Transcript MBA 860 - Adv. Mkt. Strategy

Business Marketing
By Frank G. Bingham, Jr. and Roger Gomes
ISBN: 0-658-01534-6
Published by NTC/Contemporary Publishing Group, Inc.
4255 W. Touhy Ave.
Lincolnwood (Chicago), IL 60712-1975 U.S.A.
©2001 NTC/Contemporary Publishing Group, Inc.
Chapter 1
Introduction to the
Business Marketing Environment
Chapter Outline
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Business Marketing: An Overview
Why Study Business Marketing?
How the Business Market Differs from the Consumer
Market
Characteristics of Business Demand
The Nature of Business Buying Behavior
A Classification of Business Goods and Services
Business Customers
Business Marketing Planning and Strategy Formulation
Format of This Text
What Is Business Marketing?
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What Is Marketing?
• One Definition: “The process of planning and executing the
conception (product), pricing, promotion, and distribution of
want-satisfying ideas, goods, and services to individuals and
organizations.”
What Is Business Marketing?
• Those activities that facilitate exchanges involving products
and customers in business markets
• A business transaction between a professional seller
(representing a selling company) and a professional buyer
(representing a buying company)
• Activities in which goods or services are sold for any use other
than personal consumption
• Note: It is not the nature of the product; it’s the nature of the
transaction.
(continued)
What Is Business Marketing?
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Is it a consumer transaction or a business transaction?
• You buy a gear to fix your mountain bike.
• Ford buys the same gear to fix a machine.
• Xerox buys soft drinks for its cafeterias.
• You start a landscaping business and purchase a
lawnmower.
• Coke buys TV ad time or sugar.
• The U.S. government buys…anything.
Business versus
Consumer Marketing
Characteristic
Business Market
Consumer Market
Sales volume
Purchase volume
Number of buyers
Size of individual buyers
Location of Buyers
Greater
Greater
Fewer
Larger
Geographically
concentrated
Closer
More direct
Multiple (buying center)
More complex
Yes
Greater
Personal selling
Smaller
Smaller
Many
Smaller
Diffuse
Buyer-seller relationship
Nature of channel
Nature of buying influences
Type of negotiations
Use of reciprocity
Use of leasing
Primary promotion method
More impersonal
Less direct
Single
Simpler
No
Smaller
Advertising
Philosophy Test
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What is the purpose of a business?
• To some people, maximizing shareholder wealth is consistent with
an accounting philosophy—but not marketing concept philosophy.
• To manufacturing folks, the purpose might be to make the world’s
best widgets.
• To marketers, the purpose is to get and keep customers.
• To a customer-driven company, it would be the same.
• The principal task of the marketing function (operating under the
marketing concept) is not to manipulate customers to do what
suits the interests of the firm but rather to find efficient means of
making the firm do what suits the interests of the customers.
Characteristics of
Business Demand
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Derived Demand
Inelastic Demand
Fluctuating Demand
Joint Demand
Scope and Importance
“Derived demand” says that demand for a business product is
linked to demand for a consumer good. This means consumer
demand affects business marketing up a vast network of channels.
For example, when OfficeMax experiences increased demand for
paper clips, the effect is felt by its suppliers, paper clip
manufacturers, and their suppliers.
Classification of
Business Goods and Services
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Major equipment
Accessory equipment
Process materials
MRO (maintenance, repair, operating) supplies
Fabricated and component parts
Business services
Raw materials
Major Categories of Customers
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Commercial enterprises
• Indirect channel members and facilitators
• OEMs (original equipment manufacturers)
• Users = customers
Governmental organizations
Institutions
Scope and Importance
of Customers
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350,000 manufacturers
300,000 business service providers
400,000 wholesalers, distributors, agents
2.5 million retailers
80,000 government agencies (federal, state, local)
Plus nonprofits—hospitals, museums, parks, universities,
political parties
Major Uses of Products
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For additional production (e.g., components are combined into
subassemblies and become part of the finished product)
For use in operations, but not part of the finished product
For resale
Business Marketing View
of a Consumer Product
Identify what purchasing bought.
The picture suggests quantities of the following
were purchased:
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Conveyer
Conveyer replacement and
maintenance materials
Components going down
conveyer
Raw material and components
of components
Assembly station magnifier
Power tool with blue cord
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Assembly fixture
Table and chair
Trucks with components on
them
Floor cleaning systems
Lighting systems
Heating/AC systems
Uniform vest
Health insurance
How Do They Buy It?
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Items made from:
• Steel
• Wood
• Plastic
• Chemicals
• Printed forms
• Transportation
• Electronics
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How do you pick one
