Business marketing

Last updated

Business marketing is a marketing practice of individuals or organizations (including commercial businesses, governments, and institutions). It allows them to sell products or services to other companies or organizations, who either resell them, use them in their products or services, or use them to support their work.

Contents

The field of marketing can be broken down into many sections such as business-to-business (B2B) marketing, business-to-consumer (B2C) marketing, and business-to-developer (B2D) marketing. However, business marketing is typically associated with the business-to-business sector. [1]

Origins

The practice of a purveyor of goods trading with another may be as old as commerce itself. In relation to marketing today, its history is more recent. Michael Morris, Leyland Pitt, and Earl Dwight Honeycutt say that for several years business marketing took "a back seat" to consumer marketing. [2] : xix  This entailed providers of goods or services selling directly to households through mass media and retail channels. David Lichtenthal (professor of marketing at Zicklin School of Business) notes in his research that business marketing has existed since the mid-19th century. He adds that the bulk of research on business marketing has come in the last 25 years. [3]

This began to change in the middle to late 1970s. Academic periodicals, including the Journal of Business-to-Business Marketing [4] and the Journal of Business & Industrial Marketing, [5] now publish studies on the subject regularly. A 2005 paper from the University of Portsmouth refers to Fill and Fill's Business-to-business marketing: relationships, systems and communication (2005) as a key academic text on this subject, and works on the Buy Class (see Buying center) by Robinson, Farris and Wind (1967) and the decision-making unit by Webster and Wind (1972) as the "traditional references". [6]

Professional conferences on business marketing are held every year[ citation needed ] and courses are commonplace at many universities today. According to Jeremy Kourdi, more than half of marketing majors start their careers in business marketing rather than consumer marketing. [7]

Internal and external efficiency

The internal efficiency of a business entity is the factor by which it prepares a product or service in a cost efficient manner.[ citation needed ] The external efficiency of a business entity is the factor by which it effectively markets itself so as to utilize the market, in order to retrieve maximum profits from that internal efficiency.[ citation needed ] So in a B2B market setting, the external efficiencies of the business entities due to conduct trade is vital to the success of the B2B transaction, especially if they belong to the same concern, in which case an internal market between the co-owned business entities is emergent.[ citation needed ] Being able to make use of external economies of scale within the same ownership group is actually one of the motivations for creating a concern. [8] [9]

Business and consumer markets (B2C)

Business markets have derived demand – a demand in them exists because of demand in the consumer market.[ citation needed ] An example would be a government wishing to purchase equipment for a nuclear power plant.[ citation needed ] Another example would be when items are in popular demand.[ citation needed ] The underlying consumer demand that has triggered this is that people are consuming more electricity (by using more household devices such as washing machines and computers). Business markets do not exist in isolation.[ citation needed ]

A single consumer market demand can give rise to hundreds of business market demands.[ citation needed ] The demand for cars creates demands for castings, forgings, plastic components, steel, and tires. [ citation needed ] In turn, this creates demands for casting sand, forging machines, mining materials, polymers, and rubber. [ citation needed ] Each of these growing demands has triggered more demands.[ citation needed ]

As the spending power of citizens increases, countries generally see an upward wave in their economies. Cities or countries with growing consumption are generally growing business markets.[ citation needed ]

Comparison with consumer marketing

Despite the differences between business and consumer marketing from a surface perspective being seemingly obvious, there are more subtle distinctions between the two with substantial ramifications. Dwyer and Tanner note that business marketing generally entails shorter and more direct channels of distribution.[ citation needed ]

While consumer marketing is aimed at large groups through mass media and retailers, the negotiation process between the buyer and seller is more personal in business marketing.[ citation needed ] According to Hutt and Speh (2004), most business marketers commit only a small part of their promotional budgets to advertising, and that is usually through direct mail efforts and trade journals. While advertising is limited, it often helps the business marketer set up successful sales calls.[ citation needed ]

Both business to business (B2B) and business-to-consumer (B2C) marketing is done with the ultimate intention of making a profit to the seller (business-to-business marketing).[ citation needed ] In B2C, B2B and B2G marketing situations, the marketer must always:

These are the fundamental principles of the 4 Ps of marketing (the marketing mix) first documented by E. Jerome McCarthy in 1960. [10]

