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MODULE 1: INTRODUCTION TO IMIndustrial marketing (or business to business marketing) is the marketing of goods and services by one business to another. Industrial goods are those an industry uses to produce an end product from one or more raw materials.

Industrial, or business to business (B2B) marketingExamples of a B2B selling process:[1]An organization seeks to split the work between the two firms based on an evaluation of each firm's capabilities.A sales representative makes an appointment with an organization that employs 22 people. He demonstrates a photocopier/fax/printer to the office administrator. After discussing a proposal, the business owner signs a contract to obtain the machine on a fully maintained rental and consumables basis, with an upgrade after 2 years.

Main features of the B2B selling process are:

Marketing is one-to-one in nature. It is relatively easy for the seller to identify a prospective customer and build a face-to-face relationship.Highly professional and trained people in buying processes are involved. In many cases, two or three decision makers must approve a purchase plan.Often the buying or selling process is complex, and includes many stages (for example, request for proposal, request for tender, selection process, awarding of tender, contract negotiations, and signing of final contract).Selling activities involve long processes of prospecting, qualifying, wooing, making representations, preparing tenders, developing strategies, and contract negotiations.Because industrial marketing often involves large orders and long-term relationships between the producer and client, the process from first pitch to close of sale is often more complex than the process between a business and a private customer.

While B2C sales might focus on one-on-one interactions between two parties, businesses are usually made up of a number of individuals. Before the product appears on the other store's shelves, the two businesses must reach a deal that will involve the manufacture, purchase, and shipping of thousands of products.Who Uses Industrial Marketing?

Many companies create and market products that have little to no application on the level of the individual customer, so their only clients will be other businesses. A company that makes large-scale manufacturing machinery, for example, is either unlikely or unable to sell that machinery to private individuals because those customers are unlikely to be able to afford it or won't need equipment of such size. The machinery would have to be sold to another business that has both the resources and need to produce large quantities of their own product, such as a mass-market toy factory that needs to create one million units of the same toy each year.

Industrial Marketing Strategies- Industrial marketing is an intricate process that occurs at many stages. It can involve a wide variety of marketing strategies, such as:Informational websites with language directed at other businessesPersonalized presentations to the management staff of potential clientsProduct samples to demonstrate confidence in the quality of the productOnline videos displaying products and sales staff

Many consumer product companies develop special marketing divisions specifically for B2B clients. Furniture manufacturers often do this, opening up their tables, chairs, and couches to businesses that may want them for their corporate offices. This typically happens when the manufacturer's business grows to a large enough scale to accommodate larger orders. Service providers also occasionally expand to industrial clients to take advantage of more lucrative contracts. A legal practice specializing in contract law, for instance, could expand its scope from representing only individuals to helping businesses develop their own contracts.

Stages of production process and Industrial firms involvement

Stage 1 :Defining the Organization's Mission:

A companys mission reflects the business domain or framework within which the firm will operate. The business domain of the organization consists of the customer groups that will be served, basic products that will be offered and the technology involved. A well- defined business mission statement should provide a view of what an organization seeks to accomplish and the markets and customers it seeks to pursue now and in the future. It defines the very purpose of the existence of the organization. A mission statement should also specify the business domain (or market) in which the organization will operate. The business domain can be defined in terms of three dimensions:i. The customer groups that will be servedii. The customer needs that will be met andiii. The technology that will satisfy these needs.

Stage 2 :Strategic and Marketing Analyses:

This stage consists of three steps:

1. Marketing audit and SWOT analysis ( external environment, past & present performance, future opportunities and threats)2. Competitor analysis and ( increasing intensity of competition, competitive edge, innovation pace, strategic alliances)3. Customer analysis (strategic planning- buying roles, buying behavior, decision process, factors influencing buying behavior)http://www.yourarticlelibrary.com/marketing/6-different-stages-of-strategic-planning-process-industrial-marketing/22566/6Stage 3: Strategic Directions and Strategy Formulation:

This stage consists of three steps. They are;1. Goals and objectives.2. Market segmentation, targeting and positioning and3. The formulation of strategy

Stage 4 :Strategic Choices:

This stage has four steps:1. Product and new product strategies.2. Pricing policies and strategies.3. The promotional plan and4. The distribution plan.

