04/21/23

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Dr. Gary Lilien, Research Director, ISBMDr.Ralph Oliva, Executive Director, ISBMwww.isbm.org 814 863 2782

Business-to-Business Marketing Introduction –

Summary/Wrap-up

Business-to-Business MarketingMKTG 533 Fall, 2013

04/21/23

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Another view of “Marketing”

Marketing is the set of activities that acts to maximize the value of the firm's assets, by connecting them to the exact right demand…

Marketing Endeavors to connect these to The “Exact Right:”

• Customers

• Markets

• Demand patterns

• Willingness to pay

• Value proposition alignment

• Propensity to loyalty

• Brand equity

• Learning, Etc.

Marketing Endeavors to connect these to The “Exact Right:”

• Customers

• Markets

• Demand patterns

• Willingness to pay

• Value proposition alignment

• Propensity to loyalty

• Brand equity

• Learning, Etc.

Capital AssetsCapital Assets

People/IP AssetsPeople/IP Assets

BrandsBrandsBrandsBrandsBrandsBrandsBrandsBrandsBrand AssetsBrand Assets

Other AssetsOther Assets

Business-to-Business

Manufacturing/Tech Culture

Market to value chain

Technical proposition

Value in use, quantifiable

Small number of customers

Large-unit transactions

Process linkage

Complex buying sequence

Web of decision participants

Consumer

Marketing Culture

Market to end of chain

Perceptual proposition

Value in brand relationship

Large customer segments

Smaller-unit transactions

Transaction linkage

More direct purchase

Consumer decides

Benefit/Message Targeting

Typical Customer Benefits Offered

Highly Competitive prices and quality

Manufacturing Plants on four Continents

Internet-Based order placement, tracking and Billing System

24/7 customer response facility with radio links to trucks

Customized manufacture and delivery of product to meet plant’s daily needs

Sunday, holiday and 24/7 delivery when required

Just-in-Time Delivery

Seller

Typical Purchase Team Members

Warehouse Manager

Purchasing Manager

Logistics Officer

Maintenance Manager

Chief Marketing Officer

CFO

COO

Buyer

Supply chain Head

CEO (On Occasion)

“Benefit Stack” “Decision-Maker Stack”

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Marketing “Value - Delivery Framework”

1. Build Value Understanding

2. Strategy Formulation

3. Design Customer Value

4. Communicate and Deliver Value

5. Life-Cycle Management

Segmentation, Targeting, Positioning

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Customer Value Definition

Customer Value is the economic impact, compared to the next best alternative, a supplier’s offering has on a customer’s business. Economic impact comes from increasing a customer’s revenue flow and/or decreasing a customer’s cost of operations.

Offering: Tangible Product/Service, Brand, Relationships, KnowHow, Everything…

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Value, Costs, and Prices

Customer Value

Perceived Value

Price

Total Cost

External Purchases

Conceptualizing Value: Language and Taxonomy

Competitive Reference

Value

Competitive Reference

Value

Differentiation Value

Differentiation Value

Price

Incentive To Buy

Incentive To Supply

Value, Costs, and Prices

Customer Value

Perceived Value

Price

Total Cost

External Purchases

Value Distributed or Economic Driving Force

Margin

Value Created

CONCEPTUALIZE

© 2005, ISBM _ Penn State

Potential Value Lost

Value Added

The Value Salami

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Tools from George Cressman – Strategic Pricing Group:EVE® Value Analysis Template

•Competitive Alternative:Competitive Alternative:

•Negative Differential Value

•Positive Differential Value

• Total Differential Value

•Differential Value

•Inputs and Sources

• Value Formula

•Value Driver•Benefit•Feature

For ____________________(target customer/segment)…

…that need _________________(the problem we solve)…

Our Brand’s ____________________(the offering)…

Beats the Competition Because________(unique, quantified benefit – hits the Target Buying Incentive)…

…unlike _______________________(next best alternative).

We do this by _________(how do we do it/proof points)…

…This connects to our brand by_____________...

Template for Strong Value Proposition/Positioning

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PresentState

Behaviors

Ignore

Postpone

Engage inPurchase Process

DesiredState

Functionaland

EconomicNeeds

Perceivedand

PsychologicalNeeds

•Search for options•Evaluate options•Choose option•Purchase Option•Use Option

CustomerValueMeasurementApproaches

ObjectiveMeasuresof Value

PerceptualMeasuresof Value

BehavioralMeasuresof Value

Customer Needs and Buying Process

Motivation

Customer Needs and Customer Value Customer Needs and Customer Value MeasurementMeasurement

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Loyalty Ladder

May invest in you

Seeks to collaborate on new product development

Is willing to pay premiums

Endorses Products

Resists Competitive predation

Wants to Grow Relationship

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The “Design-In” CycleProcess Initiation: Stage – Gate, Competitive Reaction, Other process

Early Concept:

Engineering support, management buy in, proof of value

Manufacturing Prototypes: Process support, supply viability early price negotiations

Final Specification: Factory rationalization and planning, supply schedule, final price negotiations, first buy

Manufacture: Straight/Modified Re-buy

Early Alert to Next Cycle

Invest $$$

Make $$$

Divergent Effects: Orders and Customers

What do we need to do today? The need for immediate cash

What is our long-term vision? What Business are we in?

