BUSINESS-TO-BUSINESS MARKETING: ANALYSIS AND PRACTICE

BUSINESS-TO-BUSINESS MARKETING: ANALYSIS AND PRACTICE Robert P. Vitale San Jose State University Joseph Giglierano San Jose State University Waldemar Pfoertsch China Europe International Business School Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

CONTENTS Foreword xxvii Preface xxix Acknowledgments xxxi Chapter 1 Introduction to Business-to-Business Marketing 1 Introduction 3 Marketing Fundamentals in Business-to-Business Markets 3 The Marketing Mix 4 PRODUCT 4 PRICE 5 PLACE 6 PROMOTION 7 Marketing Philosophy and Culture 7 Further Differences Between Business Marketing and Consumer Marketing 8 Derived Demand and Business-to-Business Supply Chains 8 **' THE BULLWHIP EFFECT 8 VOLATILITY 11 Complexity A Rationale for Relationship Marketing 12 OPPORTUNITIES THROUGH RELATIONSHIPS 13 Market Structure 13 Integrated versus Networked Supply, Brand Identity 14 Some International Considerations 15 An Examination of Value 18 The Value Chain 19 Direct versus Support Activities 20 Misunderstanding of the Value and Value Chain Concepts 21 Trends and Changes in Business Marketing 22 HYPERCOMPETITION 22 FORMATION OF PARTNER NETWORKS 23 ADOPTION OF INFORMATION TECHNOLOGY AND THE INTERNET 23 SUPPLY CHAIN MANAGEMENT 23 TIME COMPRESSION 24 Thoughts to Take with You into the Next Chapter 24 Key Terms 25 Questions for Review and Discussion 25 Endnotes 26 IX

Contents Chapter 2 Business-to-Business Environment: Customers, Organizations, and Markets 28 Introduction 30 Practical Application of Market Generalizations 30 Types of Organizational Customers 31 Commercial Enterprises 31 INDUSTRIAL DISTRIBUTORS 31 VALUE ADDED RESELLER'S 31 ORIGINAL EQUIPMENT MANUFACTURERS 32 USERS OR END USERS 32 Government Units 33 Nonprofit and Not-for-Profit Organizations 33 Producer Types 33 RAW MATERIALS PRODUCERS 33 COMPONENT PARTS AND MANUFACTURED MATERIALS PRODUCERS 34 CAPITAL GOODS MANUFACTURERS 34 CUSTOMER SPECIFICATIONS 35 Customer Needs Influenced by Classification of Markets 35 Classifying the Business-to-Business Market Environment 35 Publics 35 FINANCIAL PUBLICS 36 INDEPENDENT PRESS 36 PUBLIC INTEREST GROUPS 36 INTERNAL PUBLICS 37 The Macroenvironment 37 THE DEMOGRAPHIC ENVIRONMENT 37 THE ECONOMIC ENVIRONMENT 38 THE SOCIOCULTURAL ENVIRONMENT 38 THE NATURAL ENVIRONMENT 38 THE TECHNOLOGICAL ENVIRONMENT 39 THE COMPETITIVE ENVIRONMENT 39 Usefulness of Classification 41 Value Networks and Supply Chains 41 Supply Chain Management as a Form of Value Network Management 43 Using the Value Network and Supply Chain Concepts 43 VALUE NETWORKS AND COMPETITION 44 Changes in Markets Over Time 44 The Product Life Cycle 45 The Technology Adoption Life Cycle 47 BRIDGING A CHASM 47 ACROSS THE CHASM AND INTO THE TORNADO 48

