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Business MarketingManagement: B2B
- ««1
MICHAEL D. HUTTArizona State University
THOMAS W. SPEHMiami University
THOMSON*
S O U T H - W E S T E R N
A u s t r a l i a • B r a z i l • C a n a d a • M e x i c o • S i n g a p o r e • S p a i n • U n i t e d K i n g d o m • U n i t e d S t a t e s
Preface
PrtEiE
Chapter 1 A Business Marketing PerspectiveBusiness Marketing
Business Marketing Management
Business Market Customers
Business Markets versus Consumer-Goods Markets
B2B TOP PERFORMERS: Career Path for B2B CEOs:For Many, It Began in Marketing!
INSIDE BUSINESS MARKETING: Google: B2C or B2B?
Designing Customer Solutions
Marketing's Cross-Functional Relationships
Characteristics of Business Markets
Business and Consumer Marketing: A Contrast
Smucker: A Consumer and Business Marketer
Distinguishing Characteristics
A Relationship Emphasis
The Supply Chain
Supply Chain Management
Managing Relationships in the Supply Chain
INSIDE BUSINESS MARKETING: Career Profile: DeliveringService Solutions to IBM Customers
Commercial Enterprises as Consumers
Classifying Goods for the Business Market
Entering Goods
B2B TOP PERFORMERS: Jim Ryan, Group President,W.W. Grainger, Inc.
Foundation Goods
Facilitating Goods
Business Marketing Strategy
Illustration: Manufactured Materials and Parts
Illustration: Installations
Illustration: Supplies
A Look Ahead
Summary
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Contents
, ' Discussion Questions 27
Internet Exercises 29
Case: Wireless E-mail: A Challenger to BlackBerry? 30
Chapter 2 The Business Market: Perspectiveson the Organizational Buyer 31
Commercial Enterprises: Unique Characteristics 32
Distribution by Sjze 33
Geographical Concentration 33
Classifying Commercial Enterprises, 34
The Purchasing Organization 35
Goals of the Purchasing Function 36
INSIDE BUSINESS MARKETING: The Supply Chain for McNuggets 37
Strategic Procurement 37
INSIDE BUSINESS MARKETING: Harley-Davidson's World-Class
Purchasing Organization ' 41
E-Procurement 42
Everyone Is Getting Wired 42
Enhancing the Buyer's Capabilities 42
Delivering Measurable Results 43
Buying Direct and Indirect Goods 43
Reverse Auctions 45
ETHICAL BUSINESS MARKETING: Gift Giving: "Buy Me
These Boots and You'll Get My Business" 46
How Organizational Buyers Evaluate Potential Suppliers 46
Governments: Unique Characteristics 46
E-Government 47
Influences on Government Buying 47
Understanding Government Contracts 47
Telling Vendors How to Sell: Useful Publications 48
Purchasing Organizations and Procedures: Government 48
Federal Buying 50
A Different Strategy Required 51
The Institutional Market: Unique Characteristics 52
Institutional Buyers: Purchasing Procedures 52
Dealing with Diversity: A Market-Centered Organization 55
Summary 55
Contents
Discussion Questions 56
Internet Exercises 57
Case: Managing Supplier Relationships: Does DetroitNeed a New Driver? 58
MANAGING RELATIONSHIPS IN BUSINESS MARKETII
Chapter 3 Organizational Buying Behavior 61The Organizational Buying Process 63
The Search Process 64
New Task 65
Straight Rebuy 66
Modified Rebuy 67
Forces Shaping Organizational Buying Behavior 69
Environmental Forces 69INSIDE BUSINESS MARKETING: Pressuring Suppliers to Outsource 71
Organizational Forces 71
Strategic Priorities in Purchasing 72
Organizational Positioning of Purchasing 73
INSIDE BUSINESS MARKETING: Go Digital to Target Buying Influential 75
Group Forces 75
INSIDE BUSINESS MARKETING: Innovate and Win with BMW 78
Individual Forces 80B2B TOP PERFORMERS: Delivering Customer Solutions 82
The Organizational Buying Process: Major Elements 83
Summary 85
Discussion Questions 85
Internet Exercise 86
Case: Dell, Inc. 88
Chapter 4 Customer Relationship ManagementStrategies for Business Markets 89
Relationship Marketing 90
Types of Relationships 91
Value-Adding Exchanges 92
Nature of Relationships 92
Strategic Choices 92
xviii Contents
B2B TOP PERFORMERS: Understanding the Customer'sBusiness—the Key to Success 93
Managing Buyer-Seller Relationships 93
Transactional Exchange 94
Collaborative Exchange 94
Switching Costs 94
Strategy Guidelines ~" 95
Measuring Customer Profitability 96
Activity-Based Costing 96
