We regularly talk with Business to Business companies about the importance of a positioning strategy as an element of the marketing plan. Positioning is used as a marketing communications tool to reach customers in a crowded marketplace. It doesn't matter if a company chooses to compete with a superior value strategy or a lowest cost approach, what does matter is the company develops a realistic and sustainable way to differentiate itself from the competition, and give the customer a reason to buy their product.
Many years ago, Michael Porter identified three positioning alternatives; product differentiation, low cost leadership, or niche strategy. Later Treacy and Wiersema called these value disciplines and defined them as product leadership, operational excellence, and customer intimacy. What they agreed upon was that different managerial systems, processes, and cultures were needed for each value discipline and that it is difficult to be the best at any one of these, let alone multiple positions. Even the largest and most exceptional companies had difficulty making multiple positions for the same product work successfully. Smaller business to business companies do not have the resources and reach to pursue multiple positioning strategies. Select one area to be the best and focus on being good in the other areas.
A product or service may be positioned in several categories including: a feature or benefit, use or application, target user, competitive position, price, or level of quality. The product is positioned for specific market segments with defined product needs at specific prices.
Steps to Positioning
Develop possible positioning themes based on knowledge of markets, customer needs and company capabilities.
Screen these themes on
- Relevance to target customers
- Feasibility based on firms abilities and customer's perception of the firm
- Competitive: The firms unique advantages over the competition that would be difficult for the competitors to match
- Support of company's long term sales and profitability objectives
Reasons for Positioning Failure
- The position taken is meaningless to the customer. A key marketing rule is to understand the customer.
- It is confusing irrelevant or doubtful and is not supported by the firm's capabilities, brand and reputation. Core competency, customer knowledge, market research, and competitive analysis can help identify the correct positioning
- The differentiation has no economic value to the customer. The position must be meaningful and add value to the offer (ie lowest lifecycle cost).
- The differentiation is invisible. The company may be superior to its competition, but if the customer is not aware of, or does not understand the value of the differences, then the positioning will not be successful. A well designed integrated marketing communications program (internet, public relations, advertising, etc) is an important factor in good positioning.
The best positioning strategies emphasize your company's and product's strengths and away from weaknesses. Position your product to reach the target buyers and decision makers whose profiles match the solutions you provide, in the distribution channels you serve, and at the prices that achieve your goals.
Do a Google search on "health care reform" and you'll find there are just a shade under 23,000,000 pages. "War in Iraq"...43,000,000. "World peace"...51,000,000.
Now do a search on "social media." A whopping 202,000,000 (that's million) pages returned. More than the previous three examples combined! Yes, social media is a hot topic these days - dominated by names like Facebook and Twitter. What does it all mean to a B2B marketer?
I've read article after article...after article...all praising the power, the reach, the absolute necessity of implementing these social media tools (and that's what they are - tools). One article in Ad Age recently chastised and called out any ad agency as basically "unqualified to handle an account" if they didn't have an active Twitter and Facebook account. And at a minimum, according to the article, they weren't qualified to handle the social media portion of an account. Well, that's like saying that if a B2B advertising agency isn't running print ads in trade publications, they're not qualified to handle the print media portion of an account. Or that if a B2C agency isn't running 60 second Super Bowl ads, they're not qualified to produce them. You get my point. But that's the hype surrounding the social media conversation right now.
It's time to put social media in perspective, step back, take a deep breath, and look at it for what it is....another marketing tool at our disposal. It's not the panacea some would have you believe. It needs to be framed inside an integrated marketing communications program (not on the island its currently being put on), and then evaluated appropriately.
Putting together an integrated marketing communications program involves many steps. Maybe you already have one, maybe not. (You should). To evaluate whether you should be using social media of any type as part of your marketing strategy, you need to get back to marketing basics - just as you do with any other media. What are you selling, to whom, where can you reach them (magazines, websites, blogs, etc.), and how can you most cost effectively reach them? Granted, I've greatly oversimplified the IMC process here.
When B2B marketers frame social media inside an integrated marketing program, they're going to find that currently, there are MANY B2B audiences out there who are not engaged in social media for work, in any way, shape or form. Your tweets may may not be falling on deaf ears, but they're falling on unqualified ears. Because the company that the 58 year old machine operator you're trying to reach with news of the improved speeds and feeds on your equipment blocks all social media websites at the plant. And the middle-aged and overworked plant manager doesn't have time, nor the inclination to tweet from his company issued cell phone. They MIGHT have Facebook accounts to stay in touch with family and friends.
Moral of the story? Consider your audience...consider your audience...consider your audience. Social media might be a marketing tool, a channel, to STRATEGICALLY integrate into your marketing program - but then again it might not be.