Stage 5: Strategic Evaluation:

In choosing between alternative courses of action or strategies, it is desirable to choose the best; but how is the best to be recognized? The best from the viewpoint of one interest group like stockholders may not be the best from another view point. Specifying criteria by which choices are to be made among competing alternatives is a crucial step in working towards improved marketing performance.State 6: Strategic Implementation and Control:

Of the two operating functions, production and marketing, the latter is the most difficult area to plan and control since it is the source of sales forecasts and revenue estimates that can rarely be predicted accurately.

Difference between consumer market and business market

Economic perspective of Industrial demandThe Industrial CustomersTYPES OF INDUSTRIAL CUSTOMERSIndustrial customers are normally classified into four groups:

Commercial EnterprisesCommercial enterprises are private sector, profit-seeking organisations such as IBM, General Motors, Computer Land, and Raven Company, purchase industrial goods and/or services for purposes other than selling directly to ultimate consumers.

(ii) Governmental Agencies The largest purchasers of industrial products are Central and State Government departments, undertakings, and agencies, such as railways, department of telecommunication, defense,

(iii) InstitutionsPublic and private institutions such as hospitals, schools, colleges, and universities are termed as institutional customers. Some of these institutions have rigid purchasing rules and others have more flexible rules. An industrial marketing person needs to understand the purchasing practice of each institute so as to be effective in marketing the products or services.

(iv) Co-operative SocietiesAn association of persons forms a cooperative society. It can be manufacturing units (e.g. Cooperative Sugar Mills) or non-manufacturing organisations (e.g. Cooperative Banks, Cooperative Housing Societies). They are also the industrial customers.Customer value in Business marketsIndustrial Products ClassificationThe industrial products and services are classified into three broad groups: Materials and Parts Goods that enter the product directly consist of raw materials, manufactured materials, and component parts. The purchasing company, as part of manufacturing cost treats the cost of these items.Raw Materials: These are the basic products that enter in the production process with little or no alternations. They may be marketed as either OEMs or user customer.

Manufactured Materials: Manufactured materials include those raw materials that are subjected to some amount of processing before entering the manufacturing process e.g., Acids, fuel oil, and steel that are the basic ingredients of many manufacturing activities.

Component Parts: Component parts such as electric motors, batteries and instruments can be installed directly into products with little or no additional changes. When these products be sold to customers who use them in their production processes, they are marketed as OEM goods. The component parts are also sold to the dealers or distributors, who resell them to the replacement market. 2) Capital itemsCapital items are used in the production processes and they wear out over certain time frame. Generally they are treated as a depreciation expense by the buying firm or user customers. These are classified as follows:

Installations/Heavy Equipment: Installations are major and long-term investment items such as factories, office buildings and fixed equipment's like machines, turbines, generators, furnaces, and earth moving equipment. These items are shown in the balance sheet as plant and equipment, and are fixed assets to be depreciated over a period of years if they are absolutely purchased.Accessories/Light Equipment: Light equipment and tools which have lower purchase prices and are not considered as part of fixed plant, are power operated hand tools etc..Plant and Buildings: These are the real estate property of a business/ organisation. It includes the firms offices, plants (factories), warehouses, housing, parking lots, and so on.

