In today´s highly competitive marketing methods, the market segments B2B (Business-to-Business) and B2C (Business-to-Consumer) are very well established and applied. The worldwide largest market segment, the B2A/B2G (Business-to-Administration/Business-to-Government) however, has until now received little or no attention in the literature. Basically, B2G/B2A is the market that serves “public spending”. The public spending enables governments to purchase/obtain services and goods in order to fulfil their objectives. In this paper, we will highlight the key differences between B2A compared to B2C and B2B.
The B2A/B2G market is a monopsony
That means, that a few companies bid to one demander – the state. Because of their unique position, monopsonies have a wealth of power (Young, 2003). Therefore, there is a great influence in decisions by political interests, geopolitics, and infrastructure. Decisions are mostly taken as a budget decision (a certain budget has to be spent, otherwise it will be reduced in the future).
B2G-market is impenetrable
Compared to B2C or B2B, contracts and decisions in governments (B2A/B2G) should be transparent. Moreover, a disadvantage of the B2G/B2A market is, that it is very impenetrable, with bureaucratic obstacles, tight budgets, and comprehensive contracts. These problems will be examined more closely in this scientific work based on a case study from the Philippines.
Material and Methods
In order to analyse the problems and obstacles of entering the B2G market, we have observed and analysed the market entry by a company in the Philippines. Krah Pipes Manila sells large diameter plastic pipes throughout the country and beyond. The complete company story of Krah Pipes Manila was monitored from start-up until now (the production capacity is doubled in the year 2020). The monitoring took place in all kind of business fields (financing, human resourcing, etc.) but in this case study only the marketing part is published.
Customer visits, registration and interviews
During many customer visits, registration, and approval periods, I had the opportunity to talk extensively with the people involved to find out where the difficulties and obstacles are. To obtain the relevant information, many interviews with the General Manager and the Sales Manager were conducted in January 2020.
Information from the DPWH
To shed light on the infrastructure situation in the Philippines, we used information from the department of public works and highways (DPWH). The DPWH is using a special government agency called MWSS (Metropolitan Waterworks and Sewerage System) (2020, May 28.000Z). There we got further information about the water supply and about sewerage projects in this country. Moreover, we also used the internal management report from Krah Pipes Manila Inc. to analyse the sales structures of the company.
In the B2G market, decisions on product introductions are usually made within the available budget of the state. Only listed companies and products can be purchased. Therefore, the government must first be convinced that the product offered is the right one and of the best quality. The authorities are not very interested in new products, but in increasing efficiency and if it only means using the budget more efficiently.
Aggressive market-penetration strategy
In our case, the product was completely new for the existing market. The existing market was served for many years via a few local companies with other pipe materials and system properties. The product itself was superior compared to the available alternatives. So, the marketing concept was an aggressive market-penetration strategy for a displacement market.
Department of Public Works and Highways
The ministry of construction in the Philippines is the DPWH (Department of Public Works and Highways). It is the only final customer for all national projects and the counterpart (divided in several branches, offices, structures) to handle, to promote and sell infrastructure products successfully in the Philippines. It was not easy to set up the company occurred from the fact that start-ups have problems registering its new company, as balance sheets and history are missing. Therefore, reference was made to the balance sheets and histories of the shareholders.
Convincing of our product
The fact that your product is approved and part of the “blue book” (Standards and Specification Book, a register of all products to be used in public tenders), because it made it easier for us to convince those responsible. Furthermore, our product could convince with the fact that we are using international standards and the approval of BRS. Shop-drawings were needed for all products and the quality control procedure was accredited by the agencies.
Project of the paradise island of Boracay
Krah Pipes Manila Inc. was very lucky to receive the big and famous project for the rehabilitation of the paradise island of Boracay, due to a lot of preparatory work and good relations with DPWH and the construction companies (Bläcker, 2020). To convince the government of the project, it was demonstrated how the product has already been successfully used in other projects. Moreover, many photos were shown, customers from other countries were visited and many details explained.
In Conclusion, the B2A/B2G market requires a long market penetration time and high start-up costs. But large volume business and loyalty will follow, when you could present good reference projects. The example of the Philippines has shown that it is possible to implement a new product on the market, therefore it needs a certain starting period (especially for infrastructure projects). It is important that the methods to penetrate the market are very different from those of the B2B and B2C markets, because it has its own rules and structures that must be respected. But if everything is considered, you can be very successful in the B2G market.
Author: Bernhard Alexander Krah, Faculty of Management, Comenius University, Bratislava
Key Words: Marketing, B2G, B2A, market segments, Business-to-Administration, Business-to-Government, infrastructure, Philippines
Bläcker, L. (2020, May 28.000Z). KRAH – Krah Pipes – Emerging solution for Philippines. https://www.krah.net/de/news/latest-news/481-krah-pipes-emerging-solution-for-philippines
Metropolitan Waterworks and Sewerage System | Corporate Office. (2020, May 28.000Z). http://mwss.gov.ph/
Young, J. (2003, November 24). Monopsony Investopedia. https://www.investopedia.com/terms/m/monopsony.asp
My paper was published in the book PefNet 2020, this book has the following ISBN: 9788075097491
Its like you read my mind! You seem to know a lot
about this, like you wrote the book in it or something.
I think that you could do with a few pics to
drive the message home a bit, but other than that, this is great blog.
An excellent read. I will certainly be back.