A Business Marketing

Perspective
What Is Marketing?
• the process of planning and executing
• the conception (product), pricing, promotion, and distribution
• of ideas, goods, and services
• to create relationships
• that satisfy individual and organizational objectives.
Business to business is NOT business to
consumer
• Do Not Serve Same Types of Customers
• Do Not Serve the Same Number of Customers
• Do Require Strong Buyer-seller Relationships
• Do Depend on Strong Buyer Demand for their Customer’s Products
So what is Business Marketing?
Business Markets
• Markets for products and services bought by businesses, government
bodies, and institutions for:
• Incorporation
• Consumption
• Use
• Resale
Business Marketing
• Those activities that facilitate exchanges involving products and
customers in business markets
• Activities in which goods or services are sold for any use other than
personal consumption
• Note: It is not the nature of the product; it is the reason for the
transaction.
Consumer marketing is almost the same as B2B marketing. After all, aren’t
these customers and multiple buying influences and environmental forces
present in each market? Shouldn’t a person who was in charge of marketing
for toothpaste be able to adapt to selling oil well drilling equipment?

Or are we saying that people stop being human when they become
industrial buyers?
Business Solutions Businesses

Warehousing Transportation Consumer and Auto

Automotive
pharma outbound

In-factory Value added Enterprise

logistics services E-commerce Bulk mobility
services

Freight
forwarding

Mahindra Logistics Business

Click here for:

Mahindra Logistics Purpose Film
So, what are business products?
Business products
• Used to manufacture other products
• Become part of another product
• Aid in the normal operations of an organization
• Are acquired for resale without change in form
• A product purchased for personal use is considered a consumer good
So, how business markets differ from
consumer markets?
Is it a consumer transaction or a business
transaction?
• You buy a gear to fix your bicycle.

• Ford buys the same gear to fix a machine.

• Infosys buys soft drinks for its cafeterias.

• The Indian government buys…anything.

B2C and B2B
The Consumer Market (B2C) and the Business Market (B2B) at

HP

B2C B2B

Customers: Individuals & Businesses Institutions Government

Households Global Healthcare State
Large corporations Education Central
Small & Medium
sized businesses

Selected PCs PCs

Products: Printers Enterprise Storage
Laptops Servers
Simple Service Complex Service Offerings
Agreements
Business Marketing (continued)

• Factors that distinguish business marketing from consumer marketing

• Nature of the customer
• Utility of the product for the customer

• Key to successful marketing strategy

• To identify unique dimensions of each major business market and formulate
programs that respond to specific characteristics of each business market
sector
Categories of Business Market Customers

OEMs
Commercial
Firms Wholesalers
Retailers

Central State
Governments
Government Government

Educational Civic Societies Healthcare

Institutions
Institutes Nonprofits Other
Business Market Customer
Commercial Enterprises

Three categories of Commercial Customers:

• Users
• Example: Tata Motors buys machines to produce automobiles that
are sold to consumers and businesses. Tata Motors is a user.
• OEMs
• Individuals and organizations that buy business goods and
incorporate them into the products that they produce for eventual
sale to other producers or to consumers.
• Dealers and distributors
Watch this
Classifying Goods for the Business Market

Classify industrial goods by

asking the following:
How does the good or Source: Adapted from Philip Kotler,
Marketing Management: Analysis,
service enter the Planning, and Control, 4th ed. (Englewood
production process? Cliffs, N.J.: Prentice-Hall, 1980), p. 172,
with permission of Prentice-Hall, Inc.

How does it enter the cost

structure of the firm?
A product known as an auto diode is a key component in the alternators used in virtually
every automobile in the world. One old line electrical products manufacturer was supplying
an attractive product at a cost of nearly one dollar per unit.

Competitors developed a much simpler product which eliminated the outer layer of
packaging and could be offered to automotive manufacturers at less than $0.20.

The engineers at the older firm were convinced that buyers at General Motors, Ford, and
Toyota would be willing to pay more for the better packaged product, even though both
met the same functional requirements. One engineer even remarked, “they can see the
better quality – it looks better!”

Is price the only consideration in B2B markets? Are we living in a world where
manufacturers can only survive by being the cheapest? Or is the real issue value? And how
do you define that?
Governments
• Central and State Government and local bodies

• Generally use the bidding approach to purchase goods and services

• Bidding process with opening up of tenders

Institutions
• This is the nonprofit segment of the market that does not seek to achieve
normal business goals such as ROI, %share of market or profit

• Market includes universities, hospitals, schools, religious bodies, NGOs,

foundations, etc.
Differences in Consumer and Business Marketing

• Nature of markets
• Market demand
• Buyer behavior
• Buyer-seller relationships
• Environmental influences
• Market strategy
Characteristics of Business Markets
• Derived demand
• Demand for industrial products is derived from the ultimate demand for
consumer products
• Fluctuating demand
• Business marketers carefully monitor fluctuating trends and patterns in
consumer markets
• Downturn in the economy creates the opposite result
Characteristics of Business Markets (continued)
• Stimulating demand
• Business marketers must monitor final consumer markets and develop a plan
that reaches the ultimate consumer directly
• Price sensitivity
• Responsiveness of the quantity demanded to a change in price
• Called demand elasticity
Concentration of Customers
• Business marketers serve fewer but larger customers than consumer-
products marketers
• Customers can be manufacturers of products who in turn target millions of
potential buyers

• Geographical concentration indicates that a large potential volume

exists in a given area
• Large metropolitan areas are lucrative business markets
Classifying Goods for the Business Market
3 Main Categories of Products
• Entering Goods
• Become part of the finished product
• Cost assigned to the manufacturing process
• Foundation Goods
• Capital Items
• Typically depreciated over time
• Facilitating Products
• Support organizational operations
• Handled as overhead expenses
Classifying Goods for the Business Market
Entering Goods
• Raw Materials
• Farm products & natural products
• Only processed as necessary for handling & transport
• Require extensive processing
• Manufactured Materials & Parts
• Any product that has undergone extensive processing prior to purchase
• Component Materials require additional processing
• Component Parts generally do not require additional processing
Classifying Goods for the Business Market
Foundation Goods
• Installations
• Major long-term investment items
• Buildings, land, fixed equipment, etc.
• Accessory Equipment
• Less expensive & short-lived
• Not considered part of fixed plant
• Portable tools, PC’s, etc.
Classifying Goods for the Business Market
Facilitating Products
• Supplies
• Any supplies necessary to maintain the organization’s operations
• Services
• Maintenance & Repair support
• Advisory support
• Logistical support
Business Markets and Consumer-Goods
Markets
• Benefit by employing a market orientation
• Requires proficiency in understanding and satisfying customers
• Are market-driven
Aspects of Market-Driven Firms
• Set of values and beliefs that places customers’ interests first
• Ability to generate, disseminate, and productively use superior
information about customers and competitors
• Coordinated use of interfunctional resources
Distinctive Capabilities
Market sensing capability

• Ability to continuously sense change and to

anticipate customer responses

Customer linking

• Capability to develop and manage close customer

relationships
Roles of Marketing Managers
Instigator

• Capitalizes on the close connection to customers, thinks strategically, and

challenges the status quo

Innovator

• Takes an active role in shaping the company’s innovation agenda

Integrator

• Links multiple functions to unite organizational members on a clear

strategy path

Implementer

• Mobilizes diverse organizational members across the firm

Customer Value Proposition
• Customers compare value elements of a firm’s offering with those
offered by the next best alternative
• Captures set of benefits that a supplier offers to advance the
performance of the customer organization
Figure - Key Characteristics of Business Market Customers
Figure - Supply Chain For Automobile Creation
Organizational Buying
Behavior
Understanding the Dynamics of
Organizational Buying
• Market-driven firms sense market trends and work closely with their
customers and vendors. This is crucial to:
• Identify profitable market segments
• Locate buying influences within segments
• Reach organizational buyers efficiently and effectively with an offer

• Each decision goes through various steps. Skipping a step can be

essential to the decision-making process.
How is a hair dryer manufactured?
Organizational Buying Process
Coil Coatings Example
• Beckers is a leading worldwide supplier of industrial coatings and the global market leader of coil
coatings
• It is a Swedish company with customers in 60 countries
• In India, Beckers started with a JV with Berger Paints in Saligao, Goa IDC, Goa
Processed raw
materials

Materials, repair and overhaul (MRO)

1. Problem Recognition
• Before anything is bought, most buyers need to be made aware of a
problem.
1. Problem Recognition
Internally

• The manufacturer needs Resins, pigments, solvents and additives

for paint manufacturing

• They are in short supply of resins

• Someone needs to order the processed raw materials (resins)

• Someone recognizes an opportunity that can be captured by

acquiring the product
1. Problem Recognition

Externally:

• More often than not, it is the salesperson who precipitates the

need for a new product

• Advertising also can influence purchasing

• Many organizations participate in trade shows and exhibitions

2. General Description of Need
Once a need is recognized, the purchasing department
works with the buying group to define what is needed by
asking:

• What is the extent of the problem?

• What alternatives can solve the problem?
• Where can the solution be purchased?

Each small decision ultimately helps define the product

specifications.

Sometimes the supplier is involved if the supplier influences

the sale (i.e., the supplier makes the buyer aware of the
need).
3. Product Specifications

Many times the question boils down to:

1. Is it a new task buy?

2. Is it a straight rebuy?
3. Is it a modified rebuy?

Buyers try to be objective and consider many ideas. Professional sellers

try to influence this decision as early as possible in the buying process—if
they can!
4. Supplier Search
• Who will be the supplier?

• The creating influencer has a lot of say about the choice of supplier.
If a salesperson creates the need, often the specs are written so
that only the salesperson’s organization is able to fulfill the
contract.

• In established businesses, often only preferred vendors are

considered.
5. Acquisition and Analysis of Proposals
• This step occurs only when the buying organization lacks
adequate information to make a decision.

• Proposals are presented in detail often by a team engineers, users

and purchasing agents. Successful proposals determine the
supplier.

• Many times, this step is perfunctory. The buyer may have already
determined the preferred vendor, but legally it may be necessary
to seek other vendor proposals to attain government contracts.
6. Supplier Selection
At this point, negotiation includes not only monies,
but also:
1.Quantities
2.Delivery times
3.Level of service
4.Warranties
5.Payment schedules
7. Selection of Order Routine
• Once the supplier is selected, the order routines are
established
8. Performance Review
After receipt of the product or service, a
performance review asks:

1. Did the supplier meet delivery time?

2. Did the product meet the specs?
3. Does the contract have to be modified?
4. Did the vendor live up to expectations?
Discussion
• The coil coatings imported from South Korea and China are considerably
cheaper given the substandard resins used in it manufacturing
• The coil coatings by Becker tend to lose out on this with the competition, as the
resins used by Becker are German made and hence demand a higher price
• This in turn increases the overall cost of manufacturing the same being charged
to the buyer
• What should Becker Coatings do in this scenario?

Low volume – High margins

High volume – low margins
Reference: https://www.coatingsworld.com/
Buying Process
• Stages in the buying process are not as sequential as suggested
by the model.
• Under what conditions the steps can be skipped?

• Sometimes steps are skipped. For example, on straight rebuys,

buyers choose to purchase almost immediately.

• However, the model represents important aspects of how

companies buy and evaluate business purchases.
Buying Process
There other events that influence the buying
process, most notably:

1. Economic conditions
2. Competition
3. Basic shifts in the organizational objectives
4. The buying situation
Three Buying Situations

1. New task
2. Straight rebuy
3. Modified rebuy
1. New Task
There are 2 approaches to New Task purchasing:

1. Judgmental Situations

2. Strategic Decisions
• Let us consider Acro Paints wanting to enter into manufacturing of
coil coating paints
• Revisiting the production process, what all decisions need to be made
by the manufacturer
Marketing Consideration for
New Task Buys
Marketers can gain an edge if they:
1. Initiate problem recognition
2. Get involved very early in the decision-making
process
3. Get involved early in the procurement process
4. Understand the buying organization's behavior
patterns
Three Buying Situations
2. Straight Rebuy

• Straight rebuy – a problem or need that is recurring

or a continuing requirement.
• Buyers have experience in the area
• Require little or no new information
• Buyers operate in routine problem-solving stage
Straight Rebuy

• Many companies review this area of business

every now and then, but the edge usually goes to
the supplying company.

• Relationships become very important.

Three Buying Situations
3. Modified Rebuy
} Modified rebuy—Decision makers feel there is a benefits to reevaluating
alternatives.

} Internal Forces:
} Search for quality improvement
} Cost reductions
Modified Rebuy
• Buyers feel they can make significant advances if they review their buying
situations on a regular basis.

• Often, changes in styles, materials or even alternative solutions facilitate

this review.

• Another reason for Modified Rebuy is dissatisfaction with present supplier.

• New supplier was able to find the present supplier’s weaknesses and
offered buyers new alternatives to “fix” their problem(s).
We are often told that marketing is about managing the exchange process, yet
government departments and many institutions seem to lay down the ground rules from
the start. Marketers have to play by the buyer’s rules to be in the game at all – so how can
they possibly be managing the process? Pushed from one set of constraints to the next, it
would seem that the average marketer is just a pawn in the buyers’ hands!

