Midterm Assessment – Case Analysis
Written assignment
Activity brief
BC0316 – Industrial Marketing
Online campus
Professor: Juan Pablo Lema | [email protected]
Description You will write an analysis for Cambridge Sciences
Pharmaceuticals’ case study.
The objective of the assignment is to provide an
opportunity to gain an understanding of the complexities
and challenges of managing a B2B company’s
marketing strategy.
You are to examine the company situation and based
on your findings and on the content in the course
material and other reference sources, you will purpose a
plan with three different B2B marketing strategies for the
company.
The required structure of your paper is (use these very
same titles for differentiating your paper sections):
1. Company’s main problem: you are to examine the
situation in depth and then, identify and explain the
company’s main problem.
2. Three possible strategies: you are to propose
three B2B strategies for the company, to face the
problem described, with their benefits (at least three
for each strategy) and weaknesses (at least three for
each strategy).
3. KPIs: you are to establish how you are going to
measure the success of your B2B marketing
strategies, including specific goals for each KPI.
Format This activity must meet the following formatting
requirements:
• Font size 12
• Double-spaced
• The task should be submitted in a pdf
document.
• Cover, Table of Contents and References are
mandatory.
• Papers should not be clutter with definitions,
concepts nor brand history.
• The in-text References and the Bibliography
have to be in Harvard’s citation style.
• Wordcount: 2500-3000 words.
• Cover, Table of Contents, References and
Appendix are excluded of the total wordcount.
Goal(s) • Equip students with a critical understanding of
marketing practices in the industrial business
environment.
• Enable students to identify, contextualize and
interpret the characteristics of B2B marketing and
decision-making processes within the industrial,
marketing, and purchasing contexts.
Due date Deadline: June 21st, 2021 at 14:00 CEST
Late submissions without approved mitigating
circumstances may result in one of the following
penalties:
• Work submitted until June 23rd at 14:00 CEST, will
be marked and feedback will be provided. However,
the grade will be capped at 70%.
• Work submitted after June 23rd at 14:00 CEST, will
not be marked and will receive the final grade ‘0’.
Weight towards
final grade
This activity has a weight of 40% towards the final
grade.
Learning
outcomes
• Have an in-depth understanding of B2B market
opportunities.
• Identify and differentiate between the different and
unique challenges of business markets.
• Have a systematic understanding of how theoretical
concepts can be applied in business markets.
• Apply and assess the tools for B2B marketing
strategy development and implementation.
Assessment
criteria
Your paper will be graded based on the explanation of
each strategy, with its benefits and risks or
weaknesses, and the reason why you recommend it.
Additionally, your ability to apply concepts from the
literature to your analysis, with proper citation of
articles and books.
Specifically:
• Main problem: 20% of the grade
• Each strategy: 20% of the grade
• KPI’s: 10% of the grade
• Formatting requirements: 10% of the grade.
Rubric: written assignment
Criteria Accomplished (A) Proficient (B) Partially proficient (C) Borderline (D) Fail (F)
Problem
identification
The business issue has been
correctly identified, with a
competent and comprehensive
explanation of key driving
forces and considerations.
Impact on company operations
has been correctly identified.
Thorough analysis of the issue
is presented.
The student correctly identified
the issue(s), taking into account
a variety of environmental and
contextual drivers. Key case
information has been identified
and analyzed.
The student correctly identified
the case (issues), considering
obvious
environmental/contextual
drivers. There is evidence of
analysis, but it lacks depth.
The student correctly identified
the issue(s) but analysis was
weak. An absence of context –
the work is basically descriptive
with little analysis.
The student failed to correctly
identify the issue(s); analysis
was incorrect or too superficial
to be of use; information was
misinterpreted.
Information
gathering
The student showed skill in
gathering information and
analyzing it for the purposes of
filling the information gaps
identified. Comprehensive and
relevant.
Relevant information gaps were
identified and additional
relevant information was found
to fill them. At least two different
types of sources were used.
The student demonstrates
coherent criteria for selecting
information but needs greater
depth.
The student correctly identified
at least one information gap
and found relevant information,
but which was limited in scope.
Some evidence of sound
criteria for selecting information
but not consistent throughout.
Needs expansion.
An information gap was
identified and the student found
additional information to fill it.
However, this was limited in
scope. Weak criteria for the
selection of necessary
information.
Information was taken at face
value with no questioning of its
relevance or value. Gaps in the
information were not identified
or were incorrect.
Conclusions The student evaluated,
analyzed, synthesized all
information provided to create a
perceptive set of conclusions to
support the decisions and
solutions.
The student evaluated,
analyzed and synthesized to
create a conclusion(s) which
support decisions and
solutions.
The student reached
conclusions, but they were
limited and provided minimal
direction for decision-making
and solutions.
The conclusion was reasonable
but lacked depth and would not
be a basis for suitable strategy
development.
The student formed a
conclusion, but it was not
reasonable. It was either
unjustified, incorrect or
unrelated to the case in hand.
Solutions The student used problem
solving techniques to make
thoughtful, justified decisions
about difficult and conflicting
issues. A realistic solution was
chosen which would provide
maximum benefit to the
company. Alternative solutions
were explored and ruled out.
The student used problem
solving techniques to make
appropriate decisions about
complex issues. Relevant
questions were asked and
answered. A realistic solution
was chosen. Alternatives were
identified, explored and ruled
out.
The student used problem-
solving techniques to make
appropriate decisions about
simpler issues. The solution
has limited benefit but does
show understanding of
implications of the decision.
Alternatives were mentioned
but not explored.
The student used problem
solving techniques to make
decisions about simpler issues
but disregarded more complex
issues. Implications of the
decision were not considered.
Alternatives were not offered.
The student formed a
conclusion, but it was not
reasonable. It was either
unjustified, incorrect or
unrelated to the case in hand.
INTRODUCTION
BCO316 INDUSTRIAL MARKETING
Bachelor Program
Academic Year 2020-2021
Online Campus
LET’S MEET EACH OTHER
• What’s your name?
• Where do you live?
• What are you
studying?
• What do you expect
from this class?
RULES
• Schedule
• Attendance
• Interventions
COURSE DESCRIPTION
• The course introduces the key elements of business-to-
business (B2B) marketing and analyses the differences
between industrial and consumer markets. Topics include:
1. Business buyer behavior
2. Steps in business-buying decisions
3. B2B marketing strategies
4. B2B marketing campaigns
OBJECTIVES
• Equip students with a critical understanding of marketing
practices in the industrial business environment.
• Develop the students’ understanding of the marketing mix
in the industrial business environment.
• Enable students to identify, contextualize and interpret the
characteristics of B2B marketing and decision-making
processes within the industrial, marketing, and purchasing
contexts.
OUTCOMES
• Have an in-depth understanding of B2B market
opportunities.
• Identify and differentiate between the different and unique
challenges of business markets.
• Apply and analyze the different B2B systems and processes.
• Have a systematic understanding of how theoretical
concepts can be applied in business markets.
• Critically appreciate B2B marketing strategy assessments
and developments.
• Apply and assess the tools for B2B marketing strategy
development and implementation.
Week Content
Week 1 Introduction to B2B Marketing
Week 2 Character of Business Marketing
Week 3 B2B Digital Marketing
Week 4 Customers and Segmentation
Week 5 Managing B2B Relationships
Week 6 Business Marketing Channels
Week 7 Industrial Branding and Pricing
Week 8 Review week & Final Assessment
WEEKLY CONTENT
BIBLIOGRAPHY
RECOMMENDED
• Fill, C. and McKee, S. (2011) Business Marketing Face to
Face: The Theory and Practice of B2B. Woodeaton:
Goodfellow Publishers Ltd.
• Complete Guide to B2B Marketing: New Tactics, Tools,
and Techniques to Compete in the Digital Economy; Kim
Ann King; 2015. Pearson Publishing
• B2B Digital Marketing: Using the Web to Market Directly
to Businesses; Michael Miller; 2012. Que Publishing
ASSESMENT
TOPIC DATES PERCENTAGE
Formative Evaluation
Forum Participation
Discussion 1 – Customer relationships Week 1 – Week 2
Discussion 2 – Digital marketing Week 3 – Week 4
Discussion 3 – Distribution channels Week 5 – Week 6
Discussion 4 – Branding Week 7 – Week 8
Summative Evaluation 100 %
Midterm Assessment: Case study Week 4Deadline: June 20, 2021 at 23:59 CET 40 %
Final Assessment: B2B Marketing Plan Week 8Deadline: July 18, 2021 at 23:59 CET 60 %
INTRODUCTION
CONTENT
• Define and explain the nature of business to business (B2B)
marketing.
• The differences between consumer marketing and B2B marketing.
• Explain the types of industrial markets and major uses of B2B
products.
• Illustrate the different types of business markets and how they differ
from consumer markets.
• Learn the strategies for marketing to both business purchasers and
final users.
• Explain how B2C marketing mix, decision-making processes and
customer relationships differ from BSB’s.
• Learn how commercial enterprises and their products are classified.
B2B VS. B2C
• The B2B market is huge.
• Larger than the consumer
market.
• Organizations are usually
structurally and legally
independent but
interdependent.
• Businesses buy to their on
consumption or to create other
products.
• Buyers do not consume the
products or services themselves.
SIMILARITIES
1. Customer orientation.
2. Work backwards from an
understanding of customer
needs.
3. Need the ability to gather,
process, and use
information about
customers and competitors
in order to achieve their
objectives.
B2B
CHARACTERISTICS
THE NATURE OF DEMAND
• Understanding demand generation
is a key activity because:
– Demand is derived from
consumers of B2C companies.
– Demand is variable according
to changes in consumer
preferences and behavior. This
means that organizations should
monitor and anticipate demand
as cycles emerge.
– Demand has limited
elasticity. Unforeseen and
uncontrollable supplier price
increases have to be absorbed.
BUYING PROCESSES
• In consumer markets:
– Decisions are made relatively quickly
– The level of risk is low (for everyday items)
– Focus is primarily on the emotional aspects
– Purchases are generally made and consumed
individually
• In B2B markets:
– The potential risk is often quite large
– Decisions take much longer
– Involve considerably more people (decision making unit
– DMU)
– Consumption, or product usage, is an organizational
activity.
– Interaction between organizations is based on an
understanding of individual business customers’ needs.
INTERNATIONAL ASPECTS
• B2B organizations are increasingly engaging in
international markets.
• In comparison to consumer markets, international
business is easier.
• B2C markets issues:
– Culture and values
– Products and promotional activities need to be
adapted (color, ingredient, style, packaging and
language).
• B2B organizations benefit from
– A lower diversity in product functionality and
performance.
– The inherent nature of the products and
materials.
– Trading associations agreeing standards relating
to content and performance.
RELATIONSHIPS
• In B2C markets:
– Relationships between manufacturer and
consumer, or reseller and consumer are relatively
weak and unimportant.
– The nature of the products, their perceived value
to consumers, and competitive factors, are more
important in B2C.
