role of branding in business marketing
...ssors has resulted in a strong customer pull forcing the assemblers to use Intel processors only. It is common for industrial marketers to derive a major portion of their total revenues and profits from a relatively small number of customers. This would be obvious in the case of original equipment (OEM) automotive parts suppliers, for example. The typical industrial firm probably has no more than a few hundred customers, with maybe five to ten accounting for over half of its total sales. The strength of the brands like Infosys, ABB, GE, etc has value for their commercial customers. Industrial goods and services can be classified in several different ways. One common typology defines raw materials, processed materials, component parts, subassemblies, light equipment, heavy capital equipment, construction, MRO (maintenance, repair, and operating) supplies, and services. Services can be further categorized to include financial, logistical, medical, educational, management consulting, marketing, technical, data processing and information management, and a host of other services. Some services are bought in connection with the purchase, installation and operation of physical products while others are stand-alone services such as tax advice or investment banking. Brand names serve as differentiating features in each of these product and service categories. Branding strategy obviously needs to be tailored to the specific product type. For many raw and processed materials and many types of components and sub-assemblies, the product is inevitably tending toward commodity status as technology-based differences disappear and buyers become more knowledgeable and increasingly focus on price. Branding & Industrial Buying Behaviour Industrial markets are distinctive primarily because of their profit-motivated and budget-constrained customers, not their products. These customers are different from consumers because of the size of their purchases, the concentration of their buying power, the nature of the relationships they demand from their suppliers and perhaps most importantly their buying process. Industrial buying is in most respects different from that of the individual or household consumer. Industrial buying is a combination of individual and organizational decision-making processes and brands have influence on both sets of processes. Buying behavior involves individuals making decisions in interaction with other people both within and outside their organizations, in the context of their organization's goals, resources, strategy and structure. The organization in turn is operating in the context of an economic, geographical, political, technical, legal and social/cultural environment that is continuously changing. Industrial buying decisions typically involve many actors, take place over a long period of time and goes through a series of decision stages. The participants in the buying process can be described in terms of their roles in the buying process. These roles have been defined as initiators, users, buyers, deciders, influencers, and gatekeepers. Quickly summarizing these - 1. initiators define the buying situation and start the buying process; 2. users actually use the product; 3. buyers can commit the organization to spend money; 4. deciders have the authority to choose among potential product offerings and vendors; 5. influencers add information or constraints in the buying process; 6. gatekeepers can control the flow of information into the buying process. In this buying decision making unit (DMU), several individuals can occupy a given role (e.g., there may be many users or influencers) and one individual may occupy multiple roles. A purchasing manager, for example, often occupies simultaneously the roles of buyer, influencer, and gatekeeper, as when he or she can determine which sales reps can call on other people in the organization, what budget and other constraints to place on the purchase, and which firm will actually get the business, even though others (deciders) might select two or more potential vendors who can meet the company's requirements. The DMU may include people outside of the target customer organization, such as government officials, consultants, technical advisors and other members of the marketing channel. Strong brand awareness and favorable attitudes among the dispersed members of the buying center can exert major influence throughout the process. Some members of the Decision making unit may have the authority to decide on behalf of the organization and could conceivably behave in an autocratic, authoritarian manner. Others may have veto power and the ability to overturn any decision made by another individual or the buying group as a whole. Typically, however, there will be some kind of a group decision-making rule such as consensus or voting, using such interpersonal influence processes as persuasion, bargaining, negotiation, etc. Individuals will be subject to many social and interpersonal influences at multiple levels within the organization. They may be loyal to the needs of their particular department or division even as they attempt to find a solution to the buying problem. The need to achieve consensus in the industrial buying process in order to arrive at a group decision is a major driver on the necessity and value of branding in industrial markets. The brand can be a major tool for achieving a consensus in organizational perceptions and buying action. Each member of the DMU is likely to give priority to very different decision criteria. For example, engineering personnel may be concerned primarily with maximizing the actual performance of the product; production personnel may be concerned mainly with ease of use and reliability of supply; financial personnel may focus on initial purchase price whereas purchasing may be concerned with operating and replacement costs; union officials may emphasize safety issues and so on. While each of these participants may be trying to minimize both the risk of product performance and the social risk of making a decision that will be judged by others, each may also define those risks in a different way. Getting all of the participants in the DMU to the same conclusion and getting a commitment out of the organization is usually a very complicated process. As a general proposition, the more complex the buying process in terms of the complexity of the procurement problem, the size and scope of the DMU and the amount of time required, the more valuable a strong brand becomes in helping to achieve organizational consensus and decision. Strong brands and strong brand loyalty can be a major asset for industrial marketers because of the preference of organizations collectively, and their members individually, to avoid