Business Marketing

Management: B2B
lie

MICHAEL D. HUTT
Arizona State University

THOMAS W. SPEH
Miami University
*

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SOUTH-WESTERN
CENGAGE Learning-

Australia Brazil Japan Korea Mexico Singapore Spain United Kingdom United States

CONTENTS

Preface
PARTI

VII

Chapter 1 A Business Marketing Perspective

Business Marketing

Business Market Customers

Commercial Enterprises as Customers
A Concentration of Customers

5
6
6

Government Units as Customers

Institutions as Customers
Business Marketing Management

7
8

B2B TOP PERFORMERS: Jim Ryan, Chairman, President and Chief Executive
Officer, W. W. Grainger, Inc.
Business Markets versus Consumer-Goods Markets
What Makes a Marketing Leader?
Creating the Customer Value Proposition
Characteristics of Business Markets
Business and Consumer Marketing: A Contrast
Smucker: A Consumer and Business Marketer
Distinguishing Characteristics
A Relationship Emphasis
The Supply Chain
Supply Chain Management
Managing Relationships in the Supply Chain
Commercial Enterprises as Consumers
Classifying Goods for the Business Market
Entering Goods
i
Foundation Goods
Facilitating Goods
Business Marketing Strategy
Illustration: Manufactured Materials and Parts

9
10
11
12
14
15
16
17
17
18
19
20
20
22
22
22
24
25
25

Illustration: Installations
Illustration: Supplies

26
26

A Look Ahead

27

Contents
Summary

28

Discussion Questions
Internet Exercises
Case: The Middleby Corporation
Discussion Questions

29
30
31
32

*!

Chapter 2 Organizational Buying Behavior

35

The Organizational Buying Process

The Search Process
New Task

36
37
38

Straight Rebuy

39

Modified Rebuy
Environmental Forces
Economic Influences

41
42
43

Technological Influences

43

Organizational Forces
Growing Influence of Purchasing
Strategic Priorities in Procurement
Procurement Manager's Toolkit

44
44
44
46

Total Cost of Ownership (TCO)

46

INSIDE BUSINESS MARKETING: Use TCO to Inform Next Car Purchase

;
Strategy Response: Develop Value-Based Sales Tools
Segmenting Purchase Categories
E-Procurement
Reverse Auctions
Organizational Positioning of Purchasing
Strategy Response: Key Account Management

46
47
47
49
49
50

50

ETHICAL BUSINESS MARKETING: Gift Giving: "Buy Me These Boots and

You'll Get My Business"
Group Forces
'
The Buying Center

51
52
52_

INSIDE BUSINESS MARKETING: Innovate and Win with BMW

54

Buying Center Influence

Individual Forces

54
56

Differing Evaluative Criteria

Information Processing

57
57

Risk-Reduction Strategies

58

Contents

xix

Summary
Discussion Questions
Internet Exercises
\
Case: Sealed Air Corporation: Delivering Packaging Solutions

59
60
61
62

Discussion Questions

63

Chapter 3 Customer Relationship Management

Strategies for Business Markets
Relationship Marketing

64
65

Types of Relationships
Value-Adding Exchanges
Nature of Relationships

66
67
67

Strategic Choices
Managing Buyer-Seller Relationships

67
68

Transactional Exchange

68

Collaborative Exchange
Switching Costs
Strategy Guidelines
Measuring Customer Profitability

68
69
69
71

Activity-Based Costing
Unlocking Customer Profitability

71
71

The Profitable Few

72

Managing High- and Low-Cost-to-Serve Customers

73

INSIDE BUSINESS MARKETING: Loyalty and Customer Profitability

Managing Unprofitable Customers
Firing Customers
Customer Relationship Management

75
75
75
76

Acquiring the Right Customers

Crafting the Right Value Proposition

78
79

Instituting the Best Processes

Motivating Employees

81
82

Learning to Retain Customers

Relationship Marketing Success

83
84

Drivers of Relationship Marketing Effectiveness

Relationship Marketing (RM) Programs

84
86

Financial Impact of RM Programs

Targeting RM Programs

87
87

Contents
Summary
Discussion Questions
Internet Exercises
Case: IBM Challenge: How to Serve a Diverse Mix
of Demanding Customers

