B2B MARKETING

UNIT I
I. Values as the foundation of Business Market
Management
II. Managing Business Market Processes
III. Doing Business Across Borders
IV. Working Relationships and Business Networks
V. Summary
 Business Market Processes
Managing New Business
Market Offering Channel
Offerings Realization Management

Marketing Gaining
Sensing New
Business

Understanding Sustaining
Firms as Understanding Creating Delivering
Value Value Value Reseller
Customers Partnerships

Crafting
Market Guiding Principles Managing
Strategy Customers

Regard Value as the Cornerstone

Focus on Business Market Processes

Stress Doing Business Across Borders

Accentuate Working Relationships & Business Networks

 Basic Concepts
 Business Market Management is the
process of understanding, creating, and
delivering value.

 Business Markets are firms, institutions,

or governments that acquire goods and
services. Focuses on functionality or
performance.
 Guiding Principles of Business
Market Management
 Regard value as the cornerstone

 Focus on business market management

processes
 Stress working across borders
 Accentuate working relationships and business
networks
 Value as the Cornerstone of
Business Market Management
What is Value in Business Markets?
 Monetary
 Economic, technical, service, and social net benefit
 The exchange for price paid
 Value
 Value can only be estimated.
 Value changes when:
Same functionality or performance provided
while its cost changes to customer
Functionality or performance changes while
cost remains the same
 Customer Incentive to Purchase is the
difference between value and price.
 Assessing Value
 Supplier firms create and deliver value to targeted
market segments and customer characteristics

 Business market management strives to both

understand and capitalize on customer and market
segment variations
 Value Analysis
 Conducted by a cross-functional team with
the customer firm
 Team assesses market offering’s attributes
in term of:
Functionality or performance
Total cost of specific performance or
functionality
Identification of lower-cost alternatives
 Managing Business Market Processes

 Business Process: a collection of

activities that take one or more kinds of
input and creates an output that is of value
to the customer

Business Market Management, 3rd edition Chapter 1-9

 Processes Defined by Allaire
How the CEO runs the company
Management How management interacts with employees
Processes How decisions get made
How communication takes place

Focus is on reengineering efforts

Business
Large, crosscutting collections of activities (product design,
Processes order fulfillment, customer service)

Work Basic building blocks of business processes

Processes How the work actually gets done

Business Market Management, 3rd edition Chapter 1-10

 Shareholder Value
Shareholder Value:
when the economic
returns generated
from realizing its
business strategy
exceed the cost of
capital employed
Business Market Management, 3rd edition
Value Drivers:
 Sales growth rates
 Operating profit margins
 Income tax rate
 Working capital investment
 Fixed capital investment
 Cost of capital
 Forecast period
Chapter 1-11
Shareholder Value (Contd)

Translating
customer value into shareholder value
critically depends on business’s ability to
claim an equitable return on the
value it delivers to customers.

Business Market Management, 3rd edition Chapter 1-12

 Core Business Processes
Product Understanding customer requirements and preferences
Development
Anticipating how they will change
Management
Constructing solutions that customers are willing to pay for
(PDM)

Incorporates acquisition of all physical and informational

Supply Chain
inputs
Management
Efficiently and effectively transforms processes into
(SCM) customer solutions

Addresses all aspects of

Customer • Identifying customers
Relationship • Creating customer knowledge
Management • Building customer relationships
(CRM) • Shaping customer perceptions about the organization
and its products

Business Market Management, 3rd edition Chapter 1-13

 Contributions to Marketing
 Making core business processes more
market-driven can result in:
Accelerated and enhanced cash flow
Reduced time to market
Earlier adoption from targeted customers

Business Market Management, 3rd edition Chapter 1-14

 Market-Driven Processes
Market-Driven Business
Business Processes
Processes
PDM PDM
Create solution that enables
Design a technically superior product customer to experience maximum
value and benefit

SCM SCM
Design, manage, and integrate firm’s
Best inputs at cheapest price supply chain with suppliers and
customers

CRM CRM
Customer relationship is an
Customer relationship is a means to opportunity to learn about customers’
sell, deliver, and service a product needs and wants and how best to
create, satisfy, and sustain them

Business Market Management, 3rd edition Chapter 1-15

 Why Business Marketing Management?

