character Business to business marketing

Character to business to business marketing

1. Character of Business
Marketing

2. •NAICS= North American Industrial Classification System
•Replaces SIC (Standard Industrial Classification)codes
•Common for NAFTA countries
•NAICS hierarchical structure:
XX Industry sector
XXX Industry subsector
XXXX Industry group
XXXXX Industry
XXXXXX U.S., Canadian, or Mexican national
specific
http://www.naics.com/cgi-bin/search.pl
(continued)
Classifying Commercial Enterprises

3. Divides economy into 20 major industry sectors
(at two-digit level):
11 Agriculture, Forestry, Fishing,54 Professional, Scientific, and Technical
and Hunting services
21 Mining 55 Management of Companies and Enterprises
22 Utilities 56 Administrative and Support, Waste
23 Construction Management, and Remediation Services
31–33 Manufacturing 61 Education Services
42 Wholesale Trade 62 Health Care and Social Assistance
44–45 Retail Trade 71 Art, Entertainment, and Recreation
48–49 Transportation 72 Accommodation and Food Services
51 Information 81 Other services (except Public Administration)
52 Finance and Insurance 92 Public Administration
53 Real Estate, Renting,
and Leasing
(continued)
NAICS Codes

5. Supply Chain Management
•Technique for linking manufacturer’s
operation with those of all its strategic
suppliers, key intermediaries, and
customers.

6. Supply Chain Characteristics
•Supply chains
–Are multi-tiered
–Are customer driven
–Exist externally AND internally
•Require a cross-functional effort
–And their management are ongoing
journeys –not destinations
–Require good procurement activities
Source: Roberts, Julie S. (2003) “The Buzz About Supply Chain,” Inside Supply
Management, (July), 24-28.

7. Supply Chain Goals
•Waste Reduction
•Time Compression
•Flexible Response
•Unit Cost Reduction
•Increased Final-Customer-Benefits

8. Supply Chain Example
Source: Roberts, Julie S. (2003) “The Buzz About Supply Chain,” Inside Supply Management, (July), 24-28.

9. Procurement (Purchasing) Goals
Uninterrupted Flow of Materials
Manage Inventory
Improve Quality
Develop & Maintain Supplier
Relationships
Achieve Lowest Total Cost
Reduce Administrative Costs
Advance Firm’s Competitive Position

10. Evaluating Potential Vendors
Basic Considerations
Performance Considerations
Plant Visits
Geographic Locations
Capacity

11. Performance Considerations
Must predict supplier’s total
ability to fulfill the contract
as it relates to:
price
delivery
quality
service
or any factor that is
important to the buying
firm

12. Plant Visits
Be sure to visit the supplier’s
plant if possible
Serves as indication of vendor’s
ability to provide necessary pre-
and post-sale service
Try to gain insight into the:
type of facility
personnel
housekeeping
procedures

13. Geographic Location
Long distance shipments increase
the chance of
accidents
strikes
acts of God
Geographic disadvantages can be
overcome with
special transportation
arrangements
inventory make-and-hold service

14. Capacity
Must consider several items
Physical plant and facilities
Supplier’s technical skills
Supplier’s managerial skills

15. Vendor Rating Systems
The Categorical Plan
The Weighted-Point Plan
The Cost-Ratio Plan

16. Buyers keep notes on supplier dealings as
events occur
Buyers compare notes (usually at monthly
buyer meetings)
Suppliers are categorized as being in the good,
neutral, or unsatisfactory category
Highly subjective, but easy to use & understand
Disadvantage is it’s subjectivity:
relies on memory, personal judgment, and the
experience/ability of the buyers.
The Categorical Plan

17. Vendor Cost QualitySpeed Total
A Good(+) Unsatisf(-)Neutral(0) 0
B Neutral(0)Good(+) Good(+) ++
C Neutral(0)Unsatisf(-)Neutral(0) -
Categorical Method Example

18. Assign weights (importance) to quality,
price, and service (or other relevant
criteria)
Should fit buying organization’s needs
Sellers are rated on each factor
Simple, but effective plan that can be
modified to suit specific conditions
Somewhat more objective than the
categorical plan
The Weighted Point Plan

19. Vendor
Lots
Received
Lots
Accepted
Lots
Rejected
% Acc. *
Factor
Quality
Rating
A 60 54 6 90.0 * 40 36.0
B 60 56 4 93.3 * 40 37.3
C 20 16 4 80.0 * 40 32.0

Weighted Point Plan Example:
Quality

20. Vendor
Unit
Price
-
Dis

+
Tran
Chg

Net

Low
/
Net

%
*
Factor

Rate
A 1.00 10% 0.90 .03 .93 .93 0.93 100% 35 35.0
B 1.25 15% 1.06 .06 1.12 .93 1.12 83% 35 29.1
C 1.50 20% 1.20 .03 1.23 .93 1.23 76% 35 26.6

Weighted Point Plan Example:
Price

21. Vendor
Promises
Kept
Service
Factor
Service
Rating
A 90% 25 22.5
B 95% 25 23.8
C 100% 25 25.0

Weighted Point Plan Example:
Service

22. Rating Vendor A Vendor B Vendor C
Quality 36.0 37.3 32.0
Price 35.0 29.1 26.6
Service 22.5 23.8 25.0

Total 93.5 90.2 83.6

Weighted Point Plan Example:
Composite Total

23. All activities regarding a supplier’s
performance are valued in terms of dollars
Total cost of buying is determined including:
letters, telephone calls, visits, etc
Total (real) cost varies from vendor to vendor
based on vendors’ skills & dependability
Future vendors selected on basis of lowest
total cost incurred
The Cost-Ratio Plan

