Business to Business Marketing Notes 2024 PDF

Page 1 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 BUSINESS TO BUSINESS MARKETING NOTES 2024 Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social...

Page 1 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 BUSINESS TO BUSINESS MARKETING NOTES 2024 Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 2 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 ORIENTATION Prescribed material IMM Graduate School. (2024) BBM001B, Business to Business marketing e-study Guide. South Africa: IMM Graduate School Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 3 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 INTRODUCTION TO BUSINESS TO BUSINESS MARKETING The Specialised Nature of Business-to-Business Marketing Business-to-business (B2B) marketing environment is different to the general Business-to-consumer (B2C) marketing environment. B2B marketing has an increased focus on relationship building. Other B2B unique characteristics  Design and development of the marketing mix within a B2B context is more complex.  B2B marketing involves inter-organisational relationships.  B2B marketing communications need to be adapted to the unique characteristics of this particular type of marketing environment. Defining B2B markets and B2B marketing  Business-to-business markets are sometimes referred to as Industrial Markets indicating the places in which the purchasing between businesses takes place.  Business-to-Business Marketing refers to markets for products and services, local to international, bought by businesses, government bodies, and institutions for incorporation, consumption, use or resale B2B marketing describes the transactions (products and services) that take place between businesses for purposes other than general consumption  B2B marketing is defined as the behind-the-scenes transactions that take place in the production and delivery of goods and services to the final consumer. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 4 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Similarities and Differences between B2B and B2C Markets Marketing to a business involves the same concepts and strategies as marketing to the consumer market including activities such as identifying and defining the target market, understanding the behaviour of consumers and developing effective marketing strategies Similarities Basic principles of marketing apply to both B2B and B2C markets  Below is a summary of similarities of the Basic marketing principles of B2B and B2C.  See Table Below Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 5 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Dimension of similarity B2B B2C Product   Price   Promotion   Place   People   Process   Physical evidence   Satisfying customer needs   Segmentation, targeting and positioning   Customer acquisition   Customer retention   Customer insight    Both B2B marketing and B2C marketing seek to satisfy customers and make a profit.  All marketers are seeking to create and deliver value, and build relationships with their customers. Key differences between B2B and B2C marketing In B2B markets, the customer is an organisation B2B In B2C markets the customer is an individual person B2C Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 6 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Riley (2018) identified six key areas of difference between B2B and B2C marketing Dimension 1. Area of importance 2. Market size 3. Buying complexity 4. Sophistication of buyers 5. Marketer intention 6. Promotional focus B2B marketing is different from B2C marketing in the following ways  Derived demand: Demand for a business product is linked to the demand of or the need for consumer goods or services. Example:  Fluctuations of demand: Derived demand creates volatility in business market demand which means that there will be variations (or fluctuations) in the demand for a product or service over time.  Joint demand:  Demand for B2B products is usually triggered by or is dependent on the demand for another product.  Joint demand occurs when two or more items are used in combination to manufacture a product  Example: The demand for laptops leads to a joint demand for laptop chargers Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 7 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  B2B customers (Number of buyers per segment): B2B marketers usually have a limited number of B2B customers within a specific geographic location. Example: Air Chefs a catering company that provides food and catering services to the airline industry  Market size: B2B markets are much smaller than B2C markets due to the number of products and services purchased in these markets at any single point in time.  Buying centers:  B2B buyers often operate in teams, known as buying centers since they are not buying products and services for their personal use and enjoyment.  Each member of the buying centre performs a different role and influences the final purchase decision.  Nature of marketing activities:  B2B marketing activities focus on building and maintaining close, personal relationships with business customers.  B2B marketing driving force is relationships (not simply marketing the products but the entire offering created to satisfy their customers. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 8 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  B2B’s main marketing communication tool used is personal selling as it seeks to build close and personal relationships with B2B buyers  B2B marketing activities often incorporate customised offerings which makes it easy to incorporate negotiations into marketing activities.  Market research is less necessary due to B2B marketers working so closely with their customers and brand-based marketing  B2B marketers normally utilise direct distribution channels and are less likely to use intermediaries to access their customers. Please note: Despite the differences: a B2B marketer may be a B2C marketer as well:  Example 1: a chicken farmer who sells farm fresh eggs directly to the public but also sells to grocery stores.  Example 2: Volvo sells trucks to business buyers and cars to final consumers. Reasons why B2B customers make purchases Hutt and Speh (2017) explain that B2B customers make purchases for three main reasons:  Incorporation: B2B buyers purchase products for incorporation into their own products and services. Example: A laptop manufacturer will purchase Intel Core processors as components for their laptops.  Consumption: B2B buyers purchase products for their own use or consumption. Example: A university campus will purchase white board markers for lecturers to use during lectures.  Resale. Example: B2B buyers sometimes purchase products for resale. Edgars buys clothing from various manufacturers to sell to their customers. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 9 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Types of B2B customers or buyers  B2B buyers can be non-profit organisations or businesses who aim to make a profit.  B2B customers can be categorised into four basic types B2B Customers Resellers Producers Government Institutions (i):Resellers: Individuals or businesses that purchase products or services produced by other businesses with the intention of selling these products or service to another party for a profit.  Retailers. Businesses that focus their marketing efforts on the final consumers with the intention of selling products or services directly to them. Example:  Wholesaler is in an intermediary position between the producer and the retailer in the distribution channel. Examples: (ii): Producers (Commercial enterprises):  Producers acquire goods such as raw materials and semi-finished items from other businesses to use and transform into sellable goods to sell at a profit.  Producers can be further classified by industries: mining, motor manufacturing, textile, and agriculture industries. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 10 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 (iii): Governments:  Government is one of the biggest customers in B2B marketing is the government (national, provincial, as well as local authorities).  Government purchases a wide range of goods and services to accomplish social objectives or to provide services to communities.  Example: Government purchase printers, weaponry, buildings, highway construction services, waste disposal services, medical and security services. (iv): Institutions:  Institutions are business with charitable, educational, community or other non- business goals such as schools, universities, hospitals, churches, nursing homes and non-profit organisations.  Example: A university will buy furniture from a local furniture store to use in their offices Different Types of Products in Business-to-Business Marketing A product is a physical good that is produced to satisfy a want or need. A service is an intangible offering that is delivered to satisfy a want or need B2B products can be classified into different groups Capital goods  Capital goods form part of a business’s balance sheet and are generally shown as fixed assets.  Capital goods include plant, property, equipment, and vehicles used to operate the business. Revenue items  Revenue items are generally listed on the financial statements of the business under the profit and loss statement on the balance sheet of a business.  Revenue items include stock purchased for resale, inputs and support products used in production. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 11 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Inputs:  Inputs are products become part of the finished products that a business will sell on to their customers.  Inputs include raw materials that are transformed during the production of other products Installations and accessories:  Installations are specialty products used in the operations of the business such as a telecommunications system.  Accessories are less expensive forms of capital goods which are also used to improve production such as office equipment. Support products:  Support products are used to facilitate the production process and are indirectly related to production.  