 Marketing work processes should take

place within business market processes
 Business market processes cut across
functional areas
 Depends upon seamless
cross-functional cooperation
 Business Market Processes
Understanding Value
Marketing Sensing: process of generating
knowledge about the marketplace that
individuals in the firm use to inform and
guide their decision making
 Business Market Processes
Understanding Value
Generating knowledge about the marketplace that
Marketing
Sensing
individuals in the firm use to inform and guide their
decision making

Learning how companies rely on a network of suppliers

Understanding
to add value to their offering, integrate purchasing
Firms as
Customers activities with those of other functional areas and
outside firms, and make purchase decisions

Studying how to exploit a firm’s resources to achieve

Crafting
short-term and long-term marketplace success, deciding
Market
Strategy upon a course of action, and flexibly updating it as
learning occurs during implementation
 Business Market Processes
Creating Value
Managing Putting products services, programs, and systems
Market together in ways that create great value for targeted
Offerings market segments and customer firms

Developing new core products or services, augmenting

New
them to construct market offerings, and bringing them to
Offering
Realization market. Realization is all the activities used to transform
ideas into a market offering that it commercializes

Designing a set of marketing and distribution

arrangements that create superior customer value for
Business
targeted market segments and customers, and executing
Channel
Management those arrangements either directly through supplier firm
sales forces and logistics system or indirectly through
resellers and third-party service providers
 Business Market Processes
Delivering Value
Differentiating business opportunities, prospecting for new
Gaining New business, assessing the fit with supplier offerings and
Business priorities, gaining the initial order, and fulfilling it to the
customer’s complete satisfaction

A supplier and its reseller fulfilling commitments they have

Sustaining
made to deliver value to customer firms, strengthening this
Reseller
Partnerships delivered value, and working progressively together to
continue to fulfill changing marketplace

Differentiating transactional and collaborative customers,

Managing delivering offerings that fulfill the respective requirements,
Customers and preferences of a portfolio of customers in a superior
way, and getting a fair return in exchange
 Marketing Business Marketing

Understanding that
“The true meaning of advances in marketing
Marketing [is] knowing work processes &
what is value for the marketing relationships
customer.”
customer are needed to realize &
profit from
--Peter Drucker understanding of value.
(1980)
 Updated: “The four Ps”
Product Pricing
Flexible market offerings that What a market offering is worth to the
consist of naked solutions customer
Offerings are responsive to
customer requirements and
preferences
Promotion Place
Marketing communications are Design customer-driven distribution
focused channels
Tailored to varying requirements for Channel offerings build marketplace
gaining and sustaining customers & equity
resellers Implement cooperative channels
Shape and reinforce supplier’s value arrangements that are adaptive
Doing Business Across Borders