24. Initial costs associated with Quality,
Delivery, and Service are determined
Each cost is then converted to a ratio
Ratio expresses cost as a percentage of
the total value of the purchase
Sum the three individual cost rates to
obtain overall cost ratio
Apply overall ratio to quoted unit price
Cost Ratio Plan Process

25. Vendor
Quality
Cost
Ratio
Delivery
Cost
Ratio
Service
Cost
Ratio
Total
Penalty
Quoted
Price/
Unit
Net
Adjusted
Cost
A 1% 3% -1% 3% 86.25 88.84
B 2 2 3 7 83.25 89.08
C 3 1 6 10 85.10 93.61

Abbreviated Example:
Cost-Ratio Plan

26. Governments & Institutions
•Compliance Programs
–Must maintain affirmative action
programs for minorities, women &
disabled
•Set-Aside Programs
–% of contracts offered only to small
or minority-owned businesses
•Other aspects of non-profit
buying will be addressing in
Pricing

27. Two Types of Contracts
1.Fixed-price contracts
•A price is agreed to before contract is
awarded and payment is made at
conclusion of work.
•Provides for the greatest profit potential.
•Poses greater risks.
2.Cost-reimbursement contracts
•Reimbursement for allowable costs may
be allowed and sometimes a number of
dollars above costs as profit is allowed.

28. Relationship Marketing
•All marketing activities directed
toward
•establishing, developing, and
maintaining
•successful relational exchanges
•for the mutual benefit of all
involved parties.

29. Focal
Firm
Goods
Suppliers
Services
Suppliers
Competitors
Non-Profits
Government
Ultimate
Customers
Intermediate
Customers
Employees
Business
Units
Functional
Dept.’s
Supplier
Partnerships
Buyer
Partnerships
Lateral
Partnerships
Internal
Partnerships
Partners in Relational Exchanges

30. Value of RM to Sellers
•Helps to ensure substantial
and reliablepurchase
volumes at adequate
margins.
•Helps to determine the
buyer’s choice the next time
around.

31. Value of RM to Buyers
•Costs of carrying safety stocks, and
those of high return rates, numerous
reorders, & long lead times have
steadily risen.
•RM helps to eliminate waste and
improve system economies.
–inventory reduction
–decreased line shutdowns
–purchasing labor savings

32. REQUIREMENTS FOR HIGH
PERFORMANCE RELATIONSHIPS
•BEYOND THE FINANCIAL CONSIDERATIONS:
–INTEGRITY
–FAIRNESS
–LOYALTY
–FLEXIBILITY
–INPUT INTO PARTNER’S STRATEGY
–PARTNER’S INPUT INTO YOUR STRATEGY
–COMPLIANCE WITH PROCEDURES & AGREEMENTS

33. Types of Relationships
•Discrete Transactions
–have a distinct beginning, short duration, and
sharp ending by performance.
•Value-Added Exchanges
–Focus shifts from attracting customers to
keeping customers. Begin focusing more
closely on understanding & fulfilling needs.
•Collaborative Exchanges
–traces to previous agreements, and is longer in
duration, reflecting an ongoing process.

34. Why is Trust So Important?
•The parties have confidence in their
relational partner’s reliability and
integrity
•Without trust, there is NO
commitment
•Without commitment, future
exchanges are questionable at best
•Without trust and commitment,
negotiation costsare increased
•Without trust and commitment,
monitoring costsare increased

35. Synthesis and Extension Model of
Relationship Management
Relationship
Commitment
Trust
Relationship
Termination
Costs
Relationship
Benefits
Shared
Values
Communication
Trust
Dimensions
Involvement
Knowledge
Opportunistic
Behavior
Constraint-Based
Relationship
Dedication-Based
Relationship

36. Different Customer Motivations
•Constraint-Based Relationships
–One party believes it cannot exit the
relationship due to economic, social,
or psychological costs.
–The strength of the constraints is a
function of the party’s perceived
dependence upon the other.

37. Different Customer Motivations
•Dedication-Based Relationships
–Party remains in relationship
because he/she is committed to
the relationship and wants to
remain.
–Dedication generally arises
due to dependence and/or trust.

38. The Consequences
Constraint-Based
Relationship
Dedication-Based
Relationship
Propensity
To Leave
Interest in
Alternatives
Acquiescence
Cooperation
Enhancement
Identity
Advocacy

39. Outcomes Associated with
Constraint-Based Relationships
•Interest in Alternatives
–lasts only as long as constraints
–individuals in constrained relationships
attempt to restore freedom to chose.
–increased attempts to identify alternative
suppliers.
–more environmental monitoring
–more receptive to competitors’
relationship offers.

40. Outcomes Associated with
Constraint-Based Relationships
•Acquiescence
–degree to which partner
accepts or adheres to another’s
specific requests or policies.
–passive agreement to maintain
the relationship.

41. Outcomes Associated with Dedication-
Based Relationships
•Cooperation
–active participation for mutual benefit
•Enhancement
–broaden/deepen relational bonds
•buying additional services
•providing capital, information,
labor, or other resources
•participating in company events

42. Outcomes Associated with Dedication-
Based Relationships
•Identity
–thinks of relationship partnership
as a team and considers the
partner in proprietorial terms.

43. Outcomes Associated with Dedication-
Based Relationships
•Advocacy
–ultimate test of relationship
–promote relationship partner to
others
–defend relationship partner against
detractors
–main purpose is to, of course, benefit
from positive word-of-mouth.

44. SUGGESTIONS FOR MAKING B2B
RELATIONSHIPS LAST
•On-site visits
•Trade personnel
•Manage total dependence with
alternate suppliers
•Continuous service
•Develop a relational contract
(????????)