Business MarketingManagement: B2B
lie
MICHAEL D. HUTT
Arizona State University
THOMAS W. SPEH
Miami University
* rf SOUTH-WESTERNt % CENGAGE Learning-
Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States
CONTENTS
Preface VII
PARTI i
Chapter 1 A Business Marketing Perspective 3Business Marketing 4
Business Market Customers 5
Commercial Enterprises as Customers 6
A Concentration of Customers 6
Government Units as Customers 7
Institutions as Customers 7
Business Marketing Management 8
B2B TOP PERFORMERS: Jim Ryan, Chairman, President and Chief ExecutiveOfficer, W. W. Grainger, Inc. 9
Business Markets versus Consumer-Goods Markets 10
What Makes a Marketing Leader? 11
Creating the Customer Value Proposition 12
Characteristics of Business Markets 14
Business and Consumer Marketing: A Contrast 15
Smucker: A Consumer and Business Marketer 16
Distinguishing Characteristics 17
A Relationship Emphasis 17
The Supply Chain 18
Supply Chain Management 19
Managing Relationships in the Supply Chain 20
Commercial Enterprises as Consumers 20
Classifying Goods for the Business Market 22
Entering Goods i 22
Foundation Goods 22
Facilitating Goods 24
Business Marketing Strategy 25
Illustration: Manufactured Materials and Parts 25
Illustration: Installations 26
Illustration: Supplies 26
A Look Ahead 27
Contents
Summary 28
Discussion Questions 29
Internet Exercises *! 30
Case: The Middleby Corporation 31
Discussion Questions 32
Chapter 2 Organizational Buying Behavior 35The Organizational Buying Process 36
The Search Process 37
New Task 38
Straight Rebuy 39
Modified Rebuy 41
Environmental Forces 42
Economic Influences 43
Technological Influences 43
Organizational Forces 44
Growing Influence of Purchasing 44
Strategic Priorities in Procurement 44
Procurement Manager's Toolkit 46
Total Cost of Ownership (TCO) 46
INSIDE BUSINESS MARKETING: Use TCO to Inform Next Car Purchase 46
; Strategy Response: Develop Value-Based Sales Tools 47
Segmenting Purchase Categories 47
E-Procurement 49
Reverse Auctions 49
Organizational Positioning of Purchasing 50
Strategy Response: Key Account Management , 50
ETHICAL BUSINESS MARKETING: Gift Giving: "Buy Me These Boots andYou'll Get My Business" 51
Group Forces ' 52
The Buying Center 52_
INSIDE BUSINESS MARKETING: Innovate and Win with BMW 54
Buying Center Influence 54
Individual Forces 56
Differing Evaluative Criteria 57
Information Processing 57
Risk-Reduction Strategies 58
Contents xix
Summary 59
Discussion Questions 60
Internet Exercises \ 61
Case: Sealed Air Corporation: Delivering Packaging Solutions 62
Discussion Questions 63
Chapter 3 Customer Relationship ManagementStrategies for Business Markets 64
Relationship Marketing • 65
Types of Relationships 66
Value-Adding Exchanges 67
Nature of Relationships 67
Strategic Choices 67
Managing Buyer-Seller Relationships 68
Transactional Exchange 68
Collaborative Exchange 68
Switching Costs 69
Strategy Guidelines 69
Measuring Customer Profitability 71
Activity-Based Costing 71
Unlocking Customer Profitability 71
The Profitable Few 72
Managing High- and Low-Cost-to-Serve Customers 73
INSIDE BUSINESS MARKETING: Loyalty and Customer Profitability 75
Managing Unprofitable Customers 75
Firing Customers 75
Customer Relationship Management 76
Acquiring the Right Customers 78
Crafting the Right Value Proposition 79
Instituting the Best Processes 81
Motivating Employees 82
Learning to Retain Customers 1 83
Relationship Marketing Success 84
Drivers of Relationship Marketing Effectiveness 84
Relationship Marketing (RM) Programs 86
Financial Impact of RM Programs 87
Targeting RM Programs 87
Contents
Summary 88
Discussion Questions 89
Internet Exercises 90
Case: IBM Challenge: How to Serve a Diverse Mixof Demanding Customers 91
Chapter 4 Segmenting the Business Market andEstimating Segment Demand 95
Business Market Segmentation Requirements and Benefits 96
Requirements 97
Benefits 97
INSIDE BUSINESS MARKETING: How to See What's Next 98
Bases for Segmenting Business Markets 99
INSIDE BUSINESS MARKETING: Balancing Risk and Return in aCustomer Portfolio 100
Macrolevel Bases 100
Microlevel Bases 103
Illustration: Microsegmentation 106
The Segmentation Process 107
Choosing Market Segments 107
