B 2 B MARKETING

What are B2B Markets ?

-- Business markets consist of all organizations
that purchase goods and services to use in
the creation of their own goods & services
-- They generally consist of fewer but larger
customers than consumer markets
-- Purchases are of larger value and more
complex in economical, technological,
and financial terms.
What is Business Marketing ?
-- Business Marketing is the process of matching
the capability of the supplier to supply
goods and services to the buyer who in turn
matches the requirements of the customer
-- That is, business marketing aims to create
value for the customer

The Marketing Mix
-- The principles of marketing are the same for
consumer & B2B marketing, with some differnces
Product
-- In general marketing theory a product means
a core product which can have additional
features and options to appeal to different buyers
-- Some of the differences are:
* In B2B marketing the sellers product is
incorporated into the buyers product to offer
to their own customers.
* Therefore there is considerable partnership
between seller & buyer.
* The product is therefore specific to the buyer
* It maximizes the value creation ability of
the seller
* Since the product is tailor made and technical
in nature, there will be a written specification

-- Price
* In any transaction price is the amount of money
that is agreed upon to satisfy both parties
* Price, the value of exchange is decided by the
market, not the cost incurred in creating
the product
* In B2B marketing price usually is the final step
in a complex series of activities involving
design, development, negotiation etc:-
* This is usually because products are complex
and is usually produced in a colloborative
manner
-- Place
* In a consumer markets, place is about getting
the right form ( size, packaging, quantity etc:- )
at a useful time ( retail hours ) with minimum
inconvenience
* In consumer markets economic utility refers
to consumer preferences in locational
convenience, required quantities / sizes and
acquisition convenience
* Using a car as an example, the company gains
economic utility by
-- locating dealership near population centers
-- Heavily trafficked shopping areas
-- Easy availability with minimum fuss
-- can usually drive away with the new car in
a couple of hours
* In B2B marketing economic utility takes the
form of the supply chain management,
inventory, services, material planning etc:-
* Using the same example of a car, the company
to add to the customers fleet offers cars in
various models and numbers at periodic
time intervals
* the cars are shipped to right locations with
appropriate quantities of spare parts at the
right timing
* This is not easy when production schedules have
to be matched with delivery schedules
* the manufacturing plants may not be
located near the many rental outlets of the
company
-- Promotion
* In consumer markets the promotion mix of
advertising, sales promotion, public relations
personal selling plays a major role
* In B2B marketing advertising cannot be
leveraged as Ads are a monologue a one way
communication

* In B2B marketing personal selling is the most
effective way of promotion
* In B2B marketing as said earlier, products are
made collaboratively
* The relationship is close and long lasting

The Marketing Concept
-- In many organizations the focus is on
production or sales, or even marketing
-- In such organizations marketing is perceived to
be a distinct but dependent part of the Org.



* It is seen as an expense rather than a
generation of margin.
In the marketing concept it says that to be
successful should
Understand customer needs
Meet those needs through co-ordinated activities
Do it in a way that meets organizational needs
A firm that operates under this philosophy focuses
all its efforts and resources towards satisfying the
needs of its customers
Marketing is the driving force in the organization
and defines the role of other functions to meet
the needs of the customers


5) Volatility and the nature of Demand.
Consumer Demand
i. In consumer demand it is the quantity of goods
or services that the customer wants.
ii. It is dependent on market conditions and is
usually expressed as a function of market
price.
Derived Demand
i. In Derived Demand it is the demand of the chain
of supplies and produces that constitute to a
total offering.
ii. Without initial consumer demand there is no
demand in the supply chain.
i. Cotton is not purchased because of its inherent
properties but to make cloth
ii. The demand for nylon fabrics by consumer does
not exist. However nylon is needed to spin yarn .
To weave fabrics which are needed to make
clothes. These are all derived demands arising
out off the ultimate consumer demand
Joint Demand
When several different products go to make up
another product, the demand or availability of any
other products effects the manufacturing of that
product

Exp : Flour , yeast sugar eggs for making bread . Each
affects the other.
Cross Elasticity of Demand
Sometimes one product replaces another for various
reasons may be price, advancement in technology,
Exp : Furniture wood Steel or plastic
House Construction Redwood or cedar.
6)Volatility of Demand:
It partially explains the volatility of derived
demand when consumer demand varies it has effect
on all the contribution who go to make up the final
product.

This impact or leveraging causes wide swings in
demand
Suppliers in the chain forecast production & inventory
based on current orders in hand
When consumers demand drops , chain members
immediately cut production and inventory levels
The initial production cut will be larger than the
difference between the old and the new order . This is
because:
There is already some inventory being held and is
enough for the new smaller order.
Customer who closely monitor their inventory
change order frequently sometimes daily.
Thus small frequent adjustments lead to
inventory problems, multiply these effects
throughout the supply chain and we see why
there is so much volatility in derived demand.
Exp: Firestone recalled 6.5 million tyres fitted
Ford Explorer SUVs . Ford had to shut down till
new tyres were available. The shut down cost
them $100 million and a fixed profit was less by
$500 million. This had a ripple effect back
through the entire supply system
7) Discontinued Demand
This is a condition in which quantity demand in
the market makes :
Market makes large changes in the response to
the market forces.
The transition from on market state to another
occurs in large increments rather than small
incremental changes.
A supplier tailors his capacity based on forecasts
of demand
Due to increase in consumer demand his
customer makes increasing demand on the
supplier and he increases his production and
purchase of raw materials.
When he reaches the maximum capacity a
situation:
where there is a discontinuity in supply till such
time as the suppliers sets up additional capacity
If the supplier elects to increase the capacity then
the entire supply chain is impacted by increased
demand.
8) Price Elasticity
Price elasticity of demand refers to the
percentage change in quantity demand relating
to the percentage change in price
If the price change produces a demand change
that is less than the percentage price change then
it is inelastic
When demand fluctuates a lot in business markets,
its also inelastic in the short term
I. The customer has incorporated the suppliers goods
into his finish products and may not be able to find
a substitute
II. If the component product is significantly
differentiated from competitors product.
III. If the change in the supply system that caused the
price change is expected to continue for sometime ,
the manufacturer may eliminate the suppliers
product or find alternatives

Relationships Opportunities
In B 2 B Markets additional product design effect is
needed to ensure that the product complexity
enhances the value to the customers and not detract
it.
The dialogue between customer / supplier will be
complex and must be quickly understood .
Communication is personal in B 2 B market.
The close relationship ensures that the uniqueness of
the customer is emphasized and accommodated.
When this uniqueness and closeness is very effective
the cost becomes very high for the customer to switch
supplier.
This is because due to the closeness of the
parties concerned there is a high matching of
buying , ordering, in bound logistics and delivery
systems.
The personal rapport and closeness may not
be as tangible as the logistical linkages , but
however this binding is also very difficult to break
CLASSIFYING CUSTOMERS,
ORGANIZATIONS AND MARKETERS
There are several standard forms of products,
competition and market conditions that make
up the business environment.
Marketers have their own system for
classifying customers. The main categories
are:
1] Commercial enterprises
These are those segments of profit oriented
organizations.
A] Industrial Distributors
-- Also known as industrial wholesalers
-- act as middlemen providing services to the
customers in terms of form, time, place,
and possession.
-- Matches the product need of the customers
with the manufacturers.
-- Manufacturers use such middlemen when
customers needs are small for direct mktg.
-- They take ownership of the goods
B] Value Added Resellers ( VAR )
-- The presence of these intermediaries in the
market place has broadened traditional
concepts
-- They provide unique enhancements to
manufacturing products
-- Typically the provide systems to its
customers tailored to their needs
( Exp. Matching software with hardware )
-- They draw goods from many manufacturers
to provide systems to the customers