• In B2B markets:
– The development and maintenance of positive
relationships between buying and selling
organizations is pivotal to success.
– Collaboration and partnership over the
development, supply and support of products and
services is a core element.
– Both buyers and sellers are actively involved.
– Influence can be either directly or indirectly.
TYPES OF
ORGANIZATIONAL
CUSTOMERS
CLASSIFICATION
• B2B marketing was previously referred to as
industrial marketing.
• This phrase failed to recognize the
involvement of other non-industrial
enterprises.
• Therefore, the term organizational
marketing is better.
• Ways of characterizing organizations
– By size: large. medium, small and home
offices.
– By geography: global and national
– By ownership: public and private.
• For understanding different purchasing
procedures and buyer needs the best
classification is: commercial, government
and institutional organizations.
COMMERCIAL
• It has four main sectors.
• All characterized by the different
ways in which they use products and
services.
• They share common buyer behavior
characteristics and associated
communication needs.
• They are:
1. Distributors
2. Original equipment
manufacturers
3. Users
4. Retailers.
1. DISTRIBUTORS
• Also called intermediaries.
• Include wholesalers, distributors/dealers and
value added resellers.
• Facilitate the transfer of products through the
marketing channel.
• Ownership and physical possession of the
goods often pass from one distributor to
another.
• There are occasions when the ownership
passes over, rather than through, to the next
intermediary or customer.
• Enable manufacturers to
– Reach customers who do not require
sufficient quantities to buy directly from
them.
– Concentrate on their core activities.
1.1 DISTRIBUTORS/
DEALERS
• Supply:
– End-user business customers
– Original equipment
manufacturers
• Take full title to the industrial
goods they purchase for resale
• Provide a wide range of products
from a number of different
manufacturers, offering easy
access to them for their customers.
• Provide advice, repair, storage or
service support, and credit
facilities where necessary.
1.2 VALUE ADDED
RESELLERS
• Are a relatively recent type of
intermediary.
• Bring together a variety of
software and hardware
products to design
customized systems solutions
for their business customers.
• Provide integrated systems
by drawing on a network of
providers and in doing so
create a value network, at the
business customer level.
2. ORIGINAL EQUIPMENT
MANUFACTURERS
• OEMs purchase materials that are
subsequently built into the products
that they market to their customers.
• These materials may take many
forms:
– Parts
– Finished and partly finished
goods
– Sub-assemblies which have been
outsourced.
• Sometimes it is not possible to
identify the manufacturer(s) of
these components.
3. USERS
• Organizations that purchase goods and
services to support their production
and manufacturing processes.
• Consume these materials.
• They do not appear in the final offering
but contribute to its production.
• For example:
– Machines
– Tools
– Equipment
– Vending machines
– Office furniture
– Stationery
4. RETAILERS
• Intermediaries, but with a different
role.
• A retailer’s customer is an end-user.
• Purchase goods to offer them to
consumers
• The buying processes is similar, but
simpler than DMU.
• Play a significant role on B2B
marketing.
• Organizations need to sell into
retailers and understand the needs
of this market and accommodate
them accordingly.
GOVERMENT
• Governments, and related institutions, are
responsible for a huge volume and enormous
value of business purchases.
• Health, environmental protection, education,
policing, transport, national defense and security
are just some of them.
• Procedures and guidelines are in many ways
radically different from commercial
organizations.
• Government projects are not only massive, but
also complex and involve a huge number of
stakeholders.
• These are the main differences between
government and private commercial purchasing:
1. POLITICAL OBJECTIVES
• The balance between
meeting different goals
can be difficult in the
public sector.
• Efficiency vs. political or
social goals.
2. BUDGET POLICIES
• Budgeting techniques and policies are very
different from those in the commercial sector.
• All government spending is bounded and
constrained by central government policy.
• Priorities are predetermined and generally
immovable.
• Government budgets are subject to public
scrutiny and some decisions are deliberated
for a considerable time.
• Procedures are normally detailed and
protracted, involving a large number of people.
• If the allocated funding is not spent within the
prescribed budget period, any under spend
may not be retained and budgeting process
might have to be started again.
3. ACCOUNTABILITY
• Purchasing procedures are slow as
each manager is required to give
authorization.
• Managers are spending public
money and they are accountable
for the money they authorize.
• Emphasis is placed on procedure
rather than the quality of the
purchase itself.
• Due to contract management:
– Cost are far in excess.
– Inefficiency and inappropriate
spending of public money.
4. TYPES OF PUBLIC
SUPPLY CONTRACTS
PROCEDURE
• The open
procedure
• The restricted
procedure
• Negotiated
procedure
EXPLANATION
• This involves the submission of tenders from
a huge variety of suppliers, most of who will
not be known to the government.
• This involves only those suppliers previously
invited (and vetted) by the contracting
organization to tender for the work.
• Subject to special conditions, specified by the
EC, the contracting authority may choose five
suppliers and enter into negotiations with
them, as long as, among other things, all
parties are treated fairly.
Source: Based on van Weele (2002)
INSTITUTIONS
• Organizations that are neither entirely
governmental nor private and commercial in
nature.
• For example, not-for-profit organizations such
as churches and charities, hospitals, schools,
museums, libraries and universities.
• Adopt some of the characteristics associated
with both commercial and government markets.
• Unite to form large buying groups to command
increased discounts based upon volume
purchases.
• Conflicts for different approaches and needs
within the group.
• Purchasing departments impose restrictions on
certain supplies to professionals that deliver the
service.
TYPES OF BUSINESS
GOODS AND SERVICES
INPUT GOODS
• Become part of the finished item.
• There are two main types:
– Raw materials have been subject
to minimal processing and enter
the production process in their
natural state (iron, sugar).
– Semi-manufactured parts have
undergone some processing
before entering the main
manufacturing process (sheet
metal, cloth, light bulbs).
• In addition to this there are finished
goods: finished products barely
transformed (phone cases).
EQUIPMENT GOODS
• Items that are purchased
to enable the production
of finished goods.
• They are not part of the
finished product.
• Equipment, capital or
investment goods.
• They are depreciated in
value over time because
they are not consumed
immediately.
SUPPLY GOODS
• Materials necessary to keep the production process running (e.g. electricity and
oil).
• These are not assets and are not depreciated. They appear as an expense item.
• Sometimes these are referred to as maintenance, repair and operating materials
(or MRO items).
• There are also services, like IT.
• Could be provided internally or outsourced.
B2B MARKETING
MIX
FROM 4Ps TO 7Ps
• Many products and services are targeted
at both consumers and organizations.
• Business marketing is distinguished from
consumer marketing by two main ideas:
– The intended customer, which is an
organization.
– The intended use of the product to
support organizational objectives.
• As a result, different marketing programs
are required to reach and influence
organizational buyers as opposed to
consumers.
• The marketing mix incorporated people,
physical evidence and processes, then 4
had become 7Ps.
PRODUCTS
• B2C products are traditionally
made available with limited
opportunities for adaption or
customization.
• Manufacturers are seeking ways in
which customers feel they can
customize a product.
• In the B2B market the entire
offering (product and service
components) can often be
reconfigured to meet a customer’s
particular requirements.
• The result is an offering that is
unique to the buying organization.
PRICING
• In B2C list prices are usually the norm
and limited discounts are applied.
• Hire purchase and credit-based schemes
make purchases more accessible.
• Negotiation is not usually a feature of
pricing.
• In B2B the designated value is likely to
increase as a relationship becomes more
collaborative and partnership-orientated.
• Prices are based on list prices, quantity
discounts and competitive bidding.
• Discounts and allowances are varied and
complicated.
• Negotiation becomes an important aspect
of pricing in B2B markets.
PLACE
• In B2C intermediaries:
– Reduce the complexity of the range of goods
consumers are offered
– Provide a level of specialization and support
(advice)
– Enable consumer expectations to be met
(location, quantity, easiness).
• In B2B markets, the utility principles are
similar but:
– The length of the channels is smaller
– The number of intermediaries is smaller
– Individual attention and customization of
product offerings (relationships).
– Delivering in the quantities and at the time
required by the buyer
PROMOTION
• In B2C advertising is the focal point.
– Large, widely dispersed audiences.
– Focus on awareness, interest and beliefs.
– Feedback is minimal and relationships
are temporary and not very close.
• Advertising is impotent in B2B
– More detailed and technical information.
– Audiences are small in number and can
be more closely defined and easily
targeted with less wastage (direct
marketing).
– Messages need to provide means of
differentiation, reinforcement and
persuasion.
– Feedback is important (personal selling).
PEOPLE
• In B2B, and service industries in
particular, people who represent the
manufacturer or provider, are
extremely important.
• They have a direct impact on the way
customers, and other stakeholders,
make judgements about the quality
of the overall service.
• Staff representing the service should
deliver their element of the service
process consistently.
• The appropriate recruitment,
training, and rewarding of staff is an
imperative.
PHYSICAL EVIDENCE
• The intangibility of a service means
that it is important to provide
tangible cues for potential customers.
• This enables them to understand the
product quality.
• Signs about the quality and
positioning:
– Sales literature
– Brochures
– Staff deportment and dress
– Offices status
– Cars/airplanes newness
PROCESSES
• The processes customers use
when interacting with a supplying
organization, need to work
effectively and appropriately.
• Activities, tasks, schedules,
systems and routines that enable
a product/service to be delivered
to a customer.
• Understanding the process lets
integrate benefits into key steps.
• This helps to provide
differentiation and enhance the
brand experience.
INTRODUCING
PERCEIVED VALUE
CONCEPT OF VALUE
• Customers buy:
– Benefits not features.
– Solutions to problems not products.
• Businesses buy what have the
potential to add value to their
offerings.
• Value is determined by the net
satisfaction derived from a
transaction, not the costs to obtain it.
• The creation of value depends on an
organization’s ability to deliver high
performance on the benefits that are
important to the customer .
VALUE CREATION
• The creation of value is based
on:
1. Customers will select the
offering (they perceive) will
offer them the best value.
2. Customers do not want
product or service features,
they want their needs met.
3. It is more profitable to have a
long-term relationship rather
than a one-off transaction.
SOURCES OF VALUE
• Value is relative to a customer’s
needs, expectations, and
experience of competitive
offerings.
• Value can be derived from
services, such as:
– Training or support facilities
– Association with a highly
regarded brand (co-branding)
– Legal or insurance provision
– Joint working relationships
between government and
building/finance schemes.
RELATIONSHIPS
• Sources of value may be more
important than the core
benefit arising from product
and price attributes.
• Between them, relationships
are a critical aspect of B2B
marketing.
• Are the most potent
representations of value.
• They are longer lasting and
difficult for competitors to
copy or destroy.
THE VALUE CHAIN
• Customers choose among offerings on the basis of their
perceptions of the relative value.
• Each organization develops it, through a chain of activities.
SUPPLY CHAINS
• Value chain is an internal context.
• Organizations join their value chains together
and form supply chains.
