Todays marketers face seven important business marketing challenges.

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B2B Marketings

Balancing Act
By Ralph A. Oliva and Bob Donath
needed to meet them. But which challenges are the most pressing across all B2B markets, now and for the rest of this decade? Which skills should business marketers master to meet those challenges? What kinds of knowledge should receive the most attention from marketing trainers, educators, researchers, and marketing managershoping to improve overall performance? According to industry-experts and marketer respondents comprising the largest network of its kind, gaining deep insight into customers real, often inexpressible needs, is the greatest challenge confronting the business marketing function now and over the next three years. Identifying new opportunities for organic business growth is the second most critical task. Those are among the topline conclusions from the B-to-B Marketing Trends 2010 Study, the latest in a biennial series of surveys conducted by the Institute for the Study of Business Markets (ISBM).

usiness marketers face a wide range of persistent challenges in creating and managing competitively superior offerings, often in diverse markets spread around the globe. Individual company strengths, market conditions, and the changing buying patterns of customers determine each marketers most critical challenges and the capabilities

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EXECUTIVE

Knowing the most important challenges B2B marketers face now and through the end of the decade allows marketing managers and the academic research and consulting communities that serve them to improve marketing performance where it will count most. According to the newly

briefing

released B-to-B Marketing Trends 2010 Study by the Institute for the Study of Business Markets, seven critical issues will top the list of importance for the next three years.

Study results suggest that business marketers still need to improve their performance on several of the most basic elements of their craft. According to the study, these are the top seven challenges facing business marketers: 1. Understanding deep customer needs in new ways. 2. Identifying new opportunities for organic business growth. 3. Improving value management techniques and tools. 4. Calculating better marketing performance and accountability metrics. 5. Competing and growing in global markets, particularly China. 6. Countering the threat of product and service commoditization by bringing innovative offerings to market faster, and moving to more competitive business models. 7. Convincing c-level executives to embrace the marketing concept and support robust marketing programs. The Trends 2010 Study is the sixth biennial survey of business marketing issues and concerns produced by the ISBM, a research and management centersupported by 70 member corporations and headquartered at Penn States Smeal College of Business. The survey process begins with an open-ended online poll of a select panel of key marketing informants: corporate, research and academic thought leaders who work with ISBM worldwide. ISBM uses results of that qualitative first phase to design a broader quantitative online survey of all managers in ISBMs extensive database of B2B marketers. In mid-2007, researchers asked panelists in the qualitative study phase to discuss their top of mind thoughts about the toughest challenges confronting business marketers through 2010, the professional capabilities that marketers will need to meet those challenges, and the companies that best do so now. ISBM and one of its member firms, HSR Business to Business (Cincinnati, Ohio) are disseminating study results to all business marketers. The results of this study in turn help to shape the B2B marketing agendas of academic research, consulting and training that drive knowledge, learning, and practice in the field.

quently reveals the opposite. They often suffer from a depth deficit by failing to think deeply enough about customers: their true motivations, how they actually perceive value in their buying options and the supplier capabilities and strategies that will influence them the most. For example: Our marketing teams have an abundance of superficial insights, a newly appointed chief marketing officer complained to a study panelist. They are some of the best superficial insights in the world. What we also have in abundance are vacuums of real thinking which [the teams] gloss over by adding still more superficial thinking to our knowledge base. Survey respondents said that understanding what customers really need as individuals and as organizations persists as the premier challengea fundamental obligation of business marketing still unmet. Often, customers themselves cannot articulate their deeper needs, much less identify the hidden value drivers that resonate best with them. Business buying is a complex process involving multiple decision makers, particularly when the risk of choosing the wrong supplier is high. (See Exhibit 1.) Marketers can win competitive advantage by becoming especially astute at intimately understanding customers and the environment in which they are involved: their

Exhibit 1
B to B value across the buying center
Benefit stack
Typical customer benefits offered
Highly competitive prices and quality Manufacturing plants on four continents Internet-based order placement, tracking and billing system 24/7 customer response facility with radio links to trucks Customized manufacture and delivery of product to meet plants daily needs Sunday, holiday and 24/7 delivery when required Just-in-time delivery

Decision maker stack

Typical purchase team members
Warehouse manager Purchasing manager Logistics officer Maintenance manager Chief marketing officer CFO Supply chain head COO CEO (on occasion)

1. Deep Customer Knowledge

Although industrial sales and marketing people routinely claim that they know their customers, close inspection fre26

Seller
Reprinted with permission of Harvard Business Review, September 2005.

