Industrial Marketing TO B2B Marketing ?

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How can WE contribute to a great
course ?

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 How can YOU contribute to a
great course ?
• Summer Internship
• Post questions
• Respond to peers
• Engage in discussion
• Focus on **** slides

Engage with guest speakers

4
B2B Marketing
Evaluation

 CP- 10
 Quiz- 20
 Project- 30
 End term- 40

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A Business
Marketing
Perspective

6
A Business
Marketing
Perspective

7
 80% of all B school graduates join firms that
directly compete in the business market

 Because of interest in high-tech markets and

the size of industrial markets, increased
attention is being paid to business marketing
management

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Business Markets
Bought by:

 Businesses
 Government bodies
 Institutions

For:
 Incorporation (parts)
 Consumption (tea/coffee)
 Use (Printer)
 Resale (Channel)
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Business to Business (B2B) Marketing is Huge

1. Business marketers serve the largest markets

of all.

2. Rupee volume of the business market greatly

exceeds the consumer market.

3. India’s 100 largest Manufacturing companies

purchase more than Re. 900 Lakh Crore worth
of goods and services annually
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B2C and B2B
The Consumer Market (B2C) and the Business Market (B2B) at
Wipro
Infotech

B2C B2B

Customers: Individuals & Businesses Institutions Government

Households Global Healthcare State
Large corporations Education Central
Small & Medium
sized businesses

Selected PCs PCs

Products: Printers Enterprise Storage
Laptops Servers
Simple Service Complex Service Offerings
Agreements

11
Marketing’s Cross-Functional Relationships
 Professional business marketers act as an
integrator between various functional areas
within the company
 Functional areas include:
◦ Manufacturing
◦ Research & Development (R&D)
◦ Customer Service
◦ Accounting
◦ Logistics
◦ Procurement
◦ Examples from summer projects 12
 Business and Consumer Marketing Differs In ***
1. Nature of their markets
2. Market demand
3. Buyer behavior
4. Buyer-seller relationship
5. Environmental influences (competition,
political, legal) and
6. Market strategy
 Due to these differences, business marketers need to
understand how demand for industrial products and
services differs from consumer demand.
13
Business Market
Demand Characteristics*

 Derived demand

 (more) Fluctuating demand

 Stimulating demand
 Price sensitivity / demand elasticity

14
Derived Demand
 The demand for business products is called
derived demand because the demand for
industrial products is derived from the
ultimate demand for consumer products.

 As a result, business marketers must carefully

monitor fluctuating trends and patterns in
consumer markets.

15
Fluctuating Demand
Because demand is derived, an increase or decrease in
consumer demand can create a fluctuating demand for
many industrial products.

Example:
 An increase in loan rates can quickly stifle new home
sales. This slows down the need for new household
products. Businesses react by decreasing their
inventory of materials or putting off buying new
machinery.

 This action explains why the demand for many

industrial products tends to fluctuate more than the
demand for consumer products.
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 Stimulating Demand
 Sometimes, business marketers need to stimulate
demand for consumer goods which either
incorporate their products or are used to make
consumer products.

17
Inelastic Demand
• Inelastic demand is demand without
regard to price. An increase or decrease
in the product price will not significantly
affect the demand for the product.

• Example: Price for petrol

18
 Global Market Perspective
Marketers must have a global perspective:

 Enormous growth in developing countries

such as Brazil, China, Russia, and South Africa
offer huge opportunities for both large and
small businesses

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 Building one-to-one relationships with
customers is the heart of business
marketing

20
 Characteristics of Business Market Customers**

Characteristic Example

•Business market customers are comprised •Among HCL Technology’s customers are
of commercial enterprises, institutions, and Reliance Industries Ltd, State Bank of India and
governments. many central and state government’s entities.

•A single purchase by a business customer is •An individual may buy one unit of a software
far larger than that of an individual consumer. package upgrade from Microsoft while
Citigroup purchases 10,000.

•The demand for industrial products is derived •New home purchases stimulate the demand for
from the ultimate demand for consumer products. paint, appliances, furniture, lumber, and a
wealth of other products.

•Relationships between business marketers •IBM’s relationship with some key customers
tend to be close and enduring. spans decades.

•Buying decisions by business customers often •A cross-functional team at Hindustan Unilever

involve multiple buying influences rather than a (HUL) evaluates alternative laptop PCs and
single decision maker. selects Hewlett-Packard.

•While serving different types of customers, •Job titles include marketing manager, product
business marketers and consumer-goods manager, sales manager, account manager.
marketers share the same job titles.

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Managing Relationships in the Supply
Chain

 As important as it is to gain customers, it is

just as important for manufacturers to
develop strong relationships with suppliers.

 Companies such as IBM and Toyota develop

strategies to create suppliers who provide
new ideas and who are loyal.

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Review

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Organizational Buying Behavior

1
Organizational Buying Process**
2. General
1. Problem 3. Product
Description
Recognition Specifications
of Need

Organizational 5. Acquisition
4. Supplier
Buying and Analysis
Search
Process of Proposals

6. Supplier 7. Selection
8. Performance
Selection of
Review
Order Routine

2
2. General Description of Need
Once a need is recognized, the purchasing department
works with the buying group to define what is needed by
asking:
 What is the extent of the problem?
 What alternatives can solve the problem?
 Where can the solution be purchased?

Each small decision ultimately helps define the product

specifications.
Sometimes the supplier is involved if the supplier
influences the sale (i.e., the supplier makes the buyer aware
of the need).

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 3. Product Specifications

Many times the question boils down to:

1. Is it a new task buy?

2. Is it a straight rebuy?
3. Is it a modified rebuy?

Buyers try to be objective and consider many ideas.

Professional sellers try to influence this decision as early as
possible in the buying process—if they can!

4
4. Supplier Search
 Who will be the supplier?
 The creating influencer has a lot of say
about the choice of supplier. If a
salesperson creates the need, often the
specs are written so that only the
salesperson’s organization is able to fulfill
the contract.
 In established businesses, often only
preferred vendors are considered.

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5. Acquisition and Analysis of
Proposals
 This step occurs only when the buying organization
lacks adequate information to make a decision.
 Proposals are presented in detail often by a team
engineers, users and purchasing agents. Successful
proposals determine the supplier.
 Many times, this step is perfunctory. The buyer may have
already determined the preferred vendor, but legally it
may be necessary to seek other vendor proposals to
attain government contracts.

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7
Types of proposals**

 Expression of Interest (40,000 ft. view)

 Request for Proposal (10,000 ft)
 Notice Inviting Tender (1000 ft.)
 Google

 If you are getting to know of a bullet train

project from a Notice Inviting Tender-
chances are you are not going to get the
project. Why ?
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6. Supplier Selection
At this point, negotiation includes not only monies,
but also:
1.Quantities
2.Delivery times
3.Level of service
4.Warranties
5.Payment schedules
6.And a host of final details that determine selection

L1/ single tender

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7. Selection of Order Routine
 Once the supplier is selected, the order
routines are established
8. Performance Review
After receipt of the product or service, a
performance review asks:

1. Did the supplier meet delivery time?

2. Did the product meet the specs?
3. Does the contract have to be modified?
4. Did the vendor live up to expectations?

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Three Buying Situations**

1. New task
2. Straight rebuy
3. Modified rebuy

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 Marketing Consideration for
New Task Buys
Marketers can gain an edge if they:
1. Initiate problem recognition
2. Get involved very early in the decision-making
process
3. Get involved early in the procurement
process
4. Understand the buying organization's behavior
patterns

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 Marketing Challenges to Straight Rebuy

 Purchasing departments handle this situation in most

cases; the determinant is who is “IN” and who is
“OUT”?

 “IN” seller needs to constantly reinforce their services, meet

buying expectations, continue developing relationships and
be responsive to changing needs.

 “OUT” sellers have a much more difficult task.

 What can they do ?

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Out Sellers in Straight Rebuy*

To get in, OUT sellers need to convince the

buying organization that:

1. Their current supplier is not doing their job.

2. They are experiencing problems that they
were not aware of earlier.
3. Their purchasing requirements have
changed.
4. They should consider other alternatives.
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IN verses OUT Suppliers
 IN suppliers need to understand
developments within the buying
organization so they can be a part of the
modified rebuy situation. They generally
have an edge unless they are “out of
touch” with the buyer.
IN verses OUT Suppliers

 OUT suppliers need to create the need and

influence the buying organization to consider
other alternatives. This demands superior
salespersonship.
 Selling company needs to offer performance
guarantees, warranties and often additional
services and training.

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 Forces Influencing Organizational Buying Behavior*
• Economic outlook:
domestic & global
Environmental • Pace of technological
A projected change in change
Forces • Global trade relations
business conditions
can alter buying plans
drastically. • Goals, objectives and
Organizational strategies
Forces • Organizational position
Organizational of purchasing
Buying
Behavior • Roles, relative
Group influence and patterns
Forces of interaction of buying
decision participants

•Job function, past

Individual experience, and buying
Forces motives of individual
decision participants
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 Procurement Manager’s Toolkit*

Total Cost of Ownership

TCO considers the full range of

costs associated with the purchase
and use of a product or service over its
complete life cycle.

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Centralized vs. Decentralized Purchasing

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 Roles in the Buying Center**

Initiator Influencers Gatekeepers

Decider Purchaser Users

8 21
 Buying Center Roles

Initiator Initially perceives a problem and initiates the buying

process to solve it.
Affects the purchasing decision by providing technical
Influencer information or other relevant (internal or external)
information.
Controls the information to be reviewed by members of
Gatekeeper the buying group. (For example, buyer may screen
advertising material and even salespeople.)
Actually makes the buying decision, whether or not they
Decider have formal authority to do so. Could be the owner, an
engineer or even the buyer.
Has formal authority to select and purchase products or
Buyer services and the responsibility to implement and follow
all procurement procedures.

User Actually use the product in question. Can be

inconsequential or major players in the process.
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23
 Clues for Identifying
Powerful Buying Center Members
1. Isolate personal stakeholders. Who has the
most to gain and/or lose?
2. Follow the information flow. Influencers are
usually the ones who actually facilitate the
exchange.
3. Identify the experts. Experts ask the most
questions, exhibit the most knowledge, and
are often the most influential.

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Clues for Identifying
Powerful Buying Center Members
4. Trace the communication to the top. Who
are the decision makers?

5. Make sure you understand purchasing’s

role. Often purchasers are not decision
makers, but they may be the bargainers.
In repeat buying situations, they are
usually dominant players because of their
specialization.

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Who Makes the Decision?
 Individuals make the decision, not
organizations!

 Each member has a unique personality,

experience and motive, and are subject to
risk and rewards.

 Professional marketers understand this

and make sure that they learn to
recognize and match to it.

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 Evaluative Differences
 Education: Engineers have a different educational
background than purchasing managers
 Also, various occupations have different
dispositions. For example:
1. Engineers are usually cold, analytical and
suspecting.
2. Salespeople are usually warm, open and optimistic.

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Review

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Customer Relationship
Management Strategies
for Business Markets
Relationship Marketing centers on

• Establishing,
• Developing, and
• Maintaining
successful exchanges with customers.
SIP
 Types of Relationships******
• Continuum of buyer-seller relationships
• Transactional, Value-added & Collaborative exchanges

The Relationship Spectrum

Spectrum of Buyer-Seller Relationships*
Buyers and sellers craft various relationships in response to:
a) Market conditions
b) Characteristics of the purchase situation
 Switching Costs*
• A major consideration before changing from one
supplier to another is the switching costs.
• Organizational buyers invest heavily in their
relationships with suppliers.
Investments include:
1. Money
2. People
3. Training Costs
4. Equipment
5. Procedures and processes
 Switching Costs

• Buyers hesitate to switch because it can cause costly

disruptions.
• Risk of making a wrong choice of less-established
suppliers can be costly.
• From a marketing perspective, the prospect’s
PROBLEM must exceed the BENEFITS that they are
presently experiencing with their current supplier
before they will consider switching.
 Value Drivers in
Collaborative Relationships*
Suppliers of routinely purchased products offer
three sources of value:

1. Value creation through core offerings

2. Value creation within the sourcing process
3. Value creation at the customers level of
operations
 Furthering Collaborative Relationships
To develop ‘key supplier’ status, sellers need to:
• Target the right customer.
 Match with their purchasing situation.
 Develop strategies that are appropriate for each
type of buyer . Collaborative buyers seek long,
strong and lasting relationships.
 Buyers perceive significant risks with suppliers, so
competence and commitment are vital when
starting the relationship.
Measuring Customer Profitability

• Activity-based costing (ABC) is a technique that

allocates the cost of performing various services
to each customer (customer-specific costing).

• Through Customer Relations Management

(CRM) programs, one can relate revenues and
costs to each and every activity.
 Whale Curve & Profitability*
• 20/80 Rule says “20% of customer provide 80%
of sales

• Whale Curve reveals:

– 20% of customers generate 150–300% of total profits
– 70% of customers break even
– 10% of customers lose from 50-200% of total profits
– Leaving company with 100% of total profits
 High- vs. Low-Cost-to-Serve Customers*
High-Cost-to-Serve Customers Low-Cost-to-Serve Customers

Order custom products Order standard products

Order small quantities Order large quantities

Unpredictable order arrivals Predictable order arrivals

Customized delivery Standard delivery

Frequent changes in delivery requirements No changes in delivery requirements

Electronic processing (EDI)
Manual processing
(i.e., zero defects)

Large amounts of presales support Little to no presales support

(i.e., marketing, technical, and sales resources) (i.e., standard pricing and ordering)

Large amounts of post-sales support No post-sales support

(i.e., installation, training, warranty, field service)

Require company to hold inventory Replenish as produced

Pay slowly (i.e., high accounts receivable) Pay on time

Source: Robert S. Kaplan and V.G. Narayanan, “p. 8. Measuring and Managing Customer Profitability,” Journal of Cost Management 15, No. 5
(September/October 2001):
 Customer Profitability **

High

Passive Costly to service,

Product is crucial but pay top
Net Margin Realized

Good supplier match money

Price-sensitive but Aggressive

few special Leverage their buying power
demands Low price and lots of
customization
Most challenging
Low
Low High

Cost-to-Serve
Managing Unprofitable Customers
Low margin / high cost customers offer the most
challenge for marketing mangers.

• Start with ways to reduce costs

• Next, work with customers to possibly change
their actions resulting in lowering costs or
increasing profitability
 Firing the Customer
• We must try everything to make a customer
profitable before firing them.
• If after trying, and the customer continues to
be reluctant to change, and the relationship
remains unprofitable, we can say outright,
“YOUR FIRED!” but…
• There are better approaches. We can let
customers ‘fire themselves’ by raising our
prices, reducing or charging more for
services, eliminating discounts, etc., until
they become profitable or find another
distributor.
 Customer Retention
• Retention of profitable customers is crucial to
business. However, due to competition and
internal / external environmental factors,
achieving this goal is difficult.

• One method that is proving successful for

customer retention is the use of CRM programs.
CRM Strategy - Priorities
1. Acquire the right customer.
2. Craft the right value proposition.
3. Institute the best processes.
4. Motivate employees.
5. Learn to retain customers.
 Value Proposition
A value proposition may include:
1. Points of parity to a competitive option
2. Points of difference

Best practice suppliers base their value

proposition on their target market’s needs by
communicating their offering of superior
performance in a way that conveys they
understand their customer’s business priorities.
 Best Practices Follow-Up
• In addition to using best practices, successful
organizations (like IBM) employ follow-up techniques
such as:
1. Assigning a client representative to take ownership of
the relationship.
2. Assigning a Project Owner who completes the project
or solves project problems.
3. Developing an in-process feedback and measurement
system.
 How to Pursue Growth from Existing
Customers

Identify and cultivate customers that offer the

most growth potential by:
1.Estimating current percent “share of wallet”
2.Pursuing opportunities to increase share
3.Projecting and enhancing customer
profitability
 RM Programs*

• Social RM Programs
• Structural RM Programs
• Financial RM Programs
Segmenting the
Business Market
 BUSINESS SECTOR

 The business market consists of 3 broad sectors:

1. Commercial Enterprises
2. Institutions
3. Government

 Each sector has many segments

 Each segment has a unique need and requires a
unique marketing strategy
 BUSINESS MARKET
 Often in the business market, segments that
appear strong (that is, they produce a lot of
volume) often do not contribute as much to
profits as they should. Why ?

 Because of this, it is important to choose

business market segments wisely.
WHAT KEY CRITERIA BEST DEFINE A UNIQUE
MARKET SEGMENT?

• Measurability

• Accessibility

• Substantiality

• Responsiveness
ART OF SEGMENTATION*

Segmentation involves identifying groups of

customers or business groups that are…
1. Large enough
2. Unique enough
3. Financially independent enough
4. Reachable enough
…to justify a separate marketing strategy.
MISSED OPPORTUNITIES – THREE
CUSTOMER GROUPS
1. Undershot customers - Existing solutions fail to
meet their needs, resulting in:
a. a purchase of new product versions
b. at steady or increasing prices.

2. Over Shot Customers - Existing solutions are too

good, thus customer is reluctant to purchase new
version.
3. Non-Consuming Customers – Customers who lack
resources, skills or ability to benefit from existing
solutions.

