B2B

What marketing is not…

1. Convincing customers to buy substandard products and services

2. ulfilling all types of customer request without questioning

3. just creating advertising material, brochures or organizing exhibition events

4. exclusively relevant for companies operating in consumer markets

5. only relevant for marketing executives

1. more than communication/ advertising

2. with the key objective of value creation

3. many stakeholders

4. set of activities in a process logic

• Creating, communication, exchanging and delivering value

  
  

• To create value, understanding (future) customer needs is important but not at all easy

1. Situation analysis

   1. customer analysis

   2. Competitive analysis

   3. Analysis of market environment

      
      

2. Forecasting

   1. Market potential/ market growth

   2. Changes in customer demand or behavior

   3. Activities of competitor

      
      

3. Strategic planning

   1. Target markets and segments (internationalization)

   2. Market and salesrelated cooperation

   3. Competitive actions (timing strategies)

      
      

4. Operational planning

   1. Product and service design/ variants

   2. Pricing models

   3. Communication campaigns

   4. Sales management

• involves activities that facilitate exchange involvin products and customers in business markets

  “Include all organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.”

What are the four groups of Customer in B2B marketing?

Producers

Producers are companies that purchase goods to transorm them into other goods [product manufacturers and service providers]

Resellers

Resellers are companies that sell products and services generated by other companies without any substantial change (e.g. agents, distributors, retailers)

Governments

Governments and public authorities are also buying huge quantities of products and services

Institutions

Institutional markets include non-profit organizations such as the red-cross, churches, charities, non-profit associations or public clinics

B2B - marketing sphere

• 3tier supplier – Rio Tinto Australia

• 2tier supplier – ThyssenKrupp Steel

• 1tier supplier – Edscha roof systems

• Original Equipment Manufacturer – BMW AG

B2C - marketing sphere

Independent dealer – BMW dealer Hamburg

End customer / Consumer

Level 1 companies

Improving the benefits of the core product Enhancing the own brand Mitigating the direct negative env. impacts

Level 2 companies

Improving benefits of the entire value chain Shaping the dynamics of the ecosystem Targeting the root causes of env. challenges

Level 3 companies

Creation of new sustainable businesses Changing the entire market playing field Creating high and large-scale benefits

• challenege is to drive sustainable choises by all customers, not just those who are moved by sustainable claims

• Developing a typology of early adopters based on rechnological frames

• Digital interactions and data-driven sales

By 2025

• 80% of B2B sales interactions between suppliers and buyers will occur in digital channels

• 60 % of B2B sales organizations will transition from experience - and intuition-based selling to data-driven selling, merging their sales process, applications, data ans analytics into a single operational practice

Digital tools are introduced in all phases of the customer journey

• Onsite and offsite content (whitepapers, videos, testimonials, webinars, virtual exhibitions)

• (Automatized) online problem and need analysis

• Configurators and price estimation tools

• Online contracting

• Remote equipment monitoring / geo location / smart tools

• influence the success of new products and services

• decision-making unit of a purchasing company

• Includes all individuals and groups participating in the buying decision process who have interdependent goals and share comon risks

• ermerge informally and is often not institutionalized

  • Creats probplems for sellers to identify the relevant buying center members

1. Initiator

2. Buyer

3. User

4. Influencer

5. Decider

6. Gatekeeper

The buying center may not only include people from within the buying company but also external stakeholders influencing the buying decision.

1. Marketing

   Wants to create competitive advantage through the procurement of innovative components. Checks the impact of purchase decision on customer satisfaction

2. Production

   Requires on-time delivery and reliability of input such that interruption of production is minimized. Checks compatibility of with existing production process

3. Product engineering/ quality

   Defines the requirements / specs of new products and services. Evaluates technical quality of different supplies

4. Research and Development (R&D)

   Suggests the integration of new technologies (e.g. new components, new parts, new materials, new software) into future products and services.

5. Strategy

   Analyzes the strategic and long-term implications of purchase decisions. Wants to ensure future competitiveness of the firm (e.g. new business creation).

6. Top Management

   Establishes guidelines for all buying decisions and defines the key evaluation criteria in critical buying decisions. Makes and checks important buying decisions

7. Procurement

   Identifies and evaluates suppliers and sellers. Implements buying routines. Oversees cost effectiveness in buying. Develops relationship with sellers

Organizational goals

• Purchasing price within budget and favorable terms of contract (e.g. payment)

• Low total cost of ownership

• High suitability and reliability of product / service

• Reliable supply (e.g. just-in-time delivery, fast service recovery)

• Multiple sources of supply

Personal goals

• Low decision risk

• Job security and future career

• Support of superiors

• Upholding power position

• Respect from peers

Commodity products

• Low level of customization

• Little information required

• Products specifications are usually based on worldwide eligible standards

  
  

Buying Decision: Straight Rebuy

• Less number of people involved in the buying decision, fast/less formal process

• Low level of risk associated with the buying decision

• The specifications remain more or less the same

• A well-known group of suppliers and alternatives are considered

• Examples: Bearings, nut and bolts, standard electronic components, auxiliary materials, energy etc

Complex capital goods

• High level of customization

• A lot of information necessary

• Specifications are subject of extensive analysis

Modified Rebuy or New Buying Task

• High number of people involved in the buying decision, slower and more formal

• High level of risk associated with the buying decision

• New features and specifications need to be considered

• Consideration of new suppliers and new alternatives is important

• Examples: Custom-tailored special trucks, large fullyautomatized printing machines, customized ERP software etc.

