B2B Marketing in India
Content
B2B Business Marketing in India : Opportunities and Challenges Business markets have grown significantly in size and scope in recent times in developed economies. In India, since liberalization, this discipline has acquired new dimensions and importance. Business marketers in order to succeed need to be fully abreast of market structure and demand, the nature of the buying unit and the types of decisions, and the decision process involved. Relationship marketing developing long-term, cost-effective and mutually beneficial relationships with customer scan only brings in the desired results for the business marketers in the days ahead. The business market is defined to include organizations that buy goods and services for use in the production of other products and services that are sold, rented and supplied to others. The full business to business (B2B) market includes government purchases, quasigovernment operations, commercial enterprises, NGOs, hospitals, charities, resellers and other bodies and institutions engaged in the purchase of physical goods and services. Growing Importance of Business Marketing The present decade of the 21st Century can be appropriately termed as the decade of business to business (B2B) marketing. In recently published US government trade data, the value of business to business (B2B) and business to consumer (B2C) shipments appear nearly at same level (at around $8.3 tn each), but the number of items involved in sales to business buyers are much more than to retail consumers, highlighting the high importance of business marketing. In India, with the onset of economic reforms and thrust on globalization in different sectors of Indian economy, there have been tremendous changes, both in value and content of marketing of industrial products and services. The factors like—advances in technology, newer product and service offerings, higher levels of customer orientation and increased customer expectation, growth in investments, including FDI leading to international expansion of products and services—have caused significant changes in marketing practices of industrial products and services in recent years as compared to the past. Still, most companies in business markets tend to apply consumer marketing solutions to industrial markets, willynilly, with poor results. The key reason for such dichotomy is that the business marketing texts and teaching curriculum have so far depended heavily on consumer marketing concepts and principles. This situation has begun to change of late, and business marketing is
gradually emerging as a distinct area of marketing practice and knowledge having its own unique dimensions. Business Marketing vis-á-vis Consumer Marketing In order to appreciate the specific nuances of business marketing, it will be appropriate to capture the key differences between business and consumer markets. While on the surface the basics of marketing are the same for attracting the consumers, businesses, governments and institutions, there are a number of crucial differences which make the marketing of products and services in the B2B market quite different from marketing to consumers. These differences can be better understood under three main categories as spelled out below. Internal Factors • Interdepartmental and Cross- functional Coordination Most of the products and services in business markets are made to order with appropriate emphasis on technology, innovation, design and high level of customization. The marketing, selling and operation functions, including engineering, manufacturing, technical and information resources must have close integration. • Wider Management Responsibilities In a business market situation, the marketing product manager has to function as a mini general manager. The need for marketing and operations integration means business marketers have to make or participate in decisions that go beyond strict functional boundaries. Product development/ improvement, application engineering, capacity planning, quality assurance, product costing are only a few among many non-marketing activities that a business marketing manager has to undertake regularly. • Closer Link between Marketing Strategy and Corporate Strategy In business marketing, the marketing strategy often acquires the dimensions of the overall corporate strategy. For reasons stated above, particularly when pursuing significant marketing opportunities involving large government and key customer contracts, the entire business has to change its strategy from purely commercial to strategic and involve many of the firm’s functional areas and its resources for strategy formulation. External Factors • More Rational Decision-making Business goods and services are purchased by highly trained professionals who strive hard to achieve corporate targets like lowering cost, improving quality, etc., as laid down, within the framework of organization’s purchasing policies, constraints and
requirements. While emotions do play some role from time to time, buying decisions in business markets tend to be more rational and based on specific performance characteristics or benefits sought by the customer, as compared to consumer marketing. • Concentrated Customer Base Business marketers generally have a much smaller base of potential customer and in many cases a small number of key customer firms represent a large percentage of the industry’s buying potential. This narrow base means that in many markets, the buyers have more power than the sellers. Small numbers of customers, many of them large enough to demand personalized marketing, often require customized products and prices. • Several Buying Influences and Locations In business markets, the decision-making groups or buying committees consisting of technical and commercial experts and often senior management personnel in case of critical and high value purchases are common. These individuals who are involved in procurement decision-making take on specific roles and make or influence decisions based on these roles. Furthermore, several locations or factory/business units may be involved in decisionmaking. • Communication of Benefits Business marketers, in order to succeed, should track the needs and concerns of each key member of the buying team and then communicate the benefits of their offering appropriately to each member. They must also make each manager aware of all these benefits that are offered to others, as purchase decisions are often arrived after joint consultation among members of the decision-making group. • Direct Purchasing Business buyers often buy directly, more particularly for technically complex and expensive items, though smaller and dispersed customers may be serviced through many different channels. Each effort, either through direct sales force or through different distribution channels reaching different customers requires a different marketing strategy. • Close Supplier-Customer Relationship In business markets, suppliers are frequently required to customize their offerings to individual customer needs. Managing individual customers has become imperative for those who want to succeed in business markets today. As competition has intensified in business markets, customers are demanding increasingly more services and support. Suppliers can deliver those services only if they understand what each customer wants. Thus, an extremely vital element in
