B2B MARKETING

Prof Deepak Shyam

MBA Program
B2B MARKETING

Unit 3
Formulating Product Planning and
sales process

Prof Deepak Shyam

MBA Program
B2B MARKETING
Developing Product Strategy

• Product decisions are the most important and complex

decisions facing management
• Product decisions tend to the riskiest variable in the
marketing mix, and when ill conceived, they can be costly
• New product design, development and introduction are a
costly venture involving company commitment and risk
• Due to increased pace of technological change, products
can become obsolete before the firm has recouped all its
development costs
• It requires an integrated effort of all departments in an
organization for successful product planning
B2B MARKETING
Developing Product Strategy

In developing product strategies, an organization has two

primary goals:
1. To ensure that the product mix (all the products
marketed by the firm) is in accord with overall
organizational and marketing objectives
2. To set guidelines for developing product lines and items
B2B MARKETING
Developing Product Strategy

What is an industrial product?

• From the buyer's perspective, a product is a combination
of basic, enhanced and augmented properties
• The industrial marketer must be astutely aware of what
comprises the total product package in the minds of
prospective buyers

1. Basic properties:
• Basic properties are those that constitute the generic
product and connote the various benefits sought by
buyers and influencers
• E.g. The basic property of a printer is to provide good
quality prints
B2B MARKETING
Developing Product Strategy

2. Enhanced properties
• They are properties which differentiate the generic
products.
• These properties are physical additions or deletions to the
generic product and include features, styling and quality.
• E.g. A laser printer is different from ink jet printer. The
cost per print can be different among different
manufacturers.
• A deletion involves enhancing a product by removing
properties .
• E.g. A frugal engineered machine can be developed with
minimum functions
• In developing or modifying a product, decisions must center
on the enhanced properties the buyer is actually
purchasing.
B2B MARKETING
Developing Product Strategy

3. Augmented properties
• These are additional benefits connoted in the purchase of
a particular product.
• These are usually intangible benefits and include:
• Training
• Technical assistance
• Availability of spare parts
• Maintenance and repair services
• Assurance of supply
• Warranties
• Delivery capabilities
• Financial terms
• Seldom do industrial buyers purchase only on the basis of
basic and enhanced product characteristics.
B2B MARKETING
Developing Product Strategy

Product strategy involves continuous change

• Since product offerings are designed to satisfy customer needs,
any change in customer needs will result in change in product
offerings.
• E.g. Firms in semiconductor industry refurbish their plants
every two to three years to keep pace with rapidly changing
technology
• Customers needs change as their environment change.
• Changing laws, politics or economics can also affect customer
needs, which effects product requirement.
• As a product reaches maturity, decisions must be made as to
whether it should be modified to maintain a market position or
be withdrawn from the market.
• New products must be developed to replace those that are
phased out if the firm is to maintain and increase its
profitability.
B2B MARKETING
Developing Product Strategy

Product strategy issues involves a continuous process of

evaluating product/market positions to determine
1. Whether changes are needed in current products
2. Whether products should be added or dropped
B2B MARKETING
Industrial product life-cycle analysis

Industrial product life-cycle analysis

• Product life-cycle theory is widely used for determining
appropriate product strategies.
• According to this theory, products tend to go through
different cycles, or series of stages, that begin when they
are introduced and end when they are removed from the
market.
• Because each stage is affected by different competitive
conditions, each stage requires different marketing
strategies if sales and profits are to be efficiently realized.
B2B MARKETING
Industrial product life-cycle analysis

Applying the PLC theory to industrial product strategies

• Although PLC analysis has received limited attention in
developing industrial marketing strategy, it is a useful
concept.
• PLC analysis enables marketers to determine where a
product is in its life cycle and to develop appropriate
marketing strategies aimed at those governing factors.
B2B MARKETING
Industrial product life-cycle analysis
B2B MARKETING
Industrial product life-cycle analysis

Industrial product life-cycle strategies

1. Introduction stage
• Product acceptance during the introductory stage of an
industrial product is considerably different from what is
generally experienced in the consumer market.
• While some products are rapidly accepted others are
accepted very slowly and entail considerable market
development before reaching an appreciable growth
stage.
• E.g. Hand-held electronic calculators replaced mechanical
calculators very fast, but, electric typewriters took over
two decades to achieve market acceptance
B2B MARKETING
Industrial product life-cycle analysis

