Major differences along the supply chain between B2B and B2C marketing with regard to "Fast-Moving-Consumer-Goods" (FMCG)

Table of Contents

List of Tables and Figures

1. Introduction
1.1. Explanation of the term ‘Fast-Moving-Consumer-Goods’
1.2. B2B and B2C with regard to the Supply Chain

2. B2B versus B2C marketing

3. Marketing Mix
3.1. Product
3.2. Price
3.2.1. Price and Product
3.2.2. Price and Distribution
3.2.3. Price and Promotion
3.3. Place
3.4. Promotion

4. Customer and Markets

5. Competition

6. Conclusion

Bibliography

Appendix

List of Tables and Figures:

Table 1 Categories of Fast-Moving-Consumer-Goods

Table 2 Questions to be asked in B2B markets concerning markets and customers

Figure 1 Supply Chain in detail

Figure 2 Marketing Mix

Figure 3 Factors influencing the interaction between price and added value in B2B and B2C decision making

1. Introduction

It is the objective of the present assignment to identify, to analyse and to evaluate the major differences along the supply chain between business-to-business (B2B) and business-to-consumer (B2C) marketing. In particular, organisations which are involved in the manufacture and retailing of fast moving consumer goods (FMCG) should be examined.

1.1. Explanation of the term ‘Fast-Moving-Consumer-Goods’

Fast-moving-consumer-goods are mainly products that we can find in supermarkets (Table 1). Furthermore, these products are sold in a fast way so that the shelves must constantly be replenished (www.moneyglossary.com). Customers do not show high loyalty to fast-moving-consumer-goods.

1.2. B2B and B2C with regard to the Supply Chain

As we mentioned above, the differences between B2B and B2C along the supply chain are to be assessed within this work. The stages of a typical supply chain are supplier, manufacturer, distributor, retailer and customer (Chopra 2001 p.5). With regard to Figure 1 which provides an overview about a more detailed supply chain we can state that the first five steps belong to B2B marketing whereas the last three steps beginning with distribution belong to B2C marketing.

2. B2B versus B2C marketing

The most important differences between B2B and B2C marketing are going to be highlighted within this part in order to differentiate between both terms. Obviously, the most significant difference between B2B and B2C marketing is the manner of advertising concerning products and the buying decision. In B2B markets the quality, the price and other economic aspects are of interest. B2C markets in contrast are acting with the AIDA model which is more directed to the final consumer (Kotler 2001 p. 891). Furthermore, B2C markets are characterized by unpremeditated buying whereas B2B markets tend to be more planned and controlled. Hutt mentioned in his book ‘Business Marketing Management’ that ‘Business markets are markets for products and services, local and international, bought by businesses and government bodies, and institutions for incorporation, for use, or for resale…’ and ‘The only markets not of direct interest are those dealing with products or services which are principally directed at personal use or consumption such as packaged grocery products, home appliances, or consumer banking’ (Hutt 2001 p. 4). In B2C marketing companies and organizations sell their finished products to the final consumer.

3. Marketing Mix

At this point, we commence the evaluation of the major differences between B2B and B2C marketing along the supply chain with the marketing mix. The marketing mix is a combination of marketing approaches with the aim of success on the market concerned. McCarthy popularized a classification of approaches in four groups, the so-called ‘four P’s’ (Kotler 2001 p. 150). These are product, price, place and promotion (Figure 2).

