Business MarketingManagement: B2B

lie

MICHAEL D. HUTT

Arizona State University

THOMAS W. SPEH

Miami University

* rf SOUTH-WESTERNt % CENGAGE Learning-

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

CONTENTS

Preface VII

PARTI i

Chapter 1 A Business Marketing Perspective 3Business Marketing 4

Business Market Customers 5

Commercial Enterprises as Customers 6

A Concentration of Customers 6

Government Units as Customers 7

Institutions as Customers 7

Business Marketing Management 8

B2B TOP PERFORMERS: Jim Ryan, Chairman, President and Chief ExecutiveOfficer, W. W. Grainger, Inc. 9

Business Markets versus Consumer-Goods Markets 10

What Makes a Marketing Leader? 11

Creating the Customer Value Proposition 12

Characteristics of Business Markets 14

Business and Consumer Marketing: A Contrast 15

Smucker: A Consumer and Business Marketer 16

Distinguishing Characteristics 17

A Relationship Emphasis 17

The Supply Chain 18

Supply Chain Management 19

Managing Relationships in the Supply Chain 20

Commercial Enterprises as Consumers 20

Classifying Goods for the Business Market 22

Entering Goods i 22

Foundation Goods 22

Facilitating Goods 24

Business Marketing Strategy 25

Illustration: Manufactured Materials and Parts 25

Illustration: Installations 26

Illustration: Supplies 26

A Look Ahead 27

Contents

Summary 28

Discussion Questions 29

Internet Exercises *! 30

Case: The Middleby Corporation 31

Discussion Questions 32

Chapter 2 Organizational Buying Behavior 35The Organizational Buying Process 36

The Search Process 37

New Task 38

Straight Rebuy 39

Modified Rebuy 41

Environmental Forces 42

Economic Influences 43

Technological Influences 43

Organizational Forces 44

Growing Influence of Purchasing 44

Strategic Priorities in Procurement 44

Procurement Manager's Toolkit 46

Total Cost of Ownership (TCO) 46

INSIDE BUSINESS MARKETING: Use TCO to Inform Next Car Purchase 46

; Strategy Response: Develop Value-Based Sales Tools 47

Segmenting Purchase Categories 47

E-Procurement 49

Reverse Auctions 49

Organizational Positioning of Purchasing 50

Strategy Response: Key Account Management , 50

ETHICAL BUSINESS MARKETING: Gift Giving: "Buy Me These Boots andYou'll Get My Business" 51

