2. UNIT I
I ) Difference between B2B & B2C Marketing
Derived demand
It is the convention in marketing to treat demand by consumers as direct and demand from
businesses as derived. In essence, consumers want certain goods to satisfy their needs.
Businesses require certain goods in order to produce products that satisfy customer needs.
Therefore a business’s demand is derived from consumer demand.
The accelerator effect
The accelerator effect describes the effect of a change in direct demand on the derived demand.
In some cases, relatively small changes in direct demand can result in a relatively large (possibly
temporary) change in derived demand, or the other way round. This is called the accelerator
effect (see b2b snapshot 1.2 for an example). One task for the business marketer is to understand
both the scale of the underlying accelerator exerted by conditions in the market and the behavior
of managers in customer organizations.
Market concentration in b2b markets
B2b markets in general are characterized by higher concentration of demand than consumer
markets. However, the degree of demand concentration varies from market to market and it is
important to have some means of comparing markets to establish just how highly concentrated
they are. A standard measure used is concentration ratio. This ratio reflects the market shares of
the few largest firms in the market – known as the ‘oligopoly group’. It usually consists out of
the top 3 or 4 firms.
To a business marketer it is the perspective of the industry supplier that is generally most
relevant, along with the implications of the industry structure for sales and marketing strategy.
While economists are generally most concerned about the monopoly power that businesses have
over their customers, business marketers are usually more interested in the monopsony power
that businesses have with respect to their suppliers because of the concentration of buying power.
However, since those firms that control large shares of the customer market are also the largest
customers for suppliers to the industry, we can use the concentration ratio as a proxy for the
concentration of buying power.
Other market structure differences
Demand elasticity – it is argued that businesses have less freedom simply to stop buying things
than consumers, so that demand is likely to be less price elastic. Second, it has been suggested
that there will be more instances of reverse price elasticity. Businesses need critical inputs if they
are to continue trading. If prices on these critical inputs start to rise, it might mean that supply is
running out (demand>supply). This might cause a business to increase their orders (reverse price
elasticity).
More heterogeneous, fragmented and complex – it is argued that organizations are even more
diverse than consumers -> A local decorating business employing three people has almost
nothing in common with a global electrical equipment manufacturer.
Buying behavior differences and marketing practice differences
3. In essence, organizations tend to have more professionalized buying processes than consumers,
often involving formal procedures and explicit decision-making practices, which in many
organizations are implemented by managers who are specifically employed as purchasing
professionals. Transaction values can be very high. As a result, sellers tend to tailor their product
offerings to the needs of the buyer.
4. II) Classification of B2B Customers/Markets
Commercial Enterprises
The classification or commercial enterprises rcflects a segmentation of for-profit organizations
based on how the products or services in question are going to be used. This group includes
industrial distributors and dcalers, resellers, original equipment manufacturers, and users or end
users.
INDusTRIAL DIsTRIBuToRs
Also known as industrial wholcsalers, these organizations act as middlemen providing the
economic utilities of form, time, place, and possession to the manuf aacuurers or the products
they distribute and segments or customers of those manufacturers that lhey serve. The creation of
assortments of products from many manufacturers to closely match the needs or customer
segments is a major added value of middlemen. Busincss marketers often elect to use middlemen
to reach customers whose purchase volumes do not justiry direct sales cfforts. Chapter 14
contains a complete discussion or marketing channcls, including appropriate products for this
type of representation and the vaFue provided by these middlemen. For now, note that these
intermediaries take ownership of goods from manufacturers and provide their customers timely
access to lhese goods.
VALUE ADDED RESELLERs
The addition of value added resellers (VARs) to the marketplace has broadened traditional
intermediary concepts More than distributors or wholesalers, vARs provide an offering with
unique enhancements to manufacturers' products. Typically, a vAR provides systems to its
customers (computer software and hardware integration, communications systems, etc.) tailored
to a particular customer's needs. The vAR draws on goods and services from many
manufacturers o create these custom systems, often developing unique expertise in the
integration of many different products. The combined offering may include portions or products
and services trom different organizations that, without the vAR, would normally be competitors.
Thus, the VAR's integration of offerings from many sources is, in effect, the creation or a value
network at the user level. Later in this chapter we look at value networks. coalitions to satisry
specific segment needs, as a rapidly developing competitive form.
Original equipment manufacturers (OEMs)
OEM’s purchase goods ro incorporate them into goods they produce and sell to their customers.
Business-bo-business marketers spend the major part of their resources approaching, learning
5. about. developing, and satisfying these customers. OEMs are usually the largest-volume users of
goods and services, particularly in oligopolistic markets.
For example. General Motors (GM) purchases tines from Goodyear; Hewlett-Packard (HP)
purchases computer processors from Intel. GM and HP use tires and computer processors.
respectively, as an original part of the products they offer to their customers. Note that Goodyear
and Intel, both OEM suppliers in this scenario, offer their products to customers in the
replacement market through distributors as well. while the total offer is significantly different
(tires through distribution are aimed at local dealers with lower volumes and greater geographic
diversity than vehicle manufacturers), the core products, tires and computer processors, remain
unchanged.
USERS OR END USERS
Manufacturers that purchase goods and services for consumption, either as supplies, capital
goods, or materials for incorporation into their products such that the identity of the purchased
product is lost are known as users or end users. when providing tires to GM, Goodyear is an
OEM in the preceding example. when purchasing steel for fabrication into steel tire belts.
Goodyear is an end user. Goodyear has specified the properties of and type of steel as part of its
tire design process. The steel supplier views Goodyear as its end user because the steel, produced
to the Goodyear specification. becomes an integral part of the tires and loses its separate identity.
Business marketers find that this traditional relationship is changing as end users attempt to
differentiate their products by communicatin the quality or their raw materials or components
obtained from their suppliers. Recognizing this trend, suppliers have begun to brand their produ
ucss and communicate the value of their brands downstream to the end users' customers.4
Successfully branding business-to-business products allows the supplier or brand owner the
opportunity to capture some or the margin that the end user obtains by charging higher prices to
its own customers. This also places responsibility for the performance of the product with the
supplier as well as the specifier.
TRw brands several or its product lines, principally because it does so much activity in the
automotiv’c parts aftcrmarket. TRw brands include KlheyIlayes braking products, TRw steeri in?
and suspension systems, Au:ospecialry brake and clutch components. Power Stop Extreme
Performance rotors, and 9-1-1 Extreme Perfonmance heavy duty brake pads.3 Using the same
branding across the oEM and aftermarket lines of business actually increases the value that TRw
provides to both oEM and aftermarket (end user) customens. OEM customers gain assura anc?
that their products will be supported and can be easily maintained by service and repair
technicians. Further, the inclusion of TRw's premium brands in the manufacturer's cars can be
communicated to consumers to assure them lhat the cars are well built, using high-quality comp
6. onnenss. value is provided to aftermarket customers—repair technicians and consumers—by
offering to them the same brands of parts that were originally installed on the car. nhis assures
end users that the replacement parts meet original equipment specifications and will work just as
well as the original pans.
