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Business to Business (B2B) and SME Marketing

Business to Business (B2B) and SME Marketing. Lecture 9 Karen Knibbs Marketing Practice – U14210 S2 08/09. Learning objectives. By the end of the session, you should be able to: Understand a range of issues specific to the nature of marketing operations for:

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Business to Business (B2B) and SME Marketing

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  1. Business to Business (B2B) and SME Marketing Lecture 9 Karen Knibbs Marketing Practice – U14210 S2 08/09

  2. Learning objectives By the end of the session, you should be able to: • Understand a range of issues specific to the nature of marketing operations for: • B2B (Business-to-business / Industrial) • and SME (Small to medium sized enterprises) organisations Marketing Practice S2 2008

  3. Marketing in context (Lect 1) • Marketing is useful to ALL types of business • Textbooks often focus on large “blue chip” companies, typically consumer oriented, American and globally operating • Let’s consider SME’s (account for 99.8% of all UK businesses – ONS, BERR 2006), B2B, NFP & Dotcoms • Plus many SME’s are B2B! Marketing Practice S2 2008

  4. Setting the context… Business 1: Goth Cloth, S’ton Business 1: BMW Group AG • B2B • SME Buys products and services from Buys products and services from Business 2: Actinic , Surrey Business 2: Shell Group Prolonged process of establishing centrally controlled formal buying procedures and policies, sending out tenders and comparing contracts, suppliers will be selected due to strategic fit with demographic, economic and geographic characteristics and relationship factors Only a handful of employees in the whole company, may be no formalised supplier selection and acquisition processes, relationships may be created through ad hoc networking, and choices made due to gut feel, comparison of promises, price quotes and payment terms. Purchases may be one-offs. Marketing Practice S2 2009

  5. Influences Shaping Organisational Buying Behaviour Baines, Fill & Page, (2008)

  6. Membership of the B2B Decision Making Unit N.B. This may be the format for a large MNE with centralised buying policies, but all of these roles may be performed by one owner-manager in a SME Baines, Fill & Page, (2008)

  7. Business decision process & stimuli Dibb, Simkin, Pride & Ferrell (2006)

  8. Key Characteristics of Business Markets Baines, Fill & Page, (2008)

  9. Fewer buyers Larger buyers Closer supplier-customer relationships Geographically concentrated buyers Derived demand Inelastic demand Fluctuating demand Professional purchasing Several buying influences Direct purchasing Reciprocity Leasing / Contractual Agreements Characteristics of organisational markets (from Principles)

  10. B2B Business examples Volvo Group • “Big Blue” = IBM • Used to be more consumer focussed when it owned PC / desktop business • Sold this to Chinese firm Lenovo • Hard disk drives business sold to Japanese firm Hitachi • Selling to VARs, much of the marketing spend is on trade promotions • Now their focus is on those 90%+ of firms which are SME’s, offering “business solutions” • Volvo Group • Often considered as purely a car maker, focussing on automotive consumers • But with Marine,Truck and Industrial vehicle/engine SBU’s, their major income is from selling to other businesses • Hence they have to consider both the derived demand of their intermediaries, and the consumer demand which affects all of the partners involved from supply, to production, to consumption IBM solutions Marketing Practice S2 2008

  11. The Concept of Value in B2B Customers will choose between alternative offerings and select the one they perceive will offer them the best value Customers are not interested in products and features, they want their needs met and satisfied It is more profitable to a long term relationship between a company at its customers than to have a series of one-off transactions [and with suppliers = “partnering”] Doyle, (2000), cited in Fill, (2005)

  12. B2B Partnership Success Factors Commitment, Coordination, Trust and Interdependence Attributes of Partnership Communication Behaviour Conflict Resolution Techniques Quality, Information Sharing and Participation Joint Problem Solving, Persuasion, Smoothing, Domination, Harsh Words and Arbitration Mohr and Spekman (1996), cited in Fill (2000)

  13. Consumers often: Purchase goods and services alone, which meet individual or family needs Buy on impulse or switch supplier with minimal processes Experience minor irritation if supply fails Accept the stated price Businessesoften: Purchase goods and services, as part of a team, to meet specific business needs Use formalised, lengthy purchasing policies and processes Find switching supplier difficult Experience major problems if supply fails Negotiate on price Summary of Differences