supplier from the
thousands out there?
How do you get them to
purchase products from
your company?
Remember What
Business Marketers Do!
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Identify customers.
Identify customer needs and sell benefits.
Communicate with customers (contact personally, reach through
media, build relationships, sell benefits).
Communicate internally, build relationships, sell benefits.
Analyze buyer behavior, identify key buying center influencers
and their roles.
Develop products and services (complete packages of
attributes).
Study the market and competitive environment (economic, legal,
technological).
(continued)
Remember What
Business Marketers Do!
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Set prices and terms, negotiate, sell benefits.
Make products available at the right time, in the right place, in
the right quantity, in the right condition.
Allocate resources across products.
Create, implement, monitor, control, and continuously evaluate
the marketing mix and strategic program to optimize customer
satisfaction and meet profit objectives.
Be a solution to customer problems, sell benefits.
Be challenged—Use business judgment—Make decisions—
Make decisions—Make decisions.
Mission Statements
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Mission Statements reflect an organization’s purpose, values, and
customer orientation.
What can you tell about the people and culture that produced each of the
following mission statements?
• Company 1: “We truly care for each customer. We build enduring
relationships by understanding and anticipating
our customer’s needs and by serving them better each time than the
time before. Our customers can count on us to consistently deliver
superior products and services that
help them achieve their business objectives.”
• Company 2: “We are dedicated to maintaining our position as a
profitable organization and a leader in our industry. In this way, we
provide our shareholders a solid return on their investment, our
employees with the benefits of gainful employment, and the
surrounding community with a share in our prosperity.
(continued)
Mission Statements
• Company 3: “To be the number one _______ company in the world
and among the premier industrial concerns in terms of quality,
profitability, and growth.”
• Company 4: “We are dedicated to the creation and demonstration
of a new corporate concept of linked prosperity. Our mission
consists of interrelated parts:
(a) make and distribute the finest quality innovative products, (b)
operate the company in such a way that actively recognizes the
central role that business plays in the structure of society…by
improving the quality of life of the broad local, national, and
international community.”
(continued)
Mission Statements
• Company 5: “We believe that our past, current, and future
successes come from a total dedication to excellent service to
those who buy our products. Satisfying our customers and
consumer needs in a superior way is the only reason we are in
business.”
• Company 6: “We are in business to please our customers…to
provide greater value than our competitors.”
• Company 7: “______ is a global company committed to building
long-term growth in volume and profit and to enhancing its
worldwide leadership position by providing products of superior
value.”
Don’t Forget
the Marketing Concept
The Marketing Concept is a business philosophy which states that
the customer’s want-satisfaction is the social and economic
justification of a company’s existence; consequently, all company
activities must be devoted first to determining what the customer’s
wants are and then to finding a way to satisfy those wants while
still making a satisfactory profit.
Chapter 2
The Organizational Buying Process
Chapter Outline
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Objectives of Business Buyers
Profile of a Professional Buyer
The Changing Role of the Buyer
The Business Buying Process
Business Buying Situations
The Buying Center
The Materials Management Concept
Purchasing and the Internet
Environmental Forces and Buying Decisions
Purchasing's Impact Upon Company Profit
Typical Job Ad
Square D Company has a Buyer position available at the Asheville,
NC, location. Square D is a manufacturer of electrical control
products. Responsibilities include: developing, communicating,
and implementing strategies and tactics to establish, manage, and
improve all aspects of supplier performance; acting as a liaison
between the external supplier base and manufacturing operations;
analyzing and developing strategies to manage commodity
availability and pricing market conditions.
(continued)
Typical Job Ad
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Prefer a BS degree in business with knowledge of a JIT
environment. CPM or APICS certification a plus. Experience in
value analysis required. This position requires a highly
motivated self-starter with excellent verbal and written
communication skills and strong computer experience.
Steps in the
Business Buying Process
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Recognizing the need
Developing product specifications
Soliciting bids from potential suppliers
Making the purchase decision
Issuing the contract
Inspecting delivered goods for quality
Evaluating vendor performance
Value Analysis:
Comparison of Function to Cost
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Select a relatively high-cost or high-volume purchased item (part,
material, or service).
