Post on 16-May-2015
description
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-1
CONNECTING CONNECTING
WITH CUSTOMERS
PART
3
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-2
ANALYZING ANALYZING
Business Markets
Chapter
7
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-3
1. What is the business market & how does it differ from the consumer market?
2. What buying situations do organizational buyers face?3. Who participates in the business-to-business buying
process?4. How do business buyers make their decisions?5. How can companies build strong relationships with
business customers?6. How is B2B relationship marketing conducted in the
Japanese keiretsu & the Korean chaebol?7. How do institutional buyers & government agencies
do their buying?
In this chapter, weaddress the
followingquestions:
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-4
German SAP: leading seller to business marketStrategy - focus on what customers want
“The best run businesses run SAP”• Software helps standardize processes & automate functions
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-5
What is Organizational What is Organizational Buying?Buying?
Organizational buyingOrganizational buying
decision making process where
formal organizations establish
need for purchased products & services
& identify, evaluate & choose
among alternative brands & suppliers
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-6
What is Organizational Buying?What is Organizational Buying?The Business Market versus the Consumer MarketThe Business Market versus the Consumer Market
Business market
All firms that acquire goods
used in production
of other products that are
sold, rented or supplied to others
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-7
What is Organizational Buying?What is Organizational Buying?The Business Market versus the Consumer MarketThe Business Market versus the Consumer Market
Business market characteristicsBusiness market characteristics 1. Fewer, larger buyers2. Close supplier-customer relationship3. Professional purchasing4. Several buying influences5. Multiple sales calls6. Derived demand7. Inelastic demand8. Fluctuating demand9. Geographically concentrated buyers10.Direct purchasing
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-8
What is Organizational Buying?What is Organizational Buying?Buying SituationsBuying Situations
Business buyer faces decisions – buying situation
3 types of buying situations:
1. STRAIGHT REBUY reorders on a routine basis
2. MODIFIED REBUY modify product, prices etc
3. NEW TASK buys product for the 1st time
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-9
What is Organizational Buying?What is Organizational Buying?Systems Buying & SellingSystems Buying & Selling
Systems buying
Buy total solution from 1 seller Systems selling
Key industrial marketing strategy - large-scale industrial projects
eg dams, utilities
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-10
What is Organizational Buying?What is Organizational Buying?Systems Buying & SellingSystems Buying & Selling
Systems contracting
1 supplier for entire MRO
(maintenance, repair, operating) supplies
– Supplier manages inventory - BENEFITS?
– Customer - reduce cost & protect price
– Seller - low operating costs - steady demand
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-11
Participants in the Business Buying Participants in the Business Buying Process – Process – The Buying CenterThe Buying Center
The buying center
decision making unit of a buying
organization
May include people outside
organization such as
government officials, consultants
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-12
Participants in the Business Buying Participants in the Business Buying Process – Process – The Buying CenterThe Buying Center
Buying center includes:
Initiators Users Influencers Deciders Approvers Buyers Gatekeepers
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-13
Participants in the Business Buying Participants in the Business Buying Process –Process –Buying Center InfluencesBuying Center Influences
Buying members - priority to different criteria
Respond to influences eg perception education
Different buying styles
Personal needs “motivate” person’s behavior but organizational needs “legitimize” buying decision
Industrial buying decisions serve both needs of organization & individual
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-14
Participants in the Business Buying Participants in the Business Buying Process –Process –Buying Center TargetingBuying Center Targeting
Who are major decision participants?
What decisions do they influence?
What is their level of influence?
What evaluation criteria do they use?