-- They develop unique expertise in the
integration of many different products
C] Original Equipment Manufacturers ( OEM )
-- Purchase goods to integrate them into
goods they manufacture and sell to their
customers
-- B2B marketers spend the major part of
their resources approaching, learning
about, developing and satisfying customer
-- OEMs are usually largest-volume users of
goods/ services in oligopolistic markets
Exp: Maruti -- buys tires from MRF
HP -- buys processors from Intel
-- But these also supplies the replacement
markets through industrial marketers
D] End User
-- Manufacturers that purchase goods for
consumption as supplies, capital goods, or
materials for incorporation in their
products such that the identity of the
purchased goods is lost
-- In the above example, MRF is an OEM.
But when MRF buys steel to make tires
the supplier views Goodyear as an end-user.
-- When MRF buys fuel for its trucks, its a
routine re-buy involving one purchasing
individual.
-- When MRF buys a robot tire plant a large
number of individuals would participate in
this one time purchase
-- In either situation MRF is the end-user

2] a ) Government Units
-- Governments, either federal or state are
the largest consuming group in the country
-- Widely dispersed, with a large number of
players, these units are influenced by
specifying agencies, legislations, evaluators
and end users.
-- Value as understood in the private sector
takes on a completely different meaning
in the public sector.


-- complicated procurement laws & regulation
often have social goals/ policies as the
driving force.
-- Socially motivated contract provisions,
quotas, & other regulations that have
nothing to do with the product attributes
can be frustrating.
-- The roles governments play in society,
defense, education, disaster relief, political
agenda Etc:- leads to a requirement of non-
standard products.
-- Competitive bidding is often resorted to,
so that favoritism & undue influence is
avoided.
B] Nonprofit/ Not- For Profit Organizations
-- Institutional customers such as , hospitals,
churches, colleges, nursing homes etc:- are
part of this category.
-- It may appear that for this category of
customers price may be a major factor.
-- However this is not always true and best
value offered can be decisive.
-- Many of these entities are sometimes open
to public scrutiny, hence their buying habits
may become similar to government buying.
3] a) Raw Material Producers
-- Depending on the goods/ materials in its life
cycle, producers may find materials price
sensitive.
-- Raw material supplies that have significant
competition, seek value added aspects to
core products.

Example: Sugar supplied to Britannia: Texture,
granule size, quick dissolving are all
distinct competitive advantage.
-- Items like steel, plastics, glass are usually
supplied by large producers directly to
consumers
-- Smaller customers are supplied by industrial
distributors.
-- Many times raw materials loos their identity
when combined into a customers product.

Examples: sheet steel to automobile bodies
sugar into a soft drink
rubber into tires
-- That is, the commodity value of steel, sugar,
rubber has been replaced by the value
addition to the finished product.
B] Component Parts Manufacturers
-- These materials usually retain their identity
even after incorporation into the customers
finished products.
Examples: batteries in automobiles
fan motors in computers
the component manufacturers core
product contribution to finished
products is still recognizable.
C] Capital Goods Manufacturers
-- Capital goods are used to produce products
-- there is considerable risk involved for the
purchase
-- The process is lengthy and the development
work is considerable.


-- sophisticated/ complex specifications are
arrived at, to ensure that the customer gets
what he has been promised.
-- When customers invest in a capital item,
they are reposing tremendous trust in the
supplier
-- customers of capital goods expect an
offering involving installation, equipment,
and accessories
-- often trials/ evaluations are required


D] Accessory Equipment Suppliers
-- companies that make equipment that works
with some other offering are known as AES
-- the accessories may be bundled by a system
integrator.
-- business customers may buy them
separately
Example: CD,s for computers
-- primary product manufacturers will not
make them as an independent supplier can
make them more quickly and cheaper.

CLASSIFICATION OF B2B MARKET
ENVIRONMENT
A] Publics
-- These include the various publics or
communities of interested parties
-- they are not direct participants as customers
channel members, suppliers or competition.
B] Financial Publics
-- Banks, lending institutions, Venture capital
firms, stock exchanges, financial analysts etc

-- These institutions seek to maximize returns
on their investments in the company
-- they attempt to impact on company policies
due to their clout in the financial community
-- most companies will be highly sensitive to
the views and opinion of these entities
-- B2B companies need to understand these
sensitivities in order to make resources
available
-- B2B companies may have to make presentat-
-ions to these entities to raise resources.
C] Independent Press
-- The media can publish news that can
enhance or destroy a market position.
-- companies must maintain cordial relations
with the news media
-- pro-active public relations effort, so that a
single incident does not do serious damage
D] Public Interest Groups
-- many public interest groups though a
minority of the population can exert
enormous influence through opinion leaders
and media
-- this effort can draw the attention of the
financial publics leading to impact on
investors
-- companies must recognize its socital
responsibilities as these public interest
groups if showing interest maybe indicative
of shifts in the market.
-- Example: When oil prices increased in the
70s/80s, Ford added more safety features
and increased fuel economy on its SUVs
E] Internal public
-- Every employee is a representative of the
organization to the public
-- Every employee is a representative of their
part of the company to other parts
-- The representative of a firm or its parts
greatly impacted by the attitude of
employees
-- The purpose of internal marketing is to
promote a sense of belonging and ownership
among employees
5] The Macro environment
a) Demographic environment
-- They are vital statistics to describe a
population
-- Characteristics of the people in the people
in a potential geographic region
-- Variables include, distribution of ages, income
wealth, religion, ethnic background,
living conditions etc:
-- Businesses themselves have demographic
characteristics like type, size, location etc:
b) Economic Environment
-- The macro economic environment in a region
impacts on B2B customers
-- These include, how fast the economy is
growing ( or slowing down ) in size, level of
employment, rate of unemployment, intrest
ratios, exchange rates etc:
-- Customers willingness to buy, influence of
channel members etc:




c) Socio-cultural Environment
-- The culture in which the company exists
-- What people buy, why they buy, where they
buy, how they use it etc:
-- The business marketer must know the social
and cultural trends effecting the customer,
competition, partners and employees.
d) The Natural Environment
-- Includes natural resources, raw materials, the
ecology, weather etc:
-- Mainly raw materials, water and energy
-- Societal preferences not to spoil the local
land conditions, pollution etc:
-- EXP: McDonalds changed from foamed
containers to wax paper containers due
to customer feelings that the former is
not bio-degradable.
-- However, it is another matter that the public
does not know that wax coated paper is
also not bio-degradable.