Supplies and services

Supplies and services sustain the operation of the purchasing organisztion. They do not become a part of the finished product. They are treated as operating expenses for the periods in which they are consumed.Supplies: Items such as paints, soaps, oils and greases, pencils, typewriter ribbons, stationery and paper clips come under this category. Generally, these items are standardized and marketed to a broad section of industrial users.Services: Companies need a broad range of services like building maintenance services, auditing services, legal services, courier services, marketing research services and others.Marketing implicationFor large OEMs or users selling is done directly from a seller to a buyer organisation for materials and parts products. Though, for smaller volume OEMs and users, the standard raw materials or components are sold through industrial dealers or distributors, as it is cost effective. In case the components are custom-made, considerable interaction takes place between technical and commercial persons from both buyer and seller organisations, and obviously selling is done directly. It is therefore, important for an industrial salesman to remains in close touch with purchase or materials department persons as well as with quality, production, R&D, marketing, and accounts/finance persons of buyer organisations as they influence buying or payment releasing decisions.

In case of standard products, the factors, which influence buying decisions, with differing share of business for various suppliers, are product quality and performance, delivery dependability, price, payment terms, customer service, and customer rapport.

For this, advertising and distribution through multiple channels all over the country becomes an important part of marketing strategy. Personal selling is the primary promotional method used which is used in industrial marketing.Direct selling, is used for marketing supplies for large-volume buying firms. And distributors or dealers are used to market to diverse markets consisting of small and medium size companies. The purchase or materials department persons generally make buying decisions based on dependable delivery, price, and locational convenience. Advertising in magazines, trade journals, local newspapers, and yellow pages are used to generate awareness of the company and its products to the latent users and distributors/dealers

In the strategy of marketing of service, buying firms contact the selling firms to know their reputation by way of word of mouth. The selling firms efforts are on consultative or advisory nature, and continuation of the service depends upon the quality, price, and timeliness of service to meet the customers needs.Purchasing OrientationsIndustrial marketers are aware that all business buyers do not have the same purchasing orientation and the overall purchasing philosophy. Business buyers choose from any one f the 3 purchasing orientations-

BuyingThe purchasing firm here has a narrow & short term focus. The buyers follow the following practices:Lowest price ( buying firm selects the lowest price supplier)Gain Power ( the buying firm gains power over the suppliers by using tactics like commoditization & multi sourcing)Risk ( avoid risks by following standardized purchase procedure & depending upon the already tested suppliers)

2) Procurement The purchasing firm has a strategic focus and is proactive. The buyers seek both quality improvements and cost reductions. For this the company adoptsCollaborative relationship with major suppliersWorking closely with other functional areas https://books.google.co.in/books?id=l7AIqlP8VnsC&pg=PA21&lpg=PA21&dq=industrial+marketing-what+are+the+purchasing+practices&source=bl&ots=JAhpZIgJL-&sig=wFkx02eWvqJZ8ycncvH2l430Slc&hl=en&sa=X&ei=JWA2VZLyOpLx8gXkkoGQDw&ved=0CEAQ6AEwBg#v=onepage&q=industrial%20marketing-what%20are%20the%20purchasing%20practices&f=false173) Supply chain managementHere the purchasing is extended to value adding and strategic operations. It has 3 purchasing philosophies:Deliver value to end usersOutsource non- core activitiesSupport collaborative relationships with major suppliersSupply chain management orientationProcurement OrientationBuying OrientationRaw material suppliersComponent & sub-assembly suppliersFinal Assembly ManufacturerIntermediaries (distributors, dealers)Consumers/ end usersPurchasing Practices

The industrial marketers market industrial goods or services at different types of customers such as commercial enterprises, governmental customers, and institutional customers. For effective marketing of industrial products, it is significant to know the purchasing practices generally customized by the various types of industrial customers:Purchasing in Commercial Enterprises

The purchasing practices depend upon the nature of business and the size of the commercial enterprise as well as the volume, variety, and technical complexity of the products purchased. In large and medium size organizations, the purchase decision makers involve from different departments viz. production, materials, quality, finance/cost accounting, engineering, and also senior management executives. Further, an industrial marketer must understand a set of formal purchasing procedure and documentation motioned in a commercial enterprise. An industrial marketer must understand a set of formal purchasing procedure and documentation motioned in a commercial enterprise.

