Download Types of Organizational Customers

Chapter 2
Classifying Customers, Organizations, and Markets
Prepared by John T. Drea, Western Illinois University
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Types of Organizational Customers
Commercial
Enterprises
Industrial
Distributors
Value-Added
Resellers
Government
Units
85,000 local,
state, and federal
government units
Original
Equipment
Manufacturers
Users or End Users
Nonprofit and
Not-for-Profit
Organizations
Churches,
hospitals,
colleges,
nursing homes,
etc.
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• Industrial Distributors
Commercial
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users
– Provide economic utilities
of form, time, place, and
possession to
manufacturers
– Creates assortments of
products from many
manufacturers
– Particularly useful for
reaching customers too
small to justify direct sales
efforts
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• Value-Added Resellers
Commercial
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users
– More than just a
distributor or wholesaler.
– Provides unique offering
enhancements tailored to
a customer’s needs by
combining
products/services from
other manufacturers.
– Creates a value network
at the user level.
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Commercial
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users
• Original Equipment
Manufacturers (OEMs)
– Purchase products
and incorporate those
products into their
products.
– Usually the largest-volume
users of goods and
services.
– Ex: Intel is an OEM
supplier to many computer
manufacturers, Firestone
was an OEM supplier to
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Ford for many years.
Commercial
Enterprises
Industrial
Distributors
Value-Added
Resellers
Original
Equipment
Manufacturers
Users or End Users
• Users or End Users
(E/U)
– A manufacturer that
purchases goods or
services for consumption/
incorporation into their
products in such a way
that the identity of the
purchased product is
lost.
– When Goodyear
purchases steel for
fabrication into steel belts
for tires, Goodyear is the
steel manufacturer’s E/U.
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Producer Types
Raw
Materials
Producers
Component Parts
and Manufactured
Materials
Producers
Accessory
Equipment
Suppliers
Capital
Goods
Manufacturers
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Producer Types
Raw Materials Producers
Often compete in price sensitive markets
Raw
Materials
Producers
Seek value added positions
Products lose identity once incorporated
into the customer’s product
Raw materials markets are often dominated
by a few very large producers
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Producer Types
Components Parts and Manufactured Materials Producers
Parts retain their same form when
incorporated.
Component Parts
and Manufactured
Materials
Producers
Usually retain identity even when
incorporated into the customer’s
product.
More differentiated from direct
competition by the value added to
the customer’s product.
Seagate computer drives are an example.
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Producer Types
Capital Goods Manufacturers
Capital goods involve large purchases
with considerable risk for the customer.
Capital
Goods
Manufacturers
Involves the development of
specifications to ensure that
organizational needs are met.
Adherence to specifications reduces
opportunities for differentiation.
Customers expect an offering that
includes installation, equipment, and
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accessories.
Producer Types
Accessory Equipment Suppliers
Accessory equipment is equipment that
works with some other offering.
Accessory
Equipment
Suppliers
Accessories can be added to a
bundled offering by a channel
intermediary.
Accessory equipment is usually
produced by an independent
supplier.
The key to providing value is to be
compatible with industry standards for
the primary offering.
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Financial
Publics
Public Interest
Groups
Communities of interested parties who are not direct participants in a
market as customers, channel members, suppliers, or competitors.
Publics
Independent
Press
Internal Publics
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The Macroenvironment
Demographic
influences
Environment
value
creation.
Competitive
Environment
Economic
Environment
Technological
Environment
Sociocultural
Environment
Natural
Environment
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Forms of Competition in B2B Markets
• Pure Competition
– No single entity dominates the market or
has much of an influence on price.
– Most common in commodity industries.
– Little product differentiation – price is a
major component of the marketing mix.
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Forms of Competition in B2B Markets
• Monopolistic Competition
– Many buyers, many sellers.
– Product is differentiable – can vary in
quality, features, and style
– A range of prices is possible.
– Promotion and branding are important to
product differentiation.
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Forms of Competition in B2B Markets
• Oligoplistic Competition
– Market consists of a few sellers that are
sensitive of each others’ strategy.
– Barriers limit entry of new competitors.
– Prices are aimed at maintaining market
stability.
– Key is building relationships with large
volume customers.
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Forms of Competition in B2B Markets
• Pure Monopoly
– Only one primary seller.
– Competitors that do exist are small niche
players.
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An Adaptation
An Adaptation of the Value
Chain
of the
Value Chain
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Multinational Value Network
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The
Product
Life
Cycle
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The Technology Adoption Life Cycle
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PLC and TALC
• Product Life Cycle
(PLC)
–
–
–
–
Introduction
Growth
Maturity
Decline
• Technology Adoption
Life Cycle (TALC)
– Technophiles
– Visionaries (aim for
“quantum leaps”)
– Pragmatists (want
proven solutions)
– Conservatives
– Laggards
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TALC and How Technology Markets Evolve
• Chasm
– A break in the sales growth curve for a new
technology.