Yet maybe that is how it should be, if customers are at the center of everything we do.
Not to mention that the management process itself could be construed as a clearing-
house for pressures rather than as a directive force – in a sense, no manager is actually in
control, so why should marketers be any different?
Roles in the Buying Center

Initiator Influencers Gatekeepers

Decider Purchaser Users

Buying Center Roles
Initiator Initially perceives a problem and initiates the buying process to solve it.

Affects the purchasing decision by providing technical information or other

Influencer relevant (internal or external) information.

Controls the information to be reviewed by members of the buying group.

Gatekeeper (For example, buyer may screen advertising material and even
salespeople.)
Actually makes the buying decision, whether or not they have formal
Decider authority to do so. Could be the owner, an engineer or even the buyer.

Has formal authority to select and purchase products or services and the
Buyer responsibility to implement and follow all procurement procedures.

User Actually use the product in question. Can be inconsequential or major

players in the process.
Relationship Marketing
Relationship Marketing centers on
• Establishing,
• Developing, and
• Maintaining
successful exchanges with customers.
Discussion
• We are often told that marketing is about managing the exchange
process, yet government departments and many institutions seem to
lay down the ground rules from the start.
• Marketers have to play by the buyer’s rules to be in the game at all –
so how can they possibly be managing the process?
• Pushed from one set of constraints to the next, it would seem that
the average marketer is just a pawn in the buyers’ hands!
Organizational Forces
• Strategic priorities in purchasing
• Corporate goals and priorities grow as the purchasing profession grows
• Procurement managers give increased emphasis to suppliers’ capabilities
• Explore new areas where a strategic supplier can add value to the firm’s product or
service offerings
Strategic Priorities
Types of Relationships
• Continuum of buyer-seller relationships
• Transactional, Value-added & Collaborative exchanges

The Relationship Spectrum

Types of Relationships
• Transactional exchange: Centers on timely exchange of basic
products at highly competitive market prices
• These transactions are autonomous
• Collaborative exchange: Features close information, social,
operational linkages, and mutual commitments
• Operational linkages: Reflect how much the systems, procedures, and
routines of the buying and selling firms have been connected to facilitate
operations
Value-Adding Exchanges
• Fall between transactional and collaborative exchanges
• Selling firms shift from attracting customers to keeping them by:
• Understanding customer’s needs and changing requirements
• Tailoring the firm’s offerings to those needs
• Providing continuing incentives that promote repeat business
Figure 3.2 - Characteristics of Relationships
Scenario
• How will value be created for the buyers through a collaborative
relationship?
• Jitsu industries want to open CASA for its employees and day to day
operations
• Jitsu industries is looking for additional benefits over the standard
features of CASA.
• How can a bank edge over its competitors and create value for Jitsu?
Measuring customer profitability
• Employing an activity-based costing (ABC) process, one can accurately
assess the cost and profitability of each customer.

• By linking financial information with transactional data created in

CRM programs, companies are able to accurately calculate “cost-to-
service” components to yield customer profitability.
Measuring Customer Profitability

• Activity-based costing (ABC) is a technique that allocates the

cost of performing various services to each customer
(customer-specific costing).

• Through Customer Relations Management (CRM) programs,

one can relate revenues and costs to each and every activity.
Figure 3.3 - Whale Curve
Whale Curve & Profitability

• 20/80 Rule says “20% of customer provide 80% of sales

• Whale Curve reveals:

• 20% of customers generate 150–300% of total profits

• 70% of customers break even

• 10% of customers lose from 50-200% of total profits

• Leaving company with 100% of total profits

Figure 3.4 - Profit Lens

SOURCE: From “Manage Customers for Profits (Not Just Sales)” by B.P. Shapiro et al., September-October 1987, p. 104, Harvard
Business Review.
Scenario
• How to manage unprofitable customers?
• Scenario: HDFC bank has tied up with Jitsu Industries for maintaining
the salary accounts of their employees (200 Nos.). They have
provided the highest perks and benefits salary account to the
employees
• Jitsu industries usually delays the salaries every month with a backlog
of 4 months of salary being pending.
• The day on which the salary is credited to the employee’s account is
not fixed. The employees withdraw complete salary from account
once credited
• How can HDFC bank handle this situation?
Managing Unprofitable Customers
Low margin / high cost customers offer the most challenge for
marketing mangers.

• Start with ways to reduce costs

• Next, work with customers to possibly change their actions
resulting in lowering costs or increasing profitability
Firing the Customer
• We must try everything to make a customer profitable before firing them.

• If after trying, and the customer continues to be reluctant to change, and

the relationship remains unprofitable, we can say outright, “YOUR FIRED!”
but…

• There are better approaches. We can let customers ‘fire themselves’ by

raising our prices, reducing or charging more for services, eliminating
discounts, etc., until they become profitable or find another distributor.
Segmenting the Business
Market and Estimating Segment
Demand

1
What Is A Market?
A market is…
(1) People or organizations who
(2) need & want what we offer (all have the same problem and
need a similar solution)
(3) have the ability to purchase and
(4) the willingness to buy ASAP.

A group of people that lacks any one of these characteristics is not a

market. 2
Market Segmentation
Market People or organizations with
needs or wants, the ability to purchase and
the willingness to buy.

Market A group of present or potential customers

Segment with some common characteristics which we
can explain (predict) their actions when
subjected to marketing stimuli.

Market The process of dividing a market into

Segmentation meaningful, relatively similar and identifiable
segments or groups.
3
Business Market
• Often in the business market, segments that appear strong
(that is, they produce a lot of volume) often do not
contribute as much to profits as they should.

• Because of this, it is important to choose business market

segments wisely.

4
What key criteria best define a unique
market segment?
• Measurability

• Accessibility

• Substantiality

• Responsiveness
What key criteria best define a unique
market segment?
• Measurability The degree to which information on particular buyer
characteristics exists or can be obtained.

The degree to which the firm can effectively focus its

• Accessibility marketing efforts on chosen segments.

The degree to which the segments are large or profitable

• Substantiality enough to be worth considering for separate market
cultivation.

The degree to which segments respond differently to

• Responsiveness different marketing mix elements such as pricing or
product features.
6
Missed Opportunities – Three Customer Groups
1. Undershot customers - Existing solutions fail to meet their needs,
resulting in:
a. a purchase of new product versions
b. at steady or increasing prices.

2. Over Shot Customers - Existing solutions are too good, thus

customer is reluctant to purchase new version.

3. Non-Consuming Customers – Customers who lack resources,

skills or ability to benefit from existing solutions.

7
Missed Opportunities (continued)
} Often, marketers focus too much on Undershot and not enough
on Overshot or Non-Consuming customers.

} Consequently, marketers miss opportunities to:

◦ Recognize new innovations that could motivate Overshot and Non-
Consumers to buy.
◦ Invent new products that could revolutionize industries as we know it.

8
Business Marketing Segmentation

Macro-
segmentation

Business
Markets

Micro-
segmentation

9
Small, medium,
Size (scale of operations)
large

USA, Europe,
Geographical location
Asia pacific, etc.
Characteristics of buying
organization
Non-user, light,
Usage rate
moderate, heavy

Centralize/
Structure of procurement
decentralized

Macrolevel Varies by product

Product/service application End market served
segmentation or service

Value in use High, low

New task,
Type of buying situation modified rebuy,
Characteristics of purchasing straight rebuy
situation
Stage in purchase decision Early stage, late
process stage 10
Quality, delivery, supplier
Key purchasing criteria
reputation

Purchasing strategies Single source, multiple sources

Structure of decision making Major decision participants (Purc.

unit (DMU) Manager, plant manager
Microlevel
segmentation

Importance of purchase High importance, low importance

Organizational
Innovator… Follower
innovativeness

Demographics, Decision style, risk.

Personal characteristics
Confidence, job responsibility
11
Macrolevel Bases
• Useful to partition the market by size of potential buying organization
• Usage rate - Buyers are classified on a continuum ranging from
nonuser to heavy user
• Structure of the procurement function influences the degree of buyer
specialization, criteria emphasized, and composition of the buying
center
Centralized and Decentralized Buyers

• Centralized buyers - Stress on long-term supply availability and the

development of a healthy supplier complex
• Decentralized buyers - Tend to emphasize short-term cost efficiency
Product/Service Application
• Specific industrial good can be used in different applications and, as a
result, market can be divided by specific use applications
Value in Use
• Product’s economic value to the user relative to a specific alternative
in a particular application
• Frequently varies by customer application
Purchasing Situation
• Buying organizations are classified as new-task, straight rebuy, or
modified rebuy organizations
• Marketing strategy is defined by one of the following
• Position of the firm in the procurement decision process
• Firm’s location on the buying situation continuum
Table 4.1 - Selected Macrolevel Bases of Segmentation

Variables Illustrative Breakdowns

Characteristics of Buying Organizations

Size (the scale of operations of the Small, medium, large; based on sales or
organization) number of employees

Geographical location USA, Asia Pacific, Europe, Middle East,

and Africa

Usage rate Nonuser, light user, moderate user,

heavy user

Structure of procurement Centralized, decentralized

Table 4.1 - Selected Macrolevel Bases of Segmentation (continued)
Variables Illustrative Breakdowns

Product/Service Application

End market served Varies by product or service

Value in use High, low

Characteristics of Purchasing Situation

Type of buying situation New task, modified rebuy, straight

rebuy

Stage in purchase decision process Early stages, late stages

Table 4.2 - Selected Microlevel Bases of Segmentation

Variables Illustrative Breakdowns

Key criteria Quality, delivery, supplier reputation

Purchasing strategies Single source … multiple sources

Structure of decision-making unit Major decision participants (for

example, purchasing manager and
plant manager)

Importance of purchase High importance … low importance

Organizational innovativeness Innovator … follower

Table 4.2 - Selected Microlevel Bases of Segmentation
(continued)

Variables Illustrative Breakdowns

Personal characteristics

Demographics Age, educational background

Decision style Normative, conservative, mixed mode

Risk Risk taker, risk avoider

Confidence High … low

Job responsibility Purchasing, production, engineering

Key Criteria

Prompt and
Product Technical
reliable
quality support
delivery

Supply Supplier
Price
continuity profiles
Types of Buyers

Programmed buyers: Neither price or service sensitive

Relationship buyers: Value partnerships and are not price sensitive

Transactional buyers: Price is important but considerations are made to service,

depending upon importance of product

Bargain hunters: Price sensitive but always relative to importance of product

Customer Segments
Innovation-focused customers

• Committed to being the first in the market with new

products and technologies

Customers in fast-growing markets

• Constantly under pressure from competitors in fast-growth

markets

Customers in highly competitive markets

• Have mature products in highly competitive markets

Purchasing Strategies
• Microsegments can be classified according to their purchasing
strategies
• Some buyers have several suppliers and give each a healthy volume of
business
• Some buyers need an assured supply, giving most of their business to a few
suppliers
Other Microsegments
• Importance of purchase
• Appropriate when product is applied in various ways by various customers
• Organizational innovativeness
• Some organizations innovate more and thus are more willing to purchase new
industrial products
Other Microsegments (continued)
• Personal characteristics
• Research is needed on segmentation based on individual characteristics to
explore its potential
• New products
• When new products are introduced, marketers may need to approach new
influencers versus traditional buyers
27
AGS
• Started as graphics firm which eventually started manufacturing paint
mixing machines (Applied Graphics Solutions – now abbreviated to
AGS)
• Banking Automation
• Payment Solutions
• Cash Management
• Retail Automation
• Fuel Retail Automation
• Transit Business
• Colour Automation

28
AGS
• Has ATM manufacturing plant in Daman
• So they are also OEM

29
• So AGS started with Cash Management Business (Cash logistics) which helps
businesses and Banks transport Cash from one place to other. This works in
sync with their ATM business as ATMs need cash replenishment services which
AGS can provide.
• This business is governed by regulatory authorities and difficult to enter so is
thriving due to norms. So, there are less than 10 players in India
• Banking switch services is another cross service AGS had which made them
single stop solution with Cash, ATM and switch services (all 3) which given
them advantage as they have larger portfolio to offer from and more avenues
to generate revenue. 30
• Along with this business, they ventured into small segments like cash
counting machines etc.
• Apart from this, AGS also started their retail products, Billing kiosks,
Cash safes etc.
• Future group, reliance retails and other small chains are their clients.
• Cash safes are like drawers or desks with passwords which help large
retailors store large volumes of cash. (Future group uses this.)

31
• Post this, in 2015 they started with Retail Transaction products –
Swipe machines, payment gateways, QR code, UPI (Started in 2018-
19) – This was targeted towards Banks as well as retailers.
• During this period, they also did some partnerships with some smaller
companies and tried to sell B2B retail products with but it failed as
existing sales team could not push.
• Product included – Billing softwares for retailers, Loyalty card
products for retails (still working in some segments)

32
Account-Based Marketing (ABM)

• Approach that treats an individual account as a market

• Ensures that marketing and sales are fully focused on a target client’s
most important business issues
• Work collaboratively to create value propositions
Account-Based-Marketing (ABM)
• ABM is an approach that treats an individual account as a market.

