A comprehensive summary of the 500 page book Business Marketing by Robert Dwyer and John Tanner, including all most important models, theories, and figures.
Business Marketing
Organized into four parts:
Business markets & business marketing
(Orients on some of the unique phenomena and players in business markets)
Foundations for creating value
(Delves into the world of strategic scanning, planning, and spanning in a business context in order to
deliver superior value to customers)
Business marketing programming
(Covers the key areas of business marketing programming, from product development and channel
management to the integration of advertising, tradeshows, etc.)
Managing programs and customers
(Critical concepts for evaluating and controlling marketing efforts and retaining customers)
Chapter 1
Business Marketing is marketing products or services to other companies, government’s bodies, institutions, and
other organizations. Business marketing includes marketing to companies that buy products in order to make
other products or to facilitate their companies’ operations.
Different types of business markets:
Companies that consume (Original equipment manufactures)
Government agencies (State or province)
Institutions (Hospitals, schools, etc.)
Resellers (Wholesalers, brokers, etc.)
How it differs from consumer markets:
Many of the difference are due to the fact that consumers purchase for personal consumptions, and in most cases
individuals within organizations do not, but instead purchase to satisfy needs of the organizations.
How Business Marketing differs:
Varying buyer-seller relationships
(The strategic importance of many purchases is too great for companies to always shop around when
making a purchase; they need to make absolutely sure that the product fits their needs and that it will be
available when needed at the right costs.)
Shorter Distribution Channels
(Distribution Channels do not include anyone between the manufacturer and the customer who uses the
product, or user. Shorter channels contribute to the closer relationship between manufacturer and buyer.
Buyers can have more direct input into the product planning process.)
Emphasis on Personal Selling
(Complex buying procedures involving many members of the buying organization also require personal
selling. Only through personally getting to know each individual and coordinating the sales-purchase
process can a business be successful. A customer’s size and a direct channel also increase the
importance of negotiation.)
Greater Web Integration
(The Web becomes the backbone of a supplier/customer communication network that enables customers
to track shipment information, order products at prices and terms agreed to by the sales-person and
buyer, and access other account information that helps manage the supply process.)
Unique Promotional Strategies
(Each different department may have a separate set of needs and interests, which may influence how
marketers promote their products. Additionally, few business shopping malls exist, so trade shows or
expositions are created. These shows last for a few days and bring together buyers from all over the
world. As you can see, business marketers engage in many unique promotional activities that are
different from what you see as a consumer.)
,Types of Products:
Whether the product is part of the organization’s final product or facilitates the organization’s activities is the
primary difference in determining product type. Because the buying organization has its own customers with
their own demand for quality, doing a superior job of buying products that become part of the final product can
be a competitive advantage. Therefore, understanding the types of products bought and sold in business markets
is important:
Raw materials (such as iron, gold and silver)
Manufactured material (steel, a product that is further processed into manufactured material)
Component parts / OEM parts (are parts assembled into the final product without further
transformation.
Subassembly or assembly (in some instances, a company may purchase OEM parts and assemble these
to make a component for installation into the final product by another company. For example, purchase
plastic casing from Plastech and parts from Metric Devices and then assemble these into a tachometer
that is sold to GM. GM would then put the tachometer into its cars. GM may refer to the part as an
assembly).
Raw Materials Manufacture Subassembly Assembly Component Finished
d material parts product
Plastic Plastic casing + Tachometer Tachometer into Dashboard Car with
parts dashboard dashboard
Iron Steel - - Cutted steel Car frame
Other products:
Facilitating products (they facilitate the company’s achievements, such as hand tools, routers, etc.)
Office equipment (personal computers, desktop printers, would also fit in accessory equipment)
Capital equipment (refers to large equipment used in the production process that requires significant
financial investment, such as industrial robots)
The nature of demand
Demand for business products does not always operate in the same fashion as demand for consumer goods. In
part, the nature of demand in business markets is due to the types of products sold, varying for raw materials,
component parts, and so forth. Two concepts, derived demand and joint demand, are useful in understanding how
demand for business products can be determined.
