B2B Book Notes PDF

CHAPTER 1: A BUSINESS MARKETING PERSPECTIVE BUSINESS MARKETS: - The markets for products and services, local to international, bought by commercial enterprises, government bodies, and institutions for incorporation, consumption, use or resale. TYPES OF BUSINESS MARKET CUSTOMERS: 1....

CHAPTER 1: A BUSINESS MARKETING PERSPECTIVE BUSINESS MARKETS: - The markets for products and services, local to international, bought by commercial enterprises, government bodies, and institutions for incorporation, consumption, use or resale. TYPES OF BUSINESS MARKET CUSTOMERS: 1. COMMERCIAL CUSTOMERS - E.g.: manufacturers, construction companies, service firms, transportation companies, professional groups, resellers 2. GOVERNMENT UNITS - 2 purchasing strategies: - formal advertising (open bid): when the product is standardised and specifications are straightforward. Contracts are awarded to the lowest bidder - negotiated contract: when the product cannot be differentiated on the basis of the price alone or when there are few potential suppliers 3. INSTITUTIONS - Schools, universities, hospitals, etc - Possible group buying, which allows institutions to enjoy lower prices, improved quality, greater competition. B2B VS. B2C MARKETS - Main difference is the intended use of the product and the intended customer. - Differ in the nature of markets, market demand, buyer behaviour, buyer-seller relationships, environmental influences and market strategy. - Derived demand: refers to the direct link between the demand for an industrial product and the demand for the consumer product: the demand for the industrial product is derived from the ultimate demand for the consumer product. - Fluctuating demand: worldwide changes in the demand patterns and changing buying preferences in the consumer market ultimately affect the business market - hence, demand for industrial products fluctuates more than for the consumer products. - The bullwhip effect - supply chain phenomenon that describes how small fluctuations in point of sale demand can cause progressively larger fluctuations in demand at the distributor, manufacturer and raw material supplier levels. To counteract, employ better communication and information sharing among supply chain partners. - Stimulating demand: some business marketers must develop a marketing program that reaches the ultimate consumer directly: e.g. Boeing promotes convenience of air travel to keep the long-term demand for its planes. - Demand elasticity: if the final consumer is not sensitive to the price changes, the manufacturer’s demand for components won’t be elastic either. However, if the final consumers are price sensitive, the manufacturer’s demand elasticity increases as well. *** A business marketer selling to other businesses must understand a few major questions: Who are the key participants in the purchasing process? What is their relative importance? What criteria each participant applies to the decision? What info sources did key buying influentials consult before making a decision? So, as a business marketer you need to understand the process the organisation follows in purchasing a product and identify which organisational members have roles in this process. CLASSIFYING B2B PRODUCTS AND SERVICES 1. ENTERING GOODS - Become part of a finished product - Raw materials: farm products and natural products, only being processed to the level required for economical handling and transport; basically enter the production process in the natural state. - Manufactured materials and parts: undergo more initial processing. - Component materials are processed but are being processed further when becoming a part of the final consumer product. - Component parts, including small motors, motorcycle tires, automobile batteries, can be directly installed into another - product with no or little additional processing. 2. FOUNDATION GOODS - Capital items - Installations: major long-term investment items that underline the manufacturing process, such as buildings, land rights, and fixed equipment - The demand is shaped by the economic climate but is driven by the market outlook for a firm’s products. - Accessory equipment: less expensive and short-lived compared to installations. This equipment is not part of the plant but can be found in the plant or the office. E.g. personal computers, copying machines. 3. FACILITATING GOODS - Supplies and services that support organisational operations. - Supplies: e.g. printer cartridges, paper, business forms, maintenance and repair items - Services: - Maintenance and repair support (involves preventive and remedial services that physically repair and optimize; repair support means restoration of a broken, damaged or failed device, equipment, barter property to an acceptable operating or usable condition) - Advisory support (A Consulting service that develops findings, conclusions and recommendations that are presented to the client for consideration and decision making) Different marketing strategies are needed for each type of business products: CAPABILITIES: - Market-sensing - The capability that concerns how well the organisation is equipped to continuously sense changes in its market and anticipate customer responses to marketing programs - Customer-linking - The capability that comprises the particular skills, abilities and processes an organisation has developed to create and manage close customer relationships - Crucial in B2B Market KEY IMPERATIVES FOR BUSINESS MARKETING MANAGEMENT: 1. DEMONSTRATE THE VALUE AND IMPACT OF MARKETING EXPENDITURES ON FIRM VALUE - Impact on business performance - Marketing expenditures are considered as customer assets that deliver value and marketers experience pressure to demonstrate the return on investment from marketing spending - Customer relationship management capabilities: The skills required to identify initiate, develop, maintain profitable customer relationships 2. UNDERSTAND THE CUSTOMER DECISION JOURNEY and how new info is reshaping the organisational buying process - Nowadays customers have access to information at any point in the buying process, therefore the marketing strategist needs to direct attention to those points in the decision journey, where they can be most effective in reaching key decision makers 3. ENGAGE MORE DEEPLY WITH CUSTOMERS AND CUSTOMERS’ CUSTOMERS - A business marketer becomes a preferred supplier by working closely as a partner, developing an intimate knowledge of the customer's operations and contributing unique value to that customer's business 4. ALIGN STRATEGY AND SALES - To align strategy and sales, firms must clearly communicate the strategy, select the right customer prospects and match them with the optimal products and services, and make the strategy relevant by operationalizing the distinctive features of the value proposition 5. TAKE AN ACTIVE ROLE IN SHAPING THE COMPANY’S INNOVATION AGENDA - 4 rules for this: 1) The instigator. This role involves scanning the entire business landscape for marketing ideas as opposed to thinking exclusively about the current products in markets 2) The innovator. In performing this role the leader needs to expand beyond product features to consider new business models or fresh approaches to pricing, delivery and customer engagements 3) The integrator. The integrator builds bridges across multiple functions to unite organisational members on the clear strategy path 4) The implementer. To translate plans into actionable strategies, marketing executives must mobilise diverse organisational members across the firm. CUSTOMER VALUE PROPOSITION - The proposition that captures the particular set of benefits that a supplier offers to advance a performance of the customer organisation. - “Best practice suppliers base their value proposition on the few elements that matter most to target customers, demonstrate the value of the superior performance and communicated in a way that conveys a sophisticated understanding of the customer's business priorities” - Building blocks of a successful value proposition: 1) Points of parity: The value elements with essentially the same performance characteristic as the next best alternative  2) Points of difference: The value elements that render the suppliers offering either superior or inferior to the next best alternative RELATIONSHIP MARKETING - The marketing that centers on all marketing activities directed toward establishing, developing and maintaining successful exchanges with customers. CHARACTERISTIC OF BUSINESS MARKET CUSTOMERS: 1. Business Market customers are comprised of commercial enterprises, institutions and governments 2. a single purchase by a business customer is far larger than that of an individual consumer 3. The demand for industrial products is derived from the ultimate demand for consumer products 4. buying Decisions by business customers often involve multiple buying influences, rather than a single decision maker 5. while serving different types of customers business marketers and consumer-goods marketers share the same job titles BUYER-SELLER RELATIONSHIPS IN A PRODUCT'S SUPPLY CHAIN - Supply Chain management: is a technique for linking and