Business to Business Marketing Yogesh Baviskar

Subject Outline:- B2B MarketingIntroduction to B2B MarketOrganizational Buying Behavior Relationship Management Segmenting the Business MarketManaging Products & New Innovations Management in B2B MarketManaging Services in B2B MarketPrice Management in B2B MarketChannel Management in B2B MarketE-Commerce in B2B MarketBusiness 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 B2B MarketConsumer MarketMarket Characteristics Geographically ConcentratedGeographically DisbursedRelatively Fewer BuyerMass Market

Product Characteristic Technical ComplexStandardizeCustomized

Service CharacteristicService , timely Availability extremely ImportantSomewhat Important

Buying BehaviorInvolvement of Various functional area from both the endsInvolvement of family membersPurchase Decisions are performance based and rational Purchase decisions are mostly based on Physiological /social/psychological needsTechnical ExpertiseRelatively less technical expertise is requiredStable Interpersonal relationship Non- Personal relationship

Industrial Vs Consumer Marketing

Areas of Difference Industrial MarketConsumer MarketChannel Characteristic More DirectIndirectFewer IntermediariesMultiple layer of Intermediaries

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

Price CharacteristicCompetitive Bidding and Negotiated PricesList Price or MRP List Price for Standard Products

B2B Distribution Channel CharacteristicsManufacturerCompany Sales ForceRepresentative AgencyDistribution DealerCustomerCustomerCustomer

Characteristics of B2B DemandDerived 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 OrientationsBuying OrientationProcurement Orientation Supply Chain Management OrientationPurchasing Practices of Industrial Customers Commercial BusinessGovernmentInstitutesCo-operative Environmental Analysis:-Types of Environment Influencing B2B Market

Understanding B2B Market & Environment with Buyers Perspective

2.Understanding B2B Market & Environment with Buyers Perspective SuppliesServicesLubricants, Fasteners, paints , Electrical Items Supplies & ServicesIron ore, Crude oil, fruits, fishMaterial & PartsCapital itemsLight equipment/ AccessoriesSubassembliesAcids, Fuel oil, Steel , ChemicalsComponent PartsGauges, TV tubes, Tyres, Plants & BuildingInstallation or Heavy EquipmentsHand tools, Dies, JigsExhaust Pipe in Motor Cycle Manufactured MaterialsRaw MaterialsPlants, Office BuildingMachine Tools, FurnacesLegal, Auditing, Advertising, Courier, Market Research

2.Understanding B2B Market & Environment with Buyers PerspectiveGoals Of Purchasing Uninterrupted Flow MaterialManage InventoryImprove QualityDeveloping and Managing Supplier relationshipsAchieve Lowest total costReduce Administrative costAdvance Firms Competitive Position

2.Understanding B2B Market & Environment with Buyers Perspective

Purchase OrientationBuying OrientationProcurement OrientationSupply chain Management OrientationApplications of Purchase Orientation to Industrial CustomersIndustrial Customers Supply Chain ManagementProcurement Government as a CustomerBuying OrientationInstitutes Buying Orientation

2.Understanding B2B Market & Environment with Buyers Perspective

Purchasing Practices of B2B CustomersIndustrial customersGovernmentInstitutesCooperative

Environmental Analysis:- Ecological & Physical

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

2.Understanding B2B Market & Environment with Buyers PerspectiveEnvironment Analysis:- Internal Environment:-Company Location, R&D Facilities, Production Facilities Human Resource and Image of the companyExternal Environment:-Micro Environment :-Customers & CompetitorsSuppliers Macro Environment:-EconomicTechnologicalGovernment/Political & LegalCultural & SocialInvestors & NGO

Organizational Buying ProcessOrganizational Buying SituationsForces 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 BehaviorProblem Recognition General Description of NeedProduct SpecificationSupplier SearchAcquisition & Analysis of ProposalSupplier SelectionSelection of Order RoutinePerformance 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 timeThe buyer wants to modify product specifications, price, service or supplier New TaskModify RebuyStraight Rebuy

Forces Shaping Organizational Buying Behavior Environmental ForcesOrganizational ForcesGroup ForcesIndividual 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 CenterInitiator :- 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 centerDeciders:- 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 RelationshipBuyer Seller Relationship :- Establish , Develop & Maintain the meaningful relationship with the customer. Types of Buyer Seller Relationship Transactional ExchangeCollaborative ExchangeSwitching Cost

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

Transactional ExchangeCollaborative ExchangeAvailability of Alternative Many AlternativeFew Supply Market DynamismStableVolatile Importance of PurchaseLowHighComplexity of PurchaseLowHighInformation ExchangeLowHighOperational LinkageLimitedExtensive

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 ServeLow Cost to ServeOrder Custom ProductsOrder Standard ProductsOrder Small QuantitiesOrder Large Quantities Unpredictable Order arrivalsPredictable order arrivals Customized delivery Standard DeliveryFrequent Changes in delivery requirement No changes in delivery requirementManual Processing Electronic Processing Large amount of presales support Little to no presales supportRequire company to hold inventoryReplenish as produced Longer credit periods Payment on time

Creating a CRM StrategyAcquire the Right CustomerCrafting the right value proposition for the customer Design the Best Process to deliver the product /servicesMotivating the EmployeesRetain the customer

Segmenting the Business MarketWhy Segmentation:-Criteria for the segmentation:-Measurable Assessable SubstantialComputability ResponsivenessBenefits 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 segmentationMicro level Segmentation

Macro Segmentation

Variable of SegmentationBreakdown of Segments Characteristics of Buying BehaviorSizeSmall. Medium & Large ( Based on Sales or o. Of Employees Geographical location Region , Industrial zones Usage rate Non user, Light user, Moderate user, heavy userStructure of procurement Centralize , Decentralize

Product/ Service ApplicationEnd market serveAs per Product/Service Value in useHigh , Low

Characteristics of Purchasing Situations Types of buying situations New task, Modified task, Straight RebuyStage in purchase situationEarly stages, late stages

Micro Segmentation

Variable of SegmentationBreakdown of Segments Key CriteriaQuality, Delivery, supplier reputation Purchase StrategiesOptimizer, Satisfier Structure of decision making unitImportance of purchaseHigh , LowAttitude towards vendorFavorable, unfavorable Organizational innovativeness Innovator, FollowerPersonal Characteristics of Top Management or Decision makers DemographicsAge, Educational backgroundDecision Style Normative , conservative, mixed mode RiskRisk taker, Risk avoiderConfidence High, lowJob 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 customers perspective and include both technical and organizational skills.Core Competencies and Selected Products at CanonDeveloped 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 firms 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 StagesStage 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 CustomersCustomer ValueBenefits

SacrificesCore

Add-on

Price

Acquisition Costs

Operations CostsSource: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, Understanding Customer Value,Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 47.

Proprietary or catalog productsCustom-built productsCustom-designed productsIndustrial servicesFour Types of Industrial product Lines

Steps in the Product Positioning Process1.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 ProcessSuccessful 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 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.Resource Commitments

New Product StrategySet 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 SuccessProduct 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.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 nearest-neighbor 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 while, ignore the laggards and their skepticism.