Although a common man might see consumer market much bigger than business-to-business market place. In fact, B2B is much more bigger than B2C markets. Whether we talk about commercial markets, trade industries, government organizations or institutions, all are involved in B2B transactions, either directly or indirectly.
Some firms focus entirely on business markets, while some sell both to consumer and business markets. Infosys, Satyam, TATA, IBM, WIPRO, Logitech, Epson, HP, Canon, LG, Samsung for example. Business-to-Business markets deal with business purchases of good & services to support or facilitate production of other goods & services, either to facilitate daily company operations or for resale.
According to Reeder et al (1991), all marketing strategies must begin with a thorough understanding of Organisation Buying Behaviour as this entails a different knowledge about the buying situation, process and criteria to apply when making purchasing decisions. Also, the understanding of Organisational Buying Behaviour is fundamental for the supplier of an
avalikud riigihanked firm in order to perceive how to satisfy customer demand in an optimal way.(Baptista, Forsberg, 1997).
Further, Haas (1995) stated that organisational buying is not simply the action someone takes. It is actually the outcome of interactions between purchasing professionals. And those who are involved in the process may in one way or another influence what is being purchased and supplied. The evolution of technology has changed the traditional way of business purchases. New tools have opened a new era and new opportunities in every part of market. The arrival of internet as a multifaceted tool continues to change the performance of the organisations.(Smith, Berry & Pulford, 1998)
Organizational buying differs largely from consumer buying. One of the salient features of organizational buying is that it is basically a rational buying process. i.e it is based purely on Utilitarian concept. There is nothing called hedonic buying. By, principle, organizational buyers do not bring emotions in their buying process and as such emotional appeals do not make any impact on their buying process.
Moreover, there are some other distinctions, which can be stated as:
Like a manufacturer buys raw material, machinery, etc. to create company's product while a wholesaler or reseller buys products to resell. Similarly, institutional purchasers such as government agencies and non-profit organizations buy things to meet needs of their constituents.
As far as business market is concerned, it is completely rational by nature and there is no scope for impulse buying. This all is due to environmental, organizational, interpersonal & buying centre factors, which influence B2B markets. Moreover, budget, cost, profit considerations all play parts in business buying decisions. Also, business buying process typically involves complex interactions among many people.
Now, B2B markets are diverse, transactions ranging from order as small as box of paper clips to deals as large as parts for an automobile manufacturer.
For sake of simplicity business markets categories can be defined as:
Commercial market: It is one of the largest segment of business market. It includes all individuals/ firms that acquire goods & services, either directly or indirectly.
When Air India buys aircraft, when IBM purchases software to produce new software or hardware products and when purchase manages orders light bulb for a factory. These all transactions take place in commercial markets.
Trade industry: It includes retailers and wholesalers that purchase goods for resale to others. We can also term them as resellers. These markets include software, hardware, clothing, appliances, sports equipment, automobile, etc. products.
Government organizations/ Public Sector Units: It includes domestic units of government- central and state, as well as foreign governments. This is also one of the most important segment which purchases wide variety of products, ranging from highways development to social services.
Institutions: Both public and private, are the fourth component of business markets. This category includes wide range of organizations like hospital, temple, church, college, school, university, museum, not-for-profit organization, etc.
Some business follow standardized purchasing & selling procedures, while others may employ less formal buying practices. B2B marketers often have to set up separate divisions to sell to institutional buyers.
B2B markets include a variety of customers optimal strategy can be made by applying market segmentation concepts to groups of business customers. The overall process of segmenting divides markets based on different criteria, usually organizational characteristics and products applications.
Based upon demographic, firms or business can be grouped by size (either sales revenue or number of employees). Even different strategies can be developed for Big and Small corporations with complex purchasing procedures and another strategy for small firms where decisions are made by one or two people. Now-a-days, small and medium businesses have caught the eye of business-to-business marketers. This fast growing segment offers tremendous potential according to business analysts like Microsoft, SAP, nucleus, etc.
B2B organizations can group customers based on broad categories like manufacturer, service provider, government agency, not for profit organization, retail and much more, which can further be subdivided as per the need.
In fact, customer based segmentation is a related approach which is often used in B2B markets. Moreover, organizational buyers tend to detail much more precise product specifications than ultimate consumers do. This all is required to meet specific buyer requirements, creating a form of market segmentation.
This approach focuses on a precise way in which a business purchases will use a product. For e.g. a mineral manufacturer may serve markets ranging from paints to cosmetics to inks to paper to government departments. Each end use of the product may dictate unique specifications for performance, quality and price. This can prove a good approach for small and medium enterprises, so as to concentrate on specific end use market segments.
Purchasing procedures for Big organizations in fact structure their purchasing functions in specific ways. Some organizations have centralized purchasing departments while others have decentralized purchasing. Similarly, purchasing may be done by 2-3 persons in a small or medium enterprise while a big organization may involve more number of persons for taking purchasing decisions. A supplier may deal with one purchasing agent or several decision makers at various levels. All of these structures result in different buying behaviour. When buying situation is one of the criteria, one has to consider whether customer has made previous purchases or if this is clients first order. Like Birla soft might use a different marketing approach to sell to its existing customer than to a potential new customer who is unfamiliar with its offerings.
Today's internet era has become a useful tool for businesses. Internet provides products and its information to potential buyers and gives marketers an opportunity to make available virtual catalogues, forms, product information, etc. Samli, Wills and Herbig (1997), stated that, in future the WWW is expected to offer a much broader range of benefits to both suppliers and customers, due to improved international communication generated by the Internet.
Unlike the traditional media, internet is characterised by interaction and it facilitates tow way communication as well. Though this interaction is not physically face to face, but diminishes the boundation of time or any geographic location. This means that people can, without any face to face contacts still be able to meet each other and manage their regular work such as communication, businesses and even negotiations.
Haas (1995), says that the way organisations purchase products is one of the most important questions to the business marketing managers of today. The buying of goods and services by organisations is complex and difficult to analyse. Over the years, many models have been developed in attempt to explain Organisational Buying Behaviour. Without the understanding of this, the marketing strategies and the tactical programs cannot be optimally developed. Moreover, Haas (1995) describes that it is the business marketing managers who are the one that are involved in this complex process with the following tasks:
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