5
BUSINESS MARKETING [B2B]
SUPPLY CHAIN MANAGEMENT
OEM
GOVERNMENT
RESELLERS
B2B MARKETS
----------------CONSUMER
MARKETS
MINING
SUPPLY
CHAIN
TELECOMMUNICATIONS
TRANSPORTATION
RESELLERS
SERVICES
MANUFACTURING
INSTITUTIONS
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
MARKETS
Consumers:
Customers
Prospects
Suspects
CUSTOMER’S
CUSTOMERS
SUPPLIER’S
SUPPLIERS
SUPPLIERS
or
SUPPLIERS
CUSTOMERS
TOPPER’S TRIPS TO MARKET
1-Plastic eyes & 10-transistors
Shenzhen, China
2& 9-Speakers for voice, 12wiring
Dongguan, China
3-Plastic body
Malaysia
4-Motor for legs
Shaoguan, China
5-Plastic legs & 11-IC chips
Taiwan
Manufacturer
Outbound
Port
Inbound
Port
Warehouses and
Distribution
Centers
6-Microfiber fabric coat
Korea
7-Voice recognition requirements
San Francisco
8-Voice recognition
programming
Taiwan
13-Packaging Hong Kong, China
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
LO1
THE NATURE AND SIZE OF
ORGANIZATIONAL MARKETS
BUSINESS BUYER CLASSIFICATION
PRODUCERS
[Manufacturers,
OEMs or Private
Labelers]
RESELLERS
Purchase products for producing other goods
and services [can be either a finished good or a
component]
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
Purchase finished goods or components for
resale, rental, or leasing for a profit
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
Technical
industrial
Consulting
Engineering
Investment
banking
Quality
Research
Education
…
Product testing
…
Project
related
On-going
Education &
training
Maintenance
contracts
Installation
Field upgrades
Maintenance
…
…
THE ECONOMY AND NAICS
GROW OR MAKE
Agriculture
GOV’T
SERVICE
Wholesale
Information
Finance
Mining
Retail
Real Estate
Professional
Utilities
Transportation
Construction
Manufacturing
SELL
Management
Administration
Entertainment
Education
Health
Accommodation
Other
Public
Administration
LO1
MEASURING DOMESTIC AND GLOBAL
INDUSTRIAL, RESELLER, AND
GOVERNMENT MARKETS
North American Industry
Classification
System (NAICS)
•
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]
6-11
FIGURE 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
Fluctuating, derived demand
Geographically dispersed
Mass markets
Small volumes
Primary demand
Standard / complex / custom
Service etc. are critical
Business applications
Standard
Service etc. of some note
Personal use
Market
Structure
Products
Individuals purchasing
Some family influence
Social / psychological drives
Buyer
Behavior
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
Supply Chains
/ Channels of
Distribution
BUSINESS MARKETS
CONSUMER MARKETS
Often shorter [more direct]
Not seen by consumer
Usually indirect except for catalog
and internet.
Simple
Advertising
Promotion
Often involves resellers
Price
Volume sensitive
Complex formalized process
Competitive bid / Many strategies
Demand
Inelastic in the short-run
Volatile and discontinuous
Individuals limited purchasing skill
Little, if any, leverage
Simple process
Not applicable
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 CLASSIFICATION
For 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
LO2
CHARACTERISTICS OF
ORGANIZATIONAL BUYING
Characteristics of Demand
Organizational Buying Objectives
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
60
50
40
A
B
30
C
20
TOT
10
0
1
2
3
4
5
6
7
8
9
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 EFFECT
http://www.shmula.com/310/the-bullwhip-effect
INFLUENCES ON BUSINESS BUYERS
ENVIRONMENTAL