Support products include supplies used for maintenance, repairs, and operating such as cleaning supplies, spare parts, and stationery. B2B reason to buy and corresponding product Reason to buy Type of product Incorporation  Raw and processed materials  Component parts  Example: A laptop manufacturer will purchase Intel Core processors as components for their laptops. Use  Maintenance, repair, and operations supplies  Capital goods  Tools and accessories  Services  Systems  Example: A university campus will purchase white board markers for lecturers to use during lecturers. Resale  Finished goods  Example: A clothing retailer buys clothing from various manufacturers to sell on to their customers Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 12 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Business-to-Business Services Business services include intangible products businesses buy to facilitate their production and operating processes e.g. advisory support and financial services The main difference between B2B products and services is:  the intangibility of services  and inseparability (the need for the B2B service provider to be part of the buyer’s consumption of the services). Types of services  Pure service: Only service with no product offering such as recruitment or tax consulting  Product offering accompanied by a service: This is a combination of product and service. Services that support products for example repair and maintenance of machinery where parts and labour are needed. Defining characteristics of a service offering (Service Quality criteria or dimensions) B2B services need to be evaluated for quality before consumption due to the intangible nature using a certain service quality criteria: RARET  Reliability  Assurance  Responsiveness  Empathy  Tangibles Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 13 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Reliability means that the company delivers on its promises about delivery, sevice provision, problem resolutions and pricing dependably and Reliability accurately Customers derive their perception of service quality by comparing the tangibles associated with the services provided such as the appearance of Tangibles the physical facilities, equipment, personnel etc Responsiveness is the willingness to help customers and provide prompt service in dealing with customer’s requests, questions, complaints and Responsiv problems. eness Assurance is defined as employees’ knowledge of courtesy and the ability of the firm and its employees to inspire trust and confidence Assurance Empathy means providing caring and individualised attention to customers to show the customer that the company does best to satisfy his Empathy or her needs. Impact of service Quality Dimensions Service Sevice Customer Customer Quality Quality Satisfaction loyalty Dimensions Complete the practice quiz below to test your understanding Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 14 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 (i): King Pie pays monthly fees for the software package used to run the operations across all franchises. What type of B2B product would the software package be? Select one: a. Inputs. b. Capital goods. c. Support products. d. Installations and accessories. (ii): King Pie is not only a marketer, but also a B2B buyer as King Pie purchases supplies to produce their pies and chips. When King Pie purchases flour, it also purchases eggs. This is an example of: Select one: a. Derived demand. b. Joint demand. c. Fluctuating demand. d. Support products. (iii):When King Pie buys Coca-Cola products to include in King Pie combo meal promotions, King Pie is acting as a: Select one: a. B2B reseller. b. B2B producer. c. B2B consumer. d. B2C buyer. (iv): King Pie has a large footprint across South Africa and the SADC nations. This has led King Pie to utilise direct distribution channels when selling to retailers, such as school tuck shops, rather than working with intermediaries. This is an example of: a. The nature of B2B marketing activities. b. The structure of B2B markets. c. The nature of B2B customers. d. The behaviour of B2B buyers. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 15 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 RELATIONSHIP BUILDING IN BUSINESS-TO-BUSINESS MARKETING Relationship building is the development of long-term relationships with business- to-business customers with the primary goal of providing value-added services and products. Business-to-business markets are argued to be operations-orientated rather than market-orientated resulting in them transferring their focus on ‘trappings’ (promotions and advertising) of marketing and away from the ‘substance’ (consumer needs) of marketing.  It is argued that in the end relationships are what makes a business-to-business organisation successful  Relationships are built over time and in stages and Dainty (2014) identified five stages or tiers of B2B customer relationship building. Stages of relationship building Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 16 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Vendor:  Vendor is the first stage in the building of B2B relationships where the B2B marketer is seen as just another potential supplier of goods or services.  Vendor’s role is transactional and ends as soon as the deal is completed Preferred supplier:  Once a business (vendor) has proven to be a steady and reliable supplier of quality products and services to B2B customer, it becomes a preferred supplier.  A preferred supplier is the B2B buyer’s first choice when they need to make a purchase. Solution provider:  Relationship between the buying organisation and the supplier takes on a more strategic dimension.  Supplier becomes more proactive in problem solving. Trusted partner:  Supplier is seen by the customer as a source of strategic planning and as a partner in dealing with challenges they face  B2B supplier will begin to develop relationships higher up in the organisational hierarchy and be involved at a more strategic level. Strategic business advisor:  Supplier works with the client to explore emerging needs on a confidential basis.  B2B marketer becomes part of the decision-making team offering an external perspective. Disengagement. Palmatier, Kumar and Harmeling (2018) added another relationship phase to complement Dainty’s (2014)’s view. Disengagement occurs when B2B marketers remove themselves from a relationship with a B2B customer often due to the B2B marketer working with a competitor of the B2B customer. Conclusion: The aim for B2B marketers should be to reach the highest tier in the relationship development process as quickly as possible. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 17 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Inter-organisational networks and relationship building Inter-organisational networks refer to B2B organisations interacting with multiple stakeholders in a network of relationships where one organisation’s behaviour can impact all the others in the network.  B2B marketing requires businesses to interact with one another as well as other stakeholders in order to deliver the best possible value and satisfaction to the final consumer.  Interaction leads to networks of interdependent organisations who all need each other to get their offering to the next step in the distribution channel.  The ability of a B2B marketer to achieve the objectives set will be dependent on the inter-organisational network it belongs to, as well as its position within that network Benefits of inter-organisational networks Leigh-Hunt (2016) identified five benefits of inter-organisational networks and the source of these benefits is collaboration between organisations which drives innovation, experimentation, risk-taking and entrepreneurship. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 18 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Coordination of a wider variety of skills, talents and ideas lead to greater innovation and creativity and this allows the network as a whole to have Greater a great impact in the markets within which they operate impact Pooling resources among the network makes each stakeholder more More efficient, more effective, and more powerful resources First two benefits discussed above lead to better ways of doing things. More skills, ideas and pooled resources allow businesses within the net New and to operate better. better ways Collaboration results is the sharing of risks among network partiners Shared risk Networks results in improved overall cost efficiency per participant Sharing of costs Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 19 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Network relationships Three important elements that contribute to successful inter-organisational relationship Actor bonds.  Actor bonds are initiators of the relationships within a firm as they create and control resources and activities.  Actors can be individuals or organisations, who are mutually committed to the relationships formed with other actors (individuals or organisations). Resource ties.  Resource ties tie the businesses in the inter-organisational network together.  Resource ties are the reason the businesses are interacting with each other and occur when businesses within the network interact to exchange or create resources  An example of a resource exchange would be a B2B marketer using a machine to manufacture a product for a B2B buyer in exchange for money. Activity links.  Activity links are the result of actor bonds and resource ties, as activity links are formed when an inter-organisational relationship serves its purpose  Example an activity link would be formed when a B2B buyer places an order with a B2B marketer. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 20 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 PRICING IN BUSINESS-TO-BUSINESS MARKETING: CONCEPTS AND COMPLEXITIES Pricing is not something that is just “thought up” based on gut feeling but it is a process that includes careful research. B2B pricing decisions are affected by a range of variables that includes the two main issues that affect pricing decisions  Interdependence of pricing with the other elements of the marketing mix  Setting prices that will be agreeable to others within the supply chain including the including the final consumer Differences between B2B and B2C pricing practices. B2B buyers usually don’t use their own money.  