WINNING IN BUSINESS-TO-BUSINESS MARKETS

Transcription

1 WINNING IN BUSINESS-TO-BUSINESS MARKETS Making global trends work By Professors Jean-Pierre Jeannet, Kamran Kashani, Martin Koschat, Stuart Read and Adrian Ryans (September, 2007) IMD Chemin de Bellerive 23 PO Box 915, CH-1001 Lausanne Switzerland Tel: Fax:

2 Senior managers working in Business to Business (B2B) marketing face a number of key challenges surrounding current global trends. Here, IMD s Business Marketing program Faculty offer some ideas for effectively managing these pressing issues making the trends work as opposed to against you. Global trends affecting B2B marketing Several global trends have emerged as significant to B2B marketing. These are: - Decreasing brand appeal - Client made/designed products - Increasing importance of services - Changing role of Key Account Management - Growing prominence of Brazil, Russia, India, and China (BRIC) - Offerings need to be both more global and more local - Capabilities as the differentiator - Fleeting advantage from investment in innovation - Elusiveness of profitability - Fierce global competition Approaches for dealing with these trends No single solution will address all these trends and all can have both positive and negative implications, depending upon a B2B firm s positioning and how its managers set their strategies. The four approaches outlined below offer potentially useful ways to deal with particular trends. All have a single common denominator: creating client success. B2B firms need to add value and differentiate themselves beyond a traditional definition of the core product or service so as to offer customers novel benefits such as added productivity, reduced cost and improved competitiveness that boost their own success. IMD - WINNING IN BUSINESS-TO-BUSINESS MARKETS Page 2/6

3 - Advancing a product business into services Products, even sophisticated ones, are increasingly being commoditized, particularly by nimble challengers from BRIC countries. Services, however where the expertise of the team is the differentiator are often easier to innovate and harder to copy. Ramping up the service component of a business can therefore help firms remain competitive in traditionally stable industries and in face of fierce competition. Service revenue might consist of replacement or spare parts, service contracts to regularly maintain equipment or products, or consulting on how to best utilize products. This is a challenging organizational undertaking. Companies must decide between integrating the service business into the regular product sales operation, or creating a separate organizational service unit; define the boundary between warranty and service; and price different service components. The effort is worthwhile, however. Stocks from firms which score well on the American Customer Satisfaction Index (ASCI) grew 144.5% from 2001 to 2006, while the S&P index, reflecting the market as a whole, grew by only 38.7% in the same time period. The consistent feature of firms with successful service businesses is a close customer connection: that is, building service propositions, pricing, and delivery around aspects of clearly differentiated value to paying clients. - Managing the increasing power of distribution In most developed countries, three or four retailers control over 75% of the market for key product categories. The increasing economic and brand power of such large retailers is turning some traditional Business to Consumer (B2C) product firms into B2B firms that view their market as the retailer more than the end consumer. Such companies have developed various strategies for succeeding in this environment. Some devote specific product efforts to the large retailers, while others actively pursue growing channels such as hard discounters. Manufacturers and retailers are increasingly sharing product and consumer data, leading to optimized planning and execution of product introductions, promotions, and in-store placement, as well as customized shop-in-shop areas. In a few cases, manufacturers have even found that they can dispense with the retailer altogether and deal directly with the consumer. IMD - WINNING IN BUSINESS-TO-BUSINESS MARKETS Page 3/6

4 - Creating advantage from data Many firms have invested in information infrastructure for collecting, staging, and managing data on client, sales, inventory, and corporate resources. However, getting the right data and getting the data right remain a challenge. B2B firms must not only collect information on their direct customers, but also on their customers operations and their customers customers. A second challenge is gaining and communicating tangible insights from the collected data. This requires analytics: sophisticated software that analyzes data to produce outputs that managers can readily interpret and act on. Ideally, analytics will not only help a B2B firm sharpen its own operations, but also provide useful outputs for its customers thus making the firm a valuable business partner that can bring tangible insight and value to its customers operations. - Creating a new value space Firms facing a competitive commodity industry need to enhance their core offering in order to differentiate and position it as a premium offering. Three general approaches have been successful for this. One is targeted extension, where value is added by stretching the firm s core offer into more segments to better meet customized needs. Under this strategy, the firm may decide to simultaneously offer commodity core product to some clients, and targeted offerings to others. Targeted offerings can bring greater flexibility in pricing, with more advanced applications carrying a price premium over the undifferentiated core product. The second is system development. Here, the firm develops a package of products and services that offers the synergistic benefits of a system. Not all the bundled components need to be produced by the firm; however, the finished package carries the company s brand and performance guarantees. The value for the client lies in the integration among the system s elements, making the bundle larger than the sum of its parts. The third approach is solution innovation, where value creation takes an ambitious turn away from the core business and addresses specific client problems with specific solutions. IMD - WINNING IN BUSINESS-TO-BUSINESS MARKETS Page 4/6

5 Firms planning to enter the solutions business which promises attractive margins need to be innovative and re-invent what the industry has traditionally defined as value. Business to business marketing is becoming one of the most complex environments that managers face today. However, by thinking in terms of creating client success - matching a differentiated offering to customer needs managers can convert complexity into profitability. This Tomorrow s Challenge is a summary of an article appearing today in the European Business Forum magazine, (EBF). It is a collaboration of the Faculty Team on the Business Marketing program at IMD, Jean-Pierre Jeannet, Kamran Kashani, Martin Koschat, Stuart Read and Adrian Ryans. A full version of this article is available at EBF's web site: IMD - WINNING IN BUSINESS-TO-BUSINESS MARKETS Page 5/6

6 RELATED PROGRAMS BUSINESS MARKETING - Winning in Business-to-Business Markets - Develop and execute winning business-tobusiness marketing strategies Program Directors John Stuart Read - Improve the tools used by senior managers from marketing, sales and management positions to develop and implement winning business-to-business marketing strategies - Explore critical challenges in industrial products, service businesses, and companies that market products and services based on new technologies - Exchange ideas with peers facing similar issues in different industries LOW COST COMPETITION - Meeting the Challenge Program Director Adrian Ryans - Learn how to meet the growing challenge of low cost competitors - Understand how low cost competitors operate, and learn from them - Compete more effectively with low cost competitors by crafting and using innovative strategies IMD - WINNING IN BUSINESS-TO-BUSINESS MARKETS Page 6/6