This article will focus on business marketing, especially business-to-business(B2B) marketing and e-commerce. The foundation of business marketing strategy is based on three concepts, which are segmentation, targeting, and positioning. Many forecasters have predicted that B2B markets can expect purchases to net several trillion dollars a year, which is why many are predicting that the growth will outpace business-to-consumer marketing. Although business-to-consumer electronic commerce captures the attention of the industry, business-to-business electronic commerce is the format that is predicted to reap most of e-business activity.
Keywords Business Marketing; Business-to-Business Electronic Commerce; Business-to-Consumer Electronic Commerce; Business-to-Business Marketing; Business-to-Consumer Marketing; Consumer Marketing; Customer Value Proposition; Market Segmentation; Positioning; Targeting; Value Based Pricing
Marketing> Business Marketing
When marketing is mentioned, many think of the function as it relates to consumers. However, there is another side that is expected to blossom during the next decade — business-to-business marketing. According to the 2007 Marketing Priorities and Plans survey conducted by the trade journal B to B, marketing efforts will grow as business-to-business marketers increase budgets, do more business online, and try new technologies (Maddox, 2006). Respondents shared some of their goals for 2007, and the top three goals were customer acquisition (62.3 percent of the respondents), brand awareness (19.5 percent) and customer retention (11 percent). "New market growth, product penetration, research and positioning the company as a thought leader" were other goals listed in the survey (Maddox, 2006). Although e-mail, search, and webcasts were listed as still being important and worthy of some funding, website development was allocated the biggest percentage of online marketing funds. It was also illustrated that “67.7 percent of advertisers plan to launch new ad campaigns in 2007” (Maddox, 2006).
Many forecasters have predicted that the business-to-business market can expect purchases to net several trillion dollars a year, which is why many are predicting that the growth will outpace business-to-consumer marketing. However, the marketing industry will respond accordingly by providing both markets with sufficient attention even though both have different focuses.
Business Marketing Versus Consumer Marketing
There are many differences between the two forms of marketing, such as business marketing using shorter and more direct channels of distribution (Dwyer & Tanner, 2006), and consumer marketing aiming at larger demographic groups through mass media and retailers. In addition, the negotiation process is more personal between the buyer and seller in business marketing. Business marketers tend to use direct mail and trade journals as the preferred method of advertising, and they only commit a small portion of their budgets to do so (Hull & Speh, 2001).
According to Oliva (n.d.), some of the unique features between the two methods are:
Business-to-Business (B2B) Marketing
- Transactions among and within value chains
- Value primarily determined by business economic use
- Small numbers of customers, many requiring personalized marketing, including customized products and prices
- Large customers with strong market power (a business's customers tend to be its competitors)
- Diverse and varied customer types and customer needs
- Large unit transactions
- Complex and lengthy selling processes involving many players creating a demand decision chain
- Deeper partnerships with members of the value chain, including customers
- Channel management oriented up and down the supply chain
- Sales focused on key account management, and multiple purchasing influencers
Business-to-Consumer (B2C) Marketing
- Transactions through the dealer to the end consumer
- Value determined by end-consumer perception
- Focus on brand management
- Large number of generally similar consumers
- Small transactions
- Linear selling process, usually of short duration
- Channel management oriented toward retail
- Sales activity focused on the end user
Business marketing’s foundation is based on “building profitable, value-oriented relationships” between two organizations and their workforces (Oliva, n.d.). Business marketers focus on a small number of customers by using sales processes that are large, complex and technical. Due to new marketing and communication technologies, B2B and B2C marketing efforts cross many industries. Business marketers must understand how the two methods work together in order to create and deliver value.
Importance of Value
Value is central to all marketing practices, especially business marketing. In business markets, the real value of a product or service can be understood by “analyzing the product’s use in the marketplace and comparing the product or service to the next best alternative for the customer” (Oliva, n.d.). For example, Microsoft has introduced Office 2013. However, many companies are still using Office 2010. Many organizations tend not to update to the newer version until the bugs are worked out. The value concepts for both of these products can be calculated in monetary terms. In consumer markets, value is based on perception. For example, the value of coffee is based on brand symbolism, loyalty, experience, and taste preference.
Some business marketers have made the mistake of pricing their products and services too low. Many believe that price and costs are directly related. However, pricing based on cost may create pricing errors, which may lead to missed profit opportunities with business-to-business efforts. In order to avoid this costly mistake, value based pricing should be used by companies. Value based pricing occurs when a company creates a marketing and sales program geared toward educating potential customers on the value of the product or service they are receiving. If this goal is successful, potential customers tend to be willing to pay more for the product or service. Oliva (n.d.) believes that “studying the impact of value on profitability is one of the most important analyses a business marketer can conduct. Value in business markets can be examined on many levels” such as:
- The actual economic value of the offering delivered to the typical customer.
- The value of the supplier to the customer, and the brand strength and relationship value of the supplier.
- How value differs among actual and prospective customers, and among the individuals who collectively make a buying decision.
- How specific marketing activities influence customer recognition of value.
- How value builds through the industry supply chain and how much of that value is actually captured in the prices charged by supply chain members (Oliva, n.d.).
Once the importance of value in business marketing has been established, value-based strategies should be developed. Value-based pricing aims to match the price of a product with the value that product imparts. Some value-based pricing strategies consider the break-even point and tend to be subjective. According to SmallBusinessNotes.com ("Value-based pricing," 2007), three of these types of strategies are:
1. Price the same as competitor.
This strategy is useful when offering a commodity product, when prices are well established or when there are no other means to set prices. Organizations will be challenged to develop a plan that will lower their costs so that they can receive a higher profit than their competitors.
2. Establish a low price on a product in order to capture a large number of customers in that market.
This strategy is useful if the organization's goal is to achieve non-financial objectives such as creating product awareness, meeting the competition or establishing an image of having a low cost. This strategy will work if the organization can maintain profitability at the low price or if it is able to maintain an acceptable level of sales in the event that it wants to raise prices at a later date.
3. Charge a high price relative to cost if the product has a uniqueness that is valuable to the customers.
This strategy is useful when the target market is affluent and the product is positioned as being upscale. In this type of situation, the organization may be able to mark up the price because there will be a demand. The organization charges what it believes potential customers are willing to pay.
Business Marketing Strategy
The foundation of business marketing strategy is based on three concepts: segmentation, targeting, and positioning....
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