Preface iii

Acknowledgements vii
Features of the Book viii
Brief Contents x
List of Exhibits and Case Studies

xvii

1. B2B MarketingAn Introduction

Introduction 3
Characteristic Features of B2B Marketing 6
B2B vs B2C Marketing 10
Market Structure 11
Product Characteristics 13
Buyer Behaviour 13
Channel Characteristics 15
Promotional Variables 16
Pricing Strategies 16
B2B Marketing Concept 17
Organizational Dimensions 18
B2B Marketing System 19
Flow of Goods 19
Market Potential 23
Contract Management 26
Proposal or Offer 26
Acceptance of the Proposal 26
Agreements as Contracts 26
Communication of Acceptance 28
AcceptanceIdentical to Proposal 28
Withdrawal of an Offer/Proposal 28
Withdrawal of Acceptance 29
Stamping of Contracts 29
Execution of Contracts 29
Contracts on Behalf of Central/State Governments 29
Production, Sales, and Purchases by Indian B2B Organizations 33
Case Study: Hooper Gas India Ltd (HGIL): An Insight 39
Annexure 1.1: General Guidelines for Entering into Contracts 41

2. The Nature of B2B Marketing

43

Importance of B2B Marketing 45

Economics of B2B Demand 47
The Resellers Market 49
Market Characteristics 49
Product Characteristics 49
Buyer Characteristics 49
Channel Characteristics 50
Promotional Characteristics 50
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Price Characteristics 50
Economics of Demand 50
Key Drivers in B2B Marketing Organizations 51
Elements of the B2B Marketing System 52
Participants 52
Distribution Channels 54
Relationships 55
Functional Dimension of B2B Marketing 58
Marketing as a Business Philosophy 58
The Functional Dimension 59
Mission Definition 60
Market Definition 61
Buying Process in B2B Markets 68
Buying Centre and its Stakeholders 75
Factors that Influence Buying Behaviour in Businesses 77
Case Study: Aditya Birla in Talks with 3i to Sell Insulator Business 93
Annexure 2.1: Rolta India Ltd (Exclusive Marketing Rights of Intergraph, US, for India for
CAD/CAM Software Solutions) 95

3. B2B Strategic Planning

96

Planning at Corporate Headquarters 97

Defining Corporate Mission 97
Establishing the SBUs 101
Assigning Resources to Each SBU 103
Planning New Business 104
Goal Formulation 108
Strategy Formulation 109
Programme Formulation 112
Implementation 112
Feedback and Control 114
Strategic Alliances and Joint Ventures 114
Types of Marketing Alliances 117
Importance of Strategic Planning 117
Importance of Strategic Marketing Planning 118
Nature of Marketing Planning 119
Corporate Planning 120
Marketing Planning Appraisal Process 129
External Appraisal 129
Internal Appraisal 129
SWOT Analysis 129
Gap Analysis 129
Forecasting 130
Strategic Marketing Planning Models 131
BCGs GrowthShare Matrix (BCG Model) 131
General Electric Matrix (GE Model) 132

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Arthur D. Little Model 134

Porters Five Forces Model 134
Marketing ElementsFunctional Planning 137
Case Study: Sailing through Rough TimesSteel Authority of India

4. B2B Market Research and

Information Systems

144

Introduction 146
B2B Marketing Research 146
Consumer vs Business Marketing Research 146
Classification of B2B Marketing Research 147
B2B Marketing Research Process 151
Role and Scope of B2B Marketing Research Process 155
Collection of Secondary Information for B2B Markets 158
General Sources of Secondary Information 158
Industry-specific Sources of Secondary Information 159
Evaluation of Secondary Information 160
Research Techniques in Business Research 161
Desk Research 161
Focus Groups 161
Interviewing 162
Online Focus Groups 163
Sample Survey 166
Online (Web) Surveys 168
Statistical Techniques Used in Business Research 169
Correspondence Analysis (Brand Mapping) 169
CHAID Analysis 170
Cluster Analysis 171
Correlation Analysis 171
Factor Analysis 171
Advantages of B2B Marketing Research 174
Limitations of B2B Marketing Research 174
B2B Marketing Research and the Internet 175
B2B Marketing Research through MIS and DSS 175
Inputs of MIS 176
Outputs of MIS 176
Ethics in B2B Marketing Research 181
Case Study: General Electric Plastics 185

