B To B Marketing-1

B-TO-B MARKETING
Market segmentation
• Segmentation for its own sake is of little value, its value comes when it is used to
make decisions about target markets & to establish specific competitive positions
with respect to those targets that bring value to the firm.
• Ultimately, it is the success of differential competitive positioning within markets
that creates success: doing things differently from competitors to establish
advantage( like customized offerings at lower costs)
• Activities required to achieve success are-segmentation, targeting & positioning.
• While all customers are different, some may share similar needs & behaviors. It is
through the of segmentation that a BToB marketer can establish a degree of
homogeneity in respect of different customers in marketplace.
• In this way notional groups of like-minded or like behaved customers are created,
for whom it becomes possible to talk meaningfully about different market
offerings.
• It enables the marketer to research the needs of specific groups , make choices
about which groups are worth the investment of marketing efforts & how that
effot needs to be managed.
Market segmentation
• Thus, market segmentation is a process of
dividing the total market for a product into
several segments or distinct group of buyers.
• Each group of buyers is homogeneous and
may require separate benefits from the
offered product or service.
Introduction
• Organizations & consumers often buy the same products; laptops,
cleaning services, medical services, stationary etc.
• One cannot distinguish between a business market and a consumer
market on the basis of the nature of the product.
• There are certain products that are often bought by organizations and
never by individual consumers, such as management services, forklifts,
cranes etc.
• The key distinguishing feature of a B-TO-B market is that the customer is
an organization rather than an individual consumer.
• Business organizations include manufacturing companies, govt.
undertakings, educational bodies, dealers and distributors etc.
• On the other hand, it is difficult to think of anything that consumer buys
that would not be bought by some organization.
• The generally accepted term for the marketing of goods & services to
organizations is business to business marketing or industrial marketing as
it was called in the 1980s.
INTRODUCTION
• Business markets involve both goods and services.
• Most of the developed economies have a very large & influential
service sector.
• Business markets can be differentiated from consumer markets on
the basis of market structure differences, buying behavior
differences, and marketing practice differences.
• It is not the nature of the product that is bought and sold that
differentiates business markets from consumer markets.
• Business organizations buy products & services to manufacture
goods & services, to make profits.
• Consumers buy products & services for their own consumption.
• So, what are the differences or defining characteristics by which
business markets can be distinguished from consumer markets?
Comparison
• Market Structure Differences:
• Dimension Business Mktg Con.Mkt
• Nature of demand derived direct
– Demand volatility greater less
• Demand elasticity less more
• nature of Customers heterogeneity homoge
• Fragmentation greater less
• Mkt complexity more less
• Mkt size large value smaller
• No of buyers/seller few many
• No of buyers/segment few many
• Size of buyer/seller often similar seller larger
• Geog concentration often clustered dispersed
Comparison
• Buying Behavior Differences
• Dimension B. mktg C. mktg
• Buying influences many few
• Purchase cycles often long short
• transaction value often high small
• Buying complexity complex simple
• Buyer/sellerdepend high low
• Pur professionalism high low
• Imp of relationships important unimp
• Interactivity high low
• Written rules common uncommon
Comparison
• Marketing Practice Differences
• Dimension B. mktg c.mktg
• Selling process system selling prod sell
• Personal selling extensive limited
• Relationships extensive limited
• Pormo strategy cust specific mass mkt
• Web integration greater limited
• Branding limited extensive
• Mkt research limited extensive
• Segmentation unsophisticated sophisticated
• Comp. awareness lower(?) higher
• Product complexity greater lesser
Comparison
• Marketing practice in business markets differs from that in
consumer markets because of the underlying differences in markets
structure, and because of the differences in buying behavior.
• For example, the extensive use of personal selling in business
markets can be traced to the market structure and buying behavior
characteristics commonly found in business markets which are
usually not found in consumer markets.
• Typically, in many business markets, demand is concentrated in the
hands of a few powerful buyers(market structure), who employ
teams of purchasing professionals to do their buying(buying
behavior).
• In most consumer markets demand is dispersed widely throughout
the buying public and no single consumer has any real buying
power(market structure), buyers are not trained
professionals(buying behavior).
Comparison
• Therefore, personal selling makes sense in business markets( concentrated
demand, powerful buyers, trained professional), since trained
organizational buyers expect to hear a well-argued case specifically
tailored to the needs of their organization, and costs of employing a sales
executive are justified by the high potential value of each order.
• Whereas, mass advertisement makes sense in consumer markets(

dispersed demand, no powerful buyers), primarily because the relatively
low value of a typical transaction only justifies low selling costs.
• Now, with current advancement in IT technology, it is possible to send

specifically tailored messages to meet the needs of individual customers.
• The new technologies and the use of CRM software has brought about a
degree of convergence between the marketing practices of consumer and
business markets.
Market Structure Differences
• A. Derived demand:
• Conventionally, in marketing demand by consumers is treated as
direct demand and demand from business as derived.
• The word derived indicates that the demand for something only
exists so long as there is a demand for the goods or services that it
helps to produce.
• The whole chain of derived demand is driven by the direct demand
of consumers.
• The implication of derived demand in business markets is that
marketers must be aware of developments, both upstream and
downstream, that may affect their marketing strategy. (Ex: Demand
for new housing increases the demand for housing materials like
steel, cement, paints timber etc. known as the accelerator effect.)
• B. Market concentration in B-TO-B markets
• B-to-B markets are in general characterized by higher
concentration of demand than consumer markets.
• The measure used is concentration ratio.
• It is defined as the combined market shares of the few(
three or four or five) top largest firms in the market-
oligopoly group of firms in the market.
• The higher the concentration ratio, the more likely it is
that firms in an industry will collude to raise prices
above those that would be found in a truly
competitive market.
• Derived demand, the accelerator effect and concentration ratios
provide a basis for analyzing many of the structural differences
between consumer and business markets.
• Businesses have less freedom simply to stop buying things than
consumers, so that business demand is likely to be less price elastic(
less responsive to price changes) than consumer demand.
• For similar reasons, there will be more instances of reverse price
elasticity of demand in business markets than in consumer markets.
• Businesses need critical inputs if they are to continue trading.
• If due to shortage in supply the price of a critical input increases,
this may lead to an increase in orders in the short term to
guarantee sufficient supply of that input. ( reverse elasticity where
a price rise triggers an increase in demand)
Buying behavior & marketing practice
differences
• Business organizations have more professionalized buying
processes than consumers, involving formal procedures and
explicit decision making practices.
• Transaction values are high. As a result, sellers tend to tailor
their product offerings to the needs of the buyers, seeking
to offer complete solutions to their business problems,
rather than just to sell them a product.
• Conventional tools of consumer mass marketing are
inappropriate here.
• Sales managers and key account executives/managers are
employed to develop and mage relationship between
buying & selling organization.
Classifying business products and
markets
• Basically, key difference between business marketing &
consumer marketing is the nature of the customer rather than
the product.
• In business markets customers are organizations who buy
products that are not bought by consumers—management
consultancy service, heavy engineering equipment etc.
• There are many products bought by both- organizations and
consumers-like PCs, stationary, ACs, etc.
• The product classification is based on the use to which the
products are put, and the extent to which they are
incorporated or enter into the final product.
• Example- services like cleaning are not incorporated in to the
final product of an organization. The difference between
‘entering goods’ and other goods is based on the idea that
something incorporated into the organization’s final products
contribute directly to finished product quality.
Classification of products..
• Installations are major investment items-engineering
equipment which are treated as investment items
which can be depreciated
• Accessory equipment are smaller items like hand tools.
• Maintenance and repair operating supplies are minor
but recurring items of expenditure.
• Raw materials are basic materials like crude oil, steel.
• Manufactured materials and parts are finished goods
and components ready for incorporation into final
product.
• Business services like maintenance and repair services,
business advisory services.
Classification of products…
• Based on the product classification, organizations are classified into
original equipment manufacturers, and others.
• OEMs are manufacturing businesses that buy component parts
from other firms to incorporate into a finished product that is sold
under their brand.[Honda, Toyoya,Leneovo,Dell]
• There is OEM market & after market. Customers in after market
can be either organizations or consumers.
• OEM customers are by definition business customers.
• The demand for industrial products & services is a derived
demand—it does not exist by itself but is derived from the ultimate
demand for consumer goods & services.
• Joint demand for a product occurs when one industrial product is
useful if the other products exist—pump & electric motor or diesel
engine.
Types of business markets
• Commercial enterprises: industrial distributors,
OEMs, manufacturing & non-manufacturing
companies( ad companies, service providers
• Government bodies like central and state
governments, PSUs, railways, other government
departments like defense, road building etc.
• Institutional customers: schools, hospitals,
• Cooperatives: sugar, milk producers
Organizational Buying Behavior
• To function, an organization requires access to supply

