Business to Business Marketing Management of Kunst Vacuum Pumps - Term Paper Example

Table of contents Executive summary 2 Introduction 3 2. Background 3 2 Target Market 4 2.2 Outline of Market Mix 4 2.3 Product Outline 5 3. Need for B2B Strategy 5 3.1 Linkages 6 3.2 Factors that promote B2B alliance 7 3.2.1 Time, cost and Market expansion 7 3.2.2 Establish credibility in international market 7 3.2.3 Diverse technology 8 3.2.4 Changing preferences of people 8 4. Proposition for Value creation for Kunst 1600 8 4.1 Perceiving the need 10 4.2 Seeking and assessing value 10 4.3 Price and buying value 11 4.4 Consumption value and satisfaction 11 4.5 After sales performance 12 5. Recommendations 12 References 15 Executive Summary Atler GmbH has acquired Kunst to enter American market which has high brand value amongst scientists, engineers and health professional for its top end vacuum pumps. Kunst 1600 would be introduced in new application segment in United States. The B2B market strategy for Kunst 1600 is proposed by creating a value proposition model. The value proposition model of a product is a critical element of marketing. The value of a product differs from its monetary cost and incorporates features that are designed to give higher level of perceived satisfaction to the customer. Through reduced time, the customer firm can increase revenue by doing more jobs per week. But the most important value proposition for Kunst pump is its environment friendly operation which does not need oil. The use of Kunst pump promotes environment conservation and its rust free body requires less maintenance. These are major features that are envisaged to give advantage to Kunst 1600. 1. Introduction The current recessive trends in the global economy have adversely affected the interests of the global and domestic business environment. There is liquidity crunch in the market and there is severe corrosion in the trust amongst the business community and the system as a whole. As a result, the commercial activities of the market are cautiously moving forward. The compulsions of the fast changing trends in the socio-economic paradigms have forced the domestic and global business to re-evaluate their market strategies and develop creativity in their approach to not only maintain their current customers but also try to attract new clientele. Kunst Vacuum Pumps is recently acquired by Atler GmbH, a leading German firm that produces high quality and high precision instruments and equipments for hospital and scientific laboratory. The paper would be discussing the B2B market strategy for introducing new product, Kunst 1600, in application segment in United States by developing a value proposition model for the product. 2. Background Kunst Vacuum Pump, based in Minneapolis, has high brand value amongst scientists, engineers and health professional for its top end vacuum pumps. The pumps can evaluate chambers to almost perfect vacuum and work efficiently at lower pressure as against their competing models in the market. Presently Kunst holds about 60% of the market share in scientific laboratory, healthcare and industrial applications. Atler GmbH has acquired Kunst to enter American market. The recently developed model Kunst 1600 is a dry piston vacuum pump that Atler would be marketing under its own brand in the Kunst’s traditional market but would like Kunst to introduce the product in new application segment of commercial market in United States, where it is relatively unknown. 2.1 Target market The senior executive of Kunst are quite optimist of its usage in application market and have tentatively identified residential AC repair and home and light commercial refrigerator repair segment. But the market research findings have shown that home and light commercial refrigerator repair would be the best target market. Kunst’s product manager, Evan would like to develop effective market strategy and value creation model for this product so it could be successfully launched in United States. Their strategy would be focused towards B2B market comprising of target consumer firms which are into home and light commercial refrigeration repair work. 2.2 Outline of Market Mix The marketing mix primarily relies on myriad media to promote goods and services. One needs to be more open when Shultz say that it is the end-users who now control the markets rather than the marketers (2001). Marketing mix becomes highly relevant because the technological advancements have brought forth an explosion of information that is easily accessible to public through the internet and other media like television, radio, mobile phones etc. The internet has made it easy for the customers to become aware of the product details including its availability at competitive prices which has precipitated the need to develop a whole new perspective for a new marketing technique. In the B2B market strategy, the marketing mix would enable the firm to create brand image and help carry forward its credibility from the previous segment. Kunst’s vacuum pumps are highly regarded in the healthcare, industries and scientific laboratories across United States for their quality, precision and performance. 