3.1. Product

Product is the most important element of the four P’s which makes up the good, service or the idea which is offered by the marketer (Czinkota 2001 p. 19). Furthermore, possible tangible characteristics like the core product and packaging and intangible characteristics like branding and warranties are included. Above we ascertained that among other things toothpaste can be seen as a fast moving consumer good. From B2C marketing’s point of view the packaging, the styling of the tube and the brand name e.g. Colgate of the producer are of a high significance. The reason for this becomes understandable when we take a look at the supply chain of Figure 1. As we mentioned above the first five steps belong to B2B marketing. After the products - in our case toothpaste - have left the manufacturer and are on their way to the wholesaler we begin talking about B2C marketing. This means that the wholesaler has to know whether the toothpaste will find a good outlet subsequent to the disposal to the retailer or not. Therefore, the packaging and other external characteristics are extremely significant. When we think about B2B marketing we are talking about the first five steps of the supply chain. At the beginning of the value-added process the quality of the raw materials is important. Primarily, toothpaste is made of chemicals which have to be produced by Colgate or by one of its suppliers. In general we can say that in B2B marketing with regard to FMCG consistent quality and a sufficient volume of raw materials and prefabricated products along the supply chain are essential in order to guarantee a reliable final product.

3.2. Price

The pricing policy determines the cost of a product to the customer. Generally, the price is above the costs of the company and below the prevention price a customer would not pay for the product. Within the marketing mix price is the only element that generates revenue (Czinkota 2001 p. 19). Due to the fact that price is an integral part of the marketing mix it should never be discussed and set in isolation (Wright 2004 p. 317). With regard to the positioning of products which are in our case FMCG we can say that in B2B markets the positioning would be based only on rational criteria whereas in B2C markets emotions and the consumer’s mind play a significant role. In many cases pricing in B2C markets is easier than in B2B markets. This can be seen as the result of little personal contact, a price taken for granted and the intention of every individual to buy or not to buy in B2C markets. In B2B markets individual customers have to be consulted and convinced (Wright 2004 p. 318). Furthermore, the purchase quantity of products has an influence on pricing as well. As we mentioned before price should never be discussed and set in isolation. Therefore we now examine price in relation to the other three elements of the marketing mix.

3.2.1. Price and Product

In both B2B and B2C markets customers purchase products and services which provide a range of added value benefits that will assist to solve problems. Personal problems being emotional and rational will occur in B2C markets. However, in B2B markets those problems tend to be more organizational and also rational (Wright 2004 p. 320). Figure 3 provides an overview about factors influencing the interaction between price and added value in B2B and B2C decision making.

3.2.2. Price and Distribution

When we talk about distribution there are two possibilities of marketing we are thinking of, direct and indirect marketing. Direct marketing signifies that the product is made available to the customer directly by distribution of the producer. Indirect marketing indicates that the distribution is carried out through an intermediary (Wright 2004 p. 320). With reference to B2B and B2C marketing we can say that direct marketing is primarily of interest for B2B whereas indirect marketing is executed by B2C organisations. Indirect marketing is often linked with higher final prices of products due to the fact that the intermediary which is generally a wholesaler or reseller is expecting a payment for its buying and selling activities. In this way the price for the product increases and influences the supply chain by raising the value of the product.

3.2.3. Price and Promotion

Promotion contains different methods which are utilized to communicate messages to the target audience to promote the product. Clearly, advertising is used in both B2B and B2C market and has an influence on the final price. In B2C markets advertising is mainly carried out via TV, newspapers or radio in order to reach a high number of potential buyers. However, the consumers are willing to pay a higher price as a result of the emotional value which is associated with the product (Wright 2004 p. 323). In contrast to B2C advertising B2B advertising is directed at a smaller market. Therefore, TV spots do not or rarely exist. Advertising in B2B is mainly carried out by journals and magazines (Wright 2004 p. 323).