markets for sustaining its activities.
• Efforts[amount of money, energy & time] and risks are
considered to be costs incurred by buyers when making a
decision.
• Access to supply markets and products is affected by
factors like general macro-environmental factors and
influences that are more peculiar to the sector & market in
which the organization operates.
• In addition to the external factors, purchasing is affected by
what goes on inside a firm.( like organizational
characteristics and group as well as individual factors like
purchasing behavior of managers as well as groups.)
Factors affecting purchasing decisions
• 1. The nature of company business:
• The industry sector or the market in which customers
operate & how the dynamics of these industries
influence their purchasing behavior.
• A company can be categorized according to its
activities-- unit, mass or process production
technology.( manufacturing, engineering or service
business)
• These categories can be used to generate some
understanding of the nature of key product capabilities
that customer companies might purchase and the
expectations that might be placed on suppliers.
Factors affecting purchasing decisions
• Unit production involves design & supply of products that are tailor made
to specific customer requirements( high capital investment products like
power plants ).
• Technological complexity & scale of such projects affects supply needs &
purchasing behavior of organizations.
• Here, design & production capabilities of suppliers are central to finished
products.
• Unit production companies require involvement of suppliers in its design,
production, assembly phases & requires coordination among its various
suppliers.
• Mass production company is involved in design & supply of high-volume,
standard products.( production efficiency & low cost base). Here,
importance is attached to stable and secure flow of materials &
components to support the buying organization’s primary production
needs results in company seeking some influence over the behavior &
activities of the supplier.(invest in just in time delivery systems).
Purchasing decisions..
• Production activities are inflexible, requiring supplies of materials & components to be precise,
regular & consistent.
• The company expects its suppliers to adjust its administrative & logistical procedures to suit its
needs to link these procedures with its own operations.
• The purchasing company exercises influence over the behavior & activities of suppliers. The mass
producing company’s ability to compete is also determined by cost & introduction of new
products. Hence, its key suppliers are expected to contribute to the buying organization’s new
product development activities.
• Supply continuity is essential for big retailers like Wall-Mart as they work with their key suppliers to
maximise efficiency of retail operations.
• Process production companies are involved in high volume production, with low cost requiring
supply continuity.
• 2. Business strategy: It can give some indication of the way in which customer will deal with supply
markets.
• A product leadership strategy purses innovation in order to offer leading-edge products requires a
company has excellent technical & creative capabilities. Here, involvement of suppliers in those
processes is key to its ability to pursue product leadership strategy.( logistic/ supply chain efficiency
is critical for e-commerce leadership).
Purchasing decisions..
• Alternatively, cost leadership pursuit, where a company
competes to provide reliable products at competitive
prices, must contain costs to achieve the lowest possible
cost. Suppliers or business markets dealing with such
companies would expect procurement of products at the
minimum costs.( low cost airlines must have efficient
ground services like refueling, luggage handling, aircraft
cleaning within minimum time).
• It might rethink the design & implementation of business
processes, eliminating redundant activities.
• Suppliers dealing with such companies will procure
products in a way to keep costs to a minimum. Hence, cost
cutting ways would be an ongoing & central feature of
dealing with suppliers.
Purchasing orientation
• Classification of buying orientations : buying, procurement and
supply management.
• Buying orientation uses purchasing practices whose main purpose is
to achieve reductions in monetary value spent by a company on
bought in goods and services.
• Here, decisions are driven by attempts to get the best deal for
buying organization by maximizing power over suppliers so that
target prices are met as set by the purchaser.( target buying prices
are set based on the selling prices of the final product).
• To strengthen its negotiating position, the buyer might centralize
his purchasing decisions thereby consolidating his volume
requirements and thus enhancing his negotiating position.
• He can enhance his negotiating power by using multiple supply
sources for the same category and by playing suppliers off against
each other.
• Purchased items and the purchasing function can have a
dramatic impact on an org’s financial performance ( buy
better).
• When the emphasis shifts from getting the ‘best deal’ to
optimizing the purchase resource, to increasing
productivity, the use of ‘procurement orientation’ and the
use of this approach changes the way that purchasing
managers deal with suppliers and with other functions
inside their own company.
• To increase productivity, a firm will not select & review
suppliers according to lowest price offer with specification
conformance, but will base evaluation & decision on total
cost ownership.(TCO)
• TCO looks at the true cost of obtaining a product from a given
supplier, and involves a company measuring costs in terms of its
acquisition, possession, use and disposal.
• TCO varies depending on the category, value & volume of product
purchases.
• TCO is used for products that are used over an extended time
period, like capital goods, purchase of raw materials, manufactured
parts involving large financial sums, repetitive buying.
• Here the purchasing firm has a long term (strategic) focus & is
proactive.
• Buyers with procurement orientation look for both quality
improvements & cost reductions and adopt collaborative
relationships with major suppliers and work closely with other
functional areas.(like material handling, logistics).
Purchasing Orientation
• TCO is an analysis meant to uncover all the lifetime costs
that follow from owning a certain kinds of assets. Its also
called as lifecycle cost analysis; as the after purchase costs
can be substantial.
• Apart from asset purchase costs, there are costs involved
due to installation, deployment, using, upgrading,
maintaining an asset.
• TCO analysis finds a very large difference between a
purchase price & the total life cycle costs.
• Such differences can be used to make large value purchase
decisions.
• TCO analysis gives a strong message to corporate buyers,
capital review groups, asset managers.
Purchasing Orientation
• TCO is thus valuable while making purchase
decisions for large IT systems, vehicles, buildings,
medical equipment, factory equipment, aircrafts
etc. (Neo engines in A-320).
• It attempts to uncover both the obvious costs &
the hidden costs of ownership.
• It helps in activities like budgeting & planning,
evaluating capital project proposals, asset life
cycle management, vendor selection, prioritizing
capital purchase decisions, lease v/s buy
decisions.
• Companies with procurement orientation are most likely to use
target costing—it will work back from the selling price.
• Reducing total ownership costs requires willingness to share
information & align more closely activities between supplier &
buyer orgns.
• The purchase and supply process and handling of goods can be
improved by just-in-time delivery systems so that administrative
and material flow costs are reduced.
• A supply management orientation is driven by efforts to maximize
value along the chain resulting in assessment of core competencies
& key capabilities by the companies to determine what activities
they will perform themselves, which activities will be outsourced,
restructuring of suppliers so that a company will rely on a smaller
number of direct suppliers and larger network of second and third
tier suppliers.
Purchasing orientation..
• The firm might be buying from fewer direct suppliers but their
contribution is more important in terms of product expertise,
involvement in the company’s development activities, coordination
of activities with second and third tier suppliers.
• In short, business buyers choose one of the three purchasing
orientations-buying, procurement, supply chain management.
• Buying orientation has a narrow & short term focus and buyers
follow practices like lowest price involving hard negotiations with
short-listed or qualified suppliers. Buyers typically argue that there
are no differences between various suppliers’ offers in terms of
product quality, technical services or product features as it is a
commodity & price is the only thing negotiable. Here, buyers avoid
risk to reduce chance of any criticism. Tactics used are-follow
standard & established purchase procedure; depend on earlier
proven suppliers to avoid risk.
• Procurement orientation has a strategic or long term focus. The
focus is on integration of other activities like order processing,
material handling & logistics. Buyers seek both quality
improvements and cost reductions and to achieve this the firm
follows practices like collaborative relationship with major
suppliers( for this both the firm & the supplier must trust each
other, agree to share the rewards of working together like JIT
working and delivery scheduling, quality assurance to attain zero
defects. It involves integrative negotiation where it is assumed that
resources can be expanded to benefit both buyer & supplier, focus
on common interest and goals, exchanging information & seeking
solutions to meet goals) and working closely with other functional
areas( buyers are involved in describing the specifications of
products & services that the firm is looking for, ensuring quality of
purchased goods, timely availability of products.)
• Supply chain management orientation: Here the purchasing role is further
expanded to become more value-adding and strategic operations. It
includes co-ordination & integration of purchasing function with other
functions within the company and also with other organizations in the
whole value chain like customers, customers’ customers, intermediaries,
suppliers and suppliers’ suppliers. The objective is to improve the whole
value chain from raw materials to end users.
• The firm tries to deliver value to end users by conducting research to
understand the requirements of end users & direct supply chain to deliver
superior value to end users.
• Top management identifies core competencies and groups its products &
services into strategic and non-strategic systems. The firm outsources
those systems that have become non-competitive, are non-strategic.
• Managers work with major suppliers in partnering relationships requiring
close co-operation, communication, trust, commitment between supplier
and customer. Objective is to lower costs , increase value in order to
achieve mutual benefits.
Purchase process
• Buying a product consists of a number of linked activities, involving
the decision making process. In business markets, buying consists of
following activities:
• Need/ problem recognition: Purchases are triggered by the need to
solve specific supply problems such as identification of under-
capacity which would trigger the purchase of extra production
capacity in the form of equipment, staff, or subcontracting of
production activity.
• If the company has to develop new products to pursue new market
opportunities, then it will look to its supply markets for support.
• Determining product specification: Based on the supply need, the
company will draw up specifications for the item. It could include
what product will be required, its physical properties, how it should
be produced, performance of the product.
Purchase process..
• For vendors or suppliers, this stage in buying process is critical as the
vendors through their contacts can influence the specification & thus
potentially lock out competing suppliers(example of vvip helicopter
purchase by GOI).
• Supplier & product search: Here the buyer will look for organizations that
can meet its product needs. The search will centre on finding a product
that will match its specification and the organizations that can satisfy its
requirements.
• Proposal evaluation & selection of suppliers: Evaluation will depend on
complexity & risk attached to the purchase decision.
• Assessment of supplier organization & the expected contribution of
supplier orgn to the buying company’s business is carried out.
• Supplier selection & evaluation will consider points like financial stability
of a supplier, technological capabilities, geographic location, after sales
technical support, TQM, JIT capabilities, cost etc.
Purchase process..
• Selection: Once a supplier is chosen, purchasing team
will be responsible for negotiating price, delivery etc.
• Performance feedback & evaluation: In this process,
user departments will evaluate the performance of the
supplier & the product & give feedback to the supplier.
• For business customer the decision making process can
vary depending on the buyer orgn’s familiarity with &
experience of the product to be purchased, such that it
has three different buying situations: new task(new
purchase), modified re-buy(change in supplier),
straight re-buy(repeat purchase).
Buying situations
• New Task: When a company is buying the item for the first time. In this
situation, a judgmental(high uncertainty, decision based on personal
judgment ) or strategic buying approach(requires long term perspective
for supply needs & lot of efforts needed to evaluate info on suppliers)
might be used.
• Need for a new purchase arises due to diversification, changes in product
specifications or components, modernization/modification of an existing
product.
• In new purchase situation, the buyers may have limited knowledge & lack
of previous experience. Here, the risks are more, decisions may take
longer time, more people will be involved in decision making(production,
quality, ).
• Modified re-buy: It might consist of either a simple or complex buying
approach.
• A modified re-buy can occur when the organization is not satisfied with
performance of existing supplier or is looking for cost reduction or quality
improvement.
Buying situations..
• If technical specifications of a product changes or the
marketing department asks for additional features in the
product to meet competition or to outsmart competition.
In this situation search for an alternate supplier becomes
necessary.
• Straight re-buy: The company might use the routine or
casual or routine low-priority purchasing approaches.
• This situation occurs when the buyer wants certain
products or services continuously and when such products
had been purchased in the past.
• A mere re-order or repeat order is placed with existing
suppliers, mostly without making any changes in the terms.
Buyer-grid framework
Orgn. Buying process
• Buying stages new task mod rebuy str reby
• Problem recognition yes possibly no
• Product specification yes yes no
• Prod & supplier search extensive limited no
• Evaluation & supp. Select extensive limited no
• Selection of order routine yes possibly no
• Perfor. Feedback,evaluation yes yes yes

