INDUSTRIAL MARKETING

By Prof Ravi Chhabra

Ay 2008

Industrial & Institutional Marketing

Overview

For SIBM

By Prof. Ravi Chhabra

Lovely world of Consumer marketing

Industrial Marketing

Industrial Marketing

Industrial Marketing

Marketing

Definition :

Marketing is a process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, services to create exchanges that satisfy individual and organizational goals.

Consumer marketing is marketing of product and services to individual, families and household for their own consumption

Consumer marketing

Industrial Marketing

Definition

The marketing of goods and services to business organizations for use in the manufacture of their products or in the operation of their businesses.

Business organization include manufacturing companies, government undertakings, private sector organizations, educational institutes, dealers etc.

Industrial Marketing

Why Organizations buy?

1) To make other goods and services.

M/s Chitale buys sugar for making sweets or

Bajaj buys tyres for incorporating into Motor cycles

2) To resell to other business users or to consumers

Cummins buys starters from Delco-Remmy for directly selling as spares

3) To conduct organization’s operation

Hero Honda buys gear grinding machine for producing finished gears.

Industrial markets Consumer markets

Market structure Geographically concentrated , relatively fewer buyers

Geographically dispersed, mass markets

Products Technical complexity, customized, service, delivery & availability very important

Standardized, service, delivery & delivery somewhat important

Buyer behavior Functional involvement, rational / task motive predominate, technical expertise, stable relations, interpersonal relationships, reciprocity

Family involvement, social / psychological motives predominate, less technical expertise non personal relationships,

INDUSTRIAL VS CONSUMER MARKETING

Industrial markets Consumer markets

Channels Shorter, more direct, fewer linkages

Indirect, multiple linkages

Promotion Emphasis on personal selling

Emphasis on advertising

Price Competitive bidding, negotiating on complex purchases, list prices on standard items

List price

Demand for industrial goods and services is derived from the ultimate demand for consumer goods and services.

It is derived from expectations of the actions of ultimate consumers.

Demand for industrial products is also often joint.

Joint demand occurs when the demand for a product depends upon its use in conjunction with another product/ products.

ECONOMIES OF INDUSTRIAL DEMAND

It is the single most important force in the marketing of goods & services.

Industrial customers purchase goods & services for use in producing other goods or services

Eventually , whatever is finally produced will be sold to the consuming public or kept forever in inventory.

Forecasts of ultimate consumer demand determine the levels of demand throughout the entire industrial pipeline.

DERIVED DEMAND

It occurs when one product requires existence of others to be useful.

Most products require several components parts or ingredients.

Industrial customers often prefer to buy joint items or complete product lines from one supplier , rather than purchase individual products from different suppliers.

JOINT DEMAND

It is the responsiveness of the sale of one product to a price change in another.

It can have a dramatic impact on the marketing strategy of an industrial firm.

The demand of many industrial goods is influenced by the price of other goods.

The degree to which resources are substitutable for one another is an important issue in the industrial market.

CROSS ELASTICIY OF DEMAND

The larger the substitute resources available , the greater the cross – elasticity of demand for a particular resource.

Cross – elasticity for substitutes is always positive , i.e. the price of one good and the quantity demanded of the other always move in the same direction

Cross – elasticity for complements ( joint demand ) is negative i.e. price and quantity move in opposite direction

Contd.

The concept of cross – elasticity of demand can be very useful to industrial marketers

First, it is important that a firm know how the demand for its products is likely to be affected by changes in the prices of other products

Second, it is useful in measuring inter relationships among industries.

1. Of the several basic differences between industrial and consumer marketing covered in this session, which, from your point of view, would have the most significant impact on the development of marketing strategy ? Why ?

2. Using a product with which you are familiar, illustrate the concept of joint demand

QUESTIONS

3. Would a price decrease be an effective marketing strategy if the demand for an industrial product was falling because of decreased consumer demand ? Justify your response.

4. How would the desire for stable relationships in industrial market affect a firm’s ability to sell its products to a manufacturer currently buying from another source ?

THANK YOU