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KARTHEEK.ALDI
BAPUGI B SCHOOLS
Definition of Industrial Marketing
Industrial marketing consist of all activities involved in the marketing of products & services
to organisation (commercial enterprise, profit & non profit institutions, government
agencies & resellers) that use products & services in the production of consumer or
industrial goods & services, & to facilitate the operation of their enterprise.
In simple IM is one where manufacture is selling its products to another business either in
the form of raw materials, component parts or selling its service for consumption, use,
resale or for value addition
Process of exchange in the IM
1.product or service exchange
2.Information exchange
3.Financial Exchange
4.Social exchange
Contrasting Industrial & consumer marketing
1. The structure of the market
2.product usage
3.the nature of buying behaviour involved
4.The channels of distribution
5.promotional variables
6.Pricing strategies
Characterstics IM
1. Market Characteristics
2. Product Characteristics
3. Service Characteristics
4. Buyer behaviour
5. Decision-making
6. Channel Characteristics.
7. Promotional Characteristics
8. Price Characteristics
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Economics of Industrial Demand
Derived Demand
Industrial customer purchase goods & services for use in the producing other goods & services
Joint Demand
It occurs when products require existence of other products.
Cross elasticity of demand
It is the response in the sales of one product to a price change in another.
Fluctuating Demand
The industrial marketer must monitor the changing preferences of the consumers & demand
patterns
Resellers Market
Resellers like industrial firm do not purchase goods & services for personal consumption but
do so facilitate the operations of their businesses.
TYPES OF INDUSTRIAL CUSTOMERS
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Purchasing in commercial enterprise
The purchase of goods & services by commercial enterprise depends on the nature o the
business,the size of the firm & technical complexity of the products purchased.
Activity chart for a typical purchasing process in a commercial enterprise
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Types & Analysis of Environment
Strategies for managing industrial environment
A continuous monitoring of the external environment will spin out new opportunities &
threats which need to be identified
Three strategies are available for managing external environment
1.independent strategies
2.cooperative strategies
Strategic planning
The nature of Industrial Buying
The main objective of purchase /materials management is defined as buying right items in
the right quantity,at the right price,for delivery at the right time & Place.
Purchasing objectives
AIR & WATER POLLUTION SOLID WASTE DISPOSAL CONSERVING NATURAL RESOURCES WATER, POWER, TRANSPORTATION
COMPANY LOCATION, IMAGE / REPUTATION R & D & PRODUCTION FACILITIES
ECOLOGICAL
PHYSICAL
INTERNAL (S&W ANALYSIS)
MICRO (AFFECTS A PARTICULAR FIRM)
ENVIRONMENT
LOW-COST, SKILLED MANPOWER
H R & FINANCIAL RESOURCES MARKETING EFFECTIVENESS
CUSTOMERS & COMPETITORS
SUPPLIERS
ECONOMIC TECHNOLOGICAL
GOVT., POLITICAL, LEGAL CULTURAL & SOCIAL PUBLIC - PRESS, SHARE HOLDERS, INVESTORS & PUBLIC INTEREST
EXTERNAL (O&T ANALYSIS) MAC
RO (AFFECTS ALL FIRMS)
KARTHEEK.ALDI
BAPUGI B SCHOOLS
1.Delivery/Availability
2.Product Quality
Product may satisfy Indian standard or British standard specifications but may fail on shop
floor
Consistency in product quality to reduce cost of inspection
Interruptions in production process due to rejections
Loss of time due to arranging of rejected materials
3.Lowest price
4.services
Prompt & accurate information from suppliers
Application or technical assistance
Spare parts availability
Repairs & maintenance capability
Training if required
5.Supplier relationship
Personal objectives
1.higher status
2.job security
3.salary increments
4.promotions
5.social considerations
Phases in buying decision
1. Recognition of problem or need
2. Determination of the application or characteristics & quantity of the needed product
3. Development of specifications or description of needed product
4. Search for & qualifications of potential suppliers
5. Obtaining & analyzing supplier proposals
6. Evaluation of proposals & selection of suppliers
7. Selection of an order routine
8. Performance feedback & post purchase evaluation
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Types of purchase or buying situations
1.new purchase or new task
2.change in supplier or modified rebuy
3.repeat purchase or straight rebuy
Purchasing Practices of Different Types of Industrial / Business Customers
1. Purchasing in commercial enterprises
2. Purchasing in Govt. units
3. Purchasing in Institutions
4. Purchasing in cooperative societies
The buy grid frame work
DECISION MAKING UNIT
The roles of buying center members are as follows/Buying centre roles
1. Initiators
2. Buyers
3. Users
4. Influencers
5. Deciders
6. Gatekeepers
KEY MEMBERS IN BUYING ORGANISATION/Identifying key members of buying
centre
1. Top Management
2. Technical Persons
3. Purchasers
4. Accounts/Finance Persons
5. Marketing People
Models of organisation behavior
1.The webster & wind model
2.The sheth model.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
The webster & wind model
The sheth model.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Industrial market segmentation
Market segmentation is the process of dividing a market into groups of
customers who have similar requirements for a product or service
offering.
