Communication Strategies in B2B Markets

A high degree of innovation and the impact on several departments make purchasing decisions in B2B markets very complex. Therefore suppliers in B2B markets have to inform their customers very well to reduce the buyers’ risks on the one hand and to strengthen their own competitive position on the other hand.

Objectives of communication

  • inform prospects about company’s products/services
  • provide information to give potential customers the opportunity to check products according to their needs
  • offer possibility for immediate trial of products/services
  • aim regular purchasing
  • create large sales volume

Communication tools

  • personal selling
  • advertising
  • Internet
  • Direct Mail
  • seminars
  • trade fairs
  • press releases
  • telesales

Choose appropriate communication tools for different objectives

increase knowledge about products: advertising, trade fairs, public relations
create positive image: advertising, trade fairs, public relations
decrease cost of demand: trade fairs, public relations
create trust in quality of products/services: personal selling, public relations
create trust in performance of company: trade fairs, personal selling, public relations

Timeline of communication process

  1. public relations – to create knowledge
  2. advertising –  to provide information about products and company
  3. sales promotion/trade fairs – give information about usage of products, communicate advantages for customers
  4. personal selling – persuade customer that product/service is the appropriate tool to solve customer’s problem

Public relations

have to address the following publics:

  • customers
  • employees and unions
  • shareholders and banks
  • suppliers
  • government authorities
  • media and other opinion leaders

Questions

  1. What are the aims of marketing communication in B2B markets?
  2. Name classical communication tools affecting the customer
  3. Describe the different stages of the communication process in B2B markets
  4. How are information and risk linked in B2B purchasing decisions?
  5. Why might public relations be more important in B2B markets than in B2C markets?
  6. Explain the function of PR.
  7. Name the most important publics/target groups of public relations in B2B markets?

Literature:

Godefroid, P. (2003). Business-to-Business-Marketing. In H. C. Weis (Hrsg.) Modernes Marketing für Studium und Praxis. Ludwigshafen (Rhein): Kiehl

Retail & Wholesale Questions

1. A number of general trends affect the retailing industry worldwide. Give examples and show the impact on employees.

2. Describe the following functions of trade:

  • Economic function
  • Service and ecological functions
  • Distributive function
  • Communicative function

3. Give an explanation of the term ‘convenience store’.

4. Outline the business of retail trade.

5. Discuss prevention and waste reduction in the retail trade.

6. Give an overview of the performance factors and performance areas of the retail trade.

7. Describe three levels of the service system.

8. Explain three types of non-store retailing.

9. Assess the advantages of the EAN-system in combination with the electronic point of sale scanning system.

10. Explain three types of store retailing.

11. Describe pricing strategies relative to different target groups.

12. Define ‘retailing’. Explain the nature of retailing and wholesaling in the distribution channel.

13. What are the main functions of wholesalers and retailers.

14. Give an overview on the different types of retailers.

Marketing Research

Lesson Objectives: marketing research

  • know and understand terms and definitions of marketing research according to Kotler
  • search definitions of primary research, secondary research, survey and experiment
  • explain the marketing research process
  • design a research plan
  • carry out a survey

What is marketing research?

Companies need information about the market to answer the questions:

  • Who are our competitors?
  • What do consumers expect? Which features of our product do they want?
  • Are our products up-to-date?

“Marketing research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.”

Kotler, Philip: Marketing Management. Millennium Edition. Prentice Hall.

The company might obtain data in various ways. The procedure contains

  • collect data
  • edit and analyse data
  • make decisions

Types of marketing research:

Primary research:
survey – observational research – focus group – behavioural data – experimental research

Secondary research
using internal or external sources.

Large companies have their own marketing research department. Small companies can hire agencies or conduct research in affordable ways, such as

  • engage students to design and carry out a project
  • use the Internet
  • check out rivals.

The Marketing Research Process

Step 1: Define the problem and research objectives
Research projects can be exploratory, descriptive and causal.

