the handbook reference for btob marketing” philippe ... · marketing, after several years in the...

BU

SIN

ESS

TO

BU

SIN

ESS

MA

RK

ETI

NG

PH

ILIP

PE

MA

LA

VA

LC

HR

IST

OP

HE

BÉ

NA

RO

YA

ISBN : 978-2-8041-8267-0

www.deboeck.com

The Handbook Reference for BtoB Marketing”

“Business to Business Marketing” is the reference hand-book for years in the French speaking countries. It encom-passes the diverse BtoB contexts and combines the mostrecent academic research to the best business practices.Hence it is an operational guide to better adapt the marke-ting techniques and tools to professional targets. Writtenby experts, Business to Business Marketing provides all thesteps of the Marketing Approach in an exhaustive and ope-rational way:• The “surveys marketing” (market watch, innovation ma-nagement, segmentation)• The “strategy marketing” (positioning, marketing plan andstrategic matrices)• The “operational marketing” dealing with the elaborationof the offering (innovative product/service, pricing, salesmanagement),and its valorization (communication, lob-bying, networking).Moreover this book is enhancing the increasing role playedby the final user in the BtoB value chain. Beside the directcustomer organization, three other target types are to betaken into account:

• The employees of the customer organization – B to B toEmployee (BtoBtoE)• The consumers of the customer organization – B to B toConsumer (BtoBtoC)• The users of the customer organization (energy, transpor-tation utilities, administration…) – B to Administration toUser (BtoAtoU).

In the business context, customers and diverse stakehol-ders as well might be targeted, especially in project mar-keting environment, and complex selling processes, bothin terms of relational and transactional activities. Additio-nally, the recent trends in e-communication are developed,including the use of Internet and Social Medias.

Pedagogically oriented, the book is user-friendly, based onnumerous examples and business cases, from different sec-tors and companies (IT, telecom, building industry, aero-nautics, catering, car equipment, consultancy, etc.). Itpresents a lot of visual illustrations. Each chapter encom-passes questions and a dedicated business case, deliveringan efficient and attractive handbook.

Key features

e The book is pedagogically oriented. It is basedon numerous examples and business cases

r It is the reference handbook for years in the French speaking countries

t It presents a lot of visual illustrations

u Examples are from different sectors andcompanies (IT, telecom, building industry,aeronautics, catering, car equipment, consultancy...)

i Each chapter encompasses questions and a dedicated business case

“

Target: students in Management Schools and Universities, Engineering Schools,Managers in Industrial Product and Services Companies.Programmes: BtoB marketing, Industrial Marketing, Project Marketing, Business Marketing, BtoB Communication, Purchasing Behaviour, Segmentation/Positioning, Surveys.Levels: Executive MBA, MBA, Master 2 in marketing/communication/Sale ofproducts and services BtoB, 2nd and 3rd year of Schools and Universities,masters, academic and executive programmes.

BTOBMAR

P H I L I P P E M A L AVA L graduated from Toulouse Business School, Doctor in management and habilitatedto supervise research, is Professor of marketing, in charge of several Master Pro-grammes and MBAs or DBAs. He is also teaching in Engineering Schools. Experi-enced from the Industrial field, he founded and manages Business Conseil.Specialised in BtoB marketing, he is the author or co-author of several books fromStrategy and Management of Industrial brands (published in Usa), BtoB brandsand Aerospace Marketing Management with Christophe Bénaroya (published inUsa, Italy, China). He is also the author of Pentacom with Jean-Marc Décaudin.

C H R I S T O P H E B É N A R O YA graduated from Toulouse Business School, Doctor in Management is Professor ofMarketing, after several years in the corporate field. He is in charge of the MarketingManagement and Communication Master, and the B2B Programme. Consultant forseveral industrial companies, he is notably the co-author with Philippe Malaval ofAerospace Marketing Management and BtoB Brands, and the co-author of Sales Effi-ciency in BtoB.

BTOBMAR_Ok_Mise en page 1 01/08/13 10:03 Page1

BTOBMAR-pgLim.indd 1 5/08/13 16:43

Authorized Translation from the French language edition, entitled Marketing Business to Business, 5e édition, 978-2-7440-7648-0 by Philippe Malaval et Christophe Bénaroya, published by Pearson France, Copyright © 2013 Pearson FranceAll rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage retrieval system, without permission from Pearson France.Electronic ENGLISH language edition published by De Boeck, Copyright © 2013

For further information about our catalogue and new titles in your field, visit our website: www.deboeck.com

© De Boeck Supérieur s.a., 2013 1th éditionRue des Minimes 39, B – 1000 BruxellesFor the english translation All rights reserved for all countries. The reproduction, storage or communication, in any form or on any medium, of all or parts of this book is forbidden unless prior written consent of the publisher.

Printed in Belgium

National Library, Paris, August 2013 Royal Belgian Library, Brussels: 2013/0074/203 ISBN 978-2-8041-8267-0


Table of ContentsPreface............................................................................................................................................ XVII

Chapter 1. The.specificities.of.the.Business.to.Business.Marketing....................... 1

1.1 Main.areas.of.business.to.business................................................................................... 2

1.1.1 Raw materials............................................................................................................... 41.1.2 Processed goods............................................................................................................. 41.1.3 Consumables.................................................................................................................. 41.1.4 Ingredients and entering goods.................................................................................... 51.1.5 Spare parts and components........................................................................................ 51.1.6 Machine tools and office automation.......................................................................... 51.1.7 Large equipment............................................................................................................ 61.1.8 Services........................................................................................................................... 61.1.9 Consumer goods for industry........................................................................................ 6

1.2 The.characteristics.of.the.business.to.business.marketing......................................... 6

1.2.1 A limited number of potential consumers................................................................... 61.2.2 A heterogeneous clientele.............................................................................................. 71.2.3 An international clientele............................................................................................. 71.2.4 A group buying process................................................................................................. 81.2.5 The active role of the customer..................................................................................... 81.2.6 A high level of reciprocal involvement between customers and suppliers................. 81.2.7 The creation of value.................................................................................................... 91.2.8 Specialized promotional means.................................................................................... 91.2.9 The “extended” life- cycle of products..........................................................................101.2.10 The development of specialized tools on the Internet................................................10

Communication.tools...........................................................................................10Purchasing.tool...................................................................................................12Sales.tool............................................................................................................12

Chapter 2. Derived.demand.and.buying.center.........................................15

2.1 Sector.and.derived.demand...............................................................................................16

2.1.1 The sector concept........................................................................................................162.1.2 Dependence on derived demand..................................................................................172.1.3 A multilevel strategy with several levels of intervention...........................................18

2.2 Lycra.case,.Invista................................................................................................................19

2.2.1 First target: Manufacturers..........................................................................................202.2.2 Second target: Distributors..........................................................................................202.2.3 Third target: Consumers..............................................................................................21

202475RLR_LIVRE.indb 5 31/07/13 08:13

Business to Business MarketingVI

2.3 The.buying.center................................................................................................................25

2.3.1 Business to business buying behavior.........................................................................252.3.2 The perceived risk criterion..........................................................................................262.3.3 Composition of the buying center................................................................................27

The.decision.makers............................................................................................27The.buyers..........................................................................................................27The.influencers...................................................................................................29The.users............................................................................................................31

Chapter 3. The.Business.to.Business.Purchase..........................................33

3.1 Buying.phases.......................................................................................................................34

3.1.1 Anticipation and recognition of a need......................................................................343.1.2 Defining the characteristics and quantities to be purchased.....................................353.1.3 Investigation and qualification for potential sources................................................363.1.4 Collecting and analyzing proposals............................................................................363.1.5 Choosing suppliers and the ordering process..............................................................363.1.6 Information feedback and performance evaluation...................................................37

3.2 The.different.situations.......................................................................................................38

3.2.1 The straight rebuy........................................................................................................383.2.2 The modified rebuy......................................................................................................393.2.3 New task.......................................................................................................................39

3.3 Main.models..........................................................................................................................40

3.3.1 The Robinson and Faris model....................................................................................413.3.2 The Ozanne and Churchill model...............................................................................413.3.3 The Webster and Wind model.....................................................................................433.3.4 The Sheth model...........................................................................................................433.3.5 The Choffray and Lilien model...................................................................................463.3.6 Recent developments....................................................................................................46

The.inductive.approach.......................................................................................47The.interactive.approach.....................................................................................49

3.4 E-.procurement.and.the.development.of.marketplaces...............................................51

3.4.1 Principles and objectives of the e- procurement...........................................................513.4.2 Marketplaces evolution................................................................................................52

3.5 Purchase.marketing.............................................................................................................53

3.5.1 The different conceptions of purchase marketing......................................................543.5.2 The objectives of purchase marketing.........................................................................553.5.3 Means of action............................................................................................................55

Purchase.marketing.and.the.external.target..........................................................56Purchase.marketing.and.the.in-.house.target.........................................................57

202475RLR_LIVRE.indb 6 31/07/13 08:13

Table of Contents VII

Chapter 4. Project.Marketing...........................................................63

4.1 The.specific.nature.of.project.marketing........................................................................64

4.1.1 High financial stakes...................................................................................................644.1.2 A generally “one- off” project........................................................................................664.1.3 Generally predefined buying procedures.....................................................................664.1.4 A generally discontinuous supplier- customer relationship........................................67

4.2 Building.demand..................................................................................................................68

4.2.1 Identifying the customer’s latent demand..................................................................684.2.2 Helping to formulate dissatisfaction...........................................................................694.2.3 Developing a solution...................................................................................................694.2.4 Drafting a solution.......................................................................................................71

4.3 Customer.intimacy...............................................................................................................71

4.3.1 The depth of the interaction........................................................................................744.3.2 The extent of the interaction.......................................................................................75

4.4 Influencing.specifications...................................................................................................76

4.4.1 Intervening upstream of the deal................................................................................774.4.2 Intervening in the deal.................................................................................................78

4.5 Marketing.objectives............................................................................................................81

4.5.1 Be informed..................................................................................................................814.5.2 Intervening as far upstream as possible.....................................................................824.5.3 Understanding how the local authorities function.....................................................824.5.4 Optimizing the company’s participation in the consultation underway..................84

Chapter 5. Scanning.and.innovation.management......................................91

5.1 Scanning:.an.active.listening.............................................................................................92

5.1.1 Different types of scanning..........................................................................................935.1.2 Setting up scanning......................................................................................................95

5.2 Information.system.sources...............................................................................................97

5.2.1 The information system...............................................................................................975.2.2 The three main approaches.........................................................................................98

In-.house.information...........................................................................................98Desk.research......................................................................................................99Field.research......................................................................................................99

5.2.3 Information sources...................................................................................................100Open.sources.....................................................................................................100Closed.sources...................................................................................................100Other.information.collection.methods.methods...................................................101Other.information.gathering.methods.................................................................103

5.2.4 Information protection...............................................................................................103

5.3 Origine.of.new.products...................................................................................................113

5.3.1 In- house innovations: the “push” strategy................................................................1075.3.2 Innovations from outside: the “pull” strategy..........................................................108

202475RLR_LIVRE.indb 7 31/07/13 08:13

Business to Business MarketingVIII

5.4 Implementation.of.innovation........................................................................................109

5.4.1 Product development phases......................................................................................1095.4.2 The conditions for successful development...............................................................114

The.development.process...................................................................................114At.the.launch....................................................................................................115

Chapter 6. Qualitative.and.quantitative.studies.......................................121

6.1 The.main.role.of.studies...................................................................................................122

6.1.1 The two types of qualitative and quantitative studies.............................................122

6.1.2 The common points of Business to Business and Business to Consumer studies...................................................................................................124

Using.in-.house.intelligence................................................................................124Using.document.-.based.research.before.going.into.the.field................................124A.qualitative.phase.to.prepare.the.quantitative.phase.........................................124Ad.hoc.and.permanent.studies...........................................................................124

6.1.3 The specificities of B to B studies..............................................................................126Data.generally.unavailable.................................................................................126Lack.of.financial.incentive.................................................................................126A.shared.center.of.interest.................................................................................126Providing.a.summary........................................................................................127Using.reccomendations......................................................................................127An.invitation.to.meet.a.recognized.expert..........................................................127

6.1.4 Other objectives of B to B studies..............................................................................127Using.studies.to.attract.customers......................................................................127Contact.studies..................................................................................................127Studies.to.strengthen.sales.arguments................................................................128

Technical based studies................................................................................128Sales based studies......................................................................................128Financial based studies................................................................................128

“Tailor.made”.studies........................................................................................128

6.2 Qualitative.studies..............................................................................................................129

6.2.1 The Face to face interview.........................................................................................129

6.2.2 The telephone interview.............................................................................................129

6.2.3 The group interview or focus group..........................................................................131

6.2.4 The Delphi Method.....................................................................................................132

6.3 Quantitative.studies...........................................................................................................133

6.3.1 Directive documents for quantitative studies...........................................................134Studies.using.the.postal.system.or.internet.........................................................134Internet.............................................................................................................134Directive.study.by.telephone..............................................................................135

6.3.2 Professional user panels............................................................................................135

6.3.3 The audience panel....................................................................................................139

6.3.4 The distributor panel.................................................................................................139Demand............................................................................................................140

202475RLR_LIVRE.indb 8 31/07/13 08:13

Table of Contents IX

Chapter 7. Market.segmentation......................................................145

7.1 Segmentation.objectives...................................................................................................146

7.2 Main.segmentation.methods...........................................................................................147

7.2.1 Segmentation by type of customer and type of product...........................................1477.2.2 Traditional top- down segmentation..........................................................................148

Bottom-.up.segmentation....................................................................................1497.2.3 Segmentation: the data entry tool for sales strategy................................................150

7.3 Segmentation.methods.used.in.business.to.business................................................157

7.3.1 Wind and Cardozo segmentation .............................................................................1577.3.2 Bonoma and Shapiro segmentation: the “nested” approach...................................158

Chapter 8. Positioning.and.strategy.in.Business.to.Business..........................167

8.1 Product/service.positioning.............................................................................................168

8.1.1 Positioning objectives.................................................................................................169The.two.dimensions.of.positioning.....................................................................169

8.1.2 Setting up positioning................................................................................................170Choosing.positioning.........................................................................................171Main.differentiation.strategies............................................................................172Operational.positioning.....................................................................................172Positioning.errors..............................................................................................173The.strategies.for.modifying.positioning.............................................................173

8.2 Strategic.positioning.of.the.company............................................................................174

8.2.1 The strategic dimension of company positioning.....................................................174A.need.for.structure...........................................................................................174The.“Three.axis.method”...................................................................................175

8.2.2 The perceptual dimension of the firm’s positioning.................................................177How.to.identify.perceptual.positioning?.............................................................178

8.3 The.strategic.approach......................................................................................................178

8.3.1 The three phases of the approach..............................................................................1788.3.2 Strategy and marketing.............................................................................................179

Three.types.of.strategies....................................................................................1798.3.3 The strategic tools of recurring B to B markets........................................................181

The.McKinsey.Model.........................................................................................181The.Little.model................................................................................................182The.assets/advantages.matrix............................................................................183

8.3.4 The strategic tools of B to B project marketing.........................................................185

Chapter 9. Marketing.and.Sales.action.plan...........................................189

9.1 The.marketing.plan............................................................................................................190

9.1.1 Part one: the analysis................................................................................................191First.type.of.plan:.external/internal.analysis.......................................................191Second.type.of.plan:.by.theme...........................................................................193