While "other businesses" might seem like the simple answer, Dwyer and Tanner say business customers fall into four broad categories: companies that consume products or services, government agencies, institutions and resellers.[ citation needed ]

The first category includes original equipment manufacturers, such as large auto-makers who buy gauges to put in their cars and also small firms owned by 1–2 individuals who purchase products to run their business.[ citation needed ] The second category, government agencies, is the biggest.[ citation needed ] In fact, the U.S. government is the biggest single purchaser of products and services in the country, spending more than $300 billion annually.[ citation needed ] But this category also includes state and local governments.[ citation needed ] The third category, institutions, includes schools, hospitals and nursing homes, churches and charities. [ citation needed ] Finally, resellers consist of wholesalers, brokers and industrial distributors.[ citation needed ]

Strategies

Target market

B2B Buyer Decision Map: Problem, solution alternatives, decision support B2B buyer decision map.jpg
B2B Buyer Decision Map: Problem, solution alternatives, decision support

Often the target market for a business product or service is smaller and has more specialized needs reflective of a specific industry or niche. [11] 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.[ citation needed ] 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. [12] In addition the research and decision making process a B2B buyer undertakes will be more extensive. [13] Finally the purchase information that buyers are researching changes as they go through the buying process.[ citation needed ]

Pricing

The business market can be convinced to pay premium prices more often than the consumer market with appropriate pricing structure and payment terms.[ citation needed ] This pricing premium is particularly achievable if it is supported with a strong brand. [14]

Scale

Hutt and Speh (2001) note that "business marketers serve the largest market of all; the dollar volume of transactions in the industrial or business market significantly exceeds that of the ultimate consumer market".[ citation needed ] For example, they note that companies such as GE, DuPont and IBM spend more than $60 million a day on purchases to support their operations.[ citation needed ]

Dwyer and Tanner (2006) say the purchases made by companies, government agencies and institutions "account for more than half of the economic activity in industrialized countries such as the United States, Canada and France".[ citation needed ]

A 2003 study sponsored by the Business Marketing Association estimated that business-to-business marketers in the United States spend about $85 billion a year to promote their goods and services. The BMA study breaks that spending out as follows (figures are in billions of dollars):[ citation needed ]

Despite the stream of leads and undeniable impact of marketing in B2B organizations, a 2021 report by Statista states that majority of businesses only allocate 5% of their budget towards promotions. [15] By contrast, B2C companies typically spend 5% to 12% of their total revenue on marketing. [16] [ improper synthesis? ]

According to Morris, Pitt and Honeycutt (2001), the growth of business marketing is largely due to three "revolutions". [2] [ page needed ][ clarification needed ]

  1. Technological revolution. Technology is changing at an unprecedented pace, and these changes are speeding up the pace of new product and service development. A large part of that has to do with the Internet, which is discussed in more detail below. Technology and business strategy go hand in hand. Both are correlated. While technology supports forming organization strategy, the business strategy is also helpful in technology development. Both play a role in business marketing.[ citation needed ]
  2. Entrepreneurial revolution. To stay competitive, many companies have downsized and reinvented themselves. Adaptability, flexibility, speed, aggressiveness and innovativeness are the keys to remaining competitive today. Marketing is taking the entrepreneurial lead by finding market segments, untapped needs and new uses for existing products, and by creating new processes for sales, distribution and customer service.[ citation needed ]
  3. (Occurring within marketing itself) Companies are looking beyond traditional assumptions and they are adopting new frameworks, theories, models and concepts. They are also moving away from the mass market and the preoccupation with the transaction. Relationships, partnerships and alliances are what define marketing today. The cookie-cutter approach is out. Companies are customizing marketing programs to individual accounts.[ citation needed ]

Impact of the Internet

According to Anderson and Narus (2004), two new types of resellers have emerged as by-products of the Internet: infomediaries and metamediaries.[ citation needed ] Infomediaries, such as Google and Yahoo, are search engine companies that also function as brokers, or middlemen, in the business marketing world.[ citation needed ] They charge companies fees to find information on the Web as well as for banner and pop-up ads and search engine optimization services.[ citation needed ] Metamediaries are companies with robust Internet sites which furnish customers with multiproduct, multivendor and multiservice marketspace in return for commissions on sales.[ citation needed ]

See also

Footnotes

Related Research Articles

E-commerce is the activity of electronically buying or selling products on online services or over the Internet. E-commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. E-commerce is the largest sector of the electronics industry and is in turn driven by the technological advances of the semiconductor industry.