Contents xi Thoughts to Take with You into the Next Chapter 50 Key Terms 50 Questions for Review and Discussion 50 Endnotes 51 Chapter 3 Organizational Buying and Buyer Behavior 52 Introduction 54 The Nature of Buying 55 The Consumer Buying Decision Process 55 Organizational Buying 55 The Buying Center 56 Organizational Buyers' Decision Process: A Stepwise Model 58 Intricacies of the Buying Decision Process 58 INDIVIDUAL ROLES AND PERSONAL NEEDS 58 THE BUYING PROCESS IS SIMULTANEOUS, NOT SEQUENTIAL 58 RELATIONSHIPS AND LOYALTY 59 THREE KINDS OF NEEDS 59 CLUSTER OF STAKEHOLDERS' VALUES 59 Organizational Buyers Decision Process: A Process Flow Model 59 _. Stage 1: Definition 60 THE MEANING OF A SPECIFICATION 61 THE SPECIAL CASE OF AN INTEGRATED SUPPLY CHAIN 62 Stage 2: Selection 63 DISTINCTION FROM PUBLIC SECTOR PURCHASING 64 BUYERS SEEK SELLERS WITH BEST TOTAL OFFERING AND CAPABILITIES 64 Stage 3: Solution Delivery 65, SUPPLY CHAIN IMPLICATIONS 66 Stage 4: Endgame 66 Two Examples of Buying Decision Processes 66 Discussion of Examples 67 Transition of Buying Decision Process New Task Becomes Rebuy 70 Influences that Shape the Buying Decision Process 71 Other Organizational Influences 72 Other Interpersonal and Individual Influences 72 Implications for Business Marketing 72 The Variability of Rational Buying Decisions 73 Human Factors in Business Decisions 73 Mutual Dependence and Customer Loyalty 74 A Brief Psychology of this Process 74 APPLICATION IN BUSINESS RELATIONSHIPS 75

xii Contents Thoughts to Take with You into the Next Chapter 76 Key Terms 77 Questions for Review and Discussion 77 Endnotes 78 Chapter 4 The Legal and Regulatory Environment 79 Introduction 80 Business Regulation in a Free Market 81 Enforcement Responsibilities 81 The Legislative Acts that Affect Marketing 82 Sherman Antitrust Act (1890) 82 Clayton Act (1914) 83 Federal Trade Commission Act (1914) 83 Robinson-Patman Act (1936) 85 Celler-Kefauver Act (1950) 85 Consumer Goods Pricing Act (1975) 85 Securities Laws 86 Sarbanes-Oxley Act and Its Offspring 86 The Uniform Commercial Code 86 Business Legislation Issues 87 Intercorporate Stockholding 87 Interlocking Directorates 87 Price Maintenance 87 Refusal to Deal 89 Resale Restrictions 89 Price Discrimination 89 Quantity Discounts 92 Substantiality Test 94 Company Size 95 Some International Implications 95 FOREIGN CORRUPT PRACTICES ACT (FCPA) 95 BASIC PROVISIONS OF THE FCPA 96 Supply Chain Implications 96 Intellectual Property 96 Antitrust Implications of Intellectual Property 97 Cross Licensing 98 Joint Ventures 99 Confidentiality Agreements 99 Political Framework of Enforcement 100 Pacific Drives Revisited 100

Contents xiii Thoughts to Take with You into the Next Chapter 100 Key Terms 101 Questions for Review and Discussion 101 Endnotes 102 Chapter 5 Concepts and Context of Business Strategy 103 Introduction 104 What is Strategy? 105 Strategy-Making and Strategy Management Processes 107 Performing Strategic Management in the Business-to-Business Company 107 A Critique of the Model 110 Key Strategy Concepts 111 Strategic Resource Allocation 112 Strategic Business Unit Management 112 Tools for Designing Strategy 113 The Growth-Share Matrix 114 RETHINKING THE MATRIX 115 Multifactor Portfolio Matrix 116 INCOMPATIBILITY OF CULTURES WITHIN ORGANIZATIONS 117 "PORTFOLIOS AND VALUE 117 The Balanced Scorecard 118 Taking an Entrepreneurial Approach to Marketing Strategy 118 The Organization Mission 119 FOSTERING OWNERSHIP 119 Changing the Rules 120 Special Issues in Business Strategy 120 Strategy Implications of Value Networks and,integrated Supply Chains 120 Strategy Development and the Internet 120 Strategic Implications of Market Ownership 121 Strategy Development in New Businesses 121 Thoughts to Take with You into the Next Chapter 122 Key Terms 122 Questions for Review and Discussion 122 Endnotes 123 Chapter 6 Market Research and Competitive Analysis 124 Introduction 126 Market Research 127 Market Research Fundamentals 128 DEFINE THE PROBLEM AND RESEARCH OBJECTIVES 129 DESIGN THE RESEARCH METHOD TO ACHIEVE THE RESEARCH OBJECTIVES 129

