II. Lecture
“Business Marketing in a Changing Global Environment”
This discussion focuses on some of the day-to-day considerations the business marketer faces in
organizing and operating in the increasingly complex business-to-business marketing setting. Students
may have difficulty identifying with the business marketing process since few have had any direct
connection with the process. For this reason, the discussion focuses more on some of the rules or
guidelines and allows the instructor an opportunity to add various current examples.
The discussion begins with an overview of the changes in the business-marketing environment and
then moves through some of the most important rules for the business marketer. It concludes with a
discussion of the implications of some of these concepts in industry.
Teaching Objectives
To stimulate students to think about the critical issues in business marketing.
To consider how to proceed with the considerations and strategies related to business marketing.
To discuss some specific approaches to help the marketer more effectively meet his or her
business-to-business marketing objectives.
Discussion
INTRODUCTION
In this era of fast-paced marketing change, mistakes can be and frequently are fatal for the unwary or
lackadaisical. This is especially true in the business-marketing arena. In fact, some of the “Must” items
can turn into “Never!” depending on the industry, product, service, offer, and positioning in the
marketplace.
There are as many or more variables in business marketing than in consumer marketing. Everything
depends on the way the product or service is distributed and sold, the seasonality of demand for the
product, the length of time that it takes to sell the product, whether the product is sold directly through
the mail or leads are created for the sales force, the details of the offer, credit availability, size of the
order, and much more.
RULES OF BUSINESS–TO-BUSINESS MARKETING
The first rule is that the business marketer has to invest considerable time and effort to prepare to deal
with customers in the business-to-business marketplace. Within the “B-to-B” arena, it is essential to
know what is going on with all the significant players in the industry. It is a well-known rule that
professionals ask around in the industry. They take advantage of various business-to-business
direct-marketing programs by examining every piece of direct mail received.
Another rule is that if you are likely to be the other firm’s customer, they could be your customer as
well. Professional buyers check into all the likely, and unlikely, industry periodicals they can think of.
there will be selling parallels that can be carried from industry to industry.
An old adage in business marketing holds that typically about 40 percent of business-to-business direct
marketing results will come from the firm’s choice of database or list. Sadly, it is often the case that
the amount of time, thought, and energy put into the selection of the list for a direct-marketing effort is
OTHER CONSIDERATIONS
The next 40 percent of the results will be determined by the offer. Business marketers must consider
what they are trading with the audience in exchange for their time, commitment, money, or attention.
There are many variables such as credit, delivery, bulk pricing, and other similar arrangements.
Overall, the primary variable is the degree to which the potential supplier firm is able to differentiate
option.
The remaining 20 percent of the results are determined by the “creative” copy, art direction, headlines,
and the overall appearance of the marketing/advertising effort to create a positive attitude with the
client/customer about the supplier’s products. However, this is not the only variable, because the best
creative in the world is useless if it is not seen by the right people or does not include an offer that
provides visible value for the customer.
industry as individuals, understand their past buying patterns, their requirements, etc.
The business purchasing process usually has more players involved than the typical consumer
purchase effort. The user very often only recommends but does not specify; the user’s supervisor also
can recommend and sometimes can specify. Above these strata is the level that specifies; these are the
show them that they are so important that the supplier firm takes the trouble to learn as much as
possible about the customer firm. Every business marketer should start by knowing names, companies
and products, as well as critical buying concerns.
It is useful to keep in mind that the more the business marketer knows about his or her customers at
would be an example of a response file.
The alternative is a “compiled” file: a database that has been constructed from researched information.
For example, a list of purchasing agents, vice presidents of purchasing, and purchasing executives in
the umbrella industry compiled from membership rosters in various umbrella and purchasing industry
response file and a compiled file.
Why is one type of “file” preferable to the other? The answer is that there is one thing we know for
sure about the people in the response file: they have shown that they respond to direct marketing.
Individuals on a compiled database may or may not be responder material. Using a response list helps
the business marketer to stack the deck in her or his favor.
are key contact points.
Up until 1997, the business marketer could use SIC codes to segment the business market. If an
organization’s product is used to move liquids from one place to another on dairy farms, then the SIC
code is 0241. Anther possible SIC is 2033, Canned Fruits and Vegetables Manufacturing, or SIC 2061,
Cane Syrup, Made from Sugar Cane; or even SIC 2013, Canned Meats. All of these options could
NAICS uses a six-digit coding scheme. The first five digits are standard across North America. The
last, sixth digit, is country specific.
Business marketers also improve marketing operations and success by approaching others in the
potential customer company. They talk to sales people, staff engineers, etc., to identify the sales
Another approach is to ask company sales people for the names, titles, and addresses of 50 individuals
they want to sell to but who are buying from the competition; then market to their hit list.
It also pays to identify the “worst” customers, too. The comparison can be useful in designing a
program to migrate the “worst” customers into a better category. A customer who provides a large
marketing activities into a moneymaking machine.
The buying environment has become more challenging as organizations leverage technology in
support of the buying process. Reverse auctions have to a certain extent commoditized some products
and services. Marketing databases have become an increasingly important asset as organizations can
leverage all relevant data surrounding their relationships with businesses. The request for information
III. Background Article(s)
Issue: Developing B to B Campaigns
Source: “Constructing B-to-B Campaigns,” BtoB, April 16, 2001, p. 20.
Solid marketing fundamentals are most important component in building B-to-B campaigns 10 lessons
that B-to-B marketers should follow when building ad campaigns are provided includes being clear
about the campaign’s objective.
investments plummet.
