B2B marketing strategies and applications

B2B Marketing

what role do buyers and prospective buyers play in the development of new products? Give an example of and industry where they play a significant role.

Given the highly synchronized nature of companies selling products and services to one another, where products to have be precisely created to integrate with another company's machinery or processes, the role of buyers and prospective buyers is critical. These two groups, buyers, who are existing customers, and prospective buyers, who are potential customers, both have a major influence on the design, development and manufacture of B2B-oriented products. The processes by which companies gather and analyze their customers are collectively called Voice of the Customer (VoC) programs and they are specifically designed to capture the unique requirements of business buyers. The greater the complexity and level of abstraction in products, the greater the need for companies selling B2B-oriented products to increase their level of knowledge of both existing and potential buyers' requirements, and this is clearly the case in enterprise software.

SAP AG, the leading provider of enterprise resource planning software, has a thorough series of VoC programs for capturing the critical requirements of its customer base in addition to those prospective customers. As SAP sells software that manages the many tasks and processes involved in running manufacturing centers, the level of expertise that their software needs to exhibit is critical. In addition, their many competitors, including IBM, Microsoft, Oracle and others all make for product development cycles that are quickening and changing the entire it landscape of enterprise software. SAP's approach to gathering customer requirements begins with the use of Customer Advisory Councils where the top existing customers of the company are invited to as week-long event where short presentations are made my senior management to serve as conversation starters around what is needed in their next generation of software. These Customer Advisory Council meetings yield excellent insights including the beginnings of what would later become SAP's NetWeaver architecture. NetWeaver is a Services-Oriented Architecture (OA) that gives their customers the ability to define processes first, it systems second, in creating their strategic goals. This ability to disengage it systems for business goals and focus on processes instead yielded major benefits for the NetWeaver application developers, or SAP partners, as well. The net result is that SAP now dominates the SOA marketplace, while Oracle continues to work towards finishing their Fusion SOA platform (LWC Research 2005). The need for staying in close contact with both existing and potential customers is clear when one considers that SAP's strategy of being the first to market with an entirely new platform for enterprise computing based on a SOA framework is evident in their success to date. SAP has successfully launched over 500 new customers on the NetWeaver platform as of May, 2007.

Q2: what do some business channels contain more layers than others? is this a function of price, competition, product complexity, country, adoption of technology or some other factors?

The structure of business channels varies significantly by industry, and while all the above factors in the question are driving factors, one of the most critical is the selection of end customers and the alignment of product features and services specifically to their requirements. Multi-layered distribution channels exist because the customers' ultimate requirements include a high level of customization, tailoring of, and service for specific products. It is common to find multiple layers of a distribution channel all having sold to the end customer before, having extensive knowledge of their requirements and needs as a result. In B2B-based multi-tier distribution channels especially there is a pervasive approach to solution selling that encompasses the unique strengths of each distributor, reseller or dealer in the service of the end customer. This central focus on delivering a unified and highly integrated solution is what is also significantly changing selling strategies through multi-tier channels as well.

The coordination of all members of a distribution channel in fulfilling customers' requirements is called solution selling. This is an approach to selling that moves away form treating every interaction with an end customer as just another transaction, but instead embraces the idea of delivering last value to the customer through the combined efforts of everyone in the distribution channel. Solution selling also focuses on the long-term implications of relationships with customers, looking to become an integral part of their business strategies and activities. This is called becoming a trusted advisor to the customers, and while there are many books written on this topic every year, the concept of the trusted advisor is that the members of a distribution channel form a team to assist customers in assessing their needs, modifying products to specifically meet those needs, and creating a strong foundation of support. AMR Research (2003) in defining the complexity of fulfilling B2B product needs for customized products shows how both processes and software can be used to streamline in-channel product customization.

The bottom line is that business channels, or as they are sometimes called multi-tier distribution channels, vary significantly by industry due to the major differences between customers' requirements and the need for bringing together members of a channel to form a team that can respond effectively to the complex needs of customers. This is pervasive in B2B marketing, selling and servicing scenarios. Several layers of a channel may have varying relationships with the end customers, and therefore bring to the manufacturer insights into specific needs that just one company may not have the bandwidth and ability to respond to. The evolution of solution selling and the trusted advisor is actually leading to more cooperation across the layers of a business channel framework, as the role of trusted advisor becomes critical for the long-term selling to larger customers with more complex organizations and needs. There are many other reasons for channels to have more layers in some industries and less in others, yet the most dominant factor is the complexity of end customers' needs and the corresponding requirement of aligning all available resources to serve and retain the end customer.

Q3: many companies seem to devote more energy to getting new customers than keeping old ones. Please explain why.

In many industries there is a high level of customer churn, or customers continually seeking new alternatives to existing solutions to their problems, and as a result many companies in these industries need to replace existing customers quickly, as attrition of their customer bases happen over time. The costs and time associated with winning a new customer, especially in a B2B environment, is inordinately higher than keeping an existing customer. Customer retention and loyalty studies have indicated that customers leave a company for one of two reasons, either the customer defects from the company or disadopt the new technology according to (Hogan, Lemon, Libai 2003). Increasingly the latter is occurring in the enterprise software market for example.