BUSINESS TO BUSINESS MARKETING

Module I

A BUSINESS MARKETING PERSPECTIVE

 Distinguish between perspective
and approaches of marketing in
B2B and B2C markets.

Examine distinguishing
Learning outcomes characteristics of business
markets.

Identify factors which enable

classification of goods in
business markets
In this module…
• Why B2B marketing?
• Understanding ‘Business markets’ and ‘Business Marketing’
• Contrasting Business, Industrial and Consumer markets
• Characteristics of Business markets
• Trends in B2B marketing
WHY B2B MARKETING?
 US $300 Billion US $700 Billion
in 2017 in 2020

Gartner India : B2B e-commerce potential

 B2C e-
commerce B2B e-Commerce market
market
6X
X

Economictimes.com
 GDP growth rate B2B : 3-4 times GDP
5-6 % growth rates

Forbesindia.com
 Impact on
logistics, Demand for man- Indirect impact on
warehousing and power – job public infrastructure
delivery industry creation across all – roads, IT and
(8-12% spend) strata of society telecommunication

SME India
Mandatory use of GeM (the
government e-marketplace)

Mandatory for all its departments

to procure goods and services
through GeM

Rs 2 lakh crore spends translating

into savings of Rs. 20,000 crores.
 More than 50% of all business
school graduates join companies
which compete in business
markets

Economictimes.com
 Business Markets
…for incorporation (ingredients or
Business markets are ‘markets for components)…
products and services… …for consumption (office
supplies)…
…local to international, bought by …for use (installations or
businesses (Industrial), equipment)…
government bodies and
institutions… …for resale.

Hutt & Speh

 Business Markets

Business market comprises of

individuals and organizations that
are purchasing goods and services
which in turn are sold, leased or
provided to others.

American Marketing Association

Business markets: summary
What? Products and Services

Businesses (Industrial),
For whom? government bodies and
institutions

Incorporation,
Purpose? consumption, use or
resale
 B2B marketing

‘Marketing activities that are not directed

towards households or the final
consumer”

Haas, 1986
 B2B marketing

“A set of processes used for creating,

communicating and delivering value to
other organizations in such a way as to
benefit both the organization and
stakeholders”.

CĂESCU and DUMITRU

B2B VS. INDUSTRIAL VS. B2C
 B2B vs. Industrial markets
Industrial consumers use the
goods and services purchased in
order to produce goods and
services for resale or lease
“Marketing of goods and services through value creation
oriented towards the industrial
and institutional consumers”.
Institutional consumers are those
consumers who buy products and
services for self-consumption.

Webster, F.E. (1991), Industrial Marketing Strategy, 3rd Edition, John Wiley & Sons Ph, New York
 B2B vs. Industrial markets
B2B marketing is a much larger
and broader concept than
industrial marketing
Industrial marketing does not
include government and
B2B marketing includes intermediaries
businesses, governments and
intermediaries

Webster, F.E. (1991), Industrial Marketing Strategy, 3rd Edition, John Wiley & Sons Ph, New York
B2B Markets

Businesses
Industrial
Government
Institutional
Intermediaries
B2B vs. B2C
Two factors distinguish business
marketing from consumer
marketing

Intended consumer

Intended use of the product

B2B vs. B2C
Dell

Individuals Businesses Institutions Government

Households • Global • Healthcare • National
• Large • Education • State
businesses • Municipal
• MSMEs

PCs PCs, Laptops, Servers, Enterprise grade servers,

Laptops Complex AMCs
Printers
Consumer
Electronics
AMCs
 B2B vs. B2C
B2B markets Consumer goods market
Transactions are carried out within Transactions are carried out
and between components of the through dealers with final
distributions channels consumers

Value is determined by the Value is determined by consumer

economic utility of the product perception
A small number of consumers,
many of them requiring a Focusing on brand management
custom marketing approach

Ralph O. (2003), Business-to-Business Marketing Overview, B2B International, White Papers.

Value is determined by the Value is determined by consumer
economic utility of the product perception
 B2B vs. B2C
B2B markets Consumer goods market

Few and financially strong buyers Large number of relatively similar

buyers

The acquisition process is more

The process of sale and process of
complex, lengthy and contains a
purchase are linear and performed
large number of persons involved
within a short time-span.
in the purchasing function.

Ralph O. (2003), Business-to-Business Marketing Overview, B2B International, White Papers.

 B2B vs. B2C
B2B markets Consumer goods market
Long term partnerships between
the members of the logistics There is a transactional approach
channels, including customers

The sales activities are focused on

the management of the important The sales activities are focused on
customers and on the factors that the final consumer
influence the decisional process

Ralph O. (2003), Business-to-Business Marketing Overview, B2B International, White Papers.

CHARACTERISTICS OF B2B MARKETS
Derived demand
Derived demand refers to the link
between the demand for an
industrial product and the demand
for consumer products.

The demand for industrial

products is derived from the
ultimate demand for consumer
products
Fluctuating demand
As demand is derived, business
marketers must monitor demand
patterns and changing preferences
in consumer markets
RBI Reduces Increased Reduced
Bank rates money supply commercial
loan rates
Stimulating demand
Some business marketers must not
only monitor consumer markets
but also develop marketing
programs which reaches the end
consumer directly

Targeting the ultimate consumer is

essential to
• Create a favorable environment
• Long term demand for products
Price sensitivity
Global perspective
Global perspective

US$ 65 US$ 165

A complete picture of business
markets should include a horizon
that stretches beyond immediate
geographical boundaries
Limited number of customers
Limited number of customers

Unlike consumer markets, As a consequence

business markets customers can • Easy to identify potential customers
be classified into commercial • Deal with a “known” target sector
enterprises, government and and not with one that is
institutional customers ‘anonymous’
Complex products
Complex products
The products are accompanied by a
range of services that increase the
Most products traded in these customer value and provide not
markets are more technically only a simple component,
complex from a features, form, but a “solution” for a specific need.
composition, quality and use
perspective. Performance are also The business therefore has to
clearly defined in terms of assesses not just the tangible
technical specification. qualities of the product but also the
entire package of benefits
associated
Professional buyers
Business buyers are specialists and
have a good knowledge of the
The purchase in the B2B market is
products.
all the time based on rational
reasons and less emotional
Tend to be well informed on reasons as it is often met on the
data related to the market and consumer goods market.
capable of distinguishing between
the various types of items based
on product specifications
Long purchase cycles
Long purchase cycles

When they decide to purchase,

the organizational customers Negotiations for contracts
consider not only the product, but are longer than for the individual
also the lead-times, methods of consumer goods, and have as
installation and integration in the main objective to harmonize the
technological line, price, auxiliary economic interests
services, etc.
Long purchase cycles

In the purchase process, the

The whole decision process is the
“purchasing centre” selects two or
result of the work of the
more suppliers in order to protect
“purchasing centre” of the
the long term interests of the
enterprise.
company
CLASSIFICATION OF GOODS FOR
BUSINESS MARKETS
Entering goods
Become part of finished goods.
Includes raw materials and
manufactured materials & parts

Raw materials: includes farm and

natural product (wheat/ iron ore)

Manufactured materials & parts:

Products which have already
undergone initial processing.
Need to be processed further
before it reaches end customer
Foundation goods

They are, therefore, used up and

An important characteristic of worn out and a portion of their
foundation goods are that they original cost is assigned to the
are capital goods or items production process as
depreciation cost

Installations

Accessory equipment
Installations
Include all major long-term
investment items that are
essential for the manufacturing
process

Includes land, buildings and fixed

equipment such as machine tools
and servers
Accessory equipment

Less expensive and short-lived

compared to installations

Not considered to be a part of the

fixed plant
Facilitating goods

These type of goods do not enter

These are supplies and services
the production process or
that support an organisation’s
become a part of the finished
operations
product

Supplies

Services
Supplies

Includes operating supplies such

as cartridges, paper, forms etc.

Also includes maintenance and

repair items such as paint and
cleaning materials
Services

Can broadly be classified into two

types

Maintenance and repair support

Advisory support
END OF MODULE
TRENDS IN B2B MARKETING
 AI & ML

Forbes.com
 AI & ML

The integration of artificial In late 2016, Forrester Research

intelligence and machine learning predicted that "AI will provide
into B2B marketing playbooks will business users with access to
continue to increase this year. powerful insights”

Forbes.com
 AI & ML

AI will drive faster business

Businesses will leverage use of
decisions in marketing, e-
cognitive interfaces in complex
commerce, product management,
systems, advanced analytics, and
and other areas of the business by
machine learning technology.
helping close the gap from insights
to action.

Forbes.com
 Visual content marketing

Forbes.com
 Visual content marketing

B2C marketers still place more The most common forms of visual
emphasis on the importance of content that will be used in 2017
visual content in their marketing will be video (including 360-
portfolios, but B2B marketers are degree video), infographics, and
catching up quickly. images in blogs and social media
posts.

Forbes.com
 Content personalisation

Entrepreneur.com
 Content personalisation

The most common forms of visual

Despite the popularity of web content that will be used in 2017
content personalization, B2B will be video (including 360-
businesses are slow to adopt it. degree video), infographics, and
images in blogs and social media
posts.

Entrepreneur.com
 Influence marketing

Forbes.com
 Influence marketing
Warren Whitlock, a noted
marketing professional, says,
“Everyone has influence. Influence
B2B marketers will continue
marketing is the practice of finding
partnering with influencers but
the people who are already
will focus more on social channels
influencing your market. They will
like LinkedIn, Twitter, YouTube, etc.
welcome your help to serve their
audience better and reward you
with reputation and trusted leads.

