business marketing management: b2b

Business MarketingManagement: B2B

- ««1

MICHAEL D. HUTTArizona State University

THOMAS W. SPEHMiami University

THOMSON*

S O U T H - W E S T E R N

A u s t r a l i a • B r a z i l • C a n a d a • M e x i c o • S i n g a p o r e • S p a i n • U n i t e d K i n g d o m • U n i t e d S t a t e s

Preface

PrtEiE

Chapter 1 A Business Marketing PerspectiveBusiness Marketing

Business Marketing Management

Business Market Customers

Business Markets versus Consumer-Goods Markets

B2B TOP PERFORMERS: Career Path for B2B CEOs:For Many, It Began in Marketing!

INSIDE BUSINESS MARKETING: Google: B2C or B2B?

Designing Customer Solutions

Marketing's Cross-Functional Relationships

Characteristics of Business Markets

Business and Consumer Marketing: A Contrast

Smucker: A Consumer and Business Marketer

Distinguishing Characteristics

A Relationship Emphasis

The Supply Chain

Supply Chain Management

Managing Relationships in the Supply Chain

INSIDE BUSINESS MARKETING: Career Profile: DeliveringService Solutions to IBM Customers

Commercial Enterprises as Consumers

Classifying Goods for the Business Market

Entering Goods

B2B TOP PERFORMERS: Jim Ryan, Group President,W.W. Grainger, Inc.

Foundation Goods

Facilitating Goods

Business Marketing Strategy

Illustration: Manufactured Materials and Parts

Illustration: Installations

Illustration: Supplies

A Look Ahead

Summary

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Contents

, ' Discussion Questions 27

Internet Exercises 29

Case: Wireless E-mail: A Challenger to BlackBerry? 30

Chapter 2 The Business Market: Perspectiveson the Organizational Buyer 31

Commercial Enterprises: Unique Characteristics 32

Distribution by Sjze 33

Geographical Concentration 33

Classifying Commercial Enterprises, 34

The Purchasing Organization 35

Goals of the Purchasing Function 36

INSIDE BUSINESS MARKETING: The Supply Chain for McNuggets 37

Strategic Procurement 37

INSIDE BUSINESS MARKETING: Harley-Davidson's World-Class

Purchasing Organization ' 41

E-Procurement 42

Everyone Is Getting Wired 42

Enhancing the Buyer's Capabilities 42

Delivering Measurable Results 43

Buying Direct and Indirect Goods 43

Reverse Auctions 45

ETHICAL BUSINESS MARKETING: Gift Giving: "Buy Me

These Boots and You'll Get My Business" 46

How Organizational Buyers Evaluate Potential Suppliers 46

Governments: Unique Characteristics 46

E-Government 47

Influences on Government Buying 47

Understanding Government Contracts 47

Telling Vendors How to Sell: Useful Publications 48

Purchasing Organizations and Procedures: Government 48

Federal Buying 50

A Different Strategy Required 51

The Institutional Market: Unique Characteristics 52

Institutional Buyers: Purchasing Procedures 52

Dealing with Diversity: A Market-Centered Organization 55

Summary 55

Contents

Discussion Questions 56


Case: Managing Supplier Relationships: Does DetroitNeed a New Driver? 58

MANAGING RELATIONSHIPS IN BUSINESS MARKETII

Chapter 3 Organizational Buying Behavior 61The Organizational Buying Process 63

The Search Process 64

New Task 65

Straight Rebuy 66

Modified Rebuy 67

Forces Shaping Organizational Buying Behavior 69

Environmental Forces 69INSIDE BUSINESS MARKETING: Pressuring Suppliers to Outsource 71

