4MD3 Business to Business Marketing


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  • This will happen to you in real life: We are getting together in 15 minutes I thought I had invited you Give the info a once over – we need your input
  • database-centred marcom (outbound is one-on-one like PS but not face-to-face – I.e. requires a list of names and addresses)   requires a response that is: * measurable (one reason for growing popularity of direct marketing - e.g. measure number of sales leads generated etc.) * direct to the manufacturer (in fact "direct-response marketing" is a better name)   direct marketing media: * direct mail (both “snail mail” and courier packages) * telemarketing (telephone selling by “inside sales people”) * e-mail * the WWW  
  • the near-perfect promotional medium (delivers everything that every communicator wants – such as?? - a precisely-tailored message at a precise time to a precise recipient – also perfect reach because every business is reachable by mail – also no waste with good list – and no in-medium competition) what per cent of US industrial sales? (direct mail accounts for about 6.5% of US industrial sales, per the Direct Marketing Association – emphasizes the fact that even a near-perfect medium can do only a small part of the total communication job – note that CM number is 15% - this BM/CM contrast emphasizes?? – the nature of our products and customers requires much more personal selling) mailings are typically “tiered” (e.g. to promote former “Priority” delivery service FedEx used three tiers – 19000 frequent users of “Priority” were sent a goodwill gift, 120,000 infrequent users were sent a mailing that allowed them to request the gift, the non-users were sent a mailing that enabled them to get the gift with their first purchase) synergy with personal selling (remember we said that the purpose of all non-personal elements is to support personal selling – in one e.g. soft-drink bottlers were requiring 10 field sales calls to place a vending machine without direct mail, only 3.7 with) response rates (??? - typically 1% to 2% depending on many factors including what action called for, how "tight" the mailing list was - e.g. "response lists" give higher response than "compiled lists" because recipients known to be "mail-responsive" - more like 3% or 4% however when direct mail used in combination with telemarketing to get synergies)   direct mail costs (about $1 or $2 per exposure – why not just cost of stamp? - because the mailing has to be prepared and the recipients identified)
  • (i.e. of a direct mail “piece” – but not all parts used all the time)   * envelope (can print on it to stimulate opening – no envelope if card used)   * letter (your “offer” - begin with your position I.e. benefit – also always include a "call to action" – in BM it’s usually an intermediate step, not the purchase itself – e.g attend our show exhibit)   * enclosure (supports the offer - e.g. a study supporting the claim in the offer, a videotape, a specialty item or gift - enclosure called a "dimensional" if not flat)   * customer-reply device (makes it easy for the customer to take the action - e.g. business reply card)  
  • avoid outbound "spam" (ask for the recipient’s permission to send outbound e-mail to avoid its sometime negative image - also to avoid being deleted for fear of a virus)   e-mail has its uses (fastest form of written communication - but remember McLuhan said "the medium is the message" – so what message does this medium send?? -a low-image - so stick to short, simple, tactical communications - "horses for courses")   integrate with other media (your e-mails should show your 1-800 number, your mailing address and your Web address - just as they should show your inbound e-mail address)  
  • systematized selling by phone… (planned and continuous "inside selling“ – two types)…   “ inbound telemarketing” (is passive - e.g. customers responding on 800 lines to ads) “ outbound telemarketing” AKA “inside selling” (is active and) is good for:  * generating qualified sales leads (for hand-over to “outside sales force”) * selling to high-access-cost customers (namely?? - those small, dormant or remote accounts just too expensive to reach by field selling even when product cost is high)   * even selling to all customers (when??? - when your unit product cost is very low – e.g. copier toner at $50 per container - you can’t afford even one $300 field sales call, even if several containers bought at one time – another solution?? – sell through a middleman’s sales force as per Wind Technology discussion)   cost per outbound contact (about $15 to $20)        
