Transcript SUPPLY CHAIN MANAGEMENT Online/Distance Learning Course

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
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
Who will benefit?
MARKET[S]
SEGMENT[S]
PRODUCTS, SERVICES, &
TECHNOLOGIES
Where is it acquired?
CHANNELS
What you are selling?
APPLICA
-TIONS
Where or how it is used?
MARKET SEGMENTATION:
FILLING THE GAPS
CHANNELS OF DISTRIBUTION
1
3
PRODUCTS
4
SERVICES
APPLICATIONS
2
MARKETS / SEGMENTS
TARGET MARKET
[SEGMENT]S
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
Amateur
Close interpersonal relationships
Impersonal
Long-term focus
Immediate / Short-term
May be very dependent on each other
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
BUSINESS PRODUCTS CLASSIFICATION
For 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
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 Purchase finished goods and services for
resale, rental, or leasing for a profit
/ INSTITUTIONS
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.
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.
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
segments—which are frequently not in concert with
each other.
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.
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
SUPPLY CHAIN MANAGEMENT
MARKETS
Consumers:
Customers
Prospects
Suspects
CUSTOMER’S
CUSTOMERS
SUPPLIER’S
SUPPLIERS
VENDORS
or
SUPPLIERS
FOCAL
FIRM
FOCAL FIRM
NEW PRODUCT
DEVELOPMENT
CUSTOMERS
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.
THE B2B MARKET: DECISIONMAKING
•
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.
BUYING PARTICIPANTS
Users
Initiators /
Info seekers
STARTERS
Buyers /
Purchasing
FORMS
MANDATORY
Gatekeepers
Influencers
/ Advocates
SUPPORT
CONTROL FLOW
Deciders
AUTHORITY
Approvers
NECESSARY
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
–
…
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.
THE SUPPLY CHAIN AT WORK
UPSTREAM
DOWNSTREAM
DEALERS
STEEL
UPSTREAM
COMPANY
SUPPLIER
3RD
TIER
2ND
TIER
DIRECT
SUPPLIER
1ST TIER
FORD, GM
CHRYSLER
OEM
FASTENERS
RADIATORS
CONSUMERS
AGENCIES
FLEETS
SPECIAL
RESPONSIBLE
STEEL
RENTAL
VEHICLES
Semi-finished / component products
VEHICLES
Finished products
SUPPLY CHAIN MANAGEMENT
FOCAL FIRM
NEW PRODUCT
DEVELOPMENT
MARKETS
Consumers:
Customers
Prospects
Suspects
FOCAL
FIRM
FOCAL FIRM
SUPPLIERS and
SUPPLIER’S
SUPPLIERS
CUSTOMERS
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.
THE B2B MARKET: PRICE
•
Competitive bidding
•
Complex negotiations
•
Total system cost
–
–
–
–
–
–
Quality
Delivery
Serviceability
Dependability
Net unit price
…
BUSINESS SEGMENTATION
VARIABLES
DEMOGRAPHICS
Organizational /
Company Demographics
OPERATING VARIABLES
Product / Process /
Technology
APPLICATION of the
Products / Services
BEHAVIORAL
Build-to-order
BUYING APPROACH
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
BUSINESS MARKET
SEGMENTATION
• GEOGRAPHIC
AREA
LA – Long Beach
New York
Philadelphia - NJ
Chicago
Source: D&B Sales and Marketing Catalog
BUSINESSES
686,222
598,093
405,082
399,511
BUSINESS MARKET
SEGMENTATION
• DEMOGRAPHIC
EMPLOYEES
1,000+
500-999
100-499
<100
Source: D&B Sales and Marketing Catalog
BUSINESSES
18,864
16,270
126,466
1,803,535
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/
BUSINESS SEGMENTATION:
Applications of the Products / Services
• Finished products for consumption
• Finished products for private label
• Component products
•
•
Product Application http://plastics.dow.com/plastics/na/application/
Industry or solution [application] http://www.ibm.com/solutions/us/?trac=L2
BUSINESS PRODUCT-APPLICATIONMARKET SEGMENTATION
MARKET (SEGMENT) NAME
Brief verbal description
INDUSTRY /
INDUSTRY /
INDUSTRY /
INDUSTRY /
SEGMENT NAME SEGMENT NAME SEGMENT NAME SEGMENT NAME
DESCRIPTION
DESCRIPTION
DESCRIPTION
DESCRIPTION
NAIC(S)
NAIC(S)
NAIC(S)
NAIC(S)
PRODUCT 1
APPLICATION 1
APPLICATION 2
APPLICATION 1
PRODUCT 1
PRODUCT 2
PRODUCT 3
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
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
…