Business to Business Marketing

Yogesh Baviskar

Subject Outline:- B2B Marketing

1. 2 3 4 5 6 7 8 9 10 11

Introduction to B2B Market Organizational Buying Behavior Relationship Management Segmenting the Business Market Managing Products & New Innovations Management in B2B Market Managing Services in B2B Market Price Management in B2B Market Channel Management in B2B Market E-Commerce in B2B Market Business Marketing Communication 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 Market Characteristics B2B Market
Geographically Concentrated Relatively Fewer Buyer

Consumer Market
Geographically Disbursed Mass Market

Product Characteristic

Technical Complex Customized

Standardize

Service Characteristic

Service , timely Availability extremely Somewhat Important Important

Buying Behavior

Involvement of Various functional area Involvement of family members from both the ends Purchase Decisions are performance based and rational Technical Expertise Stable Interpersonal relationship Purchase decisions are mostly based on Physiological /social/psychological needs Relatively less technical expertise is required Non- Personal relationship

Industrial Vs Consumer Marketing

Areas of Difference Channel Characteristic Industrial Market
More Direct Fewer Intermediaries

Consumer Market
Indirect Multiple layer of Intermediaries

Promotional Characteristic

Emphasis on Personal Selling

Emphasis on Mass Media (Advertising)

Price Characteristic

Competitive Bidding and Negotiated Prices List Price for Standard Products

List Price or MRP

B2B Distribution Channel Characteristics

Manufacturer

Company Sales Force

Representative Agency

Distribution Dealer

Customer

Customer

Customer

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

Material & Parts

Raw Materials
Manufactured Materials Component Parts Subassemblies

Iron ore, Crude oil, fruits, fish Acids, Fuel oil, Steel , Chemicals Gauges, TV tubes, Tyres, Exhaust Pipe in Motor Cycle

Light equipment/ Accessories Installation or Heavy Equipments

Hand tools, Dies, Jigs

Capital items

Machine Tools, Furnaces

Plants & Building

Plants, Office Building Lubricants, Fasteners, paints , Electrical Items Legal, Auditing, Advertising, Courier, Market Research

Supplies Supplies & Services Services

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 Customers
Industrial customers Government Institutes 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

3.The Nature of Industrial Buying and Buying Behavior

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

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

Straight Rebuy

Modify Rebuy

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

New Task

The buyer purchase product or service for the first time

3.The Nature of Industrial Buying and Buying Behavior Forces Shaping Organizational Buying Behavior
Environmental Forces

Organizational Forces

Group Forces

Individual Forces

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 of Product/ Services ( Could be Initiator) Individuals who could influence the purchasing decision ( Technical / Design Engineers / External consultants ) Individuals who control the flow of information to the members of buying center Individuals or group of people who make the actual purchase decisions about the product or services

User:Influencer :Gatekeepers:Deciders:-

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 Availability of Alternative Supply Market Dynamism Importance of Purchase Complexity of Purchase Many Alternative Stable Low Low Collaborative Exchange Few Volatile High High High Extensive

Information Exchange Low Operational Linkage Limited

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

Characteristics of High Vs Low Cost-to-Serve Customers High Cost to Serve Order Custom Products Order Small Quantities Unpredictable Order arrivals Customized delivery Frequent Changes in delivery requirement Manual Processing Large amount of presales support Require company to hold inventory Longer credit periods Low Cost to Serve Order Standard Products Order Large Quantities Predictable order arrivals Standard Delivery No changes in delivery requirement Electronic Processing Little to no presales support Replenish as produced Payment on time

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 Characteristics of Buying Behavior Size Geographical location Usage rate Structure of procurement Small. Medium & Large ( Based on Sales or o. Of Employees Region , Industrial zones Non user, Light user, Moderate user, heavy user Centralize , Decentralize Breakdown of Segments

Product/ Service Application End market serve Value in use As per Product/Service High , Low

Characteristics of Purchasing Situations Types of buying situations Stage in purchase situation New task, Modified task, Straight Rebuy Early stages, late stages

Micro Segmentation
Variable of Segmentation Key Criteria Purchase Strategies Structure of decision making unit Importance of purchase Attitude towards vendor Organizational innovativeness Personal Characteristics of Top Management or Decision makers Demographics Decision Style Risk Confidence Job responsibility Age, Educational background Normative , conservative, mixed mode Risk taker, Risk avoider High, low Purchasing, production, engineering High , Low Favorable, unfavorable Innovator, Follower Breakdown of Segments Quality, Delivery, supplier reputation Optimizer, Satisfier

Managing Products & New product develofor B2B Marketing

Core Competencies and Selected Products at Canon

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 customers perspective and include both technical and organizational skills.
Developed by Cool Pictures and MultiMedia Presentations

Three Tests to Identify the Core Competencies

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 firms end products. Third, a core competence should be difficult for competitors to imitate.

Sustaining the Lead . . . Three Questions

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?

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 firms quality performance relative to competitors and examines customer perceptions of the value of competing products.

What Value Means to Business Customers

Core Benefits Customer Value Add-on Price Sacrifices 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. 47.

1. Proprietary or catalog products

2. Custom-built products

Four Types of Industrial product Lines

3. Custom-designed products

4. Industrial services

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 products 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.

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

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

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 firms resources and skills in marketing.

Four Strategic Factors For New Product Success

Technical synergy concerns the fit between the needs of the project and the firms 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 nearestneighbor export markets.

Technology Adoption Cycle

Innovators These are the people who are fundamentally committed to new technology on the grounds . Early Adopters These 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 Majority These 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 Majority These 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. Laggards This 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 Strategy With 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