202475RLR_LIVRE.indb 9 31/07/13 08:13

Business to Business MarketingX

9.1.2 The objectives..............................................................................................................194Global.objectives...............................................................................................194Intermediate.objectives......................................................................................195

9.1.3 The resources or action plan......................................................................................196Global.budgeting...............................................................................................196Presentation.of.the.action.plan...........................................................................197

9.2 The.sales.action.plan.........................................................................................................199

9.2.1 The objectives of the sales action plan......................................................................199Establishing.“Product.priorities”.for.the.period...................................................200Establishing.“Customer.priorities”.for.the.period................................................200Transmitting.essential.information.to.the.sales.force...........................................200Harmonizing.sales.management.methods...........................................................200Better.preserving.confidentiality.of.the.plan.......................................................201

9.2.2 How the sales action plan is carried out...................................................................201

9.2.3 An example of the contents of a sales action plan...................................................201

Chapter 10. Brand.Strategy.............................................................205

10.1 Foundations.of.the.industrial.brand..............................................................................206

10.1.1 Brand mechanisms.....................................................................................................207Awareness,.a.quantitative.tool.for.evaluating.the.brand......................................207Image,.a.qualitative.tool.for.evaluating.the.brand...............................................209Loyalty:.main.objective.of.a.brand.strategy........................................................210

10.1.2 Brand functions for the supplier...............................................................................211Fundamental.objectives.....................................................................................212Intermediary.objectives.....................................................................................212Final.objectives.................................................................................................213

10.1.3 Brand functions for the customer..............................................................................213Facilitating.technical.performance......................................................................215Facilitating.commercial.performance..................................................................216Facilitating.the.operating.performance.of.the.customer.company........................218

10.2 Special.characteristics.of.the.industrial.brand............................................................219

10.2.1 Purchaseability levels of the industrial brand..........................................................219

10.2.2 The visibility strategy.................................................................................................220

10.2.3 Industrial brand classification..................................................................................224As.a.function.of.the.use.of.goods.......................................................................224As.a.function.of.the.international.brand.policy...................................................224As.a.function.of.the.origins.of.brands.................................................................226As.a.function.of.the.positioning.of.industrial.brands...........................................228

10.3 The.visual.identity.code,.logo.and.baseline................................................................231

10.3.1 The visual identity and the logo................................................................................231

10.3.2 Baselines.....................................................................................................................234

10.3.3 Jingles.........................................................................................................................235

10.3.4 The visual identity code.............................................................................................235

202475RLR_LIVRE.indb 10 31/07/13 08:13

Table of Contents XI

Chapter 11. Product.Management......................................................239

11.1 The.learning.curve.............................................................................................................240

11.2 The.product.life.cycle........................................................................................................242

11.2.1 Life cycle phases.........................................................................................................24211.2.2 Applying the life cycle concept...................................................................................243

Examples.of.life.cycle.graphs.............................................................................24511.2.3 The characteristics of each life cycle phase...............................................................246

11.3 Managing.the.product.portfolio......................................................................................247

11.3.1 The BCG model...........................................................................................................248Techniques.for.use.and.limits.of.the.model........................................................250

11.3.2 Marketing and Management of Product Portfolios..................................................251

11.4 Managing.the.product.range...........................................................................................255

11.4.1 Product range characteristics.....................................................................................25511.4.2 Strategies for managing product ranges...................................................................257

Chapter 12. Management.of.Services...................................................265

12.1 Marketing.of.services.applied.to.business.to.business.............................................266

12.1.1 Immateriality and Intangibility................................................................................26612.1.2 Perishability and stock- impossibility.........................................................................26712.1.3 Indivisibility................................................................................................................26812.1.4 Variability...................................................................................................................26812.1.5 Customer perception of quality..................................................................................270

12.2 The.business.service.market...........................................................................................274

12.2.1 Services required by law............................................................................................27512.2.2 More general services linked to management and strategy.....................................27512.2.3 Services linked to the production process..................................................................27812.2.4 Sales related services..................................................................................................27812.2.5 Global services related to general operations...........................................................279

Chapter 13. Pricing.Policy.............................................................283

13.1 Factors.involved.in.determining.pricing......................................................................284

13.1.1 External constraints...................................................................................................285Customer.requirements.....................................................................................285Intensity.of.competition.....................................................................................286The.market.context...........................................................................................287The.regulatory.framework.................................................................................288

13.1.2 Internal constraints....................................................................................................288Cost.structure....................................................................................................288Managing.the.product.portfolio..........................................................................289Managing.different.types.of.customers...............................................................289Making.sure.that.the.distribution.channel.is.satisfied.........................................289

202475RLR_LIVRE.indb 11 31/07/13 08:13

Business to Business MarketingXII

13.2 Pricing.approaches.............................................................................................................290

13.2.1 Cost- based pricing.......................................................................................................290

13.2.2 Value- based pricing....................................................................................................292

13.2.3 Bidding........................................................................................................................295The.price.factor.in.the.call.for.tender.................................................................295A.selective.participation.in.calls.for.tender.........................................................295

13.3 Pricing.strategies.................................................................................................................296

13.3.1 The skimming strategy...............................................................................................296

13.3.2 The penetration strategy............................................................................................297

13.3.3 Flexibility strategies...................................................................................................298

13.3.4 Yield management.....................................................................................................298

13.3.5 The development of the “gray market”.....................................................................300

13.4 Price-.adjustement.policy..................................................................................................300

13.4.1 Adjusting the conditions of sale................................................................................300Quantity.discounts............................................................................................300Rebates.............................................................................................................301Promotional.discounts.......................................................................................301Cash.discount....................................................................................................301

13.4.2 Leasing........................................................................................................................302

Chapter 14. The.distribution.policy....................................................309

14.1 Logistics................................................................................................................................310

14.2 Choosing.a.distribution.system.......................................................................................313

14.2.1 Choosing external solutions.......................................................................................314

14.2.2 Choosing multi- brand or exclusive distributors........................................................315

14.2.3 Different forms of indirect distribution.....................................................................316Industrial.trade..................................................................................................316Exclusive.or.mono-.brand.dealers.......................................................................317The.distribution.partnership..............................................................................317Distribution.via.sales.representatives.................................................................317Association.with.other.exporters........................................................................318Other.forms.of.distribution................................................................................318Internet.sales.....................................................................................................318

14.2.4 Selecting a distribution channel................................................................................320

14.3 Managing.an.indirect.network........................................................................................325

14.3.1 Setting up the network...............................................................................................325Criteria.for.choosing.partners.............................................................................325

14.3.2 Running the network.................................................................................................326Operating.rules..................................................................................................326Motivating.distributors......................................................................................327Supporting.distributors......................................................................................327

14.3.3 Controlling distributors’ performance.......................................................................328Changes.in.the.network.....................................................................................329

202475RLR_LIVRE.indb 12 31/07/13 08:13

Table of Contents XIII

Chapter 15. Managing.the.sales.team..................................................339

15.1 Sales.force.responsibilities...............................................................................................340

15.1.1 Communications.........................................................................................................340The.importance.of.a.trust-.based.relationship......................................................340Following.up.personal.relationships...................................................................341

15.1.2 Pre- sales: canvassing..................................................................................................341

15.1.3 Selling: presentation and negotiation.......................................................................343

15.1.4 After sales: the follow up...........................................................................................345Following.up.the.customer................................................................................345Information.feedback.........................................................................................346

15.1.5 Recent developments..................................................................................................347The.sales.team.and.the.internet.........................................................................347A.sales.aid........................................................................................................348An.information.tool...........................................................................................348A.sales.force.management.aid............................................................................349

15.2 Sales.force.organizational.methods...............................................................................349

15.2.1 The methods for evaluating the need for a sales force...........................................................................................................349

The.financial.approach......................................................................................349The.workload.approach.....................................................................................350

15.2.2 Methods of organization............................................................................................350Product.based.organization................................................................................351Organization.by.type.of.customer......................................................................351Key.account.based.organization.........................................................................352Matrix.organization...........................................................................................352

15.2.3 Profiles and jobs.........................................................................................................352The.horizontal.“support/sales.axis”...................................................................352The.vertical.“job/function.axis”.........................................................................353

15.3 Managing.the.sales.team..................................................................................................353

15.3.1 Defining objectives......................................................................................................354

15.3.2 The manager’s role....................................................................................................354Recruiting.sales.representatives.........................................................................355Supervising.the.team.........................................................................................355

15.3.3 Remunerating sales representatives..........................................................................356The.fixed.remuneration.system..........................................................................356Variable.remuneration.......................................................................................357

A system which is often unfair.....................................................................357Commissions and bonuses............................................................................358

Fringe.benefits..................................................................................................358The car ......................................................................................................358The mobile- phone and the pda .................................................................359

15.3.4 Training and career management for sales representatives....................................359Training............................................................................................................359Career.management...........................................................................................359Various.types.of.sale..........................................................................................360

202475RLR_LIVRE.indb 13 31/07/13 08:13

Business to Business MarketingXIV

Types.of.organization........................................................................................360Complexity of products and services..............................................................360The type of sale...........................................................................................360The strategic aspect of the purchase..............................................................361Individual or team organization...................................................................361

The.aims.sought:.sales-.influence.or.sales-.organization.......................................361Sales—influence..........................................................................................361Sales—organization.....................................................................................361

15.4 Influence.strategies............................................................................................................366

15.4.1 Influence strategies.....................................................................................................36615.4.2 The influence of standardizing bodies......................................................................369

Chapter 16. Business.to.business.Communications....................................375

16.1 The.objectives.and.different.types.of.communications............................................376

16.2 The.communications.plan................................................................................................380

16.2.1 The aims of the communications plan......................................................................38016.2.2 Defining the communications plans.........................................................................381

The.different.targets..........................................................................................38216.2.3 Determining the budget.............................................................................................38316.2.4 Setting up the communications plan........................................................................385

The.copy.strategy..............................................................................................386Media.planning.................................................................................................388

16.3 Corporate.or.institutional.communications.................................................................389

16.3.1 The goals of corporate communications...................................................................39016.3.2 The two targets of corporate communications: the public authorities

and public opinion.....................................................................................................391

16.4 Other.types.of.communications......................................................................................392

16.4.1 Collective communications.........................................................................................39216.4.2 Brand/product communications................................................................................39216.4.3 In- house communications..........................................................................................393

Chapter 17. The.media.in.Business.to.Business........................................399

17.1 Trade.shows.........................................................................................................................400

17.1.1 The specific characteristics of trade shows...............................................................40017.1.2 The value of participating in shows..........................................................................401

As.a.tool.for.corporate.communications.policy:..................................................403Mediatization.of.the.product.launch:..................................................................403Negotiation:......................................................................................................403Part.of.the.sales.action.plan:..............................................................................403

17.1.3 The different stages of participating in a show........................................................403The.pre.show....................................................................................................404During.the.show...............................................................................................406After.the.show..................................................................................................406

202475RLR_LIVRE.indb 14 31/07/13 08:13

Table of Contents XV

17.2 Trade.journals.....................................................................................................................407

17.2.1 Main characteristics...................................................................................................407Horizontal.publications.....................................................................................407Vertical.publications..........................................................................................408General.public.press..........................................................................................409

17.2.2 Resources and tools....................................................................................................411The.traditional.insertion....................................................................................411A.full.page.insert...............................................................................................412Editorial-.style.advertising..................................................................................412Technical.articles..............................................................................................412Professional.directories......................................................................................412Company.news.magazine..................................................................................413Press.relations...................................................................................................414

17.3 Sales.documents.................................................................................................................414

17.3.1 The company brochure...............................................................................................41417.3.2 Catalogues: “second degree” marketing....................................................................41417.3.3 Technical documents..................................................................................................416

17.4 Other.media.tools:.The.Internet,.television.and.the.radio.......................................418

17.4.1 The Internet................................................................................................................418Presentation.or.functional.websites....................................................................421Information.websites.........................................................................................421

17.4.2 Television....................................................................................................................42217.4.3 The radio....................................................................................................................42317.4.4 Billboards....................................................................................................................424

Chapter 18. e-.communication.in.BtoB:.a.communication.strategy.that.sells............429

18.1 “New”.targets.......................................................................................................................430

18.2 The.global.e-.communication.strategy.in.BtoB............................................................431

18.2.1 Websites and blogs.....................................................................................................43218.2.2 Evangelization or the main role of the White Paper................................................43518.2.3 Sharing experience.....................................................................................................43718.2.4 Lead Generation.........................................................................................................44018.2.5 Valorizing the customer ego......................................................................................44218.2.6 Mobile based communication strategies...................................................................44318.2.7 Regular analysis of the ROI (Return on Information).............................................444

Scanning.or.Monitoring.....................................................................................444Choosing.KPI.(Key.Performance.Indicators).......................................................444Other.Performance.Marketing.Actions.based.on.the.Net......................................444

Chapter 19. Sustainable.development,.ethics.and.the.environment....................449

19.1 Sustainable.development:.answering.new.requirements.........................................450

19.1.1 The firm, a major actor for change...........................................................................45019.1.2 Sustainable development: reconciling idealism and economic reality....................450

202475RLR_LIVRE.indb 15 31/07/13 08:13

Business to Business MarketingXVI

19.2 Ethics.and.its.strategic.implications..............................................................................453

19.2.1 Ethics relative to employees.......................................................................................45319.2.2 Ethics relative to suppliers.........................................................................................45419.2.3 Ethics relative to customers.......................................................................................45519.2.4 Ethics relative to shareholders...................................................................................456

19.3 The.Environment:.“green.marketing”...........................................................................456

19.3.1 The different applications of environmental marketing..........................................45619.3.2 The different targets of green marketing..................................................................460

The.industrial.customer.....................................................................................460Political.decision.makers...................................................................................465

Chapter 20. Lobbying,.Public.relations.and.Press.relations.............................469

20.1 Lobbying...............................................................................................................................470

20.1.1 “Virtuous” and “Shameful” lobbying........................................................................471Virtuous.lobbying.or.in.the.General.Interest.......................................................471“Shameful”.lobbying.........................................................................................471

20.1.2 The Objectives of a Lobbying Campaign...................................................................472Business.Lobbying.Techniques..........................................................................473Direct.techniques..............................................................................................475Indirect.techniques............................................................................................475

20.1.3 Dual and Complementary Targets: Experts and Elected Representatives..............477Experts.............................................................................................................477Elected.representatives......................................................................................477

20.1.4 Risks and Limits of Lobbying Actions.......................................................................479The.limitations.of.scientific.knowledge..............................................................479Lobbying.legitimacy.is.sometimes.subjective......................................................479A.risk.of.mixing.public.and.private.affairs..........................................................480Lobbying.for.reconstruction.after.a.military.conflict............................................480The.need.for.lobbying.ethics..............................................................................480

20.2 Public.Relations..................................................................................................................486

20.2.1 Defining Public relations and their objectives..........................................................48620.2.2 Two types of public relations targets........................................................................488

Public.relations.and.direct.targets......................................................................489Public.relations.and.intermediary.targets...........................................................490

Opinion leaders .........................................................................................49120.2.3 Public relations techniques........................................................................................49120.2.4 Evaluating the effectiveness of public relations.......................................................492

20.3 Press.relations.....................................................................................................................492

Index.................................................................................................................................................497

202475RLR_LIVRE.indb 16 31/07/13 08:13

PrefaceSince the first edition of Business to Business Marketing, marketing research in the BtoB context has been improved and refined. In the business field, a lot of changes have occurred giving birth to new “best practices” dedicated to different sectors. Furthermore, new trends have taken into account the end user to better define the prescription chain (BtoBtoC, BtoBtoE, BtoAtoU), and the selection of effective tools.

