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Industrial Marketing

The industrial market ( also known as theProducer market & the Business market )is the market consisting of individuals &

organisations who acquire goods & services

to be used in the production of further productor services for sale or rental to others.

Industrial Marketing is thus defined as The

process of marketing goods , which areused in producing consumer goods orindustrial goods , or business or personalservices. Or which facilitate the operationof a business enterprise.

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Monitor

Environmen

tal

influences

(Economic,

Political ,

Technologic

al)

Assess Market Opportunities

Commercial Market Govt. Market Institutional Market

Analysis of

Buying BehaviorPlan &

Acquire

Marketing

Info.

Functional

areas co-

ordination

Marketing Objectives

Formulate the Business marketing mix

Marketing Program

Response of Target Market Segments

Evaluation & Control

Strategy Development

Evaluate alt.

market

segments

Select Target

Market

Corporate Mission & Objective

Prod/

ServiceChannel Pricing

Personal

SellingAdvert.

Sales

Prom.

Framework of

Industrial

Marketing

Management

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Industrial Goods

These goods are purchased by a large no & variety of

concerns operating in diverse fields.

These includes : the manufacturing industries , the mines,the construction industry, htels , restaurants , theatres.

Thse products are bought for the propose of value addition& therefore the consumers are guided essentially by a profit

motive.

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Products, Services andCustomers

Industrial products are consumed as they are or withmodifications to produce

the final product.

Industrial products are grouped into raw materials, processedmaterials,

major equipment, accessory equipment, components andsub-assemblies,

maintenance repair and operating (MRO) supplies, andservices.

Some companies provide services to other manufacturing and

serviceor anizations.

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Products, Services andCustomers

Modern day industrial marketers have embarked upon a newform of marketing

called systems marketing.

Industrial markets are quite different from the consumermarket and exhibit a

different kind of purchasing behavior. Some industrialcustomers purchase

products for using them in producing the final product andthey are called

manufacturers.

Industrial customers can be broadly classified into three categories- commercial enterprises, institutions, and government

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Industrial DemandCharacteristics

The behavior of the industrial market demand is dependent on thenature of

demand in the consumer markets; thus industrial demand isderived in nature .

Joint demand, this occurs when the demand for a product dependupon its use in conjunction with another product/s , fluctuatingdemand, and stimulation of demand are some of thecharacteristics of industrial demand.

Industrial demand is sensitive to the price of the product, andto the price of

complementary products and substitutes. End consumers,business

conditions, and price are the important factors that influenceindustrial

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Buying Decision

The procurement function has both task-oriented objectives and non-taskobjectives, and is usually governed by a clearly articulated purchase policy.

The buying decision process starts with identifying the buying needs,

followed by identifying the product characteristics.

At this point, the buyer takes a 'make or buy decision'. If the decision is tobuy, then the buying process continues with the search for vendors followedby qualifying them.

The vendors are then requested to send in their proposals and quotationsrelating to the purchase requirement.

If a particular vendor's quotations are up to the buyer's expectations, thenthe contract is awarded to the vendors.

Payment and delivery terms are finalized and an order routine is mutually

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Buying Situation or Buy Phases

The vendors are also regularly monitored for their performance.

A firm purchases goods underthree situations.

In a new task, the firm buys a totally new product or an existingproduct for the first time. This involves extensive information andsupplier search.

The second situation is straight re-buy. Here the firm purchasesthe same material from the same supplier without any alterationsin the contract.

And the last situation is modified re-buy. It involvesmodifications in the form of change in supplier, change in terms ofthe contract, etc.

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Buying Centre

Also known as the DMU ( Decision Making Unit ) is involved in themajor task , in facing the industrial marketer in identifying the

individuals who are in any way involved in the industrial purchasingdecision process.

A DMU may consist ofonly one person , but it is normally a groupof individuals who share a common goal or goals which thedecision will hopefully help them to achieve , & who share the risks

arising from the decision.

In Industrial Marketing these decisions makers are referred to as the Buying Centers.