4. Can you think of examples from industries you know of/

worked in ?
 CONSUMER VS. BUSINESS PROFILING
 Consumer-goods marketers are interested in
meaningful profiles of individuals concerning:
 Demographics

 Lifestyle

 Benefits sought

 Business marketers profile:

 Organization size

 Organizational buyer’s decision styles &

buying criteria

 Two broad classifications for commercial markets:

◦ Micro & Macro Segmentation
BUSINESS MARKETING
SEGMENTATION* Geographic

Customer Type
Macro-
segmentation Customer Size

Product Use
Business
Markets
Purchasing Criteria

Purchasing Strategy
Micro-
segmentation Importance
Personal
Characteristics
KEY CRITERIA
Most business buyers value:

1. Quality
2. Delivery
3. Service
4. Supplier’s Reputation
5. Price (all other things being equal)
PRICE VS. SERVICE

 Oftenthere are tradeoffs between

buyers with respect to Price vs.
Service

 Onestudy identified four types of

buyer segments:
 Programmed buyers
 Relationship buyers
 Transaction buyers
 Bargain hunters
TYPES OF BUYERS*

1. Programmed Buyers - Neither price or service

sensitive. They buy routine products according to a
purchasing program.
2. Relationship Buyers - Value partnerships and are
not super price sensitive. Product may be moderately
important to operation.
3. Transactional Buyers - Price is important but
considerations are made to service, depending upon
importance of product.
4. Bargain Hunters - Price is everything but always
relative to importance of product.
PURCHASING STRATEGIES

Micro-segments can be classified according to their

purchasing strategies:

1. Some buyers have several suppliers and give

each a healthy volume of business.

2. Some buyers need an assured supply, thus giving

most of their business to a few suppliers.
OTHER MEANINGFUL MICRO-SEGMENTS*
✓ Importance of purchase – Appropriate when product is applied
in various ways by various customers

✓ Attitudes toward vendors – Analysis of how various buyer

clusters view alternative sources of supply; often uncovers
opportunities

✓ Organizational Innovativeness – Some organizations innovate

more and thus are more willing to purchase new industrial
products

✓ Personal Characteristics – Although some interesting studies

have shown viability of segmentation based on individual
characteristics, further research is needed to explore its potential
as valid base for micro-segmentation

✓ New Products – When new products are introduced, marketers

may need to approach new influencers vs. traditional buyers
SEGMENTATION MODEL
1. Identify key characteristics (macro-segments)
based on organizational characteristics (e.g.:
size)

2. Consider the buying situation in terms of

macro-dimensions (i.e., Where are they in the
procurement cycle – new task, rebuy, modified
rebuy?)
SEGMENTATION MODEL
3. Select set of acceptable macro-segments based on
corporate objectives and resources.

4 Evaluate each segment that possesses distinct needs,

is open to a distinct message and is responsive to your
marketing program.

5. If Step 4 is successful, select macro-segment as the

target market and complete a cost/benefit analysis for
marketing to it.

Is it worthwhile?
SEGMENTATION MODEL

A. If a particular macro-segment is not the right market,

then do a micro-segment analysis based on key
decision-making characteristics (i.e., What is their
purchasing strategy? Attitude towards vendors? etc.)

B. Select a new desired micro-segment based on a

cost/benefit analysis.

C. Identify the complete profile of the segment based on

macro & micro-level characteristics.
 UTILIZING SEGMENTATION
 Management can utilize segmentation in different
ways.

 Companies can categorize their present business

customers from:
1. Bad – Good – Great
2. Unprofitable to Profitable

 Segmenting both new prospects and present customers

in this manner can result in a more profitable
organization.
ACCOUNT-BASED-MARKETING (ABM)
 ABM is an approach that treats an individual
account as a market.

 Done right, it ensures that key accounts are:

 Fully serviced
 Understood with respect to important issues

 The strategy is to:

 Focus on that single client
 Develop a collaborative relationship
 Work with the client to mutually develop value
propositions that meet the client’s business needs
IMPLEMENTING A SEGMENTATION PLAN

A well-developed segmentation plan will fail unless the

following issues are addressed:

1. How should the sales force be organized?

2. What services will the new segment require?
3. Who will provide the new services?
4. How do we contact the new segment?
5. Can we support the new operation?
6. Will new adaptations be necessary to serve the
international market?
SEGMENTATION SUMMARY

 Managing the implementation of

segmentation is a difficult task at best. It
means the product/service mix needs to be
customized for diverse segments.

 It demands inter-organizational
coordination and cooperation.

 Managing critical points of customer

contact is one of a marketing manager’s
fundamental roles.
Business Marketing
Planning: Strategic
Perspectives
Hierarchy of Strategies – 3 parts *

✓Corporate Strategy

✓Business-Level Strategy

✓Functional Strategy
Hierarchy of Strategies – Part 1

⚫ Corporate Strategy
– What businesses are we in?
– What are our core competencies?
– How should we allocate resources?
– What businesses should we be in?
Hierarchy of Strategies – Part 2

◼ Business-Level Strategy
– How do we compete in a given industry?
– How should we position ourselves against
competitors?
Business-Level Strategy
The focus is on how firms compete in a
given industry.
Competition is not between large corporations. It
is between individual business units (SBUs) that
compete in specific markets. Each SBU needs to
develops its own business and marketing plans
to answer:
✓ How can we compete?

✓ How and what is the most efficient way to get

to the market?
✓ What are our distinctive skills?
Hierarchy of Strategies – Part 3
Functional Strategy
– How can we allocate resources to
most efficiently and effectively
support business-level strategies?
– How can we use resources to meet
the firm’s objectives within a
specific product market?
The interplay between the three levels of
strategic formulation:
1. Cuts across functional areas
2. Involves issues related to long term
objectives
3. Involves allocating resources across SBUs
and/or product markets
4. Includes decisions about the direction of
corporate strategy, application of
technology and choice of alliance partners
Cross-Functional Connections Explore Interrelationships
between Marketing and Four Business Functions*
 9

Inter-Functional Involvement in Marketing Decision Making:

An Illustrative Responsibility Chart
Organizational Function
Decision areas Marketing Manufacturing R&D Logistics Tech. SBU Corp. Level
Services Manager Manager

Product
Design specifications
Performance character.
Reliability

Price
List/Discount

Tech. Services
Customer training

Logistics
Inventory
Customer service level

Sales Force
Training

Advertising
Message development

Channel
Selection

Decision role: R=Responsibility; A=Approval; C=Consult; M=Implement; I=Inform,

X=No Role
Vocabulary
Strategy Success

For a strategy to succeed:

 Each firm needs to have a business
concept that separates them apart
from their competition.
 There are 4 components:
1. Customer Interface
2. Core Strategy
3. Strategic Resources
4. Value Network

 Refer to Figure
 Components of a Business Model*: Bridges to
Profits**

CUSTOMER INTERFACE CORE STRATEGY STRATEGIC RESOURCES VALUE NETWORK

Fulfillment & Support Business Mission Core Competencies Suppliers

Information & Insight Product/Market Scope Strategic Assets Partners
Relationship Dynamics Basis for Differentiation Core Processes Coalitions
Pricing Structure

EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

Major business concept components are tied together by

three important “bridge” elements: customer benefits,
configuration, and company boundaries.
 Value Network
A value network includes those who complement and
enrich the organization.

➢ Do we have good relations with suppliers,

partners, vendors and other supporters?
➢ Can we partner with others in such a way that we
can use their assets as if they were our own?
➢ Example: Using Bluedart as shipping service
The Management System* This system allows
management to plan,
coordinate and monitor
the links between
strategy and operations.
Balanced Scorecard

Examines the performance of a business

unit from four perspectives:
1. Financial

2. Customer

3. Internal Business

4. Learning and growth

Business Marketing
Strategies for
Global Markets
⚫ How to capture sources of global advantages in
rapidly developing economies (RDE) such as
China and India
⚫ Spectrum of Market entry options
⚫ Strategic significance of different forms of global
market participation
⚫ Distinctive types of strategies
 International

Multi-national

Trans-national

Global

Developed by Cool Pictures and MultiMedia Presentations

3
Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 80% of the world’s population is located in RDEs
[i.e., China, India, Mexico, South America (Brazil),
Eastern Europe and Russia].

 There are 25 world-class emerging multinationals.

By 2025, there will be at least a 100.

 New philosophy of “manyness” vs. the old

approach of “oneness.”
 Growth advantage

Market
access

Network Local
Integration advantage coordination adaptation “Manyness” advantage

Resource
access

Resource leverage advantage

Developed by Cool Pictures and MultiMedia Presentations

5
Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Determining Which Products to Outsource and
Which to Keep In-House: Selected Criteria*
Maintain Home-Based Relocate to RDEs
Manufacturing

Labor Contract Low High

Growth of Demand in Home Market Low High

Size of RDE Market Low High

Degree of Standardization Low High

Intellectual Property Content High Low

Logistical Requirements High Low

Source: Adapted from Arindam Bhattacharya et al., “Capturing Global Advantage: How Leading Industrial Companies Are
Transforming Their Industries by Sourcing and Selling in China, India, and Other Low-Cost Countries,” The Boston Consulting
Group, Inc., April 2004, accessed at http://www.bcg.com, pp. 26-30.
 Local Adaptation

◼ Shift power to where the growth is.

◼ Build new offerings from the ground up.

◼ Build Local Growth Team (LGT)s from the ground

up, just like forming a new company.

◼ Customize objectives, targets, and metrics.

◼ Provide senior executive support – reverse

innovation
Entering the Global Marketplace
Sell domestically-produced products to
buyers in other countries

Management Includes management and manufacture

Contracting contracting from making to assembling

A business relationship between two or more

Strategic Alliance firms to cooperate through mutual need
Domestic firm buys/joins a foreign company
Joint Venture to create new entity
Companies work together to find a balance
Multidomestic between local adaptation & global optimization
A business relationship established to cooperate
Global Strategy
out of mutual need and to share risk
 Risk Levels
Risk

Global
Strategy
Multi-
domestic
Joint
Ventures
Strategic
Alliances
Contracting

Export

Return
Global Strategy
 A global strategy seeks to achieve a competitive
advantage by integrating its operations across
countries.

 It might start with a standard core product and

adapt it as necessary to targeted countries on the
basis of contribution to globalized benefits.

 Examples: Automobiles, commercial aircraft,

consumer electronics, machinery, etc.
MULTIDOMESTIC VS. GLOBAL

 Multidomestic competition occurs when:

 Downstream activities are important to
competitive advantage so firms can pursue
separate strategies in each country.
 Competition in each country is independent
of competition in other countries.

 Global competition occurs when:

 Upstream and support activities are vital to
competition where a competitive position in
one country effects the competitive position
in another country.
Two Dimensions of Competition:
Coordination & Configuration
 Configuration is concerned about where
each activity is performed. They range
from centralized to decentralized.

 Centralized can produce economies of

scale and a reduced learning curve.

 However, centralized may not be close

enough to the market and the cost of
getting products there may be greater
than the savings.
Two Dimensions of Competition:
Coordination & Configuration

 Coordination refers to activities that

are performed in different locations
worldwide but are coupled with each
other.

 Example: A plant in one country makes

bumpers, a plant in another country
makes doors, and a third plant near
the market assembles the car.
 Which International Strategy?
◼ The nature of international competition is the determinant
as to which strategy to employ.

◼ Employ a global strategy when a position in one country

affects a position in another country.

◼ Employ a multidomestic strategy when a position in one

market does not affect a position in other markets
(markets are independent of each other).
Global Competitors Achieve
Unified Action By:

• Establishing a clear global strategy

• Developing consistent information and
accounting systems on a worldwide basis
• Encouraging personal relationships that
facilitate transfer learning among managers
• Carefully designing incentive systems to
ensure that rewards accrue for truly value-
driven actions
 Chapter 7:

Managing Products for Business Markets

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” -
Michael D. Hutt, Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other
sources)
Chapter Topics
1. How to build a strong business-to-business (B2B) brand

2. Strategic importance of providing competitively superior value to

customers

3. The various type of industrial product lines

4. Value of product positioning

5. Strategic approach for managing products across stages of the

technology adoption life cycle
 New Product Examples

New Product Release Dates

Windows 10X Windows 10X to debut in spring 2021 for
single-screen devices and spring 2022 for
dual-screens
Azure Sphere (IoT Released February 2020, Product
security) Development is
SharePoint Spaces – Expected release: First Half of 2020 a Dynamic
(brings 3-D and mixed Capability –
reality experiences) Capability to
Project Cortex (an AI- Expected release: Summer of 2020 acquire, integrate,
powered "knowledge transform and
network) release resources
to create/
Dynamics 365 develop/ expand
(Microsoft's enterprise Release Wave 2: October 2020 market
resource planning
solution)

https://rcpmag.com/articles/2011/02/01/the-2011-microsoft-product- 3
roadmap.aspx
 Marketplace Identity
• A business marketer’s marketplace identity is established through:
– Brand
– Products
– Services

• A brand is one of the firm’s most valuable intangible assets.

• Branding has emerged as a priority to marketing executives.

Brand & Brand Equity Defined

Name, sign, symbol, logo or anything that identifies and differentiates the product
from competitors.

Brand equity
Set of brand assets and liabilities linked to a brand; it can add to – or detract from –
the value of the brand
Customer-Based Brand Equity (CBBE)
• Kevin Lane Keller defines CBBE:
The differential effect that customer brand
knowledge has on their response to market
activities and programs for the brand.
• Brand Power relies on:
– What customers have learned, felt, seen and
heard about the brand over time.
– How customers link their thoughts to feelings,
perception, imagination and experience of the
brand.
CBBE Pyramid
• CBBE model lays out 4 steps for building a strong
brand:

1. Develop deep brand identity

2. Establish unique brand identity by highlighting
differences
3. Employ marketing programs to elicit positive
brand responses
4. Build brand relationships with loyal customers
CBBE Pyramid
 Brand Identity

• To achieve brand identity, marketers must create:

 Brand salience – something prominent about the product

 Brand awareness – ability to recall or recognize the brand under different
conditions

• Marketers need to create a clear connection between the product and the brand
name in markets where the product competes.
Brand Positioning
•Establishes an association in the customer’s mind that differentiates the brands’ meanings

•There are various brand associations

• Following example demonstrates two ways:

1. Brand Performance – the way(s) a product/service meets customers’ functional

needs
2. Brand Imagery – The way(s) a brand meets customers’ psychological or social
needs

• Brand positioning should incorporate both points of parity (breaks even to other
brands) & points of differences.
 Brand Response: Consumer Judgments

Consumer Judgments:

1. Quality: Customer’s attitude towards brand’s perceived quality with respect to

value and satisfaction
2. Credibility: Customer perceives brand to be credible with respect to expertise,
trustworthiness & likeability
3. Consideration set: Extent to which customer finds brand a viable option and
worth consideration
4. Superiority: Extent to which customer believes that brand offers advantages over
competitive brands

Brand Response: Consumer’s Feelings

•Consumer feeling – a consumer’s emotional reaction to a brand

•Numerous feelings can be tied to brands, i.e.:

–Warmth
–Fun
–Excitement
–Security
–Power
–Sexiness
–Functionality
 Consumer Brand Resonance

• Final step is brand resonance, which means forging a relationship. This connection translates into:

– Brand loyalty
– Attachment
– Active engagement
– Word-of-mouth satisfaction & advertising

 Smart Planet

 Networked community

Intel - Processing
 Brands
Saint-Gobain (1665)
Siemens (1847)
Bosch (1886)
UPS (1913)
General Electric (1892)
IBM (1924)
Ernst &Young (1894)
Caterpillar (1925)
Goodyear (1898)
Hewlett-Packard (1939)
Tetra Pak (1951)
FedEx (1973) Source – B2B brand
mgmt, philip kotler
Microsoft (1975) 11
 IBM
At the heart of the brand today is Smarter Planet, a strategy that
reflects IBM’s stance in the post-PC era.

Smarter Planet guides product development, employee engagement, and

all forms of external communication – from specific stakeholder
engagement programs to global marketing campaigns.

Under this roof, IBM has developed dozens of platforms, including

Smarter Education, Smarter Energy, and Smarter Cities.

Smarter Planet demonstrates the company’s unique ability to balance

innovation with sustainability. Today, IBM is widely regarded as one of the
world’s most valuable brands, on par with the likes of Apple.

(Source – mckinsey.com)
12
 Brand Microsoft - $125,843 mn revenue in 2019
Segments Products Revenue Model Competitors

Productivity and Office Commercial On premise License

Business Processes
Apple, Cisco Systems, Facebook, Google,
Segment Revenue- Office Consumer On premise License IBM, Okta, Zoom,etc
$41,160 mn (fy
19)
LinkedIn subscription online recruiting companies, talent
management companies
Dynamics License Infor, NetSuite, Oracle, Salesforce.com,
SAP, and The Sage Group
Intelligent Server Products and infrastructure-as-a-service and platform- Hewlett-Packard, IBM, and Oracle
Cloud Services - as-a-service consumption-based services,
Cloud
and per user-based services such as
Segment Revenue- Enterprise Mobility + Security
$38,985 mn (fy Enterprise Services Premier Support Services and Microsoft multinational consulting firms and small niche
19) businesses focused on specific technologies
Consulting Services - Licenses
Windows - License Apple and Google.
More
Personal
Computing
Devices various computer, tablet, and hardware
Segment Revenue-
$ 45698 mn (fy 19) manufacturers
Gaming Subscription, Live transaction, royalties, Nintendo and Sony
etc
Search Online advertising Google, Facebook

Source -Form 10 k- microsoft annual report - 2019

 Brand Microsoft- CBBE Analysis
B2b Examples -

Microsoft’s partner M-KOPA Solar has connected thousands of

homes across sub-Saharan Africa to solar power using the Microsoft
Cloud

 In Poland, MedApp is employing HoloLens to enable

cardiologists to visualize patients’ hearts as it beats – in real-time.
(source -- https://www.analyticsinsight.net/unveiling-business-
strategy-microsoft/)
Attachment
World Wide – operation Centres, Loyalty
Data centres and R&D centres.
Reliable Functionality
Good quality Secured

Customers – SMEs, Large

corporations, Govt, Cost effective
Easy to use For everyone
ISPs, OEMs, etc
Available

 Licensing options – Flexible-

Volume Licensing Innovation driven by cloud and AI
Partners programs

 Employees -144,000 worldwide

Source -Form 10 k- microsoft annual report - 2019 14
 Loyalty
Community
Attachment

Good value Smart

Credibility shopper

Convenience For everyone

Vast selection Internet pioneer
Low prices
Customized Information

Books, Records, Videos and Products

Source -http://anandahussein.lecture.ub.ac.id/files/2015/09/article-
4.pdf 15
Company Actions & Customers’
Thoughts
• Company Actions:
– Controllable elements – 4 P’s
– Clear, consistent message across activities
– Create strong brand and continue support

• Customers’ Thoughts:
– The “brand ladder” flows from awareness to brand
association to attachment to active brand loyalty
– Companies need to be aware of competitive influences
– Best way to counter competition is to stay relevant and
continue to excel at providing benefits customers want and
need
Product Quality
• International competition has made
quality an important strategic issue.
• As a prerequisite, suppliers need to
meet ISO-9000 standards.
• The quest for improved quality
permeates the entire supply chain.
Meaning of Quality It Moves through Stages
 Stage One –
To be successful:
1. Products must conform to standards
2. Meet customer specifications and possess features the customer wants.

