B2B Marketing

MBA 3006MM BUSINESS TO BUSINESS MARKETING
HALF CREDIT COURSE

Business to Business Marketing Course Contents
Unit 1 Basics of Business-to-Business Marketing
Unit 2 Understanding Business Market Environment
Unit 3 Business Market Segmentation, Target Marketing and
Prof. Sonal Muluk Positioning
Unit 4 Product and Pricing in Business Markets
Unit 5 Managing Distribution Channels and Communication in

Business Markets
BUSINESS TO BUSINESS BUSINESS TO BUSINESS

MARKETING MARKETING
Course Objectives Reference Books
a) Reference Books:
a) To provide basic understanding of concepts, processes and
• B2B marketing Michael D Hutt, Dheeraj Sharma, Thomas Speh
terms used in Business to Business Marketing. Cengage Publication
b) To acquaint the students with Business to Business  Robert R Reeder, Edward G Briery & Bitty H Reeder, Industrial
Marketing Mix. Marketing, PHI
Course Outcome:
 Industrial Marketing by Havaldar
Ability to apply marketing mix framework in Business  Business to Businesss marketing, Michael Hutt, Dheeraj Sharma,
Thomas Spech , Cengage Publication
to Business Marketing.
BASICS OF BUSINESS-TO-BUSINESS
MARKETING
1.1 Overview of Business-to-Business Marketing: Characteristic
features of Business Market, Business Market Vs. Consumer
Market, Government Markets, Organizational Buying Behavior
Process, Fundamentals of Business-to-Business (B2B) Marketing
1.2 Models of Organizational Buying Behavior – Webster & Wind

Model, Sheth Model
BASICS OF BUSINESS-TO-
BUSINESS MARKETING Unit 1 1.3 Different Buying Situations in a Business Market, Buy-grid
Framework, Role of Buying Center
Prof. Sonal Muluk MITSOM 1

BUSINESS MARKETS
BUSINESS MARKET Are markets for products and services from local to international
Bought by:
 Businesses
Markets for product and services from local to international
 Government bodies
bought by businesses, government bodies, and institutions used for  Institutions
incorporation, consumption, use, and resale  Cooperative Societies
For:
 Incorporation
 Consumption
 Use
 Resale
TYPES OF BUSINESS MARKET CUSTOMER
Commercial Institutional Governmental
• Manufactures • Government- • Non defence

• Construction related (hospitals, • Military
Companies universities) • Transportation
• Service firms • NFP • Civil service
• User organizations
• State Govt
organizations (charities,
churches)
• Retailers
10
MARKETS
CONSUMER MARKETS CHARACTERISTICS
Consumer Markets
Large no. of buyers

Organizational Markets
Smaller purchases
*There is nothing called industrial (B2B) or consumer product, there are consumer and
Geographically dispersed
B2B markets
Primary demand
The industrial marketing concept involves more than facilitating
Stable demand
exchange with these customers because it is based upon the structure
of a partnership between buyer and seller for the purpose of Personalized buying - Rational + Emotional
achieving the organizational goals of both. Could be one person decision
Impersonal / distant relationship with seller

ORGANIZATIONAL MARKETS CONSUMER MARKET AND INDUSTRIAL MARKET
CHARACTERISTICS
Few no. of buyers
Larger purchases
Geographically concentrated
Derived demand
Inelastic demand
Professional buying - Rational + Systematic
Several persons involved in decision
Closer personal relationship with seller
BUSINESS AND CONSUMER MARKETING DIFFERS IN:

CONSUMER MARKET AND INDUSTRIAL MARKET
1. Nature of their markets
2. Market demand
3. Buyer behavior
4. Buyer-seller relationship
5. Environmental influences (competition, political,
legal) and
6. Market strategy
Due to these differences, business marketers need to

understand how demand for industrial products and
services differs from consumer demand .
A SUPPLY/DEMAND CHAIN FOR CARS

Suppliers of
materials Upstream PURCHASING PRACTICES OF
(e.g. steel makers) Suppliers DIFFERENT TYPES OF INDUSTRIAL /
B2B Marketing BUSINESS CUSTOMERS
Purchasers of inputs
used in making parts Direct
(e.g. engine makers) Suppliers Typical flow (i) Purchasing in Commercial Enterprises
of goods
B2B Marketing between
organizations
Purchasers of inputs
used in making finished cars Car
(e.g. Toyota, Ford, Tata Motors) Manufacturers
Involve Technical & Commercial depts.
B2B Marketing
Major Tasks / Procedure: identifying, negotiating,
Car
dealerships Car selecting suppliers, building relationship.
(franchises or independent showrooms) Distributors
B2B Marketing Purchasing to improve operational efficiency & contribute to fi
(to corporate fleet buyers)
and rm’s competitive advantage.
B2C Marketing End users
(to individuals or families) of cars
Car
(organizational customers & consumers) Customers
17

GOVERNMENT BUYING
Two purchasing strategies used
II) PURCHASING IN GOVT. UNITS
•Product is Standardized
DGS&D agency finalizes rate contracts for standard
Formal •Specifications are straight
products for Govt. units.
Advertising/Open Bid forward
Main Tasks / Procedure
: Registration of the firm & its Products, Tender Advertisements,
no negotiation in “ Open” tenders, negotiations
•Cannot be differentiated on done in closed / limited tenders.
the basis of price Orders Finalized on lowest bidders
Negotiated Contract •Few potential suppliers
(III) PURCHASING IN INSTITUTIONS

INSTITUTIONAL BUYING
If the Institute is a Govt. Hospital Purchasing
•Purchasing Agent practices of Govt. units Followed
•Purchasing Department Similarly a private School / College follows
practices of commercial enterprises
•Group Buying However, better to study each major institution.
(iv) Purchasing in cooperative societies

•Bharti Airtel Ltd has adopted internet
Similar to Institutional purchase.
DERIVED DEMAND
BUSINESS MARKET
DEMAND CHARACTERISTICS The demand for business products is called derived
demand because the demand for industrial products is
derived from the ultimate demand for consumer
•Derived demand
products.
•Fluctuating demand
•Stimulating demand
•Price sensitivity / demand elasticity As a result, business marketers must carefully monitor
fluctuating trends and patterns in consumer markets.

INDUSTRIAL PRODUCTS AND SERVICES INDUSTRIAL PRODUCTS AND SERVICES
1. Materials and Parts 1. Materials and Parts
2. Capital Items 1. Raw material – User or OEM
2. Manufactured materials - Acids, fuel oil, and steel

3. Supplies & Services
3. Component Parts- spark plugs
4. Subassemblies
INDUSTRIAL PRODUCTS AND SERVICES INDUSTRIAL PRODUCTS AND SERVICES
2. Capital Items 3. Supplies & Services

1. Light Equipment or accessories - Power operated hand 1. Supplies- Paints, soaps, oils and greases, pencils,
tools, small electric motors, dies; jigs, typewriters and typewriter ribbons, stationery and paper clips
computer terminals 2. Services - Building maintenance services, auditing
2. Installation or Heavy equipments - Fixed equipments - services, legal services, courier services, marketing
machines, turbines, generators, furnaces, and earth research services and others.
moving equipment
3. Plant & Building - Real estate property of a business
FORCES INFLUENCING ORGANIZATIONAL BUYING BEHAVIOR

•Economic Outlook:
A projected change in
business conditions
Domestic & Global
•Pace of Technological
BUYING PROCESS
can drastically alter Environmental
Change
buying plan. Forces
•Global Trade Relations
Stages in the buying process are not as sequential
•Goals, Objectives, and
Organizational Strategies as suggested by the model.
Forces •Organizational Position
Organizational of Purchasing
Buying Sometimes steps are skipped. For example, on
•Roles, relative
Behavior
Group influence, and patterns straight rebuys, buyers choose to purchase almost
Forces of interaction of buying immediately.
decision participants
•Job function, past

Individual experience, and buying
However, the model represents important aspects
Forces motives of individual of how companies buy and evaluate business
decision participants purchases.

1. Problem
2. General
3. Product
1. PROBLEM RECOGNITION
Description
Recognition Specifications
of Need
Before anything is bought, most buyers need to be made
aware of a problem.
5. Acquisition
4. Supplier Organizational
Search
and Analysis Internally:
Buying Process of Proposals
A machine breaks down
6. Supplier
7. Selection
8. Performance Someone needs to order an MRO product
of
Selection Review
Order Routine Someone recognizes an opportunity that can be captured
by acquiring the product
1. PROBLEM RECOGNITION 2. GENERAL DESCRIPTION OF NEED

Once a need is recognized, the purchasing department works with
Externally: the buying group to define what is needed by asking:
What is the extent of the problem?
More often than not, it is the salesperson who precipitates
What alternatives can solve the problem?
the need for a new product
Where can the solution be purchased?
Advertising also can influence purchasing Each small decision ultimately helps define the product
specifications.
Many organizations use the Push/Pull Strategy
Sometimes the supplier is involved if the supplier influences the sale
(i.e., the supplier makes the buyer aware of the need).
3. PRODUCT SPECIFICATIONS 4. SUPPLIER SEARCH

Many times the question boils down to:
1. Is it a new task buy? Who will be the supplier?
2. Is it a straight rebuy? The creating influencer has a lot of say about the choice of
3. Is it a modified rebuy? supplier. If a salesperson creates the need, often the specs are
written so that only the salesperson’s organization is able to
Buyers try to be objective and consider many ideas. Professional
fulfill the contract.
sellers try to influence this decision as early as possible in the
buying process—if they can! In established businesses, often only preferred vendors are
considered.