Forbes.com
 Influence marketing

Micro-influencers typically have

The future also will mark the rise fewer followers and less reach
of micro-influencers in the B2B than their mainstream
space. counterparts, but they also tend to
be a lot more focused on one
specific topic.

Forbes.com
END OF MODULE
Module II
PERSPECTIVES ON ORGANISATIONAL BUYER AND
ORGANISATIONAL BUYING BEHAVIOUR
Learning outcomes
a. Gain insights into traits and c. Examine factors that make
characteristics of business the targeted customers behave
markets in a particular manner

b. Develop ability to classify d. Understand the various tools

customers based on governing deployed by orgs. to
principles and their role in strengthen their purchasing
markets and society function
 In this module…
• Classification and characteristics of business customers
– Commercial enterprises
– Government markets
– Institutional markets
• Buying centre and roles
• Organisational buying process – process flow model
• Buying situations and buy-grid model
• Purchasing Toolkit: TCO, Reverse Auctions, e-procurement, e-marketplaces
• Segmenting the buy*

* Self-study
TYPES OF ORGANISATIONAL CUSTOMERS AND
THEIR CHARACTERISTICS
Business markets
Businesses

Business markets : products &

services bought by businesses,
Government bodies
government and institutions
for use or resale

Institutions
Business markets

Business firms buy goods to Government and institutions

form or facilitate production or buy industrial goods to
use components for goods and maintain and deliver services
services to their consumers
BUSINESSES AS CUSTOMERS
Types of businesses

Original Equipment Dealers &

Users
Manufacturers (OEMs) distributers
Type of businesses - users
Users purchase Goods such as computers, The produced goods
industrial products or copiers machine tools or services are in turn
services to produce enable production of sold to business or
other goods or services goods and services consumer markets
Type of businesses – Original Equipment Manufacturers

Component manufacturers OEMs

The OEM purchases industrial

goods to incorporate into
products it sells to business or
consumer markets

Therefore Dell (the OEM), buys

microprocessors from Intel and
uses them to power PCs and
laptops
Type of businesses – Dealers & distributers
Dealers and distributers, are
businesses, that purchase
industrial goods for further
resale

Dealers and distributers

purchase products for further
resale to users or OEMs
Type of businesses – Dealers & distributers

Dealers and distributers, are also

essential for servicing the large
automotive after markets in the
case of industrial products

In doing so the dealer /

distributer assumes title for the
goods purchased or stored for a
brief time period
Types of businesses - Overlaps

The classifications are not

watertight or mutually
exclusive Classification is based on the
intended purpose the product
An organization can become a serves for the customer.
user as well as an OEM at the
same time
Businesses, Governments & Institutions

KEY CHARACTERISTICS
Businesses – Key characteristics

Diversity Concentration

Businesses includes 151 lakh manufacturing units

manufacturers, construction,
services, professional 100,000 employ more than 80
groups, transportation and people
resellers
These 100,000 units produce 50% of
all products made in India
Businesses – Key characteristics

Concentration Concentration

Geographically concentrated 3 crore small businesses employ

less than 10 people
Pune, Gujarat, Chennai & Uttar
Pradesh Huge market opportunity, but
difficult to serve
Businesses – Key characteristics

Personal selling : The Key Role of advertising marginal

Personal selling leveraged over Advertising forms a small

advertising to reach potential percentage of the overall
buyers budget and is limited to trade
magazines
Businesses – Key characteristics

Product + Service Price negotiations

Product & service : product Price negotiations a vital part

also includes an important of the process. Products made
service component to specifications need to be
individually priced
Quality of the product and
service is evaluated. Focus is
always on the total package
of benefits
Businesses – Key characteristics

Partnering for increased value Design solutions

To become a preferred supplier it DO NOT SELL PRODUCTS

is important to work closely as a DO NOT SELL SERVICES
partner and contribute value to a DO NOT SELL SUPPORT
customer’s business Solutions : offerings that integrate
products, services and deliver
A marketer has to constantly
customised solutions for specific
deliver a customised blend of
customers
products, service and information
before and after the sale SOLUTIONS = DEPENDENCY
Businesses – Key characteristics

Distribution Relationships

• Direct distribution to large Close and enduring. A sale signals

customers (Key accounts). the beginning of a relationship which
• Smaller accounts served is profitable to both
through intermediaries
The focus is on relationship
marketing where the business
marketer must develop knowledge of
customer’s operations and
contribute value
Government – Key characteristics

Includes all money spent by Average annual purchase

the government on defense, exceeds 2 lakh crores across a
judiciary and education diverse category of products
Government – Key characteristics

Two types of buying strategies Formal advertising

adopted by the government for
purchase of goods and services Negotiated contract
Formal advertising

Used when the product is

standardized and specifications
are straight forward Next-to-lowest bidder awarded
contract, if the lowest bidder
Government solicits bids for cannot fulfill the contract
the products and contracts are
awarded to the lowest bidder
Negotiated contract

Used to purchase goods or In such cases the contracting

services which cannot be office conducts negotiations
differentiated on the basis of with competing suppliers
price or when there are few simultaneously
suppliers
Institutions – Key characteristics

Expenditure in the educational

and the health sector exceeds
Rs 3 lakh crores every year
Institutions – Key characteristics

Presence of PCs Group purchasing

Large institutions often have Multiple institutions can collaborate

sizable and skilled PCs, who are to form associations and purchase
responsible for buying in bulk and avail volume discounts
Possibility of conflicts between
buyers and actual users

Vital for marketer to cultivate

relationship with buyers as well
as eventual end users
Institutions – Key characteristics

Purchasing practices

Largely similar to large

commercial establishments

Since institutions are

specialised there is delegation
of responsibility for purchase
of specific items (e.g.
certificates)
ORGANISATIONAL BUYING PROCESS –
PROCESS FLOW MODEL
BUYING CENTRE
 Buying?

Buying is “acts of an individuals Buying is a process

directly involved in the exchange
of money (or money substitute)
for economic goods and services As there is a process, it implies
and the decision process that that there is decision making at
determine these acts”. each stage

Kjell (1978)
 Refers to the members of the
The term “purchasing centre” was organisation who are involved in
introduced in Module 1 the buying process

However, at times, non members

“Purchasing centre” is also
can also become a part of the
referred to as the “buying centre”.
buying process

Kjell (1978),
 The number of people in the
purchasing centre (PC) varies. A Composition of the PC can change
typical PC has 4 members . as per the buying situation.

Different people become

However, the number of people
important at different stages of
involved in all stages of the buying
the buying process
process can go up substantially

Kjell (1978)
Wind (1980)
Purchasing centre roles

Typically PC members are drawn Webster & Wind have categorised

from across functions and each influences on the PC into 5
member participates at different distinct categories and labelled
times and with varying degrees of them accordingly
intensity
Roles
They are the eventual users of
the product in the organisation

Initiate purchase action and can

The Users also help develop product
specifications
Their ability to influence
outcomes varies from moderate
level to being an important
influence
Roles

Control the flow of information in

the PC
The Gatekeepers Source information, share
information, impose restrictions
on flow of information in the PC
Roles
Impact purchase decisions by
supplying information on
evaluation of alternatives or by
setting specifications
The Influencers
Technical departments like
quality, R&D, engineering play the
role of influencers
At times external experts or
technical consultants can be co-
opted into the PC and they
become influencers
Roles
Make the final decision, whether
they have the authority to do so
or not.

The Deciders Identity of the decider is the most

difficult to determine.

A decider can be the engineer

who decided on the specifications
also
Roles

Has the formal authority to select

the supplier and implement
The Buyer procedures to close the deal

Often the most powerful member

becomes the buyer
BUYING PROCESS
Wind (1980)
 General
Problem Product
description of
recognition specifications
need

Acquisition and
Supplier
analysis of Supplier search
selection
proposals

Selection of Performance
order routine review
Problem recognition
The process is initiated when
someone in the organisation
recognises a problem that can be
solved

“There are better and cheaper

alternatives available in the
market”.

Or an opportunity that can be

captured by acquiring a specific
product
Problem recognition
Recognition can be driven by
external factors or players too.

Demonstration of new product by

a salesperson can trigger a need

Advertising can be leveraged to

showcase how products or
solutions can address business
needs
 General
Problem Product
description of
recognition specifications
need

Acquisition and
Supplier
analysis of Supplier search
selection
proposals

Selection of Performance
order routine review
General description of need / Product
specifications (PS)
The next order of business is to define
the exact nature of need as well as
product specifications

PS describes all the necessary

requirements of a product as
well as the specific performance
acceptability of each requirement.