Find out how the item is used and what is expected of it—i.e., its
function in detail.
Ask the following questions:
• Does its use contribute value?
• Is it cost-proportionate to usefulness?
• Does it need all its features?
• Is there anything better, at a more favorable price, for the
intended use?
• Can the item be eliminated?
• If the item is not standard, can a standard item be used?
(continued)
Value Analysis:
Comparison of Function to Cost
• If it is a standard item, does it completely fit the proposed
application, or is it a misfit?
• Does the item have greater capacity than required?
• Is there a similar item in inventory that could be used
instead?
• Can the weight be reduced?
• Are closer tolerances specified than are necessary?
• Is needless machining performed on the item?
• Are unnecessarily fine finishes specified?
• Is commercial quality specified?
• Can you make it now? Can you buy it for less?
• If you are making it now, can you buy it for less?
• Is the item properly classified for shipping purposes to
obtain the lowest transportation rates?
(continued)
Value Analysis:
Comparison of Function to Cost
• Can cost of packaging be reduced?
• Are you asking your suppliers for suggestions to reduce
costs?
• Do material, reasonable labor, overhead, and profit total the
item’s cost?
• Will another dependable supplier provide it for less?
• Is anyone buying it for less?
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Now:
• Pursue those suggestions that appear practical.
• Get samples of the proposed item(s).
• Select the best possibilities and propose changes.
Quotations and Contracts
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RFQ: Request for Quotation
RFP: Request for Proposal
Boilerplate: Standard legal clauses (fine print) on RFQs, your bid, and
the customer’s order. May contain terms of sale that contradict terms
on your bid, and often contain penalties for nonperformance.
You may receive an RFP, send a proposal, receive an RFQ, send a bid,
receive an order, and ship products with an invoice.
A contract may be involved for long-term requirements.
If company-to-company EDI is used to order, customer’s boilerplate
may be sent once per year.
Internet purchases give seller an advantage, in that seller’s boilerplate
terms are presented, but not customer’s. A wise buyer might add a
reference to them.
Evaluating Potential Vendors
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Basic Considerations in Evaluating Potential Vendors
• Performance Considerations
• Plant Visits
• Geographic Locations
• Capacity
Vendor-Rating Approaches
• The Categorical Plan
• The Weighted-Point Plan
• The Cost-Ratio Plan
Single Sourcing
Between XYZ Corp., the buyer, and ___________, the seller. Term of contract:
January 1, 2000, through December 31, 2002.
1. Seller shall furnish all goods and services listed as scheduled and released
F.O.B. destination without additional charges.
XYZ Part #426F37 Revision A 125,000,000 units @ $55.00
per thousand units
XYZ Part #426588 Revision D 5,000,000 units @ $15.78
per thousand units
XYZ Part #426C56 Revision E
450,000 units @ $525.00
per thousand units
2. Above quantities may be adjusted as necessary by XYZ Corp. over the term of
the agreement.
3. Seller will provide technical support as required by XYZ Corp. at no additional
cost.
(continued)
Single Sourcing
4. Goods will meet all XYZ Corp. product and quality specifications.
5. If delivery is not completed within the time specified, XYZ Corp. reserves the
right to any or all of the following:
A. Terminate the agreement.
B. Purchase replacement goods at seller’s expense.
C. Bill seller for all downtime costs.
6. Seller will, at no cost to XYZ Corp., have their materials certified by an
independent laboratory as meeting XYZ Corp. specifications.
7. Seller is restricted from making any changes in the product after sample
approval is granted, including but not limited to materials,
production
operations, and packaging.
8. Sellers will allow XYZ Corp. personnel access to all areas and records
necessary to verify compliance.
(continued)
Single Sourcing
9. Seller shall assume all responsibility in connection with liability based on
seller’s performance and for the performance of their goods, including, but not
limited to patent infringement, civil liability, and criminal liability.
10. Seller shall treat as confidential all information, data, specifications, and
processes involved in this agreement.
11. XYZ Corp may terminate this agreement by way of written notice with liability
limited to products actually produced to a scheduled delivery date 10 days in
the future.
12. Part price is fixed for the term of the agreement; 24 months from the agreement
date.
13. Seller agrees that all terms expressed here are in addition to the terms of the
Uniform Commercial Code, laws of the State, and laws of the United States.
Types of
Business Buying Situations
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New-task buy: Business buying situation that is new and very
different from anything that the buyer has faced previously.
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Straight rebuy: Most common type of business buying
situation; buyer purchases a part, material, or service routinely,
with little thought going into buying process.
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Modified rebuy: Reevaluation of alternatives; necessary
because buying requirements have changed such that relatively
routine buy or purchase no longer is routine.
Roles of Buying Center Members