Buyer

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needs, concerns, desires, attitudes, behavior, etc., one study respondent commented, citing the goal of ultimately being able to tease out rare and valuable insights. Other panelists praised the ability to truly make the connection between customer needs and the core competency of the enterprise and understanding customers as rational, emotional and organizational entities with noneconomic relationship values. Importantly, panelists often blamed marketers overreliance on rudimentary research techniques. Companies need to go beyond traditional market research to gain inherent product and process understanding, according to one respondent. Another called for possibly blending ethnographic and quantitative perspectives. At ISBM, we see our members increasingly using sophisticated research techniques that are better known in businessto-consumer marketingsuch as conjoint and tradeoff analyses, choice modeling and other statistical tools. On the horizon, nondirective probes such as the ZMET methods (Zaltman Metaphor Elicitation Technique) of Olson Zaltman Associates promise deeper insight to customer needs and behaviors. Theres a proven, more basic approach to customer understanding, however, although too few marketers and even field salespeople roll up their sleeves, get their hands dirty and study how customers actually use their products. Visiting business customers facilities to see how they wring economic value from their purchasesincreasing their own profit in the value chainprovides business marketers with a unique advantage over their consumer-oriented counterparts. Following even a basic guideline such as the Alcoa Probing Checklist yields robust insights. (See Exhibit 2.) Study panelists gave Google and Boeing the most votes for being customer-savvy leaders. Even so, a leading researcher asserted, No firm I know gets above a B, at least in the business-to-business space.

2. Organic Growth
Business marketers are the managers in companies who should know customers the best. They must lead the charge in their organizations for market sensing and finding, clarifying, and assessing new opportunities for organic growth (profit derived from expanded customer sales). Meeting this challenge requires the capability to generate real market insight about potential opportunities for value creation in their current addressable market the capability to convert insights into integrated and actionable go-to-market choices, a study panelist explained. As the tough economy of 2008 and beyond puts additional pressure on profit margins, meeting this challenge requires a

Companies need to go beyond traditional market research to gain inherent product and process understanding.
view of ones potential market wider than merely ones current product and service user base. Succeeding requires driving profitable organic growth in new global markets as well as in mature local markets, a respondent stated. Panelists gave Google, General Electric (GE), Johnson Controls and Cisco the most votes as leaders in organic growth processes. At GE, for example, where marketing has in recent years led a formal push for $100 million additional revenue from innovation, more than 200 new product projects have been launched as part of GEs Imagination Breakthroughs initiative.

3. Value Management
Citing a challenge that consistently ranks highly in the Trends Study series, respondents said business marketers must build better tools and understanding, for managing value through the value chain and harvesting more profit from pricing. The effective quantification and communication of the value our offerings are able to provide to our customers is the single most critical capability for our commercial team, a panelist explained. Of course, managing value based on intimate knowledge of customers is the heart of business marketing success. Some of the challenges outlined by respondents included: differentiating offers in line with customer strategic initiatives. Value pricing strategy and implementation across multiple regions and cultures. understanding customers perception of value: how to extract, and how to effectively communicate value to customers. how to develop pricing strategies, given the increasing

Exhibit 2
Alcoa probing checklist
I would like to learn more about how youre using my product Inventory Inspections Set-up Added operations Any added parts Special tools Rejects Waste Rework Delays

For each of the above Can I see what youre doing? Why does this take place? What becomes of this work? In general Get on the plant floor Examine the total use platform Learn all you can Funnel information to the right people How much time does it take? How costly is it? Is there a better way?

