WHAT is Business Marketing

WHICH is the most valuable

2
B B Company in the world ?

"Where do you want to go today?"

"Your potential. Our passion"

"Be what's next"

Microsoft Leads the Annual Brandz™ Ranking of the World’s
Most Valuable B2B Brands, worth $143 bn after Year-on-year
Growth of 18%
-An Important difference to understand
NATURE of BUSINESS MARKETING

Closer customer - Geographical

Fewer but Larger
supplier concentration of Derived demand
Buyers
relationship buyers

Inelastic demand
Fluctuating Professional
Joint demand and Cross elastic
demand purchasing
Demand

Several buying
Direct purchasing /
influences/ Long Buying
Fewer Reciprocity
references / Process
Intermediaries
opinions

Competitive /
Negotiated Pricing
 Geographically Concentrated vs Geographically Distributed
Relatively few buyers vs Mass Market
Technical Complexity vs Standardized mechanism

Customization vs Standardization of Products

Service Timely Delivery and availability very important
vs Service Timely Delivery and availability moderately important

Trust Driven Market vs Product Driven Market

Involvement of Various functional experts vs Involvement of Family

Stable Interpersonal Relationship vs Non Personal Relationship (Mostly)

Rational / Performance based vs Physiological / Social / Psychological need based decisions

More Direct Distribution Channel vs Indirect Distribution Channel

ATL vs BTL Fewer Intermediaries vs Multiple layer of intermediaries
Competitive Bidding / Negotiated Price vs Maximum Retail Price
Personal Selling vs Advertising
Competitive Bidding / Negotiated Price vs Maximum Retail Price
Agents are mostly hired vs sometimes hired
Long Buying cycle (Multi-step) vs Small Buying Cycle
B2C and B2B

The Consumer Market (B2C) and the Business Market (B2B) at

Dell, Inc.

B2C B2B

Customers: Individuals & Businesses Institutions Government

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

Selected PCs PCs

Products: Printers Enterprise Storage
Consumer Servers
Electronics Complex Service Offerings
Simple Service
Agreements
INDUSTRIAL DEMAND

Derived
Demand

Cross – Elasticity
Joint Demand
Demand
Types of Industrial Customers

• Industrial
Distributors and
Dealers
• OEM
• Users

Commercial Government
Enterprise Customers

Cooperative Institutional
Societies Customers

• Manufacturing Units • Public Institutions

• Non- Manufacturing • Private Institutions
Units
 9. Purchase Dept. issues
1. FUNCTIONAL DEPT. 8. QC DEPT. issues IR supplies invoice along
issues (PR) after inspection. with MRR and IR to
A/c’s DEPT.
Activity Chart for Typical Purchasing Process

2. PURCHASE DEPT. 10. A/cs DEPT. check

7. On receipt / STORE
check if it is stock, (PO) and other
assures material with
supplies and (PR) is filed documents and issues
(PO) and issues (MRR)
with action taken payments.

3. If (PR). material not in 6. Supplier dispatch,

stock , identify potential Informs the details (
supplier, get quotation, Invoice, Lorry receipt
negotiate, select no. , transporter name
supplier, and issue (PO) etc.)

4. The VENDOR/
5. Follow-up with
SUPPLIER acknowledges
supplier (if required)
(PO)
 Register Company with Govt.
Unit PO released. If Tender value is
Finalization of Tender on the
• Submit Duly Filled Form low 1 or 2 suppliers and if
• Leaflet and Brochures basis of with or without
Tender value is large more
• Company Details certified by Chartered negotiation
Accountants
suppliers are appointed
• Many a times Govt. officers visits plant
Government Purchasing

For Standard Products Tender

For Closed Tenders – ‘Read Process may vary dept. to
Notice and Advertisements are
Out’ process is not followed. dept.
generated

Tender Offers in Tender Box

are opened on specific date
Closed Envelope of Tenders are
and time in presence of
received
supplier’s representative and
‘read out loud’
 Basic Products like cotton, Iron ore, Wood, Crude
Classification of Industrial Products and Services Raw Materials
Oil, Fruits, Cereals

Manufactured Materials Steel Sheets and Plates, Chemicals, Threads

Materials and Parts

These are semi finished parts like Bearing, Battery,
Component Parts
Small motors, condenser

These are semi- finished / finished goods like

Industrial Products and
Subassemblies
Accessories for Cellphone, Battery.