Purchases are made within a business’ budget:  B2B buyers are spending business funds based on clear specifications where all decisions need to be justified.  Buyer is held accountable for any purchases made. B2B buying process tends to be more complex.  A B2B purchase decision is influenced by more than one member of the buying organisation involved.  A formal process that needs to be followed and more time allowed for the final decision to be made.  Cost and risk involved in business buying decisions also makes the process more complex B2B buyers are acting in their professional capacity:  B2B buying process is more formal, the decisions made are more serious, the costs involved are generally high and there are more risks involved.  B2B marketers need to be transparent in their pricing clearly indicating where value is being added, and what benefits are being offered to the B2B buyer at what costs Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 21 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The Role of Supply Chain Management in Business-to-Business Marketing Supply chain management concept implies that there is a chain of suppliers. Supply chain management is the management of the flow of goods and services from the point of origin to the point of consumption.  Supply chain brings producers and consumers together by providing the right product at the right time and in the right place  In the supply chain:  Raw materials are sourced from suppliers  Products are produced and kept in stock for customers to order  Goods are delivered to customers when needed Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 22 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The supply chain includes  Upstream linkages (Sources of supply)  Internal linkages (Inside the business)  Downstream linkages (Distribution to end customers). There are four types of flows within a B2B supply chain: The flow of physical materials from suppliers downstream through the business itself and finally to distributors and/or B2B customers Example: Cotton that moves through the supply chain from the farmer to Physical the spinners and weavers through to the manufacturer who creates a t- resources shirt, and then finally through distributors to get to the final consumer. The flow of money upstream from organisational customers back to the company itself and higher up to suppliers. The person who buys the t-shirt sends money back through the supply Money chain, first to the distributors, then the manufacturer, then the weavers, spinners and finally the farmer. Communication that takes place between supply chain members, which can flow up or down the channel. Information Examples : See Study guide Flow of products back upstream from the customers typically for repair or recycling. The person who bought the t-shirt is unhappy with the quality, so they Products return it to the manufacturer. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 23 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Supply chain management is defined as “the integration of key business processes from end user through original suppliers which provides products, services, and information that add value for customers and other stakeholders Conclusion:  The purpose of supply chain management (SCM) is to create value, enhance efficiency and satisfy customers.  Value is added through the variety of activities that are performed within the supply chain management process which includes  Warehousing  Transportation Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 24 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 MARKETING COMMUNICATION IN BUSINESS-TO-BUSINESS MARKETING Marketing communication is the “collection of all elements of a brand’s 4Ps (Product, place (distribution), price, and promotion) and usually aimed at a target market”. Dibb et al (2019) explained marketing communication as everything an organisation does to raise awareness and persuade a specific target market to consider a product or service. DRIP model can be used to explain the objectives of marketing communications in general. Differentiate Reinforce Inform Persuade (D) (R) (I) (P)  Differentiate (D): Brand proliferation and the increasing fragmentation of markets and market segments call for organisations to differentiate their products or services  Reinforce (R):  Reinforcing the brand's message can be achieved through consolidating and strengthening brand’s messages and experiences.  Reinforcing should demonstrate why your product is different (superior, cheaper or easier to use).  Inform (I): Marketers need to inform the potential customer about the availability of the product or service especially when it is new to the market and there is little awareness.  Persuade (P): Marketers needs to identify the specific need and situation in detail and then tailor make the message to convince or influence a potential or current B2B customer to buy. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 25 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Conclusion. A marketing communication plan is used in B2B marketing to determine the appropriate marketing communication strategy since the target market is not always the final consumer based on the following  Current conditions in the market  Chosen target market  Marketing communication objectives  Available marketing communication tools  Designed method of implementation and control. Practice questions Sir Fruit uses the following message on their website: “Our loyal homies … and that’s no boast, we’ve won a bunch of awards for service. That’s because, aside from quality products, Sir Fruit values the relationships we’ve cultivated with our customers”. The fact that Sir Juice is reminding customers that they have won awards for their service delivery is an example of: A. Differentiating. B. Reinforcing. C. Informing. D. Persuading. Sir Fruit uses the following message on their website: “Our loyal homies … and that’s no boast, we’ve won a bunch of awards for service. That’s because, aside from quality products, Sir Fruit values the relationships we’ve cultivated with our customers”. The fact that Sir Juice values its customer relationships, and doesn’t just focus on selling juice like its competitors, is an example of: A. Differentiating. B. Reinforcing. C. Informing. D. Persuading Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 26 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The Strategic Importance of Business-to-Business Marketing Strategic importance of B2B marketing:  Marketing influences the entire organisation.Marketing is integrated within all areas of the organisation, influencing the organisation’s strategic planning as well as being influenced by organisational strategy  The vision and mission of a B2B organisation will impact on the direction the B2B marketers will follow, and the strategic vision that will be shared with customers.  B2B marketers act as information sources for both the internal and external components of the SWOT analysis since they work with the market and interacts with the customers and observe the competitive environment  B2B marketers are also involved in setting objectives for the organisation. Objectives such as to increase profitability, improve their competitive position in the market, or develop innovative products for the market, requires input from the marketing for them to be relevant and realistic for the organisation  B2B marketers are responsible for converting general organisational objectives into marketing-specific goals and strategies. Example 1.Increase net profit by 15% by the end of the next financial period Organisational 2.Improve competitive position in the market by gaining 5% objective market share in the primary market over the next 3 years 1.Increase sales by 20% over the next 6 months 2.Increase new customer acquisitions by 5% over the next 6 Marketing months strategy Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 27 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  Implementation. On top of converting corporate objectives into marketing strategies and goals, B2B marketers are responsible implementation: Putting marketing strategies into action. This involves developing the action plans detailing who, what, when and how, and setting budgets  Evaluation. B2B marketers are responsible for evaluating the success of their strategies and the achievement of their goals. For example, if the marketing strategy was to increase sales by 20% over the next 6 months, at the end of the 6-month period, the B2B marketer needs to measure whether the target was met or not. If not, corrective action is required. Business-to-Business Marketing and Value Creation  B2B marketing is all about creating value for B2B customers, and ultimately the final consumer.  Customer value relative to the perceived value that a customer receives for a good or service  Value creation has two key components 1. Offering more benefits to customers than what it costs them to attain those benefits 2.Offering customers products and services that they value. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 28 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The Business-to-Business Marketing Mix Introduction to the Business-to-Business Marketing Mix The complex nature of B2B transactions makes value creation more important in B2B marketing. B2B marketers must establish the different wants and needs of their customers (organisations). B2B marketers must utilise all the tools in their marketing mix to offer their business buyers as much value as possible better than their competitors. Value Creation Begins with Understanding Customer Needs  B2B marketing focuses on creating value for B2B customers, and ultimately the final consumer.  Value creation starts with understanding customer needs.  