communication often have a more significant impact on resource allocation in

B$2$B transactions than they do in consumer goods transactions. Each choice can

mean allocating capital and people to a highly specialized endeavor, often over a

long term and at great expense.

This section introduces the components of B$2$B marketing and business

strategy and how they interact.

B$2$B Marketing Components

A B$2$B marketing effort involves four basic elements: market selection, pricing,

distribution, and communication.

Market selection: A firm's decisions about how its products can serve

specific target markets will tie it to certain customers, technologies, and

processes$-$often irrevocably in the short term. Thus, market selection

choices, discussed in Section $2\mathrm{.}2,$ are strategic choices that express the firm's

priorities and define its opportunities.

For example, in $2012,$ IBM chose to focus its spending priorities around the

needs of its business customers who handle high$-$frequency, high$-$volume

transactions and interactions. The firm invested $$2$ billion in research and

development $($R&D$)$ and acquisitions to develop PureSystems $($a big data

analytics and operational platform$)$ for buyers like banks, utilities, credit

card processors, and mobile phone carriers. The focus on big data also

created opportunities to expand to serve cloud$-$based software vendors in

markets including Malaysia, India, Brazil, and Hong Kong. ${?}^5$ Many other firms

are attempting to use data$-$analytic algorithms for targeting purposes,

including market selection.

Pricing: In business markets, the same product may be worth considerably

more to some classes of customers than to others. Several factors influence

perceived value, including the availability of substitutes and whether or not

the customer can pass along the cost of the product to another member of

the supply chain. That, combined with widespread price customization and

limited sharing of information about discounts, makes it difficult for B$2$B

customers to comparison shop.

Despite the importance of market selection and pricing, the most critical

marketing decision in a B$2$B context often hinges on how the product is used.

A firm that buys pipes for underground installations could be willing to pay a

premium price for high quality to avoid the expense of digging up a defective

product. Conversely, a user of pipes in surface irrigation systems might

choose to trade off quality for a lower price, since its costs to replace a pipe

are minimal. Some especially important aspects of pricing in business

markets are discussed in Section $2\mathrm{.}4,$ Understanding and Communicating

Product$/$Service Benefits, in the reading. For more on this topic, see Core

Reading: Pricing Strategies $($HBP No$.8203).$