Light Equipment and

Hand tools, Dies, Cutters and Welders
Services
Accessories

Installation or Heavy
Capital Items Furnaces, Machines, Turbines
Equipment

Offices, Plants, Warehouses, and others which are

Plant and Building
real estate property

These are operating and maintenance supplies like

Supplies
grease, fuels, packaging material, paints, electric items

Supplies and Services

Legal, Auditing, Advertising, Research Agency, Courier,

Services
Housekeeping
Types of Environment Customer

Competitor

Environment
Micro
Ecological and Physical
Suppliers
Environment.

Internal (SW analysis) Shareholders

External (OT analysis) Political

Economic

Socio-Cultural
Macro
Technological

Legal

Public- Interest Group,

Institutional Investors
Strategies for Managing Industrial Environment

Collecting Information on customers and competitors through marketing and field sales persons

Analyzing, trade and government publications

Carrying out marketing research and economic forecasting within or through external market research agencies.

Independent Strategies

Cooperative Strategies

• Horizontal Integration
Strategic Planning
• Vertical Integration
 Change in
supplier (or
Modified
Rebuy)
Repeat
New
Purchase ( or
Purchase (or
Straight
New Task)
Rebuy)

Types of
Industrial
Purchase
Industrial Buying Decision Process

Evaluation of Proposal and

Recognition of Problem or selection of suppliers. Selection of an order
Need. (Discuss: Weighted routine.
Average Method)

Determination of the
application or
Obtaining and analyzing Performance feedback and
characteristics and
suppliers proposals. post-purchase evaluation.
quantity of needed
product.

Development of
Search for and
specification or description
qualifications of potential
of needed product.
suppliers.
(Discuss: Early Supplier
(Discuss SET Theory)
Involvement Programme)
Buyer – Seller Relationship

Compatible Style Incompatible Style

Compatible Ideal Inefficient

Content
Transaction Transaction

Content Style of Interaction

Incompatible Inefficient No • Product features • Task Oriented

• Prices • Interaction
Content Transaction Transaction • Services Oriented (Social
• Individual need and Personal
of buyer and Interaction)
seller • Self-Oriented
• T&C (Pre-Occupied
with one’s self-
Interest)
Buyer – Seller Interaction – A Conceptual Framework
Types of Relationships

Transactional
Exchanges
(or Relationship)

Collaborative/
Value- Added
Partnering Exchanges
Exchanges
(or Relationship)
UNIT 3: Segmentation of Business Markets
MARKET SEGMENTATION
Market segmentation is a process of dividing a heterogeneous market in to homogeneous sub units
having similarities among the groups of consumers so that the firm can compete successfully &
defend against competitive attacks to emerge as a market leader in the chosen segment.

Market Segmentation
Target Marketing
Carry out marketing
research Positioning
Evaluate the resulting
Identify segmentation segments
variables from that Identify target customer’s
analysis of market Select the target attribute for
research data. segment(s) differentiation.
Prepare profiles of the Decide target market Select the right attribute(s)
resulting segments strategy and benefit(s)
Communicate the chosen
position to each target
market.
Market Segmentation
Carry out marketing research
Identify segmentation variables
from that analysis of market
research data.
1. Carrying Out Marketing Research
Prepare profiles of the resulting
segments

 Secondary Research is done first by collecting info. on market from the company’s past data, online database,
library scanning or industry association.
 If Secondary research is inadequate then go for descriptive research.
 Primary Data research is for –
 Major Purchasing attributes ( Factor) considered by buyer
 Buyer’s present and future requirement of company product (or services) and their
purchasing policies.
 Competitor’s information
 Buying behavior of buyers, buying phases etc.
 ANALYSIS - Factor Analysis and Cluster Analysis
 Each group of customer or segment is now profiled (or outlined) by its specific characteristics such as
(a) application (or use) of the product, (b) volume of requirement (low, medium, high) ; (c) location; (d) type of
industry; (e) purchasing policies , (f) major purchasing attributes, (g) buyer personal characteristics, (h) buying
behavior.
 CRITERIA used for selection of segmentation variables:
1) Measurable 2) Differentiable 3) Substantial
Market Segmentation
Carry out marketing research
Identify segmentation variables
from that analysis of market
research data.
2. Identify Segmentation variables from the analysis of Market research data
Prepare profiles of the resulting
segments

Macro Variables
• Type of Industry
• Type of Customer
• Company Size
• Customer Location
• End-use (or benefits) of products

