Download - Session-11 to 15 B2B Marketing
Session-11 to 15
Chapter 6 & 7Strategy Formulation in Industrial
Markets : STP & PLC
Discussion Topics
• Assessing Market Opportunities (STP in B2B Marketing)
• Industrial Product Life Cycle• New Product Development
Know the Procedure followed for segmenting
industrial markets
Identify the Variables (bases) used for segmenting
business markets
Evaluate and select the target market segments
and strategies
Develop effective positioning strategies
PROCEDURE USED IN MARKET SEGMENTATION
The procedure has 3 stepsThe procedure has 3 steps
Conduct marketing researchConduct marketing research to collect data / information on to collect data / information on
existing and potential buyers, and competitorsexisting and potential buyers, and competitors
Carry out data analysisCarry out data analysis by using statistical techniques of by using statistical techniques of
factor and cluster analysis in order to identify different factor and cluster analysis in order to identify different
segmentssegments
ProfileProfile each segment by its characteristics like application each segment by its characteristics like application
(or/use), location, volume of requirements, etc.(or/use), location, volume of requirements, etc.
VARIABLES (BASES) USED IN SEGMENTING INDUSTRIAL (BUSINESS) MARKETS
Industrial market segmentation is done first based on “Macro Industrial market segmentation is done first based on “Macro Variables” , and then subdivided into “Micro Variables”, if Variables” , and then subdivided into “Micro Variables”, if necessary.necessary.
Macro Variables.Macro Variables. These segmentation variables are These segmentation variables are
identified based on industry/organizational characteristics identified based on industry/organizational characteristics like.like.
(i) Type of industry / Type of customer.(i) Type of industry / Type of customer.
(ii) Company size / Usage rate.(ii) Company size / Usage rate.
(iii) Customer location / Geographical area.(iii) Customer location / Geographical area.
(iv) End-use / Application / Benefits of a product. (iv) End-use / Application / Benefits of a product.
Micro Variables.Micro Variables. Macro segments are further subdivided Macro segments are further subdivided
into micro – segments’, if needed. Micro Variables are into micro – segments’, if needed. Micro Variables are
based on purchasing decisions like based on purchasing decisions like
(a) Customer interaction needs(a) Customer interaction needs
(b) Organizational capabilities (b) Organizational capabilities
(c) Purchasing policies(c) Purchasing policies
(d) Purchasing criteria(d) Purchasing criteria
(e) Personal characteristics(e) Personal characteristics
Sequential Segmentation Process.Sequential Segmentation Process. Often, business Often, business
marketers use more than one variable to subdivide the marketers use more than one variable to subdivide the
market. market.
EVALUATING MARKET SEGMENTS
Criteria / factors used for evaluating each market segment are :Criteria / factors used for evaluating each market segment are :
(i) Size and Growth (i) Size and Growth
(ii) Profitability Analysis (ii) Profitability Analysis
(iii) Competitive Analysis (iii) Competitive Analysis
(iv) Company Objectives and Resources(iv) Company Objectives and Resources
TARGET – MARKET STRATEGIES
Based on above criteria, business marketer selects one or more Based on above criteria, business marketer selects one or more market segments as target segments. Next , the marketers market segments as target segments. Next , the marketers should decide which of the following broad target market should decide which of the following broad target market strategies the company should adoptstrategies the company should adopt
(a) Concentrated or Niche marketing strategy(a) Concentrated or Niche marketing strategy
(b) Differentiated marketing strategy (b) Differentiated marketing strategy
(c) Undifferentiated marketing strategy(c) Undifferentiated marketing strategy
PROCEDURE FOR DEVELOPING A POSITIONING STRATEGY
Following steps are involved :Following steps are involved :
(i) (i) Identify which attributes / benefitsIdentify which attributes / benefits target target customers customers
consider important while buying a product / service. This consider important while buying a product / service. This information is obtained through a market research study . The information is obtained through a market research study . The variables considered for differentiating a company’s product variables considered for differentiating a company’s product from competing products are.from competing products are.
(a) Product variables,(a) Product variables,
(b) Service variables, (b) Service variables,
(c) Personal variables, (c) Personal variables,
(d) Image variables,(d) Image variables,
(ii) (ii) Select one or more major benefits (or attributes)Select one or more major benefits (or attributes) to differentiate to differentiate the company from its competitorsthe company from its competitors . (USP) . (USP)
(iii)(iii) Use Perceptual Mapping Technique.Use Perceptual Mapping Technique. To decide To decide
on positioning strategy, this technique is used, on positioning strategy, this technique is used,
after getting customers’ perceptions through after getting customers’ perceptions through
marketing research.marketing research.
