Business to Business Marketing - Essay Example

? Business to Business Marketing Table of Content Answer1 3 A)Advantages and Disadvantages of trading block 3 Advantage 3 Disadvantage 4 B)Influence of trading bloc in B2B business 4 Answer2 5 A)Concept of added value in B2B market 5 B)Difference of B2B market and B2C market 7 C)Example of B2B and B2C market 9 Answer3 10 Difference of pricing strategy in B2B and B2C market 10 Supplier are the price makers in geographic market segmentation 12 Referencing 13 Answer1 A) Advantages and Disadvantages of trading block Advantage A trade block represents a group of countries who make an agreement among themselves that they will not trade with the countries except the member countries. It is an economic integration has some significant economic advantages. Some important advantages are the followings. Being a member of trading bloc, a country will get the benefit of elimination of transaction cost between the member countries. For example, UK based companies have been spending near about ?1.5 billion per year for trading foreign currencies i.e. buying and selling foreign currencies for operating business in the EU as is not in Euro zone or European Union (Frankel, Stein & Wei, 1997, p.4) In a trading bloc, there is single market single currency across the union like Euro in all the countries in EU which make sense for the trade in the same medium of transaction. Here decision for FDI or FII in the member countries has limited risk because of currency fluctuation risk is not there which a major criterion to invest in another country. Trade block is an effective inflation controller. In 1980 when a high inflation occurs in France and Italy, then some economists and politicians argued that EU can provide the best way for solution of high inflation and both the countries become the member of trade block and very recently after that inflation was effectively reduced the withdrawing reasonable amount of investment from the other member countries (Hussain & IMF, 1998. p.4). Disadvantage Apart from having some beneficial areas, trade block has some painful difficulties. Some disadvantages are the followings. If a country can produce or manufacture a good at a comparatively at a low cost as well as can sell at low price than the regional producer of a the neighbour country under trade block, then the retailer of that neighbour country cannot import that good from there at lower price so that it can sell in lower price in domestic market and can increase the demand. I believe a loss of sovereignty in the countries of EMU is there because of countries not having individual central bank run the domestic government of a country. So, government are elected by different people of different countries but the economy is same and this is a dispute of sovereignty across the countries. I think overestimation of trade benefit results likely a wrong picture of the trade union. Some economies argued that cost advantages and trade benefit are grossly overestimate which does not reflects the real picture and recent Euro crisis is the result of long term overestimation of these (OECD, 2000, P.6). B) Influence of trading bloc in B2B business Some important benefits always positively influence the businesses within the trade block like the countries in EMU don’t have pay the tariff for doing business among all the countries of the union. This reduces a huge operational cost and products and services get the price benefit. Apart from this a huge currency liberal market is there for any product and services the market can be beneficial by saving a huge amount of transactional cost. Similarly the disadvantages of trading block have footprints into the union market. The retailers are likely forced to get supply of goods by from the producer in comparatively high price within the union. This is because the producer in the trade block gets a monopoly advantage due to the bloc of import by the retailers from outside countries. Answer2 A) Concept of added value in B2B market A restructuring of features and benefits or enhancement added to a particular product or services is done by the company before the product or the service reaches to the customer. A change value addition to a business can increase the value and as well as the quality of the product or process. For example, it can either increase the price or the value of the product or the service package like one year free after sales service to a new personal commuter is a value added business. It is the development of a competitive advantage in a particular brand by a mixture of few key features like combining, bundling and packaging all the prospective features and benefits of a product or service which results a greater customer acceptance. But the customers are not apparent to this fact of change by the time of purchase. The key characteristic of business to business market is giving solution to one business by providing service or may be supplying product by another business to fulfil the profitability motive of both the business. An innovative or effective value addition happens in b2b business by the seller only (Kaplan & Sawhney, 2000, p.98). In economics, the gap or difference in the cost price and the sales price is termed as value added per unit i.e. profit is made the some kind of value addition by the company. The difference in trader and entrepreneur is the innovative and effective way of value addition. The value added business is implemented generally in b2b business. A trader only buy a product and sell it by rising price little more and makes profit, no value addition is there but a entrepreneur add value to a product by producing or manufacturing or make a service package by using of efficient labour and sufficient capital. The amount of added value in service package or product is the ultimate output in as business which brings the profit and more the value added, more is the brand value of the company. This is why the service industry always concentrates on the effective value addition in the services they offer to another business or to an individual (Gillin & Schwartzman, 2011, p.12). Figure 1: The Risk-Value Purchasing Decision Matrix in Business-to-business Marketing (Source: Harrison, Hague & Hague, 2008, p.2) In b2b business, added values to a particular service are the key highlighted feature and it is only the driving forces which increase the demand and the customer acceptance of the service for business purpose. This is because a business firm always try to reduce business risk by outsourcing some areas