Unlocking Customer Profitability 96
The Profitable Few 97
Managing High- and Low-Cost-to-Serve Customers 98
Managing Unprofitable Customers 100
Firing Customers 100
Customer Relationship Management 101
Acquiring the Right Customers 101
INSIDE BUSINESS MARKETING: Diversify a Customer Portfolio Too! ' 103
Crafting the Right Value Proposition 104
Instituting the Best Processes 106
Motivating Employees 107
Learning to Retain Customers 107
Gaining a Customer Relationship Advantage 108
INSIDE BUSINESS MARKETING: Do Interpersonal Relationships
Matter to Corporate Buyers? 109
Customer-Relating Capability 109
Gaining a Position of Advantage 111
Achieving Performance Rewards 111
Summary 112
Discussion Questions 112
Internet Exercise 113
Case: Siebel Systems 114
Chapter 5 Segmenting the Business Market 117Business Market Segmentation Requirements and Benefits 118
Requirements 119
Contents
Evaluating the Competitive Environment 119
Evaluating the Technological Environment 120
INSIDE BUSINESS MARKETING: How to See What's Next 121
Benefits 122
Bases for Segmenting Business Markets 122
Macrolevel Bases 123
Illustration: Macrosegmentation 125
Microlevel Bases 126
B2B TOP PERFORMERS: Steering Customers to the Right Channel 128
Illustration: Microsegmentation 132
A Model for Segmenting the Organizational Market 132
Choosing Market Segments 132
Isolating Market Segment Profitability 134
Implementing a Segmentation Strategy 135
Summary 135
Discussion Questions 136
Internet Exercises 137
Case: Small Businesses Represent Huge Opportunity 138
Chapter 6 Organizational Demand Analysis 139Organizational Demand Analysis 140
Using the Internet for Business Marketing Research 141
The Role of Market Potential in Planning and Control 144
The Role of the Sales Forecast 146
Applying Market Potential and the Sales Forecast 146
INSIDE BUSINESS MARKETING: Accurate Forecasts Drive Effective
Collaboration between Boeing and Alcoa 147
Determining Market and Sales Potentials 148
Statistical Series Methods 148
Market Research 151
B2B TOP PERFORMERS: Go Deep into the Customer's Organization 152
The Essential Dimensions of Sales Forecasting 153
The Role of Forecasting 153
E-Forecasting 154
Forecasting Methods 154
Qualitative Techniques 154
Quantitative Techniques 157
Contents
Combining Several Forecasting Techniques 161
Summary 161
Discussion Questions 162
Internet Exercises 162
Case: IBM Global Services 163j
Chapter 7 Business Marketing Planning:Strategic Perspectives 167
Marketing's Strategic Role 168
The Hierarchy of Strategies 168
Strategy Formulation and the Hierarchy 171
INSIDE BUSINESS MARKETING: From Bullet-Point Plans to
Strategic Stories at 3M 173
Marketing's Cross-Functional Relationships 173
Cross-Functional Connections 174
B2B TOP PERFORMERS: High-PerformingCross-Functional Managers 175
Functionally Integrated Planning:The Marketing Strategy Center 175
The Components of a Business Model 178
Customer Interface 178
Core Strategy 179
Strategic Resources 180
The Value Network 181
Profit Potential 181
The Balanced Scorecard 181
Financial Perspective 182
Customer Perspective 183
Internal Business Process Perspective 184
Strategy Map 186
Summary 188
Discussion Questions 189
Internet Exercises 190
Case: Microsoft Targets Smalland Mid-Sized Businesses 191
Contents
Chapter 8 Business Marketing Strategiesfor Global Markets 192
Capturing Global Advantage in Rapidly Developing Economies 193
Mapping Sources of Global Advantage 194
The Cost Advantage 194
The Market Access Advantage 197
The Capabilities Advantage 198
The Outsourcing Decision 199
International Market-Entry Options 200
Exporting 200
Contracting 201
Strategic Alliances 202
ETHICAL BUSINESS MARKETING: The Bribery Dilemma in Global Markets 203
Joint Ventures 203
Choosing a Mode of Entry 204
Multidomestic versus Global Strategies 205
International Strategy and the Value Chain 205
B2B TOP PERFORMERS: General Electric Aircraft Engines:
Global Strategy Means Help Your Customers 207
Source of Advantage: Multidomestic versus Global 208
Types of International Strategy 208
A General Framework for Global Strategy 210
Build on a Unique Competitive Position 210
Emphasize a Consistent Positioning Strategy 210
