5
BUSINESS MARKETING [B2B]
RESELLERS
B2B MARKETS----------------- CONSUMERMARKETS
RESELLERS
SUPPLY
CHAIN
OEM
SERVICES
INSTITUTIONS
GOVERN-MENT
TRANSPOR-TATION
MINING
MANUFAC-TURING
TELECOM-MUNICATIONS
SUPPLY CHAIN MANAGEMENT
The supply chain is the vehicle that allows us to enjoy the vast marketplaces of today. Every entity has a supply chain!
It involves every process and step from taking materials out of the ground to making a product available in a store or online.
The World Food Program video
SUPPLY CHAIN MANAGEMENT
MARKETSConsumers:CustomersProspectsSuspects
SUPPLIER’SSUPPLIERS
CUSTOMERS
CUSTOMER’SCUSTOMERS
SUPPLIERSor
SUPPLIERS
TOPPER’S TRIPS TO MARKET1-Plastic eyes & 10-transistors
Shenzhen, China
2& 9-Speakers for voice, 12-wiring
Dongguan, China
3-Plastic body
Malaysia
6-Microfiber fabric coat
Korea
7-Voice recognition requirements
San Francisco
4-Motor for legs
Shaoguan, China
5-Plastic legs & 11-IC chips
Taiwan
8-Voice recognition programming
Taiwan
13-Packaging Hong Kong, China
ManufacturerOutbound
PortInbound
Port
Warehouses and Distribution
Centers
Thousands of Retail Stores
VALUE CHAIN GOAL
• To combine the support and direct activities to create value as perceived by the target market[s] segment[s].
BUSINESS MARKETS
• >70% of total sales
• BUSINESS MARKETS– Businesses– Governments– Resellers– International– Institutions [education and health care]– Non-profits– Captive
THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS
LO1
PRODUCERS
[Manufacturers, OEMs or Private Labelers]
Purchase products for producing other goods and services [can be either a finished good or a component]
RESELLERS Purchase finished goods or components for resale, rental, or leasing for a profit
GOVERNMENTS Federal, state, and local governments [all different buyer behaviors]
ORGANIZATIONS / INSTITUTIONS
Purchase finished goods and services for resale, rental, or leasing for a profit
BUSINESS BUYER CLASSIFICATION
B2B MARKETS
• – Numerous industries identified by NAICS codes
[usually employ a differentiation or low-cost strategy]• B2C – Inexpensive pens, pencils, pads of paper, …• B2B – floor sweeping compound
• – One or a few industries identified by NAICS codes– May be very profitable [usually employ a
differentiation or niche strategy]• B2C – $1,000 fountain pen • B2B – CT scanner
BUSINESS MARKET COMPLEXITY *
BUSINESS SERVICES
Professional Services
Industrial Services
Consulting
Investment banking
Research
Education
…
Project related
Technical industrial
On-going
Education & training
Installation
Maintenance
…
Engineering
Quality
Product testing
…
Maintenance contracts
Field upgrades
…
THE ECONOMY AND NAICS
Agriculture
Mining
Utilities
Construction
Manufacturing Wholesale
Retail
Transportation
Information Finance
Real Estate Professional
Management Administration
Entertainment Health
Education Accommodation
Other
Public Administration
SELLGROW OR MAKE SERVICE GOV’T
MEASURING DOMESTIC AND GLOBAL INDUSTRIAL, RESELLER, AND
GOVERNMENT MARKETSLO1
North American Industry ClassificationSystem (NAICS)
6-11
• NORTH AMERICAN INDUSTRIAL CLASSFICATION SYSTEM [NAICS 2007]
– 20 sectors: 1,174 industries [and growing]– NAFTA: 5 digits + 6TH for country coding– Compatible with ISIC Rev. 3 [UN]
FIGURE 6-1FIGURE 6-1 NAICS breakdown for the information industries sector: NAICS code 51 [Paging].
6-12
COMPARING CHARACTERISTICS OF BUSINESS MARKETS TO CONSUMER MARKETS
BUSINESS MARKETS CONSUMER MARKETS
Market Structure
Fluctuating, derived demand
Geographically dispersed
Mass markets
Small volumes
Primary demand
Products Standard / complex / custom
Service etc. are critical
Business applications
Standard
Service etc. of some note
Personal use
Buyer Behavior
Individuals purchasing
Some family influence
Social / psychological drives
Buyer-Seller Relationships
Technical expertise
Close interpersonal relationships
Long-term focus
May be very dependent on each other
Amateur
Impersonal
Immediate / Short-term
COMPARING CHARACTERISTICS OF BUSINESS MARKETS TO CONSUMER MARKETS
BUSINESS MARKETS CONSUMER MARKETS
Supply Chains / Channels of Distribution
Often shorter [more direct]
Not seen by consumer
Usually indirect except for catalog and internet.