• Product strategies during all the stages of the PLC are

strongly affected by the rate of product acceptance.
• Thus it becomes necessary to predict the product
acceptance before a product strategy can be developed.
• Product acceptance in the industrial market is affected by
how the product fits into the buyer's total use system.
• The use system involves other products, other persons
and a developed system of "habitual skills".
• Habit systems, once developed, are not easily changed.
• E.g. The reason for the slow acceptance of the electric
typewrite was due to inability of users to break old habits
and develop new ones. Whereas no change was needed
to use the electronic calculators instead of mechanical
calculators.
B2B MARKETING
Industrial product life-cycle analysis

• Thus, products that fit into the industrial buyer's use

system or habitual skills are adopted more rapidly than
those that requires changes.
• When the potential for rapid acceptance exists, planning
should focus on keeping well ahead of entering
competition.
• With slowly accepted products, marketing strategy should
focus on market development.
B2B MARKETING
Industrial product life-cycle analysis

2. Growth stage
• As a product begins to enter the rapid growth stage, the
emphasis on product strategy shifts to:
• Improving product design and other aspects of
product offerings to meet both low end and premium
market segment needs
• Improving distribution service
• Lowering price as increasing product demand,
accompanied by accumulated production experience,
begins to lower cost substantially. This prevents too
many firms entering the competition
B2B MARKETING
Industrial product life-cycle analysis

3. Maturity stage
• By the time the market demand reaches this stage,
industrial buyers will have found suppliers whose
offerings satisfy their needs fairly.
• The buyers are neither searching for new suppliers, nor
paying much attention to promotion of other offerings.
• Marketing strategy should be directed towards keeping
current users satisfied and looking for opportunities to
find new buyers or enter new market through product
modification and changes in other marketing mix
variables.
• It is important for the buyers to perceive substantial
benefits in product modification for any promotional
efforts to be fruitful.
B2B MARKETING
Industrial product life-cycle analysis

4. Decline stage
• Changes in customer desires as well as changes in the
state of the art that create better substitute offerings
eventually bring about a decline in the sales and profits of
every product.
• When a product enters the decline stage, the marketer is
faced with the choice of phasing the product out or
embarking on a milking strategy in which marketing
expenses are sharply reduced to increase current profit
margins.
B2B MARKETING
Industrial product life-cycle analysis

Locating industrial products in their life cycles

• The particular product status in its life cycle depends on
factors like:
• Industry profits
• Rate of change in industry sales growth
• Total number of units purchased
B2B MARKETING
Industrial product life-cycle analysis

• Clifford has suggested using accounting information for

the purpose of finding life cycle status using the following
steps:
1. Develop trend information for the past three to five
years on unit and rupee sales, profit margins, total
profit contribution, return on investment, market
share and prices.
2. Examine recent trends in the number and nature of
competitors, their market share rankings and their
product performance advantages.
3. Analyze short-term competitive tactics such as
recent new product introduction or plant expansion
announcements.
4. Obtain and analyze historical information of the life
cycles of similar or related products.
B2B MARKETING
Industrial product life-cycle analysis

5. Project product sales for the next three years to five

years based on steps 1 through 4 and estimate
profit ratios for each of these years. Profit ratios
tend to improve as products enter the growth stage,
begin to deteriorate as they approach maturity, and
then drop dramatically as they approach
obsolescence in the decline stage
6. Estimate the number of profitable years remaining
in the product's life cycle, and, from the preceding
analysis fix the product's position on its life-cycle
curve.
B2B MARKETING
Industrial product life-cycle analysis

Developing product strategies for existing products

• Industrial product strategies deal with issues like:
• Which product should be continued?
• Which should be phased out?
• The number and diversity of products to be offered
• Product innovation

• The firm must take decisions with respect to:

• Individual product items (a specific product version)
• Product lines (a group of related products)
• Overall product mix ( all the items and lines marketed)
B2B MARKETING
Industrial product life-cycle analysis

Product evaluation matrices

• Once the necessary data have been collected and
analyzed to determine where products are in their life
cycle, the product manager can use these data to
determine appropriate strategies for all product items
within a product line.
• Historical and projected figures on industry sales, market
shares and profits can be combined into a comprehensive
product evaluation matrix.
• This helps in analyzing a product or a group of products
with respect to where they have been and where they
might go.
B2B MARKETING
Industrial product life-cycle analysis
B2B MARKETING
Industrial product life-cycle analysis

