Marketing Mix:

Business Markets
CBS
March 2014

Business Market Segmentation

Macro segmentation
Size, geographic location, usage rate, industry, endmarket served, .

Micro segmentation

Purchasing strategies(single source, multiple source)

Structure of DMU( decision making)
Organizational Innovativeness(innovator, follower)
Importance of Purchase( high.low)
Key Criteria( quality, delivery, supplier reputation)
Personal Characteristics( demographics, decision styles)

ExamplesB2B Segmentation

Signode: steel strapping for packing products

Signode moved beyond traditional microsegments
It uncovered 4 distinct buyer segments:
Programmed Buyers
Not price or service sensitive
Purchased in routine manner

Relationship Buyers
Knowledgeable customers
Valued partnership model
Did not push for price or service concessions

Transaction Buyers
Large and knowledgeable buyers
Actively considered price vs service trade of

Bargain Hunters
Large volume buyers
Product and price are very important

Example:B2B Segmentation

Philips Lighting Company introduced Alto

An environmentally friendly bulb
Reduces customers overall costs
Shows environmental concern of user company
Philips targeted CFOs who embraced costs
savings and PROs who saw environmental image
benefits
Result: Replaced 25% of traditional lamps in U.S
stores, schools, offices.

Product Management

B2C Companies like Nestle, Unilever, Pepsi have

developed a host of enduring and profitable
brands.
B2B Firms like IBM, GE, Intel, HP, Cisco, Oracle,
Siemens have built valuable and powerful brands.
Steps for building a strong B2B Brand

Develop a strong Brand Identity and Brand Awareness

Create well defined Brand Positioning and Associations
Measure Brand Response( feelings, excitement, security)
Build Brand Relationships.(resonance)

Product Management

Types of B2B Product Lines

Proprietary /Catalog Products
Ofered only in certain configurations
Example: Bearings, Valves, fasteners
Produced in anticipation of orders

Custom-Built Products
Ofered as a set of basic units with many options
Example: Retail workstations from NCR,ERP solutions
Ofers end-to-end solutions from data warehousing to check out

Custom-Designed Products
Created to meet needs of a specific customer or group of
customers
Example: A power plant, Machine tool, aircraft model

Industrial Services
Capabilities like maintenance, technical services or consulting

Product Management

The Technology Adoption Life Cycle: Classes of

Customers
Technology Enthusiasts(Innovators)
Influence how products are perceived by others in the organization
Good technology/domain expertise
Lack control over resource commitments

Visionaries(Early Adopters)
Access to organizational resources
Exploit innovation for competitive advantage(revolution)

Pragmatists(Early Majority)
Make bulk of technology purchases in organization
Focus on technology evolution

Conservatives(Late Majority)
Price sensitive and pessimistic on tech investments
Purchase technology to avoid being left behind

Skeptics(Laggards)
Die-hard critics of new technology products
Very difficult to convince

Product Management
Strategies for Technology Adoption Life Cycle
How to cross the chasm between visionaries &
pragmatists(time lag and buy in readiness lag)

The Bowling Pin Strategy

Each segment is like a bowling pin
The momentum from hitting one segment carries into surrounding
segments
Lotus Notes: evolution of strategy
Corporate wide communication---business function solutions---customer service function customer included in the Notes Loop

The Tornado Strategy

Focus on product leadership& operational excellence in
manufacturing and distribution.
HP Printers Business: Just ship---extend channels----drive to next
lower price point

The Main Street Strategy

Value based strategies for specific end user segments.

Supply exceeds demand: need for niche specific extensions
HP: portable printer for space constrained users
HP: high performance color printer for commercial flyers

Bowling Pin Strategy

Overcome chicken and egg problem

Attracting users when you start with zero content
Find a niche where you can easily overcome this
problem and then hop to other niches/broader
markets
Facebook executed the Bowling Pin Strategy

Started out at Harvard

Got the first 1000 users at Harvard
Spread to other colleges
Went to the general public
A good niche has to be a true community