Promotion
Often involves resellers
Simple
Advertising
Price
Volume sensitive
Complex formalized process
Competitive bid / Many strategies
Individuals limited purchasing skill
Little, if any, leverage
Simple process
Not applicable
Demand
Inelastic in the short-run
Volatile and discontinuous
Direct
Elastic
Limited volatility
B2B MARKETING
• Businesses purchase products for one of three primary applications.
1.
2.
3.
B2B DIVERSITY AND SPECIFICATIONS
• Great variety
•
•
• For nearly all sophisticated or expensive items.
• For virtually all components and parts for resale.
BUSINESS PRODUCTS CLASSIFICATIONFor an Auto Plant
Factories, support buildings, large machines, large material handling equipment
Rolled steel, rubber, plastic resins
Spark plugs, radiators, steering wheels
Drill presses, assembly lines, small material handling equipment
Cleaning supplies, office supplies, toilet tissue,
Grounds maintenance, cleaning service, office equipment servicing
Characteristics of Demand
Organizational Buying Objectives
CHARACTERISTICS OFORGANIZATIONAL BUYING
LO2
6-18
BUSINESS DEMAND
• Elastic and Inelastic demand
• Fluctuating demand due to
–
– Erratic based on their customers demands from their customers and/or new programs/products
– Their demand is the total of the demand of multiple segments—which are frequently not in concert with each other.
DERIVED DEMAND
The demand for products and services is derived from the demand for their customers’ products and services [whose demand may also be derived].
EXAMPLE: PC’s drive demand for computer chips
MULTIPLE MARKET SEGMENT DEMAND
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9
A
B
C
TOT
DEMAND *
• It is critical one understands the all the components of the total demand schedule [Dt]!
• The problem is at the channel level. Thus the Bull-Whip Effect.
BULL-WHIP EFFECThttp://www.shmula.com/310/the-bullwhip-effect
INFLUENCES ON BUSINESS BUYERS
ENVIRONMENTALEconomic, Technological, Political [EPA], Competitive
ENVIRONMENTALEconomic, Technological, Political [EPA], Competitive
ORGANIZATIONALObjectives, Policies, Procedures, Structure, and Systems
ORGANIZATIONALObjectives, Policies, Procedures, Structure, and Systems
INTERPERSONALAuthority, Status, Empathy, and Persuasiveness
INTERPERSONALAuthority, Status, Empathy, and Persuasiveness
INDIVIDUALAge, Education, Position, Personality, and
Risk Attitudes
INDIVIDUALAge, Education, Position, Personality, and
Risk Attitudes
BUYERSRisk and Reward
BUYERSRisk and Reward
• Just-in-Time
Organizational Buying Criteria
CHARACTERISTICS OFORGANIZATIONAL BUYING
LO2
Standards
Supplier Development
Buyer-Seller Relationships and Supply Partnerships
CHARACTERISTICS OFORGANIZATIONAL BUYING
LO2
• Reciprocity
•
6-26
JUST-IN-TIME [JIT] SYSTEMS
•
• Improve logistics
• Improve product quality
• Maximize production efficiency
• Provide optimal customer service
QUALITY APPROACHES
• ISO-9000 Series
• ISO-14000 Series Environmental
• QS9000 [ISO / TS-16949] Automotive
• ISO-17779 Information Security
• SIX SIGMA Motorola, GE, …
• Malcom Baldridge Cadillac
BUYING PARTICIPANTS
GatekeepersCONTROL FLOW
Initiators /Info seekers
STARTERS
Buyers /Purchasing
FORMS
Influencers/ Advocates
SUPPORT
DecidersAUTHORITY
UsersMANDATORY
ApproversNECESSARY
• #1 Problem recognition–
• #2 Information search– Fact finding, preliminary vendor analysis,
value analysis
• #3 Alternative Evaluation – – Negotiations and contract
CHARACTERISTICS OF ORGANIZATIONAL BUYING:ORGANIZATIONAL BUYING CRITERIA
LO2
NEGOTIATIONS
• PREPARATION– Strategy alternatives– Psychological
• PERSONAL SKILLS– –
• TACTICS & COUNTERS– – Ridiculous request - ridiculous response–
• #4 Purchase decision– Final negotiations– Long-term contract
• #5 Postpurchase behavior– Supplier analysis
CHARACTERISTICS OF ORGANIZATIONAL BUYING:ORGANIZATIONAL BUYING CRITERIA
LO2
GOVERNMENT PURCHASING
Government MarketsGovernment Markets
Domestic SuppliersDomestic Suppliers
Open BidsOpen BidsCost MinimizationCost Minimization
Public ReviewPublic Review
PaperworkPaperwork
Prominence of Online Buyingin Organizational Markets
ONLINE BUYING INORGANIZATIONAL MARKETS
LO4
E-marketplaces [B2B exchanges / e-hubs]