5. Segmentation, Target Marketing,

and Positioning in B2B Market
188
Introduction 190
Market Segmentation 193
Segmentation Challenges in B2B Markets
Criteria for Market Segmentation 197

195

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141

Practical Requirements of Market Segmentation 198

Basis for Market Segmentation for B2B 198
Selecting the Market Segment 202
Advantages of Market Segmentation 203
Factors Affecting Segmentation 204
Applying Market Segmentation 206
Target Markets 207
Guidelines for Selecting a Target Market 207
Approaches to Target a Market Based on Segmentation Strategies
Advantages of Target Marketing 212
Market Positioning 212
Positioning the Image of Products and Services 215
Effective Positioning 215
Positioning Process 217
Step 1: Market Positioning 217
Step 2: Psychological Positioning 218
Step 3: Positioning Approaches 219
Positioning Maps 225
Case Study: Boeing: Segmentation, Targeting, and Positioning 227

6. Product Decision and Branding

232

Introduction 233
What is a Product? 235
Six Levels of a Product 237
Product Hierarchy 239
Product Portfolio Analysis 240
Basic Strategies Appropriate for Different Product Types 241
Product Evaluation Matrix 241
Service Offering 243
Product Classification 245
Business Product Classification 246
Product Line Analysis 247
Product Line Length 248
Brand in B2B Markets 250
The Concept and Measurement of Brand Equity 253
Branding Decision 255
Brand Name Decision 258
Brand Strategy Decisions 261
How Far should Global Branding be Pushed? 263
Brand Archaeology 264
Brand Identity in a Customized World 264
Case Study: Xerox: An Iconic Brand towards a Strong Future 268

7. New Product Development

Introduction

271

273
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208

Organizational Arrangement for New Products 273

Stages in New Product Development 274
Stage 1: Idea Generation or Search 274
Stage 2: Screening of New Product Ideas 276
Stage 3: Preliminary Business Analysis 282
Stage 4: Product and Market Research 282
Stage 5: Prototype Testing and Test Marketing 282
Stage 6: Formal Business Planning 284
Stage 7: Commercialization 284
New B2B Product 285
Innovation and Competitiveness 289
The Impact of Technology 293
New Product Development Strategy 296
The New Product Development Process 296
New Product Development Requisites 299
Case Study: New Product Shape-up: Five Ways to Leverage the Recovering Economy
304
Annexure 7.1: Thirty-three Rules to Boost Your Productivity 306

8. Pricing the Business Products

309

Introduction 310
Elements of B2B Price Management 311
The Pricing Waterfall Model 312
Setting the Price 313
Selecting the Pricing Objective 315
Determining Demand 316
Estimating Costs 319
Analysing Competitors Costs, Prices, and Offers 324
Selecting a Pricing Method 325
Selecting the Final Price 330
Influence of Other Marketing Mix Elements on Price 330
Adapting the Price 333
Geographical Pricing 334
Price Discounts and Allowances 334
Promotional Pricing 335
Discriminatory Pricing 336
Product Mix Pricing 337
Initiating and Responding to Price Changes 339
Initiating Price Cuts 339
Initiating Price Increases 339
Customers Reactions to Price Changes 340
Competitors Reactions to Price Changes 341
Export Pricing Decision 341
Case Study: Huaweis Plan to Ramp up B2B Operations in India

