Using Organizational Buying Process, have B2B marketing strategies become more relationship oriented?

Business markets consist of individuals and organizations that buy goods for purposes of further production, resale, or redistribution. Business (including government and nonprofit organizations) are a market for raw and manufactured materials and parts, installations, accessory equipment, and supplies and services. The variables impact the business buyer are similar to those of the consumer buyer in some ways but very different in others. In general, the business buyer is generally much more technical, price-oriented, educated for the job, and risk adverse than the consumer.

In certain business markets purchase decisions hinge on the outcome of a bidding process between competitors offering similar products & services. In these cases the decision to buy is often whittled down to one concern — who has the lowest price. However, in many other ways business buying is much more complicated. For instance, the demand by businesses for products & services is affected by consumer purchases (called derived demand) & because so many organizations may have a part in creating consumer purchases, a small swing in consumer demand can create big changes in business purchasing. For business to business marketers the size of individual orders, along with a smaller number of buyers, makes person to person contact by sales representatives a more effective means of promotion.

The business market is much more geographically concentrated than the consumer market. Certain industries locate in particular areas to be close to consumers. Firms may choose to locate sales offices & distribution centers in these areas to provide more attentive service. In addition to geographical concentration, the business market features a limited number of buyers. Marketers can draw from a wealth of statistical information to estimate the sizes & characteristics of business markets. Many buyers in limited buyer markets are large organization.

A significant percentage of business buying, especially within larger organizations, requires the input of many. In marketing literature those associated with the purchase decision are known to be part of a Buying Center, which consists of individuals within an organization that perform one or more of the following roles:

1) Buyer - responsible for dealing with suppliers & placing orders (e.g. purchasing agent)

2) Decider - has the power to make the final purchase decision (e.g. CEO)

 

3) Influencer - has the ability to affect what is ordered such as setting order specifications (e.g. Engineers, researchers, product managers)

 

4) User — those who will actually use the product when it is received (e.g. Office staff)

 

5) Initiator — any buying center member who is first to determine that a need exists.

 

6) Gatekeeper — anyone who controls access to other buying center members (e.g. Administrative assistant)

For marketers confronting a Buying Center it is important to first identify who plays what role. Once identified the marketer must address the needs of each member, which may differ significantly. For instance, the Decider, who may be the company president wants to make sure the purchase will not negatively affect the company's bottom line while the Buyer wants to be assured the product will be delivered on time. Thus, the way each Buying Center member is approached and marketed to requires careful planning in order to address the unique needs of each member.

Industrial buyers make decisions that vary with the buying situation or buy class. Buy classes comprise three types:

1) Straight Re-Purchase - These purchase situations involve routine ordering. In most cases buyers simply reorder the same products or services that were previously purchased. In fact, many larger companies have programmed re-purchases into an automated ordering system that initiates electronic orders when inventory falls below a certain pre-determined level. For the supplier benefiting from the re-purchase this situation is ideal since the purchaser is not looking to evaluate other products. For competitors who are not getting the order it may require extensive marketing efforts to persuade the buyer to consider other product or service options.

2) Modified Re-Purchase — these purchases occur when products or services previously considered a straight re-purchase are for some reason now under a re-evaluation process. There are many reasons why a product is moved to the status of a modified re-purchase. Some of these reasons include: end of purchase contract period, change in who is involved in making the purchase, supplier is removed from an approved suppliers list, mandate from top level of organization to re-evaluate all purchasing, or strong marketing effort by competitors. In this circumstance the incumbent supplier faces the same challenges they may have faced when they initially convinced the buyer to make the purchase. For competitors the door is now open and they must work hard to make sure their message is heard by those in charge of the purchase decision.

3) New Task Purchase — as the name suggests, these purchases are ones the buyer has never or rarely made before. In some ways new task purchases can be considered as either minor or major depending on the total cost or overall importance of the purchase. In either case the buyer will spend considerably more time evaluating alternatives. For example, if faced with a major new task purchase, which often involves complex items, such as computer systems, buildings, robotic assembly lines, etc., the purchase cycle from first recognizing the need to placement of the order may be months or even years.

Businesses must understand the dynamics of the organizational purchase process. Suppliers who serve business to business markets must work with multiple buyers, especially when selling to larger customers. Suppliers must evaluate customer needs & develop proposals that meet technical requirements & specifications.

A primary goal of business to business relationships is to provide advantages that no other vendor can provide-for instance lower price, quicker delivery, better quality & reliability, customized products features or more favorable financing terms. Hence requiring superior communications among the organization personnel. Providing these advantages means expanding the company's external relationship which include suppliers, distributors & other organizational partners.

In conclusion, close co-operations whether through informal contacts such as the business dinner or under terms specified in contractual partnerships & strategic alliances enable companies to meet buyers' needs for quality products & customer service.

SWOT Analysis

SWOT analysis in strategic planning and the interactions among the key factors in the application of this analytical tool.