Organizational Forces 71

Strategic Priorities in Purchasing 72

Organizational Positioning of Purchasing 73

INSIDE BUSINESS MARKETING: Go Digital to Target Buying Influential 75

Group Forces 75

INSIDE BUSINESS MARKETING: Innovate and Win with BMW 78

Individual Forces 80B2B TOP PERFORMERS: Delivering Customer Solutions 82

The Organizational Buying Process: Major Elements 83

Summary 85


Internet Exercise 86

Case: Dell, Inc. 88

Chapter 4 Customer Relationship ManagementStrategies for Business Markets 89

Relationship Marketing 90

Types of Relationships 91

Value-Adding Exchanges 92

Nature of Relationships 92

Strategic Choices 92

xviii Contents

B2B TOP PERFORMERS: Understanding the Customer'sBusiness—the Key to Success 93

Managing Buyer-Seller Relationships 93

Transactional Exchange 94

Collaborative Exchange 94

Switching Costs 94

Strategy Guidelines ~" 95

Measuring Customer Profitability 96

Activity-Based Costing 96

Unlocking Customer Profitability 96

The Profitable Few 97

Managing High- and Low-Cost-to-Serve Customers 98

Managing Unprofitable Customers 100

Firing Customers 100

Customer Relationship Management 101

Acquiring the Right Customers 101

INSIDE BUSINESS MARKETING: Diversify a Customer Portfolio Too! ' 103

Crafting the Right Value Proposition 104

Instituting the Best Processes 106

Motivating Employees 107

Learning to Retain Customers 107

Gaining a Customer Relationship Advantage 108

INSIDE BUSINESS MARKETING: Do Interpersonal Relationships

Matter to Corporate Buyers? 109

Customer-Relating Capability 109

Gaining a Position of Advantage 111

Achieving Performance Rewards 111

Summary 112



Case: Siebel Systems 114

Chapter 5 Segmenting the Business Market 117Business Market Segmentation Requirements and Benefits 118

Requirements 119

Contents

Evaluating the Competitive Environment 119

Evaluating the Technological Environment 120

INSIDE BUSINESS MARKETING: How to See What's Next 121

Benefits 122

Bases for Segmenting Business Markets 122

Macrolevel Bases 123

Illustration: Macrosegmentation 125

Microlevel Bases 126

B2B TOP PERFORMERS: Steering Customers to the Right Channel 128

Illustration: Microsegmentation 132

A Model for Segmenting the Organizational Market 132

Choosing Market Segments 132

Isolating Market Segment Profitability 134

Implementing a Segmentation Strategy 135

Summary 135



Case: Small Businesses Represent Huge Opportunity 138

Chapter 6 Organizational Demand Analysis 139Organizational Demand Analysis 140

Using the Internet for Business Marketing Research 141

The Role of Market Potential in Planning and Control 144

The Role of the Sales Forecast 146

Applying Market Potential and the Sales Forecast 146

INSIDE BUSINESS MARKETING: Accurate Forecasts Drive Effective

Collaboration between Boeing and Alcoa 147

Determining Market and Sales Potentials 148

Statistical Series Methods 148

Market Research 151

B2B TOP PERFORMERS: Go Deep into the Customer's Organization 152

The Essential Dimensions of Sales Forecasting 153

The Role of Forecasting 153

E-Forecasting 154

Forecasting Methods 154

Qualitative Techniques 154

Quantitative Techniques 157

Contents

Combining Several Forecasting Techniques 161

Summary 161



Case: IBM Global Services 163j

Chapter 7 Business Marketing Planning:Strategic Perspectives 167

Marketing's Strategic Role 168

The Hierarchy of Strategies 168

Strategy Formulation and the Hierarchy 171

INSIDE BUSINESS MARKETING: From Bullet-Point Plans to

Strategic Stories at 3M 173

Marketing's Cross-Functional Relationships 173

Cross-Functional Connections 174

B2B TOP PERFORMERS: High-PerformingCross-Functional Managers 175

Functionally Integrated Planning:The Marketing Strategy Center 175

The Components of a Business Model 178

Customer Interface 178

Core Strategy 179

Strategic Resources 180

The Value Network 181

Profit Potential 181

The Balanced Scorecard 181

Financial Perspective 182

Customer Perspective 183

Internal Business Process Perspective 184

Strategy Map 186

Summary 188



Case: Microsoft Targets Smalland Mid-Sized Businesses 191

Contents

Chapter 8 Business Marketing Strategiesfor Global Markets 192

Capturing Global Advantage in Rapidly Developing Economies 193

Mapping Sources of Global Advantage 194

The Cost Advantage 194

The Market Access Advantage 197

The Capabilities Advantage 198

The Outsourcing Decision 199

International Market-Entry Options 200

Exporting 200

Contracting 201

Strategic Alliances 202

ETHICAL BUSINESS MARKETING: The Bribery Dilemma in Global Markets 203

Joint Ventures 203

Choosing a Mode of Entry 204

Multidomestic versus Global Strategies 205

International Strategy and the Value Chain 205

B2B TOP PERFORMERS: General Electric Aircraft Engines:

