Business To Business

Marketing
Marketing Strategies
Learning Objective
• Formulation of Marketing Strategies for Industrial Products
• Concept of strategic planning,
• Role of marketing in strategic planning
• Marketing strategies
• Planning process
• Tools for designing Business marketing strategies
• Industrial Market Segmenting, Targeting and Positioning
• Segmenting the business market, criteria, Bases, Evaluating segments, targeting
strategies, positioning.
• Nesting- a typical business market segmentation process.
Strategic Planning - Introduction
• Strategy is concerned with moving the organization from where it is
now to where we would like it to be.

• It is the business process concerned with planning the long- range

activities, character, and underlying values of the organization.

• Strategy differs from tactics

• Strategic decisions are far more difficult to reverse
• They usually involve the decision-makers in rejecting other options
• They tend to dictate the long-term nature of the organization as well as its
activities.
 Strategic Planning Process
• Strategic planning starts with the firm’s full
understanding of the business it participates in.
• No better approach has been developed than
that offered by Peter Drucker (1973).
• Drucker advised businesses to ask three basic and
two sub-questions:

• What is our business?

• Who is the customer?
• What is value to the customer?
• What will our business be?
• What should our business be?
 Strategic Planning Process

PEST SWOT
VISION, MISSION AND OBJECTIVES
Vision is the management’s view of what the organization should be. Often the
vision comes from the founder of the organization.

•The corporate mission is the overriding reason for the organization’s existence.
•It is the purpose of the organization.
•The mission statement is the formal document which outlines the reasons for
the organization’s existence

•A corporate mission statement has five characteristics (Ackoff, 1986):

• It contains a formulation of objectives that enables progress toward them to be measured.
• It differentiates the company from its competitors.
• It defines the businesses that the company wants to be in, not necessarily the ones it is
already in.
• It is relevant to the stakeholders in the organization, not just to shareholders and
managers.
• It is exciting and inspiring.
STRATEGY
• Strategies are a series of actions.

• Some believe that strategy should be defined as a plan and some

combine the reactions and the plan in their definition.

• Peter Drucker (1994) explained that successful firms develop

• “the theory of the business.”
COMPETITION AND HYPERCOMPETITION
• Competitive positions within markets become established over time
Market Leader

This company has the largest market share

•

These firms can control the market because they have the largest buying power.
•

•Market leaders have two basic strategic options: they can try to win even greater share from the smaller
firms in the market, or they can try to expand the overall market.

Market leaders will try to squeeze more profit from the same market share by cutting costs
•
COMPETITION AND HYPERCOMPETITION
• Competitive positions within markets become established over time
Market Challengers

•These are firms which seek to increase their share of the market, either at the expense of the market
leader or at the expense of the smaller firms in the market.

•In order to attack the market leader, the challenger must have a substantial competitive advantage,
whereas attacking smaller competitors may only involve running a powerful promotional campaign, a
short price war, or a takeover policy.
COMPETITION AND HYPERCOMPETITION
• Competitive positions within markets become established over time
Market Followers

•Market followers usually try to avoid any direct confrontation with the market leaders, since they are
unable to sustain a competitive battle in the long run.

•The usual strategy for a follower is to allow the market leader to make most of the investment in
developing a new market, then pick up any segments which are too small for the market leader to bother
with.

• Although market followers will never become marketing leaders, they often have much the same profit
levels since they do not have the expense of developing the markets.
COMPETITION AND HYPERCOMPETITION
• Competitive positions within markets become established over time
Market Nicher

•These companies concentrate on small segments of the market, seeking to meet the needs of those
customers as closely as possible.

•Since nichers operate on a low-volume, high- margin basis, they are often small to medium-size
companies

