b2b marketing - summary
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A summary on what B2B Marketing is all about.TRANSCRIPT
Business (B2B) MarketingBusiness (B2B) MarketingIFMR – PGDM II Yr. (2009-10)IFMR – PGDM II Yr. (2009-10)
Module 1Module 1Overview of Business marketingOverview of Business marketing
S.BalachandranS.Balachandran
July 2009July 2009
Learning ObjectivesLearning Objectives
• What is ‘Business Marketing’?What is ‘Business Marketing’?– Classification of B2B Products/Services, Classification of B2B Products/Services,
Markets & CustomersMarkets & Customers
• Differences between Consumer & Differences between Consumer & Business Markets & MarketingBusiness Markets & Marketing
• B2B Buying Orientations & CharacteristicsB2B Buying Orientations & Characteristics
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Business Enterprises : Activities Business Enterprises : Activities
Outputs• Services• Goods
Outputs• Services• Goods
B2B Transformation
Processes
5
1
2
3
4
Inputs• Materials• Components• Consumables• Services
Resources• Equipment• Facilities• Systems• Land• Human
Inputs• Materials• Components• Consumables• Services
Resources• Equipment• Facilities• Systems• Land• Human
Consumer or B2B Markets
Either part of Output OR facilitating the Transformation
Either part of Output OR facilitating the Transformation
• For Consumption• For Use• For Resale
• For Consumption• For Use• For Resale
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B2B Goods & ServicesB2B Goods & Services
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Industrial Production CategoriesIndustrial Production Categories
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Business ServicesBusiness Services
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B2B Markets & CustomersB2B Markets & Customers
• Commercial EnterprisesCommercial Enterprises– UsersUsers– OEMsOEMs– ResellersResellers– Service ProvidersService Providers
• Institutions : Profit/Non-ProfitInstitutions : Profit/Non-Profit– Educational, Healthcare, NGOsEducational, Healthcare, NGOs
• Government / Quasi-Govt. BodiesGovernment / Quasi-Govt. Bodies– Central, State, Local, PSUs, DefenceCentral, State, Local, PSUs, Defence
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Some Indian B2B EnterprisesSome Indian B2B Enterprises
• BHEL / NTPCBHEL / NTPC• ECC (L&T) / Hindustan ConstructionECC (L&T) / Hindustan Construction• TCS / Infosys / WIPRO / CTSTCS / Infosys / WIPRO / CTS• ORG Marg / R K Swamy BBDOORG Marg / R K Swamy BBDO• SAIL / Tata SteelSAIL / Tata Steel• MICO / Sundaram Clayton / Bharat Forge / MICO / Sundaram Clayton / Bharat Forge /
Bimetal Bearings / Delphi TVSBimetal Bearings / Delphi TVS• ONGC/ Neyveli Lignite Corp. / Bharat Coking ONGC/ Neyveli Lignite Corp. / Bharat Coking
CoalCoal• IPCL / Gujarat Alkalis / Tata ChemicalsIPCL / Gujarat Alkalis / Tata Chemicals• Shipping Corporation of India / TVS LogisticsShipping Corporation of India / TVS LogisticsJuly 2009 © S.Balachandran 8 of 37
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Value EquationValue Equation ‘ ‘Product’ or ‘Service’ satisfies a ‘need’ or Product’ or ‘Service’ satisfies a ‘need’ or
‘want’ by providing ‘value’.‘want’ by providing ‘value’.
Attributes/Features
Attributes/Features BENEFITSBENEFITS VALUEVALUE
NETT VALUE = BENEFITS - COSTSNETT VALUE = BENEFITS - COSTS
VALUEDELIVERY SYSTEM
VALUEDELIVERY SYSTEM
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Value Creation & DeliveryValue Creation & Delivery
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Marketing StrategyMarketing Strategy
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• Unique to each distinct Product-Market segmentUnique to each distinct Product-Market segment• Five Main ElementsFive Main Elements
– SegmentationSegmentation– TargetingTargeting– PositioningPositioning– DifferentiationDifferentiation– Marketing MixMarketing Mix
Differentiation
RECAP
Capabilities RequiredCapabilities Required• Market SensingMarket Sensing• Customer LinkingCustomer Linking
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Value Creation & Delivery SystemValue Creation & Delivery System
Provide the value
Communicate the value
Understand Value Desires
Select Targets
Define Benefits/ Price
Understand & Create the Value
• Market Research• Customer Behaviour
• Market Research• Customer Behaviour
• Product- Market Segments• Position
• Product- Market Segments• Position
• Differentiation• Product Management
• Differentiation• Product Management
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Providing the ValueProviding the Value
Commu-nicate
the value
Choose the
valueProvide the Value
Technology Design Product Distribute Service Price
Procure, Manu-facture
• Source• Sophisti- cation• Patents• Process Choice
• Source• Sophisti- cation• Patents• Process Choice
•Function• Physical charact- eristics• Aesthetic• Quality
•Function• Physical charact- eristics• Aesthetic• Quality
• Integration• Raw Mtl.• Capacity• Location• Part Prodn.• Assembly
• Integration• Raw Mtl.• Capacity• Location• Part Prodn.• Assembly
• Channels• Integration• Inventory• Ware- housing• Transport
• Channels• Integration• Inventory• Ware- housing• Transport
• MRP• Negotiation• Discount• Combo• Financing• Other Costs
• MRP• Negotiation• Discount• Combo• Financing• Other Costs
• Warranty• Speed• Captive/ Indepen- dent• Parts
• Warranty• Speed• Captive/ Indepen- dent• Parts
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Communicating the ValueCommunicating the Value
Choose the
ValueProvide the Value
Communicate the Value