Role of buying centre/team
• Purchase decisions are made by individual managers but also
involves managers that represent buying team or ‘decision making
unit’.(DCU)
• Members of the DCU have following roles:
• Initiators: requesting the purchase item & therefore triggering the
decision-making process.
• Deciders: making actual purchase decisions. Members may not
have formal authority but have sufficient influence such that their
decision carries weight within the buying team. Difficult to identify
for a business marketer due to lack of formal authority.
• Buyers: select suppliers, manage buying process such that
necessary products are bought. Can greatly influence the
parameters of the decision.
Buying center/team..
• Influencers: contribute to the formulation of the product & supply
specifications, recommend which vendors to consider or which
products best satisfy organization needs. Contribute to the
evaluation of offers from suppliers.
• Users: frequently initiate purchase and actually use the product.
May be involved in specification process prior to purchase, and will
also evaluate its performance.
• Gatekeepers: controlling the type and flow of information in to &
out of the company and members of the buying team.
• To influence the purchase decisions in your favor, a business
marketer must know who key members of the DMU are and what
are their specific requirements or concerns in relation to the
purchase decision.
• This information enables the marketer to formulate
solutions/answers to satisfy individual needs/concerns.
Buying center/team
• If a decision involves new purchase or modified re-buys, the
marketer has to have contact with members of the DMU at an early
stage of decision making process in order to influence key
decisions( product specifications-vvip helicopters) that could
subsequently determine supplier selection decisions.
• Business marketers will have to know which managers across a
range of departments will yield the required influence for a
favorable decision in their favor.
• Business managers must be able to identify senior managers who
can exert considerable influence by identifying employees who
work in boundary-spanning roles, who have close involvement in
buying centre , who are heavily involved in communication across
departments in the buying organization, who have direct links with
senior management.
Buying center/team
• Generally, decisions are made by a team effort and not by
single individual, like in public sector units or government
departments.
• There is a certain degree of risk attached to purchase
decisions which could be linked to financial or performance
issues.
• As the level of risk increases ,the buying centre composition
changes, both in terms of members and their authority, the
buying team actively reaches for information & uses a wide
range of sources( personal contacts from other companies,
users) to guide the decision process; suppliers with a
proven track record tend to be preferred by the buying
team.
Business Market Segmentation
• While all customers are different some may share similar needs and behaviors, is
at the heart of segmentation.
• Through a process of segmentation a BtoB marketer can establish a degree of
homogeneity in respect of different customers in the marketplace.
• In this way, notional groups or like-behaved customers are created for whom it is
possible to communicate meaningfully about a range of different market offerings.
• It enables the marketer to research the needs of specific groups and make choices
about which groups in the market are worth the investment of marketing efforts
and how to manage the efforts.
• Segmentation gets its value when it is used to make decisions about target
markets and to establish specific competitive positions with respect to those
targets that bring value to the firm.
• It is the success of differential competitive positioning within markets that creates
success: doing things differently from competitors to establish advantage ( more
customized offerings or similar offerings at lower costs)
• Activities associated with approaching market to obtain success are-segmentation,
targeting, positioning.
Segmentation
• There is no perfect competition as per the economics books and markets are
imperfectly competitive.
• This means there is scope to differentiate products of different suppliers and to
identify different market segments, each with different demand characteristics.
• Though standardization brings operating efficiencies to the firm, it does not meet
the needs of all customers.
• Hence, other firms will try to satisfy the needs of such customers by providing
them more satisfying offerings.
• Failure to recognize the reality of market segments results in loss of market
position.
• The difficult task of understanding customers & delivering market offerings
involves adopting a position somewhere between standardization & over
customized offerings.
• The value of segmentation lies in this territory.
• By viewing markets in terms of a set of different customer requirements, the
marketers can make clearer choices about those segments that they want to serve,
enabling them to match their strengths & capabilities with specific needs of each
segment.
Segmentation
• Single segment concentration: Mc Donald,
Bata
• Selective specialization: ERP systems, School &
educational books for schools(S.Chand & Co.)
• Product specilization: M&M(suv), fashion
clothing, Swiss watches(Rolex)
• Full coverage: Coca Cola, Titan
Segmentation
• Importance and strategic use:
• Segmentation is valuable as it facilitates better understanding of the
whole marketplace including buyer behavior and why they buy; enabling
better selection of market segments that best fit the company’s
capabilities; enabling improved management of marketing activity.
• It helps marketer to identify groups of needs shared by customers and
deal with more homogeneously identifiable groups of customers so that
marketing activity can be undertaken more effectively.
• It makes possible for the marketer to determine how the company stands
competitively with respect to different market segments thereby
facilitating decisions to leave some segments & pursue others.
• This strategic use of segmentation means the marketer can choose which
customers to target, which others to treat similarly and which ones to
treat differently or uniquely.
• Fundamental skill in BtoB marketing is knowing which customers to treat
similarly & which to treat differently.
Segmentation
• Process:
• Step-by-step classification of market in terms of sets of meaningful groupings with each further
step to define further subdivisions.
• Then, on the basis of classification criteria, known as segmentation bases, a set of market segments
are created.
• Industry and company size and customer location are the major macro-factors providing a broad
classification of customers.
• Here, the expectation is that companies from the same industry, or of similar sizes or locations,
share similar product needs or usage patterns.
• A) Industry: First step in segmentation is to consider where a product would be used( application of
the product).
• Knowledge of an industry that may have use for its technology enables it to quickly identify
prospects.
• B) Customer location: Location of a customer will affect the ease with which it can be reached by a
company. Location will influence decisions about where a company makes it presence felt, how it
deploys its staff, or communicates with its customers.
• Its expected that companies from the same industry, or of similar sizes or locations, share similar
product needs or usage patterns.
Segmentation
• Companies providing goods or services that are easily transportable like design
services are not hampered by geographic distances from customers.
• C) Customer size: Size of customer companies as a basis for distinguishing one
from other.
• Size often matters because of its relationship with the scale of the customer
organizations’ needs and therefore for their demands for volume.
• Operating variables: These segmentation criteria variables can be applied singly or
in combination.
• a)company technology: There is an element of technological readiness involved.
Bigger players tend to invest large amounts in technology which is most likely to be
up-to-date.
• Thus, an analysis of technology of companies is valuable in segmentation and
targeting decisions because it gives a strong indication of a company’s buying
needs as well as the ease with which the supplying company can meet those
needs.
Segmentation
• b)Product & brand use status: Companies segment market in order to establish
targets for their products, so they would use the behavior of customers with
respect to brands or products to aid their segmentation.
• Customer reactions to products in terms of readiness to use(for those who are not
yet customers) and usage rate( light , medium or heavy for those who already
purchase) are valuable means of distinguishing one from another.
• Retaining heavy users is the obvious use of segmentation.
• c) Customer capabilities: A supplier might genuinely want to esstablish what
customers are capable of doing with either its product or the process.( Providing
key technical support schemes or inputs to glass processors by glass
manufacturers).
• E) Purchasing approach: How buying companies are organized to buy and the
buying criteria can be a valuable intelligence to marketer, as this information will
enable them to produce an offering that is most valuable to a target segment
defined in terms of purchasing approach.
• Buying companies differ in how they organize themselves for procurement.
Segmentation
• In smaller firms there may not be an identifiable group or department

with purchasing responsibilities where as in big companies there is an
identifiable purchasing function or group.
• Whether the responsibility is delegated to each division or handled
centrally or both.
• Understanding how a purchase function is organized is valuable in
knowing who to approach, as well as understanding the levels and types
of purchasing they control.
• The relative influence of different departments will have an impact on the
buying process.
• Different forms of purchasing criteria are applied by buying companies.
• They may be financial (purchase price), technical performance
characteristics( power consumption, durability, quality consistency),
quality of service( continuity of supply, delivery performance), technical
assistance pre and post sales, standard of customer service.
Segmentation
• While organizational structures, policies and processes create a

framework for purchase decisions, it is the buying staff who actually
conduct the process.
• Marketers can segment in terms of the characteristics of the
people, like what drives their buying behavior, how fastidious they
are in evaluating suppliers, their approaches to managing risks.
• To use these personal characteristics, a company must have very
close contact with the buyers.
• The greater the number of segmentation steps, and the
differentiating criteria that are applied, the smaller and more
fragmented are the segments produced.
• When fragmentation begins to reach the point where further
separation does not lead to meaningful differences in customer
purchase behavior, the process should be curtailed.
Segmentation
• The tests that business markets can use to establish the quality of
segmentation process are:
• 1. Measurable: Segmentation must be clearly measurable—it must be
possible to establish the size of the firm, its capabilities, its purchasing
policies, selection criteria, its size of orders and the attitude to risk.
• 2.Accessable: A segment needs to be accessible to be targeted usefully.
Reach includes physical ease of getting to the customers & the ability to
communicate with them.
• 3.Substantial & profitable: Size & potential profitability of segments are
crucial. Segments must be big enough, be able to pay enough, to justify
the costs of serving them.
• 4.Actionable: The company should be able to bring offerings to bear that
will meet needs of the segment. It should know what capabilities the
company has or needs to develop to serve a segment profitably.
Segmentation
• In short, a common procedure to carry out market segmentation has three steps:
marketing research, analysis to identify segments, profile of segments.
• Secondary marketing research can be done first by collecting information on the
markets from company’s past data, online databases, library scanning, industry
associations etc.
• If primary research data is inadequate, more detailed research can be done from
existing and potential industrial buyers on major purchasing attributes, buyers’
present and future requirements and their purchasing policies, competitors’
information( their present market perception, market share of each, quality,
capacity available, strategies followed in pricing, payment terms, after-sales
service, distribution & promotion strategies, level of technology.
• Analysis of the collected data from secondary & primary research is analyzed using
statistical techniques like factor analysis, cluster analysis.
• Profiling each group of customers by its specific characteristics like use of product,
volume required, location, type of industry, purchasing policies and major
purchasing attributes, buyers personal characteristics, buying behavior.
Segmentation
• Benefits of segmentation:
• 1.It enables the industrial marketer to compare
marketing opportunities of different market
segments by studying customer needs &
potential, competition, satisfaction levels of
customers in each market segment.
• 2. Firms can develop separate marketing
programs to meet the needs of different market
segments.
• 3. Allocation of budgeted resources can be done
effectively to various segments.
Targeting
• To make the best-informed choices about what markets to serve and how to serve
them by devising appropriate strategies.
• Target segment selection: After establishing relevant segments, the firm will have
to consider its possible competitive position in relation to each segment to
determine whether the segments merit the company’s attention.
• The company’s competitive position within a market and its ability to reach the
buyers, the size of a market, the extent to which the segment is compatible with
its objectives & resources, the extent to which the company considers it profitable,
whether the company expects future growth in the sector, segment size, customer
product/service needs and fit with company’s competence in meeting the needs,
how activities of Government or public at large may affect the segment, how
technology impacts it, structure & nature of competition in the segment, are the
most commonly used criteria.
• The evaluation of such factors is followed by an estimation of the demands of the
segment would make in terms of finance, technology, human resources.
• Whether the management wants to pursue a segment as a part of strategic
development.
• After these steps, the company can decide on targeting strategy it should adopt.
Targeting
• Targeting strategy: Three strategic approaches: undifferentiated, differentiated and

