What is Business-to-Business Marketing?
Business-to-Business (B2B) marketing involves the exchanges of goods and services that businesses purchase for purposes other than general consumption. Of course in consumer markets the focus of the marketer is upon the customer as a purchaser who is the consumer, or who will give the product or service to the consumer. Business-to-Business often sees companies selling on goods and services since they are part of the supply chain, or distribution channel. See Marketing Teacher’s lesson on place for more on distribution.
There are many examples of business to business marketing in operation. The general consumer might decide to buy some clothes, and so by wearing them the product has been consumed. There is a decision-making process on the part of the consumer, and there are similarities when it comes to a company or organization making buying decisions.
Dell would buy components and then manufacture computers. Dell is the customer and the component manufacturer is the supplier. Dell would go through a decision-making process but it is not the final consumer of the product. Boeing and Airbus manufacture long haul aircraft. Cathay Pacific would buy an aircraft, but it would not consume the aircraft. Your local supermarket or store would go to a wholesaler to purchase well-known brands that it placed upon its shelves; you (the customer) would go into the store and purchase the product. Dell, Cathay Pacific and your local store are all participants or customers in Business-to-Business markets.
Our marketing mix is the same and marketing principles remain largely unchanged when we consider Business-to-Business markets. However there are some differences. In Business-to-Business markets you are not selling to a single consumer since an organisation has many employees some of whom are involved in the decision to buy the final product. There are much fewer organisational buyers simply because there are more end-users or consumers and producers. A car manufacturer would be a large single purchaser of car tires/tyres, and there are fewer car manufacturers then there are car drivers in the world. This is also an example of derived demand, whereby the number of car tyres/tires sold increases with the number of cars sold and vice versa.
Business purchasers tend to buy in much greater quantities. Business buyers tend to be concentrated in the same place. Consumers will consume chocolate bars in every geographical location whereas companies tend to be placed close to each other, for example in industrial cities where manufacturing takes place.
There are many different types of business to business customers, which generally fall under the category of producers, resellers and government markets. From our previous example Dell would be a producer of computers (although it is a reseller of computer peripherals such as printer ink). Large retailers such as Walmart and the John Lewis Partnership are examples of resellers because they do not manufacture sugar/coffee/milk, they essentially buy from the producers and retail it. Government markets are large and lucrative, and often need a very precise marketing expertise in this field. Governments undertake large public works projects on behalf of their citizens. Purchases could include bridges, roads, hospitals, military equipment and educational supplies, and much more. Can you think of examples from your own country of different types of Business-to-Business customers?
The Business-to-Consumer markets are those markets which we traditionally talk about when learning marketing. Buyers tend to be individuals and not groups. Buyers as consumers tend to be found in mass markets and they are not concentrated in single places as are organisational buyers. Consumers tend to buy in small quantities and not in bulk; therefore they pay a much higher price per unit in comparison to the companies. The marketing effort would change to recognise the nature of the consumer. For example segmentation could be based on demographics or lifestyle when dealing with consumers. Finally the marketing mix is very much focused on the customer as a consumer, and a marketing effort is about creating value and customer satisfaction for individuals.