INDUSTRIAL MARKETING Major Differences Between Consumer Marketing and

Industrial Marketing:
Part I

I. Marketing

- marketing of products and services to business and other

organizations for use in the manufacturing and marketing of
other products and services.

- process of performing market research, selling products

and/or services to customers and promoting them via
advertising to further enhance sales.

Three Elements in a Market System:

Part II
A. Products B. Buyers C. Sellers
II. Nature of Industrial Marketing
Three Basic Functions Performed in an Economy:
Industrial Market
A. Production B. Distribution C. Consumption
- concept which is different from the regular market of
consumer goods
Industrial units perform the tasks of converting raw materials
and processed goods into finished goods.
- consumer goods markets exist at different locations, mostly
in towns and villages
Industrial Classification
Three Broad Industries:
Important Features of the Industrial Market
A. Extractive industry
A. There is a continuous supply and demand for a large
B. Manufacturing industry
variety of items. The quantity of goods demanded and
C. Constructive industry
supplied is on a large scale.
Industrial Demand
B. Economies of large scale can be easily availed by suppliers
as well as buyers.
The nature and the factors which determine the demand for
industrial goods are different than those for consumer goods.
C. This market forms one segment of the total market in the
economy.
Derived Demand - demand for industrial goods and services
exists on the basis of demand for consumer goods and
D. Most of the transactions in these markets take place
services
indirectly i.e., through agents.
Joint Demand - demand for industrial products may also
E. Agreements are made between the buyers and sellers for
depend upon its use along with the existence of other
the supply of goods and services on certain terms and
product or products
conditions.
Cross-elasticity Demand
F. Most of the supplies are made on credit basis with some
exceptions.
- Cross-elasticity of demand is the responsiveness of sales of
one product to a price change in another product which
G. Industrial markets are the markets where there are regular
could be a substitute product or complementary product.
demands for raw materials, spare parts, components, fuel,
power and for finished goods.
- An industrial marketer must know how the demand for his
product is likely to be affected by the changes in the prices of
Need for Understanding Industrial Markets
substitute products.
- An industrial marketer needs to understand industrial
- Substitutions of several materials are taking place in the
markets for developing an effective market plan.
industrial markets.
- Knowledge of the market becomes essential for them to
- The cross-elasticity of substitute is always positive
make the right type of investments so that they can get
better returns on these.
- For complementary products, the cross-elasticity of
demand is negative
- Knowledge of trends as to rising prices or declining prices
Industrial Marketing vs Consumer Marketing
can always help an industry to take decisions in buying the
quantity.
Industrial market, markets are relatively concentrated and
the channels of distribution are shorter; buyers are organized,
- The effect of the macro environment can always help a
have different purchasing techniques and there are multiple
marketer to take strategic decisions for their industry.
influences contributing to purchasing decisions.
- Understanding the industrial market is essential even for
Industrial marketing creates its own set of conditions for
distributors and agents in the market because market
marketing decisions.
information enables decision making for their own business.
Consumer marketing, marketing strategies are carried out
- Every entrepreneur can protect the interest of its own unit
within the marketing department through changes in
with the knowledge of industrial markets and can always
advertising, sales promotion and packaging.
have competitive advantage.
- Since there is globalization of trade due to the liberalization
policy, the industry needs to understand the changing market
environment to make a successful marketing strategy.

Industrial Customers

The industrial customers are classified into four groups,

which are:

1. Commercial Enterprises - enterprises that have profit as an

essential motive of their buying.

a. Industrial distributors and dealers

b. Original Equipment Manufacturers (OEMs)

2. Government Customers
3. Institutional Customers
4. Cooperative Societies
Business Environment
Classification of Industrial Products and Services
- An organization’s business environment encompasses both,
1. Materials and Parts the external environment and the internal environment.
2. Capital Items
3. Supplies and Services - An organization has to understand the external
environment in order to operate effectively in the
Industrial Purchasing System marketplace. It should also be able to adopt itself to changing
circumstances to survive in business.
- Industrial purchasing is totally different as compared to
individual consumer purchases due to the nature of business, The external environment of a firm essentially includes:
size of the enterprise as well as volume, variety and technical
complexity of the products purchased. A. Political environment
B. Economic environment
- Since the industrial marketers sell their products to C. Technological environment
different types of industrial customers, it is important to D. Cultural and social environment
know the purchasing practices adopted by those industrial
customers. Factors Influencing the Industrial Marketing
Environment
1. Commercial Enterprises Purchasing System
2. Government Purchase System 1. Micro-environmental Factors - this consists of customers,
3. Institutional Purchasing competitors and suppliers. These forces affect individual
4. Purchasing in the Resellers’ Market firms differently.
5. Purchasing in Cooperative Societies
2. Macro-environmental Factors:
Part III
A. Governmental, Political and Legal
III. Industrial Marketing Environment B. Economic Environment
C. Technological
Industrial Marketing Environment starts with identifying D. Social
industrial markets, market opportunity, understanding E. Public
changes in customer needs, identifying technological
innovation, considering changes taking place in governmental, Managing the Industrial Marketing
political and legal factors. Environment

