Jobber, 2007, p. 19). One of the crucial exercise while developing marketing strategy, marketer will need to evaluate the companys general strength, weakness, opportunity and threats. This constructive methodology is also known as the SWOT analysis. It is recognised that from the basic marketing concepts and the marketing mix which have been mentioned earlier, there is a crucial element which a marketer must remember consumers. Consumers may be divided into two categories: final/ultimate consumers and organisational consumers. However, they are both the source of revenue for the organisation. They are the targeted people which the marketer would need to satisfy, in order to make the sales. Therefore, the basic marketing concepts and principles may be applied to both types of consumers. Only adaptation of the targeted consumer type is needed. The 4-Ps is a useful marketing tool in determining the marketers trade channels and their final consumers. The Product element in the 4-Ps is where the company needs to choose what type of product or service to provide to a group of customer, in order to satisfy their wants. This is especially crucial in new product development. A product may be in the form of physical goods, such as mobile phones, isotonic drink, LED television and etc. Service is intangible benefits that a company or individual can offer to the customers, such as financial consultant, medical care, and etc (Kotler, et al., 2003, p. 17). 2 Price is one of the most important components in the 4-Ps. This is due to the fact that it signifies the benefits that the company will receive from the sale of products and services. As compared to other elements of the 4-Ps, which represent costs. It is crucial for company to determine the most suitable pricing of its product. This is because product price may influence the purchasing decision of the buyer. Some companies may opt for lower price strategy by offering a lower price version of the same product offered by competitor (McDaniel, et al., 2006, p. 196). Promotion is the means for a marketer to communicate with the targeted customer, to enable the awareness of the product existence and availability. Marketer will be required to decide the channel of promotional activities suited for the product or service its offering. Some larger companies may choose television advertisement as the promotional activity, because it is able to cover wide audiences in a fast way. Some companies with a lesser resources may choose internet as their promotional tools, where the cost is lower and it is not limited by geographical boundary (Elliot, et al., 2008, p. 34). Place involves ensuring the products and services is available to the targeted customers. Marketer needs to decide on the distribution channels and the management of the product location, transportation and etc. A good distribution method is able to create competitive advantage for the company. This is apparent in the case for Dell computers (Kotler, et al., 2003, p. 17). People play an important role in todays business. The quality of service by the companys employee very much influence customers impression on the companys product. This is particularly essential to the service industry. Potential customer may walk away from a purchase if they feel that they receive ill-treatment from the sales staff. Study has shown that a company is able to generate more sales by improving customer service (Mathe and Shapiro, 1993). Physical evidence represents the ambience where the service is being carried out. The physical environment, decoration and colour which are visible to the targeted customers have the ability to affect the customers decision (Kotler Keller, 2009). 3 Process is the flow of activity or the medium of transaction where customers obtain services. Process decisions completely influence how the company delivers the service to the customer. It is understood that in order to establish a suitable marketing mix, a company must understand its targeted customer. And this customer can be divided during the process of market segmentation and target marketing. A company should be able to differentiate its customer base; whether they are final consumer (B2C) or organisational consumer (B2B). After identifying this, the same seven Ps may be applied to targeted consumers. Coviello and Brodie (2001) found that existing business process for both B2C and B2B companies is concerned with managing the marketing mix to attract customers. This is also known as transaction marketing. Either final consumer or organisational consumer, the marketer should consider all the seven elements in marketing mix to derive on the most suitable marketing strategy. Some might argue that basic marketing concepts are suitable for a B2C environment. However, study has shown that even international company like Levi Strauss (a renown clothing brand, specialise in jeans) needs to make certain adaption in developing its marketing mix. By understanding each countrys local cultural, physical environment, legal issues, and etc; Levi Strauss is able to apply the right marketing mix to the right consumer group (Vrontis Vronti, 2004). 