b mkt class mod 1 demensions
TRANSCRIPT
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Introduction to
BusinessMarketing
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Learning Resources
Business marketing : RobertDwyer & John F Tanner
Industrial Marketing : Robert R
Reeder , Edward G & Betty HReeder
Industrial Marketing : Krishna K
Havaldar
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What is business
marketing?!
Marketing products or services toother companies , governmentbodies , institutions and other
organizations. Consumer marketing : marketing of
products and services to individuals
, families and households.
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Areas Industrial markets Consumer markets
Marketcharacteristics
Geographically concentratedRelatively few buyers
Geographically distributedMass markets
Productcharacteristics
Technical complexityCustomised
Standardised
Servicecharacteristics
Service , timely delivery and availabilityis very important
Service , delivery andavailability is somewhat
importantBuyer behavior Involvement of functional areas of both
buyer and sellerInvolvement of familymembers
Purchase decisions made rationally Purchase decisions madeon personal needs
Technical expertise Less technical expertise
Channelcharacteristics
More directFewer intermediaries
IndirectLot of intermediaries
Promotion Personal selling Advertising
Price Competitive bidding List prices or MRP
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Industrial demand :
Derived
Industrial customers buy goods andservices for use in producing othergoods and services. Eventually ,
whatever is produced is sold to theconsumers. Thereby , demand forindustrial goods and services is
derived from consumer goods andservices.
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Joint demand : occurs when oneindustrial product is useful if otherproduct also exists.
Cross elasticity of demand : The concept of elasticity
Cross elasticity of demand is the
responsiveness of the sales of oneproduct to a price change in anotherproduct
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Types of industrial
customers
Industrial customers are generallyclassified into 4 groups.
Commercial enterprises
Government customers Institutional customers
Cooperative societies
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Industrial customers
Commercial enterprises : privatesector , profit seeking organizationsconsisting of :
Industrial distributors Original Equipment Manufacturers
(OEMs)
Users
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ass ca on oindustrial products and
services There are many methods by whichindustrial products and services areclassified. The method that is most
accepted classifies products andservices based on how products orservices enter the production
process , and their relative costs. Materials and parts
Capital items
Supplies and services
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Materials and parts
Materials that enter productdirectly.
Raw materials
Manufactured materials ( acids , fuel ,steel , chemicals)
Component parts ( spark plugs ,
bulbs , LCD Display units )
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Capital items
Capital items are those which areused in the production processesand they wear out over certain time
frame. Heavy equipment ( turbines ,
generators , furnaces , boilers , earthmovers)
Accessories / light equipment (computer peripherals , hand tools etc)
Plant and building (offices , plants ,
warehouses , parking lots etc)
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Supplies and services
Supplies and services support theoperation of the purchasingorganization. They do not become
the part of final product. Supplies ( coffee , soaps , oils and
grease , pencils etc)
Services ( building maintenance ,auditing , legal , courier , marketingresearch , catering)
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Industrial customers
purchasing orientations
Business buyers ( industrialcustomers) do not have the samepurchasing orientation , or overall
purchasing philosophy whichguides them through thepurchasing decision.
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Rawmaterial
suppliers
Component andsubasse
mbly
Finalassembl
y
intermediaries Consum
ers / end
users
SCM Orientation
Procurement Orientation
BuyingOrientatio
n
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Buying orientation
The purchasing firm with buyingorientation has narrow and shortterm focus.
Lowest Price : selects lowest pricesupplier
I win you lose is the negotiation style
Gain power : the buying firm gainspower over suppliers by using tacticssuch as commoditisation and multisourcing
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Procurement
orientation
Purchasing firm has a strategicfocus and is proactive. Both Qualityimprovementsand Cost reductions
are sought after. Collaborative relationships
Working closely with other functional
areas
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upp y a nmanagement
orientation Includes coordination and integration ofpurchasing function with other functions withinthe company and also with other organizations.
Focuses on improving the whole value chain
from raw materials to end users (products) Deliver value to end users
Outsource non core activities
Support collaborative relationships with suppliers
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Industrial marketing
environment
Interfacelevel
Public
Macroenvironment
Government
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Interface level
Involves key participants whoimmediately interface with anindustrial firm in facilitating
production , distribution andpurchase of firms goods andservices.
Input suppliers Distributors
Facilitators
Competitors
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publics
Publics are distinct groups that have anactual or potential interest or impact oneach firms ability to achieve its
respective goals.
