KnowThis Blog Postings
- Published on February 16, 2010
- Posted by Paul Christ
Many companies sell products that work as both component products within a larger product or stand alone as a final product. For example, electronic audio manufacturers sell radios to car manufacturers as built-in components but also sell stand-alone products for general consumer purchase. But selling to manufacturers requires a different marketing strategy than selling to consumers since these markets are fundamentally different and buyers in each market respond differently to the message coming from the marketer.
But differences in how buyers make purchase decisions are not limited to consumer versus business market. Consider the market that exists between the manufacturer and the consumer – the reseller market. Resellers, such as retailers and wholesalers, purchase products from manufacturers and then market these to consumers or other resellers. A company selling products as both a component product and as a stand-alone consumer product should recognize manufacturers will respond to different marketing approaches than resellers will. Why? Here are a few reasons:
1. Role of the Buyer
The main role of most industrial buyers centers on the tasks involved in making product and service purchase decisions. That is, their functions are primarily investigating and negotiating with suppliers with the aim of making sure the products and services offered by a seller fit the needs of the buyer’s company. But buyers for resellers have additional responsibilities. Not only do they engage in purchasing tasks but many are also tasked with merchandising responsibilities involved in selling products to final users. Consequently, purchasing decisions for resellers not only revolve around the decision to accept or reject the product itself but decisions are also influenced by promotional programs (i.e., sales promotions) that may be offered by the seller to help promote the product.
2. Key Benefits
When making a purchase, industrial buyers may evaluate a product by considering multiple benefits the product offers. Yet, one of the most important benefits sought by industrial buyers concerns how the product itself will perform. The reseller buyer, however, is much less concerned with whether a product works as advertised since they are not the user of the product. Rather, the reseller is more interested in whether the product is helping to achieve organizational goals. Consequently, key benefits for resellers rest more with issues of customer satisfaction, service, promotional assistance, and financial gains.
3. Number of Decision Makers
Purchasing by industrial buyers typically requires marketers deal with a buying center consisting of many members representing several functional areas. Besides being a time consuming process, dealing with a buying center situation means marketers must tailor their message to appeal to each member. By comparison, far fewer members of the reseller’s organization are involved in purchase decisions. Even when many are involved in a reseller purchase situation, in most cases those participating are primarily from the same functional area. Thus, the requirement for the marketer to tailor their message to each member is not has difficult.
4. Design of Products
As noted above, industrial buyers are highly focused on product issues when making purchase decision. So much so, that many industrial purchases require sellers to design products to meet specifications set by the buyer so that how a product looks to one buyer may be different than how it looks to another buyer. In some cases resellers also negotiate with supplying firms on certain product matters but invariably these negotiations do not affect the product itself but affect other product issues such as packaging, where a large reseller may require the product be provided in certain package sizes or designs. But in most cases resellers are not in a position to request the seller change the makeup of the product itself.
5. Image and Reputation
If an industrial buyer is not satisfied with the reputation or image of a seller there is a good chance a sale will not take place. A seller’s reputation is evaluated in many ways including the quality of products produced and service reliability. For sellers whose reputation is held in low esteem by industrial buyers the chance for success is not very high. Resellers may also have issues with a seller’s reputation. Yet, the reseller buyer’s own take on the reputation of a seller may be of secondary importance if the product is in demand by the reseller’s customers.
6. Importance of Price
Surely it is not possible that manufacturers and resellers differ on their interest in getting the best price? Well, actually they do. Manufacturers work long and hard to get the best price for products that are used in the manufacturing process. This includes playing one supplier off against another who may offer a similar product. The reseller is also highly concerned about getting the best prices since lower prices help improved their margins. But what option does a reseller have if a supplier’s price increases but their customer’s still demand a particular brand? While the reseller may complain or even reduce their order, the order is made nonetheless though the reseller does have the option to pass along the price increase to consumers but direct blame to the supplier.
7. Promotional Approach
Whether selling to manufacturers or to resellers, sellers are most likely to spend a considerable amount to support face-to-face selling efforts. Yet, while the majority of promotional spending when marketing to manufacturers is directed to personal selling, marketing to resellers requires more. Reseller must see that the seller is helping consumer demand for the product by investing in consumer advertising. Additionally, the reseller may want to see that incentives are available, such as trade promotions designed to encourage the reseller to sell more, or consumer sales promotions designed to build reseller traffic.
These are just a few reasons why marketers should be ready to adjust their strategy when selling certain business markets. Obviously, these differences could extend to other business markets as well, such as government and not-for-profits. The lesson to be learned is a key principle of marketing – know your customers well.