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PowerPoint by:

Ray A. DeCormier, Ph.D.

Central Connecticut State University

Chapter 7:

Managing Products for

Business Markets


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1. How to build a strong business-to-business (B2B) brand

2. The way in which sustainability strategies are transformingthe competitive landscape.

3. Strategic importance of providing competitively superiorvalue to customers

4. The various type of industrial product lines and the value of

product positioning

5. Strategic approach for managing products across stages ofthe technology adoption life cycle


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A business marketers marketplace identity is

established through:

Brand

Products Services

A brand is one of the firms most valuable

intangible assets.

Branding has emerged as a priority to

marketing executives.


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Product Management

Products are developed to fit the needs of the marketand are modified as needs change.

Tools such as

Market & demand analysis

Business market segmentation

Market potential forecasting

help marketers select markets and provide productsthat meet their needs.

Product policy is directly related to market selection.


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MARKETING FUNCTION: LEAD ROLE

Marketers tasks include evaluating:

1. Potential product/market fit

2. New market opportunities

3. Competition4. Strength & Weaknesses

Marketers lead role is to transform the firms skills

and resources into products & services that willenjoy positional advantages.


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Companies need to ask:

1. What do you want your company

name to stand for?

2. What do you want it to mean in thecustomers mind?


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Brand & Brand Equity Defined

Brand

Name, sign, symbol, logo or anything that

identifies and differentiates the product

from competitors

Brand equity

Set of brand assets and liabilities linked toa brand; it can add to or detract from

the value of the brand


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Customer-Based Brand Equity (CBBE)

Kevin Lane Keller defines CBBE:

The differential effect that customer brand

knowledge has on their response to market

activities and programs for the brand.

Brand Power relies on:

What customers have learned, felt, seen and

heard about the brand over time. How customers link their thoughts to

feelings, perception, imagination and

experience of the brand.


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CBBE model lays out 4 steps for building astrong brand:1. Develop deep brand identity2. Establish unique brand identity byhighlighting differences3. Employ marketing programs to elicit

positive brand responses4. Build brand relationships with loyalcustomers


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CBBE PYRAMID


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Brand Identity

To achieve brand identity, marketers mustcreate:

Brand salience something prominent

about the productBrand awareness ability to recall or

recognize the brand under differentconditions

Marketers need to create a clear connectionbetween the product and the brand name inmarkets where the product competes.


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Establishes an association in the customersmind that differentiates the brands meanings

There are various brand associations

Following example demonstrates two ways:

1. Brand Performance the way(s) aproduct/service meets customers functionalneeds

2. Brand Imagery The way(s) a brand meets

customers psychological or social needs

Brand positioning should incorporate bothpoints ofparity (breaks even to otherbrands) & points ofdifferences.


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Consumer Judgments:

1. Quality: Customers attitude towards brandsperceived quality with respect to value andsatisfaction

2. Credibility: Customer perceives brand to becredible with respect to expertise,trustworthiness & likeability

3. Consideration set: Extent to which customer

finds brand a viable option and worthconsideration

4. Superiority: Extent to which customerbelieves that brand offers advantages overcompetitive brands


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Consumer feeling a consumersemotional reaction to a brand Numerous feelings can be tied to

brands, i.e.: Warmth Fun Excitement Security Power Sexiness Functionality


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Consumer Brand

Resonance Final step is brand resonance, which

means forging a relationship. This

connection translates into:

Brand loyalty

Attachment

Active engagement

Word-of-mouth satisfaction & advertising


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CBBE Pyramid


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Brand Strategy Guidelines

The Brand Mantra

Develop a coherent branding strategy and then build on thereputation of that brand

A firm with a strong brand can command a price premium

for its products or services. However, to sustain that

premium, important points of differentiation must beclearly communicated to target customer segments

Successful branding requires a well-conceived market

segmentation plan


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Product Quality and Customer Value

18


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International competition has madequality an important strategic issue.

As a prerequisite, suppliers need to meetISO-9000 standards.

The quest for improved quality permeatesthe entire supply chain.


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Meaning of Quality as

It Moves through Stages

Stage One - To be successful:

1. Products must conform to standards

or

2. Meet customer specifications and

possess features the customer wants


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MEANINGOF QUALITYAS

IT MOVESTHROUGH STAGES

Stage Two: Emphasizes that quality is more

than a technical specialty and that pursuit of

quality should drive the entire business cores

processes.