It is a specific type of goal

statement that clearly and specifically
lists the requirements. It should be
made in table form
Product features Product specifications

Product feature describes the Product specification describes

product from the end user the product from available
perspective. technology perspective.
These features include Unique Product specifications describe
Selling Points, product product features technically or
differentiators / Points of technologically. Specifications
differentiators and Points of are outcome of architecture
Parities. phase of product design and
development process.
These features are derived based
on competitor products or
product innovation thought
process.
 General
Problem Product
description of
recognition specifications
need

Acquisition and
Supplier
analysis of Supplier search
selection
proposals

Selection of Performance
order routine review
Supplier search / Acquisition & analysis
of proposals
Once product specs have been
defined, the attention turns
towards identifying the supplier

Higher the criticality of the

product = higher investment of
time and effort in supplier
identification

Critical to the performance of the

organisation
Critical to the performance of the
product
Supplier search / Acquisition & analysis
of proposals
Incase the product is not critical,
stage 4 & 5 occour
simultaneously

The purchasing centre may check

the price on the catalogue or off
the internet and place the order
Supplier search / Acquisition & analysis
of proposals
Stage 5 also becomes a distinct
category when the information
needs are high

The process of acquiring and

analysing proposals can involve
multi-functional teams including
purchasing managers, engineers,
marketing and other members
from the organisation
 General
Problem Product
description of
recognition specifications
need

Acquisition and
Supplier
analysis of Supplier search
selection
proposals

Selection of Performance
order routine review
Supplier selection
Based on analysis of the
proposals received a supplier is
selected

The purchasing centre may also

decide to select more than one
supplier to increase the
organisation’s leverage and to
reduce future risk

Supplier selection criteria

 General
Problem Product
description of
recognition specifications
need

Acquisition and
Supplier
analysis of Supplier search
selection
proposals

Selection of Performance
order routine review
Selection of order routine
The order routine (details of the
order) is finalised between the
organisation and the supplier

The order routine addresses

issues such as order quantity,
negotiated price, expected time
of deliver, place of delivery etc.
Performance review (PR)

The PR is the final stage of the

purchasing process and can
translate into continuation,
modification or cancellation of
the agreement
BUYING SITUATIONS
 New task

Under buying situations the focus

shifts to the buying situations Straight rebuy
under which one buys rather than
the products
Modified rebuy
New task
New task
In new-task buying situations,
problem / need seen as unique
and completely different from
past experiences

Org. needs information to explore

alternative ways of solving the
problem and searching for
alternative suppliers
New task - decision process
Purchasing centre of an
organisation, in case of a new-
task, operates in a stage called
extensive problem solving.

There is no well-defined criteria

for comparing products and
suppliers.

There is no criteria for choosing

products and suppliers.
Buying decision approaches – new task

Judgmental Strategic new

new task task
Buying decision approaches – new task
Characteristics
• Product – technically complex
• Eval. of alternatives – difficult
• Unpredictability of suppliers

Judgmental new task In such cases, there is a moderate

level of information search &
moderate use of tools in
evaluating decisions
Largely the choice of products,
evaluation of alternatives and
evaluation of suppliers is
judgmental
Buying decision approaches – new task
Normally strategic changes take
place when the business or
technological environment is
Strategic new task changing rapidly
Long-term planning drives
decision making. Purchasing
decisions important to the
company strategically &
financially
US$120 million
Straight rebuy
Straight rebuy
Used in the case of continuous
and recurring demand

Purchasing centers have

substantial experience in dealing
with this situation and require
little or no new information

Evaluation of new alternatives is

going to result in marginal or no
improvements
Straight rebuy

Straight rebuys handled by

routinely selecting suppliers from
a pre-approved list and placing
orders with them

Place routine orders even in the

case of e-procurement
Modified rebuy
Modified rebuy
Modified rebuy
Purchasing centre feels that they
can derive significant benefits by
relooking at alternatives

Experience exists especially in

satisfying needs or requirements.

It is believed that it is worth

seeking additional information or
looking at alternatives
Modified rebuy
Thought process largely driven by
several factors

Quality improvements

Cost cutting
External / environmental
factors
Performance levels of supplier
(poor service / quality)
Strategic supplier options in modified rebuy

Straight rebuy Modified rebuy

Current or ‘In’ Address customer problems understand &

satisfy procurements needs, rebuild damaged
supplier relationships

Prospective or Ensure org. remains in

a MR status
new or ‘Out’
supplier Push for re-evaluation
of suppliers by offering
performance guarantee
Summary : process & buying situations
(Buy grid model)
New Task Straight Rebuy Modified Rebuy
Problem recognition
General description of need
Product specifications
Supplier search
Acquisition of proposals (Fairly intensive)
Analysis of proposals (Fairly intensive)
Supplier selection (Routine) (Based on LT interest)
Selection of order routine (Automatic)
Performance review
PROCUREMENT CENTER'S TOOLKIT
 Total cost of Reverse
ownership auctions

Segmenting
E-procurement
purchase categories

E-marketplace
E-marketplace
E-procurement
PCs are adopting online
purchasing technology as they
deliver

Material cost savings

Process efficiencies
Performance enhancement
Elimination of intermidiaries
Total cost of ownership
The PC always takes into account
a range of costs over and above
the actual price.

TCO takes into account the full

range of costs associated with
purchase and use of a product
over its complete life cycle
Total cost of ownership
Reverse auctions
Reverse auction involves one
buyer, who invites bids from
several pre-qualified suppliers

Reverse auctions face-off takes

place in a dynamic real time
competitive bidding process
Reverse auctions

Unsuited for categories where

strategic relationships exists or
Best suited for commodity when suppliers have specialised
products such as fuel, chemicals, capabilities or when there are a
raw materials etc few suppliers

Has the potential to damage

relationships with suppliers
Reverse auctions
Merits Demerits
Direct cost reductions Inadequate event planning

Best for biddable attributes Unclear specs or auction rules.

Cycle-time savings for buyers and Damages profitability and survival

suppliers of industries

Increases buyers’ reach Sets unrealistic benchmarks for

the future
Price visibility

Transparency in the process

Segmenting purchase categories

Each firm buys a unique portfolio Products which have the greatest
of products and services impact on revenue generation

PCs segment purchases into Products that present the

distinct categories to enable greatest risk to corporate
sharp focus on critical purchases performance
Segmenting purchase categories
This understanding is vital as the
position of the product in the
Business marketers need to organisation’s portfolio has a
understand where their product direct bearing on
is positioned in the portfolio
Revenues

Importance level of the marketer

Nature & intensity of relationship

END OF MODULE
Module III
SEGMENTING THE BUSINESS MARKET AND
CUSTOMER RELATIONSHIP MANAGEMENT
 Understand the process and
variables of segmentation and
positioning in business markets

Understand factors essential to

Learning outcomes build relationships in business
markets

Understand the types of

relationships in business markets
In this module…
• Segmentation bases – Macro and micro
• Process / model for segmenting business market
• Positioning in business markets
• CRM in business markets
• Buyer seller connectors
• Managing buyer-seller relationships : relationship spectrum Org.
demand analysis
• Determining market and sales potential
• Sales forecasting methods (self study)
 Segmentation helps the marketers to
bring together individuals or
Segmentation organisations with similar choices,
desires, attitudes and interests on a
common platform.
While segmentation brings together individuals
and organisations with similar choices, the essence
of segmentation lies in dividing up or slicing a
market into distinct groups that:

Have common needs

Will respond similarly to a marketing action

Benefits of segmentation

1 Segmentation forces business marketers to become

attuned to the needs of customers

Segmentation provides base for effective business

2 marketing strategies i.e. product development, pricing or
advertising

3 Segmentation provides guidelines for allocation of critical

resources
Bases for segmentation

Macro-segmentation Micro-segmentation

Centers on characteristics of Calls for higher degree of

the organisation and buying knowledge. Focuses on
situation characteristics of decision
making units or PCs and
Divides the organisation on individuals in the PC
the basis of size,
geographical location etc. Buying decision criteria,
importance of purchase,
attitude towards vendors etc
Macro-segmentation
Product / service application

As a specific product is used in

different ways. Marketers can
divide the market on the basis
of specific end user
applications
Structure of procurement
Purchasing Situation

1 2 3
Straight Modified
New Task
Rebuy Rebuy
Micro-segmentation
Key criteria
A business marketer can also
divide markets according to
the criteria which is most
important in the purchase
decision

Product quality, delivery,

price, technical support are
some of the criteria
Purchasing strategies

Multiple vs. Limited suppliers

Importance of purchase

Segmenting customers on the

basis of perceived importance
of the product
PROCESS FOR SEGMENTING
ORGANISATIONAL MARKETS
Identify macro-segments based
on organisational characteristics

Select set of macro-segments based

on objectives and resources
If yes, select desired
Evaluate each segment (does the target macro-segment Stop if macro-segment =
based on costs and target audience
segment respond to mktg. program)
benefits associated with
reaching the segment
If no, identify within macro-segment
relevant micro-segments based on PC
characteristics

Select desired micro-segment based

on costs and benefits associated with
reaching the segment

Develop profile of segment based on

macro & micro level characteristics
POSITIONING
The art and science of fitting
the product or service to one or Unique
more segments of the broad
market in such a way as to set it Only
meaningfully apart from
competition.
Positioning is the sum total of the
Develops in your mind, over time
perceptions in the customer's
and is influenced by many
mind of the nature of the
variables, internal as well as
company and its products, relative
external.
to competitors.
 Right goal : Profitability

Unique value proposition

Distinctive value chain

Positioning
Trade-offs

Fit: Mutually reinforcing activities

Continuity of direction
Focus on the right goal

Superior long term return on

investments

NOT sales volume leadership

or market share leadership
Unique value proposition

Deliver value proposition to

customers that differs from
other competitive players
Distinctive value chain

Create a distinctive value

chain by performing different
activities as compared to
rivals

OR by performing the same

activities in different ways.
Accept trade offs

Recognise that an
organisation must forego
some product or service
features to remain
distinctive
Positioning is all
about sacrifice
Fit: Mutually reinforcing
activities
Ensure that all elements of
the strategy fit and
continuously reinforce one
another
Continuity of direction

Ensure that all elements

come together to provide a
distinct yet continuity in
direction to the customer
CRM STRATEGIES FOR
BUSINESS MARKETS
UNDERSTANDING RELATIONSHIPS
Meaning of ‘Relationship’