Marketing audit is a systematic examination of key factors such as market environment, strategy, organisation, marketing system, productivity and function. These key factors affect an organisation’s marketing activities at a specific time.

First is the market environment audit refers to the macro environment such as technology and the tasks of competitors.

Second is the market strategy audit examines whether the strategy is in line with the business mission.

Third is the market organisation audit, which refers to the structure and functional efficiency such as interface efficiency.

Fourth is the market system audit examines the planning and control.

Fifth is the market productivity audit refers to profitability analysis and cost effectiveness analysis. Lastly, the market function audit refers to the marketing mix elements.

SWOT analysis is part of marketing audit, which is a tool for auditing an organization and its environment. SWOT is used to assess an organisation’s strengths, weaknesses, opportunities, and threats.

The example to better illustrate SWOT is XYZ Company. XYZ Company is a tyre manufacturing company.

Strength refers to the competitive advantages or core competencies that gives the firm an advantage in meeting the needs of its target markets. Examples for XYZ Company’s strengths are patents, robust reputation, a wide range of products to cater to consumers needs and wants, shortening of lead time, good marketing integrated system and providing value-added services such as after sales services. XYZ Company exercised its strength by producing consistency in meeting the needs of the target markets.

Weakness refers to any limitation that a company faces in developing or implementing a marketing strategy. Examples of XYZ Company’s weakness are high cost structure and insufficient supply to meet the huge demand. In order to reduce these weakness, XYZ Company implements cost saving strategies to reduce high cost structure and offers alternatives to the huge demand.

Thus, strengths and weaknesses are internal factors, which influences an organisation’s ability to satisfy its target market and are controllable by the organisation. Both strengths and weakness should be examined from a customer perspective because they are only meaningful only when they help or hinder the firm in meeting customer.

Opportunities refer to favourable conditions in the environment that could produce rewards for the organisation if acted upon properly. Examples of XYZ Company’s opportunities are arrival of new tyre moulding technologies and free trade agreements. In order exploit such opportunities, XYZ Company utilises new technology to achieve economies of scale and scope. XYZ Company devised business expansion plans to new regional markets by maximizing the usage of free trade agreements.

Threats refer to conditions or barriers that may prevent the firm from reaching its objectives. Example of XYZ Company’s threat is the escalating cost of raw materials. In order to minimise this threat, XYZ Company is signing long-term exclusive contracts with rubber suppliers to get rubber on a more favourable term. 

Thus, opportunities and threats are external factors, which exists independently of the firm and represent issues to be considered by all organisations.

In essence, an organisation matches internal strengths to external opportunities; it creates competitive advantages in meeting the needs of it customers. An addition, organisation should also act to convert internal weakness into strengths and external threats into opportunities

Next, XYZ Company, which is a tyre manufacturing company, is used to illustrate the interactions among the key factors in the application of SWOT analysis.

First is the interaction between strength and opportunity. XYZ Company’s strength is a wide range of products to cater and XYZ Company opportunities are the arrival of new tyre moulding technologies and free trade agreements. With the utilisation of new technology, XYZ Company achieves economies of scale and scope by producing large quantities and better quality products to customers. Furthermore, XYZ Company can target not just the local market but also expand its businesses to new regional markets by maximizing the usage of free trade agreements. This is the key success factor for XYZ Company as the strength facilitates the organisation in its efforts to exploit opportunities.

Second is the interaction between strength and threats. XYZ Company’s threat is cut throat competition as competitors lower their price, the customers will be attracted to such offers and switch to their competitors, as these are savings. However, XYZ Company has strengths such as value added service, call centre, after sales services and a comprehensive marketing information system. Furthermore, It has a good track record of prompt delivery of goods. Customers will think twice as the switching cost is high.  Therefore, XYZ Company has demonstrated these strengths overcome the threats that encompasses.

Third is the interaction between weakness and opportunity. XYZ Company’s weakness is the insufficient supply to meet the huge demand. For example, Off-The-Road (OTR) tyres are relatively large tyres, which are facing shortages worldwide, but the demand is huge. Therefore, the opportunity for expansion to regional markets with high demand is comprised. The next weakness is that XYZ Company’s tyres do not have Euro 4 and Dot certification. Huge capital is involved in applying these certifications and it is a liability. In order to counter this weakness, XYZ Company get loans from financial institutions.

Fourth is the interaction between weakness and threat. In this instance, the fact is clear that weakness impair the organisation ability to cope with threats. The threat that XYZ Company faces is perfect competition. There is no barrier to entrance and exit to market. There will be potential entrants or competitors to compete away the profits. Moreover, the weakness that XYZ Company’s brand is still not robust to contend with established brands. In order counter, XYZ Company devise plans to build strong branding in their products through marketing mix. So, as to gain customer’s confidences, owning the product generic recognition and setting the bench mark of quality tyres.

In conclusion, through exploring the interactions between factors with the SWOT analysis, it identifies the key internal strengths and weakness matched with external factors to indicate the organisation’s ability abilities to respond to key factors in the business environment

 

 

Conduct a competitor and industry analysis. Explain how this would affect the implementation of your marketing strategy

 

A company is planning an important investment in a market and a competitor and industry analysis is requested. How this would affect the implementation of your marketing strategy?