 Stage Two –

Emphasizes that quality is more than a technical specialty and that pursuit of quality
should drive the entire business core’s processes.

Overall value is determined by the service rendered, product performance and

products’ price relative to competitors.

 Stage Three –

Buyers focus on market-perceived quality and value verses competitors’ offerings with
the objective of “not only zero product defects” but “zero customer defections.”

The objective is to have a cadre of suppliers that can produce quality products that
keeps customers LOYAL!
What Value Means to Business Customers

Core
Benefits
Add-on

Customer Value
Price

Sacrifices Acquisition
costs

Operations
costs

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,”
Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.
Benefits & Sacrifices
• Benefits:
1. Core – requirements a product must possess for a
relationship to exist.
2. Add-ons – attributes that create differentiation &
provides more value than competition.

• Sacrifices:
1. Price
2. Acquisition costs (e.g., ordering costs)
3. Operations costs (Can defect free parts really lower
operation costs?)
What Matters Most?
#1 - Add-ons: All qualified vendors provide equal
core, so add-ons are the differentiators, which
include:
a. Differing attributes
b. Relationships
c. Advice
d. Product support: Various Services –
Pre & Post sale
#2 – Trust
#3 – Attention to reducing customer costs
 Industrial Product Line Defined
• Proprietary: Comes only in certain configurations and are available in
anticipation of orders. The product decision is to add, delete or reposition
it. Example – Motors, Pumps, Fans, etc.
• Custom-built: Product(s) offered to meet one or a small group of
customers’ need. The product decision centers on offering a proper mix of
additional options. Eg Custom factory integration of Dell Laptops and
Notebooks , weighing systems with additional units, etc
• Custom-designed: Unique item is created to meet one or more customers’
need. Product is defined in terms of company’s capability, and consumer
buys that capability. Eg. Power plant , cement plant, Boeing aircraft, etc
• Industrial service: Buyer buys company’s capability to do certain task (i.e.,
maintenance, technical service or management consulting).
 Defining the Product Market – 4 dimensions
Customer Function What functional benefits does the product/service
provide for the buyer? Example - ( Solar Generation
set)( laptop for office work)
Technological Are there alternative ways a particular function can be
Function performed?
Example: (Grid supply, Diesel generator sets)/ (
Desktop)

Customer Segment Various customer segments have distinct functional

needs. What are they and how can they be served?
( Rural Cottage Industry)/ ( Small and medium
business)

Value-Added System Many services are offered by competing “service

chain” of vendors. Sometimes they are separate, but
other times they merge their services to offer a more
overall competitive product.
Example: (Installation plus maintenance of solar sets)/
( AMCs + Troubleshooting + Specialized software
supply)
Planning for Today & Tomorrow
• Successful companies need to plan for both today and
tomorrow by assessing their products, their markets and their
customers’ future needs.
• This is done by understanding:
a. The present market and its future needs.
b. WHAT the future might offer, what problems might exist, what products
will solve them?
c. WHO are the:
» Undershot consumers
» Overshot consumers
» Non-consumers
d. WHY is that?
Steps in Product Positioning Process

1. Identify relevant competitive products.

2. Identify determinant attributes that customers use to differentiate

among options and determine their preferred choices.

3. From sample of existing and potential customers, collect their

ratings of each product on determinant attributes.

4. Determine own product’s current position versus competing

offerings for each market segment.

5. Examine fit between preferences of market segments and current

product position.

6. Select positioning or repositioning strategy.

Innovation: Classes of Customers

• Technology enthusiasts
• Visionaries
• Pragmatists
• Conservatives
• Skeptics
• Laggards

 A Chasm is a period of time where sales falter (and sometimes plummet) due to
differences between Visionaries and Pragmatists.

 Visionaries want change (revolution) whereas Pragmatists want change (evolution).

But Pragmatists make most buying decisions in organizations.

 Pragmatists are the gateway to the mainstream market. If that chasm gap can’t be
bridged, often products become part of ancient history.
Landscape of Technology Adoption Life Cycle
Classes of Features
customer
Technology a. Explore latest innovations
Enthusiasts – b. Possess a significant influence over product perception by others
Innovators c. Usually lack resource commitments
d. Try things out but move on to new ideas as they come about

Visionaries – a. These customers desires to exploit innovation for a competitive advantage.

Early Adopters b. These customers are true revolutionaries in business, but new technologies need to
be more customized for this group (i.e., expensive).
c. Government visionaries have access to resources but usually demand modifications
to the product that are difficult for innovators to provide.

Pragmatists – These customers:

Early Majority
a. Make the bulk of technological purchases
b. Believe in technological evolution (not revolution)
c. Seek products that have proven themselves

Conservatives – These customers are:

Late Majority a. Pessimistic about receiving any benefits from new technologies
b. A sizable group who are price sensitive
c. Reluctantly purchase technological products to avoid being left behind

Skeptics – These are potential customers

Laggards
They are ever-present critics of hype around new technology
Strategy for High Tech Adoption
1. Put innovative products in the hands of
technology enthusiasts.

2. After a while visionaries will see the value of the

new technology and will begin to view it in
business terms.
3. New technologies usually enjoy a honeymoon
reception from enthusiasts and visionaries,
however sales begin to falter… a chasm forms…
Strategies
Bowling Alley •Each market is like a bowling pin. The momentum of moving one pin (with good
Strategy technology products) successfully carries over into surrounding segments.

•The bowling alley is where mainstream market segments begins to accept the new
product, but it still has a way to go.

•Strategy: Win one niche, then work on another.

Tornado • This strategy assumes a product has very wide appeal. The seller’s strategy is to:
Strategy 1. Move as quickly as possible in getting the product out to the market.
2. Build distribution ASAP.
3. Drive price down to next lower price break ASAP.
• This strategy demands product leadership, operational excellence in manufacturing
and distribution.

Main Street Once the mainstream has adopted the product, the aftermarket phenomenon occurs:

a. Mass marketers of the products begins to subside.

b. Competitors force supply to exceed demand.
c. Prices fall.
d. High tech product becomes a commodity.
e. Profit growth can no longer come from selling the commodity.
f. Profit can only come from extending the platform of the product to other
niche-specific needs.
30
 Chapter 8:

Managing Innovation and New Industrial Product

Development

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” -
Michael D. Hutt, Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other
sources)
Chapter Topics
I. Strategic processes through which product
innovations take shape

II. Characteristics of innovation winners in high-

technology markets

III. Factors that drive a firm’s new product

performance

IV. Determinants of new product success and

timeliness
 3
Source – bcg.com
 Innovation -Boond Microgrid (Rural BoP)
Rural Customer includes rural industries and rural consumers

Re-engineered rural milk collection chain and improved supply chain cost
and quality in collaboration with PURICA , a milk cooperative in UP using 4
solar power. (Source – Boond.com)
5
• Innovation tends to be:
a. Individually motivated
b. Opportunistic
c. Customer Responsive
d. Non-linear
e. Interactive

• Clearly though, some new-product-development is

an outgrowth of deliberate strategies.
 Product Champion

• A product champion is an individual who:

1. Takes on a central role in sensing a marketing
opportunity
2. Mobilizes an informal network to assess the
opportunities via their:
a. Technical feasibility
b. Financial opportunity
3. Is willing to take on risk (reputation) to bring
the project to light
Senior management at 3M Company will not commit to a project unless
a “Product Champion” emerges and will not abandon the effort unless
the champion “gets tired.”
Entrepreneurial Motivation
Entrepreneurial motivation can be nurtured and
encouraged based on:
1. Availability of rewards
2. Senior managements’ encouragement & support
3. Resource availability including release time to work
on entrepreneurial projects
4. Organizational structure that promotes
entrepreneurialism by providing an administrative
mechanism that brings others into the innovative
process when needed
5. Two other influences are:
– Intrinsic motivation
– Work design: availability of challenging projects
 Innovation

COMPANY INNOVATION
MILK MANTRA Milk Mantra helps track the quality and quantity that milk
farmers produce. This information helps the farmers better
determine the market value of their product
UDAAN For building a B2B marketplace for 2 million retailers in 900
cities to buy direct from manufacturers. Udaan‘s mobile app
connects 150,000 traders, wholesalers, and retailers in
India, enabling small- and medium-sized businesses to do
business directly with manufacturers.
AMBEE For sensing air-quality data to make customized
recommendations
Ambee is an air-quality data network. The company’s
sensors measure air quality in terms of dust, particulate
matter, volatile organic compounds, temperature, humidity,
UV light, and sound. This data, which is hyperlocal and
crowdsourced, is fed into a proprietary algorithm that learns
from the user’s routines and lifestyle and is able to suggest
changes.

9
 Innovation

COMPANY INNOVATION
LOCUS For enhancing its logistics software by translating ad hoc
addresses into precise locations
Locus lets businesses manage their logistics and e-
commerce using AI. The company automates tasks that
previously required significant human labor, including
tracking inventory, transporting goods, and optimizing
delivery routes.

10
 Patterns of Strategic Behavior
Induced vs. Autonomous Strategic Behavior:
Selected Characteristics of Marketing Strategy Formulation Process

Table 12.1 7th ed

Developed by Cool Pictures and MultiMedia Presentations

Breakthrough products, services and processes -customers Innovation centres –

➢ Research, Development and Technology business of Tata Steel Europe;

➢Tata Chemicals Innovation Centre; Tata Motors European Technical Centre;
➢TCS Innovation Labs; National Automotive Innovation Centre (at University of
Warwick); and
➢Technology Development Centre of Tata group at Bengaluru.

Tata companies publish approximately 2000 patents per year Examples of

innovation from group companies:

Food & Wellness – UAV based technology to boost efficiency of water, pesticide
and fertilizer use in agriculture ,
Energy – cost efficient Fuel Cell Stack for automotive, defence and stationary use
cases ,
Digital consumer products and services – 1st of its kind safety wearable for a
factory floor worker, in form of a smart watch, to track various health parameters
Cognitive automation technology – World’s first neural automation system for
the enterprise – TCS’ ignio – predicts and prevents IT outages before they happen

Source – TATA Group website

 Tata Innoverse (https://www.tatainnoverse.com/)

Tata Innoverse aims to tackle problems by reaching out to talented people (solvers)
globally and providing them a platform to demonstrate their skills and creativity to
develop novel solutions to solve real world industry challenges through OPEN
INNOVATION. Diverse community of 11,000 solvers. Cracked20+ challenges and all
of these solutions are in different phases of implementation.
The solvers also got rewarded, so much so that they have now become our trusted
technology partners.

Challenge - Avoidance of burning of Rubber pads in

wagons due to direct contact with hot steel coils
 GE Innovation Time line

FLIGHT ENERGY HEALTHCARE MANUFACTURING SECURITY

Exploring advanced Materials, combustion, Driving the convergence Bridging innovation and Safeguarding critical
propulsion, novel and digitization across the of digital technology, production with infrastructure with
energy ecosystem physics, and biology computing and applied cyber protections
materials, and digital automation
technologies

1879 - 2020

1879 1882 1976 2019

Aviation asset
practical
First power plant Medical device performance
incandescent lamp
management

Source : www.ge.com 14
 Four Types: Development Projects

Derivative projects center on incremental product

enhancements, incremental process improvements, or
incremental changes on both dimensions. (Eg – feature
enhancement in a canon photocopier)
Platform projects create design and components shared
by set of products. (eg multiple application of intel
microprocessor)
Breakthrough projects establish new core products and
new core processes that differ fundamentally from previous
generation of process and product. ( eg Pendrives / clouds/
internet banking)
Research and development creates knowledge of new
materials and technologies that eventually leads to
commercial development—more like “pure” science.
 TCS
TCS follows a proven process to develop a full spectrum of research and
innovation solutions:

Derivative innovations – Drive continual improvement across current

services and solutions.

Platform innovations – Make significant changes in the delivery of products

and services across technologies and markets. Such innovations typically
have a two- to three-year horizon.

Disruptive innovations – Identify breakthroughs and develop potentially

game-changing business offerings or models. Such innovations have a time
horizon of about five years.
Source – www.tcs.com

Research and Development – Research collaboration with academia (eg

national automotive innovation centre at University of Warwick)
16
Source – TATA group website
TCS Co Innovation network

Source – www.tcs.com
 The Disruptive Innovation Model
Performance

Range of
Performance
that Customers
Performance that
Can Utilize
Customers Can Utilize
or Absorb

Disruptive
Innovations

Time

Source: Clayton M. Christensen and Michael E. Raynor, The Innovator’s Solution: Creating and
Sustaining Successful Growth (Boston: Harvard Business School Press, 2003), p. 33.
 Table 10-2 Three Approaches to Creating New-Growth Businesses
Low-End New-Market
Sustaining
Dimensions Disruptions Disruptions
Innovations

Performance good Lower performance in

Targeted perform- Performance improvement
in attributes most valued by enough along traditional “traditional” attributes,
ance of product but improved performance
or service industry’s most metrics of performance
demanding customers. at low end of in new attributes—typically
mainstream market. simplicity and convenience.
These improvements may
be incremental or break-
through.

Over-served customers in Targets non-consumption:

Targeted customers The most attractive (i.e.,
profitable) customers in low end of mainstream customers who historically
or market lacked money or skill
application mainstream markets who market.
to buy and use product.
will pay for improved
performance.

Uses new operating or Business model must make

Improves or maintains
financial approach or both— money at lower price per
Effect on required profit margins by
exploiting existing processes different combination of unit sold, and at unit
business model
and cost structure and lower gross profit margins production volumes that will
(processes and
and higher asset utilization initially be small. Gross
cost structure) making better use of
current competitive can earn attractive margin dollars per unit sold
returns at discount will be significantly lower.
advantages.
prices required to win
business at low end of Eg Canon Desktop
Eg incremental process
market. Eg Indigo airlines photocopiers
improvements
Source: Clayton M. Christensen and Michael E. Raynor, The Innovator’s Solution: Creating and Sustaining Successful Growth (Boston:
Harvard Business School Press, 2003), p. 51. 19
 Vscan GE
This could be the 21st century stethoscope ------roughly size of
the smartphone…..GE healthcare’s Vscan device incorporate
powerful ultrasound technology providing imaging capability at
the point of care. Detection of gallstones, fluid on the heart,
pumping condition of heart, etc. It is portable and can be used in
any clinics, taken from room to room, etc. It received approval
from US food and Drug administration & regulatory bodies in
europe and canada.

Philips, GE, Siemens, Canon, etc are key suppliers of the

handheld ultrasound systems that began to spread in the
market 10 years ago. These pocket-size systems consist of a
transducer, which is held against the patient’s body and is about
the size and shape of a small electric hair trimmer, which plugs
into a smart mobile device, such as a smartphone or a tablet.

• Is vscan a disruptive innovation?

20
Successful High-Tech Companies Win
Because:
1. Limited Structure: Creating successful products to meet changing
customer needs requires flexibility, but successful product
innovators combine this flexibility with a few rules that are never
broken.

2. Real Time Communication and Improvisation: Improvisation

involves design and execution of actions that converge with each
other in time.

3. Experimentation – Probing into the Future: Successful product

portfolio creators did not invest in any one version of a future
product but instead used a variety of low-cost probes to create
options for the future.

4. Time Pacing: Product innovators carefully manage transitions

between current and future projects, while less successful
innovators let each project unfold according to its own schedule.
Critical Success Factors
Critical success factors that drive a firm’s new
product performance are:
1. Quality of the new product development
process
2. Resource commitments to new product
development
3. New product strategy
Major Drivers of Firm’s New Product Performance
 Sources of New Product Idea

➢Lead Users
• Since many industrial markets consist of a small number of high volume firms,
special attention must be given to the needs of lead users.

• Lead Users are small, highly influential buying organizations that consistently
adopt new technologies earlier than most users.
– Example: If an auto manufacturer wanted a new breaking system, they might
ask a racing team to help them develop the product.

➢ Customer visits

➢ Web Based methods for improving customer inputs to design

Product advantage refers to Marketing synergy
customers’ perceptions of represents the degree of fit
product superiority with respect between project needs and the
to quality, cost-performance firm’s resources and marketing
ratio, or function relative to skills.
competitors’ products.

Four Strategic Factors

for New Product Success
International orientation:
Technical synergy comes from
New products designed and
the fit between project needs
developed to meet foreign
and the firm’s R&D resources
requirements and targeted at
and competencies. world or nearest-neighbor
export markets.
 Development Process Factors

In addition to a successful strategy, various

proficiencies are important. They include:

1. Pre-Development Proficiency
2. Market Knowledge Proficiency
3. Technical Knowledge Proficiency
Innovation and NPD (Part 2)

References - Hutt, Sharma, Speh and Multiple Sources as

provided in slides
Recap - Major Drivers of Firm’s New Product Performance
Product advantage refers to Marketing synergy represents
customers’ perceptions of the degree of fit between project
product superiority with respect needs and the firm’s resources
to quality, cost-performance ratio, and marketing skills.
or function relative to
competitors’ products.