Group Forces ' 52

The Buying Center 52_

INSIDE BUSINESS MARKETING: Innovate and Win with BMW 54

Buying Center Influence 54

Individual Forces 56

Differing Evaluative Criteria 57

Information Processing 57

Risk-Reduction Strategies 58

Contents xix

Summary 59

Discussion Questions 60

Internet Exercises \ 61

Case: Sealed Air Corporation: Delivering Packaging Solutions 62

Discussion Questions 63

Chapter 3 Customer Relationship ManagementStrategies for Business Markets 64

Relationship Marketing • 65

Types of Relationships 66

Value-Adding Exchanges 67

Nature of Relationships 67

Strategic Choices 67

Managing Buyer-Seller Relationships 68

Transactional Exchange 68

Collaborative Exchange 68

Switching Costs 69

Strategy Guidelines 69

Measuring Customer Profitability 71

Activity-Based Costing 71

Unlocking Customer Profitability 71

The Profitable Few 72

Managing High- and Low-Cost-to-Serve Customers 73

INSIDE BUSINESS MARKETING: Loyalty and Customer Profitability 75

Managing Unprofitable Customers 75

Firing Customers 75

Customer Relationship Management 76

Acquiring the Right Customers 78

Crafting the Right Value Proposition 79

Instituting the Best Processes 81

Motivating Employees 82

Learning to Retain Customers 1 83

Relationship Marketing Success 84

Drivers of Relationship Marketing Effectiveness 84

Relationship Marketing (RM) Programs 86

Financial Impact of RM Programs 87

Targeting RM Programs 87

Contents

Summary 88

Discussion Questions 89

Internet Exercises 90

Case: IBM Challenge: How to Serve a Diverse Mixof Demanding Customers 91

Chapter 4 Segmenting the Business Market andEstimating Segment Demand 95

Business Market Segmentation Requirements and Benefits 96

Requirements 97

Benefits 97

INSIDE BUSINESS MARKETING: How to See What's Next 98

Bases for Segmenting Business Markets 99

INSIDE BUSINESS MARKETING: Balancing Risk and Return in aCustomer Portfolio 100

Macrolevel Bases 100

Microlevel Bases 103

Illustration: Microsegmentation 106

The Segmentation Process 107

Choosing Market Segments 107

Isolating Market Segment Profitability 108

Implementing a Segmentation Strategy 109

Estimating Segment Demand 109

The Role of the Demand Estimation 109

Methods of Forecasting Demand 111

Qualitative Techniques 111

Quantitative Techniques 113

CPFR: A New Collaborative Approach to Estimating Demand 115

Combining Several Forecasting Techniques 115

Summary ' 116

Discussion Questions 116

Internet Exercises . 117

Case: Federated Insurance: Targeting Small Businesses 118

Cultivating Business Relationships 118

Discussion Questions 119

Contents xxi

Chapter 5 Business Marketing Planning:Strategic Perspectives 123

Marketing's Strategic Role 124

The Hierarchy of Strategies 124

Strategy Formulation and the Hierarchy 126

Functionally Integrated Planning: The Marketing Strategy Center 128

B2B TOP PERFORMERS: Cross-Functional Relationships: Effective ManagersDeliver on Promises 129

The Components of a Business Model 130

Customer Interface 131

Core Strategy 131

B2B TOP PERFORMERS: Winning with a New Business Model at Dow Corning 132

Strategic Resources 133

The Value Network 133

Strategic Positioning 134

Strategic Positioning Illustrated 135

Building the Strategy Plan 136

The Balanced Scorecard 137

Financial Perspective 137

Customer Perspective 139

Internal Business Process Perspective 140

Strategy Map 142

Summary 144

Discussion Questions 145

Internet Exercises 146

Case: Intuit's Solutions for Small and Medium-Sized Businesses 147

Discussion Questions 147

Chapter 6 Business Marketing Strategiesfor Global Markets 148

Capturing Global Advantage 149

Market Access 151Resource Access 152

INSIDE BUSINESS MARKETING: How Offshore Outsourcing AffectsCustomer Satisfaction—and a Company's Stock Price! 154