2.3 Product outline Kunst 1600 dry piston vacuum pump is a light weight (16.5 pound), injection moulded aluminium pump that pumps with a speed of 1.5 CFM1. It is highly environmental friendly as it is oil free with rust-free aluminium body. It is a reconfigured compressor and therefore, it is capable of running for a longer time and is cooler than traditional pumps in the market. It works more efficiently at lower pressure which other pumps cannot do. It has fewer loose parts and therefore, it is more sturdy and can undergo rough handling while transportation from truck to location and vice versa. The product is tentatively priced at $400 for wholesalers. 3. Need for B2B strategy The organization’s strategy would be planned around two core areas. The first one focuses on the competencies of the product/ company and the second is creating a value proposition for its proposed target customers. Coombe and Georghiou (2002) assert that the in contemporary competitive business environments, especially when new products are introduced, building network relationship has made become essential part of effective strategy. Forging strategic business alliances and promoting networking with other business entities provide the firms with plethora of informed choices for improving and improvising their performance outcome. Kunst vacuum pump is not targeted for mass consumption but for targeted retailers who do bulk buying. Thus, B2B strategy would help exploit new opportunities in the real world and become necessary business tool for Kunst 1600 in US. 3.1 Linkages Collaboration, partnership and any other types of contract business relationship are the linkages that facilitate higher level of efficiency and organizational growth which would offset a competitive advantage over their rivals. According to P.F.Drucker, ‘access to information represents the basic precondition for success of a firm’ (Drucker, 1998). These linkages help provide the firms with wider database of knowledge and facilitate manipulation of strategic business information to improve the overall business prospects. B2B marketing is generally carried through shorter and more direct channels of distribution (Dwyer and Tanner, 2006). Through B2B marketing, Kunst would be able to penetrate the application market with more ease. The retail market, therefore, would become a huge asset for new product, Kunst 1600 in United States. Retailing can be broadly defined as expansion of business interests through business alliances with third party under predefined terms and conditions. In the current financial constraints, the retail marketing has considerable impact on the customer relationship and performance outcome of the business enterprises. By adapting retail marketing as core business strategy, the businesses are able to take their products directly to doorsteps of their customers. At the same time, they are able to target that segment of market, which they might not have been able to access. Kunst needs to identify the salient issues and factors that significantly impact the market segment and would facilitate a competitive advantage against its rival product in the segment market. 3.2 Factors that promote B2B alliance Barnett (2004) firmly believes that in the fast changing dynamics of business vis-à-vis financial consideration, technology and new logistic approach in global economy, the value addition features of a product become the winning combination for the firms. Hence, emerging new business compulsions become the key factors for forging network relationships. Few major factors are as follows: 3.2.1 Time, cost and market expansion Financial considerations are strong motivating factors that promote strategic collaboration and retail agreements. Such business alliances help the firms to maintain competitive advantage at great speed and without incurring extra expenditure on expansion of business on stand-alone basis. All three issues are vitally important for Kunst and needs to be addressed. 3.2.2 Establish credibility in international market The strategic partnership with global business entities helps the firms to gain entry in new areas. When Atler acquired Kunst Vacuum Pump, this was a major point of consideration as Kunst’s vacuum pumps are highly regarded in the industrial and scientific laboratory segment. Atler’s desire to cash in the brand name and credibility of Kunst for introducing new products is a compulsive business decision that could significantly influence market. 3.2.3 Diverse technology The vast diversity in the technology area is one of the most significant factors for fostering new business tie-ups. This is one of the major areas that Kunst would be focusing on its network alliances with local retailers. The use of new technology and value content of the product are important features that would influence the retailers’ buying decision. 3.2.4 Changing preferences of the people It is important for the firms to incorporate the changing requirements of the people through the development of new products and services that meet the changing demands of the masses. Therefore, changing preferences become one of the major motivating factors for fostering alliances. But since Kunst’s business strategy is focused on B2B, the firm’s priority are divested towards diverse technology and cost effectiveness. 