  • how to make it it effective (ideas?? - set specific objectives for success - carefully establish the interface with field sales - set up dedicated facilities and staff – do lots of training - ensure staff are motivated, possibly by a sales-based bonus – I.e. as with trade shows, do it right or not at all)   pros to doing "in-house"? (ideas?? - better control of training, work schedules and work quality - quicker access to company database – firm gets more direct access to customer opinions - firm has better knowledge of company and products, the same factor that leads to more business advertising and research being done in house)   pros to "contracting out"? (ideas?? - supplier has specialist expertise - no up-front investment by marketer in training or equipment - no delay while these are obtained - easier to track seasonal etc. swings or to shut down completely) (once again we see a marketing activity that can be “contracted out” – in addition to market research, advertising, trade show activities)    
  • needed for the foregoing forms of DM (I.e. direct mail, e-mail and outbound telemarketing)   you can create your own "house list" (from?? - internal files re past sales, enquiries etc. – or if you are a software manufacturer?? – use your list of registered users)   or rent or purchase a list (from?? - "list houses" - from trade publications - from trade-show promoters – from associations – from software marketers who sell their list of registered users - two kinds of list that you can rent or purchase…)   "compiled lists" (compiler combs directories and public records for names and verify by phone - typical price about 25 cents per name from a list house)   "response lists" (a list of buyers who have recently bought through the mail - thus known to be "mail-responsive" - that's why as a consumer you get more mailings when you buy something through the mail)   list brokers (go-betweens between list owners and users - often hard for business marketers to get their attention given greater volume of names bought by consumer marketers)  
  • not strictly direct marketing (why?? - b/c not one-on-one, so no list required, but your text classifies Web as DM – actually more like advertising) B2B dominates total sales on Web (by how much?? - currently BM/CM sales ratio is about 10:1 - contrary to popular opinion that B2C does )   why less popular with consumers? (the Web can’t deliver social interaction and the simple joy of shopping, both less important in BM – also consumers concerned about confidentiality of financial data and suppliers about credit-worthiness – not as important in BM because?? - business suppliers and customers know and trust each other)   marketer sites have varied purposes online information only (the most basic site – show for e.g. your product catalogue) database publishing (adds search engine so customer can search by key words) customer self-service (a password enables customers to get info specific to them – e.g. pricing, purchase-specific service data etc.) transactions (customer can not only learn but also buy and pay)
  • marketer extends its geographic reach (cf. low global reach of ad in local trade journal, cost of field sales visit half-way around the world, etc.) a small marketer looks larger (I.e. your one-person operation can look like your giant competitor on the Web – particularly useful in markets where the size and reputation of your giant competitor are not known) customer exposure is verifiable (how??– new technology allows marketer to track “click-stream data” - i.e.site navigation data like click- throughs and time-in-site, not just log-ons – cf. marketer’s inability to verify customer exposure to magazine ads)   marketer communicates info fast and 24/7 (site is an on-line brochure/catalogue available to customers worldwide “24/7” - compare round-trip time and expense for magazine bingo cards to deliver brochure/catalogue) some two-way communication possible (through web-site e-mail - better than ads, worse than personal selling) low-cost alternative channel (Web’s cost per exposure much lower than personal selling - sometimes even lower than print ads – so as with telemarketing, the logical focus for your Web effort is those high-access cost customers – I.e. small, numerous and remote customers) customer outsourcing should increase (why?? - the Web makes it easier for customers to collect and decipher voluminous data from the marketplace – and new risk management services like Worldwidetesting.com and Insuretrust.com provide sampling, surveying and testing of commodities, reducing customer concern about the impersonal nature of the the Web)      