•The competitive strategy of a nicher is to get to know the segment so well that competitors are
effectively shut out, so the key to success is to specialize.
Market Leader Defense Strategies
Strategy Explanation
Position defense This involves building barriers which prevent or restrict competitors from entering the market.
These barriers may be related to inputs – for example, cornering the market in raw materials –
or to outputs, for example using a patent to protect a particular process
Flanking defense Since market leaders often ignore parts of the market which they feel are not worth
approaching, competitors can sometimes find an opening without directly confronting the
market leader.
Pre-emptive defense The market leader will sometimes attack the other companies before they can move in, for
example by using a massive price cut to stave off a threat of entry.
Counter-offensive When attacked, the market leader launches an instant counter-attack. This can take the form of
defense a promotional campaign, a price war or the development ofa “me-too” version of the
competitor’s product.
Mobile defense The market leader moves into new markets before the competitors can do so.
In effect, the market leader takes a proactive approach.
Contraction Sometimes the market leader finds itself unable to defend all its markets and withdraws to its
defense core business. In some cases this has not proved sufficient,and the company has continued to
retreat until it has nowhere left to go.
Market Challenger Defense Strategies
Strategy Explanation
Frontal attack In a frontal attack the market challenger attacks the target company by matching its efforts
across the board. The challenger attacks the competitor’s strengths rather than its weaknesses,
in effect entering into a war of attrition. The company with the greatest resources will usually
win in these circumstances, but such frontal attacks are costly for all concerned.
Flanking attack The flanking attack concentrates on the competitor’s weaknesses, seeking out areas where the
competitor is unable to compete effectively. The challenger will identify areas of the business
which the competitor is serving badly.
Sometimes the company under attack will simply retreat rather than fight for a market which is
marginal for it, so this can be an effective strategy for a small firm attacking a larger one.
Encirclement attack This strategy involves attacking from several directions at once. It works best when the attacker
has more resources than the defender.
Bypass attack Here the challenger bypasses the other firms entirely and targets totally new markets. This is
particularly effective in a global context, where a new market may open up in which the leading
competitors are not represented.
Guerrilla attack The challenger makes occasional attacks on a larger competitor, using different tactics each time
in order to confuse the target competitor. The constant switching of tactics does not allow the
competitor time to formulate a response, in effect forcing the competitor to become a follower.
 The 7-S Framework
• Not intended to be read as a series of generic strategies.
• It is a set of key approaches that might carry the organization in many different
directions.
• The framework also encompasses three factors for effective delivery of tactical
disruptions of the market: vision, capabilities, and tactics.
tactics
• Within the hypercompetitive environment, traditional sources of strength no
longer apply.
• Giants of industry are frequently brought down by relatively small competitors,
able to adapt to new situations or able to bring new ideas to bear.
• Much of the success in a hypercompetitive environment is based on the
strategy of finding and building temporary advantages through market
disruption
The 7-S Framework
• Not all disruptions are successful.
• For a disruption to be successful, it must fulfill the first S – the creation of
a temporary ability to serve stakeholders better than the competition
can.
• Successful firms may well prioritize the customer as the most important
stakeholder: customer satisfaction becomes the instrument by which the
company seeks the satisfaction of other stakeholders such as employees
and shareholders.
• For example, Intel have a process of concurrent engineering in which
Intel designers visit every major computer manufacturer and every major
software house around the world to ask them what they want in a chip.
The company also provides early software simulations to computer
manufacturers, thus allowing these customers to gain a first-to-market
 The 7-S Framework
Factor Explanation
Superior stakeholder The ability to satisfy the firm’s stakeholders more effectively than competitors are able to offers
satisfaction clear advantages. Customer satisfaction, much beloved by marketers, is only part of this process,
since other stakeholders must also be kept happy or even delighted by the firm’s activities.
Strategic soothsaying This is about understanding the future evolution of markets and
technology. Success in predicting future trends is clearly linked to success in making or
responding to changes.
Positioning for speed Preparing the company for a rapid change of approach is crucial to the firm’s ability to initiate
and respond to competitive shifts.
Positioning for surprise Being able to make changes rapidly enough to take the competitors by surprise is a useful
capability, as is being flexible enough to cope with surprises.
Shifting the rules of As firms learn how to break down entry barriers quickly and cheaply, the “gentlemen’s
the game agreements” to avoid direct competition are breaking down. A firm which is successful at
shifting the rules is likely to catch competitors flat-footed and thus gain competitive advantage
quickly.
Signaling strategic Letting competitors know what will happen if they follow a particular course may be a good way
intent to slow down or negate their strategic actions.
Simultaneous and Either carrying out a number of different competitive initiatives at once, or carrying them out in
sequential strategic a rapid sequence, can confuse and disorientate competitors. Often, a “false start” along one
thrusts coursefollowed by a rapid change of direction to another course will be highly effective.
 The 7-S Framework – Trade Offs
Trade-off Description
Speed vs. stakeholder Companies may sacrifice product quality (thus affecting customers) or may push employees too
satisfaction hard in order to increase speed of change. Rushing new products to market without proper
testing may also reduce customer satisfaction.
Surprise vs stakeholder Sudden changes of direction are unsettling for employees and may well confuse customers.
satisfaction Shifting the rules and simultaneous strategic thrusts also lead to confusion among staff and
shareholders, and may weaken brand values which have taken years to establish.
Speed vs. soothsaying Speed can easily leave too little time for reflection on future events, especially since the effects
of change cannot be estimated if the changes themselves are happening too fast. The same is
true of simultaneous strategic thrusts.
Shifting the rules vs. Shifting the rules often requires strategic alliances to be formed with other firms (either
speed competitors or members of the value chain) which means that negotiations will reduce speed.
These negotiations also reduce the possibilities for surprise, since any such negotiations are
likely to be public.
Sequential thrusts vs Sequential thrusts commit the firm to a predetermined course of action which may be surprising
surprise in itself, but which will rapidly lose the element of surprise as the plans leak out.
Reasons Strategic Plans Fail
• Failure to understand the customer
why do they buy
is there a real need for the product
inadequate or incorrect marketing research