Derived Demand
That is, demand for their products and services is derived from the demand for their customers’ products and
services (whose demand may also be derived). Ultimately, most demand is derived from consumer demand, the
exception being demand derived from government purchases such as arms sales.
As we move further away from the consumer market, however, derived demand can cause wide swings in
demand, called volatility. Demand elasticity is also affected by derived demand. Demand elasticity is the
percentage change in sales relative to the percentage change in price. In a consumer market, demand elasticity
means that as price goes up, consumers will look for alternatives or do without, and sales will go down. So for
products without substitutes, there is inelastic demand – it is not affected greatly by price.
Value is equivalent to profit for the buyer; it is the perception of how much the buyer benefited beyond what was
paid or invested in the product. Business buyers found that they break value down into three parts:
Value received from the product,
Value received from the services that the sellers offers,
Value received from the relationship with the seller.
Competitive advantage is something that provides incremental value when compared to other offerings. The
advantage can be gained through any of the three basic values of products, services, or relationship, either alone
or in combination.
,Chapter 2
Supply Chain Management is proactively planning and coordinating the flow of products, services, and
information among connected firms focusing on creating and delivering value to end users. In the last two
decades, the strategic role of supply management has taken on new significance at many companies. It has
precipitated two related thrusts in business: (1) a press for accountability and effectiveness in marketing efforts,
and (2) an invigorated quest for operational efficiency, the elimination of any waste. Often the profit impact from
purchasing and logistical efficiencies outweighs that from market penetration.
Relationship Management
Buyer interest in maintaining a high-performance relationship often has its counterpart on the supply side. That
is, the supplier may be attracted by the promise of recurring purchases due to their volume and relative certainty.
A map of motives to relate
The Realm of buyer-seller relationships is a useful summary of our discussion to this point. It depicts each
party’s range of motivations for forging and sustaining a trading relationship. The horizontal axis represents
the possibilities for a buyer. The buyer can be highly motivated to establish and maintain a relationship with a
sole source supplier or a small set of vendors. The Vertical Axis shows that a seller has a similar range of
stakes in a relationship. This surprises some readers. Doesn’t a selling firm want to do business or forge long-
running relationships with all comers? The answer is no. Some business marketers choose not to sell to
government agencies because the paperwork is too thick and the margins too thin.
Spotting transactional exchange
What are essentially transactional relationships or spot exchanges, money traded for easily measured
commodities, include General Mills buying various wheat and other grains on commodities markets.
Communication content is quite narrow between transacting parties, and their identity is hardly relevant. Trading
terms are simple and clear. Performance is practically intermediate.
, Unequal interest in relating
Typically dubbed CRM systems, these suites of software assist marketer efforts to: (1) collect and store
accessible data on each account – the name and position of key personnel, purchase history, delivery
specifications, sales calls, trade show interactions, e-mails, and other contacts, (2) evaluate customer, program,
and product performance, and (3) support the development of customized services, communications, and more in
order to maximize the long-run profitability of each account.
A strategic partnership results when both parties have keen interest on the significance of the resources and
long-run consequences of the efforts. Thus, a three-year contract for a single supplier of lubricants to provide for
all factory needs is apt to be regarded as less strategic than a joint R&D effort on new pollution controls. Many
of the strategic partnerships that characterize business markets have been sparked by the “quality revoluations”,
a management process of renewed dedication to customer satisfaction and efficiency.
A JIT relationship requires the supplier to produce and deliver to the OEM precisely the necessary quantities at
the necessary time, with the objective that products produced by the supplier conform to performance
specification every time.
A MODEL OF RELATIONSHIP DEVELOPMENT
This model develops the marriage metaphor using business examples to illustrate concepts and implications from
research on interpersonal relationships. The model shows buyer and seller in four stages of relationship
development. The model is called: The Relationship Development Process.
Awareness
In the awareness stage, buyer and seller independently consider the other as an exchange partner. Supplier
advertisements and trade shows exhibits might be noticed by the prospective buyer. At the same time, the
supplier may collect information about the product specifications, buying process, and the like at the prospective
customers. This stage may last indefinitely, or the parties may move to the next stage of the process by engaging
each other in some form of interaction.
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