B2B Class Notes - Module 3
B2B Class Notes - Module 3
Edwin Moses
Class Notes
Strategy comes from the Greek word ‘strategos’ which means a military general. Overtime Strategy became a term that
was ubiquitous to the world of modern management. So what is it?
Strategy at its most fundamental level is finding the answer to two critical questions:
• Where to compete?
• How to compete?
• Organizational resources are finite and by resources we mean ‘People, Time and Money’
• Hence, we cannot be ‘all things to all people’. Therefore, the compelling need to focus, to make choices, to
decide what we want to do and more important what do not want to do!
Finally, the success of any organization is contingent on the interplay between a number of factors and hence Strategy is
an integrated set of choices that must be made
In the context of Marketing one of the best-known frameworks for Strategy is the Marketing Mix. First proposed by a
gentlemen called E. Jerome McCarthy a Professor of Marketing @ Northwestern in his 1960 book “Basic Marketing: A
Managerial Approach. It was made popular by Philip Kotler and today is known as the 4P Model. The Marketing Mix has
found great acceptance and application in the B2C space, but it has equal importance and applicability in the B2B space
though it has not been leveraged enough. In the context of B2B what the key components of a marketing strategy using
the 4 P Framework
Product: When we use the work Product it is tempting to consider the physical attributes of the product/ service. But in
the context of strategy, it also includes both the Physical and Abstract (intangibles). The purpose of this vector is to identify how
we can take a differentiated position based on the Product. There are some key questions that we must answer to decide the
Product strategy. It is applicable in both the B2B and B2C worlds but it’s even more critical in the B2B world.
2. Who is being served with the product/solution? / Who is the value being delivered to? / Who benefits from my
solution? / Who is my customer?
If this is unclear then we cannot create a product/ service that would provide us a competitive advantage
Example: When IBM entered the Personal Computing (PC) market in the 1980’s it turned to companies like
ComputerLand who major retailers with hundreds of stores across the US. So, overtime IBM worked as though
the retailers were their until Dell came along and revolutionized that sector. With its D2C model it engaged
with the people who finally bought and used the PC. The rest is history!
Assignment # 5:
A supplier of surgical instruments to hospitals is looking for a way to differentiate in a market that has become so sensitive
to price that it’s difficult to argue any kind of differentiated value with the buyer. After much thought the company
decides to launch a new offering called ‘Procedure Packs’ that they believe they could get premium pricing for. It’s a
complete pack of all items required for a particular procedure. They feel that it provides significant value like the surgical
team not finding themselves in the middle of the procedure and realize they have a missing instrument. With this belief
the salespeople of the company approached the hospital. Below is a representation of the people involved in the purchase
and use of the surgical instruments.
The task:
1. Identify the value each of the functions in the chain could be looking for in the context of surgical instruments.
2. Recommend who do you think they should focus their selling efforts on to convince the hospital to buy the
procedure packs.
Answer to Assignment# 5
Here are the key insights that help us to understand the multiple vectors of what ‘Product” means in the strategic
context of the 4P model:
1. The “value” that was expected at each point in the value chain was not the same
2. The point at which the value offered by the ‘procedure pack’ was resonating with the that of the buyer was where
‘reliability and safety’ was being sought. This is what is called as the ‘resonating value proposition’
3. The point of decision and the point of value (especially in the Decision-Making Unit in B2B) are not necessarily the
same. The greater the distance between the two the greater is the complexity of the selling situation
Needless to say, when the sales organization shifted their focus of selling from the Purchase Manager as they traditionally
did to the Surgeon/ Theatre Nurse/ Operating Theatre Managers they saw success!
Taken from the book “Key Account Management” by Peter Cheverton
Class Notes
Place: This ‘P’ is about reach! ‘Place’ covers where and how the product is sold. It could cover distribution, channels,
wholesalers, intermediaries, franchises, retailers, basically everything along the path of the product leaving the
manufacturer (or seller) and reaching the customer, client, or consumer. In the context of B2B
➢ In the 1990’s when Castrol realized that its Wholesaler model of selling their automotive lubricants to the
bazaar, as against competition who had their fuel outlets, was faulted because it distanced them from their
real customers who were OEM’s, Fleet Owners, ‘Ustad’s’ (reputed & respected mechanics) who ran their own
garages and their ‘chelas’ (disciples) who ended up opening their own garages over time. Hence, they shifted
to a Distributor/ Dealer model where their sales teams were measured on secondary & tertiary sales.