Reverse Auction
Online Auctions in Organizational Markets
Traditional Auction
6-34
6
MARKET RESEARCH
AMA CODE OF ETHICS
• Honesty and integrity•
• No high-pressure tactics• • No conflict of interest
Market Research
The collection and analysis ofinformationto support
the market related decisions
MARKETSRESPONDENTSCOMPETITORSSTRATEGIES
MARKET PLANNING
Market segmentation
Needs and wants analysis
Market share or potential
Competitive analysis
PRODUCT MANAGEMENT
New product ideas / concepts
New product introduction
Marketing mix decisions / IMC quality
PRODUCT DEVELOPMENT
Concept / use testing
Marketing mix decisions
Sales techniques
STRATEGIC MARKETING
Strategy analysis
Establishing / setting objectives
New business / SBU analysis
WHAT IS MARKET RESEARCH?LO1
THE MARKET RESEARCH PROCESS
Developing
the researchplan
Developingthe research
planCollect the informationCollect the information
Analyze theinformationAnalyze theinformation
Present thefindings
Present thefindings
Market research can describe, analyze, and/or predict.
PERSPECTIVE
• One’s viewpoint is their perspective.
• You must understand others perspectives to succeed.
THREE RESEARCH TYPES
Test cause-and-effect
If x then y
Tests hypotheses
Test cause-and-effect If x then y
Tests hypotheses
Define the problem.
Help to define the issues andhypotheses
Define the problem.
Help to define the issues andhypotheses
•How big?
Product potential, attitudes, …
•How big?
Product potential, attitudes, …
You must also know when marketing research will not be cost-effective or very difficult to use..
STEP 2: DEVELOPTHE RESEARCH PLAN
LO2
Specify Constraints
Identify Data Needed for Marketing Actions
8-41
Determine how to collect data
STEP 3: COLLECT RELEVANT INFO/DATASECONDARY DATA
LO3
8-42
• INTERNAL [primary – under your direction]– Corporate data– Privately purchased– Privately purchased
market research– Observational
• Watching people• Asking people
• EXTERNAL [secondary – under someone else’s direction]– Government– Standard reports and
market research– Periodicals / books– Associations
DATA AND ITS USE
• QUALITATIVE DATA
• Symbolic data• Only subjective data• Understand behavior• Evaluate reactions• Describe small groups of
subjects or individuals in depth
• Exploratory role [generate ideas and hypotheses]
• Depth and richness of information
• QUANTITATIVE DATA
• Numeric data• Objective data• Measure a market• Describe groups of
consumers [structured by parameters]
• Extrapolate from a sample to the general population [market or market segment]
• Representative data
TYPES OF SAMPLES
• PROBABILITY SAMPLE [scientific process]– Simple random sample – Stratified random sample– Cluster [area] sample
• NONPROBABILITY SAMPLE [arbitrary]– Convenience sample [easy]– Judgment sample [select]– Quota sample [n]
SCALES OF MEASUREMENTSCALE STRUCTURE EXAMPLE(S)
1:1 correspondenceSubjective data
Football numbersLottery drawing numbers
Equal distances between items (e.g. 4-2=4-3)
A scale existsNo distance relation is known (e.g. 3-2 <> 4-3)
Calendar daysTemperature
Military rankQuality of lumber, beansUpper-middle-lower class
A continuous scale of measurementDefinite relationshipsA true zero point
MeasurementLoudness scale
Equal distances between items (e.g. 3-2=4-3)
Calendar daysTemperature
TYPES OF STATISTICS
• PARAMETRIC– F, t, z, ANOVA, …– Large sample size required
• NON-PARAMETRIC or DISTRIBUTION-FREE– Chi-square, Kruskal-Wallace, Smirnoff, …– Ideal for small sample sizes
STEP 3: COLLECT RELEVANT INFO/DATA+/– OF SECONDARY DATA
LO3
Advantages
• Time Savings
• Inexpensive
• Out of Date
• Definitions/Categories Not Right
Disadvantages
• Not Specific Enough8-47
STEP 3: COLLECT RELEVANT INFO/DATAPRIMARY DATA—OBSERVING BEHAVIOR
LO4
Mechanical Observation
8-48
Personal ObservationMystery ShopperVideotaping
STEP 3: COLLECT RELEVANT INFO/DATAPRIMARY DATA—QUESTIONING CONSUMERS
LO4
Questionnaire data
Idea generation methodsIndividual interviewsDepth interviewsFocus groups
Idea evaluation methods
ELEMENTS OF A GOOD QUESTIONNAIRE
•
• Precise questions and answers
• Avoids leading questions
• Does not ask unreasonable questions
• Does not alienate the respondent– Sensitive topics = ?