Global Strategy Means Help Your Customers 207

Source of Advantage: Multidomestic versus Global 208

Types of International Strategy 208

A General Framework for Global Strategy 210

Build on a Unique Competitive Position 210

Emphasize a Consistent Positioning Strategy 210

Establish a Clear Home Base for Each Distinct Business 211

Leverage Product-Line Home Bases at Different Locations 212

Disperse Activities to Extend Home Base Advantages 212

Coordinate and Integrate Dispersed Activities 213

Summary 213



Case: Schwinn: Could the Story Have Been Different? 215

Chapter 9 Managing Productsfor Business Markets 216

Core Competencies: The Roots of Industrial Products 217

Identifying Core Competencies 218

Contents

Sustaining the Lead 218

From Core Products to End Products 220

Exploiting Selected Core Competencies 220

Product Quality 221

Meaning of Quality 222

Meaning of Customer Value 222

Product Support Strategy: The Service Connection 224

Product Policy 224

Types of Product^Lines Defined 224

Defining the Product Market 225

B2B TOP PERFORMERS: BASF: Using Services to Build a Strong Brand 227

Planning Industrial Product Strategy 227

Product Positioning 227

The Process 227

Isolating Strategy Opportunities 228

Product Positioning Illustrated • 229

Building a Strong Brand 229

Strong Brands Promise and Deliver 230

Building Brand Equity 230

Does Brand Building Pay Off? 232

The Technology Adoption Life Cycle 232

Types of Technology Customers 233

/ / INSIDE BUSINESS MARKETING: The Gorilla Advantage in High-Tech Markets 234

Strategies for the Technology Adoption Life Cycle 235

The Bowling Alley 235

The Tornado 236

Main Street 237

Summary 237



Case: NCR Self-Checkout Systems 240

Chapter 10 Managing Innovation andNew Industrial Product Development 241

The Management of Innovation 242

Induced Strategic Behavior 243

Autonomous Strategic Behavior 243

Contents

Product Championing and the Informal Network 244

Bringing Silicon Valley Inside 245

Managing Technology 247

Classifying Development Projects 247

A Product-Family Focus 248

The Disruptive Innovation Model 249

Innovation Winners in High-Technology Markets 251

INSIDE BUSINESS MARKETING: Patching: The New Corporate

Strategy in Dynamic Markets 253

The New-Product-Development Process 254

What Drives a Firm's New Product Performance? 254

Anticipating Competitive Reactions 256

Sources of New Product Ideas 256

B2B TOP PERFORMERS: Best Practices for Successful Innovation:

Create a Supportive Culture 257

Quality Function Deployment 259

Determinants of New Product Performance and Timeliness 260

The Determinants of Success 260

Determinants of Product Success for Japanese Companies 261

Fast-Paced Product Development 262

Summary 263



Case: Motorola's Disruptive Initiative: The Ultra-Cheap Cell Phone 265

Chapter 11 Managing Servicesfor Business Markets 266

From Products to Solutions 267

A Solution-Centered Perspective 267

Benefits of Solution Marketing 269

INSIDE BUSINESS MARKETING: To Sell Jet Engines, Teach YourCustomer How to Sell Aircraft 270

Business Service Marketing: Special Challenges 270

Services Are Different 271

Tangible or Intangible? J 271

Simultaneous Production and Consumption 272

Service Variability 273

Service Perishability 273

Contents

Nonownership 274

Service Quality 274

Dimensions of Service Quality 274

Customer Satisfaction and Loyalty 275

Service Recovery 276

Zero Defections 276

Return on Quality 277

Marketing Mix for Business Service Firms 277

Segmentation 278

Service Packages 278

Pricing Business Services 281

B2B TOP PERFORMERS: Growing the Service Business at Siemens

Building Technologies 282

Services Promotion 284

Services Distribution 284

Developing New Services 285

Scenarios for Success and Failure 285

Summary 288



Case: SafePlace Corporation 290

' Chapter 12 Managing Business MarketingChannels 291

The Business Marketing Channel 292

Direct Channels 293/ INSIDE BUSINESS MARKETING: IBM Uses the Internet to Collaborate