A relationship is said to exist only

when the parties move to a state
of interdependence
RELATIONSHIP MARKETING
Relationship marketing
Relationship marketing is a
paradigm shift in marketing –
where focus has moved away
from an acquisitions /
transaction focus – towards a
retention / relationship focus
Relationship marketing is a
philosophy of doing business
that focuses on keeping and
improving customers rather
than on acquiring new
customers
Relationship marketing

Transforming
The primary goal of relationship
marketing is to build and maintain a
Delighting base of committed customers who
are profitable for the organization,
over time.
Retaining

Getting
Longer the customer’s
Longer the tenure of the
association with the company,
customer, higher are the
higher the retention rate
profits for company
(higher tenure).
Relationship marketing

Benefits of Benefits of
Relationship to the Relationship to the
Customer Organization
Relationship marketing

Benefits of Benefits of
Relationship to the Relationship to the
Customer Organization
Benefits of RM to Customers

Confidence
Social Benefits
Benefits

Benefits for
Customers

Special Treatment
Benefits
Benefits of RM to Customers

Confidence
Social Benefits
Benefits

Benefits for
Customers

Special Treatment
Benefits
Confidence benefits

The customer can be relaxed

that they are in safe hands. If
they have confidence in their
service provider then they will
typically not switch service
providers.
Benefits of RM to Customers
Confidence
Social Benefits
Benefits

Benefits for
Customers

Special Treatment
Benefits
Social benefits

The organisation and the

customer quite often develop
social relationships, which are
cherished.
Benefits of RM to Customers

Confidence
Social Benefits
Benefits

Benefits for
Customers

Special Treatment
Benefits
Special treatment benefits

When a customer and a

Service Provider have a longer
term association, the
customer enjoys things like
‘loyalty bonus’, special
discounts etc.
Relationship marketing

Benefits of Benefits of
Relationship to the Relationship to the
Customer Organization
Reduced marketing costs
To get one new customer (to
Higher the retention rate, lower replace one lost customer), you
is the marketing costs in need to prospect many many
replacing churned customers customers…. Hence increased
marketing costs
Marketing costs are high in
getting new client /customer It costs 20 times more to get new
because of prospecting client for an advertising agency
than to retain an existing client
Increased profits
As the ‘acquisition’ costs are
high, quite often an organization
would make losses in the first
Profit per customer

Rs.400 few years at the customer level.

-Rs.300 It is thus important for the

-Rs.500
organization to retain its
-Rs.1000 customers, to maximise on
relationship value
YR1 YR2 YR3 YR4
Increased profits

Profit impact of a 5%
increase in retention
rate, across industries
CRM STRATEGIES FOR
BUSINESS MARKETS
Customer Relationship Management

A continuing dialogue Across all contact and

with customers access points

Results in higher Personalised

levels of customer treatment of most
retention valuable customers
5 focus areas
Acquiring the right Crafting the right
customer value proposition

Instituting the best Motivating

practices employees

Learning to retain
customers
Frederick F. Reichheld, Phil Schefter, Darrell K. Rigby - HBR
Acquiring the right customers

Customer portfolio management

Evaluation of current and

potential customer relationships

How to select, develop and

maintain profitable relationships
with them
Acquiring the right customers

Customer portfolio management

Value Profit potential

Value

How do customers define value?

The economic, technical, service
and social benefits received by a By understanding how customers
customer in exchange for the define value, a marketer can
price paid for an offering create customer clusters to
deliver enhanced value
Profit potential
As customer needs are different,
they represent different levels of
opportunities

Some customers may be willing to

pay a premium for certain type of
services

On the other hand some

customers are price sensitive and
do not value the service
Profitability pyramid
Profit potential
Profit potential is a tool which
should be combined with value to
create customer clusters

Objective 1 : to develop deeper

relationship with profitable
customers

Objective 2 : Reduce priority to

customers who are unprofitable
Crafting the right value proposition

Combination of products,
Value proposition : essentially
services, ideas and solutions
answers the question “Why buy
offered by the marketer to
me?” or “Why should the
advance the performance goal of
customers buy the brand
the customer
Instituting best processes
Front facing
Sales Force Customer
Relationship
drivers

Technical Customer
service service

Alignment of processes across Learnings from other teams

customer facing staff as well as within the org. as well as from
support processes teams outside the org.
Motivating employees
Successful CRM strategy has to
be driven by employees

Successful employees and

employee loyalty is created by
investing in

Training & Development

Challenging career paths

Aligning incentives to
performance
Learning to retain customers
Cost of serving existing customer
is less than the cost of acquiring
a new customer

Over time the marketer learns

how to serve an existing
customer efficiently and also
spots opportunities to expand
the relationship

Increasing share of wallet

Regular audit of relationship

Share of wallet
Identify customers who
demonstrate growth potential
and pursue a greater share of
their business (SoW)

Estimate current share of wallet

Identify and pursue share to

increase size of wallet
Relationship audit
Relationships tend to fray over
time which is why both the
parties need to conduct regular
audits of the relationship
Audits translates into course
correction as well as resetting of
goals
Synthesis

To address these challenges, business

marketing firms are making
substantial investments in enterprise
applications which integrate
marketing, sales and customer service
Synthesis
CRM systems synthesize
information

Across all possible contact points

or touch points (email, call centre,
sales and service feedbacks)
Analyses them for future
customer interactions
AND aids in market forecasts,
product design etc etc
BUYER SELLER CONNECTORS
Buyer-Seller Relationships in Business Markets. Joseph P. Cannon and William D. Perreault Jr.
Information exchange
Information exchange Expectations
of open sharing of information that
may be useful to both parties.
Willingness to share important, even
proprietary information

This might include involvement in

early stages of product design,
sharing cost information, discussing
future product development plans,
or jointly providing supply and
demand forecasts.
Operational linkages

At one extreme, the two

Operational linkages capture the organizations may operate
degree to which the systems and independently and at "arm's length.
Procedures of the buying and selling
organizations have been linked to At the other extreme, intercoupled
facilitate operations systems tend to specify roles
implicitly or explicitly for both arties
in a relationship
Legal bonds
Legal bonds are detailed and binding
contractual agreements
that specify the obligations and roles
of both parties in the relationship

Legal bonds provide the protections

available through the legal system
should something go wrong

They regulate the relationship

by furnishing a plan for the future
Cooperative norms
Cooperative norms reflect
expectations the two exchanging
parties have about working together
to achieve mutual and individual
goals jointly

Both parties behave in a manner that

suggests they understand that they
must work together to be
successful
Adaptation by buyer-seller

Whereas the other connectors focus

Relationship-specific adaptations are on joint behaviors and shared
investments in adaptations to expectations, adaptive behavior is
process, product, or procedures defined so that it focuses on the
specific to the needs or capabilities individual behavior specific to the
of an exchange partner other party in the relationship
Adaptation by buyer-seller

This may require investment in

Many business products, ranging
research and development and/or
from industrial coatings to machine
new manufacturing technology.
tools, are customized to the needs of
Buying firms also may adapt to a
a particular customer
particular supplier
BUYER SELLER RELATIONSHIPS
Relationship spectrum
Transactional exchanges
In the case of transactional
exchanges, the essential focus of
the organisation and the
business marketer is on

Exchange of standard products

At extremely competitive prices

Transactional exchanges
Contractual agreements and
involve little or low emotional
commitments

Used largely for commodity

items, packaging material or
cleaning services

From the organisation’s

perspective the purchase is less
important
Transactional exchanges
Largely used when

There is a competitive supply

market

Purchase decision is not complex

Supply market is stable

Value adding exchanges
Between the two extreme
positions the focus shifts from
attracting customers to retaining
customers

In this situation, the business

marketer

Understands customer needs

Tailors offerings to suit needs

Collaborative exchanges
Built on basis of information,
social and operational linkages

Mutual commitments made for

long-term benefits

Strong & deep social, economic,

service and technical ties

Focus is on lowering cost /

increasing value for mutual
benefits
Collaborative exchanges

Focus is on joint problem solving

and multiple linkages that
integrate processes of both
parties

Built on the key pillars of

commitment and trust
Collaborative exchanges

Commitment : is a belief that the

ongoing relationship is vital and
requires effort to nurture it

Trust : When both parties have

confidence in the partner’s
reliability and integrity
Collaborative exchanges
Organisations seek close
relationships when the purchase
is important or strategically
significant

OR when they believe that the

switching costs are extremely
high
Collaborative exchanges

Largely used when

Alternatives are limited

Market is dynamic e.g.
technology

Product or purchase is extremely

complex
Transactional vs. Collaborative
Transactional vs. Collaborative Exchange
Parameter Transactional Collaborative
Avialability of alternatives Many alternatives Few alternatives
Supply market dynamism Stable Volatile
Importance of purchase Low High
Complexity of purchase Low High
Information exchange Low High
Operational linkages Limited Extensive
Switching costs
 Switching costs

Switching costs are perceived

barriers that can deter One time cost which consumers
customers from leaving associate with the process of
especially when negative switching from one provider to
experiences occour another

Lee, Richard; Romaniuk, Jenni. Journal of Consumer Satisfaction,

Dissatisfaction and Complaining Behavior; Provo Vol. 22, (2009): Burnham, Thomas A;Frels, Judy K;Mahajan, Vijay
54-67. Journal of the Academy of Marketing Science; Spring 2003; 31, 2;
Types of switching costs

Economic costs Loyal customer discounts

Contractual costs Customer habits

Search costs Emotional cost

Transaction costs Financial, social, psychological risk

Learning costs
ORGANISATIONAL DEMAND ANALYSIS
Market demand forecasting

A majority of marketing decisions

are taken under the condition of One way to reduce this uncertainty
uncertainty, as there is little clarity is to estimate or forecast the future
on changes in the environment
Two perspectives

Market potential Sales forecast

Market potential : defines the Sales forecast : Level of sales an

highest possible level of market org. can hope to achieve given a
demand, for all producers, in a level of marketing effort and a
defined time period set of environmental conditions

• Level of industry effort • Dependent on the intensity of

• Assumed conditions in the the org.’s marketing effort
external environment
Two perspectives
Market potential Sales forecast
the estimated rupee or unit sales Sales forecasting is the process of
estimating the future sales
patterns of the firm by taking
for a specific future time period
past information and opinion into
account for a desired period of
based on the industry’s plan time

in an assumed marketing More important than forecasting,

environment is the level of accuracy, in the
estimation process
Two perspectives
Sales forecast
Forecasting sales estimates as
well as the accuracy of estimation
is a function of a number of
variables

Sales managers should be seized

about the nature of these
variables as well as the relative
importance of each of these
variables
Market potential estimation

Secondary research
Secondary research sources
Govt. Publications: Ministries and
Department of various ministries
of India and states publish the
data relating to their departments
or ministries.

