Business Marketing Lecture 1

Introduction to
Marketing
What is marketing?
‘Marketing is the management process that
identifies, anticipates and satisfies customer
requirements profitably’
‘The right product, in the right place, at the
right time, and at the right price’
Contd…
‘Marketing is a social and managerial
process by which individuals and groups
obtain what they want and need through
creating, offering and exchanging products
of value with others’ Kotler 1991
For an exchange to
There are at least two parties. occur…..
Each party has something that might be
of value to the other party.
Each party is capable of communication
and delivery.
Each party is free to reject the exchange
offer.
Each party believes it is appropriate or
desirable to deal with the other party
Evolution of Marketing
• Production Era
• Sales Era
• Marketing Concept Era
• Societal Era
Marketing Philisophies
Orientation Key Ideas
Production Focus on efficiency of internal operations –

if we make it, they will buy it
Sales Focus on aggressive sales techniques and believe
that high sales result in high profits
Marketing Focus on satisfying customer needs and wants

while meeting objectives - if they will buy it, we
will make it
Societal Focus on satisfying customer needs and
wants while enhancing individual and
societal well-being. I.e.-mfg using recyclables
Differences between Sales &
Marketing Orientations
Production/Sales Focus Marketing Focus
Organization’s needs Customer’s needs

Producing/Selling Satisfying customer
goods/services wants/needs
Everybody Specific groups of people
Profit through max. sales Profit through customer
volume satisfaction
Intensive promotion Coordinated mktg. activities
(4 p’s)
Relationship Marketing
• Forging long-term partnerships with
customers and contributing to their
success.
• Companies benefit from
• repeat sales/referrals that lead to increases in sales,
market share and profits, and
• decreased costs - it’s less expensive to serve existing
customers than attract new ones.
Relationship Marketing. . .
Customers benefit from:
 stable relationships with suppliers (especially in business-to-business)
 greater value and satisfaction
 discounts, (frequent flyer programs, shopper clubs, etc.)
Successful relationship marketers have:

 customer-oriented personnel
 effective training programs
 employees with authority to make decisions and solve problems
 teamwork
Marketing Mix and the Customer
Four Ps Four Cs
 Product  Customer solution
 Price  Customer cost
 Place  Convenience
 Promotion  Communication
Successful marketing requires
• Profitable
• Offensive (rather than defensive)
• Integrated
• Strategic (is future orientated)
• Effective (gets results)
Business Marketing
• “Business Marketing” or “Industrial Marketing” are used
interchangeably
• 50% of all business school graduates join firms that directly
compete in the business market
• Because of interest in high-tech markets and the size of
industrial markets, increased attention is being paid to
business marketing management
Business Markets
• Are markets for products and services from
local to international
Bought by:
• Businesses
• Government bodies
• Institutions
For:
• Incorporation
• Consumption
• Use
• Resale
What Are Business Products?
• Used to manufacture
other products
• Become part of another product Key is the
product’s
• Aid in the normal operations of intended
an organization
use
• Are acquired for resale
without change in form
• A product purchased for personal use
is considered a consumer good
Business to Business (B2B)
Marketing is Huge
1. Business marketers serve the largest markets of all.
2. Dollar volume of the business market greatly exceeds the
consumer market.
3. A single customer can account for enormous levels of
purchasing activity. (For example, GM’s 1,350 business buyers
each purchase more than $50 million annually.)
B2C and B2B
The Consumer Market (B2C) and the Business Market (B2B) at
Dell, Inc.
B2C B2B
Customers: Individuals & Businesses Institutions Government

Households Global Healthcare Federal
Large corporations Education State
Small & Medium Local
sized businesses
Selected PCs PCs

Products: Printers Enterprise Storage
Consumer Servers
Electronics Complex Service Offerings
Simple Service
Agreements
Categories of Business Market Customers
Producers OEMs
Commercial
Wholesalers
Resellers Retailers
Federal State
Governments
Municipal County
Unions Civic clubs Churches

Institutions
Foundations Nonprofits Other
Market-Driven B2B Firms
Have distinctive capabilities:
Market sensing capability: A company’s ability to sense
change and to anticipate customer responses
Customer linking: The ability to develop and manage close

customer relationships
And…
Create programs that include products, services, ideas and solutions to
problems that offer value and provide opportunities for their customers.
Professional Marketing Managers
Employ Customer Relations Management (CRM) tools for:
Identifying and categorizing customer segments
Determining customer’s present and potential needs
Visiting customers to learn about applications of
products
Developing and executing individual components of
marketing to include:
Sales, advertising, promotions, service programs,
pricing, channel development, etc.
Marketing’s Cross-Functional Relationships
• Professional business marketers act as an integrator between

various functional areas within the company
• Functional areas include:
• Manufacturing
• Research & Development (R&D)
• Customer Service
• Accounting
• Logistics
• Procurement
Marketing’s Cross Functional Relationship
Business marketing planning must

be coordinated and synchronized
with corresponding planning efforts.
Developed by Cool Pictures and MultiMedia Presentations
Business and Consumer Marketing Differs
In:
1. Nature of their markets
2. Market demand
3. Buyer behavior
4. Buyer-seller relationship
5. Environmental influences (competition, political, legal) and
6. Market strategy
• Due to these differences, business marketers need to