5. ACQUISITION AND ANALYSIS OF PROPOSALS
6. SUPPLIER SELECTION
This step occurs only when the buying organization lacks
At this point, negotiation includes not only monies, but
adequate information to make a decision.
also:
Proposals are presented in detail often by a team engineers, 1.Quantities
users and purchasing agents. Successful proposals determine the 2.Delivery times
supplier.
3.Level of service
Many times, this step is perfunctory. The buyer may have 4.Warranties
already determined the preferred vendor, but legally it may be 5.Payment schedules
necessary to seek other vendor proposals to attain government 6.And a host of final details that determine selection
contracts.
7. SELECTION OF ORDER ROUTINE 8. PERFORMANCE REVIEW
Once the supplier is selected, the order After receipt of the product or service, a performance
review asks:
routines are established
1. Did the supplier meet delivery time?
2. Did the product meet the specs?
3. Does the contract have to be modified?
4. Did the vendor live up to expectations?
THREE BUYING SITUATIONS

BUYING PROCESS
There other events that influence the buying 1. New task

process, most notably:
2. Modified rebuy
1. Economic conditions 3. Straight rebuy
2. Competition
3. Basic shifts in the organizational objectives
4. The buying situation

EXAMPLES OF PRODUCTS PURCHASED USING THE BUY-
TYPES OF PURCHASE OR BUYING SITUATIONS CLASS
Straight rebuy
Straight Modified New
 a routine repurchase that may have been made many times Rebuy Rebuy Buy
Office Vehicles Consulting Installations
before Supplies Services
Modified rebuy
 the in-between process where some review of the buying Pure Complete
Electrical
routine Components negotiation
situation is done—though not as much as in new-task buying
Electricity Computer Moon Shot
Gas/Water Systems Insurance
New-task buy Bulk
Chemicals
 a firm has a new need and the buyer wants a great deal of
information
NEW TASK - JUDGMENTAL SITUATIONS

1. NEW TASK This is the greatest amount of uncertainty because there is little
information or experience to support a decision.
There are 2 approaches to New Task purchasing:
To overcome this, decision-makers conduct outside research to
1. Judgmental Situations analyze key aspects of the buying decision.
2. Strategic Decisions An example of key questions might include:

 What kind and model of production equipment should we purchase?
 Who are the available suppliers?
 Will they provide the services we need?
NEW TASK - STRATEGIC DECISIONS THREE BUYING SITUATIONS

2. STRAIGHT REBUY
This level of New Task purchasing is the most important
because it concerns long-range planning, larger Straight Rebuy – a problem or need that is recurring
investments and increased risk if they are wrong. or a continuing requirement.
An example of strategic questioning might include:  Buyers have experience in the area
 Should we develop a new product line which demands us to  Require little or no new information
buy new machinery, retool what we have, and maybe even hire  Buyers operate in routine problem-solving stage
a different type of employee?
 What should we do?

BUYING DECISION APPROACHES THREE BUYING SITUATIONS
3. MODIFIED REBUY
Casual purchases: Involve no information search or analysis.

 Modified Rebuy—decision makers feel there is a
benefits to reevaluating alternatives.
 Internal Forces:
Routine low priority: Decisions are more important and  Search for quality improvement
involve a moderate amount of analysis.  Cost reductions
MODIFIED REBUY BUY GRID FRAMEWORK

Robinson have formulated the buygrid framework
Buyers feel they can make significant advances if they review
their buying situations on a regular basis.
Often, changes in styles, materials or even alternative solutions

facilitate this review.
Another reason for Modified Rebuy is dissatisfaction with

present supplier.
New supplier was able to find the present supplier’s

weaknesses and offered buyers new alternatives to “fix” their
problem(s).
THE “BUYING CENTER” ROLES IN THE BUYING CENTER
Business purchases often involve multiple influence Initiator Influencers Gatekeepers
"Buying center"—all people who participate in or

Decider Purchaser Users
influence a particular purchase
Buying center varies from purchase to purchase
Does not appear on the "organizational chart"
Structure may be formal or informal

8

BUYING CENTER ROLES
Initiator Initially perceives a problem and initiates the buying process to

solve it.
Affects the purchasing decision by providing technical
Influencer information or other relevant (internal or external) information.
Controls the information to be reviewed by members of the

Gatekeeper buying group. (For example, buyer may screen advertising
material and even salespeople.)
Actually makes the buying decision, whether or not they have
Decider formal authority to do so. Could be the owner, an engineer or
even the buyer.
Has formal authority to select and purchase products or
Buyer services and the responsibility to implement and follow all
procurement procedures.
User Actually use the product in question. Can be inconsequential or

major players in the process.
BUYING CENTER MEMBERS ISOLATING THE BUYING SITUATION

Members of the buying center assume different roles
throughout the procurement process.
Since buying is a process and not an event, one
needs to understand who affects the potential
1. Isolate the personal stakeholders sale and how they affect it.
Clues to help 2. Follow the information flow
identify powerful
buying center 3. Identify the experts One method is to isolate the sale. That means to
members: define the buying situation and to understand
4. Trace the connections to the top
what stage it is in. Effective salespeople create a
5. Understand purchasing’s role need, whereas less effective salespeople become
involved later in the buying process.
STRATEGY TO ISOLATE THE SALE STRATEGY TO ISOLATE THE SALE
Depending upon the product, selling companies For more established type products (MRO), the
that have new-buy products must: strategy should be to:
 Create a need  Get a foothold
 Get involved in the early stages of the buying process  Start small
 Learn the company
 Offer better deals
 Be ready to offer more as buying/selling opportunities
occur

CLUES FOR IDENTIFYING CLUES FOR IDENTIFYING
POWERFUL BUYING CENTER MEMBERS POWERFUL BUYING CENTER MEMBERS
4. Trace the communication to the top. Who are the
1. Isolate personal stakeholders. Who has the most to gain decision makers?
and/or lose?
5. Make sure you understand purchasing’s role. Often
2. Follow the information flow. Influencers are usually the ones purchasers are not decision makers, but they may be
who actually facilitate the exchange. the bargainers. In repeat buying situations, they are
usually dominant players because of their
specialization.
3. Identify the experts. Experts ask the most questions, exhibit the
most knowledge, and are often the most influential.
EVALUATIVE CRITERIA
WHO MAKES THE DECISION? Industrial product users value:
1. Prompt delivery
2. Efficient and effective service
Individuals make the decision, not organizations!
Engineering values:
Each member has a unique personality, experience and 1. Product quality
motive, and are subject to risk and rewards.
2. Standardization
3. Testing
Professional marketers understand this and make sure that
they learn to recognize and match to it.
Purchasing values:
1. Price advantage and economy
2. Shipping and forwarding
MODELS OF ORGANIZATION BUYING THE WEBSTER AND WIND MODEL OF

BEHAVIOR ORGANIZATIONAL BUYING BEHAVIOR
It considers four sets of variables:
1. The Webster and Wind Model
1. Environmental
2. The Sheth Model 2. Organizational
3. Buying center
4. Individual

THE WEBSTER AND WIND MODEL OF ORGANIZATIONAL
BUYING BEHAVIOR
THE SHETH MODEL
Professor Jagdish Sheth Developed model in 1973
Emphasizes the joint decision –making by two or more

individuals and the psychological aspects of the decision
making individuals in the industrial buying behavior.

2/28/2019
Content
 2.1 Classification of Industrial goods
Understanding Business 

2.2Macro and Micro Environmental factors influencing decision making in B2B Market
2.3 Purchasing Orientations – Buying Orientation, Procurement Orientation, Supply
Market Environment Chain Management Orientation, Applications of Purchasing Orientation
 2.4 Purchasing Practices of Industrial Customers – purchasing in commercial enterprises,
purchasing in government units and Tendering, institutional purchasing, purchasing in
UNIT 2 Prof. Sonal Muluk reseller’s market, purchasing in cooperative societies
 2.5 Vendor Evaluation and Rating
Industrial Products 2.1 Classification of Industrial goods

Facilitating
Entering Goods
Goods
 “Individuals and organizations that acquire
goods and services to be used, directly or
indirectly, in the production of other goods and
services or to be resold.”
Foundation
Goods
Materials & Parts Capital Items
 Raw Material: These are the basic products which enter into the production process with
 Installation :Large installations such as factories, warehouses and other
little or no alterations. They may be marked to user customers or OEMs (Original
buildings are capital items which require long time installation and are used for
Equipment Manufactures). Such as iron ore, crude oil, vegetables.
an even longer time.
 Manufactured Materials: That also includes those raw materials that are subjected to
 Equipment :Equipments are both – heavy machineries as well as a utility to the
some amount of processing before entering the production process. Such as acids, fuel
oil, steel and chemicals.
organization using them. Equipment in case of factories will be caterpillars,
trucks, cranes
 Component parts: These are the semi finished parts that can installed directly into the
products with little or no additional change. Such as small motors, batteries and tires.  Heavy equipments
 Light Equipments
Prof Sonal Muluk, MITSOM 1

2/28/2019
Supplies and services Business service
 Any short term goods or material which is necessary for the day to  a) Business advisory services – Chartered accountant. Similarly legal, consulting, advertising,
day operations or a company or businesses is termed as supplies. A simple
marketing are all business agencies within themselves which provide services to industries.
exam is A4 sized paper.
a) Maintenance and repair supplies – Paints are a form of maintenance  b) Maintenance and repair services – There is a difference between repair goods and repair
supplies and Asian paints is the leader in that. Cleaning services are another
services. Where paint is a repair good, a repair service is window cleaning or printer and copier
form of maintenance.
repairing, something which is best left to the professionals. And there are many professionals out
b) Operating supplies – Pen and paper, notepads, lubricants for automobiles
are part of the operating supplies needed on a day to day basis. there who pick industrial contracts for an annual year towards repair and maintenance of day to
Kangaro is an excellent brand which comes to mind when it comes to day products and equipments within an organization.
staplers and staple pins.
2.2 Macro and Micro Environmental factors

influencing decision making in B2B Market Environmental Forces - Economic
•Economic Outlook: Influences
Domestic & Global
Environmental Change
Forces •Global Trade Relations  Changes in the environment such as business conditions, technological advances or
•Goals, Objectives, and new legislation can affect buying plans.
Organizational Strategies
Forces •Organizational Position  Since much of business is driven by derived demand, business marketers must be
of Purchasing
Organizational
Buying sensitive to changes in the consumer market.
•Roles, relative
Behavior Group influence, and patterns
Forces of interaction of buying
 Also, the economy can determine a company’s ability or willingness to buy. If the
decision participants economy is bad, companies often put off purchasing until they see a change.
Forces motives of individual
Economic Influences Technological Influences
 Technology is changing so quickly that yesterday’s technological advancement is

 Not all companies are affected equally. For example, high interest rates may
today’s electronic commodity.
affect housing starts but may not affect food products, medical or transportation
Example: Computers
services.
 However, all companies need to stay alert to these changes. For example, Nokia’s
 Finally, there is an affect from foreign competitors such as China. They have strong leading position in mobile phones market in India came crashing down within 2 years
labor saving costs as a competitive advantage. because they couldn’t foresee the impact of Android based devices.
 Technological change—especially from the Internet—is drastically changing the way

 Low Cost - Best Cost
companies do business.