manufacturer's operations with those of all of its strategic suppliers and its key intermediaries and customers to enhance efficiency and effectiveness - the goal of supply chain strategy is to improve the speed, precision, and efficiency of manufacturing through strong supplier relationships - this goal is achieved through information sharing, joint planning, share technology, and shared benefits - To achieve these results the business marketing firm was demonstrate the ability to meet the customer's precise quality, delivery, service, and information requirements - Supply chain customers: commercial enterprise customers are classified into: 1) Users: Users purchase Industrial Products or services to produce other goods or services that are, in turn, sold in the business or consumer markets for example, one purchasing Machine Tools, Tesla is a user 2) original equipment manufacturers (OEMs): the OEM purchases industrial goods to incorporate into other products it sells in the business or ultimate consumer markets for example apple is an oem in purchasing a touchscreen controller that is a content in every iPhone 3) dealers and distributors: include commercial Enterprises that purchase industrial goods for resale to users and OEMs. 4) overlap of categories: these categories are not mutually exclusive 5) understanding buying motivations: each class of customers views the product differently because each purchase is the product for a different reason.  CHAPTER 2: ORGANISATIONAL BUYING BEHAVIOUR Knowledge of how organisational buying decisions are made provides the business marketer with the solid foundations for building responsive marketing strategies. CUSTOMER DECISION JOURNEY - The process of customer follows prior, during and after making the purchase decision. - Community and social media. Although media channels are important, someone else’s advocacy still plays a big role. - Important touch points: 1. Inspiration: The process that stimulates customer to turn to online channels to find, create, and compare ideas 2. Sharing: the process where customers relate their experience or post case studies using a variety of social media - Example steps that can be taken: 1. encouraging customers to post case studies on the company's websites 2. monitoring Community sites, answering questions, announcing new product offerings 3. making the data related to technical specifications more accessible on a website KEY STAGES OF THE ORGANISATIONAL BUYING PROCESS 1. Problem recognition. Triggered by internal forces (e.g. A firm my needs a new equipment to support new product launch) or external forces ( a salesperson County precipitate the need for a product by demonstrating opportunities for improving the organization's performance) 2. General description of need. E.g. production managers work with the purchasing manager to determine the characteristic needed in the new packaging system 3. product specifications. E.g. and experience production manager assists the purchasing manager in developing a detailed and precise description of the needed equipment 4. Supplier search. E.g. approaching manager identifies a set of Alternatives of suppliers that could satisfy requirements 5. Acquisition and Analysis of proposals. E.g. alternative proposals are evaluated by purchasing manager and the number of members of the production department *When the information needs of the buying organisation are low, stages 4 and 5 occur simultaneously, especially for standardised items. 6. Supplier selection. negotiations with the two finalists are conducted, and a supplier chosen 7. selection of order routine. E.g. I deliver date is established for the production equipment 8. performance review. E.g. after equipment is installed, purchasing and production managers evaluate the performance of the equipment and the service support provided by the supplier. Push strategy: a traditional strategic approach where the marketer engages in marketing activities for the purpose of moving the product ”Downstream” from manufacturer to wholesaler/ distributor to the customer. The product is pushed through the supply chain. - E.g. direct mail, print ads, cold calling Pull strategy: a strategic approach that engages in marketing activities aimed at the customer who then requests the product from wholesalers/ distributors who in turn request a product from its manufacturer. The product is pulled through the supply chain - E.g. referral, videos, networking, affiliate/ FACTORS THAT INFLUENCE ORGANISATIONAL BUYING BEHAVIOUR 1. TYPES OF CUSTOMER BUYING SITUATIONS 1) New task - a situation where the organisation decision makers perceive the problem or need as totally different from previous experiences - buyers operate in a stage of extensive problem solving (buying influentials lack well-defined criteria for comparing alternative products and suppliers) - 2 distinct buying decision approaches are used: (1) judgmental new task-situations ( these purchasing decisions involve the greatest level of uncertainty. the product may be technically complex, evaluating alternatives is difficult, and dealing with the new supplier has unpredictable aspects); (2) strategic new task decisions (These decisions are of extreme importance to the firm both strategically and financially. If the firm perceives that the rapid pace of technological change surrounds the decision, search effort is increased and concentrated in shorter time periods. long-range planning drives the decision process.) - Strategy guidelines: marketer can gain a differential advantage by participating actively in the initial stages of the procurement process. Marketers should gather information on the problems facing the buying organisation, isolate specific requirements, and offer proposals to meet the requirements. 2) Modified rebuy - the situation where organisational decision makers feel significant benefits may be derived by reevaluating alternatives. The firm has experience in satisfying the continuing or recurring requirement, but believes it is worthwhile to seek additional information. - 2 buying decision approaches: (1) simple modified rebuy (Involves a narrow set of choice alternatives and a moderate amount of both information search and analysis. buyers concentrate on the long-term-relationship potential of suppliers); (2) complex modified rebuy (involves large set of choice alternatives and poses little uncertainty. the number of alternative sellers enhances the buyer’s negotiating strength) - Strategy guidelines: (1) “in” supplier should make every effort to understand and satisfy the procurement need and to move decision makers into a straight rebuy ; (2) “out” supplier should hold organisational modified rebuy status long enough for the buyer to  evaluate an alternative offering. It is important to know the factors that led decision-makers to re-examine alternatives 3) Straight rebuy - When there is a continuing or recurring requirement, buyers have substantial experience in dealing with the need and require little or no new information. evaluation of new alternative Solutions is unnecessary and unlikely to yield appreciable improvements - 2 buying-decision approaches: (1) causal purchases (involve known formation search or analysis, and the product or service is of minor importance. the focus is simply on transmitting the order.); (2) routine low-priority purchases ( are somewhat more important to the firm and involve in water the model analysis) - Strategy guidelines: (1) Marketing communication should be designed to reach not only purchasing managers but also individual employees who are now empowered to exercise their product preferences through a point and click interface; (2) The ”in” supplier must reinforce the buyer-seller relationship, meet the buying organisations expectations, and be alerted and responsive to the changing needs of the organisation; (3) the “out” supplier must convince organisational buyers that their purchasing requirements have changed or that the requirement should be interpreted differently. Justifier - an element of the offering, other than price, that would make a noteworthy difference to companies business. 2. ENVIRONMENTAL FORCES 1) Economic forces - Marketer must be sensitive to the strength of demand in the ultimate consumer in the B2C - firms that operate on a global scale must be sensitive to the economic conditions that prevail across regions - Focus has shifted from low-cost suppliers to best-cost suppliers: an approach that evaluates a range of factors beyond labour costs, such as trade barriers and the inherent risk of longer supply chains 2) Technological forces - Increased speed of technological change changes the decision-making units in the buying organisation: importance of the purchasing manager declines, and that of technical and engineering personnel increases - acquired information is time sensitive: meaning that benefits are associated with search efforts, yet costs with prolonging the process. 3) Natural forces - Downstream impacts- those are the impacts that climate change can have on all members of the supply chain - Upstream impacts- impacts on organisational buyer behaviour initiated from the customer base itself. nowadays customers are more cautious and require firms to take responsibility for their social and environmental footprints. 