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345

9. Price and DGS&D

347

Indigenous Stores 349

Variable Price 349
Duties and Taxes 349
Instructions Relating to Import of Goods 349
Exchange Rate in Decision-making 350
Customs Duty 350
Rate Contract 350
Standard Format for R/Cs 352
Conclusion of R/Cs by DGS&D 352
Stores for which R/Cs are Considered 352
Registration of Firms by DGS&D 355
Categories for Registration 355
Processing of Applications of Indian Firms for Registration
Advantages of Registration 358
Vendor Selection against World Bank-aided Project 358
Methods of Procurement 358
Prequalification of Bidders 359
Bidding Documents 359
Qualification Criteria 359
Agents 360
Bid Security 360
Performance Bank Guarantee 360
Settlement of Disputes through Arbitration 360
Settlement of Disputes/Claims 361
Settlement in Contracts with PSUs 361
Settlement of Disputes through Court of Law 361
Appointment of Arbitrators 361
Cost of Arbitration Proceedings 362
Central Vigilance Commission Guidelines 363
Applicability 363
Objectives 363
Pre-tender Requirements 363
Eligibility Criteria 363
Earnest Money 363
Tender Documents 364
Tender Rejection 364
Tender Evaluation 365
Protective Clauses 365
Re-tendering 365
Post-tender Negotiations 365
Case Study: Tendering in Government Departments 367
Annexure A: A Sample Rate Contract 369

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356

Annexure B: Invitation of Quotations for Development of E-module on Rate Contract for

ABC, a Naval Organization in India 378

10. Personal Selling and Relationship Marketing

393

Changing Face of Personal Selling 395

Efficacy of Personal Selling in the Marketing Mix 397
Steps in Personal Selling 399
Prospecting 399
Pre-approach 402
Approach Stage 404
Presentation and Demonstration 409
Handling the Objections 411
The Close 413
Follow-up 414
Relationship Marketing 414
Case Study: Can Three be a Company in terms of Personal Selling Efforts?

11. B2B Sales Force Management

418

420

Role of Sales Management in B2B Marketing 421

Managing the Sales Force 424
Right Aggregation between Product Lines and Geographies 425
Right Strength, Qualification, and Experience 427
Right Compensation and Incentive Systems 428
Steps in Designing and Managing Sales Force 431
Organizing and Managing a Sales Force 432
Business Development Manager/Sales Executives Duties and Responsibilities
Problems of Sales Management 433
Sales ManagementFormulation of Sales Strategy 437
Relationship 437
The Double-win Strategy 439
Instant Service 439
Hard Sell vs Soft Sell Strategy 442
Integrated Sales Strategies 442
Client-centred Selling Strategy 443
Use of Social Media for Business Markets 446
Tailor Sales Strategy Based on Segments 446
Methods of B2B Selling 448
Relationship Marketing 448
Complementary Partner Referrals 448
Telemarketing: Selling Concepts on the Phone 448
Sales on the Internet 449
Mail Order Sales 449
Email Publications 449
Sales through Wholesaler 450
Importance of Sales Quotas for Sales Force 450

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432

Types of Sales Quotas 450

Territory Management 453
Factors to be Considered when Designing Territories 453
Assign to Territories 454
Case Study: Sales Force Automation Implementation Challenges

458

12. Marketing Channel and Physical Distribution of Business Products

460

Introduction 461
Objectives of Physical Distribution 462
Total Physical Distribution Concept 463
Warehousing Decisions 466
Inventory Decisions 468
Transportation 469
Order Processing 469
Protective Packing 470
Customer Service 471
Plant Location, Warehouse Location, and Facilities Planning 471
Channel Strategy Options 474
Direct Distribution 475
Indirect Distribution 477
Mixed Distribution 478
Factors to be Taken into Consideration while Formulating Channel Structure
Importance of Marketing Channels 479
Why Use Distributors? 480
Critical Functions and Weaknesses 480
Customer Expectations 481
Distributors are True Middlemen 481
Choosing the Right Distributor 482
Assigning Marketing Functions 482
Product Line Coverage 482
Outlets for B2B Marketing 486
Business Distributors 487
Sales Agents 492
Manufacturers Branch Houses 495
Case Study: Selecting Channels for Small Businesses 500

