This is a summary for the B2B marketing course of the master Marketing Management at the Rijksuniversiteit Groningen. This summary contains all the chapters in the book that need to be studied for the upcoming exam.
B2B marketing book summary
Chapter 1. B2B Markets and Customer Relationships
B2B Markets and Companies
B2B markets have in common that they deliver their products directly to other companies, governmental agencies, or
public organizations (and not to consumers). Customers are business entities. 3 different sectors:
1. The primary sector: this involves extracting, mining, and harvesting natural products from our earth. Think about
mining corporations, fishermen, and farmers.
2. The secondary sector: this involves processing, manufacturing, and constructing products using the goods or
materials that the primary sector delivers. The best examples here are manufacturing companies.
3. The tertiary sector: this involves the services sector, such as accountancies and advertising agencies.
5 product groups that B2B customers can buy:
1. Resell as is: these are products that are bought for trade, unmodified as they are, by wholesalers and retailers.
2. Integrate as components: they become part of the final product but need no further processing before that stage.
These parts are integrated unmodified into products by original equipment manufacturers (OEM). Think about
components for machines, telephones, or cars.
3. Modify and resell: products become part of the B2B customer’s final product. They have previously undergone
some processing but need further processing by the B2B customer before they enter the final product.
4. Capital items: these are used for production within the B2B customers’ organization. As such, this customer is the
end-user. Each company buys furniture, computers, etc for internal use. A company also uses services like those of
an accountant, a waste disposer etc. These goods and services help the company operate and conduct its main
activities. Capital items can be divided in two types.
- Major capital items have a lifespan of more than one year, they do not become part of the company's final product,
and cost more than $10,000 per unit (e.g., business cars).
- Minor capital items have a lifespan of more than one year, do not become part of the company's final product, and
cost between $1,000 and $10,000 per unit (e.g., computers).
5. Internal consumption: these products do not become part of the final product and are no capital items. They rather
are used for operating the company, maintenance, or repairs. Think about buying wine and beer for the Friday
meetings or toilet paper for the toilets.
B2B companies can be differentiated into the secondary sectors in two generic business logics: I2P and IB.
- Input-to-process (I2P): these are companies like metal, pulp, and paper suppliers providing goods that are utilized
as inputs in the B2B customers' process (modify and resell). The goods are transformed during the customer's
process and eventually cease to exist as a separate entity. These are 1, 2 and 3 of the previous list.
- Installed-base (IB): these companies, such as machinery and equipment industries, provide investment goods to
B2B customers, thus helping to create an installed base of machines and equipment at the customers’ plants. There
are two different types of IB businesses:
o the Capex business: capital items, as when customers invest in new plants, heavy machinery, or
information technology systems. This is number 4 of the previous list.
o the Opex business: operational expenditure for internal consumption, such as services, maintenance
and repair related to the capex investments done. This is number 5 of the previous list.
Value Chains and B2B Customers
B2B markets and companies operate in value chains (supply chains). Value chains: combinations of companies that
produce, distribute, and eventually deliver products to the end user. Everybody that ads value to the end product (raw
material supplier, manufacturer, etc).
,3 views of competition:
1. Traditional view of competition: competition is horizontal and company-to-company at each level. Suppliers in
the same business compete to get and retain the best customers.
2. Hierarchical competition: vertical integration by buying companies and integrating them into the company leads
to competition between integrated companies.
3. Strategic network competition: combining the advantages of the other two views leads to this third one. In this
case various companies are not owned but work together as network partners.
3 types B2B relationships
It is dangerous for B2B companies to focus a lot on the end customers. Therefore, there is a differentiation in different
types of B2B relationships:
- B2B: when the business customer is the end-user in the case of buying capital items or products for internal
consumption.
- B2B2B: when a supplier sells to a business customer that again sells to a customer that is a business customer. For
example, a producer of motors delivers to a car manufacturer that delivers to car dealers (raw material producer,
distributor, manufacturer).
- B2B2C: when a supplier sells to a business customer that directly sells to consumers. For example, a producer of
games delivers to game stores that sell the games to consumers (other producers (OEM), wholesale/distributor).
Differentiation is important because the company must focus on indirect customers as well and understand them.
Three approaches for this are:
1. Direct customer downstream support: A B2B supplier supports its direct customers to improve their power and
increase customer intelligence downstream in the value chain.
2. Cooperative indirect customer marketing: joint activities of the supplier and direct customer. The supplier ‘steps
out of the background’ and acts together with the direct customer towards indirect customers.
3. Independent indirect customer marketing: the supplier uses a pull approach and directly contacts the indirect
customers. In this way he passes the direct customer.
Customer-supplier relationships
Companies enter relationships with other companies
when it contributes to the competitiveness of the
organization. It takes a lot of time and resources to
form these relationships. Also, the relationships can be
difficult is the business is not the end user of the
product. In the book we focus on non-equity
relationships: based on licensing or another contractual
relationship.