Industrial Marketer needs to have a continuous
monitoring of the industrial environment, mainly external
environment so as to identify new opportunities and threats.
Introduction
- Industrial buyers and sellers operate in a changing dynamic
environment.
- The environment in which business functions can be divided
into semi-controllable and uncontrollable environment.
- Micro-environments are semi-controllable environments
which are managed by the organization.
- Industrial firms should influence, modify or respond to the
changes in the marketing environment.
- The manipulation of ‘marketing mix’ elements such as
product, place, price and promotions are not sufficient to
exploit opportunities or safeguard against the threats that
arise from the dynamics of the marketing environment.
- Industrial marketers should always gather a lot of
information on the relevant external environment.
There are three types of strategies to achieve the objective
of responding proactively and creatively for managing the
external environment:

- The organization makes strategies on the basis of the 1. Independent Strategies

‘marketing mix’ and achieves their organizational objectives. 2. Cooperative Strategies
3. Strategic Planning
- The uncontrollable environment is also known as ‘external’
or ‘macro environment’.

- The macro environment is uncontrollable by managers

because it is outside the organization’s purview.
Part IV
IV. Industrial Buying and Buying Behavior
- Industrial Buying in some ways is similar to consumer
buying since it is not the industry (organization) making the
buying decisions but people within those organizations.
- But, the industrial marketer must understand the significant
differences in order to succeed in the industrial market.
Industrial buyers search for efficient suppliers or vendors
who can deliver goods as per the requirements of the
industries.
Introduction
- In an industry, there is a separate department called
purchase department whose function is to develop
organizational buying objectives and perform activities so as
to have regular and adequate flow of goods and services into
the operations and see that the work of the firm does not
suffer.
Purpose of Industrial Buying
- Organizations have the goals of producing a good,
providing a service or reselling an item and therefore buying
products and services that will effectively engage in these
activities.
- We can say that the buying objective of an organization is
to buy the right items in the right quantity at the right price
for delivery at the right time and place.
Industrial Buying Decision Process
- Industrial buyers do not buy goods and services for personal
consumption or utility. They buy these goods and services to
make money, or to reduce operating cost or to satisfy social
or legal obligations. In fact, buying is an organizational
decision making process.
- To buy the needed goods, industrial buyers move through a
purchasing or procurement process.
8 stages in the buying decision process which are as follows:
1. Problem Recognition
2. Need Description
3. Product Specification
4. Vendor/Supplier Search
5. Proposal Solicitation
6. Vendor Selection
7. Purchase Routine Selection
8. Post-purchase Evaluation
Buying Centers
- The buying center comprises of those people in the
organization who interact during the buying decision process.
- The buying center is sometimes also referred to as the
decision making unit or buying group.
- The decision making unit may vary in size based on:
 How novel, complex and important the purchase
decision is.
 How centralized, formalized and specialized the
organization is
- The buying center is the basic unit of analysis focusing on a
particular purchasing decision, the organizational member is
involved in the purchase and their communication and
influence flows during the decision making process.
Buying Center Roles
1. Initiators – they are the first to recognize a need for the
product or service in the organization.
2. Influencers – they are the individuals who may directly or
indirectly influence purchase decisions by supplying
information for evaluating alternatives or by defining buying
specifications related to design, quality, delivery, etc.
3. Buyers – as they are the formal authority to select vendors
and negotiate the terms of purchase.
4. Deciders – they have the formal or informal authority to
select suppliers and make the final buying decision.
5. Gatekeepers – they control various forms of information
flowing into the buying center.
Important Members of the Buying Center:
1. Top Management Persons
2. Technical Persons
3. Persons in the Purchase/ Materials Department
4. Finance/Accounts
5. Marketing Persons
Major Buying Decisions taken by Business Buyers
The business buyer faces many decisions in making a
purchase. The number of decisions depends on the type of
buying situation which is as follows:
1. Straight Re-buy
2. Modified Re-buy
3. New Tasks
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