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transparency of competitive prices in certain markets, and the ability of markets to see price changes almost instantaneously. maintaining, developing and communicating superior value propositions in light of fierce global competition. The playing field has gotten larger, and the players are playing rougher. Customer value management must be a disciplined process, insist ISBM thought leaders James Anderson, Nirmalya Kumar, and James Narus in their new book, Value Merchants: Demonstrating and Documenting Value in Business Markets (Harvard Business School Press, 2007). They explain that a value merchant recognizes the suppliers own costs and the market offerings value to the customer and works to obtain a fair return for both the supplier firm and the customer firm. Significantly, those authors contrast the value merchants success with the shortsightedness of the all-too-common value spendthrift who squanders the superior value of the suppliers market offerings, getting little in return. Survey panelists praised BASF (high-level marketing excellence fast implementation), and Dupont (differentiation through innovation and strong brand position), as well as Unisys, IBM and Google as leading value marketers.

4. Improved Metrics
Harnessing better B2B quantitative tools for performance measurement and accountabilitysuch as calculating the financial return on marketing investmentsis the fourthranked challenge in the latest Trends Study. Better metrics answer the persistent and potentially embarrassing question from the company CEO: What has marketing done for us

lately? One panelist said that demonstrating the profit impact of strategy decisions is critical, particularly in the new marketplace where interactive communication is becoming the primary form of promotion. Business marketers must gain the buy-in of other senior leaderssuch as finance, operations and saleson mutually agreeable marketing performance measurement systems, a chief marketing officer insisted. Among the advanced conceptual frameworks the ISBM has recommended to fine-tune and communicate marketing strategies to senior management, the distinction between long and short return on investment (ROI) horizons developed by Mohan Sawhney of Northwestern University categorizes the organizations goals in its markets. See Exhibit 3.) Sawhney lists critical processes marketers should master and measure to achieve market leadership, asset leadership and thought leadership. (See Exhibit 4.) Panelists identify AON, Cisco Systems, Georgia-Pacific, UPS, FedEx and Google as astute metrics-oriented marketers. At AON, for example, management has brought a sophisticated philosophy of marketing into AON, and has measured and demonstrated significant marketing ROI while outsmarting and vastly under-spending its primary competitor, according to a Trends Study respondent. Cisco applies a refined set of performance metrics to all facets of its channel management and relationship management processes and outcomes.

5. Global Competition
Global competition escalates every year, challenging business marketers in several ways, our experts point out: Selling into expanding markets Protecting intellectual property

Exhibit 3
The long and short of ROI

Understanding culture-based perceptions and customer investment priorities Surmounting energy, environmental, and work force challenges

Thought leadership Shaping markets Changing perceptions

Asset leadership

Market leadership

Generating demand Short Medium Time frame

Source: Mohanbir Sawhney, Kellogg School of Management, Northwestern University. Reprinted with permission.

Long

Global issues increasingly shape domestic landscapes. Globalization erodes barriers between markets as the international vs. domestic marketing distinction disappears, local suppliers compete against offshore vendors having low-cost labor and sometimes questionable product quality, and procurement managers squeeze suppliers for the China price. Marketers must adopt strategic outsourcing and management techniques for building and managing global virtual organizations that span different cultures and economic environments, a respondent explained. And global rivalry, particularly with Chinese and Indian firms, at times requires firms to create a channel to the customer where a channel does not exist as we know it in developed markets. Another panelist asked, As the Chinese industrial base matures, how does this

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play in ones marketing strategy? GE, Honeywell and Parker Hannifin have built infrastru ctures that emphasize global B2B marketing, several panelists said. But most respondents arent as enthusiastic. As one put it, I cant think of any one firm with real answers in this area. Said a market researcher, I have been in 11 countries so far this year. Im still looking for one or two companies that understand the present and emerging marketplace. Phrases such as old-line thinking, less relevant organizational stru ctures, and hopelessly outdated planning and implementation pepper respondent comments about American marketing skills. The worst part is, marketers dont want to changeor a re afraid to change, one respondent contended. There is a lack of foresight at the top, and lethargy in the middle.

