MKTG 336 Exam 1

value

The economic, technical, service, and social benefits received by a customer firm in exchange for the price paid for the product offering.

value based sales tools

* Provide customers with a lower cost-in-use solution * Seek to move the selling proposition

Straight Rebuy

***Problem or need that is recurring or a continuing requirement***** Routine problem solving: Organizational buyers apply well-developed choice criteria to the purchase decision Examples: computers, office supplies, travel services

organizational forces

- Goals, Objectives, Strategies - organizational position of purchasing

Relationship Orientation (RO)

-Represents the customer's desire to engage in strong relationships with a current or potential supplier -RM investments improve if business marketers are able to target customers on the basis of their RO rather than size

High cost to serve customers

- Order custom products. - Small order quantities. - Unpredictable order arrivals. - Customized delivery. - Change delivery requirements. - Manual processing; high order error rates. - Large amounts of pre-sales support. - Large amounts of post-sales support. - Pay slowly.

low cost to serve customers

- Order standard products. - High order quantities. - Predictable order arrivals. - Standard delivery. - No changes in delivery requirements. - Electronic processing with zero defects. - Little to no pre-sales support. - No post-sales support. - Pay on time.

business marketing

-Business marketers serve the largest market of all -Dollar volume of the business market greatly exceeds the consumer market -A single customer can account for an enormous level of purchasing activity -Known as industrial marketing Business marketing emphasizes personal selling rather than advertising to reach potential buyers

government units

-Generate the greatest volume of purchases of any customer category in the U.S. -E-government initiatives generate a large market opportunity

ABC (activity based costing)

-Highlights activities associated with serving a particular customer and how they are linked to revenues / the consumption of resources -Link customer transaction data from customer relationship management (CRM) systems with financial information -Provides an accurate picture of the gross margins and cost-to-serve components

Creating Flexible Service Offerings

-Include the bare-bones-minimum number of services valued by all customers in a particular market segment -Optional services need to be created that add value by reducing costs or improving the performance of a customer's operations

Market Driven Firms

-Set of values and beliefs that places customers' interests first -Ability to generate, disseminate, and productively use superior information about customers and competitors -Coordinated use of inter-functional resources

Institutional Customers

-Similar to governments -Institutional purchasing process constrained by political considerations and dictated by law -Some institutions are administered by government units while others are privately operated and managed

collaborative customers

-Strong and lasting commitments are recommended -Invest resources to secure commitments and directly assist customers with planning -Regular visits to the customer by executives and technical personnel -Design operational linkages and information-sharing mechanisms align product and service offerings with customer needs

CRM systems

-Support later customer interactions -Inform market forecasts, product design, and supply chain management -Yields positive returns when a firm has a customer strategy

Market sensing capability

Ability to continuously sense change and to anticipate customer responses

Risk Reduction Strategies

Actions undertaken to reduce or eliminate the root cause of an adverse event

deciders

Affect the purchasing decision by providing information for the evaluation of alternatives or by setting buying specifications

influencers

Affect the purchasing decision by providing information for the evaluation of alternatives or by setting buying specifications

Relationship Marketing

All marketing activities directed toward establishing, developing, and maintaining successful exchanges with customers Building one-to-one relationships with customers is the core of business marketing

Business Markets and Consumer Goods Markets

Benefit by employing a market orientation ****Requires proficiency in understanding and satisfying customers****

concentration of customers

Business marketers serve fewer but larger customers than consumer-products marketers -Customers can be manufacturers of products who in turn target millions of potential buyers Geographic concentration indicates that a large potential volume exists in a given area -Large metropolitan areas are lucrative business markets

Procurement managers toolkit

Calculating the total cost of ownership of an acquired good or service Deploying e-procurement processes Conducting reverse auctions

customer linking capability

Capability to develop and manage close customer relationships

Transactional exchange

Centers on autonomous, timely exchange of basic products at highly competitive market prices Ex) HEB Display less commitment to a particular supplier- can easily switch from one vendor to another Marketer needs to offer an immediate, attractive combination of product, price, technical support, and other benefits

TCO (Total Cost of Ownership)

Considers the full range of costs associated with the purchase and use of a product or service over its complete life cycle -Acquisition costs -Possession costs -Usage costs

gatekeepers

Control information to be reviewed by members of the buying group

Collaborative Advantage

Created by demonstrating special skills in: -Managing relationships with key customers -Developing innovative strategies with alliance partners

customer decision journey

Customers can determine how, when, and where they want to acquire information -Sources of Information for the Customer: website, social media and peers

customer value proposition

Customers compare value elements of a firm's offering with those offered by the next best alternative -Price, Service, Quality Value Proposition captures set of benefits that a supplier offers to advance the performance of the customer organization

relationship composition

Decision-making capability of relational contacts at the customer firm

Routine low priority approach

Decisions are more important Moderate amount of analysis

characteristics (business markets)