• The concepts of value and the value chain are
important because they provide a reminder of
basic principles.
• Value can be perceived in many ways:
– Providing associations with prestige
(exclusivity or membership).
– Reliability
– Modular formats
– Ease and speed of servicing
– Stock and delivery flexibility
– Ease of customization
– Pre- and post-purchase customer support
VALUE AND RELATIONSHIPS
• Organizations interact with
other organizations to provide
superior value-creation
opportunities for their
customers.
• The quality, duration and level of
interdependence between
organizations in the supply chain
can and does vary considerably.
• Some relationships are price-
orientated and some are fully
collaborative, while the large
majority fall somewhere between
the two.
B2B RELATIONSHIPS
THANKS
CHARACTER OF
BUSINESS MARKETING
BCO316 INDUSTRIAL MARKETING
Bachelor Program
Academic Year 2020-2021
Online Campus
CONTENT
• Technical Products: Hidden, Autonomous, Functional
• B2B products characteristics: functionality, usability,
performance enhancement, etc.
• Learn about procurement and purchasing and responsibilities.
• Understand supply chain management.
• Explain the goals of procurement.
• What to look for in evaluating potential vendors.
• Describe the processes that purchasing uses to evaluate
vendors and their offerings.
• Understand the vendor rating systems.
PRODUCT
CHARACTERISTICS
IMPORTANCE
• The development of superior value is
based on a number of elements.
• These may vary across sectors and
markets.
• One is price
• Others include:
– Relationships
– Products and services themselves
• They contribute to customers’
perception and evaluation of a
supplier’s competitive stance.
• Products have two main types of
attributes: tangible and intangible.
ATTRIBUTES
• Tangible Core
• Tangible
Augmented
• Intangible
• These are the basic features which describe the
simple capabilities of the product. These are generic to
all product offerings in the market.
• These are features added to the core attributes, which
either provide extra facilities and performance
opportunities or provide marks to distinguish and
differentiate the basic product from competitive
offerings. For example, packaging, brand names and
logos, quality achievements and fittings and
attachments.
• Additional elements that are provided to improve the
atmosphere that surrounds a product. Technical
service and support, financial services, warranties and
delivery serve to embellish products and assist
differentiation.
INTANGIBLE
• Aspects that surround a product.
• Psychological aspects associated with:
– Service and support
– Warranties and guarantees
– Financial services
– Training
– The reputation of the company and its status.
• Are increasingly important
• Differentiation has to be achieved primarily through them.
• Attributes can be classified as:
– Determinant = important and differentiating
– Non-determinant = either important or differentiating
BUSINESS PRODUCT
STRATEGY
INTRODUCTION
• Organizations offer a range of products and
services to their target markets.
• These products vary in many ways but
management must devise and implement
strategies that enable the organization to
achieve its marketing and, ultimately,
business objectives.
• Product strategy should consider the
organization’s portfolio of products.
• Within the portfolio, two elements should
be examined.
– Individual products.
– The whole product range and how
products contribute to the overall.
• The management of the product portfolio is
crucial.
PORTFOLIO
• Portfolios are made up of:
– Product item: each individual
product.
– Product line: clusters of products
and services.
– Product mix: the number of
product lines.
– Depth of line: the number of
products offered within each line.
• Enhance the long-term profitability.
• This involves:
– Trading off one product line against
another.
– The development of new products.
– Reallocating some resources.
PRODUCT LINES
• Clusters of products and services that
should represent a coherent product mix.
• When business customers move across
segments, they perceive a consistency of
value and hence competitive advantage.
• This has implications for positioning and
marketing communications.
• Through line of products superior value and
competitive advantage can be developed.
• Can be classified based on the degree to
which it is standardized or customized, in:
– Catalogue products
– Custom-built products
– Custom-designed products
– Business services
CATALOGUE PRODUCTS
• Produced in anticipation of orders.
• Sellers speculate that there will be
sufficient demand.
• Stock is produced in a standard format.
• There is no opportunity to change the
specification to meet the needs of different
markets.
• Product line decisions concern:
– Levels of stock
– Type of stock (adding and deleting lines)
– The repositioning of products within the
line.
CUSTOM-BUILT
• Are assembled for customers using
preformed parts, subassemblies and
components.
• Parts or components are the same
for all customers.
• They are configured in particular
ways and quantities, so that they
meet a specific customer’s needs.
• The approach is similar to the Lego
building-block system.
• Product-line decisions revolve
around presenting different solutions
to customer problems based upon a
reconfiguration of the ‘blocks’.
CUSTOM-DESIGNED
• Custom-designed and built to
meet the specific needs of a
particular customer or very small
group of customers.
• Often of high capital value.
• Product-line decisions are based
around:
– Identifying and understanding
the very specific needs of
customers
– Presenting proposals that
provide a tight fit with those
needs.
BUSINESS
SERVICES
INTRODUCTION
• Almost all B2B organizations provide a
service.
• The main offering may be a product but
there are services attached:
– Order processing
– Invoicing
– Delivery
– Warranty-based support.
• Each time it is delivered there will be a
slight variance or difference in quality.
• Some organizations provide a specific
service package to support their products
• For some organizations service is their core
business activity (consultants, insurance,
accountancy, financial audit, security).
LEVELS OF SERVICE
• Organizations search for new ways to add value
and differentiate.
• Interrelationship between products and
services has become more entwined and
complex.
• At one end there will be completely ‘tangible’
products, and at the other end, completely
‘intangible’ services.
• Provision of support services can be very
profitable, often with margins higher than
those generated through the sale of products
alone.
• Primary service providers do not have a
tangible product and the service stands alone.
• In these situations, the added value offered has
to be concentrated on the quality and
consistency of the service alone.
COMPONENTS
• Services are essentially processes.
• These processes are made up of a number
of activities which in turn use resources.
• Customers interact directly with these
activities so that at the point of
production there is simultaneous
consumption.
• Services can be distinguished by five
main characteristics:
– Intangibility
– Perishability
– Lack of ownership
– Inseparability
– Heterogeneity
KEY CHARACTERISTICS
• Intangibility
• Perishability
• Lack of ownership
• Inseparability
• Heterogeneity
• Services are difficult to evaluate prior to purchase, they are
perceived subjectively and are experienced at the point of
consumption. Services deny people the opportunity to touch, feel,
see or hear, prior to, during or after the consumption of a
product, unlike products.
• Services are not capable of being stored, simply because they are
created and consumed simultaneously.
• Services are used but there is no transfer of ownership prior to
consumption.
• Services are produced and consumed simultaneously which
means that the service providers and the customer are in contact
with each other at the point of consumption.
• Services involve the interaction of many people in their
production and consumption. This means that each service
encounter is likely to be different, making it difficult to deliver a
consistent service experience for all customers.
CLASSIFICATION
• Drives different approaches and service
strategies.
• Based on the dependance for their
delivery:
– High-touch: very dependent on people
– High-tech: dependent upon physical
resources such as IS&T.
• Based on the flow of interaction:
– Continuously rendered services: a
regularized flow of interaction (office
cleaning, facilities management and
financial services)
– Discretely rendered services: a punctual
interaction (consultancy, decoration)
SPECTRUM
• Services range from some that are attached
directly to a product and some which consists of
a pure stand-alone service.
– Pure product: the offering is purely a
product and devoid of any services.
– Product with some services: the
product is supported with a range of one or
more services (installation, repair,
warranty).
– Combination: products and services are
used in equal proportion in order that
customers’ expectations are met (software
training).
– Service with some products: the
emphasis is on the service but some
products are a necessary part of the mix.
(airplane food and movies).
– Pure service: no products are involved
(consulting)
SERVICE
PROCESSES
INTRODUCTION
• Services are considered to be
processes.
• A process is a series of sequential
actions that lead to predetermined
outcomes.
• These processes are directly related
to the equipment/people.
• Categorization of services based on
what they process:
– People processing
– Possession processing
– Mental stimulus processing
– Information processing
PEOPLE PROCESSING
• People have to physically present.
• They become immersed within the
service process.
• Examples:
– Traveling on a train
– Going to the dentist
• Consideration of the process and
the outcomes arising from
participation in the service process
can lead to ideas about what
benefits are being created and
what non-financial costs are
incurred.
POSSESSION PROCESSING
• Objects are involved in processing.
• Examples: maintenance, cleaning, storing,
repairing, installation, and removal services
are typical possession-processing activities.
• The level of customer involvement is limited.
• Process:
– A telephone call/internet booking is
required to fix an appointment.
– The item either needs to be taken to the
service provider or you must wait for an
attendant to visit.
– A brief to explain the problem/task/
solution is given
– Returning to pay and take away the
renewed item.
MENTAL STIMULUS
PROCESSING
• Try to shape attitudes or behavior.
• Are oriented to people’s minds.
• People have to become involved mentally in
the service interaction and give time in order
that they experience the benefits of this type
of service.
• Examples: education, entertainment,
professional advice, and news.
• Options:
– Created in a location that is distant to the
receiver and delivered through media
channels
– Delivered and consumed at the point
where they originate.
• One of the key differences is the form and
nature of the audience experience.
INFORMATION PROCESSING
• The most intangible of all the services.
• Due to advances in technology, and
computers, has become quicker, more
accurate, and more frequent.
• The use of technology is important but
people have a huge capacity to process
information.
• Some organizations deliberately route
customers away from people processing
and into information processing.
• Examples:
– Computer based call centers
– Drive people to websites
– FAQs
PRODUCT LIFE
CYCLE
WHAT IS PLC
• A model that follows the
development of products
from inception to decline.
• Like human beings,
products have a life.
• They are born, they grow,
they become mature and
they eventually decline
and die
• Describes the progress of
products, in terms of
sales volume, over time.
PLC FORMATS
• Formats:
– Industry or class interpretation (for
example telephone communications)
– Product-based interpretation (for
example wireless or mobile
telephones)
– Brand-based perspective (the iPhone
X).
• Each of these has particular
characteristics, different shaped curves
and different managerial implications.
• Let’s focus on the product category level
of the PLC and its five-stage model:
DEVELOPMENT
• Resources are allocated to testing and analyzing materials and
prototypes.
• Investment of resources is high as is collaboration with
partners.
INTRODUCTION
• Sales build slowly as customers are
attracted to and want to try the
product.
• Organizations in the supply chain
adapt to the new processes and
procedures
• Profits remain low or even
negative, reflecting the heavy
development costs and initial
promotional investment.
• Customers learn how to adapt their
own systems and to incorporate or
use the product within their own
operations to their best advantage.
GROWTH
• Increased demand boosts sales.
• Profits start to increase
• The overall market expands rapidly.
• Competitors enter the market because
demand is proven and their risk is
lowered.
• The rate of market growth starts to
subside.
• Organizations attempt to differentiate
their products.
• Growth results from the product being
specified by B2B customers as an
integral or significant part of their own
product offerings.
MATURITY
• Most potential buyers have
adopted the product.