Establish a Clear Home Base for Each Distinct Business 211
Leverage Product-Line Home Bases at Different Locations 212
Disperse Activities to Extend Home Base Advantages 212
Coordinate and Integrate Dispersed Activities 213
Summary 213
Discussion Questions 214
Internet Exercise 214
Case: Schwinn: Could the Story Have Been Different? 215
Chapter 9 Managing Productsfor Business Markets 216
Core Competencies: The Roots of Industrial Products 217
Identifying Core Competencies 218
Contents
Sustaining the Lead 218
From Core Products to End Products 220
Exploiting Selected Core Competencies 220
Product Quality 221
Meaning of Quality 222
Meaning of Customer Value 222
Product Support Strategy: The Service Connection 224
Product Policy 224
Types of Product^Lines Defined 224
Defining the Product Market 225
B2B TOP PERFORMERS: BASF: Using Services to Build a Strong Brand 227
Planning Industrial Product Strategy 227
Product Positioning 227
The Process 227
Isolating Strategy Opportunities 228
Product Positioning Illustrated • 229
Building a Strong Brand 229
Strong Brands Promise and Deliver 230
Building Brand Equity 230
Does Brand Building Pay Off? 232
The Technology Adoption Life Cycle 232
Types of Technology Customers 233
/ / INSIDE BUSINESS MARKETING: The Gorilla Advantage in High-Tech Markets 234
Strategies for the Technology Adoption Life Cycle 235
The Bowling Alley 235
The Tornado 236
Main Street 237
Summary 237
Discussion Questions 238
Internet Exercise 239
Case: NCR Self-Checkout Systems 240
Chapter 10 Managing Innovation andNew Industrial Product Development 241
The Management of Innovation 242
Induced Strategic Behavior 243
Autonomous Strategic Behavior 243
Contents
Product Championing and the Informal Network 244
Bringing Silicon Valley Inside 245
Managing Technology 247
Classifying Development Projects 247
A Product-Family Focus 248
The Disruptive Innovation Model 249
Innovation Winners in High-Technology Markets 251
INSIDE BUSINESS MARKETING: Patching: The New Corporate
Strategy in Dynamic Markets 253
The New-Product-Development Process 254
What Drives a Firm's New Product Performance? 254
Anticipating Competitive Reactions 256
Sources of New Product Ideas 256
B2B TOP PERFORMERS: Best Practices for Successful Innovation:
Create a Supportive Culture 257
Quality Function Deployment 259
Determinants of New Product Performance and Timeliness 260
The Determinants of Success 260
Determinants of Product Success for Japanese Companies 261
Fast-Paced Product Development 262
Summary 263
Discussion Questions 264
Internet Exercise 264
Case: Motorola's Disruptive Initiative: The Ultra-Cheap Cell Phone 265
Chapter 11 Managing Servicesfor Business Markets 266
From Products to Solutions 267
A Solution-Centered Perspective 267
Benefits of Solution Marketing 269
INSIDE BUSINESS MARKETING: To Sell Jet Engines, Teach YourCustomer How to Sell Aircraft 270
Business Service Marketing: Special Challenges 270
Services Are Different 271
Tangible or Intangible? J 271
Simultaneous Production and Consumption 272
Service Variability 273
Service Perishability 273
Contents
Nonownership 274
Service Quality 274
Dimensions of Service Quality 274
Customer Satisfaction and Loyalty 275
Service Recovery 276
Zero Defections 276
Return on Quality 277
Marketing Mix for Business Service Firms 277
Segmentation 278
Service Packages 278
Pricing Business Services 281
B2B TOP PERFORMERS: Growing the Service Business at Siemens
Building Technologies 282
Services Promotion 284
Services Distribution 284
Developing New Services 285
Scenarios for Success and Failure 285
Summary 288
Discussion Questions 289
Internet Exercise 289
Case: SafePlace Corporation 290
' Chapter 12 Managing Business MarketingChannels 291
The Business Marketing Channel 292
Direct Channels 293/ INSIDE BUSINESS MARKETING: IBM Uses the Internet to Collaborate
with Channel Partners and Build Customer Loyalty 294
Indirect Channels 294
Integrated Multichannel Models 295
Participants in the Business Marketing Channel 297
Distributors 297
Manufacturers' Representatives 300
B2B TOP PERFORMERS: Why Intel Uses Reps 301
Channel Design 302
Stage 1: Channel Objectives 302
Stage 2: Channel Design Constraints 304
Stage 3: Pervasive Channel Tasks 305