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Buying Centre Roles

Primary Roles

Deciders - Those organizational members who have formal orinformal authority who actually

make the buying decision. Influencers - Technical people like Design Engineers, QualityControl Inspectors etc

Secondary Roles

Users - Those organizational members who use the products &services.

Buyers - Who have the formal authority in the selection of thesuppliers & in the purchasing

decision, might include high level officers. Gate KeepersWho control the flow of information into the buying

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Buying Motives

A product/ service buying motive is that influences thecustomer to make a buying decision to purchase oneproduct/service over a competitors product/service.

These motives can be triggered by marketing stimuli that create

a product/service position. These improves the sales prospects with increased satisfaction

to the customers.

Buyers of highly priced & complex industrial products/servicestend to rely on rational buying motives.

Some of the buying motives are : 1. Brand Preference 2. QualityPreference 3. Price Preference 4. Engineering Preference

Few other buying motives are : Emotional buying motive,rational buying motive, patronage buying motive, physicalbuying motive & psychological buying motive.

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Buying Motives of IndustrialCustomer

Several environmental forces affect the behavior ofcomponents in the industrial marketing system , such as

1. Economic Changes ( Inflation , Recession , Shortage ofMaterials)

2. Technological Changes

3. Ecological Constraints ( Govt pressures , Cleaner air & water )

4. Changing political climate , competition & internationalpressures

5. Social & Cultural Changes.

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Buying Decision Process No two companies follow the same purchasing

procedure. The industrial buying process might be

broken down into 8 distinct stages for the purpose ofanalysis.

1. Recognition of a Need or Problem & a general solution.

2. Determination of characteristics & quantity needed

3. Description of characteristics & quantity of needed item.

4. Search for potential sources of suppliers.

5. Acquisition & Analysis of Proposals.

6. Evaluation of Proposals & Selection of Suppliers.

7. Selection of an order routine.

8. Performance feedback & evaluation.

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Buy Grid Model

--- denotes most critical phases of buy phases

Stages in Buying New Task Modified

Rebuy

Straight

Rebuy

1. Recognition of a Need or Problem & a generalsolution.

2. Determination of characteristics & quantityneeded.

3. Description of characteristics & quantity ofneeded item.

4. Search for potential sources of suppliers.

5. Acquisition & Analysis of Proposals.

6. Evaluation of Proposals & Selection ofSuppliers.

7. Selection of an order routine.

8. Performance feedback & evaluation.

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MarketStructure

Products

Buyer

Behavior

Geographically ConcentratedRelatively Fewer Buyers

Oligopolistic Competition

Geographically DispersedMass Markets

Monopolistic Competition

Technical Complexity

Customized , Service , delivery

& availability very imp.

Standardized

Service , delivery & availability

somewhat important

Technical Expertise,

Stable Relations,

Functional Involvement ,

Task Motives predominates

Less Technical Expertise,

Non Personal Relationships,

Family Involvement ,

Social Motives predominates

Industrial Vs Consumer Markets

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Channels

Promotion

Price

Shorter , More direct , Fewer

LinkagesIndirect , Multiple Linkages

Emphasis on Personal Selling Emphasis on Advertising

Competitive bidding ,

negotiating on complex

purchases

List Prices

Industrial Vs Consumer Markets

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Distribution Channel

Manufacturer

Distributor/

Dealer

Representative

Agency

Company

Sales

Force

Wholesaler/

Stockist

Manufacturer

Retailer

Customer

IM CM

Representative

Agency

Company

Sales

Force

Customer Customer

CustomerCustomerCustomerCustomer

Wholesaler/

Stockist

RetailerRetailerRetailer

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Factors Influencing IndustrialBuying

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Industrial marketing

environment

Industrial buyers & sellers operate in a dynamic environment ,one constantly posing new opportunities & threats .

Chipmakers overestimate demands , build productive capacity& then sales fall short of expectation , begin an all out drive toreduce unsold inventories.

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Industrial marketing

environment

The environment within which industrial firms operate , due to manyseveral interfaces that exist between the firms that interact directlywith one another , the first level is known as the interface level.

The next two are publics& the macro environment.