Government units
Purchases by more than 85,000 local. state, and federal government units makc up about one-third or
the U.S. gross national product (GNP). Govemnment is the largest consuming group in the United States.
Widely dispersed with large numbers of players, govemnment markets are influe nccdd by specifying
agencies, legislators, and evaluators, as well as. hopefully, the eventual users. Govermment purchasing
can also be the subject of significant public scrutiny.
Vhat business marketers have come to appreciate as value in the private sector can take on a completely
different meaning in the public sector. Complicated procurement laws and regulations often have social
goals and policies as the driving force. Preference to certain types or suppliens. socially motivated general
contract provis sions, and the potential impact of quotas and other regulations that seemingly have
nothing to do with the product can be frustrating to business marketers. In these situations. the buyer's
view of value will be quite different from a buyer in the private sector.
For instance, the federal govemnm ment. most state governments. and many municipalities have
requirements that a certain percenta age of contracts be awarded ro small businesses, minority-owned
businesses, or businesses owned by women. In many foreign countries, suppliers to government agencies
are often required to be domestic (to that country) suppliers or have a domestic company as a partner. The
sxcial goals and policies or govemnment purchasing can impact the entire supply chain of an offering. In
theory, this is little different from the private sector. provided the marketer is fxcused on customer needs
rather than the product. It is necessary to examine what value is expected by the govermment customer
and who or what the influencing factors will be.
The specialii.ed role that govemnment activities play in our society (national defense, disaster relief,
education, social and political agenda, etc.) leads to nonstandard products. This complexity and the lack
of standardi,ation are often the result of significant negotiation by a diverse group or stakeholders. while
competitive bidding is often required to avoid demons stratig? any favoritism or undo influence,
negotiated contracts are also possible, particularly
Nonprofit and Not-for-Profit organizations
Institutional customers such as hospitals. churches, colleges, nursing homes, and so on are part of
this customer category. At first glance. it may appear that the major part of the marketing mi
used to appeal to this customer base is price. As with any customer group. however, the best
value recognized in the exchange is importarn. Many of these organizations are also subject to
significant public scrutiny. As a result, their buying habits may become similar to those of
7. government units, particularly ir there is a strong social agenda associated with the organization.
Classification on Basis of Producer Types
The goods they produce may also serve to classify business-to-business organizations. As
previously stated, these classifications may provide initial bases that a marketing manager can
use for segmenting markets.
Raw materials producers
Depending on the goods or materials position in its life cycle and the product degree or
uniqueness or distinction from competition, producers or materials may find markets more
sensitive to price.
Raw materials suppliers. particularly those that have significant contpctition fmom generic types,
will seek added value positions unrelated to the core product. A supplier or sugar to a large
bakery may find that the texture or granule size of its product or how well it dissolves may be a
distinctive advantage. Raw materials (such as steel, plastics, and glass) are usually supplied by a
few very large producers who sell their products directly to large end users. rdying on industrial
distributors to serve smaller customers. Often. raw materials lose their Identity” when combined
into a customer's product. As an examplc. consider a metal fabricator whose customers are
computer nanufacturers. The fabric aaoor purchases sheets of steel from its steel supplier of
choice. The fabricator forms the steel into a computer cabinet, as defined by its customer’s
specification. The customer knows the sheet steel purchased by the fabricator as a sturdy cabinet
for a computer housing, not as a branded material supplied by a particular steel company. The
commodity nature of the steel has been replaced by the added value, created by the fabricator, of
the form and function of the cabinet.
Component Parts And Manufactured Materials Producers
Components and manufactured materials (e.g.. upholstery fabric for fumniture, touchpads for
notebook computers) usually retain lheir identity ewen when fully incorporated into the
customer's product. These goods have a continuous identity and arc more easily differentiated
from their direct competition. Producers or these goods have added value to the materials and
components they have punchased to create value for lheir customers. Component parts such as
the small motors used in computer disk drives are incorporated by disk drive manufacturers in
essentially the same fomm as provided by the motor manufacturer, The component producer’s
core product contribution is still recognizable after its inclusion in lhe customer’s offering. In this
8. instance, the small motor manufacturer is an OEM supplier to the disk drive manufacturer that
incorporates the motors into the disk drives it sells to its customers.
Capital Goods Manufacturers
Capital goods—those goods used to produce output—are usually purchased with input from
many parts of the organization. These are “big ticket" purchases, such as machinery specifically
designed for an automated assembly line or real estate for a new building, with considerable risk
involved for the customer. The process is lengthy and usually includes the development or a
rather sophisticated specification to ensure that the needs of the organization are met and that the
organization gets what it has been promised. when customers invest in a capital item, they must
place a tremendous amount of trust in the supplier—and write a good specification.
Customers of capital goods expect an offering that includes installation, equipment, accessories,
employee training, and often, financing. Often, trials or evaluation installations are required. As a
substitute, suppliers may provide testimonials or successful installation and application for other
customers, provided confidentiality concerns of both the current and previous customers can be
accommodated. If a company is providing accessory equipment-or providing an accessory
service. such as cleaning uniforms or moving trade show equipment— the key to providing value
is to be compatible with the industry standards for the primary offering. For instance, keyboard
manufacturers for computers must conform to standards for data input and connection to the
computer. Makers or add-on gadgets for personal digital assistants (PDAs). such as the Palm
Pilot, must conform to the physical connection requirements of the devices and to the PalmOs
software operating system. To ensure high financial perfonnance, thc accessory equipment
supplier must pick the right standard. Once a suandard has been set, ihe surviving accessory
suppliers need to focus on driving their costs down and, if possible, branding. Good branding
strategy and execution earn a price premium (see chapter 13), but this, too, is linited by the
relative value and price or the primary offering.
III ) B2B markets that are operating simultaneously in a Two Wheeler market
As already explained in the class room, you can use the running notes
9. UNIT II
The Nature of Buying
Many consumer purchases (i.e., buying decisions) arc spur-of-the-moment decisions, often
associated with the availability of funds to make the purchase. while consumers seldom conduct
a conscious value evaluation, the act or making the purchase indicates that they have decided that
the value they are about to receive is greater than the value they are giving up (i.e., their costs). Ir
this were not the case, the exchange would not take place. nhe value assigned by the customer is
influenced by many factors beyond the serviceability of the core product or service. nhe nature or
the buyer decision process in a business-lu-business environment is no unlike the consumer
process, though the steps are often thought to be more visible and theoretically more quantifiable
Let us further compare the processes. .
10. Organizational Buying
How do organizations “buy” compared to how we, as consumers, “buy" in the retail marker? The
initial response from an inexperienced observer might be that organizations purchase whatever is
cheapest, that is, that organizations must make the most rational, lowest-cost. most-profitable
decision. while the ultimate profitability or the buying organization (or minimized cost for the
nonprofit organization) plays a major role, price is only a part of the delivered value.
