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CHAPTER 1 IM/1-1/5
THE NATURE OF INDUSTRIAL MARKETING
Learning Objectives
LEARNING OBJECTIVES
• Understand the types of industrial customers as well as
industrial goods and services.
• Know the marketing implications for different types of
customers and products.
• Understand the purchasing orientations and practices of
industrial customers.
• Know types of environment and strategies to manage
external environment.
IM/2-2/10
(A) What are the types/classifications of Industrial/Business
customers? INTERMEDIARIES /
MIDDLEMEN (DISTRIBUTORS)
COMMERCIAL
ENTERPRISES OEMS
USERS
PUBLIC SECTOR
UNITS (BHEL)
GOVERNMENT
CUSTOMERS
GOVT. UNDERTAKINGS
(RAILWAYS, DEFENCE UNITS)
INDUSTRIAL /
BUSINESS
CUSTOMERS PUBLIC INSTITUTIONS
(GOVT. HOSPITALS)
INSTITUTIONAL
CUSTOMERS
PRIVATE INSTITUTIONS
(SCHOOLS, COLLEGES)
MANUFACTURING
UNITS (SUGAR, MILK)
CO-OPERATIVE
SOCIETIES
NON-MANUFACTURING
UNITS (BANKS, HOUSING)
F
I
G
.
T
Y
P
ES
O
F
I
ND
U
S
T
R
I
A
L
/
BU
S
I
N
E
S
SC
U
S
T
O
ME
R
S
IM/2-3/10
(B) How are Industrial Products / Services Classified?
Classification into 3 Groups shown below.
RAW MATERIALS (IRON ORE, CRUDE OIL)
MATERIALS MANUFACTURED MATERIALS
& PARTS (STEEL, FUEL OIL)
(ENTER PRODUCT
COMPONENT PARTS (BEARINGS, TYRES)
DIRECTLY)
SUB ASSEMBLIES (EXHAUST PIPE IN M.C.)
MACRO TECHNOLOGICAL
(AFFECTS
GOVT., POLITICAL, LEGAL
ALL FIRMS)
CULTURAL & SOCIAL
PUBLIC - PRESS, SHARE
HOLDERS, INVESTORS &
PUBLIC INTEREST GROUPS
IM/2-9/10
(F) Strategies for Managing Changing External
Environment.
Learning Objectives
• Understand Organizational buying objectives.
• Gain knowledge of buying activities, including different
phases in buying decision process, types of buying
situations; buygrid framework & its analysis.
• Identify members of buying centers.
• Understand organizational buying behavior.
• Know how industrial buyers choose and evaluate
suppliers.
IM/3-2/16
PURCHASING OBJECTIVES OF FIRMS
• Reliability in delivery.
• Consistent product Quality.
• Lowest price (If delivery & Quality objectives are met)
• Excellent pre & post – sales services.
• Long – Term collaborative relationship.
Industrial buyers try to achieve organizational purchasing
objectives & personal objectives like higher status, job
security, salary increments, promotions & social
relationships.
IM/3-3/16
Industrial Buying Decision Process
• Marketers must study this for developing effective
marketing strategy.
• In Consumer Marketing, Household / Individual consumer
/ Buyer makes buying decisions based on certain mental
stages like (i) Problem (Need) Recognition,
(ii) Information Search (iii) Evaluation
(iv) Purchase decision (v) Post Purchase Behavior
• In Industrial Marketing, Buying Decision making process is
observable, involving many people in buying firm &
includes sequential activities / stages / phases, as follows:
IM/3-4/16
(A) PHASES IN INDUSTRIAL BUYING DECISION
MAKING PROCESS / BUYPHASES
• PHASE –1 :- Recognising A problem / need.
• PHASE – 2 :- Determining Characteristics &
Quantity of needed product / Service*.
• PHASE – 3 :- Developing specifications of the product*.
• PHASE – 4 :- Searching & Qualifying Suppliers.
• PHASE – 5 :- Obtaining & Analyzing suppliers’ offers*
• PHASE – 6 :- Evaluating & Selecting Suppliers.
(shown on next slide)
• PHASE – 7 :- Selecting an order routine
• PHASE – 8 :- Post – Purchase evaluation
* These are in addition to five stages of consumer buying
decision process.
