Consumer and Business to Business Marketing - Coursework Example

Consumer and Business to Business Marketing Introduction In the past, many introductory marketing courses and texts depicted that marketing is marketing regardless of the marketplace or product. However, with time a considerable number of marketing researchers and theorists have disputed these claims and suggested that the nature of marketing varies depending on particular characteristics and structures of a market (Simkin 2000; Reed, Story & Saker 2004). Basically, marketing is a broad concept that entails the use of varying approaches and techniques. Some of the well-known categories or aspects of marketing include consumer marketing and business to business marketing. Consumer marketing can be described as a marketing strategy aimed at selling products or services to a large group of individuals through the use of retailers or other mass media avenues. On the other hand, business to business marketing is a marketing strategy that mainly focuses on selling products or services to businesses, companies, institutions or organisations (Barschel 2007; Lamb, Hair & McDaniel 2011). Evidently, there are major differences between consumer and business to business marketing. This paper seeks to critically evaluate the major differences between consumer and business to business marketing. It will also examine the implications of these differences for marketing strategy in organisations that undertake business to business marketing. Foremost, this paper will examine in-depth the difference between consumer markets and business to business markets. It will subsequently evaluate the differences between consumer and business to business marketing. Lastly, it will examine the implications of these differences for marketing strategy in organisations that undertake business to business marketing. Differences between Consumer Marketing and Business-to-Business Marketing The difference or the distinction between consumer marketing and business to business marketing stems from the differences between consumer markets and business markets. Consumer markets and business markets have different characteristics which significantly impact on the nature of consumer and business to business marketing and have various implications for marketing strategies (Simkin 2000). Basically, Consumer marketing revolves around a large number of individual consumers. The key pillars of this marketing approach include brand development and mass communication (Reed, Story& Saker 2004). According to Shaw (2011, p.4) consumer marketing targets individual consumers or groups of consumers. Using this approach, the process of identifying customers for a particular product is usually straightforward. In this case, demographic factors, consumer needs and preferences are put into account when targeting customers. On the other hand, business to business marketing targets companies, is more intricate and focuses on brand loyalty. Contrasts between Consumer Markets and Business to Business Markets There are various characteristics which differentiate consumer markets from business markets. Principally, consumer markets are larger and more geographically diverse than business markets. This also implies that distributions in consumer markets is more indirect due to the geographical spread while in business markets it is more personal and direct (Kotler et al 2006; Hutt and Speh 2012). In addition while the customer in consumer markets, the target is an individual or a household, the target audience in business markets is businesses which naturally tend to be significantly fewer than individual customers. Consequently, consumers tend to demand and purchase products in significantly smaller volumes or quantities as compared to business markets where purchases are often made in bulk (Kotler et al 2001). While one customer may purchase one computer at a time, a computer manufacturer may have to purchase tones of tin, rubber and plastic to make the same products. The nature of demand is also different in consumer and business to business markets. Consumer demand for products is direct as the customers themselves are the final consumers of the products while in business markets, demand is derived since the products purchased will eventually be used to produce other products and is thus indirectly dependent on consumer demand (Lamb et al 2011). For example, while demand for vehicles or computers depends on consumer tastes and preferences, demand for machinery for a vehicle assembly plant is dependent on demand for vehicles. Demand for consumer products is also price elastic as changes in price will significantly impact on the quantity demanded. On the other hand, demand in business markets is price inelastic as changes in the prices of business commodities such as airplanes, steel or raw materials such as industrial chemicals is unlikely to significantly affect demand for them (Lamb et al 2011). This is also due to the fact that the price of a product which is used to make the final consumer product is a minor portion of the product’s final price and won’t significantly affect demand. For example, if the price of headlamps or tires for a luxury car increases, it wouldn’t have much impact on the final demand for the car. However, demand in business markets is less stable than that of consumer markets (Lamb et al 2011). For example, if the demand for housing declines in one year and