Publics have the ability to help or hindera firms effort to serve its markets
Financial publics
Independent press Public interest groups
General publics
Internal publics
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The macro environment
The dynamic forces of the macroenvironment have a major impacton both the publics and interface
levels of the industrial environment. Economics
Ecology
Physical environment Culture
Technology
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Government
Government , charged withadministering and controllingnations , enables and facilitates ,
but also hampers and disallowsindustrial actions.
The government laws , regulations
and activities affect all participants
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Primary functions of a government are to : Protect companies from each other
Protect consumers from unfair business practices
Protect the larger interests of society againstunrestrained business behavior
Promote income equality in society
Provide economic stabilization through control ofunemployment and inflation.
These functions involve: Regulating agencies (SEBI , IRDA, Company Law
Board)
Laws / policies(MRTP Act)
Program funding (R&D Support) Import / export regulation (FEMA, quota , trade
barriers)
Levying taxes (service , octroi , VAT)
Providing social programs ( Benefits , CSR)
Controlling interest rates (Monetary and Fiscal policies)
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Environmental analysis
Environment
Ecological andphysical
internal external
micro macro
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Case 1. Edward F. Crow Company
The Edward F. Crow Company is an industrial distributorlocated in Memphis, Tennessee. Its principal product lines
include materials handling equipment such as conveyors andtransfer stations, electric motors and controls and powertransmissions, and, finally, weighing scales, particularly thoseused as part of conveyor lines.
The firm covers a territory consisting of parts of nine states:
Tennessee, Kentucky, Alabama, Mississippi, Louisiana,Arkansas, Missouri, Illinois, and Indiana. Memphis is the hubof a trading area called the mid-South.
The firm was founded in 1937 by the late Edward F. Crow whohad earned his mechanical engineering degree from Case
School of Applied Science (now Case Western ReserveUniversity) in the 1920s. Before carting his own firm, he hadbeen a design engineer and then a sales engineer for a majormanufacturer of conveyors.
This case was prepared by Ernest F. Cooke, Professor of Marketing,Layda College, Maryland. Reprinted by permission.
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Case 1. Edward F. Crow Company
When he passed away about five years ago, operation ofCrow was taken over by one of the lawyers who was handling
the estate. There were no heirs interested in or capable ofrunning the firm.
Over the last five years, annual sales have decreased fromslightly less than $3 million to slightly more than $2 million(see Exhibit 1). Because of inflation, actual physical volume
has decreased even more (about 40 percent). Five years agothe corporation was very profitable, but last year Crowsuffered a very small loss.
Five years ago there were five outside sales people. Asconditions worsened, the sales force diminished in size, the
last outside salesperson quit last week, and only two insidesalespersons are left. They are both very competent but areoverworked. As a result, the firm lost an opportunity to bid onseven large electric motors for the Tennessee Valley Authoritywhen the closing date was missed.
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Case 1. Edward F. Crow Company
Income Statement, 1978 versus 1982 ($000)1978 1982
Sales
Motors and so on $669 $412Parts, repair and service for motors, and so on 642 516Materials handling/installations* 870 615Scales 361 224Parts, repair, and service for scales 374 298Total net sales $2,916 $2,065
Cost of goods soldMotors and so on 458 288Parts for motors and so on 237 196Materials handling 556 406
Scales 243 155Parts for scales 111 94Total cost of goods sold 1,605 1,139
Gross margin $1,311 $ 926
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Case 1. Edward F. Crow Company
Income Statement, 1978 versus 1982 ($000)1978 1982
Operating expensesService and repair, labor and overhead** 501 412Warehouse and distribution expense 212 201General administrative and selling expense*** 318 319Basically fixed costs'Total operating expense 1,031 932
Operating income [loss] $ 280 $ [6]Interest expense less interest revenue [13] [4]Net income [loss] before taxes $ 293 $ [2]Income tax [refund] 132 0Net income $ 161 $(2)
*Actual materials handling sales are larger than indicated on the income statementbecause they usually include electric motors and controls, power transmissions, andsometimes scales. When these components are included as part of a materials handlinginstallation, the sales dollars are shown under the category scalesormotors m so on.**About 10% of this is assembly labor and warranty labor associated with material handlingsales.***Basically fixed cost and includes the engineer's salary.
