industrial mkts.ppt

8/23/2019 industrial mkts.ppt

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Industrial Marketing

Also called: Business-to-Business (B2B) andOrganizational Marketing/InstitutionalMarketing

The creation and management of mutuallybeneficial relationships between organizationalsuppliers and organizational customers.

Customer can be private firm, public agency, ornonprofit organization.


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Marketing Activities

Identify customer needs

Research customer behavior

Divide market into manageable segments

Develop new products/services Establish/negotiate prices

Deliver, install, service products

Ensure adequate and timely supply of

products at correct place Allocate resources across product lines

Communicate with customers

Evaluate/control marketing programs


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Marketing Mix

Limited number of variables underMarketings control to create position that

is attractive to the target market segment.

Four Ps

Product

Price

Promotion

Place (Distribution)


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External Environment

Characterized by:

Degree of Stability

Complexity Diversity

Hostility


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External Environment

Six Environments

Technological

Economic

Social/Cultural (Customer)

Political/Legal

Natural/Climatic

Competitive


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So whats different about B2B?

Marketing Concept

Marketing Mix

Market Segmentation

Product Life Cycle

All apply in both B2C and B2B.


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So whats different about B2B?

The technical characteristics of the product areimportant.

These products directly affect the operations andeconomic health of the customer.

The customer is an organization rather than an

individual consumer, or family.


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Industrial Market Vs Consumer MarketMarket Structure

Industrial Market

Geographically concentratedFewer buyers (relatively)Big buyers

( small number of large buyers)

Consumer Markets

Geographically dispersedMass marketsFree Market

(large number of buyers)

UnderstandingIndustrialmarkets


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Industrial Market Vs Consumer MarketBuyer Behavior

Industrial Market

*Evaluated for functionalityrational/task motive to buying.*Purchasers are experts & focusis more on performance/service.*Higher interaction with the

supplier.* Formal processes.

Consumer Market

*Social / psychologicalfactors are important.*Family involvement & focusmore on product per se.*No personal relationship

with the supplier.* Less of formal processes.



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Industrial Market Vs Consumer MarketBuyer Behavior - Example

Industrial Buyer for AC

*Evaluated for functionality( evaluation by tech committee)*Purchase through tenderingProcess & brand less important.*Discuss technical details,

price negotiation etc.*Formal processes ofdocumentation etc.

Customer for AC

Should look good & matchthe dcor.*Want to buy LG only(because neighbor has)*Go to a shop, select, negotiate

pay & forget.* Less of formal processes.



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Industrial Market Vs Consumer MarketProducts

Industrial Market

* Technical complexity andcustomized.

* Service, delivery andavailability is very

important.

Customer Markets

* Standardized.

*. Service, delivery andavailability is somewhat

important.



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Industrial Market Vs Consumer MarketProducts - Example

Samsonite Outsourcingsoft luggage

* Each component is as perSamsonite specification.

* Service, delivery andavailability is very

important as it affects supplychain of the company.

Customer for Samsonite softLuggage

* Standardized product rangeto select from.

*. Service, delivery andavailability is somewhatimportant, can wait for a

Specific color / size.



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Industrial Market Vs Consumer MarketDecision making

Industrial Market

* Distinct observable stages

* Multiple influencers and

decision makers.

Consumer Market

* Unobservable mentalstages, not very clearpattern.



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Industrial Market Vs Consumer MarketDecision making - Example

Industrial Buyer Soaps forWorkers canteen

* Need identification, selection,procurement etc.

* O.K. from the workers union,agreement by contractor,

purchase departmentsnegotiation & placing order.

Customer

* Low involvement buyingand impulse purchase(the exact choice criteriadifficult to identify) & varies

from situation to situation.



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Industrial Market Vs Consumer MarketDistribution channel characteristics

Industrial Markets

* Shorter, more direct &fewer linkages between sellerand buyers.

Consumer Markets

* Indirect and multiplelinkages



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Industrial Market Vs Consumer MarketDistribution channel characteristics -Example

Hotel buying Cold Drinks

* Supplied directly by thedistributor, may even beserviced by companyemployee or a regular basis.

Customer for Cold drinks

* Normal distribution styleof distributor to retailer tocustomer. Virtually nointeraction with company.



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Industrial Market Vs Consumer MarketPromotion

Industrial Markets

* Emphasis on personal sellingor one to one dealing.

Example : Selling fridgeswith decals. You go and dealwith Coke or Pepsi H.O.

Consumer Markets

* Emphasis on mass marketpromotion.

Example : You plan an adv.campaign to highlight decals

and generate customer flow.



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Industrial Market Vs Consumer MarketPricing

Industrial Markets

* Competitive bidding &multistage negotiation.

