1
BUSINESS MARKETING
Module 1
Introduction to Business Marketing
2
What is Business
Marketing?
Business marketing is marketing of
products and services to business
customers, such as private-sector
and government organizations,
institutions like hospital, hotels, and
educational. Business customers buy
products and services to produce
other goods and services, make
profits, reduce costs, and so on.
3
Differences : Business Vs Consumer Marketing
Characteristics of business markets contrast
with those of consumer markets.
Characteristics Business Markets Consumer Markets
• Market Geographically concentrated Geographically dispersed
Fewer buyers Mass Markets
• Product Technically complex No technical complexity
Customized Standardized
• Service Very important Somewhat important
• Buyer Behaviour Functional involvement Family involvement
Social / psychological
Rational motives motives
Technical expertise Less technical expertise
Interpersonal relationships Non-personal relationship
4
Differences : Business Vs Consumer Marketing
(Continued)
Characteristics Business Markets Consumer Markets
• Channel • More direct • Indirect
• Fewer channel levels • Multiple channel levels
• Importance to personal • Importance to
• Promotion
• selling advertising
• Competitive /
• Price negotiated • List prices or
• prices
• List prices for standard • Maximum retail price
• products (MRP)
Types of Business Customers
5
Retailers: These are businesses that purchase products or services for the purpose of
selling them directly to individual consumers. For example, a grocery store purchasing
food products from suppliers.
Wholesalers and Distributors: Wholesalers buy products in bulk from manufacturers
and sell them to retailers or other businesses. Distributors often specialize in a
particular industry or product category and act as intermediaries between
manufacturers and retailers.
Manufacturers: These businesses purchase raw materials, components, or semi-
finished products to be used in their manufacturing processes. For instance, an
automobile manufacturer buying steel, rubber, and other parts.
Service Providers: Businesses that require services rather than physical products,
such as consulting firms, marketing agencies, or IT service providers.
Institutional Customers: These include government agencies, schools, universities,
hospitals, and non-profit organizations that procure goods and services to support their
operations.
Resellers: Resellers purchase products from manufacturers or wholesalers and then
repackage, rebrand, or sell them under their own name. This category includes
companies like private label brands.
Original Equipment Manufacturers (OEMs): These are businesses that incorporate
purchased components and parts into their own products.
Types of Business Customers
6
Maintenance, Repair, and Operations (MRO) Customers: Organizations that buy
products and services required for their day-to-day operations and maintenance. This
category includes items like office supplies, machinery parts, and facility maintenance
services.
Professional Buyers: These are purchasing professionals or procurement officers
within larger organizations who are responsible for sourcing and acquiring products and
services. They often negotiate contracts and make bulk purchases on behalf of their
companies.
Small and Medium-sized Enterprises (SMEs): These are smaller businesses that
may have different purchasing needs and budget constraints compared to larger
corporations.
Large Corporations: Large multinational corporations often have complex
procurement processes and may require customized solutions or long-term contracts.
Global Customers: Businesses that operate internationally and have specific
requirements related to cross-border trade, currency exchange, and compliance with
different regulations.
Strategic Partners: Some businesses form strategic partnerships with others to
collaborate on joint ventures, research and development, or shared projects, requiring
specialized agreements and purchasing arrangements.
Classification of Industrial Products 7
and Services
1. Raw Material 10. Information Technology (IT) and
Software Services
2. Intermediate Goods
11. Environmental Services
3. Capital Goods
12. Research and Development (R&D)
4. Maintenance, Repair, and
Services
Operations (MRO) Products
13. Financial and Legal Services
5. Consumer Goods
14. Human Resources and Training
6. Energy Products and Services
Services
7. Chemical Products
15. Healthcare and Safety Services
8. Transportation and Logistics
Services
9. Engineering and Construction
Services
8
Planning in Business Marketing
Compared to consumer marketing, planning in business
marketing requires:
1) Closer relationship to corporate strategy, involving capital
investment and company wide implications.
2) More functional interdependence, or other functions’ support
including cross-functional teams.
