BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 8C Brand Management and the Firm NPD Process: From Concept to Launch: Advanced Topics Business Market Segmentation ALAN L. WHITEBREAD

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BRAND MANAGEMENT AND NEW PRODUCT
DEVELOPMENTSECTION 8CBrand Management and the
Firm NPD Process From Concept to Launch
Advanced Topics Business Market Segmentation
ALAN L. WHITEBREAD
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MARKET SEGMENTATION- DEVELOP ATTRACTIVENESS
MEASURES -

• WHY IS IT WORTH DOING?
• TARGETED COMMUNICATIONS
• FULFILLS NEEDS AND WANTS
• RESPONDS TO CHANGING MARKETS
• EFFICIENT
• IF THE SEGMENTATION IS WRONG, LITTLE SEEMS TO
  WORK WELL AFTERWARD

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Who will benefit?
MARKETS SEGMENTS
What you are selling?
PRODUCTS, SERVICES, TECHNOLOGIES
APPLICA-TIONS
CHANNELS
Where is it acquired?
Where or how it is used?
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MARKET SEGMENTATIONFILLING THE GAPS
CHANNELS OF DISTRIBUTION
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PRODUCTS SERVICES APPLICATIONS
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MARKETS / SEGMENTS
TARGET MARKET SEGMENTS
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CHARACTERISTICS OF BUSINESS MARKETS
BUSINESS MARKETS CONSUMER MARKETS
Market Structure Geographically concentrated Many types of markets segments Fewer very-high volume buyers Fluctuating, derived demand Geographically dispersed Mass markets Small volumes Primary demand
Products Standard / complex / custom Service etc. are critical Business applications Engineering / Quality / Testing involvement Standard Service etc. of some note Personal use
Buyer Behavior Professionally trained Multiple levels involved Performance hurdles Individuals purchasing Some family influence Social / psychological drives
Buyer-Seller Relationships Technical expertise Close interpersonal relationships Long-term focus May be very dependent on each other Amateur Impersonal Immediate / Short-term
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CHARACTERISTICS OF BUSINESS MARKETS
BUSINESS MARKETS CONSUMER MARKETS
Supply Chains / Channels of distribution Predominant Often shorter more direct Not seen by consumer Usually indirect
Promotion Often technical Personal selling Often involves resellers Simple Advertising, POP,
Price Professional negotiating / purchasing Volume sensitive Complex formalized process Competitive bid / Many strategies Individuals limited purchasing skill Little, if any, leverage Simple process N/A
Demand Derived Inelastic in the short-run Volatile and discontinuous Direct Elastic Limited volatility
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BUSINESS PRODUCTS CLASSIFICATIONFor an Auto Plant
INSTALLATIONS Factories, support buildings, large machines, large material handling equipment
RAW MATERIALS Rolled steel, rubber, plastic resins
COMPONENTS Spark plugs, radiators, steering wheels
ACCESSORY EQUIPMENT Drill presses, assembly lines, small material handling equipment
MRO SUPPLIES Maintenance, Repair, Operation Cleaning supplies, office supplies, toilet tissue,
BUSINESS SERVICES Grounds maintenance, cleaning service, office equipment servicing
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BUSINESS BUYER CLASSIFICATION
PRODUCERS OEM or Private Label Purchase products for producing other goods and services can be either a finished good or a component
RESELLERS Purchase finished goods or components for resale, rental, or leasing for a profit
GOVERNMENTS Federal, state, and local governments all different buyer behaviors
ORGANIZATIONS / INSTITUTIONS Purchase finished goods and services for resale, rental, or leasing for a profit
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THE B2B MARKET STRUCTURE

• Buying motives will be rational not emotional.
• There are limited qualified buyers.
• There are potentially limited qualified
  competitors.
• B2B is frequently geographically concentrated by
  industry.

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DEMAND

• It is critical one understands the all the
  components of the total demand schedule Dt!
• Dt ? Dn
• Where Dn are the individual demand schedules.
  For instance, the demand for manufacturing,
  wholesalers, and retailers.
• The problem is at the channel level. Thus the
  Bull-Whip Effect.

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BUSINESS DEMAND

• Elastic and Inelastic demand
• Fluctuating demand due to
• Seasonality
• Erratic based on their customers demands from
  their customers and/or new programs/products
• Their demand is the total of the demand of
  multiple segmentswhich are frequently not in
  concert with each other.

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THE B2B MARKET

• Demand is usually derived.
• The frequently high volume purchase is for a
  company.
• The target audience is a group of knowledgeable
  buyers and other professionals.
• Decision-making varies from simple to complex and
  is hard to define.

