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Business-to-Business MarketingB2B Branding

Haas School of BusinessUC Berkeley

Fall 2008Week 8

Zsolt Katona

Today

• Case Discussion: Barco

• Case Discussion: Intel Inside

• A few thoughts on B2B Branding

•How to measure brand equity? Conjoint analysis

Most valuable global brands

Brand Value (million $) Change

1. Coca-Cola 66,667 2%

2. (3.) IBM 59,031 3%

3. (2.) Microsoft 59,007 1%

4. GE 53,086 3%

5. Nokia 35,942 7%

6. Toyota 34,050 6%

7. Intel 31,261 1%

8. McDonald’s 31,049 6%

9. Disney 29,251 0%

10. (20.) Google 25,590 43%

What is the value of a brand?

Marketing Budget

Sales

0

Is brand equity important in B2B?

Brand Value (million $) Change

1. Coca-Cola 66,667 2%

2. (3.) IBM 59,031 3%

3. (2.) Microsoft 59,007 1%

4. GE 53,086 3%

5. Nokia 35,942 7%

6. Toyota 34,050 6%

7. Intel 31,261 1%

8. McDonald’s 31,049 6%

9. Disney 29,251 0%

10. (20.) Google 25,590 43%

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Some argue that

• B2B buyers are rational and not influenced by brands

• B2B purchases are about the relationship, only sales reps matter

• Price is the only thing that matters

• B2B products are too complex

• B2B companies sell to few customers

But

• Buyers are people with emotions• People do not even know that their emotions are

affecting their decisions• They may face an overwhelming choice• Purchasing department may not be as technically

sophisticated as engineers (high-tech)• Relationship benefits are hard to objectively measure• Signaling quality

Brand value comes from

• Greater willingness to try• Greater likelihood that the product is purchased• Willingness to pay a price premium• Less sensitive to price increases• Less inducement to try a competitive offer

Differences between B2C and B2B

• Customer risk is a bigger factor (“You never get fired for buying IBM”)

• Buyer is usually not a single decision maker• Brand loyalty is usually higher in B2B, but• Building brand equity takes more time

• Special case: hybrid brands (microsoft, GE)

Small brands

• Acme Brick – brick manufacturer• $1.5 million marketing – mostly image building• Partnerships with sports celebrities, PR, charity

events• 100-year product guarantee (ind. stand.: 3 to 5)• 84% brand preference• Estimate: brand is worth 10% price premium• Sales: $200 million, brand is worth $20 million

annually

Leading global brands

• The CEO is a brand cheerleader• Understanding how a strong brand reduces

commercial risk (customers’ customers)• Efforts are focused on a global corporate brand, not

individual products• Coordination of company appearance • Rigorously measure the payback on marketing

expenditures

How to measure brand value?

Conjoint AnalysisGoal:

To estimate consumers’ preference structure (valuationof attributes) by forcing them to trade-off product attributes.

Major uses:

Measure brand value, New product design, Design modification, Pricing,Price discrimination, Benefit segmentation.

Examples of Conjoint useCONSUMER NONDURABLES

Bar soapsHair shampoosCarpet cleanersSynthetic-fiber garmentsGasoline pricingPanty hoseLawn chemicals

FINANCIAL SERVICESBranch bank servicesAuto insurance policiesHealth insurance policiesCredit card featuresConsumer discount cardsAuto retailing facilitiesHigh-tech maintenance service

INDUSTRIAL GOODSCopying machinesPrinting equipmentFacsimile transmissionData transmissionPortable computer terminalsPersonal computer design

OTHER PRODUCTSAutomobile stylingAutomobile & truck tiresCar batteriesEthical drugsToaster/ovensCamerasApartment design

OTHER SERVICESCar rental agenciesTelephone services & printingEmployment agenciesInformation-retrieval servicesMedical laboratoriesHotel design

TRANSPORTATIONDomestic airlinesTranscontinental airlinesPassenger train operationsFreight train operationsInternational Air Transportation AssociationElectric car design

Main Conjoint steps

• Define Product Concept• Define relevant attributes (focus groups, interviews)• Define levels for each attribute based on input from

– R&D– Saturation effects (focus groups)

• Collect data– Full profile procedure– Trade-off matrix

• Interpret data– Attribute level valuations– Attribute importance– Simulate scenarios– Price, market share

Conjoint exercise: Choosing a laptop computer for personal use

Assume alternative laptops only differ in three characteristics (each having two possible levels):

1. Brand (Lenovo or Dell)

2. Weight (3lb or 5lb)

3. Price ($1000 or $2000)

Task 1. Rank order the following combinations (1= most preferred, 8= least preferred)

Once finished, assign a rating to the alternatives. (100 is highest, 0 is lowest)

RANK RATING Product _____ _____ Lenovo, 5lb, $1000_____ _____ Dell, 3lb, $1000_____ _____ Dell, 5lb, $2000_____ _____ Lenovo, 3lb, $2000

_____ _____ Lenovo, 3lb, $1000_____ _____ Dell, 5lb, $1000_____ _____ Dell, 3lb, $2000_____ _____ Lenovo, 5lb, $2000

Pick one level of one attribute. What is the average rating for it? Do the same for all 6 attribute levels.

Average rating:Lenovo _______Dell _______3 lb _______5 lb _______$1000 _______$2000 _______ How much is 1 unit of rating worth?

Task 2. Assume “customer utility” is linear and additive. What is the customer utility of a Dell PC weighing 4 lbs for $1500?

V(Dell) = V(4 lb) = V($1500) =

V(Dell, 4, 1500) = V(Dell) + V(4lb) +V($1500) =

Assume market share is proportional to “value”.What is this PC’s market share if it competes with a Lenovo, 3 lb, $2000 machine and a Dell, 5lb, $1000 machine?

V(Dell,4, 1500) = V(Dell, 5, 1000) = V(Lenovo, 3, 2000) = --------------------------------------Total:

MS(Dell, 4, 1500) =

Task 3. Calculate attribute importance by taking the maximum difference in average attribute ratingsdividing it by the sum of all the differences in attribute scores.

Vmax(brand) = Vmax(weight) = Vmax(price) =

Importance of brand: ______Importance of weight: ______Importance of price: ______

An example with cars

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Example: CarsRelative importance of features in car choice (%)

5 10

1510

2010 10

1015

15

1020

2015

2015

10

35

50 5040 35

4550

40

1515 1510 55

5

1010

105

15

15

5

55 15105

20

555

Brand

Engine

Personal possession

Comfy transporter

Gadget Discreetlabel

Good value

Price

Warranty

Exterior specInterior spec

Financial transaction

Jewellery

Performance emblem

Conjoint summary thoughts

• Always use a professional market research firm.

• A key issue is finding the relevant attributes

• Consumers need to be familiar with the category (e.g. Electric car)

• There can only be a few attributes and levels

• Can include abstract attributes (e.g. brand)

• Does additive utility model make sense?

• What about interaction between attributes?

Branding Lessons

• Branding is a basic way to protect one’s market from commoditization

• In business markets, beyond product benefits, the brand also summarizes – Process benefits (e.g. MIS systems, delivery)– Relationships benefits (partnership, responsiveness…)

• Branding works because “perceptions matter”

• Branding has a strategic role in terms of– Resource allocation (R&D vs. marketing)– Going to market strategy (push or pull)– Competitive strategy (positioning)