Prof. Samir V.

Charania CRM 4_CRM_in_B2B

Chapter 4: CRM in B2B Markets

4.1 Characteristics of B2B Marketing
B2B marketing is a process of selling different types of good and services to businesses or
organisations.
With an increase in demand in consumer markets, the scope of business markets is expanding.
The following are the characteristics of an ideal business market:
1. Nature and size of customers: In general, there exist a small number of potential customers
in business markets. A single customer therefore turns to be of significant importance. In a
business market, 80% of the output is sold to 20% of customers. However, the revenue
generated from this 20% is of higher value as order sizes are very large. A large customer may
even buy 80% of the total output of an organization. Thus, it is important to build long-term
relationships with such customers and deploy dedicated sales team for managing such large
accounts. Apart from nature and size, the market of a business customer is also geographically
more centered. The buyers and sellers in a business market generally try to locate themselves
in one area only as it helps in dealing with prospects, availing the required material in less time,
reducing transportation costs of intermediary goods, etc. For example, most textile
organisations in India are located in cotton producing states of Gujarat and Maharashtra.

2. Professional buying decisions: In B2B markets, the buying decision- making process is time
consuming and complex in nature. This is because it involves decisions on part of every party in
the supply chain, such as suppliers, wholesalers and distributors. This requires long-term
relationship among different parties. Any conflict between two parties may disturb the flow of
the entire supply chain.

3. Complexity of buying: The buying process in business markets is more complex as most
business purchases involve a huge amount of money. Whenever a new business purchase is
made, executives from different levels are involved in the decision-making process.
For example, the supply chain manager, production manager and even the Chief Executive
Officer (CEO) may be involved while purchasing machinery and equipment for the production
purpose. Therefore, the sales team needs to influence executives at all levels and should have
extensive knowledge of the product they are selling.

4. Choice criteria: Business buyers may have economic and technical selection criteria as they
are accountable for their purchases to all the interested members of the organisation. Example:
Individuals in the operations team would be interested to know whether the output from the
new machinery that they have just purchased would be efficient enough to meet their
production targets. The quality control department would be interested in knowing the
capabilities of the new machinery in meeting specified quality norms. Thus, organisations

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nowadays have specialised purchase departments that develop competencies to evaluate and
assess suppliers and their product offerings. Economic criterion used by organisations before
making buying decisions includes the life cycle cost and value-in-use analysis.

5. High risks: In business markets, buyers and suppliers usually enter into contracts before
producing or manufacturing final products. Once a supplier is selected, there are long-term
contracts signed for products that are still at the development stage. A supplier contributes in
designing a particular component or may be in some cases designing the whole component. In
case of technical products, the seller might face unexpected problems once production starts
and thus may fail in his/her commitment to provide the desired components or product. Thus,
along with long-term contracts, risks are also shared in B2B markets. Highly specialized goods
industries like aircraft manufacturing face high supply risk as any inconsistency at the engine
and components manufacturing companies (that supply their output to the aircraft
manufacturing companies), may directly affect the final output of the aircraft manufacturing
companies. Such B2B market transactions involve high risks as any fault from either side may
put an entire business at risk of huge loss.

6. Trust between buyers and sellers: In most cases, business buyers set product specifications
and ask their suppliers to make a customized product that meets their specifications. In such a
case, the element of trust is of utmost importance. This is because lack of trust may create
conflicts between buyers and sellers, which may lead to unnecessary delays in product delivery
to end users.

4.2 Types of Purchase Situations:

There are many types of buying situations in business-to-business context. They differ from
each other with respect to the kind of complexity associated with the decision-making process.
The amount of work that the buyer needs to put in before considering these purchases also
varies.
(a) Straight Re-buy: This involves the buyer reordering something from its past supplier without
any modifications. The purchase department, based on the list of past suppliers and their
performance, routinely places these orders. An organisation may have an automated
reordering system triggered off by a drop in the inventory levels. This saves ordering time and
ensures timely supply of parts for the buying organisation.
(b) Modified Re-buy: In the modified re-buy, the buyer wants to modify the product
specifications, prices, terms or suppliers. This process involves more decision-making efforts on
the part of the buyer. Suppliers might feel slightly pressurized and might offer better terms to
the buying firm.

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(c) New task situation: When a firm buys a service or a product for the first time, then it is
referred to as a new task situation. In this case, if the cost or risk associated with the concerned
purchase is more than the usual, the number of participants in the purchase process
correspondingly increases. Initially; a lot of information about the purchase, the market,
suppliers, etc., is collected. The suppliers may also send their prospects to the buyer in order to
inform the buyers about their products and services and in the hope of getting their contract.
The buyer has to decide on many specifications, suppliers, price limits, payment terms, order
quantities, delivery terms, etc. The importance attached to each of these terms (factors) varies
and influences the outcome from various parties across the organisation.
(d) Systems Buying: In many situations, buyers prefer to buy a packaged solution from a single
supplier instead of buying the component from various suppliers and then integrating them.
This is known as systems buying. Systems buying help the organisation to avoid the tedious
process of making multiple decisions involved in a complex buying situation. Systems selling are
a key business marketing strategy for winning and holding accounts. The contract often goes to
the firm, which provides the best system meeting the customer's needs. Example: Many firms
such as SAP sell complete ERP solutions to their customers. These packages not only offer a
software solution but also help the organisation prepare for the change, train the end users and
boost the implementation of various processes.