4) political/legal forces - E.g. regulations during the coronavirus has have led to various disruptions in a supply chain 3. ORGANISATIONAL FORCES 1) Growing influence of purchasing - The scope of chief procurement officers CPOs role has expanded: but they remain responsible for delivering cost savings, improving asset utilisation, and viability but now must achieve these goals in a way that increases the attractiveness and competitiveness of the firm's finished products and services + Also responsible for pursuing materials in a socially and environmental responsible way - Strategic priorities in procurement: CPOs are pursuing set of strategic priorities: aligning purchasing with strategy, exploring new value frontiers, putting suppliers inside, pursuing best call sources 2) Procurement approach I. TCO (Total cost ownership) - when purchasing a product or service, the procurement manager considers a host of costs above and beyond the actual purchase price including acquisition costs (Selling, transportation, administrative cost of evaluating suppliers, expediting orders, and correcting errors in shipments or delivery), possession cost ( financing, storage, inspection, taxes, insurance, and other internal handling costs), and usage costs ( installation, employee training, user labour, and field repair, product replacement and disposal costs) - Strategy response: minimising the buyers TCO’s II. E-procurement - A procurement approach whe're purchasing managers use the internet to find new suppliers, communicate with current suppliers, or place an order III. Reverse auctions - A procurement approach where one buyer invites bids from several pre-qualified suppliers who face off in a dynamic, real time, competitive bidding process. Reverse auctions are most highly used in the automobile, electronics, aerospace, and pharmaceutical Industries - Best use for commodity type items such as purchasing materials, diesel fuel, metal parts, chemicals and many raw materials. - not appropriate for strategic relationships, where suppliers have specialised capabilities and few suppliers can meet quality and performance standards - strategic approach: (1) If a firm's offering is not highly differentiated from the competition, the reverse auction might be the only choice: however, you need to set a walk-away price to minimise the risk of winning a non profitable bid. (2) if a firm's offering provides significant value to the customer, the seller may try to convince the buyer not to go forward with the auction/ influence bit specifications and vendor qualification criteria/ or walk away. 3) Organisational positioning of purchasing - Centralised procurement decisions: as separate organisational unit has Authority for purchases at the regional, divisional, or headquarters level  - strategy response: Key account management programs have been developed to align marketers selling strategy and organization of the purchasing function of key accounts 4. GROUP FORCES - The industrial salesperson must address three questions: 1) Which organisational members take part in the buying process? 2) What is each member's relative influence in the decision? 3) What criteria are important to each member in evaluating prospective suppliers? - A salesperson must defined the buying situation and the information requirements from the organisation’s perspective in order to anticipate the size and composition of the buying Centre - Defining the buying centre - Defining the buying situation and determining whether the firm is in the early or later stages of procurement decision-making process, - Predicting composition - Buying centre influence: Users, gatekeepers, influencers, deciders, and buyers - Identifying patterns of influence: e.g. Individuals with important personal stake in the decision process, those with expert knowledge concerning the choice and those central to the flow of decision related information tend to assume active and influential role in the buying centre 5. INDIVIDUAL FORCES - Evaluative criteria: Product perceptions and evaluative criteria differ among organisational decision makers as a result of differences in their educational backgrounds, their exposure to different types of information, the way they interpret and retain relevant information, and their level of satisfaction with past purchases. - Risk reduction strategies: Rather than price, product quality and after sales service are typically most important to organisational buyers when they confront risky decisions. CHAPTER 3: CUSTOMER RELATIONSHIPS MANAGEMENT FOR BUSINESS MARKETS Collaborative advantage - It is the ability to form effective and rewarding partnerships with other firms, for mutual benefit. Many business marketing firms create a collaborative advantage by demonstrating special skills in managing relationships with key customers or by jointly developing innovative strategies with alliance partners. Relationship marketing - Focuses on all activities directed toward establishing, developing and maintaining successful exchanges with customers and other constituents. TYPES OF RELATIONSHIP The buyer-seller relationships are a continuum with 2 endpoints 1. TRANSACTIONAL EXCHANGE - Focuses on the timely exchange of basic products for highly competitive market prices. - Items are sold where competitive bidding is often employed to secure the best terms. - centres on negotiations and an arm's-length relationship - A central challenge for the marketer is to overcome the gravitational pull toward the transaction end of the exchange spectrum. - Customers are more likely to prefer a transactional relationship when a competitive supply market features many alternatives, the purchase decision is not complex, the supply market is stable, and the purchase is not strategically important 2. VALUE-ADDED EXCHANGE - The point on the relationship spectrum where the focus of the selling firm shifts from attracting customers to keeping customers. - developing a comprehensive understanding of customer's needs and changing requirements, tailoring the firm's offerings to those needs, and providing continuing incentives for customers to concentrate most of their purchases with them 3. COLLABORATIVE EXCHANGE - A process where a customer and supplier firm form strong and extensive social, economic, service, and technical ties over time, with the intent of lowering total costs and/or increasing value, thereby achieving mutual benefit. - Characteristics: 1) Open exchange of information  2) operational linkages - Reflect how much the system, procedures, and routines of the buying and selling firms have been connected to facilitate operations. - customised, high-technology products - emphasises joint problem solving and multiple linkages that integrate the processes of the two parties. - Buying firms prefer a more collaborative relationship when alternatives are few, the market is dynamic, the complexity of the purchase is high, and the purchase is strategically important. - switching costs - The negative costs incurred by a customer as a result of changing suppliers, brands, or products. Organisational buyers consider wto switching costs: investments and risk of exposure STRATEGY GUIDELINES: - first step is to determine which type of relationship matches the purchasing situation and supply-market conditions for a particular customer 1. collaborative customers: - invest resources to secure commitments and directly assist customers with planning - Regular visits to the customer by executives and technical personnel can strengthen the relationship. - Operational linkages and information-sharing mechanisms - competence and commitment - value drivers: relationships benefits, customer support, personal interaction, sellers know-how, ability to improve customer’s time to market 2. Transactional customers: - Salesperson offers an immediate, attractive combination of product, price, technical support, and other benefits - centres primary attention on the purchasing staff - No need to invest in close buyer-seller relationship MEASURING CUSTOMER PROFITABILITY the value created by the differentiation-measured by higher margins and higher sales volumes-has to exceed the cost of creating and delivering customised features and service - Many firms are unprofitable on the aggregate level because they fail to assign operating expenses to customers, and misjudge the profitability of individual customers. —-> Activity based costing (ABC) - illuminates exactly what activities are associated with serving a particular customer and how these activities are linked to revenues and the consumption of resources. - Once a firm identifies ABCs and plots cumulative profitability, often a whale curve emerges: the most profitable 20 percent of customers generate between 150 percent and 300 percent of total profits. The middle 70 percent of customers break even and the least profitable 10 percent of customers lose from 50 to 200 percent of total profits, leaving the company with 100 procent profits. STEP 1: Look inside. managers should first