,6 dimensions in the buyer seller relationship:
1. The amount, content, and openness of information exchange between the customer and supplier. Think about early
involvement in developments and product design, open book calculations, joint logistical planning, and openness
about plans for the future.
2. The operational linkages between supplier and customer: the degree to which systems, procedures and routines of
both organizations are linked.
3. The bonding and contractual agreements (legal bonds) between the partners.
4. The norms for cooperation between them. These are the expectations and rules concerning how to work together
as exchange partners.
5. The adaptations concerning processes, products or procedures made by the supplier to fit into the relationship.
6. The adaptations made by the customer.
From these dimensions, there can be 3 different types of relationships formed:
- Transactional: discrete
transactions with a definite
beginning, end, and short
duration.
- Value-adding: They are
relationships based on value
exchange with the aim of
becoming closer in the
future.
- Collaborative: intense
relationships with mutual
commitments, long duration.
Suppliers want a collaborative relationship because they are the most durable of advantages and they are hard for
competitors to copy or displace.
Stages in a B2B relationship
Key Characteristics of B2B Relationships
- The Pareto Principle (80-20 rule)
1. For many B2B suppliers, 20% of the customers provide 80% of the revenue.
2. Important to monitor value of the customer.
- Customer vs. supplier power dynamics: Direct customer often has the most power in a relationship, but in several
markets, suppliers have a lot of power when they decide what OEM, distributors, or retailers they do business.
- Growing interdependencies: B2B customers and suppliers are dependent on each other which makes relationships
complicated. This is caused by globalization, flattening, appearance of new companies, intensifying government
involvement etc.
, - Intensive relationships: B2B relationships have a long-term nature, stable, both parties invest in it, there are
decisions made how the companies will interact with each other etc.
- Customer strategy: Single vs. Dual vs. Multiple source suppliership: customers may use one (single), two (dual) or
multiple suppliers for similar products. This way, potential decreases in the supply and increases in the prices of
suppliers can be managed. But the more suppliers, the higher the managing costs. Depends on the market and
strategy what you choose.
- Ambidexterity: Balance between customer value creation and value appropriation. Companies must manage both
benefits and sacrifices for customers. Simultaneously working on high added value for customers and at the same
time working on low internal costs.
- Shifting focus from
1. customer acquisition to retention. In many markets the number of customers is consolidated and therefore the
focus should be on retention of those customers.
2. having many customers to having the right customers. We need to retain customers that contribute to the
profitability of the company.
3. solely competing on product quality to customer value creation
- Growing need for digitalization: needs to improve, B2B markets are not very good in this.
- Avoiding the commodity trap:
1. Business markets can be very dynamic: four factors have disrupted this:
1. The quality of products has been commoditized. The technical and qualitative differences between
suppliers and their offerings have been narrowed.
2. An existential threat has been posed by new disruptive technologies like cloud computing, mobile
applications, and artificial intelligence.
3. Business customers are getting better informed by doing research on their own. Easy access to online
information leads to an abundance of product information.
4. Customers shift from a focus on almost solely negotiating for the lowest price to selecting suppliers
based on added business value.
2. These dynamics have an impact on the cycle of growth, maturity, commoditization and decline of products.
What once was a specialty service or good with an attractive value for the supplier (high price) has now
become a commodity for customers. Commodity: “the
offerings over time tend to be undifferentiated in the
minds of customers, with price becoming the sole basis
for deciding among them.
3. When commodity happens, the company can only
compete on the price because the product is not that
highly differentiated anymore. This leads to a negative
price spiral called the commodity trap.
Buying and selling centers:
A buying center consist of all the customer’s people that directly or indirectly influence the relationship with a
supplier. They are a decision-making unit consisting of users, buyers, influencers, deciders, and gatekeepers.
1. Users: employees who use the purchased products.
2. Influencers: employees and other actors who influence the decision process (in)directly.
3. Buyers: employees with formal responsibility and authority to contract suppliers.
4. Gatekeepers: employees and others who control the flow of information (and materials) into the buying center.
5. Deciders: employees with authority to choose among alternative buying actions.
The role and constitution of such a buying center depends on many factors like the type of buying decision (new task,
modified rebuy, straight rebuy).
1. A new task situation occurs when the need for the product type has not risen before, there is no past buying
experience with this product type, a great deal of information is required, and alternative products and alternative
suppliers are considered.
2. A modified rebuy situation occurs when there is a continued requirement for the product and the buying
alternatives are known. However, the buying alternatives have changed due to events such as a change in supplier
prices, a new product introduction by a vendor, a need for cost reductions, or engineering modifications.
Additional information is needed before a decision can be made.
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