<span class="mw-page-title-main">Marketing</span> Study and process of exploring, creating, and delivering value to customers

Marketing is the act of satisfying and retaining customers. It is one of the primary components of business management and commerce.

<span class="mw-page-title-main">Sales</span> Activities related to the exchange of goods

Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. A period during which goods are sold for a reduced price may also be referred to as a "sale".

Marketing research is the systematic gathering, recording, and analysis of qualitative and quantitative data about issues relating to marketing products and services. The goal is to identify and assess how changing elements of the marketing mix impacts customer behavior.

<span class="mw-page-title-main">Distribution (marketing)</span> Making products available to customers

Distribution is the process of making a product or service available for the consumer or business user who needs it, and a distributor is a business involved in the distribution stage of the value chain. Distribution can be done directly by the producer or service provider or by using indirect channels with distributors or intermediaries. Distribution is one of the four elements of the marketing mix: the other three elements being product, pricing, and promotion.

In marketing, market segmentation or customer segmentation is the process of dividing a consumer or business market into meaningful sub-groups of current or potential customers known as segments. Its purpose is to identify profitable and growing segments that a company can target with distinct marketing strategies.

Business-to-government (B2G), also known as business-to-public-administration (B2PA) or business-to-public-sector (B2PS) refers to trade between the business sector as a supplier and a government body as a customer playing a major impact in public procurement. Business-to-government also includes the segment of business-to-business (B2B) marketing known as public sector marketing — a form of business-to-business-to-government (B2B2G) phenomenon, which encompasses marketing products and services to various government levels—local, state/provincial, and national—through integrated marketing communications techniques such as strategic public relations, branding, marketing communications, advertising, and web-based communications.

Database marketing is a form of direct marketing that uses databases of customers or potential customers to generate personalized communications in order to promote a product or service for marketing purposes. The method of communication can be any addressable medium, as in direct marketing.

<span class="mw-page-title-main">Business-to-business</span> Commercial transaction between businesses

Business-to-business is a situation where one business makes a commercial transaction with another. This typically occurs when:

B2B e-commerce, short for business-to-business electronic commerce, is the sale of goods or services between businesses via an online sales portal. In general, it is used to improve the efficiency and effectiveness of a company's sales efforts. Instead of receiving orders using human assets manually – by telephone or e-mail – orders are received digitally, reducing overhead costs.

The target audience is the intended audience or readership of a publication, advertisement, or other message catered specifically to the previously intended audience. In marketing and advertising, the target audience is a particular group of consumer within the predetermined target market, identified as the targets or recipients for a particular advertisement or message.

Industrial marketing or business-to-business marketing is the marketing of goods and services by one business to another. Industrial goods are those an industry uses to produce an end product from one or more raw material. The term industrial marketing has largely been replaced by the term business-to-business marketing (B2B).

Industrial market segmentation is a scheme for categorizing industrial and business customers to guide strategic and tactical decision-making. Government agencies and industry associations use standardized segmentation schemes for statistical surveys. Most businesses create their own segmentation scheme to meet their particular needs. Industrial market segmentation is important in sales and marketing.

The following outline is provided as an overview of and topical guide to marketing:

Consumer-to-business (C2B) is a business model in which consumers (individuals) create value and businesses consume that value. For example, when a consumer writes reviews or when a consumer gives a useful idea for new product development then that consumer is creating value for the business if the business adopts the input. In the C2B model, a reverse auction or demand collection model, enables buyers to name or demand their own price, which is often binding, for a specific good or service. Inside of a consumer to business market the roles involved in the transaction must be established and the consumer must offer something of value to the business.

Market environment and business environment are marketing terms that refer to factors and forces that affect a firm's ability to build and maintain successful customer relationships. The business environment has been defined as "the totality of physical and social factors that are taken directly into consideration in the decision-making behaviour of individuals in the organisation."

Customer to customer markets provide a way to allow customers to interact with each other. Traditional markets require business to customer relationships, in which a customer goes to the business in order to purchase a product or service. In customer to customer markets, the business facilitates an environment where customers can sell goods or services to each other. Other types of markets include business to business (B2B) and business to customer (B2C).