• Soon sales reach their highest
point before starting to slow.
• Discounting and price-based
strategies.
• Economies of scale
• Strategy becomes orientated
to protecting the volume of
production.
DECLINE
• The product loses customer
appeal.
• New products and new
technologies enter the market.
• The market consolidates as
products (or organizations)
are withdrawn.
• The focus of those that remain
reverts to maintaining an
efficient production capacity.
PL MANAGEMENT
• PLM seeks to improve operational
performance across the supply
chain, from new product design
through to decline and retirement.
• Strategic approach to manage
product information in order to
optimize the returns of a product.
• A way to collaborate in order to
reduce cycle costs, find
inefficiencies and to reach markets
more quickly.
• A collection of integrated software
tools and operations that are used
to manage the whole process.
STAGES MANANAGEMET
• The way a product is managed, at each stage, is
key to its survival.
• Each stage of the product life cycle requires
different marketing strategies.
• Product differentiation is an important aspect
of both the growth and maturity stages.
• When a product reaches the latter end of its
productive life, there are three options:
– No managerial intervention and product
sales decline steadily until death.
– ‘Euthanasia’, that entails voluntary
withdrawal of the product from the market.
– The rejuvenation by proposing new uses or
radically different target groups.
FINAL THOUGHTS
• Products have a limited life.
• Sales history follows an S-shaped path, at
industry and product levels.
• Products move through the different
stages, within an overall cycle at different
speeds.
• The life of the product can be extended
by:
– Introducing new ways of using the
product
– Finding new users
– Developing new attributes
• The average profitability per unit rises
and then falls as products move through
the later stages.
SERVICES
DEVELOPMENT
TYPES
• Established services innovation is
generated under intense competitive
behavior in order to improve
operational efficiency.
• Incremental service innovation is a
value creation strategy in which services
are developed to provide additional
value.
• Radical service innovation is about
the generation of value creation through
novel service concepts. This requires
new technologies, offerings, or business
concepts and involves radical system-
wide changes in existing value systems.
PROCESS
• Services are not always just an add-
on to a product offering.
• Can be a way of creating value
opportunities for clients.
• Initial stages of innovation are
characterized by a product-focus
with a relatively small amount of
services used only to augment and
complement the products.
• Later stages are characterized by
increased levels of service to provide
solutions for customer problems.
• It has 4 stages:
STAGE 1
• Services are used as after-
sale product support, for
example, parts and repair.
• Service innovation is
framed around maintaining
the product, and ensuring
that customers are satisfied
with their product purchase.
• Customers typically view
the service and product
businesses as distinct
entities.
STAGE 2
• After-sale services are
designed to complement the
core product.
• Services should attempt to:
– Improve customer
satisfaction with existing
products
– Increase loyalty
– Generate additional
purchases
STAGE 3
• A full set of services and
products are designed to
provide a clearly differentiated
offering aimed at solving
clients’ life cycle problems.
• Although the service
organization is often
consolidated in one identifiable
business, products are still core
to the company.
• End-user customers see no
major perceived boundaries
between products and services.
STAGE 4
• Firms seek to integrate the
services dimension as part of
their total offer.
• Referred to as ‘servitization’
• Involves the provision of an
integrated bundle of product/
service solutions for the entire
life cycle of their customers,
‘from cradle to grave’.
• Firms work collaboratively to
construct innovative solutions
that are of mutual value.
BUYING BEHAVIOR
INTRODUCTION
• Organizational buying is the decision
making process by which organizations
establish the need for purchased products
and services.
• Includes identifying, evaluating and
choosing among alternative brands and
suppliers.
• It is a process rather than a static, one-off
event.
• Organizations buy products and services on
a regular basis.
• Professional purchasing is a requirement.
• Presents a risk which varies according to
many factors.
• It is concerned with the development and
management of inter-organizational
relationships.
COMPARISON
CONSUMER ORGANIZATIONAL
Number of buyers
Many Few
Purchase initiation Self Others
Evaluative criteria
Social, ego & level of utility Price, value & level of utility
Information search Normally short Normally long
Range of suppliers used
Small number considered Can be extensive
Importance of supplier choice Normally limited
Can be critical
Size of orders Small Large
Frequency of orders High Low
Value of orders placed
Low High
Complexity of decision making Low to medium Medium
Range of information inputs
Limited Moderate to extensive
SIMILARITIES
• Purchases of technical
complexity adopt a rational
and fact-based approach.
• Inputs from other people is
similar to group buying
dynamics.
• Established behavior
patterns (traditional
purchasing practices, intra-
and inter-organizational
politics and relationships,
and the costs associated with
supplier switching.
DECISION MAKING
UNITS
DMU
• A large number of people are
involved in a purchase decision.
• This group is referred to as
either the decision making unit
(DMU) or the buying centre.
• DMUs vary in size and
composition.
• The size and form of the buying
centre is not static.
• It can vary according to the
complexity of the product being
considered and the degree of
risk and value.
INITIATORS
GATE-KEEPERS
INF
LUE
NC
ER
S
US
ER
S
DECISION
MAKERS
DECIDERS
DECISION
MAKING
UNIT
ROLES
• Initiators request the purchase.
• Users are involved in the specification
process. They will use it and evaluate its
performance.
• Influencers help set the technical
specifications and assist the evaluation of
alternative offerings. May be consultants hired.
• Deciders are who make purchasing decisions
and they are the most difficult to identify (often
senior managers). In repeat buying activities
the buyer may well also be the decider.
• Buyers (purchasing managers) select
suppliers and manage the process.
• Gatekeepers have the potential to control the
type and flow of information (assistants,
technical personnel, secretaries or telephone
operators).
BE AWARE
• It is vital for seller to identify members of
the buying centre and to target and refine
their messages to meet the needs of each
member.
• It can be instructive to visit purchasing
sections of organizational websites and try
to determine both the emotional character
and likely membership of a DMU.
• The DMU is a vague construct that can
reach across a number of different
functional roles with any number of
individuals participating or exerting
influence at any one time.
• The behavior of DMU members is also
determined by the interpersonal
relationships of the members of the
centre.
DECISION MAKING
PROCESS
CONSIDERATIONS
• Organizational buying decisions vary in
terms of:
– The nature of the product or service
– The frequency and the relative value of
purchases
– Their strategic impact (if any)
– The type of relationship with suppliers.
• OBB consists of a series of sequential
activities through which organizations
proceed when making purchasing
decisions.
• These are known as buying stages and
vary depending on the buy class.
• Need to focus on buying situations rather
than on products.
BUYCLASS
DEGREE OF
FAMILIARITY WITH
THE PROBLEM
INFORMATION
REQUIREMENTS
ALTERNATIVE
SOLUTIONS
New Task
The problem is fresh
to the decision
makers
A great deal of
information is
required
Alternative solutions
are unknown, all are
considered new
Modified rebuy
The requirement is
not new but is
different from
previous situations
More information is
required but past
experience is of use
Buying decision needs
new solutions
Rebuy
The problem is
identical to previous
experience
Little or no
information is
required
Alternative solutions
not sought or required
BUYCLASSES
BUYGRID FRAMEWORK
BUYING STAGE NEW TASK MODIFIED REBUY STRAIGHT REBUY
Problem recognition Yes Possibly No
General need
description Yes Possibly No
Product specification Yes Yes Yes
Supplier search Yes Possibly No
Supplier selection Yes Possibly No
Order process
specification * Yes Possibly No
Performance review Yes Yes Yes
ORDER SPECIFICATIONS
DIMENSION EXPLANATION
QUALITY Statement concerning the technical standards the product meets and whether there should be a quality certificate.
LOGISTICS Statement concerning the quantity of products required and delivery details.
MAINTENANCE Statement about how the supplier will service and maintain the product.
LEGAL AND
ENVIRONMENTAL
Statement detailing how the product and associated
requirements processes should meet health, safety and
environmental legislation.
TARGET BUDGET Statement about the financial constraints within which the product is to be produced, delivered and supported.
INFLUENCES OF
OBB
INTERNAL
• The way in which purchasing is structured.
• Central managing policy:
– Tighter control and consistency.
– Improved integration
– Costs can be reduced.
• Decentralize purchasing policy:
– Divisions or geographically dispersed.
– Facilitates purchasing to meet local needs
– Enables flexibility
– Promotes a sense of empowerment.
• Levels of authority and responsibility for purchasing.
• Enhancements to purchasing systems and technology.
• Organizational changes arising from restructuring, a
change in ownership or any politicising.
EXTERNAL
• Political and regulatory:
– Changes to packaging and labelling.
– Adjustments to the safety requirements
– Taxation regulations.
• Economy:
– Changes in the economy and confidence in
the stock market.
– Expectations concerning the buoyancy of
the end-user.
– Movements in interest rates.
• Social:
– Behavioral changes.
• Technology:
– The Internet and communications.
– New types of intermediaries and suppliers.
INDIVIDUAL
• Individuals’ perceptions of the
personal consequences of their
contribution to each of the stages in
the buying process.
• The nature and dispersal of power
within the unit can influence the
decisions that are made.
• Certain individuals are able to
control the flow of
information and/or the
deployment of resources
• Individuals may develop personal
friendships with suppliers and
buyers.
• Influence over resources.
RELATIONSHIPS
• Nature of exchange relationships:
– If the relationship between organizations is
trusting, mutually supportive and based upon a
longer-term perspective, the behavior may be
seen to be cooperative and constructive.
– If the relationship is formal, regular,
unsupportive and based upon short-term
convenience, the purchase behavior may be
observed as courteous yet distant.
• Switching (to another supplier) costs can heavily
influence buying decisions..
• Organizational buying has shifted from a one-to-
one dyadic encounter, sales-person to buyer, to a
position where a buying team meets a selling team.
• Communication style.
• Global/national dimensions.
FINAL THOUGHTS
• B2B buyer behavior has
been relatively
uncomplicated and
predictable.
• In recent years, there has
been a shift in the source
of power to buyers, mainly
due to digital technology.
• Single buyer is a thing of
the past and that the role
of a buying unit is much
more in evidence.
UNCERTAINTY, RISK
AND RELATIONSHIPS
RISK MANAGEMENT
• Organizations encounter risk when
purchasing products and services.
• The way organizations organize and
manage purchasing activities is
recognition of the existence of risk and a
broad means by which they attempt to
reduce their perceived risks.
• The risk concept consists of three main
elements:
– The potential loss
– The significance of those losses
– The uncertainty attached to the losses
• There are seven types of risks that are
relevant to organizational buyers:
RISKS
TYPE EXPLANATION
TECHNICAL Will the parts, equipment or product/service perform as expected?
FINANCIAL Does this represent value for money, could we have bought cheaper?
DELIVERY Will delivery be on time, complete and in good order? Will our production schedule be disrupted?
SERVICE Will the equipment be supported properly and within agreed time parameters?
PERSONAL Am I comfortable dealing with this organization, are my own social and ego needs threatened?