examine their company's own internal processes to ensure that it can accommodate customer preferences for reduced order sizes or special services at the lowest cost. STEP 2: a sharper profit lens - See your customers through the lens - net margin equals the net price, after all discounts, minus manufacturing costs. - costs of serving the customer, including order-related costs plus the customer-specific marketing, technical, and administrative expenses. STEP 3: identify profitable customers - Marketing managers should force relationships with “passive” customers because these customers represent a valuable asset - Avoid unprofitable customers or adjust your marketing strategy to turn them into profitable - MANAGING UNPROFITABLE CUSTOMERS: 1. Explore possible ways to reduce costs of activities associated with these customers 2. Direct attention to customer’s actions that contribute to higher selling costs 3. If unprofitable customers are new or provide opportunity to gain valuable insights - might keep them 4. Might consider disinvesting into customer in order for it to fire itself 4 TYPES OF CUSTOMERS: 1. True friends - high loyalty and high profitability 2. Butterflies - low loyalty and high profitability 3. Barnacles - high loyalty and low profitability 4. Strangers - low loyalty and low profitability. CUSTOMER RELATIONSHIP MANAGEMENT Customer relationship management (CRM) - cross-functional process for achieving continuing dialogue with customers across all their contact and access points, with personalised treatment of the most valuable customers to ensure customer retention and effectiveness of marketing initiatives. - costly investments into ​CRM systems that enterprise software applications that integrate sales, marketing, and customer service information. - a well-designed and executed customer strategy, supported by a CRM system, provides the financial payoff. CUSTOMER RELATIONSHIP MANAGEMENT STRATEGY: 1. acquiring the right customers - 2 critical assets of the b2b firm: 1) stock of current and potential customer relationships  2) collective knowledge of how to select, initiate, develop and maintain profitable relationships with these customers - Understand how customers define value (The tradeoff in the customer's mind between total customer value (i.e., product value, service value, personnel value, and image value) and total customer cost (.e., monetary cost, time cost, energy cost, and psychic cost)) - Consider profit potential - E.g. some customers place high value on supporting services and are willing to pay premium for them, others don’t value support and are very price sensitive - a marketer should divide its customers into groups. The marketer wishes to develop a broader and deeper relationship with the most profitable ones and assign low priority to the least profitable ones. 2. crafting the right value proposition - value proposition Represents the products, services, ideas, and solutions that a business marketer offers to advance the performance goals for customer organisation - essential question: How do the value elements (benefits) in a supplier's offering compare to those of the next best alternative?. - may include points of parity (certain value elements are the same as the next-best option) and points of difference (the value elements that make the supplier's offering either superior or inferior to the next best alternative). - a business marketer can gain an advantage over rivals by adding a justifier to the value proposition - The bandwidth of strategies: business marketer should identify the nature of buyer-seller relation- ships in the industry. Tailor strategies that more closely respond both to customers who desire a collaborative emphasis and to those who seek a transaction emphasis. - Flaring out by unbundling: offer each service with an incremental price increase, the price increments for the entire set of unbundled services should be greater than the price premium sought for the collaborative offering - Flaring out with augmentation: the collaborative offering becomes the augmented product enriched with features that the customer values. Because collaborative efforts are designed to add value or reduce the costs of exchange between partnering firms, a price premium should be received for the collaborative offering. - Creating flexible service offerings: First, an offering should be created that includes the bare- bones-minimum number of services valued by all customers; Second, optional services are created that add value by reducing costs or improving the performance 3. instituting the best processes - Successful relationship strategies are shaped by an effective organization and deployment of the personal selling effort and close coordination with supporting units, such as logistics and technical service. 4. motivating employees - dedicated employees are the cornerstone of a successful customer relationship strategy.  - Internal service quality drives employee satisfaction by investing heavily in training and development, providing challenging career paths to facilitate professional development, and aligning employee incentives to performance measures. - Treating employees well leads to employee satisfaction which leads to increased employee retention and productivity. - Employee satisfaction drives customer satisfaction. 5. learning to retain customers - It’s cheaper to serve existing customers than to acquire new ones - Business marketers earn customer loyalty by providing superior value that ensures high satisfaction and by nurturing trust and mutual commitments. - Developing a customer reference program: to acquire new customers, many business-to-business firms are implementing customer reference programs to leverage the value of current clients on new customer adoption. - Pursuing Growth from Existing Customers: Business marketers should identify a well-defined set of existing customers who demonstrate growth potential and selectively pursue a greater share of their business. - Evaluating relationships: relationships are important assets of a firm and must be periodically evaluated, changes should be made if needed. Important that the goals of companies match. RELATIONSHIP MARKETING SUCCESS Relationship marketing activities - Represent dedicated relationship marketing programs, developed and implemented to build strong relational bonds. These activities influence three important drivers of relationship marketing effectiveness: relationship quality, breadth, and composition- each capturing a different dimension of the relationship and exerting a positive influence on the seller's performance activity. DRIVERS OF RELATIONSHIP MARKETING EFFECTIVENESS: - relationship quality - Represents a high-calibre relational bond with an exchange partner that captures a number of interaction characteristics such as commitment and trust. - Relationship breadth represents the number of interpersonal ties that a firm has with an exchange partner. - More ties, easier it is to access the information, identify profit-enhancing opportunities - Relationship composition. For example, greater authority in the contact portfolio allows a salesperson to access information, adapt offer- ings, and reach influential decision makers. - relationship strength - Reflects The Ability of a Relationship to withstand stress and/or conflict, such that multiple, high-quality relational bonds result in strong, resilient relationships. - relationship efficacy Captures the ability of an inter-firm relationship to achieve desired objectives. High-quality relationships with members of the customer organisation, coupled with a well-structured and diverse contact portfolio, gives sellers the means to execute responsive strategy. RM (RELATIONSHIP MARKETING) PROGRAMS: - Social RM programs use social engagements (e.g. Meals, sports events) or frequent, customised communication to personalise relationships and highlight the customer’s special status. - High returns, but might be associated with the slespersonal rather than a selling firm (risking that customer may be lost if the salesperson leaves the company) - Structural RM programs - designed to increase productivity and/or efficiency for customers through targeted investments that customers would not likely make themselves. (e.g. the seller might provide an electronic order-processing interface) - Return is higher for the firms with frequent interaction - Financial RM programs provide economic benefits, such as special discounts, free shipping, or extended payment terms, to increase customer loyalty. - Generally fail to generate positive economic returns - Relationship orientation (RO)- Represents the customer's desire to engage strong relationships with a current or potential supplier. - The returns on RM in- vestments improve if business marketers are able to target customers on the ba- sis of their RO rather than size.  CHAPTER 4: SEGMENTING THE BUSINESS MARKET AND ESTIMATING SEGMENT DEMAND MARKET SEGMENT REQUIREMENTS AND BENEFITS MARKET SEGMENT a group of present or potential customers with some common characteristic which is relevant in explaining (and predicting) their response to a supplier's marketing stimuli. REQUIREMENTS four criteria for evaluating the desirability of potential market segments: 1. Measurability-The degree to which information on the particular buyer characteristics exists or can be obtained. 