MKTG CH (7 and 9) Lecture Notes

B2B Marketing and STP

B2B Markets include:

Resellers, Government, Institutions, and Manufacturers/service providers

B2B Marketing examples

Manufacturer —>Manufacturer

Manufacturer —>Reseller

Manufacturer —>Government and institutions

Reseller —>other businesses, government, and institutions

Service provider —>other businesses, government, and institutions

Is B2C or B2B bigger?

B2C dominates in terms of the number of customers and transactions, the B2B market is significantly larger in terms of total revenue and transaction value.

B2B: Government

One of the largest purchasers of goods and services. Includes local, state, and federal.

B2B Buying Process

Need recognition—>Product specification—>RFP process—>Proposal analysis, vendor negotiation, and selection—>Order specification—>Vendor performance assessment using metrics

Types of buying situations:

New Buy, Modified Buy, Straight Buy

New Buy

Most likely when purchasing for the first time and usually quite involved. probably uses all six steps in the buying process and involves many people.

Modified Rebuy

Purchasing a similar product but changing specifications such as price, quality level, customer service level, options, etc.Current vendors have an advantage and often skip RFP and vendor selection.

Straight Rebuys

Buying additional units of products that have been previously purchased. Most B2B purchases fall into this category. Usually, the buyer is the only member of the buying center involved

Stage 1: Need Recognition

Customer needs a product/service. Can be generated internally or externally

Stage 2: Product Specification

Create a list of potential specifications. Used by suppliers/ vendors to develop proposals

Stage 3: RFP Process (request for proposal)

Vendors or suppliers are invited to bid on supplying required components and services.

Step 4: Proposal Analysis, Vendor Negotiation, and Selection

The buying organization evaluates all the proposals received in response to an RFP. Pricing becomes an important compensatory factor.

Step 5: Order Specification

Firm places the order with its preferred supplier (or suppliers). It is known as PO (Purchase Order)

The exact details of the purchase are specified, including penalties for noncompliance. All terms are detailed, including payment.

Stage 6: Vendor Performance Assessment Using Metrics

Firms analyze their vendors’ performance so they can make decisions about their future purchases.

Who is involved in the buying center?

Initiator, Influencer, Decider, Buyer, User, Gatekeeper

Buying Center: INITIATOR

First suggests buying the product

Buying Center: INFLUENCER

Influences other members in buying decision

Buying Center: DECIDER

Ultimately determines the buying

Buying Center: BUYER

Handles the paperwork of the actual purchase

Buying Center: USER

Consumes or uses the product

Buying Center: GATEKEEPER

Controls information or access to decision-makers and influencer

What do we need to know about the buying center?

Who is the decider? Need to contact initiator/influencer to meet Decider. Satisfy Gatekeepers not to stop/block the sales process. Talk to Users to increase benefits and efficacy.

What are four components of Organizational Buying Culture?

Autocratic, Democratic, Consultive, Consensus

Buying Culture: AUTOCRATIC

One person makes the buying decision alone even though there may be multiple participants (e.g., small private company owned by one person)

Buying Culture: DEMOCRATIC

The majority rules (e.g., public institutions)

Buying Culture: CONSULTIVE

One person makes the decision but solicit input from others (e.g., large corporations)

Buying Culture: CONSENSUS

All members of buying center should agree to buy (e.g., some cooperatives)

Why do we do segmentation?

To enhance our understanding of customers and to aid targeting and positioning decisions

What are segmentation variables?

Splits the market into groups of current or potential customers who are likely to have similar needs with respect to our product or service. Many variables because customers differ in demographics, behaviors, attitudes, lifestyle, etc

Demographic Variables

Those which we can physically observe and measure. Age, gender, educational status, household size, income, etc. Readily available to access

Demographic variables have served as default segmentation variables for several reasons. Which of the following is not a reason?

Because they are physical variables, demographics are quite reliable. This means we can use them to predict the future; if the segment of 30- to 40-year-olds is quite large this year, it is reasonable to predict that the segment of 40- to 50-year-olds will become larger over the next 10 years

What are behavioral variables?

The variable that describes the specific actions of consumers or potential consumers. Usage: Heavy users and light users

Week-day users vs. weekend users

Coupon users vs. non-coupon users

Switchers vs. loyals

What are attitudinal variables?

Describes the thoughts, feelings, and beliefs of consumers. Attitudes drive behaviors. This data can be risky because attitudes can change.

Risk-averse vs. risk takers

Satisfied vs. unsatisfied

What are benefit variables?

Benefits that customers seek. The segmentation method most directly related to the satisfaction of consumer needs and wants. Marketers should choose/identify main benefit and dynamic benefit

Main Benefit

The primary benefit provided by the category that differentiates the category leader

Dynamic Benefit

A benefit used by a competitor to take share from the category leader

How to find the benefit variables?

1. Do anything to uncover needs and wants that are important.

(customer interviews or customer comment reviews)

2. See if the company can back up those benefits with product features.

Feature-benefit-value Ladder

Done by first listing the most important brand features, and then listing their connected benefits and values.

Features

An inherent physical or functional attribute of a product or service.

Benefits

Describes what the customer stands to gain from using the product or service. Benefits are directly linked to features. So, for example, if this book is available in digital form (feature), it will be easy to access (benefit).

Values

High-level attitudes or aspirations that help describe the status or image conferred to the user of the product (“I am an innovator,” “I am sophisticated,” “...”).

Benefit variables that make it to our segmentation short list:

(a) are most important to the customers in the category.

(b) are something our brand features can support to provide.

(c) have the potential to differentiate our brand in the category

What are different types of targeting strategies?

-Undifferentiated targeting strategy (mass marketing).

-Differentiated targeting strategy (multi-segment marketing).

-Concentrated targeting strategy.

-Micromarketing or one-to-one marketing.

When to adopt undifferentiated targeting?

When consumer tastes, needs, and wants are the same(Homogeneous market), when the company has a strong marketing power and resources, and when there is no strong competitor.

When marketers have to select one or several target segments, assess each segment is

Identifiable, Substantial, Reachable, Responsive, and Profitable

Segment Attractiveness: IDENTIFIABLE

Firms must be able to identify who is within their market to be able to design products or services to meet their needs.

Segment Attractiveness: SUBSTANTIAL

The market segment size should be substantial.

Segment Attractiveness: REACHABLE

Firms should be able to reach customers in the market segment.

Segment Attractiveness: RESPONSIVE

Customers in the market segment must react similarly and positively to the firm’s offering.

Segment Attractiveness: PROFITABLE

The market segment should be profitable. Consider the current market growth rate, future growth rate, market competitiveness, and market access costs.

Segment size adoption rate price purchasing frequency profit margin – fixed cos

How to describe the target customer?

Present a one-line description of the target and develop a persona of a typical target customer (Include Name, Habitat, Revealing behaviors, Consumption habits, Demographics, Attitudes, perceptions, values, aspirations, Benefits sought

What is positioning?

The answer to how a product/brand should be perceived in the market among target customers.

Positioning Statement

A statement of the desired image/value/benefit of offering to be perceived by customers, a crisp consumer proposition. This statement will marry our entity’s core competence and understanding of the target consumer.

STP HOW, WHO WHAT

v informs us how we will define and segment our market.

Targeting describes specifically whom we will attempt to reach.

Our positioning statement outlines what we will say to them.

Why is the positioning statement so important?

It is the final step on the bridge between strategy and execution. Marketing mix is then guided by positioning.