Recap - Four Strategic Factors

for New Product Success
International orientation: New
Technical synergy comes from the
products designed and
fit between project needs and the
developed to meet foreign
firm’s R&D resources and
requirements and targeted at
competencies.
world or nearest-neighbor
export markets.
 New Product Development

Robert G. Cooper(2019) The drivers of success in new-product development, Industrial Marketing Management 76 (2019) 36–
47
SUCCESS DRIVERS OF INDIVIDUAL NEW-PRODUCT PROJECTS

1. USP: A unique superior product – a differentiated product that delivers unique benefits and a
compelling value proposition to the customer or user

2. VoC: Building in the voice-of-the-customer – market-driven and customer-focused NPD

3. Pre-work: Doing the homework and front-end loading – due diligence, done before
Development gets underway

4. Definition: Sharp and early product definition to avoid scope creep and unstable specs, leading
to higher success rates and faster to market

5. Iterations: Iterative or spiral development – build, test, obtain feedback, and revise – and
putting something in front of the customer early and often, to get the product right

6. Global orientation: The world product – a global or “glocal” product concept (global platform,
locally tailored) targeted at international markets (as opposed to the product
designed to meet home-country needs)

7. Launch: A well-conceived, properly executed launch – a solid, properly resourced marketing

plan is at the heart of an effective launch

Robert G. Cooper(2019) The drivers of success in new-product development, Industrial Marketing Management 76 (2019) 36–
47
 Drivers of success for business Innovations – organizational & strategic factors.

1. Innovation strategy: A product innovation and technology strategy to focus the business on
the best strategic arenas and provide direction for ideation, product roadmaps, and resource
allocation

2. Focus: Doing fewer development projects (relative to resources available), better projects,
and getting the right mix of projects by adopting systematic portfolio management

3. Leveraging core competencies: Step-out development projects, which take the business into
new and unfamiliar markets and technologies, lead to higher failure rates

4. Targeting attractive markets: Certain elements of market attractiveness – market size,

growth, and the competitive situation – useful as project selection criteria

5. Resources available: Innovation resources, both quantity (people, money), and quality (the
right people) in place

6. Teams: Effective cross-functional teams to reduce time-to-market

7. Climate: The right climate and culture – one that supports and fosters innovation activities –
one of the strongest discriminators between successful innovating firms and the rest

8. Leadership: Top management supporting and leading the innovation at every opportunity

Robert G. Cooper(2019) The drivers of success in new-product development, Industrial Marketing Management 76 (2019) 36–
47
 New Product Development in
Indian Manufacturing Firm

Design Conceptualization
1. Getting 5. 6. 7. 8. 9. 10.
2. 3. 4. Detail
inputs P1 P2 Sign of market
Deliverable Verification Design Develop Prototype
s

1. from 2. To determine 3. Verify the 4. Finding 5. Develop 6. 7. P1. 8. p2. 9.Sign of

various output Input that needs to Components, Developm Develop Bulk between
sources through be done in equipment, ent of 5-10 product various
Customer calculations terms of testing Prototype samples, ion department
s, OEM, or product arrangement check the (eg500 s -
market simulations components process nos of purchasing,
Research and process and product production,
requirement validate ) quality, etc.
s the Launch
product directly
to the
market

Note – within a year of marketing, if the product is returned, it is the responsibility of the R&D department. After one year,
the quality department takes care.

NPD general framework Follows ISO

Eg- Battery Manufacturer

7
Source – Interview, 2020 Source –Interview, August 2020
 Case of Product Development for Covid Scanning Offices Solution

Relevant Detail Design

Requirement Specification
Validation of specification
gathering development
requirements (SW and HW)

Testing (
Regression
System Testing multiple units Prototype
testing
and as a block)

Field Testing Corrections Approval Bulk Launch

Collaboration between software development SME and an Source –Author, Interview , August 2020
electronic devices manufacturer

Time - 6 months/ 1 year ( approximations)

 DevOps - Software Development
DevOps is a set of practices that combines software development (Dev) and IT operations (Ops).
It aims to shorten the systems development life cycle and provide continuous delivery with
high software quality. (Source - https://en.wikipedia.org/wiki/DevOps, Aug 2020)

Energy
Conservation
Microsoft services, new
solutions

Implications
for business Industrial
model Customer
innovation

LG
Source of image -
https://medium.com/tech-
tajawal/devops-in-a-scaling-environment- How ?
9d5416ecb928, Aug 2020
Why ? Cloud +AI /
Scope of Continuous Real time ML(Azure)
Customer feedback information Real time
Continuous innovation of flow – to communication
(office 365 voice)
solutions and process and Fro,
 Innovation- Dynamic capability
Innovation and change are sometimes conceived as a two-step procedure—
invention and commercialization (Mansfield, 1974 in Teece, 2010)

Sensing Capability Seizing Capability Transformation Capability

identification and mobilization of resources continued renewal
assessment of an to address an (transforming).
opportunity (sensing), opportunity and to capture
value from doing so
(seizing),
International
Cleantechnology Company
Sense opportunity in Mobilize VC funds, Adapt solutions, and
Foreign land collaborates, deploy, business models
applies for patent and
implement business
models

Source : Technological innovation and the theory of the firm: the role of enterprise-level knowledge, complementarities,
And (dynamic) capabilities , David j. Teece (2010)
 Cross Border NPD and Market Innovation for SMEs

IP Agreements, NDAs,
Application Joint IP Clauses
6.
Local
1. 4. manufacturin
2. 5.
Product Deployment 3. Partner g and Scaling
Development in Host \Internationalize development Test up for sale in
in Host country in Foreign Marketing foreign
country country country and
back in host
countries

3.
1. 2. 4. 5.
Scout for
Generally, 2-3 Solution is Develops Deployment • Challenges
opportunity
people deployed in multiple
through – in Identified
company test centres collaboration
Internationali partners
Works with or multiple – market
zation premises
universities, locations as research,
platforms of and
research available – R&D, • Financing
supranational corrections
universities, Test results distribution, • Partner selection
platforms or
taps grants are manufacturin
for product monitored Individual g, Financing,
country
development during and customers • Opportunity
platforms or
used for Scouting
other entry
2. Patent • Pilots
modes
application • IPs

Scope of Joint Research in Stage 1 and Stage 4 general configuration - 1 research

institute + 1 SME from each countries
Source –Author, August 2020
SELCO Solar- BoP - Product Development Process

Develop approaches, strategies and solutions through an

iterative process.

Source – Selco Foundation Website

Business Model - Innovation
SELCO
Model
Operator Model

Entrepreneur
Model

Partner Model

Community
Model

Source – Selco Foundation Website

 Business Model – Innovation - BoP

Model Activities
Operator Model ➢The solar charge battery system is rented out to a community by SELCO Foundation through a
chosen operator from the community.
➢Operators in exchange for a monthly wage.
➢Operators in charge the batteries, distribute these to the renters in the community, collecting the
rent and liaising with the foundation in case of any technical difficulty
Entrepreneur ➢An existing entrepreneur from the community.
Model ➢ takes out a loan and purchases a solar powered battery charging system to then rent out individual
services to households in the community.
➢The entrepreneur’s income is the margin he keeps of total rent s/he collects per month minus the
equated monthly installments (EMI) s/he pays back to the bank/financing entity.
➢Energy centre entrepreneurs are heavily supported by SELCO Foundation and often need financial
support in terms of margin money/interest subsidy.
Partner Model ➢ The solar charge battery system is rented out to a community by a local NGO through a chosen
operator from the community.
➢It runs in a manner similar to the Operator model.
➢Partner run models are often inbuilt within an existing or a new space (in a classroom, health clinic
etc.), which also has the partner service running with the basic energy access services.
Community ➢Under a community-owned model, the IEC is purchased by the community as a whole- through
Model joint savings- and is managed by operators selected by the community.
➢ coordinate with the SELCO Foundation team.
➢ community-owned centre distributes solar-charged batteries in the evening to its customers.

Source – Selco Foundation Website

 SELCO Business Model – Innovation- Why?

Implications for B2B in the context BoP market – micro

enterprise, Cottage enterprises

Solar Panel

Community

Battery Cables
Schools,
Connectedness Household Health
cetres

Inverter Banks
SELCO
Micro Small
Enterprises Enterprise-
➢ Created -Shops Husk Mill
Energy Infrastructure
Appliances and supply chains

➢ Created market
access for local
Traditional Markets community for sales of
Potential Market /
their produce Potential
➢ facilitate local
business - weaving,
partnerships/
agriculture, photocpier, Potential Producers
printing, etc
 Innovation - Location Matters

Government
Policies

Chance

Michael Porter’s Diamond Model

 THE BELGIAN PHARMACEUTICAL CLUSTER

Pharmaceutical Value chain

Source https://www.isc.hbs.edu/resources/courses/moc-course-at-
harvard/Documents/pdf/student-projects/Belgium_Pharmaceuticals_2011.pdf
 Innovation : Location Matters
THE BELGIAN PHARMACEUTICAL CLUSTER

Source https://www.isc.hbs.edu/resources/courses/moc-course-at-harvard/Documents/pdf/student-
projects/Belgium_Pharmaceuticals_2011.pdf, august 2020
 Source https://www.isc.hbs.edu/resources/courses/moc-course-at-harvard/Documents/pdf/student-
projects/Belgium_Pharmaceuticals_2011.pdf, august 2020
Thank You
 Chapter 10:

Managing Services for Business Markets-

Part 1

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” - Michael D. Hutt,
Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other sources)
Chapter Topics
A. What is the value of systematically monitoring the customer
experience?

B. What is the central role that business services assume in

customer solutions?
Service – Revenue Generator

3
Customer Experience Approach
•
Recent research discovered that only 8% of customers think that their
experience with their vendors were superior, whereas 80% of vendors
think that they delivered a superior one.

•
This research points out an obvious disconnect.

•
By focusing on core products instead of understanding the customer’s
experience, many companies lose their customer and never know why.

•
Also, by not understanding the customer, companies lose an
opportunity to create value and cement relationships.
Source : Accenture 2018 Pulse research, accessed August 2020

https://www.accenture.com/us-en/services/interactive-index
Source : Accenture 2018 Pulse research, accessed August 2020

https://www.accenture.com/us-en/services/interactive-index

6
Customer Experience Maps
•
One way to understand the customer better is to “Map”
out experiences at various “touchpoints.”

•
Touchpoints are spots where a seller has direct or indirect
contact with the customer about the product or service
over time.

•
The map points out what is most important in the
seller/customers’ experience.
 Customer Experience Life Cycle Map
Figure 10.1 The First Step in Understanding a Customer’s Experience is to Develop a Life Cycle Map

A representative set of customer-company interactions

Product
Relationship Provider Account Order Problem Account
reception Payment
initiation evaluation setup placement resolution maintenance
and use

The company The customer The customer The customer The customer The customer The customer The customer
exposes the gets initial price obtains selects the tracks order files a claim receives and maintains
customer to its and lead-time materials for product status and obtains validates the profile
marketing quotes account setup resolution invoice information
message The customer The company
The customer The customer places the order and the The customer The customer The customer
The customer puts out an RFP provides (fills out the customer notifies the makes the maintains
seeks relevant account profile order form arrange the company of a payment supplies
information The customer information final delivery problem and
evaluates The customer terms obtains The company
providers and The company prepares resolution provides general
negotiates confirms setup specialty The customer support (not
terms and and activation documents receives and The customer related to
pricing when required inspects the seeks an problems)
The company (for example, for product invoice
The customer performs rush delivery) adjustment The customer
selects the courtesy follow- The customer and obtains obtains ongoing
provider up The company refuses or resolution price quotes
and the accepts the
The customer customer product
requests arrange initial
product delivery terms
information

SOURCE: David Rickard, “Winning by Understanding the Full Customer Experience,” The Boston Consulting Group, Inc., 2007, p. 6. Accessed at
http://www.bcg.com
 Actuators India Ltd
Actuator India ltd supplies sophisticated actuators to different process plants cross India.
A hydraulic actuator consists of a cylinder or fluid motor that uses hydraulic power to
facilitate mechanical operation. A recent survey with the end customers revealed
dissatisfaction from the customers, although it appeared that the performance of the
actuators are largely best in the class.
One of the customers reported the services person does not returns call. Another customer
complained about no replies for spares quote. One customer complained about the double
invoicing for supply of 4 nos. of actuator and for almost a year, no actions have been taken
except some emails. This customer was furious and threatened to replace the
components with another brand at the next chance. Another concern were logistics time
took for to and fro movements for repaired devices. Customers complained about delays
of receipt of actuators sent for repair at the end of Actuator India. Actuator India’s factory
is located in the outskirts of Nagpur and it receives and delivers the actuator through a
logistics provider in Nagpur town. There is increasing reports that some of the repairs are
taking long time to return back to customers. The purchase officer of a big customer plant
in Bhopal reported about the delay they faced for sending and getting back a repaired
actuator. The customers are using local repairers to get the fault repaired owing to delay in
repairs and also high prices of repair. It was revealed that emails are send to different
people based on whom the customer knew in Actuator India. The customers look forward
to an instant acknowledgement of emails communication. There was a SAP module for
purchase. A CRM module was functional but that was only used to trace customer contact.
The SAP purchase module was integrated with EU HQs and has no independence of local
changes on requirement.
It was found in Kolhapur that a government unit replaced a big chunk of such actuators
because of unavailability of services in time and bad repairs.
The Managing director of Actuator India is concerned about such feedbacks and is worried
about the deterioration of brand. Feedbacks indicate of shift of customer preference to
another brands with better service even if the performance of other brands are no where
near Actuator India.

What is the way forward?

 CEMEX
“CEMEX is a global building materials company that provides high-quality products and reliable
services to customers and communities in more than 50 countries. As a testament to its customer-
centric mindset and focus on continuous innovation and improvement, CEMEX launched CEMEX Go
to transform the customer experience.

CEMEX Go is a first-of-its-kind, fully digital customer integration platform. It is a multi-device offering

that provides a seamless experience for order placement, live tracking of shipments, and managing
invoices and payments for CEMEX’s main products, including bagged and bulk cement, ready-mix
concrete, aggregates, and multi-products. CEMEX Go delivers real-time, detailed information that
customers need to get more done in less time, enabling them to have more control over their
businesses.

In its first year, CEMEX Go has changed the experience of more than 20,000 customers in 18
countries. The 20,000 customers represent approximately 60 percent of CEMEX’s total recurring
customers worldwide. Currently, those customers are placing around a third of their orders—or
about 20 percent of CEMEX’s global sales— through the platform”.

Source : Research Insights, Standing out in b2b customer engagement, IBM institute for Business
Value, Accessed August 2020
 From a Product to a Solutions
Perspective
Product Perspective Solutions Perspective
Value Win by creating innovative Win by creating and delivering superior
Proposition products and enriching customer solutions
features of existing products
Value Value is created by the firm Value is co-created by the customer and
Creation the firm
Designing Start with the product or Start with the customer problem, and
Offerings service, and then target then assemble required products and
customer segments services to solve the problem
Company- Transaction-based Interaction-based and centered on the
Customer co-creation of solutions
Relationship
Focus on Quality of internal processes Quality of customer-firm interactions
Quality and company offerings
Determine Unique Capabilities
•
Before developing solutions, B2B firms
must:

1. Define their own capabilities

2. Figure out how to use them to help customers to:
a. Reduce costs
b. Increase responsiveness
c. Improve quality
d. Maybe even contract to do some of the work

Ø
Products provide the platform for the
 Dupont
Ø
Dupont first sold paints to Ford
Ø
Afterward, it runs Ford paints shopree
Ø
paid on the basis of number of painted vehicles
Ø
Lead to reduced sell of paint but incentives to paint
cars with least amount of waste
Ø
The revenue increase because of increased
productivity
 Expanded services
“A leading manufacturer of processing, packaging and filling machines has
continuously expanded its offers along the entire life-cycle of its machines
and lines.

It now offers technical and productivity support, training seminars for staff
and management, retrofitting and upgrades, analytic tools and services, and
services to help customers sell or relocate equipment. It also offers
contracts for inspection, support and maintenance throughout the product
life-cycle.

As a result the company was able to protect its equipment from attacks by
other service providers and also to increase its revenues from existing
customers. By understanding the kind of services its customers needed at
different stages of the equipment’s life-cycle, as well developing products
tailored to customers and selling services that delivered solid value, this
company increased its service market share by more than 10%.”

Source : https://media.bain.com/Images/Bain%20study_Service_Now.pdf, accessed august 2020

Advantages of Adopting a
Strong
•
Relationship Focus
The authors suggest that many sellers think that providing a solution is
a customized and integrated combination of products and services for
meeting customer needs.

•
However, customers view a solution as a set of customer-company
relational processes that involve:
1. Defining customer needs
2. Customizing, integrating and deploying products
& services
3. Providing post-deployment customer support
Aimed at meeting (solving) business customers’ needs (problems).
 Delivering effective customer solutions

1) The suppliers’ role -multi domain skills, boundary spanning

skills; complementary actions across departments;
documentation of effective/ non effective customer solutions;
blueprint for service (role/responsibilities/ guidelines)

2) The customers’ role –

customer Adaptiveness – willingness to adapt processes to
accommodate suppliers product, political counseling, operational
counseling

Choose customers wisely – not all are suitable for solutions.