13. Logistics Management

503

Introduction 504
The Concept of Logistics Management 507
Physical Distribution 507
Strategic Importance of Physical Distribution 507
Physical Distribution in the Marketing Mix 507
Objectives of Physical Distribution 509
CostService Trade-offs 512
Role of Logistics in Production and Sales 512

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478

Types of Logistics 513

Supplier Logistics 513
Production/Corporate Logistics 513
Customer Logistics (7 Rs) 518
Functional Areas of Physical Distribution 521
Network Design 521
Information Technology 521
Transportation 522
Inventory Management 525
Warehousing 527
Materials Handling Equipment 529
Secondary Packaging 532
Physical DistributionTasks and Approaches 532
Marketing and Physical Distribution of Petroleum Products 533
Associated Units 533
Distribution and Customer Satisfaction 534
Logistics and Adaptation to Change 535
Emerging Trends in Logistics 535
Case Study: Logistics Firm TCI Braces for Slowdown 538

14. PSU/GovernmentB2B Purchase Procedure

540

Historical Initiatives in Government Procurement 541

Government Procurement in GATT 1994 and GATS 542
Procurement in PSU/Government 546
General Rules and Evolution of Procurement Policy 547
Procurement by Central Government Enterprises 550
Types of Preferences 551
State Development Corporations 553
Earnest Money and Performance Security 553
Earnest Money Deposit 554
Performance Security 555
Forwarding of Tender Notices 559
Monthly Tender Bulletin 562
Preparation and Issue of Tender Enquiries 562
Time Frame for Submission of Tenders 562
Signing of Tender Enquiries 562
Sale of Tender Sets 563
Cost of Tender Sets 564
Records Maintained by Tender Sale Section 564
Checklist for Preparation of Tender Enquiries 564
Receipt, Custody, and Distribution of Tenders 565
Opening of Tenders 566
Late and Delayed Tenders 567
Evaluation of Tenders and Placement of Contracts 569
Initial Analysis of Tenders Received 570

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Offers with Shorter Validity 571

Offers with Discounts for Quick Inspection/Payment 571
Post-tender Revision 571
Consideration of Purchase Proposal 571
Requirement of Additional Funds 572
Post-tender Negotiations 572
Extension of Validity of Offers 573
Intimation of Unsuccessful Tenderers 573
Intimation of Acceptance of Tender 573
Authentication of Contractual Documents 573
Case Study: Public Procurement Bill Will Check Corruption: Kapil Sibal (HRD and Telecom Minister) 575

15. Electronic Procurement

577

Procurement 579
Importance of Procurement 579
Purchasing and Procurement 580
Impact of the Internet on Procurement 581
Benefits of Using the Internet in the Buying Process 581
E-procurement 583
Models of E-procurement 587
Driving Objectives to Improve an Existing E-procurement Solution 589
Criteria for Prioritizing Suppliers by an Enterprise 590
Tools of E-procurement 591
Spend Categories 591
Requests in E-procurement 592
Benefits of E-procurement 592
E-procurement Process 600
Impact of E-procurement on Procurement Work 602
Importance of E-procurement Systems in B2B Market 604
Indicators of Enterprises Performance 605
Advantages and Disadvantages 606
E-business, E-commerce, and E-procurement 607
B2B E-commerce 608
Case Study: IFFCOs E-procurement System Cuts Bid Time by a Third 611

Appendix A: Top 100 Companies from Fortune 500 List of Americas Largest Corporations in 2011 618
Appendix B: Top 50 Companies from The Economic Times 500 List of Indias Largest Corporations in 2011 620
Appendix C: Top 52 Multinational Corporations of India in 2011 624
Appendix D: Top 55 Government-owned Companies of India in 2011 626
Appendix E: Sectoral Composition of The Economic Times Top 500 Companies of
India in 2011 628
Appendix F: National Stock Exchange Top 100 Corporations of India by Market Cap-

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italization during 2012 630

Appendix G: Export Promotion Councils of India 632
Index 633
About the Authors

638

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