  14. SME business examples • One-off restaurants • Legal services firms • Independent Financial Advisors • Tradespeople: Plumbers, Electricians, Carpenters, Mechanics “the most contented people I know, they are their own boss, they decide when they want to take a job on, they earn highly per hour, and take holidays when it suits them…” • Specialised/niche product manufacturers • E.g. small applications software Marketing Practice S2 2008

  15. SME Characteristics SME’s do not often have the same levels of: • Resources - in terms of cash flow, investment finding, equipment, technical equipment, premises, time etc. • Numbers of staff (1-250), Skill sets / competencies • Numbers of customers and recruit these via ad hoc networks • Market share or brand awareness (regional only) • Influence over their micro or macro environments as compared to larger MNE’s As a consequence, their employees often: • Are generalists in terms of company operations, but specialists in their market knowledge, benefit from reduced bureaucracy • Are owner-manager opportunistic “entrepreneurs” whose actions are not always conformist! (e.g. Richard Branson, Anita Roddick) Marketing Practice S2 2008

  16. SME Marketing in practice SME’s operate through: • Relationship building, in much the same way as larger B2B organisations, but increased likelihood of face-to-face, personalised meetings and communication • Treating all stakeholders as “partners” • Generating business via “networking” • Taking a reactive stance: formalised planning is secondary as it takes focus and time away from current activity “…decision making occurs in a haphazard and apparently chaotic way, according to personal and business priorities at any given point in time (Scase and Goffee, 1980) Gilmore, Carson and Grant (2001) Marketing Practice S2 2008

  17. Marketing Planning for Small Businesses (SME) BUT, SME Marketing authors/researchers consistently state the need for effective marketing analysis and research: Chaston, (2000), Hunt & Morgan, (1996) and Mintzberg and Waters, (1982). Brassington & Pettitt, (2006)

  18. SME Marketing in practice “Where a manager depends mainly on social networks, decisions are likely to be based on incomplete information and will rely more on intuition. As the owner/manager gathers more business contacts and networking becomes more strategic, his decision making will become more rigorous… increased experiential knowledge [means] having made certain decisions before in the past, the manager will have learned from previous mistakes and will approach the task in a more structured way. Such a realisation allows for a speculation that networking can be harnessed into a proactive marketing infrastructure.” Gilmore, Carson and Grant (2001) Marketing Practice S2 2008

  19. SME Characteristics However there are advantages to being an SME: • Research evidence indicates staff are more loyal, have a harmonious workplace, “team” attitude and socialise more • Closeness to customers through small customer base and personalised, shorter lines of communication, which can lead to increased loyalty and decisions based on experience rather than purely on price • Increased speed and flexibility in dealing with customer need changes and environmental forces • Opportunity focussed – externally aware, decision making is quicker • Able to focus on smaller, profitable niches (e.g. Farmer’s markets) information through closer customer and competitive links • Informal, easy access to market as compared to larger MNE’s Carson, Cromie, McGowan & Hill (1995) Marketing Practice S2 2008

  20. Summary Youtube funny! • Reviewed: • Characteristics • Challenges • DMU’s of B2B and SME marketing • Useful to compare these to “standard” / consumer oriented and multinational marketing Marketing Practice S2 2008

  21. Further reading suggestions: Journals: • Gilmore, A., Carson, D., & Grant, K. (2001). SME marketing in practice. Marketing intelligence and planning. 19, (1), 6-11. Texts: • Carson, Cromie, McGowan & Hill (1995). Marketing and entrepreneurship in SMEs: an innovative approach. Harlow: Prentice Hall. • Chaston & Mangles (2002). Small business marketing management. Basingstoke:Palgrave. • Ford, Gadde, Hakansson & Snehota (2003). Managing Business Relationships. (2e). • Websites: • www.impgroup.org = IMO: Industrial Marketing and Purchasing • http://www.ibm.com/us/ = IBM Business Solutions dedicated pages

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