RELATIONSHIP To what extent is the long-term relationship with this organization likely to be jeopardized by this decision?
PROFESSIONAL How will this decision affect my professional standing in the eyes of others and how might my career and personal development be impacted?
E-PROCUREMENT
BENEFITS
• For sellers:
– Building closer links with various stakeholders
(customers, suppliers and third parties)
– Reduced printing and distribution costs and
delays.
– Improved ability to market new products,
quickly reduce prices on older ones, reduce the
number of incoming telephone calls.
– Improve efficiency, more accurate ordering
– Improve customer satisfaction.
• For buyers:
– Access to up-to-date product and price data
– Have fewer outgoing telephone calls.
– Faster ordering.
DISADVANTAGES
• For sellers:
– IST costs.
– Downward pressure on
prices.
– The ease with which
customers can compare
and switch suppliers.
• Both may welcome or regret
the decreased personal
contact.
AUCTIONS
• Internet-based trading
communities can be either
vertically or horizontally
focused.
• Online auctions are becoming
popular in:
– Sourcing supplies
– Disposing of surplus stock
or other assets.
• The ‘reverse auction’ is also
becoming popular.
SUPPLY CHAIN
MANAGEMENT
INTRODUCTION
• There is a dichotomy between the freedom
organizations seek to operate autonomously
and the necessity to cooperate and combine
their …
B2B
RELATIONSHIPS
BCO316 INDUSTRIAL MARKETING
Bachelor Program
Academic Year 2020-2021
Online Campus
CONTENT
• Explain relationship marketing practiced in industry.
• Understand what the requirements in high performance
relationships are.
• Discuss the synthesis and extension model of relationship
management.
• Explain the role of trust in B2B relationships.
• Discuss the outcomes associated with constrain-based and
dedicated-based relationships.
• Suggestions for making B2B relationships lasts.
RELATIONSHIP
MARKETING
INTRO
• Relationship marketing was
established in the mid 90s.
• The principles of looking after
customers have not changed.
• Relationship marketing has evolved
from exchange transactions and
buyer–seller interaction.
• Exchanges in inter-organizational
marketing contexts occur between
individuals who are, in general, known
to each other.
• The more frequent and intense these
exchanges become, so the strength of
the relationships between buyers and
sellers improves.
FUNDAMENTS
• There is a history of exchanges
and an expectation that there
will be exchanges in the future.
• Perspective is on the long term.
• Continued attachment by the
buyer to the seller.
• Price as the key controlling
mechanism is replaced by
customer service and quality of
interaction between the two
organizations.
• The exchange is collaborative
because the focus is win-win.
MARKET VS. COLLABORATIVE
BEYOND CUSTOMERS
• B2B relationship marketing is an
approach which encompasses a wide
range of relationships, not just with
customers, but also with:
– Suppliers
– Regulators
– Government
– Competitors
– Employees
– Others
• All marketing activities associated
with the management of successful
relational exchanges.
BACKGROUND
FROM INDIVIDUAL
• Originally, B2B marketing, focused
on the actions of individual
organizations.
• Attention has moved on to
consider networks of interacting
organizations.
• Networks are considered to
influence the actions of parties to a
degree not previously considered.
• This evolved into the recognition
of inter-organizational interaction.
• At first, consideration was given to
pairings of individual people.
TO PASSIVE BUYERS
• Business marketing was focused on
the units of exchange (products).
• Transactions represented market
exchanges between a single buying
and a single selling organization.
• Buyers were considered to be passive
and sellers active in these short-term
exchanges.
• Passive buyers reacted to the offers of
sellers in a more or less subservient
and unquestioning manner.
• Marketing and purchasing were
separated activities and that the
purchase activity involved just a
single, one-off purchase event.
TO COOPERATION
• Business customers (organizations) are
active problem solvers and seek
solutions that are both efficient and
effective.
• Buyers practiced cooperative behaviors
in order to find suitable suppliers.
• Inter-organizational behavior became
prevalent and focused on the
relationship between the pair of
organizations, rather than the products
traded.
• Buying center and selling center.
• Align both parties to achieve greater
efficiencies through improved
cooperation.
TO RELATIONSHIPS
• From a single discrete event, to a stream
of activities between two organizations.
• These activities are referred to as
episodes:
– Price negotiations
– Meetings at exhibitions
– Buying decision
• All take place within the overall context
of a relationship.
• Any one episode may be crucial to the
relationship but analyzing individual
episodes is insufficient.
• The unit of attention was the
relationship.
TO VALUE CREATION
• Attention moved away from vertical
integration, to recognition of the
significance of networks and loose
alliances.
• Focus not just on buyers and sellers, but
on a wide range of other organizations
each interacting with one another in a
network of relationships.
• Relationships as a function of value
rather than as a function of exchange.
• Sellers develop value propositions
embedded in their offerings.
• Buyers achieve value creation when they
incorporate a seller’s offering (products
and services) into their processes.
VALUE STRATEGIES
FOUNDATIONS
INTRO
• The development and underpinning of relationship marketing can be
traced through a variety of theoretical perspectives.
• Three main are:
– Social exchange theory
– Social penetration theory
– Interaction theory
SOCIAL EXCHANGE THEORY
• Relationships are based upon the exchange of
values between two or more parties.
• Whatever the exchange, satisfaction must be
felt as a result.
• If it lacks, buyers will compare performance
with other potential suppliers and even
withdraw from the relationship.
• Exchanges consist of two main elements:
– Value exchanges (goods for money)
– Symbolic exchanges (the feelings and
associations that are bestowed on the
user).
• Customer retention depends on that rewards
derived through exchanges exceed the
associated costs.
SOCIAL PENETRATION
THEORY
• As relationships develop, individuals
begin to reveal more about themselves.
• Relationships change from a very formal
introduction to something more
knowledgeable, relaxed and self-assured.
• Every encounter will allow each party to
discover more about the other.
• Personality breadth is the range of
topics discussed by the parties and the
frequency.
• Personality depth is the degree to which
a seller understands each of its
customers (the way they use products,
strategies, resources, culture,
difficulties, challenges, successes).
INTERACTIONAL THEORY
• Relational exchanges with a variety of
organizations within interlocking
networks.
• High degree of cooperation and
reciprocity necessary between
participants.
• Organizations undertake various
exchanges over time with varying
levels of intensity.
• Relationships are developed through
the different exchange episodes.
• Influences: technology, organizational
determinants (size, structure and
strategy), organizational experience
and individuals.
CUSTOMER
RELATIONSHIP LIFE
CYCLE
CYCLE
• Customer relationships move
through a variety of phases
through time.
• Are dynamic in nature and
structure.
• Phases:
– Acquisition
– Development
– Retention
– Decline.
• The duration and intensity of
each relationship phase will vary.
INTENSITY
• Trust and commitment are foundations for establishing and
maintaining ongoing, mutually rewarding two-way relationships.
• Customers have different requirements as a relationship evolves.
ACQUISITION
• Three main events occur:
– There is a buyer–seller search
– There is a period of initiation
during which both
organizations seek out
information about the other
before any transaction
occurs.
– Once a transaction occurs
buyer and seller start to
become more familiar and
begin to reveal information.
DEVELOPMENT
• Seller encourages the buyer to:
– Try other products
– Increase the volume of purchases
– Engage with other added value
services
– Vary delivery times and
quantities.
• The buyer will acquiesce according
to specific needs and the level of
drive to become more involved with
the supplier.
• Buyer determines whether or not it
is worth developing deeper
relationships with the seller.
RETENTION
• Will last as long as both the
buyer and seller are able to
meet their individual and
joint goals.
• Greater levels of trust and
commitment.
• Increased cross-buying and
product experimentation.
• Joint projects.
• Product development.
DECLINE
• The demise of the relationship.
• Termination may occur
suddenly as a result of a serious
problem or episode between the
parties.
• Buying organization decides to
reduce their reliance on the
seller and either notifies them
formally or begins to reduce the
frequency and duration of
contact
• Moves business to other,
competitive organizations.
CUSTOMER LOYALTY
• Retained customers are not always loyal.
• Loyalty may actually be camouflage for convenience or extended utility.
Trust and support an
organization just as it
trusts and supports them.
A market exchange
Several completed
transactions but remain
ambivalent towards the
seller organization.
Are passive about an
organization, but enter
into regular transactions.
Support an organization
and its products and
actively recommend it.
TYPES OF
RELATIONSHIPS
FACTORS
• Customers represent different values to other
organizations.
• That perceived value (or worth) may or may not
be reciprocated.
• The degree to which buyer–seller relationships
are developed can depend on:
– Internal factors (the nature of the product,
the degree of technological sophistication and
the core competences of the organization)
– External factors (industry environment,
market, competitive situation, condition of
the overall economy)
• Two additional principles:
– The strategic influence of the supplier’s input
goods.
– The degree to which supplying organizations
can be substituted.
STRATEGIC INFLUENCE
• Non strategic goods and materials providers:
– Do not warrant an investment in close
relationship development and
relationships should be remote.
– Buying flexibility and the exertion of
downward pressures on price, quality and
delivery.
• Suppliers of goods and materials that are
central to the buying organization’s strategy:
– Contribute to the development of
customer value through differentiation.
– Require the formation of close
relationships, even partnerships and
collaborative arrangements.
– Facilitate intensive negotiations and
provide continuity of personal supply and
continued customer value.
SUBSTITUTES
• Remote relationships:
– When product supply is easy
and there is active competition
for business.
– In markets where the products
are relatively standardized or
simple.
• Close collaboration and
partnerships:
– Where products are complex
and or highly customized.
– When supply is tight, especially
in growth markets.
CRITERIA
• Suppliers and commodities can be
segmented based on the type of
relationship sought using these criteria:
– Share in value adding costs
– Dependency on suppliers’ technical
know-how
– Buyer’s own knowledge about
specifications and design
– Number of possible suppliers
– Switching costs and strength of exit
barriers
– Supplier’s negotiating power
– Importance to and contribution
towards DC’s own customers
perceptions
TYPES
• There are four types of relationships:
– Transaction or market exchange
– Coordination or captive supplier
– Co-operation or captive buyer
– Alliance or strategic partnership
• The first two are regarded as essentially
operational and the second two as
strategic types of relationship.
• An organization must decide, among its
portfolio of buyers, which warrant
developing relationships and the type of
relationships to nurture.
• Resources can then be allocated
accordingly.
PARTNERS AND
ALLIANCES
WHAT IS
• A way to gain advantage and reduce
uncertainty through
complementary resources or core
competences.
• Implies a commitment to another
organization in which partners
invest resources to achieve
particular goals.
• It is strategic because the
relationship is long-term, all
partners are committed and the
relationship is mutually supportive.
• Rely on trust and commitment to
achieve the agreed outcomes.
ADVANTAGES
• Obtain complementary
resources in a fast, flexible and
cost-efficient way.
• Reduce the uncertainties
associated with developing channel
operations and relationships.
• Strengthen market positions.
• Access to larger markets and
distribution and marketing
resources.