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B2B MARKETS

• HORIZONTAL
• Numerous NAICS codes usually employ a
  differentiation or low-cost strategy
• B2C Inexpensive pens, pencils, pads of paper,
• B2B floor sweeping compound
• VERTICAL
• One or a few NAICS codes
• May be very profitable usually employ a
  differentiation or niche strategy
• B2C 1,000 fountain pen
• B2B CT scanner

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SUPPLY CHAIN MANAGEMENT
MARKETS Consumers Customers Prospects Suspects
SUPPLIERS SUPPLIERS
FOCAL FIRM
CUSTOMERS
CUSTOMERS CUSTOMERS
VENDORS or SUPPLIERS
FOCAL FIRM NEW PRODUCT DEVELOPMENT
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THE B2B MARKET BUYER BEHAVIOR

• The frequently high volume purchase is for a
  company for one of three reasons.
• 1 Consumption or to
• Incorporate in their products derived demand
• 2 Component and/or
• 3 Finished product OEM or P/L
• The target audience is a group of knowledgeable
  buyers with professional backgrounds.
• The trend is to prefer long-term relationships.
• Selling involves a much more complex buying
  process with many involved parties.

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THE B2B MARKET DECISION-MAKING

• A process with identifiable stages.
• Decision-making varies from simple to complex,
  from firm-to-firm, and is hard to define.
• You sell to knowledgeable buyers with
  professional backgrounds generally with agreement
  from other professional areas throughout the
  firm.
• Purchasing large amounts and being accountable
  for them are significant responsibilities. There
  are career implications throughout the
  organization.

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BUYING PARTICIPANTS
Users MANDATORY
Initiators / Info seekers STARTERS
Influencers / Advocates SUPPORT
Gatekeepers CONTROL FLOW
Buyers / Purchasing FORMS
Deciders AUTHORITY
Approvers NECESSARY
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THE B2B MARKET PRODUCTS

• Products are often specified by the customer and
  the supplier has numerous requirements to meet to
  prove they are in compliance
• Standards
• Product testing
• Quality methods and system to be used

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THE B2B MARKET CHANNELS

• Tend to have fewer responsible levels / steps
• B2B channels of distribution compete with each
  other.
• Promotion is important throughout the channels of
  distribution.
• Responsibility is often delegated down to or
  through the channel of distribution.
• Buyers generally have a thorough understanding of
  their supply chains.

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THE SUPPLY CHAIN AT WORK
Semi-finished / component products
Finished products
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SUPPLY CHAIN MANAGEMENT
FOCAL FIRM NEW PRODUCT DEVELOPMENT
CUSTOMERS
MARKETS Consumers Customers Prospects Suspects
FOCAL FIRM
FOCAL FIRM SUPPLIERS and SUPPLIERS SUPPLIERS
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THE B2B MARKET PROMOTION

• Personal selling involves a much more complex
  buying process with many interested parties.
• Sales personnel must understand
• negotiation strategies and tactics,
• all forms of communication, and
• their latitude in negotiating an agreement.

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THE B2B MARKET PRICE

• Competitive bidding
• Complex negotiations
• Total system cost
• Quality
• Delivery
• Serviceability
• Dependability
• Net unit price

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BUSINESS SEGMENTATION VARIABLES
DEMOGRAPHICS Organizational / Company Demographics
OPERATING VARIABLES Product / Process / Technology
BUYING APPROACH
APPLICATION of the Products / Services BEHAVIORAL
Build-to-order
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BUSINESS SEGMENTATION Organizational /
Demographic FIRMOGRAPHICS

• Industry
• Geography / Location
• Some industries are concentrated in a few areas
• Demographic
• Size
• Company sales, employees,
• Account
• Usage rate
• Channel of distribution
• and possibly customer type
• Operating characteristics

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BUSINESS MARKET SEGMENTATION

• GEOGRAPHIC
• AREA BUSINESSES
• LA Long Beach 686,222
• New York 598,093
• Philadelphia - NJ 405,082
• Chicago 399,511

Source DB Sales and Marketing Catalog
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BUSINESS MARKET SEGMENTATION

• DEMOGRAPHIC
• EMPLOYEES BUSINESSES
• 1,000 18,864
• 500-999 16,270
• 100-499 126,466
• lt100 1,803,535

Source DB Sales and Marketing Catalog
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BUSINESS SEGMENTATION Product / Process /
Technology

• Technological factors
• Technologies employed
• See plastics industry in NAICS
• Level of technology
• Industries
• some industries are tied to a specific technology
• Accompanying technologies
• Process or Configuration
• Design
• http//plastics.dow.com/plastics/na/fab/

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BUSINESS SEGMENTATION Applications of the
Products / Services

• Finished products for consumption
• Finished products for private label
• Component products
• Product Application http//plastics.dow.com/plasti
  cs/na/application/
• Industry or solution application
  http//www.ibm.com/solutions/us/?tracL2

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BUSINESS PRODUCT-APPLICATION-MARKET SEGMENTATION
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BUSINESS CLASSIFICATION

• NORTH AMERICAN INDUSTRIAL CLASSFICATION SYSTEM
  NAICS 2007
• Supply-oriented system
• 20 sectors 1,184 industries and growing
• NAFTA 5 digits 6TH for country coding
• Compatible with ISIC Rev. 3 UN
• NAICS SEARCH AND INDUSTRY DEFINITIONS explore
  at
• http//www.census.gov/epcd/www/naicstab.htm

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MARKET ATTRACTIVENESS

• What makes a market attractive?
• Quantifying some or all of the following.
• Value equation
• Size / growth rate
• Channel of distribution access
• Differentiability
• Available positioning
• Readiness to accept a new solution
• Strategic fit
• Competitive risk