9
Concepts in Industrial Demand
Derived Demand
Demand for business goods is derived from the demand for
consumer goods.
Fluctuating / Volatile demand / Acceleration effect
Demand for business goods / services is more fluctuating or
volatile than the demand for consumer goods / services.
10
Joint Demand
It occurs when one industrial product is useful or needed if
other product also exists.
Cross – Elasticity of Demand
It is the reaction or response of sales of one product to a price
change in another product.
11
Reverse – Elasticity of Demand
In this, a price increase can cause an increase in demand
and a price decrease would be followed by a decrease in
demand.
These short-term reactions are opposite from what we would
normally expect from business buyers.
Bull - Whip Effect
It is the tendency of buyers of a product in short supply to buy
more than immediate need.
Marketing Implications for Different
12
Products and Customers
Materials and parts often sold to business customers directly.
Capital items often sold to business customers directly.
Supplies and services often sold to business customers directly.
Purchasing Orientations of Business 13
Customers
Buying orientation-The purchase focus is short term and tactical. Buyers
are rewarded in their ability to obtain the lowest price from suppliers for
the given level of quality and availability. Buyers use two tactics namely
commoditization, where they imply that the product is a commodity and
care only about price; and multi-sourcing where they use several
sources and make them compete for share of the company’s
purchases..
Procurement orientation-Here buyers simultaneously seek quality
improvements and cost reduction. Buyers develop collaborative
relationships with major suppliers and seek savings through better
management of acquisition, conversion, and disposal costs. They
encourage early supplier involvement in materials handling, inventory
levels, just-in-time management, and even product design. They
negotiate long-term contracts with major suppliers to ensure the timely
flow of material. They work closely with their manufacturing group on
materials requirement planning (MRP) to make supplies arrive on time.
Purchasing Orientations of 14
Business Customers
Supply Chain Management Orientation- Here
purchasing role is further broadened to become a
more strategic, value-adding operation.
Purchasing executives at the firm work with
marketing and other company executives to
build a seamless supply chain management
system from the purchase of raw materials to the-
time arrival of finished goods to the end users.
15
Purchasing Practice of Business Customers
In commercial Enterprises
Involvement of various departments
Major tasks performed
1. Identify, negotiate, Select suppliers.
2. Ensure purchase objectives and efficiency achieved.
3. Good relationship with suppliers.
4. Establish procedure and documentation.
16
Purchasing in Government
Organizations
Establish purchase procedure.
Purchasing through Competitive Bidding / Tenders-A competitive
bid is a step in the initial public offering process whereby an
underwriter submits a sealed bid to a company that is making its
first issue of stock. After collecting competitive bids from several
underwriters, the issuer awards the contract to the underwriter
with the best price and contract terms.-
1. Closed / sealed tenders
2. Open / limited tenders-A bidding process that is open to all
qualified bidders and where the sealed bids are opened in public
for scrutiny and are chosen on the basis of price and quality. Also
called competitive tender or public tender.
Other Government contracts
DGS & D contracts
17
Purchasing in Government
Organizations
DGS&D Contracts- is the central purchase
organization of the Indian government, functioning
under the Ministry of Commerce & Industry. Its role is
to finalize the rate contracts to be used by
Government departments to procure items of
general use.
DGS&D contract rates allow the state, central and
government-owned entities to buy required goods
at the DGS&D specified prices. The contract rates for
such purchases by government departments and
public sector undertakings (PSUs) are fixed once
every year.
Purchasing in Institutions and
18
Cooperative Societies
Government institutes follow government process.
Often private sector institutes follow commercial enterprise’s
buying process.
Better to study each major customer’s purchase process.
Ethical Issues in Business 19
Marketing
Industrial marketing practitioners, marketing
educators, and marketing students must develop
both an awareness of, and a concern for, the
ethical issues of their profession.
Perhaps researchers should examine the
profession for activities which may be
questionable; and if improprieties are found, that
examination should lead to the type of research
activities which are appropriate to the general
ethical expectations of society in general.
This approach is not only "good" in the absolute
sense, but it is also somewhat self serving.