with Channel Partners and Build Customer Loyalty 294

Indirect Channels 294

Integrated Multichannel Models 295

Participants in the Business Marketing Channel 297

Distributors 297

Manufacturers' Representatives 300

B2B TOP PERFORMERS: Why Intel Uses Reps 301

Channel Design 302

Stage 1: Channel Objectives 302

Stage 2: Channel Design Constraints 304

Stage 3: Pervasive Channel Tasks 305

Contents xxv

Stage 4: Channel Alternatives 305

Stage 5: Channel Selection 307

Channel Administration 308

Selection of Channel Members 308

Motivating Channel Members 309

Summary 311



Case: Direct Marketing Campaigns at IBM 313

Chapter 13 E-Commerce Strategiesfor Business Markets 314

Defining E-Commerce 316

Key Elements Supporting E-Commerce 317

The Internet and World Wide Web 317

Intranets and Extranets 319

The Strategic Role of E-Commerce 319

E-Commerce as a Strategic Component 320

INSIDE BUSINESS MARKETING: UPS Delivers the Goods Using

Sophisticated E-Commerce Technology 321

What the Internet Can Do 322

The Internet: Strategy Still Matters 322

Crafting an E-Commerce Strategy 324

Delineating E-Commerce Objectives 324

Specific Objectives of Internet Marketing Strategies 326

B2B TOP PERFORMERS: GE Healthcare: Using the Web

to Create New Services 327

Internet Strategy Implementation 327

The Internet Product 328

INSIDE BUSINESS MARKETING: Top-Rated B2B Web Sites 329

Channel Considerations with Internet Marketing 330

The Internet as a Channel Alternative 331

The Effect of the Internet on Pricing Strategy 332

The Internet and Customer Communication 332

Summary 334



Case: Using the Internet at W. W. Grainger 337

xxvi Contents

Chapter 14 Supply Chain Management 339The Concept of Supply Chain Management 341

Partnerships: The Critical Ingredient 342

Supply Chain Management: A Tool for

Competitive Advantage 344

Supply Chain Management Goals 344

Benefits to the Final Customer 346

The Financial Benefits Perspective 346

Information and Technology Drivers 347

Successfully Applying the Supply Chain Management Approach 348

Successful Supply Chain Practices 348

B2B TOP PERFORMERS: Making Supplier Relationships Work 349

Logistics as the Critical Element in Supply Chain Management 350

Distinguishing between Logistics and Supply Chain Management 350

Managing Flows 351

The Strategic Role of Logistics 351

Sales-Marketing-Logistics Integration 352

Just-in-Time Systems 352

Total-Cost Approach 354

Calculating Logistics Costs 354

Activity-Based Costing 354

Total Cost of Ownership 354

Business-to-Business Logistical Service 355

Logistics Service Impacts on the Customer 355

Determining the Level of Service 356

Logistics Impacts on Other Supply Chain Participants 357

Business-to-Business Logistical Management 357

Logistical Facilities 358

Transportation 358

Inventory Management 360

INSIDE BUSINESS MARKETING: The Profit Impact of

Inventory Management 361

Third-Party Logistics 362

Summary 362



Case: Managing Logistics at Trans-Pro 365

Contents xxvii

Chapter 15 Pricing Strategy for BusinessMarkets 366

The Meaning of Value in Business Markets 367

Benefits 368

Sacrifices 369

Value-Based Strategies 369

B2B TOP PERFORMERS: The Key to Value-Based Strategies-Understand the Customer's Economics 370

