Chapter 1

The Unique Nature of Industrial Marketing

Industrial MarketingAlso called: Business-to-Business

(B2B) or Organizational Marketing.

Definition: IM is the marketing of products and services to business organizations which includes private firm, public agency, or nonprofit organization

The creation and management of mutually beneficial relationships between organizational suppliers and organizational customers.

The Marketing ConceptIndustrial marketer must understand

the needs, resources, policies and buying procedures of the buyer.

Creating value for customers with goods and services that address organizational needs and objectives.

For example: Steel furniture maker.

Marketing ConceptThree major components:

All company activities should begin with the recognition of a fundamental customer need.

A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D.

Customer satisfaction is viewed as the means to long-term profitability goals.

Five Major DifferencesBetween B2B and B2CMarket characteristicsProduct characteristics Service characteristics Buyer behaviorChannel characteristics Promotional characteristics Price characteristics

Market characteristics

Product characteristics

Service characteristics

Functional areas involvements.Rational and performance based decision.

Technical expertise.Stable interpersonal relationships.

Buyer behavior

Channel characteristics More direct and less intermediaries.

Promotional characteristics Emphasis on personal selling

Price characteristics Competitive bidingNegotiated pricesList prices for standard product.

Marketing ActivitiesIdentify customer needsResearch customer behaviorDivide market into manageable

segmentsDevelop new products/servicesEstablish/negotiate pricesDeliver, install, service productsEnsure adequate and timely supply of

products at correct placeAllocate resources across product

linesCommunicate with customersEvaluate/control marketing programs

Different industrial customers

Commercial enterprise.Industrial distributors and dealers.

OEM’sUsers

Government customers.Institutional customers.Co-operative societies.

Classification of I PMaterials and parts.

Raw material Manufactured materialsComponent partsSubassemblies

Capital itemsLight equipments or accessoriesInstallations or heavy equipmentsPlant and building.

Supplies and servicesSupplies services

IC’s purchasing orientations Buying

Low priceGain powerRisk

ProcurementCollaborative R/S with major suppliers.Working closely with other functional areas

Supply chain managementDeliver value to end userOut source non core activitySupport collaborative R/S with major

suppliers

Purchasing practices of industrial customerPurchasing in commercial enterprise.

Size, nature, complexity, verity, volume and value

Large and medium firms functional heads involve.

Various techniques like material planning, supplier rating system, EOQ and value analysis are used.

Managers are equipped with market knowledge, price trends, commercial matters and negotiation skills.

Major tasks in purchasing are Identifying the potential buyer Negotiating and selecting suppliersEnsure right qty and qlty material at the right

timeLong term r/s with suppliers.

Purchasing in government units.Govt units are major purchasers of industrial goods and services.To compete success fully understand the complexities.most of the state and central govt have separate procurement deptMajor tasks in purchasing are Registering the company and products with govt units. for standard products ad will be floated in newspapers.Based on that suppliers will get tender papers.Suppliers are then required to submit sealed offers duly signed .After the tenders are received in tender box the sealed covers are opened at the specified date and time.Tender offer terms and conditions are read out in the tender opening meet except closed bidding.

Closed / limited tendersEnquiry is sent to few registered suppliers of

certain category of non standard product.PO’s are issued against evaluation of tender

offers.Tender offers of other suppliers are kept

secret.Based on the lowest cost or lowest landed

cost orders are issued.If the tender value is small 2or 3 supplier or

if the TV IS more then more no's of suppliers appointed.

Institutional purchasing

Purchasing in resellers marketsAlso replacement marketConsists of industrial dealer and distributer

main aim is profit and volumes.Selection of supplier on quality and price

bothExclusive or multi producers dealer and

distributer Major tasks in purchasing are

Sharing of AD costProviding marketing materialsCompetitive price and trade discounts.Flexible payment terms with credit facility

Bargaining power play a role Purchasing in co-operative society

Industrial market environment

Dynamic environment- new OTHow well is the r/s between buyers and sellers

decides the impact of surprises posedMarketing strategies were adaptive in nature But ideology changed to proactive .Industrial market environment consists of