• Done right, it ensures that key accounts are:

• Fully serviced
• Understood with respect to important issues

• The strategy is to:

• Focus on that single client
• Develop a collaborative relationship
• Work with the client to mutually develop value propositions that meet the
client’s business needs

34
Estimating Demand
• Estimating demand within selected markets is vital to marketing
management
• Forecasting demand represents probable sales and takes into
account:
• Potential business
• Level and type of marketing effort demanded
Supply Chain Links
• Sales forecasts are critical to a smooth operation throughout the
supply chain
• Timely forecasts allow supply chain members to effectively coordinate
their efforts and share in the benefits
Sales Forecast Data
• Used to:
• Distribute inventory within the supply chain
• Manage stock at each level
• Schedule resources at all levels
• Provide material, components, and service to a manufacturer
• Accurate forecasts go hand-in-hand with good business practices
throughout the supply chain
Methods of Forecasting Demand

• Qualitative techniques - Called management judgment or subjective

techniques
• Rely on informed judgment and rating schemes
• Include the executive judgment method, the sales force composite method,
and the Delphi method
• Quantitative techniques - Called systematic or objective forecasting
• Offers time series and regression or causal methodologies
Qualitative Method: Executive Judgment
• Combines and averages top executives’ estimates of future sales

• Easy to apply and understand

• Limitations
• Does not systematically analyze cause-and-effect relationships
• New executives may have difficulty making reasonable forecasts as there is no established formula for
deriving estimates
• Difficult to asses the accuracy of the method

• Produces accurate forecasts when:

• They are made frequently and repetitively
• Environment is stable
• Linkage between decision, action, and feedback is short
Qualitative Method: Sales Force Composite
• Sales force knows their customers, markets, Benefits
Ability to draw on sales force
and competition, and they can estimate the knowledge about markets and
sales volume effectively customers
Executed with relative ease at
• Sales force’s involvement in forecasting minimal cost
process helps them understand how the Limitations
Does not involve systematic
forecast is derived and boosts their incentives analysis of cause and effect
to achieve desired sales levels Reliance on informed judgment and
opinions
• Composite forecast is attained by combining Overestimation of the forecast to
the sales estimates from all salespeople look good
Qualitative Method: Delphi Method
• Opinions of a panel of experts on future sales are converted into an informed consensus
through a highly structured feedback mechanism

• Process involved
• Written opinions about the likelihood of some future event are sought
• Responses to the first questionnaire are used to produce a second one
• Analyst assembles, clarifies, and consolidates information for dissemination in the succeeding round

• Generally applied to long term forecasting of demand

• Suitable for new products or for situations that are not well suited for quantitative analysis

• Difficult to measure the accuracy of the estimates

Quantitative Methods: Time Series

• Uses historical data ordered chronologically to project the trend and

growth rate of sales
• Past patterns can be applied to the future
• Time series of sales may include trends, seasonal, cyclical, and
irregular patterns
• Well suited for short range forecasting
Nested Approach for Segmentation

43
Nested approach
Systematic approach- marketers should
start working from outer nests going
inwards

44
Business Marketing Planning:
Strategic Perspectives
Snapshot of 3M

2
Snapshot of 3M

3
Snapshot of Dow Chemical
New Strategies

• New strategies come from new ideas

• New ideas often come from new voices

• To meet both domestic and foreign competition, B2B

firms are recognizing the vital role of marketing in
developing and implementing successful strategies
Effective Strategies

Effective strategies share a:

A. Responsiveness to market needs
B. Ability to exploit the organizations special
competencies
C. Ability to make valid assumptions about
environmental trends
D. Ability to take advantage of competitive behavior
E. Realistic basis for securing and sustaining a
competitive advantage
Hierarchy of Strategies – 3 parts

üCorporate Strategy

üBusiness-Level Strategy

üFunctional Strategy
Hierarchy of Strategies – Part 1
• Corporate Strategy
– What businesses are we in?
– What are our core competencies?
– How should we allocate resources?
– What businesses should we be in?
Alphabet Corporate Strategy
• Created through a restructuring of Google on October 2, 2015
• became the parent company of Google and several former Google
subsidiaries.

9
Alphabet Corporate Strategy
• Desire to make the core Google business "cleaner and more accountable"

• While allowing greater autonomy to group companies that operate in

businesses other than Internet services.

• Google is the largest subsidiary of Alphabet

10
Subsidiary Business
Calico Human health (by overcoming aging)
Private equity for growth stage technology
CapitalG
companies
DeepMind Artificial intelligence
Google Internet services
Google Fiber Internet access: via fiber

GV Venture capital for technology companies

Jigsaw Technology incubator

Loon Internet access: via high-altitude balloons

Urban innovation: infrastructure through

Sidewalk Labs
technological solutions
Verily Human Health
research and development for "moonshot"
X
technologies
Waymo autonomous driving
Wing drone-based delivery of freight
• What does the creation of Alphabet tell us about the company’s strategic
motives?
• What does the name Alphabet signifies
• A collection of letters that represent language, the substrate for Google’s
indexed search results (the company’s mature business).
• Competitiveness in such businesses is usually driven by scale, efficiency and
incremental improvements to stay relevant.

12
• But Alphabet also stands for alpha-bets, i.e. bets on alpha (investment
returns above a benchmark).

• “Betting on alpha” refers to investing in projects which may have a low

probability of success, but also very significant upside.

• Project Loon is such a moonshot project,

• providing internet access to remote regions by equipping balloons with

wireless capabilities.

13
• Successful companies in today’s diverse and dynamic business
environments do exactly that:
– they select right approach to strategy and execution for each part of the
business—and
– animate the resulting collage of approaches as circumstances change or
each businesses evolves.

14
Alphabet’s business level strategy

• Allows each unit to deploy the right approach to strategy and

execution

• Makes it easier to build the required capabilities in each business

• Lowers the hurdles to acquiring and growing companies

15
• Allows each unit to deploy the right approach to strategy and
execution

• AdWords: mature business - greater emphasis on planning - scale

economies - business model optimization (classical approach)

• Loon - stresses rapid iterative experimentation - organizational flexibility

(adaptive approach )
• Makes it easier to build the required capabilities in each business

• The new modular approach to strategy and organization realized by

Alphabet allows it to vary that unique recipe according to the needs of each
business.

• Visionaries, risk-takers and engineering geniuses may fit better with

moonshot companies, and disciplined doers, optimizers and commercial
types for their more mature businesses for example.

• It also allows Google to employ different leadership styles and develop

17
different cultural variations for each.
• Lowers the hurdles to acquiring and growing companies

• Umbrella organization makes forming and buying new businesses a lot

easier, too

• modular structure means that integration challenges are minimized

• increases the flexibility and agility to reshape its portfolio of bets of company

18
Number of acquisitions and mergers by Alphabet and its competitors

2012 2013 2014 2015 2016 2017 Total

since
2012

Alphabet* 16 19 35 16 17 15 118

Microsoft 8 7 12 20 11 8 66

Facebook 14 10 9 5 6 4 53

Apple 6 13 10 13 8 12 62

19
Alphabet
• Through buying other companies, Alphabet acquires new skills, technologies,
patents and improves its own products and services, allowing the company to
grow faster with less effort.

• Often, the company acquires already finished products that grow into
successful businesses, like YouTube.

20
Hierarchy of Strategies – Part 2

• Business-Level Strategy
– How do we compete in a given industry?
– How should we position ourselves against
competitors?
• Nokia Maps Vs. Google Maps
Business-Level Strategy
The focus is on how firms compete in a given
industry.
Competition is not between large corporations. It is
between individual business units (SBUs) that compete
in specific markets. Each SBU needs to develops its
own business and marketing plans to answer:
ü How can we compete?
ü How and what is the most efficient way to get to the
market?
ü What are our distinctive skills?
Hierarchy of Strategies – Part 3

• Functional Strategy
– How can we allocate resources most efficiently and effectively support
business-level strategies?

– How can we use resources to meet the firm’s objectives within a specific
product market?
Strategic
Decision
Processes
Strategic Formulation & The Hierarchy
of Strategies
The interplay between the three levels of strategic formulation:
1. Cuts across functional areas
2. Involves issues related to long term objectives
3. Involves allocating resources across SBUs and/or product markets
4. Includes decisions about the direction of corporate strategy,
application of technology and choice of alliance partners
• Cross-functional connection and interplay between departments and
functions

• Think of the following functions and discuss how marketing function support
them
– Manufacturing

– R&D

– Logistics

– Technical service
Cross-Functional Connections Explore Interrelationships
between Marketing and Four Business Functions
Cross-Functional Connections Explore Interrelationships
between Marketing and Four Business Functions
Roles in Strategic Decision Making

Participants in strategic decision making may assume the following

roles:

•Responsible (R) - Manager takes initiative, analyzes situation,

develops alternatives, consults with others, make initial
recommendation, & facilitates approval of decision

•Approve (A) - Manager accepts or rejects decisions

•Consult (C) - Manager offers input

•Implement (M) - Manager is accountable for implementing decision

•Inform (I) - Manager is informed of the decision

Discussion
• Consider Medline industries beginning to manufacture ventilator machine.
• Provides mechanical ventilation by moving breathable air into and out of the
lungs, to deliver breaths to a patient who is physically unable to breathe, or
breathing insufficiently
• Modern ventilators are computerized microprocessor-controlled machines

32
Inter-Functional Involvement in Marketing Decision Making:
An Illustrative Responsibility Chart
Organizational Function
Decision areas Marketing Manufacturing R&D Logistic Tech. SBU Corp. Level
s Service Manager Manager
s
Product
Design specifications
Performance
character.
Reliability
Price
List/Discount

Tech. Services
Customer training

Logistics
Inventory
Customer service level

Sales Force
Training

Advertising
Message development

Channel
Selection

Decision role: R=Responsibility; A=Approval; C=Consult; M=Implement; I=Inform,

X=No Role
Vocabulary
Strategy Success

For a strategy to succeed:

• Each firm needs to have a business concept that separates them
apart from their competition.
• There are 4 components:
1. Customer Interface
2. Core Strategy
3. Strategic Resources
4. Value Network
• Refer to Figure
Fig. 5.2 – Components of a
Business Model: Bridges to Profits

Major business concept components are tied together by

three important “bridge” elements: customer benefits,
configuration, and company boundaries.
Elements of Customer Interface
Fulfillment and support
• Channels a firm uses to reach and support customers

Information and insight

• Knowledge captured from customers and the degree to
which this information is used

Relationship dynamics
• Nature of the interaction between the firm and its customers

Pricing structure
• Pricing choices offered by a business concept
Core Strategy
• Determines how the firm chooses to compete
• Elements
– Business mission: Describes overall strategic objective, sets
course direction, and defines performance criteria to measure
progress
– Product/market scope: Defines where the firm competes
– Basis for differentiation: Captures the essence of how firm
competes differently than its rivals do
Differentiation of Products and Services

• Business is differentiated when its value-adding activities are

perceived as superior and profitable

• Value-added features need to motivate customers to pay a higher

premium than the cost of superior performance
Some ways to Differentiate
žProvide superior performance through:
¡ Speed
¡ Responsiveness to complex orders
¡ Customized to solve customer problems

žProvide superior quality by:

¡ Reducing customer costs
¡ Improving performance

žOffer innovative product features that employ new

technologies
Strategic Resources
• Core competencies
– Set of skills, systems, and technologies that create uniquely high value for
customers
• Strategic assets
– Tangible requirements for advantage that enable a firm to exercise its
capabilities
• Core processes
– Methodologies and routines that companies use
Value Network
• Complements and enriches the firm’s research base
• Includes:
– Suppliers
– Strategic alliance partners
– Coalitions
Example
• Paccar operates in the fiercely competitive heavy-duty truck industry, designing and
manufacturing trucks under the Kenworth and Peterbilt brand names
• Commands 20 percent of the North American heavy truck market and derives approximately
half of its revenues and proifts from outside the United States

42
• A Unique Focus : Rather than centering on large-fleet buyers or large
leasing companies, Paccar has chosen to focus on one group of
customers—drivers who own their own trucks and contract directly with
shippers or serve as contractors to larger trucking companies

• Extensive dealer network of nearly 1,800 locations worldwide

• Distinctive Value Proposition: Built to order, these customized trucks are

delivered to customers in six to eight weeks

• Incorporates features and value-added services that are embraced by owner-

43
operators
• To reduce out-of-service time, Paccar offers a comprehensive roadside
assistance program and an information-technology-supported system for
expediting and delivering spare parts

• According to Michael Porter, “Customers pay Paccar a 10 percent

premium, and its Kenworth and Peterbilt brands are considered status
symbols at truck stops.

• Enviable record of financial performance: 68 straight years of profitability,

averaging a long-run return on equity above 20 percent
44
Figure 5.4 - The Management System
Strategic Positioning

• Competitive positioning is about being different and competing in

a distinct way by using a unique mix of customer values.