niche targeting.
• 1.Undifferentiated targeting strategy is where the firms makes same offer to all
segments.
• A standard offering to whole market has advantages like operating efficiency, when
large volumes produce economies of scale.
• Such companies risk over-generalized offerings that expose the company to attack
from competitors.
• In new marketplaces, a company in order to take first mover advantage, may try to
seek as much return as possible, before competitors arrive.
• 2.Differentiated target market involves choosing a variety of different segments &
providing offerings that are focused on meeting the needs of those targets.
• This approach is less subject to challenges of an over-generalized offering as it fits
the needs of customers.
• There are numerous possibilities of customization in physical form as well as the
service elements.
• Competitive markets demand differentiation . The crucial issue is to know whether
to produce a different offering for each different segment.
Targeting
• There will be always new segments that could be targeted, but a company needs
to analyze the costs and benefits associated to ensure that over the long run,
benefits overweigh costs.
• 3.In niche marketing strategies, companies concentrate customer focus to one or a
small number of segments.
• A niche is a narrowly defined customer group, that seeks products & services
tailored specifically to individual needs & preferences.
• Its objective is to reach unsatisfied markets more effectively and profitably.
• This is a selective approach to the market where a company’s strengths or
capabilities are best matched with customer needs.
• The customers in a niche have a different needs which should be first identified
through marketing research.
• It should then develop a new product or a service so as to tailor the special needs
of benefits of such customers( financial services, specialized training, high
performance bikes/cars)
• Generally, customers in a niche are willing to pay a much higher price which best
satisfies their specific needs, giving higher profits to company.
• The key idea in niche marketing is specialization which can be achieved by
following ways:
Targeting
a) Geographic specialization by selling in certain area
b) End-user specialization where one particular type of end-user customer is targeted(
IIM, IIT specializing in high quality education)
c) Product-line specialization by concentrating on one product line( high performance
bikes/cars)
d) Customer specialization by marketing their products to one or few major customers
like OE suppliers to automobile makers.
e) Niche marketing strategy has the advantage of high profits.
f) In order to select target segments and decide which market strategy to adopt, a
company should evaluate market segments by analyzing four factors –size & growth,
profitability analysis, competitive analysis, company objective & resources.
1.Size & growth: what is the size or market potential of such a market segment. The
current & future market potential can be obtained by using demand forecasting methods
such as time-series analysis, regression analysis, econometric models, sales force
estimates, and expert opinion.
Targeting
2. Profitability analysis involves analyzing profitability of each potential
segment.
a) Market potential, which is estimating the quantity & value of a product
that the total market will purchase within a time period.
b) Sales forecast is to estimate the company’s sales based on its share out of
the market potential in a specified period.
• Sales forecast are based on informed judgment of sales persons & dealers
to estimate the market share of a company.
• This can be done by detailed analysis of customers, individually or in a
group, to estimate the market potential while taking into consideration
competitors’ position.
• c) Profitability refers to difference between sales revenue and marketing
costs of servicing & maintaining customers.
• Marketing costs are sales force costs, advertising & sales promotion costs,
new variant product development costs, discounts, warehousing and
inventory carrying costs.
• 3) Competitive analysis is the careful analysis of strengths & weaknesses
of competitors. The analysis must be done for all competitors in areas like
manufacturing, R&D, finance, technology, delivery performance, sales
force, advertisement, distribution, management etc.
Targeting
• Some of factors for selecting target segments could be-

size of market in Rs., growth rate in percentage,
profitability, degree of competition( no of competitors,
intensity), competitors’ strengths and weaknesses,
company strengths, compatibility with company’s long-
term objectives, success factors( special raw materials,
technology, large volume, low pricing, low costs).
• After evaluating several markets based on these
factors, a company can decide which & how many
segments it should select as its target market
segments.
Positioning
• Segmentation, targeting, and positioning(STP) process is a core element of
strategic marketing planning.
• The aim of competitive/market positioning is to encourage buyers to view
a supplier as different from other suppliers in elements of their offering
that the customer perceives as adding value.
• Successful positioning entails establishing a clear distinction your
organization’s products and services, and those of your competition.
• Hence, it is very important the attributes on which you choose to
differentiate yourself are actually important to customers.
• Here, there is little point in basing your position on a low-cost strategy ,
when what is valued by customers is high-quality components or flexible
delivery or outstanding after sales service etc.
• Thus, the key role of the B to B marketing manager is to represent market
and customer’s point of view to the organization so that it can define the
characteristics of the offer and decide upon its position.
Positioning
• There are three ways to use customer value proposition in order to
position their organization.
• 1. The all benefit approach: Here, suppliers just list all the potential
benefits they believe their product or service might provide for target
segments.
• Here, there is a danger of making claims that are not actually deliverable
to individual customers and to distinguish the firm’s offerings from the
competitive alternatives.
• 2. The favourable points of difference approach which aims to answer the
customer’s questions: why should our company buy your offering rather
than your competitor’s?
• This means managers need more detailed knowledge of their offering in
order to be able to differentiate it from the next best alternative.
• The points of difference listed by supplier must be valuable to customers.
Positioning
• The most targeted approach, the resonating focus
proposition: Here, the selling firm makes its offerings
superior on the few elements where performance
matters most to customers.(fuel/electrical efficiency).
• The supplier manager must be able to demonstrate
this superiority and communicate/convince the buyers
in a manner that suggests the supplier understands the
customer’s business needs these key issues.
• To build a position that resonates, the supplier will
need to conduct research to provide the necessary
insights into customer perceptions of value.
Positioning
• After selecting target markets, the industrial marketer should decide positioning
strategy for each target market.
• The offering from a marketer /company occupies a space in the minds of the
buyer( Dell was perceived as a customized and low priced product).
• This position establishes the supplier in an idealized position that most closely
represent the customer need.
• This relative position becomes the basis by which the supplier is compared to
other competitors .
• It is necessary to ensure that this relative position occupied in the buyer’s mind is
most favorable.
• Thus, positioning is defined as the distinct place a product/service occupies in the
minds of the target customers relative to other competing products/services.(high
tech products, specialised applications, custom-made products etc)
• It is how a firm wants its products/ services to be perceived by the target
customers on important attributes or benefits.( TCS, L&T)
• In establishing the relative position a firm has to be clear where its strengths lie.
• The positioning it adopts must be clear and clearly communicated to buyers.
Positioning
• Developing a positioning strategy:

• --Identify the target customers’ needs in terms of major attributes or benefits. This
is done by marketing research to find these differentiating attributes which the
target customer consider important while taking decision.
• The purpose is to understand the major attributes the target customer
organizations consider important while making buying decisions.
• After capturing the customers’ perceptions regarding various competing products,
an industrial marketer can use several variables to differentiate his offerings from
that of competing products by product variables, service variables, personnel
variables, image variables.
• --Product variables for standard industrial products may be few. Here, product
quality or product performance can be used for differentiation like getting ISO or
other certifications indicating superior quality or efficiency.
• For products that can be offered with extra features, the firms have to decide
which features to make standard & which optional.
• Use of one or five star to indicate electrical savings in appliances is an example
which differentiates the quality and get higher price.
Positioning
• -- Service variables offered by industrial firms like pre-sales services(providing

assistance in arriving at specific requirement of a product in terms of capacity, like
air conditioning or steam requirement or arriving at a solution to a problem),
during - sales services( like on time delivery) .
• The pre-sales services will be further complemented by after-sales service set-up
(maintenance, spares).
• Pre-sale service is an important variable to differentiate one supplier from others
when an industrial buyer finds a solution to a vexing problem like air/water
pollution or savings due to wastage reduction like in fuel, electricity.
• The importance of these services depend upon types of products—industrial
products.
• Service variables become key competitive advantage when products offered by
competitors are similar( so, instead of a product, a company offers a
comprehensive solution to a problem or requirement after thorough study at the
buyer’s plant).
• --Personnel variable is in the form of providing better quality people or by
arranging training programs for its people as well as for the buyer. (implementing
ERP packages with customer training)
• --Image variables are in the way buyers perceive a company. It can build its image
by identity or image building programs to shape the buyers’ opinion.
Positioning
• Promotional, advertisement tools are used over a period of time to deliberately