• Reduction of long lead times and
high extended costs necessary to
operate in a variety of markets.
LEVELS OF INTEGRATION
REASONS WHY
• Distributors and retailers:
– Ensure a flow of desirable
products
– Differentiate themselves from
others.
• Manufacturers:
– Better market coverage
– Lower costs
– Lower order cycle times
– Lower stock-related costs
– Higher service output levels
SUCCESS FACTORS
• The success factors
associated with external
collaboration and
partnerships are:
– Goal congruence
– Trust at all levels of
interaction
– Intensive positive
communication
– Attention to internal
factors
TRUST
IMPORTANCE
• Trust is an element of personal,
intra-organizational and inter-
organizational relationships,
being both necessary for and
resulting from their perpetuation.
• Trust is a means of reducing
uncertainty in order that effective
relationships can develop.
• B2B relationships are about the
creation of mutual business
advantage and the degree of
confidence that one organization
has in another.
DIMENSIONS
• Inter-organizational trust is based on
two main dimensions: credibility and
benevolence.
– Credibility is the extent to which
one organization believes (is
confident) that another organization
will undertake and complete its
agreed roles and tasks.
– Benevolence is the goodwill, that
the other organization will not act
opportunistically, even if the
conditions for exploitation should
arise.
• Trust involves judgements about
another organization’s reliability and
integrity.
OUTCOMES
• In the B2B market, institutional
trust is important in terms of
the overall reputation of the
organization.
• The development and
establishment of trust is
valuable because of the
outcomes that can be
anticipated:
– Buyer satisfaction
– Perceived risk
– Continuity
FACTORS
• Trust in a relationship is influenced by:
– Duration of the relationship
– Relative power of the participants
– Presence of cooperation
– Various environmental factors.
• The greater the losses anticipated
through the termination of a relationship
the greater the commitment.
• When partners share the same values
commitment increases.
• Trust is enhanced when communication
is perceived to be of high quality
• Trust decreases when one organization
takes action that will be to the detriment
of the other.
Commitment
Trust
Cooperation
POWER
INTRODUCTION
• Inter-organizational relationships are
complicated by a number of different
issues.
• The most important are:
– Nature and distribution of power.
– The degree of conflict that exists
between organizations.
• These topics are interrelated because the
use of power can be a source of conflict.
• It’s necessary to develop cooperation by:
– Exercising authority through the use
of the power.
– Establishing trust and a spirit of
collaboration between
organizations.
THE CONCEPT
• Organizations seek to achieve their
objectives by working with other
organizations.
• Interdependence is not distributed in
a uniform and equitable way.
• Inequality of organizational
interdependence becomes a major
source of power.
• No single organization can have
absolute power but some
organizations have the opportunity to
exploit others.
• Power concerns the ability to get
another to do what they/it would not
normally have done.
IN A CHANNEL CONTEXT
• Power is obtained through the
possession and control of resources that
are valued by another member.
• Power is a function of dependency.
• As all members of a channel are
interdependent, all members have a
degree of power.
• Dependency is concerned with two
main elements:
– The value that one organization
derives from interacting with
another.
– The number of alternative sources of
equivalent value that an
organization has.
SOURCES OF
POWER
REWARDS
• One of the more common
sources of power.
• They are based on the belief that
one organization intends, and is
able, to reward another with a
resource (source of value) that
the other desires if agreed
actions are accomplished.
• e.g. A manufacturer might grant
a wholesaler particular
discounts dependent upon the
volume of products bought
during an agreed period.
COERCION
• It is the other side of the reward-
based coin.
• Negative measures, or punishments
may be administered.
• These sanctions may take the form
of:
– Reduced margins
– Changes to delivery cycles
– Withdrawal of product range
privileges
• It is perceived as an attack, which
often provokes self-defence and a
counterattack.
EXPERT
• It is based on the perception that
one organization considers
another to possess particular
knowledge and expertise that they
do not possess but require if they
are to fulfill their obligations.
• This makes them dependent upon
the flow of (expert) information
from the source organization.
• Franchise systems are based on
the expertise owned by the
franchisor.
• Problems can arise through the
transfer of expertise, over time.
LEGITIMATE
• When one party recognizes the
authority of another to manage a
relationship.
• Legitimacy is provided either
through the judicial system
(trademarks and contracts) or
through the norms and social values
established within particular
markets and industries.
• The use of legitimate power is
relatively uncommon in
conventional channels and it is only
present in contractual and
corporate vertical marketing
systems.
REFERENT
• It’s like ‘renting a reputation’.
• It works on the basis of association
and identification.
• It is about public acknowledgement
in order to gain increased value.
• A retailer may find it beneficial, that
is of increased value, to be able to
carry particular prestigious brands
as the association will enhance the
perception end-user customers will
have of them.
• Some manufacturers may benefit
from distribution through
association with particular retailers.
FINAL THOUGHTS
• These power bases need to be
considered as a collective group,
not as separate sources.
• There is a level of reinforcement
between different types of power.
• Power is not distributed
symmetrically.
• No one organization is totally
dependent upon another.
• Power needs to be understood as
an imbalance between
organizations which are
dependent upon each other.
CONFLICT
CHANNEL CONFLICT
• It is inevitable that there will be some
level of conflict between channel
members.
• The degree of conflict will vary from:
– Channel to channel
– Organization to organization
• Conflict can be observed between
vertically channel members and also
between organizations that operate
across channels horizontally.
• Conflict occurs in all types of channels.
• Multichannel distribution systems has
given rise to increased levels of
conflict.
THE GOOD SIDE
• Conflict impairs channel performance but it also
can improve channel performance.
• Conflict is triggered by a failure (of a dependent
channel member) to reach performance
threshold levels.
• Managers should be concerned more with
efficiency than performance effectiveness when
managing conflict.
• So, if conflict is a result of a breakdown in the
levels of cooperation between channel partners,
management has a prime responsibility to
manage conflict.
• Conflict management is to manage relationships
such that the frequency, intensity and duration
of inter-organizational conflict is minimized.
THE NATURE
• Conflict is the perception on the part of
a channel member that its goal
attainment is being impeded by another,
with stress or tension the result.
• Conflict concerns an incompatibility of
ideas, purpose, understanding and aims.
• Conflict can be categorized as:
– Task conflict: incompatibilities
and disagreements between
organizations about respective
responsibilities.
– Emotional conflict: interpersonal
incompatibilities and friction
between members of each
participating group.
COMPETITION
• Conflict should not be confused with
competition and competitive behavior.
• Conflict is behavior that is opponent-
centered, it is personal and direct.
– Members are perceived to be blocking
or impeding another member from
achieving their goals.
– It is about members struggling with
one another.
• Competition is behavior that is object-
centered, it is impersonal and indirect.
– Members of different channels
attempt to attain goals controlled by
others such as customers.
– It is about members striving with
others.
DIMENSIONS
• Conflict is a complex, dynamic and
multidimensional concept.
• Organizations do not experience uniform
levels of conflict or no conflict at all.
• Conflict is complex because it is thought
to occur at a number of levels.
• There are major variations in the
intensity and frequency of conflict and
there are varying degrees of importance
attached to different conflict issues.
• Internal conflicts arising from the
development of multi-channels can be
observed, involving competition either
for finite internal resources, or for the
same customers.
REASONS FOR
CONFLICT
SOURCES
• Identification of conflict causes can lead to
marketing management strategies that prevent,
remedy or at least seek to repair any damage.
• Tension can arise between organizations for any
number of reasons:
– Deviance from agreed roles and
responsibilities.
– Disagreements about resources or the
decisions other members make
– Differences in the way organizations perceive
the actions of others
– Poor inter-organizational communications.
• All of these reasons can be distilled into three
main factors:
– Competing or incompatible goals
– Domains
– Perceptions of reality.
COMPETING GOALS
• A common form of conflict,
• Typically occurs when one upstream
member changes strategy so that its
goals become difficult for other
downstream members to support.
• Examples:
– A manufacturer wants to reach new
market sectors but current dealers
might resist this strategy.
– When retailers try to increase
performance by lowering their stock
levels.
– A retail organization wants to keep
just one brand of those owned by
one company.
DOMAIN DIFFERENCES
• Refers to an area, field or sphere of function.
• It has four main elements: population, territory,
member roles and technology/marketing issues.
• One channel member perceives another member
operating outside of the previously designated
(agreed) element.
• Examples:
– A wholesaler start to sell direct to end-users.
– A manufacturer decides to sell through a
dealer’s competitors.
– An intermediary starts selling another
(competing) manufacturer’s products at the
expense of its own range of products.
• Changes to agreement should be negotiated and
managed in a cooperative way.
PERCEPTIONS OF REALITY
• The objectives of each of the channel
members are different.
• Members may react to the same stimulus
in completely different and conflicting
ways.
• It is likely that each member perceives
different ways of achieving the overall
goals.
• As each member organization perceives
the world differently, their perception of
others and their actions may lead to
tensions and disagreements.
• Poor or incomplete communication is the
main reason for this.
• Cultural differences are an important
source.
MANAGING
CONFLICT
CONTEXT
• Conflict cannot be eradicated but it can
be managed.
• Through the provision of adequate
proactive strategies, the frequency,
intensity and duration of conflict can be
reduced and prevented.
• The management of inter-organizational
conflict is a continuous activity.
• It has tow contexts:
– At the early stages the goal is to
diffuse levels of incompatibility, in
order to contain and prevent any
escalation.
– When it breaks out and reaches a
manifest stage, it needs to be
resolved or brought to an end.
OPTIONS
RELATIONSHIP QUALITY
• Flourishing inter-organizational
relationships is one of the principles
for successful B2B performance.
• These relationships concern all
organizations that participate or
contribute to active networks and
supply chains.
• Trust and commitment are the clue.
• Awareness by all parties of the need to
consider how others in the network of
relationships will react to a particular
strategy, policy change or initiative.
• Relationships managers play an
important role.
COMMUNICATION
• Conflict management is based upon a
willingness of all organizations to share
appropriate information.
• What is deemed by one organization as an
appropriate strategy may in fact be a source
of potential conflict if communication is
ineffective.
• Effective inter-organizational
communication requires that there be a
dialogue between all members.
• Two-way communication is required.
• Access and openness to competitively
sensitive information.
• Parties should be willing to share
information that will enable the channel to
attain its goals.
• Information deviance develops conflict.
…COMMUNICATION
• Communication between organizations
can be formal or informal.
• Formal communication:
– Technology such as electronic data
interchange (EDI).
– A senior manager dedicated.
– A constant flow of information.
• Informal communication:
– A variety of soft methods and
techniques (conferences, seminars,
memos, emails, telephone
conversations and corridor
meetings)
• Communication (quality and frequency)
between organizations reduces conflict.
RESOLVING
• A joint industry committee:
– Composed of elected members
from the industry.
– Provide a forum for the views of
the organizations in conflict to
be heard.
– Trade associations provide this
mechanism.