➢ In the B2B space there is a successful company called Atlassian based out of Australia. They are a 3 billion USD
SaaS company providing licensable software products on the Cloud. They position themselves with this simple
tag line “Great Products, Passionate Users”. Here are some key differences on how they have applied “Place’
to their business
✓ Low Touch Sales model
✓ Their sales cycle: ‘Discover-->Try-->Buy-->Repeat’
✓ No Direct Field Sales Teams
✓ Product Specialists engage with Prospects and 65% of the selling cycle is completed by them before
they are handed over to a back-end sales team to formalize the sale
Class Notes
Price: Any member of the sales team will testify as to the importance of Price in negotiations.
o If too high them a barrier to closing and if too low in its segment, then the product is ‘cheap’
o It also set expectations of product and/or service quality, demand & market position. The famous saying “you pay
peanuts, you get monkeys”
o Higher prices mean higher perceived value & higher desirability
We saw how price plays out in the case of Coke and the company Orica in explosives.
Promotion: In the B2B world this is all about communication. It encompasses the ways a brand communicates with
its market (which is often the entire sales channel, not just end users). Advertising and PR are the obvious components
here and promotions and direct marketing also feature heavily. In the B2B space some of the vehicles of promotion are:
o Trade Shows/ Participation in Industry Forums or Standard Bodies/ Providing the community free for use IP/
Centers of excellence/ Co-development/ Case Studies/ Testimonials/ Advisory Groups/ ‘Oracle World’
Many felt the 4P model was too ‘outside in’ and therefore lacked customer centricity and hence modified this to
a 4C model. Also, in order to make it more applicable/ relevant to the B2B space Motorola proposed a variation
of the 4P model and called it a SAVE model. Here is a overview:
At the end of the day the purpose of Strategy is to help an organization to have a competitive edge over competition so
that it can deliver superior & sustainable financial returns for the organization
There are two building blocks that help us define the viability of our strategic choice to achieving a stated market
objective. One is a an ‘outside-in view” called ‘Competitive Advantage’ and the other is an ‘inside-out view’ called ‘Core
Competence’
Competitive Advantage
Postulated by Michael Porter in 1985. It uses Porter’s 5 forces framework to understand the market and decide what
should be the competitive advantage on which we can build our strategy. In summary it looks at how an organization can
perform better that its competition, it’s all about outcomes. In short it is all about ‘What an organization should do?’
Core Competence
Postulated by CK Prahalad and Gary Hammel in the 1990’s. Their assertion was that to have a sustainable competitive
advantage organizations must have inherent competencies that were special expertise of the organization that is unique
and very difficult to be imitated by competition. In short it is all about ‘What an organization can do?’
Olay find its origin at a South African lab by an ex-Unilever employee called Graham Wuff. Oil of Olay was
originally a thick pink liquid which was marketed as an anti-ageing fluid which is light on skin. In the 1970s the
range expanded to include all manners of skincare products and the company was bought by Procter and
Gamble in the mid-1980s. In 1999 what was called Oil of Ulay in the UK, Oil of Olaz in other European countries
and Oil of Ulan in Australia, became known as just Olay the world over. It is now sold in 80 countries worldwide
to an estimated 60 million women.
Step 1: Objectives
Step 2: Position
1. P&G’s only flagship in the skin care segment was “Oil of Olay”
2. The brand was not growing but it was a brand with high recall in the skin care segment.
3. Skin care was a weak link in P&G’s beauty portfolio.
4. It was providing a revenue of 800mil USD in a market that had a size of 50 billion USD.
5. The skin care concerns of the new generation in their early 30’s was changing. They were concerned
about age spots, lines, skin tone etc.
Step 3: Problem
1. The brand had lost its relevance in a market where baby boomers were becoming a dominant part of the
market while the current market segment of 50+ women that Oil of Olay was being sold to was not
growing.
2. It was not able to compete on price with the ever-growing cheaper alternatives in its category.
3. It was able to realize a price of only $3.99 while the top market brands like Clinique were retailing @
upwards of $25 dollars
4. Seen as an old-fashioned brand and derogatorily called “Oil for Old Women”
Class Notes
Step 4: Possibilities
Option #1: Retain ‘Oil of Olay’ and launch another upmarket brand for the new generation. The downside was
that it could take years before this could make a difference for P&G
Option#2: Extend an existing brand from a different segment called “Cover Girl” to the skin care segment. The
P&G team felt that there was no guarantee of success in a already crowded market
Option # 3: Acquire a leading brand like Clinique (Estee Lauder) or Nivea (Beiersdorf). The downside was that
this would expensive and speculative.