Organizational purchases involve inputs from many or the professional specialities in the
organization. The organization relies on decision makers and influencers at many levels and from
different disciplines to contribute their expertise to satisfy a diverse set of needs. The inputs from these
stakeholders aim to ensure that the best possible buying decisions arc made for the organization.
Individual stakeholders may contribute their expertise to influence the decision process without full
knowledge or appreciation for the requirements of other stakeholders. Seldom is any one individual
entirely responsible for an organizational purchase decision. This decision process requires
communication among stakeholders within the buying organization. It is necessary for the supplying
organization to
Characteristics of Organizational Buying Process:
1. In organizations, many individuals are involved in making buying decisions,
2. The organizational buyer is motivated by both rational and quantitative criteria dominant in
organizational decisions; the decision makers are people, subject to many of the same emotional
criteria used in personal purchases
3. Organizational buying decisions frequently involve a range of complex technical dimensions.
A purchasing agent for Volvo Automobiles, for example, must consider a number of technical
factors before ordering a radio to go into the new model. The electronic system, the acoustics of
the interior, and the shape of the dashboard are a few of these considerations.
4. The organizational decision process frequently spans a considerable time, creating a
significant lag between the marketer's initial contact with the customer and the purchasing
decision. Since many new factors can enter the picture during this lag time, the marketer's ability
to monitor and adjust to these changes is critical.
5. Organizations cannot be grouped into precise categories. Each organization has a
characteristic way of functioning and a personality
Buying Situations:
The Straight Rebuy:
11. It is the simplest situation: The company reorders a good or service without any modifications.
The transaction tends to be routine and may be handled totally by the purchasing department.
Modified Rebuy:
Here the buyer is seeking to modify product specifications, prices, and so on. The purchaser is
interested in negotiation, and several participants may take part in the buying decision.
New Task:
A company faces a new task when it considers buying a product for the first time. The number of
participants and the amount of information sought tend to increase with the cost and risks
associated with the transaction. This situation represents the best opportunity for the marketer.
I) ORGANISATIONAL BUYING PROCESS/STAGES:
1. Problem recognition: The process begins when someone in the organization recognizes a
problem or need that can be met by acquiring a good or service. Problem recognition can occur
as a result of internal or external stimuli. External stimuli can be a presentation by a salesperson,
an ad, or information picked up at a trade show.
12. 2. General need description: Having recognized that a need exists, the buyers must add further
refinement to its description. Working with engineers, users, purchasing agents, and others, the
buyer identifies and prioritizes important product characteristics.
Table 4.1 lists several sources of information for many industrial customers. Armed with
extensive product knowledge, this individual is capable of addressing virtually all the product-
related concerns of a typical customer. To a lesser extent, trade advertising provides valuable
information to smaller or isolated customers. Noteworthy is the extensive use of direct marketing
techniques (for example, toll-free numbers and information cards) in cor.junction with many
trade ads. Finally, public relations play a significant role through the placement of stories in
various trade journals.
3. Product specification: Technical specifications come next. This is usually the responsibility
of the engineering department. Engineers design several alternatives, depending on the priority
list established earlier.
4. Supplier search: The buyer now tries to identify the most appropriate vendor. The buyer can
examine trade directories, perform a computer search, or phone other companies for
recommendations. Marketers can participate in this stage by contacting possible opinion leaders
and soliciting support or by contacting the buyer directly. Personal selling plays a major role at
this stage.
5. Proposal solicitation: Qualified suppliers are next invited to submit proposals. Some
suppliers send only a catalog or a sales representative. Proposal development is a complex task
that requires extensive research and skilled writing and presentation. In extreme cases, such
proposals are comparable to complete marketing strategies found in the consumer sector.
13. 6. Supplier selection: At this stage, the various proposals are screened and a choice is made. A
significant part of this selection is evaluating the vendor. One study indicated that purchasing
managers felt that the vendor was often more important than the proposal. Purchasing managers
listed the three most important characteristics of the vendor as delivery capability, consistent
quality, and fair price. Another study found that the relative importance of different attributes
varies with the type of buying situations.
For example, for routine-order products, delivery, reliability, price, and supplier reputation are
highly important. These factors can serve as appeals in sales presentations and in trade ads.
7. Order-routine specification: The buyer now writes the final order with the chosen supplier,
listing the technical specifications, the quantity needed, the warranty, and so on.
8. Performance review: In this final stage, the buyer reviews the supplier's performance.
This may be a very simple or a very complex process.
II ) CRM Strategies for Business Markets
A CRM program cannot help unless a company employs the proper
strategy to secure and retain profitable customers. Special attention
must be given to five areas.
14. CRM Strategy – PrioritiesCRM Strategy – Priorities: 1) Acquire the right customer. 2) Craft the
right value proposition. 3) Institute the best processes. 4) Motivate
employees. 5)Learn to retain customers.
#1 - Acquiring the Right Customer#1 - Acquiring the Right Customer
Account selection demands a clear understanding of: 1) Seller’s resources 2)
Customer’s needs 3) Cost of serving various groups of customers 4) Potential
profit opportunities 5) How customers define value and how to meet those
expectations
What do customers value. 1) Some demand low price 2) Some demand customer service 3)
Some demand quick delivery 4) The question is: “Can the seller deliver it profitably?” 5) Many
sellers try to meet all their customer’s needs, and may do so, but fail to do it profitably.
#2 – Crafting the Right Value Proposition
1) A value proposition encompasses the products, services, ideas and solutions that a business
marketer presents to the prospect/customer that is designed to solve the customers’ problems. 2)
They can be generic or customized.
Value Proposition
A value proposition may include: 1) Points of parity to a competitive option 2)
Points of
difference
Best practice suppliers base their value proposition on their target market’s
needs by
communicating their offering of superior performance in a way that conveys
they understand
their customer’s business priorities.
15. Value Proposition StrategiesValue Proposition Strategies
Strategies that competitors employ fall into a range referred to as: “IndustryStrategies that competitors employ fall into a range referred to as: “Industry
Bandwidth of Working Relationships”. It ranges from pure transactional toBandwidth of Working Relationships”. It ranges from pure transactional to
pure collaborative exchanges (see Fig.3.5 on the next slide).pure collaborative exchanges (see Fig.3.5 on the next slide).
Figure 3.5 - Transactional & Collaborative Working RelationshipsFigure 3.5 - Transactional & Collaborative Working Relationships
Flaring Out StrategyFlaring Out Strategy
1) ‘Flaring out’ strategy (Fig 4.5b) states that the seller can either1) ‘Flaring out’ strategy (Fig 4.5b) states that the seller can either
unbundle (point A), that is, reduce the service associated with a lowerunbundle (point A), that is, reduce the service associated with a lower
price (transactional in nature), or 2) Augment by adding more servicesprice (transactional in nature), or 2) Augment by adding more services
to the core offerings (point D) which adds cost to the services. This isto the core offerings (point D) which adds cost to the services. This is
collaborative in nature.collaborative in nature.
