B2B Marketing - Summary

Business (B2B) MarketingBusiness (B2B) MarketingIFMR – PGDM II Yr. (2009-10)IFMR – PGDM II Yr. (2009-10)

Module 1Module 1Overview of Business marketingOverview of Business marketing

S.BalachandranS.Balachandran

July 2009July 2009

Learning ObjectivesLearning Objectives

• What is ‘Business Marketing’?What is ‘Business Marketing’?– Classification of B2B Products/Services, Classification of B2B Products/Services,

Markets & CustomersMarkets & Customers

• Differences between Consumer & Differences between Consumer & Business Markets & MarketingBusiness Markets & Marketing

• B2B Buying Orientations & CharacteristicsB2B Buying Orientations & Characteristics

July 2009 © S.Balachandran 2 of 37

July 2009 © S.Balachandran

Business Enterprises : Activities Business Enterprises : Activities

Outputs• Services• Goods

Outputs• Services• Goods

B2B Transformation

Processes

5

1

2

3

4

Inputs• Materials• Components• Consumables• Services

Resources• Equipment• Facilities• Systems• Land• Human

Inputs• Materials• Components• Consumables• Services

Resources• Equipment• Facilities• Systems• Land• Human

Consumer or B2B Markets

Either part of Output OR facilitating the Transformation

Either part of Output OR facilitating the Transformation

• For Consumption• For Use• For Resale

• For Consumption• For Use• For Resale

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B2B Goods & ServicesB2B Goods & Services


Industrial Production CategoriesIndustrial Production Categories


Business ServicesBusiness Services


B2B Markets & CustomersB2B Markets & Customers

• Commercial EnterprisesCommercial Enterprises– UsersUsers– OEMsOEMs– ResellersResellers– Service ProvidersService Providers

• Institutions : Profit/Non-ProfitInstitutions : Profit/Non-Profit– Educational, Healthcare, NGOsEducational, Healthcare, NGOs

• Government / Quasi-Govt. BodiesGovernment / Quasi-Govt. Bodies– Central, State, Local, PSUs, DefenceCentral, State, Local, PSUs, Defence


Some Indian B2B EnterprisesSome Indian B2B Enterprises

• BHEL / NTPCBHEL / NTPC• ECC (L&T) / Hindustan ConstructionECC (L&T) / Hindustan Construction• TCS / Infosys / WIPRO / CTSTCS / Infosys / WIPRO / CTS• ORG Marg / R K Swamy BBDOORG Marg / R K Swamy BBDO• SAIL / Tata SteelSAIL / Tata Steel• MICO / Sundaram Clayton / Bharat Forge / MICO / Sundaram Clayton / Bharat Forge /

Bimetal Bearings / Delphi TVSBimetal Bearings / Delphi TVS• ONGC/ Neyveli Lignite Corp. / Bharat Coking ONGC/ Neyveli Lignite Corp. / Bharat Coking

CoalCoal• IPCL / Gujarat Alkalis / Tata ChemicalsIPCL / Gujarat Alkalis / Tata Chemicals• Shipping Corporation of India / TVS LogisticsShipping Corporation of India / TVS LogisticsJuly 2009 © S.Balachandran 8 of 37


Value EquationValue Equation ‘ ‘Product’ or ‘Service’ satisfies a ‘need’ or Product’ or ‘Service’ satisfies a ‘need’ or

‘want’ by providing ‘value’.‘want’ by providing ‘value’.