Benefits of solution marketing

Creating growth opportunity, sustaining differentiation & customer loyalty,

 Coordination of supplier and customer is critical in custom design
projects and after sales services- Calls for superior service and long term
relationship

Turbines in Power plants installation

Blast furnace in steel plant erection
work

https://www.marubeni.com/en/news/2016/release/20161201E.pdf, accessed 2020

Source -
https://www.utilities-me.com/article-1367-alstom-touts-combined-cycle-power-plant-so
august 2020

17
Business Product-Service Classification
Based on Tangibility Continuum

18
Unique Service Characteristics
Business services that are intangible-dominant market offerings.
Few services are totally intangible – they often contain
elements with tangible properties.
Thank You

20
 Chapter 10:

Managing Services for Business Markets-

Part 2

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” - Michael D. Hutt,
Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other sources)

1
 Topic
A. Recap
B. roles of service quality, customer satisfaction
and loyalty assume in service marketing
success
C. Service Packages
D. Hybrid Offering
 Recap- Delivering effective customer solutions

1) The suppliers’ role -multi domain skills, boundary spanning

skills; complementary actions across departments; documentation
of effective/ non effective customer solutions(key milestones in
solution development, recoding history and for learning from
experience); blueprint for service (role/responsibilities/ guidelines)

2) The customers’ role –

customer Adaptiveness – willingness to adapt processes to
accommodate suppliers product, political counseling, operational
counseling

Choose customers wisely – not all are suitable for solutions.

Benefits of solution marketing

Creating growth opportunity, sustaining differentiation & customer loyalty,

 Recap- Unique Service Characteristics
Business services that are intangible-dominant market offerings.
Few services are totally intangible – they often contain
elements with tangible properties.
Source :https://www.bain.com/insights/winning-in-industrial-service/, accessed august 2020

5
Service Quality

•A good service is one that meets or exceeds the customer’s

expectations.

Dimensions of service quality -

Reliability, Responsiveness, assurance, empathy and tangibles.

Customer satisfaction and loyalty

The basic elements of products/service, basic support services – technical

assistance/ training, recovery process , extraordinary services in solving
customer’s unique problem.

Service Recovery – Policy. Procedures and processes a firm uses to resolve

customer’s problem.

Zero defections – service quality impacts defection. No defection increases

bottom line, and creates many other benefits.

Return on quality- justify quality improvements on financial basis as it has

also diminishing returns after some points
5 Dimensions of Service Quality
 Actuators India Ltd - Problems identified in the case
a) the services person does not returns call.
b) no replies for spares quote.
c) double invoicing for supply of 4 nos. of actuator and for almost a year, no actions have been taken except
some emails.
d) Long logistics time took for to and fro movements for repaired devices.
e) Customers complained about delays of receipt of actuators sent for repair at the end of Actuator India.
f) There is increasing reports that some of the repairs are taking long time to return back to customers.
g) It was revealed that emails are send to different people based on whom the customer knew in Actuator
India.
h) The customers look forward to an instant acknowledgement of emails communication.
i) A CRM module was functional but that was only used to trace customer contact.
j) The SAP purchase module was integrated with EU HQs and has no independence of local changes on
requirement.
h) unavailability of services in time and bad repairs.
Actuator India Ltd - Examination of Selected Customer experiences

Quality Customer Tactics Implications

experiences
Reliability the services training of service person, People, Process.
person does not service supply chain issues,
returns call. inventory issues

Responsiven unavailability of Develop third party service Place, Pricing

ess services in time delivery channels, and
and bad repairs. repair centre
Assurance Confusions Designate single point of process
created by contact, use CRM and
Multiple points of integrate with ERP
contact
empathy Long time of Problem identification and Place
repairs due to addressing the same with
delay in logistics Logistic service provider
tangibles. Lack of Best practices manual, Physical evidence,
information on training of SME personnel Promotion,
gear conditions for Process
maintenance
9
 Customer Satisfaction and Loyalty

Customer-linking processes that affect satisfaction:

1. Basic elements of the product or service that customers
expect all competitors to provide.
2. Basic support services, such as technical assistance or
training, that makes product more effective.
3. A recovery process for quickly fixing product or service
problems.
4. Extraordinary services that so excel in solving customers’
unique problems or in meeting customer needs that these
services make the product or service seem customized.
 Service Recovery
✓ A Firm does not provide flawless service ✓ IBM assigns a resolution owner,
all the time. Hence, service recovery generally an expert, after receiving
strategy is important. the complaint.

✓ Service recovery strategy encompasses ✓ Ocean freight-shipping industry

found clients who expressed higher
procedures, policies, and processes that
satisfaction with claims handling,
firms use to resolve customer service complaint handling and problem
problems promptly and effectively. resolution have a higher level of
overall satisfaction with the
✓ One way of resolving a discrepancy is to shipping line.
negotiate the resolution.
✓ Customers who have experienced a
service failure and have got it
✓ “What’s it going to take for you to be corrected to their satisfaction are
very satisfied with the resolution of this more loyal than customer who have
complaint?” not experienced a service failure.
 Zero Defections

• Deals with zero defection of customer – implications for customer

loyalty and customer retention.

• It is beneficial in terms of sales and profits because:

1. The firm can charge more – revenue across the years increase.
2. The cost of doing business is reduced.
3. Long-term customers provide word-of-mouth advertising.

• Therefore, the strategy is to:

1. Track defections to find out “why.”
2. Recognize that continuous improvement is not a cost but an
investment in a customer that generates profits.
3. Measure return on quality – return should neutralize cost
investment.
 Service Package
Developing the Service Package

 The service package can be thought of as the

product dimension of service, to include:
1. Essential concept of the service
2. Range of service provided
3. Quantity, quality and level of service

In addition:
 Service package must consider some factors unique
to services – personnel, physical product and a
process for providing the service.
13
 Services Packages

➢ Customer- benefit concept – the core benefit the customer derives from
the service

➢ Service concept – It defines the general benefits that the service

company shall provide to the customer through the bundle of products and
services.

➢ Service offer - service offer spells out in – more detail those services
to be offered - when, where, and to whom they shall be provided and how
they shall be presented. Shall include all the tangibles and intangibles.

➢ Service delivery system – How the service is provided by the system? It

should provided a carefully designed blueprint how the service is to be
delivered

➢ Service personnel – Ensure that all personnel know and understand the
service benefit concept.---- attitude, knowledge and skills of the service
people.
Conceptualizing the Service Product
Conceptualizing the Service Product – Hotel services for corporate customers training annual sales meeting

Service concept –
flexibility, responsiveness and
courteousness in providing
Customer – Benefits – meeting rooms, a full range of
a successful annual sales meeting audiovisual equipment, flexible
meal schedules, message services,
professional personnel, climate
controlled meeting rooms

Service offers – when, where and to

whom – total service package – Service delivery system –
tangible and intangible – multitude of personnel with capabilities and
tangible elements ( soundproof attitudes, facilities and layouts for
meeting, projection equipment, video effective work flows, and carefully
players, slide projections, flip charts) developed processes and
and intangible elements ( attitude of procedures
personnel, warmth of front desk
greetiings, response to reuests)

Service Personnel –a ) knowledge,

attitude, behaviour and skills of
personnel.

16
Conceptualizing the Service Product – ABC India Ltd

Customer – Benefits - Service concept –supply of all

Troubleshoot gear operational Spares of gears, Inspection and
problems Repairs services

Service Offers– when, where and to Service delivery system –

whom – components repairs to supply
a) Specially trained customer
of entire gear, best practices manual,
training programmes, delivery within 3 relationship manager , b) one point of
days from request, in-situ inspection contact - dedicated 24x7 call centre, c)
within 2 days in case of major failure, dedicated service team., d) service
repairs and dispatch to client factory camps
within 7 days of receipt, gear Long term – a) third party channels
inspection for next 6 months, etc.

Service Personnel –a ) well trained

customer relationship manager, b)
service experts and c) Trained third
party people.

17
 Hybrid Offerings

Unique Unique
resources capabilities
Service related data
Installed base
processing and
product usage and
interpretation
process data.
capability
Differentiation
Product Execution risk advantage
development and assessment and
manufacturing mitigation
assets. capability

Product sales force Cost leadership

Design to service
and distribution
capability advantage
network

Field service Hybrid offering

organization sales capability

Hybrid offering
deploying capability

18
 Hybrid Offerings

Hybrid offerings represents a combination of one or more goods and

one or more services that together more customer benefits than if
the goods and services were available separately.

Unique resources - manufacturer

Installed base product usage and process data - can be used for
monitoring operations, maintenance and other process interventions.
Product development and manufacturing assets - can be leveraged to
achieve a competitive advantage by leverage by incorporating
customer feedback.
Product sales force and distribution network -
Field service organization – after sales service, new products and
services
Unique capabilities Definitions
Unique capabilities -manufacturer
Service related data Manufacturer capacity to gather, analyze, and interpret installed base product usage
processing and interpretation and process data to help business customer s to reduce costs and increase
capability productivity . Eg - An industrial equipment manufacturer uses customer energy usage
data for energy consulting services

Execution risk assessment The manufacturer’s capacity to evaluate the likelihood that agreed upon outcomes
and mitigation capability of hybrid offerings will be achieved and the to design and implement safeguarding
mechanisms to meet performance commitments and to maintain internal profit
targets. Eg- A manufacturer of in-flight entertainment systems of commercial airlines
examined product usage and process data from installed base of customers to develop
reliable outcome expectations and performance guarantee

Design to service capability The manufacturer’s capability to integrate the product and service elements of the
offering in the development process to tap the full potential for revenue generation or
cost reduction. Eg -Enabling technician to do remote maintenance and increase
revenue and reduce cost
Hybrid offering sales The manufacturer’s capacity to reach key decision makers in the customer organization,
capability co-ordinate key contacts in the customer and vendor firms, sell hybrid offering value
through specific documentation and communication tools and aligns the sales force
with both the field organization and channel partners to increase hybrid offering
revenues . Eg- using sales force to mobilize third party partners as well as internal
service team as and when needed.
Hybrid offering deploying Capacity to use flexible offering platforms that can standardize production and delivery
capability processes while providing menu of options to adapt to individual customer’s need. Eg
six different maintenance packages for printers to cover the needs of retail banking
customers

20
 Supplier Process support services - process
promise improvement of customer – a
to Product life cycle services -input based
manufacturer of material handling
perform maintenance services within lifetime
a deed equipment offers warehouse optimization
and logistics counseling to the customer

Nature of
the value
proposition Services for Hybrid
Offering

Supplier Asset efficiency services - output based –

promise to
achieve Improve productivity performance of Process delegation services - services to
performan assets - Manufacturer of flight perform on behalf of a customer – dupont
ce
infotainment offering 98.5% availability paint shop – paints supply plus painting
of video screens during flights.

Service oriented towards Service orietned towards

Supplier goods Customer process

Service Recipient

adapted from Wolfgang, U. and Reinartz, W.J.( 2011), Hydbrid offerings,: How manufacturing firms combines goods and services sucessully, Journal of
Marketing, 75 in Hutt Speh and Sharma

21
Source :https://www.bain.com/insights/winning-in-industrial-service/, accessed august 2020

22
 Service Mix - 7P
Service Mix DHL Services

Product (Service) DHL Logistics aims offering variety of service options to its customers with 5 divisions, namely DHL Express, DHL
Global Forwarding, DHL Freight, DHL Supply Chain and DHL Global Mail

Pricing ✓For standardized freight services, DHL Logistics prefers implementing cost plus pricing strategy.
✓ For customized services, prices are relatively high when compared with standardized transportation services
provided by the company.

Promotion DHL usually prefers introducing its service offerings through television advertisements.
DHL holds several sponsorship deals with some of the most exclusive worldwide events such as Rugby World
Cup, Formula 1, IMG Fashion Week , etc reflecting the values of the company.

Place Branches all around the world. DHL has 850 terminals, warehouses and offices located in approximately 150
territories. Express conducts its operations in more than 220 countries and territories with a fleet of more than
250 aircrafts.

Physical evidence Components of physical layout such as odors, colors, temperature, noise level, and comfort of furnishings may
influence the perceived performance of service provider (Bitner, 1990).
✓Eg- DHL uses its widely-known logo, red DHL writing on a yellow-colored-base, and yellow color on its trucks,
packaging materials and buildings.
✓website, brochures, business cards and even invoices.
✓No dress code for employees working at internal operation departments , but dress code essential for front
line employees .

People New Employee Orientation Program that aims introducing all products of DHL to employees
and developing their communication skills., Soft skill plus basic IT / IS training, SAP training, Functional trainings

Process ✓DHL pays attention to the for measuring customer satisfaction and being able to inform customers about
processes – Soft trans program – measures of duration of cargo handling to address cargo handling
programme.
✓I-sell program is being used for keeping records of customer visits and sales reports.
✓7/24/365 customer service for specific industries

Source – Oflaca, B.S, Dobrucalı,B., Yavas, T., and Escobar, M.G. (2015)Services Marketing Mix Efforts of a Global Services Brand: The Case of DHL Logistics, Procedia
Economics and Finance 23 , 1079 – 1083, , www.sciencedirect.com
 Service Guarantees
✓A service guarantee has been defined as a written promise of
performance combined with an offer of compensation in the event that
service promises are not achieved

✓decreasing the perceived risk in purchasing, increasing customer

satisfaction, building customer loyalty, and supporting quality improvement
initiatives in the supplier organization

✓service guarantees are perceived as valuable to the extent that

customers are ready to pay a substantial price premium.

✓service guarantees in a b2b setting must be co-created jointly with

the customer to ensure they are relevant and valuable

Source - R .McColl, Y. Truongb , and A.L. Rocca (2019)Service guarantees as a

base for positioning in B2B, Industrial Marketing Management 81 (2019) pp.78–86
Thank You

25
 Chapter 11:

Managing Business Marketing Channels

Reference –Majority contents are from a) “B2B Marketing – A South Asian

Perspective” - Michael D. Hutt, Dheeraj Sharma & Thomas W. Speh and b)
R.A.Cormier, besides other sources)
Chapter Topics
1. The alternative paths to business market
customers
2. The critical role of industrial distributors and
manufacturers’ representatives in marketing
channels
3. The central component of channel design
4. Requirements for successful channel strategy
Healthcare India Pvt Ltd (MNC) – Medical devices

Healthcare India limited is a big multinational in

India a healthy market share in MRI, X-Ray, USGs,
etc. It has thriving healthcare business across
multiple continents. In India, they are Present
only in major cities (Tier 1). The company needed
to expand in other small towns. But they have
lack of manpower and on-boarding manpower
represents higher cost. What can be the probable
approach to enter the rest of the Indian urban
market of small towns?
Go to Market Strategy
Lawrence G. Friedman’s influential book states
that:

 The ability to make smart decisions about going to the

market depends on how well you understand your
customer.

Who are they?

What do they buy?
How do they buy?
How do they want to buy?
What would motivate them to buy from you?
Importance of Channel Component
• Selecting the channel design mix is challenging

1. The alternatives are numerous

2. Marketing goals differ between channel members
3. Business markets segments vary, thus it may require
numerous channels concurrently
4. Business market environment constantly changes
5. Competition is stiff
6. Customer requirements change
7. Internet technology is changing the landscape

• All of this creates new opportunities and the need

for fresh channel strategies
Managing the Channel
• Once a channel structure is specified and goals set,
marketing managers need to:
a. Develop procedures for selecting intermediaries
b. Motivate them to meet goals
c. Resolve conflict between them
d. Evaluate performance

• The following discussion centers around

designing and administering the business
marketing channel.
Distribution Channel
• The link between the manufacturer and the customer is
called the Channel of Distribution

• The channel accomplishes all the tasks necessary to get

the product/service to market

• Tasks can be performed by the manufacturer or be

delegated throughout the channel

• The question is: “What is the best way to execute the

tasks?”
Channel Tasks Include:
• Contacting potential buyers • Financing
• Negotiating • Servicing the product
• Selling • Inventorying
• Contracting • Transporting
• Transferring title • Storage
• Training
Direct and Indirect Channels
• Direct is when the manufacturer performs all
the marketing functions

• Indirect is when some type of intermediary

sells or handles the product
Fig. 11.1 – B2B Marketing Channels

Manufacturer

Direct Channels Indirect Channels

Direct Online Telemarketing

Sales Marketing
Manufacturers’
Representatives

Industrial
Distributors

Customer Segments
Direct Sales Force Required When:
• Sale is complex • Then, seller must
• Product/service is highly control the process to
customized ensure proper
• Customers are large implementation of total
product package and to
• Products are complex guarantee quick
• Sales involve extensive responses to market
negotiations conditions
• Professionalism is required
• Customer requires direct
contact
Indirect Distribution:
Generally Found Where…
Markets are fragmented and widely
dispersed.
Low transaction amounts prevail.
Buyers typically purchase a number of
items.
 IBM
 IBM’s massive sales organization concentrates on
large corporate, government and institutional
customers.

 Industrial distributors serves thousands of other

IBM customers- SMEs. These channel partners play a
vital role in IBM;s business at a global scale. It provides
high level support including co-marketing
opportunities, customer lead generation, extensive
training, and technical assistance.
 B2B Marketing Channels

Lead Generation Triggered by sales call, by customer’s response to direct mail, or by

Web request for information; firm makes initial contact with prospect.

Lead Qualification Potential customer screened: prospect’s need for product or service,
buying interest, funding, and timeframe for making the purchase are
assessed.

Bid and Proposal Bid and proposal prepared to meet customer’s requirements (a complex
task for large technical projects).

Negotiations and Negotiation of prices, terms, and conditions, followed by agreement on

Sales Closure a binding contract.

For standardized product or service, delivery of offering to customer.

Fulfillment Configuration, customization, and installation for more complex sales.

Post-sale problem resolution, customer guidance, and ongoing contact

Customer Care and Support to ensure customer retention, loyalty, and growth.

SOURCE: Adapted from Lawrence G. Friedman, Go To Market Strategy: Advanced Techniques and Tools for Selling More Products, To More Customer, More Profitably (Boston: Butterworth-Heinemann, 2002), pp. 234-
236.
Customer Contact Points
 Multi-channel strategy is used when it is
necessary to reach a large business market that
is composed of large, mid- and small-sized
customers.