• Michael Porter states there are six fundamentals principles that a

company should employ for establishing and maintaining a
distinct strategic position.
Michael Porter Asks: What is Strategic Positioning?
Michael Porter & Strategic Positioning
— Right goal: Superior long term ROI instead of performance
goals (i.e., % share market)
— Create and deliver a good customer value proposition
— Create a distinctive value chain by offering or performing
similar features but in a different way
— Accept trade-offs: You can’t be everything to everyone,
therefore give up some things and reinforce others that
enhance the distinctions
— Emphasize those element that facilitate the strategic “fit” and
reinforce them
— Continuity of direction means to define a distinctive value
proposition and build strong customer relations by staying
consistent to that plan
Engagement exercise
• Create a fictitious B2B product for a current company and map out the principles to
formulate a strategic position.

• Refer to Figure 6.3 “The Principles of Strategic Positioning”

• Each group to brainstorm a fictitious product in a single, specific industry

• You need to use the six fundamentals of strategic positioning to arrive at a positioning
statement using the format below:

• Positioning statement: To (segment of the market or specific customer), (company

and product) provides best value over (competitors weaknesses) through its (key
benefits of company and product, value chain etc) and (strategic continuity of
direction)

49
• How do companies know if their strategy is working?

• How do companies measure success? Is profit the only

measure?

50
Balanced Scorecard
• Comprehensive system for converting a company’s vision and strategy into a
tightly connected set of performance measures
• Combines financial measures of past performance with measures of the
drivers of performance
• Developed by Kaplan and Norton.
• We know measures are central to any strategy.
• The Balanced Scorecard is a comprehensive system for converting a
company’s vision and strategy into a tightly connected set of performance
measures.
What is the Balanced Scorecard?
• The Balanced Scorecard essentially calls for organizations to create a set of
internal metrics that will help them to assess their business performance in 4
key areas (sometimes referred to as ‘perspectives’):
• Financial
• Typical scorecard metrics might include cash flow, sales performance, operating income or
return on equity.
• Customer
• With scorecard metrics such as: % of sales from new products, on-time delivery, net
promoter score or share of wallet.
• Internal Business Process
• This would include measuring things such as: unit costs, cycle times, yield, error rates, etc.
• Learning and Growth
• Examples of metrics being: employee engagement scores, retention rates of high
performing staff, skill increases of staff, etc.
• The Big Mistake that People make when
Implementing the Balanced Scorecard
• A lot of people look at the Balanced Scorecard as 4
simple perspectives that you simply 'slot your goals'
into
• The Balanced Scorecard is not a series of equally weighted perspectives.

• It is rather a process whereby, starting at the bottom, you work your way
upwards through each perspective with a view to delivering the topmost -
Financial Gain.

• Each perspective unlocks your ability to deliver effectively against the one
above it
Figure 5.5 - Balanced Scorecard
Customer Perspective: Core Measures

Market share Represents the proportion of business in a given

market (in terms of number of customers, dollars spent,
or unit volume sold) that a business unit sells.

Customer Tracks, in absolute or relative terms, the rate at which a

acquisition business unit attracts or wins new customers or
business.
Customer retention Tracks, in absolute or relative terms, the rate at which a
business unit retains customers.
Customer Matches the satisfaction level of customers on specific
satisfaction performance criteria such as quality, service, or on-time
delivery reliability.
Customer Assesses the net profit of a customer, or segment, after
profitability deducting the unique expenses required to support that
customer or segment.

57
Aligning Internal Business Processes to the Customer Strategy

Customer The Focus of Internal Business Processes

Strategy
Operations Customer Innovation
Management Relationship Management
Management
Low-total-cost Highly efficient Ease of access Seek process
strategy operating for customers; innovations gain
processes superb post-sales scale economies
efficient, timely service
distribution
Product Flexible Capture customer Disciplined, high-
leadership manufacturing ideas for new performance
strategy processes rapid offering educate product
introduction of customers about development first-
new products complex new to-market
product/services
Aligning Internal Business Processes to the Customer Strategy
(continued)

Customer The Focus of Internal Business Processes

Strategy
Operations Customer Relationship Innovation
Management Management Management
Complete Deliver broad product/ Create customized Identify new
customer service line create solutions for customers opportunities to
solutions network of suppliers for build strong customer serve customers
strategy extended product/ relationships develop anticipate future
service capabilities customer knowledge customer needs

Lock-in Provide capacity for Create awareness Develop and

strategies proprietary influence switching enhance proprietary
product/service reliable costs of existing and product increase
access and ease of use potential customers breadth/applications
of standard
Strategy Map
• Tool for visualizing a firm’s strategy as a chain of cause-
and-effect relationships among strategic objectives
• Enables an organization to describe and illustrate its
objectives, initiatives, and targets
Strategic objectives fall into one of four perspectives

• A strategy map is a series of cause and effect relationships of the strategic

objectives, starting from the bottom and moving upwards

61
Figure 5.6 –
Strategy Map
64
• Your ability to learn and grow will directly dictate your ability to
better manage your internal processes.
• In turn, as your internal processes improve, this will have a positive
impact on your customers as well as directly reducing your costs.
• The combined benefit of this lower cost/higher customer
engagement in your product (essentially sales) will lead to your end
goal, increased profit and financial return.
Title: Starbucks BSC Analysis
Financial Perspective Customer Perspective
Revenue Growth Customer Satisfaction Score
Operating Income Market Share
Return on Investment New Store Success Rate

Internal Process Perspective Learning & Growth Perspective

Order Fulfillment Time Employee Training Hours
Store Opening Process Partner (Employee) Satisfaction
Supply Chain Efficiency Digital Innovation Initiatives
69
Employee Training ➔ Order Fulfillment Time ➔ Customer Satisfaction ➔ Revenue Growth

Digital Innovation ➔ Supply Chain Efficiency ➔ Operating Income

Partner Satisfaction ➔ Customer Service ➔ Market Share

70
• Strategic maps and BSC are dynamic in nature.
• They tend to evolve over time.
• Accordingly other objectives modify or change

72
The Balanced Scorecard - Translating Strategy Into
Operational Terms
1. Financial Perspective
Cause-and-Effect Relationships
Long-Term
Shareholder Defines the chain of logic by which
Value
Productivity
Revenue
Growth
intangible assets will be
transformed to tangible value.

2. Customer Perspective

Product/Service Attributes Relationship Image

Customer Value Proposition
Clarifies conditions that create
Price Quality Time Function Partnership Brand
value for the customer.

3. Internal Process Perspective Value-Creating Processes

Manage Defines processes that transform
Manage
Operations
Manage
Customers
Manage
Innovation
Regulatory
and Social
intangible assets into customer
Processes and financial outcomes.

Clustering Assets and Activities

4. Learning and Growth Perspective
Defines intangible assets to be
aligned and integrated to create
Human Information Organization
Capital + Capital + Capital value.
Strategy Map
• The cause & effect components of the Balanced
Scorecard template is transformed into visual
model called the “strategy map.”

• The strategy map allows the company to

describe and illustrate its:
– Objectives, initiatives & targets
– Measurements used to assess performance
– Linkages which are the foundation of the
strategic direction
Strategy Map
The next frame illustrates a firm’s strategic map for pursuing
a product leadership strategy.
– To start the company emphasize:
• Productivity strategy &
• Revenue Growth strategy

– Refer to Strategy Map Template

Balanced Scorecard
Strategy Map Template: Product Leadership
Long-Term Shareholder Value
Financial
Perspective Productivity Strategy Revenue Growth Strategy

Manage Total Life-Cycle Revenues from Gross Margins:

Product Costs New Products New Products

“Products and Services That Expand Existing Performance Boundaries into the Highly Desirable”
Customer
Perspective
High-Performance Products: Smaller,
Faster, Lighter, Cooler, More New Customer
First to market Segments
Accurate, More Storage, Brighter…

Operations Management Customer Management Innovation Regulatory and Social

Rapid Educate Disciplined, Minimize

Flexible Product Liability
Introduction Customers about High-Performance
Robust And
of New Complex New Product
Internal Processes
Products Products/Services Development Environmental
Perspective Impact

Supply In-line Product

Experimentation Capture Customer
Capacity Development Contribute to
and Ideas for New
for Rapid Improvement Time: From Idea Communities
Products/Services
Growth to Market

“Find, Motivate, Grow, and Retain the Best Talent”

A Capable, Motivated and Technologically Enabled Workforce

Learning and Human Capital Information Capital Organization Capital
Growth
Perspective Computer-Aided
Deep Creative, Versatile Virtual Product Design and
Functional Employees: Cross- Prototyping and Manufacturing
Creativity,
Expertise functional Teamwork Simulation (CAD/CAM) Innovation
Managing the Marketing Effort and
Marketing Return on Investment
Figure 2.7 SWOT Analysis: Strengths (S), Weaknesses (W),
Opportunities (O), and Threats (T)
What is a SWOT analysis and why
should you use one?

A SWOT analysis guides you to identify the

positives and negatives inside your
organization (Strength & Weakness) and
outside of it, in the external environment
(Opportunity & Threat). Developing a full
awareness of your situation can help with
both strategic planning and decision -
making.
When do you use SWOT?
You might use it to:
• Explore possibilities to
problems.
• Make decisions for your
initiative.
• Determine where change is
possible.
• Adjust and refine plans mid-
This "TOWS Matrix" is adapted from Fred David's
Strategic Management text.

Using strengths to maximize Minimizing weaknesses by

opportunities taking advantage of
opportunities

Minimizing weaknesses and

Using strengths to minimize avoiding threats
threats
Starbuc
ks

Using strengths to maximize Minimizing weaknesses by taking

opportunities advantage of opportunities

Using strengths to minimize threats

Minimizing weaknesses and avoiding
threats
David gives an example for Campbell Soup Company that
stresses financial goals, but it also illustrates how you can pair
the items within a SWOT grid to develop strategies. (This
version of the chart is abbreviated.)
Listing Your Internal Factors:
Strengths and Weaknesses (S, W)
General areas to consider
• Human resources - staff, volunteers, board members,
target population
• Physical resources - your location, building, equipment
• Financial - grants, funding agencies, other sources of
income
• Activities and processes - programs you run, systems
you employ
• Past experiences - building blocks for learning and
success, your reputation in the community
Listing External Factors:
Opportunities and Threats (O, T)
Forces and facts that your group does not control include
• Future trends in your field or the culture
• The economy - local, national, or international
• Funding sources - foundations, donors, legislatures
• Demographics - changes in the age, race, gender,
culture of those you serve or in your area
• The physical environment (Is your building in a growing
part of town? Is the bus company cutting routes?)
• Legislation (Do new federal requirements make your job
harder...or easier?)
• Local, national or international events
How do you use your SWOT
analysis?
Use it to:
• Identify the issues or problems you intend to change.
• Set or reaffirm goals.
• Create an action plan.
Chapter 7
Managing Products for Business Markets
Marketplace Identity

• Established through brand, products, and services

• Brand is one of the firm’s most valuable intangible assets

• Branding has emerged as a priority to marketing executives, CEOs, and the

financial community
Brand and Brand Equity
• Brand
• Name, sign, symbol, or logo that identifies and differentiates the product
from competitors
• Brand equity
• Set of brand assets and liabilities linked to a brand, its name, and symbol
Customer-Based Brand Equity (CBBE)
• Kevin Lane Keller defines CBBE:
• The differential effect that customer brand knowledge has on their response to market
activities and programs for the brand.

• In order to build a strong brand, you must shape how customers think and feel
about your product.
• You have to build the right type of experiences around your brand, so that
customers have specific, positive thoughts, feelings, beliefs, opinions, and
perceptions about it.
Brand-Building Steps
Develop deep brand identity

Establish unique brand identity by highlighting differences

Employ marketing programs to elicit positive brand responses

Build brand relationships with loyal customers

Figure 7.1 - CBBE Model
Brand Identity

• To achieve brand identity, marketers must create brand salience

• Brand salience: Tied directly to brand awareness
• Brand awareness: Customer’s ability to recall or recognize the brand under different
conditions

• Marketers need to create a clear connection between the product

and the brand name in markets where the product competes
Brand Positioning
• Establishes unique association in the customer’s mind that differentiates
the brand and creates competitive superiority
• Types of brand associations
• Brand performance: Way in which the product/service meets customers’ functional
needs
• Brand imagery: Ways in which the brand meets customers’ psychological or social
needs

• Should incorporate points of parity and differences

Brand Response: Consumer Judgments
Quality

• Customer’s attitude towards brand’s perceived quality and their perceptions of

value and satisfaction

Credibility

• Extent to which customer perceives brand to be credible with respect to expertise,

trustworthiness, and likeability

Consideration set

• Degree to which customer finds brand a viable option and worth consideration

Superiority

• Extent to which customer believes that brand offers advantages over competitive
brands
Forging Brand Relationships

• Brand resonance
• Strength of the psychological bond that a customer has with a brand

• Degree to which this connection translates into loyalty, attachment, and

active engagement with the brand
Brand Attitude

• Percentage of organizational buyers who have a positive image of a

company minus those with a negative opinion

• Component and indicator of brand equity

• Building brand attitude for high-technology firms increases the firm’s value

• Firms that have developed strong brands create value for their
shareholders by yielding greater returns

11
Product Quality
• Many international companies insist that suppliers meet quality standards set out
by the Geneva-based International Standards Organization (ISO)

• ISO-9000 standards
• Certification requires a supplier to thoroughly document its quality-assurance program