Isolating Market Segment Profitability 108
Implementing a Segmentation Strategy 109
Estimating Segment Demand 109
The Role of the Demand Estimation 109
Methods of Forecasting Demand 111
Qualitative Techniques 111
Quantitative Techniques 113
CPFR: A New Collaborative Approach to Estimating Demand 115
Combining Several Forecasting Techniques 115
Summary ' 116
Discussion Questions 116
Internet Exercises . 117
Case: Federated Insurance: Targeting Small Businesses 118
Cultivating Business Relationships 118
Discussion Questions 119
Contents xxi
Chapter 5 Business Marketing Planning:Strategic Perspectives 123
Marketing's Strategic Role 124
The Hierarchy of Strategies 124
Strategy Formulation and the Hierarchy 126
Functionally Integrated Planning: The Marketing Strategy Center 128
B2B TOP PERFORMERS: Cross-Functional Relationships: Effective ManagersDeliver on Promises 129
The Components of a Business Model 130
Customer Interface 131
Core Strategy 131
B2B TOP PERFORMERS: Winning with a New Business Model at Dow Corning 132
Strategic Resources 133
The Value Network 133
Strategic Positioning 134
Strategic Positioning Illustrated 135
Building the Strategy Plan 136
The Balanced Scorecard 137
Financial Perspective 137
Customer Perspective 139
Internal Business Process Perspective 140
Strategy Map 142
Summary 144
Discussion Questions 145
Internet Exercises 146
Case: Intuit's Solutions for Small and Medium-Sized Businesses 147
Discussion Questions 147
Chapter 6 Business Marketing Strategiesfor Global Markets 148
Capturing Global Advantage 149
Market Access 151Resource Access 152
INSIDE BUSINESS MARKETING: How Offshore Outsourcing AffectsCustomer Satisfaction—and a Company's Stock Price! 154
xxii Contents
Local Adaptation 154
Network Coordination 155
INSIDE BUSINESS MARKETING: Made in America—Again 156
Global Market Entry Options 156
Exporting 156
Contracting 158
Strategic Global Alliances (SGA) 159
Joint Ventures 160
Choosing a Mode of Entry ;' 161
Multi-domestic versus Global Strategies 162
Source of Advantage: Multi-domestic versus Global 162
Types of International Strategy 163
A Strategic Framework 165
Global Strategy 166
Build on a Unique Competitive Position 166
Emphasize a Consistent Positioning Strategy 166
Establish a Clear Home Base for Each Distinct Business 166
Leverage Product-Line Home Bases at Different Locations 167
Disperse Activities to Extend Home-Base Advantages 167
Coordinate and Integrate Dispersed Activities ' 168
Summary 168
Discussion Questions 169
Internet Exercise 170
, Case: Schwinn: Could the Story Have
Been Different? 171
Alternative Reality One: Aim High 171
Alternative Reality Two: If You Can't Beat Them, Join Them 171
Discussion Questions 172
Chapter 7 Managing Products for BusinessMarkets 173
Building a Strong B2B Brand J 174
Brand-Building Steps 175
Brand Strategy Guidelines 177
Profiling a Strong Brand: IBM 178
Product Quality and Customer Value 179
Meaning of Quality , 180
Contents xxiii
Sustainability: Strategic Imperative . 180
GE's Ecomagination Marketing Campaign 182
Meaning of Customer Value >: 182
B2B TOP PERFORMERS: Green Is Green 183
Product Support Strategy: The Service Connection 185
Product Policy 185
Types of Product Lines Defined 186
Defining the Product Market 186
B2B TOP PERFORMERS: BASF: Using Services to Build a Strong Brand 188
Planning Industrial Product Strategy 188
Product Positioning 189
The Process 189
Isolating Strategy Opportunities 190
Product Positioning Illustrated 190
the Technology Adoption Life Cycle 191
Types of Technology Customers 191
Strategies for the Technology Adoption Life Cycle 192
INSIDE BUSINESS MARKETING: The Gorilla Advantage in High-Tech Markets ' 193
The Bowling Alley 193
The Tornado 194
Main Street 195
Summary 196
Discussion Questions 195? Internet Exercise 197
Case: Hidden Inside: International Flavors & Fragrances, Inc. 198
Discussion Questions 198
Chapter 8 Managing Innovation and NewIndustrial Product Development 199
, The Management of Innovation 200
Induced Strategic Behavior ? 201
Autonomous Strategic Behavior 201
Product Championing and the Informal Network 203
Conditions Supporting Corporate Entrepreneurship 204
Managing Technology 204
Classifying Development Projects 205