2/28/2019
Organizational Forces &

Technological Change
Growing Influence of Purchasing
 The Internet has leveled the playing field, allowing competitors the opportunity  As manufacturing has become less important, purchasing and
to compete in the world’s most technological advanced countries. procurement have become more important.
 Companies are outsourcing many activities such as manufacturing,
 It affects not only entire companies (the printing industry is struggling due to marketing, accounting, etc., yet procurement remains a strong
digital printing and electronic communication), but also individual careers (An influence resulting in a shift to more professional procurement
Indian’s edge in outsourcing market is vanishing quickly due to the competition positions.
from Vietnam, Poland and other such countries).
2.3 Purchasing Orientations Buying orientation
Narrow and short term focus

Supply Chain management orientation
 Lowest Price
Procurement orientation  Lowers price suppliers
 Quality & Availability
Buying Orientation  Negotiation “I win –you loss”
Component  Gain Power
& Intermediaries
Raw subassembly Final  Commoditization : Buyers argue that there are no difference between various suppliers’
material assembly offers in terms of technical services, product quality/features
Suppliers Manufact Consumers
urer  Multi-sourcing: many suppliers
 Risk :
 Avoid risk – follow std procedure and select supplier best on earlier performance
Procurement Orientation Procurement Orientation
 Strategic Focus( long-term) and Proactive  Collaborative Relationship with Major Suppliers
 Span of influence id more  Trust
 Inter firm tams who implements JIT, Delivery scheduling and quality assurance to
attain zero defects
Quality
Cost Reduction
Improvements
 Working Closely with other Functional areas
 MRP

2/28/2019
Supply Chain Supply Chain Management
Upstream Direct Value adding and strategic operations

Manufacturers Buyer
Supplier Suppliers
1. Deliver value to end user
Suppliers of
Purchase input Purchase input
manufactured Consumer
used in creating used to produced
materials and
parts
other product finished product
marketing 2. Outsource non-core activities
3. Support collaborative relationships and major suppliers

Sheet metal or Power steering or Business
automobile
plastic resin Car seat marketing
Supply Chain Management Purchase Orientations
 Focus on end users

Procurement Supply management
 Craft a sourcing strategy Buying orientation orientation orientation
• Obtain the best deal in • Improve quality • Focus all of the firm’s efforts on delivering
 Build a supply network : Speculation vs. Postponement strategy – manufacturing logistics /
terms of price, quality, and value to end users
made to stock vs. build to order /efficient customer response ( ECR) system • Reduce total cost of
availability from supplier • Craft a sourcing strategy around the firm’s
ownership
 Sustain high collaborative relationships with select suppliers : Value in use price core competences and resources
• Maximize power over
• Cooperate with suppliers
suppliers • Build a supply network that efficiently
 Applying purchasing portfolio management :supplier segmentation as generic / leverage
completes required business processes
/bottleneck / critical • Avoid risk wherever
• Sustain highly collaborative relationships
possible
with select supplier and sub-supplier firms
 Putting knowledge of purchasing orientation to use
Purchasing in Commercial Enterprises Purchasing in Commercial Enterprises
 Multiple Influencers :production people, engineers, cost accountants, middle and upper
 How goods and services are purchased by commercial enterprises depends
management, and purchasing agents.
on the nature of the business, the size of the firm, and the volume, variety,
 Technical sophistication: Materials requirement planning, sup-plier rating systems
and technical complexity of the products purchased
economic order quantity and value analysis are commonly used in the industrial market
 Value Analysis: Value analysis involves systematized techniques for reducing costs and
improving the performance value of materials, components, and manufacturing
processes.

2/28/2019
Purchasing in Government Units Institutional Purchasing
 CENTRAL AND STATE GOVERNMENT UNDERTAKING AND PUBLIC SECTOR UNITS
 The suppliers must fulfill a set of standard terms and conditions issued by procurement Dept.  Institutional buyers are either the government or the private
 There are several methods of purchasing: organizations. Thus, they follow the government purchase
• Closed/ Sealed Bidding. procedures or commercial enterprise’s one.

• Open Bidding/ Open Tender.
• Reverse Bidding (Buyers set the highest possible bidding price that they accept).
• Government contracts (Fixed-price contract, Cost reimbursement contract).
Purchasing in Reseller’s Market Purchasing in Cooperative Societies
 Reseller market or replacement market consists of industrial dealers or  An industrial firm cooperates with other firms, industries or group in
the environment
distributors whose main goals are profits and sales volume. Therefore, the
intermediaries select a supplier based on product, quality and also based on
 Industry association - Confederation of Indian industries (CII)
the policies of the supplier‘s product.
 Federation of Indian chamber of commerce and Industries (FICCI)
Vendor Evaluation and Rating Vendor Evaluation
 Vendor evaluation is a system for recording and ranking the performance of a supplier  vendor evaluation tool that allows transaction data to be analyzed to give a
in terms of a variety of issues, which may include delivery performance and the quality comparison between vendors.
of the items. A process of vendor rating is essential to effective purchasing.

 The vendor evaluation uses criteria that have been determined by the purchasing
 Vendor selection is crucial because of its strategic importance especially when it department to compare vendors such as price, delivery reliability, delivery date
comes to Government Supplies where money & quantities involved are generally very adherence and quality of the item.
large

2/28/2019
Vendor Evaluation Vendor Rating
 There are any numbers of criteria that can be used in a comparison and these are  Vendor rating is the result of a formal vendor evaluation system. Vendors or suppliers
usually weighted so that important criteria are given more credence. are given standing, status, or title according to their attainment of some level of
 For example, a company may decide that quality of the items it receives from performance, such as delivery, lead time, quality, price, or some combination of
vendors is more important than price, which in turn is more important that delivery variables
reliability.

2/28/2019
Content
 2.1 Classification of Industrial goods
Understanding Business 

2.2Macro and Micro Environmental factors influencing decision making in B2B Market
2.3 Purchasing Orientations – Buying Orientation, Procurement Orientation, Supply
Market Environment Chain Management Orientation, Applications of Purchasing Orientation
 2.4 Purchasing Practices of Industrial Customers – purchasing in commercial enterprises,
purchasing in government units and Tendering, institutional purchasing, purchasing in
UNIT 2 Prof. Sonal Muluk reseller’s market, purchasing in cooperative societies
 2.5 Vendor Evaluation and Rating
Industrial Products 2.1 Classification of Industrial goods

Facilitating
Entering Goods
Goods
 “Individuals and organizations that acquire
goods and services to be used, directly or
indirectly, in the production of other goods and
services or to be resold.”
Foundation
Goods
Materials & Parts Capital Items
 Raw Material: These are the basic products which enter into the production process with
 Installation :Large installations such as factories, warehouses and other
little or no alterations. They may be marked to user customers or OEMs (Original
buildings are capital items which require long time installation and are used for
Equipment Manufactures). Such as iron ore, crude oil, vegetables.
an even longer time.
 Manufactured Materials: That also includes those raw materials that are subjected to
 Equipment :Equipments are both – heavy machineries as well as a utility to the
some amount of processing before entering the production process. Such as acids, fuel
oil, steel and chemicals.
organization using them. Equipment in case of factories will be caterpillars,
trucks, cranes
 Component parts: These are the semi finished parts that can installed directly into the
products with little or no additional change. Such as small motors, batteries and tires.  Heavy equipments
 Light Equipments

2/28/2019
Supplies and services Business service
 Any short term goods or material which is necessary for the day to  a) Business advisory services – Chartered accountant. Similarly legal, consulting, advertising,
day operations or a company or businesses is termed as supplies. A simple
marketing are all business agencies within themselves which provide services to industries.
exam is A4 sized paper.
a) Maintenance and repair supplies – Paints are a form of maintenance  b) Maintenance and repair services – There is a difference between repair goods and repair
supplies and Asian paints is the leader in that. Cleaning services are another
services. Where paint is a repair good, a repair service is window cleaning or printer and copier
form of maintenance.
repairing, something which is best left to the professionals. And there are many professionals out
b) Operating supplies – Pen and paper, notepads, lubricants for automobiles
are part of the operating supplies needed on a day to day basis. there who pick industrial contracts for an annual year towards repair and maintenance of day to
Kangaro is an excellent brand which comes to mind when it comes to day products and equipments within an organization.
staplers and staple pins.
2.2 Macro and Micro Environmental factors

influencing decision making in B2B Market Environmental Forces - Economic
•Economic Outlook: Influences
Domestic & Global
Environmental Change
Forces •Global Trade Relations  Changes in the environment such as business conditions, technological advances or
•Goals, Objectives, and new legislation can affect buying plans.
Organizational Strategies
Forces •Organizational Position  Since much of business is driven by derived demand, business marketers must be
of Purchasing
Organizational
Buying sensitive to changes in the consumer market.
•Roles, relative
Behavior Group influence, and patterns
Forces of interaction of buying
 Also, the economy can determine a company’s ability or willingness to buy. If the
decision participants economy is bad, companies often put off purchasing until they see a change.
Forces motives of individual
Economic Influences Technological Influences
 Technology is changing so quickly that yesterday’s technological advancement is

 Not all companies are affected equally. For example, high interest rates may
today’s electronic commodity.
affect housing starts but may not affect food products, medical or transportation
Example: Computers
services.
 However, all companies need to stay alert to these changes. For example, Nokia’s
 Finally, there is an affect from foreign competitors such as China. They have strong leading position in mobile phones market in India came crashing down within 2 years
labor saving costs as a competitive advantage. because they couldn’t foresee the impact of Android based devices.
 Technological change—especially from the Internet—is drastically changing the way

 Low Cost - Best Cost
companies do business.

2/28/2019
Organizational Forces &

Technological Change
Growing Influence of Purchasing
 The Internet has leveled the playing field, allowing competitors the opportunity  As manufacturing has become less important, purchasing and
to compete in the world’s most technological advanced countries. procurement have become more important.
 Companies are outsourcing many activities such as manufacturing,
 It affects not only entire companies (the printing industry is struggling due to marketing, accounting, etc., yet procurement remains a strong
digital printing and electronic communication), but also individual careers (An influence resulting in a shift to more professional procurement
Indian’s edge in outsourcing market is vanishing quickly due to the competition positions.
from Vietnam, Poland and other such countries).
2.3 Purchasing Orientations Buying orientation
Narrow and short term focus

Supply Chain management orientation
 Lowest Price
Procurement orientation  Lowers price suppliers
 Quality & Availability
Buying Orientation  Negotiation “I win –you loss”
Component  Gain Power
& Intermediaries
Raw subassembly Final  Commoditization : Buyers argue that there are no difference between various suppliers’
material assembly offers in terms of technical services, product quality/features
Suppliers Manufact Consumers
urer  Multi-sourcing: many suppliers
 Risk :
 Avoid risk – follow std procedure and select supplier best on earlier performance
Procurement Orientation Procurement Orientation
 Strategic Focus( long-term) and Proactive  Collaborative Relationship with Major Suppliers
 Span of influence id more  Trust
 Inter firm tams who implements JIT, Delivery scheduling and quality assurance to
attain zero defects
Quality
Cost Reduction
Improvements
 Working Closely with other Functional areas
 MRP

2/28/2019
Supply Chain Supply Chain Management
Upstream Direct Value adding and strategic operations

Manufacturers Buyer
Supplier Suppliers
1. Deliver value to end user
Suppliers of
Purchase input Purchase input
manufactured Consumer
used in creating used to produced
materials and
parts
other product finished product
marketing 2. Outsource non-core activities
3. Support collaborative relationships and major suppliers

Sheet metal or Power steering or Business
automobile
plastic resin Car seat marketing
Supply Chain Management Purchase Orientations
 Focus on end users

Procurement Supply management
 Craft a sourcing strategy Buying orientation orientation orientation
• Obtain the best deal in • Improve quality • Focus all of the firm’s efforts on delivering
 Build a supply network : Speculation vs. Postponement strategy – manufacturing logistics /
terms of price, quality, and value to end users
made to stock vs. build to order /efficient customer response ( ECR) system • Reduce total cost of
availability from supplier • Craft a sourcing strategy around the firm’s
ownership
 Sustain high collaborative relationships with select suppliers : Value in use price core competences and resources
• Maximize power over
• Cooperate with suppliers
suppliers • Build a supply network that efficiently
 Applying purchasing portfolio management :supplier segmentation as generic / leverage
completes required business processes
/bottleneck / critical • Avoid risk wherever
• Sustain highly collaborative relationships
possible
with select supplier and sub-supplier firms
 Putting knowledge of purchasing orientation to use
Purchasing in Commercial Enterprises Purchasing in Commercial Enterprises
 Multiple Influencers :production people, engineers, cost accountants, middle and upper
 How goods and services are purchased by commercial enterprises depends
management, and purchasing agents.
on the nature of the business, the size of the firm, and the volume, variety,
 Technical sophistication: Materials requirement planning, sup-plier rating systems
and technical complexity of the products purchased
economic order quantity and value analysis are commonly used in the industrial market
 Value Analysis: Value analysis involves systematized techniques for reducing costs and
improving the performance value of materials, components, and manufacturing
processes.