Markets have changedThe environment has changed, and especially inter- enterprises markets via four main trends:

z Globalization has extended to different activity sectors. Whatever the size, it is impossible for a company to only consider a country or a continent. It must be able to import and export worldwide in order to stay competitive.

z Markets’ liberalization regularly makes progress in different areas, independently from political options. Public sector’s actors have progressively realized that they need to open their capital in order to finance research and development invest-ments. In addition, the need for transnational agreements has rapidly spread to face competitive multinationals. For all these reasons, protected sectors have been liberalized, including air and train transport as well as energy and services industries.

z The generalization of the effects brought with Internet and information technologies has on the one hand reduced the gap between companies from developing countries and companies from developed countries. On the other hand, buying processes, and particularly those in the professional arena have been shortened. This has brought a buying procedures’ dematerialization, especially in public markets.

z The more and more general adoption of the client approach by companies operat-ing in technological and sometimes state sectors has progressively enlarged the application of concepts and tools of business to business marketing.

Because of time acceleration, all sectors are today facing worldwide competition. In order to preserve profit margins, companies are forced to reduce their operating costs both in marketing and commercial structures.

Marketing has adaptedDue to these changes, marketing must also evolve and adopt new ways of working. Closer to the operational level, it must first shorten cycles, from conception to market access. The current customer loyalty objective becomes the main purpose, more than the search for new customers. As such, the aim is to optimize expenditures, whether it be surveys or communication actions, by regularly and carefully controlling the efficiency of the

202475RLR_LIVRE.indb 17 31/07/13 08:13

Business to Business MarketingXVIII

money spent. Finally, it is important to accelerate decision making, often by reducing the number of hierarchy levels, and by making functional and operational people work on customer- oriented transversal projects. Progressively, the customer dimension has had to enter into the different departments, from human resources management to production, to research and development.

The fifth edition Previous editions of Business to Business Marketing proposed a marketing resource, at the same time complete and pragmatic, dedicated to companies selling products or services to other companies or public / association organisations. This is why this new edition is based on the same principles: giving an accessible tool, illustrated with examples from many sectors: office equipment, IT services, telecommunications, building trade, automotive, aeronautics, packaging, and professional services, from consulting to collective catering.

The chosen outline allows the reader to directly access the different sections and chapters: the book doesn’t need to be read in a linear way. Without being exhaustive on research axes, the main recent works are presented, in a synthetic way, throughout the themes. Thus, the book presents classical chapters concerning mix variables such as market sur-veys, segmentation, positioning, marketing plan, product and services management, pricing policy, place policy, sales force management, and business to business communication.

Nevertheless, many chapters present some particular subjects such as B to B brand strategies, ethics, environment and sustainable development, lobbying techniques and business or project marketing.

Internet impact concerns different aspects of marketing. That is why this tool is definitely integrated, not only in a single chapter, but throughout the book, from its role in market surveys to its use in communication and sales, especially through marketplaces and e- procurement.

Innovations of this edition A chapter entirely dedicated to e- communication (digital marketing)

Digital marketing speeds up the business transactions. A dedicated chapter to this enables the reader to understand how traditional communication techniques must be adapted to the web environment (i.e. experience sharing, stakeholder marketing, professional communities).

By integrating the latest practices and research results, this book offers useful and practi-cal perspectives for brand management:

z Core BtoB: the target is the client organization and it is impossible to precisely identify the individual beneficiaries (prescribers and users).

z BtoBtoC: the brand addresses the client consumers of the final products manu-factured by the client organization. This approach is characterized by the strong prescription role of the client company’s marketing department and can be part of a vertical cobranding.

202475RLR_LIVRE.indb 18 31/07/13 08:13

Preface XIX

z BtoBtoE: the final customers of the brand are the employees of the public or private client company. The goods and services are sold to the company but are meant for the company’s employees’ use. In this approach the Human Resources department can have a prescription role.

z BtoAtoU: The brand does not target a consumer but a user (sometimes called road- user in public transportations). Lobbying techniques are particularly effective in this case.

These approaches by final user can be found both in recurrent BtoB contexts and in one- off projects.

Acknowledgments First of all we would like to thank Diane Pokossy, Carole Rodriguès and Alexandra Vitti, students in the Mastère Marketing Management & Communication of Toulouse Business School for their efficient support.

We are indebted to the faculty members of TBS:

z Jacques Igalens, Isabelle Assassi, Jean- François Verdié and Denis Lacoste;

z Our colleagues of the Marketing & Sales Department;

z Jacques Digout and the Mastère Marketing Management & Communication, and the research lab Marketing Communication & Networks managed by Jean- Marc Décaudin;

z Jacques Tournut and the Aerospace MBA;

z Florence Lévy and the library team;

z Georges Forn and the IT department.

Our gratitude goes as well to:

z Gabriel Szapiro for his input on e- communication;

z our students of the Business to Business Option in Toulouse and Barcelona, and of the International Marketing Management Option in Toulouse;

z our students of the specialized Mastère Marketing Management & Communication located in the other Campuses of TBS, Toulouse, Paris, Barcelona and Casablanca;

z to our “senior” delegates in different programmes and Executive MBAs for their valuable suggestions.

We finally want to warmly thank Dominique De Raedt, Mireille Raskin and the whole team of DeBoeck for their friendly and efficient enthusiasm.

Our overriding debt continues to our parents and families for their support and inspiration.

Thanks to my children Guilhem, Bertrand, Robin and Marion.

Thanks to my wife Christine and my son Alexy.

202475RLR_LIVRE.indb 19 31/07/13 08:13

202475RLR_LIVRE.indb 20 31/07/13 08:13

1

00 Chapter objectives• Understand the nature and the extent of business to business activities.• Identify the essential characteristics of business to business markets.• Replace classical tools of marketing in the business to business context whether

it is about recurrent industrial markets or project marketing.• Learn about the proper tools of the business to business marketing.

The specificities of the Business to Business Marketing

202475RLR_LIVRE.indb 1 31/07/13 08:13

Chapter 10 00 The specificities of the Business to Business Marketing2

The business to business marketing includes all the transactions of goods and services conceived and sold to other organizations and corporate bodies (from the independent worker to the multinational company as well as service providers, public organizations, associations or non- governmental organizations). The economic weight of the business to business sector is therefore considerable and exceeds that of the consumer market sector, even if the latter is more visible.

1.1 MainareasofbusinesstobusinessThe general term “industrial goods” is effective in that it encompasses all those goods that are destined for professionals. Industrial goods, in their widest definition, include goods, products, and services manufactured and sold by companies to other companies: indus-try, organizations, or businesses. Thus suppliers of raw materials, processors, assemblers, original equipment manufacturers, wholesalers, manufacturers of semi- finished products, distributors, and service providers all use industrial goods. One of the major differences with the mass market sector concerns the diversified nature of the clients who buy goods for professional purpose, i.e. for the running of their organization.

However, industrial goods are extremely heterogeneous: wheat, cotton, cement, micro-processors, motors, machine tooling, turbines, and aircraft are all industrial goods. As such they are often classified in two different ways. The first, suggested by Kotler or Saporta divides industrial goods into three major categories:

z Goods entering into the final product, known as entering goods or input goods,

z Production goods entering directly into the manufacturing process, also known as equipment goods,

z Facilitating goods, or industrial goods and services which do not directly enter into the manufacturing process, known as supply goods.

The Business to business environment is indeed not homogeneous. It might be split into three parts according to the very nature of the goods (standardized, customized or unique), of the customer needs and marketing practices (cf. figure 1.1).

− Mass B to B deals with sizeable orders following the example of VSEs, or self- employed people who purchase office supplies and computer related items. It also includes electricians, self- employed craftsmen, specialized SMEs and in- house departments of large companies which by definition constitute a mass- market for low- voltage electric equipment suppliers. The large number of potential clients enables the use of traditional B to C tools such as market research, as well as communication and sales tools (Malaval & Bénaroya, 2009; Anderson and Narus, 2004).

− Recurrent B to B was formerly named “industrial marketing” (Wilson, 1986). This industry organization implies an ongoing supplier- client relationship. The offered products/services are no longer standardized but customized or exclusively designed for a unique account. The automotive industry is a good example: Valeo provides the electric equipment of the Peugeot 308, resulting in a constant infor-mation, products and financial flow between the business partners that lasts for several years. This situation is generally characterized by very few participants (integrator clients), which illustrates the complexity of the influences leading to the

202475RLR_LIVRE.indb 2 31/07/13 08:13

Main areas of business to business 3

final decision. The organizational purchase features combined with the weight of both stakes, risks implied are all of importance in this decisional process.

− Business marketing or project marketing implies a discontinued supplier- client relationship (Bansard et al., 2003; Günter et Bonaccorsi, 1996). Invitations to tender are often categorized by long and complicated buying processes. More people are involved on both parts in the preparation of the deal and in the choice of the appropriate solution as well as in the project follow- up and the after- sales service.

Internet Use

Length of thepurchasing/selling

process

Amount of people involved

Amounts of clients

MassB2B

RecurrentB2B

ProjectB2B

Figure1.1 – Main characteristics of the three types of B2B marketing

The Business to Business concept embodies different approaches that can be described depending on their final target:

− In “regular B to B” the target is the client company though, no specific internal or external beneficiary is known. For instance, fuel, electricity, manufacturing sup-plies, financial and computer related services are not intended to any manager or department in particular but meant to improve the overall activity of the company.

− In “B to B to E” the target is private/public client companies’ employees. This target sales goods and services to companies for the individual and the professional use of its employees. A good example is PPE (Personal Protective Equipment): eyeglasses, gloves, protective shoes, working clothes…), company cars and service companies such as company restaurants or medical, retirement and training benefits.

− In “B to B to C” the target is the consumer of the products manufactured by the client company. This product B to B to C category includes organic flour, elastane fiber, packaging and components such as microprocessors and small automotive spare- parts. These products can be co- branded vertically with the brand of the

202475RLR_LIVRE.indb 3 31/07/13 08:13


supplier and the brand of the integrator (Bengtsson & Servais, 2005). The case study presented hereunder illustrates a different point of view. It stakes that the final buyer will be the one consuming the product which could be either food, clothing items, vehicles or even housing.

− In “B to B to U” the target is designated as a user rather than being called a consumer (sometimes called road user in public services). On the contrary in a “B to B to C” environment, the user is “passive”, as he may not choose the product made available for him. In most countries, the client organization of the “B to B to U” transaction is generally a local body or a government that is ruled by Administration, hence the use of the acronym B to A (and sometimes B to G for “Government”). Then, the acquired product is used by the final user (U). One example of B to A could be: public transportation equipment (tramways, buses, streetcars, high- speed trains, helicopters and planes), as well as public health care related equipment (public hospitals), or education (schools, high schools, colleges), leisure, sports (stadiums, gymnasiums, swimming- pools, sport centers) and cultural (auditoriums, convention halls, …). In that “B to A to U” context, the final user does not buy the product but rents it temporarily in exchange for an access ticket, a usage right or a tax (Malaval and Bénaroya, 2008).

Another classification of B to B activities puts industrial goods in nine categories, depend-ing on their nature, complexity, and level within industry.

1.1.1 Rawmaterials

Raw materials are bought and used in their natural state by initial processing industries, to produce other industrial goods. Raw materials come from farming and forestry industries such as wood, livestock, and fishing; however, minerals and sand come from extraction industries. In general, they are divided into two main groups depending on their origin, either agricultural or industrial.

1.1.2 Processedgoods

Halfway between raw materials and components, processed materials include second-ary raw materials, or those which have undergone simple processing: cement, textiles, leather, glass, flour, cocoa, resins, chemicals, etc. Most of the time, they become a nameless part of the final product. Companies which process materials generally aim to create added value by going beyond the simple processing phase.

1.1.3 Consumables

Consumables, or supplies used for production, cover all those goods that the company needs to function including maintenance supplies such as detergents, paints, etc., operat-ing supplies such as lubricants, solvents, abrasives, sealants, greases and fuels, which are not part of the finished product, and supplies, that facilitate activity: small office supplies, paper for photocopiers or fax, etc.

202475RLR_LIVRE.indb 4 31/07/13 08:13

Main areas of business to business 5

1.1.4 Ingredientsandenteringgoods

Ingredients are manufactured goods that are used in the fabrication of a product. These intermediary goods have added value owing to a more complex manufacturing process and a differentiated marketing strategy. For example, this is the case with polymer techniques such as Pebax developed by Arkema or the artificial sweetener Nutrasweet developed and produced by Monsanto. These products have increasingly sophisticated brand policies (see Chap. 12).

1.1.5 Sparepartsandcomponents

Spare parts also enter into the final product. Assemblies and sub- assemblies, they are easily identifiable: automotive equipment, building materials, etc. Spare parts are indus-trial goods that can be directly assembled in the final product or which require few modifications.

They include all components, from the simplest (mono- functional) to the most complex (multi- functional): screws, bolts, ball bearings, gearboxes, microprocessors, small electric motors, aluminium structures or insulation materials for buildings, optical heads for CD and DVD readers, etc. Thus these can be broken down into primary and sophisticated products.

z Primary components: these include manufactured goods, often composed and generally standardized, entering into the manufactured product. They involve a more complex production process than that of processed materials, in terms of operations and staff involved. They are not directly identifiable in the finished or semi- finished product.

z Sophisticated components: these involve several complex processing operations to manufacture and are used in finished and semi- finished products. They are generally easily identifiable thanks to their brand policies. This is true for Motorola or Intel microprocessors.

This includes both standardized and tailor- made products depending on customer needs.

1.1.6 Machinetoolsandofficeautomation

Machine tools and OA are equipment goods that contribute to the growth of a company's activity by participating in the creation of its products and services. They can be divided into two categories, light and heavy equipment goods:

z Light equipment goods: include all of the small tools, machines and materials that contribute to the growth of the company's activity such as electric motors, hand tools, personal computers, small copiers, office equipment (furniture), etc.

z Heavy equipment goods include equipment, installations and machines used to produce products or services: machine tools, production tools, mobile elevators, cranes, mainframe computers, heavy transport vehicles from buses to aircraft, etc.

202475RLR_LIVRE.indb 5 31/07/13 08:13


1.1.7 Largeequipment

This category includes heavy equipment goods and systems which can not be considered as machine tools or any of the other goods described above. Large equipment, which calls for heavy investment and is subject to bidding, is used mainly by public customers such as governmental bodies, public organizations, and large international companies. This includes the construction of production sites, airports, highways, nuclear power stations, aircraft carriers, etc. This category in particular is important for business marketing (project marketing) which is characterized by the creation of unique products or services tailor- made for each customer and which do not produce a constant sales flow (cf. Chap. 5).

1.1.8 Services

Services are directly or indirectly involved in the manufacture of industrial goods (cf. Chap.15). Corporate catering, legal and financial services, marketing or management consulting, surveillance, engineering, insurance, transport, and leasing, among others, all provide indirect support. Other services such as equipment rental, temp agencies, maintenance, and cleaning services are more directly involved in production.

