Subject Outline:- B2B Marketing1. Introduction to B2B Market2 Organizational Buying Behavior3 Relationship Management4 Segmenting the Business Market5 Managing Products & New Innovations Management in B2B Market6 Managing Services in B2B Market7 Price Management in B2B Market8 Channel Management in B2B Market9 E-Commerce in B2B Market10 Business Marketing Communication11 Case Studies & Further Discussion
Business to Business Marketing :-• Definition:- “Business Marketing is the practice of individuals, or organizations, including commercial businesses, governments and institutions, facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations”
Industrial Vs Consumer MarketingAreas of Difference B2B Market Consumer MarketMarket Characteristics Geographically Concentrated Geographically Disbursed Relatively Fewer Buyer Mass MarketProduct Characteristic Technical Complex Standardize CustomizedService Characteristic Service , timely Availability Somewhat Important extremely ImportantBuying Behavior Involvement of Various functional Involvement of family members area from both the ends Purchase Decisions are performance Purchase decisions are mostly based based and rational on Physiological /social/psychological needs Technical Expertise Relatively less technical expertise is required Stable Interpersonal relationship Non- Personal relationship
Industrial Vs Consumer MarketingAreas of Difference Industrial Market Consumer MarketChannel Characteristic More Direct Indirect Fewer Intermediaries Multiple layer of IntermediariesPromotional Characteristic Emphasis on Personal Selling Emphasis on Mass Media (Advertising)Price Characteristic Competitive Bidding and Negotiated List Price or MRP Prices List Price for Standard Products
B2B Distribution Channel Characteristics Manufacturer Company Sales Representative Force Agency Distribution DealerCustomer Customer Customer
Characteristics of B2B Demand• Derived Demand:- – The demand for a good or service that results from the demand for another good or service. – Ex.:- Pig Iron ---Steel ---Steel Sheets---Automotive part companies--Automobiles--End customer• Demand Elasticity:-• Joint Demand:- - Demand for product or services is interdependent on each other – Ex:- Coffee Powder, Sugar & Milk in Making Coffee – Ex:- Software- Operating System, Car & Fuel
2:- Understanding B2B Market & Environment with Buyers PerspectiveB2B CustomersB2B Products Marketing of industrial products to B2B CustomersPurchasing of Industrial Products Goals of Purchasing Purchasing Orientations Buying Orientation Procurement Orientation Supply Chain Management OrientationPurchasing Practices of Industrial Customers Commercial Business Government Institutes Co-operativeEnvironmental Analysis:- Types of Environment Influencing B2B Market
Understanding B2B Market & Environment with Buyers Perspective
2.Understanding B2B Market& Environment with Buyers Raw Materials Iron ore, Crude oil, fruits, fish Perspective Manufactured Acids, Fuel oil, Steel , Materials Chemicals Material & Parts Component Parts Gauges, TV tubes, Tyres, Subassemblies Exhaust Pipe in Motor Cycle Light equipment/ Hand tools, Dies, Jigs Accessories Installation or Heavy Capital items Machine Tools, Furnaces Equipments Plants & Building Plants, Office Building Lubricants, Fasteners, paints Supplies , Electrical Items Supplies & Services Legal, Auditing, Advertising, Services Courier, Market Research
2.Understanding B2B Market & Environment with Buyers Perspective Goals Of Purchasing Uninterrupted Flow Material Manage Inventory Improve Quality Developing and Managing Supplier relationships Achieve Lowest total cost Reduce Administrative cost Advance Firms Competitive Position
2.Understanding B2B Market & Environment with Buyers PerspectivePurchase Orientation – Buying Orientation – Procurement Orientation – Supply chain Management OrientationApplications of Purchase Orientation to Industrial Customers Industrial Customers Supply Chain Management Procurement Government as a Customer Buying Orientation Institutes Buying Orientation
2.Understanding B2B Market & Environment with Buyers PerspectivePurchasing Practices of B2B Customers Industrial customers Government Institutes CooperativeEnvironmental Analysis:-Ecological & Physical 1.Pollution & Conservation of Natural resources 2. Utilities, Manpower & Transportation
2.Understanding B2B Market & Environment with Buyers PerspectiveEnvironment Analysis:-Internal Environment:- Company Location, R&D Facilities, Production Facilities Human Resource and Image of the companyExternal Environment:- Micro Environment :- Customers & Competitors Suppliers Macro Environment:- Economic Technological Government/Political & Legal Cultural & Social Investors & NGO
3.The Nature of Industrial Buying and Buying Behavior• Organizational Buying Process• Organizational Buying Situations• Forces Shaping Organizational Buying Behavior -- Environmental Forces -- Organizational Forces -- Group Forces :- - Buying Center -Elements of Buying Center -- Individual Forces
3.The Nature of Industrial Buying and Buying Behavior Problem Recognition General Description of Need Product Specification Supplier Search Acquisition & Analysis of Proposal Supplier Selection Selection of Order Routine Performance Review