4. Proposition for Value creation for Kunst 1600 The value proposition model of a product is a critical element of marketing. Anderson, Narus & Narayandas (2009) assert that value of a product in business market is ‘the worth in monetary terms of the technical, economic, service, and social benefits a customer company receives in exchange for the price it pays for a market offering’. Hence, the value of a product differs from its monetary cost and incorporates features that are designed to give higher level of perceived satisfaction to the customer. Many scholars also emphasize that the value of the product is the sum total of benefits and sacrifices incurred in the purchase of the same (Bloise, 2003; Ulaga, 2003). The benefits could be in terms of effective usage, quality, technology etc and the sacrifice vis-à-vis cost of transportation, maintenance, poor performance, purchase cost etc. Indeed, it is important to note that when a consumer buys a product he expects it to have certain basic values like quality, fair price and good after sales service. These are basic criteria of acquiring new customer and retaining the old. In the research study carried out by Evan, the comment of one of the contractor actually sums up the fundamental criteria of Kunst’s marketing. ‘If you can’t show me how your vacuum pump is going to increase the number of jobs I can do per week or cut my operating costs’. While the cost of the pump is much higher that its rivals’ products, the area where Kunst can make significant inroad is the reduced time of vacuuming in home and light commercial refrigerator repair segment. The time saved during the repair work in light commercial refrigeration would result in 2 more work per week in peak season of summer. Apart from this, the cost would be saved on the oil and technician’s half an hour time that is normally used in changing the oil of the traditional pump. The cost of soap and cloth for cleansing would also be saved. Hence, the customer firm would not only be saving but would also get opportunity to increase revenue by getting two more jobs done per week. But the most important and critical value proposition for the Kunst pump is its environment friendly operation which does not need oil. The change of oil in the traditional pumps are normally tossed off unethically in deserted dumpsters or pay $5 per gallon to the municipality as charges which is a rare occurrence as per the research study. The use of Kunst pump promotes environment conservation and its rust free body requires less maintenance. These two perceived values of the pump need to be highlighted to promote ‘environment friendly brand image’. 4.1 Perceiving the need Consumer only buys a good when he thinks that there is need for it. The recognition of the need could arise voluntarily or it could be prompted by advertisement which could lead to the decision to purchase. In the case of Kunst vacuum pump, the need to create awareness is intrinsic part of B2B strategy and Kunst must ensure that value proposition model of the product are not only convincing and practically applicable but the wider socio-economic criteria of the product is also highly appealing. 4.2 Seeking and assessing value When the need for a product is recognized with the intention to buy, a person often tries to gather relevant information about it through various channels like internet, friends or browsing trough the shops. His need for information also looks for its alternatives that could provide him or her with better bargain vis-à-vis price, value added features etc. While these factors are essential part of consumer behaviour psychology in consumer segment, they are equally applicable for other customers like B2B firms. The need for more information becomes necessary for new products, especially those which are costly or are perceived to be relevant for specific usage. For expensive products, information gathering is more intense and purchase decision is not made until all the criteria of its perceived values are satisfied. This is done to reduce the risk of spending a lot of money on goods which might not be what the consumer is actually looking for. In the case of Kunst 1600 pumps, the marketing mix would be a strong communication channel that would help establish the brand and thereby facilitate in creating an ideal value proposition model for the product. 4.5 Price and buying value The prices are not major issue with the old customers but competitive pricing helps to bring in new customers. The buying value broadly entails the credibility of the manufacturers, reliability of the product, life cycle, quality, after sales services etc. that lends credence to the buying decision. The cost of Kunst pumps is much higher than the existing pumps and therefore, the challenge for the firm would need to be addressed in innovative manner. 