Customers have different levels of needs. Core requirement.A customer will have a core requirement that they want satisfied. Quality dimension. That core requirement may then be complemented with some quality dimensions that would increase the customer’s satisfaction. Attractive qualities.A final layer of attractive qualities is then added which, if met, would lead a customer to switch suppliers The Kano model of customer satisfaction The Kano Model is based on the premise that customer satisfaction depends on how well an offering functions, or serves the desired purpose  The figure below indicates the continuum between satisfaction and dissatisfaction, and fulfilment and non-fulfilment  The two dimensions of satisfaction and functionality form the basis of the Kano Model and are used as the two axes of the model Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 29 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  The model shows how customers can move between total satisfaction (delight and excitement) to total dissatisfaction (frustration) with different satisfaction levels in-between Customer satisfaction continuum and functionality dimension  Customer satisfaction continuum shows different satisfaction levels based on interaction with the product.  Functionality dimension shows how functionality move from no functionality at all to the best possible implementation. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 30 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Four features of a B2B offering (Demir and Cebi, 2020): Performance features Features where the more benefits received the better, and the more customers will be satisfied. Price is related to performance, as the more benefits a customer receives, the more they are willing to pay Performance is shown as a straight line because performance and satisfaction are directly related Example: when purchasing laptops for sales staff, a business buyer will be interested in the hard drive space and processing speed Must be features These are features that the customer expects to be there, and are seen as common requirements. If the features are not present the offering will be considered incomplete The must be features curve stays in the dissatisfaction half of the model, because if the must be features are not present, the customer will be dissatisfied Example: when purchasing laptops for sales staff, a business buyer will assume the laptop has a screen, keyboard, and USB ports. Attractive features These are product features that customers react positively to, which are seen as added benefits. The attractive features curve stays in the satisfaction half of the model, because if the attractive features are not present the customer will have neutral feelings towards the offering, but they will not be dissatisfied Example: when purchasing laptops for sales staff, a business buyer will find the compact design of the laptop an attractive feature. Indifferent features Features that customers have no real feelings towards, so their presence doesn’t make a difference to their satisfaction. An investment in indifferent features is a waste of resources Example: when purchasing laptops for sales staff, a business buyer would not care if a laptop comes in a pink or blue box Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 31 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Practice questions Apply the Kano model to the King Pie supply chain. King Pie's primary brand colour is purple. When a school considers purchasing King Pie pies to sell in their tuck shop, the colour of the branding is an example of: Select one: a) A performance feature. b) A must-be feature. c) An attractive feature. d) An indifferent feature. Apply the Kano model to the King Pie supply chain. King Pie knows Coca-Cola, their beverage supplier, has a reputation for award-winning service delivery, earning Coca-Cola King Pie's loyalty. This is an example of: Select one: a) A performance feature. b) An indifferent feature. c) An attractive feature. d) A must-be feature. Apply the Kano model to Vodacom. Vodacom states that through its investment in renewable energy and energy efficiency, its water-wise initiatives, and its activities to reduce waste, it is working to reduce the environmental impact of its activities. This is an example of: Select one: a) Satisfaction and non-fulfillment. b) Dissatisfaction and non-fulfillment. c) Dissatisfaction and fulfilment. d) Satisfaction and fulfilment Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 32 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The value equation The value equation is one of the guiding principles of B2B marketing  Value equation is based on the assumption that long-term success will only be achieved if a B2B marketer is able to offer their customers value  Value equation is the sum total of value that is offered to a customer, taking into consideration all the benefits (Q+S) that are offered to the customer in relation to all the costs (C) the customer has to make in order to attain those benefits  Note: It can be concluded that customer value is defined as the difference between the perceived value and the perceived cost of a product or service Five categories of perceived benefits and three types of costs Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 33 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Perceived benefits  Functional benefits. The tangible benefits the customer perceived the offering to have. Products would be reliable, durable, and perform the desired functions  Emotional. The positive emotions a customer experiences when purchasing an offering, including excitement, pleasure, and satisfaction  Social. Positive responses from society, such as compliments from peers, or status associated with the offering  Service. Augmented services that are included in the offering, such as delivery and installation, maintenance, or a guarantee  Experiential benefits. Sensory experience involved in utilising the offering, including ease of use and satisfaction with the output produced Perceived costs Monetary The monetary expense involved in acquiring the offering, including purchase price, ownership and use of the product Time and Energy The time and physical effort used to search for the offering, determine if it is suitable and then purchase and use it Mental costs Mental stress involved in acquiring the offering, which includes stress caused in searching for and deciding to purchase the offering, evaluating the risks involved, and post-purchase regret (cognitive dissonance) Conclusion:  The principle of the value equation is that the B2B marketer should ensure that customers perceive an offering as involving more benefits than cost.  The B2B marketer can increase the amount of value the customer perceives the offering as having by increasing the benefits the customer perceives the offering to have, decreasing the costs the customer perceives the offering to involve. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 34 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Practice questions (i): Apply the value equation to Sir Fruit. Sir Fruit has an online store where payments are safely processed. This is an example of: a) Functional benefit. b) Emotional benefit. c) Monetary cost. d) Social benefit. (ii): Apply the value equation to Sir Fruit. Sir Fruit is known to have high levels of customer loyalty, which is due to customers feeling high levels satisfaction. This is an example of: a) Time and effort cost. b) Emotional benefit. c) Monetary cost. d) Social benefit. Apply the value equation to Vodacom. Vodacom sells its data to Safaricom at R39 per GB. This is an example of: Select one: a) Monetary cost. b) Functional benefits. c) Mental cost. d) Experiential benefits. Apply the value equation to Vodacom. Vodacom has an online store offering customers a quick and easy purchase option. This is an example of: Select one: a) Time and effort cost. b) Emotional benefit. c) Mental cost. d) Experiential benefit. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 35 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Business-to-Business Marketing Mix: Product The concept of a product  A product is essentially the item that an organisation offers to the customer  A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services and ideas.  Products can be viewed as consisting of three layers Core benefit. At the center of the product offering is the core benefit. This is the first level and the essential benefit the customer gets from using the product. Actual product. The core benefit is surrounded by a combination of features, design, product style, packaging, brand name and capabilities that are designed to make the product appealing to the customer. Augmented product. The augmented product is the add-ons or extras that are used by marketers to differentiate their product such as product support, after sales service, warranties etc. The augmented product is often what differentiates one B2B marketer from another, and leads to a competitive advantage Note  Development of new product offerings is important for businesses to maintain a competitive position in a B2B market and be seen to deliver value to their customers.  B2B buyers are always on the lookout for innovative products that can offer them more benefits and enable them to deliver better service to their customers, and the final consumer. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 36 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  Innovation may be considered an attractive feature in some markets or even a must be feature in others The B2B product value proposition  The B2B marketer’s value proposition is the statement of benefits or solutions that are being offered to the B2B customer.  The value proposition is the B2B marketer’s competitive positioning tool, detailing what it is offering to customers.  A company’s value proposition may include points of parity and points of difference Points of parity and points of difference These two elements are linked to must be features and the attractive features that will suit the customer. Points of parity Points of parity are aspects of a product that are the same as those of competitors’ products for example same distribution facilities Points of parity are aspects of the product that are considered to be mandatory. Must be features Points of difference Points of difference are unique attributes or benefits that customers see the product as offering, which they positively evaluate and believe that they could not find in a competitors’ product. A purchase decision is often based on the perceived uniqueness of a product offering. Sources of points-of-difference can be based on the functional, emotional, social, service, or experiential benefits of the product. Points of difference are often attractive features Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 37 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The four parts that makes up a value proposition  A clear identification of the customers the B2B marketer is seeking to satisfy.  