It is imperative for a company to have a detailed knowledge of their competitors in order to position itself and distinguish it from its counterparts. As fierce competition erodes the competitive advantage, company must create more economic values than competitors to obtain or maintain a sustainable competitive advantage.  The company must have the capabilities to adapt in the fast-changing environment and react quickly, else it would not be able to keep up with the market and maintain the sustainable competitive advantage and profitability. This is particularly true when competitors have changed their market positioning strategies, marketing mix strategies or introduction of new products which directly affect or neutralise the company’s competitive advantage. Thus, company needs to perform competitor analysis to identify the threats, opportunities, or strategic uncertainties created by emerging or potential competitor moves, weaknesses or strengths, which will influence the product-market investment decision.

Competitor analysis is an important phase of external analysis and it starts with identifying current and potential competitors. There are 4 key issues to investigate.

First is to identify the competitors.

 

Second is to identify the most intense competitors and the less intense but still serious competitors.

Third is to identify the makers of substitute products.

Fourth is to classify competitors into strategic groups on the basis of their assets, competencies and strategies.

Fifth is identifying the potential competitive entrants.

After the competitors are identified, the focus shifts to attempting to understand them and their strategies. Marketers would then again need to investigate the following key issues on competitors:

 Mission Statement

By investigating competitors’ mission statements, marketers could study their main objectives and vision, which depicts long-term strategies. Marketers could then identify threats and opportunities from their strategies and make adjustments to its marketing strategies to counter or overwhelm competitor’s strategies.

Market Targeting

Through understanding of competitor’s market segmentation, marketers could identify which groups of the market the competitor attempts to target. It would then provide opportunities for marketer to explore and target a new market which competitors have not targeted.

Image and Market Positioning Strategy

Marketers need to understand how competitors position themselves in the market and the strength of their market positioning strategies on consumers. It could be analysed by using perceptual mapping, which attempts to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition. Competitors that are positioned closely together are close competitors and form a competitive grouping. Hence, marketers should consider the introduction of a new product in an area on the map that is free from competitors.

The level of entry and exit barriers

Marketers need to identify the level of entry and exit barriers to the market. If the level of barriers for entry and exit to the market are low, it means that lesser resources and capabilities are required to enter into the market. However, the company could face more competition and might dissipate market share and profitability.

Marketing Mix Strategy

Marketers need to identify what are the marketing mix strategies that are adopted by the competitors. Particularly, what are the products they are offering, how they promote their products, how they priced their products and what are the distribution channels used for the products, which ultimately influences the product-market decision makings.

Assessing Strengths and Weaknesses

Marketers need to identify competitors’ strengths and weaknesses. By analysing competitor strengths and weaknesses, company could identify opportunities and threats they should pay attention to, and develop marketing strategies to create more economic values.

Porter's 5 forces analysis is a framework for industry analysis and business strategy development, it helps to understand both the strength of the company competitive position, and the strength of a position the company is advancing to. Conventionally, the tool can be used to identify whether new products, services or businesses have the potential to be profitable.

The bargaining power of suppliers

It defines how easy it is for the suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one another to another. Thus, the fewer the supplier choices, the more the company need for suppliers’ help, the more powerful the suppliers are.

The bargaining power of buyers

It is driven by the number of buyers, the importance of each individual buyer to the company, the cost to them of switching from the company products and services to competitors. If the company is dealing with few, powerful buyers, the buyers would have higher bargaining power.

The intensity of competitive rivalry

It is driven by the number and capability of competitor. If the company has many competitors, and they offer equally attractive products and services, then the company would most likely have little power in the situation.

The threat of substitute products

It is affected by the ability of the customers to find a product that can be substituted with the company’s product. If substitution is easy and substitution is viable, then this would weaken the company’s power.

The threat of the entry of new competitors

Power is also affected by the ability of firms to enter the market. If it costs little in time or money to enter the market and compete effectively, if there are few economies of scale in place, or if there is little protection for company’s key technologies, then new competitors can quickly enter the market and weaken the position. If the company have strong and durable barriers to entry, then the company can preserve a favourable position and take fair advantage of it.

As the level of barriers to entry into the market is low, new competitors could replicate the key technologies and produce similar product design and functionality at a lower price. Just like in the case of hundreds over imitation brands of portable media players at a lower price in the market. A company needs to educate and convince the consumer in differentiating and demonstrate the desired benefits of its products respectively.

Conclusion

In conclusion, it is important for company to have detailed knowledge of competitor, so as to identify the opportunities and threats, which would influence the product-market investment decision. Marketer needs to evaluate its powers on whether it is worth the investment to enter into the market using the Porter’s five forces analysis. Ultimately, it is essential for the company to diversify and expand product lines, differentiating its products and increase brand loyalty in order to survive in portable media player industry.