Business and Consumer Markets: Procurement, CRM, and Segmentation
Business Market vs. Consumer Market
Both business and consumer markets aim to understand and satisfy consumer needs, benefiting from market orientation. Both are market-driven.
Marketing Functions
Manufacturing, Research & Development (R&D), Customer Service, Accounting, Logistics & Sales.
Marketing Values
Value is created by identifying ways for customers to create value. Offering value involves creating programs with services, ideas, and products that address problems.
Business Products
- Used to manufacture other products.
- Acquired for resale and distribution.
- Become parts within another product.
A product purchased for personal use is considered a consumer good.
Commercial Customers
- Users (industrial products and services used in manufacturing).
- Dealers and distributors.
- OEMs (Original Equipment Manufacturers).
Supply Chain Management
The internet plays a significant role by enabling joint planning. There’s a closer physical relationship between manufacturers, suppliers, intermediaries, and customers to enhance efficiency and effectiveness. Developing strong supplier relationships is as important as gaining customers.
E-Procurement
The process of purchasing over the internet.
Government Contracts
Two types:
- Fixed-price contracts: The price is agreed upon before the contract, and payment is made upon completion.
- Cost-reimbursement contracts: May be permitted. Cost-plus contracts allow for profit.
Government Procurement Strategies
- Formal Advertisement: Government solicits bids from suppliers.
- Negotiated Contract: Used for products or services not differentiated by price.
Organizational Buying Process
- Problem Recognition
- Description of Need
- Product Specifications
- Supplier Search
- Analysis of Proposals
- Selection
- Selection of Order Routine
- Performance Review
Buying Situations
- New task: A perceived problem or need that is entirely different from previous experiences.
- Direct re-buy: The need is recurring.
- Modified re-buy: Decision-makers feel there are benefits to reevaluating alternatives.
Identifying Powerful Buying Center Members
- Isolate the personal stakeholders.
- Follow the information flow.
- Identify the experts.
- Understand the purchaser’s role.
Decentralized purchasing allows local branches/departments to purchase what they need, offering flexibility. Disadvantages include no volume discounts, lack of specialization, potential corruption, compromised purchasing power, and reduced options for large organizations.
Centralized purchasing offers greater specialization, better coordination, better long-term supplies, and volume savings. Disadvantages include being unwieldy, slow, inflexible, bureaucratic, and unresponsive.
Customer Relationship Management (CRM)
CRM is a cross-functional process for achieving:
- Continuing dialogue with customers across all contact and access points.
- Personalized service to the most valuable customers.
- Increased customer retention.
- Continued marketing effectiveness.
Market Segmentation
Segmentation is central to strategic marketing. It involves dividing a diverse market into smaller submarkets with common features. The objective is to identify groups of potential customers with similar requirements.
Key Criteria for Segment Selection
- Measurability
- Accessibility
- Actionability
- Substantiality
- Differentiable
Customer value is the customer’s perception of what they want in a specific use situation, with the help of a product or service offering, to accomplish a desired purpose or goal.
Pricing Models
Traditional, Value-based pricing, Investments or life cycle pricing.