2. Accessibility-The degree to which the firm can effectively focus its marketing efforts on chosen segments. 3. Substantiality-The degree to which the segments are large or profitable enough to be worth considering for separate marketing cultivation. 4. Responsiveness-The degree to which segments respond differently to different marketing mix elements, such as pricing or product features. BENEFITS 1. The mere attempt to segment the business market forces the marketer to become more attuned to the unique needs of customer segments. 2. Provides the foundation for efficient and effective business marketing strategies 3. Provides business marketer with valuable guidelines for allocating resources Market segmentation provides the basic layer of analysis for marketing planning and control. BASE FOR SEGMENTING BUSINESS MARKETS Business marketer profiles organisations (size, end use) and organisational buyers (decision style, criteria). MACRO SEGMENTATION - centres on the general characteristics of the buying organisation, the nature of the product application, and the characteristics of the buying situation and thus divides the market by such criteria as size, geographic location, organisational structure. - Macro Level bases: 1. Characteristics of buying organisation - Size - the bigger the firm, the lower the influence of presidents, owners, etc - Geographical location - Usage rate: from non-users to heavy users - Structure of the procurement: centralised, decentralised. Centralised buyers place significant weight on long-term supply availability and the development of a healthy supplier complex. Decentralised buyers tend to emphasise short-term cost efficiency. 2. product/service application  3. Value in use - is a product's economic value to the user relative to specific alternatives in a particular application. 4. Purchasing situation - First-time buyers have perceptions and information needs that differ from those of repeat buyers. - new-task, straight rebuy, or modified rebuy organisations. MICROSEGMENTATION - requires more knowledge, focusing on the characteristics of the decision-making units within each microsegment - including buying decision criteria, perceived importance of the purchase, attitude toward vendors and personal characteristics. - Micro level bases: 1. Key criteria - which criteria are the most important in the purchase decision. - Criteria include product quality, prompt and reliable delivery, technical support, price, and supply continuity. 2. Purchasing strategies - Several suppliers vs concentrated purchases with 1 or 2 suppliers 3. Structure of the decision making unit - a way to divide the business market into subsets of customers by isolating the patterns of involvement in the purchasing process of particular decision participants 4. Importance of purchase - especially appropriate when various customers apply the product in various ways. 5. Organisational innovativeness - Some organisations are more innovative and wil- ing to purchase new industrial products than others. - enables the mar- keter to identify segments that should be targeted first when it introduces new products. 6. Personal characteristics - personal characteristics of decision makers: demographics (age and education), personality, decision style, risk preference or risk avoidance, confidence, job responsibilities, and so forth. EVALUATING AND SELECTING MARKET SEGMENTS Start with the microsegmentation - if it’s enough to develop marketing strategy → cool. If not → continue with microsegmentation As firms develop more segments with special requirements, it then becomes necessary to assess whether the cost of developing a unique strategy for a specific segment is worth the profit to be generated from that segment. Account-Based Marketing - is the ultimate in segmentation, as one company is viewed as a separate segment. - has the potential to deepen relationships with existing clients and build profitability by shortening the sales cycle and increasing win rates and sole-sourced contracts. Isolating segment’s profitability  - Many business marketing firms categorise customers into tiers that differ in current and/or future profitability to the firm. - Special attention is given to the individual drivers of customer profitability, namely, the cost to serve a particular group of customers and the revenues that result. - Keep profitable customers, convert average to profitable and get rid of bad ones. Implementing segmentation strategy - How should the sales force be organised? - What special technical or customer service requirements wil organisations in the new segment have? - Who will provide these services? - Which media outlets can be used to target advertising at the new segment? Has a comprehensive online strategy been developed to provide continu- ous service support to customers in this segment? - What adaptations will be needed to serve selected international market segments? Estimating segment demand - Vital step - reflects management's estimate of the probable level of company sales, taking into account both the potential opportunity and the level and type of marketing effort demanded. Setting the course - Once demand is estimated for each segment, the manager can allocate expenditure on the basis of potential sales volume. - Only after the marketing strategy is developed can expected sales be forecasted. - Sales forecasts are essential to smooth operations of the entire supply chain METHODS FOR FORECASTING DEMAND QUALITATIVE TECHNIQUES (management/subjective judgement) - Rely on informed judgement and rating schemes - Depends on the close relationships between customers and suppliers - Work well for: heavy capital equipment; new product or new technology forecast - Include: 1. executive judgement method: The judgement method that combines and averages top executives estimates of future sales and is popular because it is easy to apply and understand and enjoy high -level usage.. 2. sales force composite: An approach where salespeople can effectively estimate future sales volume because they know the customers, the market, and the competition. 3. Delphi approach to forecasting: the opinions of the panel of experts on future sales are converted into an informed consensus through a highly structured feedback mechanism. QUANTITATIVE TECHNIQUES (systematic/objective forecasting) 1. time-series analysis: A technique that uses historical data ordered chronologically to project the trend and growth rate of sales. The rationale behind time-series analysis is that the past pattern of sales will apply to the future. - Most suitable for short-term forecasting  2. regression/causal analysis: A Process that identifies factors that have affected past sales and incorporates them in a mathematical model to estimate future sales. - Suitable for intermediate forecast - A Critical aspect of regression analysis is to identify the economic variable(s) to which past sales are related. COMBINING TECHNIQUES - Improve Forecasting accuracy CHAPTER 5: BUSINESS MARKETING PLANNING - STRATEGIC PERSPECTIVES MARKETING’S STRATEGIC ROLE THE HIERARCHY 1. Corporate strategy defines the businesses in which a company competes, preferably in a manner that uses resources to convert distinctive competence into competitive advantage. - the role of marketing is to (1) assess market attractiveness and the competitive effectiveness of the firm, (2) promote a customer orientation to the various constituencies in management decision making, and (3) formulate the firm's overall value proposition, articulating it to the market and to the organisation at large. 2. Business-level strategy centres on how a firm competes in a given industry and positions itself against its competitors. - The focus of competition is not between corporations; rather, it is between their individual business units. - A strategic business unit (SBU) is a single business or collection of businesses that has a distinct mission, responsible manager, and its own competitors and that is relatively independent of other business units. - The marketing function contributes to the planning process at this level by providing a detailed and complete analysis of customers and competitors and the firm's distinctive skills and resources for competing in particular market segments 3. Functional strategy centres on how resources allocated to the various functional areas can be used most efficiently and effectively to support the business- level strategy. - The primary focus of marketing strategy at this level is to allocate and coordinate marketing resources and activities to achieve the firm's objective within a specific product market. FUNCTIONALLY INTEGRATED PLANNING: MARKETING STRATEGY CENTRE - A successful business marketing manager acts as an integrator, leveraging the strengths of manufacturing, R&D, and customer service to create marketing strategies that effectively respond to customer needs. - marketing strategy centre - A Business unit that constitutes the members of the organisation involved in the business marketing decision-making process. - By understanding the concerns of personnel from other functional areas, the business marketing manager can build effective cross-unit working relationships. THE COMPONENTS OF THE BUSINESS MODEL BUSINESS MODEL consist of 4 components that are tied together by customer benefits, configuration and company boundaries: 1. CUSTOMER INTERFACE - Four elements: 1) Fulfilment and support refers to the channels a business marketing firm uses to reach customers and the level of service support it provides. 