Economic, Technological, Political [EPA], Competitive
ORGANIZATIONAL
Objectives, Policies, Procedures, Structure, and Systems
INTERPERSONAL
Authority, Status, Empathy, and Persuasiveness
INDIVIDUAL
Age, Education, Position, Personality, and
Risk Attitudes
BUYERS
Risk and Reward
CHARACTERISTICS OF
ORGANIZATIONAL BUYING
LO2
Organizational Buying Criteria
Standards

Supplier Development
• Just-in-Time
CHARACTERISTICS OF
ORGANIZATIONAL BUYING
LO2
Buyer-Seller Relationships
and Supply Partnerships
• 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
Users
Initiators /
Info seekers
STARTERS
Buyers /
Purchasing
FORMS
MANDATORY
Gatekeepers
Influencers
/ Advocates
SUPPORT
CONTROL FLOW
Deciders
AUTHORITY
Approvers
NECESSARY
LO2
CHARACTERISTICS OF ORGANIZATIONAL BUYING:
ORGANIZATIONAL BUYING CRITERIA
• #1 Problem recognition
–
• #2 Information search
– Fact finding, preliminary vendor analysis,
value analysis
• #3 Alternative Evaluation
–
– Negotiations and contract
NEGOTIATIONS
• PREPARATION
– Strategy alternatives
– Psychological
• PERSONAL SKILLS
–
–
• TACTICS & COUNTERS
–
– Ridiculous request - ridiculous response
–
LO2
CHARACTERISTICS OF ORGANIZATIONAL BUYING:
ORGANIZATIONAL BUYING CRITERIA
• #4 Purchase decision
– Final negotiations
– Long-term contract
• #5 Postpurchase behavior
– Supplier analysis
GOVERNMENT PURCHASING
Government Markets
Public Review
Domestic Suppliers
Cost Minimization
Paperwork
Open Bids
LO4
ONLINE BUYING IN
ORGANIZATIONAL MARKETS
Prominence of Online Buying
in Organizational Markets
E-marketplaces [B2B exchanges / e-hubs]
Online Auctions in Organizational
Markets
Traditional Auction
Reverse Auction
6-34
6
MARKET RESEARCH
AMA CODE OF ETHICS
• Honesty and integrity
•
• No high-pressure tactics
•
• No conflict of interest
LO1
WHAT IS MARKET RESEARCH?
STRATEGIC MARKETING
Strategy analysis
Market Research
Establishing / setting objectives
New business / SBU analysis
MARKET PLANNING
The collection and analysis of
information
to support
the market related decisions
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
MARKETS
RESPONDENTS
COMPETITORS
STRATEGIES
PRODUCT DEVELOPMENT
Concept / use testing
Marketing mix decisions
Sales techniques
THE MARKET RESEARCH
PROCESS
Developing
the research
plan
Present the
findings
Market research can describe, analyze, and/or predict.
Collect the
information
Analyze the
information
PERSPECTIVE
• One’s viewpoint is their perspective.
• You must understand others perspectives
to succeed.
THREE RESEARCH TYPES
Define the problem.
Help to define the issues and
hypotheses
•How big?
Product potential, attitudes, …
Test cause-and-effect
If x then y
Tests hypotheses
You must also know when marketing research will not be cost-effective or very difficult to use..
LO2
STEP 2: DEVELOP
THE RESEARCH PLAN
Specify Constraints
Identify Data Needed for Marketing
Actions
Determine how to collect data
8-41
LO3
STEP 3: COLLECT RELEVANT INFO/DATA
SECONDARY DATA
• 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
8-42
DATA AND ITS USE
• QUALITATIVE DATA
• QUANTITATIVE 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
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 MEASUREMENT
SCALE
STRUCTURE
1:1 correspondence
Subjective data
A scale exists
No distance relation is
known (e.g. 3-2 <> 4-3)
EXAMPLE(S)
Football numbers
Lottery drawing
numbers
Military rank
Quality of lumber, beans
Upper-middle-lower
class
Equal
Equaldistances
distancesbetween
items
between items
(e.g.
