Value-Based Strategies for Business Marketing
Business Marketing refers to the marketing operations of businesses whose mission is to serve other businesses, whether companies, government agencies, institutions or resellers. Since it is known that customers purchase value (and not products, services or features) suppliers seeking competitive advantage must ensure that they offer the best value to their targeted customers in selected consumer value segments. The trend, therefore, is for companies to move away from cost-based strategies to customer-oriented value-based strategies, to ensure optimal value creation and value delivery.
Business marketing is the development of strategic plans and the execution of the idea, price, advertisement, and allocation of ideas, goods, and services by organizations (including commercial business organizations, governments, and institutions) to other organizations that resell them, use them as components in their products or services, or use them to support their operations.
Business marketing, also known as "business-to-business marketing," "b-to-b marketing," "B2B marketing," and "industrial marketing," therefore refers to the marketing operations of businesses whose mission is to serve other businesses. Such businesses usually have a specific business customer and strategy in mind. Consumer marketing, also known as "business-to-consumer marketing" or "B2C marketing," on the other hand, is generally characterized by organizations offering their goods and services directly to households via the mass media and retail channels.
The practice of traders doing business with each other dates back to time immemorial, but the subfield of industrial marketing has only been in existence since the mid-nineteenth century, and the discipline of business marketing, in its modern form, is even more recent.
There are four broad categories of business marketing customers:
- Companies that consume products or services (either to use in their operations or for their own consumption);
- National and local government agencies;
- Institutions (including schools, hospitals and nursing homes, churches, and charities); and
- Resellers (wholesalers, brokers, and industrial distributors).
In most countries, the largest of the four categories is the government agencies.
Since the mid-1970s, business marketing has gradually overtaken consumer marketing in terms of its popularity as an academic discipline and a career choice, as well as in monetary terms. The volume of transactions in the industrial or business market is significantly larger than that of the consumer market. The purchases made by companies, government agencies, and institutions in industrialized countries account for a significant portion of the economic activity in those countries.
Business-to-business marketers in the United States alone spent 10.1 percent of their firm budgets in February 2013 just in the promotion of their services and 10.8 percent on marketing their goods, the CMO Survey found (Moorman, 2013). This promotional budget is spent on trade shows and events, the Internet and electronic media, promotion and market support, magazine advertising, publicity and public relations, direct mail, dealer and distributor materials, market research, telemarketing, directories, and other promotional efforts.
Business marketing differs from consumer marketing in several ways:
- First, it often involves shorter and more direct distribution channels than consumer marketing.
- Second, the negotiation process between buyers and sellers is more personal in business marketing than in consumer marketing, where the target markets are larger demographic groups and the main marketing communications vehicles in use are the mass media and retailers.
- Another difference is the fact that most business marketers spend less on advertising than consumer marketers.
The phenomenal growth and development taking place in the business marketing arena is largely due to the fast-paced changes occurring within the fields of technology, entrepreneurship, and marketing. Technological advancement has served and still serves as a catalyst to the development of new products and services. Progress in entrepreneurship has led to leaner, "meaner," reinvented companies, and the twenty-first-century field of marketing is characterized by adaptability, flexibility, speed, aggressiveness, and innovativeness. Relationships, partnerships, and alliances are considered to be prerequisites of success.
Due to the above-mentioned developments, the Internet has become an indispensable tool in helping business marketers manage their relationships with their customers, improve on their customer service in general, and improve the opportunities they have with their distributors. The Internet has also given rise to new e-commerce middlemen, such as infomediaries and metamediaries.
Infomediaries are information intermediaries: They are information providers, such as Google and Yahoo, that collect personal data from customers and market that data to businesses while maintaining consumer privacy, offering consumers a percentage of the brokered deals. Metamediaries, on the other hand, are intermediaries that gather and coordinate the products and services offered by mediators who specialize in specific areas.
The Internet has also paved the way for an increasing amount of collaborations between businesses, with virtual marketplaces allowing companies and their suppliers to conduct business in real time, while simplifying purchase processes and cutting costs.
The Importance of Value
It is a well-known fact that customers buy value, not products, services, or features. Discerning customers make purchases from the company that generates the greatest benefit for them, making sure that they purchase the products and services that are in their best interest.
A value-based strategy differs from a mass-marketing strategy in that it is a targeted strategy directed at selected consumer value segments deemed profitable by the supplier. To be successful in highly competitive markets, companies must try to achieve and maintain competitive advantage, and to do so, they must ensure that they offer the best value to their targeted customers. They must be able to show that their product offers better value for money, and this must be evidenced by higher ratios of value to cost.
Business-to-business marketers must therefore be able to explain to their business customers what the customers are getting from their product, and hence, they must be able to justify the price they are charging in return for those benefits. Their customers must be persuaded to recognize, purchase, and value the difference between the company and its competitors, and they must also be made to believe that what the supplier is offering them is beyond their expectation.
Offering better value, even when it comes at a higher price, is a customer-oriented approach that has several benefits:
- A customer-oriented approach based on value gives rise to sustainable competitive advantage, since it is relatively difficult for competitors to duplicate advantage that is derived from the overall value generated for the customer.
- This customer-oriented approach can also reinforce the company's reputation for providing high-quality goods or services,...
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