Business-to-many or B2M is a marketing term for a business that sells their goods or services to other businesses as well as to consumers. Unlike B2B firms that only engage themselves with other businesses or retail firms (B2C) that only contact consumers or the end users of the product, B2M firms do both. It is important to understand that just because an organization does B2M marketing, this does not mean that they target their products and services to everyone. B2M companies, like any other type of company, have a more specific target audience.

Marketing automation refers to software platforms and technologies designed for marketing departments and organizations automate repetitive tasks and consolidate multi-channel interactions, tracking and web analytics, lead scoring, campaign management and reporting into one system. It often integrates with customer relationship management (CRM) and customer data platform (CDP) software.

There are many types of e-commerce models, based on market segmentation, that can be used to conducted business online. The 6 types of business models that can be used in e-commerce include: Business-to-Consumer (B2C), Consumer-to-Business (C2B), Business-to-Business (B2B), Consumer-to-Consumer (C2C), Business-to-Administration (B2A), and Consumer-to-Administration

References

  1. ↑ "Business Marketing | Encyclopedia.com". www.encyclopedia.com. Retrieved 2023-10-27.
  2. 1 2 Morris, Michael H., Pitt, Leyland F., and Honeycutt, Earl Dwight (2001), Business-to-Business Marketing: A Strategic Approach, Sage Publications Inc.
  3. ↑ Chauhan, Gyan; Anbalagan, C. "Strategy and Trends in B2B Business: Opportunities and Challenges - A Global Prospective" (PDF). International Faculty and Student Multi-Research Consortium. Archived from the original (PDF) on 1 September 2015. Retrieved 3 August 2015.
  4. ↑ Valenzuela-Fernandez, Leslier; Merigó, José M.; Lichtenthal, J. David; Nicolas, Carolina (2019). "A bibliometric analysis of the first 25 years of Journal of Business-to-Business Marketing". Journal of Business-to-Business Marketing. 26 (1): 75–94. doi:10.1080/1051712X.2019.1565142. ISSN   1051-712X. S2CID   169087808.
  5. ↑ Valenzuela-Fernandez, Leslier; Merigó, José M.; Johnston, Wesley J.; Nicolas, Carolina; Jaramillo, Jorge Fernando (2017). "Thirty years of the Journal of Business & Industrial Marketing: a bibliometric analysis". Journal of Business & Industrial Marketing. 32 (1): 1–17. doi:10.1108/JBIM-04-2016-0079. ISSN   0885-8624.
  6. ↑ Andrews, T. and Rogers, B. (1967), Buyer behaviour in SMEs: Research sponsored by DocumentGENie, University of Portsmouth Working Paper Series, published on 13 September 2005
    Robinson, P. J., Faris, C. W. and Wind, Y. (1967), Industrial Buying and Creative Marketing, Boston, MA., Allyn and Bacon
    Webster, F. E. and Wind, Y. (1972), Organisational Buying Behaviour, Englefield Cliffs NJ, Prentice Hall
  7. ↑ "Business-To-Business Marketing". More Great Ideas A Day: 365 more business ideas for each day of the year. Marshall Cavendish International Asia Pte Ltd, 2013. 2013. p. 266. ISBN   978-9814484664 . Retrieved 6 August 2015.
  8. ↑ "Internal vs. External Economies of Scale: What's the Difference?".
  9. ↑ "On the Efficiency of Internal and External Corporate Control Mechanisms".
  10. ↑ McCarthy, Jerome E.: "Basic Marketing: A Managerial Approach". Homewood, IL: Irwin, 1996
  11. ↑ Malaval: "Strategy and Management of Industrial Brands: Business to Business Products and Services", page 16. 2001
  12. ↑ Brown, Duncan and Hayes, Nick. Influencer Marketing: Who really influences your customers?, Butterworth-Heinemann, 2008
  13. ↑ Glynn. Business-to-business Brand Management, Emerald Group Publishing, 2009
  14. ↑ Kotler & Pfoertsch: "B2B Brand Management", page 53. Springer Berlin, 2006
  15. ↑ Guttmann, A (February 26, 2021). "Share of B2B Budgets Devoted To Marketing In The U.S. In 2020". Statista. Archived from the original on 2020-12-03.
  16. ↑ "What is an average marketing budget for a small business?". BDC.ca. 2020-09-12. Retrieved 2023-07-31.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.