(iv) (iv) Communicate Positioning StrategyCommunicate Positioning Strategy. . The firm The firm
should decide and communicate its positioning should decide and communicate its positioning
strategy to target customers, through sales strategy to target customers, through sales
force, advertising in journals, internet, and trade force, advertising in journals, internet, and trade
showsshows
Excellent Product Quality
StrongCustomerService
Low Product Quality
1.0
0.8
0.6
0.4
0.2
.D
.C
.B- 0.2
- 0.4
- 0.6
- 0.8
- 1.0
1.0 0.8 0.6 0.4 0.2 - 0.2 - 0.4 - 0.6 - 0.8 - 1.0
.A1
A
WeakCustomerService
Perceptual MappingTechnique
SUMMARY OF CHAPTER - 6
Procedure used in market segmentation includes (i) Marketing research, (ii) Data analysis (iii) Profiling each segment
Variables used for segmenting industrial markets include macro variables and if needed, micro variables. Sequential segmentation process is often used
Criteria used for evaluating market segments are (i) size and growth , (ii) Profitability (iii) Competitive analysis (iv) Company Objectives and Resources
Target market strategies are (a) Concentrated or Niche marketing, (b) Differentiated marketing, (c) Undifferentiated marketing strategy
Steps used for developing positioning strategy include : (i) Identifying attributes / benefits, (ii) Selecting one / more major benefits, (iii) Using perceptual mapping technique, (iv) Communicating positioning strategy.
CHAPTER 7CHAPTER 7
PRODUCT STRATEGY
AND
NEW PRODUCT DEVELOPMENT
Define an Industrial Product
Understand Changes in the product strategy
Know Product Life cycle (PLC) Theory and its application
Develop Product strategies for existing products
Understand new product development
Know impact of technology and high-tech marketing
Learn Marketing of industrial services
DEFINATION AND MEANING OF AN INDUSTRIAL PRODUCT
Defination Defination : Its is a physical thing as well as a Complex set of : Its is a physical thing as well as a Complex set of
economic, technical, legal and personal relationship between a economic, technical, legal and personal relationship between a
buyer and a seller. buyer and a seller.
Meaning of a Total Product Package :Meaning of a Total Product Package : It includes basic properties It includes basic properties
(with fundamental benefits), enhanced properties (with tangible (with fundamental benefits), enhanced properties (with tangible
benefits), and augmented properties (with intangible benefits).benefits), and augmented properties (with intangible benefits).
In a competitive market,In a competitive market, business marketers must understand business marketers must understand
target customers’ perceptions of a total product package and offer target customers’ perceptions of a total product package and offer
the same better than competitors.the same better than competitors.
CHANGES IN PRODUCT STRATEGYCHANGES IN PRODUCT STRATEGY
Business marketers must understand that a product Business marketers must understand that a product
strategy is dynamic and flexible.strategy is dynamic and flexible.
It changes due to changes inIt changes due to changes in
(i) Customer needs(i) Customer needs
(ii) Technology(ii) Technology
(iii) Government Policies / Laws(iii) Government Policies / Laws
(iv) Product Life – Cycle(iv) Product Life – Cycle
A General Model of Product Life – Cycle (PLC)
Rupees
IndustrySales
IndustryProfits
Maturity DeclineGrowthIntroduction
APPLICATION OF PRODUCT LIFE – CYCLE THEORY TO MARKETING STRATEGY
Introduction StageIntroduction Stage : : Marketing Strategy should focus on Marketing Strategy should focus on market development for slowly accepted products. For market development for slowly accepted products. For rapidly accepted products, a competitive strategy rapidly accepted products, a competitive strategy (Skimming pricing or Competitive pricing or Superior quality (Skimming pricing or Competitive pricing or Superior quality product or Basic properties) should be evolved.product or Basic properties) should be evolved.
Growth StageGrowth Stage : :To take advantage of high growth of sales To take advantage of high growth of sales and profits, the marketing strategy should concentrate on (i) and profits, the marketing strategy should concentrate on (i) Improving product design or adding product features (ii) Improving product design or adding product features (ii) Improving distribution and (iii) Reducing price, as increased Improving distribution and (iii) Reducing price, as increased sales and production reduce the costs.sales and production reduce the costs.