of the business operations like craw material supply from the professional suppliers, customer services from BPO, technological assistance from its, financial services from banks in the form of business banking services and many more. Risk in the b2b business depends on reputation and reliability of the seller (Harrison, Hague & Hague, 2008, p.1). B) Difference of B2B market and B2C market B2B and B2C markets are the two main part of a market and every market consist of these two and one is depended on other. A business or a firm is a customer of another business like supplier, transporter, etc and the firm manufacture a value added product by the help of the one or more business and lastly sell the products to an individual customer (Brennam, Canning, McDowell, 2010, p.19). So, a business can have both the b2b as well as b2c business like the production companies, manufacturer etc. In b2b market both the parties are business firms but in b2c business one is business firm and another is individual customer. A person or an individual buying a product for personal use verses a company buying product or services for its business use is the key difference. B2b market depends on only the relationship building for repeat purchasing unlike the consumer focused strategy like b2c marketing. Using customer focused in b2b business will cost the company and as well as the customers. Internet marketing shows the clear differences in b2b and b2c marketing and as well as the market and the consumer. Internet commerce business sells product like wearing, gadgets etc. primarily to the consumer and provide services like advertising, public relation, alliances etc. to other business as well (Meyar, 2007, p.2) Main characteristics of b2c business are product driven and customer focused. Companies always try to differentiate an existing product by adding or cutting some features of that product because in b2c market repeat purchase only happens by product differentiation otherwise customer will shift to different brand. The companies are customer focused because of huge competition in a market of similar categories of product and getting new customers is very tough and that is why firms concentrate on the customer relationship management. Here the target market is very large and providing satisfactory customer service is very tough. In b2c market single step process is provided and the sales cycle is very small so that quick liquidation stock happens and the firms can reinvest the money in new arrivals and for new product differentiation. Other important characteristics are like b2c business firms try to maximise the value of the transactions so that no of unit selling is increases. Brand identity increases through the no of repeat purchasing of the same product and thus the brand can get more penetration in to a large market by the word of mouth the existing clients. Point of purchase gets the more importance in b2c market as closing the deal is most important for each individual customer because very time of selling a product to a customer even in the repeat purchase a valuable amount of sales is needed by the seller. Buying behaviour of individuals depends on different customer psyche like living status, desire, price verses income level etc (Barsvhel, 2007, p.4). B2B market has some key characteristics which totally opposite from b2c market. This business is only relationship driven because the focused target market as well as the target customer is small and all these are organizational clients. Here business transactions are broadly called business deal which can be maintained by relationship with the clients. Multistep buying process increases the sells cycle. As this type business industry is generally service oriented, so the offered services has many categories like regular, standard, premium etc. Starting from regular service to standard to premium the price increase and the quality and efficiency and effectiveness of the services are far better than previous one. The brand value or brand identity is created on the basis of personal relationship with the clients. The seller provides training to the user of services for better acceptance of service and for renewal of deal. In this market, getting a new client is more tough than repeat servicing the existing clients which will maintain sustainable and continuous profit. The process of converting a prospective client or a new client to the value customer or premium customer is a long way process. Relationship building and communication is the two important way of using marketing activities so that required lead can be generated during the sales cycle. B2B companies generally do marketing campaign to aware about the key benefits of a product or services to the team of professional from different business. This is because a b2b purchase decision is not made by an individual’s decision in an organisation (Lilien, 2012, p.4). C) Example of B2B and B2C market Best example of b2b business is BPO service. Large companies concentrate only the core business practices. They outsource some areas of their business like customer relationship management, new client acquisition, customer service etc from BPO companies because these companies are expert on this business and have trained professional of the same work. Outsourcing is cheaper than making another different division in the business. Business growth will happen by concentrating on the core business which helps to increase3 the brand identity. Retail market is one the best example of b2c market because it has all the characteristics of b2c market. It is the daily market of individual buyers for their daily or fast moving goods. Here repeat purchase happens only of the good or reputed brands otherwise the seller need to create additional sales force to a buyer for a new product or new brands. Point of purchase is most important because the consumer only complete the buying process if he or she knows all the features and benefits of a product or these fulfil the customer’s requirements. Answer3 Difference of pricing strategy in B2B and B2C market Introduction The goal of pricing strategy is to build and maintain the sustainable growth of brand value or brand equity. Pricing a product is most important and first step of marketing mix, an analytical tool of marketing strategy. Pricing not only gives life to a new product but also segment and position the product into the market in different and desired way. Pricing in “Business to Consumer” Marketing There are two types of final price i.e. point of purchase price maker