• E.g. product A, in 1983, was in the growth industry with

an average market share and its profits were on target.
But in 1987, it is in a stable industry, with declining sales,
a marginal market share and below-average profits.
• Product B, has been in the growth industry, with the
market share moving from average to dominant, while
meeting its profit objectives.
• The marketing manager may choose to improve product
A's market position through product modification or
improvement, targeting new market segment or may
delete the product from the line. He may choose to
maintain the favorable position for product B.
• The product manager can simulate market conditions by
projecting competitive behavior in relation to alternate
strategies through DSS and plot them on the matrix.
B2B MARKETING
Industrial product life-cycle analysis

• The general strategic alternatives for a particular product

or for the entire line might include:
1. Maintaining the product and its marketing strategy in
the present form
2. Maintaining the present form of the product but
changing its marketing strategy.
3. Changing the product and altering the marketing
strategy.
4. Dropping the product or the entire product line.
5. Adding one or more new items into a line or adding
new product lines.
B2B MARKETING
Perceptual mapping in product evaluation

• It is a widely used technique for examining the relative

strengths and weaknesses of a product compared to
competitors.
• Computer programs enable the marketer to map the
perceptions of different groups of buying influencers, such as
top management, as compared to engineers, as compared to
researchers and do so across customer groups.
• Perceptual mapping generates three important types of
information that are highly useful in developing marketing
strategy:
1. The position of competing brands relative to one
another
2. The position of brands, or product options, with
respect to their attributes
3. The position of product attributes compared to each
other.
B2B MARKETING
Perceptual mapping in product evaluation
B2B MARKETING
New Product Development

• New product development is complex and difficult, but it

is a vital and necessary task for a profitable growth of a
firm.
• It tests a firm's market knowledge, technical competence,
financial strength and ability to compete.
• Products that have entered the decline stage have to be
replaced to maintain profitability and growth.
B2B MARKETING
New Product Development

Classification of new products

• New products can be classified as:
1. Products that are innovative and new to the world.
• E.g. Ace from Tata Motors
2. Products that are new to the company, but not new to
the market.
• E.g. Finacle from Infosys, Air Conditioners from Onida
3. Revisions or improvements to the existing products in
the existing markets.
• E.g. New OS from Microsoft
B2B MARKETING
New Product Development

4. Additions to the existing product lines with additional

markets.
• E.g. Development of new spark plugs by MICO for Nano
5. Repositioning existing products to new market
segments.
• E.g. Selling of existing products to other countries
6. Products with substantial cost reduction without
reduction in performance.
• E.g. ERP solutions from SAP for small enterprises
B2B MARKETING
New Product Development
Some of the factors responsible for failure of products are:
1. New products do not satisfy the needs of many potential
customers. This is due to inadequate coordination
between R&D and marketing functions.
2. New products are not significantly different from existing
products. They may be imitations of the existing products.
3. New products do not deliver the expected performance.
Though the companies understand the market
requirements they fail due to poor product design.
4. Prices of the new products are much higher than the
value perceived by the customers.
5. The companies with weak new product development
process are beaten by competitors who copy their
product but have superior product quality and marketing
effectiveness.
B2B MARKETING
New Product Development

New product development process

• The process by which potential product ideas are
generated, evaluated, directed and turned into products
is called the new product development process.
• The seven stages of new product development are:
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Business analysis
5. Product development
6. Market testing
7. Commercialization
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New Product Development

1. Idea generation
• The idea for a new product can come from sales persons,
customers, distributors, suppliers, design engineers and
managers.
• Customers are important due to the buyer-seller
relationship and interdependence.
• Ideas for new products can be got when customers are
looking for solutions for their problems.
• Industrial organizations can attract good ideas by using
brainstorming and attribute listing techniques.
• In attribute listing technique, major attributes of an
existing product are listed. Ideas are invited from
employees to search for an improved product by
modifying each attribute.
B2B MARKETING
New Product Development
2. Idea screening
• The purpose of idea screening is to select those ideas which are likely
to succeed.
• A carefully specified criteria and procedure for screening is necessary.
• It can be done in two stages:
• In the first step the new product committee asks certain questions or
apply certain checks to the product ideas like:
• Is the new product in line with the company's long-term
objective and strategies?
• Does the company has adequate resources to make it
successful?
• Is it really useful to customers by providing certain benefits or
solving a specific problem?
• Does it deliver more value to customers than competing
products?
• What is future growth, market size, and competition in the new
product industry?
B2B MARKETING
New Product Development