Contents xxv
Stage 4: Channel Alternatives 305
Stage 5: Channel Selection 307
Channel Administration 308
Selection of Channel Members 308
Motivating Channel Members 309
Summary 311
Discussion Questions 311
Internet Exercise 312
Case: Direct Marketing Campaigns at IBM 313
Chapter 13 E-Commerce Strategiesfor Business Markets 314
Defining E-Commerce 316
Key Elements Supporting E-Commerce 317
The Internet and World Wide Web 317
Intranets and Extranets 319
The Strategic Role of E-Commerce 319
E-Commerce as a Strategic Component 320
INSIDE BUSINESS MARKETING: UPS Delivers the Goods Using
Sophisticated E-Commerce Technology 321
What the Internet Can Do 322
The Internet: Strategy Still Matters 322
Crafting an E-Commerce Strategy 324
Delineating E-Commerce Objectives 324
Specific Objectives of Internet Marketing Strategies 326
B2B TOP PERFORMERS: GE Healthcare: Using the Web
to Create New Services 327
Internet Strategy Implementation 327
The Internet Product 328
INSIDE BUSINESS MARKETING: Top-Rated B2B Web Sites 329
Channel Considerations with Internet Marketing 330
The Internet as a Channel Alternative 331
The Effect of the Internet on Pricing Strategy 332
The Internet and Customer Communication 332
Summary 334
Discussion Questions 335
Internet Exercise 336
Case: Using the Internet at W. W. Grainger 337
xxvi Contents
Chapter 14 Supply Chain Management 339The Concept of Supply Chain Management 341
Partnerships: The Critical Ingredient 342
Supply Chain Management: A Tool for
Competitive Advantage 344
Supply Chain Management Goals 344
Benefits to the Final Customer 346
The Financial Benefits Perspective 346
Information and Technology Drivers 347
Successfully Applying the Supply Chain Management Approach 348
Successful Supply Chain Practices 348
B2B TOP PERFORMERS: Making Supplier Relationships Work 349
Logistics as the Critical Element in Supply Chain Management 350
Distinguishing between Logistics and Supply Chain Management 350
Managing Flows 351
The Strategic Role of Logistics 351
Sales-Marketing-Logistics Integration 352
Just-in-Time Systems 352
Total-Cost Approach 354
Calculating Logistics Costs 354
Activity-Based Costing 354
Total Cost of Ownership 354
Business-to-Business Logistical Service 355
Logistics Service Impacts on the Customer 355
Determining the Level of Service 356
Logistics Impacts on Other Supply Chain Participants 357
Business-to-Business Logistical Management 357
Logistical Facilities 358
Transportation 358
Inventory Management 360
INSIDE BUSINESS MARKETING: The Profit Impact of
Inventory Management 361
Third-Party Logistics 362
Summary 362
Discussion Questions 363
Internet Exercise 364
Case: Managing Logistics at Trans-Pro 365
Contents xxvii
Chapter 15 Pricing Strategy for BusinessMarkets 366
The Meaning of Value in Business Markets 367
Benefits 368
Sacrifices 369
Value-Based Strategies 369
B2B TOP PERFORMERS: The Key to Value-Based Strategies-Understand the Customer's Economics 370
The Pricing Process in Business Markets 371
Price Objectives 371
Demand Determinants 372
Cost Determinants 375
Competition 377
Pricing across the Product Life Cycle 379
Pricing New Products 379
ETHICAL BUSINESS MARKETING: On Ethics and Pricing at Raytheon 380
Legal Considerations 381
Responding to Price Attacks by Competitors 381
Evaluating a Competitive Threat 382
Understanding the Rules of Competitive Strategy 384
Competitive Bidding 384
Closed Bidding 385
Open Bidding 385
Strategies for Competitive Bidding 386
Summary 386
Discussion Questions 387
Internet Exercise 388
Case: Meeting the Challenge of Reverse Auctions 389
Chapter 16 Business Marketing Communications:Advertising and Sales Promotion 390
The Role of Advertising 391
Integrated Communication Programs 391
Enhancing Sales Effectiveness 392
Increased Sales Efficiency 393
Creating Awareness 393
xxviii Contents
Interactive Marketing Communications 393
What Business-to-Business Advertising Cannot Do 394
Managing Business-to-Business Advertising 394
Defining Advertising Objectives 395
Written Objectives 395
Determining Advertising Expenditures 396
Developing the Advertising Message 398
Selecting Advertising Media for Business Markets 399
B2B TOP PERFORMERS:"Search Engine Marketing at Google: .