• Readily lends itself to statistical analysis
STEP 3: COLLECT RELEVANT INFO/DATAPRIMARY DATA—QUESTION FORMATS
LO4
Open-Ended Questions
Closed-End or Fixed Alternative Questions
Dichotomous Questions
Semantic Differential Questions
Likert Scale Questions
8-51
WHICH TYPE OF QUESTION IS BEST FOR YOUR SITUATION?
OPEN-END or COMPLETELY UNSTRUCTURED
OBTAINS INFORMATION WITHOUT BIAS
What do you think about scholarship support at Texas Tech University?- General understanding of that person’s perspective- Complex question[s]-
- Answer interpretation can be problematical
FREE RESPONSE
ANSWERS ARE LIMITED TO A WORD OR A PHRASE
Does TTU provide inadequate, sufficient, or exceptional financial scholarship support?
TYPES OF QUESTIONS
SENTENCE COMPLETION
THE answer IS OBTAINED BY DIVIDING the numerator BY the denominator.
GOOD FOR ROTE MEMORY MEASUREMENT – BAD FOR
TYPES OF QUESTIONS
DICHOTOMOS
THE RESPONDENT MUST ANSWER ONE OF JUST TWO CHOICES
Do you think TIDE gets clothes clean without injuring the fabric? YES NO
TYPES OF QUESTIONS
DICHOTOMOS
THE RESPONDENT MUST ANSWER ONE OF JUST TWO CHOICES
Do you think TIDE gets clothes clean without injuring the fabric?
YES NO
YES = CLEAN AND WITHOUT INJURY TO THE FABRIC
NO = WHICH? CLEAN, INJURES, CONFUSED, … ?
TYPES OF QUESTIONS
MULTIPLE CHOICE
VERY EASY
ONE CORRECT ANSWER
TO MEDIUM
SEVERAL ANSWERS ARE ONLY SLIGHTLY DIFFERENT
TO HARD
COMBINATION ANSWERS ONLY SLIGHTLY DIFFERENT
TYPES OF QUESTIONS
RANKING, RATING, and CONTINUUM QUESTIONS
FORCE A MORE PRECISE SCALE OF MEASUREMENT
SCALE DETERMINES TYPE OF STATISTICAL ANALYSIS
THE CHALLENGE WITH ALL OF THESE IS THE MEANING OF THE SCALE OF MEASUREMENT.
PROBLEMS WITH QUESTIONS
• THE RESPONDENT
– DOES NOT UNDERSTAND THE QUESTION
– DOES NOT HAVE THE INFORMATION TO ANSWER THE QUESTION
– CAN NOT REMEMBER THE ANSWER
– DOES NOT WANT TO ANSWER
THE PROBLEMS OF ENGLISH
• AMBIGUITY– Pear, pare, pair– To, two, too– The, run
• THE CHICKEN AND THE EGG
• SPECIFICITY AND ABSTRACTION– What is the midpoint between right and
wrong?
STEP 3: COLLECT RELEVANT INFO/DATAPRIMARY DATA—PANELS & EXPERIMENTS
LO4
Panels
Experiments
• Independent Variable:The Cause
• Dependent Variable:The Result
• Test Markets8-60
STEP 3: COLLECT RELEVANT INFO/DATA+/– OF PRIMARY DATA
LO4
Advantage
• Expensive
• Time Consuming to Collect
Disadvantages
• More Specific to the Problem
8-61
STEP 3: COLLECT RELEVANT INFO/DATAUSING INFO TECHNOLOGY TO TRIGGER MARKETING ACTIONS
LO5
• Data Mining is the extraction of hidden predictive information from large databases.