Now, in the slow economy, where every ad dollar must be justified, marketers are going back to the
principles on which all effective ad campaigns are built.
In talking with a variety of advertisers and agencies for this special report, BtoB identified 10
1. Be clear about your campaign’s objective. Everything during the development of the
campaign, from positioning strategy to media placement, should be designed to meet that
objective.
Seagate Technology Inc.
When developing an integrated campaign for its Barracuda ATA III disk drive, Seagate
brought together its product marketing, channel marketing, and branding teams to agree on
positioning even before the agencies got involved.
2. Communicate openly about everything with your agency. In working with outsourced experts,
person to handle all communication.
“It’s got to start with straight talk with the agency,” said the VP-worldwide marketing, IBM
Software Group.
3. Identify the core influencers. When IBM Corp. was developing its “Codernaut” software
4. Use integrated media when possible. An integrated approach usually yields higher results than
has multiple objectives.
5. Test the product positioning and creative concept with the target audience. Use focus groups,
teleconferencing, online research, and other market research.
“To answer the question, ‘How will we build awareness quickly?’ we went straight to the
Micro Motion.
6. Use creative that will stand out with relevant messages. Balance intrusion with information.
because the value-added reseller audience tends to respond less to online ads, according to the
director of media services at Lot21.
7. Follow up on direct campaigns. It is vital to contact the recipient through telemarketing, sales
Motion established three points of contact with prospects, including the targeted direct mailing,
8. Build in metrics to measure the results. If it’s a branding campaign, determine the timeline and
IBM has a monthly monitoring cycle for all of its campaigns, during which time its market
advertising.
9. Don’t be afraid to make changes midstream. This includes pulling ads that are offensive to the
audience and changing copy and creative when possible.
Particularly for online executions, offers can be adjusted to take advantage of changing
variables such as pricing or inventory levels.
10. Take what you learn from one campaign and build on it. Just because one campaign worked for
a specific objective does not mean it will work the next time around. Seagate learned that its
VAR audience responded well to the larger online ad units, driving six to seven times the
average traffic to its reseller’s site. So, in a campaign launched this month for its Barracuda
180 drive, Seagate is building on its online ads developed by Lot21, including an online
product demo in a pop-up ad.
The bottom line of all this? Advertising is a constantly moving target, and campaigns need to
reflect that. There’s nothing wrong with trying new techniques, but to forget the fundamentals
is just plain foolish.
IV. Case
Arrow Electronics
HBS Case: 598-022 TN: 500-111
Teaching Perspectives
The Arrow/Schweber division of Arrow Electronics, a distributor of semiconductors and other
electronics components, must decide whether to sign onto Express Parts’ new Internet broker service.
This is the largest division of Arrow Electronics, and the President and CEO of Arrow Electronics
wants Arrow to keep its margins above 15 percent so that the parent corporation can continue to meet
its financial goals.
The case deals with the issue of cross selling and managing a portfolio of products and services in
business markets. Management must decide whether to pursue an opportunity to sell its products
through a new ecommerce site, which could threaten the viability of its overall business model.
Due to the structure of manufacturers’ incentives, Arrow/Schweber has developed a selling strategy of
subsidizing its value added services to ensure margins obtained from book and ship commodity
product (B&S) sales. The Express proposal presents an opportunity to sell commodity products
through a new electronic bidding site. It appears that this new channel has the potential to attract
incremental sales to new customers that Arrow had never served. However, there is the risk that the
new channel can break down Arrow’s current business model by siphoning out the lucrative high
margin product sales.
The division president must decide how to respond to these challenges. In the case, students assess
how a seller needs to manage a portfolio of products while managing customer relationships, and how
the firm needs to change its customer management model in response to changes in the environment.
The case provides an avenue for discussing the role of electronic commerce in a business-marketing
firm’s channel strategy. The electronics industry has become accustomed to doing business in a highly
structured way, with a careful balance of power between manufacturer and distributor. The emergence
of the Internet presents a challenge to Arrow’s value proposition since it is a traditional distributor.
Arrow has to decide on how it wants to respond to the Internet-based e-commerce.
This case also deals with the issue of cross selling and managing a portfolio of products and services
offered to customers ranging from transactional customers to relationship customers. The firm
supplies customers in both market segments with commodity products, and with “value added” (VA)
products that include services such as programming, field application engineering, etc. Arrow earns
significantly lower margins on its specialty products than on its commodity products. Its suppliers,
electronic chip manufacturers, have systems to protect prices in the marketplace. Assured that the
margins on the chips will be protected, Arrow literally gives away its specialized value-added
engineering and programming services in return for customer commitments to purchase chips. Arrow
is thus able to make a reasonable return on the product and service bundle. The Express Parts Internet
brokerage service option threatens to undermine this cross-subsidization model by siphoning the
high-margin, commodity product sales from relationship purchasing into a competitive Internet-based
auction channel.
The case also highlights a variety of innovative channel design issues. Through an ingenuous approach
of offering distributors discounts based on the quality of information provided by the distributor,
suppliers are able to access critical customer-level information despite using an indirect channel of
distribution. Further, they can maintain price levels in the marketplace while employing multiple
distributors in the same market.
Questions:
1. What does Arrow sell to whom, and where does it make money?
2. How do the Arrow/Schweber (Arrow) salespeople build their relationship with their
customers? Specifically, how do they leverage Arrow’s product line B&S versus VA
products to add value to their customers?
does it provide its customers?
the Internet to facilitate its sales effort?