Business to Business Marketing

Yogesh Baviskar

Subject Outline:- B2B Marketing

1. Introduction to B2B Market

2 Organizational Buying Behavior

3 Relationship Management

4 Segmenting the Business Market

5 Managing Products & New Innovations Management in B2B Market

6 Managing Services in B2B Market

7 Price Management in B2B Market

8 Channel Management in B2B Market

9 E-Commerce in B2B Market

10 Business Marketing Communication

11 Case Studies & Further Discussion

Top B2B Brands:-

Business to Business Marketing :-

• Definition:-

“Business Marketing is the practice of individuals, or organizations, including commercial businesses, governments and institutions, facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations”

Industrial Vs Consumer Marketing

Areas of Difference B2B Market Consumer Market

Market Characteristics Geographically Concentrated Geographically Disbursed

Relatively Fewer Buyer Mass Market

Product Characteristic Technical Complex Standardize

Customized

Service Characteristic Service , timely Availability extremely Important

Somewhat Important

Buying Behavior Involvement of Various functional area from both the ends

Involvement of family members

Purchase Decisions are performance based and rational

Purchase decisions are mostly based on Physiological /social/psychological needs

Technical Expertise Relatively less technical expertise is required

Stable Interpersonal relationship Non- Personal relationship

Industrial Vs Consumer Marketing

Areas of Difference Industrial Market Consumer Market

Channel Characteristic More Direct Indirect

Fewer Intermediaries Multiple layer of Intermediaries

Promotional Characteristic Emphasis on Personal Selling Emphasis on Mass Media (Advertising)

Price Characteristic Competitive Bidding and Negotiated Prices

List Price or MRP

List Price for Standard Products

B2B Distribution Channel Characteristics

Manufacturer

Company Sales Force

Representative Agency

Distribution Dealer

Customer CustomerCustomer

Characteristics of B2B Demand

• Derived Demand:-– The demand for a good or service that results from the demand for another good or service.

– Ex.:- Pig Iron ---Steel ---Steel Sheets---Automotive part companies--Automobiles--End customer

• Demand Elasticity:-

• Joint Demand:-

- Demand for product or services is interdependent on each other

– Ex:- Coffee Powder, Sugar & Milk in Making Coffee

– Ex:- Software- Operating System, Car & Fuel

2:- Understanding B2B Market & Environment with Buyers Perspective

B2B Customers

B2B Products

Marketing of industrial products to B2B Customers

Purchasing of Industrial Products

Goals of Purchasing

Purchasing Orientations

Buying Orientation

Procurement Orientation

Supply Chain Management Orientation

Purchasing Practices of Industrial Customers

Commercial Business

Government

Institutes

Co-operative

Environmental Analysis:-

Types of Environment Influencing B2B Market

Understanding B2B Market & Environment with Buyers Perspective

2.Understanding B2B Market & Environment with Buyers

Perspective

Supplies

Services

Lubricants, Fasteners, paints , Electrical Items

Supplies & Services

Iron ore, Crude oil, fruits, fish

Material & Parts

Capital items

Light equipment/ Accessories

Subassemblies

Acids, Fuel oil, Steel , Chemicals

Component Parts Gauges, TV tubes, Tyres,

Plants & Building

Installation or Heavy Equipments

Hand tools, Dies, Jigs

Exhaust Pipe in Motor Cycle

Manufactured Materials

Raw Materials

Plants, Office Building

Machine Tools, Furnaces

Legal, Auditing, Advertising, Courier, Market Research

2.Understanding B2B Market & Environment with Buyers Perspective

Goals Of Purchasing Uninterrupted Flow Material

Manage Inventory

Improve Quality

Developing and Managing Supplier relationships

Achieve Lowest total cost

Reduce Administrative cost

Advance Firms Competitive Position

2.Understanding B2B Market & Environment with Buyers Perspective

Purchase Orientation– Buying Orientation

– Procurement Orientation

– Supply chain Management Orientation

Applications of Purchase Orientation to Industrial Customers

Industrial Customers

Supply Chain Management

Procurement

Government as a Customer

Buying Orientation

Institutes

Buying Orientation

2.Understanding B2B Market & Environment with Buyers Perspective

Purchasing Practices of B2B CustomersIndustrial customersGovernmentInstitutes

Cooperative

Environmental Analysis:-

Ecological & Physical

1.Pollution & Conservation of Natural resources 2. Utilities, Manpower & Transportation

2.Understanding B2B Market & Environment with Buyers Perspective

Environment Analysis:- Internal Environment:-

Company Location, R&D Facilities, Production Facilities Human Resource and Image of the company