These include the topics like

employment, savings,
investments, imports/exports.
These publish the data
periodically; i.e. monthly,
quarterly or annually.
Secondary research sources
International Publications:
World bodies such as I.M.F.,
World Bank, W.T.O.; W.H.O etc.
also publish the data regarding
their organisations.

They are of immense use to

business taking interest in
import/export etc.
Secondary research sources
Reports of Committees and
Commissions: Union and state
governments at time appoint
some committees or commissions
to make research into any
problem such as Finance
Commission, Minority
Commission, Planning
Commission etc.
Secondary research sources
Spread across 28 states and 7
union territories, the census
covered 640 districts, 5,924 sub-
districts, 7,935 towns and more
than 6 lakh villages.

27 lakh officials visited

households in 7,935 towns and 6
lakh villages, classifying the
population according to gender,
religion, education and
occupation
Society of Indian Automobile Manufacturers
Secondary research sources

Publication by Trade / Business

Associations: Big trade and
business associations such as
FICCI and CII also publish periodic
data about trade and industry
which are of much use.
Secondary research sources
Private Publications:
Some private institutions
belonging to big education
houses also bring out their
publications with data on
different topics. These topics may
include development,
employment import/export or
balance of payments position etc.
Secondary research sources
Secondary research sources

Semi-government Publications:
These are the institutions such as
Municipal Councils and Zila
Parishads. These publish data
about births and Deaths, Health
and Education etc.
Need for market potential estimation

Foundation for Market potential estimation

planning process provides the foundation for the
planning process

Planning and control Market and sales potential in

by segment developing marketing programs
Sales Forecasting : Importance
Drives company wise commitments across functions like
recruitment, advertising and so on

Also translates into financial benefits such as better cash

management and prediction of cash flow

Forecasting essential to set sales quotas and targets for

sales function
Sales Forecasting : Importance
Management of supply chain and value chain depends
on category demand patterns

Forecasting also drives procurements of raw material or

finished sub-products which are essential inputs

In-time procurement

Procurement at right price

ASSIGNMENT 3
END OF MODULE
Forecasting process
a series of decisions and actions taken by
a business organisation…

…in identifying forecasting objectives,…

Forecasting process is…
…determining dependent and
independent variables,…
…developing a forecasting procedure…

…and using the available data in the

selected method to estimate sales for the
future.
 Develop forecast Determine
independent and Forecast objectives
procedure
dependent variables

Develop forecast
analysis method
Evaluate results
against forecasts
Evaluate total
forecast procedure

Present all
Collect and analyse assumptions about Make and finalise
data data the forecast
 First step is to determine the objectives and also
Forecast objectives
the unit of forecast (Rupee, Units)

Dependent variables are the variables which are

forecasted i.e. unit or rupee sales
Determine variables Independent variables are variables which
influence or impact the dependent variables.
Independent variables can be measured

Forecast and analysis Forecast and analysis methods have to be

method evaluated and finalised. Assumptions are built
into the forecast method selected
Sales Forecasting Methods

Qualitative methods Quantitative methods

Executive’s judgement Time series

Regression / causal analysis

Delphi technique

Sales force composite

Sales Forecasting Methods

Qualitative methods Quantitative methods

Qualitative methods
Also referred to as management
judgements and they rely on
informed judgements The expertise and knowledge of
these set of people is leveraged to
Salesforce, senior executives, create qualitative demand
industry experts or even estimates
intermediaries called to give
assessment
Executive judgement

Senior executives from marketing,

This method has a high level of sales, production, procurement
usage as it is easy to understand etc. collaborate by leveraging
and apply their collective knowledge to
arrive at a forecast
Executive judgement

Ideal for Key issues

When forecasts are made No analysis of cause-effect

regularly and repetitively relationship

External environment is stable There is no established formula.

What does a new executive do?
Linkage between forecasts,
action and feedback is short Accuracy of this approach is
difficult to assess
Delphi method

The method tries to determine

forecasts on the likely time period
of occurrence of certain future
events and probability of
occurrence
Delphi method
Delphi method

Group has several experts and one Only the coordinator knows all
Delphi coordinator. Experts give their members of the group and has access
opinion to the coordinator, who to them. Process will terminate at a
processes, compiles and refers it back consensus stage. The coordinator
to the committee till a consensus is carries out statistical analysis,
reached. variability, prediction intervals etc.
Delphi method

Ideal for Key issues

New product launches Getting a panel of

‘independent’ experts is
Estimation of future events extremely difficult
where historical data is limited
Officials from the same firm
Situations not suited for tend to share the same attitude
quantitative analysis
Experts at times refuse to
modify opinion as it is their
opinion
Sales force composite

The underlying principle here is The organisation asks sales force

that those in direct contact with to come up with their forecasts.
customers and members of the The individual forecasts are then
channel will be better informed combined to get a demand
about market trends forecast for the organisation
Sales force composite

Ideal for Key issues

Draws on sales people’s knowledge No systematic analysis of cause

of market & customers and effect
Works well when buyer-seller Sales can be overestimated by
relationships are close and salespeople to look good
enduring
Or even be underestimated to
Can be executed easily and at a
ensure that they get a lower
low cost
quota
Sales Forecasting Methods

Qualitative methods Quantitative methods

Quantitative methods

Also referred to as Systematic or Time series

Objective forecasting has two
primary methodologies Regression or causal analysis
Time series

The rationale driving the time

Uses past or historical data to
series method is that “the past
project the trend and to forecast
pattern will also apply in the
future sales
future
Society of Indian Automobile Manufacturers
Time series patterns - trend

Indicates long term general

direction of data

The trend can be a straight line

or a curved line
Time series patterns - cycle
The cycle represents the
intermediate term with regular
upswings and downswings

The changes that have occurred

are booms or depressions
Time series patterns - seasonal

Represents regular recurring

movements within the year
Time series patterns - irregular
Reflects short-term as well as
random movements which does
not confirm to any pattern

Largely caused by extraneous

and uncontrollable factors such
as acts of god, competitive
activity and such like
Time series

Time series as a methodology is While forecasting, an analyst must

also impacted by patterns and one understand the impact of each
must understand the patterns pattern on sales and factor in
which have an impact on sales these four patterns while
forecasting
Regression or causal analysis

Identifies factors or variables A sales forecast is therefore a

which have an impact on sales and function of all the factors or
incorporates them into a variables which have a direct
mathematical model bearing
Regression or causal analysis

Some factors are more important

These values also reflects the
than other factors and therefore
importance of each factor on the
values have to be assigned to each
sales and therefore sales forecast
factor
Regression or causal analysis

The mathematical model reflects This method requires significant

the causal relationship of each amount of historical data
variable. The model is also • To determine the variables
referred to as a regression • To assign values to the
equation variables
END OF MODULE
 Measurability

1
A business marketer has five The degree to which
criteria for evaluating information on particular
desirability of potential buyer characteristics exists
markets or can be obtained
 Accessibility Sustainability

2 3
The degree to which firms The degree to which
can effectively focus its segments are large or
marketing efforts on chosen profitable enough to be
segments worth considering
 Compatibility
Responsiveness
The degree to which the

4 5
The degree to which
firm’s marketing and
segments respond
business strengths match the
differently to different
present and expected
marketing mix elements
competitive and
technological state of the
market
Apart from the 5 criteria the Competitive environment
business marketer must also
evaluate the Technological environment
Competitive environment

By choosing a segment the

Short PLCs
marketer also chooses a
competitive environment Short design LCs

New technologies

New players
NIC category end market served

By creating different sections

Central Statistical organisation for each user group as per
evolved a standard industrial needs identified by NIC the
classification called National marketer can focus better on
Industrial Classification customer requirements
Module IV
MANAGING NEW PRODUCT DEVELOPMENT AND
PRICING IN BUSINESS MARKETS
 Use the process and
methodology of New Product
Development in business
markets
Learning outcomes
Examine the various components
and processes involved in
managing the pricing of products
 In this module…
New Product Development Pricing
• Drivers and barriers to innovation • Meaning and components of
• Innovation types customer value
• New product development • Pricing process
process • Pricing approaches: Target,
Skimming, Penetration*,
Negotiated pricing and
competitive bidding
• Responding to pricing attacks

* Self study
 Meaning of innovation

“The generation, acceptance, “Conceptually a process that

and implementation of new begins with a novel idea and
ideas, processes, products and concludes with market
services.” introduction”

Caraballo, E. L., & McLaughlin, G. C. (2012). Individual perceptions of Wang, S., Guidice, R., Tansky, J. and Wang, Z. (2010), “When R&D spending
innovation: A Multi-dimensional construct. Journal of Business & Economics is not enough: The critical role of culture when you really want to
Research (Online), 10(10), 553. innovate”, Human Resource Management, 49, 4, pp. 767-792.
Meaning of innovation
Innovation could mean one or all of the following
• An invention, i.e. creation of something entirely new;
• An improvement, i.e., a refinement of what has been
developed;
• The diffusion or adoption of innovation developed
elsewhere (Zhuang, et al., 1999) p. 58).

