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Is Business to Business Marketing Distinct from or, the Same as Consumer Marketing?

3125 words (13 pages) Essay in Marketing

08/02/20 Marketing Reference this

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Fern and Brown (1984) claimed that the distinction between industrial and consumer marketing lacked any clear foundation, while later Vargo and Lusch (2011) argued that business-business markets underpin the most recent developments in marketing theory overall.

In your opinion, and making reference to these standpoints and more recent research studies, is business- to-business marketing distinct from or, the same as consumer marketing?

Introduction

“Marketing includes those business activities in the flow of goods and services from production to consumption. Goods and services are of two types; consumer and industrial” (Cassel et al, 1954). Firstly, it is important to define the primary difference between Business to Business Marketing and Business to Consumer Marketing in which will underpin the arguments within this essay. Both markets are types of commercial transactions, however, simply put, business to consumer (B2C) “is the process of selling products directly to consumers” (Chron, 2019) and industrial/business to business (B2B) “is the process of selling products or services to other businesses” (Chron, 2019). However, the differences between both business systems are much more complex than their simple definitions, so are their similarities. Obviously, both B2B and B2C markets have one fundamental difference: the type of customer. However, this essay is going to investigate these markets further, discussing the similarities and differences between their market’s structure, marketing practices and buying behaviour within the industry. Within much of the literature surrounding this topic, academics have discussed the importance of identifying whether these market systems are similar or different and have argued their case. Fern and Brown (1984) argue that the industrial-consumer dichotomy that has been widely accepted is insufficiently founded and that the similarities between the two are greater than the differences between them. They also question whether “the importance of these differences is sufficient to justify this commonly accepted dichotomy” (Fern and Brown, 1984) as the similarities have proved useful developing marketing theory. Vargo and Lusch (2011) also challenge the dichotomy, arguing that the contributions of B2B marketing to general ‘mainstream’ marketing theory have been significant. Whereas many academics consider them to be very different entities, of which I will explore within this essay and evaluate the arguments surrounding them. However, in the interest of brevity, only a short number of many similarities and differences can be discussed, and this should be considered when weighing up the argument.

Market Structure

One key difference in the markets is the nature of demand. According to Fern and Brown (1984) and Brennan et al (2017), demand within consumer marketing is primary/direct and demand within business marketing is derived. Essentially, “consumers want certain goods to satisfy their needs. Businesses require goods in order to produce products that satisfy customer needs. Therefore, a business’s demand is derived from consumer demand” (Brennan et al, 2017). For example, within the fast-food industry, consumers demand fast-food products out of the primary need to consume food when they’re short of time. Whereas fast-food businesses demand ingredients such as chicken, potatoes and oil in order to manufacture these fast-food goods, a demand derived from the consumer’s demand for the final food product.

However, Fern and Brown (1984) argued that demand for consumer goods can also be derived and that demand for industrial goods can also be primary. For example, a consumer’s demand for baking ingredients can be derived from the demand to bake a cake, just as a business’s demand for basic goods such as lightbulbs can be seen as primary/direct. This displays that similarities and differences aren’t as clear cut as they might seem.

Another characteristic of demand which is different within the two markets is demand elasticity. Demand elasticity is “the responsiveness of the quantity demanded to a change in price” (Hutt and Speh, 2012). Businesses demand tends to be less price elastic because “businesses have less freedom to simply stop buying things than consumers” (Brennan et al, 2017). This is because businesses often require critical components and raw materials in order to continue manufacturing and remain competitive within the market. Whereas consumers have more freedom and if prices rise, they can simply stop purchasing or find an alternative; there is less need for consistency within consumer purchasing than there is for business purchasing as it causes little issue for the consumer to simply switch brand/product, whereas this is troublesome and complex process for a business to simply switch vendors. For example, if the prices rose at McDonald’s, the consumer could easily seek cheaper alternatives such as Burger King, KFC etc. Whereas, if the prices of potatoes rose, it would be incredibly difficult for McDonald’s to just change potato vendors who had the capacity to supply their whole chain to high quality. Therefore, McDonald’s would most likely have to accept the price rise in order to avoid the implications of switching vendors. However, again, this demand elasticity is derived from the consumer’s demand for fast-food.