Whether you're a B2C or B2B marketer, it's critical that you know and understand your target audience. To say things are a little more complicated on the B2B side is putting it mildly.
Your B2B buyer is actually a team of people, each with his or her own responsibilities, biases, "turf" to protect, and persona. To effectively market to the entire team, you need to understand who they are, what their roles are, and how to communicate effectively with each of them.
If you think about the buying process your customers go through, chances are you'll be able to identify these key members of the buying team:
Decider - This is a team member with significant influence who must be sold on both your company, and your products. It's important to build a relationship with this person, who is usually a high level decision maker. It's usually very difficult to get a meeting with the Decider, so it's important to stay in front of them with branding and product focused advertising, public relations, direct mail, search engine marketing, etc.
Influencer - This is someone with a particular expertise or past experience that gives them a high level of credibility. Their credibility means they will significantly influence the final buying decision. The Influencer is usually a high level decision maker. Believable, benefit oriented and product focused messages should work best to gain this team member's attention and trust.
Gatekeeper - We all know the Gatekeeper. This person gathers information and keeps all team members "in the loop" on the decision making process. They may have more or less influence than is not immediately evident. It's important to build a strong and positive direct relationship with this person.
End-User - This is the individual(s) who will actually be using the product you're selling. As odd as it seems, the End-User is often times not a member of the buying team. This will vary by the type of product or service you offer. You should monitor this to see if the person who will use your product each and every day is influencing the purchase decision. If they are, they will respond to a strong and clear product message - features, benefits.
One thing to keep in mind with this person(s) - if your product is going to reduce labor requirements, the End-User may not be such a big fan, since you may actually threaten their job security.
Buyer - This is the person who actually places the order and facilitates the buying process once a vendor is chosen. Often times this person is part of the purchasing department. They can influence the decision, especially when price is a major issue. Commodity type consumables come to mind - tapes, glues, lubricants, etc. They may have allegiances to particular vendors that may or may not include your company.
If the Buyer is a factor, you need to communicate topics such as how easy you are to order from, quantity discounts, affinity program availability, price decreases, price increases, etc. You need to build a relationship through direct (phone) contact and email. Keep this person informed, so there are no surprises!
Some pricing strategies to think about as you're trying to stay profitable when times are tough... This may be obvious to some of you, but when you look at raw pricing strategy formulas, it may stop you from making quick (but costly) decisions:
This simple example assumes you need to maintain a 25% gross profit, or gross margin, and shows what happens (or doesn't) if you lower or raise prices.
If you lower prices by:
2% - You must increase sales by 8.7%
5% - You must increase sales by 25.0%
10% - You must increase sales by 66.7%
20% - You must increase sales by a whopping 400.0%!!
If you raise prices by:
2% - You get the same profit on a sales volume of 92.5%
5% - You get the same profit on a sales volume of 83.3%
10% - You get the same profit on a sales volume of 74.4%
20% - You get the same profit on a sales volume of 55.5%
Makes you sit up and take notice, doesn't it?
I recently came across the "2009 Forbes Advertising Effectiveness Survey", conducted annually by Forbes Magazine. This survey asks senior level advertising, media and marketing executives to gauge their perception of various media and digital marketing campaigns.
Here are some of the key highlights:
- 43% said that sponsoring a website, page or digital publication is the most effective digital tool when it comes to affecting brand perceptions.
- SEO and Email and e-newsletter marketing are by far the most popular methods of digital marketing among respondents, used by 75%.
- 48% percent of marketers said that SEO was the best method for generating conversions online. More than one-half of marketers with budgets over $1 million agreed.
- In 2007, only 19% utilized SEO as part of their online strategies and as of 2009, 39% of the businesses are implementing SEO.
- 87% measure results of their digital campaigns in some way, the most popular being benchmarking against goals set prior to the campaign.
- The success of digital marketing appears to be measured by physical action, with impact to the bottom line being far and away the most important factor in determining success.
- The tools seen as most effective for generating conversions were SEO (48%), email and e-newsletter marketing (46%), and pay-per-click/search marketing (32%).
- In the coming six months, respondents expect that viral marketing and SEO will likely see the biggest increases.
What does this mean for B2B companies?
- It is important, not just to maintain a website but, to actively market the site through exceptional content and search engine strategies. More companies are using Internet marketing strategies and your marketing budget should reflect the increasing importance of the digital channels.
- Search engine optimization involves many technical factors, including content development, public relations, link building, organic search engine marketing, pay per click advertising and other tactics, but if done professionally it will increase your search engine rankings and drive more qualified traffic to your website. This would appear to be a primary area to allocate resources.