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User: Person who will use the product in question; influence can
range from minimal to major.
Gatekeeper: Keeps tight control on flow of information to other
buying center members; can open or close the gate for salespeople.
Influencer: Provides information to other members for evaluating
alternative products or sets purchasing specifications; can operate
within or outside the buying center.
Decider: Makes buying decision; often difficult to identify.
Buyer: Assigned formal authority to select vendors and complete
purchasing transaction.
Materials Management Concept
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Materials management: Grouping of functions involved in obtaining
and bringing materials into a production operation.
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Usually one manager responsible for planning, organizing,
motivating, and controlling all the activities principally concerned
with the flow of materials into an organization.
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View material flow as a system.
MRP Systems
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MRP = Materials Requirement Planning
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MRP systems: Large computer systems used to plan and schedule
operations using a “push” approach.
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Starting from the order due dates and forecast, MRP considers every
required raw material, operating supply, and component part, their
order of use, and what equipment they will occupy.
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Backs into a schedule of what will have to be done when, including
what will have to be ordered when and received when.
Just-In-Time Systems
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JIT = Just-In-Time
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Adopted and implemented by many original equipment
manufacturers (OEMs) and suppliers of component parts and
materials.
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An operational philosophy thought to epitomize the relationship
marketing model.
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Uses a “pull” approach; much more than material arriving just in
time.
JIT Features
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Zero defects—Strict quality control
Frequent, reliable delivery of quantities as needed
Close location
Advanced telecommunications, EDI.
Single sourcing—Customer-supplier partnerships/alliances
Value analysis
Early supplier involvement
Evergreen contracts
Customer access to financial and process information
Integrated JIT versus
U.S. Manufacturing (pre-1985)
JIT System
Pre-1985 U.S. Mfg.
What it is
An integrated
philosophy of
operating a
business
The way it has
always been done
Raw material and
in-process inventory
A liability to be
eliminated
to maximize
Protection against
problems, necessary
machine
Immediate needs
only
Based on EOQ and
efficient long
production runs.
utilization
Order size
Integrated JIT vs.
U.S. Manufacturing (pre-1985)
JIT System
Pre-1985 U.S. Mfg.
Production setup time
Fast at insignificant
cost; flexible
manufacturing
(Ex: stamping die
change =5 minutes)
Low-priority concern
(Ex: same die change
=5 hours)
Suppliers
Part of the teamsingle source
Adversarie-multiple
source
Delivery
Must arrive within
small time window,
go right to the line,
packaged for
assembly efficiency
Arrives on due date
plus or minus,
packaged for
warehouse storage
Integrated JIT vs.
U.S. Manufacturing (pre-1985)
Purchasing
JIT System
Pre-1985 U.S. Mfg.
Involve supplier in
design; long-term
contracts at fixed
prices
recognize need
Design in secret,
competitive bidding;
contract for current
requirement;
for price increases
Efficiency
improvements
Workers see as
strengthening
company
Workers see as threat
Production control and
scheduling
Demand “pull”—
Kanban to minimize
in-process inventory
Forecast “push”—
maximize machine
utilization
Kanban Exercise
1. Fill in the empty seats so that all the empty seats are in the back of your
row.
2. Take the piece of paper handed out, put your name on it, and put it at
your feet in the isle between your chair and the person in front of you.
This is the product you have just assembled (like a newly assembled
door you’ve just put a handle on).
3. Your job on this assembly line is to repeat this process, but only when
you see that the next person in the operation has taken the piece you
just assembled. (If the paper with you name on it is still at your feet, do
nothing).
SEE HOW DEMAND “PULLS” THE ASSEMBLY OPERATIONS?
Strategic Alliances between
Suppliers and Customers
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Bose Corporation
• Reduced production
costs
• Reduced staff
• Allowed for just-in-time
delivery
• Streamlined and costeffective product
development
• Consistently met
customer requirements
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Benefits to Bose Suppliers
• Evergreen contracts
• Improved production
efficiency
• Elimination of sales calls
• Improved communication
Environmental Forces and
Buying Decisions
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The Economic Environment
The Physical Environment
The Competitive Environment
The Technological Environment
The Legal-Political Environment
The Ethical Environment
ISO 9000 Certification
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ISO= International Organization for Standardization
ISO 9000 Certification: a series of standards that include:
• Effective quality system