Chapter 4 Segmenting the Business Market and

Estimating Segment Demand

88
89
90
91

95

Business Market Segmentation Requirements and Benefits

96

Requirements
Benefits

97
97

INSIDE BUSINESS MARKETING: How to See What's Next

Bases for Segmenting Business Markets
INSIDE BUSINESS MARKETING: Balancing Risk and Return in a
Customer Portfolio
Macrolevel Bases
Microlevel Bases
Illustration: Microsegmentation
The Segmentation Process
Choosing Market Segments
Isolating Market Segment Profitability
Implementing a Segmentation Strategy
Estimating Segment Demand
The Role of the Demand Estimation
Methods of Forecasting Demand
Qualitative Techniques
Quantitative Techniques
CPFR: A New Collaborative Approach to Estimating Demand
Combining Several Forecasting Techniques
Summary
'
Discussion Questions
Internet Exercises
.
Case: Federated Insurance: Targeting Small Businesses
Cultivating Business Relationships
Discussion Questions

98
99
100
100
103
106
107
107
108
109
109
109
111
111
113
115
115
116
116
117
118
118
119

Contents

Chapter 5 Business Marketing Planning:

Strategic Perspectives

xxi

123

Marketing's Strategic Role

The Hierarchy of Strategies

124
124

Strategy Formulation and the Hierarchy

126

Functionally Integrated Planning: The Marketing Strategy Center

128

B2B TOP PERFORMERS: Cross-Functional Relationships: Effective Managers

Deliver on Promises
The Components of a Business Model
Customer Interface
Core Strategy

129
130
131
131

B2B TOP PERFORMERS: Winning with a New Business Model at Dow Corning

132

Strategic Resources
The Value Network
Strategic Positioning

133
133
134

Strategic Positioning Illustrated

Building the Strategy Plan

135
136

The Balanced Scorecard

Financial Perspective

137
137

Customer Perspective

139

Internal Business Process Perspective

140

Strategy Map
Summary
Discussion Questions

142
144
145

Internet Exercises
Case: Intuit's Solutions for Small and Medium-Sized Businesses
Discussion Questions

146
147
147

Chapter 6 Business Marketing Strategies

for Global Markets

148

Capturing Global Advantage

149

Market Access
Resource Access

151
152

INSIDE BUSINESS MARKETING: How Offshore Outsourcing Affects

Customer Satisfactionand a Company's Stock Price!

154

xxii

Contents
Local Adaptation
Network Coordination

154
155

INSIDE BUSINESS MARKETING: Made in AmericaAgain

156

Global Market Entry Options

Exporting
Contracting

156
156
158

Strategic Global Alliances (SGA)

159

Joint Ventures
;
Choosing a Mode of Entry
'
Multi-domestic versus Global Strategies

160
161
162

Source of Advantage: Multi-domestic versus Global

Types of International Strategy

162
163

A Strategic Framework
Global Strategy

165
166

Build on a Unique Competitive Position

Emphasize a Consistent Positioning Strategy
Establish a Clear Home Base for Each Distinct Business

166
166
166

Leverage Product-Line Home Bases at Different Locations

167

Disperse Activities to Extend Home-Base Advantages

Coordinate and Integrate Dispersed Activities
'
Summary

167
168
168

Discussion Questions

169

Internet Exercise

170

Case: Schwinn: Could the Story Have

Been Different?
Alternative Reality One: Aim High
Alternative Reality Two: If You Can't Beat Them, Join Them
Discussion Questions

171
171
171
172

Chapter 7 Managing Products for Business

Markets
Building a Strong B2B Brand
Brand-Building Steps

173

174
175

Brand Strategy Guidelines

Profiling a Strong Brand: IBM

177
178

Product Quality and Customer Value

Meaning of Quality

179
180

Contents
Sustainability: Strategic Imperative

xxiii
180

GE's Ecomagination Marketing Campaign

>:
Meaning of Customer Value

182
182

B2B TOP PERFORMERS: Green Is Green

Product Support Strategy: The Service Connection
Product Policy

183
185
185

Types of Product Lines Defined

Defining the Product Market

186
186

B2B TOP PERFORMERS: BASF: Using Services to Build a Strong Brand

Planning Industrial Product Strategy
Product Positioning
The Process
Isolating Strategy Opportunities

190

Product Positioning Illustrated

the Technology Adoption Life Cycle

190
191

Types of Technology Customers

Strategies for the Technology Adoption Life Cycle

191
192

INSIDE BUSINESS MARKETING: The Gorilla Advantage in High-Tech Markets '

The Bowling Alley
The Tornado

193
193
194

Main Street
Summary

195
196

Discussion Questions
Internet Exercise

195
197

Case: Hidden Inside: International Flavors & Fragrances, Inc.

