Business to Business Marketing Management

A Global Perspective

Alan Zimmerman, Jim Blythe

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000487305
• Edition: 4
• Topic: Business
• Subtopic: Marketing
• Index: Business

Business to Business (B2B) markets are considerably more challenging than consumer markets and demand a more specific skillset from marketers. B2B buyers, often dealing with highly complex products, have specialist product knowledge and are far more knowledgeable and demanding than the average consumer. This textbook takes a uniquely international approach to this complex environment, the result of an international team of authors and real-life cases from across the globe.

This new edition has been fully revised with new and updated case studies from a variety of regions. Every chapter has been brought in line with current business to business research, alongside new coverage of non-profit and government marketing, digital marketing, ethics, and corporate social responsibility. Other unique features include:

• The placement of B2B in a strategic marketing context.

• A full discussion of strategy in a global setting including hypercompetition.

• A detailed review of global B2B services marketing, trade shows, and market research.

More selective, shorter, and easier to read than other B2B textbooks, this is ideal for introductory B2B and intensive courses. It is also comprehensive enough to cover all the aspects of B2B marketing management that any marketer needs, whether they are students or practitioners seeking to improve their knowledge.

The textbook is also accompanied by an extensive collection of resources to aid tutors, including a full set of PowerPoint slides, test bank of questions, and practical exercises to aid student learning.

Section III

Formulating the marketing mix

CHAPTER 8

Product strategy and product development

DOI: 10.4324/9781003164036-11

Introduction

No market remains the same forever, and marketing managers are always looking for new and better ways to generate satisfaction for their customers and increase return to their shareholders. Competitors lurk in every market, trying to think of more attractive products and services. All of this means a firm must engage in a formal new product development (NPD) process. The firm needs to develop an overall product strategy, and then manage a process which will keep its offerings as attractive as possible to customers.

Chapter objectives

After reading this chapter, you should be able to:

• Differentiate between B2B and B2C product strategy.
• Understand the product lifecycle and how it applies to B2B and global markets.
• Outline and explain the new product development process.
• Discuss the considerations in global brand strategy.
• Understand the make or buy decision, and how global sourcing and subcontracting relate to this decision.

Definition of product

A product is an offering of a firm which satisfies the needs of customers. Customers are seeking to purchase benefits, and they are willing to part with items of value (including money and time) in exchange for gaining these satisfactions. This includes the core product and benefits, essentially the value the customer is actually purchasing, plus the product attributes which include the brand name, the design, the country of origin, price, and packaging, as well as support services such as delivery, installation, warranty, and after-sales service. Since many business marketers began their careers as engineers, they often focus too strongly on the tangible core product and functions, rather than the total package that the customer considers when he or she buys.

The customer looks at the total product as shown in Figure 8.1.

Figure 8.1 The total product

Figure 8.2 Trade-offs in launching new products

Product strategy

The product strategy of a firm relates to making decisions about the features, quality, and the entire offering as shown in Figure 8.1. Needless to say, the product strategy is a most tangible expression of the overall firm strategy discussed in Chapter 3. Product strategy involves developing a rational relationship between and among product offerings. For instance, an office furniture product manager must decide upon the features, functions, and benefits of a particular seating line, the quality level which will affect the pricing, and all of the ancillary items under his control, including packaging, design, country of origin, delivery, installation, warranty, and after-sales service. They also have to make decisions about the brand. If one assumes that a product manager is employed by Steelcase, the world’s largest office furniture manufacturer, they may choose to offer the product as a Steelcase branded product or to develop a new brand name not associated with Steelcase so that this product stands on its own. A third choice might be to private-brand the product for some other outlet such as Office Depot or Staples. These three choices are illustrated in Figure 8.2.

In deciding upon the entire product offering, the manager must distinguish between an individual product, which has the unique set of the attributes seen in Figure 8.1; a product line, which is a group of these individual products which are related to one another; and the overall product assortment, which is all of the product lines together.