2/28/2019
Purchasing in Government Units Institutional Purchasing
 CENTRAL AND STATE GOVERNMENT UNDERTAKING AND PUBLIC SECTOR UNITS
 The suppliers must fulfill a set of standard terms and conditions issued by procurement Dept.  Institutional buyers are either the government or the private
 There are several methods of purchasing: organizations. Thus, they follow the government purchase
• Closed/ Sealed Bidding. procedures or commercial enterprise’s one.

• Open Bidding/ Open Tender.
• Reverse Bidding (Buyers set the highest possible bidding price that they accept).
• Government contracts (Fixed-price contract, Cost reimbursement contract).
Purchasing in Reseller’s Market Purchasing in Cooperative Societies
 Reseller market or replacement market consists of industrial dealers or  An industrial firm cooperates with other firms, industries or group in
the environment
distributors whose main goals are profits and sales volume. Therefore, the
intermediaries select a supplier based on product, quality and also based on
 Industry association - Confederation of Indian industries (CII)
the policies of the supplier‘s product.
 Federation of Indian chamber of commerce and Industries (FICCI)
Vendor Evaluation and Rating Vendor Evaluation
 Vendor evaluation is a system for recording and ranking the performance of a supplier  vendor evaluation tool that allows transaction data to be analyzed to give a
in terms of a variety of issues, which may include delivery performance and the quality comparison between vendors.
of the items. A process of vendor rating is essential to effective purchasing.

 The vendor evaluation uses criteria that have been determined by the purchasing
 Vendor selection is crucial because of its strategic importance especially when it department to compare vendors such as price, delivery reliability, delivery date
comes to Government Supplies where money & quantities involved are generally very adherence and quality of the item.
large

2/28/2019
Vendor Evaluation Vendor Rating
 There are any numbers of criteria that can be used in a comparison and these are  Vendor rating is the result of a formal vendor evaluation system. Vendors or suppliers
usually weighted so that important criteria are given more credence. are given standing, status, or title according to their attainment of some level of
 For example, a company may decide that quality of the items it receives from performance, such as delivery, lead time, quality, price, or some combination of
vendors is more important than price, which in turn is more important that delivery variables
reliability.

4/2/2019
PRODUCT & PRICING IN BUSINESS MARKET

Industrial Product
UNIT 4
PROF SONAL MULUK
Marketplace Identity Product
 Industrial product is defined as a complex set of

 A business marketer’s marketplace identity is established
through:
economic, technical, legal, and personal relationship
 Brand
 Products
between the buyer and the seller.
 Services
 A brand is one of the firm’s most valuable intangible assets.  A product is a combination of basic, enhanced, and
 Branding has emerged as a priority to marketing executives. augmented properties. Basic properties are included in the
generic product, with fundamental benefits sought by
customers.
Factors demanding changes in Product

Product strategy
 Generic products are made differentiable by adding tangible

1. Customer Needs
enhanced properties such as product features, styling and
quality. The augmented properties include intangible benefits
2. Technology
such as technical assistance, available of spare parts,
maintenance and repair services, warranties, training, timely
3. Government policies/ law
delivery, and attractive commercial terms.
4. Product life cycle
Prof Sonal Muluk 1

4/2/2019
Competing through Innovation Innovation
 Designing for more efficient production  Innovation tends to be:
 Less use of raw material

a. Individually motivated
 Reduced environmental impact b. Opportunistic
c. Customer Responsive
 More effective marketing communication or selling
d. Non-linear
 More effective distribution
e. Interactive
 Clearly though, some new-product-development is an

outgrowth of deliberate strategies.
Innovations Start Out Chaotic Autonomous Strategic Behavior
 Generally, innovations start out chaotic.  This approach often employs a “product or project
champion” who is also referred to as an “intrepreneur”
 As a project (product development) progresses and as the costs go or “entrepreneur.”
up, more formal planning and controls come in.
 Still, flexibility must be inherent in the project.  Product Champion is one who…
 Creates, defines or adopts an idea for innovation
 There are two broad categories of strategic behavior:
 Willingly assumes significant risk (loss of prestige &
 Induced
even their job)
 Autonomous
…to successfully implement the innovation.
Product Champion Managing Technology

 A product champion is an individual who:
1. Takes on a central role in sensing a marketing opportunity
2. Mobilizes an informal network to assess the opportunities via their:  According to Michael Porter:
a. Technical feasibility
b. Financial opportunity  Technological change is the great
equalizer
3. Is willing to take on risk (reputation) to bring the project to light
Can erode the competitive advantage
of even the most established
competitors
Can propel even the smallest
companies to the forefront
Prof Sonal Muluk 2

4/2/2019
Innovations Disruptive Innovation

 Incremental innovation- that the existing product &offering &make small
step improvements to the original design  Disruptive innovation occurs when a totally new innovative product is
developed that interrupts the way business and society does things.
 Radical innovation (Breakthrough innovation): can produce large
changes in the functions and performance of a product or offering with  Examples: Train, automobile, telephone, plastics, and computers.
a new combination of types of value produced.
 Usually disruptive products start out small but grow to overshoot the market.
 Disruptive innovation: introducing product or service idea that creates a
new kind of value.
 Sustainable innovation: Improves the existing dominant technology,

product, offerings.
Disruptive vs. Sustaining Innovation Three Approaches to Creating New-Growth Businesses

Sustaining Low-End
Dimensions New-Market
Innovations Disruptions
Disruptions
Targeted perform-
Performance improvement Performance good
ance of product Lower performance in
 Looking at the Disruptive Innovations model, we see that sustaining or service in attributes most valued by
industry’s most
enough along traditional
metrics of performance
“traditional” attributes,
product innovation often leads to product developments that offer

but improved performance
demanding customers. at low end of
in new attributes—typically
mainstream market.
much more capacity than the “mainstream” market needs. These improvements may
simplicity and convenience.
be incremental or break-
through.
 Sustaining innovation is designed for the heavy user. In computer Targeted customers
The most attractive (i.e., Over-served customers in
or market application Targets non-consumption:
technology, we see heavy use by the government. profitable) customers in low end of mainstream
market.
customers who historically
mainstream markets who lacked money or skill
will pay for improved to buy and use product.
performance.
 Disruptive innovation is usually simpler, but still changes the world as Effect on required
Uses new operating or
we know it. business model
(processes and
Improves or maintains
profit margins by exploiting existing financial approach or both—
Business model must make
money at lower price per
processes and cost structure and making different combination of
 Ex: We once used pens to write until typewriters disrupted that, then cost structure)
better use of current competitive lower gross profit margins
unit sold, and at unit
production volumes that will
and higher asset utilization
computers disrupted typewriters. advantages.
can earn attractive
initially be small. Gross
margin dollars per unit sold
returns at discount
will be significantly lower.
prices required to win
business at low end of
market.
Managing Technology Industrial Product life cycle

 Many of the great companies we see today grew
out of technological changes that they were able
 The behavior of PLC depends on
to exploit.
1. Changing needs of customers
 Long run competitiveness depends upon how
they: 2. Changes in technology
 Manage,
 Increase, and 3. Changing competition
 Exploit their technology base.
 Let’s start by classifying development projects!
Prof Sonal Muluk 3

4/2/2019
Industrial Product Life Cycle and APPLICATION OF PRODUCT LIFE – CYCLE

strategies THEORY TO MARKETING STRATEGY
 Introduction Stage : Marketing Strategy should focus on market
development for slowly accepted products. For rapidly accepted
products, a competitive strategy (Competitive pricing or Superior quality
product ) should be evolved.
APPLICATION OF PRODUCT LIFE – CYCLE APPLICATION OF PRODUCT LIFE – CYCLE

THEORY TO MARKETING STRATEGY THEORY TO MARKETING STRATEGY
 Growth Stage :To take advantage of high growth of sales and profits, the  Decline Stage Since both sales and profits decline, marketing strategy
marketing strategy should concentrate on (i) Improving product design or should focus on (i) substantial reduction in costs, (ii) develop a substitute
adding product feature product, (iii) withdraw the product slowly from the market
 Maturity Stage As competition increases and profits decline, marketing
strategy should concentrate on (i) cutting costs, (ii) keeping existing
customers satisfied (iii) entering new markets.
CLASSIFICATION OF NEW PRODUCTS

PRODUCT STRATEGIES FOR EXISTING (i) Products that are new to the world & innovative.
PRODUCTS (ii) Products that are new to the company, but not new to the world.
(iii) Improvements / Revision to the existing products.
 Business marketers should take the following steps :
(iv) Addition to the existing products.
 1. Evaluate the performance of existing products by using “product
(v) Repositioning existing products to new market segments (vi) Products with
evaluation matrix”. substantial cost reductions without reduction in performance.
 2. Examine the relative strengths and weaknesses of the company’s NEW PRODUCT DEVELOPMENT PROCESS
It consists of 7 Stages : (i) Idea generation, (ii) Idea Screening, (iii) Concept
products by using “ perceptual mapping” technique
development and testing, (iv) Business analysis, (v) Product development, (vi)
Market testing, & (vii) Commercialization.
Prof Sonal Muluk 4