Discussion Questions

198
198

Chapter 8 Managing Innovation and New

Industrial Product Development
,

188
188
189
189

The Management of Innovation

Induced Strategic Behavior
Autonomous Strategic Behavior

199
200

201
201

Product Championing and the Informal Network

Conditions Supporting Corporate Entrepreneurship
Managing Technology
Classifying Development Projects

203
204
204
205

A Product-Family Focus

206

The Disruptive Innovation Model

206

xxiv

Contents

INSIDE BUSINESS MARKETING: Disrupters Pull Different Innovation Levers

208

Illustration: A New-Market Disruption

Innovation Winners in High-Technology Markets
The New-Product-Development Process
What Drives a Firm's New Product Performance?
Anticipating Competitive Reactions

209
210
212
212
214

Sources of New Product Ideas

214

B2B TOP PERFORMERS: Inviting New Product Suggestions

215

Determinants of New Product Performance and Timeliness

The Determinants of Success

217
217

Fast-Paced Product Development

Summary
Discussion Questions

219
220
221

Internet Exercise
Case: Vscan: GE Healthcare's Pocket-Sized
Imaging Device
Discussion Questions

222

Chapter 9 Managing Services for Business

Markets

223
223

^ ^ ,
224

Understanding the Full Customer Experience

225

The Customer Experience Life Cycle

225

Applying the Customer Experience Map

226

Customer Experience Management

A Solution-Centered Perspective

226
228

Delivering Effective Customer Solutions

229

The Supplier's Role

The Customer's Role

230
231

B2B TOP PERFORMERS: Smart Customer Solutions from IBM

Choose Customers Wisely

232
232

Benefits of Solution Marketing

Business Service Marketing: Special Challenges

233
233

Services Are Different

234

Tangible or Intangible?
Simultaneous Production and Consumption
Service Variability

235
235
236

Service Perishability

236

Contents

INSIDE BUSINESS MARKETING: Do Service Transition Strategies Pay Off?

Nonownership
Service Quality
\

xxv

237
237
238

Dimensions of Service Quality

Customer Satisfaction and Loyalty
Service Recovery

238
239
239

Zero Defections
Return on Quality

240
240

Service Packages

241

Customer-Benefit Concept
Service Concept
Service Offer

241
241
242

Service Delivery System

Service Personnel

243
243

Hybrid Offerings
Unique Resources Manufacturing Firms Can Leverage

243
244

Distinctive Capabilities for Launching Hybrid Offerings

245

Classifying Services for Hybrid Offerings

Summary
Discussion Questions

246
249
249

Internet Exercises
Case: Paychex, Inc.
Discussion Questions

250
251
^__

Chapter 10 Managing Business Marketing

Channels

251

252

The Business Marketing Channel

Direct Channels
Indirect Channels
Integrated Multichannel Models

253
254
255
255

Participants in the Business Marketing Channel

Distributors

258
258

INSIDE BUSINESS MARKETING: W. W. Grainger: Profile of a Leading-Edge

Industrial Distributor

259

Manufacturers' Representatives

261

B2B TOP PERFORMERS: Why Intel Uses Reps

Channel Design

262
263

Step 1: Define Customer Segments

264

Step 2: Identify Customers' Channel Needs by Segment

265

xxvi

Contents

Step 3: Assess the Firm's Channel Capabilities

Step 4: Benchmark to Competitors
Step 5: Create Channel Solutions for\Customers' Latent Needs

266
266
266

Step 6: Evaluate and Select Channel Options

Crucial Points in Channel Transformation
Channel Administration

266
267
267

Selection of Channel Members

268

Motivating Channel Members

Summary

268
270

Discussion Questions
Internet Exercises

271
271

Case: Snap-on, Inc.: A Unique Go-to-Market

Strategy
Discussion Questions

272
272

Chapter 11 Supply Chain Management

273

Supply Chain Management: A Tool for Competitive Advantage

275

Supply Chain Management Goals

275

Benefits to the Final Customer

277

INSIDE BUSINESS MARKETING: When the Supply Chain Gets Disrupted

The Financial Benefits Perspective

278
278

Information and Technology Drivers

279

Successfully Applying the Supply Chain Management Approach

280

Successful Supply Chain Practices

280

B2B TOP PERFORMERS: Making Supplier Relationships Work

Logistics as the Critical Element in Supply Chain Management
Distinguishing Between Logistics and Supply Chain Management