Step 2: Develop the Research Plan
This stage requires decisions on data sources, research approaches, research instruments, sampling plan, and contact methods.

Data sources
Secondary data do exist already, primary data have to be gathered for a specific purpose.
Sources of secondary data: customer data base, data warehousing and data mining

Research approaches
Observational research – listen how customers talk about the company, use competitors’ products or services
Focus groups – 6-10 persons discuss the products or services guided by a skilled moderator
Survey research – descriptive research – carried out to learn about knowledge, beliefs, preferences and satisfaction of customers
Behavioural data – customers leave traces everywhere – on the web, when ordering from catalogues, using credit cards
experimental research – to find cause-and-effect relationships, most scientific method.

Research instruments
Questionnaires: are the most common instrument to collect primary data. A questionnaire consists of a set of questions presented to respondents for answers The marketing researcher develops the form, wording and sequence of the questions.

Closed-end and open-end questions can be used. Closed-end questions provide answers easier to interpret, but narrow respondents’ answers.

The questionnaire should be simple, use unbiased wording and be pretested before large-scale use. The lead questions creates interest, difficult questions are placed at the end to prohibit anger, the questions should follow a logical order.

Sampling plan
Sampling unit – who is to be surveyed? (target population)
Sample size – how many people should be surveyed?
Sampling procedure – how should the respondents be chosen?
Representative samples require a probability sample. Non-probability samples are less costly.

Contact methods
Marketing researchers can choose between mail, telephone, personal or on-line interviews.

Step 3: Collect the information

This phase is the most expensive and source of  problems: respondents are not at home, refuse to cooperate, give biased or dishonest answers. Some interviewers might be biased or dishonest. Thanks to computers and telecommunication data collection methods are improving.

Step 4: Analyse the information

Extract results from the collected data via tabulating and developing frequency distributions.

Step 5: Present the findings

The researcher presents the findings to the relevant parties.

Revision Questions Marketing Basics

  1. Give a definition of marketing.
  2. What are the marketing considerations of the tactical marketing tools – the 4 Ps?
  3. Why do marketers consider additional 3 Ps when marketing services? Explain.
  4. The elements of the marketing mix are interdependent. What does this mean?
  5. Distinguish between USP and ESP.
  6. What is the basic difference between national, international and global marketing?
  7. Define the following terms: needs, wants, demands, products and services, stakeholders, relationship marketing, markets, competitive advantage, strategic business unit.
  8. Name and explain the characteristics of services. What are the marketing implications?
  9. Strategic planning takes place at four levels: corporate, division, business unit, and product. Describe the planning process.
  10. Differentiate between a company’s mission and vision. What is the content of a mission and vision statements?
  11. What are the major categories of business objectives?
  12. Companies may combine the marketing tools in a variety of ways guided by a marketing concept. Describe the different options marketers can choose from.

 

Pricing: The importance of pricing

This lesson is about definition of price, the reasons why pricing is such an important element of the marketing mix, and the objectives of pricing.

Definition

Price is the amount of money charged for a product or service. It is the sum of values that consumers exchange for the benefit of having or using a product or service.

Prices may either be quoted using a cost-based, a market-oriented or a competition-based pricing approach.

The price is a very important element in the marketing mix for 4 reasons:

  • Quality: customers assume that more expensive products are of better quality than cheaper competitive products.
  • Image: pose value means a high price to have prestige value
  • Fair price: customers resist a very high price because they dont want to get ripped-off; on the other hand a cheap price means low quality to them
  • Price bands: different groups of buyers require different price levels. Good value for money is achieved by offering a range of products within a certain price band.

Marketers distinguish between the basic price for the core product and the premium price differential, the extra amount charged for the superior product with better features, often only differences in packaging or advertising.