- E-mail marketing, e-news letter marketing, and pay per click (PPC) marketing are effective digital tools for generating conversions. A commitment to these programs and implementation by a professional is necessary to achieve success.
- Programs should have clear and realistic objectives set prior to implementation and results should be monitored. Digital marketing offers more opportunity to track ROI than some traditional marketing methods.
I just spent a week at Inbound Marketing University learning more about search engine optimization, blogs, social media, email marketing, and various strategies to convert website leads. All of this was extremely interesting and time well spent. With all the buzz being generated by the social marketing gurus, one gets the impression that businesses are missing something if they are not using social media marketing tactics. I think inbound marketing will continue to develop into an important business to business marketing tool, but there is still a need for traditional outbound marketing tactics in the overall marketing mix.
A key is to get back to B2B marketing basics and clearly define goals and objectives. Conduct market research to look at customer segments and customer "persona's". Once the basic business to business buying process and how customers are gathering their information is understood, then the marketing tactics can be budgeted and implemented. In business to business marketing, trying to reach the multiple individuals who participate in the buying decision is not easy. Social media tools can be very effective, but not every prospect or business uses Facebook, Twitter or reads blogs (yet). It might make sense to add some search engine marketing, blogging and social media strategies to the traditional outbound marketing methods, depending on how your customers and prospects want to get their information.
Social marketing and networking is not free. It takes a lot of time and to do it right requires dedicated resources with skills and abilities to consistently create and skillfully write content of value for your customers. That content must be updated regularly and be interesting and relevant to the segment being targeted. And even then maybe only a few business customers may currently respond to these efforts.
B2B companies need to analyze their markets carefully and determine which marketing tactics will lead to the best returns. Maybe a balanced, integrated marketing program using Internet marketing, search engine optimization (SEO) for the website, blogs, and email marketing supported by traditional direct mail, trade show, public relations and advertising strategies will yield the best ROI.
When developing marketing and communications plans and tactics, applying the "Six C's" of market driven companies is a key to the success of programs for all business to business companies. Advertising, public relations, email marketing, branding strategy, trade shows,and internet marketing strategies will be more effective if the needs of the customer and market segment are researched and understood, both by the business and the agency. This knowledge drives the creation and implementation of the most successful marketing programs.
There are significant contrasts between a market driven company and an inside out approach to business, much as there are contrasts between an agency that is market driven (external focus) or creatively driven (internal focus). Many business and agency managers are internally focused and could achieve a better understanding of their customers and markets by implementing the "Six C's" approach.
- Customer Segment: To be market driven, thinking and actions begin with an understanding of customer market segments, their requirements, and unmet and emerging needs
- Competition: Market driven B2B companies study the products, services and performance of their competitors to determine their strengths and weaknesses
- Capabilities: Market driven organizations actively evaluate their technologies and capabilities in light of changing market conditions. They quickly adapt (before their competitors) products and services to meet the needs of the target market segments.
- Cost: To be market driven companies must constantly strive to improve costs and efficiency and increase value to their customers and shareholders
- Continual Improvement: By constantly learning and seeking to improve in all operational areas, market driven companies improve customer value, response time, productivity and also their own profitability
- Cross-Functional Teams: Utilizing cross functional teams with responsibility to implement business plans leads to better decisions, response, and service to the target markets
Many business to business companies define their marketing strategy success as growing market share, increasing account share, and customer acquisition, satisfaction, and retention. Despite these measures of customer success, companies lose sight of the profitability objective and the need to maximize their profits from selling products and services. In order to satisfy customers, companies take reduced margins and may lose money with them. They offer additional discounts, product features, and services to their large customers, but do not get prices that cover the costs for these additional features and services.
In developing the market plan and targeting and segmenting markets, we suggest that you want to attract customers that contribute to company profit. This is not easy!
- Customer cost is hard to track because accounting systems are not designed to track customer by customer costs
- Focusing on customer profitability can lead to decisions that are different than decisions based on other metrics, such as market share. I.e. Higher market share is not necessarily better, because low value customers may have been acquired to increase share
- Customer profitability brings together marketing (customer is the focus and we have to provide value) and finance (how much value do I get from this particular customer?)
- If we don't provide value to a customer he won't buy anything, but if he doesn't provide value to us, do we want to spend resources pursuing his business
Some typical metrics that can be used to measure individual customer profitability and tailor market strategy are:
- Margins on purchase
- Technical support costs
- Marketing and sales costs
- Accounts receivables
- Inventory programs
- Special requirements
- Intangibles (ie fill machine production in slow times)
Many companies have experienced profitless revenue growth because the market strategy and marketing plan may not target the right customers. Commercial market research, and solid market and competitive analysis will help identify the profitable segments. Developing tailored business to business marketing programs to improve inbound marketing through improving public relations efforts, website design, and search engine marketing and optimization can decrease customer acquisition costs. Aligning marketing programs to make the customer focus consistent with financial objectives is important to achieve success in today's business to business market climate.