u xiv Contents COLLECT THE DATA 130 ANALYZE THE DATA AND DRAW CONCLUSIONS 130 PRESENT THE FINDINGS 130 Implications of Types of Decision Support 130 RESEARCH TO SUPPORT TARGETING DECISIONS 130 RESEARCH TO SUPPORT DESIGN DECISIONS 132 RESEARCH TO SUPPORT GO/NO-GO DECISIONS 133 Designing the Research Differences from Market Research in Consumer Markets 134 CONCENTRATED MARKETS 134 DIVERSITY OF INTERESTS IN THE BUYING CENTER 134 TECHNICAL EXPERTISE 134 Designing the Research Approach Other Special Circumstances in Market Research 135 TIME COMPRESSION 135 UNCERTAINTY 135 MARKET RESEARCH FOR ENTREPRENEURIAL MARKETING 136 MARKET RESEARCH WITH ONLINE DATA COLLECTION AND ANALYTICS SOFTWARE 136 Practical Advice for Performing Market Research in Businessj-To-Business Markets 136 CONDUCTING PERSONAL INTERVIEWS 137 ADDRESSING THE TOUGHER ISSUES 138 APPROPRIATE USE OF SURVEYS IN BUSINESS-TO-BUSINESS MARKETS 139 MANAGING UNCERTAINTY 139 MINIMIZE IMPACT OF TIME COMPRESSION 139 INTERACTIONS OF THE BUYING CENTER 140 Summary of Market Research 140 Com petitive Ana lysis 140 The Nature of Competition 140 The Six Sources of Competition 141 Information to Collect on Individual Competitors 142 COMPETITOR GOALS 142 COMPETITOR STRATEGIES 143 COMPETITOR CAPABILITIES 143 COMPETITOR ASSUMPTIONS 143 Sources of Competitive Information 144 THE CUSTOMER 144 THE INTERNET 144 BUSINESS AND TRADE PRESS 145 TRADE SHOWS 145 OTHER SOURCES 145 Summary of Competitive Analysis 145

Contents xv Thoughts to Take with You into the Next Chapter 146 Key Terms 146 Questions for Review and Discussion 146 Endnotes 147 Chapter 7 Segmenting, Targeting, and Positioning 148 Introduction 150 The Relationship Between Segmenting, Targeting, and Positioning 150 Market Segmentation 151 Basic Framework of Segmentation 151 FINDING GROUPS WITH SIMILARITIES IN WHAT THEY BUY OR HOW THEY ACT 151 NEED FOR MEASURABIUTY CREATES INFORMATION NEEDS 152 TYPICAL BASES FOR BUSINESS-TO-BUSINESS SEGMENTATION 152 Value-Based Segmentation 153 The Process of Determining Segmentation 154 ANALYTIC APPROACH TO DETERMINE A SEGMENTATION FRAMEWORK 155 SEGMENTATION BY INNOVATION TRANSLATION 158 Summary of Segmentation 160 Choosing Target Segments 160 Attractiveness of Segments 160 MARKET ATTRACTIVENESS 161 COMPETITIVE ATTRACTIVENESS CHOOSING YOUR BATTLES 161 CHANNEL ATTRACTIVENESS 162 COMPETITIVE ATTRACTIVENESS SUPPLY CHAINS AS A DISTINCTION 162 INTERNAL ATTRACTIVENESS PLAYING TO YOUR STRENGTHS 163 ATTRACTIVENESS OTHER CONSIDERATIONS 163 Choosing Targets 163 PROCESS FOR CHOOSING TARGET SEGMENTS ANALYTICALLY 163 UNCERTAINTY AND TIME COMPRESSION THE NEED TO USE ANALYSIS AND TRANSLATION TOGETHER 166 Positioning 166 Further Issues in Segmentation, Targeting, and Positioning 167 Segmentation and Positioning Based on the Technology Adoption Life Cycle 168 Positioning a Product Line 169 Thoughts to Take with You into the Next Chapter 170 Key Terms 170 Questions for Review and Discussion 171 Endnotes 171 Chapter 8 Developing the Product, Service, and Value of the Offering 173 Introduction 174 The Product Life Cycle 175