2) Information and insight refers to the knowledge captured from customers and the degree to which this information is used to provide enhanced value to the customer. 3) Relationship dynamics refers to the nature of the interaction between the firm and its customers 4) Pricing structure 2. CORE STRATEGY - determines how the firm chooses to compete. - Three elements: 1) The business mission describes the overall objectives of the strategy, sets a course and direction, and defines a set of performance criteria that are used to measure progress. 2) Product/market scope defines where the firm competes. 3) Basis for differentiation captures the essence of how a firm competes differently than its rivals. 3. STRATEGIC RESOURCES 1) Core competencies are the set of skills, systems, and technologies a company uses to create uniquely high value for customers. 2) Strategic assets are the more tangible requirements for advantage that enable a firm to exercise its capabilities. Included are brands, customer data, distribution coverage, patents, and other resources that are both rare and valuable. 3) Core processes are the methodologies and routines that companies use to transform competencies, assets, and other inputs into value for customers. - configuration component links strategic resources to the core strategy. - Configuration refers to the unique way in which competencies, assets, and processes are interrelated in support of a particular strategy. 4. THE VALUE NETWORK - Component that complements and further enriches the firm's research base. - Included here are suppliers, strategic alliance partners, and coalitions. PRINCIPLES OF STRATEGIC POSITIONING: 1. Centre on the right goal: superior long-term return on investment rather than performance goals 2. Deliver a customer value proposition, or set of benefits, that differs from those of rivals. 3. Create a distinctive value chain by performing different activities than rivals or performing similar activities in different ways. 4. Accept trade-offs and recognize that a company must forgo some product features or services to remain truly distinctive in others. 5. Emphasise the way in which all the elements of the strategy fit and reinforce one another. 6. Build strong customer relationships and develop unique skills MARKETING EXCELLENCE organic growth - Growth attributable to sales and expansion through the company's own internal resources (not growth through mergers and acquisitions). Marketing excellence - particular activities that provide the levers for achieving a firm's goal of organic growth 1. MARKETING ECOSYSTEM PRIORITY - a firm's strategic means of growing the business by developing mutually beneficial systems of networks - Two main categories of firm activities are included: 1) Building Ecosystems in Proximal and Distal Networks - activities related to forming systems of relationships within the supply chain, outside the supply chain, and beyond the firms' horizon. 2) fostering integrated ecosystems - activities related to connecting, guiding, and steering the firm's systems of relationships. 2. END-USER PRIORITY - firm's strategic emphasis on engaging with the final customer, who applies or consumes the offering, and leveraging the final customer insights for growing the business. - 2 primary categories: 1) End-user engagement - The focus here is on initiatives related to building interfaces to final customers and directly interacting with final customers such as personalised touchpoints, online forums, and chats. 2) Applying End-User Knowledge for Business Model Creation - by deriving insights from end-user trends, a firm is better equipped to develop a more future-oriented and sustainable business model. 3. MARKET AGILITY PRIORITY - a firm's strategic means for executing growth activities by the marketing organisation and its members through simplified structures and processes, fast decision making, and trial and error learning. - Activities fall into 2 categories: 1) Enhancing Agility in the Marketing Organization  2) Facilitating Agile Marketing Behaviours BUILDING THE STRATEGIC PLAN Execution of successful strategy involves two basic rules: "understand the manage- ment cycle that links strategy and operations, and know what tools to apply at each stage of the cycle. A MANAGEMENT SYSTEM represents "the integrated set of processes and tools that a company uses to develop its strategy, translate it into operational actions, and monitor and improve the effectiveness of both. " Involves 5 stages: 1. strategy development 2. translating the strategy into objectives and measures that can be clearly communicated to all functional areas and employees. 3. designing key processes 4. monitoring performance 5. adapting the strategy STAGE 2: TRANSLATING THE STRATEGY 2 tools for that: 1. The balanced scorecard - Provides managers with a comprehensive system for converting a company's vision and strategy into a tightly connected set of performance measures. - examines the performance of a business unit from four perspectives: (1) financial - Financial performance measures allow business marketing managers to monitor the degree to which the firm's strategy, implementation, and execution are increasing profits. - The balanced scorecard seeks to match financial objectives to a business unit's growth and life cycle stages. - Three stages of a business: growth, sustain, harvest (2) customer - he business unit identifies the market segments it will target and the value proposition - Key Value Propositions and Customer Strategies: low total cost, product innovation and leadership, complete customer solutions, lock-in. - Core measures: market share, customer acquisition, customer retention, customer satisfaction, customer profitability. (3) internal business processes - Internal business processes support two crucial elements of a company's strategy: (1) they create and deliver the value proposition for customers and (2) they improve processes and reduce costs, enriching the productivity component in the financial perspective. - Among the processes vital to the creation of customer value are: 1 Operations Management Processes 2. Customer Management Processes 3. Innovation Management Processes  - Strategic alignment: key internal processes can be aligned to support the firms' customer strategy or differentiating-value proposition. (4) learning and growth - highlights how the firm's intangible assets must be aligned to its strategy to achieve long-term goals. - The three principal drivers of organisational learning and growth are: human capital, information capital, organisation capital - Strategic Alignment: To create value and advance performance, the intangible assets of the firm must be aligned with the strategy. - 2. The strategy map - a visual representation of the cause-and-effect relationships among the components of the balanced scorecard - the key principles that underlie a strategy map: - Companies emphasise two performance levels in developing a financial strategy—a productivity strategy and a revenue-growth strategy. - Strategy involves choosing and developing a differentiated customer value proposition. - Value is created through internal business processes. - Strategy involves identifying and aligning the critical few processes that are most important for creating and delivering the customer value proposition. - Value isi enhanced when intangible assets are aligned with the customer strategy. Summary of last part: Successful execution involves linking strategy to operations, using tools and processes such as the balanced scorecard and strategy map. The balanced scorecard converts a strategy goal into concrete objectives, and measures are organised into four different perspectives: financial, customer, internal business process, and learning and growth. The approach involves identifying target customer segments, defining the differentiat- ing customer value proposition, aligning the critical internal processes that deliver value to customers in these segments, and selecting the organisational capabilities necessary to achieve customer and financial objectives. Business marketers primarily emphasise one of the following value propositions or customer strategies: low total cost, product leadership, complete customer solutions, or system lock-in. Strategy map provides a visual representation of a firms' critical objectives and the cause-and-effect relationships among them that drive superior organisational performance. CHAPTER 6: ESG and Business Marketing Strategies for Global Markets THE KEY COMPONENTS OF ESG PROFILE 1. E - ENVIRONMENTAL CRITERIA - considers the energy a company uses and the waste it discharges, the resources it requires, and the consequences for society that result. - carbon emissions and climate change 2. S - SOCIAL CRITERIA - addresses the relationships that a company has with its employees, supply chain partners and the reputation it fosters with institutions in the communities - S includes labour relations,. employee diversity, inclusion, and pay equity. 