The Right Message, the Right Time 400
Direct Marketing Tools 402
Measuring Advertising Effectiveness 404
Measuring Impacts on the Purchase Decision 404
The Measurement Program 405
B2B TOP PERFORMERS: IBM Gold Service Customers 406
Managing Trade Show Strategy 406
Trade Shows: Strategy Benefits 406
Trade-Show Investment Returns 407
Planning Trade-Show Strategy 407
Trade-Show Objectives 408
Selecting the Shows 408
Managing the Trade-Show Exhibit 409
Evaluating Trade-Show Performance 409
Summary 410
Discussion Questions 411
Internet Exercise 411
Case: Johnson Controls, Inc. 412
Chapter 17 Business Marketing Communications:Managing the PersonalSelling Function 413
Foundations of Personal Selling: An OrganizationalCustomer Focus 415
Relationship Marketing 415
INSIDE BUSINESS MARKETING: Career Profile: Managing
Relationships at IBM 416
Relationship Quality 417
Managing the Sales Force 418
Contents xxix
Organizing the Personal Selling Effort 418
Key Account Management 420
National Account Success 422
B2B TOP PERFORMERS: Using Customized Strategies
to Outmaneuver Rivals 423
Isolating the Account Management Process 423
Account Management Success 424
Sales Administration 425
Recruitment and Selection of Salespersons 425
Training 426
Supervision and Motivation 427
Evaluation and Control 430
ETHICAL BUSINESS MARKETING: Ethics in Selling 431
Models for Industrial Sales Force Management 431
Deployment Analysis: A Strategic Approach 431
The Internet: Transforming the Selling Process 433
Summary 435
Discussion Questions 435
Internet Exercise 436
Case: Account Management at Yellow Roadway:Choosing Customers Wisely 437
Chapter 18 Controlling Business MarketingStrategies 441
A Strategy Map: Portrait of an Integrated Plan 442
Developing the Strategy: The Process 444
Maps: A Tool for Strategy Making 446
Marketing Strategy: Allocating Resources 447
Guiding Strategy Formulation 447
Managing Individual Customers for Profit 448
The Marketing Control Process 448
Control at Various Levels 448
Strategic Control 449
Annual Plan Control 450
Efficiency and Effectiveness Control 452
Contents
INSIDE BUSINESS MARKETING: Digital Cockpits to Track CorporateFinancial Performance 453
Profitability Control 453
Feedforward Control 455
Implementation of Business Marketing Strategy 456
The Strategy-Implementation Fit 456
Implementation Skills 457
The Marketing Strategy Center: An Implementation Guide 457
B2B TOP PERFORMER'S: Cross-Functional Relationships:
Effective Managers Deliver on Promises 459
Looking Back 460
Summary 461
Discussion Questions 461
Internet Exercise 462
Case: Sealed Air Corporation: Delivering Package Solutions 463
Cases 465Case Planning Guide 465
S.C. Johnson's Professional Division 466
Westward Industries Ltd. (A) 468
Clariant Corporation Marketing 483
RJM Enterprises, Inc.— Romancing the Vine 498
Pfizer, Inc. Animal Health Products—A: Market
Segmentation and Industry Changes 531
Circuit Board Corporation 543
Beta Pharmaceuticals: Pennsylvania Distribution System 556
Pivot International—Pursuing Growth 562
Deere & Company Worldwide Logistics 583
Yield Management at American Airlines 588
Barro Stickney, Inc. 594
Advanced Elastomer Systems: Market Strategy
for a New, Technical Product 600
Cyanide Destruct Systems Inc. 625
The Indicted CFO 638
Ethical Dilemmas in Business Marketing 641
Name Index 643
Subject Index 649