• Inability to predict environmental reaction

what will competitors do
⇒ fighting brands
⇒ price wars
will government intervene
Reasons Strategic Plans Fail
• Over-estimation of resource competence
can the staff, equipment, and processes handle the new strategy
failure to develop new employee and management skills
• Failure to coordinate
reporting and control relationships not adequate
organizational structure not flexible enough
•Failure to obtain senior management commitment
failure to get management involved right from the start
failure to obtain sufficient company resources to accomplish task
•Failure to obtain employee commitment
new strategy not well explained to employees
no incentives given to workers to embrace the new strategy
Reasons Strategic Plans Fail
• Under-estimation of time requirements
no critical path analysis done

• Failure to coordinate
 no follow through after initial planning
 no tracking of progress against plan o no consequences for above
 STP in Business Market

Segmenting

Targeting

Positioning
STP in Business Market - Introduction
• Choosing the most rewarding market segments  most important
strategic decision a firm must make.

• Most demanding of decisions.

• When a firm chooses the market segment(s) it wishes to pursue

it is also eliminating a number of potential market segments from
its customer base
IMPORTANCE OF SEGMENTATION AND TARGETING
• Effective segmentation offers a number of advantages to any firm that successfully
completes the task.

• First, the very act of analyzing all potential customers and narrowing the list to those
deemed potentially most responsive is in itself a worthwhile undertaking.
undertaking

• By doing this, the firm can develop specific marketing strategies for one or a number of
identified segments, so that the product/service offering, the pricing, the promotion,
and the distribution will be tailored to satisfy each segment.

• By identifying the most rewarding segments a firm will be able to allocate its budgets
properly, making the largest expenditures on the most lucrative and responsive market
segments.

• Once the segments are clearly identified and the marketing process begins, the firm
can monitor the success of these efforts and reallocate resources or re-segment as
necessary.
Segmentation/Targeting/Positioning Process
Tests of a good segment

SEGMENT MARKETS
■ Measurable
Find segments with
common
characteristics ■ Substantial

TARGET SEGMENTS ■ Accessible

Choose segments to focus
on
■ Differentiable

DEVELOP/EXPLOIT ■ Stable
POSITION

Devise marketing mix

for
each segment

Source: adapted from Kotler (2003).

 Identifier
Demographic
• Industry classification
• Firm type – OEM, end user,
(MRO)
• Company size
• Geographic location
• Financial info/credit rating
Response
Vendor product attributes
• Overall value
aftermarket • Product quality
• Vendor reputation
• Innovativeness
• On-time delivery
• Lowest cost

Operations Customer variables

• Technologies used •DMU (buying center) make-up
• Level of use – heavy, light ,non-user •Purchase importance
• Centralized/decentralized purchasing • Attitude toward product
Segmentation • Corporate cultural characteristics (innovativeness)
Variables
Product required Application
•Custom ←→ standard •End use
•Importance of value in use

Purchasing situation DMU/buying center personal characteristics

•Buying situation – new task, modified rebuy, straight • Risk tolerance
rebuy • Loyalty to current vendor
•Current attitude toward our firm • Age
•Relationships • Experience
• Education
• National culture
Source: adapted from Kotler (2003); Day (1990); Rao and Wang (1995); Malhotra (1989); Cardozo (1980).
 Diagnosing
and treating
key
segmentation
barriers
The Nested Approach
to
Segmentation