Pricing objectives

  • Improve profitability
  • Set up/expand market share
  • Achieve a return on investment
  • Maintain price stability
  • Prevent competition

Profitability

  • Low prices mean small profit margins but higher sales volume
  • High prices mean high profit margin but lower turnover

Market share

Large market shares enable a firm to operate cost-effectively, allow firms to dictate the prices which weaker competitors have to follow.

Another option would be to pursue a small specialist market segment with high prices.

Return on investment

Firms want to get back a certain proportion of the money invested

Price stability

This is a popular objective mainly in the market structure of an oligopoly (e.g. Unilever, Procter & Gamble, the oil industry). A limited number of sellers dominate the market and control the prices. Price wars follow when one firm decides to lower prices, a downward spiral of prices results in the same market share but at lower prices and thus lower profit margins.

A good advice would be not using only the price but concentrate on the other elements of the marketing mix and pursue a strategy of non-price-competition.

Competition

The extent of competition depends on the market structure. Numerous competitors and easy access to the market might cause intensive price competition.

Another reason for a high degree of price competition is an early stage of the PLC where prices are used to gain a market share.

Price stability can be found I mature markets where products are established and the market is dominated by a few large firms.

Source: ARGE Commerce: Marketing & International Business. Manz Verlag. Wien 2006. P 106-108

Revision questions

  1. Explain the difference between cost-based and market-oriented pricing strategies.
  2. Suggest the most suitable pricing strategy for new products.
  3. Why might a business lose revenue if the price is not set correctly?
  4. How can price be used to differentiate a product?
  5. Describe the basic principles behind the range of different pricing strategies used by firms.
  6. How does the availability of a product affect pricing?

Marketing terms and hundreds of other business words can be found on the new Business English Posters:
http://wirtschaftsenglisch.lerntipp.at/

Pricing methods, strategies and tactics

Subject Outline

1. How important is price?

Pricing is part of the marketing mix, and it is fundamental to a firm’s revenues and gross profit margin. Pricing is affected by various factors:

  • Customer sensitivity to price

A company has to find the psychologically right price range between a price set too low and a price set too high. The price depends on the features and the quality of a product; it depends on the income and desire of customers as well.

  • Level of competitive activity

In a competitive market customers have more choice. Brands differentiate the products. The price for branded goods can be set higher to reinforce the brand’s value. The same comes true for the market structure of monopoly. Monopolist businesses are able to charge higher prices.

  • Availability of the product

Shortage forces prices up and removes barriers to price (e.g. art world)

2. Price determines business revenue

Sales revenue equals price multiplied by numbers of products or services sold. If the price is not right businesses could lose customers and earn less revenue. Firms lose revenues when the price is too low.

3. How do businesses decide what price to charge

Pricing means finding a balance between being competitive and being profitable.

There are two basic decisions: pricing a new product and managing pricing throughout the product life cycle. Proper pricing requires market research, competitive research, analysis of sales patterns, and costs of sales staff.

4. Pricing methods

  • Cost-plus-approach

The price is set in dividing the total costs by the number of units, and then adding a mark-up

  • Contribution pricing

Variable costs + contribution

  • Competitive pricing

Prices are set in relation to competitors’ prices – either pricing at the prevailing market price or pricing at a discount to the market leader.

  • Price discrimination

Pricing by market segments – e.g. rail travel, business travelers, peak times

5. Flexibility is the best method

Flexibility means using a combination of the different methods. Pricing depends on the product and on the market as well.

6. Pricing strategies

  • Strategies for new products

Skimming and penetration are useful strategies – skimming for innovative products, penetration for similar products to gain a high market share.

  • Strategies for existing products
    • Price leaders (strong brands)
    • Price takers (at the market level)
    • Predatory pricing (undercutting)

7. Pricing tactics

  • Loss leader – encourages customers to buy other products or complimentary products
  • Psychological pricing –  19,99 instead of  20,00.
  • Special offer pricing
  • Discounting – early payment, quantity purchase, seasonal, travel business

8. Pricing an evaluation

The downward pressure on prices has never been so great as today. There has been an economic crisis, a slowdown in consumer spending and a vastly increasing power of purchasers. Furthermore the Internet makes it easier to compare prices, and the low labor costs in China have also driven down the prices.