• Has become a seal of approval to compete for business overseas and in the United States

• Affects the entire supply chain

Stages of Quality Movement

1 2 3
Stage one - Centers on Stage two - Emphasizes that Stage three - Examines a firm’s
conformance to standards or quality is more than a quality performance relative to
success in meeting technical specialty that of competitors
specifications • Analyses customer perceptions of the
value of competing products
Sustainability

• Emerging mega-trend that forces companies to change the way they think
about products, processes, and business models

• Involves the integration of economic, environmental, and societal

considerations into business decision making

• Integral part of value creation

Sustainability (continued)

• Distinct segments
• Cautious adopters - View sustainability as a vehicle for cost cutting, resource
efficiency, and risk management
• Embracers - Recognize that sustainability strategies provide a means for
gaining competitive advantage
• Through innovation, process improvements, brand building, and access to
new markets
Figure 7.2 - Sustainability
Figure 7.3 - Benefits and Sacrifices
Forms of Customer Benefits

• Core - Requirements a product must possess for a relationship to exist

• Add-ons - Attributes that create differentiation and provides more value

than competition
Product Policy

• Involves the set of all decisions concerning the products and services that
the company offers

• Business marketing firms attempt to satisfy customer needs and build a

sustainable competitive advantage by capitalizing on core competencies
Types of Product Lines Defined
Proprietary or catalog products : Offered only in certain configurations and
produced in anticipation of orders

Custom-built products: Offered as a set of basic units, with numerous accessories

and options

Custom-designed products: Created to meet the needs of one or a small group of

customers

Industrial services: Buyer is purchasing a company’s capability in an area rather

than an actual product
Defining the Product Market

• Fundamental to a sound product policy decision

• Attention must be given to the alternative ways to satisfy customer needs

• Product strategists can be in touch with the market by including products

and technology that compete for the same end-user needs
Dimensions of a Market Definition

Customer Technological Customer Value-added

function function segment system
Benefits that are
Alternative ways in Competitors serving
provided to satisfy Customer groups
which a particular the market can
the needs of have distinct needs
function can be operate along a
organizational that must be served
performed sequence of stages
buyers
Planning for Today and Tomorrow

Planning for today Planning for tomorrow

• Requires clear, precise ¡ Centers on how the
definition of the business business should be
• Focuses on shaping up the redefined for the future
business to meet the needs
of today’s customers with ¡ Entails reshaping the
excellence business to compete more
effectively in the future
Important Customer Groups

• Non-consumers - May lack the specialized skills, training, or resources to purchase the
product or service
• Undershot customers - For whom existing products are not good enough
• Overshot customers - For whom existing products provide more performance than they
can use
Smart, Connected Products

• Require companies to build technology stack that includes:

• Operating system embedded in the product and hardware

• Software applications and network communications to provide

connectivity

• Product cloud that provides a platform for developing software

applications
Choosing Product Capabilities and Features to Offer

• Identify features that will deliver real value to target customers relative to
their cost

• Tailor for target segments the company elects to serve

• Develop and incorporate those capabilities and features that reinforce its
competitive positioning
Factors in Deciding the Enabling Technology

• Response time - Feature that demands a fast response, requires that the
software be incorporated directly in the physical product

• Automation - Fully-automated products require functionality that is

embedded into the device
Factors in Deciding the Enabling Technology (continued)

• Network availability, reliability, and security

• Embedding software in the product lowers the risk that confidential

data will be compromised during transmission

• Frequency of service or product upgrades

• Companies can make product changes and upgrades easily and

automatically by hosting functionality in the product cloud
Capturing Data

• Product data is vital to competitive advantage for smart, connected products

• Costs and complexities are related to securing the rights to the data and in
transmitting, storing, and analyzing it

• Firms must determine how each type of data creates tangible value for
functionality

• Types of data that a firm decides to collect and analyze depends on its core
strategy
Risks Involved in Choosing Smart, Connected Products
Adding product features that customers do not need or value

Underestimating security and privacy risks

Failing to anticipate or recognize new competitive threats

Moving slowly and allowing competitors to gain a foothold

Overestimating internal skills and capabilities

Product Positioning
• Represents the place that a product occupies in a particular market
• Found by measuring buyers’ perceptions and preferences in relation
to competitors
Figure 7.4 - Positioning Process
IBM-repositioning
qFrom the days when it was known worldwide for their punch-card calculator
systems
qIt ventured into warehouse-sized mainframe computers
qIBM has made a radical shift in its product and service lineup, one that has taken
it out of such industries as personal computers altogether.
qThe 2002 acquisition of PwC Consulting and a series of innovation initiatives in
the ensuing years
• IBM has repositioned itself as an intelligent problem solver, primarily
to business. IBM’s Smarter Planet initiative exemplifies this transition.

• Smarter Planet is IBM’s strapline for a range of services intended to

help companies and systems become much more efficient, intelligent,
resilient and reliable.
• These are based on what the company views as six “imperatives for a
smarter planet”.
1. Turn information into insights.
2. Drive enterprise operations’ effectiveness and efficiency.
3. Increase agility.
4. Connect and empower people.
5. Enable business service and product innovation.
6. Manage risk, security and compliance.
• By investing heavily in long-term R&D, and creating a constant
interface between R&D and marketing, IBM has worked to mine the
potential of their 4,000 patents filed annually to deliver solutions
such as smart traffic management, electricity grid, water and supply
chains.

• Further reference: https://www.ibm.com/thought-leadership/smart/

Technology Adoption Life Cycle
• Discontinuous innovations
• New products or services that require the end-user and the marketplace to
change their past behavior, with the promise of gaining equally dramatic new
benefits
• Common in computer-electronics industry
Types of Customers in Technology Adoption Life Cycle

Customer Profile
Technology enthusiasts Interested in exploring the latest innovation, these
(innovators) consumers possess significant influence over how
products are perceived by others in the organization but
lack control over resource commitments
Visionaries Desiring to exploit the innovation for a competitive
(early adopters) advantage, these consumers are the true revolutionaries
in business and government who have access to
organizational resources but frequently demand special
modifications to the product that are difficult for the
innovator to provide
Types of Customers in Technology Adoption Life Cycle
(continued)

Customer Profile
Pragmatists Making the bulk of technology purchases in organizations, these
(early majority) individuals believe in technology evolution, not revolution, and
seek products from a market leader with a proven track record
of providing useful productivity improvements

Conservatives Pessimistic about their ability to derive any value from

(late majority) technology investments, these individuals represent a sizable
group of customers who are price sensitive and reluctantly
purchase high-tech products to avoid being left behind

Skeptics Rather than potential customers, these individuals are ever-

(laggards) present critics of the hype surrounding high-technology
products
Strategy for High Tech Adoption
• Put innovative products in the hands of technology enthusiasts.

• After a while visionaries will see the value of the new technology and
will begin to view it in business terms.

• New technologies usually enjoy a honeymoon reception from

enthusiasts and visionaries, however sales begin to falter… a chasm
forms…
Chasm
• A Chasm is a period of time where sales falter (and sometimes
plummet) due to differences between Visionaries and Pragmatists.

• Visionaries want change (revolution) whereas Pragmatists want

change (evolution). But Pragmatists make most buying decisions in
organizations.

• Pragmatists are the gateway to the mainstream market. If that chasm

gap can’t be bridged, often products become part of ancient history.
Strategies to Cross the Chasm
• One strategy to cross the chasm is for the marketer to provide
pragmatists with 100% solutions to their problems using the new
technology.

• Too many companies only supply a part of a solution. They are trying
to be something to all, not 100% to some. That is unacceptable to
pragmatists.

• Goal: Win a niche foothold with a small group of pragmatists as

quickly as possible … that is what crossing the Chasm means.
Strategies for the Technology Adoption Life
Cycle
• Bowling Alley Strategy

• Each market is like a bowling pin. The momentum of moving one

pin (with good technology products) successfully carries over
into surrounding segments.

• The bowling alley is where mainstream market segments begins

to accept the new product, but it still has a way to go.

• Strategy: Win one niche, then work on another.

Strategies for the Technology Adoption Life Cycle

Tornado Strategy
• This strategy assumes a product has very wide appeal. The seller’s strategy
is to:
• Move as quickly as possible in getting the product out to the market.
• Build distribution ASAP.
• Drive price down to next lower price break ASAP.
• This strategy demands product leadership, operational excellence in
manufacturing and distribution.
Strategies for the Technology Adoption Life Cycle

Main Street
• Once the mainstream has adopted the product, the aftermarket phenomenon occurs:

• Mass marketers of the products begins to subside.

• Competitors force supply to exceed demand.

• Prices fall.

• High tech product becomes a commodity.

• Profit growth can no longer come from selling the commodity.

• Profit can only come from extending the platform of the product to other niche-specific needs.
Managing Innovation and New
Industrial Product Development
The Management of Innovation

• James Quinn asserts that

“innovation tends to be individually motivated, opportunistic, customer

responsive, tumultuous, nonlinear, and interactive in its development.
Managers can plan overall directions and goals, but surprises are likely
to abound.”
Innovations Start Out Chaotic
• Generally, innovations start out chaotic.

• As a project (product development) progresses and as the costs go up, more

formal planning and controls come in.

• Still, flexibility must be inherent in the project.

• There are two broad categories of strategic behavior:

• Induced

• Autonomous
Induced Strategic Behavior

• Consistent with the firm’s traditional concept of strategy

• Takes place in relationship to its familiar external environment

• Top management can keep strategic behavior in line with the current
strategy course by manipulating various administrative mechanisms

• Seen in product-development efforts for existing markets

Autonomous Strategic Behavior
• Employed by large resource-rich companies
• Conceptually equivalent to entrepreneurial activity
• Introduces new categories of opportunity into the firm’s planning
process
• Successful autonomous strategic initiatives provide top management
with the opportunity to rationalize retroactively

IBM Innovation Jam

Championing around employees
• Gary Fadell is the engineering genius behind the iPod.
• Art Fry championed Post-it notes at 3M.
• P. D. Estridge promoted the personal computer at IBM.
• Stephanie L. Kwolek advanced the bulletproof material Kevlar at
DuPont.
Product Champion
• Organization member who creates, defines, or adopts an idea for an
innovation
• Willing to assume significant risk to successfully implement the
innovation
• Takes up a central role in sensing a marketing opportunity and in
mobilizing an informal network
• To assess the idea’s technical feasibility and market potential
Civic of the sky
• In 1986, a young Honda engineer named Michimasa Fujino crystallized that vision
when Honda initiated research and development into an advanced, air-bound
Honda.

• After four decades of both passion and hard work, the HondaJet creator has
nearly completed his vision as the president and CEO of Honda Aircraft Company.

• (3) HondaJet Walk-Around & Review (Exterior & Interior) - YouTube

Civic of the sky
• The HondaJet is the world’s most advanced light business jet.
• As the fastest, highest-flying, quietest, most fuel-efficient, and most spacious light
jet in its class, the HondaJet could be your dream come true.
• The single-pilot HondaJet, the first of which flew in June 2014, has a patented
over-the-wing engine that maximizes cabin and storage space. It also reduces
cabin noise.
• The Key To Innovation: How The HondaJet Climbed Above Adversity
Product Champion
• A product champion is an individual who:
• Takes on a central role in sensing a marketing opportunity
• Mobilizes an informal network to assess the opportunities via their:
• Technical feasibility
• Financial opportunity
• Is willing to take on risk (reputation) to bring the project to light

Michimasa Fujino
Activity
• Students will analyze product innovation through induced strategic
behavior and autonomous and compare the benefits and drawbacks of
each.

“The director of research and development for your company is concerned

about the current lack of innovation and product development. He has
asked your team to provide a brief summary on the best way to generate
innovation. Provide the details of autonomous and induced strategic
behavior and list the benefits and drawbacks. ”
Entrepreneurial Motivation
• Entrepreneurial motivation can be nurtured and encouraged based on:

• Availability of rewards

• Senior managements’ encouragement & support

• Resource availability including release time to work on entrepreneurial projects

• Organizational structure that promotes entrepreneurialism by providing an administrative

mechanism that brings others into the innovative process when needed

• Two other influences are:

• Intrinsic motivation
• Work design: availability of challenging projects
Advantage - Xerox
• Kodak, Lockheed, IBM, and the management teams of other corporations failed
to recognize the major technological opportunity that xerographic copying
presented.
• These firms were among the many that turned down the chance to participate
with the small and unknown Haloid Company in refining and commercializing this
technology.
• In the end, Haloid pursued it alone and transformed this one technological
opportunity into the Xerox Corporation.
Managing Technology
• According to Michael Porter:

• Technological change is the great equalizer

• Can erode the competitive advantage of even the most established
competitors
• Can propel even the smallest companies to the forefront
Managing Technology
• Many of the great companies we see today grew out of technological
changes that they were able to exploit.

• Long run competitiveness depends upon how they:

• Manage,
• Increase, and
• Exploit their technology base.

• Let’s start by classifying development projects!

Four Types: Development Projects
Derivative projects center on incremental product enhancements, incremental
process improvements, or incremental changes on both dimensions.
Illustration: A feature-enhanced or cost-reduced Canon color copier.

Platform projects create design and components shared by set of products.