External Environment:-

Micro Environment :-

Customers & Competitors

Suppliers

Macro Environment:-

Economic

Technological

Government/Political & Legal

Cultural & Social

Investors & NGO

• Organizational Buying Process

• Organizational Buying Situations

• Forces Shaping Organizational Buying Behavior

-- Environmental Forces

-- Organizational Forces

-- Group Forces :-

- Buying Center

-Elements of Buying Center

-- Individual Forces

3.The Nature of Industrial Buying and Buying Behavior

3.The Nature of Industrial Buying and Buying Behavior

Problem Recognition

General Description of Need

Product Specification

Supplier Search

Acquisition & Analysis of Proposal

Supplier Selection

Selection of Order Routine

Performance Review

3.The Nature of Industrial Buying and Buying Behavior

Organizational Buying Situations

The buyer routinely re-orders the same product or service with out any

modification

The buyer purchase product or service for the first time

The buyer wants to modify product specifications, price, service or

supplier

New Task

Modify Rebuy

Straight Rebuy

Forces Shaping Organizational Buying Behavior

Environmental Forces

Organizational Forces

Group Forces

Individual Forces

3.The Nature of Industrial Buying and Buying Behavior

Group Force – Buying Center “Buying Center can be defined as the body of all the individuals and groups participating in the buying decision process and who have interdependent objectives and share common risk”

3.The Nature of Industrial Buying and Buying Behavior

Roles of Buying Center

Initiator :- Recognition of Problem or Need

Buyer :- Obtains the quotation

Supplier evaluation & Selection

Processing purchase order

Expediting deliveries

Implement the purchasing policies of the organization

User:- User of Product/ Services ( Could be Initiator)

Influencer :- Individuals who could influence the purchasing decision

( Technical / Design Engineers / External consultants )

Gatekeepers:- Individuals who control the flow of information to the members of buying center

Deciders:- Individuals or group of people who make the actual purchase decisions about the product or services

3.The Nature of Industrial Buying and Buying Behavior

B2B Buying Behavior Model

4. Buyer Seller Relationship

• Buyer Seller Relationship :- Establish , Develop & Maintain the meaningful relationship with the customer.

• Types of Buyer – Seller Relationship • Transactional Exchange• Collaborative Exchange

– Switching Cost

Managing Buyer Seller Relationship

• Typical Characteristics of Buyer Seller Relationship based on Market Condition and Purchase Behavior

Transactional Exchange Collaborative Exchange

Availability of Alternative Many Alternative Few

Supply Market Dynamism Stable Volatile

Importance of Purchase Low High

Complexity of Purchase Low High

Information Exchange Low High

Operational Linkage Limited Extensive

CRM Strategy

• Determine which type of relationship matches the purchasing situation and supply-market conditions for a particular customer.

• Develop a strategy that is appropriate for each strategy type.

Understanding Customer Profitability

High Cost to Serve Low Cost to Serve

Order Custom Products Order Standard Products

Order Small Quantities Order Large Quantities

Unpredictable Order arrivals Predictable order arrivals

Customized delivery Standard Delivery

Frequent Changes in delivery requirement

No changes in delivery requirement

Manual Processing Electronic Processing

Large amount of presales support Little to no presales support

Require company to hold inventory Replenish as produced

Longer credit periods Payment on time

Characteristics of High Vs Low Cost-to-Serve Customers

Creating a CRM Strategy

Acquire the Right Customer

Crafting the right value proposition for the customer

Design the Best Process to deliver the product /services

Motivating the Employees

Retain the customer

Segmenting the Business Market

Why Segmentation:-

Criteria for the segmentation:-

Measurable

Assessable

Substantial

Computability

Responsiveness

Benefits of Segmentation:-

Concentrate on unique needs of target segment,

Focus on product development,

Develop profitable pricing strategy

Select the appropriate channel

Develop communication and advertising strategy

Variable of Business Market Segmentation:-Macro level segmentation

Micro level Segmentation

Macro Segmentation

Variable of Segmentation Breakdown of Segments

Characteristics of Buying Behavior

Size Small. Medium & Large ( Based on Sales or o. Of Employees

Geographical location Region , Industrial zones

Usage rate Non user, Light user, Moderate user, heavy user

Structure of procurement Centralize , Decentralize

Product/ Service Application

End market serve As per Product/Service

Value in use High , Low

Characteristics of Purchasing Situations

Types of buying situations New task, Modified task, Straight Rebuy

Stage in purchase situation Early stages, late stages

Micro Segmentation

Variable of Segmentation Breakdown of Segments

Key Criteria Quality, Delivery, supplier reputation

Purchase Strategies Optimizer, Satisfier

Structure of decision making unit

Importance of purchase High , Low

Attitude towards vendor Favorable, unfavorable

Organizational innovativeness Innovator, Follower

Personal Characteristics of Top Management or Decision makers

Demographics Age, Educational background

Decision Style Normative , conservative, mixed mode

Risk Risk taker, Risk avoider

Confidence High, low

Job responsibility Purchasing, production, engineering

Managing Products & New product develofor B2B Marketing

• Core competencies are embodied in the superior skills of employees--the technologies they have mastered, the unique ways in which these technologies are combined, and the market knowledge that has been accumulated.