4/2/2019
 New products are classified into six groups and consist of seven stages of
development process :- idea generation, idea screening, concept
development & testing, business analysis, product development, market
testing, and commercialization.
 • In High –tech marketing situation, technology application and market
Pricing
needs are difficult to predict . The “technology adoption life cycle” is
modified to suit high-tech marketing.
 • Unique high – tech marketing strategies include targeting a niche
market, planning whole product, developing partnership, unique
positioning, effective communication , multi – channel
Price Objectives Differentiating Through value-creation
 Research suggests that most companies offer similar

 Pricing decision must be based on marketing and overall services, however, the following seem to be more
corporate objectives. prominent.
 1. Service support
 Marketer starts with principal objectives and adds
collateral pricing goals:  2. Personal interactions
 Achieving target return on investment.  3. Supplier know-how
 Achieving market-share goal.  4. Ability to improve customer’s time to market
 Meeting competition.
 Moderate differentiating factors include:
 Other objectives include competition, channel  1. Product quality
relationships and product-line considerations.  2. Delivery
 3. Acquisition and operation costs
Elasticity of Demand Cost Concept Analysis

 Direct Traceable or Attributable Costs: All costs, fixed
Elastic  Consumers buy more or less or variable, that are solely incurred for a particular
Demand of a product when the product, territory, or customer (e.g., raw materials)
price changes
 Indirect Traceable Costs: All costs, fixed or variable,
 An increase or decrease in that can be traced to a particular product, customer
Inelastic or territory (e.g., general plant overhead)
Demand price will not significantly
affect demand
 General Costs: Costs that support a number of
 An increase in sales exactly activities not directly related to a particular product
Unitary offsets a decrease in prices, (e.g., administrative overhead, R&D)
Elasticity and revenue is unchanged
Prof Sonal Muluk 5

4/2/2019
Price Skimming
Pricing Strategies
Price Skimming is charging a high initial price
 3 Major Pricing Strategies
Price Skimming:
1. Follow the Crowd  Appropriate for distinctly new products
 Provides the firm with opportunity to profitably reach market
segments not sensitive to high initial price
2. Price Skimming  Enables marketer to capture early profits
 Enables innovator to recover high R&D costs more quickly
3. Penetration Pricing
Strategy:As the product goes through its product life
cycle, the strategy is to lower the price in line with
production and demand capacity.
Penetration Pricing
Competitive Bidding
Penetration Pricing is charging a very low initial  Certain groups do bidding
price.
1. Governments
Penetration Pricing is appropriate when there is: 2. Large companies (using preferred suppliers) bid for:
› High price elasticity of demand a. Non-standard material
› Strong threat of imminent competition b. Complex designs and difficult manufacturing methods
› Opportunity for substantial production cost reduction as volume
expands
Types of Bidding Online Open Bid Format

 Closed bidding: Suppliers submit a written bid on a specific
contract and all bids are opened simultaneously and often Bidding is costly and time consuming.
job goes to lowest bidder…
A. Simultaneous bids often used.
 On-line sealed bids: on-line auctions
B. All participants see the bids.
 Open bidding: more informal.
 When it is hard rigidly define requirements C. Goal: push price down.
 Prices may be negotiated.
D. Can damage supplier-customer relationships
Prof Sonal Muluk 6

4/2/2019
Factors That Influence Pricing

Strategies of Competitive Bidding 37
Strategy
 Choose bid opportunities with care
Both external and internal factors affect prices.
 Find contracts that offer the most promise The external factors are those factors, which are beyond the control of a firm.
Such factors include the government price policy, elasticity of demand, consumers’
 Remember that the low bidder may be able
tastes and preferences, the purchasing power of the buyer and so on. On the other
to secure much more business that is profitable
hand, internal factors are those, which are within the control of the firm.
over the longer term
 How likely will follow-on business occur??? Such factors includes organizations Objectives, ROI, Cash flow, marketing share,
profits, various cost like fixed or variable costs etc.

Strategy
(1) Customer Demand
(2) The Nature of Derived Demand

THANK YOU!
(3) Competition
(4) Cost and Profit Relationships
(5) The Market’s Reaction to and Perception of Price
(6) Government Regulation.
Prof Sonal Muluk 7

4/2/2019
PRODUCT & PRICING IN BUSINESS MARKET

Industrial Product
UNIT 4
PROF SONAL MULUK
Marketplace Identity Product
 Industrial product is defined as a complex set of

 A business marketer’s marketplace identity is established
through:
economic, technical, legal, and personal relationship
 Brand
 Products
between the buyer and the seller.
 Services
 A brand is one of the firm’s most valuable intangible assets.  A product is a combination of basic, enhanced, and
 Branding has emerged as a priority to marketing executives. augmented properties. Basic properties are included in the
generic product, with fundamental benefits sought by
customers.
Factors demanding changes in Product

Product strategy
 Generic products are made differentiable by adding tangible

1. Customer Needs
enhanced properties such as product features, styling and
quality. The augmented properties include intangible benefits
2. Technology
such as technical assistance, available of spare parts,
maintenance and repair services, warranties, training, timely
3. Government policies/ law
delivery, and attractive commercial terms.
4. Product life cycle
Prof Sonal Muluk 1

4/2/2019
Competing through Innovation Innovation
 Designing for more efficient production  Innovation tends to be:
 Less use of raw material

a. Individually motivated
 Reduced environmental impact b. Opportunistic
c. Customer Responsive
 More effective marketing communication or selling
d. Non-linear
 More effective distribution
e. Interactive
 Clearly though, some new-product-development is an

outgrowth of deliberate strategies.
Innovations Start Out Chaotic Autonomous Strategic Behavior
 Generally, innovations start out chaotic.  This approach often employs a “product or project
champion” who is also referred to as an “intrepreneur”
 As a project (product development) progresses and as the costs go or “entrepreneur.”
up, more formal planning and controls come in.
 Still, flexibility must be inherent in the project.  Product Champion is one who…
 Creates, defines or adopts an idea for innovation
 There are two broad categories of strategic behavior:
 Willingly assumes significant risk (loss of prestige &
 Induced
even their job)
 Autonomous
…to successfully implement the innovation.
Product Champion Managing Technology

 A product champion is an individual who:
1. Takes on a central role in sensing a marketing opportunity
2. Mobilizes an informal network to assess the opportunities via their:  According to Michael Porter:
a. Technical feasibility
b. Financial opportunity  Technological change is the great
equalizer
3. Is willing to take on risk (reputation) to bring the project to light
Can erode the competitive advantage
of even the most established
competitors
Can propel even the smallest
companies to the forefront
Prof Sonal Muluk 2

4/2/2019
Innovations Disruptive Innovation

 Incremental innovation- that the existing product &offering &make small
step improvements to the original design  Disruptive innovation occurs when a totally new innovative product is
developed that interrupts the way business and society does things.
 Radical innovation (Breakthrough innovation): can produce large
changes in the functions and performance of a product or offering with  Examples: Train, automobile, telephone, plastics, and computers.
a new combination of types of value produced.
 Usually disruptive products start out small but grow to overshoot the market.
 Disruptive innovation: introducing product or service idea that creates a
new kind of value.
 Sustainable innovation: Improves the existing dominant technology,

product, offerings.
Disruptive vs. Sustaining Innovation Three Approaches to Creating New-Growth Businesses

Sustaining Low-End
Dimensions New-Market
Innovations Disruptions
Disruptions
Targeted perform-
Performance improvement Performance good
ance of product Lower performance in
 Looking at the Disruptive Innovations model, we see that sustaining or service in attributes most valued by
industry’s most
enough along traditional
metrics of performance
“traditional” attributes,
product innovation often leads to product developments that offer

but improved performance
demanding customers. at low end of
in new attributes—typically
mainstream market.
much more capacity than the “mainstream” market needs. These improvements may
simplicity and convenience.
be incremental or break-
through.
 Sustaining innovation is designed for the heavy user. In computer Targeted customers
The most attractive (i.e., Over-served customers in
or market application Targets non-consumption:
technology, we see heavy use by the government. profitable) customers in low end of mainstream
market.
customers who historically
mainstream markets who lacked money or skill
will pay for improved to buy and use product.
performance.
 Disruptive innovation is usually simpler, but still changes the world as Effect on required
Uses new operating or
we know it. business model
(processes and
Improves or maintains
profit margins by exploiting existing financial approach or both—
Business model must make
money at lower price per
processes and cost structure and making different combination of
 Ex: We once used pens to write until typewriters disrupted that, then cost structure)
better use of current competitive lower gross profit margins
unit sold, and at unit
production volumes that will
and higher asset utilization
computers disrupted typewriters. advantages.
can earn attractive
initially be small. Gross
margin dollars per unit sold
returns at discount
will be significantly lower.
prices required to win
business at low end of
market.
Managing Technology Industrial Product life cycle

 Many of the great companies we see today grew
out of technological changes that they were able
 The behavior of PLC depends on
to exploit.
1. Changing needs of customers
 Long run competitiveness depends upon how
they: 2. Changes in technology
 Manage,
 Increase, and 3. Changing competition
 Exploit their technology base.
 Let’s start by classifying development projects!
Prof Sonal Muluk 3

4/2/2019
Industrial Product Life Cycle and APPLICATION OF PRODUCT LIFE – CYCLE

strategies THEORY TO MARKETING STRATEGY
 Introduction Stage : Marketing Strategy should focus on market
development for slowly accepted products. For rapidly accepted
products, a competitive strategy (Competitive pricing or Superior quality
product ) should be evolved.
APPLICATION OF PRODUCT LIFE – CYCLE APPLICATION OF PRODUCT LIFE – CYCLE

THEORY TO MARKETING STRATEGY THEORY TO MARKETING STRATEGY
 Growth Stage :To take advantage of high growth of sales and profits, the  Decline Stage Since both sales and profits decline, marketing strategy
marketing strategy should concentrate on (i) Improving product design or should focus on (i) substantial reduction in costs, (ii) develop a substitute
adding product feature product, (iii) withdraw the product slowly from the market
 Maturity Stage As competition increases and profits decline, marketing
strategy should concentrate on (i) cutting costs, (ii) keeping existing
customers satisfied (iii) entering new markets.
CLASSIFICATION OF NEW PRODUCTS

PRODUCT STRATEGIES FOR EXISTING (i) Products that are new to the world & innovative.
PRODUCTS (ii) Products that are new to the company, but not new to the world.
(iii) Improvements / Revision to the existing products.
 Business marketers should take the following steps :
(iv) Addition to the existing products.
 1. Evaluate the performance of existing products by using “product
(v) Repositioning existing products to new market segments (vi) Products with
evaluation matrix”. substantial cost reductions without reduction in performance.
 2. Examine the relative strengths and weaknesses of the company’s NEW PRODUCT DEVELOPMENT PROCESS
It consists of 7 Stages : (i) Idea generation, (ii) Idea Screening, (iii) Concept
products by using “ perceptual mapping” technique
development and testing, (iv) Business analysis, (v) Product development, (vi)
Market testing, & (vii) Commercialization.
Prof Sonal Muluk 4

