Hutt and Speh (2013, p. 4) note that, ‘Business marketers serve the largest market of all; the dollar volume of transactions in the industrial or business market significantly exceeds that of the ultimate consumer market’. Having spent many years as a business-to-business (B2B) marketing practitioner and more recently also as an academic, I’m often asked about the nature of business markets.

Common questions include:

• How do business markets (B2B) differ from consumer markets (B2C)?
• In what ways are the two markets similar?
• Which of the promotional elements are most effective in B2B markets?
• How should B2B markets be segmented?
• What special challenges are there for marketing B2B services?
• How does the purchasing process differ for B2B markets?

The following is a first-principles look at B2B markets and marketing, to provide an overview of and grounding in the basic drivers within the B2B space.

CHARACTERISING BUSINESS MARKETS

Hutt and Speh (2013, p. 14), a pre-eminent text in this space, provides the following useful B2B insights on how B2B markets differ from B2C markets:

• Nature of B2B markets
• Market demand
• Buyer behaviour
• Buyer-seller relationships
• Environmental influences
• Market strategy

NATURE OF B2B MARKETS

B2B markets (in comparison to B2C markets) are characterised by: fewer customers/clients and more concentrated target markets, more complex product/service offerings (including significant customisation), larger value purchases, longer sales cycles, increased consultative sales efforts, a tendency towards long-term relationships, more complex buying processes and buying centres.

B2B MARKET DEMAND

The demand for B2B products or services is derived from, or dependent upon, the ultimate demand for consumer products and services. For example, in Australia, the demand for extruded aluminium products is largely dependent upon the level of building activity and ultimate demand for new homes and the level of renovations. As a consequence, the B2B marketer must have a strong handle on the demand determinants for their industry, to forecast likely future market activity. How well do you really understand your industry’s outlook?

BUYER BEHAVIOUR

The B2B buying process and buying centre are very distinctive from that of B2C markets. Given the large size of many B2B contracts and purchases, the buying process is often thorough and very deliberate. Hutt and Speh (2013, p. 37) suggest the following stages of the purchase process:

• Problem recognition
• General description of the need
• Product specification
• Supplier search
• Acquisition and analysis of proposals
• Supplier selection
• Selection of the order routine
• Performance review

The buying centre consists of all individuals who take part in the purchase decision and include the following roles:

• Users
• Gatekeepers
• Influencers
• Deciders
• Buyers

The B2B marketer, therefore, needs to have a keen understanding of the prospective customer/client buying process and buying centre if they are to secure and maintain business contracts. I can think of many war stories from my own career where we have, and sometimes haven’t, understood these concepts! How well does your organisation understand your own customers’/clients’ buying processes and buying centres?

BUYER-SELLER RELATIONSHIPS

Relationship marketing is vital in B2B markets. The nature of business contracts, typically large in dollar value and in force for years, means that personal selling is the most potent element of the B2B marketer’s promotional mix. B2B marketers must assess where their relationships need to sit along the transactional-to-partnership continuum and develop strategies accordingly. How well does your organisation manage its own personal selling efforts? How do you measure your own sales force effectiveness?

B2B MARKETING STRATEGY

Because B2B markets are typically small in number, but large in dollar terms, segmentation needs to be considered in a different fashion to B2C markets. Hutt and Speh (2013, p. 101, 103) suggest the following levels of segmentation:

Macro-level bases of segmentation:

• Characteristics of buying organisations
• Product/service application
• Characteristics of purchasing situation

Micro-level bases of segmentation:

• Key criteria
• Purchasing strategies
• Structure of decision-making unit
• Importance of purchase
• Organisational innovativeness
• Personal characteristics (demographics, decision style, risk, confidence and job responsibility)

When the above segmentation criteria are developed, it is not inconceivable that the ultimate conclusion may well be a market segment of one very large prospective or current client. Now consider the implications to your organisation of delivering a coherent, refined and effective marketing mix to this important client.

REFERENCES

Hutt, M. D., & Speh, W. (2013). Business Marketing Management: B2B (11th edition). Mason, Ohio: South-Western Cengage Learning.