Customer based Marketing completo

Consumer-based Marketing Strategy

Prof Clemente Bottani e Annalisa Tunisini (Business to business marketing. Relationships,

Networks & Strategies. Nick Ellis)

Marketing is a set of activities and processes by which companies create and deliver value for customers and build

strong customer relationships in order to capture value from customers in return. In the marketing approach the

customer is at the center and the main goal of marketing activities is to satisfy and fulfill customers’ needs. The

relationships that marketing wants to establish are long-term relationship, since customer loyalty is fundamental.

Some definitions:

• Segmentation: the process of dividing customer in different clusters/group each of which have different

characteristics. Once you segmented the customers, you need to target them.

• Targeting: you exclude the segments that will not be profitable, and you select clusters that are likely to

be the more profitable. Once you target your segment, you position in them.

• Positioning: positioning is one of the most important process in marketing. Positioning is how the

company wants that the customer, which is my target cluster, remembers or perceive the brand itself.

So, I fail when I find the wrong target for me and I position with something which is not related and do

not have a connection with the cluster selected. For example, if I choose people over 70 and offer high

tech products. So, it is important to have an alignment between my target and my positioning.

In our case, the customer we are referring to are other companies and organizations, not individuals:

Consumers = business enterprises/organizations

Even if we are considering business market (customers are business), we must remember the connection with

consumer market. The significance of B2B marketing (Chapter 1)

The customers we are referring to in this course are business enterprises and organizations. Industrial products

are a typical example of products sold to industrial customers and are central to industrial marketing. However,

we do not only have industrial products. We must consider that business customer may need to refer to business

markets. Let’s say you produce clothes or shoes, why would you have relationships also with business market?

And not only with business consumers? Maybe a company produces both with its own brand and for another

luxury brands (Chanel, Armani, etc.). So, when you buy a pair of shoes by Chanel they were made by another

company. The business market is the most valuable, important customers (luxury ones) buy high quantities and

pay a lot. When we deal with business clients the number of the customer are less with respect to customers,

but they spend much more. In the consumer business, customers are more but they spend less. If we think about

durable goods (for example furniture brands) they deal not only with consumer business but also with other

organizations. If we think about services, such as insurance companies, revenues come from both consumers and

other companies. In fact, high revenues are generated in the business market.

In case of B2B marketing, customers are business entrepreneurs and/or organizations which must be satisfied,

must be provided with value, must be retained. The term business-to-business marketing is used to describe the

marketing activities of any kind of organization which has exchange relationship with other organizations or

businesses. A business market is a market made up of other companies which operate in other markets. B2B is

the market, the most valuable part of market that involved most items that we use every day (ex: you can buy a

coffee and it is possible thank to b2b partners). Many relationships among companies have long history. There

are many clients that used to buy by the same supplier since decades and if these businesses are satisfied, they

do not change the supplier because change is time and cost expensive. In this kind of market is difficult to

compete: if you are similar to other long-time suppliers, clients do not consider you; when you have new

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technology, which is better than those of competitors, change is possible. The context of most B2B marketing

activities is the trade between the supplying and buying organizations that make up what is commonly called the

supply chain, but which is becoming known as the demand chain.

Let’s make a comparison between the business market and the consumer market

B2B B2C

Buyers use your products to do other business or also Buyers are persons that buy product to fulfill their

to serve the final market. needs.

Small number of customers (10/20) but higher value High number of customers (30/50.000) with lower

purchases. If you lose only one client, you will lose a value purchases. Losing one client is not important,

lot, each business customer is really important, so you you a lot of them.

need to keep them satisfied.

The number of products demanded by each company The number of demanded products by consumer is

is higher than that demanded by consumer lower than in the case of companies.

The supplier has with the client a relationship which Here transactions are simpler: a customer pays for the

can be very complex: there may be the need for a lot product and you sell it.

of interactions. So, we have complex exchange

relationship.

What makes really the differences is not the product but who is the client. If the client is a business you have to

pay attention to develop long term relationship, keep them, invest on them and manage customized one to one

relationship. If on the other hand you have consumers, you need to focus on general clusters. So, the focus is on

clients and not on products.

Products and service are bought by:

• Businesses

• Government bodies

• Institutions

• Resellers

For different reasons, including:

• Manufacturing other products

• Becoming part of another product

• Aiding in the normal operations of an organization 2

• Acquired for resale without change in form

Remember that a product purchased for personal use is considered a consumer good and by customer we mean

the party who actually buys the products as distinct from the consumer.