A definition of the product offering, including core competencies, quality, and product policy.  The alternative options available to customers.  An explanation of the experience a customer can expect when interacting with the B2B marketer. When defining the product offering, there are three aspects that need to be considered, namely, the core competencies represented by the offering, the quality of the offering, and product policy governing any decisions made about the offering Core compet Product ences Quality Product policy Definition of the product offering 1) Core competencies:  These are skills the B2B marketer has developed over time, including operational systems and technological infrastructure, used to create and deliver value to the customer.  Example: Frontier Coffee has 17 years’ experience, qualified technicians, 8-hour turnaround time on all installations Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 38 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 2) Product quality.Product quality is a determinant of how well the actual product performs and thus directly affects customer satisfaction. Quality is assessed based on two criteria  The adaptability of the product to meet customer requirements  Delivering more value than alternatives  Example: Frontier Coffee machines offer fresh milk and coffee beans or powdered milk and granulated coffee options depending on customer needs. 3) Product policy. Every organisation have policies in place governing their product decisions, giving formal guidelines on how the products will be managed to best meet customers’ wants and needs and gain a sustainable competitive advantage in the market. The product policy will include a classification of the various product lines  Catalogue products. Standard offerings that are produced on a continuous basis. Policy decisions would include adding more products to the line, removing obsolete products, and repositioning products within the line.  Custom-built products. A basic offering with customisable options.  Custom-designed products. A unique product designed entirely around the customer’s requirements.  Industrial services. Support services offered together with the product, including maintenance, technical support, and after-sales service.  Example: Frontier Coffee’s catalogue products include standard coffee machines The B2B product strategy  A product strategy describes how the B2B marketer plans to manage the products that they offer to the market in terms of the product portfolio, marketing products at different stages of the product life cycle, and new product development.  Product strategy serves to assist the B2B marketer in providing the best possible products to meet their customers’ wants and needs in a dynamic environment with evolving customers’ needs, market conditions and competitive factors. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 39 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Product portfolio  A product portfolio is a method for B2B marketers to systematically record and categorise all the products that they offer to customers.  Product portfolios are made up of product lines, individual product items, product mixes and product mix consistency  Product line. A product line is the name for a group of related product items offered to specific market segments. Example: Soups represents one of Campbell’s product lines.  Product item. A product item is an individual product offered by an organisation. It is also referred to as stock keeping unit (SKU). Example: Campbell’s Cream of Chicken soup.  Product mix. A product mix refers to the collection of all the product lines offered by an organisation. All Campbell’s products such as soups, sauces, frozen entrées, beverages, and biscuit constitute its product mix.  Breath. The breadth (width) of the product mix refers to how many product lines there are. Example: Product width of Campbell’s product mix is made of five product lines. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 40 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  Product mix consistency refers to how similar or related the various product lines are. (Example, Unilever offers soaps, washing powder and dishwashing liquid) Practice Questions (i): Which of the following would you classify as a product line in King Pie's product portfolio? Select one: a) Large chicken pie. b) King Pie pies c) Double filla pies d) Stock counting unit. (ii): Which of the following would you classify as the product mix in King Pie's product portfolio? Select one: a) Large chicken pie. b) Double filla pies. c) King Pie pies d) Stock counting unit. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 41 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 The product portfolio analysis  Product portfolio analysis is used to examine the positions of products in the market by considering the attractiveness of the market and the ability of the company to operate competitively within the market  The BCG growth share matrix is a useful tool for analysing the product portfolio of an organisation BCG growth share matrix  The model positions the B2B marketer’s products in quadrants based on relative market share (horizontal axis) and speed of market growth (vertical axis).  These two dimensions reveal likely profitability of the products, assessing the investment needed to support that product and revenue generated (Which products to invest in and which ones should be divested) Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 42 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  Stars: Products with high market share in rapidly growing markets. Star products are where investments are made because stars are expected to become cash cows and generate positive cash flows  Cash cows: Products with high market share in low-growth markets. Cash cows are products that are the most profitable and are referred to as cows because the B2B marketer should “milk” them to squeeze out as much revenue as possible. The revenue earned by cash cows should be invested into stars and question marks to support their further growth  Question marks: Products with low market share in rapidly growing markets. Question marks require careful consideration regarding future investment. These products have the potential to gain market share and become stars, and later cash cows.  Dogs: Products with low market share in low growth markets. Dogs are not worth investing in because they generate low or negative revenue returns. B2B marketers may even consider producing a product that is a dog although not profitable, but to deliver value to the customer (a dog product may be a complementary product or an accessory product that does not generate profit) The product life cycle model  The Product Life Cycle (PLC) tool is used to determine what stage the product is in and what strategies would be optimal to implement at what time.  The theory suggests that all products go through specific stages in their lifetime.  The life cycle of a product is broken into four stages  Introduction  Growth  Maturity  Decline. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 43 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 These stages can be plotted into the four stage PLC model. 1) Introduction stage: The product is launched into the market for the first time. Sales are relatively low due to lack of awareness. Characteristics  High failure rates  Few competitors  Frequent product modification  Limited distribution.  Marketing costs in the introductory stage are normally high as the B2B marketer will have to put extra sales force effort into educating B2B buyers about the new product and its benefits and features.  Production costs are also often high in this stage as product faults and manufacturing flaws are systematically identified and corrected Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 44 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Strategies  Promotion during the introductory stage focuses on developing product awareness and informing consumers about the product’s potential benefits.  Intensive personal selling is often required to gain acceptance for the product. 2) Growth stage: Sales and profits start to increase and grow once awareness has been created and sales start picking up. Characteristics  Sales growing at an increasing rate  Competitors beginning to enter the market  Profits rise rapidly in the growth stage, reach their peak, and begin declining as competition intensifies. Strategies Promotion and distribution become major keys to success during the growth stage as B2B marketers work hard to sign up customers and distributors, and to build long-term relationships 3) Maturity stage: The maturity stage begins when sales are still increasing but at a decreasing rate. Characteristics  No new customers and the market is said to be saturated.  Levelling off of sales  Price competition  Decreased profits  Some competitors leaving the market.  Maturity is the longest stage of the product life cycle. Example: Mazoe orange crush is a well-established brand. It has a good reputation and has reached its peak level of market penetration. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 45 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Strategies  Promotion strategy during this stage focuses on retaining loyalty.  Product strategy focuses on modification. The product life cycle of the Mazoe orange crush has been extended by constant upgrades and redesigning of quality and related features to keep the product on top of the market. 