Business-to-BusinessBusiness-to-BusinessMarketing:Marketing:a cornerstone ofa cornerstone ofprofitable growthprofitable growth
McKinsey & Company, Inc.
McKinsey & Company, Inc.
1st edition 1998
2nd edition 2000
Printed by Frhlich Druck AG, Zollikon
McKinsey & Company, Inc.
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Strategy: Setting the stage 7
Understanding customers and market 9
Pinpointing the right segments and customers 13
Defining a distinctive value proposition 18
Operations: Putting the system in place 25
Standardized product businesses: 27
learning from consumer goods
System businesses: 37
profiting from integrated solutions over the whole lifecycle
Project-based businesses: 46
providing economic value to the customer
Organization: Capturing the opportunities 55
Building an attractive platform 57
Executing a well-orchestrated set of initiatives 59
Ensuring implementation and adjusting the organization 62
We invariably treat information about our clients as confidential. To
make the case for business-to-business marketing come alive without
compromising this confidentiality, we have only mentioned by name a
number of companies that are acknowledged marketing all-stars or tal-
ented specialists in a particular area. Their success stories, drawn from
public sources, are supplemented by further disguised examples from
our consulting work.
In most industrial companies, marketing used to be a lower-level man-
agement job. Often it was synonymous with supporting the sales force;
sometimes it was associated with creative advertising. Most companies
were centred on engineering and on offering a wide range of standard-
ized and/or technically advanced products.
Those days are ending. More and more managers are realizing
that developing and selling are not enough. Knowing how to position,
value, price, and brand your product or service is now the key factor
for success. Companies that very early on adopted a systematic market-
ing orientation based on a good understanding of these fundamentals
have gained share and outperformed competitors.
Their success has generated intense interest in business-to-busi-
ness marketing or B-to-B for short. It is a vast arena. Last year, more
than 20 million businesses around the world sold more than $20 tril-
lion dollars of products and services to other businesses. As one of my
American colleagues put it: It is BHP Steel selling processed metals to
Motorola; Motorola using that metal to make semiconductors, which
are sold to Arrow Electronics. Arrow Electronics reselling those same
semiconductors to IBM. IBM using the semiconductors to build main-
frame computers, which in turn are sold to Boeing. Boeing using its
mainframes to build airplanes, which are sold to GE Capital. GE Capi-
tal leasing those airplanes to Delta Air Lines, which then uses those
planes to provide special charter flights for Coca-Colas annual meet-
ing of bottlers.
Of course, B-to-B marketing is never this linear. The market is
really a multiplicity of user communities; the customer is a multi-
plicity of decision-makers. Suppliers who already have strong market-
ing processes naturally have an advantage.
With this brochure we would like to summarize the great benefits
of developing a superior marketing orientation, the levers that can be
used to do this, some examples of successful practical approaches from
companies in various types of businesses, and a roadmap for doing it,
using consultant support to accelerate the process.
On behalf of the authors, I would like to thank the clients and
colleagues who generously shared their views with us. My special thanks
go to Terry Gilman, whose great dedication and skilful editing have
enabled a diverse team of authors to produce a readable whole, and to
Charles Whitehouse for his invaluable contribution to design and pro-
In my own experience, the focus on delivering value to the cus-
tomer that is at the heart of marketing makes it an infinitely fascinating
and satisfying field of professional activity. I hope we have managed to
convey our enthusiasm.
As an introduction to excellent business-to-business marketing, here
are some brief answers to the five key questions on the back cover:
Why learn to sell your customers products to their customers?
Because the industrial companies that grow profitably are the ones
that focus obsessively on their customers business needs. They put
themselves in their customers shoes and think about how to satisfy
their customers. This helps them to identify the main points of leverage
to improve customers performance in the marketplace a source of
hard-to-copy ideas for even better products and services.
Why have a list of customers you dont want to serve? Because all
customers are not created equal. Even the best understanding of cus-
tomer conduct is no guarantee that a particular account will be profit-
able. But if your basic market segmentation reflects customer needs
and attractive earnings potential, a hard look at individual accounts
will make plain where to focus your energy and adjust your offering.
And for great growth, excellent marketers know that Its better to own
80% of one customer segment than 10% of the market.
Why go all-out to convince customers that your offering is distinc-
tive? Because you can only own a segment if customers believe there
is no substitute for your product offering. Rapid short-term growth can
be achieved by developing a value proposition that, in customers eyes,
offers benefits they cannot get elsewhere. It is often enough to have a
profile just 510% better than your competitors in carefully selected
areas. But the higher the real or perceived price-value positioning, the
eharder it is for competitors to copy. It also deflects competitive attacks
based solely on savings from restructuring.
Why worry if customers pay a competitor more for products with
fewer technical features than yours? Because they are building a rela-
tionship you may never be able to penetrate. Instead of just relying on
the technical advantages of a product to attract and retain customers,
top competitors like SAP, Federal Express, Intel, Cummins Engines,
and Gore-Tex have also actively invested in branding the value. They
have forged a link between their names and customer satisfaction, lay-
ing the basis for lasting customer relationships.
Why figure out how much you could earn by giving customers your
equipment for free? Because knowing all the numbers gives you an
edge. We are not advocating selling below cost, but understanding the
entire lifecycle of the customers investment. System suppliers like Otis
and Tetra Pak are professionals at this. They have grown by thinking
through the total profit stream that can be generated over the useful
life of the initial investment, whether an elevator or a packaging line.
Their bundled product and pricing solutions for equipment plus
services, spare parts, software, and supplies are being emulated by more
and more industrial companies. The lifecycle perspective points the
way out of the commoditization trap of pure price competition and
eroding profit margins. It also suggests new strategies for teaming up
with suppliers and customers to create more value.
Why ask yourself questions like these? Because they go to the core
of marketing strategy. Coming up with explicit answers here will help
your company or business unit to identify the two or three activities
that really drive profitable growth, and then to perform them excel-
lently, day by day.
Marketing makes the difference
Our studies in the international electronics, machinery, and compo-
nents manufacturing industries confirm that what distinguishes the top
companies is not better restructuring skills. What makes the diffe