risk-taking in buying decisions. The organization's evaluation-and-reward system may implicitly provide incentives for brand loyalty by encouraging the choice of ‘tried-and-tested" or at least familiar and respected brands. Industrial Buying Dynamics The fundamental point is that individuals, not organizations, make decisions. These individuals are motivated by their own needs and perceptions as they do their organizational work in an attempt to maximize the rewards offered by the organization. These payoffs are earned based on the performance evaluation-and-reward system of the organization. The organization structure, goals and resources available guide and constrain the actions of the individuals within the organization. Each individual tries to achieve organizational goals subject to resources and other constraints in a way that minimizes risk and maximizes the payoffs. Personal needs motivate the behavior of individuals but organizational needs legitimate the buying decision process and its outcomes. People are not buying products. They are buying solutions to two problems, the organization's purchase problem and their own personal goal of obtaining individual achievement. In this sense, industrial buying decisions are both rational and emotional, as they serve both the organization's and the individual's needs. However, in the typical buying decision, the solution to the organization's problem will tend to take precedence over the individual's needs, especially when it comes to providing a rationale for the choices made. Economic and functional appeals will normally be dominant in the brand value proposition as compare to emotional appeals of the brand. For example, the dominant brand attribute may be the rational/functional one of superior product performance, but the emotional/motivating appeal might be that the buyer cannot afford the social risk of buying the product which may arise because of inferior performance of an unbranded or less known product / vendor. Generally, industrial service brands are positioned as choices that will help the buyer make a good impression in front of his boss or colleagues. But they will look good because the product performs well, not because of some hidden psychological or ego-enhancing benefit. For this reason, product-related brand associations are likely to play a more important role than non-product related associations for successful industrial branding. Industrial Buying and Relationship Management Over the past decade or so, both buying practice and marketing theory have moved toward a view of industrial buying and marketing as relationship management. This represents a significant shift away from the dominant paradigm of an adversarial relationship in which buyer and seller attempt to maximize their own benefit in the transaction as a zero-sum game. The focus has shifted from transactions and conflict to long-term relationships and cooperative buyer-seller behaviors. Compared with earlier practice, industrial customers now rely upon fewer vendors for their requirements with longer-term contracts for a larger portion of their total needs. While prices and margins may be somewhat lower under these conditions, marketers often benefit from the more reliable revenue stream, lower costs to serve and lower marketing costs. Industrial buyers in turn obtain a more complete and reliable solution to their problem, often at lower prices and lower total cost of procurement. However, not all customers are relationship customers. There is a continuum of procurement situations and customer types from pure transactions to strategic alliances. In the middle are increasingly strong buyer-seller relationships, from repeated transactions through simple relationships to strategic buyer-seller partnering to integrated firm-to-firm alliances. Unique market segments can be defined at multiple points on this continuum. Industrial brands may have different roles to play in different market segments. Relationship and partnership customers will likely place greater value on the trustworthiness, reliability and corporate credibility dimensions. Transactions customers may focus more on product performance, pricing and tangible service attributes. To summarize, industrial branding must take into account the complexity of the industrial or organizational buying process. Not only must the brand image have value and relevance for the individual decision makers, but it must have meaning that can be shared among them. It must appeal to the needs and perceptions of people in different buying roles with different frames of reference and different buying criteria. In strategic buyer-seller relationships, the partner who owns the strongest brand is likely to own the relationship with the customer. This fact has profound importance in terms of the firm's control over its position in the value chain. Firms like Microsoft and Intel are good examples of this. Branding Strategies for Industrial Brands If we look at the typical industrial brands, from GE to ABB to XEROX, all of them are essentially company names. The company blanket brand (GE for example) may be applied to a wide range of products. If we consider example of GE the brand extends to components to switchgears to turbines even construction (turn-key power-generation plants). This practice is consistent with the fact that industrial marketing and buying are increasingly focused on relationships, not individual transactions. The customer wants an on-going relationship with a reliable supplier of quality products and services. The relationship is company-to-company. The brand is a relationship between buyer and seller. The characteristics of the supplying firm -- its financial strength, its reputation for ethical dealing, its record of reliable delivery and service, its technical expertise, its ability to control production processes, and so on, are likely to be even more important than the quality of its products per se. In terms of economic value, brand strength becomes more important and the brand becomes more valuable as a strategic asset as the size of the user base increases and users play a more important role in the buying process. Thus, the leading industrial market brands represent products familiar to millions of users. The brand value comes from the present and future value of earnings on sales to individual users of these companies' products. But this does not mean that the product becomes a consumer product. Whereas brand promotion by these manufacturers may create enhanced perception of value on the part of the actual user, the development of purchase specifications, the buying process itself and the actual purchase are done by the businesses that buy these products and incorporate them into their operations and product offerings. You ...