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To understand B2B marketing one should identify the value chain that starts with a consumer demand and from which dozens of business products or services are required. For example of the Computer we use. They do not arrive in the shops by accident. There is a value chain of enormous complexity that begins with raw materials for hardware, then building hardware, then assembling from the scratch. Businesses sell hardware to the computer production companies. They buy them with the ultimate aim of adding value in order that they can move the products down the chain until they finally reach us, the general public. Strauss and Frost (2001) support the above statement and suggested that, sales, public relations, direct marketing, and advertising are marketing communication that comprises the crucial components of e-marketing strategy. In the B2B services context different types of costs can easily be identified. For example, in the insurance industry, speed to settle a claim may differentiate one firm from others, while incurring added cost to deliver that uniqueness. In software, differentiation may be achieved (at increased cost) by designing a product that functions identically across different operating systems. Insurance production costs include developing efficient underwriting processes, while in software these costs would be initial code development costs (Jones and Butler, 1988). The "both" business unit invests such that higher transaction costs are offset by higher revenues from products that customers are willing to pay a premium for, while higher production investments are offset by higher margins due to scale economies. An example of this enormous chain could be found in figure 1.1 below.
The development of the internet and the world wide web (www) as a tool for the global sharing of information has opened up new opportunities in marketing practices. "The rapid growth of internet users has made the internet an increasingly important and attractive platform for business transactions" (Liang et al., 2004, p. 538). The e-marketing refers to the use of electronic methods or media to build upon and maintain customer relationship through electronic platforms (e.g. business-to-business (B2B) e-marketplaces) that facilitates the exchange of ideas, products, and services to satisfy both buyers and sellers (Ngai, 2003). Sales, public relations, direct marketing, and advertising are marketing communication that comprises the crucial components of e-marketing strategy (Strauss and Frost 2001).
The following figure shows the usage of internet in Europe which is a crucial factor for B2B marketing (Internet World Stats, 2010).
B2B e-marketplace, as one of the major trading platforms brought by the internet technology has made a significant contribution to the e-marketers. The larger organisations in UK are taking advantages from the vast array of suppliers/buyers via the B2B e-marketplace (Stockdale and Standing, 2004). However, small and medium sized enterprises (SMEs) are also eager to compete in the electronic environment remain concerns as how their businesses can gain benefits from B2B e-marketplace. According to Eid et al. (2006), the e-marketing has been considered an important propriety asset to compete in the global marketplace. The need for marketing for gaining a competitive edge in global markets is the main reasons for marketers to participate in e-marketing. Despite the potential of e-marketing, it would be beneficial to review the benefits and challenges to the marketers.
Example of UK e-commerce values on 2010:
E-Commerce - UK - February 2010 - Retailer Competitor Analysis
Figure 13: Retail websites visited by UK residents, Jan 2010
Unique visitors, Jan 2010
Growth on Jan 2009
Home Retail Group (Argos)
Apple.com worldwide sites
Shop Direct Group
The Carphone Warehouse Group
Dixons Stores Group
John Lewis Partnership
Marks & Spencer
Orange e-shop and internet
Online food retailers market positioning, Nov 2009-Jan 2010
B2B environment, UK e-marketing strategy: SWOT analysis
Better relationship with customers
Improve in sales
Reduced marketing costs
Exposure to new market segments
More customer feedback
Make a global presence
Problems in implementation
Lack of expertise
Lack of expertise
Lack of senior management support
More UK B2B companies are expanding their operations internationally since international activities are fundamental to their performance (Katsikeas, 2006). Moreover, B2B companies tend to start internationalizing at early stages in their development (Rialp et al., 2005; Knight et al., 2004). It can be seen new network-based approaches of internationalization and renewed efforts of international streamlining resulting in a subtle strategy mix of adaptation, aggregation and arbitrage (Ghemawat, 2007). Business-to-business international Internet marketing (B2B IIM) has emerged as one of the key drivers in sustaining an organisation's competitive advantage. However, market entry and communication via the Internet have affected the dynamics and traditional process in B2B commerce. The differences between consumer and B2B marketing are well documented (Simkin, 2000). Traditionally, the contrasts revolve around:
market structure and demand;
the nature of the buying unit; and
the types of decisions and the decision process involved (Kotler et al., 2001).