 First, arrange customers in terms of “relative cost

of sales” from top to bottom. Use:
1. Direct sales for large accounts
2. Indirect distribution for middle and smaller
accounts.
Business Partner’s Key Role
• A key role is to generate leads for channel
members.

• They can do it by:

– Internet
– Direct mail
– Tele-channels, etc.

• More complex roles will be performed by more

sophisticated members (professional sales
people – direct or indirect)
 Multi-Channel Integration Map
Simple Example of High-Coverage Partnering Model
Sales
Lead Qualification Bid & Negotiation/ Fulfillment Customer care
task
generation proposal sale closure & support
Channel

$$$
Direct sales
channel
(field reps)

Business
partners

Tele-channels

Occasional support
by sales reps to
Direct mail help partners
close key
strategic deals
Internet
$

Sales Cycle
CRM Systems
• Tracking activity on prospects/customers used to be
a difficult task.

• Before computers (Internet), no one could really

track a prospect’s situation from beginning to end.

• Today, with virtual CRM programs, all activities can

be recorded at every level, thus making it easier to
serve the customer by coordinating all sales channel
activities.
Distributors
• There are two primary intermediaries:
1.Industrial distributors
2.Manufacturers’ representatives

• These two groups handle a very sizeable

share of B2B sales.
Participants in the business marketing channel

Distributors – full service intermediaries, provides credit,

delivery ,wide product assortment, technical assistance, etc

Manufacturer Reps – When a business has a complex

technical product and needs a strong selling job,
manufacturer reps are solutions. These are outsourced
sales persons.
Distributor responsibility
Contact
Product availability
Repair
Assembly and Light manufacturing

Distributor Classification –
 general line – cater to brad array of needs,

 specialists – one of few related lines.,

combination house –operates in both industrial and

consumer
 5 Dimensions of Service Quality

Source :https://www.bain.com/insights/industrial-channel-partners-snap-chart/06/08/20, date

22
Expanded Distributor Roles
 To add more value for their customers
many large distributors have expanded
their roles to include more services:

1. Inventory management
2. Automatic replenishment
3. Product assembly
4. In-plant stores
5. Design services

 Many charge a separate fee for

additional services
Primary Distributor Classifications
General-Line Distributors
• Stock extensive variety of low tech (commodity)
products

Specialists
• Focus on one or few related lines geared around
high tech or industries demanding complex
customer requirements

Combination House
• Operates in two markets: industrial and
consumer
Choosing a Distributor
• Choosing a distributor depends upon the market a
company wishes to target

• What are some distributor qualifications?

1. Financial
2. Good functional operations
3. Skills & technical expertise
4. Contacts

• In other words, “What can they do & who do they know?”

• E-collaboration between manufacturer and distributor

from planning to servicing is a critical strategic force in the
B2B arena
Manufacturers’ Representatives(MR)
• MR fill a different role than Industrial
Distributors.
• They perform a much higher level of service.
• They:
1. Are more technically advanced
2. Know their territory better
3. Are able to sell professionally
4. Are experienced in the industry
5. Usually represent several companies
Manufacturers’ Reps
• Used by small, medium and large firms.
• Often, small and medium firms cannot support a full
time salesperson.
• Large firms use them to supplement their direct
force for introducing new products to an area not
covered by their sales force.
• The main reason for using Reps is because it is
economically correct to do so. Little or no training
costs, no benefits, no outrageous risks, and Reps are
highly motivated vs. employees.
Manufacturers’ Reps are used when:
• Product is not standard—closer to made-to-order
• Reps do not take title nor hold inventory
• Reps are normally paid commission, however deals can
be made to be paid a monthly minimum
• Commission rates can range from 3%, 20% or more
• Gross margin is not large
• Relatively few customers or concentrated geographically
or concentrated in few industries
• Customers order relatively infrequently and allow fairly
long lead times
Channel Design Process
• Channel design is a dynamic process:
1. They can be developed (new channels) where
none existed (i.e., Internet)
2. Or modify existing channels

• Channel design is a vigorous activity rather than

passive one.
• One of the most difficult jobs in marketing is to
develop a channel(s) of distribution
Step 1: Define Customer Segments
• Primary goal is to satisfy (solve) end users’
needs (problems)
– Define target market segments
– Isolate each segments’ buying and usage
behavior
• What do they buy
• How do they buy
• How do they use their purchases
Step 1: Define Customer Segments
• Channel members are not customers. Look
beyond to the buying unit who has the real
need.
• Example: A manufacturer of ball bearings
should not consider the wholesaler as their
customer. They should consider the various
OEMs or repair shops that need good
bearings as their customer.
Step 2: Customers’ Channel Needs by
Segment
 Identify and prioritize channel functions
requirements for each segment.

 Next, align the function with the customer’s needs.

 Example: One customer may need product

information as their top priority while another may
need product quality assurance as their top priority.
Step 2: Customers’ Channel Needs by Segment –Con’t.
Channel Function Customer Need Table 11.2
1. Product Information Customer seeks more information for new or more complex products
especially in rapidly changing environments.

2. Product Customization Some products must be technically modified or need to be adapted to

meet the customer’s unique needs.

3. Product Quality Assurance Because of its importance to a customer’s operation, product integrity &
reliability might be given special emphasis.

4. Lot Size Purchase of products with a high-unit value or those used extensively
represents a large dollar outlay, thus being important.

5. Assortment Customer may need a broad range of products and may assign special
importance to “one-stop shopping.”

6. Availability Some customers’ environment demands that the seller support a high
level of product availability.

7. After-Sale Service Customers require a range of services from installations and repair to
maintenance and warranty.

8. Logistics Customer may require special transportation and storage services to

support its operations strategy.
Step 3: Assess the Firm’s Channel
Capabilities
• Once segment is defined, functional requirements
isolated and prioritized, the next step is to:
– Analyze the segment’s channel strengths and weaknesses
– Identify gaps between what the segment functionally
desires and what the channel is providing

• Customers base their choice on the bundle of benefits

(channel functions) the channel offers.
Step 4: Benchmark to Competitors
• What go-to-market strategies are key
competitors using?
• Understanding what competitors are doing,
or not doing, offers opportunities to discover
gap(s) that might need to be closed.
Step 5: Create Channel Solutions for
Customer's Latent Needs
• Sometimes, by reviewing what competitors are doing, or not
doing, latent customer needs emerge.
• Latent needs are those that are not obvious. Sometimes
discovering them can even lead to a whole new service.
• Example: An office products supplier that mainly sold print
cartridge products to the copy repair industry noticed that some
of their customer also supplied “magnetic platters” (hard drives)
to mainframe users. They informed some of their other copy
repair customers about this related service. Some of them
decided to try it and became successful. These customers now
had a new service to sell, and the office products supplier had a
new product (platters) to market to them.
Step 6: Evaluate and Select Channel
Options
• Channel options need to be considered in light of a
cost/benefit analysis.
• Some gaps may offer opportunities.
• More often, channel members can work together to better
align themselves with their customers.
• The idea is to enhance value for their customers.
• Channels must be open to change as customers and
competitors change.
• Channel management is an ongoing process.
 Welding Ltd
Welding Ltd is a welding manufacturing company located in Trichi. It
manufactures different category of welding rods to steel, cement, power,
defense sectors which are public (large PSUs) and private sector
organizations. It wants to enter the eastern region market. Eastern region
market essentially covers the state of Bihar, Jharkhand, Odisha and West
Bengal.
It has employed two sales executive who works from home and for the last
three years. Government organizations largely consist of organizations in
Steel, Power, Mining and manufacturing sectors from central government.
Working with such sectors require approval of products from the units
quality control department and other associated processes at the plant
level, with proper approval documents. Working with private sector is not
bureaucratic in that sense but needs a demonstration of the produced.

What is the distribution strategy going forward?

Channel Administration
Addresses:
1. Selecting good channel participants and
making sure that all tasks and obligations are
assigned and understood.

2. Motivating members to perform tasks

necessary to achieve channel objectives.
3. Controlling inter-channel conflict.
4. Controlling and evaluating performance.
Channel Administration
• Finding and selecting good people is a very difficult tasks
manufacturers have to do. They can use:

1. Industrial Distribution magazines

2. Manufacturers’ Rep Directory
3. Advertisements in business newspapers

• Convincing a rep to come on is a two-way street. The rep asks

the question, “Is this a good opportunity for me?”
Motivating Channel Members
• Distributors and Manufacturers’ Reps are:
A. Independent
B. Profit Oriented
C. More concerned about their customers’ situation
than the manufacturer’s state of affairs.
D. Thus, Distributors and Mfg. Reps have a different
outlook and perception than the manufacturer.
Partnership
• The channel is motivated by the understanding that
the relationship is a partnership.
• Relationship Marketing demands:
a. Trust
b. Working together
c. Open communication
d. Support during “good” and “bad” times
• This relationship leads to meeting performance
goals.
Dealer Advisory Councils
• This approach to motivating the distribution channel
is to bring in the players for the purposes of:
1. Developing policy
2. Developing strategy
3. Attaining advice to correct problems
4. Taking advantage of opportunities

• Progressive companies bring them into the decision-

making process as much as possible (AMAP).

46
Compensation
• Margins and commissions are the driving force to motivate
this element of marketing.

• Margins and commissions must meet market norms.

• Companies and products that offer higher commissions and

margins do get the attention over those that don’t meet
norms.

• Many companies ask the distributor to do more and those

extra services need to be compensated for. Example:
Market research.
Trust – The Ultimate Compliment
• Another way for trust to occur is for each member to
make the system work and to reduce channel
conflict. Techniques include:
a. Joint decision making
b. Joint goal setting
c. Cooperative programs
d. Arbitration committees to settle problems
A Successful Distribution Channel
• Needs communication and trust. To manifest this:
1. Members offer benefits and resources superior
to what other partners could offer.
2. Corporate values are similar throughout the
chain.
3. Members share information on expectations,
markets and performance.
4. Members don’t take advantage of each other.
Thank You
 Supply Chain Management

(Reference –Majority contents are from a) “B2B Marketing – A South

Asian Perspective” - Michael D. Hutt, Dheeraj Sharma & Thomas W.
Speh and b) R.A.Cormier, besides other sources)
 Topics
• The role of Supply Chain Management (SCM) in
business marketing strategy

• The importance of integrating both firms and

functions throughout the entire supply chain

• The critical role of logistics activities in achieving

supply chain management goals

• The importance of achieving high levels of logistical

service performance while simultaneously controlling
the cost of logistic activities
2
Supply chain management

SCM is a technique for linking a

manufacturer’s operations with those of all
of its key intermediaries and customers to
enhance efficiency and effectiveness
Supply Chain Management

IMPROVE REVENUE
Make the supply chain more responsive to
demand

DECREASE COST
Integrating processes from procurement .
Manufacturing and logistics
 Supply Chain Management

 Encompasses the planning and management of all activities

involved in sourcing and procurement, conversion, and
logistics.

 Central to SCM are the coordination and collaboration

activities performed with channel partners, which may
included suppliers, intermediaries, their party service
providers, and customers.

 In essence, supply chain management integrates supply

and demand across companies.
 Supply Chain

Money

Raw Raw
Finished End
material material
goods customer
mining processing

Information
The industrial drive combines a suitable motor with a drive or inverter to control
the speed, torque and position, as well as switches, sensors and communications
links as part of the Industrial Internet of Things (IIoT). (Source- Internet, accessed
august 2020)
 Cross Border Supply chain of an
Automation company
Malaysia/Taiw
an- Motors/
gearbox

OEM/ End
Assembly/testing Logistics
customer

EU Country –
Drives, PLC, HMI,
Gearbox
 Supply Chain for Electric Motors
Taiwan

US co.

Customer base-
India, Srilanka,
Bangladesh
Bhutan,
India burma,thailand,
Vietnam,
subsidiary Australia

Africa Japan (Multiple

Sectors)
Source-https://www.tatasteel.com/investors/integrated-report-2017-18/supply-chain.html, accessed on 30th June
2019
 Supply chain Management Goals
Waste reduction – excess inventory is wastage.
Postponement and customization is a good tactics, to
reduce waste.
Dell provides a build to order model. (demand side)
Supplier side Performance measure – inventory turn around
per hour.
 Time compression – order – to- delivery cycle time
reduction…….. Implies……… logistics +production time
reduction. Cash…to…..cash cycle time reduces for all.
 Flexible response –order handling, order configuration,
product variety, order size, etc………..customer’s unique
requirement can be handled cost effectively.
 Unit cost of reduction – ??? Efficient supply chain
means cost minimized, but this is not always possible. Eg
Honda – daily deliveries of
components……..implies……unfilled transportation
capabilities. Needs trade off
 Samsung Supply Chain

https://www.samsung.com/us/aboutsamsung/sustainability/supply-chain/

Key evaluation item for new supply chain

evaluation programme - environment safety,
labour rights, eco partners
Global responsible
recycling

Conflict mineral management – Titanium,

tungsten, gold, tin, etc
 Supply chain managements perspective

Benefits to the final customer - supply chain reduces waste, improves cycle
time , flexible response, cost minimization…………..no of dimensions………..
Tangible benefits for the customer………….but there can be no of players…….
Different demands…….desires…….idiosyncrasies.

Raw material supplier……….Electronic component manufacturer………….radio

manufacturer……..car manufacturer……….car buyer (car has a radio).

The financial benefit perspectives –

Lower costs, higher profit margins, enhanced cash flows,, revenue growth, higher
return on assets.

Information and technology drivers ….supply chain software…….integrate

functional areas and bridge gaps………..real time data transfer……… fedex
…integrates variety of technologies…….best practices leader……. Each day…..Fed
ex India communication network processes ….. 4lakhs consumer call, tracks the
location, pick up time and delivery time of 25 lack package
 Supply Chain Software

 The other major contributing factor to an efficient SCM

system is the Supply Chain Software available through
companies such as Oracle.
 The ability to transmit data in real time and process it
accordingly offers a competitive advantage.
 The trend is to develop better programs that integrate
all functional activities throughout the SC, and not just
those within each member of the SC.
 Again, this demands TRUST.
 Successful supply chain practices

•Good partners (trust)

•Clear objectives ( of supply chain partners).
•Strategy tied to objectives.
•Performance metrics.
•Monitor and evaluation
• Rewards/ awards
Logistics as the critical element in Supply
Chain

Distinguishing between logistic and supply chain

Managing Flows…….. Focus on product flows
(timely delivery)
Sales – marketing – logistics Integration
 Just in time systems (JIT)
 Just in time relationship
 Elements of a logistical system
 Logistics
Logistics management is that part of the supply chain that plans,
implements and controls the efficient forward and reverse flow and
storage of goods, services, and related information between the point of
origin and point of consumption in order to meet the consumer
requirements. Focus should be flow of product with timely information
driving the entire process. ( product flow in the reverse direction is also
important).

Difference between Logistics and Supply Chain

Logistics is the critical element in the supply chain

AND

SCM integrates all business process that add value of all the stakeholders
in the chain.
 Logistics

Strategic roles of Logistics

For many business marketers, Logistic is their primary

marketing tool for gaining and maintaining competitive
superiority.

Incorporate logistics planning into long term business

planning.

TATA STEEL value added service – Deliver steel to a construction site at a very
short period of time and off load steel beams in the site in the sequence , it is needed
To be used. This is a significant advantage as storage space is limited in many
Construction sites in urban area.
 Sales, Marketing and Logistics integration

Unified teams of sales, marketing, production, logistics,

information system develop integrated logistic programmes to
offer to potential customers.

Teams of specialists from each area make sales call and tailor
logistic solutions to customer problems.

DHL’s flexible same day express services for immediate

collection and delivery within a 24 hour time frame
 JIT systems

• Just In Time systems originally applied to moving inventory through the

production process.

• The objective is to get the right part to the right place at the right time in
perfect condition (zero defects).

• JIT’s purpose is to relate production to purchase.

• Example: If 100 units are expected to be purchased, then produce 100

units (getting product to match market needs).

23
 Controllable elements in a logistics system

elements key aspects

customer service level of customer service impacts cost, market
share and profitability
Order processing Triggers the logistic process
Logistics communication Guides the activities of the system
Transportation Significant cost area
Warehousing Enhance service and lower trans cost
Inventory control Product availability and correct mix of product
packaging Product identity throughout movement,
protection an effective product density
Materials handling Speed and time. Cost generating activity.
Production planning Availability of product in correct assortment.
Done along with logistics planning
Plant and warehouse location Strategic locating can reduce costs and improve
service
 Logistics cost

Activity based – costing ----- calculates the cost based on

each activity and traces it to a product, customer and
channel that used the activity…asses the contribution to
profitability correctly….design appropriate level of service

Total cost of ownership-----------consider the full range of

costs associated with the purchase and use of a product or
service over its complete life cycle.
Eg Initial high cost can be offset by few manufacturing
defect, lower inventory cost and lower administrative cost.
Total cost calculations –
Acquisition cost----- selling price + transportation cost+ admin cost of evaluating
suppliers+ expediting order and correcting errors in shipment and delivery
Possession cost – financing, storage, inspection, taxes, insurance, and othee internal
handling costs.
Usage costs – associated with the ongoing use of the product – installation, training,
labor, field repair , product replacement and disposal costs
 B2B Logistics

Logistics service impact the customers in terms of cost,

delivery time and supply shortages

Determining the level of the services………….

profitable level of the services – use to cost to serve
analytics – Dow chemical used cost to serve analytic to
expose the root causes like last minute, uncoordinated
planning and purchasing of the customer, and unwillingness
to share the inventory levels.

Logistics impact on other supply chain participants – all

the players need to act effectively and efficiently.
 B2B Logistics
Logistical facilities –strategic development of warehouses to
increase level of service or reduce transportation cost or both
Serving other supply chain members
a) multiple warehouse with manufacturing representatives
b) few warehouses to supply the distributors with distributors.