Data Mining: A New Approach to Searching the Data Ocean
8-62
STATISTICAL MEASURES
• – Intent– Does it measure what it is meant to?
• – Error – What is the consistency of the data?
• – Who? Type of …? How many …?– Is it representative of the population?
STEP 5: TAKE MARKETING ACTIONSLO5
Frequently Evaluate the Results
Make Recommendations
• Evaluate the Decision Itself
Implement the Recommendations
• Evaluate the Decision Process Used
8-64
OTHER MATHEMATICAL TOOLS
• Calculus
• Linear programming, matrix algebra, and Simplex solutions
• Queing theory
• Markov chains
• Regression analysis
• Time series analysis
SOME MARKETING RESEARCH TOOLS
• CORRESPONDENCE MAPPING
• CLUSTER ANALYSIS
CORRESPONDENCE MAPPING
• #1 - Graphically represents the relationship between brands / products and other variables such as psychographics, media, etc..
• #2 - A preliminary step to cluster analysis, used in determining the most discriminatory psychographic statements
CLUSTER ANALYSIS
• USED FOR SEGMENTING MARKETS BY GROUPING INDIVIDUALS WITH SIMILAR RESPONSES INTO DISCRETE GROUPS.
• A POWERFUL STATISTICAL TOOL FOR UNDERSTANDING CHARACTERISTICS AND RELATIONSHIPS
7
MARKET SEGMENTATION
and
TARGET MARKETING
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
PRODUCTS, SERVICES, & TECHNOLOGIES
APPLICA-TIONSCHANNELS
MARKET[S]
SEGMENT[S]
WHY SEGMENT MARKETS?WHEN AND HOW TO SEGMENT MARKETS [Kotler]
LO1
9-72
WHY IS SEGMENTATION WORTH DOING?
• Allows targeted communications• Fulfills consumers needs and wants• Responds to changing markets• Very efficient use of resources
WHAT IS MARKET SEGMENTATION?
• A multi-step process– The same process whether B2C or B2B
•
• A process for determining attractive target market segments
MARKET SEGMENTATION- A MULTI-STEP PROCESS -
POSITIONING FOR EACH SEGMENTThe desired consumer mental image.
MARKETING MIX PER SEGMENT
IDENTIFY BASES FOR SEGMENTATIONWhich attributes are important? What are their limits?
DEVELOP SEGMENT PROFILESWrite a description of the typical consumer in that segment.
DEVELOP ATTRACTIVENESS MEASURESWhat makes a segment attractive for your firm?
SELECT TARGET MARKET SEGMENTSbased on attractiveness.
MARKET
SEGMEN-
TATION
SELECT & RANK THE MOST MEANINGFUL BENEFITS
MARKET SEGMENTATION- BASES FOR SEGMENTATION-
UNIVERSE OF PROSPECTS
1+ CHILDREN
HISPANIC
AGES 25-34 HOUSEHOLD INCOME
OVER $50,000
CONSUMER [B2C] MARKET SEGMENTATION METHODS
• Geographic
• Demographic
• Psychographic
• Behavioral
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Geographic Segmentation B2C
9-77
World region North America, Europe, EU,
Region Southwest, Mountain States
Population SMSAs or SCAs, small cities
Population density Urban, suburban, exurban, rural
Climate Temperate, hot, humid, rainy
“Lubbock’s leading radio station”
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Demographic Segmentation B2C
9-78
INCOME
MARITAL STATUS
GENDER
AGE Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+
Male, female
Single, married, divorced, living together, widowed
Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,000, $100,000 and over
OCCUPATION**
EDUCATION Some high school, high school graduate, some college, college graduate, postgraduateProfessional, blue-collar, white-collar, agricultural, military
SUBCULTURES/RACE / ETHNICITY
RELIGION
CULTURES American, Italian, Chinese, Mexican, …
Catholic, Protestant, Jewish, Moslem, other
African-American, Caucasian, Asian, Hispanic
FAMILY LIFE CYCLE Bachelors, young married, empty nesters, …
VALS2 CONSUMER MODEL
FULFILLEDS[Satisfied]
10.5%
BELIEVERS[Family focused]
17.0%
ACHIEVERS[Committed]
14.7%
STRIVERS[Needs others]
11.8%
EXPERIENCERS[Socializer]
12.9%
MAKERS[Traditional]
12.0%
ACTUALIZERS[Sophisticated]
11.7%
PRINCIPLE STATUS ACTION
STRUGGLERS[Uneducated]
9.5%
$$$
$
I
N
C
O
M
E
PRIZM
• PRIZM– 500,000 neighborhoods– 62 clusters– Claritas
• http://www.claritas.com
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Psychographic Segmentation B2C
9-81
LEARNING-INVOLVEMENT
PERCEPTION
PERSONALITY*
NEEDS-MOTIVATION Shelter, safety, security, affection, sense of self-worth
Extroverts, novelty seeker, aggressives, low dogmatics
Low-risk, moderate-risk, high-risk
Low-involvement, high-involvement
ATTITUDES Positive attitude, negative attitude
SOCIAL CLASS* Lower, middle, upper, …