IM/3-5/16
A SUPPLIER EVALUATION SYSTEM.
ATTRIBUTE/ WEIGHT/ SUPPLIER’S SUPPLIER’S
FACTOR IMPORTANCE PERFORMANCE RATING
SCORE
PRICE 15 0.5 07.5
Organisation Variables
Objectives and goals
Organisation Structure
Purchasing Policies / Procedures
Evaluation & reward systems
Degree of decentralisation
Individual Variables
Personal Goals, Values
Education, Experience
Expertise, Job Position
Lifestyle, Income
IM/3-15/16
CUSTOMER SERVICE
• Important Customer Service Elements. Carry out market
survey to understand which of the following elements of
customer service are important to customers, what service
levels are expected by customers, the service levels offered
by the firm and its competitors.
(i) Pre – Sales Service : Advising, Informing,
Problem solving
(ii) During – Sales Service : Product availability,
on–time delivery, order cycle time, and information.
(iii) Post – Sales Service : Warranty, AMC, Repair,
Installation & Training.
• Develop superior service package.
• Test, Set Goals, and Establish Control system
IM/3-16/16
SUMMARY OF CHAPTER - 3
• Industrial marketers should understand that business buyers
try to achieve both organizational & personal objectives.
• Industrial buying decision process consists of eight steps /
stages (buyphases) & three types of buying situations
(buyclasses).
• Buygrid model combines buyphases & buyclasses.
• Marketers must understand roles & key members of buying
centre, including key buying influencers.
• Many factors influence organizational buying behavior, but
major factors are organizational ( or task – oriented ) objectives
and personal (non – task oriented ) objectives.
• The Sheth model of industrial buyer behavior is comprehensive,
focusing of psychological & joint – decision making aspects.
• Webster and wind model is also widely used & comprehensive
model on buyer behavior.
CHAPTER - 4 IM/4-01/11
LEARNING OBJECTIVES :
• Understand buyer sales rep. interactions.
• Types/range of relationships between
buyer & seller firms.
• Customer relationship management (CRM)
/ relationship marketing.
• Methods used to influence industrial
customers.
IM/4-02/11
INDUSTRIAL BUYER-SALES REP. INTERACTIONS
Incompatible Inefficient No
Content Transaction Transaction
LEARNING OBJECTIVES :
1. Know Nature and Scope of Industrial
Marketing research.
2. Examine the Marketing Research
Process.
3. Understand Industrial Marketing
Intelligence System.
SCOPE OF INDUSTRIAL MARKETING
IM/5-3/6
RESEARCH
Scope is vast. Some of the areas are :
i. Market share analysis .
ii. National and Geographical area-wise
market potential.
iii. Competitors’ analysis.
iv. New product acceptance and potential
MARKETING RESEARCH PROCESSIM/5-4/6
Marketing
Research
studies
Industrial
Secondary Decision
Marketing Market
Data Support
Intelligence Marketing
Research
Responce
System
studies
Industrial
Secondary Decision
Marketing Market
Data Support
Intelligence Responce
Source System
System
Source
System
LEARNING OBJECTIVES :
1. Know the Procedure followed for segmenting
industrial markets.
2. Identify the Variables (bases) used for
segmenting business markets.
3. Evaluate and select the target market segments
and strategies.
4. Develop effective positioning strategies.
IM/6-2/9
PROCEDURE USED IN MARKET
SEGMENTATION
1.0
.A1 0.8
0.6
.D
.C 0.4
0.2 Weak
Strong 1.0 0.8 0.6 0.4 0.2 - 0.2 - 0.4 - 0.6 - 0.8 - 1.0
Customer Customer
Service Service
- 0.2
.B
- 0.4
- 0.6
. - 0.8
A
- 1.0
Rupees
Industry
Profits
Maturity Decline
IM/7-5/20
APPLICATION OF PRODUCT LIFE – CYCLE 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.
Dominant P
Growth Average
Marginal
Dominant
Stable Average
Marginal S
Dominant
Decline Average
Marginal
IM/7-10/20
PERCEPTUAL MAPPING TECHNIQUE
High Price
High Low
Quality Quality
A*
1 *A
C
Low Price
IM/7-11/20
Firm A’s product quality is perceived to be “average” by
customers, compared to its competitors B & C. Firm A
should try to move to a new position of superior quality at
a reasonable (average) price to improve its profitability.
