B2B vs B2C Markets

B2B vs B2C Markets

• Marketing in B2B is centered on building strong relationships with business clients and suppliers
• The core questions in B2B marketing are on how to make customers favor your business over competitors and how to cater to customers effectively

Differences Between B2B and B2C Markets

• Demand in B2B is derived from consumer demand, creating a "domino effect"
• Demand in B2C is direct as it is the final transaction
• B2B demand volatility is higher due to fewer buyers and greater company dependence on each one
• B2C demand volatility is lower
• B2B clients are more heterogeneous, including companies and suppliers
• B2C clients are more homogeneous, being final consumers
• Market concentration in B2B is higher, making companies vulnerable if a major client leaves
• Market concentration in B2C is lower, so losing a client isn't typically significant
• B2B market complexity is high due to numerous parties like suppliers and distributors, leading to specialization that can blur responsibilities
• B2C market complexity is lower, with B2C marketing as the final element in inter-firm relationships
• B2B market size is larger, representing the biggest part of marketing with a $22 trillion market in 2002
• B2C market size is smaller at $11 trillion in 2002
• B2B has a higher geographic concentration
• B2C has a higher geographic dispersion
• The supplier and client sizes are often similar in B2B
• The supplier size in B2C is much bigger than the client size

Trends in Company Integration

• Vertically integrated companies that handle everything from start to finish are rare
• Car manufacturers assemble and outsource parts, Toyota is one example

Visions of Marketing: Kotler's Vision

• Centers around creating, winning, and dominating markets
• Views the market as atomized with many suppliers, individually insignificant customers and great separation between them
• Is focused on fast moving consumer goods and actions/transactions

Visions of Marketing: B2B Perspective

• Differs in B2B, especially with oligopolies where a few companies hold large market shares
• Marketing is about managing business relationships, with significant, relevant, and heterogeneous clients, as well as active suppliers and customers
• Aims to offer solutions and interact, valuing service, which leads to a value proposition

Three Visions of Marketing

• Transactional vision emphasizes transactions with analysis focused on STP (segmenting, targeting and positioning) and the marketing mix, frequently seen in B2C
• Relational and interactive vision aims to create and manage long-term relationships with clients, suppliers, and other actors, common in B2B
• Network vision sees transactions as a system with analysis focused on mapping networks, defining network positioning, and creating network strategies

Customer Value and Customer Centricity

• Involves offering value through a value proposition
• B2B marketing is similar to tango needing practice, personalization and interdependence

Offerings in B2B

• Offerings include product, place (distribution), promotion, and price, supplemented by process, physical environment, and people

Offering Elements

• Elements of offering include products, service, logistics, advice, and adaptation
• Physical product is often overemphasized with intrinsic value arising from problem solving
• Services should be the major part of the offering
• Customers often prefer services over products like renting over buying
• Outsourcing exemplifies the service trend
• Logistics is vital, especially when products/services are similar
• Meeting logistics requirements at affordable costs is challenging
• Advice increases customer understanding, it also allows customers to offer advice, used for interactive supplier development
• Adaptation involves changes made to the offering; it demonstrates commitment, and can disrupt operations
• Costs of adaptation should be weighed against relationship and customer lifetime value

Communicating Value

• Marketing communication includes non-customized methods like advertising and PR along with customized strategies like sales forces and direct marketing
• Communication differs between B2B and B2C, as personal selling is key in B2B
• Integrated communication tools include networking and advertising
• Communication objectives should decide the tools and media used
• Digitalization will impact the tools used

Distribution Strategies

• Companies use different routes to markets with different factors impacting strategy
• Companies use different distribution channels in different markets
• Choices made should suit you best

Pricing

• Pricing involves both internal and external elements
• Prices should not be lower than costs, or higher than consumer's perceived value
• Prices should align with company goals; prioritizing either profitability or market share

Value and Cost Considerations

• Value depends on perceived benefits minus perceived costs
• Costs for B2B includes implementing and training for new software