Outsourcing the warehousing functions - to 3PL logistics

providers – Flexibility, reduced assets and professional
management

Warehousing Decision – Operating cost, service level and

investment requirements.
 Transportation

 Transportation is usually the most expensive part of the logistic

process.
 There are various transportation choices (see next slide for
details).
 Cost, speed, reliability, and capability need to be considered
when making the choice.
 Studies show that carrier performance improved when they
were involved in buyer and seller relationships.
 Further, if carriers are integrated into the chain, overall
competitive advantage increased.
 Criteria for Ranking Modes of Transportation

Highest Lowest
Relative Air Truck Rail Water
Cost
Transit Water Air
Rail Truck
Time

Reliability Truck Rail Air Water

Capability Water Rail Truck Air

Accessibility Truck Rail Air Water

Traceability Air Truck Rail Water

 Transportation

• The best decision as to which mode results

from balancing of:
1. Service
2. Variable costs
3. Investment required
4. Speed of ordinary vs. expedited (rush)
orders
 Inventory Management

• Buffer between supply and demand

• Logistical systems are necessary to balance

this difference
 Importance of Inventory Management

Inventories are needed because:

 Production and demand not perfectly matched. Production usually occurs in

anticipation of demand.

 Operating deficiencies in logistical system often result in product

unavailability.

 Business customers cannot predict their product needs with certainty.

 Inventory Levels

Inventory levels depend upon

1. Customer requirements
2. Cost
3. Investment
4. Service required
5. Anticipated revenue
 Objective: Eliminate Inventory

• The objective of Total Quality Management and

JIT principles is to eliminate excess inventory.

• Current thinking is that inefficiencies in the

system results in excess/shortfall inventory.

• If there could be better forecasting, improved

delivery and zero manufacturing defects, the
possibility to eliminate the need for inventory is
possible, especially due to certain advances.
 Third Party Logistics
• Almost everything is a make or buy situation. Same
goes for various logistical functions.

• Most companies are now outsourcing transportation,

warehousing and information processing. The trend is
continuing.

• This is really a form of specialization and division of

labor.
 Third Party Logistics

• The results of specialization are:

1. Lower costs
2. Better service
3. Improved asset utilization
4. Increased flexibility
5. Access to leading technologies
 Third Party Caution
• Despite certain advantages, there are some reasons
for caution.

• Due to outsourcing, companies can lose control

over the logistics process.

• Diminished direct contact with customers

• problems of terminating internal operations.

 The green supply chain

Design, source, manufacture and manage the end of life stage for all
of their products in an environmentally and socially responsible
manner.

Developing green packaging and refurbishing products to avoid or

minimize landfill waste

40- 60% of a company’s carbon footprint resides upstream in its

supply chain – from raw materials, transports, and packaging to the
energy to the energy consumed in manufacturing processes
 Pricing

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” -
Michael D. Hutt, Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other
sources)
 Pricing process in business markets

Set Strategic Pricing Objectives

Estimate demand and the price elasticity of demand

Determine costs and their relationship to Volume

Examine competitors ‘ prices and strategies

Set the price level

 Pricing process in business markets

Successful pricing strategies demonstrate three principles :

 Value based – reflect a clear understanding of how a

firm’s products or services create value for customer

 Proactive - anticipate disruptive events such as competitive

threat, negotiations

 Profit driven – judge success based on the bottom line

performance, rather than the level of the revenue generated.
 Pricing process in Business markets

Price Objectives-

a) Achieving a target return on investment

b) Achieving a market share goal

c) Meeting competition
 Demand Determinants

Customer value remains the cornerstone of b2b business

Differentiating through value creation – value based

strategies………..from transaction to long term relationships built
around value and total lower cost (?)……… Build trust,
commitment, flexibility, collaborations.

Key supplier – service support and interaction as core

differentiators, supplier’s know-how, improve time to market……
product quality and delivery performance …..moderate potential
for key supplier status…….. Price shows the weakest role as
differentiator.
 Capturing Value

Economic value- The cost savings and/or revenue gains that customers
realize by purchasing the firm’s product instead of the next best
alternative( the reference value).

Commodity value -Value that a customer assigns to product features

that resemble those of competitors offerings.

Differentiation value – Value that are associated with product features

that are unique and different from competitor
 Demand Determinants

Isolate features that matter most, demonstrate the value of their unique elements and
Communicate value in that manner

Isolating value drivers in key segments-

Use exploratory methods (depth interviews)

Step 1 - To understand customer needs and problems to understand how to

apply products / services to solve customer’s problem.
Step 2 - Cost drivers/ revenue drivers
Step 3 - Convert the impact of product or services on value drives (quantify)
Step 4- Isolate and compare unique features that are unique and
differentiating
Step 5 - Develop pricing strategy and marketing plan
 Value Drivers

Value Drivers Cost driver Revenue Driver

Online support reduces travel cost of Increase of the time

sales & service people devoted by sales
by 50% person to customer by
40%

Lathe Machine Reduces time of the 20 minutes gain

operation from 60 adds up to perform
minute to 40 minutes extra operations in the
Machine Room
 Value Drivers
A motor company wants to sell energy efficient motors which complies to recent
Regulations. But these motors are priced at a higher price than the previous
regimes Motors. All these motors are used in main processes of the customers’
Manufacturing process. The company has identified recently that there are
auxiliary pump units which are not part of the main production process but yet
consumes Substantial Energy unit as they are used for water treatment plants.

The motor company after examination found that the current energy
consumption level of these pumping motors is higher and the new motor if
installed can have substantial reduction on energy consumption. The payback
period generally is 4 years.

What in your opinion is the value driver?

 Demand Determinants

Value research ------- value based approach – value

perceived by market segments.
Elasticity variation by market segment - comparisons of
alternatives and switch suppliers.
Satisfied customers are less price sensitive
………important to develop customized solution
 Search behaviour and switching costs - searching and
tracking alternatives , switch suppliers.
End use – increases demand, if there is a price reduction
at end user product.
End- market focus – importance of trends in end user
market.
 value based segmentation – offering may vary by
industrial segment
 Cost determinants -

Target costing –
Design-to-cost philosophy
 identifies and targets the most attractive market segments
 determination of level of quality and type of product attributes
for the segment, for a predetermined price and volume level.
 To set the target price, marketer needs the customer’s
perception of value.
 Target price and target profit margins set and finally, allowable
cost is calculated.
 Target cost is broken down and transmitted to each components
(automobile = engine+ transmission, cooling system and audio
system)
A profit management tool-
 target costing used by Toyota to reduce the price of its Camry
model
Canon used it to bring cost down of in its personal photocopier
 Cost determinants
Pricing -

Classifying costs –

 Direct traceable or attributable costs – fixed or variable

costs for a particular product, customer or sales territory (raw
material)

 Indirect traceable costs - fixed or variable (overheads)

 general cost – cost supporting a number of activities that

cannot directly be associated ( administrative costs)
 Competition

Competition places upper limit on price.

In various market segments, one must ask how competitors will
respond to market strategy.

a) Hyper competitive rivalries ---- Constantly changing

scenarios.
a) Companies seeking new sources of advantage
b) Torando strategy - huge demand followed by price cuts.

b) Gauging competitive response ----- examination of cost

structure and strategy of the competitor.

c) Competitors are price sensitive to those segments that they

perceive important.
 Pricing across Product Life Cycle

• Skimming - High initial price ( Dupont) - new

products for segment that is not price sensitive.
• As demand grows and product ages, demand
becomes more price elastic.
• Penetration – Low initial price ( Dow chemical)
a) High price elasticity of demand, b) strong threat
of imminent competition c) opportunity for
substantial reduction in production costs as
volume expands.
• Product-line consideration – Whether to add
new products?

• Legal considerations- Competition Act

 Evaluating A Competitive Threat
Competitive price
or “low cost”
product entry

If you
respond, is
Is your competition
No No Is there a response that Yes No
Accommodate position in willing and
would cost less than the Respond
or Ignore other markets able to
preventable sales lost?
at risk? reestablish the
price
difference?
Yes

Does the value

of the markets Yes
No
at risk justify
Will the multiple responses
the cost of No required to match a
response?
competitions cost less than the
preventable sales loss?
Yes Yes

Respond
Respond

Source: Figure from “How to Manage an Aggressive Competitor” by George E. Cressman, Jr. and
Thomas T. Nagle from BUSINESS HORIZONS 45 (March-April 2002): p. 25. Reprinted with permission from Elsevier.
 Responding to price attacks
• Evaluating a competitive threat
• is there a response that would cost you less than the preventable sales
loss?
• reactive price cut for only those customers that impacted upon by
competitors
•region, geographies , channels where competitor has the most to lost.
•capitalize on any competitive advantage as an alterative to matching the
price cut.
• raise the cost on the customer relating to its discounting
•Can customer re-establish after a price cut? - not to follow competitors
specially if market share is low…….
•Multiple price cuts –
•Allow competitor to win, where profitability damage is the lowest,….
Price sensitive, lower margin segments
• create barriers for competitors to reach less price sensitive, more
profitable segments( unique solutions for valuable customers)
•Positions in another markets? Plan for long term strategic benefits, as
action in one market can introduce price war in other markets.

•Understanding the rules of competitive strategy -don’t compete, where

there is no advantage
 Evaluating a Competitive Threat
1. Before responding, ask: “Do the benefits justify the costs?”

a. If responding to a price change is less costly than losing a

sale, then do it.

b. If competitor threat only affects a small segment, the

revenues lost from ignoring it may be so small that it is not
worth it.

c. In other words, “Why lower the price to lose revenue from

other segments too?”
 Evaluating a Competitive Threat
2.If you respond to the threat, is the competitor willing to merely
reduce price again to restore the price difference?

• Matching a price cut is ineffective if the competitor will merely

lower the price again.
• Therefore, try to understand what the competitor is trying to
do.
1. Do they want % share of market which is very low?

2. Do they just want to recoup some of their investment quickly?

 Evaluating a Competitive Threat

3. Will the multiple responses that may be required still cost less than
the avoidable sales loss?

• One consideration is the industry. With high-capital investment, it is

essential for the competitor to pursue aggressive sales to neutralize
fixed cost.

• Allow the competitor to win, where it is least damaging to

profitability, such as in more price-sensitive, lower margin customer
segments

• Strategy: Build into your products high switching costs tp protect

the less price sensitive segments.
 Evaluating a Competitive Threat
4. Is your position in other markets at risk if the competitor increases
their % share of market?

 Strategically, does the value of all the markets that are at risk justify
the cost of responding to a price war?

 Before responding, make sure you understand all of the

ramifications, the long run strategic benefits as well as the risks of a
particular response.
 The benefits include additional sales in a particle market in the
future, or immediate sales gain of complementary product or a
lower cost of future sales resulting from increased volume
 The risks are that targeted price reduction will reach other markets
and create downward price spiral leading to decreased profitability.
 Rules

 Engage where there is strength to

win

 Engage from position of advantage

( not to engage by competitor’s

rule)
 Competitive bidding

 closed bidding – one buyer can see one seller

at a time.

 open bidding – open to all buyer and sellers.

Leads to reverse auction.

GeM is the e-market place for Indian govt. All govt

organizations have to procure from GeM

https://gem.gov.in/
 Competitive Bidding
• Certain groups do bidding

1. Governments
2. Large companies (using preferred suppliers)
bid for:
a. Non-standard material
b. Complex designs and difficult
manufacturing methods
 Types of Bidding
• Closed bidding: Suppliers submit a written
bid on a specific contract and all bids are
opened simultaneously and often job goes
to lowest bidder

• Open bidding:
– The goal is to push the price down.
– Sometimes it has a negative effect because it brings out
sensitive financial standings between competitors.
– The result can cause distrust between supplier and
buyer.
Strategy for Competitive Bidding
Bidding is costly and time consuming.

A. Screen the project to make sure the contract is related to

your core competencies and is one you can perform
(profitably).

B. Price to a level that, hopefully, will allow you to win the

contract but not bankrupt you.

C. Sometimes it is worth winning a contract even at a small

loss if it can lead to bigger contracts.

D. The determinant is the switching costs involved for the

buyer to bring on another vendor.
 Business Marketing
Communications

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” -
Michael D. Hutt, Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other
sources)
 Paints Pvt Ltd
Paints Pvt Ltd is an anti corrosive paints company with annual
revenue of 5 crs . It manufacture paints is in Singur near Kolkata.
Paints Pvt is head quartered in Kolkata. The plant has been
installed and commissioned recently. The owner is an
entrepreneur from humble background. He has looped in some
technical experts in a flexible arrangements to develop new
products and run the plant. The plant has two mixers which
produces the paints. At this moment, it is working in a water pipe
paints project . It supplies anti corrosive paintings for water pipe
project. The project is a government funded. Paints Pvt is looking
forward to expansion and to get few more clients. It does not uses
advertising. At this moment , it does not have a website and is
planning to launch a website. In future, it has aspiration to use
digital marketing tools.

Please develop an outline for its advertising strategy and also

develop an outline for the digital advertising strategy for the
company.
 Objectives
 Role of social media
 Structuring advertising decision
 Understanding b2b advertising decision area
 Evaluate role of online advertising
 Evaluate role of trade shows
 Business to business social media

b2b social media refers to the various channels through the

social web where customer prospects an business communicate
across platforms as diverse as discussion forums, blogs, wikis, and
social networks, engaging with each other through the exchange
of content.

Discussion forum – a website on which participant can contribute

online discussions by posting opinions and questions related to
particular subjects.

Blog – an online journal maintained by an individual who uploads

content intended to information, express opinion, etc

Wiki –a collaborative web site on which User can develop and edit
informative content through their web browser.

Social networks-web sites comprised of online profiles for

individuals and groups that distribute content to others.
 Dell’s social Media Brand

Dell publishes several blogs in five languages including blogs on several topics
such as enterprise IT perspectives, healthcare and education.

 Sponsors a handful of online communities where customers can join

discussions on issues ranging from small business applications too gaming and the
company’s responsiveness

 Support forums – allow users to ask questions, and find answers about laptop
computers, servers, mobile devices, and other offerings

 Dell has more than 15 crore followers on Twitter, 600,000 fans on face-book
and 6000 subscribers to Dell’s You tube channel.

Dell’s signature media initiative is Idea Storm online community. Consumers

can post innovation ideas for Dell to consider, view their peer ideas, and vote for
or against ideas. Dell has received 15000 ideas from which 442 ideas have come
into fruitition.
 The customer decision journey

Marketers need to recognize how digital marketing has

changed the customer decision process or customer
decision journey.

Based on a study of nearly 20000 customers across five

industries , the research has find that “ single most impetus
to buy someone is someone else’s advocacy. Still, many
marketers focus media spending ( principally advertising)
rather than on driving advocacy.”
 Charting CDJ
Consumer decision journey (CDJ)

CDJ includes two critical points

Inspiration – turn online to find, create and compare ideas.

Sharing – customers relate their experiences or post case studies using a

variety of social media

Transforming the strategy ( global light)

1. After project completion, share the project cases online(website),
send to customer prospects and cross post in community sites
2. a team of marketing manager and salespeople keep monitoring the
community sites.
3. make the technical specification available in the website in easy
format. Tools for wattage selection for architects and consultants.
les sons learnt
Customer experience includes everything from discussions in social
media to face to face meetings with sales people to continued
interaction with the company and with other customers.
 The role of advertising

• Integrated communication programs

•Enhancing sales effectiveness
•Increased sales efficiency
•Creating awareness -------awareness to brand preference
to conviction to purchase
 Integrated Communication Programme
Advertising and sales promotion are rarely used alone in the
B2B but intertwined with total communication strategy
especially personal selling.

 Blend advertising and sales promotion strategy with

personal selling
 B2b advertising cannot

replace personal selling .

 cannot create product preferences……. Needs
Demonstration, operational testing
For effective communication, the business
marketing manager must blend all
communication tools – print and online.
Advertising creates awareness, provide
information and uncover important leads
 Enhancing Sales Effectiveness
Effective
advertising can make personal selling more productive

Rupee sales per salesperson call were significantly higher when

customer had been exposed to advertising.

Primary role of B2B advertising is to enhance the reputation of the

supplier

Efficiency

Increased spending on advertising leads to greater brand awareness for

industrial products which translates into larger market shares and higher
profits.

For an industrial product, Gross margin after advertising > 4-5 X gross
margin before advertisements.
 Increased sales efficiency

The effect of advertising on the marketing program’s overall

efficiency is evidenced in two way.

a) Business suppliers need to remind actual and potential

buyers of their solutions or make them aware.

b) Advertising appears make all selling activities more

effective. Advertising interact with all communications and
selling activities and it can boost efficiency for the entire
marketing expenditure.
 Creating Awareness

From a communication standpoint, the buying process takes

potential buyers sequentially from unawareness of a product or
supplier to awareness to brand preference o conviction that a
particular purchase will fulfill their requirements and ultimately
to actual purchase.

 61% of the design engineers returning an enquiry card from a

magazine indicated that they were unaware of the company that
advertised before seeing the ad.

 Business advertising may also make some contribution to

creating preference for the product.
 Managing b2b advertising
Set advertising objectives and define target markets

Determine the advertising budget

Developing the advertising message

Selecting advertising media for business market

Evaluate advertising effectiveness

 Set advertising objectives and define target markets

Set advertising objectives and define target markets-

 Advertising mission flows directly from marketing strategy.

Advertising objective must fulfill –creating awareness, providing

information, influencing attitudes and reminding buyers of
company and product existence

Written objectives

 Must be realistic and measurable and must specify what is to be achieved and when
 A specific objective can be “ to increase from 15% to 30% the proportion of general
contractors associating energy efficiency feature with our brand of air-conditioners
 Business advertising does not bear direct relationship to specific sales targets.
 Advertising goals are generally stated in terms of communication goals such as brand
awareness , recognition and buyer attitudes.
 Managing B2b advertising

Objectives ( contd)……..
the target audience needs to be defined. Each segment has
distinct product/ service attribute and criteria. Advertising
must focus these areas and hence, the objective must
mention the target audience.

creative strategy statement

has to be mentioned. It provides guidelines to the company
and advertising agency how to position the product in the
market place.

