11 business-to-business marketing b2b branding haas school of business uc berkeley fall 2008 week 8...
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11
Business-to-Business MarketingB2B Branding
Haas School of BusinessUC Berkeley
Fall 2008Week 8
Zsolt Katona
Today
• Case Discussion: Barco
• Case Discussion: Intel Inside
• A few thoughts on B2B Branding
•How to measure brand equity? Conjoint analysis
Most valuable global brands
Brand Value (million $) Change
1. Coca-Cola 66,667 2%
2. (3.) IBM 59,031 3%
3. (2.) Microsoft 59,007 1%
4. GE 53,086 3%
5. Nokia 35,942 7%
6. Toyota 34,050 6%
7. Intel 31,261 1%
8. McDonald’s 31,049 6%
9. Disney 29,251 0%
10. (20.) Google 25,590 43%
What is the value of a brand?
Marketing Budget
Sales
0
Is brand equity important in B2B?
Brand Value (million $) Change
1. Coca-Cola 66,667 2%
2. (3.) IBM 59,031 3%
3. (2.) Microsoft 59,007 1%
4. GE 53,086 3%
5. Nokia 35,942 7%
6. Toyota 34,050 6%
7. Intel 31,261 1%
8. McDonald’s 31,049 6%
9. Disney 29,251 0%
10. (20.) Google 25,590 43%
6
Some argue that
• B2B buyers are rational and not influenced by brands
• B2B purchases are about the relationship, only sales reps matter
• Price is the only thing that matters
• B2B products are too complex
• B2B companies sell to few customers
But
• Buyers are people with emotions• People do not even know that their emotions are
affecting their decisions• They may face an overwhelming choice• Purchasing department may not be as technically
sophisticated as engineers (high-tech)• Relationship benefits are hard to objectively measure• Signaling quality
Brand value comes from
• Greater willingness to try• Greater likelihood that the product is purchased• Willingness to pay a price premium• Less sensitive to price increases• Less inducement to try a competitive offer
Differences between B2C and B2B
• Customer risk is a bigger factor (“You never get fired for buying IBM”)
• Buyer is usually not a single decision maker• Brand loyalty is usually higher in B2B, but• Building brand equity takes more time
• Special case: hybrid brands (microsoft, GE)
Small brands
• Acme Brick – brick manufacturer• $1.5 million marketing – mostly image building• Partnerships with sports celebrities, PR, charity
events• 100-year product guarantee (ind. stand.: 3 to 5)• 84% brand preference• Estimate: brand is worth 10% price premium• Sales: $200 million, brand is worth $20 million
annually
Leading global brands
• The CEO is a brand cheerleader• Understanding how a strong brand reduces
commercial risk (customers’ customers)• Efforts are focused on a global corporate brand, not
individual products• Coordination of company appearance • Rigorously measure the payback on marketing
expenditures
How to measure brand value?
Conjoint AnalysisGoal:
To estimate consumers’ preference structure (valuationof attributes) by forcing them to trade-off product attributes.
Major uses:
Measure brand value, New product design, Design modification, Pricing,Price discrimination, Benefit segmentation.
Examples of Conjoint useCONSUMER NONDURABLES
Bar soapsHair shampoosCarpet cleanersSynthetic-fiber garmentsGasoline pricingPanty hoseLawn chemicals
FINANCIAL SERVICESBranch bank servicesAuto insurance policiesHealth insurance policiesCredit card featuresConsumer discount cardsAuto retailing facilitiesHigh-tech maintenance service
INDUSTRIAL GOODSCopying machinesPrinting equipmentFacsimile transmissionData transmissionPortable computer terminalsPersonal computer design
OTHER PRODUCTSAutomobile stylingAutomobile & truck tiresCar batteriesEthical drugsToaster/ovensCamerasApartment design
OTHER SERVICESCar rental agenciesTelephone services & printingEmployment agenciesInformation-retrieval servicesMedical laboratoriesHotel design
TRANSPORTATIONDomestic airlinesTranscontinental airlinesPassenger train operationsFreight train operationsInternational Air Transportation AssociationElectric car design
Main Conjoint steps
• Define Product Concept• Define relevant attributes (focus groups, interviews)• Define levels for each attribute based on input from
– R&D– Saturation effects (focus groups)
• Collect data– Full profile procedure– Trade-off matrix
• Interpret data– Attribute level valuations– Attribute importance– Simulate scenarios– Price, market share
Conjoint exercise: Choosing a laptop computer for personal use
Assume alternative laptops only differ in three characteristics (each having two possible levels):
1. Brand (Lenovo or Dell)
2. Weight (3lb or 5lb)
3. Price ($1000 or $2000)
Task 1. Rank order the following combinations (1= most preferred, 8= least preferred)
Once finished, assign a rating to the alternatives. (100 is highest, 0 is lowest)
RANK RATING Product _____ _____ Lenovo, 5lb, $1000_____ _____ Dell, 3lb, $1000_____ _____ Dell, 5lb, $2000_____ _____ Lenovo, 3lb, $2000
_____ _____ Lenovo, 3lb, $1000_____ _____ Dell, 5lb, $1000_____ _____ Dell, 3lb, $2000_____ _____ Lenovo, 5lb, $2000
Pick one level of one attribute. What is the average rating for it? Do the same for all 6 attribute levels.
Average rating:Lenovo _______Dell _______3 lb _______5 lb _______$1000 _______$2000 _______ How much is 1 unit of rating worth?
Task 2. Assume “customer utility” is linear and additive. What is the customer utility of a Dell PC weighing 4 lbs for $1500?
V(Dell) = V(4 lb) = V($1500) =
V(Dell, 4, 1500) = V(Dell) + V(4lb) +V($1500) =
Assume market share is proportional to “value”.What is this PC’s market share if it competes with a Lenovo, 3 lb, $2000 machine and a Dell, 5lb, $1000 machine?
V(Dell,4, 1500) = V(Dell, 5, 1000) = V(Lenovo, 3, 2000) = --------------------------------------Total:
MS(Dell, 4, 1500) =
Task 3. Calculate attribute importance by taking the maximum difference in average attribute ratingsdividing it by the sum of all the differences in attribute scores.
Vmax(brand) = Vmax(weight) = Vmax(price) =
Importance of brand: ______Importance of weight: ______Importance of price: ______
An example with cars
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Example: CarsRelative importance of features in car choice (%)
5 10
1510
2010 10
1015
15
1020
2015
2015
10
35
50 5040 35
4550
40
1515 1510 55
5
1010
105
15
15
5
55 15105
20
555
Brand
Engine
Personal possession
Comfy transporter
Gadget Discreetlabel
Good value
Price
Warranty
Exterior specInterior spec
Financial transaction
Jewellery
Performance emblem
Conjoint summary thoughts
• Always use a professional market research firm.
• A key issue is finding the relevant attributes
• Consumers need to be familiar with the category (e.g. Electric car)
• There can only be a few attributes and levels
• Can include abstract attributes (e.g. brand)
• Does additive utility model make sense?
• What about interaction between attributes?
Branding Lessons
• Branding is a basic way to protect one’s market from commoditization
• In business markets, beyond product benefits, the brand also summarizes – Process benefits (e.g. MIS systems, delivery)– Relationships benefits (partnership, responsiveness…)
• Branding works because “perceptions matter”
• Branding has a strategic role in terms of– Resource allocation (R&D vs. marketing)– Going to market strategy (push or pull)– Competitive strategy (positioning)