Figure 3.5 - Transactional &
Collaborative Working
Relationships
16. Creating Customized Products
The seller starts with a core service (“naked solutions”) and adds customized
services to it (“custom wrapped”) that create more value.
#3 - Institute Best Practices
The sales force plays a key role in establishing and growing a customer
from a transactional account to a collaborative partnership.
They can do this by aligning and deploying technical and service support
units to match with their customers’ units.
Technical groups can consist of research, logistics and customer service
units.
Through careful management and screening, transactional accounts can
progress to partnerships.
Best Practices Follow-UpBest Practices Follow-Up
In addition to using best practices, successful organizations (like IBM)
employ follow-up techniques such as:
• Assigning a client representative to take ownership of the relationship.
• Assigning a Project Owner who completes the project or solves project
problems.
• Developing an in-process feedback and measurement system.
#4 - Motivating Employees
Dedicated employees are the key to a successful customer relationship
strategy.
The best approach is to: 1) Hire good people. 2) Invest in them to increase
their value to the company and its customers. 3) Develop challenging
careers and align incentives to performance measures.
17. #5 - Retaining Customers
Retain customers by: 1) Providing superior value (more than expected) to
ensure high
satisfaction. 2) Nurturing trust. 3) Developing mutual commitment. 4) If
possible, helping
customers grow their business.
Pursuing Growth from Existing CustomersPursuing Growth from Existing Customers
Identify and cultivate customers that offer the most growth potential by: 1)
Estimating current percent “share of wallet”. 2) Pursuing opportunities to
increase share. 3) Projecting and enhancing customer profitability
Evaluating Relationships: 1) Some relationship-building efforts fail because expectations of the
parties don’t mesh. 2) Example: Seller wants a business relationship whereas the customer
responds in a transactional mode. 3) By understanding and isolating customer needs, the
marketer is better equipped to match their product offerings to a particular customer’s needs.
UNIT III
I) Business Market Segmentation
The fact that all customers are unique does not mean that for the B2B marketer all individual relationships
need to be managed differently and uniquely. It may be necessary for a couple of strategically important
customers, it is also the case that there will be a substantial number of customers that do not really require
a wholly customized offering. This understanding is at the heart of segmentation. Through a process of
segmentation a marketer can establish a degree of homogeneity in respect of the different customers.
Principles and Value of Segmentation.
In the real world, markets are imperfectly competitive. This means that there is scope to differentiate the
products of different suppliers and to identify different market segments. Single over-generalized
offerings to the whole market, despite its operating efficiencies, lead to problems for companies in
achieving their objectives. The difficult task of understanding customers and delivering market offerings
involves adopting a position somewhere in between the over-generalized and the over-customized.
The pioneering view of segmentation put forward by Wendell smith was that it ’consists of viewing a
heterogeneous market as a number of smaller homogeneous markets in response to differing product
preferences among important market segments’. Shapiro and Bonoma pointed to the value of industrial
segmentation in three areas:
18. - Facilitating better understanding of the whole marketplace including the behaviour of buyers and why
they buy.
- Enabling better selection of market segments that best fit the company’s capabilities.
- Enabling improved management of the marketing activity.
The process of segmentation involves an iterative (step-by-step) classification of the market in terms of
sets of meaningful groupings. As far as the process is concerned, the most common difficulties that
managers face are knowing the combination of descriptive or explanatory segmentation variables to use,
and where to stop with a set of meaningful segments.
Segmentation Bases.
In the earliest published consideration of industrial segmentation bases, Frederick lists five factors that
should be taken into account: industry, geographic location, channels of distribution, product use and
company buying habits. Many different variables have been used to classify segments, this means that
there is agreement that there are different levels of segmentation. This involves moving from the use of
more general or easily observable criteria at initial levels through to more specific and less observables
measures in the later stages. The larger-scale analysis is often referred to as macro-segmentation while the
finer-level analysis is micro-segmentation.
Shapiro and Bonoma captured this movement from macro- to micro-segmentation in the figure below.
Moving from firmographics down to personal characteristics.
19. 1. Firmographics; are the macro-factors of a firm, divided into several subsections:
- Industry; knowing an industry that may have use for your technology enables you to very quickly
distinguish interesting companies from less interesting ones. The use of SIC codes helps a lot in this.
- Customer location; it is possible to segment on where prospects (future) might be. Customer
concentration in one location seems favourable, but this really depends upon the nature of the industry.
- Customer size; the size of customer companies may be a sensible basis for distinguishing one from
another. The basis for measuring size differs, depending upon what is being purchased. You have high
volume for low-priced products customers, but also low volume for high-priced products.
2. Operating variables; this involves more precise descriptions of what customer companies can do.
However, they are still relatively easily observed. Again, this is sub-divided:
- Company technology; in selecting possible customers, there is an element of technological readiness
involved.
- Product and brand-use status; it is only sensible that companies would use the behaviour of customers
with respect to products or brands to aid their segmentation.
- Customer capabilities; exchange involves matching the abilities and uncertainties of buyers and sellers.
Given this, a supplier might want to establish what customers are capable of doing.
- Customer strategic type; using Miles and Snow’s four-part typology – prospector (innovative), defender
(efficient), analyser (efficient and adaptive) and reactor (no consistent strategy) – predicts buying
behaviour better than firmographics. However, the determination of the strategic type of a company is
20. difficult, it relies for measurement on either self-indication, observation, or content analysis of company’s
marketing plans.
3. Purchasing approach; how buying companies are organized may constitute valuable intelligence to a
marketer, as it may enable them to produce an offering that is most valuable to a target segment that is
defined in terms of its purchasing approach. Again, sub-divisions:
- Purchasing function organization; each firm differs in how they organize themselves for procurement. A
big issue for the marketer is whether procurement is handled centrally or whether responsibility is
delegated to each division.
- Power structures; the relative influence of different departments within the firm may have an
impact upon the nature of the buying process or the criteria that are applied.
- Buyer-seller relationship; Jackson distinguished between customers on basis of their tendency to behave
transactionally (always-a-share customers) or relationally (lost-for-good customers).
- General purchasing policies; marketers can use knowledge of policies to determine whether they want or
would be able to meet the policy needs of a buyer.
- Purchasing criteria; knowing the specific criteria would enable segmentation to be undertaken more
precisely. However, buying companies do not express completely the criteria and their relative
importance.
4. Situational factors; situations arise where companies are instead guided temporarily by the prevailing
factors in the business environment. So, rather than defining all companies requiring a product as
equivalent and thus putting them in the same segment, it may often be possible to define a segment in
terms of the prevailing need.
5. Personal characteristics of buyers; ultimately, buying companies are only human. For a company to
segment on basis of personal characteristics it must have some degree of contact with the buying
company.
Successful Segmentation.