3. G - GOVERNANCE - is the internal system of procedures, control, and transpar- ent practices a company applies to make effective decisions, comply with the law, and meet the needs of external stakeholders. - G includes mandatory company disclosures on global sustainability, corporate board diversity, and other regulatory filings. NET-ZERO EMISSIONS - achieving a balance between greenhouse gas emissions produced and greenhouse gas emissions taken out of the atmosphere. a strong and proactive ESG proposition will resonate well with stakeholders: - Customers: customers are emphasising sustainable purchas- ing objectives and seeking partners that understand and can deliver sustainable product and service solutions - Investors: investors are increasingly scrutinising the sustainability practices of firms and pressing companies to report on their climate-related risks and emissions - Employees HOW A STRONG ESG PROPOSITION CAN CAPTURE PROFITABILITY SUSTAINABILITY involves the integration of economic, environmental. and societal considerations into business decision making. Two levels of value reaction through adopting sustainability: 1. Profitable revenue growth - better products... or from new business: Stronger brand; Pricing power; Margin Improvement; Increased customer loyalty; Fresh market opportunities 2. Lower operating costs - companies end up reducing the inputs they use: More efficient use of resources; Greater supply chain efficiencies; Entlanced production efficiencies; Increased employee loyalty; Greater employee productivity FORCES THAT SHAPE GLOBAL ADVANTAGE FOR THE FIRM With the shift in the global economy and the rise of RDE (rapid developing economies) b2b businesses must adjust their business models. THE BCG GLOBAL ADVANTAGE DIAMOND To achieve global leadership, integrated strategies should incorporate the following elements: 1. MARKET ACCESS - driving sales growth by reaching new markets and targeting new market segments; - Companies can expand market access in RDEs by (1) increasing the number of countries served and/or (2) penetrating more deeply into new customer segments and new product categories in existing markets - Due to the lower income in RDEs, To capture the next wave of growth, multinational companies must go beyond the premium segments 2. RESOURCE ACCESS - leveraging valuable resources (for example, talent, assets, raw materials, and knowledge) in RDEs to achieve competitive advantage - Many leading-edge companies have shifted their focus to "best-cost-country sourcing," an approach that considers a full range of factors beyond labour costs: factor costs, supply chain restraints, transportation costs, and relative strengths and weaknesses of RDEs. - Re-shoring is the process of returning the production and manufacturing of goods back to the company's original country. Near-shoring is where a business moves its operations to a nearby country from one of greater distance - The criteria that favour relocation to RDEs include products or services with high labour content, high growth potential, large RDE markets, and standardised manufacturing or service delivery processes 3. LOCAL ADAPTION - developing and adapting products and services to satisfy the unique needs of RDE customers 4. NETWORK COORDINATION - integrating operations to capitalise on the strength of the company's global network. - Economies of scale and scope can be advanced through process standardisation, adoption of common technology, and rapid information sharing GLOBAL MARKET ENTRY OPTIONS OPTIONS OF PARTICIPATING IN A GLOBAL MARKET: 1. EXPORTING - a workable ent5ry strategy when a firm lacks the resources to make significant commitment to the market, want to minimise risks, or is unfamiliar with the country’s market requirements and cultural norms.  - Although it preserves flexibility and reduces risk, exporting may limit the future prospects for growth in the country 2. CONTRACTING - Somewhat more involved and complex form of international entry strategy and includes contractual entry modes· (1) licensing and (2) management contracts. - Licensing - an agreement where one firm permits another to use its intellectual property in exchange for royalties or some other form of payment. The property might include trademarks, know-how or company name. In short, licensing involves reporting intangible assets. - limitations: First, licensees may become an important competitor in the future. Second, licensing agreements typically include a time limit. Third, a firm has less control over a licensee. - management contract - when full ownership or a joint venture are not feasible or not permitted by a foreign government, a management contract provides a way to participate in a venture. 3. STRATEGIC GLOBAL ALLIANCES (SGA) - is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achiev- ing a common objective. - This strategy works well for market entry or to shore up existing weaknesses and increase competitive strengths 4. JOINT VENTURE - Involves a joint-ownership arrangement to produce and/or market goods in a foreign market. In contrast to a strategic alliance, a joint venture creates a new firm. - Pros: Expanded market opportunities, Cost efficiency, Stronger local relationships,Cultural adaptability - Cons: High failure rate, Sensitive information risks, Profit-sharing disputes, Management and strategy conflicts, Decreasing popularity,Complex exit strategies MULTIDOMESTIC STRATEGIES - permits individual subsidiaries to compete independently in their home-country markets. The multinational headquarters coordinates marketing policies and financial controls and may centralise R&D and some support activities. GLOBAL STRATEGY - Seeks competitive advantage with strategic choices that are highly integrated across countries. MULTIDOMESTIC INDUSTRIES - Firms pursue separate strategies in each of their foreign markets - competition in each country is essentially independent of competition in other countries. GLOBAL INDUSTRIES - is one in which a firm’s competitive position in one country is significantly influenced by its position in other countries. GLOBAL STRATEGY INSIGHTS BUILD ON A UNIQUE COMPETITIVE POSITION  - A business marketing firm should globalise first in those business and product lines where it has unique advantages. - Rather than modifying the firm's product and service offerings from country to country, "a global strategy requires a patient, long-term campaign to enter every significant foreign market while maintaining and leveraging the company's unique strategic positioning ESTABLISH A CLEAR HOME BASE FOR EACH DISTINCT BUSINESS - home base - a location where strategy is set, core product and process technology is created and maintained, and a critical mass of sophisticated production and service activity reside. - The home base should be located in a country or region with the most favorable access to required resources (inputs) and supporting industries (for example, specialised suppliers). LEVERAGE PRODUCT-LINE HOMME BASES AT DIFFERENT LOCATIONS - As a firm's product line broadens and diversifies, different countries may best pro- vide the home bases for some product lines. Responsibility for leading a particular product line should be assigned to the country with the best locational advantage DISPERSE ACTIVITIES TO EXTEND HOME-BASE ADVANTAGES - Although the home base is where core activities are concentrated, other activi- ties can be dispersed to extend the firm's competitive position COORDINATE AND INTEGRATE DISPERSED ACTIVITIES CHAPTER 7: MANAGING PRODUCTS FOR BUSINESS MARKETS BUILDING A STRONG B2B BRAND BRAND is a name, sign, symbol,or logo that identifies the products and services of one firm and differentiates them from competitors. Brand equity is a set of brand assets and liabilities linked to a brand, its name, and symbol that add to or subtract from the value provided by a product or service and/or to that firm's customers. - the assets and liabilities that impact brand equity include brand loyalty, name awareness, perceived quality and other brand associations, and proprietary brand assets (for example, patents) customer-based brand equity (CBBE) is defined as the differential effect that customers' brand knowledge has on their response to marketing activities and programs for that brand BRAND BUILDING STEPS 1) develop deep brand awareness or a brand identity - The goal here is to ensure that customers understand the particular product or service category where the brand competes by creating clear connections to the specific products or services that are solely under the brand name. 2) establish the meaning of the brand through unique brand associations (that is, points of difference) - Brand positioning involves establishing unique brand associations in the minds of customers to differentiate the brand and establish competitive superiority - brand meaning can be captured by: - Brand performance - Brand imaginary 3) elicit a positive brand response from customers through marketing programs - customer judgments Includes four types of judgements (quality, credibility, consideration set, and superiority) which are particularly vital to the creation of a strong brand. 