Buyer sellerInterface

Government

Macro

Environment

Publics

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Industrial marketing

environment

The Interface Level

The level involves those key participants who immediatelyinterface with an industrial firm ( buyer or Seller ) in facilitating

production, distribution, & purchase of a firms goods & services.

Participants in the Interface Level :--

1. The Input suppliers( Raw Materials, component parts , labor, &capital) ,

2. Distributors /Dealers,3. Facilitator Manufacturers representatives, distributors/dealers,

advertising firms, banks & insurance companies , transportationfirms.

4. Market SegmentsGovt., Commercial enterprises , Institutions,

OEMs , Users5. Com etitors

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Industrial marketing

environmentPublicsPublics are distinct groups that have an actual or

potential interest or impact on each firms ability to achieveits respective goals.

These have the ability to help or hinder a firms efforts toserve its markets.

1. Financial PublicsInvestment Houses , stock BrokerageFirms, & Individual Stockholders.

2. Independent Press- Mass Media

3. Public Interest GroupsThese seek towards theprotection & expand the rights of women , sr. citizen, thusthese limits the freedom of suppliers & buyers in theindustrial market.

4. General Public-

5. Internal Publics- The BOD & managers , employeemorale.

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Industrial marketing

environmentThe Macro Environment

The dynamic forces of the macro environment have a major impacton both the public & interface levels of the industrial environment.

While any participant in the interface level can adjust its marketing

or operating strategy to counter act the actions , or attempt toinfluence or adjust to the actions of the publics, forces in the macroenvironment are usually beyond an individual firms ability toinfluence or control.

Economics TechnologyCulturePhysical

EnvironmentEcology

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Industrial marketing

environmentThe Macro Environment

The main reason is that the micro environment keeps changing & itdoes so at an accelerating rate.

1. Economic Influences:

Because of the derived nature of industrial demand, changes in

economic variables affect the consumers discretionary purchasingpower have an impact on the industrial producer. As consumersdiscretionary income change, prominent shifts in the demand fordifferent categories of durable goods occur.

2. Ecological Influences

Industrial organizations face public reaction & govt. interventionwhen industrial activities pose potential danger to the earthsresources. All are concerned with the environmental damage to theearths water, land , air & people.

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Industrial marketing

environment

3. Physical Environmental Influences:

The ability to produce & market goods & services at a profitnecessitates a favorable combination of the inputs needed. Certainadvantages stem from the natural endowments of an environment

such as raw materials, water & power, adequately skilledmanagement, low-cost labor & transportation facilities.

4. Cultural Influences

Cultures, habits, norms , & traditions greatly influence the structure& function of an organization as well as the interpersonal

relationships of organizational members.5. Technological Influence

Technological development & changes in the industrial marketstrongly affect both buyers & sellers. Buyers have the concerntowards profitability & market acceptance will be favored bychanges in suppliers' product design & manufacturing process.

Suppliers are concerned towards the customers that how they will

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Government Influence over the IM

Government charged with administering & controlling nations& their subdivisions , transcends the industrial marketingenvironment.

As the world competition increases , the industrial managergives greater attention to the actions of government.

In the interface environment, government laws, regulations &activities affect all participants.

Some of the govt. actions include effective changes in interestrates & taxes, specifying product safety standards, sponsoringresearch & development etc.

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Government Influence over the IM

Primary Functions

Protect companies from eachother.

Protect consumers fromunfair trade practices.

Protect the larger interest ofsociety against unrestrained

business behavior.

Ameliorate income equality insociety.

Provide economicstabilization through control

These functions involve

Regulating Agencies.

Laws/ Politics.

Program Funding.

Research Funding.

Import/ Export Regulation.

Levying Taxes.

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Types of Industrial

Customer

Industrial

Customers

Comm.

Enter.

Profit/

Non

Profit

Govt.

Agency

Lubricants, Coal,Brooms &

Management

Consultancy

Services

Surgical Appliances

Airplanes, Guns,

Paint &Legal Services

Steel, Cement,Motors, Batteries ,

Farm Products

Users

OEMs

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END OF UNIT 1