Zhuang, L. (1995), “Bridging the gap between technology and Zhuang, L., Williamson, D. and Carter, M. (1999), “Innovate or
business strategy: A pilot study on the innovation process”, liquidate – are all organizations convinced? A two-phased study into
Management Decision, 33, 8, pp. 13-19. the innovation process”, Management Decisions, 37, 1, pp. 57-71.
FACTORS THAT DRIVE INNOVATION
 Need orientation. Inventor-entrepreneurs tend to be “need or
1 achievement oriented.” They believe that if they “do the job better,”
rewards will follow.

Experts and fanatics. Company founders are often described as

2 “possessed” or “obsessed,” working toward their objectives to the
exclusion even of family or personal relationships.

Low early costs. Innovators tend to work in homes, basements,

3 warehouses, or low-rent facilities whenever possible. They incur few
overhead costs; their limited resources go directly into their projects.

Quinn, J. B. (1987). Managing Innovation: Controlled Chaos: Harvard Business Review. 2(4), 485.
 Flexibility and quickness. Undeterred by committees, board approvals,
4 and other bureaucratic delays, the inventor-entrepreneur can
experiment, test, recycle, and try again with little time lost.

5 Incentives. Inventor-entrepreneurs can foresee tangible personal

rewards if they are successful.

Availability of capital. Rich variety of sources to finance small, low-

6 probability ventures. If entrepreneurs are turned down by one source,
other sources can be sought in myriads of creative combinations.

Quinn, J. B. (1987). Managing Innovation: Controlled Chaos: Harvard Business Review. 2(4), 485.
BARRIERS TO INNOVATION
 Top management isolation. Many senior executives in big companies
1 have little contact with conditions on the factory floor or with
customers who might influence their thinking about technological
innovation.

2 Intolerance of fanatics. Big companies often view entrepreneurial

fanatics as embarrassments or troublemakers.

Short time horizons. The perceived corporate need to report a

3 continuous stream of quarterly profits conflicts with the long time
spans that major innovations normally require.

Quinn, J. B. (1987). Managing Innovation: Controlled Chaos: Harvard Business Review. 2(4), 485.
 Accounting practices. By assessing all its direct, indirect, overhead,
overtime, and service costs against a project, large corporations have
4 much higher development expenses compared with entrepreneurs
working in garages.

Excessive bureaucracy. Bureaucratic structures require many approvals

5 and cause delays at every turn. Experiments that a small company can
perform in hours may take days or weeks in large organizations.

Inappropriate incentives. Reward systems in most big companies are

6 designed to minimize surprises. Yet innovation, by definition, is full of
surprises.

Quinn, J. B. (1987). Managing Innovation: Controlled Chaos: Harvard Business Review. 2(4), 485.
INNOVATION IN LARGE
ORGANISATIONS
 Autonomous
Induced Strategic
Strategic
Behaviour
Behaviour
Induced Strategic Behaviour
Under conditions of ISB,
innovation is driven by org.’s
traditional concept of strategy
Induced Strategic
Innovation is controlled, by the
Behaviour (ISB)
top management by…

…influencing the perceived

interests of mid-level managers...

… and keeping strategic

behaviour in line with current
strategy
Autonomous Strategic Behaviour
Under conditions of ASB, pools
of entrepreneurial talent in orgs.
are unleashed
Autonomous Strategic
Behaviour (ASB) Conceptually equivalent to
entrepreneurial activity, ASB
introduces new categories of
opportunity to the firms
planning process
 ISB vs. ASB

Hutt, M. D., Reingen, P. H., & Ronchetto Jr, J. R. (1988). Tracing emergent processes in marketing strategy formation. The Journal of Marketing, 4-19.
ISB vs. ASB

Top-down process whereby the Bottom-up process in which

firm’s current strategy and product champions pursue new
structure, foster product ideas, to develop, coordinate
innovations that are closely and commercialise a new
associated with that strategy and product or service.
structure.
ISB vs. ASB

Induced strategic behaviour ASB involves all actions that are

involves all intentional actions relevant for the realisation of
that are on the one hand strategic objectives but are
relevant for the realization neither directly nor indirectly
of the fundamental objectives of triggered or motivated by the
the org. strategic concept.
ISB vs. ASB

Different groups of actors have

their own agenda evolve their
own processes following their
own preferences and
perceptions.
NEW PRODUCT DEVELOPMENT (NPD)
PROCESS
Criticality of processes
Successful organisations follow
cutting edge NPD process which
emphasises on

• Careful attention to execution

of agreed activities
• Extra care taken at each
decision point, not just at the
ideation stage but across the
NPD journey
Processes characterised by
Upfront market and technical
assessments before projects
move to a development stage

Complete description of product

concept, product benefits,
positioning and target markets,
before development work is
initiated
Processes characterised by
Tough go / kill decision points
included. Kill option is actually
used

New product process was

flexible. Certain stages could be
omitted depending on the
nature and risk associated with a
project
Lead User Method of NPD

Stage 1 : Laying the foundation Stage 4 : Developing and assessing

preliminary product ideas

Stage 2 : Determining the trends

Stage 5 : Developing the

Stage 3 : Identifying lead users breakthrough
Lead users
Eventually the number of buyers Lead users face need that are
in industrial or technological • Mostly general in nature
markets is small and restricted • But they confront these
needs months or years before
Though the numbers are most of the market
restricted, these restricted recognises the need
numbers of customers or lead
customers buy in bulk Lead users, therefore become
critical and special attention
needs to be given to their needs
Lead user method
Consists of a cross-disciplinary team,
of 4 to 6 people from marketing and
technical dept. One member serves
as project leader

Team spends 12 to 15 hours / week

on the project for its duration. High
level of immersion drives creative
thought the project’s momentum.
Lead User Method of NPD

Stage 1 : Laying the foundation Stage 4 : Developing and assessing

preliminary product ideas

Stage 2 : Determining the trends

Stage 5 : Developing the

Stage 3 : Identifying lead users breakthrough
Laying the foundation
In this stage, the team identifies:
• the markets it wants to target
• type and level of innovations
desired by key stakeholders
within the company

If the team’s recommendations

are to be credibly received, these
key stakeholders must be taken
on board early in the project
Determining the trend
It’s a truth that lead users are
ahead of the trend. But what is
the trend?

To find out, the team must talk

to experts in the field they are
exploring

Or people who have a broad

view of emerging technologies
and leading-edge applications in
the area being studied
Identifying the lead user
The team now begins a
networking process to identify
and learn from users at the
leading edge of the target
market and related markets.

The group’s members gather

information that will help them
identify especially promising
innovations and ideas that might
contribute to the development
of breakthrough products.
Developing and assessing
preliminary product ideas
Based on learnings from the
previous stage, teams also begin
to shape preliminary product
ideas

Assess the business potential of

these concepts or ideas

Assess fitment with company’s

interests
Developing the breakthrough
The goal, in this stage, is to move
the preliminary concepts toward
completion.

The team hosts a workshop with

lead users, a half-dozen in-house
marketing and technical people,
and the lead user team itself.
Such workshops may last two or
three days.
Developing the breakthrough

The participants first work in

small groups and then as a
whole to design final concepts
that precisely fit the company’s
needs.
Developing the breakthrough
Post workshop, the project team
hones the concepts and
determines whether they fit the
needs of target-market users

Finally the project team presents

its recommendation (single or
multiple product ideas) to the
senior management of the
company
Developing the breakthrough

The recommendations are also

backed by solid evidence that
explains why customers would
be willing to pay for the new
products.
Developing the breakthrough
Although the project team is
disbanded, at least one member
stays involved with any concepts
that are chosen for
commercialization.

This enables the rich body of

knowledge, collected during the
process, remains useful as the
product or service families are
developed and marketed.
PRICING
Value

In the broadest sense, value

represents a trade-off between
benefits and sacrifices
Customer value
Customer value, therefore, is a
business customer’s overall
assessment of the utility of a
relationship, with a supplier
based on :

Benefits received…

…and sacrifices made

 Customer value

Benefits Sacrifices

Core benefits Add-on Acquisition Processing

benefits cost cost

Usage cost

Menon, A., Homburg, C., & Beutin, N. (2005). Understanding customer value in business-to-business relationships. Journal of Business-to-Business
marketing, 12(2), 1-38.
Benefits
Basic or primary requirements
that a marketer must meet to be
included in a customer’s
consideration set
Core benefits
Specific levels of product quality
Defined levels of pre and post
sales service standards
Benefits

Attributes, not required, that

assist a customer in selecting
Add-on benefits suppliers from along a qualified
group of potential suppliers
Sacrifices
Sacrifices

Acquisition Processing
cost cost

Usage cost
PRICING PROCESS
Factors impacting pricing
Pricing needs to factor in a
diverse set of dimensions as well
as variables
Demand

Cost
Level of competition

Profit margins

Customer usage patterns

 Estimate demand Estimate cost and
Set strategic
and price elasticity their relationship
pricing objectives
of demand to volume

Setting the price Examine competitor’s

levels pricing and strategy

Internal External
Setting pricing objectives
Essentially flows from the
corporate as well as the
marketing objectives