4) Decline stage: Demand falls, price competition increases and sales and profits decline. The decline stage is signalled by a drop in sales, with the rate of decline based on how rapidly consumer tastes and customer wants and needs are changing This is an illustration of a fad product. This reflects a product which rapidly gains popularity but, just as rapidly loses it e.g. clothing and shoe industries. Fad product items may lose their market overnight, leaving large inventories of unsold items, such as corporate branding companies left with boxes of unbranded materials Features of the decline stage  A decline in sales volume and popularity of the product falls  A fall in prices and profitability (the latter ultimately moving in the negative zone)  Eventually, the product is withdrawn from the market. Strategies  B2B marketer may also follow a strategy termed “organised abandonment” which is based upon a periodic audit of the product portfolio and elimination of underperforming product items or lines. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 46 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Key takeaways from the PLC  Newer, more successful products push older ones out of the market  The concept of product life cycle helps inform business decision-making, from pricing and promotion to expansion or cost-cutting.  The PLC for a product category is usually longer than the PLC for an individual product item, unless the individual product item is a pioneer product  Changes made to update a product, the variety of usage applications, its image, or its positioning in the market can extend that product’s life cycle  Some products move through their life cycle relatively quickly, such as fad items  Shortened PLCs are usually due to faster new product development cycles and accelerating technological innovation  Derived demand affects the PLC, for example if the final consumer loses interest in a product, then there will be a knock-on effect throughout the supply chain.  Maturity is the most profitable stage (The costs of producing and marketing decline. Note: While a new product needs to be explained, a mature one needs to be differentiated. Why failure rates in the introductory stage are so high (Why new products fail)  Poor marketing planning. A lack of marketing planning when entering a new product into the market.  Customer expectation. A lack of understanding of the wants and needs of the target customer.  Pricing. Introducing the new offering at the wrong price point. The price is higher than the perceived value of the product.  Poor targeting. Focusing on a market where demand is too limited, or non- existent.  Introducing a new offering before the design has been properly tested  Introducing a new offering simply because there is a trend in the market.  Uniqueness: The product is not significantly different from other products.  Timing: New products must be launched when the market is ready. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 47 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Developing new products in B2B markets Over time a B2B marketer needs to develop new product offerings to introduce into the market to replace those fading away before all sales are lost due to decline demand of outdated products The importance of developing new products is to maintain a competitive age Two main risks involved with the introduction of new products: Risk of wasting resources on developing a new product Investment risk that does not succeed in the market. If the product fails, the business will lose all its investments The risk of focusing so much on new offerings that Opportunity risk older, successful products become neglected Categories of new products: (i):New to the world products:  Ground breaking and completely new to the market.  These are high risk products as the market might reject the newness of the product due to unawareness or feel threatened by it.  Example: The first 3D printer (ii): New product lines:  These are new category entries. The products are not new to the world but to the business in question  Create opportunities to expand the product offerings and attract new customers.  Example: Frontier Coffee adding a tea range to their offering. Tea is not a new product, but it is a new range of products for a coffee machine supplier Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 48 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 (iii): Additions to product lines: These are line extensions. The business creates new products to add to their existing product line (iv): Product improvements:  The business attempts to make their respective products better in one way or the other  Example: Frontier Coffee making the disposable coffee cups they supply to customers 100% recyclable. (v): Repositioning  Changing the way in which a product is viewed, so it can be seen to have a new use or application  Example jik New product development New product development is the process of creating products or different characteristics that offer new or additional benefits to the customer Steps in the new product development process Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 49 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 1) Step 1: Idea generation: Identifying and selecting viable business opportunities. New product ideas can come from various sources internally and externally.  Internal sources: Salespeople, marketing research information, and R&D staff  External sources: Suppliers, customers, and competitors are external sources.  Positioning maps often help in idea generation. When all the competitors’ offerings in a market are plotted on a positioning map, gaps in the market may be identified which present opportunities for new products or services 2) Step 2: Screening and preliminary investigation: Examining ideas generated to determine if the company should continue to determine  Whether new ideas are in line with the vision, mission, objectives of the company  The new ideas ‘s ability to serve the needs of the market  The market potential for the proposed new product  The competitive advantage of the new offering  The company’s ability to realistically produce and market the proposed new product 3) Step 3: Specifying the product features: The information gathered from the market research will be used to specify the desired product features, such as the physical specifications of the proposed product 4) Step 4: Product development:  Designing and testing prototypes.  The technology involved is tested to ensure that it meets the specifications in the product protocol.  During this stage, beta testing, or field testing, is usually conducted to establish whether the product performs as intended, and whether it satisfies customers’ wants and needs  Beta, or field testing, is risky, as the information may be leaked to competitors. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 50 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 5) Step 5: Launch (Commercialisation):  The new product is made commercially available to the market.  Launch strategy which may include market testing, prelaunch preparations, launching the product offering and post-launch control. 6) Step 6: Evaluation: There are two factors that guide NPD process evaluation.  Market success. Market success is based on how customers have received the new product and the competitive advantage that was created.  Financial success is based on a comparison of the time and resources invested in the development and launch of the new product versus the budgeted amounts B2B product failures B2B marketers need to consider the following factors to ensure that their products are successfully received by the target market Market research B2B marketers should always be aware of the wants and needs of their customers and design products that meet customer expectations. Customer satisfaction Any product adjustments or improvements must increase customer satisfaction, and all products should contain the must be features that customers expect Uniquiness Customers will remain loyal if the B2B marketer’s offering is not available anywhere else, giving the B2B marketer a monopolistic market advantage. This may be done by offering superior value, or through the additional support services provided. Market expectations It is the B2B marketer’s responsibility to create the expectations customers have for their offering. Then the B2B marketer is obligated to meet those expectations by delivering on the value proposition. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 51 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Business-to-Business Marketing Mix - Price B2B pricing is a process that includes careful research and in-depth understanding of the customers’ needs, with consideration given to factors such as transfer pricing and costing methods. B2B marketers need to be aware of the effect that price will have on the rest of the supply chain, including the final customer. B2B pricing considerations Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 52 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Key take away: The Price the final customer pays, is made up of a number of cost elements from the B2B marketer and the business who buys their offering to pass down to the final customer The B2B pricing process Set pricing Research the Determine objectives target market demand Develop a Research pricing competitors Cost analysis strategy pricing Set the price 1) Step 1: Setting pricing objectives  Pricing objectives should be SMART, based on the organisational objectives and be in line with the marketing objectives. Objectives can be:  Sales orientated objectives: The goal of these objectives is to achieve the highest possible sales and thus achieve optimal market share  Profit orientated objectives: These objectives aim to achieve the highest profit possible  Status quo objectives: These involve meeting the competitor’s prices or keeping the price constant while competing on a non-price basis Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 53 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 2) Step 2: Research the target market B2B marketers must do research to ascertain the wants, needs and expectations of their target markets, and this will provide insight into the most suitable pricing strategy to follow 3) Step 3: Determining demand Demand refers to the amount of product needed by the customers. B2B marketers should use market research and demand forecasting techniques to estimate sales potential and the relationships between different pricing strategies and projected sales volumes. There are four categories of demand  Derived demand  Inelastic demand  Joint demand  Fluctuating demand: Demand for B2B products is not stable Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 54 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 4) Step 4: Cost analysis Cost refers to the expenses involved in manufacturing the final product. Certain organisations base their price solely on the cost plus mark-up. 5) Step 5: Research competitors’ prices  Prices will always be influenced by those of competitors in some way. The number of competitors in the marketplace also affects the price decision, especially when there is little differentiation between the products  A B2B marketer will be better able to set prices knowing the prices charged for competing products.  