Chapter 1 The Unique Nature of Industrial Marketing

Industrial Marketing
Also called: Business-to-Business

(B2B) or Organizational Marketing.

Definition: IM is the marketing of

products and services to business organizations which includes private firm, public agency, or nonprofit organization The creation and management of mutually beneficial relationships between organizational suppliers and organizational customers.

The Marketing Concept

Industrial marketer must understand

the needs, resources, policies and buying procedures of the buyer. Creating value for customers with goods and services that address organizational needs and objectives. For example: Steel furniture maker.

Marketing Concept
Three major components: All company activities should begin

with the recognition of a fundamental customer need. A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D. Customer satisfaction is viewed as the means to long-term profitability goals.

Five Major Differences Between B2B and B2C

Market characteristics

Product characteristics
Service characteristics Buyer behavior Channel characteristics Promotional characteristics Price characteristics

Market characteristics

Product characteristics

Service characteristics

Buyer behavior
Functional areas involvements. Rational and performance based

decision.
Technical expertise.

Stable interpersonal relationships.

Channel characteristics
More direct and less intermediaries.

Promotional characteristics
Emphasis on personal selling

Price characteristics
Competitive biding

Negotiated prices
List prices for standard product.

Marketing Activities
Identify customer needs Research customer behavior Divide market into manageable segments Develop new products/services Establish/negotiate prices Deliver, install, service products Ensure adequate and timely supply of

products at correct place Allocate resources across product lines Communicate with customers Evaluate/control marketing programs

Different industrial customers

Commercial enterprise. Industrial distributors and dealers. OEMs Users Government customers. Institutional customers.

Co-operative societies.

Classification of I P
Materials and parts.
Raw material Manufactured materials Component parts Subassemblies

Capital items
Light equipments or accessories Installations or heavy equipments Plant and building.

Supplies and services

Supplies services

ICs purchasing orientations

Buying
Low price Gain power Risk

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

Supply chain management

Deliver value to end user
Out source non core activity Support collaborative R/S with major suppliers

Purchasing practices of industrial customer

Purchasing in commercial enterprise.
Size, nature, complexity, verity, volume and value

Large and medium firms functional heads involve.

Various techniques like material planning, supplier

rating system, EOQ and value analysis are used. Managers are equipped with market knowledge, price trends, commercial matters and negotiation skills.

Major tasks in purchasing are

Identifying the potential buyer

Negotiating and selecting suppliers

Ensure right qty and qlty material at the right time Long term r/s with suppliers.

 Purchasing in government units.

Govt units are major purchasers of industrial goods and

services.
To compete success fully understand the complexities.

most of the state and central govt have separate

procurement dept

Major tasks in purchasing are

Registering the company and products with govt units. for standard products ad will be floated in newspapers. Based on that suppliers will get tender papers. Suppliers are then required to submit sealed offers duly

signed .
After the tenders are received in tender box the sealed

covers are opened at the specified date and time.

 Closed / limited tenders Enquiry is sent to few registered suppliers of

certain category of non standard product.

POs are issued against evaluation of tender

offers.
Tender offers of other suppliers are kept secret. Based on the lowest cost or lowest landed cost

orders are issued.

If the tender value is small 2or 3 supplier or if the

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

Institutional purchasing

Purchasing in resellers markets

Also replacement market Consists of industrial dealer and distributer main

aim is profit and volumes. Selection of supplier on quality and price both Exclusive or multi producers dealer and distributer
Major tasks in purchasing are Sharing of AD cost Providing marketing materials Competitive price and trade discounts. Flexible payment terms with credit facility
Bargaining power play a role

Industrial market environment

Dynamic environment- new OT How well is the r/s between buyers and sellers decides

the impact of surprises posed

Marketing strategies were adaptive in nature But ideology changed to proactive . Industrial market environment consists of

Interface level
Publics Macro environment

Interface level
Key participants immediately interface

with industrial firm

Includes environmental factors like
Input suppliers Distributors

Facilitators - ad agency, transportation,

warehouse etc
Competitors

 Financial publics
Independent press

Publics

Public interest groups General public Internal public

The macro environment

Economic
Ecology Political environment

Culture
Technology

Governments impact on IME

The macro environment

Economic forces
Regulate the exchange of materials, money, energy, and information