Segmenting & Targeting Frame work
1. Conduct marketing research to collect data on buying firms & competition
2. Identify macro segments based on analysis of data
3. Select those macro segments which satisfy company objectives & resources
4. Evaluate each selected macro segment
-> if yes select the target macro segments based on specific criteria
-> if no identify within each macro segment meaningful micro segments
5. Select the target micro segments based on earlier specified criteria
6. Profile the target segments based on buying Organisation & DMU characteristics
KARTHEEK.ALDI
BAPUGI B SCHOOLS
PROCEDURE USED IN MARKET SEGMENTATION
The procedure has 3 steps .
1. Conduct marketing research to collect data / information on existing and potential buyers,
and competitors.
2. Carry out data analysis by using statistical techniques of factor and cluster analysis in order
to identify different segments.
3. Profile each segment by its characteristics like application (or/use), location, volume of
requirements, etc.
Benefits & limitations of market segmentation
Benefits
1.to compare marketing opportunities of different market segments
2.if resources are available with the organisation it develop separate programs for different
segments
3.the budgeted allocation of resources can be done effectively to various segments
Limitations
1. Increase in marketing expense such as inventory carrying cost,& advertisement cost.
2. Difficulty in segmenting due to the existence of great differences in buying practices,
customer characterstics, & product applications
Criteria used for selection of segmentation variables
Measurable – can the size,growth & buyer characterstics of the segment be measured.
Differentiable – the segments should be distinguishable & should respond differently to
separate marketing plans or strategies
Substantial -The segments should be large enough in terms of sales potential & profits
VARIABLES (BASES) USED IN SEGMENTING INDUSTRIAL (BUSINESS) MARKETS
Industrial market segmentation is done first based on “Macro Variables” , and then
subdivided into “Micro Variables”, if necessary.
Macro Variables. These segmentation variables are identified based on
industry/organizational characteristics like.
(i) Type of industry / Type of customer.
(ii) Company size / Usage rate.
(iii) Customer location / Geographical area. (iv) End-use / Application / Benefits of a product.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Micro Variables. Macro segments are further subdivided into micro – segments’, if needed.
Micro Variables are based on purchasing decisions like
(a) Customer interaction needs,
(b) Organizational capabilities,
(c) Purchasing policies,
(d) Purchasing criteria,
(e) Personal characteristics.
Sequential Segmentation Process. Often, business marketers use more than one variable to
subdivide the market.
Target marketing
After segmenting the market into various segments the company should then evaluate the
various segments
Evaluation of market segments can be done by using the following factors
1.size & growth
2.profitability analysis
3.competitive analysis
4.company objectives & resources
Target market strategies
1.concentrated marketing
2.differentiated marketing
3.undifferentiated marketing
Niche marketing: A niche is a more narrowly defined customer group that seeks products
or services tailored specially to the individual needs & preferences.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
Positioning
Is defined as the distinct place a product occupies in the target customers relative to competing
products.
Procedure for developing a positioning strategy
1.product variables – for standard industrial products the product quality or performance can be
used for differentaiation
2.service variables – offering superior pre sales service is important as industrial products are
technical products it is the easy way of positioning considering service variable.
3.personal variable – by recruiting capable employees & training them who can differentiate
with the competitors
4.Image Variables – image is the way buyer perceives a company. this can be achieved by the
company by adopting various promotional tools
Characterstics of market oriented organisation
1. Shared values
2. Organisation
3. Strategy
4. Stake holders
The role of Marketing in strategic planning
Hierarchy of strategies
1.corporate strategy
2.business level strategy
3.functional strategy
Strategic planning at corporate level
1.Developing corporate mission & objectives
Defining SBU
3.allocation of resources to SBU
Developing corporate strategies to fill the strategic planning gap
Developing corporate strategies
The strategic planning gap can be filled by three alternative strategies
KARTHEEK.ALDI
BAPUGI B SCHOOLS
A.intensive growth strategy
B.market penetration stratgey
C.market development strategy
Business unit strategic planning
CHANGES IN PRODUCT STRATEGY
Business marketers must understand that a product strategy is dynamic and flexible.