4/2/2019
 New products are classified into six groups and consist of seven stages of
development process :- idea generation, idea screening, concept
development & testing, business analysis, product development, market
testing, and commercialization.
 • In High –tech marketing situation, technology application and market
Pricing
needs are difficult to predict . The “technology adoption life cycle” is
modified to suit high-tech marketing.
 • Unique high – tech marketing strategies include targeting a niche
market, planning whole product, developing partnership, unique
positioning, effective communication , multi – channel
Price Objectives Differentiating Through value-creation
 Research suggests that most companies offer similar

 Pricing decision must be based on marketing and overall services, however, the following seem to be more
corporate objectives. prominent.
 1. Service support
 Marketer starts with principal objectives and adds
collateral pricing goals:  2. Personal interactions
 Achieving target return on investment.  3. Supplier know-how
 Achieving market-share goal.  4. Ability to improve customer’s time to market
 Meeting competition.
 Moderate differentiating factors include:
 Other objectives include competition, channel  1. Product quality
relationships and product-line considerations.  2. Delivery
 3. Acquisition and operation costs
Elasticity of Demand Cost Concept Analysis

 Direct Traceable or Attributable Costs: All costs, fixed
Elastic  Consumers buy more or less or variable, that are solely incurred for a particular
Demand of a product when the product, territory, or customer (e.g., raw materials)
price changes
 Indirect Traceable Costs: All costs, fixed or variable,
 An increase or decrease in that can be traced to a particular product, customer
Inelastic or territory (e.g., general plant overhead)
Demand price will not significantly
affect demand
 General Costs: Costs that support a number of
 An increase in sales exactly activities not directly related to a particular product
Unitary offsets a decrease in prices, (e.g., administrative overhead, R&D)
Elasticity and revenue is unchanged
Prof Sonal Muluk 5

4/2/2019
Price Skimming
Pricing Strategies
Price Skimming is charging a high initial price
 3 Major Pricing Strategies
Price Skimming:
1. Follow the Crowd  Appropriate for distinctly new products
 Provides the firm with opportunity to profitably reach market
segments not sensitive to high initial price
2. Price Skimming  Enables marketer to capture early profits
 Enables innovator to recover high R&D costs more quickly
3. Penetration Pricing
Strategy:As the product goes through its product life
cycle, the strategy is to lower the price in line with
production and demand capacity.
Penetration Pricing
Competitive Bidding
Penetration Pricing is charging a very low initial  Certain groups do bidding
price.
1. Governments
Penetration Pricing is appropriate when there is: 2. Large companies (using preferred suppliers) bid for:
› High price elasticity of demand a. Non-standard material
› Strong threat of imminent competition b. Complex designs and difficult manufacturing methods
› Opportunity for substantial production cost reduction as volume
expands
Types of Bidding Online Open Bid Format

 Closed bidding: Suppliers submit a written bid on a specific
contract and all bids are opened simultaneously and often Bidding is costly and time consuming.
job goes to lowest bidder…
A. Simultaneous bids often used.
 On-line sealed bids: on-line auctions
B. All participants see the bids.
 Open bidding: more informal.
 When it is hard rigidly define requirements C. Goal: push price down.
 Prices may be negotiated.
D. Can damage supplier-customer relationships
Prof Sonal Muluk 6

4/2/2019

Strategies of Competitive Bidding 37
Strategy
 Choose bid opportunities with care
Both external and internal factors affect prices.
 Find contracts that offer the most promise The external factors are those factors, which are beyond the control of a firm.
Such factors include the government price policy, elasticity of demand, consumers’
 Remember that the low bidder may be able
tastes and preferences, the purchasing power of the buyer and so on. On the other
to secure much more business that is profitable
hand, internal factors are those, which are within the control of the firm.
over the longer term
 How likely will follow-on business occur??? Such factors includes organizations Objectives, ROI, Cash flow, marketing share,
profits, various cost like fixed or variable costs etc.

Strategy
(1) Customer Demand
(2) The Nature of Derived Demand

THANK YOU!
(3) Competition
(4) Cost and Profit Relationships
(5) The Market’s Reaction to and Perception of Price
(6) Government Regulation.
Prof Sonal Muluk 7

4/2/2019
Content
5.1 Industrial Distribution Channels: Characteristics of Industrial
Distribution Channels, Types of Industrial Middlemen, Channel Flow
Managing Distribution Channels Design, Formulating Distribution Strategies and Cost Benefit Analysis
and Communication in Business 5.2 Communication is Business Market: Developing Industrial

Communication Programme, Advertising, Trade Shows, Exhibitions,
Markets
Catalogues, Samples, Public Relations
Unit 5
5.3 Personal Selling: Role & Characteristics of Personal Selling,
Prof. Sonal Muluk
Development & Management of Sales Force, Key Account
Management - ABC Analysis of Industrial Customers
5.1 Industrial Distribution Channels

 Industrial channel structures include both direct and indirect channels.
 Direct Channels. Examples are direct selling through company sales force and
direct marketing through on-line marketing, telemarketing and direct mail.
Direct channels are used typically when
(i) Transaction value is large,
(ii) Technical & commercial negotiations are held at various levels
(iii) Buying process takes a long time
(iv) Buyers want to buy directly from manufacturers.
5.1 Industrial Distribution Channels Types of Intermediaries

 1. Industrial Distributors / Dealers.
 Indirect Channels.
They perform many functions like buying, storing, promoting, financing, selling,
Consists of intermediaries like distributors / dealers,
transporting and servicing certain geographic market, & are given discounts.
manufacturer’s reps / agents, value-added resellers (VARs),

Major categories are
brokers and commission merchants (i) General – line distributors,
(ii) Specialized distributors,
and (iii) Combination house.
Prof Sonal Muluk 1

4/2/2019
Structure of Industrial Channel

Types of Intermediaries
Direct Channel Indirect Channel
 The manufacturers perform all the  The manufacturer and the  2. Manufactures’ Representatives / Agents.
functions intermediaries share the tasks
 Approach is viable when: between them. They perform functions like promoting manufacturers’ products / services,
 The value of each transaction is large  Approach is appropriate when:
 The value of transactions or sales are getting orders, and colleting market information. They are independent
 The selling includes extensive
technical and commercial negotiations low
at various levels business firms, representing various
 The manufacturer has limited
 The buying process lengthy resources
 The industrial buyers insist on buying  The industrial buyers purchase many
directly from the manufacturers product items in one transaction
Types of Intermediaries CHANNEL DESIGN

 It includes developing new channels and modifying the existing channels.
 3. Value-added Resellers (VARs) They are new type of intermediaries from computer
The procedure / steps are as follows;
industry. They deal with computer hardware and software companies, customize the
same to solve specific problems of buying firms. They are paid discounts. (i) Developing channel objectives;
(ii) Analyzing channel constraints;

 4. Brokers They bring together buyers and sellers, when information is not available
completely. They represent either a buyer or a seller, and their relationship is short
(iii) Analyzing channel tasks;
term. They do not buy products & services and are paid on commission basis. (iv) Identifying channel alternatives. These include the following issues :
(a) Types of intermediaries. (b) Number of intermediaries. (c) Number of channels.

 5. Commission Merchants. They represent sellers / manufactures
(v) Evaluating the channel alternatives. The criteria used are: (a) Economic factor
(b) Control factor (c) Adaptive factor (vi) Selection of the channel
MANAGING CHANNEL MEMBERS Concept of Supply Chain Management

 It includes :
(SCM)
 1. Selecting Intermediaries.
 SCM includes activities of moving goods from raw material through operations
 2. Motivating Intermediaries. (a) Partnering relationships. (b) Reasonable discounts and to final consumers, as shown in “SCM Framework
commission. (c) Distributor councils. (d) Other motivational tools.  Main aims of SCM are (i) Reduce cost per unit, (ii) Reduce waste &
 3. Controlling Channel Conflicts (a) Sources of channel conflicts. (b) Controlling conflicts by duplication, (iii) Minimize order to delivery cycle, and (iv) Ensure superior
(i) Effective communication network; (ii) Joint goal – setting; (iii) Diplomacy; Mediation; delivery service. Firms adopting SCM gain competitive advantage.
Arbitration. (iv) Vertical marketing system (VMS).  The aims are achieved by a network of interdependent firms working
together with partnering relationships to manage and control various
activities, in order to improve flow of materials and information from
suppliers to end users.
Prof Sonal Muluk 2

4/2/2019
Supply Chain Management Framework

Logistics Management (LM)
Information Flow
Cash Flow
 LM plans and coordinates activities to achieve superior customer service levels at lowest
costs. LM optimizes material flow within the firm, but SCM extends integration of material
Product Flow
flow to suppliers’ suppliers and customers’ customers. For better understanding, see figure
Planni Distribu Perfor

on “ business logistics system”, which has two product Product
tion Custome
Suppliers ng Purchas ion or mance
and and r and Business
of raw e Operati
logistic Service Custome
material foreca on evalua
sting s tion rs or end
s and
compone users
nts
BUSINESS LOGISTIC SYSTEM

Physical supply Industrial Manufacturer Physical distribution TASKS OF PHYSICAL DISTRIBUTION
Sl No Tasks Brief Description
Raw materials
1 TRANSPORTATION It is the means of moving goods from production unit to
Components Material storage customer. It is the most important cost area in physical
distribution.
Supplies
2 WAREHOUSING It provides storage space for products which are made
available to customer when needed. It can improve customer
service & transportation cost.
Manufacturing 3 INVENTORY Inventory is used to insure the products are available to
CONTROL customers in the right product mix, at the right location, &
at the right time.
Industrial customers 4 PACKAGING It provides protection to products & maintains product

Finished Goods identity when products arrive at the market place.
storage Industrial
Distributors/Dealers 5 MATERIAL It increases speed & minimizes costs of order- picking,
HANDLING moving products between storage & transport carriers,
loading & unloading operations.
TASKS OF PHYSICAL DISTRIBUTION

Total Cost Approach
Sl Tasks Brief Description

No  Focuses on balancing two important elements:
6 ORDER It starts the physical distribution process & directs 1. Total Distribution Costs = Freight + Warehouse Cost + Inventory Cost +
Cost of Lost Sales due to delayed delivery
PROCESSING various activities which are necessary to deliver the
products to customers. Speed & accuracy of order 2. The level of service provided to customers
processing affect customer service & costs. (a) customer’s service need.
7 COMMUNICATION Information is exchanged between the countries (b) competitor’s service level.
physical distribution or marketing logistic department (c) company’s profitable objective.
& its customer. It assist in performing various tasks.
8 FACTORY AND Right locations of manufacturing plants & warehouse
WAREHOUSE (or godowns) increase customer service & reduce
LOCATIONS transportation (or freight) costs.
9 CUSTOMER The result of physical distribution activities is
SERVICE customer service, it create customer value (or benefits)
that has impact companies market shares, total cost &
profitability.
Prof Sonal Muluk 3