e) The Technological Environment
-- B2B marketers need to scan the technological
environment for developments that can
change the market
-- It may include changes in the competitors
products/ process
-- It may be due to changes in the customers
technology
-- The technological environment is both a
blessing and a curse
Through technology customer service can be
improved and more information given
-- News of technological changes are available
through trade journals, trade conferences,
trade shows, showing future technologies
and trends. Research journals, academic
conferences in science and engineering.
-- However technology is changing at an ever
increasing pace
-- It is therefore technology per say which is
important. Technological advantage is fleeting



THE NATURE OF BUSINESS BUYING
We will discuss the different criteria involved
in business buying in this section
1] The purchasing decision process that
organizational buyers apply when confronted
with different buying situations
2] The various roles of influencers in the
purchasing decision process, and to identify
these influencers and their power
The criteria that organizations apply in making
buying decisions
Organizational buying activities
-- Buying centers experience and informations
and
about products and services
-- When it is a routine buying process of
products already in use there is not much
need
for information.
-- But when it is buying a new untried product
or supplier, then there is a need for extensive
information on the product, suppliers and
their experience
-- Buying activities will also consist of various
phases of decision making
-- Depending on the type of buying situation
if regular or new , these phases will vary in
importance
-- The focus will be on the buying situation the
buyer is facing
-- Understanding buying behavior is more easily
understood if it is divided into various phases
and analyzed under different buying situation

The BUY- GRID Model
The model is bifurcated into buy phases & buy
Classes
BUY PHASE BUY CLASSES
new modified straight
task rebuy rebuy
1] Anticipation/ recognition
of problem
2] determination of quantity
of needed items and its
charateristics
3] description of new modified straight
of characteristics of
needed items
4] search for qualified
and suppliers potential
suppliers
5] analysis of proposals
6] evaluation of proposals
and selection of vendors
7] selection of an order routine
Buying Situations
-- Buyers have various levels of experience and
information to use in buying products.
-- The same purchase in two different firms
may have dissimilar purchasing strategies
if buying situation is different.
-- A straight re-buy in one organization maybe
a New-task in another.
-- Therefore, marketing strategy begins with
identifying the type of buying situation.
New Task
-- In this situation the problem or need is
considerably different from past experience.
-- Problems may be triggered by internal or
external factors
-- A change in customer requirements or a
need for new equipment to meet this need.
-- Both requirement are new decision makers
lack the experience and product knowledge
to make comparisons with alternative
products and suppliers.
Modified Rebuy
-- When significant benefits such as quality
improvements or cost reductions is possible,
firms reevaluate alternatives and look at
modified rebuy possibilities.
-- In this situation firms have a reasonable
level of knowledge of the product or services
offered by the vendors. Thus a routine rebuy
little new information is needed. In a new
situation lots of relevant information is needed
Straight Rebuy
-- The most common situation in industrial
purchasing is the straight rebuy.
-- When recurring purchases are made there is
little need for new information.
-- Routine response is the normal buying
pattern.
-- Buyers usually have well-developed choice
criteria that has been used and reused over
a period of time.

Phases in the Purchasing Decision Process
Phase I: Anticipation or recognition of a problem
-- The purchasing decision process is based on
the recognition of a problem, need or
potential opportunity.
-- The recognition may originate in the firm
when customer needs change, outmoded
machinery, equipment breaks down, current
materials are unsatisfactory in quality or
availability.





-- It may also originate outside the buying firm.
-- A marketer who reveals a new opportunity
for performance improvement.
-- The marketer, particularly in a new task
situation will have a distinct advantage in
influencing the final decision.
-- This is a distinct plus point when the final
decision is made, as he is likely to get the
order.
-- It has been found that more often than not
new product ideas originate from the buyer.
Phase II : Determination of the characteristics
and quantity of needed items.
-- Once a problem has risen, the firm will seek
answers to questions such as:
-- What performance requirements are needed
-- What are the application requirements ?
-- What quantities will be needed ?
-- The narrowing of the problem and
alternatives at this phase is a task internal to
the user department.
Phase III : Description of characteristics and
quantity of needed items
-- This is often a crucial phase for the marketer
-- This is the phase at which influencers and
those who set specifications enter.
-- At this phase influencers may change from
departmental heads to engineers and
manufacturing personal.
-- It is at this phase, too, that buying influencer
starts to look for outside suppliers for
assistance in product specifications.
Phase IV: Search for and qualification of
potential sources
-- Once the solution has been found and
described the firm searches for alternative
source of supplies.
-- This leads to qualification of suppliers.
-- However qualification will vary with type of
buyer, the buying situation and buying
influencers involved. Exp. A firm may need a
new task primarily because of price. Hence the
finance department will be the main influencer
Phase V : Acquisition and Analysis of Proposals
-- Identified qualified suppliers will be asked to
make specific proposals.
-- Phases IV & V may occur simultaneously in a
in a straight rebuy situation.
-- Many months may be spent exchanging
proposals and counterproposals.
-- In such purchase situations, the need for
extensive information is needed and a great
deal of time is spent on comparing products,
services and cost.
Phase VI : Evaluation of Proposals and
Selection of Suppliers
-- All the proposals of qualified competing
vendors are compared
-- If a firm is facing a make-or-buy situation
then proposals are compared to see if the
firm can make it more economically, the
buying process is terminated.
-- If it is not a make-or-buy situation, further
negotiations may continue with one or more
suppliers on terms, price, deliveries etc;-
Phase VII : Selection of an Order Routine
-- Order routines are given by issuing purchase
orders to vendors and status reports to user
departments and by inventory levels,
current and what is forecast over various
time periods.
-- While the purchase order has been placed,
the purchase phase is not over till the goods
have actually been delivered and accounted
for by the purchase department.

Phase VIII : Performance Feedback/ Evaluation
-- This is a formal or informal review and a
feedback regarding product performance
and vendor performance.
-- It involves the user department on whether
purchased item solved the original problem
-- If it has not, then some of the original
screened vendors may be given consideration
-- The feedback can cause members of the
decision making unit to rethink their position
Identifying Buying Center Members
The buying center gives a good idea of who is
Are involved in the buying process.

The buying center is an informal group of people
From various departments who are involved in
Acquisition and processing relevant purchasing
Related information.

People in the buying center are there because
Of formal responsibility or knowledge.



