4MD3 Business to Business Marketing

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4MD3 Business to Business Marketing

• Steve Howse
• February 2, 2009

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PREVIEW OF THEORIES

• the buy-grid model
• switch triggers
• how customers evaluate bids
• theories of business buyer motivation
• the buying team (AKA buying centre)

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SegmentationTargetingPositioningThe 4 Ps

•  

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DEFINITION OF A BUSINESS SEGMENT

• Organizations
• with similar needs, expectations and preferences
  (NEPs)
• i.e. seeking similar benefits
• i.e. that respond similarly to a given 4P mix  
•  

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MORE ON SEGMENTATION

• first marketing reference in 1956
• segments are identified, not created
• the size of segments

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WHY SEGMENT MARKETS?

• purpose of segmentation is creation of
• a unique 4P mix for each segment
• benefits of segmentation are
• a competitive advantage  
• higher margins 
• but theres a problem

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THE GULF BETWEEN SEGMENTATION THEORY AND PRACTICE

• the task is simply avoided because managers do
  not understand how to approach segmentation
• managers find the practice of segmentation
  difficult and confusing

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YOUR SEGMENT CHOICE DETERMINES YOUR

• customers
• competitors
• external environments
• positioning
• 4Ps
• firm's skills and resources
• firm's growth rate  
• i.e. just about everything, so choose wisely!!

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THE MARKETING PROCESS (STP P)  

• S choose your segmentation variable(s)
• T1 gather data on the resulting "candidate
  segments" 
• T2 select your target markets (TMs)  
• Po choose a unique product position for each TM
• Pr create a unique 4P mix for each TM/position
•  

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THE BEST VARIABLESTO CHOOSE IN THEORY

• the NEPs themselves
• thats called "benefit segmentation
• or "customer-back segmentation"
• but it's often too difficult in practice
•  

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SO IN PRACTICE

• "predictor variables often used instead
• customer attributes
• customer behaviours 
• i.e. CABs
• usually in combination
• discrimination is the test of their validity

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MACROSEGMENTATION VARIABLES

• Observed outside the customer organization
•  geographic location
• customer size
• customer existing or new? (contd)
• commercial enterprise, government or NPI?
• customers NAICS classification
• econometric foot-printing
• business clustering

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MICROSEGMENTATION VARIABLES

• Inside the Customer organization
• price sensitivity  
• business culture
• purchase orientation
• purchasing centralized or decentralized?
• criticality of on-time delivery   (contd)

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MICROSEGMENTATION VARIABLES (CONTD)

• criticality of product use
• intensity of product use  
• level of loyalty of existing customers
• customers innovativeness
• degree of product value-added

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COMBINATION METHODS

•  
• two-stage segmentation
•  
• nested approach
•  

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USING A CUSTOMER DATABASE CRM

• definition the business marketer's repository
  for all relevant customer information
• great for segmentation 
• and for account management
• and for targeting promotion
•  
• what your database should contain  

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TARGETING CRITERIA A WISH LIST

• easy accessibility
• good fit with your firms objectives, resources
  and values
• high awareness of your firm and products

• high unit volume
• high volume growth
• high unit price
• low segment-specific costs
• low segment risk

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SEGMENT-SPECIFIC COSTS

• product
• promotion
• distribution
• pricing
• research, analysis and planning

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CHOOSING THE NUMBER OF SEGMENTS TO SERVE

• i.e. the number of target markets
• the benefits of segmentation
• must exceed segment-specific costs
• under-segmentation
• over-segmentation

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POSITIONING

• deciding the customer benefits you want your
  offering to be known for
• becomes your promotional message
• dont use technical features

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BM/CM DIFFERENCES - MARKET RESEARCH

• usually identified before contact
• personal interviews done in R's office   
• harder to contact  
• more wary when contacted
• higher interviewer skills required
• not as much formal research  needed
• sample and population are smaller

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BM/CM DIFFERENCES - MARKET RESEARCH (CONTD)

• research is less formal and structured  
• more effort for secondary research
• primary research mostly surveys
• surveys mostly phone or face-to-face  
• response rate higher for mail surveys
• must research more customer layers  

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Steves Tips

• You decide.