Illustrations: A common motor in all Black & Decker hand tools; multiple applications
of Intel’s microprocessor.

Breakthrough projects establish new core products and new core processes that
differ fundamentally from previous generation of process and product.
Illustrations: Computer disks and fiber-optic cable created new product categories.

Research and development creates knowledge of new materials and technologies

that eventually leads to commercial development—more like “pure” science.
Illustration: Cisco Systems’ development of communications technology that underlies its
networking systems used by diverse customers like retailers, banks, and hotel chains.
A Product-Family Focus

• Honda applies its multivalve cylinder technology to power-generation

equipment, cars, business jets, motorcycles, and lawn mowers

• Products that share common platform but have different specific features and
enhancements required for different consumer sets.

• Strategists argue that firms should move away from planning emphases that
center on single products and focus on a family of products that share a
common platform.
Disruptive Innovation
• Disruptive innovation occurs when a totally new innovative product is
developed that interrupts the way business and society does things.

• Examples: Train, automobile, telephone, plastics, and computers.

• Usually disruptive products start out small but grow to overshoot the
market.
The Disruptive Innovation Model

Disruptive Innovation Explained (youtube.com)

Source: Clayton M. Christensen and Michael E. Raynor, The Innovator’s Solution: Creating and
Sustaining Successful Growth (Boston: Harvard Business School Press, 2003), p. 33.
Table 8.2 Three Approaches to Creating New-Growth Businesses
Sustaining Low-End New-Market
Dimensions Innovations Disruptions Disruptions

Targeted perform- Performance improvement Performance good enough along traditional Lower performance in
ance of product in attributes most valued by metrics of performance at low end of “traditional” attributes,
or service industry’s most mainstream market. but improved performance
demanding customers. in new attributes—typically
simplicity and convenience.
These improvements may
be incremental or break-
through.

Targeted customers The most attractive (i.e., Over-served customers in low end of Targets non-consumption:
or market application profitable) customers in mainstream market. customers who historically
mainstream markets who lacked money or skill
will pay for improved to buy and use product.
performance.

Effect on required Improves or maintains Uses new operating or financial approach or Business model must make
business model profit margins by exploiting both—different combination of lower gross money at lower price per
(processes and existing processes and cost profit margins and higher asset utilization unit sold, and at unit
cost structure) structure and making better can earn attractive returns at discount production volumes that will
use of current competitive prices required to win business at low end of initially be small. Gross
advantages. market. margin dollars per unit sold
will be significantly lower.

24 Source: Clayton M. Christensen and Michael E. Raynor, The Innovator’s Solution: Creating and Sustaining Successful Growth (Boston: Harvard Business School
Press, 2003), p. 51.
How High-Tech Innovators Win
• To win in the high tech game, which experiences:
• Stiff competition
• Short life-cycled products
• High velocity industry

• A high tech firm needs to:

• Stay aligned with the market
• Must continually innovate
• Be responsive (on schedule, on time & on target’s needs)
• Anticipate customer needs
Successful High-Tech Companies Win Because:
• Limited Structure: Creating successful products to meet changing customer needs
requires flexibility, but successful product innovators combine this flexibility with a few
rules that are never broken.

• Real Time Communication and Improvisation: Improvisation involves design and

execution of actions that converge with each other in time.

• Experimentation – Probing into the Future: Successful product portfolio creators did not
invest in any one version of a future product but instead used a variety of low-cost
probes to create options for the future.

• Time Pacing: Product innovators carefully manage transitions between current and
future projects, while less successful innovators let each project unfold according to its
own schedule.
New Product Development Process

• To sustain new product success companies:

• Make new product development a top priority

• Directly involve managers and employees to make decisions and speed up

action

• Because of substantial risks and/or incredible opportunities, companies

employ systematic thinking about new product development.
What Drives the Firm’s New Product Performance
Sources of New Product Ideas
• Internally from: • Externally from:

1.Salespeople 1. Channel Members

2.Employees 2. Competitive Moves
3.R&D 3. Industrial Customers
4.Marketing Research 4. Ultimate Consumers
5.Serendipity
Lead Users

• Small number of highly influential buying organizations that are

consistent early adopters of new technologies

• Face general needs in the marketplace, but they confront these needs
well ahead of most of that marketplace encounters them

• Positioned to benefit significantly by obtaining a solution that satisfies

those needs
Figure 8.3 - Lead User Method
Approaches to Gain New Product Insights

• Customer visits - Cross-functional team visits a customer organization

to secure a firsthand account of customer needs

• Innovative toolkits - Give customers an array of features that can be

configured to create their own customized products

• Crowdsourcing: Aggregating a number of diverse contributions from

consumers into a value-creating whole
Figure 8.4 - Determinants of New Business
Product Success
Product advantage refers to Marketing synergy
customers’ perceptions of represents the degree of fit
product superiority with respect between project needs and the
to quality, cost-performance firm’s resources and marketing
ratio, or function relative to skills.
competitors’ products.

Four Strategic Factors

for New Product Success
International orientation:
Technical synergy comes from
New products designed and
the fit between project needs
developed to meet foreign
and the firm’s R&D resources
requirements and targeted at
and competencies.
world or nearest-neighbor
export markets.
Development Process Factors
• Predevelopment proficiency: Provides the foundation for a successful product
and involves:
• Initial screening

• Preliminary market and technical assessment

• Detailed market research study

• Preliminary business/financial analysis

Development Process Factors (continued)
• Market knowledge and marketing proficiency
• Solid understanding of the:
• Customer’s needs, wants, and preferences
• Customer’s buying behavior and price sensitivity
• Size and trends of the market
• Competitive situation

• Technical proficiency
• Having a strong base of knowledge about the technical aspects of a potential new product
• Passing through the stages of the new-product-development process proficiently
Successful Strategies in Fast-Paced Product
Development
Compression strategy

• Views product development as a predictable

series of steps that can be compressed

Experiential strategy

• Rapidly building intuition and flexible options in

order to learn quickly about and shift with
uncertain environments
Managing Services for
Business Markets
The Purple Promise
• The combination of a broadened business model, operational innovation, and a
strong corporate culture has allowed FedEx to secure its position as one of the
world’s most admired companies.
• Founded in 1973, FedEx (formerly Federal Express from 1973-2000) has grown
from a modest expedited parcel delivery company to a diversified logistics firm
worth over $47 billion in annual revenue.
The Purple Promise
• FedEx began as a parcel delivery service that specialized in overnight
air delivery.
• Over time, this business has been broadened to offer its customers a
wider range of logistics solutions.
• their core overnight delivery service, still continues to be the most
profitable segment
The Purple Promise
• FedEx seeks to provide reliable logistical solutions to its customers at both the
business and retail levels.

• FedEx charges premium prices for most of their services, especially the traditional
expedited parcel delivery service, but their customers willingly pay the price for
guaranteed, on time delivery.

• For parcel and freight delivery, prices are based on size, weight and the time
horizon for the delivery
• FedEx Express Segment: This segment includes the heir
to the original express delivery service

• FedEx Ground Segment: This segment includes FedEx

Ground (a traditional small-parcel ground delivery
service similar to UPS)

• FedEx Freight Segment: This segment includes FedEx

Freight (a less-than-truckload freight service for small
businesses)

• FedEx Services Segment: FedEx Service Segment

includes FedEx Services (FedEx’s own sales, marketing,
information technology and back office functions),
FedEx TechConnect (technical support and electronics
repair) and FedEx Office (a chain of document, shipping
and business services retail stores)
The Purple Promise
220 countries 49,000 ground
652 aircraft
and territories vehicles

10 air express 47,000 drop-

375 airports
hubs off locations

165,000
employees
The Purple Promise

• Underlying their operational excellence is a culture that supports

both their operating and business models.

• By placing its people first and prioritizing customer service through

the “Purple Promise,” FedEx is able to deliver on its value proposition
to its customers.
From Products to Solutions
• Many companies, especially smaller ones, start by developing a product to replace an
existing product. This is the “building-a-better-mousetrap” mentality.

• Many companies also think that the best way to win customers is to develop a superior
product and continually work to make it better.

• In other words, they start with the product & services first and consider customer
relations as an afterthought.

• This is an error in thinking!

• A better approach is to understand the customer by mapping out experiences.

Customer Experience Approach
• Recent research discovered that only 8% of customers think that their experience
with their vendors were superior, whereas 80% of vendors think that they
delivered a superior one.

• This research points out an obvious disconnect.

• By focusing on core products instead of understanding the customer’s

experience, many companies lose their customer and never know why.

• Also, by not understanding the customer, companies lose an opportunity to

create value and cement relationships.

Additional reading: Breaking the trade-off between efficiency and service, HBR
Customer Experience Life Cycle
Customer experience

• Represents the internal and subjective response a

business customer has to any direct or indirect
contact with a company

Touchpoints

• Instances in which the customer has direct contact

with either the product or service itself or with
representatives of it by a third party
Customer Experience Maps
• One way to understand the customer better is to “Map” out experiences at
various “touchpoints.”

• Touchpoints are spots where a seller has direct or indirect contact with the
customer about the product or service over time.

• The map points out what is most important in the seller/customers’ experience.
Customer Experience Life Cycle Map
Figure 9.1 The First Step in Understanding a Customer’s Experience is to Develop a Life Cycle Map
A representative set of customer-company interactions
Relationship Provider Account Order Product Problem Account
reception Payment
initiation evaluation setup placement resolution maintenance
and use

The company The customer gets The customer The customer The customer The customer The customer The customer
exposes the initial price and obtains materials selects the tracks order files a claim and receives and maintains profile
customer to its lead-time quotes for account setup product status obtains validates the information
marketing message resolution invoice
The customer puts The customer The customer The company The customer
The customer seeks out an RFP provides account places the order and the The customer The customer maintains supplies
relevant information profile information (fills out the order customer notifies the makes the
The customer form arrange the final company of a payment The company
evaluates The company delivery terms problem and provides general
providers and confirms setup The customer obtains support (not
negotiates terms and activation prepares specialty The customer resolution related to
and pricing documents when receives and problems)
The company required (for inspects the The customer
The customer performs courtesy example, for rush product seeks an invoice The customer
selects the follow-up delivery) adjustment and obtains ongoing
provider The customer obtains price quotes
The customer The company and refuses or resolution
requests product the customer accepts the
information arrange initial product
delivery terms

SOURCE: David Rickard, “Winning by Understanding the Full Customer Experience,” The Boston Consulting Group, Inc., 2007, p. 6. Accessed at http://www.bcg.com
Ultimate Goal of Experience Map

• The ultimate goal of an Experience Map is to identify:

• The value that customers place on different levels of performance for each element of the
experience.

• The customers’ minimal expectations for each element.

• The customers’ perception of the firm’s performance versus that of key competitors.

• Once the map is developed, the next step is to meet with the customer and pare down the list to
the most critical issues.
Work with the Customer

• Co-creating value means that products and services are developed in concert
(integrated) with the customer such that its benefits provides solutions to customer
problems.

• Co-creation in Banking?

• Services are a critical feature of the solution:

• It provides a valuable basis for competitive advantage.

• It’s an important driver of profitability.

From a Product to a Solutions Perspective
Product Perspective Solutions Perspective

Value Win by creating innovative products and Win by creating and delivering superior customer
Proposition enriching features of existing products solutions

Value Value is created by the firm Value is co-created by the customer and the firm
Creation
Designing Start with the product or service, and Start with the customer problem, and then
Offerings then target customer segments assemble required products and services to solve
the problem

Company- Transaction-based Interaction-based and centered on the co-creation

Customer of solutions
Relationship

Focus on Quality of internal processes and Quality of customer-firm interactions

Quality company offerings
Do Service Transition Strategies Pay Off?

• To improve competitiveness many firms add services to their existing product offerings to make…

• The firm’s value offering more unique

• Duplication difficult for rivals

• Products more valuable to customers

• … thereby enhancing profitability and firm value.

• Does it pay off?

• Adding services is more effective for firms that relate the service to their core products.

• Adding services is effective in turbulent or slow growth industries, but counterproductive in stable or
high growth industries.
Customer’s role in New services

• Customer adaptiveness refers to the degree to which a customer is willing to

adjust its routines and processes to accommodate a supplier’s products.

• Solution effectiveness is enhanced if the customer provides information and

guidelines concerning the priorities and sensitivities of various stakeholders in
the customer firm.