In the global context, product lines tend to expand to accommodate the varying requirements of national markets. Each country requires slightly different product characteristics, leading to a proliferation of models. It is critical for a manager of the product line to attempt to limit the number of products and product lines to the minimum which will satisfy the requirements of most of his customers. Pruning the product line to remove unprofitable or underperforming products should be a regular activity for marketers.

While consumer product strategy is similar to business product strategy, there are a few major differences. First, consumer products focus more heavily on brand identity and product appearance than do strategies related to business products. Since most business products are sold with related services like installation, training, after-sales service, and maintenance, in almost every case, a business product must be offered as a total package (Biemans and Griffin, 2018). As mentioned earlier, business buyers attempt to minimize the emotional aspect of their decisions. In most cases, they are concerned with specific tangible benefits which can be measured when they make a buying decision. Therefore, designing a business product requires a full understanding of the customer’s value-creating activities so that the product can be positioned as an important contributor to the customer’s value chain.

The product lifecycle

The product lifecycle (PLC) dictates that a firm engages in a dedicated product development process (see Figure 8.3), and posits that there are four major stages through which most industries advance.

Figure 8.3 Product lifecycle

The first is Introduction, marked by start-up sales growth. Generally, in this stage, a firm is spending more on producing and marketing the product than it is receiving in revenue from sales. In the Growth stage, the product begins to be accepted and sales climb, with a consequent improvement in the relationship between revenue and expenditure. The initial investment in developing the product and preparing to produce it has probably been met, and the firm should begin to see a positive return on the investment. The longest period is the Maturity stage, in which sales begin to level off since penetration in the market is high. Even though sales level off, so that revenue remains fairly constant, profits can continue to rise throughout this stage, depending upon competitive pressure and efficiencies the firm may realize.

The Maturity stage is the point at which the investment really pays off. Expenditure on marketing is usually relatively low as a percentage of the revenue received, and the initial start-up investment should have been recouped. The final stage is Decline, in which sales of the product gradually fall off as it is supplanted by some newer solution. Here, profits may continue to be positive even though sales revenue may decrease sharply. Eventually, the product will cease to be viable as competing products enter the market, or as newer versions of the product are produced by the firm.

The PLC concept has been criticized because it presents too specific a pattern of stages for industries which don’t always follow a smooth curve. In addition, those who are marketing the product seldom know what stage the product is in. A key criticism is that the PLC may be the result of marketing efforts rather than a course followed by products, regardless of the effort placed behind them. In other words, marketers act in ways which make the PLC inevitable. For example, whenever Intel develops a new computer chip, they publicize the product heavily, they carry out major sales campaigns with the computer manufacturers, and they price competitively. Inevitably, this means that the new chip has a rapid growth rate but loses money at first – just as the PLC model predicts. As the chip becomes established, Intel invariably begins developing the next generation of chip, thus ensuring that the current model must go into a decline when the new chip hits the market. Thus, the PLC becomes a self-fulfilling prophecy. A further criticism of the PLC is that there is no way to determine the timescales, so there is no way of knowing whether the product still has another year to go in the Growth stage or whether it is heading into Maturity. The Maturity stage might last anything from a few weeks (in the case of some electronic products) to a period of centuries (in the case of, say, iron ore). Also, there is no doubt that the lifecycle is affected by marketing activities. A product which is heading into Decline might be repositioned into a new market (commonly a foreign one), or might be nursed back to life with some clever promotional campaigns. Finally, the PLC is nearly irrelevant for particular brands. Thus, the PLC is a better descriptor than it is a predictor.

Despite the criticisms, the PLC is a useful short-hand tool for considering the most effective strategy at a particular time.

As can be seen from Table 8.1, in the Introduction stage, by necessity, only a few product variations are offered. Pricing can be high to recoup large investments (“skimming”) or low to establish market share (“penetration”). Marketers in this stage attempt to build channels of distribution. They use promotion to build primary demand; that is, to explain to customers why they need this particular innovation. The overall objective here is to create awareness and have individuals try the p...