  • can undercut the basic goal of marketing! (which is?? - to differentiate your offering so as not to compete on price – how undercuts?? - price is easier to communicate than other purchase criteria like quality, image, reputation of your product o so Web implicitly puts focus on a price deal) and hurt the relationship (the focus is not only on a deal , but also on a rushed deal now - vs. a transaction in context of past and future relationship – so Web encourages opportunistic, spot buying) and lower the unit price paid (why?? - there are more competitors – also the hurry-up nature of on-line bidding encourages price undershoots – I.e. a reverse bidding frenzy) swings power balance to buyer (because has access to more potential suppliers all around the world – you lose any regional monopoly you had)
  • a large marketer looks smaller (so a con if you’re the large firm) suited to “cataloguable” products only (namely?? - simple pre-designed products because complexity and custom design require 2-way communication – goods not requiring testing/inspection/demonstration – inexpensive goods because medium’s image not suited to expensive business products - g oods capable of description in print and made to widely-accepted standards by many manufacturers - little product differentiation - "spot-market" products not requiring close relationship - e.g.s?? - plumbing supplies, nuts and bolts, fractional-HP electric motors) not for high-risk products (why?? - b/c they require a relationship and the “soft” capabilities that determine relationship fit cannot be communicated on a Web page – for e.g. your business philosophy and culture, and your flexibility – “Web learning is clearly limited to codified knowledge”) customers must actively search (for your site - unlike other direct marketing media, sales calls etc. where customer is contacted – unlike even print ads to which customer is exposed without trying) Marketer must promote the site (using other promotional tools like?? - ads, but not banner ads on web because “click-through rates” only about 10% even when banner ads targeted – how else increase hits?? – good search engine practice is crucial – in some engines seller pays to be first on list in given product category, pays the pre-agreed price for each actual click-through - you can get search-engine to give higher ranking to your site through proper design – also you can purchase key words on search engines to trigger pop-up ads – finally you must register your site with search engines shown by research to be most popular with your customers) site can create channel conflict (how?? - your conventional middlemen can be upset by your Web channel if it’s not done right - as indeed they can with any alternative channel – we’ll discuss in detail how to “do it right” under “Distribution”)
  • Website still initiated by the marketer (as were the sites previously discussed but customers provide the content (unlike the sites we discussed previously – here fans of your product chat online) promotes brand loyalty and involvement (builds on the “contagious nature of information scattering on the Internet – i.e. viral marketing”) frees customers from geographic restrictions on communication (a customer in Toronto can chat online with one in Australia) frees marketer from info-blocking by middlemen (marketer can read the chat notes directly – no need to depend on the willingness and ability of a middlemen to communicate customer comments)
  • (now we turn to why and how our customers are using the Web …..) online buying reduces purchasing costs (by how much?? - 10 to 30%, according to “market makers”, a somewhat biased source – that’s for lower unit price and lower purchasing/admin costs combined) usage level varies by buyer’s industry (which highest?? - the electronics industry purchases 40% of its total needs online - then auto at 24% - down to under 2% for heavy industry and construction – overall 11% –see FP March 22, 2000 article) two types of purchasing site… (per next two slides)