Micro Variables
• Customer Interaction Needs
• Organizational Capabilities
• Purchasing Policies
• Purchasing Criteria
• Personal Characteristics
Market Segmentation
Carry out marketing research
Identify segmentation variables
from that analysis of market
research data. 3. Prepare profiles of the resulting segments
Prepare profiles of the resulting
segments

 Each group of customer or segment is now profiled (or outlined) by its specific characteristics such as

(a) application (or use) of the product

(b) volume of requirement (low, medium, high)
(c) location
(d) type of industry
(e) purchasing policies
(f) major purchasing attributes
(g) buyer personal characteristics
(h) buying behavior etc.
Target Marketing
Evaluate the resulting
segments
Select the target 1. Evaluate the resulting segments
segment(s)
Decide target market
strategy

• Current and Future Market potential need to be obtained by any of the forecasting
Size and Growth methods like Time series analysis, Regression , Sales Force estimates , Expert opinion. This
analysis will indicate what is the size and the estimated market growth of each segment.

• Three elements involved in Profitability analysis: (a) Market Potential, (b) Sales Forecast ,
Profitability Analysis
(c) Profitability (Deviation between sales price and cost of marketing.

• Profit Potential and ability of industrial marketer to penetrate depends upon careful
analysis of Strength and weakness of major competitors in each segment with respect to
Competitive Analysis
R&D, Finance, Technical services, Quality, Delivery, Promotions, Sales force , branch,
inventory capacity etc.

• An Industrial firm should ask itself whether each potential segment is in line with the
firm’s long term objectives. If not such segment(s) should be eliminated. In other words,
Company Objective and
Any company can succeed only if they possess most critical purchasing factor of any
Resources
industry like Automotive industry ask for quality and after sales service, Hotel Industry for
services and FMCG for cost etc.
Target Marketing
Evaluate the resulting
segments Concentrated
Marketing
Select the target
segment(s)
Decide target market
strategy

Target –
Differentiated
Niche Marketing Market Marketing
Strategies

Undifferentiated
Marketing
Positioning
Strategic Attribute
Identify target customer’s Positioning Positioning
attribute for
differentiation.
Select the right attribute(s)
and benefit(s)
Product
Communicate the chosen Benefit
Category
position to each target Positioning
Positioning
market.

Competitor Cost
Positioning Positioning

Application/
Segment
use
Positioning
Positioning
Positioning
Distinctive
Identify target customer’s
attribute for
differentiation.
Select the right attribute(s)
and benefit(s) Profitable Superior
Communicate the chosen
position to each target
market.
Essential for
Differentiation

Economic Communicable

Sustainable
 Product Design
and
New Product Development
Types of New Product Introductions
(Booz and Allen)
High

New New-to-world products

product lines 10%
20%

Additions
Improvements to to existing
existing products product lines
26% 26%

Repositionings
Cost
7%
reductions
Low 11% High
Newness to market

Size of circle denotes number of introductions relative to total.

Does it have unique features?

Does it have mass appeal ?

Does it solve a problem?

Is there a powerful offer with a supportive cost of goods?

Can you easily explain how it works?

Is there a magical transformation or demo?

Is it multifunctional?

Is it credible; are there testimonials?

Are there proven results?

Can you answer the questions the viewer is thinking?

• Market too small, forecast  Lack of Channel support or
too large power
• Poor company match  Poor prediction of
Competitors’ reactions
• Synergy, synergy, anyone see
my synergy  Changes in Consumer Taste
• Not really new/different  No sustainable commitment
and resources
• No real benefit
 Lack of organizational
• Poor positioning teamwork
• Needs/Use not well  Who’s the brand manager
understood today?
 New Product Development Process
• Is the idea worth Considering ?
Idea generation

• Is the product idea compatible with company objectives,

Idea Screening strategies and resources ?

Concept Development and • Can we find a good concept consumers say they would
Testing try ?

Marketing Strategy • Can we find a cost-effective, affordable marketing

Development strategy?

• Will this product meet our profit goal?

Business Analysis

• Have we got a technically and commercially sound

Product Development product ?

• Have product sales met expectations ?

Market Testing

• Are product sales meeting expectations ?