business marketing today is the development and maintenance of close customer relationships. Environmental Factors • Technology Technology and performance superiority can give the industrial products or services competitive edge in marketplace. Continuous product improvements in successive generations of industrial products can lead to market leadership position. With business customers, the application of proper technology in input items often has significant effects on the success of their outputs and financial results. Furthermore, an industrial product sales engineer needs to be intimately familiar with the technology used by its customers in order to serve these firms effectively and gain customer confidence. • Demand Issues The demand for business goods is derived demand, ultimately derived from demand from consumer goods. The demand is inelastic—usually not much affected by price changes and tends to be volatile, as a given increase in consumer demand can lead to a much greater percentage increase in the demand of equipment necessary for the increased output. Thus, business marketing involves building profitable, value-oriented relationships between the supplier and the customer organizations and many individuals within them. Business marketers focus on a fewer customers, with usually much larger, more complex and more technical sales processes. However, the emphasis on customer understanding can only succeed when based on intimate knowledge of customer operations, economics and business priorities. Value Propositions Clearly, companies aiming for sustainable and profitable growth should make customer value propositions fundamental to their business strategy and each value proposition must be: • Distinctive: It must be clearly of higher order to those claimed by the competitors. • Measurable: All value propositions should be based on tangible points of difference that are quantifiable in monetary terms and can be brought to the table. • Sustainable: The firm must be able to execute such value proposition over a considerable period of time. Paradoxically, most business marketers are concerned over deciding how their firms can create value that they rarely pay attention to communicating the benefits to the executives in the client firms who desire them and are involved in purchasing decision-making. To acquire customers, firms must try to be at least at par with rivals on tangible benefits (points of parity) and use non-tangible benefits to
differentiate their offerings (points of difference) from their competitors. To retain and build customer relationship, the efforts will be to shift the customer’s focus from tangible benefits to non-financial, non-tangible benefits like the services they consistently deliver over and above their contractual obligations. Customer Relationship In mature industrial markets, companies engaged in basic industrial products like metal, chemicals, wood, paper etc, are faced with flattening cost curves and virtually undifferentiated product quality and leading companies have taken a fresh look at how best to compete. These companies have turned their attention to their customers—and beyond, to their customers’ customers. Traditionally, manufacturers of basic materials used to see themselves as selling commodities, but now, they are beginning to discard the notion of hard and fast boundaries between them and their key customers. Instead, they are focusing on customer integration: Viewing supplier and customer as a single entity and working closely together in order to minimize transaction costs and maximize value to the next customer in the chain. Research shows that close collaboration with customers not only improves profits but also drives innovation. Customer integration is, by nature, a game of give-and-take with advantages to both parties. Once the seeds of a fruitful partnership have been planted, strong roots emerge and intertwine, making it rather impossible to break supplier and customer apart and move in. There are several examples of such a successful partnership in auto components, software solutions and other areas in recent times. Know Your Customers Well Enough What does a business marketer need to do to excel in today’s highly competitive market scenario? Managing individual customers is tough, and understanding the needs of their customers is tougher but these have become imperative in business markets today. Companies still have a long way to go before they can say they manage individual customers in business markets. However, all these do not require big promotional expenditures or complex and sophisticated software programs. All it demands is a return to the basics of marketing— understanding customer needs and what they really value.
gradually emerging as a distinct area of marketing practice and knowledge having its own unique dimensions. Business Marketing vis-á-vis Consumer Marketing In order to appreciate the specific nuances of business marketing, it will be appropriate to capture the key differences between business and consumer markets. While on the surface the basics of marketing are the same for attracting the consumers, businesses, governments and institutions, there are a number of crucial differences which make the marketing of products and services in the B2B market quite different from marketing to consumers. These differences can be better understood under three main categories as spelled out below. Internal Factors • Interdepartmental and Cross- functional Coordination Most of the products and services in business markets are made to order with appropriate emphasis on technology, innovation, design and high level of customization. The marketing, selling and operation functions, including engineering, manufacturing, technical and information resources must have close integration. • Wider Management Responsibilities In a business market situation, the marketing product manager has to function as a mini general manager. The need for marketing and operations integration means business marketers have to make or participate in decisions that go beyond strict functional boundaries. Product development/ improvement, application engineering, capacity planning, quality assurance, product costing are only a few among many non-marketing activities that a business marketing manager has to undertake regularly. • Closer Link between Marketing Strategy and Corporate Strategy In business marketing, the marketing strategy often acquires the dimensions of the overall corporate strategy. For reasons stated above, particularly when pursuing significant marketing opportunities involving large government and key customer contracts, the entire business has to change its strategy from purely commercial to strategic and involve many of the firm’s functional areas and its resources for strategy formulation. External Factors • More Rational Decision-making Business goods and services are purchased by highly trained professionals who strive hard to achieve corporate targets like lowering cost, improving quality, etc., as laid down, within the framework of organization’s purchasing policies, constraints and