4.6 Consumption value and satisfaction Lee et al. (2002) assert that the concept of consumer satisfaction is relative to his or her level of satisfaction which he feels after consuming or using the product or possessing it. The factors like life cycle, maintenance cost and post purchase service greatly impact the consumption value. If the perceived value exceeds the consumption value, consumer would buy it again but if it does not meet it, he would be dissatisfied and would get the product from another manufacturer. Ravald and Grönroos (1996) insist that the perceived value primarily entails the perceived benefits after over and above the purchase cost and cost of maintenance. If the maintenance is costly and performance is not as expected the perceived value significantly falls. 4.7 After sales performance The consumer is liable to promote goods and services who’s after sales service is prompt and satisfactory. The good after sales performance inculcates trust amongst the consumers and promotes credibility of the brand or product. Thus, post purchase behaviour of the sellers and manufacturers greatly helps in retaining old and new customers. 5. Recommendation The company needs to initiate strategic marketing through comprehensive public relation exercise, involving different media, and improved website with interactive module. It should also create brand and focus on building a niche market for its new product. Since the firm is introducing new product in new application segment, it would have to reduce the cost to make it more appealing to the customer firms because the cost of traditional pumps are significantly lower to that of Kunst vacuum pump that the firm has tentatively priced at $400. AirMaster, the most popular pump in same category costs just $200! The company’s transportation logistic would need to evolve more dynamic strategy that is cost effective and efficient so as to provide a competitive edge to its rivals. The company would also need to develop its own trainers to disseminate information about sustainable development techniques and paradigms to the people. The company must use its extensive experience of promoting sustainable development and biodiversity in its operation, to create awareness. The company must offer state of the art repair facilities and shorter downtime for repair work. It should also ensure replacement of working Kunst pump while the customer’s product is under repair. As an introductory offer, the firm could provide the customer firms who are bulk purchaser or large contractors, some value added services like free pickup and delivery of pumps for repair and maintenance, full replacement if the repair takes more than 6 hours etc. They can also strengthen the network relationship through effective online help services. The challenges of unarticulated elements like ethical practices and manipulated demand and supply chain by some vested interests, needs to be met by the innovative and strategic methodology of marketing and sale of its mainstream products. Arbuthnot asserts that ethical perceptions are important factors that influence buying behaviour (Arbuthnot, 1997). Hence ethical issues need to be addressed in the retail strategy. The customer firms must be made aware of the environment conservation issues and the need to be proactive participants in promoting the cause. Anderson, Narus & Narayandas (2009) also emphasize that ‘flexible market offerings’ that can incorporate the requirements of the customer firms give significant market leverage to the suppliers. Hence, regular interaction with the customer firms would enable Kunst to understand the changing needs and market compulsions of its customer firms which it can exploit to promote its business. Market credibility is one of the most cherished elements of firm’s performance criteria. By ensuring customer satisfaction and promoting more constructive dialogue between the two to evolve new measures of improved performance, the firm would promote mutual trust and relationship building, thus promoting a credible image. Reference Anderson, James C., Narus, James A. and Das Narayandas. (2009). Business Market Management: Understanding, Creating, and Delivering Value. 3rd Edition. Upper Saddle River, NJ: Pearson Education. Arbuthnot, J,J. (1997). Identifying Ethical Problems Confronting Small Retail Buyers During The Merchandise Buying Process. Journal of Business Ethics, 16 May, 745-755. Barnett, Thomas P M.(2004). The Pentagon’s New Map. War and Peace in the Twenty-First Century. New York: Putnam. Bloise, K. (2003). Using Value Equation to Analyse Exchanges. Marketing Intelligence and Planning, 21(1), 16-22. Coombe, Rod and Georghiou, Luke. (2002). A new Industrial Ecology. Science; vol 296, 471. Drucker, P.F. Next information revolution. Forbes, 24 August, 1998. Database: Academic Search Elite. Dwyer, F. Robert, Tanner, John F. (2006). Business Marketing: Connecting Strategy, Relationships, and Learning. 3rd Edition, McGraw-Hill/Irwin. Lee, Dong-Jin, M. Joseph Sirgy, Val Larsen, and Newell D. Wright. (2002). Developing a subjective measure of consumer well-being. Journal of Macromarketing 22(2), pp 158-69. Shultz, Don E.(12 February, 2001). Bid Farewell Strategy based on old 4Ps. Marketing news, 35(4), 7. Ravald, A. and Grönroos, C. (1996). The Value Concept and Relationship Marketing. European Journal of Marketing Volume 30(2), 19-30. Ulaga, W. (2003). Capturing Value Creation in Business Relationship: A Customer Perspective. Industrial Marketing Management, 32, 677-693. Read More