INTEGRATED MARKETING• Direct Sales Force• Distribution Channel Partners• Brochures, Website, Email• Advertising & Promotions• Physical Evidence• Employees• Processes
INTEGRATED MARKETING• Direct Sales Force• Distribution Channel Partners• Brochures, Website, Email• Advertising & Promotions• Physical Evidence• Employees• Processes
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Value ExpectationsValue Expectations
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Consumer Markets• Monetary Benefits• Look/Feel Better Aesthetics/ Psychological Benefits• Social Benefits• Convenience Place/Time• Quick Service
B2B Markets• Economic Benefits Cost of Procurement/ Transport/ Storage/ Ownership/ Usage/ Maintenance/ Modification/ Disposal
• Help in Maintenance/ Service/ Repair/ Upgradation/ Performance Improvement
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Value Hierarchy – Product LevelsValue Hierarchy – Product LevelsCORE BENEFITFundemental Benefit customer isreally buying
BASIC PRODUCTBuilt around Core Benefit
EXPECTED PRODUCTAttribute & conditions buyersNormally expect
AUGMENTED PRODUCTExceeds Customer Expectations
POTENTIAL PRODUCT All possible augmentations &Transformations product mightUndergo in future Customer Delight !
Framework for B2B MarketingFramework for B2B Marketing
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Key Differences:B2B vs Consumer Marketing Key Differences:B2B vs Consumer Marketing
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MARKETINGCUSTOMER MANUFACTURING
External Environment Internal Environment
ExternalLinkage
InternalLinkage
Derived DemandComplex Buying Process
Concentrated Customer Base
Emphasis on Technology High Level of Customisation
Made to Order
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Nature of B2B DemandNature of B2B Demand
• Derived Derived Fluctuating Fluctuating– Necessity to Necessity to monitor changesmonitor changes in in Demand Demand
PatternsPatterns of of Customers’ CustomersCustomers’ Customers
• Stimulation of Stimulation of Primary DemandPrimary Demand & & popularising popularising new applicationsnew applications
• Price Sensitivity/Demand Elasticity in B2BPrice Sensitivity/Demand Elasticity in B2B– Depends on B2CDepends on B2C
• OpportunitiesOpportunities of of Global MarketsGlobal Markets & & ImpactImpact of of Global CompetitionGlobal Competition : much more in B2B : much more in B2B than B2Cthan B2C
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Complexity of Buying ProcessComplexity of Buying Process
• Strategic Importance of itemStrategic Importance of item– Senior Management InvolvementSenior Management Involvement
• Cost : High, Medium, LowCost : High, Medium, Low– Different Buying ProcessesDifferent Buying Processes– Relative Importance of financial ApprovalsRelative Importance of financial Approvals
• Complexity of need servicedComplexity of need serviced– Level of Customisation & Service requiredLevel of Customisation & Service required– Multi-functional ScrutinyMulti-functional Scrutiny
• Complexity of Buying OrganisationComplexity of Buying Organisation– Centralised vs Decentralised AuthorityCentralised vs Decentralised Authority
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Concentrated Customer BaseConcentrated Customer Base
• Direct sellingDirect selling– More EconomicalMore Economical– Customer ExpectationCustomer Expectation
• Buyer Bargaining Power Buyer Bargaining Power – Competitor Influence on BuyerCompetitor Influence on Buyer– Management of Short Term setbacksManagement of Short Term setbacks
• Close RelationshipsClose Relationships– Monitor happenings @ Customer endMonitor happenings @ Customer end– Expectations of C, Q, D, S, R1 & R2Expectations of C, Q, D, S, R1 & R2
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Emphasis on TechnologyEmphasis on Technology
• Constant pressure to improve/ upgrade/ Constant pressure to improve/ upgrade/ innovateinnovate
• Collaborative Design & DevelopmentCollaborative Design & Development
• Product Performance OrientationProduct Performance Orientation– Performance to Price RatioPerformance to Price Ratio
• Expected to provide SolutionExpected to provide Solution– Understanding of Customer Business Understanding of Customer Business
• Selling : Technical / Multi-Functional SkillsSelling : Technical / Multi-Functional Skills
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High Level of CustomisationHigh Level of Customisation
• Inflexible technical SpecificationsInflexible technical Specifications
• Sometimes necessary for manufacturer Sometimes necessary for manufacturer to redesign / re-layout operations to redesign / re-layout operations facilitiesfacilities
• Even standard products: Installation, Even standard products: Installation, Configuration, Service & Support may Configuration, Service & Support may have to be highly customisedhave to be highly customised
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Differences in Emphasis : B2B vs B2CDifferences in Emphasis : B2B vs B2C
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Nature of Products Nature of Products B2B Marketing B2B Marketing
• Manufactured Materials & PartsManufactured Materials & Parts– Custom-made partsCustom-made parts
• Personal selling & CRMPersonal selling & CRM• Design & Supply Chain capabilitiesDesign & Supply Chain capabilities
– Standardised PartsStandardised Parts• Contractual Purchase, Large quantitiesContractual Purchase, Large quantities• Price, Delivery, Support servicePrice, Delivery, Support service• Resellers usedResellers used
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Nature of Products Nature of Products B2B Marketing B2B Marketing (Contd.)(Contd.)