suddenly rises above previous levels in the next year, cement manufacturers will be forced to radically alter their demand for limestone. Another contrast between consumer and business markets is with regard to the nature of the purchase and the purchase decision. In consumer markets, it is the individual consumer who makes the purchase decision on their behalf or on behalf of a household (Ferrell and Hartline 2010). The consumer decision making process flows from need recognition to information search, evaluation of alternatives, actual purchase and to post purchase evaluation. The consumer is influenced by personal, psychological and social influences (Chang and Simkin 1997: Simkin 2000). For example, in purchasing a vehicle, the consumer mainly considers its appropriateness to his social class, his tastes and preferences and is influenced by personality traits or family. A consumer in this market may also be susceptible to impulse buying. In contrast, purchase decisions in business markets are much more complex, involving consideration of a significantly larger number of factors and actors. The decision making model flows from problem recognition to identification of product specifications that could solve the problem, a search for products and suppliers, evaluation of products and vendors with respect to specifications, selection and order of products and supplies and evaluation of product and vendor performance. Such purchases are technical, involve multiple parties and are constrained by multiple factors such as business purchasing policies, legal and regulatory considerations, organizational objectives and even the education level of the negotiators (Simkin 2000). Purchasing a fleet of jets by an airline, for instance, is a more complicated process than purchasing a home or a car. The procurement manager must first ask for brochures and commence a lengthy consultation before any purchase. In addition, there is very little chance of an impulse buy in a business market. Other differences include the possibility of reciprocity. In consumer markets, there is very low reciprocity between the customer and the vendor. However, purchasers in business markets often have a policy of transacting with each other and becoming each other’s customers (Lamb et al 2011). For example, it is a perfectly reasonable business practice for a logging company to purchase its furniture from a firm it supplies timber to or for a computer chip manufacturer to buy its computers from the computer manufacturer it supplies. Contrasting Consumer Marketing and Business to Business Marketing The key differences between consumer marketing and business to business marketing are based on the contrasts between consumer markets and business to business markets discussed. These key differences arise out of the different market structure and demand and nature of purchase and purchase decision making (Kotler et al 2001). The Marketing Mix Consumer marketing and business marketing can be contrasted on Jerome McCarthy’s “4P’s” of the marketing mix - product, promotion, price and place/channel (Dibb 1997). With regards to the product, consumer marketing is different from business to business marketing in the supply channel in the sense that the product has to be packaged and branded in a way that appeals the customer once it has left the point of production. There is a strong emphasis on branding to create customer loyalty and a lot of attention is paid to consumer branding. On the other hand, in business to business marketing, the product must be of high quality and does not necessarily need to be packaged until the purchase decision is made (Chang and Simkin 1997). For example, in consumer marketing, cereal on a supermarket shelf must appeal to the customer in the same way a new car at a showroom does. But in business to business marketing, the steel supplied to a tools manufacturer or aircraft being purchased by an airline should meet the specifications of the buyer and can be packaged to meet their preferences on order. Business to business marketing also includes a higher level of customer service in terms of technical pre-sales advice, ongoing customer support and aftermarket operations such as maintenance of aircraft, machinery in plants or software upgrades for a computerized assembly plant (Simkin 2000: Kotler et al 2006). Consumer marketing and business to business marketing is also different with regards to pricing strategy. In consumer marketing, the price is taken for granted- the customer can chose to buy or not to buy based on their emotions or preferences. Therefore, it is easier to set prices in consumer marketing as compared to business to business marketing where the customer (business) has to be convinced and often needs to buy the product (Kotler et al 2006). While a customer may chose not to buy a TV set, a cereal manufacturer cannot decide not to buy wheat. However, it is rare for businesses to adhere to a listed price (Hutt and Speh 2012: Simkin 2000). Since the purchase decision making process involves evaluating products and vendors, price negotiation is a very important part of selling in a business market. With regards to promotion, the products in consumer markets should be advertised differently from those in business to business markets. As earlier indicated, consumer markets and business to business markets have different structures, demand and nature of purchase. Therefore, in consumer marketing, advertisements