Marketing :
-- Purchasing decisions have an impact on
the marketability of a product
-- Such as product material, packaging, price.
-- In such cases marketing people become
active influencers in the purchase decition
process.
-- The marketing perspective will be if it will
enhance salability.
Manufacturing :
-- Manufacturing is responsible for the
feasibility and economic considerations of
producing end products.
-- Thus issues on specifications, parts, etc:- are
confirmed by this department.
-- Equipment needs, costs and impact on
current production are carefully evaluated.
-- Continues feedback to purchase department
on performance makes manufacturing a key
influencer.
Research and Development
--They are initially involved in the development
of products and processes.
-- They set broad specifications for component
and materials, minimum end product
performance standards and sometimes
manufacturing techniques.
-- The earlier the marketer is involved in the
development process the better the chances
of its ideas incorporation in the final product


General Management :
-- They become involved in purchasing
decisions when faced with unfamiliar
situations, not faced day to day activities.
-- Or when purchasing decisions have major
impact on the firms operations.
-- Such major instances may also make the
management to take decisions without
seeking information from lower levels.
-- They lay down criteria for furthur purchases
Purchasing :
-- Purchasing is not the central figure un the
purchasing process.
-- Purchasings dominant position is in phases
IV, V and VI of the buying decision process.
-- That is after the speci fication has been fixed
and suppliers qualified.
-- They are the dominant players in the
repetitive purchase process because of their
knowledge in purchase, negotiation skills
and close relations with vendors.


BUYING CENTER ROLEs
Primary Roles
Deciders:
-- Members who have formal or informal
authority who actually make the buying
decision. They are sometimes most difficult
to identify.
Influencers:
-- Individuals inside or outside the firm who
who influence the decision process by giving
information, engineers, specialists etc:-
Secondary Roles
Users:
-- Those who use the products or services.
-- A minor but important influencers. They may
even initiate the buying process and define
purchase specifications.
Buyers:
-- Firm members who have formal authority in
selection of suppliers.
-- Implementing procedures involved in
purhasing. Major role is negotiation, ordering
Gate Keepers:
-- Members who control the flow of
information into the buying center
-- They control printed information and
advertisements, as well as by controlling
which sales person is allowed to speak to
individuals within the buying centers.
-- They can be extremely dangerous and can
spoil a firms chances of becoming a supplier
INDUSTRIAL MARKET
SEGMENTATION
Successful market segmentation depends on
-- Identifying
-- Analyzing
-- Evaluating
Attractive market segments
This is necessary to
-- Allocate resources
-- Funds are best used
-- Which target market gives best returns


Very few firms have so much resources to
-- To serve all segments
-- Therefore invest in segments that give
best returns on investment
Once a segment has been chosen the firm has
to analyze
-- Its customer base
-- Competition
-- Technical, social, political environment
Market segmentation is the first step in a series
Of steps to maximize return on investment.



Industrial marketing also differs in their needs
-- needs
-- Resources
-- Buying attitudes
So first requirement is identify those group of
companies
-- Similar purchase requirements
-- Response to similar marketing programs
-- Divide into homogenous groups


Thus the firm identifies
-- Different ways to segment the market
-- Develop profiles of each of these segments
-- Evaluate each segments attractiveness
Difference between Market segmentation and
Target marketing is difficult
-- Great diversity of end users
-- Product application
-- Customer characteristics
-- Buying practices
So a few simple criteria is not enough. Also
the number of people involved engineers,
purchase department, R&D, production
department etc:- For effective segmentation
the variables chosen for analysis should be
1] Measurable Information should be
obtainable through primary or
secondary sources for chosen
variable

2] Relevant Chosen variable should be relevant
for significant number of potential
customer groupings
Also relate to differences among
groupings to marketing programs
3] Operational Chosen variable for evaluation
should be related to differences
customer requirements.
Buying behavior
Marketing approaches to
product, price, distribution etc:



The purpose behind segmentation is
-- allow the marketer to allocate resources
-- Develop marketing strategies for different
segments.
Before embarking on segmentation
-- the costs involved to be analyzed
-- gathering information is costly
-- will the additional costs be covered by the
end product.


Basis for segmenting industrial markets
-- no magic formula segmentation
-- consumer markets are segmented on the
basis of demographic and psychographic
-- in industrial markets the approach two fold
2) Macro segmentation, the difference in
price , geographical location , product
application
3) Micro segmentation , the differences
directly related buying prices, behavior of
individuals directly involved.


Macro Variables
Listed below are some of the macro variables.
The aim is to a) identify potential markets
b) Evaluate potential markets during the first
stage of segmentation
Variables Examples
======== =========
Industry Agriculture,
mining, autos
manufacture
Organizational buying process,
Characteristics reaction to mktg.
programs
Size size of customers
parent company.
size of business.
plant characteristics size of customers
plant, degrees of
automation
Economic factors cyclicity of the
cos industry

Location distance from plant
state of plant. Rural
suburban, urban
Customers industry growth rate of ind.
customers growth
stage in industry.
ultimate customers
of your customer
Competitive forces degree of competition
in the industry. Ease
of entry.




Purchasing factors decentralized verses
centralized. Number of
purchasing levels
End use markets mining, highways etc:
Product applications small appliances,
computers, close circuit
TV systems etc:
Industry characteristics:
Firms produce goods and services that can
-- targeted to different industries.
-- effective market segmentation.




This will depend on clear understanding of the
Similarity and differences between industries
Exp. Computer equipment and software.
Banks, insurance companies, investment cos
-- All are investment companies
-- but needs/ applications are very different.
Organizational Characteristics
Demographys
Industries:
Organizations in the industry will have
different demographic characteristics.
Big companies will have different purchasing
requirements
Respond to market programs differently
May not accept small suppliers
Small companies may avoid supplying to big
companies because of:
-- lack of capacity
-- customer location
-- distance
-- transportation
-- warehousing
-- decentralized/ centralized
End Use Markets
-- multitude of end uses
-- bus, torches, trucks, military etc:
-- banks, financial institutions lend to mining,
shipping, construction etc:
Product Application
-- solinoid switch used in automobiles, trucks,
hence segmentation is on the basis of
product application.

Micro Variables
Macro segmentations helps in identifying
Industry
Organization
Endues Markets
Product Applications
Micro segmentation helps in Industry
Specific organization buying procedures
Individual criteria directly connected to buying
procedure


To gather these information one needs
Primary data through
Sales force
Special market studies
Organizational Variables :
a) Purchasing situation phases
Market strategy is affected by purchasing situation
customer is facing
When they are in the decision making stage.
Exp : In new task situation to penetrate one market
able to assist in problem solutions
provide information
work with customer through purchasing decision
process.

b) Customer experience
when customer is unfamiliar with product
delegate to person competent
competent to deal with the uncertainty involved
attracted by the package offered
how proven is the technology
As they become familiar with product application
delegate to purchase department
become more price sensitive
good time for out supplies to set a chance
c)Customer interaction needs
In complex/important products

final purchase decision is dependent on
how buyer respond
to vendor stimulation during
decision making process
Product package have to
be adapted to buyer needs
considerable interactions between buyers/sellers
The duration of this association will depend on
buyer capacity to identify needs
this is dependent on the sellers ability to
understand these needs.
Micro segmentation on the basic
different needs
identify during the interaction period
is a useful for complex needs
d) Customer needs
Benefit segmentation on the basis of
similar customer needs
product attribution within group of buyers
gives an idea of customer needs
Such identifications helps in
product design
pricing
distributions
This also gives an opportunities
to look at competitors product
technology
service offerings
insight into competitors weak areas
c) Product innovation
the buying needs/practices of innovation is
very different
innovators more open to ideas/suggestions
large groups of people across depts involved
vendors can influence at this stage
once implementation stage is reached
less influence
unless a real innovation comes up