Attributes/Features

Attributes/Features BENEFITSBENEFITS VALUEVALUE

NETT VALUE = BENEFITS - COSTSNETT VALUE = BENEFITS - COSTS

VALUEDELIVERY SYSTEM

VALUEDELIVERY SYSTEM

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Value Creation & DeliveryValue Creation & Delivery

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Marketing StrategyMarketing Strategy


• Unique to each distinct Product-Market segmentUnique to each distinct Product-Market segment• Five Main ElementsFive Main Elements

– SegmentationSegmentation– TargetingTargeting– PositioningPositioning– DifferentiationDifferentiation– Marketing MixMarketing Mix

Differentiation

RECAP

Capabilities RequiredCapabilities Required• Market SensingMarket Sensing• Customer LinkingCustomer Linking


Value Creation & Delivery SystemValue Creation & Delivery System

Provide the value

Communicate the value

Understand Value Desires

Select Targets

Define Benefits/ Price

Understand & Create the Value

• Market Research• Customer Behaviour

• Market Research• Customer Behaviour

• Product- Market Segments• Position

• Product- Market Segments• Position

• Differentiation• Product Management

• Differentiation• Product Management

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Providing the ValueProviding the Value

Commu-nicate

the value

Choose the

valueProvide the Value

Technology Design Product Distribute Service Price

Procure, Manu-facture

• Source• Sophisti- cation• Patents• Process Choice

• Source• Sophisti- cation• Patents• Process Choice

•Function• Physical characteristics• Aesthetic• Quality

•Function• Physical characteristics• Aesthetic• Quality

• Integration• Raw Mtl.• Capacity• Location• Part Prodn.• Assembly

• Integration• Raw Mtl.• Capacity• Location• Part Prodn.• Assembly

• Channels• Integration• Inventory• Ware- housing• Transport

• Channels• Integration• Inventory• Ware- housing• Transport

• MRP• Negotiation• Discount• Combo• Financing• Other Costs

• MRP• Negotiation• Discount• Combo• Financing• Other Costs

• Warranty• Speed• Captive/ Indepen- dent• Parts

• Warranty• Speed• Captive/ Indepen- dent• Parts

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Communicating the ValueCommunicating the Value

Choose the

ValueProvide the Value

Communicate the Value

INTEGRATED MARKETING• Direct Sales Force• Distribution Channel Partners• Brochures, Website, Email• Advertising & Promotions• Physical Evidence• Employees• Processes

INTEGRATED MARKETING• Direct Sales Force• Distribution Channel Partners• Brochures, Website, Email• Advertising & Promotions• Physical Evidence• Employees• Processes

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Value ExpectationsValue Expectations


Consumer Markets• Monetary Benefits• Look/Feel Better Aesthetics/ Psychological Benefits• Social Benefits• Convenience Place/Time• Quick Service

B2B Markets• Economic Benefits Cost of Procurement/ Transport/ Storage/ Ownership/ Usage/ Maintenance/ Modification/ Disposal

• Help in Maintenance/ Service/ Repair/ Upgradation/ Performance Improvement

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Value Hierarchy – Product LevelsValue Hierarchy – Product LevelsCORE BENEFITFundemental Benefit customer isreally buying

BASIC PRODUCTBuilt around Core Benefit

EXPECTED PRODUCTAttribute & conditions buyersNormally expect

AUGMENTED PRODUCTExceeds Customer Expectations

POTENTIAL PRODUCT All possible augmentations &Transformations product mightUndergo in future Customer Delight !

Framework for B2B MarketingFramework for B2B Marketing


Key Differences:B2B vs Consumer Marketing Key Differences:B2B vs Consumer Marketing


MARKETINGCUSTOMER MANUFACTURING

External Environment Internal Environment

ExternalLinkage

InternalLinkage

Derived DemandComplex Buying Process

Concentrated Customer Base

Emphasis on Technology High Level of Customisation

Made to Order

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Nature of B2B DemandNature of B2B Demand

• Derived Derived Fluctuating Fluctuating– Necessity to Necessity to monitor changesmonitor changes in in Demand Demand

PatternsPatterns of of Customers’ CustomersCustomers’ Customers

• Stimulation of Stimulation of Primary DemandPrimary Demand & & popularising popularising new applicationsnew applications

