Transcript Industrial Marketing - Faculty Directory | Berkeley-Haas

Business-to-Business Marketing
Haas School of Business
UC Berkeley
Fall 2008
Zsolt Katona
Agenda today
• Review of course structure
• Needs and decisions in B2B markets
• Introduction to INDUSTRAT
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Course objectives
• To learn
– how general marketing concepts apply to (differ in) the
industrial business context
– some new concepts
• To experience a realistic industrial marketing
environment
– complex daily decisions but need for long-term strategic
thinking
– typical B2B setting
– interacting teams
– time pressure
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Assignments
• Simulation related (group work):
– After third decision, write-up a strategic plan
• corporate goals (mission statement)
• how to achieve these goals
– Final presentation (more details later)
• in view of the planed strategy...
• Industry / Firm analyses
• ~15 minutes
• Class participation
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Evaluation
• Group work/simulation results 50%
• Final presentation 20%
• Participation 30%
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Introduction to B2B marketing
• Definition: B-to-B marketing is
– marketing to organizations,
– marketing products that will be used to create
other products.
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Some distinctions
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fewer customers
fewer transactions with higher $ value
marketing is more a general management function
high degree of functional interdependence
higher degree of product complexity
derived demand (!)
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Key distinctions
1. Higher importance of Process and
Relationship benefits compared to
Functional benefits.
2. High degree of buyer-seller
interdependence (strategic relationships)
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Materials management
JIT
MIS systems…
3. Complex buying decision process
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–
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longer
more people involved (DMU)
more “structured” (DMP)
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Three types of benefits
Functional benefits
- technical specifications
- quality
Process benefits
- cost of transport
- reliability of supply
- MIS, materials management
Relationship benefits
- trust
- flexibility
- customization
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Consumers’ Purchase Decisions
Utilitarian
Products
Model: Know → Feel → Do
Rational evaluation of alternatives: trade offs
Choice heuristic: ‘Buy the Best’
Low
Involvement
Products
Model: Know → Do → (Feel)
No evaluation of alternatives: confirmation
Choice heuristic: ‘Buy the Familiar’; ‘Buy the
Cheapest’
Hedonic/EgoExpressive
Products
Model: Feel → Do → (Know)
Emotional evaluation: feeligs
Choice heuristic: ‘Buy What I Like’
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Prototypical DMP for a utilitarian product
(consumer goods)
Try
Prefer
Consider
Know benefits
Aware
Mkt. potential
Marketing weapons
Also called:
- AIDA
- Hierarchy of effects
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Prototypical DMP steps for
an industrial good
• Need recognition
• Product definition and specification
• Development of procurement strategy
– make or buy?
– formation of buying center!
– design sourcing system
• Search/qualification of potential sources
– simultaneous vs. sequential evaluation
– RFPs: open/closed bids, existing vendors
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Selection of suppliers - final negotiations
Design of an order routine (contract)
Order
Performance feedback and evaluation
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Example: Brake Pads
Weapons:
Pass rate:
DMP steps:
Trade shows
Aware of company
90%
Trade Publications
Brochures
Aware of product line
80%
Short-listed for bid
40%
D-spec check
10%
Promotion expense
Material scientists
Development engineers
b-check
10%
pre-production check
5%
Production engineering
Price, delivery service
primary
supplier
4%
secondary
supplier
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Example: OAG
• OAG – Official Airline Guide
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Publishing public flight information
~100k customers
Monthly subscription: $20
80% gross contribution
Family business
• In 1982 AMEX decides to enter the corporate travel
business and becomes interested in OAG.
• What should OAG do?
– Should it sell?
– What negotiation power does it have against AMEX?
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The O.A.G. Funnel
Problem: Mgr. stuck in Chicago at 2:00 am. He is pissed !!
Mgr. complains to Secretary
Sec. complains to Travel Agent


Travel Agent recommends OAG
Sec. orders OAG
Sec. receives OAG + invoice
Inv. goes to finance
Inv. to accts payables
Bob pays !!
☺
Mgr. thanks Sec. ☺☺
Mgr. uses the Guide
Sec. gets renewal invoice
Funnel Analysis
• The DMP often has important strategic implications in
B2B markets.
• Never use/accept the ‘standard’ DMP.
• Use Funnel Analysis, a simple qualitative method to
uncover the DMU/DMP in an organization.