The Pricing Process in Business Markets 371

Price Objectives 371

Demand Determinants 372

Cost Determinants 375

Competition 377

Pricing across the Product Life Cycle 379

Pricing New Products 379

ETHICAL BUSINESS MARKETING: On Ethics and Pricing at Raytheon 380

Legal Considerations 381

Responding to Price Attacks by Competitors 381

Evaluating a Competitive Threat 382

Understanding the Rules of Competitive Strategy 384

Competitive Bidding 384

Closed Bidding 385

Open Bidding 385

Strategies for Competitive Bidding 386

Summary 386



Case: Meeting the Challenge of Reverse Auctions 389

Chapter 16 Business Marketing Communications:Advertising and Sales Promotion 390

The Role of Advertising 391

Integrated Communication Programs 391

Enhancing Sales Effectiveness 392

Increased Sales Efficiency 393

Creating Awareness 393

xxviii Contents

Interactive Marketing Communications 393

What Business-to-Business Advertising Cannot Do 394

Managing Business-to-Business Advertising 394

Defining Advertising Objectives 395

Written Objectives 395

Determining Advertising Expenditures 396

Developing the Advertising Message 398

Selecting Advertising Media for Business Markets 399

B2B TOP PERFORMERS:"Search Engine Marketing at Google: .

The Right Message, the Right Time 400

Direct Marketing Tools 402

Measuring Advertising Effectiveness 404

Measuring Impacts on the Purchase Decision 404

The Measurement Program 405

B2B TOP PERFORMERS: IBM Gold Service Customers 406

Managing Trade Show Strategy 406

Trade Shows: Strategy Benefits 406

Trade-Show Investment Returns 407

Planning Trade-Show Strategy 407

Trade-Show Objectives 408

Selecting the Shows 408

Managing the Trade-Show Exhibit 409

Evaluating Trade-Show Performance 409

Summary 410



Case: Johnson Controls, Inc. 412

Chapter 17 Business Marketing Communications:Managing the PersonalSelling Function 413

Foundations of Personal Selling: An OrganizationalCustomer Focus 415

Relationship Marketing 415

INSIDE BUSINESS MARKETING: Career Profile: Managing

Relationships at IBM 416

Relationship Quality 417

Managing the Sales Force 418

Contents xxix

Organizing the Personal Selling Effort 418

Key Account Management 420

National Account Success 422

B2B TOP PERFORMERS: Using Customized Strategies

to Outmaneuver Rivals 423

Isolating the Account Management Process 423

Account Management Success 424

Sales Administration 425

Recruitment and Selection of Salespersons 425

Training 426

Supervision and Motivation 427

Evaluation and Control 430

ETHICAL BUSINESS MARKETING: Ethics in Selling 431

Models for Industrial Sales Force Management 431

Deployment Analysis: A Strategic Approach 431

The Internet: Transforming the Selling Process 433

Summary 435



Case: Account Management at Yellow Roadway:Choosing Customers Wisely 437

Chapter 18 Controlling Business MarketingStrategies 441

A Strategy Map: Portrait of an Integrated Plan 442

Developing the Strategy: The Process 444

Maps: A Tool for Strategy Making 446

Marketing Strategy: Allocating Resources 447

Guiding Strategy Formulation 447

Managing Individual Customers for Profit 448

The Marketing Control Process 448

Control at Various Levels 448

Strategic Control 449

Annual Plan Control 450

Efficiency and Effectiveness Control 452

Contents

INSIDE BUSINESS MARKETING: Digital Cockpits to Track CorporateFinancial Performance 453

Profitability Control 453

Feedforward Control 455

Implementation of Business Marketing Strategy 456

The Strategy-Implementation Fit 456

Implementation Skills 457

The Marketing Strategy Center: An Implementation Guide 457

B2B TOP PERFORMER'S: Cross-Functional Relationships:

Effective Managers Deliver on Promises 459

Looking Back 460

Summary 461



Case: Sealed Air Corporation: Delivering Package Solutions 463

Cases 465Case Planning Guide 465

S.C. Johnson's Professional Division 466

Westward Industries Ltd. (A) 468

Clariant Corporation Marketing 483

RJM Enterprises, Inc.— Romancing the Vine 498

Pfizer, Inc. Animal Health Products—A: Market

Segmentation and Industry Changes 531

Circuit Board Corporation 543

Beta Pharmaceuticals: Pennsylvania Distribution System 556

Pivot International—Pursuing Growth 562

Deere & Company Worldwide Logistics 583

Yield Management at American Airlines 588

Barro Stickney, Inc. 594

Advanced Elastomer Systems: Market Strategy

for a New, Technical Product 600

Cyanide Destruct Systems Inc. 625

The Indicted CFO 638

Ethical Dilemmas in Business Marketing 641

Name Index 643

Subject Index 649

business marketing management: b2b

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