Chapter 7: Managing Products for Business Markets

PowerPoint by: Ray A. DeCormier, Ph.D. Central Connecticut State University

1.

How to build a strong business-to-business (B2B) brand The way in which sustainability strategies are transforming the competitive landscape. Strategic importance of providing competitively superior value to customers The various type of industrial product lines and the value of product positioning Strategic approach for managing products across stages of the technology adoption life cycle

2.

3.

4.

5.

business marketers marketplace identity is established through:

Brand Products Services

brand is one of the firms most valuable intangible assets. has emerged as a priority to marketing executives.

Branding

Product Management
Products are developed to fit the needs of the market

and are modified as needs change.

Tools such as
Market & demand analysis Business market segmentation Market potential forecasting

help marketers select markets and provide products that meet their needs.
Product policy is directly related to market selection.

MARKETING FUNCTION: LEAD ROLE

Marketers tasks include evaluating: 1. Potential product/market fit 2. New market opportunities 3. Competition 4. Strength & Weaknesses Marketers lead role is to transform the firms skills and resources into products & services that will enjoy positional advantages.

Companies need to ask:

1.

What do you want your company name to stand for? What do you want it to mean in the customers mind?

2.

Brand & Brand Equity Defined

Brand
Name, sign, symbol, logo or anything that identifies and differentiates the product from competitors

Brand equity
Set of brand assets and liabilities linked to a brand; it can add to or detract from the value of the brand

Customer-Based Brand Equity (CBBE)

Kevin Lane Keller defines CBBE: The differential effect that customer brand knowledge has on their response to market activities and programs for the brand.

Brand Power relies on: What customers have learned, felt, seen and heard about the brand over time. How customers link their thoughts to feelings, perception, imagination and experience of the brand.

CBBE model lays out 4 steps for building a strong brand: Develop deep brand identity Establish unique brand identity by highlighting differences Employ marketing programs to elicit positive brand responses Build brand relationships with loyal customers

1. 2. 3. 4.

CBBE PYRAMID

Brand Identity
To achieve brand identity, marketers must

create:
Brand salience something prominent

about the product Brand awareness ability to recall or recognize the brand under different conditions

Marketers need to create a clear connection

between the product and the brand name in markets where the product competes.

Establishes an association in the customers mind that differentiates the brands meanings There are various brand associations Following example demonstrates two ways:
1.

2.

Brand Performance the way(s) a product/service meets customers functional needs Brand Imagery The way(s) a brand meets customers psychological or social needs

Brand positioning should incorporate both points of parity (breaks even to other brands) & points of differences.

Consumer Judgments:
1.

2.

3.

4.

Quality: Customers attitude towards brands perceived quality with respect to value and satisfaction Credibility: Customer perceives brand to be credible with respect to expertise, trustworthiness & likeability Consideration set: Extent to which customer finds brand a viable option and worth consideration Superiority: Extent to which customer believes that brand offers advantages over competitive brands

Consumer feeling a consumers emotional reaction to a brand

Numerous feelings can be tied to brands, i.e.:
Warmth Fun Excitement Security Power Sexiness Functionality

Consumer Brand Resonance

Final step is brand resonance, which means forging a relationship. This connection translates into:
Brand loyalty Attachment Active engagement Word-of-mouth satisfaction & advertising

CBBE Pyramid

Brand Strategy Guidelines

The Brand Mantra Develop a coherent branding strategy and then build on the reputation of that brand A firm with a strong brand can command a price premium for its products or services. However, to sustain that premium, important points of differentiation must be clearly communicated to target customer segments Successful branding requires a well-conceived market segmentation plan

Product Quality and Customer Value

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 International

competition has made quality an important strategic issue.

a prerequisite, suppliers need to meet ISO-9000 standards. quest for improved quality permeates the entire supply chain.

As

The

Meaning of Quality as It Moves through Stages

Stage One - To be successful: 1. Products must conform to standards

or
2. Meet customer specifications and possess features the customer wants

MEANING OF QUALITY AS IT MOVES THROUGH STAGES

Stage

Two: Emphasizes that quality is more than a technical specialty and that pursuit of quality should drive the entire business cores processes.
value is determined by the service rendered, product performance and products price relative to competitors.

