1-1 Introduction to Production and Operations Management

MKTG 375 INDUSTRIAL MARKETING - B2B

Department of Management

1st SEMESTER, 2020/2021

Facilitator: Moses Mpiima Kibirango, PhD

Mob No.: +254777416305 / +254720420017 # Week 2a

Email Add: kibirangom@ueab.ac.ke
CREATING
VALUE FOR
BUSINESS
CUSTOMERS
PowerPoint Presentation Prepared by Moses Mpiima Kibirango, PhD.
University of Eastern Africa, Baraton
 CREATING VALUE
FOR BUSINESS
CUSTOMERS

2a - 2 Foundations for Creating Value

 Foundations for
Part One
Creating Value

2a - 3 Foundations for Creating Value

 Finding Business to Business Opportunities
1. 2.
DEVELOP MARKETS FIND OPPORTUNITIES
AMONG CURRENT WITH EXISTING
CUSTOMERS CUSTOMERS

NEW MARKET
OPPORTUNITIES

3. 4.
DEVELOP ACQUIRE
A RESEARCH NEW
PROGRAM CUSTOMERS

2a - 4 Foundations for Creating Value

 1. DEVELOP MARKETS AMONG
CURRENT CUSTOMERS
FOUR STEP PROCESS
1. RANK YOUR BEST CUSTOMERS
2. MAXIMIZE REVENUES THROUGH
COLLABORATION EFFORTS
3. DEVELOP SPECIFIC PRODUCTS FOR EACH
CUSTOMER
4. LEARN OF SPECIAL NEEDS FROM YOUR
CUSTOMER’S CUSTOMERS

2a - 5 Foundations for Creating Value

 2. FIND OPPORTUNITIES WITH
EXISTING CUSTOMERS

FOUR STEP APPROACH

1. ESTABLISH A FORMAL FEEDBACK PROGRAM
WITH CUSTOMER CONTACT POINTS (SALES,
SUPPORT)
2. DEVELOP DATABASES
3. COMPILE DECILE REPORTS
4. DEVELOP CUSTOMER RESEARCH ASSISTANCE
PROGRAM

2a - 6 Foundations for Creating Value

 3. RESEARCHING CUSTOMERS
FIND OUT YOUR CUSTOMER’S NEEDS THROUGH:

1. FOCUS GROUPS – best for generating ideas and

gaining customer insights
2. SURVEYS – asking questions by personal interview,
mail, telephone, internet
3. JOINT DEVELOPMENT AND TESTING – use to
adjust and adapt products after purchase
4. CUSTOMER VISITS – use on-site meetings for problem
identification

2a - 7 Foundations for Creating Value

 4. ACQUIRE NEW CUSTOMERS

1. Calculate your current customer’s lifetime value

(CLV) to serve as yardstick for planning

2. Find customers in a new segment who “look

like” your existing customers

3. Expand into new geographic territory

4. Transfer/modify existing products for other

industries

2a - 8 Foundations for Creating Value

 Current Customer Lifetime’s Value Analysis
Expected customer migrations following acquisition
Yrs. since 1st Yr. 2nd Yr. 3rd Yr. 4th Yr.
the Last Purchase Expected $ Account Acquisition after after after after
Purchase Probability Purchases Service Costs Period acquisition acquisition acquisition acquisition
0 0.60 $90 $20 100 60.0 36.0 31.2 27.4
Customers 16.0 9.6 8.3
15.0 4.8 2.9
45.6 1.9
40.5
1 0.40 $60 $10 40.0 24.0 20.8 18.2
2 0.20 $50 $ 4 24.0 14.4 12.5
3 0.10 $50 $ 2 19.2 11.5
17.3
Profit forecasts
Acq+1 [60 buyers ($90)]×.8 gr. profit–[100 accts×$20 service/acct] =
Acq+2 [36 buyers ($90)+16 buyers ($60)] .8 gr. profit- [60 accts×$20+40 accts×$10] =
Acq+3 [31.2 buyers($90)+9.6 buyers($60)+4.8 buyers($50)] .8 gr. profit- [52 accts×$20+24×$10+$24×$4] =
Acq+4 [27.4 buyers ($90)+8.3 buyers ($60)+2.9 buyers ($50)+1.9 buyers ($50)]-
[45.6×$20+20.8×$10+14.4×$4+19.2×$2] =
Discounting profits NPV @ 10 NPV @ 10% NPV @ 20%
Acq+1 $2,109 $2.017 $1,933
Acq+2 $1,455 $1.331 $1,222
Acq+3 $1,144 $1,002 $ 881
Acq+4 $ 919 $ 769 $ 649
LTV/100 customers $5,627 $5,119 $4,686

2a - 9 Foundations for Creating Value

 DEVELOPING OPPORTUNITIES
THROUGH MARKETING RESEARCH
PURPOSE OF RESEARCH
1 2
CUTOMER MANAGEMENT ACQUIRE NEW CUTOMERS

ACHIEVED BY
1. CUSTOMER RESEARCH – through focus groups and
surveys
2. INTERACTING WITH CUSTOMERS – through joint
product development and product testing
3. DEVELOPING ON-SITE VISITATION PROGRAMS

2a - 10 Foundations for Creating Value

 FINDING SEGMENTS
1. USE NAICS CODES TO ASSESS INDUSTRIES’
SIZE AND NEEDS
https://www.naics.com/what-is-a-naics-code-why-do-i-need-one/#:~:text=NAICS%20Codes%20allow%20them%20to,from%20their%20products%20and%20services.

2. EVALUATE COMPANY CHARACTERISTICS

SUCH AS SALES, NUMBER OF EMPLOYEES
3. DETERMINE A COMPANY’S BUYING
PROCESSES AND HOW THEY BUY
4. MATCH PRODUCT OFFERINGS TO
COMPANIES SEEKING WHAT PRODUCT DOES
BEST

2a - 11 Foundations for Creating Value

 PERCEPTUAL MAP

BRAND C
Reasonable price
Order process BRAND A
efficiency & accuracy After-sale service
Rapid delivery
BRAND B

Helpful / informative

BRAND D Technical
performance

2a - 12 Foundations for Creating Value

 SEGMENTATION AND
OPPORTUNITY ANALYSIS

IDENTIFY SEGMENTS THROUGH INDUSTRY

CLASSIFICATION (SIC / NAICS)

CHOOSE YOUR INDUSTRY TARGETS

CHOOSE YOUR SPECIFIC COMPANY TARGETS BY:

1. HOW THEY BUY
2. THE BENEFITS THEY SEEK
3. MEMBERSHIPS IN PROFESSIONAL / TRADE
ORGANIZATIONS

2a - 13 Foundations for Creating Value

 CRITERIA FOR SUCCESSFUL
SEGMENTATION
• SEGMENT MUST BE IDENTIFIABLE-
enumerated and evaluated
+
• SEGMENT MUST BE ACCESSIBLE-
can be reached by marketing activity
+
• SEGMENT MUST BE SUBSTANTIAL-
enough to justify efforts

2a - 14 Foundations for Creating Value

 ESTIMATING SEGMENT SIZE

ANALYTICAL TOOLS
FOR SEGMENT EVALUATION:

1. USE OF SCENARIOS - Articulate events and

futures
2. BUILDUP APPROACH/FACTORING –
Estimate product use in its applications
3. STATISTICAL SERIES – Use correlation
between demand and economic activities

2a - 15 Foundations for Creating Value