3.The Nature of Industrial Buying and Buying BehaviorOrganizational Buying Situations The buyer routinely re-orders the Straight Rebuy same product or service with out any modification The buyer wants to modify product Modify Rebuy specifications, price, service or supplier The buyer purchase product or New Task service for the first time
3.The Nature of Industrial Buying and Buying BehaviorForces Shaping Organizational Buying Behavior Environmental Forces Organizational Forces Group Forces Individual Forces
Group Force – Buying Center“Buying Center can be defined as the body of all the individuals and groupsparticipating in the buying decision process and who have interdependent objectivesand share common risk”
3.The Nature of Industrial Buying and Buying BehaviorRoles of Buying CenterInitiator :- Recognition of Problem or NeedBuyer :- Obtains the quotation Supplier evaluation & Selection Processing purchase order Expediting deliveries Implement the purchasing policies of the organizationUser:- User of Product/ Services ( Could be Initiator)Influencer :- Individuals who could influence the purchasing decision ( Technical / Design Engineers / External consultants )Gatekeepers:- Individuals who control the flow of information to the members of buying centerDeciders:- Individuals or group of people who make the actual purchase decisions about the product or services
3.The Nature of Industrial Buying and Buying Behavior B2B Buying Behavior Model
4. Buyer Seller Relationship• Buyer Seller Relationship :- Establish , Develop & Maintain the meaningful relationship with the customer.• Types of Buyer – Seller Relationship• Transactional Exchange• Collaborative Exchange – Switching Cost
Managing Buyer Seller Relationship• Typical Characteristics of Buyer Seller Relationship based on Market Condition and Purchase Behavior Transactional Exchange Collaborative ExchangeAvailability of Alternative Many Alternative FewSupply Market Dynamism Stable VolatileImportance of Purchase Low HighComplexity of Purchase Low HighInformation Exchange Low HighOperational Linkage Limited Extensive
CRM Strategy• Determine which type of relationship matches the purchasing situation and supply-market conditions for a particular customer.• Develop a strategy that is appropriate for each strategy type.
Understanding Customer Profitability Characteristics of High Vs Low Cost-to-Serve CustomersHigh Cost to Serve Low Cost to ServeOrder Custom Products Order Standard ProductsOrder Small Quantities Order Large QuantitiesUnpredictable Order arrivals Predictable order arrivalsCustomized delivery Standard DeliveryFrequent Changes in delivery No changes in delivery requirementrequirementManual Processing Electronic ProcessingLarge amount of presales support Little to no presales supportRequire company to hold inventory Replenish as producedLonger credit periods Payment on time
Creating a CRM Strategy Acquire the Right Customer Crafting the right value proposition for the customer Design the Best Process to deliver the product /services Motivating the Employees Retain the customer
Segmenting the Business MarketWhy Segmentation:-Criteria for the segmentation:- Measurable Assessable Substantial Computability ResponsivenessBenefits of Segmentation:- Concentrate on unique needs of target segment, Focus on product development, Develop profitable pricing strategy Select the appropriate channel Develop communication and advertising strategyVariable of Business Market Segmentation :- Macro level segmentation Micro level Segmentation
Macro SegmentationVariable of Segmentation Breakdown of SegmentsCharacteristics of Buying BehaviorSize Small. Medium & Large ( Based on Sales or o. Of EmployeesGeographical location Region , Industrial zonesUsage rate Non user, Light user, Moderate user, heavy userStructure of procurement Centralize , DecentralizeProduct/ Service ApplicationEnd market serve As per Product/ServiceValue in use High , LowCharacteristics of Purchasing SituationsTypes of buying situations New task, Modified task, Straight RebuyStage in purchase situation Early stages, late stages
Micro SegmentationVariable of Segmentation Breakdown of SegmentsKey Criteria Quality, Delivery, supplier reputationPurchase Strategies Optimizer, SatisfierStructure of decision making unitImportance of purchase High , LowAttitude towards vendor Favorable, unfavorableOrganizational innovativeness Innovator, FollowerPersonal Characteristics of TopManagement or Decision makersDemographics Age, Educational backgroundDecision Style Normative , conservative, mixed modeRisk Risk taker, Risk avoiderConfidence High, lowJob responsibility Purchasing, production, engineering
Managing Products & New product develofor B2B Marketing
Core Competencies and Selected Products at Canon• Core competencies are embodied in the superior skills of employees--the technologies they have mastered, the unique ways in which these technologies are combined, and the market knowledge that has been accumulated.• They focus on the basics of what crates value from the customer’s perspective and include both technical and organizational skills.Developed by Cool Pictures and MultiMedia Presentations
Three Tests to Identify the Core Competencies• First, a core competence provides potential access to an array of markets.• Second, a core competence should make an important contribution to the perceived customer benefits of the firm’s end products.• Third, “a core competence should be difficult for competitors to imitate.”