Another key difference between industrial and consumer marketing is the size of the market. Cassel et al (1954) says that there are much fewer industrial buyers than consumer buyers due to the specialisation involved in industrial markets; “some specialised industrial markets may comprise less than a dozen potential customers” (Cassel et al, 1954). For example, in an industry such as software technology, products are so niche and specialised (and often tailored to the business customer) that there are very few buyers in the market. Whereas in a similar consumer example, if there was a particular software on the market, such as Microsoft Office or a virus software, this can be marketed to the masses as many people today own computers and therefore, there is a demand for such software, but not a demand for a specialised, tailored industrial software. This therefore, highlights the difference in target market and demand between industrial and consumer markets.

Marketing Practices

One key difference between B2B markets and B2C markets is the importance and length of relationships. In B2B markets, businesses often tend to seek longer relationships with their customers as they are seeking a “reliable partner who they can depend on for the foreseeable future” (Forbes, 2015). According to Hutt and Speh (2012), “developing and nurturing close, long-term relationships is an important goal for the business marketer” as it displays trust and demonstrated performance (Hutt and Speh, 2012). Whereas, Brennan et al (2017), argues that both business marketing and consumer marketing “could benefit from adopting a relationships and network perspective, particularly in relation to the management of their supply chain”. However, they also argue that B2B marketing organisations “certainly have the most to gain from the relationships and network perspective on strategy” (Brennan et al, 2017). Relationships are especially important for larger corporations that often because they require larger quantities of goods and need consistent quality.

For example, within the fast-food industry, a huge corporation such as McDonald’s requires a vast supply of food, as well as consistency throughout their entire chain of franchises. Therefore, it is very important for them to have a strong and long-lasting relationship with their supplier and be able to depend on them to deliver what is required and agreed. If McDonald’s had vendors constantly letting them down and were therefore, having to change suppliers regularly, they would not be able to uphold the consistent level of quality and service which has made them so successful.

Another reason why businesses like to have longer relationships with their suppliers is to keep costs down. If they are buying large quantities over large periods of time and have proved themselves to the business to be a reliable customer, then they are likely to benefit from reduced costs and economies of scale. In summary, there are many benefits to relationship management including customer loyalty and retention, this is especially important in B2B where there are only a small number of buyers and therefore, competition is high. Relationships are far less important in the majority of consumer purchases as consumers do not require dependability as much as their purchases are often one-off. However, B2B relationships can be similar to B2C relationships when regarding services as there is the requirement for face-to-face interaction and the reliance on the business to complete the service.

Another major difference in the marketing practices of B2B and B2C marketing is the type of marketing and the contents of the marketing mix. Within industrial marketing “the seller commonly goes to the buyer -the reverse situation in the consumer field, with the exception of door-to-door selling” (Cassel, 1954). B2B marketing therefore, usually heavily consists of identifying a specific target market in order to generate leads of potential customers and personal selling to them in attempt to close them, which may include the “negotiation of adjustments to the supplier’s products offer or the formulation of a bespoke offering to match the customer’s needs” (Brennan et al, 2017). This means that organisations are able to offer price segmentation where they can adapt the prices to the customer given the level of tailoring and modifying of the product to the customer’s needs as well as the quantity and level of service required. For example, if a potato supplier was to gain a contract with such a big customer such as McDonald’s, they would likely be able to offer them a cheaper price due to the mass quantity they required. Whereas if they were to supply an independent restaurant, they would have to charge a higher price per quantity. This is a basic principle of purchasing economies of scale, where there are “reduced costs for larger businesses in buying inputs, such as raw materials or parts…because of a larger discount given to a larger purchase than smaller businesses can make…allowing a lower cost per unit” (Business Dictionary, no date). This is obviously an advantage that businesses can benefit from, which consumers can’t to the same extent, given the vast quantities required. However, consumers are sometimes still able to benefit from ‘bulk buying’ and economies of scale in some cases, and products are sometimes open to negotiation, however, less prevalently than within B2B markets.