• Price Sensitivity/Demand Elasticity in B2BPrice Sensitivity/Demand Elasticity in B2B– Depends on B2CDepends on B2C

• OpportunitiesOpportunities of of Global MarketsGlobal Markets & & ImpactImpact of of Global CompetitionGlobal Competition : much more in B2B : much more in B2B than B2Cthan B2C


Complexity of Buying ProcessComplexity of Buying Process

• Strategic Importance of itemStrategic Importance of item– Senior Management InvolvementSenior Management Involvement

• Cost : High, Medium, LowCost : High, Medium, Low– Different Buying ProcessesDifferent Buying Processes– Relative Importance of financial ApprovalsRelative Importance of financial Approvals

• Complexity of need servicedComplexity of need serviced– Level of Customisation & Service requiredLevel of Customisation & Service required– Multi-functional ScrutinyMulti-functional Scrutiny

• Complexity of Buying OrganisationComplexity of Buying Organisation– Centralised vs Decentralised AuthorityCentralised vs Decentralised Authority


Concentrated Customer BaseConcentrated Customer Base

• Direct sellingDirect selling– More EconomicalMore Economical– Customer ExpectationCustomer Expectation

• Buyer Bargaining Power Buyer Bargaining Power – Competitor Influence on BuyerCompetitor Influence on Buyer– Management of Short Term setbacksManagement of Short Term setbacks

• Close RelationshipsClose Relationships– Monitor happenings @ Customer endMonitor happenings @ Customer end– Expectations of C, Q, D, S, R1 & R2Expectations of C, Q, D, S, R1 & R2


Emphasis on TechnologyEmphasis on Technology

• Constant pressure to improve/ upgrade/ Constant pressure to improve/ upgrade/ innovateinnovate

• Collaborative Design & DevelopmentCollaborative Design & Development

• Product Performance OrientationProduct Performance Orientation– Performance to Price RatioPerformance to Price Ratio

• Expected to provide SolutionExpected to provide Solution– Understanding of Customer Business Understanding of Customer Business

• Selling : Technical / Multi-Functional SkillsSelling : Technical / Multi-Functional Skills


High Level of CustomisationHigh Level of Customisation

• Inflexible technical SpecificationsInflexible technical Specifications

• Sometimes necessary for manufacturer Sometimes necessary for manufacturer to redesign / re-layout operations to redesign / re-layout operations facilitiesfacilities

• Even standard products: Installation, Even standard products: Installation, Configuration, Service & Support may Configuration, Service & Support may have to be highly customisedhave to be highly customised


Differences in Emphasis : B2B vs B2CDifferences in Emphasis : B2B vs B2C


Nature of Products Nature of Products B2B Marketing B2B Marketing

• Manufactured Materials & PartsManufactured Materials & Parts– Custom-made partsCustom-made parts

• Personal selling & CRMPersonal selling & CRM• Design & Supply Chain capabilitiesDesign & Supply Chain capabilities

– Standardised PartsStandardised Parts• Contractual Purchase, Large quantitiesContractual Purchase, Large quantities• Price, Delivery, Support servicePrice, Delivery, Support service• Resellers usedResellers used


Nature of Products Nature of Products B2B Marketing B2B Marketing (Contd.)(Contd.)

• InstallationsInstallations– Product, Technology, Service CapabilitiesProduct, Technology, Service Capabilities– Personal Selling & Account ManagementPersonal Selling & Account Management– Less Costly, More StandardisedLess Costly, More Standardised

• Marketing IntermediariesMarketing Intermediaries

– Costly, more involvedCostly, more involved• Close relationshipsClose relationships• Long negotiationsLong negotiations• Several Executives of buyer organisation involvedSeveral Executives of buyer organisation involved


Nature of Products Nature of Products B2B Marketing B2B Marketing (Contd.)(Contd.)