understand how demand for industrial products and
services differs from consumer demand.
Business Market Demand
Characteristics
• Derived demand
• Fluctuating demand
• Stimulating demand
• Price sensitivity / demand elasticity
Derived Demand
• The demand for business products is called derived demand
because the demand for industrial products is derived from the
ultimate demand for consumer products.
• As a result, business marketers must carefully monitor fluctuating

trends and patterns in consumer markets.
Fluctuating Demand
Because demand is derived, an increase or decrease in
consumer demand can create a fluctuating demand for
many industrial products.
Example:
•An increase in mortgage rates can quickly stifle new
home sales. This slows down the need for new household
products. Businesses react by decreasing their inventory
of materials or putting off buying new machinery.
•This action explains why the demand for many industrial
products tends to fluctuate more than the demand for
consumer products.
Stimulating Demand
• Sometimes, business marketers need to stimulate
demand for consumer goods which either incorporate
their products or are used to make consumer products.
• Pharmaceutical manufacturers advertise on television by

presenting various ailments followed by offering their products
as solution to the ultimate consumer. (“Ask your doctor if XYZ
is right for you!”)
• Industrial companies try to create brand value for their raw

materials in other companies’ finished goods:
• DuPont, Dow, Intel, Burlington Industries
Figure 1.4 Characteristics of Business Market Customers
Characteristic Example
•Business market customers are comprised •Among Dell’s customers are Boeing,
of commercial enterprises, institutions, and Arizona State University, and numerous
governments. state and local government units.
•A single purchase by a business customer is •An individual may buy one unit of a software
far larger than that of an individual consumer. package upgrade from Microsoft while
Citigroup purchases 10,000.
•The demand for industrial products is derived •New home purchases stimulate the demand for
from the ultimate demand for consumer products. carpeting, appliances, cabinets, lumber, and a
wealth of other products.
•Relationships between business marketers •IBM’s relationship with some key customers
tend to be close and enduring. spans decades.
•Buying decisions by business customers often •A cross-functional team at Procter & Gamble
involve multiple buying influences rather than a (P&G) evaluates alternative laptop PCs and
single decision maker. selects Hewlett-Packard.
•While serving different types of customers, •Job titles include marketing manager, product
business marketers and consumer-goods manager, sales manager, account manager.
marketers share the same job titles.
The Supply Chain Figure 1.5
Michael Porter and Victor Millar observed that “to gain competitive
advantage over its rivals, a company must either perform these activities at a
lower cost or perform them in a way that leads to differentiation and a
premium (more value).”
Categories of Business Market Customers
Producers OEMs
Commercial
Wholesalers
Resellers Retailers
Federal State
Governments
Municipal County
Unions Civic clubs Churches

Institutions
Foundations Nonprofits Other
Business Market Customer
Commercial Enterprises
Three categories of Commercial Customers:
• Users
• OEMs
• Dealers and distributors
Users
• Users purchase industrial products or services to produce other

goods or services that are, in turn, sold in the business or consumer
markets.
• Example: Toyota buys machines to produce cars that are sold to

consumers and businesses. Toyota is a user.
OEMs
Original Equipment Manufacturers
Individuals and organizations that buy

business goods and incorporate them into the
products that they produce for eventual sale
to other producers or to consumers.
Governments
• Municipal, State and Federal Government
• Generally use the bidding approach to purchase

goods and services
• Purchase up to 1/3 Gross Domestic Product

(GDP)
Institutions
• This is the nonprofit segment of the

market that does not seek to achieve
normal business goals such as ROI, %share
of market or profit
• Market includes universities, hospitals,

schools, churches, civic clubs, foundations,
etc.
Classifying Goods for the Business Market
Classify industrial goods by

asking the following:
How does the good or
service enter the
production process?
How does it enter the cost Source: Adapted from Philip
structure of the firm? Kotler, Marketing Management:
Analysis, Planning, and Control,
4th ed. (Englewood Cliffs, N.J.:
Prentice-Hall, 1980), p. 172,
with permission of Prentice-
Hall, Inc.
A Framework for Business Marketing Management
Business marketing strategy

is formulated within the
boundaries established
by the corporate
mission and
objectives.

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Introduction to

Production Focus on efficiency of internal operations –

Marketing Focus on satisfying customer needs and wants

Organization’s needs Customer’s needs

Successful relationship marketers have:

 Price  Customer cost

Customers: Individuals & Businesses Institutions Government

Selected PCs PCs

Unions Civic clubs Churches

Customer linking: The ability to develop and manage close

• Professional business marketers act as an integrator between

Business marketing planning must

• Due to these differences, business marketers need to

• As a result, business marketers must carefully monitor fluctuating

• Pharmaceutical manufacturers advertise on television by

• Industrial companies try to create brand value for their raw

Unions Civic clubs Churches

Three categories of Commercial Customers:

• Users purchase industrial products or services to produce other

• Example: Toyota buys machines to produce cars that are sold to

Individuals and organizations that buy

• Municipal, State and Federal Government

• Generally use the bidding approach to purchase

• Purchase up to 1/3 Gross Domestic Product

• This is the nonprofit segment of the

• Market includes universities, hospitals,

Classify industrial goods by

Business marketing strategy

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