In followers the opposite happens during innovative stage
difficult to influence
cant be done informally
may need formal presentation
High tech products
go through different life cycles
more rapidly than in others
Micro segmentation on organization innovations
allow the vendor
to identify those to be targeted first
when introducing new products

f) Organizational Capabilities
organization can be segmented on the basis of

operating capabilities
technical capabilities
financial capabilities
Purchase situation variables
a)Inventory requirements
Firms who use
MRP
JIT
Have an impact on marketing programmes
Technical/Financial overtime in buying behavior

Selling should need to be highly trained in
Negotiation
Human relations skills
Supply true products

in time
as per schedule
Segmenting on the basis of inventory is important
b) Purchase importance
when product are applied differently
clarify according to perceived importance is useful
c)Purchasing Policy
potential customers are segmented on the basis
agreed prices
tendering
leasing vs outright purchase
d) Purchasing Criteria
performance criteria
economic criteria
adaption criteria


integration criteria
legalization criteria
e) Structure of buying center
organization can be segmented on the basis of
involvement in the buying decision
inter department personnel
when involving patterns are known
makes meaningful segmentation possible
Individual Variables
a) Personal characteristics
buying decision are ultimately made by individuals
though decisions are made an organizational variable
segmentation is possible based on individuals
some buyers take more risks than others
risk taking is directly attributed to self confidence

a sales information can be -----
send in data to enable segmentation
b) Power structures
It can be the engineering dept , in other finance etc
Strategies for restoring conflicts
Collaboration
Compromise
Avoidance
Coalition Formation
Can segment on the basis of
Power
Communication strategy
Market segmentation a step by step process
Market segmentation involves cost
The more deeper the segmentation the greater the cost
degree of segmentation depends on detail required
macro variable are relatively easy
can be obtained from secondary source
micro variable may require
research study
more and more individual contents will be needed
segmentation begins with macro variables
works towards micro variables
up to the needed level
that is one segmentation becomes good enough
it should stop
no further segmentation should be done
Evaluating potential segments
Market segmentation mainly identifies
potential opportunities

most attractive markets
use limited returns to maximum returns
Market profitability analysis
In analyzing profitability of any segment there are 4 elements:
1)Market potential
most optimistic estimation of many products you can sell
in a given time
2)Sales potential
most optimistic estimation of firm share in a given time
3)Sales forecast
expected sales in a given time
4)Profitability
difference between potential revenue (-) cost of
serving/maintaining customers.
There are many measures for measuring marketing potentials
quantities - based on available data
qualitative based on informal judgment
When data is not available management calls on
sales force
to executives
customers
To estimate market potential
Once market has been
estimated potential
sales forecast made
It is necessary to see how customer will be accrued
Customers can be accrued only it
market programme suits customer needs
as well as competitors positions in the segmentation

Markets in sender segments may be
costly
need different programme
Before individual segmentation profitability is assessed
cost associated with
Sales force deployment
advertising
product development
pricing strategy
logistics
Competitors analysis
how good is the analysis of competitors strategy
profit analysis is made on strengths\weaknesses of
competitors in that segment
potential new entrants
In evaluating a segment following questions must be asked of
competitors :
Who
Strength
Weakness
Product innovation
Product Quality
Design Capability
Sales force capability
Competitors will always define a segment while trying to take
market share in others.
Target Markets
Profitability
Capacity to serve the market
Target the segment

undifferentiated market
Product is standardized
Sold to a broad range of industry
Undifferentiated marketing strategies is required
Firms ignore segment differentiation
Develop a single market programme
Focus is common to all
On the basis of ROI undifferentiated marketing is most
attractive
Risk is that vendors who differentiate will attack you
Make a mistake on delay in supply differentiating
vendors will step in.
Differentiated Market Selections
Firms offer this product
Diverse segments
Usage is different
Response to marketing programme is different
However this involves over all income is costs in
Product development
Production
Marketing
Advertising \publicity
Idea is to set higher sales and better positions in
the segment
Concentrated Marketing
Concentrates only a few segments, though many
segments exists
Gets larger share of one \two segments
Vendor will be in a strong market position
As firm gains experience
Firm turns its response to buyers requirements
Leads to advantage of competitors


Operating economics are also obtained due to knowledge in :
Production
Distribution
Publicity
Niche Marketing :
When segments \segmented to even tinier segments
Gaining grounds in industrial markets\ service markets
Vendors can offer specifically tailored products
Vendors monitor marketing closely
Emerging trends \ requirements
Develop new product to satisfy their needs
Reposition existing product for new application
Niche marketing is growing today because of
Lot of information is available today
Vendors with huge volume of data
Helps in discovering Niche.



BUSINESS STRATEGY
Strategy literally means The art of the general
Sun Tzu wrote a book called the art of war 2500 years ago.
The concentrated essence of winning strategy.
A] The strategic planning process
-- As in consumer marketing, in B2B marketing also the
strategy starts with a mission statement, which is
formulated into objectives.
-- The four elements of strategy are :
1) The need for systematic decision making
2) The development of programs for their implementation
3) The measurement of performance against objectives
4) Modification of the strategy itself if needed
-- Planning imposes a degree of order upon potential chaos
-- Planning allocates resources in the most effective way

-- Planning leads to a shared sense of opportunity, direction
significance and achievement.
-- This process has four distinct stages :
1) Evaluation:
Where are we now ?
Where do we want to go ?
What resource capabilities do we have ?
2) Strategy formulation : How are we going to get there ?
3) Detailed planning :
4) Implementation & review
-- The key ideas that form the basis for strategic management
are :
1) The business strategy design seeks to have a fit between
the business and the business environment.

2) The key element of fit in business strategy is to provide
superior value to the customer
3) Superior value means offering differentiated products from
competitors in the minds of customers
4) Differentiation is produced is by using core competitiveness to
advantage
5) The more distinct the core competency the higher the customer
value and higher the profits
6) Quality and process improvement are fundamental to provide
superior value
7) Measuring results and tracking results create learning and later
improvement

Today with rapid technological change and the internet, there is a lot
Of new thinking on strategy and strategic planning
Change in customs, channels and competition interact to
create disturbances in the market
While companies can influence how the market changes, they
cannot control the pace of change
Companies need change the rules of the markets they
compete in . For this they need to develop their own
business model instead of the competitors
Such change of rules are of course subject to the business
environment
Strategists will have to identify core competences
Such advantages are not sustainable for long. Companys must
innovate constantly and change the rules on an ongoing basis
to stay ahead of competition

B] The Mission Statement
-- A mission statement has to be seen in the light of two
questions
1) What business are we in ?
2) What business should we be in ?
-- A mission statement should be capable of :
* A powerful integrating function
* A statement of core corporate values
* Framework within which individual business units
prepare their plans
A worthwhile mission statement should be capable of
providing all personal in the organization with a shared sense
of :