• SuppliesSupplies– Large Users: Direct MarketingLarge Users: Direct Marketing– Smaller Users: Marketing IntermediariesSmaller Users: Marketing Intermediaries– Strong eProcurement tendenciesStrong eProcurement tendencies– Less Personal SellingLess Personal Selling– More of Catalogue approachMore of Catalogue approach– Price & Range criticalPrice & Range critical


Distinctive Capabilities for B2B MarketingDistinctive Capabilities for B2B Marketing


Supply Chain Management

Mgmt. of

Strategic

Alliances

Mgmt. of

Hybrid Channels

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Goals of PurchasingGoals of Purchasing


Total Cost of OwnershipTotal Cost of Ownership


Factors that drive total cost.Factors that drive total cost.

Acquiring and managing costs.Acquiring and managing costs.

Quality, reliability over the life cycle.Quality, reliability over the life cycle.

Value of product to firm/customers.Value of product to firm/customers.

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Procurement DevelopmentProcurement Development


SourceNegotiate

Manage Info &Logistics

Value Analysis &Complexity mgmt.

StrategicPartnership

Segmenting the BuySegmenting the Buy


KSFs

Demonstrated Capabilities─ Skilled Personal selling

Cost & RangeEfficient Management of

Info & Logistics

StrategicPartnership

Procurement ProcessesProcurement Processes

• Source ApprovalSource Approval

• Contract (annual) / Non-contractContract (annual) / Non-contract

• Inventory Control SystemsInventory Control Systems

• eProcurementeProcurement

• Reverse Auction – eBiddingReverse Auction – eBidding• Tiered Structure Tiered Structure (Ex. Fig 1.5, p15)(Ex. Fig 1.5, p15)


Government ProcurementGovernment Procurement


• Compliance Compliance -- requires government contractors maintainrequires government contractors maintain

affirmative action programs.affirmative action programs.

• Compliance Compliance -- requires government contractors maintainrequires government contractors maintain

affirmative action programs.affirmative action programs.

• Minority-subcontracting Minority-subcontracting -- may require major may require major contractors subcontract a certain percentage of the contractors subcontract a certain percentage of the contract to minority firms.contract to minority firms.

• ReservationReservation - - a percentage of the contract is set asidea percentage of the contract is set aside

for small minority businesses.for small minority businesses.

• ReservationReservation - - a percentage of the contract is set asidea percentage of the contract is set aside

for small minority businesses.for small minority businesses.

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Govt. ContractsGovt. Contracts


1.1.Fixed-price contractsFixed-price contracts• Price agreed to Price agreed to before contract awardbefore contract award• Payment made at Payment made at conclusion of workconclusion of work• Provides for the greatest Provides for the greatest profit potentialprofit potential• Poses greater Poses greater risksrisks

2.2.Cost-reimbursement contractsCost-reimbursement contracts• Reimbursement of Reimbursement of allowableallowable costs costs• Price = Cost + Profit%Price = Cost + Profit%• Disclosure of Cost StructureDisclosure of Cost Structure

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Govt. ProcurementGovt. Procurement

• AgenciesAgencies– Defence BodiesDefence Bodies– DGS&DDGS&D– PSUsPSUs– CommitteesCommittees

• ProcessProcess– TenderingTendering– Approved Supply sourcesApproved Supply sources– NegotiationNegotiation


Institutional ProcurementInstitutional Procurement

• Schools, health care organizations, non-Schools, health care organizations, non-profit agenciesprofit agencies

• Similar to government buyersSimilar to government buyers– PoliticalPolitical considerations and considerations and lawslaws

• Similar to commercial buyersSimilar to commercial buyers– Often managed like corporationsOften managed like corporations– Broad range of purchase requirementsBroad range of purchase requirements

• Group purchasing quite commonGroup purchasing quite common


B2B Marketing - Summary

Documents

brochur s

sal s forc distribution

b2b markets3 f

benefits value nett

b tt r

value equationproduct

unicat th valu sourc

unicat th valu int g