Also has to factor

internal issues : market-share
goals
External issues : Competition,
channel relationships
Setting pricing objectives
Define principle pricing goals

A targeted RoI

Meeting market-share goals

Meeting competitive pricing

 Estimate demand Estimate cost and
Set strategic
and price elasticity their relationship
pricing objectives
of demand to volume

Setting the price Examine competitor’s

levels pricing and strategy

Internal External
Understand price elasticity
A business marketer
contemplating change in pricing
must understand elasticity of
demand

Nature of the product

Satisfied customers are less price

sensitive

High / low switching costs

Understand end use

How important is the business If a product has an insignificant

marketer’s product as an input effect on cost the demand is
to the total cost of the end likely to be inelastic and vise-
product versa
 Estimate demand Estimate cost and
Set strategic
and price elasticity their relationship
pricing objectives
of demand to volume

Setting the price Examine competitor’s

levels pricing and strategy

Internal External
Types of costs

Direct traceable or
attributable costs
Costs, fixed or variable, incurred
by and solely for the product,
customer or a sales territory
Types of costs

Costs, fixed or variable, which can

be traced to the product,
Indirect traceable
customer or a sales territory
costs
E.g. plant overheads
Types of costs

Costs which cannot be objectively

assigned to a product on the basis
of a direct physical relationship
General costs
E.g. administrative costs of a
sales territory
Costs

Direct costs + Indirect cost + General costs = Total cost

Total cost / units produced = Cost / unit

Cost/unit + profit margin = Selling price

Fundamental errors

Cost + margin philosophy is a

Organisations normally base cardinal mistake as it does not
prices on their own costs. take into account customer
perceptions of value
Target costs
The org. identifies and targets the
most attractive segments
Target cost is a design-to-cost
philosophy that begins by It then determines what level of
examining market conditions quality and types of products
attributes are required to succeed
in each segment, given a pre-
determined target price and
volume levels
Target costs
A target price can be established
only when there is a complete
understanding of the customer’s
perception of value

Once the target price and target

profit margin has been
determined, only then can the
firm calculate the allowable cost
Target cost
Cascading effect of target costs
A target cost is driven by
competitive pressures and this in
turn has a downstream
cascading effect

Target cost of product, cascades

into functional target cost and
component target cost putting
pressure on functions and
suppliers
 Estimate demand Estimate cost and
Set strategic
and price elasticity their relationship
pricing objectives
of demand to volume

Setting the price Examine competitor’s

levels pricing and strategy

Internal External
Competition

Direct competitors
Competitive players
includes Producers of potential
substitutes
 Need to differentiate
Differentiate, through pricing? Differentiate through
• Reputation
“Even if a company • Technical expertise
manufactures commodity like • Delivery reliability
products, it can differentiate • Service dimensions
through service or support. It can
leave commodity mentality in the Ability to differentiate, gives
factory and bring diversity orgs. latitude in pricing
mentality to the marketplace”

Regis McKenna, Relationship Marketing, pp 178-179

In stable environments any
organisation can develop a fairly Hypercompetitive
rigid strategy which can address environments?
long-term challenges
Hypercompetitive environment
In hypercompetitive
Newer and newer sources environments successful
of advantage companies pursue strategies
which:
• Creates temporary advantages
Next lower price or • Destroys advantages of rivals
advantage point • Constantly disrupts market
equilibrium
Hypercompetitive environment

Cost structures of
competitive players
Relentless research on
Market strategy of
competitive players
Gauging competitive response in HE

US Retail price = 575. Profit = $261

 Estimate demand Estimate cost and
Set strategic
and price elasticity their relationship
pricing objectives
of demand to volume

Examine
Setting the price
competitor’s pricing
levels
and strategy
PRICING APPROACHES
Skimming

Largely applicable for distinctly Allows marketer to capture early

new products profits and then reduce price to
reach price sensitive segments

Gives marketers an opportunity Enables recovery of high

to service price insensitive development costs
markets
Penetration

High price elasticity of demand

Penetration as a pricing strategy Strong threat of competition

is leveraged when
Opportunity for reduction in
production cost due to volume
expansion
Competitive bidding

In business markets significant

number of transactions use the
competitive bidding method to
buy or sell products or services
Non- Standard Standard

Complex & Reverse

No established auctions, used
fabricated
market level as a mechanism
products
price to buy standard
Made to Competitive products
buyer’s bidding therefore
specifications enables buyer to
Design and evaluate
manufacturing appropriateness
methods vary of price
Closed bidding Open bidding

Involves a formal invitation to Informal and allows suppliers

submit written and sealed bids to make oral or written offers
up to a certain date
All bids opened at the same
time Buyers could also deliberate
with the suppliers throughout
Normally awarded to the the bidding process
lowest bidder or the lowest
responsible bidder Used when specific
requirements are hard to
define or when products /
services of competing
companies vary substantially
RESPONDING TO PRICE ATTACKS
Superior long term return on
investments
Cressman Jr, G. E., & Nagle, T. T. (2002). How to manage an aggressive competitor. Business Horizons, 45(2), 23-30.
 Do benefits justify the cost?
Competitive price
cut or ‘low cost’ What will you gain if you
product entry respond?

What will you lose if you

Is there a response which
respond?
would cost less than the
preventable sales loss?
What will you lose if you do not
respond?
 Retaliation has to be in the form of the
most cost effective option or cost of
retaliation should be minimised

Offer price cuts to only that segment of

customers who would be attracted to
Is there a response which the competitor’s offer
would cost less than the
preventable sales loss? Price cuts in specific geographies, for
specific channels or on specific product
lines which will hurt the competitor
the most
Increasing value of your offering to
match the price through extended
warranties etc.
Cressman Jr, G. E., & Nagle, T. T. (2002). How to manage an aggressive competitor. Business Horizons, 45(2), 23-30.
 Matching a price cut is meaning less if
the competitor re-establishes the price
differential by reducing price further

Critical for a marketer to understand

If you respond, is the why the competitor chose to compete
competitor willing and on price?
able to re-establish the
Huge R & D investments? Recovery of
price difference? money is essential

In such cases, accommodation through

share loss is less expensive than
fighting a price war
Cressman Jr, G. E., & Nagle, T. T. (2002). How to manage an aggressive competitor. Business Horizons, 45(2), 23-30.
 Investments and capacity created,
push competitors to see price as a
strategic and a long-term tool

Therefore, a single response is never

Will multiple responses be adequate to stop price moves
required to match a competitor
Allow competition to win where it is
cost less than preventable sales
least damaging to profitability e.g.
loss? Lead customers

Create barriers, by creating value (and

high switching costs), which will make
the most profitable customers
inaccessible to competitors
Cressman Jr, G. E., & Nagle, T. T. (2002). How to manage an aggressive competitor. Business Horizons, 45(2), 23-30.
Is your position in other
markets at risk? Before responding, define the long
term strategic benefits of the response
Does the value of the markets
at risk justify the cost of Before responding, define the long
response? term strategic risk of the response
END OF MODULE
Module V

MANAGING BUSINESS MARKETING

CHANNELS AND COMMUNICATION
 Identify various channel forms in
B2B markets and examine ways
of managing them
Learning outcomes
Gain thorough knowledge of the
various promotional tools used
in B2B business
In this module…
Marketing Channels Marketing Communication
• Direct and indirect channels • B2B advertising
• Participants in business • Rational and informative
marketing channel advertisements in B2B
• Channel objectives and markets
design • Trade shows
• Key account management
MANAGING BUSINESS
MARKETING CHANNELS
Sales cycle

Friedman, L. G. (2002). Go-to-market strategy: advanced techniques and tools for selling more products, to more customers, more profitably. Routledge.
Meaning of a channel

Manufacturer Customer
The link or links between
manufacturers and
customers is the channel of
Manufacturer
distribution

The channel, therefore

accomplishes all tasks
necessary to
• Effect a sale
• Deliver the products to
a customer Customer
Channel tasks include

Bulk breaking & repackage

Making contact with buyers

Manufacturer
Negotiating

Contracting
Transferring the title
Communicating and
arranging financing
Customer
Servicing the product
 1
Which channel tasks will be
In light of the complex performed by the org.?
nature of the tasks being
managed by the channel,
answering two questions
becomes essential.
2
Which tasks, if any, will be
performed by channel
members?
When the marketer performs all
marketing functions needed to
make and deliver products, such
a mechanism is referred to as
Direct Channel

When the marketer engages an

intermediary (dealer or
distributor) to sell or handle the
product, such a mechanism is
referred to as Indirect Channel
Direct distribution
In the case of direct
distribution, there are no
intermediaries

The manufacturer’s sales force

deals directly with customer
and assumes responsibility for
performing all channel tasks
Direct distribution
Direct distribution is effective

The customers are large and

well defined
Customers insist on direct sales
Sales involve negotiations with
top management

Selling has to be controlled to

ensure that the ‘product
package’ is implemented
correctly
Direct distribution
Direct distribution is effective

Sales opportunities are complex

When the solutions are

extremely customised

Or for large customers and

complex products
Indirect distribution
Indirect distribution uses at
least one type of intermediary,
if not more

Typically, business marketing

channels use lesser number of
intermediaries than consumer
goods channels
Multi-channel distribution
Organisations also leverage
multiple channels to serve
certain customer segments

Goal of a multi-channel system,

is to coordinate the activities of
many channels to enhance
customer experience and
profitability
Multi-channel distribution

In a multi-channel system,
different channels can perform
different tasks within a single
sales transaction with a
customer
Friedman, L. G. (2002). Go-to-market strategy: advanced techniques and tools for selling more products, to more customers, more profitably. Routledge.
 Manufacturer