– Method: interviews, focus groups
– Main uses:
• Diagnose bottle necks
• Forecast sales
• Targeting: optimize sales strategy
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Implication:
Communication strategy
• Personnel selling is rated by industrial marketers
more than twice as effective as other
communications media
• 90% of sales budget is personnel selling
• But…
– Bain and Co.
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INDUSTRAT
The Strategic
Industrial Marketing
Simulation
Jean-Claude Larréché & David Weinstein
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Objectives of
INDUSTRAT
Review of strategic concepts
Application in an industrial
marketing context
Focus on prime industrial
marketing issues
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INDUSTRAT
Features
Strategic Marketing
Long term perspective
Marketing as a profit center
Marketing strategy based on segmentation,
positioning and portfolio approach
Marketing mix decisions secondary to
strategic decisions
Competitive environment
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The Pedagogical Approach
A Simulated Environment
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The Economic Environment
Population: 250 million
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Korex Products
Strategic Product Attributes
Resistance:
Suspension:
Frequency:
Density:
Ohms
Micro-seconds
Kilo-hertz
Micro-grams per mm3
(W)
(Msc)
(KHz)
(MGC)
Non Strategic Product Attributes, e.g
Liquid
Powder
Fiber
Solid
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Lomex Products
Strategic Attributes
Convexity:
Degrees
(De)
Conductivity:
Micro-Seconds
(MSc)
Purity:
Percent
(%)
Maximum Energy:
Micro Watts
(MW)
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The “Competition”
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INDUSTRAT’s Competitors
KARR
KERR
Firm 1
Firm 2
KIRR
Firm 3
KORR
Firm 4
KURR
Firm 5
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The Economic Environment
WEST CENTRAL
EAST
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Account Size
Small
Medium
Large
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End-Product Applications
Communication
Instrumentation
Consumer Goods
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Korex Market
Macro segmentation
large
medium
east
small
central
west
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The Adoption Process
Testing
Awareness
Supplementary Supplier
Major Supplier
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Purchasing Process
Dynamics
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Korex Market Micro-segmentation
General Manager
Production
Engineering
Purchasing
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Dynamics of the Purchasing
Process
Awareness
General
Testing
Supplementary
Major
100%
Production
Purchasing
Engineering
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0%
Industry Dynamics
Market growth
Korex
?
Lomex
Competition
No new competitors
Introduction of Lomex
Collaboration
Technology
No further scientific innovation expected
Four Korex technologies
One Lomex technology
Economic
environment
Growing GNP
Inflation
Antitrust intervention
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Direct Selling and Distribution
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Corporate Resource Allocation
Production
Dept.
Finance
Dept.
Manufac.
Costs
Inventory
Holding
Costs
Marketing
Expenditure
Budget
Internal Transactions
R&D
Sales
Dept.
Dept.
R&D
Expendditure
Sales force
Expenditure
Advertising
Expenditure
Client
Companies
Advertising
Agency
Technical
Support
Promotional
Expenditure
Promotional
House
Market
Research
Mkt Res
Firm
Corporate
Marketing
Dept.
Corporate
Communication
Expenses
Commission
Marketing = Profit Center
Sales
Revenues
Technical
Dept.
Net Marketing
Contribution
Licensing
Fees
Licensors
Licensing
Revenues
Licensees
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External Transactions
Administrative Structure
Corporate Resource Allocation
Marketing
Expenditure
Budget
Marketing = Profit Center
Net Marketing
Contribution
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Administrative Structure
Internal Transactions
Production
Dept.
Finance
Dept.
R&D
Dept.
Manufact.
Costs
Inventory
Holding
Costs
R&D
Expendditure
Sales
Dept.
Sales force
Expenditure
Technical
Dept.
Technical
Support
Commissions
Corporate
Marketing
Dept.
Corporate
Communication
Expenses
Marketing = Profit Center
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Administrative Structure
External Transactions
Marketing = Profit Center
Sales
Revenues
Advertising
Expenditure
Client
Companies
Advertising
Agency
Promotional
Expenditure
Market
Research
Licensing
Fees
Licensing
Revenues
Promotional
House
Market
Research
Firm
Licensors
Licensees
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Administrative Structure
External Transactions
Marketing = Profit Center
Joint R&D
Funds
Obsolete
Inventory
Sales
Partners
Exporters
Loans
Loans Repayments
+ Interest
The Bank
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Decisions for your First Period
No market research available
No R&D allowed
No licensing allowed
Avoid radical changes
Familiarization
Gather information
Organize your team
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