Option #4: Was to focus on a new unaddressed segment of needs of women in the 30+ ager group whose
aspiration was to stay “younger longer”. To this end the plan was to reinvent the Olay brand
Step 5: Proposal
********************
Class Notes
A) What is Segmentation
The simplest definition is that it is a way of dividing the market into logical groups.
Objective Focused Definition: It is splitting of a Customer Group with different needs and preferences into sub-groups
with similar needs and perceptions
C) Approaches To Segmentation
1. Demographic Segmentation
This looks at grouping customers based on their demographic details like
• Age
• Gender
• Occupation
• Location
• Marital Status etc.
2. Psychographic Segmentation
This looks at grouping customers based on their:
• Lifestyle (Student/ Outdoor/ Athletic etc.)
• Social Status (Elite/ Upper Class/ Upper Middle Class/ HNI etc.)
• Personality Type (Creative, Emotional, Introvert, Opiniated, Organized etc.)
• AIO
o Activities (Hobbies, Social Activity, Vacations, Entertainment etc.)
o Interests (Food/ Recreation/ Reading, Clubs etc.)
o Opinions (Political, Religious, Social, Cultural etc.)
3. Behavioral Segmentation
This looks at grouping the customers based on the behaviors they are likely to exhibit through the Customer
Journey
• Buying Behaviour
o Impulsive
o Considered
o Product Aware
o Seeks Value
o Price Sensitive
• Usage Behaviour
o Engaged
o Event Driven
o Rarely Uses
• Demand for Attention
o High Touch
o Moderate
o On Demand
Class Notes
➢ Segmentation must allow us to clearly differentiate between groups of buyers/ potential buyers
➢ It must relate to the strategic purpose of the segmentation effort
o How to serve the customers (‘delegators’ vs DIY in wealth management. One needs personal Wealth
Managers and the other perhaps needs an electronic platform for example ‘GROW’)
o Positioning
o Pricing decisions
o MarCom strategies
o Distribution decisions
o Introducing new products
➢ Segmentation largely revolves around two key questions
o Why a customer buys?
o How a customer buys?
Examples:
a) Aligning the target customers to the value proposition (B2C)
Behavioral Look for Functionality and cost 1. Looking for quality of life
effectiveness 2. Good things cost money
3. I have earned the right to access
the best
Psychography “Do it yourself (DIY) and save money I am successful and I want to subtly
while doing it”. A value mindset reflect that in my lifestyle
A B2B technology firm wanted to introduce a new cloud platform solution for network operators. It wanted to know
which of them it should target its effort on. As a first step they did segmentation on a single vector by asking the
customer the following question “What factor would have the greatest influence on your buying decision”. This is
what they got in terms of segmentation analysis:
It left them confused since it gave no clear direction on which segments of the market they should focus on. Then,
they added another dimension to the segmentation by asking a further question to the customer “What is your
readiness to outsource the management of your network?”. This is the segmentation analysis they got. They
found that only 63% of the market was ready to consider outsourcing their network management
As a result of this segmentation, they were able to identify three clear segments they could focus on that would
address 48% of the market. The Tech Seekers, The Manage My Network Better & The Network Performance
Seekers!
c) Enabling “Customer Self-Selection”. Self-selection is where a customer makes the choice as to which segment, they
best fit in. The product categories are provided by the seller and the selection is done by the customer
➢ Sephora: provides on its platform a category called “Concerns: Dandruff, Skin Tone, Age Spots etc.)
➢ Multiply SKU’s (Stock Keeping Units): Example this is what Kellog does in its Breakfast Cereal portfolio
➢ Coupons for Discounts: Example is what Pizza Hut or Dominos does. The advantage is that all customers do
not avail of the discount. The ‘discount seekers’ are the ones that use it, and this is ‘self-selection’
➢ Packaging the product differently: Example the variants that car manufacturers provide on a model like Maruti
provides on Baleno. They have 9 variants Sigma, Delta, Zeta, Alpha etc. We also saw this in the Quidel
example.
