B2B

A company grows cotton. That company sells it to a factory where they spin the cotton, and turn it into fabric and thread. A t-shirt company buys some of thier cotton fabric and thread. They also buy dyes and print (with it's own trail of transactions behind it). The t-shirt company sells those t-shirts to Topshop. Topshop sold the t-shirt to you- only, of course, after a hefty mark and and putting it's own label in.

Inbetween each of these transactions transportation companies have been hired to ship around these goods. All the companis in each stage of this process has will probably have bought a property from an estate agency, furniture from IKEA, electricity from EDF, hired staff from a temp agency or through a newspaper, bought computers from Currys, pens and pencils out of a Viking catalogue, put new windows in from Velux, had local painters in to re-decorate, hired a repairman when the coffee machine stopped working, calamity, I know, hired a solicitor, an accountant and a cleaner and had so many other transaction with many other businesses. And for what? So that You could buy a t-shirt from Topshop.

Business to business (B2B) transactions are much more likely to be of a higher value,but fewer, than B2C transations. Most companies are buying to create something else to sell on, and therefore buy in bulk. This means that you cannot afford to lose any of your customers. An example that was given in class was the comparison between a company selling MRI scanners (B2B) and Coke (B2C).

Focusing on the UK, Coca-Cola has millions of customers. A company selling MRI scanners probably has very few, probably only the NHS. However, Coke has hundreds of compititors, other soft drinks, hot drinks, squash at home, water, alcoholic drinks, all from different companies. There probably aren't many retailers of MRI scanners in the UK. This means B2B retailers must work much harder at building a relationship with the customer. This is why personal selling is much more efficient than advertising and many other types of marketing that are widely used in the B2C sector.

Because there are often fewer substitutes in B2B markets the demand for products and services is more likely to be inelastic- "A situation in which a cut in price yields such a small increase in quantity taken by the market that total revenue decreases". This means two things for marketers. Firstly, it is harder to stimulate sales through price cuts and promotional offers. Secondly, the marketer is, often, able to set the price because if cutting the price doesn't increase sales it is likely that raising the price will not decrease sales. The cause for this, in many cases, is that if a business needs a product, it needs the product. An example given for this in class was financial software, but the same could be true for communications solutions, farm machinery and hospital beds. There are three core causes of price elasticity, "a measure of the sensitivity of demand to changes in price" ; 1. the availabilty of substitutes 2. the amount of budget available to spend 3. time.

The availability of substitutes probably has biggest influence of price and demand elasticity, as has been discussed earlier. Budget affects elasticity as a rise in the price of a product without a rise in the alloted budget for the product would mean that the company would not buy the product.

There are three main types of organisations (Fill & Fill, 2005):

• Government Organisations- eg. Health, NHS, and Policing, London Metropolitain Police
• Institutional Organisations- eg. Not-For-Profit, Cancer Research UK, Community Based Projects, Watford Women's Centre
• Commercial Organisations- eg. Distributors, Eddie Stobbart, Retailers, Zara

The main method of marketing in B2B is personal selling. Salesmen and women have a lot of pressure on them to make sales, and a lot of time and money is put into training them. Earlier in the module we were shown Kotler's Buyer Decision Process. Quickly we realised that this was not always how consumers bought products, especially FMCGs and impulse buys. But his model is much more applicable in B2B buyer behaviour.

Problem Recognition > Information Search > Evalutation > Purchase > Postpurchase Evaluation

In the B2C market this might translate into something like:

I'm Hungry > What's Available? > Ice-Cream or Cake > Ben&Jerry's > Should have had Cake

In the B2B market it might look quite different and involve many more people, especially in a larger organisation. The Marketing Department might decide that their sales team need some extra training, so they go to the Finance Department to see if there is any funding. The Finance says there is. So the Marketing Department look for what type of training is available. They then take this to the CEO, or who ever needs to sign it off, and the R&D Department want to see what type of course it is, to see if it will be effective for what they are working on. The CEO and R&D agree. So the salesteam go off for training. Then the sales figures speak for themselves. This might look something like:

Sales needs training > What training is available? > B2B or B2C? > B2B > Good choice, most of our clients are Businesses

Randy Shattuck, of the Shattuck Group, summerizes corporate buying as the following things:

• Methodical
  Complex
• Budgeted
• High-risk
• Analytical
• Coordinated

Shattuck states that B2B buyers are motivated to spend because they know that if they don't spend their budget they will probably lose it. He emphasizes that the desired effect of the product is what creates the risk. "The bigger the desired effect, the bigger the risk". Shattuck's version of the B2B buyer decision process differs slighlty from Kotler's:

Identify the Problem > Create Criteria > Search for Providers > Evaulate the Options > Test the Options > Procure the Solution

The main difference is the lack of post purchase analysis. With most B2B purchases there is no option to get it wrong, this is why the solution must be tested. When you are the driver behind a big purchase decision it is often the case that your position, or at least credibility, in the company is at stake.

To improve sales and build inter-business relationships many companies use reciprocity, "A buying arrangement in which two organizations agree to purchase one another's products". They enter into an agreement that, for example, a mobile phone company will provide phones for a car company in return for a company car. Another option is leasing. Companies often make the decision to lease a product rather than buy it out right. This may be because it is an expensive product and they do not have the budget for it, or maybe they feel that because it will become obsolete soon.

Culture Is...