• Valid measurements and calibration
• Appropriate statistical techniques
• Lot control, part tracing, record keeping
• Internal process auditing
• Employee quality training
Mandates:
• Define appropriate quality standards
• Document processes
• Prove consistent adherence to both
(continued)
ISO 9000 Certification
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Required by U.S. Dept. of Defense, Japan, European Community, and
others. Requirement includes second-tier subassembly and component
makers (and their suppliers, etc.).
Prior to ISO 9000, most companies had their own versions of quality
systems (many modeled on military specifications).
Certification assures customers that suppliers have capabilities and
systems to provide high-quality goods. (Doesn’t assure that particular
products are high quality, just the standards of the system they were
produced under.)
(continued)
ISO 9000 Certification
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Other International Standards receiving attention:
• AS 9000 (aerospace)
• ISO 14000 (environmental management
• SA 8000 (social accountability)
ISO creates standards; typically, consultants help company
adapt systems to meet the standards. When ready, a
certification company audits the systems and awards
certification (and provides periodic checking).
Adoption cost = ~$250,000–$500,000 for average-size plan
operation.
Why Is ISO 9000
a Marketing Issue?
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If customer does not require it, ISO 9000 certification can be a differential
advantage.
If customer does require ISO 9000, marketers ensure that customer needs
are met. If marketing is confident that their quality department can handle
ISO requirement, marketing can deal with other aspects of customer’s
needs. If marketing is not sure, then they need to be involved until they
are. This is true of any customer requirement (e.g., technical, delivery,
packaging).
Keep in mind that marketers decide which customers to serve with what
marketing mixes. For example, marketing can decide that it is in the
company’s best interest to target customers who require ISO 9000, but
not approach customers who require AS 9000.
Today’s marketers will need to be familiar with ISO specifications. Find
out more at www.ISO.ch and www.bsi.org.uk.
Chapter 3
Marketing Research
and Information Systems
Chapter Outline
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Differences Between Business and Consumer Marketing
Research
Technology and Marketing Research
Major Tasks of Marketing Research
Marketing Research Versus Marketing Information Systems
Database Development
The Marketing Research Process
Qualitative Versus Quantitative Research
The Make-or-Buy Decision in Research
Developing Information Sources
Marketers with Marketing Research
Responsibility
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Vice President of Marketing
Director of Marketing
Marketing Manager
Product Manager
Assistant Product Manager
Sales Manager
Field Salesperson
All other professional-level
marketing positions
If you would like to have one
of these positions, take
learning marketing research
skills seriously. Marketing
research is a “must-have”
core skill.
Marketing Research Assignment
Scenario:
Clemson Electronics Inc. is a high-tech electronics manufacturer
that has designed a mobile, quick-responding device to measure
and identify hazardous waste in soils. Traditionally, soil samples
are collected, brought to a lab, and processed through a series of
tests by a trained chemist. The new device is brought to the site,
requires no special training, and can quickly provide an accurate
analysis. The general manager has assigned you to develop
information upon which strategic planning will be based.
How would you respond?
Marketing Research Assignment
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Questions to consider:
•
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•
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What are the present and potential market segments?
Who are the key potential customers?
Can you develop a demand forecast for the first five years?
Who are the major competitors in each segment?
How do we compare in costs and customer benefits?
What environmental factors could favorably or unfavorably affect demand?
Are there government data that you recommend using?
Do you recommend primary research?
Can you have a report ready prior to the senior management meeting in three
weeks?
Be specific: Where would you get what information, and how long would
it take? These are the questions researchers must answer.
.
Consumer vs. Business
Marketing Research
Consumer
Business
Universe population
72.5 million households
250 million persons
Limited by industry
Respondent accessibility
Over the years, more and
more difficult
Fairly difficult
(false research, overresearched. Why respond?)
Sample size
Can be large and random
Limited by number in group
Respondent definition
Usually obvious who
to ask
Need to understand buying
center
Interviewers
Easy to train to deal with
consumers
Need to be able to deal
with executives, know
about product
Study costs
Function of sample size
Usually much more
expensive (travel, cost of
interviewer, time,
nonresponse, etc.)
Major Tasks of
Business Marketing Research
Market Potential
97%*
Market-Share Analysis
97
Market Characteristics
97
Sales Analysis
92
Forecasting (Demand Projection)
89
Business Trends
87
Competitive Analysis
87
* Percent of firms doing this type of research, based on an AMA published survey.
Marketing Information Systems