Overall value is determined by the service

rendered, product performance and productsprice relative to competitors.


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Stage Three: Buyers focus on market-perceived quality and value versescompetitors offerings with the objective ofnot only zero product defects but zerocustomer defections.

The objective is to have a cadre of suppliersthat can produce quality products that keepscustomers LOYAL!


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Sustainability is an emerging megatrend that istransforming the competitive landscape, forcingcompanies to change the way they think aboutproducts, processes, and business models

Sustainability is a mother lode of organizationaland technological innovations that yield bothbottom-line and top-line returns. Becomingenvironmentally friendly lowers costs becausecompanies end up reducing the inputs they use In addition, the process generates additional

revenue from better products or from newbusinesses

24


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Companies that excel in sustainability do oldthings in new ways such as outperforming

competition on regulatory compliance andenvironment-related cost management.

Leading performers also do new things in newways such as redesigning products, processes,

and whole systems to optimize natural resourceefficiencies across their value chains.

Sustainability innovations transform corebusinesses and even lead to the creation of new

businesses and new sources of differentiation GEs Ecomagination initiative provides a rich

illustration of the powerful growth opportunities

25


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What Value Means to Business Customers

Customer Value

Benefits

Sacrifices

Core

Add-on

Price

Acquisition

costs

Operationscosts

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, Understanding Customer Value,

Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 47.


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Benefits & Sacrifices

Benefits:1. Core requirements a product must possess

for a relationship to exist.

2. Add-ons attributes that create

differentiation & provides more value thancompetition.

Sacrifices:

1. Price

2. Acquisition costs (e.g., ordering costs)

3. Operations costs (Can defect free parts really

lower operation costs?)


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What matters most?

#1 - Add-ons: All qualified vendors provide equalcore, so add-ons are the differentiators, whichinclude:

a. Differing attributesb. Relationshipsc. Adviced. Product support: Various Services

Pre & Post sale

#2 Trust

#3 Attention to reducing customer costs


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Product Policy

Involves all decisions concerning

Product

Services

that a company offers.

Proper product policy provides the

opportunity to attain and maintain a

competitive advantage by focusing

on core competencies.


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Four Types of Industrial Product Lines

1. Proprietary/

catalog products

2. Custom-built

products

3. Custom-designed

products

4. Industrial

services


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Industrial Product Line Defined

Proprietary: Comes only in certain configurations and

are available in anticipation of orders. The product

decision is to add, delete or reposition it.

Custom-built: Product(s) offered to meet one or a small

group of customers need. The product decision centers

on offering a proper mix of additional options.

Custom-designed: Unique item is created to meet one

or more customers need. Product is defined in terms of

companys capability, and consumer buys thatcapability.

Industrial service: Buyer buys companys capability to

do certain task (i.e., maintenance, technical service or

management consulting).


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Defining the Product Market

Defining the product market is fundamentalto a sound product policy decision.

Even if a company has a successful product, it

needs to always be on the alert to consideralternative (technological) ways to satisfycustomer needs.

This forces the company to be open minded

about product innovation. The keeps the company in touch with the

market.


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1. Customer function dimension.

Technological dimension

Customer segment dimension

Customer function dimension

1. Customer function dimension.

Value-added system dimension


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Customer Function What functional benefits does the product/serviceprovide for the buyer?

TechnologicalFunction

Are there alternative ways a particular function canbe performed?(Example: Communications: cell phone, email,pager, notebook computer)

Customer Segment Various customer segments have distinct functionalneeds. What are they and how can they be served?

Value-Added System Many services are offered by competing servicechain of vendors. Sometimes they are separate,

but other times they merge their services to offer amore overall competitive product.(Example: Product provider (Motorola) aligns withservice provider (AT&T) to offer a more efficientproduct/service)


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Successful companies need to plan for both todayand tomorrow by assessing their products, theirmarkets and their customers future needs. This is done by understanding:a. The present market and its future needs.b. WHAT the future might offer, what problems might exist,what products will solve them?c. WHO are the:

Undershot consumers Overshot consumers Non-consumers

d. WHY is that?


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Marketing Plan for Industrial Products

Having a strategic marketing plan for anindustrial product is most vital for aproduct to be successful.

One way to start is to develop a

Product Positioning strategy.


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A products competitive position inthe market is referred to as theproducts position.

It is found by measuring buyersperceptions and preferences inrelation to competitors.

The first question is: What are thedeterminant attributes that play acentral role in the buyingdecision?