The greater the number of segmentation steps undertaken, and thus the number of differentiating criteria
that are applied, the smaller and more fragmented are the segments produced. When the fragmentation
begins to reach a point where further separation does not really lead to meaningful differences, the
process should be stopped. There are a series of tests that business marketers can use to establish the
quality of the segmentation process and the usefulness of the segments that are proposed;
- Measurable / Distinctive; criteria for segmentation must be clearly measurable.
- Accessible; for a segment to be targeted successfully it needs to be accessible. ‘Reach’ includes the
physical ease of getting offerings to the customers.
- Substantial / Profitable; the segment needs to be big enough to justify the costs of serving a small
segment.
- Actionable; a company should be able to actually bring offerings that will meet the needs of the
segment.
Another factor, thought of by Gross et al, is compatibility between buyer and seller. However, this is not a
measure of quality, it is a characteristic of the purchasing approach of customers.
Targeting.
Targeting involves making choices about those segments that should be pursued, and devising the most
appropriate strategies for pursuing them. A company will need to consider its possible
competitive position in relation to each segment in order to determine whether it merits the company’s
attention. A step-wise segment selection process.
In observing how companies target market segments, it is often argued that there are three strategic
approaches:
- Undifferentiated; companies that engage in this form make essentially the same offer to all segments. It
has advantages in terms of operating efficiency and economies of scale. However, companies risk over-
generalization.
21. - Differentiated; this involves choosing a variety of different segments and providing offerings that are
focused on meeting the needs of those targets more specifically.
- Niche targeting; this concentrates the customer focus to one or a small number of segments. A more
concentrated approach is more likely to be necessary for smaller companies that lack the resources to
meet the needs of a larger number of segments.
Business-to-Business Positioning.
When it comes to each individual segment there is a need to consider the position that the marketer
occupies in the mind of the buying company. The reasons for this are two-fold: (1) the offering from a
marketer occupies a space in the mind of the buyer, and (2) the relative position becomes the basis by
which the supplier is compared to others as well as the ideal.
II) ORGANIZATIONAL DEMAND ANALYSIS
One management expert suggests, “Without a forecast of total market demand, decisions on
investment, marketing support and other resource allocation will be based on hidden,
unconscious assumptions about industry wide requirements and they often be wrong”. (Berman,
2001)
Organizational demand should be analyzed from two perspectives. Firstly the products market
potential which is also influenced by the level of industry marketing efforts and assumed external
conditions. Secondly firm’s sales forecast which depends on the firm’s marketing effort. (Hutt &
Speh, 2007b)
Market Potential analysis: Market potential is the maximum possible sales of all the sellers of a
given product in a defined market during a specific time period (Cox & Havens, 1977).
Our product is marketed to EU and US based retailers who are spread around the globe, therefore
we would consider global market of jeans as the market potential. World Jeans market was 51.6$
Billion in 2007 and expected to become 56.2$ billion by 2014. The global demand of Jeans is
growing at 5% per annum. There are total of 513 denim manufacturers around the globe with
over 75% in Asian region. (Agarwal, 2009)
The population and age, income groups can be analyzed by region but we have limited our
research since we our targeted customers are retailers only. Analysis can be done at the deeper
level by calculating the number of outlets in the region and their growth.
Key steps in estimating the market potential is defining target market and segmentation,
geographic market, selling price and annual consumption (Wolfe, 2006). Therefore we Market
potential analysis has been done based on the check list by Wolfe (Ibid).
22. Source: Tucker 2007
US Market is by far the most prominent buying region of Jeans and this is our main market for
Volume based buyers. However for the premium jeans market we would target European region.
III) Sales Forecasting Methods
The forecast is the major component of decision making process because all budgets in company
ultimately depend on how many units sold, the sales forecast often determines companywide
commitments for everything from raw materials and labor to capital equipment and advertising.
Accurate forecasting of sales ensure better product stocking policies, improved cash management
and cash flow, more efficient warehouse management, better product distribution and finally
minimization of company’s risk in covering material demand. Selection of a forecasting
technique is depends on many factors, including the period for which the forecast is desired, the
purpose of the forecast, availability of the data, companies level of technical expertise, the
accuracy desired, the nature of the product and the extent of the product line. Evaluations of each
factor suggests the limits within which firm must work in terms of forecasting methods. (Hutt &
Speh, 2007b)
Two primary approaches to sales forecasting are recognized (1) qualitative and (2) quantitative.
Qualitative techniques rely on informed judgment and rating schemes. The sales force, top-level
executives, or distributors may be called on to use their knowledge of the economy, the market
and the customers to create qualitative demand estimates. Techniques for qualitative analysis
include the executive judgment method, the sales force composite method and the Delphi
method. Quantitative forecasting offers two primary methodologies, (1) time series and (2)
regression or causal. (Hutt & Speh, 2007b)
Quantitative forecasting also referred to as systematic or objective forecasting, offers two
primary methodologies: (1) Time Series and (2) Regression or Causal. Time Series techniques
use historical data ordered in time to project the trend and growth rate of the sales. The rationale
behind time series analysis is that the past pattern of the sales will apply to the future. Time
series methods are well suited to short range forecasting because the assumption that the future
will be like the past is more reasonable over the short run than over the long run and that is why
we have selected this method of forecasting for the denim jeans product industry. (Hutt & Speh,
2007b)
23. World Jeans market was 52 $ Billion in 2007 and forecasted to become 56.2$ billion by 2014.
The global demand of Jeans is growing at 5% per annum. There are total of 513 denim
manufacturers around the globe with over 75% in Asian region. (Agarwal, 2009)
General Approaches to Forecasting
Judgmental Approaches to Forecasting
Surveys. This is a "bottom up" approach where each individual contributes a piece of
what will become the final forecast. For example, we might poll or sample our customer base to
estimate demand for a coming period. Alternatively, we might gather estimates from our sales
force as to how much each salesperson expects to sell in the next time period.
Consensus methods. As an alternative to the "bottom-up" survey approaches, consensus
methods use a small group of individuals to develop general forecasts. In a “Jury of Executive
Opinion”, for example, a group of executives in the firm would meet and develop through debate
and discussion a general forecast of demand. Each individual would presumably contribute
insight and understanding based on their view of the market, the product, the competition, and so
forth.
Experimental Approaches to Forecasting
Customer Surveys are sometimes conducted over the telephone or on street corners, at
shopping malls, and so forth. The new product is displayed or described, and potential
customers are asked whether they would be interested in purchasing the item. While this
approach can help to isolate attractive or unattractive product features, experience has shown
that "intent to purchase" as measured in this way is difficult to translate into a meaningful
demand forecast. This falls short of being a true “demand experiment”.
Consumer Panels are also used in the early phases of product development. Here a
small group of potential customers are brought together in a room where they can use the
product and discuss it among themselves. Panel members are often paid a nominal amount for
their participation. Like surveys, these procedures are more useful for analyzing product
attributes than for estimating demand, and they do not constitute true “demand experiments”
because no purchases take place.