4 Further the seven Ps, the SWOT analysis of the company is also important to the marketer. The analysis examines the companys internal environment (strengths and weaknesses) and external environment (opportunities and threats). By knowing the companys resources and capabilities, it is possible to turn weaknesses into strengths. Knowing the market environment and trends, it is possible to convert threats into opportunities. SWOT analysis is not limited to certain type of business or consumer. It is about the study of the companys internal and external environment. Therefore, this same basic concept is applicable to both B2B and B2C companies (Elliot, et al., 2008, p. 34). Todays business environment is very dynamic; a marketer should realise that the older marketing concepts is insufficient for a successful marketing strategy. In order to have a more comprehensive strategy, marketers have adopted the Holistic marketing concept. It is the concept that accepts everything matters in marketing, extensive outlook of the business environment is necessary for successful marketing campaign. It is concern with relationship marketing, integrated marketing, internal marketing and performance marketing (Baines, et al., 2008, p. 12). 5 The holistic marketing concept is another evident that shows it does not limit to B2C environment, and the basic concept can be applied to B2B environment. However, some adaption may be required during the application and implementation process. Study has indicated that marketing comprises the whole business; as a result, it includes top management, administration, production, finance and other functional departments. Marketing-oriented management signifies todays business environment. A company who recognises this phenomena would be able to swift its organisation to a more competitive edge; performing better than its competitor (Polese, 2004). It has been established earlier that basic marketing concepts and principles apply to both B2B and B2C business environment, only the application of the marketing strategy needs to be adapted accordingly. The objective of marketing is to identify and satisfy the needs and wants of targeted customers, better than the competitor. The targeted customers of B2B are the organisational buyers. Business marketer faces the same challenges of consumer marketer. However, there a few aspects of business market which are undoubtedly differ from consumer market (Baines, et al., 2008, p. 659). 6 It was found that organisations in USA, Argentina and New Zealand still uses the traditional four marketing mix as a general guide in their marketing practices. Although the new modern marketing concepts are included in their effort to reach out to targeted customers. Some countries may uses transaction marketing, or some may opt for network marketing. It shows that basic marketing concepts are applicable to both B2B and B2C (Pels, et al., 2004). In order to the understanding of business market, the marketer should be concerned about the buying process of the organisation. The organisational buying process has a few stages more than of consumer buying process. There are eight stages involved, please see figure 4 below. Understanding the difference between business market and consumer market is necessary. Lilien (1987) argued that B2B market is distinctive due to several reasons. The business market generally has few and larger buyers, i.e. the purchase quantity will be large. And the buyer is unable to take any risk of errors, because it may be part of the organisations cost saving strategy. The difference between consumer and business marketing were also documented by Simkin (2000). Simkin believed that business market is conventionally involves the business market structure and market demand; the nature of the buying unit within the organisation; and the type of decisions and the decision process involved (Kotler et al., 2001). Hakansson (et al., 1976) also characterise B2B companies as containing a lot of customers and require to be handled individually. 7 There is close relationship between supplier and customer. As argued by Gruen (1995), B2B marketing is motivated very much by relationship. From strategic aspect of business, it is more beneficial to the company to maintain its current customer, compared to attracting a new customer. The long term customer who is satisfy with the companys service may act as the ambassador to the company; spreading the goodwill of the company which may encourage new customers (Cann, 1998). A research into organisational buying behaviour done by Sheth (1996) has shown the organisation behaviour is changing from a transaction-centred to a relational-centred value. Adaptation is needed from the traditional marketing concepts. This is crucial in order to provide the right products and services to the targeted consumers (Hallen et al., 1991). Professional purchasing, this may consist of a team of procurement staff or a few business units. Multiple buying influences, whereby buying process is required to go through several formal and legal documentations and approval. Multiple sales calls; derived demand; inelastic demand; fluctuating demand; geographically concentrated buyers and direct purchasing. Although both business market and its buying process contrast dramatically from that of consumer market, the basic market concepts and principles is still applicable; which is meeting and satisfying customers needs. 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