Small sellers- key buying influencers
Large sellers - multilevel in-depth selling
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-15
Participants in the Business Buying Participants in the Business Buying Process –Process –Buying Center TargetingBuying Center Targeting
4 types of business customers
1.Price-oriented
2.Solution-oriented
3.Gold-standard
4.Strategic-value
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-16
Participants in the Business Buying Participants in the Business Buying Process –Process –Buying Center TargetingBuying Center Targeting
Price-oriented buyers - lower price,
conditions
– Eg: No refunds
Risk & gain sharing - offset requested price
reductions from customers
Solution selling - alleviate price pressure -
enhance revenues, decrease risks & costs
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-17
A A Kodak adKodak ad targets hospital targets hospital administrators - administrators - offer servicesoffer services
that streamline that streamline processes, integrate processes, integrate
technologies & technologies & improveimprove
productivityproductivity
Business marketers Business marketers - periodically review- periodically reviewtheir assumptions their assumptions
about buying center about buying center participantsparticipants
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-18
The Purchasing/Procurement The Purchasing/Procurement ProcessProcess
Business buyers -highest benefit for market offering’s costs
Incentive to purchase > in proportion to ratio of perceived benefits to costs
Construct profitable offering - superior customer value to target buyers
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-19
The Purchasing/Procurement The Purchasing/Procurement ProcessProcess
Buying Orientation –short-term, tactical
Procurement Orientation – seek to
improve quality & reduce cost
Supply Chain Management
Orientation – a more strategic, value-
adding operation
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-20
The Purchasing/Procurement The Purchasing/Procurement ProcessProcess
--Types of Purchasing ProcessesTypes of Purchasing Processes4 product-related purchasing
processes:1. Routine products
- low value & cost & little risk
2. Leverage products- high value, cost; little supply risk
3. Strategic products- high value, cost & risk
4. Bottleneck products- low value, cost some risk
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-21
The Purchasing/Procurement The Purchasing/Procurement ProcessProcess
- - Purchasing Organization & Purchasing Organization & AdministrationAdministration
Purchasing jobs - strategic, technical,
team-oriented
In MNCs – purchasing - separate divisions
Centralize purchasing
– Headquarters buys centrally
– Substantial savings
Business marketer - fewer & higher-level
buyer
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-22
Table 7.1Table 7.1 Buygrid Framework: Major Stages (Buyphases) of Industrial Buying Process in Relation to Major Buying Situations (Buyclasses)
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-23
Figure 7.1 Organizational Buying Behavior in Japan: Packaging-Machine Purchase Process
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-24
Stages in the Buying ProcessStages in the Buying Process- - Problem RecognitionProblem Recognition
Buying process - problem/need recognized - met by good/service
Trigger - internal or external stimuli Events lead to problem recognition Stimulate problem recognition -
direct mail, telemarketing & calling on prospects
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-25
Stages in the Buying Process - Stages in the Buying Process - General Need Description & Product General Need Description & Product
SpecificationSpecification
Buyer - item’s features & quantity
Complex items - buyer work with
others on reliability, durability or price
Business marketers - how their
products meet or exceed buyer’s
needs
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-26
Stages in the Buying Process - Stages in the Buying Process - General Need Description & Product General Need Description & Product
SpecificationSpecification
Product value analysis (PVA)Product value analysis (PVA)Approach to cost reduction
where components are studied and redesigned or standardized
and/or produced with lower costs
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-27
Stages in the Buying Process - Stages in the Buying Process - General Need Description & Product General Need Description & Product
SpecificationSpecification
Buyer - develops technical specifications
Examine high-cost components
Identify those - last longer than product
Tightly written specifications - buyer can
refuse if too expensive, below standards
Suppliers - PVA as tool to win account
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-28
Hewlett PackardHewlett Packard ads ads with theme with theme
“+ hp = everything is “+ hp = everything is possible”possible”
Focus - consulting & Focus - consulting & advisory capabilitiesadvisory capabilities
Joint venture with the Hong Joint venture with the Hong Kong Special Administrative Kong Special Administrative
Region governmentRegion government
- - created Web portalcreated Web portal - -
Hong Kong’s citizens Hong Kong’s citizens
24-hour access to 24-hour access to government servicesgovernment services
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-29
Stages in the Buying Process Stages in the Buying Process – – Supplier SearchSupplier Search
Buyer identify appropriate suppliers:– Trade directories– Contacts with companies– Trade advertisements & shows
Marketers put products, prices online Internet purchasing - future purchasing B2B marketing in Asia - learn from the
U.S.