  • a direct link to suppliers (no middleman – e.g.s…) reverse auction (buyer states needs and suppliers bid online until no-one will go lower – accounts for 10-15% of total corporate spend - amid the gloom, what advantages to marketers?? - unlike normal RFQs, we get to see competitors’ pricing – we also enjoy shorter bid-to-contract cycle time, so production and inventory planning are easier – research shows that at least five viable bidders are required to create the necessary competitive environment, more than for RFQs - Quaker Oats and SmithKline Beecham report savings of millions of dollars – but per research many customers fear that reverse auctions will destroy marketer’s trust in customer – i.e. will ruin the relationship) other e.g.s ( GE ’s purchasing site is one of the originals also – GM/Ford/DC/Renault/Nissan joint site Covisint –also IBM is working to get its 10,000 suppliers Internet-capable in order to automate all purchase transactions, save estimated $240 million)
  • sites established by “market-makers” (I.e. third-party firms independent of both the buyers and the sellers – various kinds…) catalog hubs (combine catalogues of several vendors –when many disparate products are offered to allow one-stop-shopping the site is called a “metamediary”) “ vertical market sites” (what means?? – as for trade mags, vertical means “industry-specific” - such hubs exist for steel, chemicals, paper, hospital supplies and plastics industries – hubs charge transaction fees but not growing as predicted because don’t provide the close relationships needed in the IMP world – low use and high competition have squeezed hub profits– in fact giant Chemdex site went bankrupt in 2000 in the face of many “life-science” competitors like still-surviving ChemConnect) reverse auctions – again! (but this time established by m/m –– such as?? – Ariba, Commerce One – in fact such “reverse auctions are often seen by suppliers as a divisive purchasing tool designed principally to drive down unit prices” – indeed market makers have been known to add a couple of marginally-qualified suppliers to pull price down, improve likelihood of transaction occurring, to get user fee– usage by US-based aerospace companies has declined a lot over the last two years – it’s now believed that the drop in supplier cooperation caused by the use of reverse auctions is a factor in the reduced competitiveness of the US auto industry ) * other e.g.s (see article re Commerce One, Ariba etc. - another e.g. is eBay)
  • 4MD3 Business to Business Marketing

    1. 1. 4MD3 Business to Business Marketing Steve Howse, C. Dir March 8, 2007
    2. 2. The hand-in Case <ul><li>Take a look at the break and hand it back </li></ul><ul><li>Any questions book a meeting with the TA </li></ul><ul><li>[email_address] </li></ul>86.0% 61.0% High Low Range 75.9% Mean Marks
    3. 3. Date: Saturday, March 10, 2007 10:00 a.m. - 12:30 p.m. Room: REF-102 <ul><li>In preparation of the exam this Saturday - here are a few tips: </li></ul><ul><li>focus on the text, the lectures reinforce the readings the cases done in class are not on the exam the format is a mix of T/F, Multiple Choice, Short Answer and a Short Case it is a closed book exam, no material can be brought in except your ID, pencils/pens/ erasers and a McMaster approved calculator </li></ul>
    4. 4. <ul><li>Wind Technology (p. 652 of your text) </li></ul><ul><li>As a business marketing consultant - highly paid of course! - what would you say to Wind Technology regarding the following issues? </li></ul><ul><li>1) Market Entry : Do you recommend that WT enter the HVPS market or not? Justify your recommendation in detail. </li></ul><ul><li>2) Segments and Positions : Assume for this question that WT does enter the HVPS market, regardless of your answer in a). Which segments do you recommend that WT serve, and within each segment, what position? Justify your recommendations in detail. </li></ul><ul><li>3) Promotion and Distribution : Still assuming that WT enters the HVPS market, what changes do you recommend to WT’s promotion (including its sales force) and distribution? </li></ul>
    5. 5. 6 Step Selling Plan <ul><li>Prep work </li></ul><ul><li>Get the meeting – make the call </li></ul><ul><li>Ask questions </li></ul><ul><li>Present your solution </li></ul><ul><li>Overcome objections </li></ul><ul><li>Close the deal </li></ul><ul><li>Always follow up </li></ul>
    6. 6. DIRECT MARKETING <ul><li>database-centred “marcom” </li></ul><ul><li>requires a response that is… </li></ul><ul><ul><li>measurable   </li></ul></ul><ul><ul><li>direct to the manufacturer (DIRECT REPSONSE MARKETING) </li></ul></ul><ul><li>direct marketing media…  </li></ul><ul><ul><li>direct mail  </li></ul></ul><ul><ul><li>e-mail </li></ul></ul><ul><ul><li>telemarketing  </li></ul></ul><ul><ul><li>the Web </li></ul></ul>