xxii Contents

Local Adaptation 154

Network Coordination 155

INSIDE BUSINESS MARKETING: Made in America—Again 156

Global Market Entry Options 156

Exporting 156

Contracting 158

Strategic Global Alliances (SGA) 159

Joint Ventures 160

Choosing a Mode of Entry ;' 161

Multi-domestic versus Global Strategies 162

Source of Advantage: Multi-domestic versus Global 162

Types of International Strategy 163

A Strategic Framework 165

Global Strategy 166

Build on a Unique Competitive Position 166

Emphasize a Consistent Positioning Strategy 166

Establish a Clear Home Base for Each Distinct Business 166

Leverage Product-Line Home Bases at Different Locations 167

Disperse Activities to Extend Home-Base Advantages 167

Coordinate and Integrate Dispersed Activities ' 168

Summary 168

Discussion Questions 169

Internet Exercise 170

, Case: Schwinn: Could the Story Have

Been Different? 171

Alternative Reality One: Aim High 171

Alternative Reality Two: If You Can't Beat Them, Join Them 171

Discussion Questions 172

Chapter 7 Managing Products for BusinessMarkets 173

Building a Strong B2B Brand J 174

Brand-Building Steps 175

Brand Strategy Guidelines 177

Profiling a Strong Brand: IBM 178

Product Quality and Customer Value 179

Meaning of Quality , 180

Contents xxiii

Sustainability: Strategic Imperative . 180

GE's Ecomagination Marketing Campaign 182

Meaning of Customer Value >: 182

B2B TOP PERFORMERS: Green Is Green 183

Product Support Strategy: The Service Connection 185

Product Policy 185

Types of Product Lines Defined 186

Defining the Product Market 186

B2B TOP PERFORMERS: BASF: Using Services to Build a Strong Brand 188

Planning Industrial Product Strategy 188

Product Positioning 189

The Process 189

Isolating Strategy Opportunities 190

Product Positioning Illustrated 190

the Technology Adoption Life Cycle 191

Types of Technology Customers 191

Strategies for the Technology Adoption Life Cycle 192

INSIDE BUSINESS MARKETING: The Gorilla Advantage in High-Tech Markets ' 193

The Bowling Alley 193

The Tornado 194

Main Street 195

Summary 196

Discussion Questions 195? Internet Exercise 197

Case: Hidden Inside: International Flavors & Fragrances, Inc. 198

Discussion Questions 198

Chapter 8 Managing Innovation and NewIndustrial Product Development 199

, The Management of Innovation 200

Induced Strategic Behavior ? 201

Autonomous Strategic Behavior 201

Product Championing and the Informal Network 203

Conditions Supporting Corporate Entrepreneurship 204

Managing Technology 204

Classifying Development Projects 205

A Product-Family Focus 206

The Disruptive Innovation Model 206

xxiv Contents

INSIDE BUSINESS MARKETING: Disrupters Pull Different Innovation Levers 208

Illustration: A New-Market Disruption 209

Innovation Winners in High-Technology Markets 210

The New-Product-Development Process 212

What Drives a Firm's New Product Performance? 212

Anticipating Competitive Reactions 214

Sources of New Product Ideas 214

B2B TOP PERFORMERS: Inviting New Product Suggestions 215

Determinants of New Product Performance and Timeliness 217

The Determinants of Success 217

Fast-Paced Product Development 219

Summary 220

Discussion Questions 221

Internet Exercise 222

Case: Vscan: GE Healthcare's Pocket-SizedImaging Device 223

Discussion Questions 223

Chapter 9 Managing Services for Business ^ ^ ,Markets 224

Understanding the Full Customer Experience 225

The Customer Experience Life Cycle 225

Applying the Customer Experience Map 226

Customer Experience Management t 226

A Solution-Centered Perspective 228

Delivering Effective Customer Solutions 229

The Supplier's Role 230

The Customer's Role 231

B2B TOP PERFORMERS: Smart Customer Solutions from IBM 232

Choose Customers Wisely 232

Benefits of Solution Marketing 233

Business Service Marketing: Special Challenges 233

Services Are Different 234

Tangible or Intangible? 235

Simultaneous Production and Consumption 235

Service Variability 236

Service Perishability 236

Contents xxv

INSIDE BUSINESS MARKETING: Do Service Transition Strategies Pay Off? 237

Nonownership 237

Service Quality \ 238

Dimensions of Service Quality 238

Customer Satisfaction and Loyalty 239

Service Recovery 239

Zero Defections 240

Return on Quality 240

Service Packages 241

Customer-Benefit Concept 241

Service Concept 241

Service Offer 242

Service Delivery System 243

Service Personnel 243

Hybrid Offerings 243

Unique Resources Manufacturing Firms Can Leverage 244

Distinctive Capabilities for Launching Hybrid Offerings 245

Classifying Services for Hybrid Offerings 246

Summary ^ 249

Discussion Questions 249

Internet Exercises 250

Case: Paychex, Inc. 251

Discussion Questions ^ _ _ 251

Chapter 10 Managing Business MarketingChannels 252

The Business Marketing Channel 253

Direct Channels 254

Indirect Channels 255

Integrated Multichannel Models 255

Participants in the Business Marketing Channel 258

Distributors 258

INSIDE BUSINESS MARKETING: W. W. Grainger: Profile of a Leading-EdgeIndustrial Distributor 259

Manufacturers' Representatives 261

B2B TOP PERFORMERS: Why Intel Uses Reps 262

Channel Design 263

Step 1: Define Customer Segments 264

Step 2: Identify Customers' Channel Needs by Segment 265

xxvi Contents

Step 3: Assess the Firm's Channel Capabilities 266

Step 4: Benchmark to Competitors 266

Step 5: Create Channel Solutions for\Customers' Latent Needs 266

Step 6: Evaluate and Select Channel Options 266

Crucial Points in Channel Transformation 267

Channel Administration 267

Selection of Channel Members 268

Motivating Channel Members 268

Summary _ 270

Discussion Questions 271

Internet Exercises 271

Case: Snap-on, Inc.: A Unique Go-to-MarketStrategy 272

Discussion Questions 272

Chapter 11 Supply Chain Management 273Supply Chain Management: A Tool for Competitive Advantage 275