281
282
282

Managing Flows
The Strategic Role of Logistics

282
283

Sales-Marketing-Logistics Integration
Just-in-Time Systems

283
284

Total-Cost Approach
Calculating Logistics Costs

285
286

Activity-Based Costing
Total Cost of Ownership

286
286

Business-to-Business Logistical Service

287

Logistics Service Impacts on the Customer

Determining the Level of Service

288
288

Contents

xxvii

Logistics Impacts on Other Supply Chain Participants

289

Business-to-Business Logistical Management

Logistical Facilities
^
Transportation
Inventory Management

289
289
290
292

INSIDE BUSINESS MARKETING: The Profit Impact of Inventory Management

Third-Party Logistics
Summary
Discussion Questions
Internet Exercises

Case: Supply Chain Issues at Optimal Medical Parts Company

Discussion Questions

Chapter 12 Pricing Strategies for Business

Markets

293
293
294
295
296
297
298

299

The Pricing Process in Business Markets

300

Price Objectives
"
Demand Determinants
Value-Based Pricing Illustrated

301
302
305

Cost Determinants
Competition

307
309

Pricing across the Product Life Cycle

Pricing New Products

311
311

INSIDE BUSINESS MARKETING: Understanding the Economic Value

o'f New Products
'
Legal Considerations
Responding to Price Attacks by Competitors

Evaluating a Competitive Threat

Understanding the Rules of Competitive Strategy
Competitive Bidding
Closed Bidding
Open Bidding
j
Strategies for Competitive Bidding
Summary
Discussion Questions
Internet Exercise
Case: Free-Product Competitors Challenge Microsoft
Discussion Questions

313
313
314
314
316
317
317
318
318
319
320
321
322
322

xxviii

Contents

Chapter 13 Business Marketing Communications:

Advertising and Sales Promotion

323

Business-to-Business (B2B) Social Media

325

Dell's Social Media Brand

The Customer Decision Journey
Charting CDJ

325
326
326

The Role of Advertising

Integrated Communication Programs

328
328

Enhancing Sales Effectiveness

328

Increased Sales Efficiency

Creating Awareness
What Business-to-Business Advertising Cannot Do

328
329
329

Managing Business-to-Business Advertising

Defining Advertising Objectives

329
330

. Written Objectives
Determining Advertising Expenditures
Developing the Advertising Message
Selecting Advertising Media for Business Markets
B2B TOP PERFORMERS: Search Engine Marketing at Google: The Right
Message, the Right Time
Direct Marketing Tools
Measuring Advertising Effectiveness
Measuring Impacts on the Purchase Decision
The Measurement Program
Managing Trade Show Strategy
Trade Shows: Strategy Benefits
Trade-Show Investment Returns
"
Planning Trade-Show Strategy
Trade-Show Objectives
Selecting the Shows
Managing the Trade-Show Exhibit
Evaluating Trade-Show Performance
J
Summary
Discussion Questions
Internet Exercise
Case: Johnson Controls, Inc.
Discussion Questions

330
331
333
334
336
337
339
339
340
341
341
342
343
343
343
344
344
345
346
347
348
348

Contents

Chapter 14 Business Marketing Communications:

Managing the Personal
Selling Function1
Managing the Sales Force
Organizing the Personal Selling Effort
Key Account Management
National Account Success

xxix

349
351
351
352
355

B2B TOP PERFORMERS: Using Customized Strategies to Outmaneuver Rivals

Isolating the Account Management Process

356
356

Account Management Success

Sales Administration

357
360

Recruitment and Selection of Salespersons

Training
Supervision and Motivation
Evaluation and Control

360
360
361
364

Deployment Analysis: A Strategic Approach

Territory Sales Response
Territory Alignment

366
366
367

Developing the Customer Database

Sales Resource Opportunity Grid
Isolating High-Opportunity Customers

368
368
369

GE's Sales Force Effectiveness Initiative

Summary

370
371

r Discussion Questions
Internet Exercises

'

Case: Account Management at YRC Worldwide: Choosing

Customers Wisely
Discussion Question

371
372
373
373

EVALUATING BUSINESS MARKETING

STRATEGY tAND!ERERMArfeE

Chapter 15 Marketing Performance Measurement

377

A Strategy Map: Portrait of an Integrated Plan

Developing the Strategy: The Process
Maps: A Tool for Strategy Making

379
380
383

Marketing Strategy: Allocating Resources

383

Guiding Strategy Formulation

384

Contents
Managing Individual Customers for Profit
The Marketing Control Process
Control at Various Levels

"}

Strategic Control
Annual Plan Control
Marketing Control: The Marketing Performance Dashboard
B2B TOP PERFORMERS: CMO Profile
Efficiency and Effectiveness Control
r

384
385
385
385
388
388
391
391

Profitability Control
Implementation of Business Marketing Strategy
The Strategy-Implementation Fit

391
394

Implementation Skills
The Marketing Strategy Center: An Implementation Guide
Looking Back
Summary

395
396
398
399

Discussion Questions

400

Internet Exercises
Case: Danaher Corporation

401
402
402

Discussion Question

395

Name Index

403

Subject Index

412