Exam April 2018

Question 1

In business-to-business markets, business relationships are essential.

a) Explain the content of a business relationship. (5 points)

Answer 1

Book.

Open Communication
Trust and Commintment
Conflict Resolution
Coordination Mechanisn

Compendium

• COMPLEXITY of the relationships in terms of multifaceted contacts between the companies

• LONG TERM of the relationships which often stretches over decades
• The scope of the adaptation of individual relationships required, from both organizational and technological points of view
• LOW DEGREE OF FORMALIZATION, indicating that the firms do their best to safeguard themselves against unpleasant surprises through reciprocal trust rather than through formal agreements
• POWER DEPENDENCE BALANCE in the relationship
• SIMULTANEOUS PRECENSE OF CONFLICT AND COOPERATIO, with one conclusion being that effective relationships must contain elements of both

Question 2

Business relationships are not static but may develop over time,
b) Discuss how and why they may develop and in which dimensions. (10 points)

Answer 2

Pre-Relationship stage
Questions
What will we both get?
How much investment?
What adaptations?
What learning
Trust

Exploratory stage

Investment of time for learning & distance reduction, no routines or commitment

Developing Stage

Intense mutual learning building trist through investment & informal adaptation

Stable Stage

Routine and institutionalization

DIMENSIONS OF THE DEVELOPMENT OF A RELATIOSHIP

LEARNING: Learning is a process in which companies reduce the uncertainties (need to learn, willingness to learn, ability to learn)

INVESTMENT: Tangible (Equipment, new products) Intangible (time, relationships development, contacts). Small invesments in production such as changing the production sequence.

ADAPTATIONS: Unique investmens by the compay from its normal procedures. Relationships are important assets , and retuns of the investment must to be measured

TTRUST AND COMMITMENT: A supplier may increase the prices suddenly, or a buyer company may lie in order to make the supplier invest even though the buyer is aware that the needs will change in a short term.

DISTANCE: SOCIAL DISTANCE; CULTURAL DISTANCE; TIME DISTANCE.

Question 3

QUESTION 2 (10 points)
In the course we have distinguished between in principal two different distribution strategies to reach out to end users – sales through direct distribution and sales through indirect distribution.
Discuss under which circumstances (i) direct distribution and (ii) indirect distribution is most suitable.

Answer 3

Direct sales
– Large and well defined customers – Customers require direct sales – Negotiation on top level is required – Feedback from customers is important – Producer needs to be part of the
implementation of the product – Customised solutions – Complex products that require
extensive product knowledge

• Indirect sales – Fragmented customer structure with many small customers – Need of assortment
– Fast deliveries are required

Question 4

QUESTION 3 (10 points)
Many firms have a purchase process (referred to as the BUY GRID FRAMEWORK in the course book). This process includes a number of phases (for example, problem recognition, need description, product specification, supplier search, requests for quotations (RFQs), supplier selection and performance evaluation).
Discuss how the purchasing process differs depending on purchasing situation. (10 points)

Answer 4

BUY GRID FRAMEWORK

Problem Recognition
Need Description
Product Specification
Supplier Search
Request for Quotatios (RFQ's)
Supplier Selection
Performance Evaluation

Business-to-business marketers recognize that at each step in the buying process, business buyers have different needs, and different groups within the organization may be involved. Business marketers anticipate which step organi¬zational buyers are in and attempt to provide the needed information and support for that stage of decision making. Marketers who can become involved early in the decision-making process have a greater chance of being considered in the final selection process. Many organizations, includ¬ing government agencies, have formal purchasing proce¬dures incorporating the buy-grid model. Set-aside programs targeting small and minority-owned businesses and bid solicitation requirements for government offices follow a similar defined procedure for PURCHASING.

Most business-buying situations do not involve all of the steps in the buy-grip model. The number of steps varies with the buy-class, the type of buying decision. There are three buy-class categories: 
new buys, straight rebuys, and modified rebuys.

DIFFERENT TYPES OF REBUYS

NEW BUYS (purchases of prod¬ucts or services never used before)

STRAIGHT REBUYS

MODIFIED REBUYS

While the complete buying process is typically used for new buys (purchases of prod¬ucts or services never used before),a majority of business purchasing decisions are either straight rebuys or modi¬fied rebuys. In straight rebuy situations, only the need recognition (the company almost out of the product) and reordering steps are used. For business marketers it is critical for their products or services to be listed as approved vendors for straight rebuys. Marketers will use reminder ADVERTISING, relationship-building entertain¬ment and hospitality, and PERSONAL SELLING to maintain their status as the preferred provider. In modified rebuy decisions (where a buyer is willing to “shop around”), the buyer may go through some or all of the purchasing steps. For marketers desiring to be considered during modified rebuy situations, comparison advertising and demonstrations are used to influence business buyers. Incumbent firms will use relationships, special offers, and anticipation of or quick response to customer needs to maintain their status when business buyers are con¬sidering alternatives.

Question 5

Textile Inc. is currently developing a new technology to be able to sell “intelligent textiles”. Textiles containing this technology can have new characteristics regarding measurement of exact heat flows and other functions such as that the textile repels dirt and liquids.