Maturity StageMaturity Stage As competition increases and profits As competition increases and profits
decline, marketing strategy should concentrate on (i) cutting decline, marketing strategy should concentrate on (i) cutting
costs, (ii) keeping existing customers satisfied (iii) entering costs, (ii) keeping existing customers satisfied (iii) entering
new markets. (iv) modify product, thru’ improvements in new markets. (iv) modify product, thru’ improvements in
quality / features / style.quality / features / style.
Decline StageDecline Stage Since both sales and profits decline, Since both sales and profits decline,
marketing strategy should focus on marketing strategy should focus on (i) substantial (i) substantial
reduction in costs, (ii) develop a substitute product, (iii) reduction in costs, (ii) develop a substitute product, (iii)
withdraw the product slowly from the market.withdraw the product slowly from the market.
PRODUCT STRATEGIES FOR EXISTING PRODUCTS
Business marketers should take the following steps :Business marketers should take the following steps :
Evaluate the performance of existing products by using Evaluate the performance of existing products by using
““product evaluation matrixproduct evaluation matrix””
Examine the relative strengths and weaknesses of the Examine the relative strengths and weaknesses of the
company’s products by using “ company’s products by using “ perceptual mapping” perceptual mapping”
techniquetechnique
Decide the product strategies, based on above analysisDecide the product strategies, based on above analysis
PERFORMANCE EVALUATION OF EXISTING PRODUCTS
Example : A material handling Co.Example : A material handling Co. (i) Product = P (Pallet Truck)(i) Product = P (Pallet Truck)
Last 3 year’s average performance figures areLast 3 year’s average performance figures are• Industry sales growth = 25%, Company sales growth = Industry sales growth = 25%, Company sales growth =
30%30%• Market Share = 30% (Dominant) , Profitability = As per Market Share = 30% (Dominant) , Profitability = As per
TargetTarget
(ii) Product = S (Stackers)(ii) Product = S (Stackers)• Industry Sales growth = 16% (Stable) ; Company Sales Industry Sales growth = 16% (Stable) ; Company Sales
Growth = 15% (Stable)Growth = 15% (Stable)• Market Share = 12% (Average) ; Profitability = Below Market Share = 12% (Average) ; Profitability = Below
TargetTarget
Product Evaluation MatrixProduct Evaluation Matrix
Company Sales Decline Stable Growth
ProfitabilityIndustrySales
MarketShare
BelowTarget
Target AboveTarget
BelowTarget
BelowTarget
Target TargetAboveTarget
AboveTarget
Growth
Dominant
Average
Marginal
Stable
Decline
Dominant
Dominant
Average
Average
Marginal
Marginal
P
S
PERCEPTUAL MAPPING TECHNIQUEPERCEPTUAL MAPPING TECHNIQUE
HighQuality
High Price
Low Price
LowQuality
* *AA1
B
C
Firm A’s product quality is perceived to be “average” by Firm A’s product quality is perceived to be “average” by
customers, compared to its competitors B & C. Firm A should try customers, compared to its competitors B & C. Firm A should try
to move to a new position of superior quality at a reasonable to move to a new position of superior quality at a reasonable
(average) price to improve its profitability.(average) price to improve its profitability.
DECIDE PRODUCT STRATEGIESDECIDE PRODUCT STRATEGIES
(USE BCG Matrix – it can help your decision making)
(i) Maintain / Continue the product and/or its marketing (i) Maintain / Continue the product and/or its marketing strategystrategy
(ii)(ii) Modify the product and/or change marketing strategyModify the product and/or change marketing strategy
(iii) Drop / eliminate the product(iii) Drop / eliminate the product
(iv) Add new product(iv) Add new product
CLASSIFICATION OF NEW PRODUCTSCLASSIFICATION OF NEW PRODUCTS
(i) Products that are new to the world & innovative(i) Products that are new to the world & innovative
(ii) Products that are new to the company, but not new to the world(ii) Products that are new to the company, but not new to the world
(iii) Improvements / Revision to the existing products(iii) Improvements / Revision to the existing products
(iv) Addition to the existing products (iv) Addition to the existing products
(v) Repositioning existing products to new market segments(v) Repositioning existing products to new market segments
(vi) Products with substantial cost reductions without reduction in (vi) Products with substantial cost reductions without reduction in
performanceperformance
NEW PRODUCT DEVELOPMENT PROCESSNEW PRODUCT DEVELOPMENT PROCESS
It consists of 7 Stages :It consists of 7 Stages :
(i) Idea generation, (ii) Idea Screening, (iii) Concept development and testing, (i) Idea generation, (ii) Idea Screening, (iii) Concept development and testing,
(iv) Business analysis, (v) Product development, (vi) Market testing, & (vii) (iv) Business analysis, (v) Product development, (vi) Market testing, & (vii)
CommercializationCommercialization
IMPACT OF TECHNOLOGYIMPACT OF TECHNOLOGY
Technological innovations create new products / services that are new to
the world. Examples of these innovations, called break through
technology are :
(i) (i) Technological inventions of 1940s of vacuum tube and amplifier Technological inventions of 1940s of vacuum tube and amplifier
circuit created new products / services like radio, wireless telegraphy, circuit created new products / services like radio, wireless telegraphy,
and telephone serviceand telephone service
(ii)(ii) Technological inventions of 1950s & 70s of transistor, integrated Technological inventions of 1950s & 70s of transistor, integrated
circuit (IC), microprocessors have applications in new products like TV circuit (IC), microprocessors have applications in new products like TV
sets, movie Cameras, Computers, Calculators, Mobile phones, Printers sets, movie Cameras, Computers, Calculators, Mobile phones, Printers
etc.etc.