4.3 Contributors in Business Buying Process:

In business organisations, major buying decisions are made by its ‘buying centre’ that consists
of individuals and units from across the organisation - each having an interest in the buying
decision being made. Each of these units has a different influence on the buying process and
members of the units play different roles. The buying centre includes all members of the
organisation who play any of the following five roles in the purchase decision process:
 Users: They are members of the organisation who ultimately use the product or service.
They initiate the buying process and help in defining the product specifications according to
their requirements.
 Influencers: They consist of all those members who have the technical capability to help
define specifications and provide information for evaluating alternatives.
 Buyers: They are the people who have the formal authority to select the suppliers and
arrange terms of purchase. Their major role is in the selection of vendors and negotiating
with them.
 Deciders: They have the formal or informal power to select or approve the final suppliers.
Sometimes buyers may play this role in routine purchases.
 Gatekeepers: They control the flow of information about the products/services being
purchased for use by others within the organisation. This often has an impact on the
decision-making process

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4.4 The Business Buying Process

The business buying process is much more complex than the consumer buying process.
It usually consists of eight stages and may take quite a bit of time before a decision is finally
made. The different stages are as follows:
i. Problem recognition: A person in the firm recognizes the problem or the need that can be
met by acquiring certain goods or services. Depending on that person's influence, the
proposal may be carried further.
ii. General need description: In this stage, the firm describes the general characteristics and
quantity of the required item.
iii. Product specification: The buying organisation decides on and specifies the best technical
product characteristics for the required item in this stage.
iv. Supplier search: This is the stage where the buyer tries to find the best vendors .
v. Proposal solicitation: In this stage, the buyer invites qualified suppliers to submit proposals.
vi. Supplier selection: The buyer reviews the proposals and selects a supplier or suppliers in this
stage.
vii. Order-routine specification: The buyer decides and specifies the details of the order. The
details include, technical specifications, quantity required, expected time of delivery, return
policies, warranties, etc.
viii. Performance review: This is the final stage where the buyer rates his/her satisfaction with
suppliers and decides whether to continue, modify or drop them.

4.5 Importance of CRM in B2B Markets

The value of transactions and the volume of transactions are much higher in B2B when
compared to sales between business houses to individual customers. Hence the complexities
and challenges involved in B2B activities are totally different from those in B2C. Customer
Relationship Management is important in B2B activities. It cannot be the same as both differ in
terms of scale and methods. Following are the importance of CRM in B2B Markets:
1. Database Management: The volume of transactions is quite high and the value per
transaction is much higher. The number of end use may not be as huge as retail customers.
Hence, there is a need to monitor the buyers given the competitive business scenario that the
sellers are into. As a starting point, even if the number of buyers are a handful, it is important
to have a database of the same. It is a must and if sellers do not have a database they should
get started immediately. This is the foundation on which the best of CRM modules are
developed. Without database the company will be groping in the dark and will be firing blind
shots in the air as far as CRM efforts are concerned. Following are the ways in which database is
developed:
a. People:

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• Existing customers
• Suppliers
• Former customers
• Dealers
• Salesperson’s friends or relatives
• Other reference groups..
b. Events:
• Social event
• Seminars
• Conference
• Trade shows or exhibition

c. Published Information:
• Newspaper
• Telephone directories
• Trade Directories (Yellow Pages)
• Business cards
• Sales records
• Computer database etc

d. Associations:
• Newspaper
• Telephone directories
• Trade Directories (Yellow Pages)
• Business cards
• Sales records
• Computer database etc

2. Limited Customers:
As is the case with CRM for individual customers, there are certainly a number of benefits as far
as CRM for B2B is concerned. First and foremost, as mentioned above, a CRM solution helps to
store information in an easily retrievable database rather than having them stored haphazardly.
Many B2B companies still lag behind in this, mostly because of complacence and the fact that
there are only handful customers to handle. However, it is important to keep in mind that these
few customers contribute to their entire turnover and in terms of volume and value it would
certainly be very high. It is therefore very important to monitor their buying habits very closely
and minutely. Missing out even on small details could prove very costly. Even if one buyer walks

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out temporarily and starts buying from some other supplier it could create a big dent in the
overall sales and revenue for the seller.

3. Good CRM for B2B Helps Organizations Become More Efficient

Organizing data is very important if a marketer is looking to monitor their buyers and any CRM
module that searches for information about customers cannot be called a CRM module at all.
When data is stored centrally, there won’t be any problem retrieving it at any point in time and
all the stakeholders can view the information just at the click of a button. Organizing data is the
biggest reason why organizations should go in for CRM for B2B.

4. Helps Keep Track on Progress or Regression

Sales force in the market, real time information on product movement, buyers’ behaviors and
patterns is of utmost importance. It should be available instantaneously so that the right
preventive and corrective action can be taken without any loss of time. It will help the
marketing team find out whether they are moving on course as far as their main objectives are
concerned.

5. Helps in Sharing Information And Increasing Knowledge Base

It helps to drag out relevant information irrespective of the location or the hierarchy in the
organization. It will not only help the marketing team but also will be useful for the human
resources team, the accounting team and even the compliance and auditing team, thus having
one specific objective in mind instead of working at cross-purposes. Example: An accounting
staff will be able to learn more about the latest happenings in the marketplace and hence the
marketing strength of the organization as a whole will increase quite dramatically. Thus with
right CRM in B2B it will go a long way in increasing the knowledge base across departments and
across hierarchies.

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