Test Marketing is often employed after new product development but prior to a full-scale
national launch of a new brand or product. The idea is to choose a relatively small, reasonably
isolated, yet somehow demographically "typical" market area. In the United States, this is often a
medium sized city such as Cincinnati or Buffalo.
Scanner Panel Data procedures have recently been developed that permit demand experimentation on
existing brands and products. In these procedures, a large set of household customers agrees to participate
24. in an ongoing study of their grocery buying habits. Panel members agree to submit information about the
number of individuals in the household, their ages, household income, and so forth.
Relational/Causal Approaches to Forecasting
The basic premise is that if we can find relationships between the explanatory variables
(population, income, and so forth) and sales for the existing stores, then these relationships will
hold in the new city as well. Thus, by collecting data on the explanatory variables in the target
city and applying these relationships, sales in the new store can be estimated. In some sense the
posture here is that the explanatory variables "cause" the sales. Mathematical and statistical
procedures are used to develop and test these explanatory relationships and to generate
forecasts from them. Causal methods include the following:
Econometric models, such as discrete choice models and multiple regression. More
elaborate systems involving sets of simultaneous regression equations can also be attempted.
These advanced models are beyond the scope of this book and are not generally applicable to
the task of forecasting demand in a system.
Input-output models estimate the flow of goods between markets and industries. These
models ensure the integrity of the flows into and out of the modeled markets and industries.
Life cycle models look at the various stages in a product's "life" as it is launched,
matures, and phases out. These techniques examine the nature of the consumers who buy the
product at various stages ("early adopters," "mainstream buyers," "laggards," etc.) to help
determine product life cycle trends in the demand pattern.
Simulation models are used to model the flows of components into manufacturing
plants based on MRP schedules and the flow of finished goods throughout distribution networks
to meet customer demand. There is little theory to building such simulation models.
Time Series Approaches to Forecasting
25. UNIT IV
I) Managing Innovation in the Business-to-Business Context:
Relevance of innovation management: Adapting and innovating is sometimes not only important but may
be also necessary to survive like during the credit crisis. It is not just about new product development but
concerns nearly every activity around a company. The source of value for firms thereby may not have to
be the end product itself and value-creating potential may stem from anywhere in and around the firm.
Therefore it is important on how the firm is organized to encourage innovation and how relationships are
used for this goal.
Organizing for innovation: Trott (2005) stated that “innovation is invariably a team game” and companies
typically need to create an environment where creative heads can work. An innovative company likewise
requires some characteristics in order to enable this operating of creative heads like e.g. ability to adapt,
willingness to invest, become aware of threats & opportunities and so on.
One step in this direction could for example be organizing the company more organically than
mechanistic.
Role of business-to-business relationships in innovation management: As said above innovation is a team
game and therefore companies could include their relationships, sometimes even their whole supply chain
and other agencies to become aware of threats and opportunities. Important is to find an answer on the
question of how to encourage external linkages to add value to the firms innovation process. Several
aspects should be considered like: the type of innovation project and degree of innovativeness required,
degree of knowledge sharing and formality of the mechanisms for knowledge sharing (formal or
informal), etc.
II) New Product Development:
Firms also need to develop successful new offerings and a research by McKinsey (2009) showed that a
focus on continued product adaption is a frequently followed approach to innovation. To ensure a balance
of financial investments over the long term new offerings need to be added to the existing portfolio of
offerings as others may be in the declining phase already.
New product offerings: an unavoidable risk: new product development and bringing them to the market
can bring along serious risks. As failure rates are high one could understand if companies did not want to
innovate. But often the proportion of sales spent on R&D is a good indicator of the level of new product
activity and as we know nearly every company has that kind of department looking for new opportunities
to gain value. Individual companies could e.g. compare their spent to key competitors or the sector´s
norm. Risk is often compounded by the cost of development like e.g. 11 billion for the new Airbus A380
26. but smaller firms will not face amounts like that. Still compared to their size it might be the case that they
encounter series costs and therefore they are probable to innovate more incrementally. This seems to be a
lower-risk approach and may also deliver incremental increases in sales. But to be stated is that
incremental innovation may, due to the volume of new aspects and ideas to a whole bunch of products,
lead to a even more complex and difficult portfolio and offerings and e.g. possibilities for economies of
scale might diminish.
New product offering development process: There has been serious effort put into establishing one valid
and clear development process. By managing the process well managers are helped in making appropriate
and right decisions at each stage and risk becomes more manageable. There are several different models
on the development process by e.g. Crawford and DiBenedetto, Gross et al. Dwyer and Tanner, Gross et
al. and so on with different amounts of stages. The one we will have a look at in this chapter is an 8 stage
process.
1. Identify opportunities/generating ideas:
The development is a very creative process and therefore requires as many seeds (ideas) as possible.
Regardless of where they come from it is of importance to establish a repository of ideas and to introduce
someone who has an eye on these ideas.
2. Screen ideas and make preliminary investigations:
A steady stream of ideas is a good starting point but discarding useless ideas on issues like company´s
capability, fit with objective or production, etc. as early as possible is just as important.
3. Analyze the business case:
The emphasis shifts to trying to establish which ideas have the most potential and there is a need to
involve careful financial estimates of market size, growth rate and potential of the new offering. Costs
may include nature of investments, staff costs, etc. but with information on financial issues it becomes
possible to compare the offering as prospective project.
4. Develop the concept and specify the features:
Reactions during the preliminary investigations on the offering allow to specify the features. It becomes
possible to state what the concept of the offering includes and which benefits it will bring to the customer.
5. Develop prototypes and develop marketing support:
With a clear concept at hand the offering can be prototyped. The intention is to develop a series of
prototypes that can be fine-tuned towards final offering. Marketing support activities for the offering
should be established around topics like e.g. packaging, labeling designs, pricing, distribution strategy,
etc.
6. Undertake limited-scale trial marketing:
By now the offering is ready to be used by customers and it is best to identify remaining adjustments and
the production costs. When it is possible test-marketing in small market areas could be beneficial.
7. Take offering to commercial launch:
Final changes can be made to the offering and the strategy on how to bring it to the market.
The launch can be planned and depending on the company´s size it may be sensible to roll out the
offering sequentially (maybe on a geographical basis).
8. Evaluate the process and draw lessons for next time:
This last step is not strictly an element of the offering development process but it is always good to reflect
on the soundness of decisions and the effectiveness of implementation, etc which could later lead to a
27. good series of new product offerings in the future and to solving problems of customers more effectively
and have more chance to grow and bring value to shareholders
III) B2B Pricing
Paradoxically, pricing is both one of the most important and yet one of the most neglected aspects of B2B
marketing. On average, a 5% increase in prince, increases EBIT by 22%, whereas a 5% increase in sales
increases EBIT with 12%.Despite this, there is evidence that relatively few companies do research on
pricing. Moreover, there is research that buyers often regard price to be comparatively unimportant as to
other buying-aspects. The business environment in which companies have to set their prices is growing
ever more challenging. There are deflationary tendencies, some of them coming from reduced costs
through experience, but also from availability of new low-cost manufacturing capacity in emerging
economies (BRIC), reductions in trade barriers, deregulation and perhaps the impact of internet, which
enabled customers to compare prices. On top of that purchasers become better trained and qualified.