A B2B marketer may price their offering slightly above competitors to give the perception of superior quality, or slightly below those of competitors to appear to be offering better value for money (buying market share) or at the same price as competitors  Note: Matching competitor’s price provides no clear advantage over the competition Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 55 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 6) Step 6: Develop a pricing strategy The pricing strategy is the B2B marketer’s approach to pricing decisions and used to guide the B2B marketer in resolving the practical problems of establishing prices. Main pricing strategies in B2B markets:  Differential pricing: The B2B marketer will set different prices for different buyers for the same quality and quantity of a product, based on other factors such as how long the B2B buyer has purchased from the B2B marketer.  New product pricing: New products often have different pricing strategies due to their newness and the risks involved with introducing them to the market.  Product line pricing: Establishing and adjusting the prices of multiple products within a product line, so that all products within the line are priced the same, and any adjustments happen across the line.  Psychological pricing: A more strategic pricing strategy that encourages customers to buy based on their emotional response to a price.  Promotional pricing: Lowering prices related to a short-term promotion of particular product. Step 7: Set the price  The B2B marketer should now have all the information and strategic tools necessary to set the final price that will be offered to customers  This price is based on the pricing objectives, the target market, demand, and competitive factors.  The B2B marketer will also need to consider economic factors and the influence the set price will have on other elements in the marketing mix. The list price is usually considered to be the price at which the product will be sold to customer segments VAT and B2B pricing  Value-added tax (VAT) is a charge levied by the government on business activities.  The charge varies between markets, states, and countries, but the concept applies worldwide. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 56 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  VAT is charged on most products but not on certain basic foodstuffs, and interest is set at a certain maximum rate by the government Special conditions that affect B2B pricing (Assessing additional factors influencing the price) 1) Exchange rate: Exchange rates may strengthen and make imports cheaper or weakens resulting in a currency buying fewer things 2) Regulatory changes. The political and legal elements of the macro-environment have a major regulatory influence over business operations, and this includes pricing. Regulatory issues includes price ceilings and price floors ,and subsidies which can disadvantage B2B marketers 3) Competitors’ responses: The influence of competitors needs to be examined in pricing  No response: Competitors may choose to carry out their business as they were.  Price match: A competitor may choose to follow a status-quo approach and match the B2B marketer’s pricing.  Offer more value: A competitor may use pricing as a competitive tool, and choose to respond by offering more value than the B2B marketer. This is done by either selling at a lower price, or offering more for the same price. 4) Competitive bidding: Competitive bidding occurs when a B2B organisation sets a price to meet customer needs. Pricing under competitive bidding works in reverse, where the B2B marketer first identifies the customer’s requirements, and then develops the price based on the customer’s product or service requirements Approaches to competitive bidding:  Competitive bidding may take place through a customer requesting a custom- designed product based on their own specification  Reverse auction: B2B marketer first identifies the customer’s requirements and develops the price based on the customer’s product or service requirements.  Competitive bidding may also take place by B2B marketers bidding to work with a potential customer Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 57 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Aspects to consider before engaging in competitive bidding  Does the B2B marketer have capacity and experience to manage the new order?  Is there an opportunity to build a relationship with the customer?  What quantity is required, and is there a possibility of more in the future?  What is the potential profit? Profit should be attractive enough  What is the potential for becoming a preferred supplier and what are the chances of securing future orders or contracts? The effect of internet on Pricing  The internet is a powerful marketing tool that keeps evolving and offering more platforms for marketers to interact with their markets through web-based marketing, mobile advertising, and social media marketing.  B2B marketers are reluctant to put prices online it allows competitors and customers to compare prices, possibly giving the competitors an advantage The advantages and disadvantages of B2B pricing on the internet 1.Can be used to collect 1.Online B2B markets are still in information about competitors’ their infancy pricing 2.Placing price information 2.Using all the resources online will allow customers to available to gain a competitive make comparisons with advantage competitors’ prices. 3.The nature of the products or services purchased makes it difficult to buy online Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 58 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 B2B negotiations  Negotiating plays an important role in B2B marketing, where buyers and sellers come together to discuss the potential business transactions that may take place between them, adjusting what is offered by all parties  Negotiation can be said to be a marketing communication tool used to merge each party’s ideals towards a mutually beneficial compromise, since negotiations typically take place between a salesperson and a customer. Three stages to the negotiation process Pre- Post Negotiation negotiation negotiation:  Pre-negotiation: The B2B marketer sets a decision-making process for all salespeople to follow when entering into negotiations with customers. This includes establishing what aspects may and may not be negotiated, as well as how much authority the salesperson has to negotiate.  Negotiation: The salesperson needs to remember that the aim of the negotiation is not only reaching a mutually beneficial deal, but also building or re-enforcing a long-term relationship with the customer  Post negotiation: A negotiation typically concludes with a signed contract, but this is not the end of the negotiation process. The B2B marketer will now need to ensure it delivers on its side of the agreement and continues to offer after- sales services to the buyer. Transfer pricing  Transfer pricing occurs when organisations set prices for products or services sold between entities within an organisation.  A business may have to move raw material, components, finished products, and other resources between departments, branches, and strategic business units.  Transfer pricing influences the cost of the product or service for the subsidiary receiving it and the profit margins of the organisation Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 59 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Business-to-Business Marketing Mix - Place The place element of the marketing mix is concerned with the delivery of the physical product or services to customers, as well as the delivery of marketing communications Direct and indirect distribution channels for consumer and industrial goods Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 60 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Direct distribution does not only relate to the distribution of products and services in B2B marketing, but also the distribution of marketing communications, through  Personal selling  Direct communication methods  Example: Sales representative from Frontier Coffee would be communicating directly with you regarding the different coffee machines available A complete supply chain will show how the flow of products and services may move directly in the B2B marketing contexts in order to get to the final consumer. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 61 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Note: Supply chain brings suppliers and customers together by providing the right product, at the right time and in the right place. Supply chain management activities  The activities that form part of supply chain management, serve to make the product or service available to the customer as conveniently as possible.  Efficient distribution is another way that B2B marketers can add value to their offering to B2B buyers. (i): Sourcing: Sourcing is the process of purchasing correct and quality raw materials, other goods and services at the right price from suppliers for use in the production of other goods and services as well as for the operation of the business. (ii): Inbound logistics: The transportation of inputs from outside the business into the business, and then internal storage until the inputs are required for operations (iii): Distributions operations: It looks at the movement of inputs through the operations process until they are ready to be delivered to the customer  Warehousing: Warehousing involves the management of the storage spaces that are used by a B2B marketer to store their raw materials, inputs, semi- finished products, consumables, and finished goods Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 62 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250  Inventory management: This activity involves managing the stock in the warehouse to avoid running out of stock or overstocking  Manufacturing and assembly: The manufacturing and assembly of the final product or service (iv): Outbound logistics,  Transportation: Meaning the transportation of outputs from inside the business to the customer’s business  Order processing: Order processing is the systematic process through which specific customer requirements will be recorded, and availability of stock confirmed and the order is processed.  