1.1.9 Consumergoodsforindustry

Certain consumer products lead a double life, aimed not only at the general consumer public but also at companies and diverse business organizations. This is the case of cer-tain materials and office furniture, and corporate catering, products which are normally sold on the consumer market but can be found in an identical form or with their own specific presentation. Foodstuffs can also be sold as ingredients with a high service to other industrials: milk, yoghurt, etc.

1.2 Thecharacteristicsofthebusinesstobusinessmarketing

This sector is characterized by a completely different context from the existing one in the consumer market sector as shown in the following specificities. Note that the other notions of the business to business—derived demand and buying center—will be discussed in the following chapter (cf. Chap 2).

1.2.1 Alimitednumberofpotentialconsumers

The very nature of the products and services sold in the business to business context limit the number of potential customers mainly due to concentration in sectors. If the company is targeting a highly concentrated sector, the small number of competitors means a limited customer base and the obligation to take care of client relationship within the restrictive number of actors evolving in the market (“village”). The market is concentrated: the clients are well informed and organized. The automotive industry,

202475RLR_LIVRE.indb 6 31/07/13 08:13

The characteristics of the business to business marketing 7

aeronautics, but also the energy sector are good examples. Thus a manufacturer of fabrics for car seats has seen the number of European car manufacturers shrink to ten, therefore reinforcing their relationship. In the same way, in aeronautics, taking into account all sizes of aircraft, a company can rarely expect to target more than 10 different customers.

The main advantage of having a limited number of potential or actual customers is that it is possible to keep carefully track of customer requirements and reactions:

z For studies, the sample is in fact unimportant; rather the global target must be studied.

z For the sales team, locating of all the potential partners makes it possible to pre-cisely evaluate the work involved and sales staff performance.

However, this specificity is not a general rule. Certain everyday products are used by 1000's of companies. Small office supplies are a good example for which both studies and communication media will be much closer to what is used for the consumer market.

1.2.2 Aheterogeneousclientele

Business to business is also characterized by the considerable differences possible between two potential customers of the same product.

A SIZE DIFFERENCE a difference of between one to a 1000 is very common in the purchase of supplies such as petroleum products, electrical equipment, but also photo-copiers, if different establishments in the same group are taken into consideration.

MOTIVATION DIFFERENCES one company may be primarily concerned with having guaranteed quick repairs, while the competition might focus more on acquisition costs.

FUNCTIONING MODE DIFFERENCES depending on the nature of their activity, sec-tor origin and structure (Very Small Enterprises, Small and Medium Enterprises, Large Enterprises), public organizations, associations, groupings and industrial or commercial companies proceed in a very different way in their purchase mode of the same good (centralized, localized, biddings, etc.).

However, it is not unusual to have sales negotiations between a supplier and a customer who is as well the supplier of the former for another category of products or services. There may be situations where a supplier sells certain products to his competitor with which he is collaborating on an innovation program and for which he can also be cus-tomer. The last situation can be met in the space sector between satellite integrators.

GEOGRAPHIC DIFFERENCES differences between customers located in the center of activity zones compared to relatively isolated factories, including the international level.

1.2.3 Aninternationalclientele

Consolidation in industrial sectors, and progressive specialization have led companies to enlarge their "hunting grounds". Thus even middle sized companies frequently work with neighboring countries. If one takes the example of a company specialized in supplying thermo- shaped packaging for yogurt, its market is so limited that it has no choice but to work in an international framework (cf. Chap 17).

202475RLR_LIVRE.indb 7 31/07/13 08:13


1.2.4 Agroupbuyingprocess

Industrial companies usually have a buying department. Yet the buying center must be distinguished from the buying department, which is only one of its components. The buying center includes all the different people concerned by the acquisition decision whether they are buyers, users, prescribers or decision makers. It is this complex net of players which calls for sophisticated business to business approaches to sales and communication (cf. Chap. 2).

1.2.5 Theactiveroleofthecustomer

The customer himself participates in the quality of the product or service sold, from studies to consumption of the product:

z Right from the pre- study phase, the customer has important input, communicating his real needs to the supplier. For example, he can provide specifications which will better define his requirements.

z The sales efficiency of the industrial customer contributes to ensuring that the products and materials purchased provide satisfaction. If, for example, a manu-facturer hesitates between two competing packaging machines, it is possible that depending on his sales forecasts he will choose the higher performance machine. But if the product is a commercial failure, the customer company will not be able to check the reliability of the machine at high yields.

z The industrial customer plays an active role in the consumption of the service pro-vided by his industrial supplier, from his capacity to sell the planned for quantities of the product, to his ability to correctly use the material. Ever more sophisticated machines in reality have extremely variable performance depending on the skills of the users. This means that training and technical assistance play a determining role in marketing effectiveness.

1.2.6 Ahighlevelofreciprocalinvolvementbetweencustomersandsuppliers

All business to business transactions between suppliers and customers follow a chaining of successive sale, from top to bottom: the notions of derived demand and channels, discussed in the second chapter, translate this interdependence of different actors along the production chain of the sector. Consequently, in business to business, customer—sup-plier relationships have a higher rate of loyalty than in the consumer market. Several studies establish to ten years the average duration of the customer- supplier relationship (often more for equipment goods and much less for products having less strategic, techni-cal or financial incidence such as certain components). The main reason for this is the technical complexity of projects, which require constant working together: the more time spent with the customer, the better he is known, the greater the chances of gaining his trust, of course if his requirements are satisfied. The change of supplier may be in certain cases extremely detrimental in terms of costs, methods, quality, warranty and safety for the customer company.

202475RLR_LIVRE.indb 8 31/07/13 08:13


In addition, heavy investments and a long term commitment require a strong contractual relationship. Thus in order to meet a car manufacturer's need for just in time delivery, the seat supplier can propose and obtain a change in how the parts are received. For the seats to arrive directly on the line at assembly, according to the principle of zero stock, new access to the building will be needed.

This relationship involves a double commitment from the supplier:

z First, concerning the confidentiality of the customer's projects. Frequently in the automotive industry, a supplier will participate in the elaboration of a future project to replace a recently launched model in the next six years. The issue of confiden-tiality is even more important given that the manufacturer knows that the parts supplier also works with competing manufacturers.

z Second, to guarantee his customer the availability of spare parts, or even specific consumables, for the lifetime of the equipment, in particular in the machine tool sector.

Relationship marketing is the gist of business to business approaches whether these relations are directly linked to the concerned market (suppliers, customers, competitors, partners) or more indirectly (organizations or individuals not linked to the market, which can influence business volumes). The creation of both formal and informal business often networks represents a commercial priority in B to B.

1.2.7 Thecreationofvalue

Whatever is the nature of their activities, organizations which buy goods and services are above all looking for a solution able to resolve the problems of private individuals. Thus, they do not buy a product or a service for what it is but for its benefits. Consequently, the idea according to which the only technical supremacy of the product is enough to allure the customer is often illusory: the latter can choose a radically different offer from a technical point of view (sometimes basic) but enabling him to solve his problem. Thus, it is according to the benefit drawn from it by the customer that value is measured and not according to the acquisition cost estimation. Customer satisfaction depends on the value creation requiring a perfect understanding of his expressed and latent needs. In project marketing, intervention has to happen upstream of customer requirements.

1.2.8 Specializedpromotionalmeans

Given the limited number of potential customers, their requirement in terms of detailed technical information and the possibility of individually contacting them, mass media are hardly used in business to business marketing. However, trade shows are the most common way of meeting customers and presenting the company's know- how. Trade magazines are even more frequently used by all sizes of companies. Overall, they involve smaller budgets: the price of an ad is calculated as a function of a much smaller audience than for consumer magazines.

From a qualitative point of view, the main vector for projecting the image of the supplier is the sales director. Responsible for the first impression made on the potential customer, it is the sales director and his team who will transmit proposals, estimates, and come up with new ideas. They/he will use the different means available, from direct marketing to presentation brochures, catalogues and technical documents.

202475RLR_LIVRE.indb 9 31/07/13 08:13


1.2.9 The“extended”life-cycleofproducts

Due to the efforts of research and development but also by the commercial dynamism of the teams, it frequently happens that products and incorporable systems developed by a company have new application fields. These new application fields extend their commercial exploitation and thus their life- cycle. For instance, it is the case for brand products like Teflon, Corian, Gore- Tex, and Lycra whose first applications started in the 1960s and are still extending today their use in multiple industrial sectors.

1.2.10 ThedevelopmentofspecializedtoolsontheInternet

The rapid growth of the Internet in the consumer goods field (B to C) was followed first by a domestication phase and then by a strong Internet growth in Business to Business. Industrial companies have progressively integrated this tool, first using it as a relatively static online information tool (corporate sites) and then as a genuine sales tool (e- business, customer relationship management) and even management tool (Intranet, tracking).

Communicationtools

For industrial firms, the Internet is a potentially very powerful tool for diffusing informa-tion. In particular, it allows the company to present its expertise and product/service offering to a target at the global level, and at a lower cost than using traditional com-munications tools. The means used include of course a company website, or special-ized sites for its subsidiaries, for certain of its brands, or even for a specific customer profile. Thus Lafarge has created two professional sites, batissor.com and creargos.com, respectively aimed at artisans and entrepreneurs for the former and general contractors and project owners for the latter. The Internet seems to be a particularly interesting tool in project marketing, being useful for the supplier or the supplier grouping, in order to present the competing project. It then becomes, if the project is approved, a relational tool of accompaniment and support during its implementation. As an example, it was the case for the research engine ITER installation project at Cadarache, France, which benefited from, during the preliminary period, a website support presenting among the diffused information, the arguments in favour of this place.

The company can also advertise using advertising banners, ads between two pages, screen savers, Flash animations, etc.

Other tools are also used:

B TO B PORTALS This is a generalist site which provides professionals with tools or qualified information (news about special deals, computing software to download, listings of companies, links to other professional sites but also to electronic catalogues, specialized search engines, forums, etc.). This is true for web2CAD.fr which is aimed at mechanical engineering and CAD professionals.

THE B TO B COMMUNITY This is a privileged, personalized space requiring a password where each visitor can define his profile and configure his next visit to the site depending on his particular interests. Unlike a portal where the information is delivered unilaterally by the editorial team of the site, visitors create the content. An example of this is atmedica.fr, site of the medical community in France or wateronline.com for water professionals.

202475RLR_LIVRE.indb 10 31/07/13 08:13


B TO B BLOGS Appeared at the end of the 1990s in the United States, weblogs or blogs are websites, which are private at the beginning but becoming quickly public, on which one or more people freely and regularly express themselves. They are generally used for auto representations and are stamped on their author’s personality. Currently very prized by the public that express their opinions and anecdotes on their authors, these ‘open sky conversations’ are the consequence of chat rooms with an added dimension of influence: in the United States, several blogs (such as instapundit.com) made it possible to reveal information which could have an important impact on public opinions within the framework of political affairs, social, etc.

The blogosphere (blogs altogether) mainly consists of non- market community blogs (health, literature, travel, politics, legal, media, education, etc). Beyond the drifts that could pepper the news on employees’ remarks towards their company, there is a new utility for blogs in- house through new forms of collaborative work (here, we talk about plog for project log) by collective intelligence which they can join together. In business to business, blogs remain less used with the exception of certain company director of SME in order to promote their activity. The use of blogs in business to business is limited to the concerns of the company and its activity sector in order to take into account customers’ opinions, prescribers, decision- makers, etc. and to detect tendencies as well as improve-ment axes (image, proposed offer, relationship, etc.). They also are part of elements taken into consideration in crisis communication and the monitoring and protection of information (risk of escapes, industrial espionage, and legal problems).

In addition, thanks to the Internet companies have developed complementary information management tools:

CUSTOMER RELATIONSHIP MANAGEMENT CRM is a decision making tool which consists of optimizing the customer relationship via better segmentation and scoring (evaluation of the commercial value of the customer, assistance to the sales team by defining a better adapted product/service offering.

KNOWLEDGE MANAGEMENT This tool is used to capture, organize and possibly redefine information or a relevant practice with the aim of addressing it at the right time to the right person or entity concerned (in- house or company partners). Among other things, this reduces operating costs such as the frequency of calls to assistance services.

COLLABORATIVE WORK With the development of high- speed connections and the standardization of development languages, the web has become a simple, powerful and inexpensive means to create running and management tools that allow a daily follow- up of the company activity. Collaborative work expanded these years not only to the public with cooperative spaces like Wikipedia but also within company and in particular in the processes led in project mode. The intensive use of collaborative work tools impacts on traditional practices of project management and modifies customer- supplier relationship management. Faced with geographic dispersal and mobility, remote joint work, resources optimization, exchange of electronic documents and the follow- up of tasks represent strategic issues for the organization and performance of companies joined together for a joint project. In the aeronautical sector, the ability to work in collaborative work mode is a selection criterion of suppliers by clients.

INTRANET An Internet network operating within a closed system within a company with possible links to pre- selected exterior partners (Extranet). An in- house communi-cation tool, the Intranet more effectively manages information circulating within the

202475RLR_LIVRE.indb 11 31/07/13 08:13


company but also mobilizes the collective intelligence of the latter. For instance, Air Liquide, world leader in high value- added gases, uses its Intranet to securely put in common research carried out at different geographic sites.

ON- LINE MARKET STUDIES In certain B to B sectors (computers, telecommunications), companies use the Internet as a complementary market study tool. This makes it possible to collect information at a lower cost about customers and prospects located in very different geographic regions. However, it is limited to professionals connected and site visitors.

Purchasingtool

The Internet facilitates supply management and simplifies the task of purchasing manag-ers. The main expectation is reducing supply costs. Thus within the framework of an identical purchase of standardized spare parts, the Internet can automate the process and reduce operating costs.

E- PROCUREMENT This system allows companies to get their supplies on the Internet (cf. Chap 3). Several companies of the same sector can group together and put in common their requirements so as to benefit from a mass effect vis- à- vis their suppliers. This is true for marketplaces developed in the automotive sector (SupplyOn created by car parts manufacturers Bosch, Continental, INA, SAP, ZF, and Siemens), in aeronautics (Aerox-change, AirNewco…), and the metallurgical industry (Steel 24-7). In food and agriculture field, Danone and Nestlé, joined by Henkel, have developed the marketplace, CPG.market.com to manage their purchases (stocks, logistics). These vertical marketplaces connect companies and suppliers of a specific sector.

Salestool

For B to B companies, the Internet can be a precious sales tool. It can be used to send estimates to customers or to reply to customer requests concerning the product/service offering on the website, facilitating the administrative process and allowing the company to be more proactive. The company also has ways of updating its product catalogues (new references, presentation of product concepts) in real time, thus making its sales policy more coherent. It can even send online a customized catalogue with adapted prices depending on customer’s applications. It can stimulate its sales administration by using an Intranet linking salespeople to the sales management, thus facilitating feedback in real time (tracking of orders, complaints, and information on the competition…). Sales tools developed on the Internet in B to B include:

“E- MARKETPLACES” These are virtual markets where buyers and sellers can make transactions. There are many advantages: buyers can contact more suppliers than in the IRL (in real life) market, and sellers have easy access to more customers, which decreases exploring costs. Sales are fluidified, and the duration and cost of transactions are reduced. Prices are set using a sort of auction system, where the price is set either traditionally by the seller or by the buyer. These marketplaces can be:

0 Horizontal and transversal: they allow companies to buy and sell non strategic products on the web (Synerdeal, Eu- Supply). They concern different activity sec-tors and all types of actors and usually involve general purchases;

0 Vertical or sector- based: they focus on a category of goods or activities.

202475RLR_LIVRE.indb 12 31/07/13 08:13


The marketplaces can bring benefi ts mainly to buyers (buy- side), to suppliers (sell- side) or being balanced. Note that after an expansion and strong development phase, many marketplaces stopped their activity or reoriented it towards provision of a service (information system integration, business intelligence…).