B2B market is not an exception, it is the prevalent value, and most of us will work in a B2B market. Not much in

the number of transaction but for sure in the value generated. If you consider all of the goods we use every day,

we must think about what stands behind a product that we buy. Behind products that we are used to buy there

are a lot of B2B transactions which often have high values. In fact, the inter-organizational buying-selling is

extensive and varied and include public sector, intermediaries, institutions and any company as buyer. That’s why

B2B marketing is significant:

• Many private and public business buyers are very high spenders

• Many B2B relationships have long-time history: why should you change your supplier if everything goes

perfect? The only possibility to break these long-term relationships is to be innovative and disruptive, you

cannot be similar to others.

• There are huge B2B exchanges behind B2C exchanges The sign

• B2B exchanges have a great impact on countries’ economy Supply chai

• B2B exchanges have important impact on people’s lives: these relationships are the drivers to changes

and innovation in the market. Upstream suppliers

Traditional supply chain is usually made of these steps: chain chain

1) Upstream suppliers Suppliers of parts and

2) Suppliers of parts and components supply components

3) Assemblers/branded producers supply

4) Distributors

5) End users Traditional Assemblers/Branded

Demand-driven producers

In traditional supply chain we follow the order from 1 to 5. However, in

the demand-driven supply chain the order is inverted, and it is from 5 to

1 since everything starts from the end users. It is important to consider Distributors

every step because a company that operates in the B2B must consider not

only its customer (another business) but the customer of the customer

(which may be a person). The product you produce must be compatible

not only with your client but also with the client of my client. End users

Fundamentally, B2B marketing managers must recognize that most organizational buyers are focused on helping

their firms (or institutions) to increase sales or lower costs, often via improving efficiency or by purchasing cheaper

goods or services. These, along with the frequent need to meet government regulations, are the driving forces

behind most business markets. These are the business markets main characteristics:

1) The size of the market and the market structure

2) The international aspect of business

3) Concentration of buyer power

4) The derived nature of the demand

5) Buying process and decision making

1) Let’s start with analyzing the size of the market and the market structure which is characterized by

concentration and small numbers. We can distinguish general concentration and geographical concentration: 3

• General concentration: the market has a high concentration, so it is difficult to enter into it. In 2015

airplanes producers where only two (Airbus & Boing). So, there are few players with high shares.

• Geographical concentration: often these few players are concentrated in a geographical area. Many B2B

relationships are between companies that are geographically close one to each other.

2) For what concerns the international aspect of business, we know that:

• Compared to B2C market, B2B market shows minor diversity at global level. B2B marketing is increasingly

taking place on a global scale. Compared with B2C markets, where tastes and culture can have a massive

impact on the acceptability of goods across borders, B2B products are much less diverse in terms of

functionality and performance (trading associations have been instrumental in setting agreed standards

for certain industries across the World).

• Globalization and technological development impact on similar way. The technological influence of the

Internet and other modes of communication have also facilitated international communication between

trading organizations. All this offers firms considerable opportunities to market their goods and services

to organizational customers worldwide.

3) Specific concentration and buyer power: if you are a B2B company, your business market is made by 100 clients

and you have 20% of them that make the 80% of your business. On average there is always this connection. So,

this 20% of clients must be managed carefully otherwise you will lose the 80% of your business, they are really

important. This is true both for big multinational companies and small companies. It is true both for the upstream

(supplier base) and downstream (customer base). You need to keep them and created repeated long-term and

repeated interactions.

That’s why business marketing is known also as “network marketing” since you need to develop network of

complex relationships. Each company has complex, crucial, valuable relationships with few other players (maybe

only one or two), both on the supply and distribution side. These important and really complex relationships refer

to relationship marketing.

4) We must introduce the concept of derived demand: the demand for business products is called derived demand

because the demand for industrial products is derived from the ultimate demand for consumer products. As a

result, business marketers must carefully monitor fluctuating trends and patterns in consumer markets. Let’s

consider the following example to understand what derived demand is: if you produce tires for cars, you depend

not only the number of tires ordered but also on the demand of cars. So, the demand of tires is a derived demand

which is derived from the final consumer. You need to study two levels of markets, the business and the consumer

(double level of markets).