Tornado Strategy

Many high-tech products qualify as discontinuous

innovation
Paradigm shock(PC replacing a typewriter)
Application Breakthrough( voice recognition for service
personnel)
For discontinuous innovation there is a chasm(gap) in
customer demand
Technologies stuck in the chasm: AI, Electric car, RFID,
..
Focus on 1 segment and become a gorilla
Develop and dominate other segments
Then the tornado starts and destroys the old technology
and establishes the new one
Examples: spreadsheets, Windows, microprocessors

Main Street Strategy

Mass Market Stabilizes

New product and infra in place
Price decline in standard product
Some conservative users look for value added
extensions with additional benefits
Add on products should command a price
premium
Examples:
Printing Machine with auto changeover add ons
Copier Machine with add on productivity features

Exercise

United Technologies Corporation(UTC)

provides a broad range of high-tech
products and support services to the
building systems and aerospace
industries. Go to http://www.utc.com and
identify UTCs major product lines.

Channel Management

Direct Channels
Use of own sales force

Indirect Channels
Industrial distributors
Used where markets are fragmented & dispersed
Number of items purchased in 1 transaction

Integrated Multi-Channel Models

Coordinate activities of multiple channels

Call centre, web, field sales rep, channel partners
Used to serve customers in a particular market.
Focus on touch points and use of CRM systems

Channel Management

Participants in the Business Marketing

Channel

General-Line Distributors
Specialist Distributors
Combination Distributors
Sales Representatives
Commission Agents

Channel Management

Channel Functions in alignment to

customer needs

Provide Product Information

Product Customization to meet unique needs
Product Quality Assurance(Reliability, Integrity)
Order Size
Meet need for Assortment/Range of Products
Drive Product Availability
Facilitate After Sales Service
Logistics support

Exercise

Sysco Corporation is a large distributor of

food and food related products to the food
service industry. The Company provides its
products and services to 415,000 customers
including restaurants, educational & health
care facilities, lodging establishments and
other customers. It generates sales of $ 25
billion annually and has 50,000 employees.
Go to http://www.sysco.com and identify
some of the services Sysco provides. What
kind of channels could Sysco be using?

Pricing for Business Markets

Acquisition
Costs +

Possession
Costs +

Usage Costs
=

Price

Interest Cost

Installation
costs

Paperwork cost

Storage Cost

Training Costs

Transportation

Quality Control

User labor costs

Order
Expediting cost

Taxes &
Insurance

Replacement
costs

Product
Obsolescence
Evaluation costs

Repair Costs

Error/Rework in Handling Costs

shipping/deliver
y

Disposal Costs

Total Cost in
Use

Steps in Price Setting for Business

Markets
Set strategic
pricing
objectives
Demand
Estimation
& Estimating
Elasticity
Determine CostVolume
relationships
Examine
competitor
Prices and
strategies
Set the Price level

Some examples

Sonoco,a packaging supplier provided a flexographic

printed film for packaging snack foods for Lance,a
FMCG Company. This reduced costs for Lance(cost
driver)& increased sales by increasing visual
appeal(revenue driver)
A new surgical product reduced the length of a
surgical procedure from 55 minutes to 40 minutes.
This released capacity in operating rooms and
helped optimize schedules. This helped in value
based pricing.
Sealed Air Corporation supplied protective packaging
for heavy items with long shipping cycles. It could
command a pricing premium in this segment.

Competition based pricing

Hypercompetitive rivalries
Intel disrupts equilibrium in microprocessor market
HP drives printer business by hitting lower price
points

Gauging competitive response

Examine cost structures of competition(annual
reports)
Examine position in learning curve
Responding to price attacks

Position in Product Life Cycle

Skimming(for new distinct vale added products)
Penetration Pricing(for mature products)
Product Line considerations

Exercise.

Hill-Rom is a leading B2B firm that

dominates a niche in the healthcare
industry. Go to http://www.hill-rom.com
and describe the product and services it
ofers. Describe how these products and
services will reduce the total cost in use
for a hospital

Advertising & Promotion for Business Markets

Direct Mail
Trade Shows
On-Line Advertising
Business Publications
Interactive Marketing Communications
Print Advertising-others

Exercise

Intuit In, a leading provider of software for

SMEs created a web site to help these
SMEs develop customized jingles. Go to
http:// thejinglegenerator.com and give an
assessment of this on line initiative