4/2/2019
Determining customer service levels

Elements of Customer Service
Customer service
 Set the goals of customer services levels for each of the important service
elements.
Presale service During- Sale service Post-sale service
 Measure the actual performance for each service element.
 Analyse the variance between actual service performance and the goal. •Product warranty
•Advising Service •Keeping Adequate stocks
•Maintenance contract
 Take corrective actions to minimise the variances. •Technical Service •Speed and accuracy of
•Repair service
•Ordering ease delivery
•Installation service
•Patronage Awards •Product substitution
•Customer training
Impact of Marketing Logistics on Role of Marketing Logistics

Intermediaries
The industrial marketer can improve the performance of  Should be considered as a long term strategic issue.
physical distribution in the entire channel system by taking
 Considered as a source of creating a unique competitive advantage.
the following steps:
 Important role in future due to global competition, world wide sourcing, JIT
1. Develop computerised information system that will link system and TQM.
individual channel members to the manufacturers system.
This will provide realistic sales and inventory of the channel
members to the manufacturer.
2. Standardise packaging and material handling at all channel
members to assist in efficient operations
3. The manufacturer and the channel members should improve
the performance of their respective tasks or services. Thus
the physical distribution must be integrated with channel
members to improve marketing effectiveness.
The Role of Advertising The Role of Advertising
 Integrated Communication Program  Increasing Sales Efficiency

 Blend with objectives  Actual customers
 Enhancing Sales Effectiveness  Potential customers
 Does it help?
 Creating awareness
 Rs. per salesperson
 Unawareness Awareness Preference
 Higher ratings  Interactive Marketing Communications

 Supplier reputation  Impact of the internet
 Increased brand awareness  Limitations of Advertising
 Gross margins
Prof Sonal Muluk 4

4/2/2019
Managing B2B Advertising Managing B2B Advertising
1. Set Advertising Objectives and Define Target Market  Set Advertising Objectives & Define Target Market
 Know what you want to accomplish
2. Determine the Advertising Budget  Written objectives
 Four characteristics
 Three common examples
3. Develop the Message  Brand awareness
 Recognition
4. Select the Media  Buyer attitudes
 Target audience
 Creative Strategy Statement
5. Evaluate Advertising Effectiveness  How to position the product?
 Determining the Advertising Budget  Developing the Advertising Message

 Two methods  Highlight attributes
 Rules of thumb
 Perception
 When to use
 Types  Attention
 Consequence of sales  Interpretation
 Objective-task method  Example: Technical advertisements
 How it works  Focus on benefits
 Establish objectives
 Focus on what customers want and
 Assess communication needed
 Focus on company’s ability to reach them
 Define goals in measurable terms
 Estimate budget needed to achieve goals  Marketing research
 Determinant of sales
 Passing the threshold
 Selecting Advertising Media  Advertising Cost

 Based on what the target market uses  Measuring efficiency
 Business publications  Cost per thousand
 Horizontal publications  Cost of reaching target market

 Ad Age, Marketing News  Frequency
 Vertical publications  How often to run the advertisement?
 Chemical Business
 Requester publications
 Why?
Prof Sonal Muluk 5

4/2/2019
Direct Marketing Tools Measuring Advertising Effectiveness
 Direct Mail  What benefits does advertising provide the company?

 Benefits  Measuring Impact on Purchase Decision
 Indirect communication
 Disadvantages  Measurement Program
 Benchmarking
 Interactive Marketing  Common benchmarks
 Customer Relationship Marketing
Trade Shows Trade Shows
 Magnitude of trade shows  Selecting the Show

 Advantages  Which one to go to?
 Costs  Net buying influences
 International trade shows
 Total buying plans
 Investment returns
 Ask customers?
 Trade show objectives
 Lead efficiency model
 Identify decision-influencers
 # of sales leads obtained at show
 Identify potential customers
 Create actual sales Total # of show visitors with plans to buy
 Provide products, services, and company information

 Learn of potential application problems
 Handle existing customer problems
Trade Shows B2B Social Media
Channels of the social web where prospects and businesses

 Managing the Exhibit
communicate across diverse platforms
 Generate interest
 Salespeople training
 Internet usage Key Platforms:
 Evaluating Performance 1. Discussion Forums
 Attraction 2. Blogs
 Contact 3. Wiki
 Conversation efficiency 4. Social Networks
36
Prof Sonal Muluk 6

4/2/2019
Use of Social Media in B2B Dell’s Use of Social Media
 Monitor what prospects are saying about the company

 Several blogs in five languages
 Capture interest from prospects looking for products  Sponsor several online communities
 Support forums: find answers to laptop questions

 Coordinate follow-up to social media interactions
 Online community for consumers to post

innovative ideas for Dell to consider
37
Customer Decision Journey Advertising’s Role

 The CDJ is the customer’s decision process in
selecting a particular product
 Be an integral part of an integrated communication programs
 Often find a mismatch between media used and the
touch points at which buyers are best influenced  Enhance sales effectiveness
 CDJ includes two critical steps
 Increase sales efficiency
1. Inspiration: use online channels to find, create and compare
2. Sharing: relate experiences using a variety of social media  Create awareness
 Key: Customer experience includes everything from  Create preferences for company, products, etc.
discussions on social media to meetings with sales
people. Social media facilitate targeted,  Facilitate interactive marketing communications
personalized contact across the customer
experience landscape
Integrated Communication Programs Dominance of Personal Selling

 Integrated Communications is the intertwining of all communication  Personal selling is dominant because:
methods to include:
 Advertising
1. Compared to consumers, there aren’t as many potential business
 Sales Promotion customers.
 Online Media 2. The dollar purchases are much larger.
 Public Relations 3. The products and services are more technical.
 Personal Selling 4. Salespeople need to know about their customers’ businesses and about
their customers’ customers’ businesses, too!
 Of these promotional techniques, personal selling is

most important in B2B marketing!
Prof Sonal Muluk 7

4/2/2019
Content
5.1 Industrial Distribution Channels: Characteristics of Industrial
Distribution Channels, Types of Industrial Middlemen, Channel Flow
Managing Distribution Channels Design, Formulating Distribution Strategies and Cost Benefit Analysis
and Communication in Business 5.2 Communication is Business Market: Developing Industrial

Communication Programme, Advertising, Trade Shows, Exhibitions,
Markets
Catalogues, Samples, Public Relations
Unit 5
5.3 Personal Selling: Role & Characteristics of Personal Selling,
Prof. Sonal Muluk
Development & Management of Sales Force, Key Account
Management - ABC Analysis of Industrial Customers
5.1 Industrial Distribution Channels

 Industrial channel structures include both direct and indirect channels.
 Direct Channels. Examples are direct selling through company sales force and
direct marketing through on-line marketing, telemarketing and direct mail.
Direct channels are used typically when
(i) Transaction value is large,
(ii) Technical & commercial negotiations are held at various levels
(iii) Buying process takes a long time
(iv) Buyers want to buy directly from manufacturers.
5.1 Industrial Distribution Channels Types of Intermediaries

 1. Industrial Distributors / Dealers.
 Indirect Channels.
They perform many functions like buying, storing, promoting, financing, selling,
Consists of intermediaries like distributors / dealers,
transporting and servicing certain geographic market, & are given discounts.
manufacturer’s reps / agents, value-added resellers (VARs),

Major categories are
brokers and commission merchants (i) General – line distributors,
(ii) Specialized distributors,
and (iii) Combination house.
Prof Sonal Muluk 1

4/2/2019
Structure of Industrial Channel

Types of Intermediaries
Direct Channel Indirect Channel
 The manufacturers perform all the  The manufacturer and the  2. Manufactures’ Representatives / Agents.
functions intermediaries share the tasks
 Approach is viable when: between them. They perform functions like promoting manufacturers’ products / services,
 The value of each transaction is large  Approach is appropriate when:
 The value of transactions or sales are getting orders, and colleting market information. They are independent
 The selling includes extensive
technical and commercial negotiations low
at various levels business firms, representing various
 The manufacturer has limited
 The buying process lengthy resources
 The industrial buyers insist on buying  The industrial buyers purchase many
directly from the manufacturers product items in one transaction
Types of Intermediaries CHANNEL DESIGN

 It includes developing new channels and modifying the existing channels.
 3. Value-added Resellers (VARs) They are new type of intermediaries from computer
The procedure / steps are as follows;
industry. They deal with computer hardware and software companies, customize the
same to solve specific problems of buying firms. They are paid discounts. (i) Developing channel objectives;
(ii) Analyzing channel constraints;

 4. Brokers They bring together buyers and sellers, when information is not available
completely. They represent either a buyer or a seller, and their relationship is short
(iii) Analyzing channel tasks;
term. They do not buy products & services and are paid on commission basis. (iv) Identifying channel alternatives. These include the following issues :
(a) Types of intermediaries. (b) Number of intermediaries. (c) Number of channels.

 5. Commission Merchants. They represent sellers / manufactures
(v) Evaluating the channel alternatives. The criteria used are: (a) Economic factor
(b) Control factor (c) Adaptive factor (vi) Selection of the channel
MANAGING CHANNEL MEMBERS Concept of Supply Chain Management

 It includes :
(SCM)
 1. Selecting Intermediaries.
 SCM includes activities of moving goods from raw material through operations
 2. Motivating Intermediaries. (a) Partnering relationships. (b) Reasonable discounts and to final consumers, as shown in “SCM Framework
commission. (c) Distributor councils. (d) Other motivational tools.  Main aims of SCM are (i) Reduce cost per unit, (ii) Reduce waste &
 3. Controlling Channel Conflicts (a) Sources of channel conflicts. (b) Controlling conflicts by duplication, (iii) Minimize order to delivery cycle, and (iv) Ensure superior
(i) Effective communication network; (ii) Joint goal – setting; (iii) Diplomacy; Mediation; delivery service. Firms adopting SCM gain competitive advantage.
Arbitration. (iv) Vertical marketing system (VMS).  The aims are achieved by a network of interdependent firms working
together with partnering relationships to manage and control various
activities, in order to improve flow of materials and information from
suppliers to end users.
Prof Sonal Muluk 2

4/2/2019
Supply Chain Management Framework

Logistics Management (LM)
Information Flow
Cash Flow
 LM plans and coordinates activities to achieve superior customer service levels at lowest
costs. LM optimizes material flow within the firm, but SCM extends integration of material
Product Flow
flow to suppliers’ suppliers and customers’ customers. For better understanding, see figure
Planni Distribu Perfor

on “ business logistics system”, which has two product Product
tion Custome
Suppliers ng Purchas ion or mance
and and r and Business
of raw e Operati
logistic Service Custome
material foreca on evalua
sting s tion rs or end
s and
compone users
nts
BUSINESS LOGISTIC SYSTEM