in b2c business; these are producer or manufacturer and retailer. B2C business is one straight-line business where the producer or the retailers stays at one end and at the other end consumer stays. So, here the business firm can be both or either producer or the retailer. In b2c business, the firm can always be in touch with its customer and can access their demands or requirement, post or pre purchase feedback etc. So that it can implement to satisfy the customers. Price of a product or a service is the most sensitive part of the marketing strategies and as well as the activities. Although the producer or the manufacturer is the initial price maker of a product or a service but the retailer has the authority to change the price for their own marketing strategy or profit making strategy. Sometimes in perfect competition market situation, the customers has the higher buyer power because of the availability of many supplier of same category of product and then the consumers get the opportunity of choosing one from many and as a result the negotiation power increases. Thus sometimes, the consumers can also become the price makers in critical market condition. Price of a product can vary in two types selling process in b2c business; these are direct selling and third party selling or channel sales. In direct selling, the producer can sell a product by door to door to selling by the sales executives and by company outlet selling. In company outlet selling generally the only producer is the price maker and no other changes of price happens by the consumers happens at point of purchase. Here the final price after the discount or offer is strictly fixed due to a quality and post purchase service is guaranteed by the producer itself. But in door to door selling the final consumers have the little negotiation power (Stiving, 2011, p.8). Pricing in “Business to Business” Marketing In b2b business refers to many types of business transactions. From the production house to the final consumer there are many stages where b2b business transaction happens like a business between manufacturer and wholesaler, or wholesaler and retailer. These all are the part of forward diversification of a business. The backward diversification of any business is totally b2b business like the supplier of raw materials, transportation, business banking etc. The main purpose of this type of business is to satisfy one business solution to by another business. There so many variables which influence the price of the product or the services offered by one business to another business. For the pre production b2b business i.e. the business between producers and the suppliers, price is determined by the negation among the two parties and the key variables which a supplier can charge the price for any product or services are delivery, reliability and reputation of the supplier. In the forward diversification of a producer or the manufacturer the initial price is determined by the producer itself and the wholesaler get the super lot price discounting to make his own profit and then the retailers get the product in extra price the wholesaler get from the producer. So, both the producer and the wholesaler already make profit when the product reaches to the retailer but main interesting part is that the b2b price of the product does not reach to the price which is written on the product. Finally the retailer sells the product to the final consumer or the user of the product on the written price or on a discounted price made by the retailer or the producer and get a per unit profit (Barschel, 2007, p.3). Supplier are the price makers in geographic market segmentation A supplier is able to charge different prices for products and services in different regions and countries. Here the supplier refers to different types of middle man of any business i.e. they can be the producer or can be the wholesaler and may be the distributors and the preproduction supplier can also be. The best example of supplier become price maker is the small or medium producer or the manufacturer who supply their product directly to the super markets and they do only b2b business. So if the producer of any particular product has different production houses in different location or regions in a country then even though the currency of the location are same then also he can sale the product in wholesale basis to the same retail out chain but in different price. This is because of though the supplier doesn’t make the price for the final consumer of the product but are aware of the demand of that particular product in that region of the retail outlets or the supermarkets. It is happens in another case like when a wholesaler is supplying a product of a particular brand to different retail outlets or small or medium departmental stores. Here also price factor depends on the demand of the product on that area but another important factor which influences the price is the transportation cost. This is differing from one region to another and the cost is included in the wholesale price of the product in which the retailer buys the product in lot size. In the pre-production business process i.e. in the backward business transaction the supplier of raw materials, transporters, the supplier of services for production or manufacturing process are also be the price makers. This generally happens because of monopoly market of a supplier or monopolistic competition among the supplier in a particular region for the supply of a particular type of product to many production houses in that area. In monopoly condition is only the price maker and no negotiation can be done by the producer or the buyer. In case of monopolistic competition, there are few supplier and many producer are there in a particular area and the products or the service has a huge demand in the production houses of that region, then all the suppliers make a cartel among themselves and make a fixed price for the product or service. They supply to the production houses of different locations in different prices according to the demand and the transportation cost (Newman, 1992, p.3). Referencing Barschel, H. (2007). B2B versus B2C Marketin. GRIN Verlag. Barschel, H. (2007). B2B versus B2C Marketing. GRIN Verlag. Blythe, J. & Zimmerman, A. (2005). Business-to-business marketing management: a global perspective. Cengage Learning EMEA. Brennan, R., Canning, L., Canning, E, L., & McDowell, R. (2010). Business-to-Business Marketing. SAGE Publications Ltd. Delener, N. (1999). 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