Quidel: In the segment of OTC products for Pregnancy Testing there is a company called Quidel based in San Diego
which uncovered a segment by just changing the question from “What they want the product for” to “Why they want
to use product”. It gave them two segments with very different value expectations. One was the “Hopefuls” who
were looking to have a baby and the other was the “Fearfuls” who were not ready to be mothers as yet! They had the
following insights
1. The mindsets were different one was hopeful, and the other was anxious.
2. The Hopefuls were also willing to pay a better price
3. The shopping aisle position should reflect the mindset of the buyer
4. Below is how they used this to create a powerful marketing mix
2. How a Customer Buys: To Manage Battleground 2 (Active Evaluation/ Discovery) more effectively
Example 1:
Class Notes
Note
Often marketeers in their optimism tend to mistake ‘change of pace buyers” as niche customers. Niche customer must
fulfill the following conditions:
1. Pay premium pricing as compared to other products in their category
2. High level of rebuy
3. High brand loyalty
Convenience Products Bought Easily/ Bought Frequently/ Low Detergents/ Toothpaste/ Regular
Price Points / Easily Accessible OTC Drugs/ Beverages/ Regular
Clothing
Shopping Products Bought Less Often/ Medium Price Points/ Clothing/ Furniture/ Electronic
Available in less location compared to Devices/Consumer Durables
Convenience Products
Specialty Products Standout Attributes/ Unique Brand Watches/ Luxury Cars/ Cars/
Perception/ Higher Price Points/ Available Perfumes/ Designer Clothing/
at Dedicated Locations Houses/ Insurance/Investment
Products/ Health Services
Example 3: When Caterpillar wanted to adapt its communication strategy they did a mono-segmentation
High Information Buyer (Focus of communication of the product features, functionality, and usage)
Outcome Driven Buyer (Focus of communication on benefits/ testimonials/ case studies)
Example 4: A technology solutions company that wanted to identify its sales approach also did a mono segmentation
High Touch
On Demand
Low Touch
Class Notes
Objective
Market Segmentation
Positioning
b) By Buyer Category
Conclusions
1. The starting point for a Segmentation is clearly identifying the Objective. What is it we want to establish?
2. Segmentation provides insights into the possible “Target Markets”. This is an iterative process; one may have to go
through multiple cycles to get this insight!
3. This potential Target Market will then have to go through two gates, one that answers the questions “will I be able
to bring to this segment a sustainable competitive advantage” and the second, “do I have the required
competencies to deliver the attributes required to secure this advantage”
4. The entire process detailing all of the above is iterative!
5. Once the Target Market is identified then follows the Positioning!
That is why Segmentation is the starting point for evolving a successful Marketing Strategy!
Class Notes
Assignment # 6:
A company called ‘Helping Hands” provides process outsourcing solutions to the Small Enterprises in the B2B space with a
total employee strength less that 50 people. Helping Hand offering is to take over end to end responsibility for several of
the customer’s back-office functions like Accounting, Procurement, Human Resource Management etc. The company just
hired a new Head of Sales & Marketing who is keen to double the business by increasing the customer base.
Az\’nalysis tells him that the services provided by Helping Hands is greatly loved by its existing customers and in the last 24
months they have not lost a single customer. A survey was conducted by the company to understand what their
customers find so compelling about “Helping Hands”. Here are the top seven reasons given by their customers:
The Head of Sales & Marketing is therefore excited about the possibility of rapidly expanding the business by acquiring
new customers. Based on this he has tasked this marketing team with a clear objective for a segmentation:
Objective: Identify the right Prospects that the sales teams can go after. To enable this, he wants the marketing team to
finally arrive at the Persona of a typical Prospect for the services offered by Helping Hands.
Your Task:
Step 1: Do a Feature Benefit Analysis for Helping Hands and identify which positioning theme/s they are best suited to
occupy in the minds of their customer
Step 2: Based on the theme/s identified describe the Persona of the target prospects/customers for Helping Hands using
the following template
Class Notes
6. Positioning
Definition
It is how one differentiates by occupying a distinctive mental position or creating a compelling imagery in the mind of the
customer/consumer about your product or service
Philip Kotler
a) Functional Positioning
Class Notes
b) Emotional Positioning
Assignment # 7:
For each of the sub-themes identify two products/service/ brand that take this positioning. For each of the product/service
/brand please provide a two-line proof of the positioning taken.
Assignment # 6 Solution:
The above feature benefit analysis shows that there are two positioning themes that Helping Hands is best positioned to
take
1. Helping entrepreneurs focus their time on growing their business by eliminating the need for them to spend it on
non-core activities
2. While doing there is able to guarantee a high level of dependability and quality of service
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