• Solution effectiveness can be enhanced if the customer provides counseling to a

supplier concerning the unique elements of its operations.
Benefits of Solution Marketing

It offers:

• New avenues of growth

• New ways to differentiate

• Higher customer loyalty

Figure 9.2 - Relational Processes Comprising a Customer
Solution
Customer’s Role
Customer adaptiveness

• Degree to which a customer is willing to adjust its routines and

processes to accommodate a supplier’s products

Political counselling

• Extent to which a customer provides a supplier with information

regarding the political landscape in the customer organization

Operational counselling

• Information provided to suppliers concerning relevant technical

systems, business processes, and company policies in the
customer organization
Benefits of Solution Marketing

• New opportunities for increasing the amount of business that a company receives
from its customer base
• Services offer more than what core products can offer

• Solutions offer more avenues for differentiation than products as they include a
variety of services

• By co-creating solutions, business marketers enhance loyalty resulting in the

customer creating barriers for competition
Services versus Products

Services Products
• Intangible • Tangible
• Consumed at the time of • Time lag exists between the
production production and
• Cannot be stored consumption
• Highly variable • Can be stored
• Highly standardized
Figure 9.3 - Business Product–Service Classification Based on Tangibility
Unique Service Characteristics
Characteristics Examples Marketing Implications
Simultaneous production Telephone conference call; Direct-seller interaction
and consumption management seminar; requires that service be
equipment repair done “right”; requires
high-level training for
personnel; requires
effective screening and
recruitment
Nonstandardized output Management advice varies Emphasizes strict quality
with the individual control standards; develop
consultant; merchandise systems that minimize
damages vary from deviation and human error;
shipment to shipment prepackage the service;
look for ways to automate
Unique Service Characteristics (continued)

Characteristics Examples Marketing Implications

Perishability: inability to Unfilled airline seats; an Plan capacity around peak
store or stockpile idle computer technician; demand; use pricing and
unrented warehouse space promotion to even out
demand peaks and valleys;
use overlapping shifts for
personnel
Lack of ownership Use of railroad car; use of Focus promotion on the
consultant’s know-how; advantages of
use of mailing list nonownership: reduced
labor, overhead, and
capital; emphasize
flexibility
Dimensions of Service Quality
Responsiveness Description Examples

Reliability Delivering on promises Promised delivery date met

Responsiveness Being willing to help Prompt reply to customers’

requests

Assurance Inspiring trust and confidence Professional and knowledgeable

staff

Empathy Treating customers as Adapts to special needs of

individuals customer

Tangibles Representing the service Distinctive materials: brochures,

physically documents
Customer-Linking Processes That Affect Customer Satisfaction

• Basic elements of the product or service that customers expect all competitors to
provide

• Basic support services that make the product or service more effective or easier
to use

• Recovery process for quickly fixing product or service problems

• Extraordinary services that excel in solving customers’ unique problems or in

meeting the needs that they make the product seem customized
Service Recovery

• Encompasses the procedures, policies, and processes a firm uses to resolve

customer service problems promptly and effectively

• Customer’s level of perceived service quality rises when service providers

satisfactorily resolve service failures

• Business marketers should develop highly responsive processes for dealing with
service failures
Zero Defections

• Customer defections - Customers who do not come back

• Profits rise considerably when company’s relationship with a customer lengthens

• Benefits of retaining customers

• Service companies can charge more

• Cost of doing business is reduced

• Long-standing customer provides free advertising

Figure 9.4 - Conceptualizing the Service Product
Hybrid Offering

• Combination of one or more goods and one or more services that together offer
more customer benefits than if the good and service were available separately

• Employed to advance revenue and profit growth

31
Figure 9.5 - Manufacturer-Specific Resources and Capabilities for Successful Hybrid
Offerings
Hybrid Service Offerings Classification

Product life cycle services (PLS)

• Facilitate the customer’s access to a manufacturer’s
product
• Ensure its desired functioning during all stages of its
useful life from delivery, installation, and maintenance
to recycling or disposal

Asset efficiency services (AES)

• Designed to provide customers with productivity
gains on their asset investments
Hybrid Service Offerings Classification (continued)

Process support services (PSS)

• Provided by a manufacturer that assist

customers in increasing the efficiency of their
own business processes

Process delegation services (PDS)

• Manufacturer performs specific processes on

behalf of the customer
Managing Business Marketing
Channels
Go to Market Strategy
• Lawrence G. Friedman’s influential book states that:

• The ability to make smart decisions about going to the market depends on
how well you understand your customer.

• Who are they?

• What do they buy?
• How do they buy?
• How do they want to buy?
• What would motivate them to buy from you?
Selecting the channel is challenging
• Numerous alternatives
• Marketing goals differ between channel members
• Business market environment constantly changes
• Competition is stiff
• Customer requirements change
• Internet technology is changing the landscape
Managing the Channel

• Once a channel structure is specified and goals set, marketing

managers need to:
a. Develop procedures for selecting intermediaries

b. Motivate them to meet goals

c. Resolve conflict between them

d. Evaluate performance
Channel of Distribution
• Link between the manufacturer and the customer
• Accomplishes all the tasks necessary to get the product/service to
market
• Tasks can be performed by the manufacturer or be delegated
throughout the channel
Channel Tasks
Making contact
with potential Negotiating Contracting
buyers

Arranging
Transferring title Communicating
financing

Providing local
Servicing the inventory,
product transportation,
and storage
Figure 10.1 - B2B Marketing Channels
Direct and Indirect Channels
• Who performs the TASKS?

• Direct is when the manufacturer performs all the marketing functions

• Indirect is when some type of intermediary sells or handles the

product
Feasibility of Direct Sales Approach
• Large and well defined customers
• Customers insisting on direct sales
• Sales involving extensive negotiations
• Selling has to be controlled to:
• Ensure that total product package is properly implemented
• Guarantee a quick response to market conditions
• Complex product and sales opportunities and highly customized
solutions
Need for Indirect Distribution

Fragmented and widely dispersed markets

Prevalence of low transaction amounts

Purchase of a number of items in one transaction

SAINT-GOBAIN
• Saint-Gobain entered India in 1996
• 22 manufacturing sites and more than 13,700 permanent and
temporary employees in India
• Regional Businesses: Glass and Glass Solutions, Gyproc Plasterboard
and Plasters, and Weber (Industrial mortars)
Direct channels
• AREA MANAGER – DISTRIBUTION NETWORK
• Incharge of sales through Channels
• Identify streams of revenue generation
• To expand the dealer, distributor and retail network in the assigned territory
• Interacting & developing rapport with the customer at all levels for customer
retention and achievement of service revenues
• Should have extensive market knowledge of the assigned region
• Receivable Management (Collection of the outstanding amount)
Direct channels
• KEY ACCOUNT MANAGER
• Expand Business in allotted area through Architects, Contractors, Builders and
Fabricators
• Relationship management with architects, contractors, builders and
Fabricators
• Identifying new business opportunities and projects and converting them into
clients
• Liasoning with the customer on various issues related to the concerned
projects/ assignments
• Carrying out Post order Management Activities
• Achieve sales targets
Direct Sales Force Required When:
• Sale is complex
• Product/service is highly customized
• Customers are large
• Products are complex
• Sales involve extensive negotiations
• Professionalism is required
• Customer requires direct contact
• Then, seller must control the process to ensure proper implementation of
total product package and to guarantee quick responses to market
conditions
Figure 10.2 - Typical Sales Cycle: Tasks Performed Throughout the
Sales Process
Figure 10.3 - Multichannel Integration Map: Simple Example of High-
coverage Partnering Model
Customer Relationship Management (CRM) Systems

• Provide a valuable tool for:

• Coordinating sales channel activities
• Managing crucial connections and exchange between the activities
• Assist in IT-driven channel coordination with no loss of information
Participants in the Business Marketing Channel

Industrial Manufacturers’
distributors representatives
Distributors
• Small, independent businesses serving narrow geographic markets
• Full-service intermediaries who take title to the products they sell
• Most pervasive and heavily used for maintenance, repair, and
operations (MRO) supplies
Distributors (continued)
• Employ both inside and outside salespersons
• Outside - Making regular calls on customers and handling normal account
servicing and technical assistance
• Inside - Taking telephone orders, processing orders, and scheduling delivery
• Larger distributors achieve operating economies
• Automating the operations to significantly reduce the sales and general
administrative expenses
Functions of Distributors
Having products readily available

Serving as manufacturer’s selling arm

Providing credit

Offering wide product assortments

Delivering goods

Offering technical advice

Meeting emergency requirements

Services Provided by Distributors
Supply chain and inventory management

Automatic replenishment

Product assembly

In-plant stores

Design services
Classification of Distributors
General-line distributors

• Stock an extensive variety of products

Specialists

• Focus on one line or on a few related lines

Combination house

• Operates in industrial and consumer markets

Choosing a Distributor
• Depends on the manufacturer’s requirements and the needs of target
customer segments
• General-line distributor offers the advantage of one-stop purchasing
• Specialist provides the manufacturer with a high level of technical capability
and a well-developed understanding of complex customer requirements
• E-collaboration - Critical strategic force in the managing channel
relationships
Manufacturers’ Representatives
• Work independently
• Represent several companies in the same geographic area
• Sell noncompeting but complementary products
• Have expert product knowledge combined with a keen understanding
of the markets and customer needs
• Give the business marketer more control as the firm maintains title
and possession of the goods
Manufacturers’ Representatives (continued)
• Act as manufacturers’ selling arm
• Making contact with customers
• Writing and following up on orders
• Linking the manufacturer with the industrial end users
• Offer technical advice while enhancing the customer’s leverage with
suppliers
• Are paid a commission on sales
• Develop their field experience while working as salespersons for
manufacturers
Need for Manufacturers’ Reps
• In small, medium-sized, and large firms
• In conditions of limited market potential
• To service distributors when a manufacturer sells through hundreds
of distributors
• To reduce overhead costs
• Medline is America's largest provider of
medical supplies and solutions, privately held
national manufacturer and distributor of
health care supplies and services
• Medline India Industries Private Limited was
setup in 2010 in Pune, India, primarily as an
offshore Development center and to augment
resources for Medline Industries Inc.
Factors Influencing the Choice of
Intermediaries
• Different market segments require different channel structures
• Distinct approaches
• Large accounts are called on by the firm’s own sales force
• Distributors handle small repeat orders
• Manufacturers’ reps develop the medium-sized firm market
• Differences in purchase behavior
Channel Design
• Dynamic process of developing new channels where none existed and
modifying existing channels
• Best conceptualized as a series of stages that the business marketing
manager must complete
• Specifies the structure that provides the highest probability of
achieving the firm’s objectives
• Focuses on channel structure
Channel Structure
• Refers to the underlying framework
• Number of channel levels
• Number and types of intermediaries
• Linkages among channel members
Figure 10.4 - Channel Design Process
Figure 10.5 - Customers Drive the Channel
Design Process
Step 1: Define Customer Segments
• Primary goal is to satisfy (solve) end users’ needs (problems)

• Define target market segments

• Isolate each segments’ buying and usage behavior

Macrolevel Microlevel
Step 1: Define Customer Segments – Con’t.
• Don’t consider channel members as customers. Instead, look beyond
them to the buying unit who has the real need.
• WHY?

• Example: A manufacturer of ball bearings should not consider the

wholesaler as their customer. They should consider the various OEMs
or repair shops that need good bearings as their customer.
Step 2: Customers’ Channel Needs by
Segment
• Identify and prioritize channel functions requirements for each
segment.

• Next, align the function with the customer’s needs.

• Example: One customer may need product information as their top

priority while another may need product quality assurance as their
top priority.
Step 2: Customers’ Channel Needs by Segment –Con’t.
Channel Function Customer Need
1. Product Information Customer seeks more information for new or more complex products
especially in rapidly changing environments.
2. Product Customization Some products must be technically modified or need to be adapted to meet
the customer’s unique needs.
3. Product Quality Assurance Because of its importance to a customer’s operation, product integrity &
reliability might be given special emphasis.

4. Lot Size Purchase of products with a high-unit value or those used extensively
represents a large dollar outlay, thus being important.

5. Assortment Customer may need a broad range of products and may assign special
importance to “one-stop shopping.”
6. Availability Some customers’ environment demands that the seller support a high level
of product availability.
7. After-Sale Service Customers require a range of services from installations and repair to
maintenance and warranty.
8. Logistics Customer may require special transportation and storage services to support
its operations strategy.
Step 3: Assess the Firm’s Channel Capabilities
• Once segment is defined, functional requirements isolated and
prioritized, the next step is to:
• Analyze the segment’s channel strengths and weaknesses
• Identify gaps between what the segment functionally desires and
what the channel is providing
• Fill that gap!

• Customers base their choice on the bundle of benefits (channel

functions) the channel offers.
Step 4: Benchmark to Competitors
• What go-to-market strategies are key competitors using?

• Understanding what competitors are doing, or not doing, offers

opportunities to discover gap(s) that might need to be closed.
Step 5: Create Channel Solutions for
Customer's Latent Needs
• Sometimes, by reviewing what competitors are doing, or not doing, latent customer needs emerge.

• Latent needs are those that are not obvious. Sometimes discovering them can even lead to a whole new
service.

• Example: An office products supplier that mainly sold print cartridge products to the copy repair industry
noticed that some of their customer also supplied “magnetic platters” (hard drives) to mainframe users.
They informed some of their other copy repair customers about this related service. Some of them decided
to try it and became successful. These customers now had a new service to sell, and the office products
supplier had a new product (platters) to market to them.
Step 6: Evaluate and Select Channel Options
• Channel options need to be considered in light of a cost/benefit analysis.

• Some gaps may offer opportunities.

• More often, channel members can work together to better align themselves with their
customers.

• The idea is to enhance value for their customers.

• Channels must be open to change as customers and competitors change.

• Channel management is an ongoing process.