It changes due to changes in
(i) Customer needs.
(ii) Technology.
(iii) Government Policies / Laws.
(iv) Product Life – Cycle.
A General Model of Product Life – Cycle (PLC)
KARTHEEK.ALDI
BAPUGI B SCHOOLS
CLASSIFICATION OF NEW PRODUCTS
(i) Products that are new to the world & innovative.
(ii) Products that are new to the company, but not new to the world.
(iii) Improvements / Revision to the existing products.
(iv) Addition to the existing products.
(v) Repositioning existing products to new market segments
(vi) Products with substantial cost reductions without reduction in
performance.
NEW PRODUCT DEVELOPMENT PROCESS
It consists of 7 Stages :
(i) Idea generation, (ii) Idea Screening, (iii) Concept development and testing, (iv) Business
analysis, (v) Product development,
(vi) Market testing, & (vii) Commercialization.
PRODUCT STRATEGIES FOR EXISTING PRODUCTS
Business marketers should take the following steps :
1. Evaluate the performance of existing products by using “product evaluation matrix”.
2. Examine the relative strengths and weaknesses of the company’s products by using “
perceptual mapping” technique.
3. Decide the product strategies, based on above analysis.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
HOW ARE PRICES SET?
Price is the only element in the marketing mix that produces revenue.
In small companies, prices are often set by top management rather than by marketing or
salespeople.
In large Top management sets the general pricing objective and policies and often approves the
prices proposed by lower levels of management.
The most common mistakes what organisations do when pricing are
1. price is not revised often enough to capitalize on market changes
2.price is not varied enough for different market segments, and purchase occasions.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
PRICE DETERMINANTS OR FACTORS INFLUENCING PRICING DECISIONS
(i) Pricing objectives, (ii) customer analysis, (iii) cost analysis, (iv) competitive analysis, (v) Govt.
policies.
SETTING THE PRICE
The firm has to consider many factors in setting its pricing policy.
1. Selecting the pricing objective
2. Determining demand
3. Estimating costs
4. Analyzing competitors' prices and offers
5. Selecting a pricing method
6. Selecting the final price.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
SELECTING THE PRICING OBJECTIVE
The company first has to decide what it wants to accomplish with the particular product.
For example, if a recreational-vehicle company wants to produce a luxurious truck camper
for affluent customers, this implies charging a high price.
FACTORS AFFECTING PRICE SENSITIVITY
1. Unique-Value Effect. Buyers are less price sensitive when the product is more unique.
2. Substitute-Awareness Effect:- Buyers are less price sensitive they are less aware of
substitutes.
3. Difficult-Comparison Effect:- Buyers are less price sensitive with they cannot easily
compare the quality of substitutes.
4. Total-Expenditure Effect.:- Buyers are less price sensitive the lower the expenditure is to
their income.
End-Benefit Effect:- Buyers are less price sensitive the lower the expenditure is to the total
cost of the end product.
SELECTING A PRICING METHOD
Markup pricing,
Target-return pricing,
Perceived-value pricing,
Value pricing,
Going-rate pricing, and
Sealed-bid pricing.
Markup Pricing. The most elementary pricing method is to add a standard markup to the
product's cost.
Target-Return Pricing. The firm determines the price that would yield its target rate of
return on investment (ROI).
Perceived-Value Pricing. Companies are basing their price on the product's perceived value.
Value Pricing. several companies have adopted value pricing by which they charge a low
price for a high-quality offering.
GOING-RATE PRICING. In going-rate pricing, the firm bases its price largely on competitors’
prices with less attention paid to its own cost or demand.
KARTHEEK.ALDI
BAPUGI B SCHOOLS
SEALED-BID PRICING. The firm bases its price on expectations of how competitors will price
rather than on a rigid relation to the firm's costs or demand.
Channel Design Process
Analyzing Customer Needs
Establish Channel Objectives
Consider Channel Constraints & List Channel Tasks
Identify Channel Alternatives
Evaluate Channel Alternatives
Select the Channel Member
KARTHEEK.ALDI
BAPUGI B SCHOOLS