Everyone in the marketing and advertising business eventually talks or writes about creativity. And for every hundred articles, or presentations, there are a hundred definitions of the word. We might not add our own definition this time, but do want to talk about what creativity isn't.
Here are a few definitions we've seen over the years that we do not agree with:
- Creativity is something that sells, with directly traceable results.
- Creativity stops and makes you think.
- A creative ad has "flashy" graphics and clever copy.
- Creativity is doing something daring, that works.
Non-creative business-to-business marketing and business-to-business advertising can sell sometimes, particularly when the headline says "biggest" or "smallest" or "free." This doesn't make it creative.
An unappealing (dare we say ugly), unprofessional, non-communicative ad can stop you and make you think too...the problem is you may not think "positive."
The simplest, most straightforward message can be creative if it accomplishes its objective. Neither flashy graphics or clever copy are necessary.
And the ideal creative marketing causes the audience to immediately recognize the value of its message. There was no chance-taking involved, simply effective communication.
Many definitions aren't really definitions at all...they simply attempt to say what creativity does. Here's what we think it does...
Creative marketing positions the company, product or service squarely in the prospect's mind, clearly and dramatically communicating unique features and benefits or primary interest to the specifier or buyer. It helps you out-market your competitors without having to out-spend them.
We can say some other things about creativity which aren't really definitions, but attributes.
Creativity is a combination of art and science. The creative B2B agency can build an aura of excitement around the client's products, in a way that contributes to his long-term sales efforts. A commercial product and a work or art are not necessarily mutually exclusive - there are many examples of "Art that sells."
Because, whatever else they are, marketing and advertising are commercial activities. They must produce commercial results. These results don't always have to be measured in immediate sales or profits; commercial results can also be obtained by creating a sense of good will and enthusiasm and excitement about the company (branding). These results are long-range ones, and ultimately more valuable than the results of an ad with cries "biggest" or "cheapest" in order to move a product quickly. Which they don't always do of course.
The creative process, in reality, is simply the process of discerning relationships between facts, and synthesizing them into a cohesive and convincing story.
Usually, the best creativity is a model of simplicity. Think back to the ad, years ago, for the Volkswagen Bug. One simple picture, and only two words. "Think Small." One of the most famous creative ads ever written - and, one of the most successful. Creative, tasteful, brilliant, and it told the entire story.
Creativity will never be defined to the agreement of all its practitioners. And that's part of what makes it fun. To us, it is, at its best, a wonderful combination of art and science, whose strongest measurement is not how it strikes the creative people, or how many awards it wins, but how closely it helps to accomplish predetermined objectives.
Many business to business companies have not yet realized the strategic value of fact based market information and do not have staff dedicated to market research. As a consequence many B2B companies do not have enough information to make informed decisions on their market opportunities.
Market research applies to consumer and business to business markets, however there are significant differences between the two because of the structure of industrial markets, and the technical requirements of B2B users. Four key areas that distinguish commercial market research are:
- B2B markets are concentrated and a small group of customers may account for a major share of the market. A handful of customers may have strong purchasing power and cause shifts in market share and these players can be easily reached for information about technical needs, trends, market size and consumption. Statistical sampling is usually not needed in industrial markets but face to face customer meetings to discuss, usage, requirements and trends are a major source of industrial market research
- The level of complexity of business to business products is usually much higher. This requires an understanding of how products work and how they fit into the customer's operations. This complexity requires that the research team needs to be technically proficient in both products and their usage and that interviews are done with a wide range of functions in the target company
- Business to Business purchases are driven by the need for solutions to problems. Businesses are looking for cost effective solutions to their technical or business problems and are not as concerned about product appearances. They tend to compare products side by side and look for superior value from the products and services they purchase, and suppliers are constantly rated throughout the relationship. Effective research identifies customer problems, seeks to define the solution to the problem and builds a relationship with the customer.
- The major sources of fact based information are industrial trade and technical associations. Secondary data from these groups, government sources, trade publications, industrial directories, and buyers guides help define markets, trends, and business potential. Most of this information is available through the internet. Trade shows, technical seminars, papers, and standards committees are also good sources of business to business market information.
Market strategy and commercial market research have an important interdependent relationship. Market research allows the strategic market plan to be more fact-based, reduce decision risk, and creates better marketing strategies and business plans