Moving Targets for Marketers

ISBM is a research center dedicated to B2B marketing, headquartered at the Smeal College of Business at Penn State University. Networked with leading executives, researchers and educators in business marketing throughout the world, ISBM is supported by 70 member corporations, with most being Fortune-500 sized. Founded in 1983, ISBM expands research and teaching in B2B marketing and sales in academia, and improves the practice of B2B marketing and sales for member firms through conferences, education courses and member networking. Seeking guidance for their own planning a decade ago, members asked ISBM to compile expert opinion about the most pressing challenges facing the business marketing function in coming years. ISBMs Trends 2010 Study is its sixth biennial review of those challenges. The main data underlying all Trends Study reports are compiled from an open-ended qualitative poll of marketing experts from corporate, academic, and consulting venuesthought leaders who regularly collaborate with ISBM. Although a number of key marketing issues rank highly study after study, their relative importance changes over time, reflecting the contemporary economic and market context of a particular survey. Emphasis on innovation in discerning new customer need and driving growth through uncertain markets in the 2010 study reflects concern over the tight credit and weak customer spending conditions expected in 2008, for example. In ISBMs first Trends Study in 1997-1998, conducted during years of economic expansion, managing the marketing function had been the respondents primary concern: establishing better working linkages and connections between marketing, product management and sales. Global marketing ranked second at that time, the response influenced by rapidly expanding international markets, more foreign competition in U.S. markets, and growing European integration. At that time, the World Wide Web was still beginning to emerge as a marketing tool in business markets.

6. Innovation vs. Commoditization

Maintaining differentiated value propositions based on technical and business process superiorities often proves fleeting in the Internet age. The pressure to innovatenot only by upgrading existing offerings, but also by inventing genuinely new forms of customer value deliverychallenges all business marketers. Except for firms that are able to sustain lowest-cost commodity production, innovation management, differentiation and speed-to-market are competitive essentials requiring what one panelist called disciplined processes [for] portfolio management and developing consensus in a decentralized organization quickly. Another said, marketers must become the networked champions of innovation.

Exhibit 4
The three marketing horizons
Dimension Horizon 1: Generating demand
Drive revenues and market share Effective marketing communication Revenue impact Outbound marketingsales as key interface

Horizon 2: Changing perceptions

Change customer perceptions Compelling offerings and value propositions Perceptual impact Inbound and outbound marketing engineering and sales Corporate advertising, PR, broad customer connection Awareness, image perceptions, consideration

Horizon 3: Shaping arenas

Shape creation of new markets and ecosystems A compelling vision of the future ecosystem Thought leadership impact Entire ecosystem partners, customers, suppliers, influencers Vision marketing experience prototyping evangelism, AR/PR white papers Perceived thought leadership in emerging categories and markets

Two years later, in the Trends 2000 Study, panelists cited mastering and managing the strategies and tools of e-business as the top challenge facing business marketers. By that time, new economy aspirations dominated business press headlines. The advancing information technologies of that day also influenced the experts choice for the second challenge: Driving better decisions through better customer and market information management. In the next biennial study, respondents confronting the turbulence following the dot-com crash and subsequent economic slowdown emphasized achieving profitable growth as the top concern. Second was the challenge of proving the investment value of marketing. Since 2005 and through 2007, a period of upturn with uncertainty, Trends Study respondents cited the creation of better processes and tools for understanding customer needs. With economic swings, greater variability, and uncertainty shaping up to be more pronounced in 2008 and beyond, acting on customer knowledge remains the top challenge in the experts eyes. Growth, particularly the organic kind thats fully a function of marketing performance, moved to second place in the Trends 2010 Study. Ralph A. Oliva

Business goal Marketing deliverables Business impact Functional interfaces

MarComm channels

Trade shows, webinars, direct sales, demos, trials, search marketing Pipeline velocity and volume, market share revenues

Success metrics

Source: Mohanbir Sawhney, Kellogg School of Management, Northwestern University. Reprinted with permission.