SPACES RESERVED ON THE SITE Professional buyers can have privileged access to a reserved space on the site where specifi c information is provided (price, project progress, new standards, etc.) and dedicated interactive zones (space for discussion, consultation or making orders). For example, in addition to its corporate site, DHL, an international express transport company, offers its customers online tracking of packages thanks to a special number and direct contact with its sales department.

However, while B to B companies use the Internet for buying and selling certain goods, they are more cautious about using the latter for strategic purchases (entering goods essential for the production of the fi nal product, purchases requiring very heavy invest-ments and requiring a long term commitment). The Internet is thus mainly used for professional purchases that satisfy individual needs (books, publications, information, etc.) or which facilitate operations (supplies, consumables, etc).

Chapter summaryBusiness to business marketing is the one practiced by companies which sell goods and services sold to another organization in the framework of their functioning (companies, groupings, crafts-men, liberal professions, communities, State, associations…) being distinguished from consumer market addressed to private individuals for their personal use. There are nine categories of prod-ucts and services subject to B to B transactions which can be gathered into entering goods, equip-ment goods, and facilitating goods. Beyond the extent of the industry branches concerned with these inter organisations business relationships, the business to business is characterized by its environment complexity: the heterogeneousness clientele (numbers, sizes, profi les, expectations, requirements, implantations, organization modes…), the upstream and downstream role played by customers in the business relationship, the various actors involved in the purchase decision, the purchase process itself and the various interactions of concerned actors, the need for value creation, the use of specifi c communication tools such as trade shows or trade magazines. Taking into account these characteristics and fundamental principles of traditional marketing, it is thus essential to adopt a specifi c marketing approach to the business to business sector.

Questions and Exercises1. Regroup the nine main categories of products detailed in this chapter according to the

following typology: 0 entering goods, 0 equipment goods, 0 facilitating goods.

2. What are the essential differences between consumer marketing and business to business marketing in terms of:0 Market, 0 Clientele, 0 Buying patterns, 0 Seller- buyer relationship,0 Product, 0 Price, 0 Promotion, 0 Place.

202475RLR_LIVRE.indb 13 31/07/13 08:13


3. Among the principal characteristics tackled in this chapter, what are, according to you, those that most influence marketing practices? Why?

4. Business to business marketing appeared nearly 20 years after the first concepts, methods and marketing tools of consumer market. How can you explain this late expansion?

5. 3M company produces and markets sticky papers Post- It. A Junior Company of a business school decides to buy some of them in order to equip its members. The team wonders where to buy them: at distance via the Lyreco company, call the agent regional sales rep-resentative of the 3M brand or go to a hypermarket. Under what conditions this purchase can be considered business to business?

6. What are the communication specificities of companies that sell their provisions of service to other companies or organizations? What are the essential differences in terms of target?

7. Go to www.synerdeal.com and www.eu- supply.com, make a buy- side and a sell- side list of services proposed by these marketplaces. What lessons do you come up with the use of marketplaces?

8. According to you, what are the implications of the business to business heterogeneousness clientele? What can be the consequences in terms of sales organisation?

202475RLR_LIVRE.indb 14 31/07/13 08:13

2

00 Chapter objectives• Learn the factors influencing the demand of goods and services business to business• Understand the two key notions of sector and derived demand and measure their

importance in their implementation in B to B marketing approach• Present the diversity of actors involved in the buying process within customer orga-

nizations: buying center• Measure the importance and nature of the risk on business to business market

within customer- supplier relationship framework• Understand the supplier need to lead targeted marketing approaches with the dif-

ferent members of the buying center• Understand the relational dimension of the B to B business relationship

Derived demand and buying center

202475RLR_LIVRE.indb 15 31/07/13 08:13

Chapter 20 00 Derived demand and buying center16

2.1 SectorandderiveddemandBeyond the specificities described in Chapter 1, the existence of a demand called derived within the sector is, without any doubt, the most important distinction in the business to business marketing applied to consumer market.

2.1.1 Thesectorconcept

Demand from companies downstream in a sector determines the level of activity of those situated upstream. This industrial chain is the basis of derived demand.

The success of a supplier’s product is closely linked to the success of his customer. An electronic component for example or a textile fiber is meaningful only in the context of the anti- locking system of a car’s wheels or the undergarment into which they are incorporated.

Thus demand for an industrial product or service depends on demand for the product in which it is:

z Incorporated: ingredients, raw materials...,

z Assembled: components, spare parts..., or on the production for which it is,

z Consumed (lubricants, energy products...),

z Used (office equipment, machine- tools, transport vehicles...).

If industrial demand naturally fluctuates as a function of the market, it proves to be not very elastic (less sensitive to price changes than are consumers in consumer market for instance).

The term sector comes from the vertical presentation often used to represent the complete production chain and its interdependence, from basic materials to the finished product (cf. figure 2.1).

This vertical vision presents teaching virtues, however, it must be moderated: beyond this chaining, every actor involved is simultaneously in presence of several interactions with many partners located upstream, downstream as well as horizontal, at the same industrial level. Indeed, each actor is, within the sector, dependent on peripheral furniture from other suppliers located outside of it: we then talk about joint demand. It results from this context that the sector concept is often close to business to business network. Interdependence is formed within the sector (whose content remains very variable according to involved actors’ weight and culture) and true systems can influence buying processes, especially in project mode (cf. Chap 5 and 10).

The supplier/customer chain has two main consequences: dependence on activities situated downstream in the sector and the opportunity to take action at many different levels.

202475RLR_LIVRE.indb 16 31/07/13 08:13

Sector and derived demand 17

Suppliers of raw materials(silicon, copper, gold...)

Motorola(semi-conductors)

Siemens(ABS systems)

RenaultBuilder

RenaultDealers

Companies“Sales �eet”

Employees

Private customers

Figure2.1 – An example of a sector

2.1.2 Dependenceonderiveddemand

This characteristic of business to business can be a hindrance and is often perceived as unfair. The idea can be stated very simply: every manufacturer within a sector, depends on his customer who in turn depends on his own customer. Thus if activity slows down within a given sector, this can affect all of the suppliers concerned.

In the automotive industry, a decrease in the miles driven by Europeans combined with fewer purchases of new cars resulted in a slowdown of activity within the whole sector. Thus, Michelin tires, in spite of its R&D strength and dominance in terms of marketing and sales, underwent the after effects with a drop in sales of original equipment tires for new cars and in renewal for cars already on the market.

This dependence can be an even greater problem for medium sized specialized suppliers, who generally only work for a few prime contractors. A limited customer portfolio can be a sign of a strong partnership, a real commitment (risk- sharing), and collaboration of new products design to services related to equipment supplies. However, at the same time, sub- contractor status involves a high level of dependence on the contractor. In fact,

202475RLR_LIVRE.indb 17 31/07/13 08:13


in an economic turndown, the trend is for major contractors to reintegrate operations so as to avoid or minimize job cuts in their own companies.

Unlike the consumer market, the supplier company is not in direct contact with the final customer. As such it cannot react quickly by modifying its products or services. The reactivity of the supplier depends on that of the actors downstream in the sector.

2.1.3 Amultilevelstrategywithseverallevelsofintervention

The interdependence of links within a sector does however have a positive consequence: several levels of marketing actions can be envisaged.

The main idea in B to B marketing is that you must always reason in terms of your customer but also:

z In relation to your customer’s customer,

z Even in terms of the customer of your customer’s customer.

To win over a customer and keep his loyalty, the most effective method is often a discussion about his own customer, to provide him with information and studies on the demand for his own products (marketing studies). This proximity with customers, this relational dimension proves to be at the heart of the B to B marketing approach.

Both market studies and promotion should be used to target customers at two levels.

STUDYING YOUR CUSTOMER’S CUSTOMER Faurecia has become one of the leading suppliers of car seats in Europe by developing studies on their final customers, drivers and simple passengers. There are two types of studies:

z Medical studies analyze back problems and fatigue suffered by people who have to drive all the time for their jobs (taxi drivers, sales reps, etc.),

z Satisfaction and dissatisfaction studies on those same drivers regarding the differ-ent seats currently available on the market.

Faurecia

sales relations

Faurecia, by carrying out studies on its nal custo-mers, improves its offer and provides Renault with valuable information.

At the same time, it is continuously in tune with customer feedback : letters from consumers, etc.

information relationsFinal customer

RenaultManufacturer

Figure2.2 – Studies carried out on end customers are an asset for the supplier in terms of his industrial customer

202475RLR_LIVRE.indb 18 31/07/13 08:13

Lycra case, Invista 19

Faurecia analyzes customer reactions to: z Specific structures and shapes of seats: lateral reinforcement, bucket seats, firm-

ness of coverings, etc. z Options such as different types of seat heating, position adjustments (angle of back,

squab), of user positions memorization, etc.

Thanks to driver specific studies, the supplier assists his customer with design, choice of options, and equipment for future models. By making his customer aware of end customer reactions to competing products, Faurecia also participates in monitoring technological development. Suppliers that position themselves upstream from the design process can get ahead of the competition.

INFLUENCING THE CUSTOMER’S CUSTOMER Invista with Lycra, clearly illustrates the different levels of marketing actions available to a supplier positioned upstream in a sector, in terms of promotion.

2.2 Lycracase,InvistaInternational company specialized in polymers, fibers and intermediary products, Invista has a wide brand portfolio including Coolmax, Thermolite, Cordura, and Tactel (formerly part of Du Pont de Nemours). Concerning the Lycra brand, Invista implements a pull strategy, involving several levels of actions, which requires a careful analysis of the respective roles of the different actors within the sector.

Raw materials suppliersPetrochemistry

Lycra �ber brand

Sector manufacture

Prêt-à-porter

Wholesalers

Hose

3 levels of Marketingintervention

Spinor or Guipor Guipor

Targets

Manufacturers

Weaver or Tricotor Hose manufacturer

Maker

Hypermarkets,supermarkets

Final consumers

Well, Le Bourget, Rosy,Chester�eld

Retailers

1

Distributors2

Consumers3

Figure2.3 – The different levels of marketing intervention of Invista for its brand, Lycra

202475RLR_LIVRE.indb 19 31/07/13 08:13


2.2.1 Firsttarget:Manufacturers

The first level of intervention for Invista is his direct customer, reel producers and hosiery manufacturers (Dim, Well, Le Bourget, Rosy) in the hosiery sector for example. Obvi-ously, if the latter don’t choose Lycra, any other measures are pointless.

What are the targets that Invista must identify within the manufacturer company? z Production manager: if the hosiery production process does not allow use of Lycra,

owing to technical constraints, such as resistance of the fiber to stretching or the required hygrometry conditions at the production site, Lycra fiber will not be chosen.

z Research and Development, so as to intervene right from the design phase of the new product. The ideal situation would be for the fiber in question to be an integral part of the new specifications.

z Marketing department, which works with R&D on choosing and perfecting new products, and which could use its influence.

z Sales department, which is in contact with distributors of the finished product. z Functional technical departments, such as Quality, which above all are concerned

with the reliability of the different production processes. z Purchasing department, which aim is to gather a maximum of information on the

different materials available on the market and the different competitors.

Obviously, the arguments highlighted will be different depending on the public concerned (cf. Figure 2.5). In addition, Invista will choose in- house managers with different back-grounds to best match the profiles of the people to be convinced.

In priority for technical contacts

In priority for marketing and salespeople

Technical arguments – productivity – reliability – cost price

Arguments taken from consumer studies on expectations in terms of appearance, color, shape, practicality, and resistance

Figure2.4 – Adapting the arguments

2.2.2 Secondtarget:Distributors

The second level of intervention is that of distribution, with mainly:

OPERATIONS TARGETING MAIN DECISION MAKERS buyers, and working group man-agers in the buying centers, as well as operational managers in the textile departments, selected because they are considered as opinion leaders or work in key points of sale.

z Provision of documents including studies on consumer behavior and trends with references from other countries of comparable situations;

z Detailed action plans on the final target: media planning, copy of TV ads, magazines…

202475RLR_LIVRE.indb 20 31/07/13 08:13


MORE TRADITIONAL COMMUNICATION OPERATIONS IN TRADE MAGAZINES con-sumer oriented operations from the Lycra media- planning that shows different finished products made with Lycra.

OPERATIONS TARGETING THOSE IN CHARGE OF DISTRIBUTOR BRANDS with the aim of convincing them to require from their manufacturers to use Lycra and make it visible to end customers on packaging in order to legitimate the distributor brand.

A practical guide distributed by DuPont to answer questions about elastane in general and Lycra® in particular.

Figure2.5 – Second target: distributors, supporting the differentiation policy of Lycra

2.2.3 Thirdtarget:Consumers

The third possible level of intervention is the end consumer. How should the latter be convinced of the qualities of Lycra? What arguments should be made to allow him/her to distinguish between Lycra and other competing fibers?

MEANS USED The first channel of information is the product itself and its packaging. The Marketing department will try to obtain the presence of the Lycra logo on the packaging, next to the logo of the manufacturer brand. The presence of the logo, the size of letters, their color and position relative to other printed information will be negotiated with the product manager.

202475RLR_LIVRE.indb 21 31/07/13 08:13


Other vectors for informing the consumer include traditional media forms such as women’s magazines, billboards and television, essentially for Invista.

POSSIBLE REACTIONS OF THE MARKETING DEPARTMENT OF THE CUSTOMER MANUFACTURER

z Desire to use allied marketing: Apart from the technical qualities of Lycra bought from Invista, the manufacturer- customer will seek to take advantage of the dif-ferent marketing actions related to Lycra brand, which will in turn strengthen his own marketing strategy.

z Fear that his own product will become banal: The manufacturer might be afraid that consumers will confuse the intrinsic qualities of his products with those of Lycra. Exclusivity is not possible on a competitive market such as hosiery. Isn’t there a genuine risk that the image of the customer will be absorbed by that of Lycra? The consumer will find Dim- Lycra®, Well- Lycra®, Chesterfield- Lycra® hosiery at the same sales outlet...

The consumer might end up thinking that the most important thing is for the pantyhose to contain Lycra and that ultimately the different brands are all about the same since they all contain Lycra. The risk comes from a reduction of the perceived difference between brands, products become banal.

One of the difficulties of the B to B marketing can be analyzed using this example. The Invista marketing department must identify how far it can go in promoting Lycra without being perceived as a major risk of “banalization” for its customers’ products. The action plans of suppliers must consider this risk and offer enough advantages and innovations to compensate.

THE STRATEGIES AVAILABLE TO INVISTA In order to continue to highlight its industrial brand, the supplier has a possible range of actions. Some of the actions which are described in the following do not necessarily apply to the Lycra case but are used on neighbour markets.

Action 1: The first advantage that a supplier can propose in the framework of a new product launch is to be the first to have an upstream innovation. The industrial customer who is the first to choose a particular process or material of the supplier contributes to the latter being adopted by other manufacturers, and therefore to its development. In exchange, the supplier can agree to an exclusivity guarantee, generally limited to six months or a year. Thus the customer manufacturer will be the first to use the process and depending on the effectiveness of his marketing strategy, the end customer will associate his product with a new advantage, thus strengthening his brand value. Other brands will be perceived as followers rather than leaders or even as imitations.