• The use of diplomacy:
– Appointing an individual or a
customer centre responsible for
a particular dealer or set of
retailers.
…RESOLVING
• Arbitration:
– A third party that provides a fast
and confidential means of solution.
– Objectivity and a fresh perspective.
– It is less expensive than legal
action.
– Makes the final decision.
• Mediation:
– A third party encourages dialogue
to enable the parties to reach their
own agreement.
– Suggesting solutions.
– Ensuring that it is implemented
correctly.
RESOLUTION STRATEGIES
CONFLICT MANAGEMENT
DIMENSIONS
• Information exchange:
channel members listen, respect
and understand partner opinions.
• Joint interpretation and
coordination: channel
members analyze, interpret, and
understand the causes of conflict
and build on the resolutions
achieved.
• Relationship-specific
knowledge memory: channel
members adjust their activities
and routines to complement
partner needs and goals.
BUILDING
RELATIONSHIPS
FACTORS
• A lot of factors that
contribute to the
development of strong
relationships and
reduced levels of
conflict.
• Power was the best
means to manage it.
• As relationship
marketing gathered
momentum, trust and
commitment became
the base of all them.
TRUST
• The confidence that one party has in
the other’s reliability and integrity.
• A lack of trust can lead to uncertainty,
conflict and dissatisfaction.
• Trust brings feelings of security and
creates a supportive climate.
• Honesty and benevolence are an
integral part of trust:
– Honesty is the belief that a partner
stands by their word, fulfills their
role, meets their obligations and is
sincere.
– Benevolence is that one partner is
interested in the welfare of the other
and will not take actions that might
be to the detriment of the partner.
COMMITMENT
• The desire to continue and maintain
a valued relationship.
• A partner’s consistency, …
CUSTOMERS AND
SEGMENTATION
BCO316 INDUSTRIAL MARKETING
Bachelor Program
Academic Year 2020-2021
Online Campus
CONTENT
• Rational Buying Motives and Practices.
• Exploring industrial markets
• Explain how high growth companies segment their
markets.
• Define B2B segmentation, understand the different levels
of B2B segmentation.
• Define value proposition and positioning in B2B markets.
• Define targeting and positioning in B2B.
• Discuss the x5 dimensions of differentiation practices in
industrial markets.
STP PROCESS
WHAT IS
• The process of dividing a market into distinct groups with
common needs and characteristics, that has three stages:
SOURCE: https://www.consumerpsychologist.com/cb_Segmentation.html
https://www.consumerpsychologist.com/cb_Segmentation.html
STAGES
1. Identify the mass market and the
various segments within the overall
market using a variety of criteria.
2. Select and target the particular
segments which appear to represent
the strongest marketing
opportunities and match most
closely the resources available to the
organization.
3. Position products and/or services
in such a way that buyers can clearly
differentiate what is being offered
from the prevailing competition.
• Distinct marketing programs can be
developed for each market selected.
SEGMENTATION
• Finding out what kinds of consumers
with different needs exist.
• “You can’t be all things to all people”
• Focusing on one of several segments
while leaving other segments to
competitors.
• Segmentation calls for some tough
choices.
• Companies that specialize in meeting
the needs of one group of consumers
tend to be more profitable.
• Several variables can be used for
segmentation, but not all.
• Choosing segments to target.
• Depends on:
– How well are existing
segments served by other
manufacturers
– How large is the segment,
and how can we expect it to
grow?
– Do we have strengths as a
company that will help us
appeal particularly to one
group of consumers?
TARGETING
POSITIONING
• Implementing
targeting.
• Repositioning:
– Attempt to change
consumer
perceptions of a
brand.
– It is very difficult to
accomplish.
– Requires time and
money. SOURCE: https://www.consumerpsychologist.com/cb_Segmentation.html
https://www.consumerpsychologist.com/cb_Segmentation.html
SEGMENTATION
HISTORY
• Segmentation was first
established by Wendell Smith
in 1956.
• Proposed as an alternative to
product differentiation.
• Became the heart of marketing
strategy in 1978.
• The foundation for successful
marketing strategies and
activities.
• Dividing a mass market into
identifiable subunits.
IN B2B
• Looking for better satisfying individual
needs of buyers and potential buyers.
• Groups have common characteristics,
needs and display similar responses to
marketing stimuli.
• B2B market segmentation had not been as
well researched and documented as that in
consumer markets.
• Supported on the 80% of profits come from
20% of customers rule.
• The intricacies involved in business market
segmentation are said to make it a more
exacting activity than in consumer markets.
• Uses a variety of variables ranging from
product-specific to customer-specific
attributes.
JUSTIFICATION
• Groups of customers, or potential
buyers, who share similar needs and
buying characteristics are more likely
to respond to an organization’s
marketing programs in similar ways.
• Enables organizations to focus
resources more efficiently and deliver
more targeted marketing programs in
order better to meet customer needs.
• Instead of reaching out to a mass
audience, the selection of particular
submarkets concentrates activities
and leads to improved profitability.
• Improves market intelligence,
customer orientation and
competitors awareness.
APPROACHES
• There are two main approaches
to segmenting B2B markets:
– The breakdown method:
the market consists of
businesses (and buyers) that
are essentially the same, so
the task is to identify groups
that share particular
differences.
– The build-up method: the
market consists of businesses
that are all different, so here
the task is to find similarities.
CONSIDERATIONS
• The debate should not be about the
direction but the content of the
segmentation approach.
• It is not a static concept and that the
process should reflect current market
conditions.
• In practice segments are often little
more than product group
classifications, a geographical location
of customers, and/or the business
sector activity of the client or
customer.
• Transactional marketing is encouraged
when e-commerce is implemented.
WHICH ONE
• Segmentation should reflect a
continuum between those
organizations that only seek
purely transactional marketing
activities and those for whom
relationships are essential.
• For purely transactional
situations, the breakdown
method is more appropriate.
• If relationship marketing
dominate a business, the build-
up approach is more
appropriate.
BASES FOR
SEGMENTING
OPTIONS
• The bases used to segment business and
consumer markets are different.
• There is no fixed way of simply identifying
business segments, because the needs of
business markets vary considerably.
• There are two main groups of variables
used to segment B2B markets, and they
are interrelated:
– Market characteristics, such as
organizational size and location.
– Buyer characteristics, the
characteristics surrounding the
decision making process.
BY MARKET
CHARACTERISTICS
INTRO
• These factors concern the
buying organizations that
make up a business market.
• Criteria more commonly
used:
– Size
– Market served
– Value
– Location
– Usage rate
– Purchase situation
SIZE
• Identify particular
buying requirements.
• Large organizations may
have particular delivery
or design needs.
• Purchasing activities in
smaller organizations
may be heavily
influenced by key
individuals, such as
owners or managing
directors.
MARKET SERVED
• Customers on a specific
business activity.
• Opportunities exist to:
– Determine new users in
the same business area.
– Develop new products and
services for the sector.
– Communicate the whole of
the current range more
effectively to existing
companies.
VALUE
• Dividing markets according to
the value they represent to the
selling organization.
• Value (high, medium or low)
may be based on:
– Sales revenue
– Profit contribution
– Some softer factors – such
as strategic access to new
markets.
– Production efficiencies
LOCATION
• Geographic location
• One of the more
common methods.
• Used by new or
small organizations.
• Not very important
due to Internet.
USAGE RATES
• Grading users according to their
rate of product and/or service
consumption.
• Users may be:
– Low
– Light
– Medium
– Heavy
• The goal is to encourage users up
the ladder by changing some
aspect of the marketing mix
variables.
PURCHASE SITUATION
• The structure of the purchasing
procedures:
– Centralized or decentralized
– Flexible or inflexible
• Type of buying situation:
– New task
– Modified rebuy
– Straight rebuy
• Stage in the purchase decision of
buyers:
– Early stages and unexperienced
– Late stages and experienced
SIC CODES
• Standard Industrial Classification
(SIC).
• Used to get an initial feel for the size
of various markets.
• They are easily available and
standardized.
• Suffer from being highly
aggregated, often superficial and
not based on customer need.
• Have limited application and are far
from being a complete solution but
are a preliminary indication of the
industrial segments in a market.
BY BUYER
CHARACTERISTICS
INTRO
• Segmenting by market
characteristics is considered to be
less than effective.
• Target market strategies should be
more aligned to the behaviors and
attitudes of targeted customers.
• This set of criteria can be
considered at two levels:
– The approach and requirements
of the decision making unit
(DMU).
– The personal characteristics of
key decision makers or members
of the DMU.
DECISION MAKING UNIT
• A DMU may have specific
requirements that influence their
purchase decisions in a
particular market.
• There may be:
– Policy factors
– Purchasing strategies
– A level of importance attached
to these types of purchases
– Attitudes towards vendors
– Attitudes toward risk
POLICY FACTORS
• Policies that govern purchasing
decisions.
• Specific delivery cycles to support
manufacturing plans.
• Certain quality standards to be
met by their suppliers
• Membership of particular quality
standards organizations (for
example ISO 9002).
• Reputation of suppliers meets
certain internally determined
criteria.
• Relation with competitors.
PURCHASING STRATEGIES
• One of two main purchasing
strategies or profiles:
• Optimizers: prefer to consider a
wide range of potential suppliers and
are prepared to evaluate a range of
proposals before selecting a supplier.
• Satisfiers: tend to prefer dealing
with familiar suppliers and award
contracts to the first supplying
organization to meet purchase
requirements.
• A new entrant is likely to have more
success becoming established by
approaching optimizers rather than
satisfiers.
LEVEL OF IMPORTANCE
• The significance of the purchase
in terms of the size and nature
of the purchasing organization.
• It’s related to the value it
represents to the purchasing
organization both financially
and in terms of its work
contribution.
• May also be perceived in terms
of the opportunities it enables
an organization to exploit (new
product development, entry to
new markets).
RELATIONSHIPS
• Attitudes and relationships
between the people who
represent organizations.
• Based on the closeness and
level of interdependence that
may already exist between
organizations.
• This could be measured in
terms of a continuum from
partners to unknowns.
• The attitude of DMUs may
also be a determining factor.
ATTITUD TO RISK
• The degree to which an organization
is willing to experiment risk through
the acquisition of new industrial
products.
• It is a reflection of the prevailing
culture and philosophy, leadership
and managerial style.
• It is reflected in:
– The speed with which new
product decisions are made.
– The nature of the products
selected
– The choice of suppliers.
PERSONAL
CHARACTERISTICS
• Personal characteristics of some
decision makers have been used in
B2B segmentation, specially
psychographic variables:
– Personality
– Decision style
– Risk
– Lifestyle
• Dimensions associated with the
personal characteristics of B2B buyers:
– Rational and non-rational
motivations.
– Attitude towards risk
– Relationship styles and preferred
forms of social interaction.