Interface levelPublicsMacro environment

Interface level Key participants immediately

interface with industrial firmIncludes environmental factors

likeInput suppliers Distributors Facilitators - ad agency, transportation,

warehouse etcCompetitors

PublicsFinancial publicsIndependent pressPublic interest groupsGeneral publicInternal publicThe macro environmentEconomic Ecology Political environmentCultureTechnology Government’s impact on IME

The macro environment

• Economic forces– Regulate the exchange of materials, money,

energy, and information

• Technological forces– Generate problem-solving inventions

The macro environment

• Political-legal forces– Allocate power, provide laws and regulations

• Sociocultural forces– Regulate values, mores, and customs

Strategies for managing IMEIndependent strategies

Competitive aggression Competitive pacification PublicsPolitical /legalResource suppliesImplicit co-operation

Co-operative strategiesContracting , cooptation , coalition

Strategic maneuvering Domain selection Diversification

Strategies for managing IMEIndependent strategies

Competitive aggression :product diff, aggressive pricing, comparative ad

Competitive pacification: price umbrellas, industry promotion, ICR’s

Publics: corporate image, voluntary Envi control, commitment to IG’s

Political /legal : direct lobbying, issue advertising, Resource supplies : Resolution of irregular demand,

DemarketingImplicit co-operation

Co-operative strategiesContracting , cooptation , coalition

Strategic maneuvering Domain selection Diversification

Organizational buying Level of experience and information that

they have,Routine needs less info.Entirely new need lot of infoBuying is a series of decision makingBuying behavior changes according to the

buying situation Buying grid consists of three situations

New taskModified rebuyStraight rebuy

Buying decision process1. Anticipation or need recognition2. Determination of quality and quantity of

the product 3. Description of quality and quantity of the

product 4. Search for the qualified source5. Acquisition and analysis of proposals6. Evaluation 7. Selection 8. Performance and Feedback

Buying grid Robinson et al. Buying phases and buy classes All eight phases are applicable in new task.Most difficult buying situation in IM new

task identifying and developing products.Modified situations are not difficult to

handleStraight rebuy are handled in routine

manner.

Buying centre DMU or buying groupAnswer some queries

Who are involved in buyingSet of people have interdependent objectives

and share common risks.Buying roles

Initiators Buyers UsersInfluencersDeciders Gate keepers

Identifying the key members of BCTop management personsTechnical or functional personsBuyers/purchasers Accounts and finances personsMarketing functions

Buying objectives Delivery / availability.Product qualityLowest price ServicesSupplier relationship

Personal relationship Higher statusJob securitySalary incrementsPromotion Social considerations

Models of organizational buying behavior

Webster and wind model

Environmental variables

Organizational variables

Buying center variables

Individual variables

Sheth model

Industrial marketing research

Objective and Systematic process of obtaining, analyzing, reporting of data for decision making.

Industrial marketing intelligence.Difference b/w IM and CMSCOPE of industrial marketing research

Development of market potentialMarketing share analysisSales analysisForecastingCompetitor analysisNP acceptance and potential Trend studies Business quota determination

Marketing research processIdentify the problem or opportunity and

define research objectives

Develop the research design

Data collection

Process and analysis of data

Present research findings

Segmenting Business MarketsWhat is segmentation ?Enhancing a company’s competitive

position by providing direction and focus for marketing strategies.

Examining and identifying growth opportunities in the market through the identification of new customers, growth segments, or new product uses.

promises the greatest return on marketing investment (ROMI)Protective Coatings Floor Coatings Road Markings

Geographic

Customer Type

Customer Size

Product Use

Segmenting Business Markets

Businessto

BusinessPurchasing Criteria

Purchasing Strategy

Importance

Personal Characteristics

Micro- segmentation

Macro- segmentation

Steps in Segmenting a MarketSelect Market or Product

Category

Choose Segmentation Bases

Select Segmentation Descriptors

Profile/Analyze Segments

Select Target Markets

Design, Implement, Maintain Marketing Mix

Steps inSegmenting a

Market

SubsequentMarketingActivities

Strategies for Selecting Target Markets

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

Multisegment Targeting

Costs• Production design costs• Production costs• Promotion costs• Inventory costs• Market research costs• Management costs• Cannibalization

Benefits• Potentially greater sales volume• Higher profits• Larger market share• Economies of scale in:

manufacturingmarketing

Positioning Bases

Positioning Bases

Attribute

Price and Quality

Use or Application

Product User

Product Class

Competitor