project the desired image.
• Strategies for positioning:
• --Industrial marketer has to decide how many and which product attributes should
be selected to differentiate the company or its products from other competitors.
• --Some companies promote general attributes like best quality or best service or in
time delivery.
• --Some promote multiple and attributes like no.1 in R&D, No.1 in technology or
latest technology, or maximum power saver, or global business operations to
convince buyers that it can deliver better solutions than competition.
• --Some companies like Accenture highlight its global capability to ‘deliver’
solutions to the best corporations.
• --While deciding the positioning strategy, the industrial marketer should consider
three factors after thorough market research.
• --First, identify the most important attributes in order of priority that target
customers consider while deciding to place orders.
Positioning
• --Second, how the target customers perceive the company’s products or service
with respect t
• After knowing the customer’s perceptions o these important attributes.
• -- Service variables like pre-sales services(providing assistance in arriving at
specific requirement of a product in terms of capacity, like air conditioning or
steam requirement or arriving at a solution to a problem).
• --Third, how the target customers perceive the competitors’ products or services
with respect to the same attributes.
• --After knowing the customer’s perspectives based on the interactions over a
period of time, a statistical analysis can be carried out.
• This is called perceptual map, which helps in deciding the positioning strategy.
• Communicating company’s positioning:
• --The industrial marketers must communicate their positioning strategy effectively
to target markets.
• --In consumer markets the positioning strategy is mainly communicated through
advertisements.
Positioning
• --In industrial markets the positioning strategy has to be communicated in

personal selling, sales promotion through trade shows or exhibitions, advertising
in trade journals.
• --When a company wants to communicate ‘world class quality’, it must implement
TQM concepts, ISO certification, and communicate to its customers its superior
quality through actions like timely deliveries, superior communication and
customer service, installation references etc.
• Summary:
• Important strategic marketing decisions an industrial marketer makes is regarding
market segmentation, target marketing and positioning.
• In market segmentation a firm decides whether it can serve the entire market or a
part/ segment of the whole market more effectively than competitors.
• Variables used for segmenting are macro variables—industry /customer type,
company size, customer location, end use/application of product.
• Micro-variables are organizational capabilities, purchasing policies, purchasing
criteria, personal characteristics, customer interaction needs.
Positioning
• After selecting target segments, the target market strategies are

chosen out of three strategies– concentrated marketing,
differentiated marketing and undifferentiated marketing.
• Niche marketing strategy is commonly used for a more narrowly
defined customer group that seeks specialized products or services.
• For each selected target segment, a firm decides positioning
strategy by differentiating its products and services vis-à-vis its
competitors.
• Procedure followed for positioning is identifying major
attributes/benefits needed by target market and selecting one or
more attributes that differentiates the company from its
competitors.
• It is essential to communicate the positioning strategy effectively to
the target market through promotional efforts.
Product Decisions
• Understanding your customers’ needs is essential, but if a firm cannot create an

offering that satisfactorily meets customer needs then everything else is pointless.
• To meet customer needs continuously, a marketer must adapt to changing needs.
• This is a dynamic process and implies that there is a development cycle for product
offerings, from conception through to deletion and need constant reappraisal.
• It implies a need to adjust to changes in market circumstances like competitive
actions, over and above changing customer needs.
• In a dynamic world, we need to study the product offering concept, its nature and
extent.
• The offering management tasks that face the B-TO-B marketer is to make the right
interventions throughout the life of an individual product/offering and managing
each individual offering as a part of a balanced portfolio.
• This simply means that an industrial organization must consider two objectives
while developing product strategies such as to ensure that the product mix is in
line with overall company and marketing objectives and to evolve guidelines for
reviewing performance of existing products by using sales, profits, competition,
customer acceptance.
Product Decisions
• Based on these points, product strategies are decided like which of the existing
products be continued, modified, or dropped and which new products need to be
developed.
• (A product may only capture physical aspects and attributes which is a part of an
overall offering. There are huge service elements involved for which customers pay
a lot more than market prices due to the value of the offering.)
• Product strategy in industrial markets needs to be flexible.
• Industrial firms need to change their product strategy because of changes in
customer needs, technology, government policies, product life-cycle.
• Customer needs: To succeed and survive in competitive markets, an industrial firm
must continuously monitor changes in the needs of its target customers and
continue to satisfy customers by making changes in product line.
• Customer needs change because of changes in environment.
• Technology: Changes in technology require either product modification or new
products as existing ones become obsolete.
• Government policies/law: Open policies after liberalization has helped many
Indian industries.
Product Decisions
• Product life-cycle: There are four major stages in the product life cycle-
introduction, growth, maturity, decline.
• There is also substantial activity before launch in development and in preparation
for launch( pre-launch stage).
• In industrial markets, the time from product concept to market launch may be
substantial, even when directly working with customer that has a particular
product need.
• 1. Introduction stage:
• --There can be huge development costs involved.
• --During introductory phase it will be costing more money than it is bringing in,
since there are marketing tasks to be carried out.
• --Up to the launch and after that, customers need to be made aware of the
product, so there are many communication activities like demonstrations,
exhibitions, trade shows etc.
• --If it is a completely new concept for the market, there is a need to generate
primary demand for the product.
• --There can be trial offers from existing key customers, especially if they are
important reference customers.
Product Decisions
• --Field sales time is likely to be invested in communicating its value( advice giving),
so the sales force must be trained in the product and shown how to demonstrate
its benefits to customers.
• -- Distribution channels must be set up.
• --All these activities are likely to continue until sales start to rise, indicating market
acceptance.
• --By this time, early problems with the offering can be identified and resolved and
experience learned in the entire process of offering stabilization will enhance sales
training.( Chesterton).
• 2. Growth stage:
• --As the offering is increasingly gets accepted in the market, and sales and profits
begin to rise more rapidly than before, the nature of the demands on the business
marketer change.
• --Competition is likely to increase resulting a pressure on prices, and as this
pressure creates greater demand thus fueling further growth.
• --For innovative products, competition is likely from copycat products tapping into
the same primary demand without costs of development in creating the demand.
Product Decisions
• --Defending the market share by differentiation may be successful in achieving

secondary demand.
• --This will involve additional costs in expanding production, increasing the product
line, adding product extensions or securing additional distribution channels.
• --The business marketer will ride the growth phase as long as possible and achieve
the best margins possible.
• 3.Maturity stage
• --Finally, the rate of sales growth slows.
• --Profits may continue to rise in the aftermath of growth phase.
• --To maintain the profit trend requires cost reductions, may be by cutting the
amount of sales force time spent on pioneering activities like finding new
applications for the product.
• --There can be a shift from more personal marketing to focus on trade customers
(rather than end-users).
• --There could be price-based promotional activities aimed at increasing customer
loyalty of big users.
Product Decisions
• --Where the offering requires maintenance and repair, it is important to have

sufficient capacity for this(manpower, material like spares).
• --Reduction in other cost sources may be necessary to be considered(like logistics,
transportation).
• 4.Decline stage:
• --The efforts in maintaining price levels and reducing costs which were initiated in
the mature market phase, will work for a limited time.
• --Profit margins will decline and the business marketer will have to look for ways
to extract further value.
• --Sustaining profitability levels requires cost reductions.
• --Marketing expenses should be at a minimum.
• --Business marketer should drop unprofitable customers and channels.
• Identifying life-cycle stage:
• Where a product is in its life-cycle stage depends on factors like industry profits,
level of technology, rate of change in the industry sales growth etc.
• The information required to locate a product in its life cycle is:
•
Product Decisions
• --Develop a trend analysis for last three to five years based on information to be
collected for an industrial firm for factors like industry profits as a percentage of
sales, value of sales, market share number of competitors, pricing trends.
• --Analysis of competitor’s market share product performance, new product
introduction, diversification and expansions.
• Estimate and project sales & profits of the product over next three to five years
• From the above analysis, fix the product’s position on its life cycle curve.
• Managing new product development:
• Development and marketing new industrial products is vital for a profitable growth
of a firm.
• It tests a firm’s market knowledge, technical competence, financial strength, ability
to compete.
• Products that have entered the decline stage must be replaced by new products to
maintain profitability and growth.
• A firm’s value creating potential may stem from its production innovations, process
innovations, marketing innovations, organizational or management innovations.
Product Decisions
• While managing innovation to create advantage, the key questions are how the
firm should be organized to encourage innovation and the role that relationships
with external partners have in aiding this process.
• Organizing innovation: Companies need to create an environment where creative
individuals can harness their creativity to meet the market needs & opportunities.
• Some of the requirements to create the right environment are:
• --commitment to long-term growth rather than short-term profits
• --awareness of threats and opportunities
• --invest in long-term development of technology
• --ability to be aware of & take advantage of externally developed technology
• --readiness to accept change
• New products can be a) innovative & new to the world/market b) products that
are new to the company c) revisions or improvements to the existing products in
the existing markets d) additions to existing products lines with additional markets
e) repositioning existing products to new markets f) products with substantial cost
reductions but without reductions in performance
Product Decisions
• Success & failure factors of new industrial products:

• Product superiority & uniqueness– superior quality & new product features that
give product a competitive advantage
• Market knowledge – to understand needs & wants of markets and then translate
this knowledge into marketing strategies & action plans.
• Technical & production capabilities to translate the product concept into product
development & commercial production
• Failure factors: If new products do not satisfy the needs of potential customers.
• New products not significantly different than existing products– may be just
imitations.
• New products do not deliver the expected performance, due to say poor product
design
• Prices of new products may be higher than value perceived by customers.
• Successful new product development requires an effective organization for
managing new product development process.
• New product development is a risky venture as research shows that not more than
10% of all new products or services continue to be profitable after three years.
Product Decisions
• In spite of high failure rates, companies have no choice.