Purchasing in a Government Units

The Government units are the largest purchasers of industrial goods and services. To compete successfully and to get more business, an industrial marketer must understand the complexities involved in selling to Government units. In general, the first step is to get the name of the company and the products registered with the Government units. Generally, the procedure of registration involves the submission of duly filled standard forms, product leaflets, and company details properly certified by a chartered accountant. For standard products and services, tender notices are advertised in national newspapers, based on which suppliers procure tender papers from the specified Government authority after paying a small amount of tender fees. The suppliers are then required to submit tender offers in sealed envelopes, duly signed by the signatory authority, as per the instructions given in the tender papers, by certain specified time and date.3) Institutional Purchasing

Institutional buyers are either the Government or the private organisations. If it is a Government hospital or college then it normally follows the Government purchase procedures. However, in cases of privately owned educational or other type of institutions, the purchase procedures are similar to those followed by commercial enterprises. An industrial marketer should study the purchasing practices of each institutional buyer so as to be effective in marketing the companys goods or services.

4) Purchasing in the Resellers Market

Reseller market or replacement market consists of industrial dealers or distributors whose main goals are profits and sales volume. Therefore, the intermediaries select a supplier based on product, quality and also based on the policies of the suppliers product. An industrial dealer/distributor could deal either exclusively with a supplier or manufacturers product or may deal with many competing firms of a product. Yet, the supplier related policies which effect competitiveness of traders in the market are: sharing of local advertising cost by the supplier, providing product leaflets or display materials, competitive prices and trade discounts, flexible payment terms with credit facility, and so on.Environmental AnalysisIndustry Environment Analysis is a study or exercise done to assess the current industry environment. This exercise helps understand the various aspects and predict trends of the industry better, and helps in many other ways. Generally, industry analysis is done by external research agencies, consulting firms or businesses themselves.The major objectives of industry environment analysis are:- To identify key success factors of that industry- To assess attractiveness and growth prospects for entry- To formulate competitive strategyTo study changes over time and predict trends

The industry environment is composed of the following stakeholders, around which analysis is done. Namely: Competitors, Suppliers and Buyers. There are also other major considerations like the political, legal, technological aspects which are a part of the environment analysis.To analyze these aspects of the industry, models- PEST, PESTEL, and PORTERs 5 forces are developed.There are 3 types of environment

Physical and Social Environment

2) Internal Environment

3) External Environment CompetitorsSuppliers https://books.google.co.in/books?id=l7AIqlP8VnsC&pg=PA21&lpg=PA21&dq=industrial+marketing-what+are+the+purchasing+practices&source=bl&ots=JAhpZIgJL-&sig=wFkx02eWvqJZ8ycncvH2l430Slc&hl=en&sa=X&ei=JWA2VZLyOpLx8gXkkoGQDw&ved=0CEAQ6AEwBg#v=onepage&q=industrial%20marketing-what%20are%20the%20purchasing%20practices&f=false231) The PESTLE & PEST analysis ascertains for the managers and the strategy builders as to where their market currently stands and where it will head off in the future.

P for Political factors: These factors take into account the political situation of a country and the world in relation to the country, like government policies, taxes etc..E for Economic factors: Economic factors include all the determinants of an economy and its condition. The inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect imports and exports etc..S for Social factors: Every country is different and every country has a unique mindset. These mindsets cast an impact on the businesses and the sales of their products and services- the cultural implications, the gender and connected demographics, the social lifestyles, the domestic structures, etc..T for Technological factors: Technology greatly influence a business. Technology changes every minute and therefore companies need to stay connected along the way and integrate as and when needed. Also, these factors are analyzed to understand how the consumers react to technological trends and how they utilize them for their benefit.L for Legal factors: Legislative changes occur from time to time and many of them affect the business environment. E for Environmental factors: The location of countries influence on the trades that businesses do. Adding to that, many climatic changes alter the trade of industries and the way consumers react towards a certain offering that is launched in the market. The environmental factors include geographical location, the climate, weather and other such factors that are not just limited to climatic conditions. These in particular affect the agri-businesses, farming sectors etc.

Porters 5 Force Model