(e.g.4-2=4-3)
3-2=4-3)
Calendar days
Calendar days
Temperature
Temperature
A continuous scale of
measurement
Definite relationships
A true zero point
Measurement
Loudness scale
TYPES OF STATISTICS
• PARAMETRIC
– F, t, z, ANOVA, …
– Large sample size required
• NON-PARAMETRIC or DISTRIBUTIONFREE
– Chi-square, Kruskal-Wallace, Smirnoff, …
– Ideal for small sample sizes
LO3
STEP 3: COLLECT RELEVANT INFO/DATA
+/– OF SECONDARY DATA
Advantages
• Time Savings
• Inexpensive
Disadvantages
• Out of Date
• Definitions/Categories Not Right
• Not Specific Enough
8-47
LO4
STEP 3: COLLECT RELEVANT INFO/DATA
PRIMARY DATA—OBSERVING BEHAVIOR
Mechanical Observation
Personal Observation
Mystery Shopper
Videotaping
8-48
LO4
STEP 3: COLLECT RELEVANT INFO/DATA
PRIMARY DATA—QUESTIONING CONSUMERS
Questionnaire data
Idea generation methods
Individual interviews
Depth interviews
Focus 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
LO4
STEP 3: COLLECT RELEVANT INFO/DATA
PRIMARY DATA—QUESTION FORMATS
 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?
LO4
STEP 3: COLLECT RELEVANT INFO/DATA
PRIMARY DATA—PANELS & EXPERIMENTS
Panels
Experiments
• Independent Variable:
The Cause
• Dependent Variable:
The Result
• Test Markets
8-60
LO4
STEP 3: COLLECT RELEVANT INFO/DATA
+/– OF PRIMARY DATA
Advantage
• More Specific to the Problem
Disadvantages
• Expensive
• Time Consuming to Collect
8-61
LO5
STEP 3: COLLECT RELEVANT INFO/DATA
USING INFO TECHNOLOGY TO TRIGGER MARKETING ACTIONS
Data Mining: A New Approach to
Searching the Data Ocean
• Data Mining is the extraction of hidden predictive
information from large databases.
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?
LO5
STEP 5: TAKE MARKETING ACTIONS
Make Recommendations
Implement the Recommendations
Frequently Evaluate the Results
• Evaluate the Decision Itself
• 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
MARKET[S]
SEGMENT[S]
PRODUCTS, SERVICES, &
TECHNOLOGIES
APPLICATIONS
CHANNELS
LO1
WHY SEGMENT MARKETS?
WHEN AND HOW TO SEGMENT MARKETS [Kotler]
WHY IS SEGMENTATION WORTH
DOING?
• Allows targeted communications
• Fulfills consumers needs and wants
• Responds to changing markets
• Very efficient use of resources
9-72
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 MARKET
SEGMENTATION
IDENTIFY BASES FOR SEGMENTATION
Which attributes are important? What are their limits?
DEVELOP SEGMENT PROFILES
Write a description of the typical consumer in that segment.
DEVELOP ATTRACTIVENESS MEASURES
What makes a segment attractive for your firm?
SELECT TARGET MARKET SEGMENTS
based on attractiveness.
SELECT & RANK THE MOST
MEANINGFUL BENEFITS
POSITIONING FOR EACH SEGMENT
The desired consumer mental image.
MARKETING MIX PER SEGMENT
MARKET SEGMENTATION
- BASES FOR SEGMENTATIONUNIVERSE OF PROSPECTS
1+ CHILDREN
HISPANIC
AGES 25-34
HOUSEHOLD INCOME
OVER $50,000
CONSUMER [B2C] MARKET
SEGMENTATION METHODS
•
•
•
•
Geographic
Demographic
Psychographic
Behavioral
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Geographic Segmentation B2C
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”
9-77
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Demographic Segmentation B2C
CULTURES
American, Italian, Chinese, Mexican, …
RELIGION
SUBCULTURES/
RACE / ETHNICITY
FAMILY LIFE CYCLE
Catholic, Protestant, Jewish, Moslem, other
African-American, Caucasian, Asian, Hispanic
AGE
Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+
GENDER
Male, female
MARITAL STATUS
Single, married, divorced, living together, widowed
INCOME
Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000$74,999, $75,000-$99,000, $100,000 and over
Some high school, high school graduate, some college,
college graduate, postgraduate