• They focus on the basics of what crates value from the customer’s perspective and include both technical and organizational skills.

Core Competencies and Selected Products at Canon

Developed by Cool Pictures and MultiMedia Presentations

• First, a core competence provides potential access to an array of markets.

• Second, a core competence should make an important contribution to the perceived customer benefits of the firm’s end products.

• Third, “a core competence should be difficult for competitors to imitate.”

Three Tests to Identify theCore Competencies

• How rare is our competence?

• How long will it take our competitors to develop the competence?

• Can the source of our advantage be easily understood by our competitors?

Sustaining the Lead . . . Three Questions

Quality Movement Stages

• Stage one centered on conformance to standards or success in meeting specifications.

• Stage two emphasized that quality was more than a technical specialty and that the pursuit of quality should drive the core processes of the entire business.

• Stage three examines a firm’s quality performance relative to competitors and examines customer perceptions of the value of competing products.

What Value Means to Business Customers

Customer Value

Benefits

Sacrifices

Core

Add-on

Price

Acquisition Costs

Operations Costs

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,”Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.

1. Proprietary or catalog products

2. Custom-built products

3. Custom-designed products

4. Industrial services

Four Types of Industrial product Lines

Steps in the Product Positioning Process

1. Identify the relevant set of competitive products.

2. Identify the set of determinant attributes that customers use to differentiate among options and determine the preferred choice.

3. Collect information from a sample of existing and potential customers concerning their ratings of each product on the determinant attributes.

4. Determine the product’s current position versus competing offerings for each market segment.

5. Examine the fit between preferences of market segments and current position of product.

6. Select Positioning or Repositioning Strategy.

Successful brand management involves developing a promise of value for customers and then ensuring that the promise is kept through the way in which the product is developed, produced, sold, services, and promoted.

How High-Tech Brands Build Equity

New Product Development Process

Successful companies employ a high-quality new product development process--careful attention is given to the execution of the activities and decision points. Benchmarking characteristics:

• The firms emphasized upfront market and technical assessments.

• The process featured complete descriptions of the product concepts, product benefits, positioning, and target markets.

• Tough project go/kill decision points were included in the process and the kill option was actually used.

• The new product process is flexible.

Three ingredients were important here:1. Top management committed the resources necessary to meet

the firm’s objectives for the total product effort in the firm.2. R&D budgets were adequate and aligned with the stated new

product objectives.3. The necessary personnel were assigned and were relieved

from other duties.

Resource Commitments

New Product Strategy

Set aggressive new product performance goal as a basic corporate goal and communicate it to all employees.

Lead user projects are conducted by a cross-functional team that includes four to six managers from marketing and technical departments; one member serves as project leader.Team members typically spend 12 to 15 hours per week on the projects.

The Lead User Method

Four Strategic FactorsFor New Product Success

Product advantage refers to customer perceptions of product superiority with respect to quality, cost-performance ratio, or function relative to competitors.

Marketing synergy represents the degree of fit between the needs of the project and the firm’s resources and skills in marketing.

Technical synergy concerns the fit between the needs of the project and the firm’s R&D resources and competencies.

International orientation--new products that are designed and developed to meet foreign requirements, and that are targeted at world or nearest-neighbor export markets.

Technology Adoption Cycle

• InnovatorsThese are the people who are fundamentally committed to new technology on the grounds .

• Early AdoptersThese are the true revolutionaries in business and government who want to use the discontinuity of any innovation to make a break with the past and start an entirely new future. Their expectation is that by being first to exploit the new capability they can achieve dramatic and insurmountable competitive advantage over the old order.

• Early MajorityThese people make the bulk of all technology infrastructure purchases. They do not love technology for its own sake, so are different from the techies, whom they are careful, nonetheless, to employ. Moreover, they believe in evolution not revolution. they are interested in making their companies' systems work effectively and look to adopt innovations only after they have established a proven track record.

• Late MajorityThese consumers are pessimistic about their ability to gain any value from technology investments and undertake them only under duress -- typically because the remaining alternative is to let the rest of the world pass them by. They are very price-sensitive, highly skeptical, and very demanding. Rarely do their demands get met, in part because they are unwilling to pay for any extra services, all of which only reconfirms their sour views of high tech.

• LaggardsThis group delight in challenging the hype and puffery of high-tech marketing. They are not so much potential customers as ever-present critics. As such, the goal of high-tech marketing is not to sell to them but rather to sell around them.

• The Marketing StrategyWith these customer segments in mind, the typical approach is to seed new products with the innovators so they can help educate the early adopters. When the early adopter's are interested, do everything that is possible to make them happy as they will then serve as references for the early majority which is the group where most of the money is made from a new product or service. Then leverage the success with this large group so that the product matures and stabilizes enough to be of interest to the late adopters. All the while, ignore the laggards and their skepticism.