Value Proposition

• Is centered on the client
• Value propositions should find solutions to problems, articulate benefits to price, and ease customer access

Promotion Focus and Price

• Should educate the customer
• Price depends on all variables, so it should be defined last

Customer Centric

• Customer should be priority and shift perspective to customer
• Identify problems by listening and building internal/external cooperation and it also helps with co-creation
• To define a customer centric offering, you must understand their business, competitive drivers, and challenges
• To offer a customer centric offering, you must have the ability to create value

Evaluating Offerings

• Identify which components you are focusing on.
• Rate yourself if you're excellent, OK, or inadequate on relevant areas
• Determine which components are critical

Audit

• Auditing shows misalignment and areas of improvement

Improve Performance

• Poor components that are important to customer must change
• Strong points of focus important to the customer must be maintained
• Points that can be are not important should be controlled
• Extra investment can be removed if something is performing well but isn't valued by the customer

Value

• It's important to rely on other partners to help with processes

Processes

• The definition and communication of the value proposition should consider how the customer buys and who makes purchasing decisions

Purchasing Process

• It's complex and involves functional areas with different needs

Improve communication

• A strong value proposition is not enough: you must communicate effectively and highlight customer benefits
• Time factors should be considered, as value is created immediately or developed over time

Customer Centric Business Model

• Defining the business based on the customer's problems

Difficulties

• Value can be difficult to communicate

Benefit Types

• Tangible benefits such as easy financial measuring are best for attracting customers and easily imitated
• Non-economic tangible is recognized but has no financial value such as reputation, brand, used to differentiate, and can lead to "premium" prices
• Economic intangible benefits can be quantified by suppliers, but are hard for customers to measure
• Non-economic intangible benefits are difficult to quantify. The customer must experience the benefit, which is good for keeping customers happy

Smart Moves

• Run tests to eliminate customer risk, but also remember the value lies with the customer, therefore you need to find common interests

Values

• Value is expressed better or worse, a value proposition can also be expressed better or worse

Dancing Benefits

• Understanding customers and their business/challenges is more important

Relationship Importance

• Strategic management and selecting partnerships is more important

Interaction Process

• Must be an ongoing process

Parts of Relationships

• Must be strategic
• Determine who to grow and select customers
• Build to fit goals, and manage differences
• Always want to seek the best benefits

Communication and Exchanges

• The use of social context is important for gathering goals and information.
• The things that matter the most are quality/cost/make and quality
• Are you creating value, can client create value? You may need to manage strategically

If you cannot do everything for everyone strategic changes must be made

• It has to be determined what should be developed for customer and see If you are specialized or diverse

When should customers be focused on?

• Value comes from the customer, therefore select the customers with the highest potential for profits, resources etc

Asymmetric Relationships:

• Focus on balance of power or control, otherwise known as domination and can cause instability
• Should be avoided and replaced with reciprocity

Value Factors For Both Partners:

• Variables that influence trust, value and reciprocity

Business Relationship

• They are long term from pre-relationship to future rewards therefore need to be managed properly

Steps For Increased Customer Commitment

• Place position to loyalty, if they lower they will be placed into different section of matrix.
• The different customers include: Commodities, Underperformers, Value and Partner

Relationship Audit

• To get a better sense of evolution there are points, history, investment, connections and operations

Customer Types

• Are based from the segmentation process for existing customer base
• Resources are allocated based potential and capacity

The categories must be classified

• Based on strategy, new connections and design

Sales Profits

• Are not representative, and profits can wary
• Key factors are net price minus cost, which can vary, but net cost is how much a customer actually pays

Serve Catagories

• There are generally 4, pre-sales, production, distribution and post sales
• Combining the 4 will result in carriage, passive, aggressive and bargain
• With that in mind pinpoint sales etc.

Customer Portfolios

• The best is always for new clients to have new strategies to align with how customers can provide you value