Stage 1 Need Recognition:

In the B2B environment, demand discovery is usually user-driven and occurs based on an internal or a customer need.

Stage 2 Definition of characteristics and quantity of solution:

The buying center establishes the needed solution which includes the main characteristics and quantity of the product or service to be purchased.

Stage 3 Definition of requirements / specs:

The explicit needs of all groups / persons involved in the purchase decision are gathered, prioritized and operationalized into measurable requirements and specs.

Stage 4 Search for suppliers:

Information or initial offers regarding potential suppliers of desired product or service are obtained [usually online, via trade shows, webinars, consultants, or existing business relationships]

Stage 5 Proposal/ quote solicitation (request proposal – RFP):

A shortlisted number of vendors receive a request for proposal (RFP) inviting them to submit an offer. The subsequent offer or bid includes details on quality, price, financing, delivery, customer service, and so on. Often, the customers organize a prebid conference.

Stage 6 Evaluation of proposals, supplier selection, negotiation:

The offers/tenders are examined, some suppliers are selected, and their offers are compared and evaluated. The weighted evaluation is carried out in alignment with procurement guidelines. Extensive negotiations are conducted to answer the open questions and to achieve better offers regarding price and other terms (quality, delivery, financing, risk sharing etc.).

Stage 7 Contracting, starting supply, getting into an order routine:

The buying center finally decides on the most suitable offer according to their standards and determines the technical and contractual details in consultation with the supplier.

Stage 8 Performance evaluation and feedback:

The purchasing decision is evaluated by the buying center. The question is addressed as to whether the product or service was able to solve the original problem, whether the promised performance was delivered or even exceeded, how the business results have changed, and how the company's own processes were influenced by the purchasing decision. Eventually, re-negotiation or change of supplier is initiated.

• What is your business (not) about?

• What is (not) your target market?

• Who are (not) your customers?

• Who are (not) your competitors

Product related market definition

Benefit or need-related market definition

First Mover

Are the first to provide a new product or service in the market. Often, they create a new market.

Early follower

Follow shortly after the pioneer, often with improved products or services

Late follower

Step onto the market after stable market structures and market demand have evolved

Good protection by patents

• Pharmaceutical industry

• Petrochemical industry

• Electronics and machinery industry

Good protection by trade secrets

• Tyre industry

• Beverage industry (Coca Cola formula)

• Speciality chemicals, biotechnology

• Ceramics industry

Poor protection

• Software

• Apparel industry

• Services (e.g. logistics)

• Retail

Companies may have complementary assets…

• in distribution and sales (exclusivity contracts with distributors, experience of the sales staff, longterm relationships with large customers)

• in advertising, public relations or sales promotion (exclusive access to communication channels, highvalue brand, strong corporate image)

• in production and service execution (process technologies, motivated and qualified staff, locations for production facilities and distribution centers)

• in supply (exclusive long-term contracts with high-quality suppliers)

• with respect to complementary technologies (e.g. system components, software-hardware)

Dominant design = Design that wins allegiance of marketplace

• Generates most value for customers

• Defines how a product “must look like” (sometimes also technical standard)

• Reduces the possibilities of (more radical) product innovations by followers

• Leads to a new competitive focus: Reducing costs by process innovations

Technology & Infrastructure

• Technological infrastructure needs to be in place and accessible for customers

• Complementary technologies need to be available

Market & Customer

• Target customers need to have the ability to pay

• Customers need to understand the new technology and the benefits of the innovation

• Market partners (e.g. distributors, installation firms) need to adopt the innovation too

Regulation

• Regulations and laws need to be in alignment with the innovation

Weak protection of IP

• Reverse engineering possible

• Patent protection easy to circumvent

Lacking complementary assets

• Revolutionary innovation: High degree of training, service and support necessary

• EMI lacked market knowledge and had no customer relationships

• No partnerships with medical technology companies were entered

Compared to the non-digital era, communication channels are more important

Example: Packaging industry

Opportunities:

1. Pulling innovations through the value chain via powerful indirect customers (e.g. automotive OEMs).

2. Overcoming resistance of direct customers against (higherpriced and risky) innovations.

3. Leaving anonymity towards (powerful) indirect customers; building up differentiation and brand reputation in the entire value chain.

4. Increasing loyalty and improving relationship with direct and indirect customers. Reducing the risk of substitution

Risks:

1. Image problems if direct customers provide poor performance to end customers. Very high quality is key in value chain marketing.