Physical supply Industrial Manufacturer Physical distribution TASKS OF PHYSICAL DISTRIBUTION
Sl No Tasks Brief Description
Raw materials
1 TRANSPORTATION It is the means of moving goods from production unit to
Components Material storage customer. It is the most important cost area in physical
distribution.
Supplies
2 WAREHOUSING It provides storage space for products which are made
available to customer when needed. It can improve customer
service & transportation cost.
Manufacturing 3 INVENTORY Inventory is used to insure the products are available to
CONTROL customers in the right product mix, at the right location, &
at the right time.
Industrial customers 4 PACKAGING It provides protection to products & maintains product

Finished Goods identity when products arrive at the market place.
storage Industrial
Distributors/Dealers 5 MATERIAL It increases speed & minimizes costs of order- picking,
HANDLING moving products between storage & transport carriers,
loading & unloading operations.
TASKS OF PHYSICAL DISTRIBUTION

Total Cost Approach
Sl Tasks Brief Description

No  Focuses on balancing two important elements:
6 ORDER It starts the physical distribution process & directs 1. Total Distribution Costs = Freight + Warehouse Cost + Inventory Cost +
Cost of Lost Sales due to delayed delivery
PROCESSING various activities which are necessary to deliver the
products to customers. Speed & accuracy of order 2. The level of service provided to customers
processing affect customer service & costs. (a) customer’s service need.
7 COMMUNICATION Information is exchanged between the countries (b) competitor’s service level.
physical distribution or marketing logistic department (c) company’s profitable objective.
& its customer. It assist in performing various tasks.
8 FACTORY AND Right locations of manufacturing plants & warehouse
WAREHOUSE (or godowns) increase customer service & reduce
LOCATIONS transportation (or freight) costs.
9 CUSTOMER The result of physical distribution activities is
SERVICE customer service, it create customer value (or benefits)
that has impact companies market shares, total cost &
profitability.
Prof Sonal Muluk 3

4/2/2019
Determining customer service levels

Elements of Customer Service
Customer service
 Set the goals of customer services levels for each of the important service
elements.
Presale service During- Sale service Post-sale service
 Measure the actual performance for each service element.
 Analyse the variance between actual service performance and the goal. •Product warranty
•Advising Service •Keeping Adequate stocks
•Maintenance contract
 Take corrective actions to minimise the variances. •Technical Service •Speed and accuracy of
•Repair service
•Ordering ease delivery
•Installation service
•Patronage Awards •Product substitution
•Customer training
Impact of Marketing Logistics on Role of Marketing Logistics

Intermediaries
The industrial marketer can improve the performance of  Should be considered as a long term strategic issue.
physical distribution in the entire channel system by taking
 Considered as a source of creating a unique competitive advantage.
the following steps:
 Important role in future due to global competition, world wide sourcing, JIT
1. Develop computerised information system that will link system and TQM.
individual channel members to the manufacturers system.
This will provide realistic sales and inventory of the channel
members to the manufacturer.
2. Standardise packaging and material handling at all channel
members to assist in efficient operations
3. The manufacturer and the channel members should improve
the performance of their respective tasks or services. Thus
the physical distribution must be integrated with channel
members to improve marketing effectiveness.
The Role of Advertising The Role of Advertising
 Integrated Communication Program  Increasing Sales Efficiency

 Blend with objectives  Actual customers
 Enhancing Sales Effectiveness  Potential customers
 Does it help?
 Creating awareness
 Rs. per salesperson
 Unawareness Awareness Preference
 Higher ratings  Interactive Marketing Communications

 Supplier reputation  Impact of the internet
 Increased brand awareness  Limitations of Advertising
 Gross margins
Prof Sonal Muluk 4

4/2/2019
1. Set Advertising Objectives and Define Target Market  Set Advertising Objectives & Define Target Market
 Know what you want to accomplish
2. Determine the Advertising Budget  Written objectives
 Four characteristics
 Three common examples
3. Develop the Message  Brand awareness
 Recognition
4. Select the Media  Buyer attitudes
 Target audience
 Creative Strategy Statement
5. Evaluate Advertising Effectiveness  How to position the product?
 Determining the Advertising Budget  Developing the Advertising Message

 Two methods  Highlight attributes
 Rules of thumb
 Perception
 When to use
 Types  Attention
 Consequence of sales  Interpretation
 Objective-task method  Example: Technical advertisements
 How it works  Focus on benefits
 Establish objectives
 Focus on what customers want and
 Assess communication needed
 Focus on company’s ability to reach them
 Define goals in measurable terms
 Estimate budget needed to achieve goals  Marketing research
 Determinant of sales
 Passing the threshold
 Selecting Advertising Media  Advertising Cost

 Based on what the target market uses  Measuring efficiency
 Business publications  Cost per thousand
 Horizontal publications  Cost of reaching target market

 Ad Age, Marketing News  Frequency
 Vertical publications  How often to run the advertisement?
 Chemical Business
 Requester publications
 Why?
Prof Sonal Muluk 5

4/2/2019
Direct Marketing Tools Measuring Advertising Effectiveness
 Direct Mail  What benefits does advertising provide the company?

 Benefits  Measuring Impact on Purchase Decision
 Indirect communication
 Disadvantages  Measurement Program
 Benchmarking
 Interactive Marketing  Common benchmarks
 Customer Relationship Marketing
Trade Shows Trade Shows
 Magnitude of trade shows  Selecting the Show

 Advantages  Which one to go to?
 Costs  Net buying influences
 International trade shows
 Total buying plans
 Investment returns
 Ask customers?
 Trade show objectives
 Lead efficiency model
 Identify decision-influencers
 # of sales leads obtained at show
 Identify potential customers
 Create actual sales Total # of show visitors with plans to buy
 Provide products, services, and company information

 Learn of potential application problems
 Handle existing customer problems
Trade Shows B2B Social Media
Channels of the social web where prospects and businesses

 Managing the Exhibit
communicate across diverse platforms
 Generate interest
 Salespeople training
 Internet usage Key Platforms:
 Evaluating Performance 1. Discussion Forums
 Attraction 2. Blogs
 Contact 3. Wiki
 Conversation efficiency 4. Social Networks
36
Prof Sonal Muluk 6

4/2/2019
Use of Social Media in B2B Dell’s Use of Social Media
 Monitor what prospects are saying about the company

 Several blogs in five languages
 Capture interest from prospects looking for products  Sponsor several online communities
 Support forums: find answers to laptop questions

 Coordinate follow-up to social media interactions
 Online community for consumers to post

innovative ideas for Dell to consider
37
Customer Decision Journey Advertising’s Role

 The CDJ is the customer’s decision process in
selecting a particular product
 Be an integral part of an integrated communication programs
 Often find a mismatch between media used and the
touch points at which buyers are best influenced  Enhance sales effectiveness
 CDJ includes two critical steps
 Increase sales efficiency
1. Inspiration: use online channels to find, create and compare
2. Sharing: relate experiences using a variety of social media  Create awareness
 Key: Customer experience includes everything from  Create preferences for company, products, etc.
discussions on social media to meetings with sales
people. Social media facilitate targeted,  Facilitate interactive marketing communications
personalized contact across the customer
experience landscape
Integrated Communication Programs Dominance of Personal Selling

 Integrated Communications is the intertwining of all communication  Personal selling is dominant because:
methods to include:
 Advertising
1. Compared to consumers, there aren’t as many potential business
 Sales Promotion customers.
 Online Media 2. The dollar purchases are much larger.
 Public Relations 3. The products and services are more technical.
 Personal Selling 4. Salespeople need to know about their customers’ businesses and about
their customers’ customers’ businesses, too!
 Of these promotional techniques, personal selling is

most important in B2B marketing!
Prof Sonal Muluk 7

B2B Marketing

Uploaded by

Copyright:

Available Formats

You might also like

B2B Marketing

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

B2B Marketing

Uploaded by

Copyright:

Available Formats

MBA 3006MM BUSINESS TO BUSINESS MARKETING

HALF CREDIT COURSE

Unit 1 Basics of Business-to-Business Marketing

Unit 2 Understanding Business Market Environment

Unit 3 Business Market Segmentation, Target Marketing and

Prof. Sonal Muluk Positioning

Unit 4 Product and Pricing in Business Markets

Unit 5 Managing Distribution Channels and Communication in

BUSINESS TO BUSINESS BUSINESS TO BUSINESS

1.2 Models of Organizational Buying Behavior – Webster & Wind

Prof. Sonal Muluk MITSOM 1

incorporation, consumption, use, and resale  Cooperative Societies

TYPES OF BUSINESS MARKET CUSTOMER

Commercial Institutional Governmental

• Manufactures • Government- • Non defence

Large no. of buyers

achieving the organizational goals of both. Could be one person decision

Impersonal / distant relationship with seller

Prof. Sonal Muluk MITSOM 2

Professional buying - Rational + Systematic

Several persons involved in decision

Closer personal relationship with seller

BUSINESS AND CONSUMER MARKETING DIFFERS IN:

Due to these differences, business marketers need to

A SUPPLY/DEMAND CHAIN FOR CARS

Prof. Sonal Muluk MITSOM 3

(III) PURCHASING IN INSTITUTIONS

(iv) Purchasing in cooperative societies

Similar to Institutional purchase.

Prof. Sonal Muluk MITSOM 4

2. Manufactured materials - Acids, fuel oil, and steel

INDUSTRIAL PRODUCTS AND SERVICES INDUSTRIAL PRODUCTS AND SERVICES

2. Capital Items 3. Supplies & Services

computer terminals 2. Services - Building maintenance services, auditing

3. Plant & Building - Real estate property of a business

FORCES INFLUENCING ORGANIZATIONAL BUYING BEHAVIOR

•Job function, past

Prof. Sonal Muluk MITSOM 5

1. PROBLEM RECOGNITION 2. GENERAL DESCRIPTION OF NEED

3. PRODUCT SPECIFICATIONS 4. SUPPLIER SEARCH

1. Is it a new task buy? Who will be the supplier?

Prof. Sonal Muluk MITSOM 6

7. SELECTION OF ORDER ROUTINE 8. PERFORMANCE REVIEW

2. Did the product meet the specs?

3. Does the contract have to be modified?

4. Did the vendor live up to expectations?

THREE BUYING SITUATIONS

There other events that influence the buying 1. New task

Prof. Sonal Muluk MITSOM 7

NEW TASK - JUDGMENTAL SITUATIONS

2. Strategic Decisions An example of key questions might include:

 Who are the available suppliers?

 Will they provide the services we need?

NEW TASK - STRATEGIC DECISIONS THREE BUYING SITUATIONS

 What should we do?

Prof. Sonal Muluk MITSOM 8

Casual purchases: Involve no information search or analysis.

MODIFIED REBUY BUY GRID FRAMEWORK