A Product-Family Focus 206
The Disruptive Innovation Model 206
xxiv Contents
INSIDE BUSINESS MARKETING: Disrupters Pull Different Innovation Levers 208
Illustration: A New-Market Disruption 209
Innovation Winners in High-Technology Markets 210
The New-Product-Development Process 212
What Drives a Firm's New Product Performance? 212
Anticipating Competitive Reactions 214
Sources of New Product Ideas 214
B2B TOP PERFORMERS: Inviting New Product Suggestions 215
Determinants of New Product Performance and Timeliness 217
The Determinants of Success 217
Fast-Paced Product Development 219
Summary 220
Discussion Questions 221
Internet Exercise 222
Case: Vscan: GE Healthcare's Pocket-SizedImaging Device 223
Discussion Questions 223
Chapter 9 Managing Services for Business ^ ^ ,Markets 224
Understanding the Full Customer Experience 225
The Customer Experience Life Cycle 225
Applying the Customer Experience Map 226
Customer Experience Management t 226
A Solution-Centered Perspective 228
Delivering Effective Customer Solutions 229
The Supplier's Role 230
The Customer's Role 231
B2B TOP PERFORMERS: Smart Customer Solutions from IBM 232
Choose Customers Wisely 232
Benefits of Solution Marketing 233
Business Service Marketing: Special Challenges 233
Services Are Different 234
Tangible or Intangible? 235
Simultaneous Production and Consumption 235
Service Variability 236
Service Perishability 236
Contents xxv
INSIDE BUSINESS MARKETING: Do Service Transition Strategies Pay Off? 237
Nonownership 237
Service Quality \ 238
Dimensions of Service Quality 238
Customer Satisfaction and Loyalty 239
Service Recovery 239
Zero Defections 240
Return on Quality 240
Service Packages 241
Customer-Benefit Concept 241
Service Concept 241
Service Offer 242
Service Delivery System 243
Service Personnel 243
Hybrid Offerings 243
Unique Resources Manufacturing Firms Can Leverage 244
Distinctive Capabilities for Launching Hybrid Offerings 245
Classifying Services for Hybrid Offerings 246
Summary ^ 249
Discussion Questions 249
Internet Exercises 250
Case: Paychex, Inc. 251
Discussion Questions ^ _ _ 251
Chapter 10 Managing Business MarketingChannels 252
The Business Marketing Channel 253
Direct Channels 254
Indirect Channels 255
Integrated Multichannel Models 255
Participants in the Business Marketing Channel 258
Distributors 258
INSIDE BUSINESS MARKETING: W. W. Grainger: Profile of a Leading-EdgeIndustrial Distributor 259
Manufacturers' Representatives 261
B2B TOP PERFORMERS: Why Intel Uses Reps 262
Channel Design 263
Step 1: Define Customer Segments 264
Step 2: Identify Customers' Channel Needs by Segment 265
xxvi Contents
Step 3: Assess the Firm's Channel Capabilities 266
Step 4: Benchmark to Competitors 266
Step 5: Create Channel Solutions for\Customers' Latent Needs 266
Step 6: Evaluate and Select Channel Options 266
Crucial Points in Channel Transformation 267
Channel Administration 267
Selection of Channel Members 268
Motivating Channel Members 268
Summary _ 270
Discussion Questions 271
Internet Exercises 271
Case: Snap-on, Inc.: A Unique Go-to-MarketStrategy 272
Discussion Questions 272
Chapter 11 Supply Chain Management 273Supply Chain Management: A Tool for Competitive Advantage 275
Supply Chain Management Goals 275
Benefits to the Final Customer 277
INSIDE BUSINESS MARKETING: When the Supply Chain Gets Disrupted 278
The Financial Benefits Perspective 278
Information and Technology Drivers 279
Successfully Applying the Supply Chain Management Approach 280
Successful Supply Chain Practices 280
B2B TOP PERFORMERS: Making Supplier Relationships Work 281
Logistics as the Critical Element in Supply Chain Management 282
Distinguishing Between Logistics and Supply Chain Management 282
Managing Flows 282
The Strategic Role of Logistics 283
Sales-Marketing-Logistics Integration 283
Just-in-Time Systems 284
Total-Cost Approach ? 285
Calculating Logistics Costs 286
Activity-Based Costing 286
Total Cost of Ownership 286
Business-to-Business Logistical Service 287
Logistics Service Impacts on the Customer 288
Determining the Level of Service 288
Contents xxvii
Logistics Impacts on Other Supply Chain Participants 289
Business-to-Business Logistical Management 289
Logistical Facilities ^ 289
Transportation 290
