The Hindu Business Line : The challenges of B2B marketing

WE all know the basic differences between B2B and B2C marketing. I am not going to elaborate all that here. Since most of the small and medium businesses I know are B2B, I will deal with key issues relevant to this segment. Among the many differences between marketing to consumers and marketing to businesses, the complexities of downstream channel relationships in the business-to-business (B2B) arena typically leave those product marketers with several definitions of the `customer'.

Rather than sell primarily to end-users through channels playing largely a logistic role, B2B marketers typically sell their products to firms that, in turn, create other products for sales further down the value chain.

Each combination of primary buyer and downstream secondary buyer creates a different customer chain. In developing marketing strategies, the first critical question is the price sensitivity of the target market segment. Does competitive advantage lie in price competition, or does it take value marketing a bundle of services and intangible benefits enhancing the product to win the business? Finding the answer that should drive your marketing plan is straightforward when the customer chain is simple, and the customer is a direct buyer or a customer purchasing through a passive channel. But most businesses do not work that way. The primary buyer responds to its set of value drivers and in turn must cater to downstream buyers' preferences. Part of your competitive advantage, then, becomes your contribution to your direct customer's marketing success downstream.

For instance, does your product help your primary customer cut costs and thus appeal better to price-sensitive downstream buyers? Or do you provide a high-quality input to your primary customers' products that contributes to a stronger value-added proposition down the value chain? The popularity of ingredient business branding, for example, reflects the industry's growing recognition of brands' ability to influence downstream demand and make a product indispensable to primary customers. The simple customer-chain model begins to fail as a strategic tool at this point.

In a two-stage customer chain, how do you protect your downstream positioning as a value-added producer when your primary customer buys primarily on price? Or, if your value sale to the primary customer does not impress the price-driven secondary customer. At this point, it can be useful to analyse your customer chains according to a useful framework developed by a reputed US-based B2B consultancy that recommends specific strategies depending on the customer chain environment in which you are selling. As the Blue Canyon framework makes clear, marketing strategies and the need to build a B2B brand are not simply a matter of throwing advertising money in the market. The basic framework specifies four B2B market environments based on the price-sensitivity of primary and secondary customers:

When both primary and secondary customers buy mainly on price factors, promote your ability to reduce their costs.

Similarly straightforward, when both primary and secondary customers buy mainly on non-price factors, competitive advantage depends on building relationships throughout the value chain, emphasising service, product enhancements and the contributions of your processes and systems to customers' business success.

When the primary buyer responds to value-added and other non-price appeals, but the secondary customer is a price buyer, your job is to provide the systems and product enhancements that help the primary customer cut its price to secondary customers.

When the primary buyer is price-driven, but the secondary customer seeks value enhancements and other non-price reasons to buy, promote cost-justifiable product enhancements that improve the primary buyer's value-added appeal to the secondary buyer.

In this environment, ingredient brand positioning strategies that assist OEM primary customers-such as the `Intel Inside' approach to personal computer OEMs and end-users-can be particularly potent.

Mapping the customer chains that create distinct market segments, then refining Blue Canyon's broad strategic model using the specifics of individual segments, have helped firms spot opportunities they missed or identify shortcomings in their marketing plans.

One industrial tool manufacturer relying on a top-shelf image and pricing to match, for example, repeatedly failed to penetrate a new distribution channel that it thought would be a natural expansion. Researching the price and value drivers of its current and hoped-for segments, and applying Blue Canyon's customer chain analysis revealed why the manufacturer's premier brand should not even try to compete in the relatively price-sensitive market segment it had hoped to capture.

(The author is CEO and Chief Consultant at Innovative Media, a knowledge management company. He writes for a number of well-known publications world-wide and has several published works to his credit.)

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