This contrasts to B2C where transactions are often quick and there is little to face-to-face interaction or personal relationship between the business and the consumer. They most likely do not require a longstanding relationship with the business as they are seeking a one-off or low quantity purchase, therefore, the price is often fixed. Businesses that advertise to consumers likely invest a lot on marketing campaigns to attract the consumer, but usually using impersonal methods. Therefore, “sales promotion expense (including advertising but excluding direct selling) in relation to the selling price is likely to be much lower in industrial selling than in consumer marketing” (Cassel, 1954). The consumer is more broadly targeted in most cases, and products are therefore, “mass-marketed”, however, are still often segmented and targeted similarly to B2B, just less directly and personally. For example, McDonald’s advertise on platforms such as television and radio, targeting the mass market. Although they still offer a wide product portfolio to meet the needs of different types of customers, for example, they make salads and healthier alternatives to fried food and have recently just created a range of vegetarian and vegan meals, appealing to different market segments. This again emphasises the contrast of target vs mass marketing within the two markets.

Buying Behaviour

The buying behaviour of B2B and B2C markets is another factor that’s different. Within B2C markets, “most sales are made on a one-time basis, with the hope for loyalty in the future…[therefore] B2C organisations spend more time [and money] on brand awareness, than customer retention programmes” (Harvey, 2018), therefore, “single unit or small volume purchases are characteristic in consumer marketing” (Cassel et al, 1954). Consumers priorities are usually speed and ease of purchase and simple product functionality. Consumers are more likely to take short amounts of time making purchasing decisions (except for larger, more expensive purchases as later discussed in this essay) and even impulse buy. Whereas, “industrial buying covers not only single unit purchases but also a prevalence of volume purchasing of raw materials and component parts and many include volume purchasing of supplies” (Cassel et al, 1954). B2B customers also seek more product customisation, specialisation and service therefore, they are likely to take more time and consideration over the purchase decision. This is likely due to the fact that the purchases will be more expensive, but also the fact that the product or service has to fit the requirements of more stakeholders, and therefore, the decision has to be deliberated between multiple people and justified to managers/accountants.  This means that B2B businesses may have fewer buyers than B2C, but buyers normally buy a larger quantity and spend more money.

However, many academics have noticed similarities in the buying behaviour of B2B and B2C markets. Sheth (1974) recognised similarities between the two when it came to family purchasing decisions and Zaltman and Wallendor (1970) expanded on this, considering the role of others in decision making and their expectations, noting the particular similarity of B2C purchasing decisions with B2B when it came to large and important purchases. David (1971), Kelly and Egan (1969) and Morgan (1961) stated that the particular relationship of husband and wife played a role on the way consumers make purchasing decisions, stating that this type of joint decision making was most similar to that of organisations.

When making a purchasing such as food, the decision-making process is likely to be short due to the likely speed/convivence/low cost of the purchase. However, when buying more important/more expensive goods that take more financial investment, families are more likely to take greater consideration when making the decision and discuss more thoroughly the costs and benefits between them and come to a mutual decision. This is similar to the way a team or department within an organisation might discuss different factors before making a purchasing decision. Many academics acknowledge this area of consumer decision-making is performed very similarly to that of an organisation as it considers the role of stakeholders in buying behaviour.

Conclusion

In conclusion, there appear to be more differences noted within the literature than similarities between B2B and B2C marketing. B2B marketing is more complex and specialised than B2C, which is broader as it generally targets a wider market. The type of customer, the type of good (Corey, 1976) and its ‘intended use’ “seems to be the most widely accepted criterion for differentiating industrial goods from consumer goods” (Fern and Brown, 1984). However, it is important to note that although both markets are independent and different in many ways, they are also closely linked and have many important similarities worth noting. Both markets have a common goal in basic marketing principles such as generating profit, growing market share and maximising efficiency and competitiveness. As Fern and Brown (1984) and Vargo and Lusch (2011) state, the similarities between the two markets are of more value than the differences because they favourably contribute to overall marketing theory, broadening and deepening our knowledge of all areas of marketing. It is also important to consider that although there appear to be more differences than similarities within the literature, most literature focuses on the differences and creating a dichotomy between the two markets. Therefore, further research is required on the similarities of B2B and B2C marketing, perhaps comparing both the similarities and differences and weighing them up could be beneficial to the development of the topic.

Bibliography:

  1. Blythe, J. and Zimmerman, A. (2013). ‘Business to Business Marketing Management: A global perspective’. London: Thomson.
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