Overall

Stage Three: Buyers focus on marketperceived quality and value verses competitors offerings with the objective of not only zero product defects but zero customer defections. The objective is to have a cadre of suppliers that can produce quality products that keeps customers LOYAL!

Sustainability is an emerging megatrend that is transforming the competitive landscape, forcing companies to change the way they think about products, processes, and business models Sustainability is a mother lode of organizational and technological innovations that yield both bottom-line and top-line returns. Becoming environmentally friendly lowers costs because companies end up reducing the inputs they use In addition, the process generates additional revenue from better products or from new businesses
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Companies that excel in sustainability do old things in new ways such as outperforming competition on regulatory compliance and environment-related cost management. Leading performers also do new things in new ways such as redesigning products, processes, and whole systems to optimize natural resource efficiencies across their value chains. Sustainability innovations transform core businesses and even lead to the creation of new businesses and new sources of differentiation GEs Ecomagination initiative provides a rich illustration of the powerful growth opportunities

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What Value Means to Business Customers

Core
Benefits Customer Value Price Sacrifices Acquisition costs Operations costs Add-on

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, Understanding Customer Value, Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 47.

Benefits & Sacrifices

Benefits:

Core requirements a product must possess for a relationship to exist. 2. Add-ons attributes that create differentiation & provides more value than competition.
1. Sacrifices:

Price 2. Acquisition costs (e.g., ordering costs) 3. Operations costs (Can defect free parts really lower operation costs?)
1.

What matters most?

#1 - Add-ons: All qualified vendors provide equal core, so add-ons are the differentiators, which include: a. Differing attributes b. Relationships c. Advice d. Product support: Various Services
Pre & Post sale

#2 Trust #3 Attention to reducing customer costs

Product Policy

Involves all decisions concerning

Product Services that a company offers.

Proper product policy provides the opportunity to attain and maintain a competitive advantage by focusing on core competencies.

1. Proprietary/ catalog products

2. Custom-built products

Four Types of Industrial Product Lines

3. Custom-designed products

4. Industrial services

Industrial Product Line Defined

Proprietary: Comes only in certain configurations and are available in anticipation of orders. The product decision is to add, delete or reposition it. Custom-built: Product(s) offered to meet one or a small group of customers need. The product decision centers on offering a proper mix of additional options. Custom-designed: Unique item is created to meet one or more customers need. Product is defined in terms of companys capability, and consumer buys that capability. Industrial service: Buyer buys companys capability to do certain task (i.e., maintenance, technical service or management consulting).

Defining the Product Market

Defining the product market is fundamental to a sound product policy decision. Even if a company has a successful product, it needs to always be on the alert to consider alternative (technological) ways to satisfy customer needs. This forces the company to be open minded about product innovation. The keeps the company in touch with the market.

1. Customer function dimension. Customer function dimension

Technological dimension

Customer segment dimension 1. Customer function dimension. Value-added system dimension

Customer Function

What functional benefits does the product/service provide for the buyer?
Are there alternative ways a particular function can be performed? (Example: Communications: cell phone, email, pager, notebook computer) Various customer segments have distinct functional needs. What are they and how can they be served?

Technological Function

Customer Segment

Value-Added System Many services are offered by competing service chain of vendors. Sometimes they are separate, but other times they merge their services to offer a more overall competitive product. (Example: Product provider (Motorola) aligns with service provider (AT&T) to offer a more efficient product/service)

a.

Successful companies need to plan for both today and tomorrow by assessing their products, their markets and their customers future needs. This is done by understanding:
The present market and its future needs. WHAT the future might offer, what problems might exist, what products will solve them? WHO are the: Undershot consumers Overshot consumers Non-consumers WHY is that?

b.

c.

d.

Marketing Plan for Industrial Products

Having a strategic marketing plan for an

industrial product is most vital for a product to be successful.

One way to start is to develop a

Product Positioning strategy.

products competitive position in the market is referred to as the products position. is found by measuring buyers perceptions and preferences in relation to competitors. first question is: What are the determinant attributes that play a central role in the buying decision?