– A chasm occurs between visionaries and
pragmatists.
• Tornado
– The chaos that occurs during a period of rapid
growth.
– A dominant supplier usually emerges from a
tornado.
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Using the Technology Adoption Life Cycle
• The vendor of an innovation passes through
technophiles and visionaries before
establishing a foothold among pragmatists.
• Crossing the chasm (called the “market
development gap”) between visionaries and
pragmatists is related to a change in the
entire marketing mix.
– There are changes in type of customer and
what the customers perceives as being of
value.
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Using the Technology Adoption Life Cycle
• Tornado
– Corresponds to the late introduction/early growth
stage of the PLC
– The market wants to support the market leader – it
reduces uncertainty for pragmatists.
– The market leader has the chance to become the
“gorilla” – the gorilla can do what it wants as long
as it stays close to what pragmatists desire.
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Introduction
• E-business tools facilitate information
flow both the ways, connect the
customer, automate transactions, offer a
communication medium, develop
catalogs, and integrate the back office
into the supply chain.
• CRM tools automate an information-rich
environment.
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Defining CRM for distribution
• Distribution knowledge is divided into explicit
and tacit forms.
• Explicit knowledge is information that can be
explained in structured form and can,
therefore, be programmed
• Tacit knowledge, on the other hand, is
inconsistent, fuzzier to explain, and poorly
understood
• E-Business focuses on the automation of
explicit knowledge.
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Defining CRM for distribution
• The purpose of data mining and
customer profiling is to simplify the
complexities of customer knowledge
and behavior.
• Data mining is the process of examining
data to determine the existence of
relationships that are not immediately
apparent.
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Defining CRM for distribution
The Boundaries of Knowledge
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Hardware Needs
• Connection has been made easy with Wide
spread availability of high-speed networks
provided by Internet Service Providers
(ISP’s).
• The threat of virus is a serious threat with a
significant impact.
• Overwhelming costs of catalog development,
hardware and software are the problems of
connectivity through web to suppliers and
customers.
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Hardware Needs
• The intention to employ a mainframe-based
system or a client/server environment by a
frame dictates the required hardware.
• Experiences of the past are the most
common determining factors.
• Capacity is an important issue.
• Selection of a CRM software for employment
is a difficult task.
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Software Needs
• Customer data is collected on a regular basis
by all firms.
• Anticipation of customer needs is categorized
into prediction with and with out historical
information respectively.
• Forecasting consists of data collection,
mathematical (historical) forecasting, and
expert forecasting.
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Software Needs
ERP and Bolt-Ons
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Anticipating and Meeting Customer
Needs
• Data collection activity is the base of
forecasting.
• Solutions to customer data problems typically
combine strategic alliances with
software/hardware solutions.
• Information batching means blocks of
information are gathered to be acted upon at
differing time intervals rather than
instantaneously. The periods are a function of
the mode of execution of customer’s orders.
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Anticipating and Meeting Customer
Needs
• Forecasting software is available as
embedded in ERP software or as an bolt on.
• ERP forecasting uses the data it gathers from
the system data bases in the forecasting
process.
• Standard forecasting methodologies
employed by many ERP systems are
statistical forecasting and simulation.
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Anticipating and Meeting Customer
Needs
• Bolt-ons are comparable to specialists
in any field.
• A feature offered by certain forecasting
bolt-ons is inventory decision-making
capability.
• Software decisions also deal with cost
minimization.
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Anticipating and Meeting Customer
Needs
• Transportation management is a critical
aspect for distribution.
• A popular option in recent years has been to
outsource transportation decisions.
• Application service provider’s (ASPs) are also
involved in the transportation activity.
• Profitability analysis software employs Activity
Based Management (ABM) techniques to
identify the value provided by an action.
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Anticipating and Meeting Customer
Needs
• Facility location software can be used to
analyze the functioning of a distribution
network.
• Warehouse management systems (WMS)
govern the activity for inventory storage.
• Database marketing includes data mining and
the storage of useful data for mining.
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Catalog Development
• Catalog development in 1990s born out
of the expectation of the distributors to
maintain their own catalogs.
• Lackluster performance and
development costs have retarded their
popularity.
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Back Office Integration
• Back office integration refers to the tools that
connect the distributor’s or the manufacturer’s
system to its channel partners.
• The other option was enterprise application
integration (EAI) that took disparate systems and
acted as a translator for the two to communicate.
• The dot.coms adopted EAI and professional
associations drove standards development to
encourage easier data exchange and development
of EAI software
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