Action 2: The second advantage lies in the convergence of information contained in advertising. If we imagine that Lycra highlights the following in its ad campaign:

z better resistance to wrinkling and sagging, z reduced risk of catching on things, z excellent elasticity, z comfort and performance, z freedom of movement, z easier to hang out for ready- to- wear.

202475RLR_LIVRE.indb 22 31/07/13 08:13


Nothing prevents the customer- manufacturer, Dim for example, from using one or more of these arguments. The two campaigns reinforce each other, increasing coverage and the frequency with which the consumer perceives the brand of the end product.

Action 3: The third advantage for the manufacturer- customer is the Lycra media plan-ning, in other words:

0 the choice of media (women’s magazines, etc.) and supports (Elle, Biba…),

0 the calendar for magazine or television ads,

0 Thus if the manufacturer is flexible and attentive in his own media planning, he will be able to strengthen his own launch by the juxtaposition of his own campaign with that of his supplier in Lycra fiber.

Example taken from a women’s magazine. Invista presents nine creations in very wide ranging areas: from furniture to jewelry and even shoes. This gives a little boost to a selection of his customers,

while inciting greater creativity.

Figure2.6 – Third target: consumers, “Lycra: a medley of ideas”

202475RLR_LIVRE.indb 23 31/07/13 08:13


Action 4: A fourth means of collaboration between Lycra and the manufacturer customer could involve the presence of the customer product in the supplier’s advertising. The latter will choose a product that is remarkable in terms of its innovation or aesthetic, especially manufactured with the material or process that he wants to feature in his own campaign.

This choice constitutes a nudge in the right direction to selected customers, in the same time, it is a stimulation for the others, an incentive to a bigger creativity.

Presentation of the consumer campaign to show the synergy effect of Lycra for the different professional actors, manufacturers and distributors.

Figure2.7 – Visual of the Lycra campaign in magazines

Action 5: The fifth advantage offered by the supplier does not directly concern Marketing. In fact, technical assistance can be provided to the technical, functional and production departments to ensure the first productions including the material or the new process. Depending on the case, a middle sized manufacturer customer can greatly value technical assistance, especially when acquiring new know- how.

Action 6: the sixth advantage is a consequence of the supply agreement. When the agreement concerns a material supply, there can be financial participation in common actions: it is sometimes the case on promotions with the organization of “special display”, an animation day at distributors’ place.

By addressing to its customers’ customers, Lycra contributes to the commercial perfor-mance of its industrial customer by aiming to stimulate even stronger derived demand. To be able to offer this type of commercial partnership, Lycra develops oriented technical partnerships, especially at the design level.

This example illustrates the multiple possibilities of actions to be taken in the B to B marketing relative to the different actors within a sector and a brand strategy perceived as facilitating performance by its industrial customers. Invista pursues the same strategy for other products, for example with Cordura or Thermolite brands for sportswear.

202475RLR_LIVRE.indb 24 31/07/13 08:13

The buying center 25

2.3 ThebuyingcenterThe concept of the buying center as we now understand it originated in the 1970s, and includes all the functional and operational managers who take part in the final buying decision, rather than merely the buying department. This notion is also known as “decisional chain” or “decision spectrum”.

The various interactions between participants as well as their respective social roles have been investigated by several authors including Robinson, Faris and Wind.

From a theoretical point of view, the buying center structure has a lateral and vertical dimension:

z The lateral dimension (or “width”) of the buying center refers to the number of departments concerned by the decision;

z The vertical dimension (or “depth”) deals with the number of levels within the hierarchy concerned by the decision.

The greater the risk for product quality and company profitability, the larger the “width” and “depth.”

The realization that many participants play a role in the buying decision has undermined the belief that rationality is the only guiding factor in the process.

2.3.1 Businesstobusinessbuyingbehavior

For a long time, the buying process and the act of industrial buying have been thought of as rational compared to the more emotionally dictated behavior of individual consumers.

This view comes from the economic reasoning underlying the act of buying in industry and in particular, the search for minimum cost, the production organization (Mate-rial Requirements Planning system, MRP, Materials Management) etc. However, this attitude clearly varies depending on the situation. For example, tailor- made goods for a company, those sold to other companies, or those sold directly to the public as well as companies, will not be evaluated by buyers in the same way.

As a general rule, a professional buyer is mainly looking for:

z Contributing to performance improvement of the company,

z Satisfying the expectations of buying center members.

The buyer must therefore offer his own judgments on buying decisions, taking into account the opinions of the buying center members. Generally speaking, the latter use the same evaluation criteria but not the same weighting. It must be said that such detailed evaluation systems represent a great advantage for the supplier who is already on the books and who gives complete satisfaction: the unknown supplier does not have such convincing arguments to allow comparisons to be made.

Among the criteria generally taken into account, it is possible to cite some examples of arguments and classify them as to their “rationality”.

202475RLR_LIVRE.indb 25 31/07/13 08:13


00 Table2.1

Mainrationalandnonrationalcriteriainformingthebuyingdecision

Cartesian reasoning Non Cartesian reasoning

• Price level• Delivery delay• Conformity to specifications (norms)• Quality• Accuracy of estimates and summary on work

completion• After sales service proposal• Proximity of distributor or of supplier’s sales office• User’s physical safety• Manager’s availability

• Supplier’s prestige and reputation• Length of relationship• Supplier’s geographical location• National role of the supplier’s investor• Interlocutor’s background (engineer,

what university…?)

However, the dividing line between rational and non rational reasoning is not always as clear. For example, in terms of geographical location, the proximity of a supplier can be at the same time a rational and non rational factor whether he represents a potentially better service (quicker and less expensive) or has “cultural” affinities with the buyer (regional economy).

Involving several managers, rational arguments are worthy so that all decisions must be justified. The weight of non- rational arguments is greater in companies where the buying department manager is alone or has a certain standing.

In reality, decision making depends on corporate culture and on the confidence accorded to the purchase manager: the corporate culture is based not only on its particular sector of activity and background, but also on managers’ training.

The work of Cardozo and Cagley, as well as that of Cunningham and White, demonstrates that economic reasoning is not the sole determining factor in the buying act, and that previous experience with the retained supplier is one of the main criteria along with his reputation, product quality and delivery time. Corey observes that the value of the offer is often taken into account rather than the price. Dickson has shown that industrial buyers give preference to suppliers depending on:

z Their capacity to respect established specifications,

z Their ability to supply the company at the right time,

z The proposed price level (for non differentiated goods, this is more important than the two first criteria).

2.3.2 Theperceivedriskcriterion

The notion of perceived risk occupies an important and ambiguous place in the buying behavior analysis. This can be explained through perceived risks for:

z The company concerning supplies security or in terms of protection against exchange rate fluctuations,

z The buyer himself contesting the final choice of other departments, suggestions that he took the easy way out, favoritism, etc.

202475RLR_LIVRE.indb 26 31/07/13 08:13


Perceived risk

Uncertainty degreeas to the consequences

of the choices made

Importance of the consequences of the choice made

At the company level

At the individual level

Figure2.8 – The main components of the perceived risk in an individual buying situation

The decision style of buyers depends on their behavior towards risks, behavior which is dependent on individual characteristics, previous experiences and risk’s perception.

According to Choffray’s perceived risk analysis model, the buying department establishes a hierarchy of risks and procedures corresponding to the estimated level of risk. For example when the degree of uncertainty is high and the choice made has important consequences, the perceived risk is at a maximum. In this case, the buying department will alert the company and the buying process will be made in several phases as it will be explained later on.

2.3.3 CompositionofthebuyingcenterThe members of the buying center can be grouped into four main blocks.

Thedecisionmakers

Person or persons who make the final decision. A look at large companies shows that most decisions are made collectively, i.e. even a CEO who is strongly involved in techni-cal decisions will prefer the decision to gat a collective vote from the management board committee instead of unilaterally imposing it. Only after the different propositions have been studied and the analysis of the different opinions, both in- house and external, will the final decision be made.

Actually, in terms of complex buying, the importance of decision makers has been strongly reduced when there is a consensus within the buying center. However, they remain important in case of non consensus. Then, they can have an influence on the final choice, impose to the buying center members to gat a consensus, or take two suppliers for the same purchase. This choice generally leads to additional cost of maintenance and training but commercial pressure can be maintained on the two selected suppliers.

In a small or medium sized business, the director often makes the decision aided by a manager, seen as trustworthy and competent for that particular project.

Thebuyers

This is basically the buying department, which in general yields its prerogatives to the profit of various prescribers for the purchase of goods and complex services. Their main functions are:

202475RLR_LIVRE.indb 27 31/07/13 08:13


z To collect information concerning the different market solutions available to the company, taking into account in- house constraints such as technical know- how and financial constraints,

z To make a list of the different national, European and overseas suppliers who could be appropriate for the company’s needs.

This dual function necessitates close, wide- ranging contacts with the market above and beyond the suppliers used and known by the company.

The other main function consists of taking in charge the pre- selection (make a short- list) and then participating to the final selection of competing suppliers. Having picked out the acceptable and possible solutions, it is then a question of selection and acceptance of the best solution for the company. The purchases often represent more than 60% of the turnover of industrial companies: it is the case for Air Liquid which is the third industrial buyer in France of electricity behind Alcan and Arcelor. The buying post has greatly evolved these years in companies, taking a more strategic dimension because of:

z The increased search for competitiveness (competitive advantage at buying);

z The speed in the globalization of supply (sourcing);

z The reinforced professionalization of the job with more specialized training (legal, international negotiations, management of profit center);

z The ethical dimension of purchase and strategic orientations taken by many industrialists in the durable development;

z The set up and exploitation of new buying management tools (marketplaces, e- procurement, Supplier Relationship Management—SRM…).

These trends allowed Buying Departments to be more important in companies (board of management committee member, strategic decision taking…).

00 Focus2.1

EthicsinpurchaseattheSuezGroup

The Suez Group defined an ethical Charter of buying. Indeed, the buyer conveys the company image: his per-sonal ethics, his integrity, his professionalism and his firmness prove the efficiency of his actions. These are some principles:

• The active and loyal participation of the different representatives during preparation and implementation the buying politics (among work groups);

• The transparency in the communication of relevant information;• The mutual respect of buying activities done by the different organizations within the group (entities,

branches, Group).Among these obligations, the buyer must justify the decisions he has taken and respect the confidentiality level of information passed on. The Charter also applies to all colleague likely to influence the buying act (the other members of the buying center). Suppliers relationship must be outstanding by integrity, honesty, impartiality, equity, courtesy, loyalty and respect of interlocutors and agreements. The buyer’s position is exposed to sup-pliers’ entreaties and pressures, in the forms of gifts, invitations, fringe benefits as well as complex and subtle emotional blackmail… in order to influence his decision. It is then recalled on the Charter that operation rules for all Suez colleagues in order to avoid situations of interest conflict or rigging:

• Gifts offered courteously and with low value are accepted only if they are exceptional and linked to justi-fied occasions (end of the year for instance) or cultural practices in certain countries.

202475RLR_LIVRE.indb 28 31/07/13 08:14


• Invitations to cultural, sports and alike events must be authorized by the hierarchy, be of an exceptional nature and do not involve extravagant expenditure.

• Invitations to journeys or congresses may be authorized by the hierarchy if they are collective invitations for professional reasons: travelling and housing expenses are the responsibility of the buying company.

• Every other advantage in nature (products or services of the supplier that might be offered or discounted for the buyer) must be refused except with the permission of the hierarchy, after checking the absence of interest conflict.

Finally, the group looks after not abusing of its position, by putting an economic actor in a situation of depen-dence, by imposing leonine conditions or by practicing discriminatory or excessive prices. The buyer must avoid actions that can be considered as a pressure by the supplier (reciprocity commitment, entreaties for sponsor-ing sports clubs or cultural events, to participate to sweepstakes…).Suez integrates environmental and community concerns in buying procedures: specifications include this type of selection criteria of suppliers and products (security, well-being of workers, children protection, no form of dis-crimination, corruption, respect of the environment). The “Guiding principles of the OECD to Multinational Com-panies” or SA8000 norms, ISO14000 are then appreciated in the presented offers.

Theinfluencers

The influencers in fact make up the contact group which, from one company to another, varies the most according to the different sectors and the different types of company culture. Two types of influencers can be distinguished, in- house and external.

z Influencers in fact have a positive role. The example of the city of Toulouse which launched a competition for the construction of a library illustrates the latter’s role. Thus six architects were in competition including Mr. X who recommended a domed roof made of glass in one piece without any soldering. However, only Saint- Gobain the company could provide this product, given the expertise and patents involved. Similarly, Alcan was the only company able to provide the required structure that holds the dome. If Mr. X won the competition, the two companies would have won the future call for tender. They could then congratulate themselves on their upstream collaboration (cf. The project marketing approach presented in Ch.5) with the winning architect who could benefit from the information network of the two companies.

z “Gatekeepers”, or filters, play a negative role; this might be the quality manager who obtains the agreement of the management committee to require ISO 9000 certification of the future supplier for a particular service, thereby eliminating the candidate company which does not have this certification. For instance, an operator or a secretary can play this role if he/she does not transmit a phone mail or does not facilitate the search of a person.

The problem with this presentation lies in the subjectivity of recommended influ-encers. Favorable for company A, might be unfavorable for company B; that is why it is better to distinguish between internal and external influencers.

z Internal influencers: These are functional managers who positively or negatively influence other members of the buying center regarding the product or service offering of a specific supplier. The main internal influencers are:

0 The quality department,

0 The maintenance department,

202475RLR_LIVRE.indb 29 31/07/13 08:14


0 The research and development department,

0 The marketing department,

0 The sales department.

In the Lycra case (cf. Chap. 1), the R&D, Maintenance, Quality, Marketing as well as Sales department managers were involved. Indeed the latter acted as an influencer on the Marketing department.

z External influencers also have an effect on the members of the buying center. These include customers, professional experts (engineering firms, design offices, architects) and journalists.

In the Lycra case (cf. Chap. 1), external influencers included:

0 The designer Jean- Paul Gaulthier who accepted to work for Lycra for the orga-nization of a fashion show (supply of new materials). He in turn influenced the prêt- à- porter industry which aligns itself with the trends set by the great fashion houses.

0 Women’s magazines from Biba to Cosmo, via traditional advertising, advertis-ing co- financed by Lycra, as well as articles developed by journalists.

0 The marketing managers of leading retailers such as Galeries Lafayette, Carrefour…: the latter gradually integrated the technical specifications of Lycra into the specifications of their products in distributor brands.

As with other intellectual professions (professors, doctors, journalists etc.), col-laboration is often a touchy issue, in particular in France because of the state of mind which is not especially favorable to business culture. These professions put a high value on their independence and do not like to feel that they are being influenced. An example of collaboration can be found at Technal with two types of architects:

0 A “star” architect already well known and employed by the company. In exchange, he participated in improving the design of products and accessories as well as designing the stand for major shows such as Batimat. In addition, he accepted to be present at events organized by the marketing department such as dinner debates, conferences, etc.

0 Architects just starting out in their careers were offered a contribution to their travelling expenses to participate to a competition. If the architect wins a prize, the company adds on to the financial reward. In exchange, their name can be used in company documents regarding their services.