and promotions should be indirect or generic, making use of channels such as wholesalers and retail outlets. Consumer marketing promotions should also take into account the large customer base and be emotive to appeal to individual consumers. The advertising material itself is not too detailed or technical. On the other hand, since business markets are smaller as compared to customer markets, promotion is more direct, more formal, less emotive and more technical (Hutt and Speh 2012). Products are marketed directly to prospective businesses and since business purchasers undergo a more complex decision making process as compared to customers in consumer markets, advertisements should provide as much information as possible as input to satisfy the informational needs of the buyer. The buyer in a business market needs to process a lot of written information before making a decision and often requires detailed material. While consumer marketing uses a large portion of the promotion budget on advertising, business to business marketing emphasizes on promotional activities such as trade shows and fairs which are less emotive and more technical in nature (Kotler et al 2006). Direct marketing is intended to address the many actors a marketer may encounter before affecting a purchase. For example, promoting a car or a computer in consumer markets can best be done through heavy TV advertising while promoting a new range of cash registers, aircraft or steel furnaces is best done through trade fairs and using direct marketing materials such as trade journals, yellow pages, brochures and direct mail or letters to prospective businesses (Hutt and Speh 2012). Business to business marketing also uses more direct and personal marketing channels than consumer marketing. As compared to consumer marketing, business to business marketers use shorter channels such as dealer networks and direct marketing as opposed to supply channels such as wholesale and retail. The salesperson in business to business marketing emphasizes on personal sales rather than advertising to scout for prospective buyers (Pride and Ferrell 2012). For example, aircraft manufacturers or suppliers of raw materials often market their products directly to their prospective customers as opposed to through retail outlets in consumer marketing. Market Segmentation Another key difference between business to business marketing and consumer marketing is how market segmentation is done. In consumer marketing, market segmentation is achieved through differentiation of products and branding focused on customer needs, attitudes and other segments. The nature of products in consumer marketing allows for such market segmentation. Customers are segmented through price, product features, demographic characteristics and other variables (Chang and Simkin 1997). A common example is in the automobile industry where there are specific lifestyle brands of cars ranging from sports cars, avant-garde and luxury to economical, eco-friendly stock models each with their own brand. Airlines offer flights on economy and business class while electronics manufacturers tailor their products such as music players, smart phones and laptop computers to appeal to a certain demographic (such as pink colored music players for teenage girls). On the other hand, business to business or industrial market segmentation is confided to standard coding and internal product groupings. For example, electronic tax register models are often referred to with alpha numeric codes such as are aircraft- F-150, Boeing 747, Gulfstream G-450. This difference is due to contrast in the nature of the product and the market. Marketing Research Another key difference between business to business marketing and consumer marketing is that while it is easier to conduct market research or on competitors in consumer marketing which often serves as input into the marketing mix, it is often difficult or impossible to do the same in business to business marketing (Chang and Simkin 1997). While consumer marketers can collect information on competitors and conduct market research on the strength of their brands, business to business marketers find it almost impossible to use similar in-depth qualitative techniques for market forecasts since other businesses tend to be wary of disclosing information that might be sensitive to them or simply don’t have the time. Supply Chain Additionally, other major differences between consumer marketing and business to business marketing is evident along supply chain. In the book, “Major Differences Along the supply chain between B2B and B2C marketing with regards to Fast Moving Consumer Goods (FMCG),” Mayer (2007) provides great insights on the difference between consumer and business to business marketing particularly in relation to supply chains of fast moving goods. According to Mayer, the most significant contrast between these marketing approaches is that when it comes to consumer marketing, the supply chain especially for fast moving goods is in most cases flexible, involuntary and unpremeditated. Conversely, when it comes to business to business marketing, the supply chain is more controlled and planned (Mayer 2007). Implications of these differences for marketing strategy in B2B Organisations Generally, the differences between consumer marketing and business to business marketing revolve around demand, the nature of the buying unit, market structure and the