requirements. While emotions do play some role from time to time, buying decisions in business markets tend to be more rational and based on specific performance characteristics or benefits sought by the customer, as compared to consumer marketing. • Concentrated Customer Base Business marketers generally have a much smaller base of potential customer and in many cases a small number of key customer firms represent a large percentage of the industry’s buying potential. This narrow base means that in many markets, the buyers have more power than the sellers. Small numbers of customers, many of them large enough to demand personalized marketing, often require customized products and prices. • Several Buying Influences and Locations In business markets, the decision-making groups or buying committees consisting of technical and commercial experts and often senior management personnel in case of critical and high value purchases are common. These individuals who are involved in procurement decision-making take on specific roles and make or influence decisions based on these roles. Furthermore, several locations or factory/business units may be involved in decisionmaking. • Communication of Benefits Business marketers, in order to succeed, should track the needs and concerns of each key member of the buying team and then communicate the benefits of their offering appropriately to each member. They must also make each manager aware of all these benefits that are offered to others, as purchase decisions are often arrived after joint consultation among members of the decision-making group. • Direct Purchasing Business buyers often buy directly, more particularly for technically complex and expensive items, though smaller and dispersed customers may be serviced through many different channels. Each effort, either through direct sales force or through different distribution channels reaching different customers requires a different marketing strategy. • Close Supplier-Customer Relationship In business markets, suppliers are frequently required to customize their offerings to individual customer needs. Managing individual customers has become imperative for those who want to succeed in business markets today. As competition has intensified in business markets, customers are demanding increasingly more services and support. Suppliers can deliver those services only if they understand what each customer wants. Thus, an extremely vital element in
business marketing today is the development and maintenance of close customer relationships. Environmental Factors • Technology Technology and performance superiority can give the industrial products or services competitive edge in marketplace. Continuous product improvements in successive generations of industrial products can lead to market leadership position. With business customers, the application of proper technology in input items often has significant effects on the success of their outputs and financial results. Furthermore, an industrial product sales engineer needs to be intimately familiar with the technology used by its customers in order to serve these firms effectively and gain customer confidence. • Demand Issues The demand for business goods is derived demand, ultimately derived from demand from consumer goods. The demand is inelastic—usually not much affected by price changes and tends to be volatile, as a given increase in consumer demand can lead to a much greater percentage increase in the demand of equipment necessary for the increased output. Thus, business marketing involves building profitable, value-oriented relationships between the supplier and the customer organizations and many individuals within them. Business marketers focus on a fewer customers, with usually much larger, more complex and more technical sales processes. However, the emphasis on customer understanding can only succeed when based on intimate knowledge of customer operations, economics and business priorities. Value Propositions Clearly, companies aiming for sustainable and profitable growth should make customer value propositions fundamental to their business strategy and each value proposition must be: • Distinctive: It must be clearly of higher order to those claimed by the competitors. • Measurable: All value propositions should be based on tangible points of difference that are quantifiable in monetary terms and can be brought to the table. • Sustainable: The firm must be able to execute such value proposition over a considerable period of time. Paradoxically, most business marketers are concerned over deciding how their firms can create value that they rarely pay attention to communicating the benefits to the executives in the client firms who desire them and are involved in purchasing decision-making. To acquire customers, firms must try to be at least at par with rivals on tangible benefits (points of parity) and use non-tangible benefits to
differentiate their offerings (points of difference) from their competitors. To retain and build customer relationship, the efforts will be to shift the customer’s focus from tangible benefits to non-financial, non-tangible benefits like the services they consistently deliver over and above their contractual obligations. Customer Relationship In mature industrial markets, companies engaged in basic industrial products like metal, chemicals, wood, paper etc, are faced with flattening cost curves and virtually undifferentiated product quality and leading companies have taken a fresh look at how best to compete. These companies have turned their attention to their customers—and beyond, to their customers’ customers. Traditionally, manufacturers of basic materials used to see themselves as selling commodities, but now, they are beginning to discard the notion of hard and fast boundaries between them and their key customers. Instead, they are focusing on customer integration: Viewing supplier and customer as a single entity and working closely together in order to minimize transaction costs and maximize value to the next customer in the chain. Research shows that close collaboration with customers not only improves profits but also drives innovation. Customer integration is, by nature, a game of give-and-take with advantages to both parties. Once the seeds of a fruitful partnership have been planted, strong roots emerge and intertwine, making it rather impossible to break supplier and customer apart and move in. There are several examples of such a successful partnership in auto components, software solutions and other areas in recent times. Know Your Customers Well Enough What does a business marketer need to do to excel in today’s highly competitive market scenario? Managing individual customers is tough, and understanding the needs of their customers is tougher but these have become imperative in business markets today. Companies still have a long way to go before they can say they manage individual customers in business markets. However, all these do not require big promotional expenditures or complex and sophisticated software programs. All it demands is a return to the basics of marketing— understanding customer needs and what they really value.