• Ideas with positive answers to the above questions will be

screened further in the second stage by using the rating
formula.
B2B MARKETING
New Product Development
3. Concept development and testing
• A product concept is a detailed version of the product
idea that is stated in a meaningful customer's terms.
• Usually a product idea will be developed into different
versions or alternative product concepts.
• Each of the product version is tested by getting reactions
from the customers.
• In concept testing, the new product concepts are tested
in prospective customer organizations.
• The concepts can be presented by developing three-
dimensional models or physical products.
• Prospective customers can operate the simulated product
in a simulated situation.
B2B MARKETING
New Product Development
• After the presentation of the concept, the users and
decision-makers are interviewed and asked questions like:
• Do you understand the concept of the new product?
• What are the major benefits of different versions of
the concept product?
• What are the three versions of the concept product
that they like the most and why?
• Are the concept products similar or different to the
products currently used by them?
• What improvements do they suggest for the concept
products?
B2B MARKETING
New Product Development
• For what uses would they prefer the different versions
of the concept products?
• What would be the reasonable price to charge for the
concept products?
• Would they buy the different versions of the concept
products (definitely, probably, probably not, definitely
not)
B2B MARKETING
New Product Development
4. Business analysis
• The purpose of the business analysis is to develop an
estimated projection of the sales, costs and profitability
of the proposed new product over 5-7 years.
• It is detailed in terms of:
• Required investments in plant, equipment, working
capital, and market development
• Market potential, sales forecast, customer and
competitive analysis
• Costs of product development, manufacturing and
marketing the product
• Likely price levels, profitability and return on
investment
B2B MARKETING
New Product Development
5. Product Development
• It is a process in which engineers and technicians create
the desired product.
• The marketing department must inform the R&D
department about the needs of the customers in terms of
product performance and the cost estimates, based on
the customer's reactions performance to the concept
testing.
• The R&D department develops one or more prototypes to
confirm or negate its ability to produce the product
within the cost estimates and the performance
parameters.
• Many activities of R&D have to be performed in parallel
to launch the new products before the competitors.
B2B MARKETING
New Product Development
6. Market testing
• Some of the methods used for market testing are:
1. Alpha and Beta testing
2. Introduction of new product at trade shows
3. Testing in distributor/dealer showrooms
4. Test marketing
• The choice of the testing method depends on:
• The size and cost of the product
• Need for maintaining confidentiality during market
testing
• The readiness to launch the product in a short span
of time
B2B MARKETING
New Product Development
1. Alpha and Beta testing
• Alpha testing is done internally within the company.
• It is suitable for high priced or new products which use
new technologies.
• It is done to evaluate the performance parameters and
operating costs.
• Beta testing is done at the potential users site if Alpha
testing proves to be a success.
• It is the responsibility of the sales/marketing
department to identify the user firms who would
permit confidential testing of the new product at their
factories.
B2B MARKETING
New Product Development
• The marketing and technical people need to observe
how the user firms use the product, problems faced
while using the new product and interact with the user
firms technical members.
• The number of user sites where product testing is done
depends on the potential number of customers.
B2B MARKETING
New Product Development
2. Trade shows
• Trade shows are places where a large number of
prospective buyers are exposed to the new product.
• It helps the company to find out potential customer's
reactions, purchase intentions or placement of orders.
• The disadvantage of this method is that the new
product gets exposed to the competitors.
• Once the new product gets exposed to the competitors,
it should be ready to launch the new product within a
short duration of time.
B2B MARKETING
New Product Development
3. Dealer show-rooms
• If the new product is sold through the distributors
channel, it can be tested at distributors' or dealers'
show-rooms.
• Since this method uses the normal selling situations it
can give useful information on customer's attitudes,
preferences and actual sales.
• Since this also exposes the new product to competitors,
the company must be able to execute the orders within
a reasonable time.
B2B MARKETING
New Product Development
4. Test marketing
• This method is used to test the new product in a limited
geographical area through their sales force, in normal
marketing situations.
• Product catalogues, price-list and sales training are
given to the sales people.
• The market knowledge gained from test marketing
helps the company to take effective decisions when the
product is launched on full-scale basis.
• The company should produce limited quantity of the
new product to be sold by the sales force.
B2B MARKETING
New Product Development
7. Commercialization
• A product is commercialized or launched when it is
introduced to a target market.
• It involves introduction of various activities that are
developed in an action plan as part of the marketing plan.
• The activities include training of sales force, product
catalogues, price lists, introductory advertisements,
adequate stocks at warehouse and/or with
dealers/distributors, and customer service.
• The marketing activities have to be synchronized with
production to ensure market-entry timing.
B2B MARKETING
Sales funnel management
THANK YOU

Prof Deepak Shyam