xvi Contents The Product Life Cycle and Life Stages of Offerings 176 Offering Development Stage 176 Offering Introduction Stage 177 Offering Growth Stage 178 PRODUCT ACCEPTANCE 178 PRODUCT DIFFERENTIATION 179 ECONOMIES OF SCALE 179 Offering Maturity Stage 181 Offering Decline Stage 181 PRODUCT ELIMINATION CONCERNS 182 Basic New Product Development Process 182 STAGE 1: IDEA GENERATION 182 STAGE 2: PRODUCT SCREENING 182 STAGE 3: BUSINESS CASE ANALYSIS 183 STAGE 4: PRODUCT/STRATEGY/PLAN DEVELOPMENT 183 STAGE 5: TEST MARKET 183 STAGE 6: PRODUCT LAUNCH 184 STAGE 7: HAND OFF TO THE INNOVATION TRANSLATION/CUSTOMER EDUCATION TEAM 185 Customer/Market Orientation 185 Team Approach 186 Invest in the Early Stages 186 Stage Gates and Phase Reviews 187 Concurrent Development 187 No Shortcuts 188 The Role of Marketing in the Product Development Process 188 Marketing Defines the Outcomes 188 Reducing the Risk of New Product Failures 190 Why Do New Products Fail? 190 THE MISSING MARKETING PLAN 190 No REAL NEED EXISTS 190 THE MARKET SIZE IS OVERESTIMATED OR A "ME TOO" PRODUCT FAILS TO PENETRATE THE MARKET 190 THE OFFERING FAILS TO MEET NEEDS ADEQUATELY 191 MARKET WILL NOT PAY 191 CONTRARY PERCEPTIONS OF INNOVATION 191 Collaborators 192 Make-or-Buy Decisions 193 Factors in the Decision 194 Supplier Role in the Decision 195 Thoughts to Take with You into the Next Chapter 197 Key Terms 197 Questions for Review and Discussion 198 Endnotes 198

Contents xvii Chapter 9 Innovation and Competitiveness 200 Introduction 202 Marketing Entrepreneurial^ 202 Changing the Rules 204 Practical Aspects of Creating an Entrepreneurial Orientation 205 HIRING THE RIGHT KINDS OF PEOPLE 205 DIRECTING APPROPRIATE ACTIVITIES 206 REMOVING IMPEDIMENTS 206 PROVIDING INCENTIVES 206 Competing Through Innovation 207 Innovation across the Offering 207 Pursuit of Disruptive Technologies 210 Pursuit of Sustaining Innovation 212 Practical Aspects of Accomplishing Innovation 213 OBTAINING THE RIGHT KINDS OF PEOPLE 213 DIRECTING THE RIGHT ACTIVITIES 213 IMPEDIMENTS AND INCENTIVES 214 Thoughts to Take with You into the Next Chapter 215 Key Terms 216 Questions for Review and Discussion 216 Endnotes 216 Chapter 10 Pricing in Business-to-Business Marketing 218 Introduction 220 Pricing Basics 222 Pricing to Reflect Customer Value 223 A VALUE-COST MODEL OF THE CUSTOMER 227 Relevant Costs 228 Contribution Analysis 230 Demand Functions and Pricing 231 Managing Price as Part of Marketing Strategy 233 Strategic Context of Pricing 233 PRICING OBJECTIVES 234 Pricing throughout the Product Life Cycle and the Technology Adoption Life Cycle 235 Price Models 237 Penetration Pricing and Price Skimming 237 LEARNING CURVE EFFECT 239 CHOICES ARE NOT ALWAYS AVAILABLE 240 Pricing in Translation Mode 240 Pricing for International Marketing Efforts 241 Managing Pricing Tactics 241 BUNDLING 242

xviii Contents Discounts and Allowances 242 Competitive Bidding 242 INITIATING PRICE CHANGES 244 Summary of Managing Price 245 Pricing Implementation: The Case of Negotiated Pricing 246 Two Types of Situations 246 Preparation for Negotiation 247 Last Thoughts on Negotiation 249 Pricing and the Changing Business Environment 249 Pricing, Time Compression, Hypercompetition, and the Internet 250 Thoughts to Take with You into the Next Chapter 251 Key Terms 251 Questions for Review and Discussion 251 Endnotes 252 Chapter 11 Business Development and Planning 253 Introduction 255 Forecasting Markets 256 Forecast Types and Techniques 258 Marketing Operation Forecasts in Depth 259 First-of-a-Kind Application, Translation of a Previous Success, or Replacement for Existing Business? 264 Managing Products Through The Product Life Cycle 265 Interrelating the TALC and the PLC 265 SUMMARY OF PLC CONCEPT 265 Marketing throughout the Product Life Cycle 268 MARKETING STRATEGY AND BUSINESS DEVELOPMENT THROUGH THE PLC 268 Organizing to Manage Simultaneous Product Life Cycles 273 Using Specialists 274 Business Development Bands through the PLC 275 Thoughts to Take with You into the Next Chapter 277 Key Terms 277 Questions for Review and Discussion 277 Endnotes 278 Chapter 12 Business-to-Business Selling 279 Introduction 281 The Nature of Sales and Sellers 281 Characteristics of Business-to-Business Selling 282 REPEATED, ONGOING RELATIONSHIP 282 SOLUTION ORIENTED, TOTAL SYSTEM EFFORT 282