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Psychographic Segmentation B2CLIFESTYLE*SEGMENTATION
Based on personality, motives, lifestyle, and geodemographics. [Zip code 79424]
Economy-minded, couch potatoes outdoors enthusiasts status seekers
ATTITUDES, INTERESTS, & OPINIONS (AIO) for instance:
Spends 1+ hours per day on the Internet, heavy e-mail user
Buys on the Internet, goes to stores only as required
Professional, income above $75,000 per year
Belongs to multiple frequent traveler programs
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Behavioral Segmentation B2C
Occasion Regular or special [4th of July, new child]
Benefits Quality, service, convenience, value
Brand loyalty None to insistence [frequent flyer]
Usage rates Light, medium, heavy
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 4: SELECT TARGET MARKETS
LO4
• KOTLER’S FIVE TESTS [B2C]– MEASURABLE – – SUBSTANTIAL – – ACCESSIBLE – – HETEROGENEOUS – – ACTIONABLE –
• EACH SEGMENT SHOULD HAVE A [NEARLY] UNIQUE RESPONSE / BEHAVIOR PATTERN.
CONSUMER [B2B] MARKET SEGMENTATION
• Use the same process as B2C
• Use different attributes / variables
BUSINESS BUYER CLASSIFICATION[Review]
Purchase products for producing other goods and services [can be either a finished good or a component]
Purchase finished goods or components for resale, rental, or leasing for a profit [distributors, dealers, wholesalers, retailers, …]
Federal, state, and local governments [all different buyer behaviors]
Purchase finished goods and services for resale, rental, or leasing for a profit
DEMAND [Review]
• It is critical one understands the all the components of the total demand schedule [Dt]!
• The problem is at the channel level. Thus the Bull-Whip Effect.
BUSINESS MARKET COMPLEXITY[Review]
BUSINESS SERVICES
Professional Services
Industrial Services
Consulting
Investment banking
Research
Education
…
Project related
Technical industrial
On-going
Education & training
Installation
Maintenance
…
Engineering
Quality
Product testing
…
Maintenance contracts
Field upgrades
…
CONSUMER [B2B] MARKET SEGMENTATION METHODS
• Geographic
• Demographic
• Behavioral
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Geographic Segmentation B2C
9-90
Statistical Areas [SMSA, SCA]
AREA BUSINESSESLA – Long Beach686,222New York598,093Philadelphia - NJ405,082Chicago399,511
Source: D&B Sales and Marketing Catalog, ~2005
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Demographic Segmentation B2C
9-91
NAICS code[s] Industries example Annual sales Channel of distribution Title / functional responsibility Number of employees See example
BUSINESS MARKET SEGMENTATION
• DEMOGRAPHIC
EMPLOYEES BUSINESSES
1,000+ 18,864
500-999 16,270
100-499 126,466
<100 1,803,535
Source: D&B Sales and Marketing Catalog, ~2005
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
LO3
• Behavioral Segmentation B2C
Usage Rate Product / process / technology / application Type of equipment [plastic manufacturing]
BUSINESS MARKET SEGMENTATION
INDUSTRY / INDUSTRY / INDUSTRY / INDUSTRY /SEGMENT NAME SEGMENT NAME SEGMENT NAME SEGMENT NAME
DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTIONNAIC(S) NAIC(S) NAIC(S) NAIC(S)
APPLICATION 1 PRODUCT 1 PRODUCT 2
APPLICATION 1 PRODUCT 1
PRODUCT 1 APPLICATION 1 APPLICATON 2 APPLICATION 3
Brief verbal descriptionMARKET (SEGMENT) NAME
A
PRODUCT – MARKET MATRIX
OrlonOrlon
RayonRayon
Pro
du
ct M
anag
ers
AcetateAcetate
NylonNylon
DacronDacron
Market Managers
Men’sMen’swearwear
Women’sWomen’swearwear
IndustrialIndustrialmarketsmarkets
HomeHomefurnishingsfurnishings
Example is DuPont, see also Dow, GE, …
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 4: SELECT TARGET MARKETS
LO4
Criteria to Use in SelectingTarget Markets
Those That Divide a Market into Segments
• Two Types of Criteria
Those That Actually Pick the Target Segments
9-96
STEPS IN SEGMENTING AND TARGETING MARKETSSTEP 4: SELECT TARGET MARKETS
LO4
Criteria to Use in Selecting Target Markets
• Market Size
• Expected Growth
• Competitive Position
• Cost of Reaching Segment
• Compatibility with OrganizationalGoals and Resources
9-97
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
MARKET SEGMENTATION:FILLING THE GAPS
MARKETS / SEGMENTS
CHANNELS OF DISTRIBUTION
PRODUCTS
SERVICES
APPLICATIONS
13
2
4
TARGET MARKETS
Identifying relatively homogeneous groups with similar needs and buyer behavior.