Source: Marcousé, Ian: Business Studies, Hodder & Stoughton, 2003.

Marketing terms and hundreds of other business words can be found on the new Business English Posters:
http://wirtschaftsenglisch.lerntipp.at/

Marketing: The Marketing Mix

Students sometimes feel bored with convential lessons built on PowerPoint, lectures, exercises, creating summaries and closing discussions. They want a more reality-based approach. That’s why a short brainstorming session was held resulting in an agprocedure:

  1. Field research: That means taking pictures of posters placed at different locations of the city
  2. Before students go out they create a checklist for poster analysis. One form is necessary for each picture to be taken
  3. Finally they get into groups of 4-6, walk around to different places, take pictures and enter their results into their checklist
  4. They return to class, transfer their photographs from their cellphones or cameras to their notebook, create a short PowerPoint presentation – consisting only of a small number of slides – to introduce their findings to class
  5. A short discussion in class takes place after each team’s presentation. Then they rank their pictures and discuss their reasoning.

Repetition of the Marketing Mix Basics:

The students already have dealt with the subject in their 2nd form.

They get into groups of 3-4. Each group prepares a presentation and a handout including one of the core concepts as well as questions on the extended Marketing Mix topics:

  • Product
  • Price
  • Place
  • Promotion
  • Physical layout
  • Provision of customer service
  • Processes

For doing that task students can use their textbook “Marketing and International Business” by Manz Verlag Schulbuch as well as the following websites:

http://www.thetimes100.co.uk/index.php
http://www.marketingteacher.com/
http://www.bized.co.uk/learn/business/marketing/mix/index.htm

Marketing terms and hundreds of other business words can be found on the brand new Business English Posters:
http://wirtschaftsenglisch.lerntipp.at/

International Marketing

Three organisational types of International Marketing

The three organizational types – multinational, global and international – differ according to a degree of centralization and emphasis on either efficiency or effectiveness.
The transnational type combines the advantages of market proximity (differentiation) and like (standardization).
Multinational companies act according to the needs of the specific national markets. Well-known examples are Nestlé and Unilever offering food, washing powder and hygiene items. Before Unilever could sell margarine in the Asian market, they had to change eating habits first.
Global Enterprises pursue a world market orientation where marketing activities are standardized. Their main objective is to achieve a maximum benefit from economies of scale.
Adidas is an example for a global enterprise. Its design, development, production and sales outlets are centralized at a few locations. The goods are produced in South East Asia and distributed by a logistics centre in Hongkong.
“Activities of the company and its around 170 subsidiaries are directed from the Group’s headquarters in Herzogenaurach, Germany. It is also home to the adidas brand. Reebok Headquarters are located in Canton, Massachusetts. TaylorMade-adidas Golf is based in California. The company also operates creation centres and development departments at other locations around the world, corresponding to the related business activity.
adidas Sourcing Ltd., a fully-owned subsidiary headquartered in Hong Kong, is the worldwide sourcing agent for the adidas Group.
Effective December 31, 2012, the adidas Group employed 46,306 people.”
Source: http://www.adidas-group.com/en/ourgroup/our_business/default.aspx (18.04.2013)

International enterprises are mixed forms of the above two extreme types. Certain responsibilities and decisional structures are delegated to national units to generate a balance between economic marketing efficiency and a broader effectiveness.
Here is the formulation example of the carmaker Fiat’s PALIO. The development of this car was guided by awareness that the demands of customers in the developing countries are distinct from those in the industrialized nations. Fiat decided to offer a product variant tailored to customer preferences in the developing countries. The PALIO offers a strengthened chassis and body for use on purely surfaced roads. The wheels were modified in terms of suspension and design. The bumpers had greater resistance to flying stones and dirt. The production facilities for the PALIO: Poland, Venezuela, Brazil, Argentina, India, Turkey, South Africa and China. It is also built under licence in North Korea. Assembling and logistics were controlled centrally in Turin.