Pricing: Strategy and Organization
Shippley and Jobber (Jews) proposed a comprehensive, multi-stage pricing process that takes into account
of all the relevant factors affecting pricing effectiveness – a process that they called the ‘pricing wheel’,
see figure 12.4. The point of the pricing wheel is to emphasize that pricing is not a decision that is taken
once and then forgotten about, but a continuous process, constantly updated for changing conditions, such
as new product features. In industries with highly customized products that are designed specifically to
meet the needs of each specific customer, price is a comparatively unimportant component of marketing
strategy. Even within a single industry sector, there is scope for a firm to put more or less emphasis on
price as a component of its marketing strategy – if the firm positions itself as a differentiator offering
enhanced customer value, then it will de-emphasize prize as a factor in its marketing strategy. Although
B2B organizations may pursue a very wide range of price objectives, research has shown that the most
common objectives are concerned with:
• Profits
• Survival
• Sales volume
• Sales revenue
• Market share
• Image creation
• Competitive parity or advantage
• Barriers to entry
• Perceived fairness
Price positioning
Price positioning strategy takers account of three elements: the price itself, the customer benefits from the
service or product, and competitor positioning. Following figure illustrates an approach to price
positioning strategy recommended by Shipley and Jobber (2001):
28. Market ruler: This position is difficult to achieve, because offering high perceived value usually
involves additional costs. This makes it difficult to offer a relative low price while also achieving a
reasonable profit margin. The market ruler makes sense on the long. Thus, if the strategy involves
becoming the established brand. This means more focus on market share than profit in the short
term.
The thriver (medium price/high ben.) is usually more sustainable than thriver (low price/med.
Ben.).
The chancer position becomes viable where the thriver and market positions are already occupied, but
both positions are vulnerable. At last, it is clear that the no-hoper and bungler offer poor customer value
and are unlikely to be sustainable. Usually these positions arise in periods of shortage of supply. The also-
ran is very vulnerable to attack, since rivals can attack on its price or customer benefits alone, or on both
simultaneously.
IV) Pricing Methods
Supply chain pricing
Changes in the environment of global business have encouraged companies to concentrate on their core
competencies and to outsource an increasing number of business activities. Under these circumstances
SCM becomes a critically important management process, and companies seek to build partnerships with
preferred suppliers. When this becomes the case, the traditional role of price must change. Traditionally,
pricing has been regarded as the way in which the value associated with a transaction is divided up
between the buyer and seller. In this traditional view, price is seen as the means of dividing up a ‘fixed’
pie of value that is created during a business transaction, and the predominant approach to pricing is
win/lose or a zero-sum game, meaning that if one party is better off than the other party must be worse
off.
Bid pricing
Types of bidding process: four basic auction mechanisms
• English – Most familiar auction – an ascending-price auction in which the last remaining bidder receives
the good and pays the amount of their bid.
• Dutch – Starts with a high public price and the price falls until the first participant finds the price low
enough to submit a bid. The first bidder is the winner and receives the good at the price prevailing when
the clock was stopped
• First-price sealed-bid – Unlike the previous two salad-bid auction are not in real time, each bidder
submits a bid and the bids are opened at a stipulated time. With this variant the bidder pays the price he
bided for
• Second-price sealed bid – The same is the previous, only here the highest bidder pays the
second highest bid
Internet auctions
The internet auction is an important and fast-growing mechanism for facilitating B2B transactions. Major
companies started to investigate the use of internet auctions in the mid 1990’s. General Electric was a
pioneer in developing its own in-house auction site, subsequently many other large firms have developed
their own in-house auction site.
Internet auctions can be conveniently categorized into the English or the Dutch/reverse auction.
In an English auction, the seller starts the bidding at a reserve price and the buyer offers higher and higher
prices until no one is willing to offer any higher. Highest bid wins the auction.
A Dutch auction is a descending price-auction. The original meaning of a Dutch auction arose where a
seller offered a good for sale at a very high, with that price gradually declining until a willing buyer could
29. be found and a bargain struck. In the case of B2B commerce, buyers post a RFQ and sellers respond to
the RFQ. A particular problem that can arise with reverse auctions is the winner’s curse.
Reverse auctions often take place in conditions of uncertainty, where the buyer nor the seller can be sure
of the true costs of fulfilling the contract. If price is used as the most important measure, the winning
seller will be the one who made the lowest estimate of costs, it is entirely possible that the seller
underestimated the costs and therefore stands to make a loss on the contract – the winner’s curse.
The costs involved in buying and selling are lower, geographical proximity is no longer an issue and the
time of the auction can be more flexible. You have two different endings of an auction: soft close and hard
close. With soft close the bidding goes on as long as there is a substantial amount of continuing bids. With
a hard close, the bidding ends at a stipulated time, so companies may use ‘sniping’ tactics (bidding in the
last minute to win).
UNIT V
I) B2B Marketing Channels
Direct Channels
Direct is when the manufacturer performs all the marketing functions.
• In direct distribution system the marketer reaches the target consumer directly without the use of
any intermediary.
• The distribution chain is small and no other party can take ownership of the product being
distributed.
• The direct distribution system can be further sub-divided on the basis of the methods of
communication that takes place during sale between marketer and consumer.
Direct methods include the following:
Direct Marketing Systems
• In this system the consumer buys the product based on information gained from impersonal
contact with the marketer like by visiting the marketer's website or ordering from the marketer's
catalogue.
• Or he buys based on information gathered through some personal communication with a
customer service personnel who is not a salesperson and can be reached through a toll-free
number.
Direct Retail System
• In this type of system the marketer operates his own retail stores. A perfect example of this
system is Starbucks.
Personal Selling Systems
• In this system the distribution of the product is carried forward by people whose main
responsibility is creating and managing sales (for instance a salesperson).
• He persuades the buyers into placing an order.
• The sales person plays a vital role here in generating sales.
Assisted Marketing System
• In this form of distribution system the marketer handles the distribution of his product and helps
it reach directly to the end user.
30. • However he needs assistance from others to spread awareness about his product among the
customers.
• An example of assisted marketing system is e-bay, here the buyers and sellers are brought
together for a fee. Agents and brokers can also be included in this category.
Indirect Channels
• Indirect is when some type of intermediary sells or handles the product.
• In indirect distribution system the marketer includes intermediaries or other members in his
distribution chain.
• These resellers make sure the product reaches the end user, while performing their duties they
take complete ownership of the product.
• However the reseller may sell products on a consignment basis wherein the reseller pays for the
product only when the product is sold.