• InstallationsInstallations– Product, Technology, Service CapabilitiesProduct, Technology, Service Capabilities– Personal Selling & Account ManagementPersonal Selling & Account Management– Less Costly, More StandardisedLess Costly, More Standardised
• Marketing IntermediariesMarketing Intermediaries
– Costly, more involvedCostly, more involved• Close relationshipsClose relationships• Long negotiationsLong negotiations• Several Executives of buyer organisation involvedSeveral Executives of buyer organisation involved
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Nature of Products Nature of Products B2B Marketing B2B Marketing (Contd.)(Contd.)
• SuppliesSupplies– Large Users: Direct MarketingLarge Users: Direct Marketing– Smaller Users: Marketing IntermediariesSmaller Users: Marketing Intermediaries– Strong eProcurement tendenciesStrong eProcurement tendencies– Less Personal SellingLess Personal Selling– More of Catalogue approachMore of Catalogue approach– Price & Range criticalPrice & Range critical
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Distinctive Capabilities for B2B MarketingDistinctive Capabilities for B2B Marketing
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Supply Chain Management
Mgmt. of
Strategic
Alliances
Mgmt. of
Hybrid Channels
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Goals of PurchasingGoals of Purchasing
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Total Cost of OwnershipTotal Cost of Ownership
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Factors that drive total cost.Factors that drive total cost.
Acquiring and managing costs.Acquiring and managing costs.
Quality, reliability over the life cycle.Quality, reliability over the life cycle.
Value of product to firm/customers.Value of product to firm/customers.
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Procurement DevelopmentProcurement Development
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SourceNegotiate
Manage Info &Logistics
Value Analysis &Complexity mgmt.
StrategicPartnership
Segmenting the BuySegmenting the Buy
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KSFs
Demonstrated Capabilities─ Skilled Personal selling
Cost & RangeEfficient Management of
Info & Logistics
StrategicPartnership
Procurement ProcessesProcurement Processes
• Source ApprovalSource Approval
• Contract (annual) / Non-contractContract (annual) / Non-contract
• Inventory Control SystemsInventory Control Systems
• eProcurementeProcurement
• Reverse Auction – eBiddingReverse Auction – eBidding• Tiered Structure Tiered Structure (Ex. Fig 1.5, p15)(Ex. Fig 1.5, p15)
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Government ProcurementGovernment Procurement
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• Compliance Compliance -- requires government contractors maintainrequires government contractors maintain
affirmative action programs.affirmative action programs.
• Compliance Compliance -- requires government contractors maintainrequires government contractors maintain
affirmative action programs.affirmative action programs.
• Minority-subcontracting Minority-subcontracting -- may require major may require major contractors subcontract a certain percentage of the contractors subcontract a certain percentage of the contract to minority firms.contract to minority firms.
• ReservationReservation - - a percentage of the contract is set asidea percentage of the contract is set aside
for small minority businesses.for small minority businesses.
• ReservationReservation - - a percentage of the contract is set asidea percentage of the contract is set aside
for small minority businesses.for small minority businesses.
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Govt. ContractsGovt. Contracts
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1.1.Fixed-price contractsFixed-price contracts• Price agreed to Price agreed to before contract awardbefore contract award• Payment made at Payment made at conclusion of workconclusion of work• Provides for the greatest Provides for the greatest profit potentialprofit potential• Poses greater Poses greater risksrisks
2.2.Cost-reimbursement contractsCost-reimbursement contracts• Reimbursement of Reimbursement of allowableallowable costs costs• Price = Cost + Profit%Price = Cost + Profit%• Disclosure of Cost StructureDisclosure of Cost Structure
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Govt. ProcurementGovt. Procurement
• AgenciesAgencies– Defence BodiesDefence Bodies– DGS&DDGS&D– PSUsPSUs– CommitteesCommittees
• ProcessProcess– TenderingTendering– Approved Supply sourcesApproved Supply sources– NegotiationNegotiation
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Institutional ProcurementInstitutional Procurement
• Schools, health care organizations, non-Schools, health care organizations, non-profit agenciesprofit agencies
• Similar to government buyersSimilar to government buyers– PoliticalPolitical considerations and considerations and lawslaws
• Similar to commercial buyersSimilar to commercial buyers– Often managed like corporationsOften managed like corporations– Broad range of purchase requirementsBroad range of purchase requirements
• Group purchasing quite commonGroup purchasing quite common
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