Derived demand -Demand for industrial products is derived from the ultimate demand for consumer products Fluctuating demand -Business marketers carefully monitor fluctuating trends and patterns in consumer markets -Downturn in the economy creates the opposite result Stimulating demand -Business marketers must monitor final consumer markets and develop a plan that reaches the ultimate consumer directly Price sensitivity -Responsiveness of the quantity demanded to a change in price -Called demand elasticity

In and Out Supplier

Determine the most appropriate marketing task by In vs Out Supplier status In Supplier must: -Reinforce the buyer-seller relationship -Meet the buying organization's expectations -Be responsive to the changing needs of the organization Out supplier must: -Convince the organization of significant benefits from breaking the routine -Understand the basic buying needs of the organization -Persuade decision makers to consider alternative solutions -Revise the preferred list to include the new supplier

customer profitability

Determined by looking at the cost/profitability structure with the plan to: -Keep profitable customers -Convert unprofitable ones to profitability -Fire those who are not profitable

value proposition

Encompasses the products, services, ideas, and solutions that a business marketer presents -To advance the performance goals of the customer organization -Gain advantage by adding a justifier -Best-practice suppliers base their value proposition on their target market's needs

categories of industrial goods

Entering goods (raw materials and manufactured materials and products) -Become part of the finished product Foundation Products (supplies and business services) -Capital Items Facilitating Goods (installations & accessory equipment) -Supplies and services organizational operations

key account management

Enterprise-wide initiative to develop strategic relationships with a limited number of customers Global account management program -Treats a customer's worldwide operations as one integrated account

Vs (business marketing vs consumer marketing)

Factors that distinguish business marketing from consumer marketing -Nature of the customer -Utility of the product for the customer Key to successful marketing strategy -To identify unique dimensions of each major business market and formulate programs that respond to specific characteristics of each business market sector

Value-Added Exchanges

Fall between transactional and collaborative exchanges Selling firms shift from attracting customers to keeping them by: -Understanding customer's needs and changing requirements -Tailoring the firm's offerings to those needs -Providing continuing incentives that promote repeat business

technological forces

Fast change of pace implies distinct benefits are associated with search effort Acquired information is time sensitive

Collaborative exchange

Features close information, social, operational linkages, and mutual commitments

strategy and sales

Firms must: -Clearly communicate the strategy -Select the right customer prospects and match them with the optimal products and services -Make the strategy relevant by operationalizing the distinctive features of the value proposition

Government Purchasing Strategies

Formal advertising - Government solicits bids from appropriate suppliers -Followed when the product is standardized and the specifications are straightforward Negotiated contract - Employed when: -Purchased goods and services cannot be differentiated on the basis of price alone -Few potential suppliers exist

individual forces

Job function, past experience, and buying motives of individual decision participants

Judgmental new-task situations

Greatest level of uncertainty Information search conducted to analyze key aspects of the buying decision

buyer

Has formal authority to select a supplier and implement all procedures connected with securing the product

relationship quality

High-caliber relational bond characterized by commitment and trust

switching costs

Include investments and risk of exposure Organizational buyers invest in their relationships with suppliers Customers perceive more risk when they: -Purchase products important to their operations -Buy from less established suppliers -Buy technically complex products

CRM (Customer Relationship Management)

Includes the skills required to identify, initiate, develop, and maintain profitable customer relationships -Helps to meet performance standards

buying center

Individuals who participate in purchasing decision and share the goals and risks arising from the decision Plays a vital bridging role in the firm by: -Connecting key personnel across departments who have a stake in a particular buying decision -Facilitating the flow of information and knowledge across units Steps involved -Defining the buying situation -Determining whether the firm is in the early or later stages of the procurement decision-making process -Composition may vary and is not prescribed by the organizational chart

Institutional Buying

Institutions may employ a purchasing agent or a purchasing department Group buying - Institutions may join cooperative purchasing associations to secure purchasing efficiencies -Allows lower prices, improved quality, reduced administrative costs, and greater competition

Strategic new-task decisions

Involve long-range planning, larger investments, and increased risk if they are wrong

Complex modified rebuy

Involves a large set of choice alternatives and poses little uncertainty

Simple modified rebuy

Involves a narrow set of choice alternatives and a moderate amount of both information search and analysis

managing relationships (supply chain)

Long-term relationships are built on trust and demonstrated performance Strategic partnerships require open lines of communication between multiple layers of the buying and selling organizations

global market perspectives

Marketers must look beyond the borders of the United States Growing demand for industrial products in Germany, Japan, Korea, Brazil, China, and India

business performance

Marketing expenditures that were considered expenses are considered investments now Marketers need to: Demonstrate return on investment from marketing spending Deliver strong financial performance Be more accountable to shareholders

