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

ComplexityA 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 ProcessNew 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 G O / N O - G O DECISIONS 133

Designing the ResearchDifferences from Market Research

in Consumer Markets 134
CONCENTRATED MARKETS 134
DIVERSITY OF INTERESTS IN THE BUYING CENTER 134
TECHNICAL EXPERTISE 134

Designing the Research ApproachOther 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 T I M E 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 W H A T THEY BUY OR H O W
THEY A C T 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 ATTRACTIVENESSCHOOSING YOUR BATTLES 161
CHANNEL ATTRACTIVENESS 162
COMPETITIVE ATTRACTIVENESSSUPPLY CHAINS AS A DISTINCTION 162
INTERNAL ATTRACTIVENESSPLAYING TO YOUR STRENGTHS 163
ATTRACTIVENESSOTHER CONSIDERATIONS 163

Choosing Targets 163

PROCESS FOR CHOOSING TARGET SEGMENTS ANALYTICALLY 163
UNCERTAINTY AND TIME COMPRESSIONTHE 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: H A N D 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 " M E T O O " PRODUCT FAILS
TO PENETRATE THE MARKET 190
THE OFFERING FAILS TO MEET NEEDS ADEQUATELY 191
MARKET W I L L 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
Sellingthe 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 W O R K 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 N E E D N O T THE TECHNOLOGY 326
LIVING THE BRAND 326

Defendingthe 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 ConceptA 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 M I X 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
W H E N 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 M E D I A 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
W H O SHOULD ATTEND 386
HAVING AN EXHIBIT 386
STAGING THE EXHIBIT 387
W H E N 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

Crisis Preparation 415

ORGANIZATIONAL STRUCTURE FOR CRISIS MANAGEMENT 415
ASSESSING AND ADDRESSING RISKS 415
PLANNING FOR UNANTICIPATED CRISES 416
INOCULATION AGAINST NEGATIVE M E D I A 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

Cases
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
DifferentiationBuilding 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 LightingHeadlamps 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 NeedNot the Technology 491
New Channels 491
Allen Chen's Challenge to His Staff 492
Defending the Market Position 492
Index 493