TARGET MARKETS
A
C
B
A
CB
A
C
B
MARKET TARGETING;CHOOSING A MARKET-COVERAGE
STRATEGY
Company Resources
ProductVariability
Product’s Life-Cycle Stage
Market Variability
Competitors’Marketing Strategies
MARKET SEGMENTATION:Market Coverage Strategies
The firm decides to ignore market segment differences.
One marketing mixSame product to all segments
Coca Cola Early Ford
• 1 Pricing strategy • 1 Promotional program aimed at everybody • 1 Type of product with little/no variation • 1 Distribution system for the entire market
– Staple foods-sugar and salt and farm produce, Henry Ford Model T – standard model, no options
MARKET SEGMENTATION:Market Coverage Strategies
The firm decides to target several [large] market segments
Each segment has a marketing mixDifferent products for each market segment
Proctor & Gamble detergents Current auto manufacturers
Until around 2000, Marriott International U.S. segmentation was
Consumer market segmentsMarriott Suites……….....Permanent vacationersFairfield Inn…………………...Economy Lodging
Business market segmentsResidence Inn………………….....Extended StayCourtyard By Marriott……….Business Travelers
MARKET SEGMENTATION:Market Coverage Strategies
The firm decides to pursue a larger market share of
selected [smaller] segments, sub-segments, or nichesDifferent products to the [sub-]segments
Different marketing mix for each segment or sub-segmentSUV’s standard to family to luxury to Disney [co-branded] to …
MARKET SEGMENTATION:Market Coverage Strategies
Specialized products for individuals and locations
[Brands, promotions] [1:1 marketing]Local chain grocery stores Amazon, Dell
8
DIFFERENTIATION
and
POSITIONING
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
DIFFERENTIATIONLO5
Differentiation is a marketing strategy that uses different marketing mixes to help consumers perceive a product as being different from and having meaningful benefits compared to competing products.
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DIFFERENTIATION
• SETTING YOURSELF APART– – Important in consumer marketing– Essential in business marketing
• DIFFERENTIATION BASED ON THE MARKETING MIX– Product [the pen exercise] and services if
applicable– Place [limited availability]– Promotion [Schlitz Beer]– Price [value perception, brand]
IDENTIFY AND ESTABLISH BRAND POSITIONING AND VALUES
• •
– RELEVANCE – relevant and important
– DISTINCTIVENESS – distinctive and superior
– BELIEVABILITY – believable and credible
– COMMUNICABLE – gets through the noise
IDENTIFY AND ESTABLISH BRAND POSITIONING AND VALUES
• –Elements where there is
disagreement as to how their performance or functionality compares to the next best alternative.
• COMPETITIVE FRAME OF REFERENCE
AREAS OF DIFFERENTIATION
ProductForm – Features
Performance – DurabilityReliability - Expected life
Design - Apple
ProductForm – Features
Performance – DurabilityReliability - Expected life
Design - Apple
ServiceRepairability, Warranty
ServiceRepairability, Warranty
ImageStyle – Design – Quality
Away from or against competitors?
ImageStyle – Design – Quality
Away from or against competitors?
PeopleCompany / User class or
segmentB2C vs. B2B
PeopleCompany / User class or
segmentB2C vs. B2B
PERCEPTION – areas for competitive differentiation
COMMON AREAS OF BRAND DIFFERENTIATION
• The brand – – provides unique or superior customer service,
purchase, or usage experience;– delivers superior performance and/or is the
technology leader or innovator / pioneer;– is the most convenient or easy to find and use; – delivers the best perceived overall value for the
price category; – has excellent testimonials; – …
THE PRODUCT CONCEPTEvery item in the product concept is an opportunity to differentiate.