• Failure to offer new products & services leads to a portfolio that over time
will come under greater pressure and ultimately will produce less value for
the firm.
• The risk in offering new products is further compounded by the costs of
development that a company must incur.( The cost of developing A380 s in
excess of $11 billion).
• Smaller firms may not face such high costs but in comparison to their size
the commitment may seem just as great( they will face capital costs)
• There may be a need to change production processes, distribution
processes or material handling methods.
• To justify such large costs for a new offering, the company will want to be
sure that there will be sufficient demand to obtain a return on its
investment after meeting development costs.
• The lower risk approach is to develop incrementally, just add new variants
to existing product lines.
Product Decisions
• New product development process:

• Because of the inherent risk, it is essential to manage the process well and take
appropriate decisions at each stage to make the risk manageable.
• 1.Identifying opportunities/generating ideas: The new offering development
process is creative and requires creating seeds of creation into ideas.( The more
ideas that are generated greater the prospect of finding a successful product
offering).
• They can come from different sources like talking to end-users, distributors,
suppliers, by examining what the competitors are doing, suggestions from staff.
• Company can have brainstorming sessions with employees, suppliers, forming
CFTs.
• 2. Screening ideas and making preliminary investigations: to implement screening
of ideas, the criteria are: company’s ability to make the offerings; the fit with
company production capabilities or technical expertise; the fit with company’s
objectives & image; the market sale & profit potential; the fit with current
offerings & distribution channels.
• Initial screening and assessment will remove the weakest ideas.
Product Decisions
• Remaining ideas will be subjected to further screening and investigation like how
customers will react to the offering & how competitors will react.
• Customer reaction focus will be on certain segments & aspects of the new offering
concept that will be attractive to them.
• On the basis of further evaluation, some more ideas will be discarded.
• 3.Analysing the business case: Further screening of ideas for finding those having
the greatest business potential.
• Business analysis involves careful financial estimates of market size, growth rate &
potential for each product offering idea.
• Business case analysis needs to establish what the development costs are likely to
be for each new idea before it can be brought to market.
• These costs include capital investment needed, staff costs, break-even level and
payback period, rate of return on investment.
• When each new offering is seen in these financial terms, it becomes possible to
compare them as prospective projects.
• 4.Developing the concept & specifying the features: The clear identification of the
likely targets & their reactions to the offerings helps to specify the features.
Product Decisions
• It becomes possible to state what the concept is and the benefits it brings to
customers and the use of such offering.
• A likely price can be estimated.
• 5. developing prototypes & developing marketing support: Having arrived at the
clear concept, the offering can be prototyped.
• A prototype is a facsimile of final product offering that enables evaluation of the
form, design, performance & material composition.
• The intention is to develop a series of working prototypes that can be fine-tuned
towards final offering.
• Simultaneously, the marketing support activities can commence—activities like
pricing, packaging, labeling, promotional plans, for final commercial launch.
• 6.Limited scale trial marketing: Successive refinements in product offering will lead
to fewer & fewer changes and the offering is ready to be used by customers.
• If feasible, test marketing in a small market or area can be beneficial in obtaining
feedback on pricing product use, marketing activities & communication.
Product Decisions
• For an industrial product, a company , through its excellent customer

relations, can use key customers to get crucial feedback on the machine
performance in a live situation.
• 7. Commercial launch: On the basis of successful trials, final changes can
be made and strategy can be finalized to bring the offering to the market.
• The launch can be a big event depending on the company size, its market
etc.
• It can also be launched on geographical basis.
• If the product is novel, then customer education may be required
concerning its function, the benefits it brings and how it can be used.
• If any service need is found during this period, training of personnel may
be carried out.
• 8. Evaluating the development processes and drawing lessons for the next
time: It’s a good idea to reflect on the process, the soundness of decisions
& effectiveness of implementation.
• The intention is to learn lessons for future.
Pricing Decisions
• Price has a direct & substantial effect on profitability, hence a critical part of
industrial marketing strategy.
• Pricing strategy is related to market segmentation strategy, product strategy,
distribution strategy, promotion strategy.
• On average, a 5% price increase can increase earnings before interest and
taxes(EBIT) by 22%, whereas a 5% increase in sales turnover increases EBIT by
12%, and a reduction of 5% in costs of goods sold increases CBIT by 10%.
• When a buying firm buys a product from a supplier ( which is in competition with
many other suppliers in the market), it means that the buying firm perceives that
the said supplier offered the highest delivered value( Delivered value is the
difference between the overall perception of value and the total cost to the buying
firm).
• The total cost to the buying firm includes not only the price of the product, but
cost of transportation, transit insurance cost, installation cost etc.
• The buying firm also takes the risks of product failure, delivery delays, lack of
technical support or service.
• Hence, the supplier offering the lowest price may not be the lowest in the total
cost, if other costs and risks are considered.
Pricing Decisions
• An industrial marketing firm has to consider many factors in pricing

decisions: pricing objectives, demand analysis, costs, customers,
competitors, Government regulations.
• 1.Pricing objectives: Pricing objectives are derived from corporate &
marketing objectives. Major pricing objectives are:
• A) Survival is a short term objective in situations like when factory
production capacity is underutilized, or piling up of unsold finished
products, due to intense competition.
• In such situations, to keep factory going and liquidate the inventory, an
industrial firm will reduce prices as a part of its survival strategy in the
short term.
• In such a situation, profits are less important than survival.
• The firm will set prices in such a way that they cover variable costs and a
part of fixed costs so that it remains in business.
• This will be a short term strategy and in the longer run it will raise prices
to cover total costs.
Pricing Decisions
• B) Maximize short-term profits: Such a policy is to select a price that gives

maximum current profits.
• Such companies estimate the market demand and costs at different alternate
prices, but in reality it is difficult to accurately estimate demand & cost.
• The emphasis is on short-term profit maximization rather than long-term
performance and customer relationships.
• Such a policy does not take into account competitors’ reactions or legal issues.
• C) Maximum short-term sales: Some companies set prices with an objective of
maximizing short-term sales revenue.
• The assumption is that by maximizing sales revenues the companies will show
growth in market share and profit maximization.
• Maximum sales growth/market share: The assumptions are– market is price
sensitive so that low prices will induce higher sales volume and market share,
higher volumes will reduce production costs leading to higher long-term profits, or
low prices will discourage entry of new competitors.
• D) Market skimming: Companies may set high price in the initial stages of the
product life cycle when they introduce new products.
Pricing Decisions
• The new product is initially aimed at those market segments where

demand is least sensitive to price and customers are willing to pay
higher price.
• By following the skimming policy, the company skims maximum
revenue and profits.
• As time passes, it may not be feasible to follow the policy and as
sales slow down, the prices are reduces to attract new customers
from price sensitive segments.
• The assumption made here is that different prices can be charged
to different segments of customers at different times.
• Main risk is that high profits will attract competitors.
• E) Product-quality leadership : The objective is to a product-quality
leader in the market by producing superior quality product(as
compared to competition) and charge a higher price. It results in
higher profits.
Pricing Decisions
• 2. Demand Analysis: The demand-price relationship is elastic when small

changes in price level leads to changes in demand.
• Demand can be inelastic when i) there are few competitors, ii) no
availability of substitute products, iii) buyers think higher prices are
justified by normal inflation or changes in taxes like excise, sales tax.
• Demand for industrial products are inelastic because these products are
technically advanced, many times customized for specific customer, or
very crucial for a buyer’s operation.
• Costs: Relevant costs associated with making of a product or delivering a
service determine the price floor, while the benefits that the buyer
perceives from the product or service to deliver determine the price
ceiling, the intensity of competition and the strategies of competitors
affect the feasible pricing region that lies between costs floor and the
customer benefits ceiling.
• To calculate price of a manufactured product, one has to look at following
different cost components:
Pricing Decisions
• Variable costs of production(material, direct labor), allocated overhead costs, full

cost of production, desired profit margin(%), final selling price.
• To calculate allocated overheads one has to consider total overhead cost for
factory, divide it by expected sales volume to arrive at overhead cost per unit.
• There are cost elements like fixed costs(rent, interest) which do not vary with
production, variable costs(raw materials, labor) that vary with production level,
direct costs(selling expenses, freight) are fixed or variable costs for a product.
• Cost plus pricing is a common pricing approach.
• It may give the firm an illusion of security since the firm covers its costs and make
a profit.
• However, cost-plus pricing ignores both competitors and customers and contains a
logical flaw because-
• --in order to set price one must know average costs of production
• --one cannot know average cost of production without knowing production & sales
volumes;
• --sales volume will vary with price;
• Therefore, in order to set price one must know---price!
Pricing Decisions
• To calculate full average cost of production the fixed overheads of business have to
be allocated, and this allocation is based on a sales volume estimate.
• If sales volume is overestimated then fixed costs per unit of production will be
higher than expected, and the firm will make less than target profit margin.
• If sales volume is underestimated, fixed costs per unit will be lower than expected,
the profit margin will be above target.
• The basic questions for managers will face concerning pricing decisions are—a) If
price is cut, then by how much sales volume will increase so that profits are
increased? b) If we raise price, then by how much can sales decline before we
incur a loss?
• These questions can be answered by break-even sales analysis or cost-volume-
profit analysis.
• It’s a technique used to consider different prices and their possible effects on sales
volume and profits.
• It is calculated by the formula– break even volume= fixed costs/selling price-
variable cost
Pricing Decisions
• Cost-benefit analysis: While conducting demand analysis, it is useful to carry out

an analysis of benefits received and the costs incurred by target customers.
• For an appropriate pricing strategy, an analysis of the benefits and costs of the
product from the customers’ point of view is useful.
• Hard benefits refer to the physical attributes of a product like production rate or
rejection percentage of a machine.
• Soft benefits include company reputation, customer service, warranty period,
customer training, which are difficult to assess.
• Costs for an industrial product include not only price but include transportation of
freight costs, installation, energy usage costs, repair & maintenance costs etc.
• A buyer might be willing to pay a much higher price to reduce the cost of failure or
cost of poor quality.
• While buying capital item, life-cycle costing concept can be used which estimates
the total cost of a product over its life span like price, freight, insurance,
maintenance, energy labor & material costs etc.
• After calculating the benefits and costs based on these perceptions, an industrial
decision maker can evaluate the possible cost-benefit trade off decisions.
Pricing Decisions
• Thus, an industrial marketer can set an appropriate price by understanding

how the customers evaluate the competing offers on cost-benefit analysis.
• Customer & demand analysis: Responsiveness of demand to price
changes is critical in pricing decisions.
• Cost-plus pricing ignores this factor.
• In making pricing decisions managers are forced to make assumptions
about demand responsiveness, which is measured by using elasticity of
demand with respect to price(demand elasticity).
• Where demand is elastic, a price increase will reduce revenue and a price
cut will increase revenue.
• Where demand is inelastic, a price increase will increase revenue and a
price cut will reduce revenue.
• In industrial markets, firms may wish to buy more of a product as the price
rises because price is seen as a clear indicator of quality and buyers may
not be interested in cheap products due to quality concerns.
Pricing Decisions
• Demand elasticity is calculated as a