Contents xix LONG TIME PERIOD BEFORE SELLING EFFORT PAYS OFF 283 CONTINUOUS ADJUSTMENT OF NEEDS 283 CREATIVITY DEMANDED OF SELLER BY BUYER 283 The Role of Sales in a Modern Organization 283 Relationship Sales and Marketing 283 DEFINING WHAT A RELATIONSHIP IS 284 RELATIONSHIPS AND ATTITUDE 285 RELATIONSHIPS AND LOYALTY 285 RELATIONSHIPS AND CORPORATE CULTURE 285 Four Forms of Seller Roles 286 THE ORDER TAKER 286 THE PERSUADER/SUSTAINER 288 THE MOTIVATOR/PROBLEM SOLVER 289 THE RELATIONSHIP/VALUE CREATOR 290 Other Types of Selling Roles 291 MISSIONARY SELLERS/FIELD MARKETERS 291 POST-SALE CUSTOMER SERVICE 293 Management Perspective 294 The Mutual Needs of Buyer and Seller 295 The Needs of the Job Function 295 The Needs of the Organization 295 The Individual Needs of the Buyer and Seller 297 Selling the Structure 298 Sales Force Organization 298 Direct Sales Force 299 Sales Force Deployment 299 Sales Force Compensation 300 STRAIGHT-COMMISSION COMPENSATION PROGRAMS 300 STRAIGHT-SALARY COMPENSATION PLANS 301 COMBINATION COMPENSATION PLANS 301 Manufacturers' Representatives 302 Market Conditions that Favor Manufacturers' Representatives or a Direct Sales Force 303 TECHNICALLY COMPLEX PRODUCTS 303 LONG LEAD TIMES 303 SELECTION, TRAINING, AND CONTROL 304 MISSIONARY WORK REQUIRED 304 EXPLICIT CUSTOMER FEEDBACK DESIRED 305 Combinations of Representation 305 Thoughts to Take with You into the Next Chapter 305 Key Terms 306 Questions for Review and Discussion 306 Endnotes 307

xx Contents Chapter 13 Business-to-Business Branding 308 Introduction 311 Holistic Branding 312 Characteristics of Business-to-Business Branding 312 The Role of Business-to-Business Brands 313 THE BRANDING TRIANGLE 314 Branding Dimensions 315 Brand Strategy 317 BRAND ARCHITECTURE 317 Communication and Corporate IdentityA/isual Identity Code 318 Measuring Equity and Value 321 Competing Through Branding 323 Importance of Brand in Business-to-Business Buyer Behavior 324 Branding as a Standard 325 FIRST WITH NEW TECHNOLOGY 325 BEING BEST WITH SERVICE 326 INNOVATING THE NEED NOT THE TECHNOLOGY 326 LIVING THE BRAND 326 Defending»the Brand 326 SUBORDINATE BRANDS 327 Building a Strong Brand 328 Building Associations 328 Quality 329 Ingredient Branding 329 Thoughts to Take with You into the Next Chapter 331 Key Terms 332 Questions for Review and Discussion 332 Endnotes 332 Chapter 14 Channel Relationships and Supply Chains 334 Introduction 336 The Rationale for Marketing Channels 336 Marketing Channels Deliver Value 338 Economic Utility 338 FORM 338 TIME 338 PLACE 338 POSSESSION 338 Channel Flows and Activities That Create Value 339 Marketing Channels Meet Customer Needs and Expectations 341 Industrial Distributors Serve Industrial End Users 342 Industrial Distributors Serve Industrial Suppliers 344