Commercialization
Use your research and development (R&D) processes

Brainstorm product
issues
Review your
quality
assurance (QA)
processes
Study catalogues and
product information

Review your
customer
complaint
records Research and
understand your
competition

Review your
research

Talk to your suppliers and other business partners

 Idea Screening

With your list of potential new product ideas, you now need to decide which ideas to
pursue and which to discard. Consider your competition, your existing products, their
shortcomings, and the needs of your market. Draw on the customer needs list you have
developed, and the areas for product improvement you have identified.
Develop a set of criteria to evaluate your ideas against. You criteria might include:

• most prominently identified customer needs

• product improvements most needed
• the benefits to your target market
• the technical feasibility of the idea
• the level and scope of research and development required
• the profitability of the idea. What is its potential appeal to the market? How
would you price it?
What are the costs in bringing it to market overall and per unit?
• where the product fits in the market. Is there a gap? How close is it to comp
etitor
products?
 the resources it will require in development
 the marketing potential of the idea
 the fit with your business profile and business objectives.

SWOT analysis

Innovation support
 Concept Development and Testing

Create a product concept

Do your sums carefully

Talk to the people who will buy it

Examine intellectual property (IP) issues

Refine your target market

Identify the features

Take your time

Marketing Strategy
Development
Business Analysis Estimate your product
price

Identify your product's

market potential

Forecast your sales

volume

Identify your break-

even point

Determine your
minimum sale price

Consider the
long term
 Product Development and Market Testing

Put someone in charge

Assign a member of your team (if not you) with strong project management skills to
manage or coordinate the product development and delivery process. Ask your product
development manager to maintain a practical, informative schedule and project plan that
details the steps involved in developing your prototype and running your market testing.

 Consult the experts

Product development specialists can help you streamline your process and avoid costly
mistakes. Consider commissioning consultants who specialize in product engineering and
design for example, graphic or industrial designers, product engineers, product quality
consultants, computer aided design (CAD) specialists.

 Protect your intellectual property (IP)

Make sure your patents are in place and your IP is protected

 Commission a prototype of your product

A product mockup will help you determine how to package, brand and market your new
product. It will also help you test the look and feel of the product in sample segments of
your market.
 Test the product in action
Put your prototype into use in the type of situations it's required in. Identify the
characteristics that are most important to your customers and test those attributes,
repeatedly.

 Run focus groups

Enlist the help of a market researcher to facilitate a focus group that will help you gauge
the response of your sample target market. Interview your customers and take your
prototype to as many informed people as possible.

 Make improvements
You may need to improve your product based on feedback. Use this opportunity to make
changes that will increase your product's chances of success. Retest the product within
more specific conditions that help you evaluate your changes for example, by
conducting a further focus group with a market segment that your product changes will
affect most.

 Test it in your industry

Attend industry events and trade or consumer expos to get feedback on your
prototype. Take the opportunity to generate market interest and capture details of
interested customers who want to hear about your product launch or even place advance
orders. Consider whether you need to prepare an initial run at this stage to test customer
acceptance more broadly.
Commercialisation

Promotion
Strategy and
Decisions

Pricing Promotion
Strategy Material

Place
Negotiations
Decisions
WHEN DO YOU ELIMINATE A PRODUCT FROM YOUR COMPANY’S OFFERING?
An Introduction
SERVICES
Services are (usually) intangible economic activities offered by one party to another. Often time-based,
services performed bring about desired results to recipients, objects, or other assets for which
purchasers have responsibility. In exchange for money, time, and effort, service customers expect value
from access to goods, labor, professional skills, facilities, networks, and systems; but they do not
normally take ownership of any of the physical elements involved

SERVICE Marketing
Services Marketing refers to the marketing of services as against tangible products. Marketing of
services is a relatively new phenomenon in the domain of marketing, having gained in importance as a
discipline only towards the end of the 20th century.

Services marketing first came to the fore in the 1980’s when the debate started on whether marketing
of services was significantly different from that of products so as to be classified as a separate
discipline. Prior to this, services were considered just an aid to the production and marketing of goods
and hence were not deemed as having separate relevance of their own.
 Involvement Intangibility

Characteristics
of Service
Inconsistency Inseparability

Inventory
(Perishability)
S.No. Physical Goods Services

1 Tangible Intangible

2 Homogeneous Heterogeneous

3 Production and Distribution are separated Production, distribution and consumption are
from consumption simultaneous process

4 A Thing An activity or process

5 Core value produced in factory Core value produced in buyer-seller interaction

6 Customer do not participate In the Customer participate in the production

production process

7 Can be kept in stock Cannot be kept in stock

8 Transfer of ownership No transfer of ownership

 Hospitality
Entertainment Telecommunication Mass media
industry/tourism

Healthcare/hospitals Government Healthcare/hospitals Public health

Financial services Professional Services

Information • Banking • Accounting
• Insurance • Legal Services Retail Sales
technology
• Investment Management • Management consultancy