Customer service: A business cannot only focus on selling goods and services without providing the necessary customer support. Customer service is needed to support the sales of goods and services. Information, cooperation, and the internet within B2B supply chain management Information sharing  Communication is necessary to ensure the customer receives the correct offering, at the right place, at the right time, and the right level of service.  Two factors that are driving information sharing between B2B marketers and their customers are:  Increased competition. The increased threat of competitors has led to a renewed focus on knowing your customers better in terms of satisfying their wants and needs better than any competitor  Application of information technology. Information technology advances have provided B2B marketers with the tools necessary to build, maintain and enhance open communication  Information sharing needs to take place through two channels:  Internal information sharing: Sharing information within the business through internal integration, where employees from different branches or departments or functions are able to communicate easily and freely with one another. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 63 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Example: When your company places an order with Frontier Coffee for a coffee machine, the sales department will notify the production department, then the production department will notify the purchasing department etc.  External information sharing: Sharing information between businesses within the supply chain, allows for coordination and integration between the various systems and processes used by the various supply chain members Supply chain cooperation  Supply chain cooperative arrangements are formed to increase the competitiveness of the supply chain as a whole, which benefits each business along the chain.  These cooperative arrangements require channel members to share information, including strategic information. Four means of cooperation between the businesses operating within a supply chain (Relationship connectors). Sharing  Businesses within the supply chain are expected to share information information openly, for the benefit of all members of the chain, including themselves, their B2B customers, and the final consumer.  Sharing information improves product quality and speeds up product improvements and new developments.  Examples of information shared: intellectually protected information, such as new product development plans or cost data. Operational  Operational linkages facilitate operations by allowing supply linkages chain members to access operations-related information about each other  Example of operational linkages: Linking online stock keeping systems with suppliers, so when stock levels drop below a certain point, the supplier will be notified, and an order will automatically be placed to replenish stock levels. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 64 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Legal  Contractual agreements may be used to legally define the contracts obligations of all parties involved in formal relationship agreements  Legal contracts offer protection against a member of the supply chain acting against the best interest of other supply chain members.  Legal contracts also reduce flexibility, as all members are bound by the requirements of the contract  Example of a legal contract: Coca-Cola supplies all retailers selling their products with free branded fridges, under the strict condition that the fridges are only used for Coca-Cola products, and nothing else. Cooperative  Cooperative norms allow businesses to work in harmony norms together to achieve mutual as well as individual goals. Example of cooperative norms:  Expectations that no members of the supply chain will act in opportunistic ways or engage in self-defeating behaviour. Communication barriers for successful cooperation  Businesses may be reluctant to share sensitive information with each other, particularly during the vendor stage of B2B relationship building  Businesses purchasing from suppliers within the supply chain may not be open to accepting new product ideas from suppliers Overcoming barriers  Top management of all businesses within the supply chain needs to show their commitment to the success and development of a competitive advantage for the supply chain as a whole, not only on individual successes.  Each business within the supply chain should form a joint agreement on performance measures that will be used to measure success throughout the chain.  A formalised reward or risk sharing system is also required Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 65 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Factors that facilitate greater co-operation between buyers and suppliers:  The goal of high and consistent quality: Parties in collaborative relationships have the single goal of producing high and consistent product quality through co-operation with each other.  The need for flexible responses: This is done to accommodate the changing needs of B2B  The need for joint product development work: Parties in collaborative relationships work jointly on the development and production of goods.  Requirements regarding specific delivery times. The B2B customer must communicate its delivery requirements in order for suppliers to match these requirements.  Frequent ordering: Collaborative relationships sometimes lead to products being designed to a customer’s specification to encourage loyalty.  A buyer requiring wide product ranges from a limited number of suppliers: Organisations buy from a limited number of suppliers, because they want to maintain long-term and collaborative relationships with suppliers instead of changing suppliers from time to time and adding new ones over time.  High degrees of physical product differentiation: Organisations buying products that require a high degree of product differentiation may opt for collaborative relationship so that their product requirements are communicated to the suppliers and so that all parties can work together on the development of the products.  Strong manufacturer brands: Building collaborative relationships with reliable suppliers who are able to consistently supply products of high quality may lead to the development of strong manufacturer brands. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 66 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Benefits from cooperative relationships in the supply chain Benefits of Cooperation Flexibility Shared risk and rewards Profitability Cost reduction Increased competencies Delivering more value Manageable supplier base Consistency Efficiency Competitive advantage 1) Greater competitive advantage: businesses cooperate to increase overall sales and reduced total costs rather than competing for a bigger share of the profit. 2) Efficiency: reduction in costs through more efficient processes. 3) Consistency: in material costs, quality, and timing, as a result of communication and information sharing. 4) More manageable supplier base: using limited suppliers which are easier for the B2B buyer to manage. 5) Delivering more value: through better performance on aspects such as delivery, reliability, and delivery time, businesses are able to deliver products on time and per specifications as information is made available. Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 67 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 6) Increased competences: faster product development, higher product quality, increase in shared technology, product innovation, and joint involvement in product design. 7) Cost reduction: economies of scale in ordering, production and transaction, and decreased administration. 8) Flexibility: faster product development, shorter time-to-market for new products, and improved cycle times. 9) Shared risks and rewards: based on joint investments, joint research, and development. 10) Increased profitability. The role of the internet in the B2B supply chain Internet technology has created many opportunities for businesses to communicate with each other, as well as other stakeholders, at a low cost, and with ease. Benefits of internet in B2B business  The internet is used to communicate with B2B partners and customers, for example through email and the corporate website, and to build relationships.  Businesses can place information about the products and services they offer, with easy access for any interested members  The internet can be an alternative distribution channel e.g. kulula  The internet is an invaluable source of market research and information for example information on products and components, new suppliers, current suppliers, competition and so forth.  The internet can allow suppliers to facilitate product delivery and service performance through streamlining the supply chain, improving speed, lowering costs and being more flexible. Power in channel management In most business situations cooperation results in conflict where different members strive to gain power within the relationship Covid 19 is real: Stay at home (if possible), Mask up, Maintain Social distance and Sanitize  Page 68 of 153 TAPIWA MUGWAGWA: BUSINESS TO BUSINESS (BBM001B): +263772446250 Conflict in the supply chain  Goal conflict occurs when a party in the supply chain pursues goals that are in conflict with another party’s goals.  Means conflict occurs when parties disagree on how something should be done.  Conflicting views may arise when supply chain members have different perceptions and theories of what should happen. Example if a manufacturer expects a distributor