Managing Unprofitable Customers

Marketing manager should: -Explore possible ways to reduce the cost of activities associated with serving these customers -Direct attention to the customer actions that contribute to higher selling costs

business markets

Markets for products and services bought by businesses, government bodies, and institutions for: incorporation, consumption, use, and resale

centralized purchasing

Separate organizational unit with authority for purchases at regional, divisional, or headquarters level Marketer who is sensitive to organizational influences can: -Accurately map the decision-making process -Isolate buying influentials -Identify salient buying criteria -Target marketing strategy for centralized buyers

relationship breadth

Number of interpersonal ties that connect the relationship

modified rebuy

Occurs when the firm is displeased with the performance of present suppliers Decision makers feel significant benefits can be derived by re-evaluating alternatives

reverse auctions

One buyer invites bids from several prequalified suppliers who face off in a dynamic, real-time, competitive bidding process -Best suited for commodity-type items 1) preempt the auction 2)manage the process 3)Walk away

User

Personnel who use the product in question and can be inconsequential or major players in the process

firing the customer

Should occur only when the customer resists all attempts to convert the unprofitable relationship into a profitable one -Let customers fire themselves -Refuse discounts and reduce/eliminate marketing and technical support -Customer divestment must be exercised sparingly

responsive marketing strategy

Prepared by marketer who is sensitive to differences in product perceptions and evaluative criteria of individual buying center members

New Task Buying Situation

Problem or need is different from previous experiences

operational linkages

Reflect how much the systems, procedures, and routines of the buying and selling firms have been connected to facilitate operations

economic forces

Requires sensitivity to the strength of demand in the ultimate consumer market Best cost approach - Evaluates trade barriers and inherent risks of longer supply chains

Instituting Best Processes

Requires: -Effective organization -Deployment of personal selling effort -Close coordination with supporting units -Through careful management and screening, transactional accounts can progress to partnerships

group forces

Roles, relative influence, and patterns of interaction of buying decision participants

selective process

Selective exposure - Accept communication messages consistent with existing attitudes and beliefs Selective attention - Filter or screen incoming stimuli to admit only certain ones to cognition Selective perception - Interpret stimuli in terms of existing attitudes and beliefs Selective retention - To recall information pertinent to own needs and dispositions

evaluative criteria

Specifications used to compare alternative industrial products and services

Extensive problem solving

Stage of decision-making that buyers operate in because they lack: Well-defined criteria for comparing alternative products and suppliers Strong predispositions toward a particular solution

supply chain management

Technique of linking a manufacturer's operation with suppliers, key intermediaries, and customers to enhance efficiencies and effectiveness -Aims to improve the speed, precision, and efficiency of manufacturing through strong supplier relationships -Achieved through information sharing, joint planning, shared technology, and shared benefits

Differentiation Strategy

Value Created > Cost of Creating + Cost of Delivering -Measured by higher margins and higher sales volumes -Marketer needs to understand the drivers of customer profitability

Customer Engagement

Through: Close working partnership An intimate knowledge of the customer's operations Unique value contribution to the customer's business -Market-driven firms place high priority on customer-linking capabilities and closely align product decisions with the customer's operations

Categories of Commercial Consumers

Users -Buy industrial products or services to produce other goods or services that are, in turn, sold in the business or consumer markets Original Equipment Manufacturers (OEMs) -Purchase industrial goods to incorporate into other products it sells in the business or ultimate consumer market Dealers and distributors -Purchase industrial goods for resale to users and OEMs -Distributor accumulates, stores, and sells a large assortment of goods to industrial users, assuming title to the goods it purchases

E-procurement

Using the Internet to find new suppliers, communicate with current suppliers, or place an order

environmental forces

economic outlook (global and domestic) pace of tech changes global trade relations

marketing manager (roles)

instigator, innovator, integrator. implementer

Casual purchases

involve no information search or analysis product or service of minor importance

commercial enterprise

manufacturers, construction companies, service firms, transportation companies, selected professional groups, resellers

value proposition (successful building blocks)

points of parity-Value elements with the same performance characteristics as the next best alternative points of difference- Value elements that render the supplier's offering either superior or inferior to the next best alternative

whale curve

top 20% of customers produce 175% of profits bottom 20% of customers lose 75% of profits

Relationship efficacy

•Ability of an inter-firm relationship to achieve desired objectives

value drivers (in collaborative customers)

•Product quality and delivery performance •Cost savings from acquisition process and operations •Service support and personal interaction •Supplier's know-how and its impact on time-to-market