BrandName
QualityLevel
Packaging
Design
Features
Delivery& Credit
Installation
Warranty
After-Sale
Service
DIFFERENTIATION AND PRODUCT DECISIONS
Product AttributesFeatures – Design - Quality
Product AttributesFeatures – Design - Quality
BrandingBranding
Packaging, Labeling, and Product WarningsPackaging, Labeling, and Product Warnings
Product Support ServicesProduct Support Services
Product Safety, Product LiabilityProduct Safety, Product Liability
Market research and new product developmentMarket research and new product development
INDIVIDUAL PRODUCT DECISIONS
WarrantiesWarranties
Product Safety, Product LiabilityProduct Safety, Product Liability
Expressed = written
Implied = unwritten
WARRANTIES
• Lifetime
• Limited lifetime
• Extended warranty
• Free from manufacturer’s defects
• Merchantability and fitness of use
INDIVIDUAL PRODUCT DECISIONS
WarrantiesWarranties
Product Safety, Product LiabilityProduct Safety, Product Liability
Product RecallsProduct Recalls
Individual and Class Action LawsuitsIndividual and Class Action Lawsuits
PRODUCT STRATEGIES
Strategies for Strategies for New New
ProductsProducts
Strategies for Strategies for New New
ProductsProducts
Strategies forStrategies forRegionalRegionalProductsProducts
Strategies forStrategies forRegionalRegionalProductsProducts
Strategies forStrategies forMatureMature
ProductsProducts
Strategies forStrategies forMatureMature
ProductsProducts
Vanilla Coke Giant Texan Coke
Coca-Cola
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
POSITIONINGLO5
9-121
Positioning helps you …
1. 2. or to see if you are launching into a crowded
competitive marketplace; 3. 4. appreciate the most important criteria customers' use
when positioning different brands in their mind; 5. 6. find the best position for your product or brand in the
marketplace.
POSITIONING
IncreasingEmotional
Connectionwith
Consumers
IncreasingDifficulty
forCompetitors
SELECT THE RIGHT COMPETITIVE ADVANTAGES FOR POSITIONING TO BE
EFFECTIVE
Affordable[relative]
Affordable[relative]
Superior[perception]
Superior[perception]
ProfitableProfitable
PreemptivePreemptive
Distinctive[differentiation]
Distinctive[differentiation]
Important[to the consumer]
Important[to the consumer]
CommunicableCommunicable
PERCEPTUAL MAPLO5
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A perceptual map is a way of displaying the perception of brands, companies, products, or services in the minds of consumers.
It allows one to understand the importance of the meaningful differences being promoted relative to the competition.
It is usually done in two dimensions, but occasionally in three.
POSITIONING DIMENSION CANDIDATES
Quality
Application[s]
Occasion[s]
Lifestyle / image
Attributes
Competition
Price
POSITIONING: PERCEPTUAL MAPPING
MoreArtwork
MoreCopy
Fashion Coverage
Club Coverage
A
B
C
Gap
Channels /
Products?
Gap
POSITIONING STRATEGIES
Against CompetitionAgainst Competition Repositiona Competitor
Repositiona Competitor
C C CU U
POSITIONING STRATEGIES
Find a PositionFind a Position
C U
C CC
Gap
POSITIONING STRATEGIES
Find a PositionFind a Position Create a PositionCreate a Position
C CC
U
C CC
CC
UU
VS
MARKET POSITION & STRATEGYSee Marketing Warfare article, by Ries and Trout
MARKETLEADER
Coca Cola
MARKETChallenger
Pepsi
MARKETFollower
RC ColaMARKETNicherP/L
Frontal or indirect attack?
Frontal attacks are usually for market leaders.
Really good marketing executives are flexible.
POSITIONING STRATEGIES
Broaden the BaseBroaden the Base
C UC C
C
MICROSOFT BRANDS IN 2003
MICROSOFT
Commercial Consumer
Windows Server
System
Microsoft Business Solutions
Microsoft Visual
Microsoft Office
MSN XBOX
UNIQUE SELLING PROPOSITION [USP]
• THREE TESTS
–
–
–
A
SALES FORECASTING TECHNIQUESLO6
Industry or Market Potential
Sales Forecast
Company Forecast
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SALES FORECASTING TECHNIQUESLO6
Statistical Methods
• Trend Extrapolation - extending a pattern observed in past data into the future
• Linear Trend Extrapolation - a straight line to extend a pattern observed inpast data into the future
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