5) Buying process and decision making: B2B organizational buying processes typically involve more people than

B2C purchases. Members of this group can include managers not directly involved with using the goods, but who

have a particular financial perspective of the purchase. Moreover, decisions are generally more rational in the

business buying process than in B2C markets. As well as financial considerations, they are also usually driven by

technical specifications. Managers working for any prospective firms hoping to win this particular contract clearly

have a lot of preparatory work to do in order to meet these demanding financial, technical, and legal criteria. 4

The significance of relationships and

Networks

EXCHANGE

TRANSACTION

Talking about the significance of relationships and networks, we have to make a distinction between exchange

transactions and exchange relationships: EXCHANGE

TRANSACTION

EXCHANGE

RELATIONSHIP

In B2B you don’t have exchange transactions, you have exchange relationships. The difference is that is the first

case nothing is generated in the between, while in exchange relationships something is generated inside. Each

EXCHANGE

B2B relationship is different: there is a high variety of exchange relationships.

RELATIONSHIP

Variety of exchange relationship: let’s take a look at the example of tires and the relationship between Pirelli and

fiat panda compared with the relationship with Ferrari. Why it is not a transaction, but it is a complex relationship?

In the case of Panda, which kind of tired does he need? Customer need safety, durability, convenience, they do

not look at the details such as measures etc. They need only basic tires, so Panda demands to Pirelli only basic

tires and Pirelli serves Panda with simple and basic tires. This is not a transaction, they have an exchange

relationship: they have agreed on how to collect information, setting the order, planning the logistics together,

planning the production, etc. Pirelli has to deliver constantly just-in-time tires to Panda in order to make sure that

Panda always have the tires when needed but also that it does not have too much left overs in the inventory. So,

for Panda the delivery and the order management are important. On the other hand, for Ferrari client’s tires are

really important. Ferrari will ask for special tires for special models with certain designs. So, tires must be designed,

customized, innovative, and the relationship is completely different with respect to the one with Panda. These

two are two completely different relationships. Remember that when we think about, for example, what Panda

wants, we refer to what Panda’s clients want. To sum up:

In conclusion, these are some implications for Marketing Managers:

1) From short-term transaction to long-term relationships. Focus on managing relationships and employ

Customers Relations Management (CRM) tools for:

• Identifying and categorizing customer segments

• Determining customers’ present and potential needs

• Visiting customers to learn about applications of products 5

• Developing and executing individual component of marketing to include sales, advertising,

promotions, service programs, etc.

2) Inter-firm collaboration underpinning effective S/DCM: the business system represented by a series of inter-

organizational relationships set up to support the buying and selling of goods has come to be termed the

‘supply chain’. ‘Demand chain management’ (DCM) starts with specific customer needs and attempts to

design the chain to serve those needs, instead of starting with the supplier/manufacturer and working

‘forwards’ as in SCM (customer-driven perspective). The flow of goods linking this chain is from top to bottom.

Other factors that serve to integrate the chain are flows of money and information and attempts at managerial

coordination and chain leadership by a focal firm. Note how B2B marketing takes place between all the actors

in the chain, and how B2C marketing can also

occur when the end user is a consumer, rather

than an organizational, customer. A

requirement of the supply/demand chain is that

each participating firm adds value in some way

to the goods flowing down it. For a business

customer, value is determined by the net

satisfaction derived from any transaction, and

not simply the costs of obtaining the goods or

services concerned. Value is relative to the

customer’s expectations and experience of

other offerings within any product category,

such as alternative (perhaps cheaper) sources of

goods or services. All the activities summarized

in the idea of a value chain have the potential to

incur cost but, crucially, also to create value.

Thus, primary activities such as bringing

materials or components into the firm,

converting them into products or services,

shipping them out to customers, and providing

marketing and servicing facilities, along with

secondary activities such as the appropriate

purchasing of materials, should all be combined to reduce cost or improve performance, such that customers

perceive they are gaining superior value. The notion of the value chain can be taken beyond its original internal

context to embrace how organizations can join together to provide a consistent stream of resources for their

customers

• Demand-driven supply chain

• Managing upstream and downstream relationships in a value chain perspective.

The goal of marketing activity has now shifted from a transactional, short-term focus towards a need to seek

and forge long-term relationships with targeted customers. An understanding of the principles of relationship

marketing (RM) can offer firms the potential to achieve sustainable competitive advantage in B2B markets.

Instead of just manipulating the marketing mix, what we attempt to manage under RM is the relationships

that are the context for trading. Inter organizational relationship (IOR) management is thus an important part

of strategy in business markets. Collaboration between firms over the development, supply, and support of

products and services is a core element of B2B marketing and S/DCM.

3) Build relationships with networks of stakeholders: ethical concerns are becoming an increasingly important

element of B2B marketing and purchasing as organizational stakeholders begin to question how their firms

have achieved their trading results. One basis is trust and trust derives from real P2P network, from personal