Return per scarce resource unit (Control View)

Core competence (Strategic View)

Order Selection

Customer SelectionMarketing

Manufacturing /Sales

Big implications for sales/ marketing/ manufacturing alignment!!!

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SegmentationSegmentation

If you’re not thinking segments,

you’re not thinking. To think

segments means you have to

think about what drives

customers, customer groups,

and the choices that are or might

be available to them.

- Ted Levitt, Marketing

Imagination

Segmenting by Customer ValueSegmenting by Customer Value

Mktg 533 2007 Value Session 3- 19

Repeat after me…..Repeat after me…..

Lesson # 1

There is NO SUCH THINGNO SUCH THING As the Best Segmentation

Short term segmentation applications:Short term segmentation applications:

Salesforce allocation/call planning Channel assignment Communication program Pricing Today’s competitors and my current relative advantage to the customer

The Many Uses of The Many Uses of SegmentationSegmentation

Longer termLonger term:

Emerging needs New and evolving market segments to serve Planning for segment development/growth Not in kind competition/threats (satisfying customer needs in different ways) Lead user identification and management Market driving (vs. customer focused)

The Many Uses of The Many Uses of SegmentationSegmentation

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When targeting customers ask....where are you fishing??

Remember 2008???Which of these 50 customers should we

target??? Why??

Switchability SegmentationSwitchability Segmentation

Current Product-Market by Switchability

Q: Where should your marketing efforts be focused?Q: How can you segment the market this way?

Loyal to Us Losable

Winnable Customers (business to gain)

Loyal toCompetitor

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How About Targeting by…Total Lifetime How About Targeting by…Total Lifetime Customer Value (Valuing CustomersCustomer Value (Valuing Customers)

Total LifetimeTotal LifetimeValue ofValue ofCustomerCustomer

Economic Value:Economic Value:(Risk Adjusted) Revenue FlowLess Cost-to-Serve

Relationship Value:Relationship Value:ReferenceReferralLearningInnovation, etc.

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High

Low

RelationshipValue

Low High

EconomicValue

Customer Portfolio AnalysisCustomer Portfolio Analysis

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Pigs

Price BuyersValue Buyers

Fire the pigs!

Ideally Business Strategy Drives Marketing and Sales Strategy

• Addresses all facets of the business: product lines, market sectors, all inputs, and all external stakeholders.

• Addresses all facets of the business: product lines, market sectors, all inputs, and all external stakeholders.

Business Strategy Marketing Strategy

• Addresses the customer marketplace - satisfy key customer needs, attract, win and retain customers.

• Addresses the customer marketplace - satisfy key customer needs, attract, win and retain customers.

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Sales Strategy

• Addresses the customer interface and organizing principles, priorities, goals and compensation for the selling force

• Addresses the customer interface and organizing principles, priorities, goals and compensation for the selling force

Sales Plan

• Provides approach for territory coverage, selling plans, call plans, Key Account Management, individual salesperson goals/assignments

• By product, By account, by territory, by person goals

• Provides approach for territory coverage, selling plans, call plans, Key Account Management, individual salesperson goals/assignments

• By product, By account, by territory, by person goals

• Details and documents marketing strategy and tactics.

• Provides important direction, information, action planning, measurement of results, ongoing market tracking

• Details and documents marketing strategy and tactics.

• Provides important direction, information, action planning, measurement of results, ongoing market tracking

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Marketing Plan

Ongoing feedback, Market/Customer needs/insight/trends, tuning, competitive information, value chain shifts, etc.

Mktg/Sales

Typical Inter-Dependencies: Marketing and Sales

Source "Aligning Strategy and Sales," Frank Cespedes, draft book in review…

From Marketing to Sales

• Overall market strategies and plans

• Program/product information and training

• Market research data and analysis

• Pricing and promotion analyses, guidelines, programs

• Contracts, proposals, presentations support

• Customization supported resources

From Sales to Marketing

• Sales forecasts and results

• Relevant information Re:: buying behavior, competition

• Customer access and feedback re: current/new products

• Execution of product, pricing, promotion programs

• Ongoing activities are re-account management

• Customer service information Re: needs and opportunities

…They’re both Important!

Focus in Time

Short-Term Long-Term

Sales

Marketing

Today’s Sale: Immediate Cashflow

Sales Support/

Lead Generation

Business Development

Market-Driven Strategy

Key Account Management

(C) 2009, ISBM - Penn State

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BtoB Opportunities for Quick-High ROI BtoB Opportunities for Quick-High ROI Success in Your BusinessesSuccess in Your Businesses

Money left on the table? (Cost versus value-based pricing?)

Where are you fishing (resource allocation)?

Customer Portfolio Analysis?

Pigs to fire?

Segmentation by Switchability?

Value-focused thinking?

Make Marketing-Sales Connection Win-Win

Commencement

Stay Connected…..Stay Connected…..

On the web….www.isbm.org

By email….Glilien@psu.eduRoliva@psu.edu

You are all now ISBM Associate Members—part of the ISBM Family.