percentage change in demand caused by a 1%
change in price.
A B
Price Price
Demand Demand
Pricing Decisions
• Market segment illustrated in curve A exhibits elastic demand, meaning a 1% change in price
causes a change in demand of more than 1%.
• Segment B shows inelastic demand where a substantial change(more than just 1%) is needed
to cause change in demand as a 1% change in price will cause far less than 1% change in
demand.
• Demand will be inelastic for industrial products where customers need is urgent, products
are strongly differentiated, compete against few alternatives, are complex & difficult to
compare, involve high switching costs, customers see price as being a quality indicator.
• Competitor analysis: Under oligopolistic market conditions, the decisions of each competitor
directly affects its rivals(interdependence).
• The legal price behavior under oligopoly is price leadership, where the industry leader is
closely watched by rivals who follow its lead in pricing decisions.
• When demand is slack & there is overcapacity, the price leader is the first one to reduce
prices giving rivals a signal to do accordingly.
• When industry is operating at near to capacity the leader will be the first to raise price, and
rivals will follow.
• There are illegal or unethical ways of price fixing by collusion.( anti-competitive pricing, price
fixing, price discrimination, predatory pricing or dumping).
• Pricing is more or less a continuous process, in which pricing decisions must be constantly
updated to account for factors like new product features, competitor pricing strategies,
technological changes, changes in taxation or raw material costs like fuel, electricity etc.
Pricing Decisions
• Most common pricing objectives are profits, sales volume, sales revenue, market
share, image creation, survival competitive parity, barriers to entry.
• Depending on the pricing objective followed, each competitor will have different
response to price changes.
• If the objective is to increase market share, then competitor is most likely to match
price reduction.
• If the objective is to maximize profits, then the competitor’s response to price cut
will be different , such as improvement in quality or customer service.
• A competitor’s response to a price change depends on his mind set. Hence, it is
essential to understand and study business philosophy, internal culture, past
practices to competing firms so as to predict his response.
• Some may react strongly to a price cut, some may react very selective way.
• Government regulations: Industrial firms must be aware of the effect of
government regulations on pricing decisions.
• To protect consumer interests, government makes certain laws making price fixing
or price cartels illegal. In India, we have CCI to look after such issues and
investigate issues relating to price fixing by industrial firms.
Pricing Decisions
• We have seen factors an industrial marketer must analyze like demand,

competition, costs, government policies which influence pricing decisions.
• The next step is to decide appropriate pricing strategy.
• These strategies will be different depending on product, market situations.
• Here we will consider pricing strategies followed for situations like competitive
bidding in competitive markets, pricing of new products.
• A huge business volume is transacted through competitive bidding, mainly to
government sector.
• In government bidding, generally the orders are decided in favor of lowest price
bidder(L1).
• In private sectors, orders or contracts are generally finalized based on the critical
evaluation of bidders’ quality, design, delivery, price factors.
• Competitive bidding can be either closed or sealed bidding where bidders respond
to newspaper tender notices for certain products or services.
• These bids are deposited by suppliers in a tender box kept at the buyer’s place
with a specific date and time of closing of the bid.
• These bids are opened on a specified date & time in presence of bidders.
Pricing Decisions
• Each bidder’s price and commercial terms are read out during the opening and
order is placed on the lowest price bidder.
• If the volumes or value is large, the government buyer may decide to place orders
not only on L1 but also on L2 & L3.
• These orders will be placed on the decreasing percentage of share of total share
provided L2 & L3 agree to match L1 prices.
• In open or negotiated tender bidding, suppliers submit bids and the buyer after
studying the product and prices as well as terms & conditions negotiates technical,
commercial, delivery issues with each bidder who is short-listed.
• Such a method is followed in private sector.
• Open bidding is a combination of bidding & negotiation.
• Competitive bidding : The strategy used is probabilistic bidding which assumes
that the pricing objective I profit maximization and secondly the buying
organization will decide the order on the lowest price bidder.
• Variables used are a) the amount of price or the price bid b) expected profit if the
bid price is accepted & c) the probability of acceptance of the bid price.
Pricing Decisions
• An industrial marketer seeks to optimize the trade-off between the bid price or
profit on the one hand and the probability of winning the contract on the order.
• The most difficult task is to estimate the probability of the acceptance of its bid
price as being the lowest.
• This depends on the marketer’s knowledge of the competitors’ costs, strengths &
weaknesses & the mind set.
• Pricing new products: Price-positioning strategy takes into account these factors-
the price itself, customer benefits derived from using the product or service,
competitor positioning.
• The strongest price-benefits tradeoff is offered by the market ruler position.
• This position is difficult to achieve because delivering enhanced benefits to
customers generally involves additional costs, making it difficult to offer low price
while achieving an acceptable profit margin.
• The pricing strategies available for new product at the introductory stage are
skimming(high initial cost) strategy & penetration(low initial price) strategy.
• To decide on any strategies, the marketer must study the price from industrial
buyers’ perceptions.
Pricing Decisions
• Another factor to be considered is how soon the company should recover the
investment on the new product.
• Skimming strategy is used for new product which is to be purchased by a market
segment that is not sensitive to initial high price.
• It has the advantage of recovering the investment sooner by generating larger
profits.
• Thereafter, the price will be reduced to reach other price sensitive segments.
• The disadvantage is that it attracts competition due to high profits.
• Hence such a policy is used for new products which are distinct, high in
technology, or capital intensive( which can create barrier to competition).--
Electronic items like new models of smart phones.
• Penetration strategy is used when price elasticity of demand is high or buyers are
price sensitive and when strong threats exist from potential competitors, when
there are possibilities of unit cost reduction & distribution with volume increases.
• This can give a company cost leadership over competition and can achieve long-
term profitability goal through large market share.
Pricing Decisions
• Pricing policies for industrial products can change as the product moves through
various stages of life-cycle.
• Pricing policy is a key factor in each of the stages.
• During growth phase, new competitors enter the market & more customers use
the product.
• So, the marketer of an industrial product will face pressure of lowering prices
below the introduction stage.
• In the growing market, new competitors will enter and the marketer will be force
to differentiate the product & seek new markets.
• As more & more competitors enter with similar offerings, buyers of the industrial
product will develop more than one supplier, thereby putting more pressure on
the firm which introduced the product first in the market.
• In the maturity stage, when competitor products are well established and there is
fierce competition, the marketer has to fight for market share of his competitors
by pricing strategy of matching the competitor prices by lowering it, if required.
• In a declining stage of the cycle, if the product quality reputation is good, the firm
can depend on cost reductions rather than price cutting to make more profits.
Pricing Decisions
• One more strategy is to cut prices to increase sales volumes & use this product to
help sell other products in the product-mix.
• Industrial marketers deal with different types of customers– users, OEMs, dealers,
bulk users—who buy in various quantities and are located in different
geographical locations.
• To account for these differences, pricing policies are evolved.
• Industrial firms generally do not set a single price but a set of price structure that
cover different product items having different sizes, and specifications of a
product.
• The pricing plan will be determined by analysis of current situation(overview of
market & SWOT analysis), strategy determination(strategy & objectives), and
implementation & control process.
• A wide range of different functions within a company have interest in pricing
decisions. Examples are senior management, sales, marketing, finance, operations,
customer service.
• Pricing is a cross functional activity involving several people from different
departments. Hence, some companies have pricing committees comprising these
stakeholders as each brings in his own perspectives & concerns.
Pricing Decisions
• Each department tends to have its own perspective on pricing decisions, and these
perspectives may conflict, thus influencing pricing decisions.
• Sales force has an important role to play in mediating between the company & its
customers with respect to pricing decisions.
• Since sales people are closest to customers they are expected to understand
customer’s valuation of the company’s product offerings better than anyone else
in a company.
• Competitive bidding : Four basic auction mechanisms are English, Dutch, first-
price sealed bid & second price sealed bid auctions.
• The English auction is an ascending price auction in which the last remaining
bidder receives the goods by paying the amount.
• The Dutch auction starts at a high level & the price falls until the first participant
finds the price low enough to submit a bid and thus he receives the goods at the
price lower than the start of auction price.
• These two types of auctions are real time auctions.
• Sealed –bid auctions are not real time where a bidder submitting highest bid price
is the winner.
Pricing Decisions
• Ethical issues: The main ethical issues that arise in B TO B pricing decisions are
anti-competitive pricing, price fixing, price discrimination and predatory pricing or
dumping.
• Anti-competitive pricing arises when a group of producers collude to raise prices
above the level that would apply in a freely operating market.
• Such pricing policies are unfair and damaging to the free enterprise system and is
prohibited by law in India and many other countries.(US, EU, Japan).
• Companies may be tempted to enter explicit or implicit price-fixing arrangements
because they believe that otherwise there is a risk of a price war leading to
financial losses.
• Unethical pricing practices arise particularly in industries where competitive
tendering is common.
• Collusive tendering occurs where there is an agreement between competitors
either not to tender or to tender in such a manner as not to be competitive with
one of the other renderers'.(defense, construction)
• The essence of collusion in tendering is that there is an agreement between
bidders to win the contract for one bidder with others getting benefits.
Pricing Decisions
• Collusion aims to undermine competitive process by avoiding price competition

leading to buyers’ disadvantage of more payment than they otherwise would pay
for a product.
• Dumping is selling of exported goods in a foreign market below the price of the
same goods in the home market.
• Leasing : Industrial buyers have an option of either buying or leasing a product.
• A lease is a contract through which the asset owner—called lessor– extends the
right to use the asset to another party--lessee in return for periodic payment of
rent over a specified period.
• Many capital goods like construction equipment, material handling equipment etc
are leased out to users.
• The trade off between buying & leasing are considered before any such decision.
• The benefits of leasing are—conserving capital, gaining tax advantage, getting the
latest products.
• The cost of leasing includes the lease payment and sacrifice of asset’s salvage
value.
Pricing Decisions
• Industrial buyers have to evaluate the costs/benefits of the lease based on