 Language and Culture

 Cross-Border Negotiation

 Dispute Resolution

 Currency Exchange and Payment

Risk
 Language and Culture
Doing business across borders does
not always mean that the language
and culture of managers will be
different, just as doing business
within the same country does not
always mean that the language
and the culture will be the
same.
 Language and Culture (Contd)
 Determine what language to use
 English regarded as the language of
international business
 Alternatives to English:
Use the language of one party
Use another language both parties
are willing to use
Or, rely on interpreters
Language and Culture (Contd)
The reasons why over 10,000 small
and 500 midsize automotive
component companies in India are
successful:
1.Large and growing Indian middle class
2.High demand, local raw materials, low
labor costs, high productivity and intense
competition
3.Government focus and consequent
support
 Language and Culture (Contd)
 Culture is an abstract and imprecise concept
 Bundled characteristics that uniquely define members
of a particular group
 Culture comprises a:
 Set of assumptions
 Values
 Beliefs
 Socially instilled norms
 Language and Culture (Contd)
“Culture is so imprecise and changeable a
phenomenon that it explains less than most
people realize…And within the overall mix of
what influences people, behavior, culture’s role
may be declining, rather than rising, squeezed
between the greedy expansion of the
government on one side, and globalization on
the other.”
--The Economist, “Cultural Explanations”
 Cross-Border Negotiation
 Considerations
Profitability of the business to be gained
Perceived benefits of the relationship
Anticipated consequences of the negotiated
deal on supplier’s business in other
country markets
 Cross-Border Negotiation (Contd)
Differences from domestic negotiation
1. Culture
2. Unfamiliar and uncomfortable settings
3. Influence of ideology
4. Greater involvement of government in business
5. Defining which country’s laws govern the business transaction
6. Instability and sudden change in foreign market
7. Dispute resolution
8. Foreign currencies
Cross-Border Dispute Resolution
 First negotiate how to resolve disputes
 International commercial arbitration
Arbitration usually occurs in a third country
Specify arbitration institution when possible
 Currency Exchange and Payment Risk

 Currency for transactions

 Supplier’s country currency
 Customer’s country currency
 Third party currency

 Letter of credit (LC)

 Confirm letter of credit
Working Relationships and Business
Networks
 Work Teams: a small number of
people with complementary skills
who are committed to:
a common purpose
set of performance goals
an approach which they hold
themselves mutually
accountable
 Work Teams
 Teams create value in their
collective work-product that could
not be produced outside the team
setting
 Working Relationships
Customer and supplier focus upon the timely exchange
Transactional
Relationships
of basic products for highly competitive prices, and/or
one end

Achieved through partnering. Customer firm and

Collaborative supplier firm form strong and extensive social,
social
Relationships economic,
economic service, and technical ties.
ties Mutual goals:
lowering total costs and/or increasing value.
 Collaborative Relationship Agreements

 Strategic Alliance: commercial agreement

between 2 or more parties to work
together in some mutual defined ways
Gives & Gets
Time Horizons
Pre-agreed dispute-
resolution mechanism
Collaborative Relationship Development

Exchange Episodes: critical incidents when

parties engage in actions related to the
development of a relationship
1. Defining purpose
2. Setting boundaries
3. Creating and claiming value
4. Evaluating exchange outcomes
 Business Networks
Business Network: a set of two or more
connected business relationships

Alliance Network: a clique

of interrelated and coordinated
business relationships
 Connected Relations for Firms in a Dyadic
Relationship
Other Other Supplementary
Other Third Parties
Ancillary Ancillary Supplier
Supplier Units in Common
Firms Firms

Focal Relationship
Supplier’s Supplier Customer Customer’s
Supplier Business Customer
Business
Unit Unit

Other Units in Other Units in

Other Other Units in
Focal Customer Competing Focal Supplier
Customers Focal Supplier
Firm Supplier Firm
Firm
 Characteristics of Business
Networks
1. Organized around developing and
realizing an envisioned market opportunity
2. Multiplex relations where firms are:
 suppliers,
 customers,
 and competitors to one another
3. Increasingly international in composition
 Analyzing Business Networks
Actors Network Horizon

Actors: firms, customers, suppliers, How extended actor’s view of the network is
regulatory agencies Depends on the actor’s experience and the
Perform the activities and control resources structural network features

Activities Network Context

Transaction, order management cycle
Structured in terms of the actors, activities,
Create value through transforming
and resources
resources

Resources Network Identities

How firms see themselves in the network
Anything that actors explicitly value
How they are seen by other network actors
Technical know-how, equipment,
Captures the uniqueness of each firm in its
personnel, capital
set of relationships
 Summary
 Overview of business market management
 Four guiding principles of BMM:
1. Value
2. Business market processes
3. Business across borders
4. Working relationships and business networks