PSYCHOGRAPHIC
• The segmentation of organizational buyers by:
– Motives
– Risk perceptions
– Social interaction styles
• Identify and predict the predispositions of the
firm’s decision makers for:
– Adopting products
– Marketing messages
– Relational selling behaviors
• Should involve an analysis of buyers’ :
– Attitudes towards relationships
– Attitudes towards each seller
– Understanding of the reasons and ways in
which organizations use products and services.
EMOTIONAL MOTIVES
• Pide or prestige
• Emulation or imitation
• Affection
• Comfort or desire for comfort
• Ambition
• Desire for distinctiveness or
individuality
• Desire for recreation or pleasure
• Habit
• Recommendation of others
RATIONAL MOTIVES
• Safety or security
• Economy in operating costs
• Relatively low price
• Suitability
• Utility or versatility
• Durability of the product
• Convenience of the product
• Credit facilities offered
• Services offered
• Efficiency of salesmen
• Wide choice
• Treatment
• Reputation
TARGETING
WHAT IS
• The second step in the STP
process.
• Select appropriate target
segments that represent the
best opportunities for the
organization, given:
– Their resources
– Strategy
– Prevailing internal and
external conditions.
• Should be based on a systematic
analysis of the market.
MARKET ANALYSIS
• This involves:
– Considering the market characteristics
– Moving then through to the buyer
characteristics.
• The cost of this activity increases as buyer
characteristics are considered.
• Market characteristics can usually be
drawn from secondary sources.
• Information necessary for the analysis of
buyer characteristics has to be gained
through:
– Primary research (expensive)
– Commercially available databases and
prospect-finding services.
THE GOAL
• Identify segments that in the medium
to long term will provide suitable
returns.
• This is not an easy task.
• Ensure that all the costs and benefits
are understood.
• Considering the necessary changes to:
– The products and services
– Pricing requirements
– Alterations and investments in
distribution channels
– The consequent knock-on impact
on the promotional plans.
CRITERIA
• To identify valid and reliable segments:
– All segments should be measurable – is
the segment easy to identify and measure?
– All segments should be accessible – can
the buyers be reached effectively with
marketing programs?
– All segments should be substantial – is
the segment sufficiently large to warrant a
separate marketing program and will it
provide sufficient return on investment?
– All segments should be actionable – has
the organization the capability to reach the
segment?
– All segments should be compatible – with
current business strategy and expected
market conditions.
OTHER ASPECTS
• Managerial discretion and
judgement will determine which
markets are selected and
exploited and which are
ignored.
• Segmentation process should
not be regarded as a perfect
marketing management activity.
• Much of what is passed off as
segmentation is merely an ad
hoc market adjustment to reflect
product amendments and
principal buyer requirements.
OVERVIEW
Segmentation Process Antecedent Prerequisites Outcome
Analysis Evaluation Implemen-
tation
Control
Market
Orientation
Market
heterogeneity
Factors
influencing the
decisions to
segment
Segmentation
bases and
process
stages
Segmentability
and target
market
selection
Integration
into strategy
and resource
allocation
Effectiveness
of marketing
strategies
Research
methodology
Data analysis
Segment
stability
Competitive
advantage
BARRIERS
INTRO
• The targeting process is not as
precise or clear-cut as many
authors suggest or imply.
• Barriers prevent businesses from:
– Starting the segmentation
process
– Implementing their chosen
course of action
• Main reasons for this failure:
– Infrastructure
– Process
– Implementation
INFRASTRUCTURE
• Are common and lie at
the root of the problems
facing many
organizations:
– The culture (product
oriented)
– Structure
– Lack of resources
which prevent the
segmentation process
starting.
PROCESS
• Lack of experience, guidance and
expertise concerning the way in which
segmentation is undertaken and
managed.
• There is little information to help
managers with the processes involved
with B2B segmentation.
• Websites and consultants recommend
using factor analysis when determining
market segments.
• In consumer markets, it is performed on
vast data sets collated from surveys, or
point of sale systems.
• In B2B markets, the challenge is to
acquire data and in sufficient numbers for
the results to be statistically significant.
IMPLEMENTATION
• The way in which an organization can
move towards a new segmentation
model.
• This may be due to a move away from
a business model based on products,
to one based on customer needs.
• There is insufficient information and
practical guidance for managers in
order that segmentation strategies be
implemented successfully.
• Established ways of doing business
become a barrier to moving over to a
new approach.
• Practical issues are often overlooked.
FINAL THOUGHTS
• Segmentation in B2B markets should
reflect the relationship needs of the
parties involved and should not be
based solely on the traditional
consumer market approach.
• Through use of both the breakdown and
the build-up approaches, a more
accurate, in depth and potentially more
profitable view of industrial markets
can be achieved.
• Problems remain concerning the
practical application and
implementation of B2B segmentation.
• It is not clear how to choose and
evaluate between the market segments
which have been determined.
POSITIONING
INTRO
• Market segmentation and target
marketing are prerequisites to successful
positioning.
• Following the analysis, determination
and final selection of market segments
and target markets, the next task is to
position the organization, brand or
product/service.
• It’s done through the development and
implementation of targeted marketing
communication programs.
• Positioning is the natural conclusion to
the sequence of activities at the core of
business marketing strategy.
• Positioning takes place in the minds of
the buyers in the target market.
WHAT IS
• Positioning is not about the product but
what the buyer thinks about the product
or organization.
• It is not the physical nature of the
product that is important, but how the
product is perceived.
• Messages in B2B markets are
traditionally rational and product-
orientated, with the emphasis on
personal selling and increasingly on
direct marketing.
• This is changing as more organizations
are using social media and B2B
branding is becoming more widespread.
THE AIM
• All products and all organizations have
a position.
• To enable buyers and potential buyers
to:
– View a supplier as different from
other suppliers
– View a supplier as a source of added
value.
– View a supplier’s offer as a set of
values that will enable them to
achieve their own goals more
effectively and more efficiently.
• The position held by each organization
can be managed or it can be allowed to
drift.
IMPORTANCE
• Increasingly competitive market
conditions.
• There is now little compositional,
material or even structural
difference between the products
offered by many organizations.
• An increase in the provision of
pre- and post-sales services, which
have the potential to generate
higher margins.
• Necessary in markets where
mobility barriers (ease of entry
and exit to a market) are relatively
low.
DRIVERS
• The pressure to reduce costs and
improve margins over the short
term.
• By switching the emphasis of
marketing communications from
individual products (or
categories) to development of the
corporate brand.
• The development of web-based
communications focuses
marketing management attention
on what the organization stands
for and how it should be
presented to the target market.
VALUE
PROPOSITION
WHAT IS
• A statement that answers the ‘why’
someone should do business with a
company.
• It is about what the organization (brand)
is, what it stands for, and the values and
beliefs that customers, hopefully, will
come to associate with, and appreciate in,
the particular brand.
• It should convince a potential customer
why a service or product will be of more
value to them than similar offerings from
a competition.
• A good value proposition can give an
advantage over competitors and is often
what prospects use to evaluate.
HOW
• Identify all the benefits a product
or services offer.
• Describe what makes these
benefits valuable in a quickly
digestible way for the consumer.
• Identify your customer’s main
problem your value proposition
helps solve.
• Connect this value to buyer’s
challenges.
• This is what helps differentiate a
brand as the best provider of this
product or service.
TOP CHARACTERISTICS
• Be concise and easy to understand.
• Define what you do.
• Make it easy for someone to find you
in an online search.
• Explain how your product resolves a
pain point for your potential
customer.
• Be displayed prominently on your
website and/or your consumer touch
points.
• Answer the question: “If I am your
ideal customer, why should I buy
from you instead of any of your
competitors?”
EXAMPLES
TRACKMAVEN
SHOPIFY
ZOOM
STRATEGIES
APPROACHES
• There are two main approaches
to positioning a brand:
– Functional
– Expressive (or symbolic).
• Functionally positioned brands
stress the features and benefits
(e.g. Deliver on time).
• Expressive positioning
emphasizes the ego, social and
hedonic satisfactions that a
brand can bring (do business
with nice people).
EVOLUTION
• Traditionally B2B marketers
have used the rationally based
approach.
• A tried and trusted sales
training aid is based around
the concept of telling
customers features and then
drawing out the benefits.
• Some organizations have
moved to a more expressive
approach drawing on softer
messages that attempt to
develop associations.
RECOMMENDATIONS
• The development of positions which
buyers can relate to and understand
is a vital part of the marketing
communications plan.
• Should reflect the type of target
market that has been selected:
– Positioning with transactional-
based segments should be more
rational and product-orientated.
– Positioning where relationship
issues are important should be
more expressive, with a focus on
support, participation, interaction
and interest in the customer’s
business.
DEVELOPING A
POSITION
STAGE 1
• Which positions are held by which competitors?
STAGE 2
• Identify the key or determinant attributes perceived by buyers
as important.
• This will require marketing research to determine attitudes and
perceptions.
STAGE 3
• Sample the target segment and assess how they rate each
product/service.
STAGE 4
• From the above, determine the current positions held by
relevant products and organizations.
STAGE 5
• From the information gathered so far, is it possible to
determine the desired position for the brand?
STAGE 6
• Is the strategy feasible in view of the competitors and any
budgetary constraints?
• A long-term perspective is required, as the selected position
has to be sustained.
STAGE 7
• Implement a program to establish the desired position.
STAGE 8
• Monitor the perception held by customers and their changing
tastes and requirements on a regular basis.
DIMENSIONS
PRODUCT FEATURES
• This is one of the easier
concepts and one that is quite
commonly adopted.
• The brand is set apart from
the competition on the basis
of key attributes or features
that the brand has relative to
the competition.
• For example: durability,
strength or design features.
PRICE /QUALITY
• This strategy is more effectively
managed than others because
price itself can be a strong
communicator of quality.
• This approach is particularly
effective in segments where
discrete exchanges
predominate.
• A high price denotes high
quality.
• A low price can deceive buyers
into thinking a product to be of
low quality and poor value.
USER
• Differentiate on
the basis that
you are of
specific benefit
to a particular
type of user
organization or
even individual
buyers.
BENEFIT
• Proclaiming the benefits that
usage confers on the customer.
• This is an extension of the
features position.
• By turning the feature into a
benefit, the focus moves from
the product to the customer and
their needs.
• These might be lower costs,
quicker order processing, less
wastage, more satisfied
customers, higher levels of
service or improved profitability.
INTANGIBLES
• Many organizations attempt to
position themselves on the
grounds of their:
– Expertise
– Leading technical capabilities
– Knowledge
– Reputation
– Corporate history
• These types of positions are
used to reduce risk and increase
trust and credibility.
FINAL THOUGHTS
• The dimensions used to position brands
must be relevant and important to the
target audience
• The image cues used must be believable
and consistently credible.
• Positioning strategies should be
developed over the long term if they are
to prove effective, although minor
adaptions can be made in order to reflect
changing environmental conditions.
• Whatever the position adopted by a
brand or organization, both the
marketing and promotional mixes must
endorse and support the position so that
there is consistency throughout all
communications.
THANKS