-- Direction
-- Opportunity
-- Significance
-- Achievement
-- The mission statement in the overall planning process
is represented by the acronym MOST
MISSION
OBJECTIVE
STRATEGY
TACTICS
-- The characteristics of a good mission statement should be :
* Short on numbers
* Long on rhetoric
* Remaining succinct
-- A mission statement is not a one off exercise
* It will change over time
* Because of internal contradictions , external factors
such as opportunities and threats
* A mission statement developed in 1980 may not be
appropriate today
* The company itself may be in a different business

Hierarchy of Business Strategy
1) -- Strategy is largely hierarchical
-- Strategy is a general means to achieve a general purpose
-- The difference between strategy and tactics depends on
ones view point
-- If you are a CIO , corporate goals and corporate
objectives define strategy, everything else is tactics
-- If you are a customer service specialist ( back office )
your strategy will be designed to support customer
service of your business unit
Corporate Strategy
I
---------------------------------------------------------
I I
Business Unit Strategy
I
------------------------------------------
I I
Production Strategy Functional area Strategy
2] Strategic Resource Allocation :
-- The strategist chooses businesses or markets to persue
and allocates resources for it
-- However the strategist also has the problem of choosing
a future vision to follow
-- This vision also then envisages the requirement for
future core competencies
-- This competency may not be available and has to be built
up or accrued
-- So corporate strategy will also have to include their core
competency so that they will become available 10/ 15/20
years hence
-- Development of these competencies cannot happen
overnight
-- Successful corporate strategy must include a
developmental path to create new competencies
-- Resources need to be allocated for creation of personal
skills and reward there application
-- All of this is structured to address the organizations
Strategic Intent
3] Strategic Business Units :
-- Once corporate strategy is determined, a strategic
architecture is formed that will guide the organization
over the next 5 / 10 / 15 years
-- Business strategic units are the next step in the hierarchy
that will guide the organization
-- SBUs are organizational entities within the firm that
address a single ( usually ) business
-- Strategy in the SBU is to determine goals and objectives
are to be met, markets and how to address them
-- The strategy of the SBU will be aligned with corporate
mission, objectives and budgets
4) Marketing Function :
-- Usually along with the SBU there will ba marketing function
-- The strategy of this market function will be choice of
marketing segments and positioning of its products
or services
-- Marketing strategy will have to operate in concert with
product line and product level
-- This strategy will generally address the customers to be
targeted and how to compete for their business
-- The customers within the target audience may exist at a
pre strategy state of mind ( unaware, aware, liking etc. )
-- Strategy is to make them aware and so on. There are also
layers below this such as :
* Product strategy
* Product development strategy
* Communication starategy
* Sales strategy
* Channel strategy
* Partnership strategy
* Pricing strategy etc.
All these strategy must be knitted together to form a cohesive
plan for the SBU.
C] Analysis :
1) Opportunity analysis
-- The opposite of threat analysis
The firm tries to anticipate favorable situation in its
domain in the present and future
-- Enables an organization to capitalize on its capabilities
to develop , maintain and defend its position in the market
-- This involves :
a) Monitoring the external environ ment
* forces likely to effect marketing
* demand for current and future products
b) An internal analysis for
* strength & weakness of its management
* organizational structure
* current position in the market
* identifying future capabilities
c) The determination of :
* market opportunities that must be persued
* which are the threats to be assessed
* their implication for planning and marketing
decisions
d) Monitoring the external environment :
* micro environment
* macro environment
e) Differential advantage analysis :
Differentiation is at the heart of successful marketing
strategy. Its rewards are :

c) Tools for designing strategy
1) The growth share Matrix
This was developed by the Boston Consulting
Group ( BCG ) almost 30 years ago.
Relative mkt. share
high low
Mkt. high
Growth
Rate low



Stars ?

Cash cows

Dogs
a) stars :
High growth rate
Invest heavily
Maintain mkt. share
market ownership is the objective
b) Cash Cows :
Relatively slow growth
prominent mkt. share
generates cash which fuels other parts
usually in late growth, maturity
or early decline stage

c) Dogs :
Slow or negitive growth
less than prominent mkt. share
can occur at any stage of product life
cycle

divest the business/ continue to harvest
d) Question mark :
mkt. potential high, but not much share
significant investment required
invest or divest ?
Some of the limitations of the growth share
matrix are :
1)Relationship between mkt. share and
profitability is suspect. This tends to
undermine the validity of the analysis and its
implications
2)There is an inherent subjectivity in the
analysis
There are no universal rules
An SBUs position in the matrix can be
compared with only another SBU in the same
organization
3) The matrix is a snapshot in time.
Current mkt. growth rate may have nothing to
do with future mkt. growth rate.

Multifactor Portfolio Matrix :
Unlike growth share matrix , the future business
strength can be defined.
This gives a higher score to a business or
products that uses resources better.
1 2 3
4 5 6
7 8 9
Strong Medium Weak
High



Medium



Weak
M
a
r
k
e
t





A
t
t
r
a
c
t
i
v
e
n
e
s
s

Business Strength
Step 1. Protect your leading position from
competition
2) Very attractive invest to build
3) Attractive build selectively
4) mkt. attractiveness is medium , but you are
strong build selectively
5) -- ditto -- ( or manage for earnings )
6) mkt. is attractive, but you are weak limited
Expansion
7) You are strong but mkt. attractiveness is low
Limited expansion
8) mkt. attractiveness is low and your strength is
medium manage for earnings
9) mkt. attractiveness is low and you are also
weak divest.

Performing Strategic Management in the B2B
Company :
Step 1: Develop goals & objectives
While defining, goals are general in nature,
Objectives are specific or vice versa so long as
you are consistant.
For exp. A firms management may state that it
wants superior profitability and leadership in
its industry. This is a goal.
Objectives are the specific expression of these
goals. The members of the management may
then say that by the year ending 2012 they
want to achieve :
-- an ROI of 20 % after taxes
-- Achieve 35 % of market share in product A
-- they should be the bench mark for the mkt
-- the objective should be reachable,
challenging and internally consistant.


Step 2 : Environmental Analysis
In this step the current situation and future
possibilities are explored. At any level the
environment includes the following elements.
1) market, segments and customers
2) Competition
3) Internal company environment
4) Effects of the economy
5) Effects of technology change
6) Public policy
At corporate level, environment includes stake
holders, financial & investment organizations.