3.3. Place

Place is often associated with distribution and covers also the supplier part of this work. Channel management and logistics management are two components of this element of the marketing mix. Channel management on the one hand ‘is concerned with the whole process of setting up and operating the contractual organization, consisting of various types of middlemen (such as wholesalers, agents, retailers, and facilitators) (Czinkota 2001 p. 19). Logistics management on the other hand has its objective in providing availability of products at fixed times and places within the marketing channel. For the price element of the marketing mix we ascertained that B2B markets tend to be characterized by direct marketing. Nevertheless, along the supply chain some intermediaries exist which want to obtain a payment for their task. In this connection we can imagine suppliers and sub suppliers of raw materials. These raw materials can be used for the production of several products including FMCG. The margin of the intermediary grows with the complexity and the quantity of the tasks performed (Wright 2004 p. 321). Furthermore, costs of distribution are a factor which should not be neglected. We can state that in both B2C and B2B marketing it is essential to satisfy customer needs. However, the second point of interest is the analysis of the costs to meet the customer needs. With regard to FMCG we can say that distribution is nearly identical to other kinds of products. Nevertheless, fast moving consumer goods tend to be sold faster than other products. Therefore, it is essential to design the distribution channels and networks in a suitable manner in order to react promptly to changing demands and requests.

3.4. Promotion

Promotion tools are used by communications policy in order to interact with customers, middlemen and the public. Advertising, sales promotion, personnel selling and publicity are the main instruments of the communication element (Czinkota 2001 p. 19). Earlier we ascertained that advertising differs in B2B and B2C markets due to larger or rather smaller markets. Sales promotion can be utilized in both B2B and B2C markets in the short term in order to increase sales and to acquire new customers (Wright 2004 p. 323). In B2C markets sales promotions are often used as a ‘pull promotion’ campaign. Imaginable promotion possibilities are money-off coupons, ‘buy now and pay later’ and more content for the same price to name a few. Concerning FMCG in B2C marketing we can say that especially more content for the same price sales promotion is performed for shaving foam, creams, lotions and shower gel. Buy now and pay later methods do not find much application in FMCG markets and are of more interest in consumer electronics and other markets with more expensive products. Another promotion method besides the more content for the same price promotion is a method in which additional product samples are packed on the product the consumer intends to buy. Likewise, this is imaginable in B2C FMCG markets. Trade promotions in B2B markets pursue the aim of pushing products and services downstream along the supply chain (Wright 2004 p. 323). This pushing effect starts with the purchasing of extra products or an increased production of the producer. Furthermore, these extra products will have to be sold to the next participant or member of the supply chain. Therefore, we talk about downstream trade promotion in B2B marketing. The same goes for FMCG.

4. Customer and Markets

Both B2B and B2C markets are subject to changes due to the well known stages of the industry life cycle. Especially in B2B marketing new technologies enable customers to buy products and services from all over the world. Additional pressure is put on buyers of companies to purchase the best materials at the lowest price in order to stay competitive. Large companies evaluate and benchmark their suppliers on a continuous basis (Wright 2004 p. 81). An example from B2B but with no direct linkage to FMCG is the auditing of DaimlerChrysler concerning their suppliers, especially their first tier. DaimlerChrysler evaluates a potential supplier for five years before they start cooperation. Table 2 provides an overview about market and customer analysis in B2B marketing. In B2C marketing it is the consumer who makes the buying decision that influences the whole supply chain. For instance, if the demand for shampoo in Europe decreases due to the fact that shaved heads are a new temporary fashion the consumer will give a pushing effect upstream along the supply chain. Also imaginable is a similar process but vice versa.

5. Competition

Due to modern technologies we have today a global market which is accessible from almost every place in the world. In this way competition increases. In B2B marketing competition is influenced by the market structure at national and international level (Wright 2004 p. 73). Furthermore, in B2B marketing a difference between monopolies in single countries and competition in global markets exists. This means that a company can have a monopoly in the UK whereas other competitors are represented in the European market. However, companies will have to create a competitive advantage by researching its markets and building up competitive intelligence systems (Wright 2004 p. 73). In B2C markets competition is more directed to the consumer and therefore sometimes tougher than B2B competition.

6. Conclusion

At first sight B2B and B2C marketing do not seem to be extremely different from each other. However, after a complete evaluation of both we can say that some considerable differences exist. Those begin with advertising and sales promotion, packaging and branding up to the intention of the buyer along the supply chain. Moreover, for a successful examination of B2B or B2C marketing different tools and methods are to be used.

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