Inventory Management 292
INSIDE BUSINESS MARKETING: The Profit Impact of Inventory Management 293
Third-Party Logistics 293
Summary 294
Discussion Questions •• 295
Internet Exercises 296
Case: Supply Chain Issues at Optimal Medical Parts Company 297
Discussion Questions 298
Chapter 12 Pricing Strategies for BusinessMarkets 299
The Pricing Process in Business Markets 300
Price Objectives " 301
Demand Determinants 302
Value-Based Pricing Illustrated 305
Cost Determinants 307
Competition 309
Pricing across the Product Life Cycle 311
Pricing New Products 311
INSIDE BUSINESS MARKETING: Understanding the Economic Valueo'f New Products ' 313
Legal Considerations 313
Responding to Price Attacks by Competitors ° 314
Evaluating a Competitive Threat 314
Understanding the Rules of Competitive Strategy 316
Competitive Bidding 317
Closed Bidding 317
Open Bidding j 318
Strategies for Competitive Bidding 318
Summary 319
Discussion Questions 320
Internet Exercise 321
Case: Free-Product Competitors Challenge Microsoft 322
Discussion Questions 322
xxviii Contents
Chapter 13 Business Marketing Communications:Advertising and Sales Promotion 323
Business-to-Business (B2B) Social Media 325
Dell's Social Media Brand 325
The Customer Decision Journey 326
Charting CDJ 326
The Role of Advertising 328
Integrated Communication Programs 328
Enhancing Sales Effectiveness T 328
Increased Sales Efficiency 328
Creating Awareness 329
What Business-to-Business Advertising Cannot Do 329
Managing Business-to-Business Advertising 329
Defining Advertising Objectives 330
. Written Objectives 330
Determining Advertising Expenditures 331
Developing the Advertising Message 333
Selecting Advertising Media for Business Markets 334
B2B TOP PERFORMERS: Search Engine Marketing at Google: The RightMessage, the Right Time 336
Direct Marketing Tools 337
Measuring Advertising Effectiveness 339
Measuring Impacts on the Purchase Decision 339
The Measurement Program 340
Managing Trade Show Strategy 341
Trade Shows: Strategy Benefits 341
Trade-Show Investment Returns " 342
Planning Trade-Show Strategy 343
Trade-Show Objectives 343
Selecting the Shows 343
Managing the Trade-Show Exhibit 344
Evaluating Trade-Show Performance J 344
Summary 345
Discussion Questions 346
Internet Exercise 347
Case: Johnson Controls, Inc. 348
Discussion Questions 348
Contents xxix
Chapter 14 Business Marketing Communications:Managing the PersonalSelling Function1 349
Managing the Sales Force 351
Organizing the Personal Selling Effort 351
Key Account Management 352
National Account Success 355
B2B TOP PERFORMERS: Using Customized Strategies to Outmaneuver Rivals 356
Isolating the Account Management Process 356
Account Management Success 357
Sales Administration 360
Recruitment and Selection of Salespersons 360
Training 360
Supervision and Motivation 361
Evaluation and Control 364
Deployment Analysis: A Strategic Approach 366
Territory Sales Response 366
Territory Alignment 367
Developing the Customer Database 368
Sales Resource Opportunity Grid 368
Isolating High-Opportunity Customers 369
GE's Sales Force Effectiveness Initiative 370
Summary 371
r Discussion Questions ' 371
Internet Exercises 372
Case: Account Management at YRC Worldwide: ChoosingCustomers Wisely 373
Discussion Question 373
EVALUATING BUSINESS MARKETING
STRATEGY tAND»!ERE©RMArfeE
Chapter 15 Marketing Performance Measurement 377A Strategy Map: Portrait of an Integrated Plan 379
Developing the Strategy: The Process 380
Maps: A Tool for Strategy Making 383
Marketing Strategy: Allocating Resources 383
Guiding Strategy Formulation 384
Contents
Managing Individual Customers for ProfitThe Marketing Control Process
Control at Various Levels "}
Strategic Control
Annual Plan Control
Marketing Control: The Marketing Performance Dashboard
B2B TOP PERFORMERS: CMO Profile
Efficiency and Effectiveness Control
Profitability Control r
Implementation of Business Marketing Strategy
The Strategy-Implementation Fit
Implementation Skills
The Marketing Strategy Center: An Implementation Guide
Looking Back
Summary
Discussion Questions
Internet Exercises
Case: Danaher Corporation
Discussion Question
Name Index
Subject Index
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