Better High-tech
High Mousetrap Marketing
Technological Marketing
Uncertainty
Low-tech High-fashion
Low Marketing Marketing
Low High
Market Uncertainty
IM/7-15/20
MODIFIED TECHNOLOGY ADOPTION
LIFE CYCLE
Deep Gap
34%
Innovators 13½%
34%
Early 16%
2½% Adopters Laggards
Pure Pure
Tangible intangible
Product service
Major Equal Major
Product, Product Service,
Minor & Minor
Service Service Product
IM/7-18/20
Unique Characteristics of services and
marketing Implications.
Characteristics Marketing Implications Examples
Indirect Channels.
• Consists of intermediaries like distributors / dealers, manufacturer’s
reps / agents, value-added resellers (VARs), brokers and commission
merchants.
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 term. They do not buy products &
services and are paid on commission basis.
5. Commission Merchants.
They represent sellers / manufactures, mostly with bulk
commodities like raw materials, to perform functions like arranging
inspection, transporting, negotiating and selling. They are paid
commission on the value of sales.
IM/8-5/14
CHANNEL DESIGN
• It includes developing new channels and modifying the existing channels.
Simple Complex
Complexity of customer
IM/9-10/12
SUMMARY OF CHAPTER-9
• Personal selling has a greater role in business marketing
than consumer marketing.
• Business selling process consists of prospecting,
qualifying, preparation (or pre-approach), sales
presentation (or approach), overcoming objections,
closing, post-sales service and follow-up.
• B 2 B selling characteristics include problem solving,
systems selling and team selling approaches.
• Intrepreneurial philosophy results in consistently good
performance.
• Management of major and national accounts is done by
team selling, relationship marketing and support from
top management and functional managers.
IM/10-1/10
CHAPTER –10
BUSINESS (INDUSTRIAL)
COMMUNICATION
Learning Objectives :
1. Develop an effective communication
(or promotional) program.
2. Understand the role of advertising
3. Understand the importance of sales
promotion, publicity, public relation
(PR), and direct marketing.
IM/10-2/10
DEVELOPING AN EFFECTIVE
COMMUNICATION / PROMOTIOAL
PROGRAMME FOR BUSINESS MARKETS
The steps involved are :
(i) Decide communication objectives.
(ii) Identify the target audience.
(iii) Decide the promotional budget.
(iv) Develop the message strategy.
(v) Select the media.
(vi) Evaluate the promotion’s results.
(vii) Integrate the promotion’s programme.
IM/10-3/10
Promotional Tools and Media in Business Markets
Promotional Advertising Sales P. R. and Direct Personal
Tools Promotion Publicity Marketing Selling
Promotional Print Media Trade shows Charitable Direct mail Sales calls
Media Business Exhibitions donations Telemar- Sales
& Publications Catalogues Adopting keting presentations
Supports Trade Sales Consents villages On-line Team selling
Journals Promotional Community marketing Relationship
Industrials novelties (gifts) relations marketing
directories Seminars News item in
Demonstration press
Promotional Technical
letters articles in
Entertainment journals
IM/10-4/10
ROLE OF ADVERTISING IN BUSINESS MARKETING
While advertising is relatively less important than
personal selling in business marketing, it is used
as support to personal selling. The functions
performed by advertising are
CHAPTER 11
INDUSTRIAL (BUSINESS) PRICING STRATEGIES & POLICIES
Learning Objectives
1. Understand the special meaning of price.
2. Know the factors that influence pricing
decisions, i.e. price determinants.
3. Understand pricing strategies for different
product/market situations.
4. Examine the pricing policies for various types of
customers.
5. Understand the role of leasing.
IM/11-2/ 29
SPECIAL MEANING OF PRICE
• Some business customers follow “Value-
based pricing” by evaluating, suppliers’
offerings based on the concept of the
suppliers offering equal to the difference
between the perception of value (or
benefits) and the cost to the buying firm.
These are “value buyers”, and marketers
should attempt to have value added
relationship, if suppliers have “purchasing
orientations”.