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-30
The Business-to-Business (B2B)The Business-to-Business (B2B)Cyberbuying BazaarCyberbuying Bazaar
Electronic marketplacesElectronic marketplaces - several forms:
1) Catalog sites
2) Vertical markets
3) “Pure Play” auction sites
4) Spot (or exchange) markets
5) Private exchanges
6) Barter markets
7) Buying alliances
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-31
The Business-to-Business B2BThe Business-to-Business B2BCyberbuying BazaarCyberbuying Bazaar
Online business buyingOnline business buyingAdvantagesAdvantages:1. Low costs for both parties2. Reduces time: order-delivery3. Consolidate purchasing systems4. Close relationships5. In Asia, increased transparencyDownsideDownside:1. Erode supplier–buyer loyalty 2. Potential security problems
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-32
The Asian B2B EnvironmentThe Asian B2B Environment
Building B2B marketplaces in Asia - address & adapt to Asian business environment:
Manufacturing dominates
Less efficient supply chains
Less well developed infrastructure
Smaller markets
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-33
Stages in the Buying Process Stages in the Buying Process – – E-ProcurementE-Procurement
Vertical hubs & Functional hubs Direct extranet links to major suppliers Buying alliances Company buying sites
e-procurement change purchasing strategy
Supplier - list in online catalogs, strong advertising & build good reputation
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-34
Stages in the Buying Process Stages in the Buying Process – – E-ProcurementE-Procurement
Benefits:
1. Aggregate purchase -volume discounts
2. Less buying of substandard goods
3. Smaller number of purchasing staff
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-35
Stages in the Buying Process Stages in the Buying Process – – Proposal SolicitationProposal Solicitation
Qualified suppliers - submit proposals
A few make formal presentations
Written proposals - marketing documents - describe value & benefits to customer
Oral presentations - confidence & position capabilities - stand out from competition
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-36
Stages in the Buying Process Stages in the Buying Process – – Proposal SolicitationProposal Solicitation
Eg: Hurdles Xerox set up to qualify
supplier– To qualify - ISO 9000– To win - Xerox Multinational Supplier
Quality Survey– Then, Xerox’s Continuous Supplier
Involvement process– Final- rigorous quality training &
evaluation– Only 176 suppliers worldwide get 95 %
rating required
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-37
Stages in the Buying Process Stages in the Buying Process – – Supplier SelectionSupplier Selection
Desired attributes & importance– Supplier-evaluation model
Marketers - how buyers get valuations 8 customer value assessment (CVA)
methods to assess customer value Buying centers to decide number of
suppliers
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-38
Table 7.2Table 7.2An Example of Vendor Analysis
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-39
Methods of Assessing Customer ValueMethods of Assessing Customer Value
1. Internal engineering assessment
2. Field value-in-use assessment
3. Focus-group value assessment
4. Direct survey question
5. Conjoint analysis
6. Benchmarks
7. Compositional approach
8. Importance ratings
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-40
Stages in the Buying Process Stages in the Buying Process – – Order-Routine SpecificationOrder-Routine Specification
After selection - negotiates final order Blanket contracts rather than periodic
purchase
Blanket contract - long-term relationship
– Supplier promises to resupply buyer as needed
– At agreed prices, over specified time
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-41
Stages in the Buying Process Stages in the Buying Process –– Order-Routine SpecificationOrder-Routine Specification
Vendor-managed inventory
– Some shift ordering responsibility
to suppliers
Suppliers replenish it automatically
through continuous replenishment
programs
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-42
Stages in the Buying Process Stages in the Buying Process –– Performance ReviewPerformance Review
Review supplier performance
3 methods:
1. Contact end users for evaluations
2. Rate on criteria - weighted score
3. Aggregate poor performance cost - get adjusted costs of purchase & price
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-43
Stages in the Buying Process Stages in the Buying Process –– Performance ReviewPerformance Review
Lead buyer to decide on supplier relationship
Reward managers for good buying performance
Increase pressure on sellers for best terms
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-44
Managing Business-to Business Managing Business-to Business Customer RelationshipsCustomer Relationships
- - The Benefits of Vertical CoordinationThe Benefits of Vertical Coordination
Vertical coordination - buying partners & sellers to engage in activities - create more value for both
Trust between parties - prerequisite to healthy long-term relationships
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-45
Managing Business-to Business Customer Managing Business-to Business Customer RelationshipsRelationships - - The Benefits of Vertical The Benefits of Vertical
CoordinationCoordination
Relationship between ad agencies & clients:
1)Formation stage - 1 partner big market growth
2) Information between partners – profit both
3)At least 1 - high barriers to entry
4)Dependence asymmetry - 1 influence the other
5)1 partner - economies of scale
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-46
Managing Business-to Business Managing Business-to Business Customer RelationshipsCustomer Relationships
- - The Benefits of Vertical CoordinationThe Benefits of Vertical Coordination
8 buyer-supplier 8 buyer-supplier relationships:relationships:
1) Basic buying & selling 2) Bare bones3) Contractual transaction4) Customer supply5) Cooperative systems6) Collaborative7) Mutually adaptive8) Customer is king
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-47