Franchising Real Estate Education

 Product

Price
Place
Promotion
7 P’s People
Of Process
Service Marketing
Physical Evidence
Designing a Service Strategy
Service Management Process; Internal, External and Interactive Marketing
Strategies.
 Few Important questions

Overall Strategic Assesment Specific Service Implementations

How the service organization is doing on all the 3 sides of What is being promoted and by whom ?
triangle ?
Where are the weaknesses ? How will it be delivered and by whom ?
Where are the strengths? Are the supporting system in place to delivered the
promised service ?
 External Marketing “Setting the Promise”

• Marketing to End User

• Involves Positioning
• Pricing Strategies, Promotional Activities and all the communication to the
customer
• Performed to capture attention ( AIDA)
 Internal Marketing “Enabling the Promise”

• Marketing to Employees
• Involves training, motivational and teamwork programs, and all
communication with employees.
• Performed to enable employees to perform the services effectively , and keep
up the promise made to the customer.

• Viewing employees as internal customers, viewing jobs as internal products

 Two Important Aspects

• Every Individual in a service organization should recognize that they have

customers to serve

• All Internal Customers must be convinced about quality of the service being
provided.
Interactive Marketing Effective

Ethical Efficient

5 E’s

Enthusiastic Enjoyable
(Distrbution)
“A channel of distribution comprises a set of institutions which
perform all of the activities utilized to move a product and its
title from production to consumption.”
-Bucklin (1966)

In other words, this is a set of interdependent organizations

involved in the process of making a product or service available
for use or consumption.
 Importance and Functions of Distribution Channels –

They gather information

They reach agreements on
about potential and current They develop and
price and other terms so
customers, competitors, disseminate persuasive
that transfer of ownership
and other actors and forces communications to
or possession can be
in the marketing environ- stimulate purchasing.
effected.
ment.

They acquire the funds to

They assume risks
They place orders with finance inventories at
connected with carrying out
manufacturers. different levels in the
channel work.
marketing channel

They provide for the They provide for buyers’ They oversee actual transfer
successive storage and payment of their bills of ownership from one
movement of physical through banks and other organization or person to
products. financial institutions other.
oncept of Delivered Value o
 Pricing
Objective

Government Demand
Regulations Analysis
Factors Affecting
Pricing Decisions

Competitive
Cost Analysis
Analysis
 Maximum Sales Maximum Product –
Maximum Short Maximum Short
Survival Growth Market Quality Competitveness
Term Profits term Sales
(Penetration) Skimming Leadership

Pricing Objective
 Cost- Benefit
Cross- Demand Analysis
Derived Joint Price
Elasticity Curve (Hard and
Demand Demand Elasticity
Demand Concept Soft
Benefits)

Demand Analysis
 Semi
Fixed Variable Total Direct Indirect Allocated
Variable
Cost Cost Cost Costs Costs Costs
Cost

Cost Analysis

ECONOMIES OF SCALE ANALYSIS

 Competitor Pricing Policy
Competitor
response to (Incl. Credit/
pricing method
price change Payment etc.)

Competitor Analysis
Acts against Restriction to Restriction to
Price Fixing / Price Predatory
Price Cartels Discrimination Pricing

Govt. Regulations
 Probabilistic
Competitive Bidding
Bidding in
competitive
market

THE
PRICING
STRATEGIES

Pricing Pricing New

Across PLC Products
Strategy at
Skimming
4 Stages of
Penetration
PLC
BID PRICE TOTAL COST PER PROBABILITY OF PROFIT EXPECTED PROFIT
(A) UNIT WINNING AT BID T(A) = A - C E(A) = P(A) x T(A)
(C) PRICE P(A)

200 150 0 50 0
180 150 0.10 30 3.0
160 150 0.40 10 4.0
150 150 0.50 0 0
140 150 0.60 -10 - 6.0
130 150 0.80 -20 - 16.0
100 150 1.00 -50 - 50.0

Application of Probabilistic Bidding Technique

KEY TERMS ASSOCIATED WITH PRICING
List Price

Trade Discounts

Quantity Discounts (Cumulative and Non Cumulative)

Cash Discounts

Geographical Pricing

• Ex-factory
• FOR Destination or FOB Destination

Taxes and Levies

 Determining the
promotional budget
Determining the Identifying the target • Affordable Method
communication objective audience • percentage of sales method
• Competitive Parity Method
• Objective and Task Method

Evaluating the promotions Developing the message

Selecting the media
result strategy

Integrate the promotional

programme