Professional, blue-collar, white-collar, agricultural, military
EDUCATION
OCCUPATION**
Bachelors, young married, empty nesters, …
9-78
VALS2 CONSUMER MODEL
$$$
ACTUALIZERS
[Sophisticated]
11.7%
I
PRINCIPLE
N
FULFILLEDS
[Satisfied]
10.5%
ACHIEVERS
[Committed]
14.7%
BELIEVERS
[Family focused]
17.0%
STRIVERS
[Needs others]
11.8%
C
O
M
STATUS
E
$
STRUGGLERS
[Uneducated]
9.5%
ACTION
EXPERIENCERS
[Socializer]
12.9%
MAKERS
[Traditional]
12.0%
PRIZM
• PRIZM
– 500,000 neighborhoods
– 62 clusters
– Claritas
• http://www.claritas.com
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Psychographic Segmentation B2C
NEEDS-MOTIVATION
Shelter, safety, security, affection, sense of
self-worth
PERSONALITY*
Extroverts, novelty seeker, aggressives, low
dogmatics
PERCEPTION
Low-risk, moderate-risk, high-risk
LEARNINGINVOLVEMENT
Low-involvement, high-involvement
ATTITUDES
Positive attitude, negative attitude
SOCIAL CLASS*
Lower, middle, upper, …
9-81
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Psychographic Segmentation B2C
LIFESTYLE*
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
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• 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
LO4
•
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 4: SELECT TARGET MARKETS
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
Technical
industrial
Consulting
Engineering
Investment
banking
Quality
Research
Education
…
Product testing
…
Project
related
On-going
Education &
training
Maintenance
contracts
Installation
Field upgrades
Maintenance
…
…
CONSUMER [B2B] MARKET
SEGMENTATION METHODS
• Geographic
• Demographic
• Behavioral
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Geographic Segmentation B2C
 Statistical Areas [SMSA, SCA]
AREA
BUSINESSES
LA – Long Beach
New York
Philadelphia - NJ
Chicago
399,511
Source: D&B Sales and Marketing Catalog, ~2005
686,222
598,093
405,082
9-90
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Demographic Segmentation B2C





NAICS code[s] Industries example
Annual sales
Channel of distribution
Title / functional responsibility
Number of employees See example
9-91
BUSINESS MARKET SEGMENTATION
• DEMOGRAPHIC
EMPLOYEES
1,000+
500-999
100-499
<100
Source: D&B Sales and Marketing Catalog, ~2005
BUSINESSES
18,864
16,270
126,466
1,803,535
LO3
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS
• Behavioral Segmentation B2C
 Usage Rate
 Product / process / technology / application
 Type of equipment [plastic manufacturing]



BUSINESS MARKET SEGMENTATION
MARKET (SEGMENT) NAME
Brief verbal description
INDUSTRY /
INDUSTRY /
INDUSTRY /
INDUSTRY /
SEGMENT NAME SEGMENT NAME SEGMENT NAME SEGMENT NAME
DESCRIPTION
DESCRIPTION
DESCRIPTION
DESCRIPTION
NAIC(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
A
PRODUCT – MARKET MATRIX
Market Managers
Product Managers
Men’s
wear
Women’s
wear
Home
furnishings
Rayon
Acetate
Nylon
Orlon
Dacron
Example is DuPont, see also Dow, GE, …
Industrial
markets
LO4
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 4: SELECT TARGET MARKETS
Criteria to Use in Selecting
Target Markets
• Two Types of Criteria
 Those That Divide a Market into Segments
 Those That Actually Pick the Target Segments
9-96
LO4
STEPS IN SEGMENTING AND TARGETING MARKETS
STEP 4: SELECT TARGET MARKETS
Criteria to Use in Selecting Target
Markets
• Market Size
• Expected Growth
• Competitive Position
• Cost of Reaching Segment
• Compatibility with Organizational
Goals and Resources
9-97
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
MARKET SEGMENTATION:
FILLING THE GAPS
CHANNELS OF DISTRIBUTION
1
3
PRODUCTS
4
2
MARKETS / SEGMENTS
SERVICES
APPLICATIONS
TARGET MARKETS
Identifying relatively homogeneous groups with similar needs and buyer behavior.
