How Customers Buy in B2b Markets on the Example of General Electric

How customers buy in B2B markets on the example of General Electric

Every day billions of people buy and consume different types of goods and services. When there was no massive production, decision making was easier and quicker, but after market development lot of producers entered in market and competition started. Increased variation of products, companies started to work to maintain competitive advantage. They started to attract customers’ attention. Today Companies serve not only customers, also businesses as well and business to business markets have been developed. From the customer perspective it was getting hard to make a decision, whom to trust? Which offer is the best? Which product or services are valuable? Lots of professionals: business people, psychologists, marketers are working to understand customer’s preferences and for now there are several strategies and theories developed. But the question is if these theories are same for business markets? And how customer buy in B2B market?

Unlike, to consumer markets there are business markets where goods and services aren’t consumed personally and there are no individual emotions involved while making a decision. They focus on what product or service can give to their businesses, what value they have and how they can use it to produce final goods. Decisions are based on logical arguments, security and details of products or services. According to Forrester research (American market research Company) 72% of business buyers spend more time online to conduct their own research before making the decision and Demandbase research shows that 52% of b2b buyers take longer before making a purchase. This proves that, b2b buyers think more and evaluate differently than b2c buyers which changes the customer behavior completely. But major similarities between b2b and b2c activities are that both are oriented to customers and they use all the resources to maintain strong place in competitive environment. It should be considered that customers have more connection today than they ever had, they talk, discuss or search for more alternatives.

Business to business marketing is a relationship-based activity. (Fill & Fill, 2005) There are three broad participants in this relationship, which have some sub-categories that are: Government organizations, institutional organizations and a commercial organization. For example, commercial organization considers 4 main participants which are distributors often referred as intermediaries, which itself have some types like wholesalers or value-added participants. Second category is Original Equipment Manufacturer (OEM`s) who buys raw materials to transform into a finished good to sell to their customers. Following category is User- organizations and businesses who buy goods or services in order to support the production processes, but they don’t make the final offering. Final offers are made by Retailers who are like intermediaries, the major difference between retailers and distributors are that distributors supports the marketing transfer of value retailers` customers are end-users, who buy and consume the product or service. Second participants in b2b relationships are Government organizations including: health, environmental protection, transportation and etc. and parts of last category of institutional participants are non-profit and community-based organizations.

The whole discussion will be based on the example of the company General electric, which is American multinational conglomerate company. Which provides goods and services all over the world. On their website there is a description of their operations. The GE Store is the global exchange of technology, talent, and expertise across GE's diverse businesses and markets. General electric is the combination of different businesses which operates in industries which are: Power, Renewable energy, Oil and gas, Aviation, healthcare, Transportation and Energy connections and lightning. List shows that General electric is producing all types of Business goods which includes input goods for example advanced materials for aviation, equipment goods for Renewable energy (systems and storage) and supply goods like energy connections and lightning. Customers of general electronic are biggest companies in the world such as:  Boeing, P.C. Richard and Son, Songas and etc. In the report of GE “Leading a Digital Industrial Era” (2006) is written that the key factor of their successes is that their business leaders understand their customers, and how they make decisions. They think that the best companies don’t make decisions according what they hope for, the main factors are the facts which they see. There is underlined that they are valuable, because of the engagement of community members where they are operating. That’s why they started to change their portfolio and invested more in technology, globalization and efficiency, which in the end affected the portion of earnings form industrial businesses that changed gradually from 45% to 90%. This fact shows that General electric is focused more on Industrial businesses. According to Philippe Cochet, Senior Vice President and Chief Productivity Officer “From the Industrial Revolution to the age of the assembly line, and now in the emergence of digital and 3D-printing technologies, manufacturing has always been an incubator for ingenuity. The GE Store provides the knowledge, tools, and scale to optimize our supply chain and pave the way for next-generation manufacturing— resulting in significant productivity gains for customers and shareholders.” (Leading in a Digital Era, 2016)

How General Electronic makes money? What kind of process is held before they start to serve companies? There are several basic components which are: Cost of services, business offering, General electric and Business segments. On the example of aviation Cost of services include R&D, manufacturing, engineering and logistics cost, also selling and administrative expenses arises including: Marketing, partnership, administrative, selling and other direct and indirect expenses and additional expenditures are restructuring a retirement and impairment costs. All above mentioned expenses are payed by GE, which makes business offers to aviation segment. Offer includes: Selling of military and commercial Jet engines, Maintenance, component repair and overhaul services (MRO) and spare parts replacement. What GE gets? Direct and partnership product revenues, Long-term MRO contractual revenues from commercial and military segment. Business buyers go thought several stages before making a buying decision. First is identifying the need of some goods or services, then they set several specifications including performance, quantity and technical requirement for a product, next stage is identifying suppliers and have details proposals to compare which gives better value for the company. At this level every supplier should offer something unique and valuable to their customers to have an advantage in next stage- evaluation stage, where all proposals are discussed, analyzed and decision is made. After negotiations about price, payment terms, delivery and etc. the last step - an offer is made.