Textile Inc. is today a sub-supplier to the car industry and sells textiles used in various applications, for example, in seats. The marketing manager at Textiles Inc. hopes to be able to reach new customers based on this new technology. As an initial step, Textile Inc. needs to perform a market segmentation.

a) Describe market segmentation and discuss alternative segmentation bases for Textile Inc. From this discussion, motivate which segmentation base(s) you would recommend (10 points)

Answer 5

Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics. The segments created are composed of consumers who will respond similarly to marketing strategies and who share traits such as similar INTEREST, NEEDS AND LOCATIONS

A key consideration for marketers is whether to segment or not to segment. Depending on company philosophy, resources, product type or market characteristics, a businesses may develop an undifferentiated approach or differentiated approach. In an undifferentiated approach, the marketer ignores segmentation and develops a product that meets the needs of the largest number of buyers.[27] In a differentiated approach the firm targets one or more market segments, and develops separate offers for each segment.[27]

In consumer marketing, it is difficult to find examples of undifferentiated approaches. Even goods such as salt and sugar, which were once treated as commodities, are now highly differentiated. Consumers can purchase a variety of salt products; cooking salt, table salt, sea-salt, rock salt, kosher salt, mineral salt, herbal or vegetable salts, iodized salt, salt substitutes and many more

Question 6

Understanding customer needs regarding these new intelligent characteristics has led to close collaboration with customers in product development. Discuss key questions when involving customers in product development in the case of Textile Inc. (6 points)

Answer 6

Why Are Customers Involved in Product Development?

• Understand customer/user needs
• Reduce development costs and time-to-market
• Source of new ideas and solutions (lead users)
• Testing in use settings
• Early sales
• References
• Loyal customers
• ”Legitimation”
• ”Co-development”
• Need for major customer adaptation

When Are Customers Involved in Product Development?

Customers are involve primarly in the idea generation or concept phase, and during the testing phase. From the innovator perpective there is no point to involve the customer in the design phase since its contribution is limited.

From the type of innovation perspective, It is not to useful to involve customers in the concept phase since it might hinder the innovation process

For incremental innovation the customer involvement in early phase might help product performance

How Are Customers Involved in Product Development?

• Information exchange in business relationships
• Specific techniques for needs analysis
(E g QFD, Kano…)
• Surveys
• Interviews
• Workshops and focus groups
• Observation of user behavior
• Testing together with customers/users
Field testing, ”clinics”…

Who Are the Customers Involved in Product Development?

Type of customer/user
Position in the value chain (e g direct customer or
end-user)
”Lead user” vs ordinary user
Other selection criteria (appl. area, location…)
• Number of customers/users
Few or many
Dyadic or multi-relational collaboration
• Selection/recruitment methods
• Type of incentives

5. What does the customer involvement
focus on?
1. Which ideas, concepts, prototypes?
2. Which product features?
The answer is very situation-specific
Difficult to generalize

Question 7

c) Differentiation is always crucial in business markets. Discuss how an offering can be built on this technology and/or new type of intelligent textiles. (4 points)

Answer 7

Product
Product+Services
Total Solutions

Question 8

Explain the meaning and consequences of the following concepts or expressions in business marketing and purchasing:

Value based pricing

Answer 8

The key point with value based pricing is that the price is set based on the value that the customer perceives from the offering, the price is set based on what the customer is willing to pay. This is in contrast to traditional pricing methods, which typically take starting point in the own costs as a base for setting the price. One consequence of value based pricing is that you as a firm need to have profound knowledge of how the customer assesses value. This process of understanding and calculating value may be difficult, costly, etc. Another consequence could be that the firm need to manage types of value assessment methods in order to calculate value. Another consequence from value based pricing could be that customers will pay different prices for more or less the same offerings, and this needs to be handled. When managed appropriately the benefits and profit margins with value based pricing are huge. The students have given innovative examples to exemplify value based pricing.

Question 9

Explain the meaning and consequences of the following concepts or expressions in business marketing and purchasing

Need uncertainty

Answer 9

b) Need uncertainty
From the Seller Company
Abilities
• Problem Solving ability: Reduce market uncertainty,
• Transfer ability: Transaction uncertainty, It is about being able to deliver a solution quickly, easily at a low price and low long-term cost.
Uncertainties
• Capacity Uncertainty: High in commodity markets (many sellers) or high fixed cost (petro-chemicals)
• Application Uncertainty; Scanning customers behaviors (example of Disk drives)
• Transaction Uncertainty: unfamiliar large and single customers.

From the Buyer Company
Abilities
• Demand Ability
• Transfer Ability
Uncertainties
• Need Uncertainties: A buying company may have difficulty in specifying its requirements, especially when they are new or complicated, or when complex technologies are involved. Here strong brands and already stablished relationships are important to deal with uncertainty (“go to the bed with a company it already have a relationship”).
• Market Uncertainties: The buyer cannot afford “go to the bed” with one supplier. There are many available solutions that may satisfy the necessity. Example: Buying computers; changing technologies, Buy new computers or update the computers
• Transaction uncertainties: A business buyer may be faced with supliers it doesn’t know or trust, or it may be concerned that it might not get what it hought it ordered, at the quality it specified or at the best price.
Uncertainties are likely to decrease when the buyer company is familiar with the technology.

Question 10

Explain the meaning and consequences of the following concepts or expressions in business marketing and purchasing:

Management of trade shows

Answer 10

Management of trade shows (C7b)

1. Formulating trade show objectives
2. Selecting trade shows
3. Designing the booth
4. Undertaking pre-show marketing
5. Participating in the trade show
6. Carrying out follow-up and post-show evaluation

The importance of trade shows

Reach out to many
Cost efficient
New products can be displayed
Potential customers can ’feel the product’
- demonstrations
Potential customers can be identified
Identify ’decision influencers’
83% are ’influencers’
Free publicity
Personal contact to further dialogue
Spread information about product,
service or the firm
Get to know about ’potential application
problems’
Receive orders
Manage customers’ problems
A way to approach new geographical
markets

Evaluating trade shows
Are you measuring the right thing?
How many that enters the booth do not need to indicate how many
that actually ’took in’ a certain message
Important to find a good way to measure
Don’t set objectives that are hard to measure. Do not set objectives
just because they are easy to measure