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Case 1. Edward F. Crow Company
At present (1983), volume is broken down as follows:
1. Electric motors and controls and power transmissions 20 %2. Parts, repairs and service for motors, and so on 25 %3. Materials handling equipment, including parts and design
services but not including motors, controls, transmissions,or scales. 30 %
4. Scales 10 %
5. Parts, repairs, and service for scales 15 %
Over the last five years, dollar sales decreased in all five categories.The share of total sales held according to category has changed, withnew motors and scales dropping from 35.3 percent to 30.8 percent,
all parts and repair increasing from 34.8 percent to 39.4 percent, andmaterial handling holding steady at 29.8 percent.
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Case 1. Edward F. Crow Company
In addition to the two inside sales people, employees include a
purchasing agent, a parts manager, a service manager, and sevenservice and repair people, an engineer who designs materials handlingsystems, some warehouse and delivery people, and clerks who handlebookkeeping, billing, and correspondence. There has been turnoveramong these employees; consequently, problems have arisen due tobeing short of help as well as having inexperienced help For example,
there is a one-month backlog in billing for completed service work duea shortage of help and inexperienced help
The purchasing agent also acts as office manager. The engineer hasincreased the amount of his customer contact because of decrease inoutside sales people.
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Case 1. Edward F. Crow Company
The firm is the exclusive distributor i the mid-South for Primax, a
foreign manufacturer of electric motors whose East an Gulf Coast port-of-entry is New Orleans. Primax has a distribution center in Memphisthat serves the entire country. Crow's annual Primax sales, five yearsago, totaled 400 units contrasted with sales last year of 200 units. Itssales quota last year was 200 units. So far this year, sales have beenat an annual rate of 200 units averaging $1,000 per unit.
Crow also represents several division of Reliable Electric, amanufacturer of electric motors, control, transmissions, and so on.Sales of Reliable products this year are running at an annual rate of$300,000 including parts. Almost 10 percent is small powertransmission components purchased from Reliable's Lodge Divisionfor materials handling installations.
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Case 1. Edward F. Crow Company
The firm is the distributor for several different manufacturers ofmaterials handling equipment and scales. These manufacturers are
competitors in some of their lines. In these cases, Crow sometimesuses more than one manufacturer for a given installation of materialshandling equipment or scales. For most manufacturers, the firm is theexclusive distributor in the Memphis area even though they carrycompetitive lines.
In the almost 40 years that Mr. Crow ran the firm, he had built up anexcellent reputation among suppliers and customers. Although thisreputation has deteriorated somewhat in the last five years, the firmstill enjoys a good reputation. If the situation continues to deterioratemuch longer, it will reach a critical stage. It may even become anirreversible situation.
Recently the Fearhank-Moose Scale Company, which manufacturers aline of portable industrial scales, canceled its contract with Crowbecause it felt that Crow was not doing justice to its line of scales.Subsequently, Fearhank signed up with another Memphis industrialdistributor who is in direct competition with Crow.
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Case 1. Edward F. Crow Company
You have just purchased a controlling interest in the firm and have
appointed yourself president, chief executive officer, and chiefoperating officer. The lawyer who was president is no longer with thefirm. There is no doubt that he was ill-equipped to run the business. Itrequires someone, like you, with marketing and management know
how!
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Class Exercise 1 Team 1 :
You are the marketing team of Symantec , renowned for the anti-virus software norton antivirus.
Latest market research , based on IP tracking of customers have revealed the following facts. Product name
Market % (product volume / total sales)
Geographical distribution ( highest of user lists)
Norton antivirhome edition
71%
Asia
Norton Antivirsmall business edition
26%
North America & europe Norton antivirenterprise edition
2%
scattered
On further investigation, following facts are revealed
Most of the IT companies in developing worlds (India & Thailand) use antivirhome edition.
There are many cases of IT service providers in India , violating the license and distribution of these products.
Norton enterprise edition , which is specifically designed for large enterprises , has little acceptance.
The cases of copyright violations and license violations through malicious code / hacking has increased.
The estimated impact on sales in Asia due to software piracy is 62%.
The hacked version cannot update itself to latest virus definitions , hence the brand value of Norton antivirus too isaffected.
You are now required to :
Come up with reasons for huge popularity of norton-home with the IT service providers.
State whether a whole new product for these regions (Asia) needs to be developed. If so , state reasons.
Prepare a presentation outlining the benefits of norton-enterprise over the home version , which needs to bepresented at the next summit of CEOs of IT companies.