• Perception of value in value-based pricing
is made up of several elements like
IM/11-3/ 29
Initiating a
price change
Responding to a competitor's
price change
Leasing
IM/11-6/ 29
PRICE DETERMINANTS OR FACTORS INFLUENCING
PRICING DECISIONS
(i) Pricing objectives, (ii) customer analysis, (iii)
cost analysis, (iv) competitive analysis, (v) Govt.
policies.
1. Pricing Objectives
• Are derived from corporate and marketing
objectives.
• Some of the pricing objectives are survival,
maximum short – term profits, maximum short –
term sales, maximum sales growth, product
quality leadership, etc.
IM/11-7/ 29
2. Customer (Demand) analysis
It includes demand analysis & cost - Benefit analysis
(i) Demand analysis. Using experimental research, it
measures relationship between price and demand (or
sales volume). It sums up how sensitive customers are to
the price changes. The formula is:
3. Cost Analysis.
• A firm’s total cost of a product is the lowest point on the price
range. Hence, for pricing decisions, the marketer must know
the various types of costs like fixed, variable, total, direct, etc.
for a product / service.
• Costs vary based on production capacity (i.e. economies of
scale), and accumulated experience (i. e. learning curve) as
shown.
IM/11-9/ 29
Cost Economies of Scale
per
Unit
Cost Experience /
per Learning
Unit
Curve.
Av. Cost Reduction
= 10-30%
Accumulated Production
IM/11-10/ 29
Break - Even Analysis is useful to consider different
prices (P1, P2, P3), and its effect on sales revenue and profits.
Sales Revenue at P3
Sales
&
Costs Sales Revenue at P2
Sales Revenue at P1
Total Cost
Fixed Cost
Sales Volume
IM/11-11/ 29
4. Analyzing Competition
• Many marketers have “competitive level” Pricing as a
pricing objective.
• Marketers should get “Competitors’ prices, discounts,
costs, product quality, service, etc for cost/benefit
analysis, pricing and positioning strategy.
• Competitors’ information can be obtained from various
sources.
5. Government Regulation/Policies
• Govt. regulations are necessary to ensure fair play and to
protect consumers and small scale suppliers.
• Price-fixing / price cartels, price discrimination (e.g.
different discounts to distributors/dealers), and predatory
pricing (e.g. dominant firm aiming to finish competitors)
are not permitted (illegal as per MRTP act, for example)
IM/11-12/ 29
PRICING STRATEGIES
Pricing strategies vary as per product-market
situations such as (i) Competitive bidding in
competitive markets, (ii) New product pricing, (iii)
Pricing across product life-cycle.
Competitor's
Bid Total Cost Profit (Rs)
Last Tender
Price Per Unit T (A) =
Price
( Rs) (A) (Rs) (C) (A) - (C)
(Rs) (B)
Rs.60 corers tender from Dept. of Telecomm. (DOT) for underground cable
jointing kits. The company ghosted Rs.400/- per kit (expected maximum profit).
Tender opening revealed, it was L4.L1 was Rs. 330/-, L2=350, L3=Rs 380/- The
company estimates of B and P(A) were incorrect.
IM/11-16/ 29
(ii) New Product Pricing Strategy
In the introduction stage of a new product,
two alternative pricing strategies are
available
(i) Skimming (high initial price) strategy, and
(ii) Penetration (low initial price) strategy.
Geographical Pricing
Learning Objectives
• Understand the characteristics of market –
oriented organization.
• Know the role of marketing in strategic planning
• Examine the strategic planning process at
business unit level.
• Understand preparation implementation and
control of industrial (or business )marketing plan.
IM/12-2/19
Corporte
Formal
Name
Corporte
Marketing
Divisional / Strategic
Business Marketing
Unit level
Marketing
Role of Marketing
5 4
Market Growth Rate
6
3 8
Cash Cow Dogs
Slow
1 2 7
Large Small
Selectivity /
High
Earnings
Medium
Low
1
IM/12-9/19
Desired Sales
A Strategic
Sales
Planning gap
B
Projected Sales
0 Time (Years) 5
IM/12-11/19
The strategic planning gap can be filled by three
alternative strategies : (A) Diversification growth, (B)
Integrative growth, (C) Intensive growth