Establishing Corporate TrustEstablishing Corporate Trust& Credibility& Credibility
Corporate credibility - 3 factors:Corporate credibility - 3 factors:I. Corporate expertiseII. Corporate trustworthinessIII. Corporate likability
Factors affecting trust in B2B Factors affecting trust in B2B relationship:relationship:
I. Perceived competenceII. IntegrityIII. HonestyIV. Benevolence of firm
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-48
Trust in online settings, stringent requirements
Buyers worry - get products - right quality to right place at right time
Sellers worry - paid on time/at all - how much credit to extend
ToolsTools: automated credit-checking applications & online trust services - determine credibility of trade partner
Establishing Corporate TrustEstablishing Corporate Trust& Credibility& Credibility
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-49
Managing Business-to Business Managing Business-to Business Customer RelationshipsCustomer Relationships - - Business Business
Relationships: Risks & OpportunismRelationships: Risks & Opportunism
Customer-supplier relation, tension between to safeguard & to adapt
Vertical coordination – strong ties but increase risk
Specific investments - spending tailored to firm & value chain partner
Supplier not monitored- might not deliver expected value
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-50
Managing Business-to Business Customer Managing Business-to Business Customer RelationshipsRelationships - - Business Relationships: Risks Business Relationships: Risks
& Opportunism& Opportunism
Opportunism - cheating or undersupply relative to contract
Concern - resources to control - more productive elsewhere
Expropriation to bonding if:– Significant time horizon – Strong solidarity norms– Customer & supplier- joint benefit
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-51
Relationship Marketing in the Relationship Marketing in the Keiretsu & ChaebolKeiretsu & Chaebol
Japanese keiretsu & Korean chaebol Buy & sell among each other
Production keiretsu -vertical integration of manufacturers & suppliers
Procurement keiretsu
– “Buy group products” mentality
– Reciprocal purchasing prominent
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-52
Relationship Marketing in the Relationship Marketing in the Keiretsu & ChaebolKeiretsu & Chaebol
Long-term cooperative relationships developed
Interdependence, social ties & trust
Competition & downturn 1990s
– Keiretsu firms expand outside group
Convergence - supplier polices of Japanese & Western automakers
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-53
Institutional & Government Institutional & Government MarketsMarkets
Institutional market - provide for people in their care (schools, hospitals)
Low budgets & captive clienteles
GovernmentGovernment Major buyer goods & service Suppliers – take lowest bid Negotiated contract basis – complex
projects
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-54
Institutional & Government Institutional & Government MarketsMarkets
Government spending - public review
– Considerable paperwork
– Justify cost - major consideration
– Show bottom-line of offerings
Suppliers - ways to cut through red tape
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-55
Institutional & Government Institutional & Government MarketsMarkets
Government procurement - price
Win government contracts - revenue & spillover benefits - others may follow
– Eg Growth of Linux expected strong in key Asian markets
– Government endorsements boost visibility
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-56
Institutional & Government Institutional & Government MarketsMarkets
In Asia - some governments favor local companies - award contracts
Government purchase – kickback,
bribery
Tie up with influential local business -
effective way to penetrate
government market
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-57
Government Procurement in KoreaGovernment Procurement in Korea
Procurement irregularitiesProcurement irregularities uncovered in
procedures:
1. Preferential treatment to firms when
establishing specifications & contract methods
2. Preferential access to tender information when
making order
3. Apply procedures to select successful bidders &
conduct private contract negotiations arbitrarily
4. Wrongdoings of contract officers
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-58
Government Procurement in KoreaGovernment Procurement in Korea
Improvements made:Improvements made:
1. Change specific procurement to general ones
2. Reduce private contract & restricted competition tenders
3. Actively publicize tender information
4. Establish contract procedures criteria to prevent arbitrary implementation
5. Online digitalizing of procurement process
6. Increase officials’ awareness on corruption
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-59
Institutional & Government Institutional & Government MarketsMarkets
China - innovative market economy
PrinciplesPrinciples:
1) Interact with all government levels
2) Develop relations through organizations
3) Guanxi not enough for good relations
4) No one-size-fits-all solution
Form government marketing department
© Kotler, Keller, Ang, Leong & Tan
Marketing Management
An Asian Perspective7-60
Marketing DebateHow Different is Business-to-Business Marketing?Many business-to-business marketing executives lament the challenges of business-to-business marketing, maintaining that many traditional marketing concepts & principles do not apply. For a number of reasons, they assert that selling products & services to a company is fundamentally different from selling to individuals. Others disagree, claiming that marketing theory is still valid & only involves some adaptation in the marketing tactics.
Take a position: Business-to-business marketing requires a special, unique set of marketing concepts & principles versus Business-to-business marketing is really not that different & the basic marketing concepts & principles apply.
Marketing DiscussionConsider some of the consumer behavior topics from Chapter 6. Howmight you apply them to business-to-business settings? For example, how might non-compensatory models of choice work?
Final discussion