• The resellers may be expected to take up a few responsibilities to help boost the sales of the
product.
Single-Party Selling System
• In this system the marketer involves another party to sell and distribute his product to the end
user.
• An example can be when the product is sold through large store-based retail chains or through
online retailers. In this case the distribution system is also referred to as trade selling system.
Multiple-Party Selling System
• In multiple-party selling system the distributor involves two or more reseller in the distribution
process before the product reaches the end user.
• This is most likely to happen when a wholesaler buys the product from the manufacturer and then
sells it to the retailer.
31. II) Distributors & Manufacturer Reps
There are two primary intermediaries:
1. Industrial distributors
2. Manufacturers’ representatives
These two groups handle a very sizeable share of B2B sales.
1) Distributors-Classification
General-Line Distributors
• Stock extensive variety of low tech (commodity) products
Specialists
• Focus on one or few related lines geared around high tech or industries demanding
complex customer requirements
Combination House
• Operates in two markets: industrial and consumer
2) Manufacturers’ Representatives (Reps)
• Manufacturers’ Reps fill a different role than Industrial Distributors.
They:
• Perform a much higher level of service.
• Are more technically advanced
• Know their territory better
• Are able to sell professionally
• Are experienced in the industry
• Usually represent several companies
• Used by small, medium and large firms.
• Often, small and medium firms cannot support a full time salesperson.
• Large firms use them to supplement their direct force for introducing new products to an area not
covered by their sales force.
• The main reason for using Reps is because it is economically correct to do so. Little or no training
costs, no benefits, no outrageous risks, and Reps are highly motivated vs. employees.
32. 3) E-Channels
• There are a number of different distribution channels available on the Internet which could
be utilised efficiently.
1. Social networks (Facebook, Myspace, Friendster)
• The current trend of the Internet is social interactions, and the trend is here to stay for a while.
• Multi-million corporations are in the hunt to acquire popular social networking sites because they
understand the potential and the impact social networking has on Internet users.
• Treating social networks such as Facebook and Myspace as your distribution channels mean
reaching to more people and increasing awareness of your website.
Social bookmarks (del.icio.us, Stumble Upon, Digg)
• Social bookmarks enable users to share, organise and store URLs of websites they like and/or
find useful.
• And because social bookmarks are created by users who understand the content of the website
they bookmark, it makes it easier for other users to find stuff related to an interest.
Social media (YouTube, Flickr, Podcasts)
• As with social networks and social bookmarks, social media has become increasingly popular
among Internet users for the same reasons.
• Using a social media like YouTube or Flickr as a medium to promote your business could bring
a lot of traffics to your website.
4. Blogs
• Blogs are popular because they provide up-to-date information and enables readers to engage in
discussions via comments.
• By using blog as a distribution channel, businesses can build a loyal readership and interact with
their customer base.
Widgets and gadgets (Yahoo! widgets, Google gadgets, Facebook APIs)
• Widgets and gadgets deliver dynamic and updated content to the users at any time.
• They leverage the website’s content to create new opportunities, extend users and strengthen the
presence of your brand.
Browser extensions
• Browser extensions such as customised search engine, add-ons, and toolbars provide users with
an easy access to your website and the functionalities that it offers instantly from their favourite
browser.
• It is an effective distribution channel for both the business and end users as it maximizes access
and visibility for both parties.
Search engines
• According to a survey conducted in 1998 by Georgia Institute of Technology, 85% of users found
websites through search engines (Tri-Media).
• Therefore, the power of search engine optimisation (SEO) and search engine marketing (SEM)
should be used to drive targeted and qualified traffic to your website and improve visibility of
your business.
III) Establishing channel objectives
Channel objectives are a part of and result from the company‘s marketing objectives that need to
be stated in terms of targeted service output levels.
Profit considerations and asset utilization must be reflected in channel objectives and the
resultant design.
It should be the Endeavour of the channel members to minimize the total channel costs and still
provide with the desired level of service outputs.
For example,
33. 1. Perishable products require more direct marketing because of the dangers associated with delays
and repeated handling.
2. Products requiring installation and/or maintenance services are usually sold and maintained by
the company or exclusively branches dealers.
3. Custom-built machinery and specialized business forms are sold directly by company sales
representatives because middlemen lack the requisite knowledge.
Channel design decisions
Analyzing customer needs
(a) Lot size (b) Waiting and delivery time (c) Spatial convenience
(d) Product variety (e) Service backup
Establishing channel objectives
Channel objectives should be stated in terms of targeted service output levels. Channel design must take
into account the strengths and weaknesses of different types of intermediaries.
Identifying major channel alternatives
A channel alternative is described by three elements : (a)the types of available business intermediaries, (b)
the number of intermediaries needed, (c) and the terms and responsibilities of each channel member.
Evaluating major channel alternatives
Channel Management decisions
Channel management warrants :
Selecting channel members :
characteristics of intermediaries à channel member’s length of business, other lines carried,
growth and profit record, cooperativeness and reputation.
Motivating individual channel members :
Positive motivators à higher margins, special deals, premium, cooperative advertising allowances,
display allowances and sales contests.
Negative motivators à threatening to reduce margins, to slow down delivery, or to end the
relationship altogether.
Evaluating their performance over time :
Evaluating standards à sales quotas, average inventory levels, customer delivery time, treatment
of damaged and lost goods, cooperation in company promotion and training programs and customer
service.
For example,
When IBM first introduced its PS/2 personal computers, it re-evaluated its dealers and allowed only the
best ones to carry the new models .
Each IBM dealer had to submit a business plan, send a sales and service employee to IBM training
classes and meet new sales quotas.
Only about two-thirds of IBM’s 2,200 dealers qualified to carry the PS/2 models.
IV) B2B Advertising
34. V) Personal Selling in B2B
Why is it so important in B2B?
Costs per sales call
Salespeople
What do they do
For their company?
For buyers?
Relationship Marketing
• Selling Center
“initiate and maintain relationships with industrial customers”
Objectives
• Buying Center
“participate in the purchasing decision and share goals and risks of that
decision.”
Objectives
Relationship quality
• Two dimensions
35. Managing the Sales Force
What is Sales Management?
• Role of strategy and forecasts
Organizing the Effort
• Depends on:
• Types
Geographical organization
• Advantages
• Disadvantages
Product organization
• Advantages
• Disadvantages
Market-centered organization
• Advantages
• Disadvantages
Key account management Managing Services for Business Markets
What is a key account?
• Purchases a significant volume as a percentage of sales
• Involves several organizational members in the process
• Buys for an organization with geographically dispersed units
• Expects a carefully coordinated response and specialized services
Differences between key accounts and regular accounts
36. Selecting Key Accounts
• Look at profit potential and degree to which customer values support services
• Look at Phase 1 companies with unique support requirements that can generate $$$
• Consider degree to which transaction complements seller’s business
VI) Marketing Mix For Business Service Firms
Marketing Mix for Business Service:
i) Development of service packages,