Step 3: strategy Design
--In this step strategy planners decide how to
meet or exceed the objectives they have set.
--They create alternative strategies and choose
the best of the alternatives.
-- they begin formulating strategies as they do
the SWOT analysis and by the end of this they
usually end up with one strategy.
-- so strategies at the corporate level includes :
Vision of the industry & its future
The choice of goals and objectives
The choice of which business to persue

Allocation of resources across businesses
Which strategies to build for the future
Allocation of resources to build strategic
competencies.
Step 4 : Implementing Plan Design :
-- after the strategy is defined, planners must
decide what actions are to be taken.
-- they will decide who will do what, when, with
whom, and at what cost.
-- once plan is laid out, the costs, personal
resources, skills needed and time required must
be assesed.
Step 5 : Monitoring of Environment &
Performance Results :
-- Data and information must be gathered and
analysed
-- Analyses will pinpoint implementation
failures, sub objectives and trade progress to
meeting high level performance targets.
-- Data to be collected regarding the business
environment.
-- Change in knowledge can lend to change in
implementation or strategy.
Step 6: Analysis of Performance :
-- Here performance is tracked relative to
objective
-- Any variance from desired performance levels
needs to be analysed.
-- Both underperformance and overperformance
needs to be analysed.
Step 7 : Adjustments :
-- Based on analysis of performance,
adjustments m,ay be needed on: strategy,
implementation, environmental knowledge,
other planning elements.
-- small adjustments can be made at the next
planning cycle.
-- big adjustments may require an entirely new
plan
-- most strategy planners continue this cycle
every planning cycle.
New Product Development
Booz, Allen and Hamilton have identified six
categories of new products.
The task of developing a new product is one of
balancing efforts devoted to three objectives.
1) product performance extent to which it
meets customer requirments.
2) speed to market : unsatisfied need how
quickly met
3) product cost total cost of delivering the
product to the customer.

Core Products and Benefits :
1) fundamental to all products is a core benefit
or value. They are appearance, quality and
ability to satisfy customer needs.
2) The core benefit having been found, the
company now tries to make a basic or
generic version of the product.
3) The third aspect is the set of attributes
customer seeks.
4) By adding additional services and benefits,
the company turns an expected product into
an augmented product.

5) Product differentiation is related to the image
and its ability to give a premium.
-- low differentiation rice, salt, sugar etc.
-- medium -- branded foods, consumer
durables etc.
-- high -- clothing, perfume, etc.
6) Evolutionary process :
-- future innovations through which the product
may pass. This is an evolutionary proses.
Role of Product Design :
Definition of product design is (1) designation of
the key benefits the product is to provide.



2 The psychological positioning of these
benefits verses competitors products
3 fulfillment of the product promise by
physical features
PRODUCT PROMISE & DESIGN :
Quality is what the customer thinks it is
Design contributes to it
Quality contributes to customer satisfaction
By providing quality companies must also
benifit

This means you have to break down customer
demands to its different components and see
how each of these elements provide an edge
over competition.
Innovation & Evolution of Markets :
Competition in markets based on innovation
has led to products which perform old
functions better or make new functions
possible. Exp. Teflon, Velcro, Synthetic wash &
wear clothes
There is seldom a single dominant product
technology in a market.

Companies can adopt different technologies
that is incremental or radical
Big companys with large market share seldom
make radical technology or innovations. This is
because of the large investments involved.
On the other hand small companies are more
likely to make radical innovations. Exceptions
are there off course. Exp. 3M
However large companies can go in for radical
innovations with a combination of strategies.
1- Break through innovation is a strategic
priority
-- Set goals that can be achived by doing
thinks differently
-- set goals to increase proportional
revenue with new products
2 Create information labs within the company.
-- Provide innovators with time, flexibility
and R & D funds
-- Modify performance assessment so
that radical ideas are not penalized
because of no immediate pay offs.
3 Establish Knowledge Markets within the
organization :
-- Small team of internal entrepreneurs who
are responsible for driving radical
innovations
-- Collect the best ideas through out the
organization and develop and market
likely winners.
Product Development Strategy :
New product development strategy starts with
an unsatisfied need
A product evolves from an idea to a
commercial reality
Three questions have to be considered
sequence
1 Is there a market for the idea
2 Can the idea be transf0rmed into a
physical product
3 Can the physical product be manufactured
and marketed profitably.
Each of these questions give rise to several
criteria that must be addressed before a
decision is taken.
A] Market Criteria :
Present size
Growth potential
Current / new customers
Amount of competition
Strength of competition
Price sensitivity
Technical services required
Are present channels sufficient
Variety of end uses known
Impact on current products
B] Product / Technology Criteria :
Degree of innovation
Differential advantage
Lead time over competition
Patentable product / process
Estimated product life
Amount of research know how
Experience with the technology
Technical feasibility
Competing technologies
Other resources needed


C] Financial Criteria :
Initial investment
Expected sales revenue
Profit- to- sales ratio
Estimated ROI
Manufacturing cost- to- price ratio
Pay back period
Net gain / loss on other products
--However it may be noted that most
organizations dont like taking risks.
-- to them innovation and change is perceived as
risky.

Aggressive innovators take risks and
sometimes they are the cause of change itself.
They thrive on change and look at it as an
opportunity.
To Centralize or Decentralize R & D :
Advantages of Centralization.
No time constraints & pressure of line
operatars
Atmosphere conducive to creative effort
All basic research is in a centralized location
More visible to operating division
Encourages exchange of ideas
Operation division picks up new technology to
enhance business
Drawbacks :
R&D must be closely aligned to the firms
strategic direction
Scientists tend to put too much effort in
technology that are not readily applicable
Are more interested in research that are not
really of strategic importance
Therefore they have to be given a framework
within which to work

New Business Development Department :
Innovators are not always technical
May be interested in finding business
opportunities unrelated to current products
It may however give competitive advantage
Exp. GM bought electronic data systems (EDS)
to give greater expertise in computer aided
design and manufacturing
Alternatives for New Product Development
New Product Committee :
Ideas originate anywhere in the company
Examined,evaluated,funded or rejected
by the committee.
The committee will include managers from
engineering, manufacturing, marketing,
finance etc.
The committee meets at regular intervals
The primary strengths of the committee are :
-- Members view each other as expert pros.
-- Work in a balanced and consensus way
-- Bureaucratic delay is minimized as they
usually deal directly with top management
-- Members can be added or removed as
necessary.


The disadvantages are :
-- The committee members are not
development specialists
-- Development activities are secondary to
daily operating problems & decisions
-- Though they may reach a consensus it may
not have much strategic value
Task Force :
Similar to the committee
Differs in that they deal only with one project
If more than one project, multiple task forces.

The common characteristics of task forces are:
Membership limited to ten or less
Reporting levels / seniority of members are
proportional to importance of the project
Tenure is usually for about six months
Voluntary membership . No staff is assigned
Work in an informal way
Management usually expects preliminary
results in around three months
New Product Development Department :
* This is usually in firms that constantly come up
with innovations
Substantial authority over development
functions from idea generation to
commercialization.
This department will have
-- Own engineering
-- Own costing
-- Pilot line production capacity
-- Specialized marketing function
-- Can call up on additional talent from within
the company
-- Full scale production is by manufacturing
Venture Teams :
Evolved in the sixties
Most autonomous
Members drawn from different departments
Unlike task force, members are full time
A study of 98 such venture teams indicated
some common features
-- Organizationally separated from the rest of
the company
-- Members are from all relevant function
areas
-- Team managers report to top management

-- Existing lines of authority dont apply to
venture teams
-- They have authority to take major decisions
-- Free od deadlines, they remain until project
is completed
-- Freedom from time pressures foster
creativity and innovation
The New Product Development Process :
1) Idea generation :
Any new product idea must focus on
a) Solving a specific problem
b) Provide definite customer benefits
c) Support and enhance firms overall strategic
thrust
This means that the firm must decide what
business it wants to be in and the qualitative
goals it seeks to achieve.
These goals determines the product idea
Exp. In the 1960s Texas Instruments set several
criterion for all new semi conductor
products it hoped to market.