Supply Chain Management Goals 275

Benefits to the Final Customer 277

INSIDE BUSINESS MARKETING: When the Supply Chain Gets Disrupted 278

The Financial Benefits Perspective 278

Information and Technology Drivers 279

Successfully Applying the Supply Chain Management Approach 280

Successful Supply Chain Practices 280

B2B TOP PERFORMERS: Making Supplier Relationships Work 281

Logistics as the Critical Element in Supply Chain Management 282

Distinguishing Between Logistics and Supply Chain Management 282

Managing Flows 282

The Strategic Role of Logistics 283

Sales-Marketing-Logistics Integration 283

Just-in-Time Systems 284

Total-Cost Approach ? 285

Calculating Logistics Costs 286

Activity-Based Costing 286

Total Cost of Ownership 286

Business-to-Business Logistical Service 287

Logistics Service Impacts on the Customer 288

Determining the Level of Service 288

Contents xxvii

Logistics Impacts on Other Supply Chain Participants 289

Business-to-Business Logistical Management 289

Logistical Facilities ^ 289

Transportation 290

Inventory Management 292

INSIDE BUSINESS MARKETING: The Profit Impact of Inventory Management 293

Third-Party Logistics 293

Summary 294

Discussion Questions •• 295

Internet Exercises 296

Case: Supply Chain Issues at Optimal Medical Parts Company 297

Discussion Questions 298

Chapter 12 Pricing Strategies for BusinessMarkets 299

The Pricing Process in Business Markets 300

Price Objectives " 301

Demand Determinants 302

Value-Based Pricing Illustrated 305

Cost Determinants 307

Competition 309

Pricing across the Product Life Cycle 311

Pricing New Products 311

INSIDE BUSINESS MARKETING: Understanding the Economic Valueo'f New Products ' 313

Legal Considerations 313

Responding to Price Attacks by Competitors ° 314

Evaluating a Competitive Threat 314

Understanding the Rules of Competitive Strategy 316

Competitive Bidding 317

Closed Bidding 317

Open Bidding j 318

Strategies for Competitive Bidding 318

Summary 319

Discussion Questions 320

Internet Exercise 321

Case: Free-Product Competitors Challenge Microsoft 322

Discussion Questions 322

xxviii Contents

Chapter 13 Business Marketing Communications:Advertising and Sales Promotion 323

Business-to-Business (B2B) Social Media 325

Dell's Social Media Brand 325

The Customer Decision Journey 326

Charting CDJ 326

The Role of Advertising 328

Integrated Communication Programs 328

Enhancing Sales Effectiveness T 328

Increased Sales Efficiency 328

Creating Awareness 329

What Business-to-Business Advertising Cannot Do 329

Managing Business-to-Business Advertising 329

Defining Advertising Objectives 330

. Written Objectives 330

Determining Advertising Expenditures 331

Developing the Advertising Message 333

Selecting Advertising Media for Business Markets 334

B2B TOP PERFORMERS: Search Engine Marketing at Google: The RightMessage, the Right Time 336

Direct Marketing Tools 337

Measuring Advertising Effectiveness 339

Measuring Impacts on the Purchase Decision 339

The Measurement Program 340

Managing Trade Show Strategy 341

Trade Shows: Strategy Benefits 341

Trade-Show Investment Returns " 342

Planning Trade-Show Strategy 343

Trade-Show Objectives 343

Selecting the Shows 343

Managing the Trade-Show Exhibit 344

Evaluating Trade-Show Performance J 344

Summary 345

Discussion Questions 346

Internet Exercise 347

Case: Johnson Controls, Inc. 348

Discussion Questions 348

Contents xxix

Chapter 14 Business Marketing Communications:Managing the PersonalSelling Function1 349

Managing the Sales Force 351

Organizing the Personal Selling Effort 351

Key Account Management 352

National Account Success 355

B2B TOP PERFORMERS: Using Customized Strategies to Outmaneuver Rivals 356

Isolating the Account Management Process 356

Account Management Success 357

Sales Administration 360

Recruitment and Selection of Salespersons 360

Training 360

Supervision and Motivation 361

Evaluation and Control 364

Deployment Analysis: A Strategic Approach 366

Territory Sales Response 366

Territory Alignment 367

Developing the Customer Database 368

Sales Resource Opportunity Grid 368

Isolating High-Opportunity Customers 369

GE's Sales Force Effectiveness Initiative 370

Summary 371

r Discussion Questions ' 371

Internet Exercises 372

Case: Account Management at YRC Worldwide: ChoosingCustomers Wisely 373

Discussion Question 373

EVALUATING BUSINESS MARKETING

STRATEGY tAND»!ERE©RMArfeE

Chapter 15 Marketing Performance Measurement 377A Strategy Map: Portrait of an Integrated Plan 379

Developing the Strategy: The Process 380

Maps: A Tool for Strategy Making 383

Marketing Strategy: Allocating Resources 383

Guiding Strategy Formulation 384

Contents

Managing Individual Customers for ProfitThe Marketing Control Process

Control at Various Levels "}

Strategic Control

Annual Plan Control

Marketing Control: The Marketing Performance Dashboard

B2B TOP PERFORMERS: CMO Profile

Efficiency and Effectiveness Control

Profitability Control r

Implementation of Business Marketing Strategy

The Strategy-Implementation Fit

Implementation Skills

The Marketing Strategy Center: An Implementation Guide

Looking Back

Summary

Discussion Questions

Internet Exercises

Case: Danaher Corporation

Discussion Question

Name Index

Subject Index

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