Business-to-Business marketing

Business marketing strategy Antti Sihvonen

Where did (marketing) management and strategy come from?

Industrialization

Increasing bureaucracy

Joint-stock companies Increasing complexity

Notion of professionalism Warfare

What is strategy?

Common ways of defining strategy

1.  Strategy is a plan, a "how," a means of getting from here to there

2.  Strategy is a pattern of actions over time

3.  Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets

4.  Strategy is perspective, that is, vision and direction

(Mintzberg 1994)

Why the role of marketing is important?

•  According to Hutt & Speh (2010, p. 116) effective business strategies… …are responsive to market needs …exploit the special competencies of the organization …use valid assumptions about environmental trends and competitive behavior à In many cases, B2B marketer has the best knowledge of these!

The hierarchy of strategies and marketers role in strategy development

Why? Marketers role

Assess market attractiveness"of the firm, promote a customer"

orientation within the firm "Defines the businesses "

in which company competes"

CORPORATE STRATEGY

Provides a detailed and complete analysis of "customers and competitors and "

the firm’s distinctive skills and resources" for competing in particular market segment(s)"

Defines how a firm competes"in a given industry"

BUSINESS-LEVEL STRATEGY

Defines how "resources can be used "

most efficiently and effectively"

FUNCTIONAL STRATEGY

Allocates and coordinates marketing "resources and activities to achieve"

the firm’s objective within"a specific product market"

(Webster, 1992)

Role of marketing strategy

BUSINESS-LEVEL STRATEGY

Overall what the company does?

What corporate divisions do?

What corporate divisions do?

Production strategy

Marketing strategy

Sales strategy

•  Within the broad organizational framework functions compete " with each other for resources"•  Each function is directed towards sub-goal attainment "

CORPORATE STRATEGY

BUSINESS-LEVEL STRATEGY

FUNCTIONAL STRATEGY

Perspectives to strategy

Business marketing strategy (“view of Hutt and Speh 2010”)

•  Based on positional advantage •  STP and 4 P’s as the tools to

find a position •  Challenging in B2B as offers are

more tailored and there are fewer customers

•  What alternative ways do we have for doing strategy?

Product Price

Place Promotion

Segmentation

Targeting

Positioning

Ways to approach strategy (Eisenhardt & Sull 2001)

Position-based strategy

•  Occupying a distinct position in the market is the basis of competitive advantage

•  New customers will buy from you as they have few choices

•  Ongoing relationships are protected fervently

•  STP & 4P’s and Porter’s five forces model focus on this

•  Works in a stable market

Threat of new entrants

Bargaining power

of suppliers

Bargaining power

of customers

Threat of substitute products or services

Rivalry among existing firms

Porter’s 5 forces model

Position-based strategy in action

•  Microsoft can be thought of as having been a position-based company as: –  Windows and Office were the

standard software for PC computers

–  At some point there were few choices

–  Emphasis on internal compatibility

•  Nowadays they are more diverse than that though

Resource-based strategy

•  Controlling strategic resources is the basis of competitive advantage

•  Resource picking accurate value forecasting

•  Key resource have to be: –  Valuable –  Rare –  In-imitable –  Non-substitutable

•  Use of key strategic resources to create value for customers

•  Works in stable markets

Resource-based strategy in action

•  Background in naval high-pressure hydraulics

•  Nowadays known for high-pressure sprinkler systems

•  The central innovation of the company rose from a customer need matched with the company resource base

Strategy as simple rules (Eisenhardt and Sull 2001)

•  Should strategy be complex in the first place?

•  Simple rules are derived from heuristics and should be followed almost religiously –  This creates consistency and boundaries for action

•  Simple rules emerge from experience, especially mistakes •  Optimal amount of rules is somewhere between two and

seven •  Competitive advantage rises from the difference that the

rules generate

What kind of rules are we talking about? (Eisenhardt and Sull 2001)

Product evaluation Ideation of new products

One way to operationalize simple rules: Case Vaisala

Product evaluation

Competition evaluation

Market evaluation

Product policy evaluation

Risk evaluation

Commercialization

Proliferating new product search

A set of rules used by top management guided evaluation of product ideas

Planning and implementing strategy

Planning business marketing strategy

•  There are various ways to plan a marketing strategy in B2B markets –  Internet is full of different planning processes and plan formats!

•  Regardless of planning process, firms that can meaningfully answer following three questions will have constructed a marketing strategy that is worth pursuing:

1.  What do we know? •  Review past performance •  Analyse the value of our product offering •  Analyse possible market segments for our product

2.  What do we want to accomplish? •  Set goals (long-term) and objectives (short-term) à KPIs! •  Find a segment of particular interest

3.  How will we do it ? •  Develop an action plan

(Anderson & Narus, 2004)

Planning business marketing strategy: Challenges

•  60-80 % of companies fall short of the success predicted from new strategies!