It

The

Perceptual Map and Positioning Strategy for Levi Strauss Products

Steps in Product Positioning Process

1. Identify relevant competitive products.

2. Identify determinant attributes that customers use to differentiate among options and determine their preferred choices.
3. From sample of existing and potential customers, collect their ratings of each product on determinant attributes. 4. Determine own products current position versus competing offerings for each market segment. 5. Examine fit between preferences of market segments and current product position. 6. Select positioning or repositioning strategy.
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Positioning or Repositioning Strategy

If change is needed, what strategy(s) should be employed?
I. For some attributes the product manager may

want to:
a. b.

Increase the importance of an attribute to the customer Increase the difference of their attribute to that of their competitors (i.e., increased efficiency, decreased cost, better training, etc.)

II.

If the product is truly better than a competitors but is not perceived that way, product managers need to do a better job of communicating the message to the market to bring it in line with reality. A products competitive advantage can be advanced by improving its level of performance on determinant attributes that buyers emphasize.

III.

Technology

Discontinuous Innovations: Truly new products that require the marketplace to dramatically change their behavior with the promise of gaining dramatic new benefits. Examples: o Cars replaced horse-drawn carriages o Computers opened the doors to revolutionary new products o Internet changed the way we do business

Innovation: Classes of Customers

Technology enthusiasts Visionaries Pragmatists

Conservatives
Skeptics Laggards

Technology Enthusiasts - Innovators

Innovators: a. Explore latest innovations b. Possess a significant influence over product perception by others c. Usually lack resource commitments d. Try things out but move on to new ideas as they come about

a.

These customers desires to exploit innovation for a competitive advantage. These customers are true revolutionaries in business, but new technologies need to be more customized for this group (i.e., expensive). Government visionaries have access to resources but usually demand modifications to the product that are difficult for innovators to provide.

b.

c.

Pragmatists Early Majority

These customers:
a. Make the bulk of technological purchases
b. Believe in technological evolution (not

revolution) c. Seek products that have proven themselves

These customers are:

a.

b.
c.

Pessimistic about receiving any benefits from new technologies A sizable group who are price sensitive Reluctantly purchase technological products to avoid being left behind

Skeptics - Laggards
These are potential customers They are ever-present critics of hype around new technology

Strategy for High Tech Adoption

1.

Put innovative products in the hands of technology enthusiasts. After a while visionaries will see the value of the new technology and will begin to view it in business terms. New technologies usually enjoy a honeymoon reception from enthusiasts and visionaries, however sales begin to falter a chasm forms

2.

3.

Chasm
A Chasm is a period of time where sales falter (and

sometimes plummet) due to differences between Visionaries and Pragmatists.

Visionaries want change (revolution) whereas

Pragmatists want change (evolution). But Pragmatists make most buying decisions in organizations.
Pragmatists are the gateway to the mainstream

market. If that chasm gap cant be bridged, often products become part of ancient history.

Strategies to Cross the Chasm

One strategy to cross the chasm is for the

marketer to provide pragmatists with 100% solutions to their problems using the new technology.
Too many companies only supply a part of a

solution. They are trying to be something to all, not 100% to some. That is unacceptable to pragmatists.
Goal: Win a niche foothold with a small group

of pragmatists as quickly as possible that is what crossing the Chasm means.

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Bowling Alley Strategy

Each market is like a bowling pin. The momentum of moving one pin (with good technology products) successfully carries over into surrounding segments.
The bowling alley is where mainstream market segments begins to accept the new product, but it still has a way to go. Strategy: Win one niche, then work on another.

This strategy assumes a product has very wide appeal. The sellers strategy is to:
1. 2. 3.

Move as quickly as possible in getting the product out to the market. Build distribution ASAP. Drive price down to next lower price break ASAP.

This strategy demands product leadership, operational excellence in manufacturing and distribution.

Main Street
Once the mainstream has adopted the product, the aftermarket phenomenon occurs:
a. b. c. d. e. f. Mass marketers of the products begins to subside. Competitors force supply to exceed demand. Prices fall. High tech product becomes a commodity. Profit growth can no longer come from selling the commodity. Profit can only come from extending the platform of the product to other niche-specific needs.