Contents xxi Value Networks Are Marketing Channels 345 USER TRAINING 346 PRODUCT INFORMATION 346 PRODUCT SUPPORT AND DELIVERY 346 FINANCING 347 The Elevation of Business Logistics Management to Supply Chain Management 347 The Physical Distribution Concept A Cost-Service Relationship 348 INVENTORY MANAGEMENT 348 TRANSPORTATION 348 WAREHOUSING 349 MATERIAL REQUIREMENTS PLANNING 349 LOGISTICS AS A COMPETITIVE EDGE 349 Economic Utility of Business-to-Business Markets 349 Channel Design 350 Reduce Discrepancy of Assortment 352 When Use of Distributor Channels Is a Good Channel Design 352 MARKETING MIX ISSUES 353 FACTORS FAVORING USE OF DISTRIBUTOR CHANNELS 353 -*' FACTORS NOT FAVORING USE OF DISTRIBUTOR CHANNELS 354 OTHER CIRCUMSTANCES 354 Vertical Integration versus Finding the Right Channel Partner 356 Distribution and the Product Life Cycle 356 Introductory Stage 356 Growth Stage 356 Maturity or Decline Stages 357 Managing Channels of Distribution 357 Selecting and Caring for Distributors 357 TEAM PLAYERS 358 Power and Conflict in Marketing Channels 358 BASES OF POWER 358 Channel Patterns and Control 359 Channels and the Internet 362 The Internet's Emerging Role in Business-to-Business Marketing Channels 362 What Has Happened to New Types of Channels 363 Future Adoption of Information Technology for Channel Management 364 Thoughts to Take with You into the Next Chapter 364 Key Terms 365 Questions for Review and Discussion 365 Endnotes 366

xxii Contents Chapter 15 Communicating with the Market 367 Introduction 369 A Communications Model 370 Losing Meaning in the Translation 370 Media Can Impact the Message 371 Feedback 371 Noise 372 Capabilities of Promotion 372 The Elements of the Promotion Mix 373 Personal Selling 373 Advertising 373 Sales Promotion 374 SALES PROMOTION FOCUSED ON THE SALES TEAM 374 SALES PROMOTION FOCUSED ON CHANNEL INTERMEDIARIES 375 Public Relations 375 PUBLIC RELATIONS ACTIVITIES 376 EFFECTIVENESS IN PUBLIC RELATIONS 376 WHEN THE IMAGE UNRAVELS 377 Promotional Methods in Business-to-Business Marketing 377 Convergence of the Promotion Mix 379 Print Promotion 379 ADVERTISING IN TRADE JOURNALS 380 DIRECTORY ADVERTISING 380 CONSUMER MEDIA 380 SENSACON APPLICATIONS OF PRINT ADVERTISING 381 Corporate Advertising 382 Direct Mail 383 Sales and Support Literature 383 CATALOGS, PRODUCT BROCHURES, AND DATA SHEETS 383 CAPABILITIES BROCHURES 383 TECHNICAL BULLETINS, TEST REPORTS, AND APPLICATION HISTORIES 384 SENSACON APPLICATIONS OF SALES AND SUPPORT LITERATURE 384 Channel Promotions 384 Promotional Merchandise 385 Public Relations, Trade Shows, Conferences, and Corporate Positioning 385 Trade Shows and Conferences 385 WHO SHOULD ATTEND 386 HAVING AN EXHIBIT 386 STAGING THE EXHIBIT 387 WHEN THE SHOW IS OVER, CAPITALIZE ON THE EFFORT 387

Contents xxiii Public Relations and Positioning 388 SENSACON APPLICATIONS OF PUBLIC RELATIONS, TRADE SHOWS, AND POSITIONING 388 TECHNICAL PAPERS 389 Internet and Web Communications in Business-to-Business Marketing 390 WebSite 391 Attracting Visitors to a Web Site 392 Opt-in E-mail 393 Newsletters 394 Online Seminars 394 Social Networking and New Media 394 Effective Internet Communications 395 Promotion and the Impact of Trends in Business-to-Business Markets 395 Promotion and Time Compression 395 Promotion and Hypercompetition 396 Thoughts to Take with You into the Next Chapter 396 Key Terms 397 Questions for Review and Discussion 397 Endnotes 398 Chapter 16 Business Ethics and Crisis Management 399 Introduction 402 Ethical Issues and the Marketing Concept 402 The Societal Marketing Concept 403 Societal Marketing as an Ethical Base 404 A Clash of Ethical Standards 404 Ethical Standards Among Different Stakeholders 405 Ethical Standards at Different Levels in the Organization 405 Ethical Standards of the Individual and Performance Standards of the Organization 407 SLTUATIONAL ETHICS 407 ETHICS IN PRODUCT ANNOUNCEMENTS 409 ETHICS IN PRODUCT CAPABILITY CLAIMS 409 ETHICS IN OBTAINING COMPETITIVE INFORMATION 409 OTHER QUESTIONABLE ETHICAL CHOICES AND OPPORTUNITIES 410 Individual Ethical Behavior 410 Win-Win, Win-Lose, and Zero-Sum 410 COMPROMISE AND WIN-WIN 412 Ethical Behavior and Value Networks 413 Ethical Behavior and Value Image 414 Crisis Management 414