    7. 7. DIRECT MAIL <ul><li>the near-perfect promotional medium </li></ul><ul><li>mailings are typically “tiered” </li></ul><ul><li>synergy with personal selling </li></ul><ul><li>response rates   </li></ul><ul><li>direct mail costs </li></ul>
    8. 8. THE FOUR PARTS OF A DIRECT MAILING <ul><li>envelope </li></ul><ul><li>letter </li></ul><ul><li>enclosure   </li></ul><ul><li>customer-reply device </li></ul>
    9. 9. E-MAIL <ul><li>avoid outbound &quot;spam&quot; </li></ul><ul><li>  </li></ul><ul><li>e-mail has its uses </li></ul><ul><li>integrate with other media </li></ul>
    10. 10. TELEMARKETING <ul><li>systematized selling by phone </li></ul><ul><li>“ inbound telemarketing ” </li></ul><ul><li>“ outbound telemarketing” AKA “inside selling” is good for…. </li></ul><ul><ul><li>generating qualified sales leads </li></ul></ul><ul><ul><li>selling to high-access-cost customers </li></ul></ul><ul><ul><li>even selling to all customers  </li></ul></ul><ul><li>cost per outbound contact </li></ul>
    11. 11. MORE ON TELEMARKETING <ul><li>how to make it effective   </li></ul><ul><li>pros to doing &quot;in-house&quot;?   </li></ul><ul><li>pros to &quot;contracting out&quot;? </li></ul>
    12. 12. LISTS <ul><li>needed for the foregoing forms of DM </li></ul><ul><li>you can create your own “house list” </li></ul><ul><li>or rent or purchase a list </li></ul><ul><li>&quot;compiled lists&quot; </li></ul><ul><li>&quot;response lists&quot; </li></ul><ul><li>list brokers </li></ul><ul><li>  </li></ul>
    13. 13. THE WEB <ul><li>not strictly direct marketing </li></ul><ul><li>B2B dominates total sales on Web  </li></ul><ul><li>why less popular with consumers? </li></ul><ul><li>marketer sites have varied purposes </li></ul><ul><ul><li>online information </li></ul></ul><ul><ul><li>database publishing </li></ul></ul><ul><ul><li>customer self-service </li></ul></ul><ul><ul><li>transactions </li></ul></ul>
    14. 14. ADVANTAGES TO MARKETERS OF THE WWW <ul><ul><li>marketer extends its geographic reach </li></ul></ul><ul><ul><li>a small marketer looks larger </li></ul></ul><ul><ul><li>customer exposure is verifiable </li></ul></ul><ul><ul><li>marketer communicates info fast and 24/7 </li></ul></ul><ul><ul><li>some two-way communication possible </li></ul></ul><ul><ul><li>low-cost alternative channel </li></ul></ul><ul><ul><li>customer outsourcing should increase </li></ul></ul>
    15. 15. KEY DISADVANTAGES TO MARKETERS OF THE WWW <ul><ul><li>can undercut the basic goal of marketing! </li></ul></ul><ul><ul><li>and hurt the relationship </li></ul></ul><ul><ul><li>and lower the unit price paid </li></ul></ul><ul><ul><li>swings power balance to buyer </li></ul></ul>
    16. 16. OTHER DISADVANTAGES TO MARKETERS OF THE WWW <ul><ul><li>a large marketer looks smaller </li></ul></ul><ul><ul><li>suited to “cataloguable” products only </li></ul></ul><ul><ul><li>not for high-risk products </li></ul></ul><ul><ul><li>customers must actively search </li></ul></ul><ul><ul><li>marketer must promote the site </li></ul></ul><ul><ul><li>site can create channel conflict </li></ul></ul>
    17. 17. ANOTHER KIND OF MARKETER SITE - ONLINE BRAND COMMUNITY <ul><li>Website still initiated by the marketer </li></ul><ul><li>but customers provide the content </li></ul><ul><li>promotes brand loyalty and involvement </li></ul><ul><li>frees customers from geographic restrictions on communication </li></ul><ul><li>frees marketer from info-blocking by middlemen </li></ul>
    18. 18. THE “BUY-SIDE” OF THE WEB <ul><li>online buying reduces purchasing costs </li></ul><ul><li>usage level varies by buyer’s industry </li></ul><ul><li>two types of purchasing site… </li></ul>
    19. 19. CUSTOMER-ESTABLISHED PURCHASING SITES <ul><li>a direct link to suppliers </li></ul><ul><li>reverse auction </li></ul><ul><li>other e.g.s </li></ul>
    20. 20. MIDDLEMAN-ESTABLISHED PURCHASING SITES <ul><ul><li>sites established by“market-makers” </li></ul></ul><ul><ul><li>catalog hubs </li></ul></ul><ul><ul><li>vertical market sites </li></ul></ul><ul><ul><li>reverse auctions – again! </li></ul></ul><ul><ul><li>other e.g.s </li></ul></ul>
    21. 21. Have A Goal List <ul><li>Two columns (want to do & BTDTGTTS) </li></ul><ul><li>These are personal goals </li></ul><ul><ul><li>Run a marathon or See the great wall of China </li></ul></ul><ul><ul><li>Concerts to see or vacations to go on </li></ul></ul><ul><li>Some are time sensitive </li></ul><ul><ul><li>Skydiving </li></ul></ul><ul><ul><li>Bike trip through Italy </li></ul></ul><ul><li>Keep the list throughout your life </li></ul><ul><ul><li>Add to it, remove items, enjoy what you have accomplished </li></ul></ul>