decision making processes involved (Kotler, Armstrong, Saunders & Wong 2001). Evidently, these differences draw several implications particularly in relation to the marketing strategy in business to business organisations. Organisations that focus on consumer markets, characterised by large numbers of individual consumers base their marketing strategy on brand development and mass communication in order to sell their products to large numbers of individual consumers. Conversely, since a considerable number of business to business organisations have large numbers of customers who have to be handled individually, their marketing strategy has to focus on long-term relationship development (Ford, Gadde, Hakansson & Snehota 2003). Developing customer loyalty is key in order for any business to business organisation to maintain its competitive edge in the market and enhance their profitability. Due to the nature of business to business markets, business to business organisations have to focus their marketing strategy on developing long-term business relationships through relationship marketing (Mattila, 2001; Price, Arnould & Tierney, 1995). With reference to the “commitment and trust theory” of relationship marketing, the strategy of business to business organisations should be geared towards developing true business relationships which are characterised by trust and commitment. Based on this theory, relational networks or business relationships between businesses and businesses, which are characterised by trust and commitment contributes to customer loyalty and minimises uncertainty. Thus due to the differences between consumer and business to business markets, the marketing strategy of business to business organisations should be more relationship centered (Morgan & Hunt 1994). As a result of the difference between consumer marketing and business to business marketing Fletcher & Hart (1990) also notes that business to business organisations tend not to employ marketing directors or have executive positions that involve the role of marketing. Conversely, organisations that focus on consumer markets have executive positions that involve marketing roles. Fletcher and Hart suggest that B2B organisations have not efficiently embraced the concept of marketing since a lower level priority is given to marketing in the organisations’ power structure (Fletcher & Hart, 1990). Recommendations In order for business to business organisations to maintain their competitive edge in the market and enhance their profitability, their marketing strategy should; Be relationship centered. Given that business markets are smaller as compared to customer markets, promotion is more direct, more formal, less emotive and more technical (Hutt and Speh 2012). Business to business organisations should work towards building long-term relationship with their clients. Focus on conducting effective business networking through channels such as the internet so as to increase their market base since business markets are smaller as compared to customer markets. Incorporate flexible pricing strategies. This is mainly because, in business to business marketing purchase decision making process involves evaluating products and vendors, price negotiation is a very important part of selling in a business to business market. Conclusion Although several commentators have claimed that “marketing is marketing” (Simkin 2000), there are various distinguishing characteristics between consumer marketing and business to business marketing which in turn have implications for marketing practitioners in both markets. The key differences in consumer marketing and business to business marketing can be attributed to the differences in consumer and business markets. The two markets can be contrasted around the market structure which includes the type of products sold, the nature and number of the customers or their geographical spread, the nature of demand in each market, the nature of purchase decision making and the possibility of reciprocity. Consequently, marketing practitioners in both markets have to acknowledge these contrasts in their market practice. For example, promotion (advertising) in consumer marketing is indirect in nature, more emotive, less detailed, informal and less technical due to the large number of customers while in business to business marketing it is more personal, more direct, more detailed and less emotive owing to the comparatively smaller number of customers and their more complex decision making processes. The differences between the two markets also have significant implications for the marketing mix as the product, pricing, promotion and place (supply channels) will differ according to the market structure and demand in consumer and business markets. Bibliography Barschel, H., 2007, B2B Versus B2C Marketing: Major Differences Along the Supply Chain of Fast Moving Consumer Goods, GRIN Verlag, Munich. Chang, A. & Simkin, L. 1997, Understanding Competitor’s Strategies, Marketing Intelligence & Planning, Vol. 15, No. 3, pp 124-134. Dibb, S. 1997, Marketing: Concepts and Strategies, Houghton Mifflin, Boston, MA. Fletcher, K. & Hart, S.J. ,1990, “Marketing strategy and planning in the UK pharmaceutical industry: some preliminary findings”, European Journal of Marketing, Vol. 24, No. 2, pp. 55-68. Ferrell, O.C. & Hartline, M. 2010, Marketing Strategy, Cengage Learning, London. 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