4) build brand relationships with customers, characterised by intense loyalty. - Brand resonance represents the strength of the psychological bond that a customer has with a brand and the degree to which this connection translates into loyalty, attachment, and active engagement with the brand. BRAND STRATEGY GUIDENLINESS 1. Employees at all levels of the organisation must understand the meaning and vision for the brand. - brand mantra -a short three- to five-word summary of the essence of the brand - can be powerful in communicating the core values of the brand to employees 2. larger and more complex companies should develop a coherent branding strategy and then build on the reputation of that brand 3. a firm with a strong brand can command a price premium for its products or services 4. successful branding requires a well-conceived market segmentation plan PRODUCT QUALITY AND CUSTOMER VALUE IS0-9000 standards Developed for the European Community but have gained a global following. Certification requires the supplier to thoroughly document its quality-assurance programs. The quest for improved product quality touches the entire supply chain. The quality movement has passed through several stages: 1. Stage one centred on conformance to standards or success in meeting specifications. 2. Stage two emphasised that quality was more than a technical specialty and that pursuing it should drive the core processes of the entire business 3. Stage three, then, examines a firm's quality performance relative to that of competitors and examines customer perceptions of the value of competing products. MEANING OF CUSTOMER VALUE Customer value represents a "business customer's overall assessment of a relationship with a supplier based on perceptions of benefits received and sacrifices made." - Benefits: 1. Core benefits - the core requirements (for example, specified product quality) for a relationship that suppliers must fully meet to be included in the customer's consideration set. 2. Add-on benefits - attributes that differentiate suppliers, go beyond the basic denominator provided by all qualified vendors, and create added value in a buyer-seller relationship - Sacrifices: 1. Purchase costs 2. acquisition costs (for example, ordering and delivery costs) 3. operations costs (for example, defect-free incoming shipments of component parts reduces operations costs). What matters most? - Add-on Benefits: the research demonstrates that add-on benefits more strongly influence customer value than do core benefits - Trust has a stronger impact on core benefits than product characteristics - Reducing Customer Costs: the importance of marketing strategies that are designed to assist the customer in reducing operations costs PRODUCT POLICY - Product policy involves the set of all decisions concerning the products and ser-vices that the company offers TYPES OF PRODUCT LINES 1. Proprietary or catalogue products. These items are offered only in certain configurations and produced in anticipation of orders. Product-line decisions concern adding, deleting, or repositioning products in the line.  2. Custom-built Products.These items are offered as a set of basic units, with numerous accessories and options. 3. Custom-designed products. These items are created to meet the needs of one or a small group of customers 4. Industrial services. Rather than an actual product, the buyer is purchasing a company's capability in an area such, as maintenance, technical service, or management consulting DEFINING THE PRODUCT MARKET Accurately defining the product market is fundamental to sound product-policy Product Market - establishes the distinct arena in which the business marketer competes. Four dimensions of a market definition are strategically relevant: 1. Customer function dimension. This involves the benefits that are provided to satisfy the needs of organisational buyers 2. technological dimension. There are alternative ways a particular function can be performed 3. Customer segment dimension. Customer groups have distinct needs that must be served 4. Value-added system dimension. Competitors serving the market can operate along a sequence of stages three important customer groups that may present the greatest opportunity for explosive growth: 1. Non Consumers who may lack the specialised skills, training, or resources to purchase the product or service; 2. Undershot customers for whom existing products are not good enough; 3. Overshot customers for whom existing products provide more performance than they can use. PLANNING INDUSTRIAL PRODUCT STRATEGY Having identified a product market, attention now turns to planning product strategy. Product-positioning analysis provides a useful tool for charting the strategy course. PRODUCT POSITIONING represents the place that a product occupies in a particular market; it is found by measuring organisational buyers' perceptions and preferences for a product in relation to its competitors. PRODUCT POSITIONING PROCESS 1. Identify the relevant set of competitive products 2. Identify the set of determinant attributes that customers use to differentiate among options and determine the preferred choice - determinant - attributes that customers use to differentiate among the alternatives and that are important to them in determining which brand they prefer 3. Collect information from a sample of existing and potential customers concerning their ratings of each product on the determinant attributes  4. Determine the product's wr;ent position versus competing offerings for each market segment 5. Examine the fit between preferences of market segments and current position of product 6. Select positioning or repositioning strategy SMART, CONNECTED PRODUCTS CAPABILITIES ADDING VALUE: 1. Monitoring: Smart, connected products enable continuous monitoring of a product's condition, operation, usage, and external environment through sensors and external data sources 2. Control Software embedded in the smart, connected product or in the product cloud enables control of an array of product functions and the personalization of the user experience. 3. Optimisation: rich flow of monitoring data, coupled with the capacity to control product operation allows to enhance product performance and optimise service performance 4. Autonomy: the capabilities of monitoring, cont5rol and optimisation combine to allow smart, connected products to achieve a level of autonomy that was previously unattainable. NEW MARKETING PRACTICES How do smart, connected products affect marketing strategies? 1. by gathering and analysing product usage data, marketing strategists can secure new insights 2. by capitalising on the rich data flows from customers 3. real-time product usage and performance data offer improvements in predictive maintenance and service productivity ALTERED BUSINESS MODELS - Smart, connected products are moving firms to an information-based model that employs user data, analytics, and software to unlock value WHICH PRODUCT CAPABILITIES AND FEATURES TO OFFER? 1. Value to customers. first, identify those features that will deliver real value to target customers relative to their cost 2. Tailoring for Segments: Second, the selection of the features and capabilities a company chooses to serve is guided by the target segments it elects to serve. 3. Reinforce Competitive Positioning: Third, business marketing strategists should seek to develop and incorporate those capabilities and features that reinforce its competitive positioning Factors that help to decide whether the enabling technology for each feature should be embedded in the product (raising the cost of every product), delivered through the product cloud, or both:  1. Response time - a feature that demands a fast response requires that the software be incorporated directly in the physical product. 2. Automation - fully automated products generally require functionality that is embedded into the device. 3. Network availability, reliability, and security - by minimising dependence on network availability and reducing the amount of data that must flow from the product to cloud-based applications, embedding software in the product lowers the risk that confidential data will be compromised during transmission. 4. frequency of service or product upgrades - by hosting functionality in the product cloud, companies can make product changes and upgrades easily and automatically MISTAKES TO AVOID: 1. Adding product features that customers don't need or value. 2. Underestimating security and privacy risks. 3. Falling to anticipate or recognize new competitive threats. 4. Moving slowly and allowing competitors to gain a foothold 5. Overestimating internal skills and capabilities.