Channel Administration Process
• Selecting good channel participants and making sure that all tasks and
obligations are assigned and understood
• Motivating members to perform tasks necessary to achieve channel
objectives
• Controlling inter-channel conflict
• Controlling and evaluating performance
Selection of Channel Members
• Ongoing process
• Through one of the following options
• Discussions with company salespeople and existing or potential customers
• Trade sources
Motivating Channel Members
• Beginning with the understanding that the channel relationship is a
partnership
• Developing a trusting relationship with the reps
• Improving communication through recognition programs, product
training, and consultation
• Informing the reps of plans, detailing objectives, and providing
positive feedback
• Specifying the cooperative efforts each firm requires of its partner
Motivating Channel Members (continued)
• Bringing in distributors or reps for the purposes of:
• Reviewing distribution policy
• Developing marketing strategy
• Supplying industry intelligence
• Providing compensation policies that meet industry and competitive
standards
Ways to Control Conflict
Channel-wide committees

Joint goal setting

Cooperative programs involving a number of marketing

strategy elements

Effectively cooperating within the channel

Building Trust and Commitment
• Offering benefits and resources that are superior to what other
partners could offer
• Aligning oneself with other firms that have similar corporate values
• Sharing valuable information on expectations, markets, and
performance
• Refraining from taking advantage of one’s partners
Business Marketing
Communications:
Advertising and Sales Promotion
B2B Social Media
• Channels of the social Web where prospects and businesses
communicate across diverse platforms
• Discussion forums: Web site on which participants can contribute online
discussions
• Blog: Online journal maintained by an individual
• Wiki: Collaborative Web site on which users can develop and edit informative
content through their Web browser
• Social networks: Web sites comprised of online profiles for individuals and
groups

2
Customer Decision Journey
• Buyers use the Internet during a purchase decision
• Marketers need to build the awareness of customer prospects by
establishing a strong online presence
• Empowered purchasers demand real-time digital interactions
supported by tools such as product configurators and price
calculators
• Use of mobile devices for product search has become increasingly
common
Customer Decision Journey (continued)

• Search engine optimization (SEO): Involves all of the tactics taken to

improve the visibility of a website to searchers using Internet search
engines
• Optimizing the online presence of a firm’s offerings for target
customers is an efficient way to increase online performance result
Introduction
• Business has learned that not even the best products sell themselves.

• Benefits, problem solutions and cost efficiencies need to be sold

through effective communications to everyone from users to
influencers to decision makers.
Most Important Component
• Due to…

• Product complexities (technical),

• The small number of buyers,
• The high price products/services, and
• Extensive negotiation process

• …The primary communications vehicle for selling Industrial/Business

products/services is the:

• SALESPERSON!
Other Non-personal Components
• There is a need for other non-personal requisites such as:

• Advertising
• Catalogs
• Internet presence
• Trade shows
• Promotional spending

• All have a unique way of getting the message out, however, they don’t
close deals as well as personal selling
Global Light: Go-to-market

• Post completion of customer projects, the company encourages

customers post case studies on company’s website.
• Helps in recounting their experience
• Detailing project highlights

• Monitoring of community sites where the case studies are reposted.

• Global light team addresses queries and provides favorable product

reviews and announces new product offerings.
Global Light- Go-to-market

• Company made technical specifications and related information more

accessible on their website

• Customer success stories are linked to the products

• New VP of digital strategy hired and investments made in social

media and site design

• New customer support team created

Integrated Communication Programs

• Advertising and sales promotion strategy that effectively blends with:

• Personal selling
• Advertising
• Online media
• Sales promotion
• Personal and nonpersonal forms of communication interact to inform
key buying influentials
Advertising’s Role
• Be an integral part of an integrated communication programs
• Enhance sales effectiveness
• Increase sales efficiency
• Create awareness
• Create preferences for company, products, etc.
• Facilitate interactive marketing communications
• Limitations
• Cannot substitute personal selling
• Cannot create product preference
Figure 13.1 - Decision Stages for Developing the Business-to-Business
Advertising Program
Advertising Objectives
• Advertising objectives must be:
• Realistic
• Measurable
• Specific outcomes during specific times

• Example: To be effective, the advertising campaign shall increase

awareness from 15% to 30% during the period from April 1st to June
31st.
Defining the Target Audience
• Major role of advertising is to reach buying influentials inaccessible to
the salesperson
• Buying influentials are concerned with distinct product and service attributes
and criteria
• Objectives must specify the intended audience and its relevant
decision criteria
Creative Strategy Statements
• Provide guidelines for the company and advertising agency to
position (or reposition) the product.

• All creative efforts should include:

• Copy
• Theme
• Color, design, etc.
• Media
• Tactics
Determining Advertising Expenditures
• Managers tend to employ the following rule of thumb:

• Allocate some percent of sales to advertising

• However, this is a dysfunctional rule!

Dysfunctional Advertising Policies
• Advertising’s purpose is to inform and influence sales, but it is not to create
sales.

• A dysfunctional policy of tying advertising budgets to % of sales defeats the

purpose.

• For example:
• If there are no sales, then is there no advertising budget?
• If sales are declining, do you cut advertising costs too?

• Does that make sense?

Objective-Task Method

• A better approach for allocating advertising costs is to relate them to

advertising objectives.

• The Objective-Task Method focuses on the communications effects of

advertising…

• Not on the sales effects.

Objective-Task Method
• Establish objectives in terms of sales volume, market share, profit
contribution and market segments.

• Assess all communication functions to realize these objectives.

• Define specific measurements required to meet these objectives such

as market share.

• Estimate the budget needed to accomplish them.

Developing the Message
• Three Considerations:

• Perception

• Benefits focus

• Understanding buyer motivations

Developing the Advertising Message

• Determining advertising objectives

• Evaluating the buying criteria of the target audience
• Analyzing the most appropriate language, format, and style for
presenting the message
Perception
• Business advertisement must catch the decision maker’s attention
• Receiver must interpret the advertisement as the advertiser intended
• Business advertiser must contend with attention and interpretation
• Advertiser must carefully tailor the technical aspects of promotional
messages to the appropriate audience
Focus on Benefits
• Advertising messages need to:
• Cater to the benefits the target customer seeks
• Persuade the reader that the advertiser can deliver them
• Messages that have direct appeals or calls to action are viewed to be
strong
Understanding Buyer Motivations

• Standard set of classic buying motives does not apply in every

purchase situation
• Marketing research has to be employed to delineate influencers’
criteria for buying in each segment
• Integrated marketing communications program includes a blend of
online, print, and direct-mail advertisements
• Business-to-business media are selected by the target audience
Online Advertising
• Effective way to communicate with customers and prospects
• Microsite: Specialized Web page a visitor lands on after clicking an
online ad or e-mail
• Use of online videos to show how the products and services provide
solutions
• Effective in telling story and producing serious leads
Business Publications
• Horizontal publications: Directed at the specific task, function, or
technology regardless of industry
• Effective when many industries are potential users
• Vertical publications: Oriented to readers in a specific industry
• Logical choice for product that has applications within only a few industries
• Requester publications: Offer free subscriptions to selected readers
Advertising Cost
• Total advertising budget must be allocated among the various
advertising tools
• Allocation of the business publication budget among various journals
depends on their relative effectiveness and efficiency
• Measured in cost per thousand
Frequency and Scheduling
• One-time ads are ineffective
• As reading audience varies, a schedule of advertising insertions is
required
• Building continuity and repetitive value
• 6 insertions per year may be required in a monthly publication
• 26 to 52 insertions in a weekly publication
Direct Mail
• Delivers the message firsthand to selected individuals
• Used for:
• Corporate image promotion
• Product and service promotion
• Sales force support
• Distribution channel communication
• Special marketing problems
Direct Mail (continued)
• May help to establish a firm’s reputation of technological leadership
in promoting corporate image
• Can provide specific product information to buying influentials in
product advertising
Direct E-Mail
• Can have a significant effect on creating and qualifying customer
leads
• Integrated in firms’ CRM programs
• Yields higher responses than direct-mail campaigns
• Generates quick results
• Many firms provide an e-mail alert service and/or an e-mail
newsletter
Measuring Advertising Effectiveness

• Evaluation against objectives formulated in terms of the elements of

the buyer’s decision process and some of the indirect communication
effects
• Indirect communication effects of advertising
• Advertising affects word-of-mouth communications, company reputation, and
the belief that advertising aids selling
• Advertising efforts are judged on cost per level of achievement
Figure 13.2 - Primary Areas for Advertising Evaluation
Problem with Advertising
• How much is enough?

• Advertising costs is like owning an old gold mine. It can return millions, or
be a bottomless pit.

• The only way to assure success is to establish and measure against goals.

• Another matter is the political side of the decision. The concern here is
that internal politics often determine budgets, not the technique-driven
process.
What B2B Advertising Can’t Do!
• Effective B2B communication needs to be integrated among all media
methods; however, it does have its limitations. It:

• Cannot create product preference for many products.

• Cannot close a sale!
• Cannot substitute for personal selling.
• Can supplement personal selling but not replace it.
Sales Promotion
Sales Promotion
§Activity that provides special incentives to bring about
immediate response from:
§ Consumers,
§ Distributors,
§ Organization’s sales force.
Sales Promotion
Can be subdivided into 2 broad categories:
1. Consumer promotions
• Designed to stimulate purchases by consumers (ultimate users)
• Help pull the product through the distribution channels
• focus on achieving trail purchase and repeat multiple purchases and building
brand loyalty.

2. Trade Promotions
• Designed to encourage distributors to purchase more additional volume and
provide encouraging merchandise support to stimulate consumer purchase.
• Help push the product through the distribution channels
Sales Promotion Planning
• In today’s environment, where planners consider an
integrated marketing approach, sales promotions are not
viewed as separate entities
• Sales Promotions are planed at the same time to ensure
that synergies are achieved across all forms of
communications.
• Promotion activity must complement the total marketing
effort.
Sales Promotion Objectives
• Objectives of consumer promotions focus on achieving:
• Trial purchase
• Repeat or multiple purchases
• Building brand loyalty
• Objectives of trade promotions focus on:
• Selling more volume of merchandise
• Encouraging merchandising support among channel members that buy and
resell products.
Promotion Strategy
Pull

Marketer Wholesaler Retailer Consumer

Marketer Wholesaler Retailer Consumer

Push
The Role of Sales Promotion
Consists of media and nonmedia
Sales
Promotion marketing communications employed
for a predetermined, limited time to
stimulate trial, increase consumer
demand, or improve product
availability.

Consumer sales promotion is

directed at consumers.

Trade sales promotion is directed at

resellers.
Trade Promotion – Push Strategy
Pushes the product through the channel

Marketer Distributors Consumers

Objectives:
§ Secure listings
§ Build sales volume
§ Secure merchandising support
Trade Promotion Planning
Three basic objectives: secure a listing,
build volume, and encourage merchandise
support.
§ Trade Allowance
§ Performance Allowance
§ Co-operative Advertising Allowance
Trade Promotion
Trade Allowances Trade allowances are short-term special
allowances, discounts, or deals granted to
resellers as an incentive to stock, feature, or
in some way participate in the cooperative
promotion of a product.

A dealer loader is a premium given

Dealer Loaders
to a reseller to encourage
development of a special display or
product offering.
• Bisleri Wholesaler Distributor Retailer

• Consumer
Trade Promotion
Trade Contests A trade contest typically associates prizes with
sales of the sponsor’s product. Trade contests
generate interest, which makes them useful for
motivating resellers.

Point-of-Purchase Point-of-purchase displays are

Display generally used at the retail level to call customer
attention to a featured product.
Trade Promotion
A trade show is a periodic, semi-
Trade Shows
public event at which suppliers rent
booths to display products and
provide information to potential
buyers.

Some manufacturers sponsor or pay

Training Programs
for training programs for customer
employees.
Trade Promotion
Push money, also called spiffs (for
Push Money
special promotional products
incentive funds), is what a
manufacturer pays retail sales-
people to encourage them to promote
its products over competitive brands.
Trade Shows
• Important promotional vehicle for business markets
• Sellers present their products and services in booths visited by
interested industry members
• Offers a unique opportunity to:
• Publicize a significant contribution to technology
• Demonstrate new and old products
Strategy Benefits of Trade Shows

• Effective selling message can be delivered to a large and interested

audience at one time
• Customers can get hands-on experience with the product in a one-on-
one selling situation
• Potential customers can be identified, providing sales personnel with
qualified leads
• General goodwill can be enhanced
• Free publicity is generated for the company
Functions of Trade Shows
• Identify decision influencers and potential customers
• Provide product, service, and company information
• Learn of potential application problems
• Create actual sales and enhance sales force morale
• Handle current customer problems
• Build corporate image and gather competitive intelligence
Selecting the Shows
• Challenge is to decide which trade shows to attend and how much of
the promotional budget to invest
• Net buying influences
• Measures the percentage of the show audience that has decision authority
for the types of products being exhibited
• Total buying plans
• Measures the percentage of the audience planning to buy those products
within the next 12 months
Lead Efficiency

Number of sales leads obtained at the show

Total number of show visitors with definite plans
to buy the exhibitor’s product or one similar to it
Figure 13.3 - Representation of Traffic Flow Model at Trade Shows as a Sequence of
Stages