•  “Most companies’ underperformance is due to breakdowns between strategy and operations” (Kaplan & Norton, 2008, pp. 3) –  Often breakdown occurs right at the beginning (Companies fail to

translate their grand strategy into operation) –  For instance, what does this mean in action: “We are enabling

systems of engagement for enterprises. And we are leading by example” (One pillar of strategy for one massive B2B company)

(Kaplan & Norton, 2008)

1) Develop the strategy"

2) Translate the strategy"

3) Plan operations"

"Execute processes"

and initiatives"

4) Monitor and learn"

5) Test and adapt the "strategy"

Planning business marketing strategy: The management system

(Kaplan & Norton, 2008)

The management system (1/5): 1. Develop the strategy

•  The management system begins with articulating the company’s strategy –  Agreement of company’s purpose (mission), its aspiration of future

results (vision) and the internal compass that will guide its actions (values)

–  Strategic analysis •  Commonly used tool(s): PESTEL, SWOT etc.

–  Strategy formulation

(Kaplan & Norton, 2008)

The management system (2/5): 2. Translate the strategy

•  Once strategy has been developed, managers need to translate it into objectives and measures (key performance indicators, KPIs!) –  Mapping strategic objectives and measuring them

•  The chain starts with long-term financial objectives (in corporate level) and then links down to objectives for customer loyalty etc.

•  Commonly used tool(s): Strategy map, Balanced scorecard

(Kaplan & Norton, 2008)

The management system (3/5): 3. Plan operations

•  The company next develops an operational plan that lays out the actions that will accomplish the strategic objectives –  Process improvements

•  Companies must enhance the performance of their ongoing processes (speed, quality, cost..)

•  What do we need to measure in process/person level (in align with KPIs of the strategy)?

–  Sales plan –  Resource capacity plan –  Budgeting

(Kaplan & Norton, 2008)

The management system (4/5): 4. Monitor and learn & 5. Test and adapt

•  Three types of meetings form the feedback and learning component of the management system: 1.  Operational review (Monitor and learn)

•  What: Dashboards for KPIs •  Who: Departments/business functions •  When: Daily, weekly or monthly •  Focus: Identify and solve short-term issues and promote continuous improvement

2.  Strategy review (Monitor and learn) •  What: Strategy map/balanced scorecard reports •  Who: Senior management •  When: Monthly •  Focus: Implement strategy and fine-tuning

(Kaplan & Norton, 2008)

The management system (5/5): 4. Monitor and learn & 5. Test and adapt

•  Three types of meetings form the feedback and learning component of the management system: 3.  Strategy testing and adapting

•  What: Analytic studies for strategy, external and competitive analyses •  Who: Senior management, business unit heads •  When: Annually or quarterly •  Focus: Test and adapt new strategies, incrementally improve or transform strategy

(if needed), authorize spending for strategic initiatives

(Kaplan & Norton, 2008)

Strategy and business models

Strategy and business model interface

Strategy does not operate in a vacuum

•  Business model defines the company as a system

•  Strategy defines how this system faces the market

•  Strategy therefore has to be derived from/matched with the business model

Business model"

Strategy"

Business model concept (1/5): Overview

Customer interface"""""""

Core strategy"""""""

Strategic resources"""""""

Value network"""""""

Efficient / Unique / Fit / Profit boosters "

Customer benefits Configurations Company boundaries

Fulfillment and support Information and insight Relationship dynamics Pricing structure

Business mission Product/Market scope Basis of differentiation

Core competencies Strategic assets Core processes

Suppliers Partners Coalitions

(Hamel, 2000)

Business model concept (2/5): Customer interface

Links the core strategy of the company to the customer interface 1.  Fulfillment and support

–  Channels used to reach customers –  Level of service support provided

2.  Information and insight –  Creation and use of market information

3.  Relationship dynamics –  Nature of interaction with customers

4.  Pricing structure –  What kind of pricing choices can be implemented (Hamel, 2000)

Business model concept (3/5): Core strategy

Determines how the firm chooses to compete

1.  Business mission –  Defines what a company does and how it is done

2.  Product/market scope –  Defines the domain in which the firm competes

(segment, channel, technology etc.)

3.  Basis for differentiation –  What the company does differently in comparison

to competitors and how it creates value (Hamel, 2000)

Business model concept (4/5): Strategic resources

Determines the central assets of the company

1.  Core competencies –  A set of skills that deliver value to customers

2.  Strategic assets –  Tangible assets that enable exercising competencies

3.  Core processes –  The processes that enable operationalizing

competencies and assets into tangible outputs (Hamel, 2000)

Business model concept (5/5): Value network

Complements and extends the immediate competence and resource base

1.  What other networks actors enable us to do? –  Who do we collaborate with and what do they bring to the table

2.  What other network actors could enable us to do in the future? –  Who could we collaborate with and what could they bring to the table

(Hamel, 2000)

3 things to remember after this class

1.  What is strategy and what is the role of marketing in it

2.  Understanding alternative perspectives to strategy 3.  Understanding planning and implementation of strategy

Thank you – Any questions?