Marketing information system uses procedures, hardware, and
software to accumulate, integrate, and disseminate important
data through reports to key marketing decision makers. In
contrast, marketing research is problem or project oriented.

Can also be defined as a system that scans and collects data
from the environment, makes use of data from transactions and
operations within the firm, and then filters, organizes, and
selects data before presenting it as information to marketing
management.
Marketing Information
System = MIS
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Most common business usage of MIS = management information
system
Management information systems usually collect, organize, and report
company operating information (production, quality, labor usage, ontime delivery reports).
In general sense, a marketing information system could be included as
one type of management information system.
MIS is also an old term for a company’s computer department
(because it was responsible for management information system
hardware, software, and system operation).
The moral of the story is, refer to a marketing information system as a
marketing information system rather than MIS.
Marketing Information System
Can Be a “CRM” Subsystem
CRM = Customer Relationship Management—
an integrated software system which typically includes:
• Customer service and communication
• Sales force automation
• Campaign management
• Business intelligence
Decision Support Systems (DSS)
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Marketing information system can also be thought of as a
decision support system (DSS) for marketers.
DSS’s modeling subsystem allows you to specify what you
want done with the data and how you want it presented (e.g.,
calculate variance and standard deviation and plot versus the
top 3 competitors for the last 5 years).
To set up a DSS, you need to know what data you want to be
able to access to help in your decision making. For example,
for a pricing decision on a bid, you need:
• Product cost accounting data
• Prices charged on other products to that customer
(continued)
Decision Support System (DSS)
•
•
•
•
•
•
•
Sales call reports on that customer
Competitor bidding history
Customer benefit and total life-cycle customer value
Industry product life-cycle position
Other members of the supply chain
Economic trends in the customer’s industry
Freight cost differences for our distance from the customer
versus competitors’
Primary Phases in a
Marketing Research Project
1. Planning the Research Design
• Recognize and define problem
• Plan research design and write project proposal
2. Preparation
• Develop sampling plan
• Collect data and construct questionnaire
3. Field Operations
• Schedule interviews
• Conduct interviews
• Check to ensure questionnaire validity
(continued)
Primary Phases in a
Marketing Research Project
4. Processing
• Code and input data
• Construct computer file
5. Tabulation, analysis, and interpretation
• Generate tables
• Analyze data
• Interpret findings
6. Reporting
• Write report/oral presentation
• Follow up
Qualitative versus
Quantitative Research
Qualitative
Quantitative
Types of questions
Probing
Limited probing
Sample size
Small
Large
Information per respondent
Much
Varies
Administration
Requires interviewer
with special skills
Fewer special interviewer
skills required
Type of analysis
Subjective, interpretive
Statistical, summarization
Hardware
Tape recorders, projection
devices, video, pictures,
discussion guides
Questionnaires,
computers, printouts
(continued)
Qualitative versus
Quantitative Research
Qualitative
Quantitative
Ability to replicate
Low
High
Training of the researcher
Psychology, sociology,
social psychology,
consumer behavior,
marketing research
Statistics, decision
models, decision
support systems,
computer programming,
marketing, marketing
research
Type of research
Exploratory
Descriptive or causal
Developing Information Sources
Secondary Data Sources
• Internal Secondary Sources
• External Secondary Data
Sources
– Government Sources
– Commercial Sources
– Professional
Publications
• Secondary Data on
the Web
• Disadvantages of
Secondary Data
Primary Data Sources
• Personal Interviews
• Telephone Surveys
• Mail Surveys
• Disadvantages of
Primary Data
Secondary Information Sources
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Internal secondary data sources—financial statements,
research reports, sales reports, customer letters
External secondary data sources—published marketing
research—governmental sources (Freedom of Information Act,
bids and contracts, patent filings)
• Commercial sources—suppliers, banks, consultants, ad
agencies
• Professional publications—trade associations, journals,
shows
• Web connection (but, as always, consider the source)
Commercial Secondary Sources
To find company contacts, telephone numbers, products
produced, and size:

Thomas Register of American Manufacturers
• Most used directory of manufacturers
• Available in libraries and on Internet
• 16 volumes of manufacturers listed by product
• 2 volumes of manufacturers listed alphabetically
• 8 volumes of manufacturer’s catalogs

City Chamber of Commerce Directory—lists all member
companies alphabetically, by product and by code
(continued)
Commercial Secondary Sources

State Industrial Directories
• Companies listed by product, then grouped by location, by
NAICS code, and alphabetically
• Field salespeople love them
• Many libraries have all 50 volumes

Association Membership Directories—lists members
alphabetically, by company, and sometimes by state or county.
NAICS Codes
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NAICS = North American Industrial Classification System; replaces SIC
(Standard Industrial Classification) codes
Common for NAFTA countries
NAICS hierarchical structure:
XX
Industry sector
XXX
Industry subsector
XXXX
Industry group
XXXXX
Industry
XXXXXX
U.S., Canadian, or Mexican national
specific
http://www.naics.com/cgi-bin/search.pl
(continued)
NAICS Codes
Divides economy into 20 major industry sectors
(at two-digit level):
11 Agriculture, Forestry, Fishing,
and Hunting
21 Mining
22 Utilities
23 Construction
31–33 Manufacturing
42 Wholesale Trade
44–45 Retail Trade
48–49 Transportation
51 Information
52 Finance and Insurance
53 Real Estate, Renting,
and Leasing
54 Professional, Scientific, and Technical
services
55 Management of Companies and
Enterprises
56 Administrative and Support, Waste
Management, and Remediation Services
61 Education Services
62 Health Care and Social Assistance
71 Art, Entertainment, and Recreation
72 Accommodation and Food Services
81 Other services (except Public
Administration)
92 Public Administration
(continued)
NAICS Codes
Example of additional digits making the product more specific:
Sector
31–33
Manufacturing
Subsector
334
Manufacturing computer and
electronic products
Industry group
3346
33461
334611
Manufacturing of magnetic and optical media
Manufacturing of magnetic media
Software reproduction
Disadvantages of Secondary Data
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Recency of data
Coverage of data (adequate for your purposes?)
Sample size (adequate?)
Bias (by sponsor or objectives of original survey)
Data source
Primary Data Sources

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Personal Interviews
Telephone Surveys
Mail Surveys
Primary Survey Methods
Fill in the table.
Approach
Personal
interview
Telephone
Mail
Internet
Cost
Time
Information Information Nonresponse
quality
quantity
problem
Interviewer
bias
Disadvantages of Primary Data

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Expensive
Time intensive
Requires experimental design/survey design skill
Unwillingness (or inability) of respondent to provide
information
Nonrepresentative, nonrespondent problem
Marketing Research Assignment:
A Second Chance
Scenario:
Clemson Electronics Inc. is a high-tech electronics manufacturer
that has designed a mobile, quick-responding device to measure
and identify hazardous waste in soils. Traditionally, soil samples
are collected, brought to a lab, and processed through a series of
tests by a trained chemist. The new device is brought to the site,
requires no special training, and can quickly provide an accurate
analysis. The general manager has assigned you to develop
information upon which strategic planning will be based.
How would you respond?
Marketing Research Assignment:
Questions to Consider
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What are the present and potential market segments?
Who are the key potential customers?
Can you develop a demand forecast for the first five years?
Who are the major competitors for each segment?
How do we compare in costs and customer benefits?
What environmental factors could favorably or unfavorably
affect demand?
Are there government data that you recommend using?
Do you recommend primary research?
Can you have a report ready prior to the senior management
meeting in three weeks?
Chapter 4
Market Segmentation, Positioning,
and Demand Projection
Chapter Outline
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General Market Segmentation Strategy
Market Strategies for Business Segmentation
Approaches to Market Segmentation
Segmenting Business Markets
Evaluating Potential Market Segments
Product Positioning Strategy
Business Demand Projection
Selecting Forecasting Methods
Why Segment Markets?

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To group customers with similar needs so one mix can
custom meet the group’s needs without having a mix for
each customer (and still create a differential advantage).
Given limited resources, to strategically target which
groups to serve.
As in all marketing activity, to better serve customer
needs.
Market Segmentation Uses
in Strategic Market Planning

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Analyze buyer behavior of each segment…
Analyze buyer decision process of each segment…
Analyze the demographics of each segment…
Pick targets, forecast sales, calculate pro forma
profitability, and design a mix for each segment based on
above…
Segment business market even if we are selling
consumer products…
Strategic Market Segmentation

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Differences in customer needs
Differences in purchasing power
Differences in geographic locations
Differences in consistency with company’s mission
A Good Market Segment Is…
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Substantial
Accessible
Measurable
Differentiable
Actionable
Strategies for Business Segmentation

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Undifferentiated
Marketing Strategy
Differentiated Marketing
Strategy
Concentrated Marketing
Strategy

Approaches to Market
Segmentation
• Macro/Micro Segmentation
• Nested Approach
– An Application of the
Nested Approach

Segmenting Business Markets
• Type of Economic Activity
• Size of Organization
• Geographic Location
• Product Usage
• Structure of the Procurement
Function
Approaches to Market Segmentation