Recently, the internet is a key facilitator for supply chain management, negotiations, virtual communities, virtual market places, servicing contracts, marketing, and so forth. Although entry in the global market is made substantially easier with current technology available to B2B companies, e-internationalization is till challenging because companies may lose their intellectual property on the web and B2B relationships are more difficult to manage in the electronic highway (Samiee, 2008). An example of B2BIIM can be found from following figure.
For example e-CRM(internet based Customer Relationship Management). Northern Ireland (NI) has the largest relative SME(Small and Medium Sized Enterprises) base in the UK, where in the private sector, it accounts for approximately 80 per cent of employment and 75 per cent of turnover (BERR, 2005). The Republic of Ireland (ROI) presents similar statistics where over 185,000 of Ireland's 190,000 companies (i.e. 98 per cent) employ less than 50 people (SFA, 2005). The SME sector is a significant employer, employing approximately 60 per cent of the workforce (SFA, 2005). Northern Ireland is also a peripheral economy, both in European Union (EU) and global market terms. Being located on this economic periphery, the motivation to utilise e-CRM, may be accentuated among SMEs (Ritchie and Brindley, 2005). ).
SMEs are different in their B2B environment compare to large organisations with particular characteristics. Their adoption of e-business tools and development of associated practices can be expected to follow patterns which differ from the models and theories put forward for large enterprises (Lawson-Body and O'Keefe, 2006; Xu et al., 2007). Most SMEs tend to be informal social entities with a short-term focus on profit in a B2B environment and the likelihood of engagement in conventional marketing is extremely unlikely (Zhang et al., 2008; Gilmore and Carson, 1999).
Larger organisations in UK practicing e-commerce, an example:
UK: Internet sales of home shopping companies, 2007-09
Mail order retailers:
Redcats (Empire etc)
The Wine Society
Abel & Cole
(a) Empire sold to Shop Direct, Jan 2008
SOURCE: Company Report and Accounts/Mintel
B2B markets typically have fewer behavioural or needs-based segments.
A price-focused segment, which has a transactional outlook to doing business and does not seek any 'extras'. Companies in this segment are often small, for example SMEs working to low margins and regard the product/service in question as of low strategic importance to their business.
A quality and brand-focused segment, which wants the best possible product and is prepared to pay for it. Companies in this segment often work to high margins, are medium-sized or large, and regard the product/service as of high strategic importance.
A service-focused segment, which has high requirements in terms of product quality and range, but also in terms of aftersales, delivery, etc. These companies tend to work in time-critical industries and can be small, medium or large. They are usually purchasing relatively high volumes.
A partnership-focused segment, usually consisting of key accounts, which seeks trust and reliability and regards the supplier as a strategic partner. Such companies tend to be large, operate on relatively high margins, and regard the product or service in question as strategically important.
B2B e-marketplace, as one of the major trading platforms brought by the internet technology has made a significant contribution to the e-marketers. The larger organisations are taking advantages from the vast array of suppliers/buyers via the B2B e-marketplace (Stockdale and Standing, 2004). However, small and medium sized enterprises (SMEs) are also eager to compete in the electronic environment remain concerns as how their businesses can gain benefits from B2B e-marketplace.
The marketing benefits from treating B2B and B2C (business-to-consumer) as part of the same marketing context and service system. B2B demand is derived from consumer markets; suppliers can profit from helping their customers' customers become more competitive; and almost all companies serve both organizational customers and consumers. This is not new but we want marketing to put more explicit emphasis on the interdependency between B2B and B2C. Which B in B2B represents the supplier and which represents the customer is not apparent. In conventional marketing management the seller is the aggressive party that takes initiatives and the buyer is persuaded and managed to behave according to the supplier's desires. Consequently the first B represents the supplier. Further, B can represent a huge global corporation but just as well a small one-man business but today a business can be global through a personal or Internet network without having many people engaged.