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Ideation and invention, the appropriately dubbed fuzzy front end of innovation, are just part of meeting the challenges of sustaining competitiveness and avoiding commoditization. Investing in the right development projects and platforms hinges on a sound development plan for markets, technologies and specific offerings. Inadequate planning generates greater costs, product liability and warranty problems, and even product failure, according to renowned new product marketing expert Robert G. Cooper of the Hamilton, Ontariobased Product Development Institute. Prioritize and focus, insists Cooper, an ISBM senior fellow. Build in quality of execution at every stage. The best way to save time is by doing it right the first time, he and Scott J. Edgett advise in their new book, Generating Breakthrough New Product Ideas: Feeding the Innovation Funnel (Product Development Institute, 2007). In todays networked world, innovation solutions often arise outside the firm itself. Sawhney co-authored a new book with Satish Nambisan, The Global Brain: Your Roadmap for Innovating Faster and Smarter in a Networked Wo r l d (Wharton School Publishing, 2007), which explores distributed innovation innovation initiatives that are spread across a diverse network of partners. They report the actual experiences of members of the Kellogg Innovation Network, a forum for senior innovation managers at large companies, which Sawhney directs. The authors describe four models of network-centric innovation Orchestra, Creative Bazaar, Jam Central, and MOD Stationstating that managers need network-centric strategies and best practices that are relevant to their business contexts so they could harness the unbounded creative potential that lies outside their four walls. Asked to pick exemplary innovators, Trends Study respondents cited Air Products (has kept up with the technology and used it to their advantage), Boeing (seems to have hit a home run with the 787), Hewlett Packard, GE and Google.

hero on the front page of the Wall Street Journal last year. He recounted how he accelerated profits dramatically by instituting value-based segmentation and pricing for many customers. For other firms to follow that example, marketers more than ever will have to be able to convince their leadership to invest in new ideas, business processes and strategies that when combined effectively achieve great upside growth potential, wrote a Trends Study participant. Not only CEOs, but chief financial officers (CFOs) too play a pivotal internal customer role in the marketing of marketing in an organization. Demonstrate that marketing investments do deliver a competitive return on assets and enlist CFOs as allies in this thinking, a study panelist recommended.

Master Key Fundamentals

ISBMs B-to-B Marketing Trends 2010 Study identifies key issues facing the entire business-to-business marketing community. As in past years, it will influence academic researchers choosing areas of inquiry; consultants and training companies developing new programs for clients; and most important, marketing organizations investing in the tools and skills that help them meet their goals. The thought leaders and marketing experts responding to our latest study suggest that mastering key fundamentals should be a top priority for many firms in the difficult global economy of 2008 and beyond. For many marketers, however, study results tell just part of the story. For example, significant challenges continue in e-commerce, the explosion of new media and new customer behaviors abetted by the Internet. Branding continues to become ever more essential to break through clutter and fight commoditization in business markets. So does the ability to innovate with channel partners and co-develop with customers. Social, political and environmental conditions will continue to shift, creating new opportunities and obsolescing some established marketing practices. The very structure of corporate organizations deserves extra scrutiny. For example, what justifies continuing to separate sales, pricing and innovation functions from marketing management? Mastering the seven most important current challenges that we have identified is just the starting pointthe table stakes, so to speak, for marketing success in the years to come.

7. C-Suite Support
In the traditional industrial company built on products, operational efficiency and an aggressive sales force, marketing is a support functionrather than the driver of the firms strategic approach to its markets. To completely break with that outdated image and win their appropriate place at the corporate management table marketers need more than just return-on-investment data and sophisticated performance metrics. Its also a matter of communication, with the burden on marketers. We dont speak the same language as senior management, so there is little trust and even less belief in our capabilities. If we dont find a better way to communicate the value of marketing and communication, none of the other factors will matter, a study respondent reasoned. Fortunately, progressive c-suite executives do get it. For example, Donald Washkewicz, CEO of ISBM member firm Parker Hannifin, became something of a value marketing folk
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About the Authors

Ralph A. Oliva is executive director of the ISBM and professor of marketing at the Smeal College of Business, The Pennsylvania State University, in University Park, Penn. Previously, he managed global marketing communications for Texas Instruments. He may be reached at roliva@psu.edu. Bob Donath is a business marketing communications consultant based on Cape Cod, in East Orleans, Mass. He may be reached at bobdonath@earthlink.net.

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