whether the cash flow benefits of the lease exceed the cash flow costs.
• There are two types of lease: a)financial(or full payment) & b) operating(or service
or rental) leases.
• Financial leases are non-cancellable, long term agreements and are fully
amortized.
• The sum of the lease payments over the contract period equal or exceed the
original purchase price of the capital item.
• A buyer is generally responsible for operating & maintaining expenses.
• The buyer is given an option of purchasing the asset at the end of the contract
period, on the basis of the assets’ fair market value.
• Operating leases are short term, cancellable agreements, and not fully amortized.
• Because the asset is provided for a short period, the purchase option is not
included.
• The rates for operating lease are usually higher than for financial lease because the
responsibility of operating expenses and the risk of obsolescence are that of the
lessor.
Pricing Decisions
• Industrial firms marketing capital goods under

leasing option should consider prospective
customer’s needs & problems.
• Some companies use leasing option as a
marketing facilitator tool for their products(xerox
& other copying machine makers).
• To stimulate demand, many companies offer
attractive lease rates for new capital goods so
that the potential customers can try new
products.
Communication for B TO B marketing
• Communication is about exchange of messages between a vendor & a specific

prospective or actual customers.
• The communication mix for industrial products is different than consumer
products due to the technical nature of industrial products, relatively smaller
number of industrial buyers, and complex nature of organizational buying process.
• Communication mix consists of direct marketing(using online & offline media),
personal selling, advertising & sales promotion, publicity & building personal
relationships.
• Communication provides a means of signalling a firm’s value proposition to its
customers.
• It is central to positioning strategy and firms must ensure that consistent messages
are conveyed to target audiences.
• The signals and messages communicated by a company will shape a customer’s
view of an organization’s brands as well as the company itself.
• It is therefore important that decisions taken by a company are consistent with its
core values & customer expectations so that its brands & corporate image are
enhanced.
Communication
• Brands can be narrowly defined as name, term, sign or symbol or design, but more
broadly brand represents a shared desirable & exclusive idea embodied in
products, services, places or experiences.
• A brand consists of tangible features & intangible associations or functional &
emotional values.
• At the company level, corporate brand identity is developed within an
organization, resulting in the expression to target audiences of a company’s
enduring traits via selected symbols, behavior and communication activities.
• In contrast, corporate brand image assumes an external perspective & signifies the
meaning by which an organization is known & the way people describe, relate or
remember it.
• Communication strategy involves planning, implementing, & controlling an
organization’s communication with target markets, audiences to achieve specified
objectives with each audience.
• A variety of tools are used such as advertising, sales promotion, public relations,
personal selling, direct marketing.
• These are combined into a communications program to enable a company to
engage buyers, other stakeholders.
Communication
• Communication Objectives: Objectives are related to what a firm wants its target
audience to do with the information transimitted via its communication tools.
• Many objectives are associated with “buyer readiness states”.
• Various stages in communication are related to the process enacted by a firm to
acquire & retain customers.
• Awareness is developed when potential customers become familiar with a product
or a brand.
• At this stage a company is trying to generate leads by directing its communication
campaign to all potential customers within a target market segment.
• Here a company will use mass communication, interpersonal tools like
advertisement & PR ,DM.
• Interest is next step, showing buyers’ desire to learn more about what(product,
brand, company), and it is trying to trigger a response from target audience to
generate enquiries and encourage the audience to seek out more information.
• Desire is the recognition by the buyer that when a supply needs arise, a particular
brand or a product is a preferred option.
• To reach this point, target customers will evaluate the product, the brand &
company information available from alternative suppliers.
Communication
• The number of prospective customers within a target for whom a

company becomes a potential supplier falls, as those interested
customers evaluate & eliminate some companies as potential
suppliers.
• Trade shows & field sales calls assume more importance at this
stage, digital media , company websites, are equally valuable.
• From the evaluation stage, the business marketer uses
communication tools to elicit specific courses of action like placing a
trial order.
• Prospects who place trial orders who become new customers will
need to enter into dialogue with the supplier.
• At this stage personal selling –field sales or inside sales teams-
become critical communication tools.
Communication
Communication Communication tools
Objectives Target customers
Advt; DM; Industry
Awareness Leads conferences
Interest Brochures, Videos,

Enquiries website, Trade Shows
Evaluation Telemarketing, Field

Prospects Sales Visits
Trial New customers Inside sales calls
Purchase Established customers Transactional &

relationship sales teams
Communication
• These various stages of the state of buyer readiness that is assumed to be rational
over which marketer has control.
• Marketer sends messages via communications tools to affect the attitudes &
behavior of target audiences.
• In reality, customers are not passive recipients of messages who search the
information they want & also send messages to marketing organizations.
• The key to success is to understand the type of information & messages preferred
by customers and the format in which they are required.
• Communications mix: Promotional tools at the business marketer’s disposal are
not interchangeable & their effects at the different stages of purchase process are
not the same.
• So, a company has to select tools and their relative importance in the
communications mix to reflect marketing communication objectives and the way
in which information is used by its target audience.
• Personal, advertising, trade shows, technical literature are most important.
• Now, digital media is added to the list of very important source of communication.
Communication
• Trade shows are the venues where potential buyers visit prospective sellers.
• Most visitors have a specific plan to buy a product or influence the purchase
decision for a particular product.
• In consumer markets intermediaries like retailers, distributors are the means
through which producers are able to present their products to target customers.
• In business markets, distributors as well as producers /suppliers will participate
directly in shows that are specific to their industry.
• There are many sites in different countries where trade shows for different
products are held either once a year or once in two years. (Hannover is the largest,
Mila, Frankfurt, Cologne, Paris etc).
• They can be regional or within a country or international.
• Trade shows can be used to showcase a country’s expertise in a specific industrial
sector. Farnborough Air Show).
• Trade shows perform selling & non selling tasks.
• Non-selling functions include building & maintaining company image, gathering
competitor information, product testing/evaluation, sometimes trying to know the
latest technology available, etc.
Communication
• Key sales related functions are –identification of prospects; gaining access to key
decision makers; disseminating facts about vendor products, services & personnel;
actually selling products; servicing problems of current customers through
contacts.
• A company’s exhibition strategy should complement other communication tools.
• Trade shows are useful in the early stages of the purchase decision process and in
identifying & qualifying prospective new customers.
• As customers progress to evaluating potential suppliers to reach purchase
decision, for closing a sale or service issue, trade shows are less valuable than
personal selling.
• These shows are costly as they demand investments, but can be economical in
terms of company benefits.
• For example, it can cost less to make an initial contact through trade shows
compared to personal visits by sales person.
• A salesperson might be able make 4 to 6 calls a day, trade show participation can
generate 40 to 50 leads in a day.
Communication
• Advertisement: Represents the largest share of the

communications budget for a lot of businesses.
• It allows a firm to communicate with large audiences at a far lower
average cost per consumer than with personal selling.
• It is used to engage representatives of target customers.
• Useful in communicating with & influencing behavior of other
stakeholders like government bodies, financial markets, pressure
groups.
• It supports a business marketer in personal selling as it is used to
create awareness amongst target customers, provide information &
identify potential leads for sales personnel.
• It can make a positive contribution to a firm’s sales effectiveness
because have been exposed to supplier advertisements & sales
revenues per call can be higher & sales personnel rated more highly
on product knowledge, service, enthusiasm.
Communication
• Public relations: Is used to manage the image of an organization

with its stakeholders & to close the gap between a company’s
desired image & the way it is perceive by various publics.
• In comparison to other tools of communication, PR has a broader
scope and its use can make marketing activities easier.
• In dealing with external publics it can be used to attract & keep
good employees, overcome misconceptions relating to an
organization, build goodwill among publics such as government
bodies, local communities, suppliers, distributors, suppliers.
• Build an organization’s prestige & reputation.
• Promote its products.

B To B Marketing-1

Diunggah oleh

Informasi Dokumen

Judul Asli

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

B To B Marketing-1

Diunggah oleh

Hak Cipta:

Format Tersedia

B-TO-B MARKETING

• Whereas, mass advertisement makes sense in consumer markets(

• Now, with current advancement in IT technology, it is possible to send

• To function, an organization requires access to supply

• Perfor. Feedback,evaluation yes yes yes

• In smaller firms there may not be an identifiable group or department

• While organizational structures, policies and processes create a

• Targeting strategy: Three strategic approaches: undifferentiated, differentiated and

• Some of factors for selecting target segments could be-

• Developing a positioning strategy:

• -- Service variables offered by industrial firms like pre-sales services(providing

• Promotional, advertisement tools are used over a period of time to deliberately

• --In industrial markets the positioning strategy has to be communicated in

• After selecting target segments, the target market strategies are

• Understanding your customers’ needs is essential, but if a firm cannot create an

• --Defending the market share by differentiation may be successful in achieving

• --Where the offering requires maintenance and repair, it is important to have

• Success & failure factors of new industrial products:

• In spite of high failure rates, companies have no choice.

• New product development process:

• For an industrial product, a company , through its excellent customer

• An industrial marketing firm has to consider many factors in pricing

• B) Maximize short-term profits: Such a policy is to select a price that gives

• The new product is initially aimed at those market segments where

• 2. Demand Analysis: The demand-price relationship is elastic when small

• Variable costs of production(material, direct labor), allocated overhead costs, full

• Cost-benefit analysis: While conducting demand analysis, it is useful to carry out

• Thus, an industrial marketer can set an appropriate price by understanding

• Demand elasticity is calculated as a

• We have seen factors an industrial marketer must analyze like demand,

• Collusion aims to undermine competitive process by avoiding price competition

• Industrial buyers have to evaluate the costs/benefits of the lease based on

• Industrial firms marketing capital goods under

• Communication is about exchange of messages between a vendor & a specific

• The number of prospective customers within a target for whom a

Interest Brochures, Videos,

Evaluation Telemarketing, Field

Trial New customers Inside sales calls

Purchase Established customers Transactional &

• Advertisement: Represents the largest share of the

• Public relations: Is used to manage the image of an organization

Anda mungkin juga menyukai