Direct Online Tele Manufacturer’s

marketing
sales mktg. representatives

Industrial
Distributors

Customers
PARTICIPANTS IN BUSINESS
MARKETING CHANNEL
 Industrial Manufacturer’s
distributors representatives
Industrial distributors are the
most important force in
distribution channels
Classification of distributors
General-line distributors :
Stock extensive variety of
product lines

Automotive, gensets, machine

tools, power tools etc.
Classification of distributors
Specialists:
Focus on just one line or a few
related lines only

Automotive. Within automotive

headlight assembly, power
transmission
Classification of distributors
Combination house:
Operate in both the markets i.e.
industrial and consumer

Electric motors for industrial

customers and automotive
hardware parts to be sold
through retailers to final
customers
Distributor’s responsibilities
Contact: Reach all customers in
a defined territory through an
outside or inside sales force

Outside SF: Calls on customers

Inside SF: Takes telephonic
orders

Product availability: Ensure

inventory and all supporting
activities: credit, advice etc.
Distributor’s responsibilities

Repair: Provide easy access to

local repair facilities

Assembly & light

manufacturing: Purchase
material in bulk, then shape,
form or assemble as per user
requirements
 Industrial Manufacturer’s
distributors representatives
Reps are salespeople who
• Work independently
• Represent several companies
in the same geographical
area
• Sell non-competing but
complementary products
Manufacturer’s representatives:
are best suited for jobs that
require
• Detailed understanding of
complex products
• Strong selling skills
Reps are used

MSMEs who cannot justify the

economic cost of maintaining
their own sales force

To cover outlying or less dense

markets

To service intermediaries, who

in turn serve end-users

Reduce overhead costs such as

fringe benefits to SF or training
cost of SF
Responsibilities of Reps

Reps do not take title of

products or hold inventory of
the products handled

Reps brings to the table

• Expert product knowledge
• Keen understanding of the
markets
• Evolved understanding of
customer needs
Payment to Reps

Paid a commission on sales.

Commission depends on type of
industry

Paid only when they generate

orders

The fact that there is only

commission motivates Reps to
generate high levels of sales
Distributors vs. Reps.
Part of the org. eco-system Independent of the org. eco-system

Normally associated with one Associated with multiple non-

company competing companies

Movement of goods No movement of goods

Title of ownership of the product No title of ownership

Need not be experts Technical / selling experts

Distributors vs. Reps.
In-depth knowledge may be Deep understanding of customer
lacking wants / needs

Entitled to margin on every Entitled to a pre-defined

product purchased from the commission percentage on total
manufacturer order value generated
Depending on agreement, Expenses not covered. Entitled to
manufacturer could defray just the commission amount.
certain distribution expenses Commission covers all incidental
expenses
CHANNEL OBJECTIVES AND DESIGN
 Developing new channels where
none existed
Channel design is the dynamic
process of Also refers to the process of
modifying existing channels
 Stage I Stage II Stage III

Setting channel Channel design Pervasive

objectives constraints channel tasks

Stage V Stage IV

Channel selection Channel alternatives

Setting channel objectives

Irrespective of the fact that a

new channel needs to be
designed or an existing channel Design of channel goals depend
has to be modified, it becomes on the marketing objectives.
essential to define channel
goals
Scenario 1

Channel objectives can reflect

Asset utilisation or

Profit maximisation

Company Manufacturer’s Rep

salesperson
Scenario II: Reflect marketing goals

Marketing: Maximise market Marketing : Maximise

share revenue
Distribution: Ensure availability Distribution: Minimise
in every auto counter in all 1 downtime. Regular service
Lakh + towns visits
 Stage 1 Stage II Stage III

Setting channel Channel design Pervasive

objectives constraints channel tasks

Stage V Stage IV

Channel selection Channel alternatives

Channel design constraints

Non-availability of
intermediaries

Blocked or ‘locked up’ by

competitive brands

Established intermediaries are

often not receptive to new
products
Channel design constraints

Established patterns of
distribution are difficult to
Traditional channel patterns change

Large customers demand direct

service
Channel design constraints

Product characteristics

Technically complex products

demand direct distribution

Regular service requirements

may require local dealers to
service the product
Channel design constraints

Company’s financial resources

Capital requirements often

make it impossible for an org. to
pursue direct distribution
Channel design constraints

Competitive strategies

Direct service strategy adopted

by the industry may force the
org. to also adopt a direct
service approach
Channel design constraints

Geographical dispersion of
customers

Allows for direct sales

Channel design constraints

Geographical dispersion of
customers

Well dispersed market often

calls for low-cost intermediaries
 Stage 1 Stage II Stage III

Setting channel Channel design Pervasive

objectives constraints channel tasks

Stage V Stage IV

Channel selection Channel alternatives

Pervasive channel tasks

Set of institutions? Set of activities?

Pervasive channel tasks
Business marketing managers must
creatively structure tasks essential to
meet customer requirements and
Re-imagine channel as a company goals, rather than accept
sequence of activities necessary existing structures or traditional
to be performed, rather than a patterns
set of institutions
Channel structures need to be
designed around tasks to be
performed, rather than the other
way around
 Stage 1 Stage II Stage III

Setting channel Channel design Pervasive

objectives constraints channel tasks

Stage V Stage IV

Channel selection Channel alternatives

Channel alternatives

Issue 1 Issue II
Number of levels in a Types of intermediaries
channel or the degree to use
of directness

Issue III Issue IV

Number of Number of channels to
intermediaries at each use
level of channel
Issue 1 : Number of levels
Length of business marketing channels is
influenced by multiple factors such as

Availability of Customer
intermediaries Market factors characteristics

Number of customers Customer perceptions

of the significance of
Geographical purchase
concentration of
Volume potential of
customers
customers
Issue II : Type of intermediaries
Type or choice of intermediaries are largely
influenced by two broad factors

Different market segments How customer’s buy?

Different market segments require Org.’s sales force would focus on complex
different channel structures buying solutions

Large accounts are served by the org.’s Distributors would only focus on selling
own sales force standardised products
Reps develop and serve medium size
customers

Distributors manage small repeat orders

Issue III : No. of intermediaries at each level
No of intermediaries at each level is dependent on the degree or
extent to which the org. would like to cover the market

Intensive distribution Selective distribution

Products are purchased more Products are inherently more complex in
frequently nature

Products are more standardised Products need more elaborate and

responsive support services
Unit price of products is lower
Orgs select one or two channel
More number of distributors members for a particular area
required to cover the market
Issue IV : No. of channels

Several or multiple channels of

Products are purchased more
distribution may be required frequently by the customer segment
when
 Stage 1 Stage II Stage III

Setting channel Channel design Pervasive

objectives constraints channel tasks

Stage V Stage IV

Channel selection Channel alternatives

Channel selection

Cost-benefit trade offs

Channel selection, in the end, is
also a function of the Estimated profitability that each of
the viable channel options delivers
BUSINESS MARKETING
COMMUNICATION
B2B ADVERTISING
Defining advertising objectives

Achieve the marketing

Knowing what advertising must objectives
accomplish enables, is critical,
as it enables the business Develop creatives which
manager to enables fulfillment of the
marketing objectives
Advertising objectives

Create awareness
Advertising objectives

Provide information
Advertising objectives

Influences attitudes
Advertising objectives

Remind about company

and product
Advertising objectives

Introduce dealers to current

and potential customers
TRADE SHOWS
Browning, J. M., & Adams, R. J. (1988). Trade shows: an effective promotional tool for the small industrial business. Journal of Small Business
Management, 26(4), 31-36.
Browning, J. M., & Adams, R. J. (1988). Trade shows: an effective promotional tool for the small industrial business. Journal of Small Business
Management, 26(4), 31-36.
Trade show : Benefits
An effective selling message can Potential customers can be
be delivered to a relatively large identified providing sales
and interested audience at one personnel with qualified leads
time

New products can be Goodwill can be created or

introduced to a large audience enhanced

Customers can get hands-on

experience, with the product in Free publicity is often generated
a one-on-one selling situation for the company
KEY ACCOUNT MANAGEMENT
(KAM)
 We define a key account as a
customer in a business-to- At times, key accounts are also
business market identified by a referred to as Strategic
selling company as of strategic Accounts or National Accounts
importance

Millman, T., & Wilson, K. (1995). From key account selling to key account management. Journal of Marketing Practice: applied marketing science, 1(1),
9-21.
Pardo, C. (1997). Key account management in the business to business field: the key account's point of view. Journal of Personal S elling & Sales
Management, 17(4), 17-26.
Sharma, A. (1997). Who prefers key account management programs? An investigation of business buying behavior and buying firm characteristics.
Journal of Personal Selling & Sales Management, 17(4), 27-39.
Sharma, A. (1997). Who prefers key account management programs? An investigation of business buying behavior and buying firm characteristics.
Journal of Personal Selling & Sales Management, 17(4), 27-39.
Benefits of KAM
“Can be very time-consuming,
but can see the benefit it gives
in understanding the
client in more detail…”
Development of deep customer
understanding
“The process required me to
investigate and understand the
client to a much greater
depth than I would have
previously”
Benefits of KAM
Increased share of customer Bonding/Improvements in
spend relations with key customers

Faster growth in revenues from Improvement in satisfaction

key customers compared to that ratings with key customers
of non-key customers
Increased advocacy
Faster decline in costs for key
customers than for non-key Increase in amount of shared
customers leading to investment
improvements in profit margins

Vyas, P. H. (2012). Key Account Management.

END OF MODULE