Customers can also play an essential influential role. Thus, an old customer could accept that new prospective customers visit his installation either during or after the work has been completed; this practice is especially common in the building and public works sector. The collaboration of this reference customer is sometimes obtained via a price reduction, similar to the practice found in the aeronautics sector with “launching companies”.

Let us suppose that city A has a project for an underground parking lot downtown: the interested supplier could invite the managers of the technical departments of city A to visit their homologues in city B, for which a similar project has already been carried out.

202475RLR_LIVRE.indb 30 31/07/13 08:14


0 The managers of the « prospective » city cannot help but accept the invitation especially in light of the diffi culty of making the right choice in terms of technologi-cal solutions for such problems as smoke extraction in case of a fi re, the closing system of safety barriers, the installation of surveillance systems (cf. Chap. 5).

0 The managers of the city that is already a customer will accept: at the personal level, the manager in question will show his boss that his past choices have been good ones and that the project has become a reference. On the collective level, the city and possibly the municipal team will be able to show the local population that their choices have been responsible ones and that public funds have been put to good use.

To optimize the infl uence strategy, it is best to fi nd a reference that is as similar as possible to the target project (cf. Chap. 18). Other external infl uencers can be used, especially consulting fi rms in industrial engineering when customer companies have decided to outsource their decisions, including for strategic investments.

Theusers

The importance granted to users varies considerably depending on:

z The prestige of the user: a surgeon rather than nurses, engineers rather than technicians, pilots rather than bus drivers, etc.

z National culture: Scandinavian countries and Japan have a long time taken into account the opinion of future users of machine tools, cars, etc. This is not exactly the case in Southern countries and even in the USA (with the exception of users of complex goods). In France, user opinions are regularly taken into consideration assuming they allow improving the company ethos based upon fi nal customers’ satisfaction.

z The size of companies: statistically, big companies have developed more tools for integrating users in decision making processes.

Industrial buying is the result of a collective decision made by a varying number of people, who are more or less involved and not very homogenous (in terms of experience, educational background, responsibilities and level of confi dence).

In order to better position themselves and negotiate, it is in the interest of supplier companies to know as much information as possible concerning the different in- house contacts within the customer company (exact role, motivations, actual position, previous post, education, other personal information).They must also identify the actual buying phase of the customer company (cf. Chap 3).

Chapter summaryThe aim of this chapter is the deepening of business to business characteristics by presenting additional concepts essential to the professional context understanding and to the elaboration of relevant marketing approaches.A B to B marketing manager must be able to perfectly analyze his company sector in order to identify the infl uencing factors at the demand level. The latter which depends on the upstream demand is called derived demand. He also has to recognize along with the sales force the power and role of the actors, including the buyer of the customer company or prospect. For example,

202475RLR_LIVRE.indb 31 31/07/13 08:14


it is mandatory to understand the organization mode of the latter and the exact attribution of the buying department. At the time of the approach of a potential customer company, the supplier is vis- à- vis an anxious buyer who wants to make a conform purchase to the different requirements of his company. The latter is subject to several internal and external pressures made by the buy-ing center members to modify his recommendations or position in the negotiation phase. This buying center, informal entity, is composed by more or less highly involved people in the buying decision. Besides, it also includes different internal prescribers (or infl uencers) extremely linked to the purchase and external prescribers (experts, referenced customers, journalists, specialists…), users (their importance varies according structures and cultures) and decision makers (whose role is to confi rm choices made or to arbitrate in case of internal non consensus). The industrial buying results from a collective decision taken by a varying number of people more or less involved in the buying and not very homogeneous (in terms of experience, education background, responsibilities and level of confi dence). The understanding of the position, motivations, weight, role and interac-tions of each buying center member is essential for every supplier. The described characteristics in this chapter allow sales and marketing managers to build from the one hand, a questioning and analysis screen of the buying center, and from the other hand, to exploit these results in order to defi ne the approach strategy. The key element in the business to business marketing is the customer- supplier relationship in which there are infl uences and interactions.

Questions and exercises1. Why does the derived demand represent an essential notion for B to B marketing managers?

2. How can a packaging manufacturer for cosmetics set up a pull strategy in order to increase sales?

3. What incidence can the centralization of buying on the head offi ce or its decentralization on business units have on buying and decision process?

4. A company wants to acquire a complete CRM information system. According to you, who are the involved buying center members? Does their role evolve during the buying process? Up to what point and why?

5. “The weight and role of the buyer are highly reinforced when the purchase is about high risk products or services”. Do you share this opinion? Why?

6. What are the factors that allow to determine if a purchase is a matter of collective process or individual process at the customer?

7. “The understanding of the buying center allows to be more effi cient in the marketing infl uence approach”. Explain. Give some examples at the sales level and in terms of communication.

8. Concerning incorporable products sold to an intermediary integrator who is going to resell them to a private individual as a fi nal customer, what are the possible marketing strategies that you may recommend?

9. Why does the sole acquaintance of the buying department not enough to establish an effi cient relationship with the customer company?

10. How can we develop an interpersonal communication with the main members of the buying center in case of a strategic product sale as a tool- machine or an essential ingredient and which cost is important in the cost price?

11. Can you use information obtained from other customers to convince your interlocutors that your offer is the most adequate? What are the conditions that must be respected?

202475RLR_LIVRE.indb 32 31/07/13 08:14

3

00 Chapter objectives • Understand the characteristics of the organizational buying.• Examine the business to business buying processes and learn how to identify the

different phases.• Know the different buying situations (or buying scenarios) and have a look at the

impact on the marketing approach.• Get used with the different understanding models of organizational buying behavior.• Consider the impact of information technologies and electronic systems in the busi-

ness to business buying (e- procurement, e- auctions…).• Understand the relational approach of buying marketing in case of strategic goods

and services buying.As shown in the Lycra case in the previous chapter, the composition and role of the

buying center are essential in the understanding of the buying behaviour. The buying cen-ter intervenes in the different buying steps with the latter’s various objectives. Moreover, the purchase of a same industrial good can occur in several scenarios, thus explaining the vari-able role of the different members of the buying center. Research has been carried out in an attempt to produce a model of the industrial buying process and the latest thinking has led to first, the development of purchase marketing which concerns in- house and external tar-gets, and second, to dematerialized buying processes (e- procurement).

The Business to Business Purchase

202475RLR_LIVRE.indb 33 31/07/13 08:14

Chapter 30 00 The Business to Business Purchase34

3.1 BuyingphasesIndustrial buying results from an iterative process which has been identified notably by Robinson, Faris and Wind who proposed a table of analysis for the different buying phases. From their work we can distinguish six main phases:

1. Recognition, or better, anticipation of a need,

2. Definition of the characteristics and quantities to purchase,

3. Search and qualification of potential sources,

4. Collection and analysis of propositions,

5. Choice of suppliers and ordering process,

6. Information feedback and performance evaluation.

3.1.1 Anticipationandrecognitionofaneed

Anticipation of a need rather than mere recognition allows the company to gain time in terms of the technical delays of acquisition. It can orient the in- house decision makers, e.g. the marketing department, towards realistic or achievable solutions. In the same way, the attentive supplier who can effectively take care of his customers’ future problems, benefits from the atmosphere of confidence that he has thus created. The anticipation of needs relies on taking account of all in- house and external information exchanged. This means detecting signs of latent needs which have still not been formalized.

Within technical departments (cf. Figure 3.1), this could be improving quality by decreas-ing the amount of waste, or replacing equipment which damaged a certain cutting tool, or preparing for the substitution of a particular material that will soon be forbidden under new environmental norms, or protecting oneself against a one- off or long- term shortage which could occur through the dependence on a sole supplier. Concretely, information is made up of feedback on dissatisfaction to the buying department.

Technical DepartmentCustomer company Information

Purchasing DepartmentCustomer company

Figure3.1 – Information transfer from the technical department to the purchasing department

Within the sales and marketing department, this involves improving customer satisfaction by correcting a product’s weak point: integration of more recyclable products, replace-ment of an ergonomically unsatisfactory control button, a dial which is difficult to read, packaging which takes up too much room once empty, etc. (cf. Figure 3.2)

Marketing & SalesDepartment

Customer companyInformation

Purchasing DepartmentCustomer company

Figure3.2 – Information transfer from the marketing & sales department to the purchasing department

202475RLR_LIVRE.indb 34 31/07/13 08:14

Buying phases 35

This requires improving the transfer of information between the in- house departments.

For information coming from outside, everything depends on the capacity of the supplier to convince his in- house contact of the potential problem. This capacity is linked to the credibility that the supplier has been able to establish and the length of the relationship between the two companies. Part of the difficulty in anticipating needs is related to the product life cycle:

z If the product is in the maturity phase, the qualitative needs are easy to work out and even more so, the quantitative ones. It is a question of being watchful to detect the availability of a material or new tool which will allow an improvement in the company’s performance,

z If the product is a new one, the field is much bigger. Nothing is definitive. Only the confrontation of ideas between the top managers of the different departments will allow the best solution to be chosen. Since the quantitative evolution is difficult to appreciate, anticipation is likewise affected.

3.1.2 Definingthecharacteristicsandquantitiestobepurchased

Here the expected performance must be defined in terms of type of product, material, tools needed and the quantities necessary for a given period of time. Setting out a specification sheet answers these specificities. Apart from the essential technical sec-tion, the “Sales department” part must be prepared, stating the delivery constraints (times, frequency), as well as the logistics, payment delays, conditions for maintenance and after sales service. For high tech. products, specifications will be established by the management of the technical department (engineering, methods, norms) aided by users, i.e. supervisors, shop foremen, etc. If they are standardized products, the user department will immediately state their needs.

This phase is very important for the salesperson who will be able to work with “influ-encers”. This is the supplier’s active participation phase. He will be able to supply detailed information about the product and sometimes, about the production process and technical assistance. The more information he has, the more he will be listened to. The more knowledge offered, the more the salesperson will be accepted in the problem solving process. His action is an investment for the next phases.

Marketing literature makes the distinction between suppliers who are “in” or “out” according to whether or not they are already on the company’s books. It will be easier for the supplier to offer technical advice if he is already “in”, i.e. known within the company. He will be better placed to identify possible improvements than a supplier who is “out”.

One of the greatest difficulties for the salesperson is to identify the final decision maker. When it is about a new product, the latter is rarely a member of the buying department. He is rather within the General management or in the technical engineering department. The supplier, who is in, has thus a greater chance of knowing the different personnel and thus those with the greatest standing.

202475RLR_LIVRE.indb 35 31/07/13 08:14


3.1.3 Investigationandqualificationforpotentialsources

This phase consists of drawing up a list of potential suppliers. This must include not only the current “in” suppliers on company’s books, but also those, “out”, with whom there have already been exchanges in the past or who have never supplied the company.

The search for these suppliers should not be restricted to a given technology: a competi-tive solution can be obtained through different technological channels. In the plastics molding industry for example, most supplies are concerned with either thermoforming or injection molding. Both techniques can be competitive depending on the required qualities for materials (flexibility, resistance) and quantities. Consequently, the search for suppliers must cover both types. However, a supplier, already on company’s book does not mean that he will be chosen: this status will only allow him to be consulted.

One very popular method for drawing up a list of suppliers consists of listing the most dynamic companies present, along with their communications strategy, in the trade press. In addition, their participation in shows, the impression they make as exhibitors and fac-tory visits they propose, provide reasons to include them on the list of competitors or not.

Certain companies are even more dynamic: here, rather than waiting for proposals from suppliers, they do the first step. This method, dealt with later, is called “purchase marketing” (cf. chapter 5).

3.1.4 Collectingandanalyzingproposals

The collection of information must be objective and scrupulous, with no preconceived ideas and trying not to take previous experience into account. A grading table can be made and applied to the different propositions, emphasizing on:

z The criteria of quality and cost,

z How much the supplier needs to be present and the desired status.

Concerning equipment goods, negotiations can last several months. There are frequent exchanges of proposals and counter proposals between the company and its suppliers. Besides these rational arguments, the supplier who proposes a tailor- made solution has greater chances.

It is also during this phase that the respective advantages of the proposed solutions of in- house production and outsourcing will be compared: Make or buy? Each time the company can produce more economically than the lowest buying- in price, the in- house solution will be retained, as well as when confidentiality is essential for the customer company.

3.1.5 Choosingsuppliersandtheorderingprocess

Choosing the ordering process depends on in- house constraints, notably technical ones. For example just in time production needs a special organization to which the supplier must adhere to.

202475RLR_LIVRE.indb 36 31/07/13 08:14

Buying phases 37

The choice also depends on the proposals and possibilities of various suppliers depending on their own logistical organization:

z Proximity of supplier’s production site;

z The logistics center.

It should be noted that the buying procedure is only ended up once the product has been delivered and received by the company, checked in by the user department and declared to be usable. A change in ordering method is obviously possible, but it will involve a re- negotiation of the agreement between the company and its supplier.

3.1.6 Informationfeedbackandperformanceevaluation

00 Focus3.1

ThebuyingpostatRenault:“Thesupplierrelationshipdepartment”At Renault, approximately 800 people work in the buying department and are in charge of constantly analyz-ing and negotiating with suppliers. The main criteria are: quality, costs, delays, innovation, adaptation ability and improvement of components manufacturers and subcontractors. Purchases, which are strategic, represent more than 80% of the cost price of Renault cars. They need a specific organization putting together buyers, financial controller, computer scientists, logisticians, strategists and economists. Two areas are defined:

• Buying job: the sixteenth buyers (SRM: supplier relationship manager) are in charge of a group of buying job (i.e. bodywork) and have to lead the supplier relationship. They lean on about forty “suppliers develop-ment” consultants in charge of evaluating their weaknesses. The SRM is the privileged contact of suppliers which needs to:

0 Know the industrial and economic area of suppliers, 0 Look for suppliers able to come up with innovations or cost reduction, 0 Select suppliers on the parts, 0 Lead the negotiations (productivity plans…), 0 Elaborate and follow up improvement plans with everyone (costs, quality, delays), 0 Manage the capacities for transverse needs (checking of capacity and specific means: press, equip-

ment…) and find out solutions in case of insufficient capacity.• Buying project: buying project managers, operating upstream, are in charge of buying preparation for every

new project (new car model). They work with ten to twenty in charge of buying. It is a question of negoti-ating project’s purchases with suppliers, ensuring that specifications are respected (quality, costs), manag-ing supply matters along with the SRM.

Besides, are depending of the supplier relationship department: 0 A quality and development of suppliers department aimed at quality improvements at suppliers. 0 An entity of a hundred people in charge of managing the purchases, associated information systems and

running the setting up of electronic tools for inversed auctions (for simple and defined components), for online biddings (equality of suppliers in front of information, shortage of delays) and for collaborative tools of development (data exchange: specifications, numerical model, performance indicators, infor-mation on norms, quality insurance processes…).

0 The strategic cell that establishes purchase criteria and gives Renault’s strategic directions to sup-pliers. It follows up its suppliers’ financial situation who have to annually present their accounts. Meetings with main suppliers are organized every two years to let them know the purchase poli-tics of the group (price, quality, innovation, environment…) so that information will be conveyed to the other suppliers.

202475RLR_LIVRE.indb 37 31/07/13 08:14


A complete buying process necessitates a checking phase. It is only through feedback from the working environment that the buying center and the buying department in particular can evaluate whether they have made the right choice.