Sustaining the Lead . . . Three Questions • How rare is our competence? • How long will it take our competitors to develop the competence? • Can the source of our advantage be easily understood by our competitors?
Quality Movement Stages• Stage one centered on conformance to standards or success in meeting specifications.• Stage two emphasized that quality was more than a technical specialty and that the pursuit of quality should drive the core processes of the entire business.• Stage three examines a firm’s quality performance relative to competitors and examines customer perceptions of the value of competing products.
What Value Means to Business Customers Core Benefits Add-on Customer Value Price Sacrifices Acquisition Costs Operations CostsSource: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,”Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.
1. Proprietary or 2. Custom-built catalog products productsFour Types of Industrial product Lines3. Custom-designed 4. Industrial products services
Steps in the Product Positioning Process1. Identify the relevant set of competitive products.2. Identify the set of determinant attributes that customers use to differentiate among options and determine the preferred choice.3. Collect information from a sample of existing and potential customers concerning their ratings of each product on the determinant attributes.4. Determine the product’s current position versus competing offerings for each market segment.5. Examine the fit between preferences of market segments and current position of product.6. Select Positioning or Repositioning Strategy.
Successful brand management involves developing a promise of value forcustomers and then ensuring that the promise is kept through the way in whichthe product is developed, produced, sold, services, and promoted. How High-Tech Brands Build Equity
New Product Development ProcessSuccessful companies employ a high-quality new productdevelopment process--careful attention is given to the execution ofthe activities and decision points. Benchmarking characteristics: • The firms emphasized upfront market and technical assessments. • The process featured complete descriptions of the product concepts, product benefits, positioning, and target markets. • Tough project go/kill decision points were included in the process and the kill option was actually used. • The new product process is flexible.
Resource Commitments Three ingredients were important here: 1. Top management committed the resources necessary to meet the firm’s objectives for the total product effort in the firm. 2. R&D budgets were adequate and aligned with the stated new product objectives. 3. The necessary personnel were assigned and were relieved from other duties.
New Product StrategySet aggressive new product performance goal asa basic corporate goal and communicate it to allemployees.
Lead user projects are conducted by a cross-functional team that includes four to sixmanagers from marketing and technical departments; one member serves as projectleader.Team members typically spend 12 to 15 hours per week on the projects.The LeadUserMethod
Product advantage refers to Marketing synergy representscustomer perceptions of the degree of fit between theproduct superiority with respect needs of the project and theto quality, cost-performance firm’s resources and skills inratio, or function relative to marketing.competitors. Four Strategic Factors For New Product SuccessTechnical synergy concerns International orientation--newthe fit between the needs of the products that are designed andproject and the firm’s R&D developed to meet foreignresources and competencies. requirements, and that are targeted at world or nearest- neighbor export markets.
• Innovators These are the people who are fundamentally committed to new technology on the grounds .• Early Adopters These are the true revolutionaries in business and government who want to use the discontinuity of any innovation to make a break with the past and start an entirely new future. Their expectation is that by being first to exploit the new capability they can achieve dramatic and insurmountable competitive advantage over the old order.• Early Majority These people make the bulk of all technology infrastructure purchases. They do not love technology for its own sake, so are different from the techies, whom they are careful, nonetheless, to employ. Moreover, they believe in evolution not revolution. they are interested in making their companies systems work effectively and look to adopt innovations only after they have established a proven track record.
• Late Majority These consumers are pessimistic about their ability to gain any value from technology investments and undertake them only under duress -- typically because the remaining alternative is to let the rest of the world pass them by. They are very price-sensitive, highly skeptical, and very demanding. Rarely do their demands get met, in part because they are unwilling to pay for any extra services, all of which only reconfirms their sour views of high tech.• Laggards This group delight in challenging the hype and puffery of high-tech marketing. They are not so much potential customers as ever-present critics. As such, the goal of high-tech marketing is not to sell to them but rather to sell around them.• The Marketing Strategy With these customer segments in mind, the typical approach is to seed new products with the innovators so they can help educate the early adopters. When the early adopters are interested, do everything that is possible to make them happy as they will then serve as references for the early majority which is the group where most of the money is made from a new product or service. Then leverage the success with this large group so that the product matures and stabilizes enough to be of interest to the late adopters. All the while, ignore the laggards and their skepticism.