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Macro-based
• NAICS category
• Industry
• Geography
Micro-based
• Decision process
• Buying structure
• Attitudes toward vendor relationships
Nested
• Hierarchical structure
Nested Segments
Computer Industry OEM
Over $500,000,000 in Sales
Uses Microsoft Windows
Centralized Purchasing
Single Source/JIT Purchases
Segmentation for
Small Precision Servomotors
Aerospace
Computers
Automotive
Robotics
Appliances
The entire market needs to be represented, not
just present customers, and not just attractive
segments. Why?
Toys
Misc.
Answer…
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You would not be segmenting the market, only part of it.
If the segment isn’t represented, you will never even
consider it.
Problems with
Adjusting Market Segments
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Company systems set up around old segments
Lack of strategic marketing training
Need for dynamic leadership to change direction
Why Strategically Position
Products and Services?
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So they are perceived as different from competitors’ in ways that
represent value to customer segments
As a tool to help marketers visualize the customer’s perceptions of
the competitive offerings available according to various variables
(axes) of importance
How Can Product Positioning Be Misused?

One common error is to create a map of where you would like your
products to be positioned or where they are positioned in your perception
of the market, then treat the resulting map strategically
as if it is a map of the actual perceptions of the customers in the market.
What Other Axes
May Be Strategically Important?

For a company that can be described as a computer-industry OEM;
$500,000+ in sales; Microsoft Windows user; centralized, singlesource/JIT purchasing:
• Positioning may have to be on the basis of multiple sets of axes
and may have to be done by segment.
• Don’t forget that positioning is just a visualization tool—you still
have to make the final strategic decisions.
• This is a simple, two-variable model. Even with a 200-variable
computerized decision support system simulation, you still have
to make the final strategic decisions. That’s why they call them
“decision support.”
Once You Have All the Maps
to Visualize the Market…
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Consider what position the firm presently owns.
Decide what position that firm wants to own.
Decide who the the firm must outflank to gain that
position.
Consider if the firm has the necessary resources and is
committed to achieving the objective.
Determine if the firm can create a marketing mix to
achieve the desired position.
Why Forecast Demand?
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Companies must plan in order to have materials/resources on
hand to meet customer needs.
It is required by top management, just as engineers must
design and accountants must add numbers.
It is a basic marketing function.
Other functional areas use demand forecasts to make their
own forecasts and budgets, make purchases, set goals, etc.
Common Forecasting Problems
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Mysticism (to those who are not trained)
Accuracy (marketers tend to be can-do, optimistic types)
Inconsistency (if that didn’t work, change it)
Accountability (developing forecast versus achieving forecast)
Implementation (mixing forecasts, goals, quotas)
Forecasting Basics
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The importance and nature of forecast impacts method chosen.
Different methods are appropriate for long-term vs. mediumterm vs. short-term forecasts.
Different methods are appropriate for different types of data
(e.g., amount of cycle, trend, noise).
The right method for the right type situation and the right type
data improves accuracy.
Forecasting is not guessing.
(continued)
Forecasting Basics
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Forecasting requires a pattern or relationship that is present
in past data and will repeat.
Forecasting is a lot more than averaging. It’s an academic
area with its own theory, textbooks, and journals.
Companies routinely hire expert consultants to improve their
forecasting accuracy by a percentage point or two and save
them millions of dollars.
(continued)
Forecasting
Qualitative
Quantitative
Time Series
Causal
Qualitative Forecasting Techniques
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Jury of executive opinion
Sales force composite
Survey of buyer’s intentions
Delphi method
Quantitative Forecasting

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Time-series
• Trend fitting
• Moving average
• Exponential smoothing
• Adoptive control
• Box-Jenkins
Causal
• Regression
• Econometrics
• Leading indicators
• Diffusion index
• Input-Output analysis
• Life-cycle analysis
What Is Not Time-Series Forecasting
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You must not casually interchange terms with specific
meanings. Why?
A “series” is not forecasting; it is a series of numbers (e.g.,
2, 5, 7, 3, 9, 2, 6, 3, 8).
A “time series” is not forecasting; it is a series of numbers
by time period. For example, sales by month = Feb. $5M; Mar.
$7M; Apr. $3M; May $9M; June $2M, etc.)
You Can Graph a Time Series
If you were asked to define a
time series and you said
anything about it being a
forecast, that would be
wrong. A time series is not a
forecast.
Causal Forecasting Methods
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Regression
Econometrics
Leading indicator
Diffusion index
Input-Output analysis
Life-cycle analysis