The two main areas are marketing- sales and the production department. The latter is the first in line to warn of anomalies or differences in the quality ordered and that actually received.

Apart from this quality follow- up, the production department can feed back information concerning the ease of the setting up or a wrong choice in terms of protection during transport, etc. However, the essential feedback will come from the sales department. Do customers notice a difference? Are they more satisfied?

Respect of the specification sheet will be judged from a technical and a commercial aspect: speed of delivery, regularity, flexibility, repair service capacity…

In order to facilitate information feedback, the buying department must do everything to catalyze the process, notably by explaining that a supplier’s position can never be taken for granted and that changes are always possible depending on reactions.

3.2 ThedifferentsituationsThere is another characteristic which renders business to business marketing even more complex: the importance of the respective representatives varies according to the type of buying. For an identical buy, the fact of buying it for the first time or the n’th time makes a difference. Three main types of buy can be distinguished:

z The straight rebuy,

z The modified rebuy,

z The new task.

3.2.1 Thestraightrebuy

The straight rebuy pattern is the most often encountered and corresponds to an almost unchanging need.

In this context, the company’s evaluation criteria are well known as are the appointed suppliers. Commercial relations are stabilized thus favoring the partners in place. To reinforce his position, the accredited supplier can go as far as to offer automatic restock-ing in order to make it even more difficult for a potential competitor, and the trend towards just- in- time production management tends to reinforce loyalty.

In most cases for this buying pattern, the decision maker remains the buyer or the top manager of the buying department, and in second place there are the users, whose experience benefits the company. For goods and complex services, the importance order is reversed: users then buyers. This is a classic pattern in the automotive industry, in construction, for spare parts and various components.

202475RLR_LIVRE.indb 38 31/07/13 08:14

The different situations 39

3.2.2 Themodifiedrebuy

This situation involves a wish to modify the response to an existing need. Indeed, this is true for a product in the maturity phase, for which the company would like an improve-ment in quality or reduced costs. As an example, we can cite the A319 Airbus airplane for a company that already owns A320 airplanes or the purchase of copy machine with different characteristics (integrated scanner, number of copies/minute…).

This situation can also hide an underlying dissatisfaction with current suppliers who, if they had only recognized the company’s expectations soon enough, could have proposed a modification or at the very least, a direction in which to conduct improve-ment research.

Here, the company will try to find out more information about other possible procedures and other possible suppliers. This is an opportunity for a supplier who is not on the company’s books, who will attempt to be the best regarding the particular improvement. It could also happen that this supplier is at the origin of the questions concerning the previous deal.

When changing a supplier becomes a possibility, the number of people to contact within the company increases: the buyer retains an important role, but the Production, Technical, Engineering and Quality Departments for example are concerned by the choice. They must verify that the proposed improvement does not mean a failing on another criterion.

3.2.3 Newtask

This situation involves the most interlocutors within the buying center. There are numer-ous interactions between the marketing department, the functional technical department (method, engineering, quality), and the production and buying department. Here, the risk is at a maximum, which is why the opinions of the influencers and advisors pre-dominate: external (they have already experienced such situation) and then in- house influencers. The buying department’s opinion no longer takes priority over that of the technical management. This is the most open type of buying situation for non- appointed suppliers.

In order to obtain new solutions, information is primordial and members of the buying center should spend a lot of time collecting and selecting it.

As shown in Figure 3.3, it is here that the Make or Buy alternative becomes apparent: either in- house production of the necessary material or buying from an outside source.

If the project is new and innovative, it could be useful to keep complete control. By making a particular spare part or component, the company will acquire new know how which will allow it to get to know the limits and demands of the type of material used. In addition, choosing in- house production could be the most discreet solution. According to how successful the product is a few years later, the company can still choose the buying- in solution.

Finally, this new task situation also corresponds to a new product launch phase and, in particular, when the price factor is less critical than that of quality.

202475RLR_LIVRE.indb 39 31/07/13 08:14


External stimulus

Problemrecognition

Internal stimulus

Choice : purchaseof the product

Proposal presentation

Product type?

Contact with potential suppliers

Search forquali�ed suppliers

Problem, solution,choice, alternatives

“Make or Buy?”

Need of anew product

Current suppliers

New suppliers

Screening listof suppliers

Supplier-CustomerInformation exchange

Evaluation ofthe proposals

Visit of suppliers’ manufactures

Supplier choice Ordering “Feedback”on performances

Figure3.3 – The decision- making process in a new task situation

3.3 MainmodelsThere has been a large amount of research and study since the sixties, concerning the behavior of industrial buyers. Following on from Levitt’s work which differentiated between repeated buying with modification, buying behavior modeling has developed and been enriched.

An analysis of the different research angles provides an overview21 of these develop-ments. Up to the 1980’s, most studies dealing with industrial buyer behavior focused on:

z Industrial customers, and understanding the buying decision and the factors which affect the choice of suppliers,

z The marketing decision from the suppliers side, aimed mainly at two distinct studies:

0 Those concerning the effect of a particular part or combination of parts of the marketing mix on the industrial markets,

0 Those concerning best adapted organizations to decision implementation.

These two approaches have increased our understanding of industrial buying behavior, in particular using methods from goods of the consumer market marketing:

z Globally, using models,

z Bit by bit, by analyzing a precise element of the buying process, a particular variable of the buying behavior, or by focusing on how the risk is perceived.

202475RLR_LIVRE.indb 40 31/07/13 08:14

202475RLR_LIVRE.indb 496 31/07/13 08:14

IndexA

win- win alliance 344associations 210cost price advantage 180technological advantage 179awareness 207, 212

B

baselines 234benchmarking 101, 143customer benefit 269, 273, 280, 286BOOT 66bottom- up 149brainstorming 107brand recall 208brand recognition 208B to B to E 273budgetization 196advertising budget 408business plan 190, 392Buyclass 41buyer side 52buygrid 41buyphases 41buy- side 13behaviour of professionnal purchasers 25industrial brand 205, 286corporate brand 225patronymic brand 226, 227

C

Specifications content 76call for tender 93catalogue 414buying center 8, 25, 28, 33,43, 68, 76, 78identity code 231, 235distribution channels 289,310

customer clubs 270clusters 89cobranding 214, 217codistribution 317collaborative manufacturing 110collective communication 392sale communication 378corporate communication 389, 403direct communication 340internal communication 393copy strategy 386, 387corporate investigators 103value creation 9cross- functional 115customer intimacy 284Customer Relationship Management

(CRM) 11, 164, 376, 432, 464Life cycle 239, 241

D

dealers 311deciders 27delphi 132derived demand 8, 16, 285design to cost 111desk research 99sustainable development 450, 451external diagnosis 192internal diagnosis 192differentiation 168, 169perceptual dimension 177direct costing 291industrial distributor 313direct distribution 313weighted distribution 140numerical distribution 139selective distribution 316technical documentation 416sale documents 414dumping 288

202475RLR_LIVRE.indb 497 31/07/13 08:14

Business to Business Marketing498

E

early adopters 111e- business 51ecomarketing 456learning effect 241e- informing 51Electronic Data Interchange 318Elected representatives 477e- marketplaces 12, 52empowerment 75eMRO 51entering goods 2, 224e- procurement 12, 33, 51e- purchasing 52e- reverse auctioning 51ERP 51e- sourcing 51, 52e- tendering 51ethics 28, 453experts 477sales engineers 347

F

facilitating goods 2, 224performance facilitation 215, 216, 218facility management 274customer fidelisation 212field research 99filters 29focus group 127, 131brand functions 211sales force 314, 340franchising 318

G

Industrial goods 2gatekeepers 29

I

Face- to- face interview 129identification 169visual identity 231

image 209immateriality 266IMP 50, 64incentives 203indivisibility 268influencers 29innovation 91intangibility 266Internet 56, 134, 418Customer intimacy 71, 179Intranet 11

J

jingles 231, 235joint- venture 104

K

Key- account 352knowledge management 11

L

line 161short line 256products line 255long line 256line width 255line length 256learning curve 240launching companies 30loyalty 210leasing 302lobbying 470shameful lobbying 471virtuous lobbying 471logistics 310, 364logo 226, 231low- cost 180

M

maintenance 267make or buy 36, 39gray market 300

202475RLR_LIVRE.indb 498 31/07/13 08:14

Index 499

purchase marketing 34, 36, 53business marketing 1, 285project marketing 3, 64, 168, 185environmental marketing 456surveys marketing 18, 168, 179interactive marketing 270internal marketing 270one- to- one 420operational marketing 168, 179reverse marketing 54strategic marketing 168, 179marketplaces 13, 52Matbuy Model 47, 48Material Requirements Planning 25Assets/attractiveness matrix 183, 185media- planning 23, 388Choffray and Lilien model 46Little model 182McKinsey model 181Robinson and Faris model 41Sheth model 43Webster and Wind model 43Interaction model 50Ozanne and Churchill model 41Modified Rebuy 39monitoring 103motto 232

N

negotiation 344New Task 39

O

objectives 199, 354one to many 51operational excellence 284Original Equipment Manufacturers (OEM)

2, 17

P

patents 100Industrial Purchase 32, 34Purchaseability 219, 220

Purchasers 27Penetration rate 212Product management 239Commercial Action Plan 147, 189, 199panels 125audience panels 125, 139dealer panels 125, 139User panels 125, 135functional performance 186relationnal performance 185perishability 267Purchase steps 34piggy- back 318communication Plan 380Marketing Plan 190communication policy 376brand policy 228product portfolio 105, 239, 247, 289positionning 146, 168, 211operationnal positionning 172perceptual positionning 177strategic positionning 174prescribers 29external prescribers 30internal prescribers 29prescription 31, 366, 370professionnal press 388, 407psychological price 292product leadership 284product oriented 147, 351production goods 2, 224Dilemma product 249Dog product 249Cash cow product 249Star product 249prospect 12, 341

Q

quality 268

R

RFP, Request for Proposal 56, 76, 93, 295RebuyStraight Rebuy 38

202475RLR_LIVRE.indb 499 31/07/13 08:14

Business to Business Marketing500

Modified Rebuy 39Desk research 9920/80 rule 150ABC rule 150, 289Press relations 414, 492Public relations 486Corporate and Social Responsability 467reverse engineering 102risk- sharing 17, 89perceived risk 26, 78back rebates 301

S

ad hoc surveys 124, 152holder market share 141share of voice 139, 383, 384market surveys on line 12qualitative surveys 121, 129, 171quantitative surveys 121, 133, 171supply chain 8, 16, 146Supplier invitation 56segmentation nested approach 158Sales Force Automation 345scanning 103screening 110, 186segmentation 57, 145, 168bottom- up segmentation 149Bonoma and Shapiro segmentation 158Top- down segmentation 148Wind and Cardozo segmentation 157seller side 52sell- side 13professional services 274short- list 28MIS Marketing Information System 346information sources 94sourcing 28sub- contractor 74stakeholders 474Straight Rebuy 38strategy 179skimming strategy 296brand strategy 205penetration strategy 297visibility strategy 220pull strategy 108

push strategy 107Supplier Choice Model 47Supplier Relationship Management 28supply chain 76sustainable development 450

T

targeting 168training 359communication targets 382task force 114top- down 148top of mind 208trade shows 388reverse trade shows 54professional trade shows 400tracking 12, 214

U

Unique Selling Proposition 170users 31

V

Perceived value 292visibility 219

W

watching 92sales watching 93competitive watching 93environmental watching 94technological watching 94win- win 57

Y

yield management 267, 292, 298

Z

zero stock 9

202475RLR_LIVRE.indb 500 31/07/13 08:14

BU

SIN

ESS

TO

BU

SIN

ESS

MA

RK

ETI

NG

PH

ILIP

PE

MA

LA

VA

LC

HR

IST

OP

HE

BÉ

NA

RO

YA

ISBN : 978-2-8041-8267-0

www.deboeck.com

The Handbook Reference for BtoB Marketing”

“Business to Business Marketing” is the reference hand-book for years in the French speaking countries. It encom-passes the diverse BtoB contexts and combines the mostrecent academic research to the best business practices.Hence it is an operational guide to better adapt the marke-ting techniques and tools to professional targets. Writtenby experts, Business to Business Marketing provides all thesteps of the Marketing Approach in an exhaustive and ope-rational way:• The “surveys marketing” (market watch, innovation ma-nagement, segmentation)• The “strategy marketing” (positioning, marketing plan andstrategic matrices)• The “operational marketing” dealing with the elaborationof the offering (innovative product/service, pricing, salesmanagement),and its valorization (communication, lob-bying, networking).Moreover this book is enhancing the increasing role playedby the final user in the BtoB value chain. Beside the directcustomer organization, three other target types are to betaken into account:

• The employees of the customer organization – B to B toEmployee (BtoBtoE)• The consumers of the customer organization – B to B toConsumer (BtoBtoC)• The users of the customer organization (energy, transpor-tation utilities, administration…) – B to Administration toUser (BtoAtoU).

In the business context, customers and diverse stakehol-ders as well might be targeted, especially in project mar-keting environment, and complex selling processes, bothin terms of relational and transactional activities. Additio-nally, the recent trends in e-communication are developed,including the use of Internet and Social Medias.

Pedagogically oriented, the book is user-friendly, based onnumerous examples and business cases, from different sec-tors and companies (IT, telecom, building industry, aero-nautics, catering, car equipment, consultancy, etc.). Itpresents a lot of visual illustrations. Each chapter encom-passes questions and a dedicated business case, deliveringan efficient and attractive handbook.

Key features

e The book is pedagogically oriented. It is basedon numerous examples and business cases

r It is the reference handbook for years in the French speaking countries

t It presents a lot of visual illustrations

u Examples are from different sectors andcompanies (IT, telecom, building industry,aeronautics, catering, car equipment, consultancy...)

i Each chapter encompasses questions and a dedicated business case

“

Target: students in Management Schools and Universities, Engineering Schools,Managers in Industrial Product and Services Companies.Programmes: BtoB marketing, Industrial Marketing, Project Marketing, Business Marketing, BtoB Communication, Purchasing Behaviour, Segmentation/Positioning, Surveys.Levels: Executive MBA, MBA, Master 2 in marketing/communication/Sale ofproducts and services BtoB, 2nd and 3rd year of Schools and Universities,masters, academic and executive programmes.

BTOBMAR

P H I L I P P E M A L AVA L graduated from Toulouse Business School, Doctor in management and habilitatedto supervise research, is Professor of marketing, in charge of several Master Pro-grammes and MBAs or DBAs. He is also teaching in Engineering Schools. Experi-enced from the Industrial field, he founded and manages Business Conseil.Specialised in BtoB marketing, he is the author or co-author of several books fromStrategy and Management of Industrial brands (published in Usa), BtoB brandsand Aerospace Marketing Management with Christophe Bénaroya (published inUsa, Italy, China). He is also the author of Pentacom with Jean-Marc Décaudin.

C H R I S T O P H E B É N A R O YA graduated from Toulouse Business School, Doctor in Management is Professor ofMarketing, after several years in the corporate field. He is in charge of the MarketingManagement and Communication Master, and the B2B Programme. Consultant forseveral industrial companies, he is notably the co-author with Philippe Malaval ofAerospace Marketing Management and BtoB Brands, and the co-author of Sales Effi-ciency in BtoB.

BTOBMAR_Ok_Mise en page 1 01/08/13 10:03 Page1

the handbook reference for btob marketing” philippe ... · marketing, after several years in the...

Documents