Source: Backhaus, K. , Büschken, J. & Voeth, M. (2005). International Marketing. New York: Palgrave Macmillan. p 27-29

Launched in 1996 in Brazil, as part of Fiat’s “178 project”, the Palio was Fiat’s first attempt to build a world car, the same basic design being produced in numerous nations around the globe. Four principal models were produced -hatchback, sedan, pickup and station wagon-, with different versions being built for different markets. The powerplants, both diesel and petrol, also varied from region to region depending on local production capability, legislation and market requirements.
The basic chassis was a development of the Fiat Uno, but little remained unchanged. The entire structure was significantly stronger in order to be suitable on the rougher roads found in some of the markets for which it was intended, as was the suspension. The body was a completely new design by the I.DE.A Institute of Turin, who also designed the new interior.
Production began in 1996 in Brazil and was followed later that year by a plant in Argentina. 1997 saw production starting in Venezuela, Poland and Morocco whilst Turkey started building the same car in 1998. India and South Africa began production in 1999, Egypt in 2001 and China in 2002.
A complete new-generation Palio was announced by Fiat Auto in early 2007. Some prototypes have seen spotted in Italy in an early stage of development. [1] but this news was wrong. The car spotted was the new Ford Ka, which has been tested in Italy. The Ford Ka is a co-development between Ford and Fiat (The 500).

Second generation (2011-present): An all-new generation of Palio was revealed in October 2011.
Source: http://en.wikipedia.org/wiki/Fiat_Palio (18.04.2013)

Questions

1. Explain the terms

  • Global Marketing
  • Multinational Marketing
  • International Marketing and
  • Transnational Marketing.

What are the main differences?

2. Go to the Websites of Nestlé, Unilever, Fiat and Adidas. Create a summary of their international marketing activities.

Global Marketing

1. DECIDING WHETHER TO GO ABROAD

Objectives:
1.Know factors a company should review before it goes abroad
2.Know how companies can evaluate and select specific foreign markets to enter
Companies need to enter and compete in foreign markets, though the risks are high:

  • Political and legal uncertainties (unstable governments)
  • Foreign-exchange problems (volatile currencies)
  • Corruption
  • Technological pirating
  • Different customer needs and expectations
  • Foreign languages
  • Tariffs and other trade barriers
  • High cost of product and communication-adaption

The main characteristics of global firms are that they plan, operate and coordinate their activities on a worldwide basis. Acting globally is not a matter of size. Even a small or medium-size firm can serve global niches.

There are various reasons for going abroad:

  • Higher profit opportunities than in the domestic market
  • Larger customer base to achieve economies of scale
  • Reduce the dependence on one market

The main decisions in International market to be made are based on these questions:
1.Whether to go abroad?
2.Which market to enter?
3.How to enter the market?
4.Which marketing program to chose?
5.Deciding on the marketing organization

But going global will cause risks that would not affect a company acting only domestically. Here are some examples:

  • Not understand foreign customer preferences
  • Failing to offer a competitively attractive product
  • Not understand the foreign business culture or know how to deal effectively with foreign nationals
  • Underestimate foreign regulations that mean unexpected costs.
  • Lack of managers with international experience

2. DECIDING WHICH MARKETS TO ENTER

When going abroad a company has to define its international marketing objectives and policies, whether to market in a few countries or many and determine the pace. Firstly it may seem wise to enter fewer countries.

The attractiveness of countries is influenced by factors like
Product
Geography
Income
Population
Political climate

Though it’s less risky to sell in the the European Union, the United States and Far East, the developing world represents a huge potential market for a wide range of goods. Furthermore regional economic integration has intensified, e.g the European Union.

Review Questions:


1.What factors should a company review before it goes abroad?
2.How can companies evaluate and select specific foreign markets to enter?