2. Direct customers want to keep freedom to decide

3. Cost and time-intensive activities (contacting indirect customers, market research in end markets)

4. Creating targets for competitive actions

The type of content can be adapted to the awareness level of the potential customers

Word of mouth is an important source of information for B2B marketing

The value of receiving referrals or recommendations from existing customers:

WOMValue = Number of referrals given x Purchase ProbabilityWOM

Trade shows within the communication mix

Trade shows and fairs represent a unique communication instrument. They enable customers to view, experience and understand the products in a face-to-face interaction with the sellers.

Information seeking behavior of trade show visitors

Purpose of visit:

1. Information about innovations

2. Market orientation, information gathering

3. Exchanging experiences with peers

4. Professional training

5. Maintain business contacts

6. Sign contracts

• Visitors don’t tend to sign a contract at trade shows

• The aim of most visitors is on gathering information about innovations and market trends and on keeping up the relationship with existing partners and suppliers

• The moment of sales happens after the trade shows

• Marketing and sales activities following the show are crucial

Small Companies:

visit <5 shows send small teams primarily salespersons booth sharing

Big Companies:

visit > 20 shows send large diversified teams product managers, marketeers, salespersons, strategic staff sophisticated booth and presentations

1. Hospitality - 3%

2. Exhibition booth and services - 30%

3. Rent of booth space - 21%

4. Payroll costs - 16%

5. Travel and accomodation - 23%

6. Promotion - 7%

1. Tenders

   • Lowest bid wins the call for tenders (if only the price matters: reverse auction)

     
     

2. Spot markets

   • Mostly electronic markets

   • Relevant especially for commodities

   • Matching supply and demand by different price mechanisms (e.g. auctions)

     
     

3. Negotiations

   • Relevant for practically all types of B2B goods (except commodities)

   • Particularly relevant for customized, complex, innovative, high-price goods

1. Customers willingness and ability-to-pay

2. Regulations

3. Competitors prices (and quantity)

4. Corporate objectives

5. Total costs

In the past, pricing decisions were often based solely on costs and competition. Recently however, value-based pricing has gained importance

The price must be set between the minimum possible price (cost floor) and the maximum possible price (willingness-to-pay of customers)

Approaches for measuring customer willingness-to-pay:

1. Deep interviews and observations of pilot customers (e.g. value calculation)

2. Direct asking

3. Indirect asking (e.g. Conjoint analysis)

4. Auctions and lotteries

5. Sales/price data of analogous markets

6. Market tests

7. Deep interviews and observations of pilot customers

Value-based pricing finds application in various industries. They can be categorized into usage and outcome-based pricing models

Software-as-a-Service (SaaS):

• „Cloud-Computing“

  • no local installation

  • online access

• Subscription based contracts.

• Pricing depending on usage intensity

Infrastructure-as-a-Service (IaaS):

• Customer purchases the data storage, databases and other services on an asneeded basis

• Supplier manages and maintains that infrastructure

Power by the Hour:

• OEM has the ownership of the aircraft engines

• Customer pays per hour of use

• OEM performs engine maintenance and repair.

Build-own-operate-transfer (Boot)

• Clients pay for desired output, not for the creation of output potential

• A facility is not only built according to customer requirements, but also run by the constructing party

• In output pricing, construction/building costs are treated as overhead.

Commissions / Brokerage

• Real-estate agents’ commissions depend on total sales volumes

• Banks are paid commissions by third parties when selling certain products to their customers

Performance-based logistics

• Logistic service providers include performance based metrics

• a base fee is paid for the transfer

• additional payments depend on punctuality, order fill, # of complaints by recipients

KPI-based payments

• Orica R2S Blast specification service shares blast outcome responsibility by assuming risk in agreed KPIs

Stimulus response approach

Stimuli (e.g. messages, information, data) can elicit predictable responses from customers. Salespeople furnish the stimuli from a repertoire of actions designed to produce the desired response

Buying phase approach

Buying process for most buyers is essentially identical. Customers go through certain phases of the buying process which correspond with different information needs and mental states. Salesperson needs to push the buyers from phase to phase.

Need satisfaction approach

Customers are buying to satisfy a particular set of needs. Salespersons first listens and let the customer take the initial part of conversation to uncover their needs.

Problem solving approach

Beyond identifying needs, sales need to offer alternative solutions for satisfying these needs. Salesperson needs to define the problem and then show all the alternatives available to solve the problem

Consultative approach

Customers need help to figure out their problems that hinder them to reach their strategic goals. Salesperson helps to reach these strategic objectives contributing something new and by co-developing the right solutions with the customer

Direct sales

• Closer relationship; higher loyalty of customers

• More control of sales approach and discounts

• Collecting more information and feedback from the customers

• Potentially higher margins and/or better end prices for customers

Indirect sales

• cost-intensive than direct distribution

• Better coverage of international markets. Faster scaling.

• Own products can be bundled with other products and services

• Companies can focus activities and investments on R&D and production