Technological forces
Generate problem-solving inventions

The macro environment

Political-legal forces
Allocate power, provide laws and regulations

Sociocultural forces
Regulate values, mores, and customs

Strategies for managing IME

Independent strategies
Competitive aggression

Competitive pacification
Publics Political /legal Resource supplies Implicit co-operation

Co-operative strategies
Contracting , cooptation , coalition

Strategic maneuvering
Domain selection Diversification

Strategies for managing IME

Independent strategies
Competitive aggression :product diff, aggressive pricing,

comparative ad Competitive pacification: price umbrellas, industry promotion, ICRs Publics: corporate image, voluntary Envi control, commitment to IGs Political /legal : direct lobbying, issue advertising, Resource supplies : Resolution of irregular demand, Demarketing Implicit co-operation
Co-operative strategies
Contracting , cooptation , coalition

Strategic maneuvering

Organizational buying
Level of experience and information that they

have, Routine needs less info. Entirely new need lot of info Buying is a series of decision making Buying behavior changes according to the buying situation Buying grid consists of three situations
New task Modified rebuy

Straight rebuy

Buying decision process

1.

2.
3. 4. 5. 6. 7. 8.

Anticipation or need recognition Determination of quality and quantity of the product Description of quality and quantity of the product Search for the qualified source Acquisition and analysis of proposals Evaluation Selection Performance and Feedback

Buying grid
Robinson et al.

Buying phases and buy classes

All eight phases are applicable in new task. Most difficult buying situation in IM new task

identifying and developing products. Modified situations are not difficult to handle Straight rebuy are handled in routine manner.

Buying centre
DMU or buying group Answer some queries
Who are involved in buying
Set of people have interdependent objectives and

share common risks.

Buying roles
Initiators Buyers Users Influencers Deciders Gate keepers

Identifying the key members of BC

Top management persons Technical or functional persons Buyers/purchasers Accounts and finances persons Marketing functions

Buying objectives
Delivery / availability.

Product quality
Lowest price Services

Supplier relationship
Personal relationship Higher status Job security Salary increments Promotion Social considerations

Models of organizational buying behavior

Webster and wind model Environmental variables

Organizational variables
Buying center variables Individual variables

Sheth model

Industrial marketing research

Objective and Systematic process of obtaining,

analyzing, reporting of data for decision making. Industrial marketing intelligence. Difference b/w IM and CM SCOPE of industrial marketing research
Development of market potential

Marketing share analysis

Sales analysis Forecasting Competitor analysis NP acceptance and potential Trend studies Business quota determination

Marketing research process

Identify the problem or opportunity and define

research objectives
Develop the research design

Data collection
Process and analysis of data Present research findings

Segmenting Business Markets

What is segmentation ?
Enhancing a companys competitive position by

providing direction and focus for marketing strategies. Examining and identifying growth opportunities in the market through the identification of new customers, growth segments, or new product uses. promises the greatest return on marketing investment (ROMI) Protective Coatings Floor Coatings Road Markings

Segmenting Business Markets

Geographic Customer Type Macrosegmentation Customer Size Product Use

Business to Business

Purchasing Criteria Purchasing Strategy Microsegmentation Importance

Personal Characteristics

Steps in Segmenting a Market

Select Market or Product Category Choose Segmentation Bases Select Segmentation Descriptors Profile/Analyze Segments

Steps in Segmenting a Market

Select Target Markets Design, Implement, Maintain Marketing Mix

Subsequent Marketing Activities

Strategies for Selecting Target Markets

Undifferentiated Strategy

Concentrated Strategy

Multisegment Strategy

Multisegment Targeting
Benefits
Potentially greater sales volume Higher profits Larger market share Economies of scale in: manufacturing marketing

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

Positioning Bases
Attribute

Price and Quality

Use or Application Positioning Bases Product User

Product Class

Competitor