To be able to segment a market by culture you first need to understand what culture is. The Culture Show on the BBC has a Culture Is... application that is fascinating. It has hundreds of words that people have entered that people think culture is. It also has many definitions of what culture is from different people. Boris Johnson says culture is what differentiates human beings from animals. Patsy Kensit says culture is taking her 8 year-old son to the Natural History Museum. James Corden says culture is nothing to so with how intelligent you are. John Humphreys says culture is everything from grand opera to soap opera. Duffy says that culture to her is speaking Welsh.

There are, also, many different dictionary definitions of culture. Wikipedia states that there are three main definitions of culture:

~excellence of taste in the fine arts and humanities, also known as high culture
~an integrated pattern of human knowledge, belief, and behavior that depends upon the capacity for symbolic thought and social learning
~the set of shared attitudes, values, goals, and practices that characterizes an institution, organization or group.

Marketingpower.com has two very good definitions. Firstly, "The set of learned values, norms, and behaviors that are shared by a society and are designed to increase the probability of the society's survival", and secondly "The institutionalized ways or modes of appropriate behavior. It is the modal or distinctive patterns of behavior of a people including implicit cultural beliefs, norms, values, and premises that govern conduct. It includes the shared superstitions, myths, folkways, mores, and behavior patterns that are rewarded or punished". About.com defines culture as "the perspectives, practices and products of a social group". Dictionary.com has pages of definitions. Most of the relevant definitions include words such as "society", "behaviours", "traits", "patterns", "class" "community", "values", "attitudes" and "population".

From this it can be seen that culture is many different things to many different people. So how, as a marketer, can you combat marketing to many different cultures? Or do you try and define a culture and market exclusively to that culture? Culture is posing more of problem to many businesses daily as cultures are mixing and as many companies go global. How employees behave in one country will not be the custom in another country. I think the most important aspects of culture are values, beliefs and customs, all of which are to be respected.

Values- The important, enduring ideals or beliefs that guide behavior within a culture or for a specific person. For example, health and fitness have recently become important values for Americans.

Beliefs- A cognition or cognitive organization about some aspect of the individuals world. Unlike an attitude, a belief is always emotionally or motivationally neutral. Krench and Crutchfield define belief as a generic term that encompasses knowledge, opinion, and faith an enduring organization of perceptions and cognition about some aspect of the individuals world. It is the pattern of the meanings of a thing, the cognition about that thing.

Customs- A practice followed by people of a particular group or region.

An article, The Need for Culture-Sensitive Marketing, explains that "culture defines the way collective groups of people think and behave". It states that Geert Hofstede defined 5 dimensions of power in culture, and how this greatly affects the way people do business and how they consume. These are as follows: power distance, individualism, masculinity, uncertainty avoidance and long-term orientation. The article summarises with a very interesting point:

"After all, if human relations are defined by cultures, then brands - which ultimately are about product-people relationships - cannot remain agnostic to them."

Geert Hofstede has scored many different countries on these 5 measures. I will explain, in brief, what they mean, but it is explained in full, along with all the country profiles, on his website. Power Distance Index (PDI) is the extent to which people in groups and organisations accept that power is distributed unevenly, this represents inequality, but defined from below not above. Individualism (IDV) versus collectivism. This is whether people are out for themselves, and look out for number one, or whether they think first about others and the greater good of the group. Masculinity (MAS) "refers to the distribution of roles between the genders which is another fundamental issue for any society to which a range of solutions are found... The IBM studies revealed that (a) women's values differ less among societies than men's values; (b) men's values from one country to another contain a dimension from very assertive and competitive and maximally different from women's values on the one side, to modest and caring and similar to women's values on the other." Uncertainty Avoidance Index (AUI) "deals with a society's tolerance for uncertainty and ambiguity; it indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations." Long Term Orientation (LTO) versus short term orientation. "It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting one's 'face'."

Not surprisingly Japan and Iran scored very low on Individualism, which means that they have a very collective culture, what is good for the group is good for them. To equate this to marketing, it means that products must be marketed in a way makes the product seen to be purchased by a large number of people. If many people in this society have the product, then it must be good. Japan also scored much higher on Long Term Orientation than Poland and the UK, which means that it merits virtue and perseverance. This Japanese Nike Advert is focused on team not individual sport. At the end it says, "How far will you go?". This plays to the Japanese collectivist attitude that you should always try your best for the greater good of your society, or here "team". Norway scored much lower on the Masculinity scale than South Africa, which indicates that it has a more modest, caring society, whereas South Africa is a more competitive, aggressive culture, as can be seen in this forceful South African Nike advert. These are also attitudes that can be marketed to. A product being marketed in Norway might want to be seen as a helpful product, one that will improve quality of life, however the same product being marketed in South Africa might strive to be seen as one that would improve your quality of life over your neighbour.

Rachel Lawes' article Consumer Behaviour: Look to the Future explains how individualism relates to the marketing world a bit more. She writes "with Western consumers generally determined individualists, each believing themselves to be the master of their own destiny. This makes them sceptical of "official" messages, including most forms of advertising". Saikat Banjeree, writing for Cross-Cultural Management, explains that the reason that culture is so important in marketing is that consumer behaviour is based on two things: inner-self and outer stimuli. Culture is the main player in the outer stimuli sector. He also states, re-iterating this importance, "relationship between culture and values manifesting themselves through consumption of products is well-documented, with material goods being important to individuals due to their ability to carry and communicate cultural meaning".

It is patent that these differences are paramount for business across cultures, whether it is for opening an office in a new culture, marketing in a different country or entertaining clients from other societies. One of the premier companies in advertising the fact that they understand this is HSBC. They have many adverts discerning the differences between different cultures and how this can affect you business.