(iii)(iii) Digital revolution of information technology and the internet Digital revolution of information technology and the internet
have improved company and consumer capabilitieshave improved company and consumer capabilities
TYPES OF MARKETING SITUATIONS
BetterMousetrapMarketing
High-techMarketing
High-fashionMarketing
Low-techMarketing
High
Low
Low
Market
High
Uncertainty
TechnologicalUncertainty
MODIFIED TECHNOLOGY ADOPTION LIFE CYCLEMODIFIED TECHNOLOGY ADOPTION LIFE CYCLE
This is suited to high–tech marketing This is suited to high–tech marketing
Time of Adoption of Innovations
Deep Gap
Innovators
2½%
13½%
EarlyAdopters
34%34%
16%Laggards
Early Majority
Late Majority
HIGH – TECH MARKETING STRATEGYHIGH – TECH MARKETING STRATEGY
Target a niche marketTarget a niche market
Plan whole product propertiesPlan whole product properties
Develop partnershipsDevelop partnerships
Unique positioning strategyUnique positioning strategy
Effective Communication StrategyEffective Communication Strategy
Multi – Channel distribution strategyMulti – Channel distribution strategy
Skimming pricing strategySkimming pricing strategy
Marketing of Industrial Services Marketing of Industrial Services
Classifications of Industrial Services Classifications of Industrial Services
Materials
Components
(Steel, Ball Bearings)
Personal
Computers
Hotels
for
Conferences
Good
Transportation
Pure
Tangible
ProductMajor
Product,
Minor
Service
Equal
Product
&
Service
Major
Service,
Minor
Product
Pure
intangible
service
Legal
Unique Characteristics of services and Unique Characteristics of services and
marketing Implications.marketing Implications.
Characteristics Marketing Implications Examples
1. Intangibility (cannot be seen / felt, before buying)
!!
Buyers see evidence of service qualitySellers tangibilise the intangible
! Management Consultancy & EDPs.
2. Inseparability (Production & consumption at the same time)
!
!
Effective interaction depend on service providers.Requires effective recruiting and training of service providers.
! Repairs to machines & Courier service.
3. Variability (Service quality varies)
!!
Uniform quality is difficultFocus on quality & automation
! Management education & marketing research.
4. Perishability (Cannot be stored) !
!Demand fluctuates.Use methods to match demand &
capacity.
! Airlines seats & Warehouse space.
5. Non-ownership (Buyer uses a service, but cannot own it)
! Advantages of non-ownership :reduction in costs & flexibility
! Hotel and car rental services.
SUMMARY OF CHAPTER - 7
PRODUCT STRATEGYS & NEW PRODUCTS DEVELOPMENTPRODUCT STRATEGYS & NEW PRODUCTS DEVELOPMENT
Industrial Product is a physical thing and also a complex set of economic,
technical, legal and personal relationship between a buyer and a Seller
Product Strategies are changed due to changes in customers needs,
technology, government policies or laws, and product life – cycle
Product life cycle (PLC) concept is used to develop marketing strategies
at different stages of PLC
Product strategies for existing products are developed by (i) evaluating
the performance of existing products, using “product evaluation matrix ,”
(ii) Studying the strengths and weaknesses of existing products, using
“perceptual mapping” technique.