All creative efforts should support creative strategy

statement. Planning an effective advertising campaign
needs a clearly written objectives that provide a foundation
for selecting media and measuring results,
 Managing B2b advertising

Advertising Expenditure

Advertising budget
Determine advertising budget – spends crores of rupees.
Increasing share of web.
Two types- rule of thumb – some percentage of sales .
Second , objective task method--- relates advertising costs to the
objectives it is to accomplish.

1.Establsih specific marketing objectives for the products in terms

of such factors as sales volume, market share, profit, etc
2. Assess the communications to be performed to realize the
marketing objectives and then determine the role of advertising in
performing these functions.
3. Define specific goals for advertising in terms of the measurable
communications response required to achieve the objectives
4. Estimate the budget needed to accomplish the advertising
goals.
 Developing the advertising message

•Perception – buyer may not perceive the message because of

perceptual barriers. Even, reading may create opposite meanings.
•Attention
•Interpretation
Buyer tends to screen out message in consistent with their needs,
beliefs and values.
Interpret in the light of needs and beliefs.
Technical readers respond more favourably to technical ads where
as non technical readers shall favour

•Focus on benefits a business buyer purchases fast delivery time/

solution/ etc. “ very clear and strong focus on benefits” ….. So that
the customer reads and believes.

•Understanding buyer motivations extensive market research is

needed to understand the motivation of buyer. “ no classical set of
motivations or buying criteria”
 Selecting advertising media for business market

an integrated marketing communications program might include a blend

of online, print and direct mail advertisements that deliver a consistent
story across the formats.

online advertising - a shift to digital spend – 34724 crs.

Paid search engine ads – 45% of total online ads followed by display ads.
Rich media/video format witnessing growth
Motorola ….integrated campaign – for its public safety solutions

 business publication - magazines or new papers who editorials is

directed towards professionals within a specific industry trade
publications.
Vertical and horizontal publications.

Direct marketing tools - direct mail, direct e-mail.

Direct mail – used for corporate image promotion, product/service

promotion, sales force support, distribution channel communication and
special marketing problems.
Selecting advertising media for business market

Direct e-mail providing direct information to the customer –

Far more cheaper than direct mails. Generally, yield higher
responses than direct mail
 Measuring advertising effectiveness

measuring impacts on the purchasing decision

advertising affects – awareness, knowledge and other
dimensions
Also measure the indirect communication effects of
advertisements , word of mouth,
Ad effectiveness is evaluated against objectives formulated
in terms of buyers decision process as well as some of the
indirect communication effects.

The measurement program measures – market, motives,

messages, media and results.

Web metrics -measure traffic to the website, seo

 Managing Trade show strategy

 Trade shows : strategy benefits ------every year 79%

consumers come to their exhibitors
 An effective selling message can be delivered to a
large , interested audience
 new product introduction to mass audience
 customer gets hands on experience of customer like
1-to-1 selling situations.
 potential customers can be identified
 general good will can be enhanced
 free publicity
 Trade show investment returns
 Trade show objectives
 Selecting the shows
 Managing the trade show exhibits
 Evaluating the trade show performance
 Trade Show return investments

 improves sales efficiency in terms of communication

Powerful way of personal selling and trade shows
complement each other.

Planning trade show strategy –

 what functions should the trade show perform in the

total marketing communication?

 to whom should the marketing effort at trade show be

directed?

 what is the appropriate show mix for the company?

 what should be the tradeshow investment-audit policy

be? How should audits be carried out?
 Trade show objectives

 Generating Sales
 Targeting potential customers
 providing product, service and company
information
 learning of potential application problems
 creating actual sales
 handling current customer problems
Gathering competitive intelligence
 building corporate image.
 Trade show planning

Selecting the show

Frequented by the companies most important customer

segment ( idea from sales people/ customers)

 information from online directories

 net buying influences/ total buying plans …..measures of

the trade shows in some databases.

Managing the trade show effectively – meeting prospects,

existing and potential customers, presenting, lead capture,
scheduling interviews, etc
 Evaluating trade show performance

Show attendees

Target audience

Attracted to the booth (attraction)

Contact with the salesperson

Sales lead (conversion)

Business Marketing – Managing the personal
selling function

Reference –Majority contents are from a) “B2B Marketing – A South Asian Perspective” -
Michael D. Hutt, Dheeraj Sharma & Thomas W. Speh and b) R.A.Cormier, besides other
sources)
 Personal Selling

 Organizing the sales force

 Key account management
 Characteristics of high performing
account managers
 Sales administration
 Deployment
 ABC Pvt Ltd
ABC Pvt Ltd produces PLCs and HMIs (Human Machine Interface or display). It is an Indian
company headquartered in Kolkata. The firm is located in the Industrial zone in Dhulagarh
about 30 kms from Kolkata. The head office is located in Park Street. It wants to expand to
Goa and Hyderabad area. It supplies mainly to OEMs that supplies machines to food
processing, pharma, piping industry. There are big OEMs in Goa and mix of big and small
OEMs in Hyderabad area. For the last couple of years, there have been entries from small
sized international companies in PLC/HMI supplies and competitive pressure is building on.
ABC main customers are the OEMs. There is no allotment of sales/service engineer to big
customers as such. In fact, some of the important customers are not visited properly.

Please design a territorial plan and deployment of sales force accordingly with proper
justification.
 Organizing the Personal Selling Effort

Geographical organization

Product based organization

Market centred organization

Organizing the Personal Selling Effort
Geographical Organization- defined geographical area –
reduced travel and time.

• Advantages:
1. Most common form
2. Reduces travel distance and time between customers
3. Usually minimizes costs

• Major disadvantages:
1. Each salesperson must perform all selling tasks for all
firm’s products and for all customers in territory.
2. Salesperson may not know about all products or only
emphasize certain (high commission) products.
3. Too much dependency on the salesperson
 Organizing the Personal Selling Effort
Product Oriented Sales Organizations - complex, diverse product line
• Salespersons specialize in relatively narrow components of total
product line. Appropriate with huge product offerings (e.g.,
General Electric).
• Prime benefit: Enables sales force to develop deeper product
knowledge level--enhances value of firm’s total offering to
customers.
• Cost of development of sales-force is high and critical mass of
demand is needed. Product line specialist being converted to
general line specialists

• Disadvantage: Expensive and sometimes confusing for customers.

 Organizing the Personal Selling Effort
Market-Centered Organizations- industry or sector
centered sales structure------ key market
segments more clear – differentiation easy.

• Salespeople learn specific requirements of

industry or customer type (e.g., specializing in the
banking industry)
• Salespeople are better prepared to identify and
respond to buying influentials
 Account Management

Unique value proposition-

Customer prioritization degree to which firms
prioritizes its customers by developing different
value propositions for its top tier versus its
bottom tier customers.
Customer prioritization leads to higher average
customer profitability and a higher return on sales
by
a) affecting relationships with high end customer
without disturbing low end customers
b) reducing marketing and sales cost
 Key Account Management

Key account ( or strategic accounts or national accounts) –

Purchases significant volumes,

 Involves several organizational members,
 Buys for an organization with geographically dispersed
units,
Expects a carefully coordinated response and
specialized services as logistical support, inventory
management, etc.
 Key Account Management
• Many companies find that 80% or their business or profits
comes from 20% of their accounts.

• Large firms have central procurement offices.

• Often, selling firms have offices located inside the buying

firm’s facilities.

• Large firms expect their suppliers to provide coordinated and

uniform services for all its geographically dispersed divisions.

• In exchange for large orders, they expect additional services &

support (e.g., JIT).
 Key Account Management
• Consists of a Key Account Manager and a team composed of
Sales, Marketing, Finance, Logistics, Engineering and other
Functional Areas.

• Key Account Managers may work on several accounts, or on ONE

account, and will report to a senior executive.
• Key account Manager should -

• Assemble the right people and gather the right information to solve their customer’s
unique problems.

• Excel at building and maintaining strong relationships.

• Use these relationships to design and align proposals that meet the selling firm’s
capabilities (solutions) to the buying firm’s needs (problems).
Traditional Selling vs. Key Account Selling
• Traditional selling emphasizes maximizing
revenues.
• Key account selling is multi-
faceted, emphasizing:
1. Closer long term relationships
2. Partnerships to reduce overall costs or
advance performance for the customer
 Traditional Selling vs. Key Account Selling
Traditional Selling Focus Key Account Selling Focus
Sales Volume Varies Large volume of purchases by the customer often across
multiple business of the seller
Nature of Product/ Core product/service Core product/service plus customized applications and
Service Offering value-added services

Time Horizon Short-Term Long-Term

Benefits to Customer Lower prices & higher quality Lower total costs; Broader set of strategic benefits

Information Sharing Limited: Narrow focus on price Extensive: Broader focus as firms share strategic goals
and product features
Sales Force Objectives Maximize revenue Become preferred supplier; Lower customer firm’s total
Satisfied customers costs; Enhance learning in the relationship
Structure of Selling Individual salesperson is Many individuals from multiple functional areas on the
Center primary selling side interact with counterparts in the customer
link to customer organization organization
Structure of Buying Purchasing Manager and a few Many individuals within the customer organization
Center other individuals are involved in interact in making decisions and evaluating the
buying decisions relationship

Source: Adapted with modifications from Joseph P. Cannon and Narakesari Narayandas,
“Relationship Marketing and Key Account Management,“ in Handbook of Relationship Marketing,
Jagdish N. Sheth and Atul Parvatiyar, eds. (Thousand Oaks, Ca.; Sage Publications, 2000), p. 409; and
Frank V. Cespedes, Concurrent Marketing: Integrating Products, Sales and Service (Boston: Harvard
Business School Press, 1995,) pp. 186-202
 Account management
Selecting Key accounts – profit potential, learning benefits and cost drivers
associate with customers. (also known as strategic or national accounts)

Three phase approach for selection of key accounts

Phase 1
a) Profit potential of customer
 Degree to which a customer values the firm’s support and services
and is willing to pay a premium.

 Phase 2
 Identifies accounts from phase1 that have unique support
requirements that provide profitable organizational learning
opportunities (-support capabilities useful in multiple other
accounts)

 Phase 3
Considers the degree to which the transactions with the potential
customer complements the economics of the seller’s business
 Account management success

 Building internal relationships

 Aligning resources to client needs
 Forging relationships with customer
organizations
 Managing the customer engagement process
 Aligning and crafting – knows competitive
intelligence, drivers of clients profitability
 Enhanced internal reputation
 Best practices – mapping the best practices of
key account managers
 Sales administration
 Recruitment and selection of salesperson

 Training

 Supervision and motivation

 Organization climate and job satisfaction

 Evaluation and Control

 Recruitment & Selection
Should the company hire experienced salespeople or hire and train
inexperienced people?
It depends upon:
a. Size of firm
b. Nature of selling task
c. Firm’s training capability
d. Market experience

Large companies with a complete training function can afford

to have inexperienced sales executive while smaller firms
hires experienced persons and avoids training costs.
 Recruiting
 Recruiting is a negotiation between two parties.

 A successful process should include procedures to weed out

unqualified people and assure that good candidates are
considered.

 Most selection is done by the 1st line manager in conjunction

with 2nd line manager.

 In larger corporations, the personal selling function is often

used as a training ground for higher level marketing and
management functions.
 Training

Salespeople need knowledge about the:

1. Firm

2. Product

3. Customer(s) & organizational buying behavior

4. Competition

5. Market & industry information

6. Effective interpersonal communication skills

7. Cross cultural training.

19
 Sales Training Skills: Effective Interpersonal
Communication Skills

• Includes:
A. Communication skills
B. Listening skills
C. Influencing skills
D. Complaint handling skills
E. Cultural diversity skills

• Many companies have found that as training increases,

productivity increases and turnover decreases.
 Supervision
Supervision’s functions include:
 continued training
 counseling
 assistance
 time management verification
 setting financial & activity quotas, etc.

Supervision also integrates sales activities with upper

management.
 Motivation

Orville Walker Jr., Gilbert Churchill Jr., and Neil Ford define motivation as:
The amount of effort the salesperson “desires to expend on each of the
activities or tasks associated with his (her) job such as:
1. calling on potential new accounts,
2. planning sales presentations, and
3. filling out reports.”

Motivation is strongly related to:

A. Individual’s perception of the types and amounts of rewards from various degrees of
job performance.
B. The value the salesperson places on those rewards.

Rewards can be:

• Internal: Personal feelings of accomplishment or self-worth

• External: Financial incentives and/or recognition
Determinants of Salespeople’s Performances

Fig. 16.3
 Incentives
 Usually consist of:
• Recognition
• Financial rewards

 Financial incentives may include:

• Salary
• Commission
• Bonus
• Expenses
• Contest winnings
• Other perks
 Organizational Climate and Job Satisfaction
 Role ambiguity and role conflict undermine job satisfaction
 An effective approach for reducing role ambiguity is training and
socialization.
 Salesperson tend to have higher level of satisfaction, when they tend to
have –
 under direct supervision
 get management support for their work and solving unusual
problems
Feeling of active part in crafting policy and standards affecting them.
 Positive relationship between job satisfaction and customer satisfaction
– a) emotional contagion and b) High quality of interaction

 Performance and Individual differences in motivation, self esteem and

verbal intelligence also affect job satisfaction.
 Evaluation and control
Management needs to:
 Determine if objectives are being achieved
 Identify problems
 Recommend corrective action
 Keep salespeople informed about changes (internally) such as new products or
(externally) such as competitive or market conditions

 Performance measures
Behaviour based – fixed income
Outcome based – variables

Performance standards -
related to marketing objectives
takes into account territorial dynamics
 Behavior-Based Performance Measures

• Having the sales manager monitor and direct salespeople activities by using
subjective measures to evaluate performance such as:
1. Application of product and company technology knowledge.
2. Quality of customer relationships.

• Compensation is more salary driven.

• Is good for:

A. Salespeople who lack experience

B. Companies that need to control how their products\services are presented
C. When salespeople are asked to perform “non-sales” activities
 Outcome-Based Performance Measures
• Includes:
 Less direct control

 Uses objective measures such as activity, sales quotas, % share market

quotas, profits, etc.

 Compensation is more performance based such as large commission

structure

• It is good for:

A. When sales efforts are a major determinate of organizational sales success.

– Erin Anderson & Vincent Onyemah state, “When sales reps make that big of a
difference to the bottom line, it is worth it to give them autonomy and to pay them
handsomely to do what they do.”
 Outcome-Based Performance Measures
• Includes:
 Less direct control

 Uses objective measures such as activity, sales quotas, % share market

quotas, profits, etc.

 Compensation is more performance based such as large commission

structure

• It is good for:

When sales efforts are a major determinate of organizational sales success.

– Erin Anderson & Vincent Onyemah state, “When sales reps make that big of a
difference to the bottom line, it is worth it to give them autonomy and to pay them
handsomely to do what they do.”
 Performance standards

 Performance of the various salesperson

 Gauging the overall productivity of the organization

 Tied to marketing objectives

 Differences of territorial dynamics – Number and aggressiveness of

competitors, level of market potential and workload.

 Behaviour based measures like relationship selling

 Deployment
Form the most profitable territories, deploy sales force to serve potential
Customers and effectively allocate sales force time among these customers

 Territory sales response -----

 Potential – Business opportunities for all sellers in a
region.
Concentration – Potential with few larger accounts in that
territory
Dispersed - Sales are lower as time wasted in travel.
The sales manager should always consider potential for
deployment
 Deployment

Territory Alignment – Business to business firms have

significant imbalances in the territory alignments of their
sales force- more effort for low valued than high valued
customers……..thus loosing million dollars….. (Research says
so)

Sound territory alignment advances productivity and firm

performance by

a) Promoting fair reward

b) Enhancing the coverage of consumers and high
potential aspects
c) Reducing travel time and costs
d) Increasing sales and profit
 Selected Determinants of Territory Sales Response

1. Environmental factors (e.g., health of the economy)

2. Competition (e.g., number of competitive salespersons)
3. Company marketing strategy and tactics
4. Sales force organization, policies and procedures
5. Field sales manager characteristics
6. Salesperson characteristics
7. Territory characteristics (e.g., potential)
8. Individual customer factors
Source: Adapted from Adrian B. Ryans and Charles B. Weinberg,
“Territory Sales Response,”
Journal of Marketing Research 16 (November 1979): pp. 453-465.

33
 Deployment

Developing customer database

Alignment databases, use with territory
alignment software to evaluate the
balance of workload and potential and
modify the current distribution if needed
to improve territory balance.
 Sales Resources Opportunity Grid
• Deployment analysis matches sales resources to market
opportunities

• PCUs are sales territories or districts that are part of an

overall portfolio with various units offering various levels of
opportunity and requiring various levels of sales resources.
 Sales Resource Opportunity Grid: Planning & Control Units (PCU)

• PCU opportunity
includes: total potential
that PCU represents for
all sellers

• Sales organization
strength includes:
competitive advantages
or distinctive
competencies that firm
enjoys within PCU

• Deployment analysis
matches sales resources
to market opportunities

• Sales resource
opportunity grid can
classify industrial firm’s
PCU portfolio
 Deployment

GE sales force effectiveness initiative

•Customer potential and Prioritization – establish a
database, calculate customer potential, prioritize customer
and potential
• Territory alignment – evaluate account quality (potential),
examining account density, implement changes to enhance
sales improvement
• Target Setting and Potentialization - set target based on
based performer achievement in each territory.
•Variable incentive compensation – linking pay to
performance. Remove caps on incentive compensation for
best performers.