xxiv Contents Cases Crisis Preparation 415 ORGANIZATIONAL STRUCTURE FOR CRISIS MANAGEMENT 415 ASSESSING AND ADDRESSING RISKS 415 PLANNING FOR UNANTICIPATED CRISES 416 INOCULATION AGAINST NEGATIVE MEDIA ATTENTION 417 Media Relations During a Crisis 417 MINOR CRISES: PREPARATION FOR AND HANDLING OF INCIDENTS 418 HANDLING MINOR CRISES IN A YOUNG COMPANY 419 MAINTAINING VIGILANCE WHILE MARKETING ENTREPRENEURIALLY 420 Thoughts to Take with You as You Finish this Chapter 420 Key Terms 420 Questions for Review and Discussion 421 Endnotes 421 Case 1 LastMile Corporation II: Choosing a Development Partner 423 Overview 423 LastMile's Dilemma 423 Questions for Discussion 425 Case 2 B2B E-Commerce in China: The Story of Alibaba.com 427 Difficulties of B2B E-Commerce in China 428 What China Is Doing to Promote B2B E-Commerce 429 Alibaba's Strategy of Online E-commerce 430 Company History 430 Meet Jack Ma: "The Jack Who Will change the World" 431 The Supporters 432 Alibaba Today 432 TaoBao and ebay 432 Feedback from Alibaba's B2B Customers 433 Cultural Differences 433 Innovation 434 AliPay Online Payment Solution 434 Alibaba Enters Strategic Cooperation with China Post 434 Alibaba Acquired Yahoo! China 435 Future for Alibaba and B2B E-Commerce 435 IPO: Alibaba Aims for 1.3 Billion in Listing 436 China's B2B E-Commerce Industry and Alibaba 436 Questions for Discussion 437

Contents XXV Appendices 437 Key Development Milestones for Alibaba 437 The Companies 438 Chinese Auction Market Share 439 Chinese Search Market Share 439 Chinese Internet Giants 440 Case 3 Dow Corning Success in China 442 Dow Corning 442 The Birth of Xiameter Model 442 Cannibalization? 445 Innovative Brand Strategy Leads to Growth 447 Dow Coming's Footprint in China 447 Drivers for Future Growth: Differentiation and B2B. E-Commerce 449 Differentiation Building a Stronger China and Meeting Consumer's Demand 449 B2B E-Commerce in China's Market 450 How to Map Out Dow Coming's B2B Marketing Strategy -*- in China? 451 Questions for Discussion 452 Case 4 Marketing Plastic Resins: GE and BW II 453 Overview 453 Introduction 453 Purchasing Habits 454 The Products 454 Market History 455 Changing Environment 458 Channel Implications 458 Questions for Discussion 462 Case 5 Automotive Headlamps II: The Paradigm Shift from Standardized Glass Sealed Beams to Today's Plastic Custom Designs 464 Overview 464 Introduction and Company Backgrounds 464 General Electric 464 General Motors 465 Ford Motor Company 465 Regulatory Agencies 465 Professional Organizations 465

xxvi Contents GEP Organization 465 The History of Forward Lighting Headlamps 466 The Situation 468 The Marketing Plan 469 Benefits 469 Risks 469 Finding the Right Customer 470 Challenging the Standard 470 Validating the Concept 471 Analysis 472 Questions for Discussion 472 Case 6 Makrolon: The High-Tech Material 473 Background on Bayer AG 475 The History 475 Organization 477 Bayer MaterialScience AG 477 Background on Makrolon 478 The Market for Polycarbonate 480 Bayer's Branding Strategy for Makrolon 480 The Example UVEX 482 Questions for Discussion 485 Case 7 SENSACON Corporation: High Technology Evolves to High Volume 486 Branding and Positioning the New Company 487 The Business Development Strategy 488 New Market Development 488 One of Many Changes 489 Partners with Different Goals 490 "Under New Management" 491 Innovating the Need Not the Technology 491 New Channels 491 Allen Chen's Challenge to His Staff 492 Defending the Market Position 492 Index 493