TARGET MARKETS
A
A
B
B
C
C
A
C
B
MARKET TARGETING;
CHOOSING A MARKET-COVERAGE
STRATEGY
Company
Resources
Product
Variability
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 mix
Same 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 mix
Different products for each market segment
Proctor & Gamble detergents
Current auto manufacturers
Until around 2000, Marriott International U.S. segmentation was
Consumer market segments
Marriott Suites……….....Permanent vacationers
Fairfield Inn…………………...Economy Lodging
Business market segments
Residence Inn………………….....Extended Stay
Courtyard 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 niches
Different products to the [sub-]segments
Different marketing mix for each segment or sub-segment
SUV’s standard to family to luxury to Disney [co-branded] to …
MARKET SEGMENTATION:
Market Coverage Strategies
Specialized products for individuals and locations
[Brands, promotions]
Local chain grocery stores
[1:1 marketing]
Amazon, Dell
8
DIFFERENTIATION
and
POSITIONING
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
LO5
DIFFERENTIATION
 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.


9-108
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
PERCEPTION – areas for competitive
differentiation
People
Company / User class or
segment
B2C vs. B2B
Image
Style – Design – Quality
Away from or against
competitors?
Service
Repairability, Warranty
Product
Form – Features
Performance – Durability
Reliability - Expected life
Design - Apple
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 CONCEPT
Every item in the product concept is an opportunity to differentiate.
Installation
Packaging
Brand
Name
Delivery
& Credit
Features
Quality
Level
Design
Warranty
AfterSale
Service
DIFFERENTIATION AND PRODUCT
DECISIONS
Market research and new product development
Product Attributes
Features – Design - Quality
Branding
Packaging, Labeling, and Product Warnings
Product Support Services
Product Safety, Product Liability
INDIVIDUAL PRODUCT DECISIONS
Product Safety, Product Liability
Warranties
Expressed = written
Implied = unwritten
WARRANTIES
•
•
•
•
•
Lifetime
Limited lifetime
Extended warranty
Free from manufacturer’s defects
Merchantability and fitness of use
INDIVIDUAL PRODUCT DECISIONS
Product Safety, Product Liability
Warranties
Product Recalls
Individual and Class Action Lawsuits
PRODUCT STRATEGIES
Strategies for
New
Products
Strategies for
Regional
Products
Vanilla Coke
Giant Texan Coke
Strategies for
Mature
Products
Coca-Cola
CREATING CUSTOMER VALUE
1. SEGMENTATION
2. TARGETING
3. DIFFERENTIATION
4. POSITIONING
LO5
POSITIONING
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.
9-121
POSITIONING
Increasing
Emotional
Connection
with
Consumers
Increasing
Difficulty
for
Competitors
SELECT THE RIGHT COMPETITIVE
ADVANTAGES FOR POSITIONING TO BE
EFFECTIVE
Important
[to the consumer]
Profitable
Distinctive
[differentiation]
Affordable
Superior
[relative]
[perception]
Preemptive
Communicable
LO5
PERCEPTUAL MAP
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.
9-124
POSITIONING DIMENSION CANDIDATES
Quality
Application[s]
Occasion[s]
Lifestyle /
image
Attributes
Competition
Price
POSITIONING: PERCEPTUAL MAPPING
Fashion Coverage
Gap
More
Copy
More
Artwork
C
A
BGap
Club Coverage
Channels
/
Products?
POSITIONING STRATEGIES
Against Competition
CU
Reposition
a Competitor
C
C
U
POSITIONING STRATEGIES
Find a Position
C
C C
U
C
POSITIONING STRATEGIES
VS
Find a Position
C
C C
U
C
Create a Position
C
C C
C
U
Gap
MARKET POSITION & STRATEGY
See Marketing Warfare article, by Ries and Trout
MARKET
LEADER
Coca Cola
MARKET
Challenger
Pepsi
MARKET
Follower
RC Cola
Frontal or indirect attack?
Frontal attacks are usually for market leaders.
Really good marketing executives are flexible.
MARKET
Nicher
P/L
POSITIONING STRATEGIES
Broaden the Base
C U
C C
C
MICROSOFT BRANDS IN 2003
MICROSOFT
Commercial
Windows
Server
System
Microsoft
Business
Solutions
Microsoft
Visual
Consumer
Microsoft
Office
MSN
XBOX
UNIQUE SELLING PROPOSITION [USP]
• THREE TESTS
–
–
–
A
LO6
SALES FORECASTING TECHNIQUES
 Industry or Market Potential
 Sales Forecast
 Company Forecast
9-134
LO6
SALES FORECASTING TECHNIQUES
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 in
past data into the future
9-135