15 % compound growth over its life cycle
25 % pre-tax returns on assets
New products must stem from unique design
Fabrication techniques to give performance
advantage
2) Idea screening
Eliminate ideas that are likely to fail
-- No market need
-- Competition already has a better
product
-- Investment too heavy
Recognize those ideas with potential
Optimize the remaining stages of the
development process
Limitations are not in ideas but in the capacity
of the firm to develop the idea into a
successful product
3) Idea Evaluation :
Ideas that pass screening stage need
additional evaluation
Ideas of internal origin must be checked for
market needs and volume potential


Ideas from a market need / specific customer
need -- feasibility to develop the product
The idea generated should be prioritized
depending on the firms marketing and
technical criteria
Exp. Priority maybe on
-- Market position
-- Increase sales volume
-- Improve profits
-- Diversify business portfolio
-- Broadening product line
4) Marketing & Engineering Agreement :
-- This is a critical stage
-- It is about Customer satisfaction & Technical
feasibility
-- There are two aspects to this agreement
a) Marketing should decide their requirements
-- Customer benefits
-- Performance characteristics
-- Not product features
-- Describe the product in terms of what it does



These benefits are further sub-divided in
terms of:
1) Essential benefits
-- This cannot be compromised
-- They represent the products primary
advantage
2) Desirable benefits
-- Benefits remain only if they do not retract
from the essential
Exp. While miniaturization is desirable, only
if the product reliability is not compromised

3) Trade Offs
There are benefits that impact each other
negatively Price verses performance
b) The second aspect is regarding the limit of
marketings inputs. They should be limited to
-- Customer needs
-- Competitors capabilities
-- General market conditions
The description of the physical product be
limited to
-- Features for customer satisfaction

-- Competitive positioning
Engineers should have the freedom to use
technology to optimize performance and
profitability
5) Preliminary Business Analysis :
At this stage in new product development the
firm will have enough information on
-- Customers
-- Competition
-- Volume potential
-- Tentative pricing

-- Technology
-- Investment levels
-- Estimated production costs
* The first financial analysis can now be made
Determine weather or not the product idea
should become a physical entity
This conversion of idea to product can be a
substantial part of total development cost
6) Product Development & Testing :
R&D converts the idea to a physical product
Proving its technical feasibility


Manufacturing will then confirm whether it
can produce or cannot within cost /
performance criteria
Marketing will then approach selected
customers with samples to check if it meets
customer needs
7) Test Marketing :
Major potential users will evaluate the
product
Interact with the entities who made the
buying decision
Interact with technical people who will
actually evaluate the product
Due to the oligopolistic nature of most
industries, acceptance of a product by a few
users gives assurance of success
Generation, refinement, screening
Continuous systematic search for the new product
Ideas
Technical Feasibility
Commercial Feasibility
R&D
Test Market, Financial and Sales Forecast, positioning

Market Research
Business and market analysis, profit margin
development costs Business & Market Plans
Product is developed and tested, packaged
Physical product design,
packaging and performance
Commercialization





Developing Product Strategy
The focus in this chapter is on the following :
1) To understand products from the industrial
customers point of view
2) Product strategies over the industrial product
life cycle
3) Managing the industrial product line
4) The differences between marketing products
and systems
5) The special problems and strategic
alternatives involved in marketing of
proffesional services.
What is an Industrial Product ?
Basic properties : Basic properties are those
that constitute the generic product and
connote the various benefits sought by
buyers. A pump is a specific generic product
that will be thought of by alternative
purchasers as providing different benefits
Enhanced Properties : generic products are
made differentiable by adding or deleting
some features, styling or quality.
A purchaser of computers will expect to buy a
basic model with some add on software and
the ability to tie into existing equipment
A deletion involves enhancing a product by
removing properties, such as to make it less
expensive and user friendly
* Augmented Properties : Those additional
benefits connoted in the purchase of a product
They are usually intangible and may include
training, technical assistance, availability of
spare parts, maintenance and repair services.
Product Strategy involves continual change :
Product offerings are to satisfy customer need
Any change in customer need changes the
firms product
Customer need changes as his environment
changes
Technological change makes products change
as old products become obsolete
Changing laws and regulations, change in the
environment changes customer needs and so
products too have to change.
Product obsolescence leads to new product
opportunities
Products also change as it moves through the
product life cycle
Product strategy therefore involves a
continuous process of evaluating a product
and market conditions to determine
1) Whether changes are needed in current
product
2) Whether products should be added or
dropped

Industrial Product Management :
Product policies
Setting product objectives
Modify existing products
Providing pre & post sale servicing
Phasing out old products
Search for new product additions
Maintain the proper product mix
Meet changing market needs
Industrial Products Life Cycle :
Introduction Stage: Acceptance of an
industrial product at introduction is
considerably different from consumer market
Exp. Hand held electronic calculators replaced
mechanical calculators practically overnight,
where as electric type writers took over two
decades to replace mechanical ones.
Product acceptance in industrial markets
depends on the fit in the buyers total use
system.
Use systems involves other products, other
persons and a developed systems that is
termed as habitual skills
Habit systems, once developed, are not easily
changed.
When products have potential for rapid
acceptance, then the marketer has to be ready
for vigorous competition
Growth Stage : when products enter rapid
growth stage, product strategy shifts to
improving product design, distribution, lower
price
Due to increasing product demand and by
accumulated production experience costs
lower substantially
Experience has shown that when prices are
lowered, entering competition is discouraged.
Maturity Stage : By this stage industrial buyers
are mostly satisfied with existing vendors.
They are neither searching for new vendors
nor paying much attention to promotion of
other offerings
Marketing strategy is to keep current users
and look for new customers by changes in the
marketing mix
Decline Stage : changes in customer needs,
better offerings, better technology etc. lowers
sales and profits
The marketer is then faced with the choice of
either phasing out the product or embark on a
milking strategy.
Locating products in their PLC :
1)Develop trend information for the past 3 or 5
years on unit and Rupee sales, profit margin,
market share, prices

2) Examine recent trends in the no. andnature of
competitors, their market share and product
performance
3) Analyze short-term competitors tactics such
as new product offerings and plant expansion
4) Obtain & analyze historical information of the
life cycles of similar or related products.
5) Project sales for the next 4/5 yers based on
steps from 1 to 4 and estimated profit ratios for
each of those years
6) Estimate the no. of profitable years in the PlC
And fix it in the life cycle