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Perceptual Map and Positioning Strategy

for Levi Strauss Products


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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations

Steps in Product Positioning Process

1. Identify relevant competitive products.

2. Identify determinant attributes that customers use todifferentiate among options and determine their preferredchoices.

3. From sample of existing and potential customers, collect theirratings of each product on determinant attributes.

4. Determine own products current position versus competingofferings for each market segment.

5. Examine fit between preferences of market segments andcurrent product position.

6. Select positioning or repositioning strategy.


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Positioning or Repositioning Strategy

If change is needed, what strategy(s) should beemployed?

I. For some attributes the product manager may

want to:a. Increase the importance of an attribute to the

customer

b. Increase the difference of their attribute to that

of their competitors (i.e., increased efficiency,decreased cost, better training, etc.)


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II. If the product is truly better than acompetitors but is not perceived that way,product managers need to do a better jobof communicating the message to themarket to bring it in line with reality.III. A products competitive advantage can beadvanced by improving its level ofperformance on determinant attributesthat buyers emphasize.


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Technology

Discontinuous Innovations: Truly newproducts that require the marketplace todramatically change their behavior withthe promise of gaining dramatic new

benefits.

Examples:

o Cars replaced horse-drawn carriageso Computers opened the doors to

revolutionary new products

o Internet changed the way we do

business


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Innovation: Classes of Customers

Technology enthusiasts

Visionaries

Pragmatists

Conservatives

Skeptics

Laggards


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Technology Enthusiasts - Innovators

Innovators:

a. Explore latest innovations

b. Possess a significant influence overproduct perception by others

c. Usually lack resource commitments

d. Try things out but move on to new ideasas they come about


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a. These customers desires to exploitinnovation for a competitive advantage.

b. These customers are true

revolutionaries in business, but newtechnologies need to be morecustomized for this group (i.e.,expensive).

c. Government visionaries have access toresources but usually demandmodifications to the product that aredifficult for innovators to provide.


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Pragmatists

Early MajorityThese customers:

a. Make the bulk of technological purchases

b. Believe in technological evolution (notrevolution)

c. Seek products that have proven themselves


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These customers are:

a. Pessimistic about receiving any benefits

from new technologiesb. A sizable group who are price sensitivec. Reluctantly purchase technological

products to avoid being left behind


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Skeptics - Laggards

These are potential customers

They are ever-present critics of hype

around new technology

St t f Hi h T h


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Strategy for High Tech

Adoption1. Put innovative products in the hands of

technology enthusiasts.

2. After a while visionaries will see the value of

the new technology and will begin to view it

in business terms.

3. New technologies usually enjoy a

honeymoon reception from enthusiasts and

visionaries, however sales begin to falter a

chasm forms


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Chasm

A Chasm is a period of time where sales falter (andsometimes plummet) due to differences betweenVisionaries and Pragmatists.

Visionaries want change (revolution) whereas

Pragmatists want change (evolution). ButPragmatists make most buying decisions inorganizations.

Pragmatists are the gateway to the mainstreammarket. If that chasm gap cant be bridged, oftenproducts become part of ancient history.


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Strategies to Cross the Chasm

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One strategy to cross the chasm is for the

marketer to provide pragmatists with 100%

solutions to their problems using the new

technology.

Too many companies only supply a part of asolution. They are trying to be something to

all, not 100% to some. That is unacceptable to

pragmatists.

Goal: Win a niche foothold with a small groupof pragmatists as quickly as possible that

is what crossing the Chasm means.


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Bowling Alley Strategy

Each market is like a bowling pin. Themomentum of moving one pin (with goodtechnology products) successfully carries

over into surrounding segments.

The bowling alley is where mainstreammarket segments begins to accept thenew product, but it still has a way to go.

Strategy: Win one niche, then work on

another.


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This strategy assumes a product has verywide appeal. The sellers strategy is to:1. Move as quickly as possible in getting theproduct out to the market.2. Build distribution ASAP.3. Drive price down to next lower price breakASAP.

This strategy demands product leadership,operational excellence in manufacturing anddistribution.


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Main StreetOnce the mainstream has adopted the product,the aftermarket phenomenon occurs:

a. Mass marketers of the products begins to subside.

b. Competitors force supply to exceed demand.

c. Prices fall.d. High tech product becomes a commodity.

e. Profit growth can no longer come from selling thecommodity.

f. Profit can only come from extending the platform of theproduct to other niche-specific needs.

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