* Sharing of cost data &budgeting of acceptableprofits in many cases.

Consumer Markets

* Normally MRP

* Concept of list price & itsimplementation.



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Industrial Market Vs Consumer MarketPricing - Example

Industrial (CSD purchaseOf Rum )

* Competitive bidding &selection on basis of L1.

* Sharing of production and

overhead cost data with CSDand price based on cost +margin.

Consumer Markets for Rum

* Normally MRP

* Concept of list price & itsimplementation in the trade.



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A big reseller can be treated as a Industrial BuyerRetail Chains

Example: Shoppers Stop / Ebony / Kids Kemp for anapparel manufacturer.

Purchase : Not for consumption but for business.

Market characteristics : Very few of them and they are big insize and have centralized purchasing.

Product characteristics : Specific private labels.

Buyer characteristics : Technical evaluation / rational process /multiple buying influencers.


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A big reseller can be treated as a Industrial Buyer

Example: Shoppers Stop / Ebony / Kids Kemp for anapparel manufacturer.

Channel characteristics : Direct service by the manufacturer.

Price characteristics : Very hard on negotiation, if they getbetter price, it straight goes to profits.

Economies of demand : Based on actual consumer off-takeof the products and hence derived.If one design clicks, it is stockedmore in anticipation.



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Organizational Customer

Type of purchasing organization

Commercial Enterprise

1. Industrial Dealers & DistributorsEssentially their objective

is to trade on the items. ( relatively narrow scope ).

2. OEMThese consumers use the products as component of

their own output. The stakes are high as their final output

depends on your product. ( Maruti as a user of headlights ).

In emergency, they can make the vehicle & fit headlights later.

3. Users ( consumers )They are the final consumers of the

product and their total operation depends on you. Example:

Eastern Coal Fields for Tisco. No coal => No Steel.

Understanding

Industrial

markets


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Government agency

1. Standard procurement processesRegistration,

Tender, L1 etc.

2. Public accountabilityeverything by rule books as far as

documentation.

Understanding

Industrial

markets


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Institutions ( Private & Public Sector )

1. Tisco giving its workers, watches as Diwali gifts.

2. XIM-B purchasing air-conditioners for faculty offices.

3. DSP cooperative buying suitcases for their members.

Characteristics : Normally one time deals, large orders,

less of technical evaluation, nonspecialist buyers.

Understanding

Industrial

markets


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Materials and parts

1. Raw materials ( natural gas, HDPE etc.)

2. Manufactured materials ( copper wire, steel sheets )3. Component parts ( switches, motors or customized gears )

Characteristics : Normally large custom made orders are sold

By the manufacturers & standard products by industrial. distributors.


Based on Type of products purchased

Understanding

Industrial

markets


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Capital Items

1. Installations ( buildings, computers, machinery etc.)

2. Accessories ( PC, Office furniture)

Characteristics: Normally major installations, because of

extensive interaction required and long negotiation time required,

the manufacturers deal directly with the customer & accessories are

sold by industrial. distributors.



Understanding

Industrial

markets


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Supplies and services

1. Supplies ( soaps, stationery etc.)

2. Services ( maintenance, canteen etc.)

Characteristics : Normally industrial distributors are used &

services are provided by the individual contractors ).



Understanding

Industrial

markets


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Example : Procurement of Injection Moulding Machine

1. R & D : Designs the moulds which are to be used.

2. Production : Output levels, installation needs.3. HRD : Manpower implications, skills to be imparted.

4. Quality Assurance : Responsible for output consistency.

5. Maintenance : Ease of operation, availability of spares,

AMC etc.6. Finance : Long & short term financial implication.

7. Purchase department : Price, payment terms, delivery

terms.

Characteristics of Organizational

Procurement

Multiple Influences

Understanding

Industrial

markets


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Example : Procurement of Rutile for paints

1. Material Planning : Exact forecasting of demand,

factoring of international prices Vs domestic prices, foreignexchange implication, inventory carrying cost etc.

2. Supplier rating : Based on the the quality reports, delivery

records , price factor, payment terms etc. the suppliers are

rated and

3. Economic order quantity : The quantity to order,

frequency of ordering etc. are planned so as to optimize the

profitability of the organization.


Procurement

Technical sophistication

Understanding

Industrial

markets


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Example : Procurement of Rutile for paints

4. Value Analysis : The option of using a lesser quantity of

costly Rutile for getting the same output level by change offormulation is explored.

In absence of the raw materials, whether any alternative can

be used is worked out. How the option of airlifting impact

cost etc. is worked out before decision making.


Procurement

Technical sophistication

Concept of optimization w.r.t constraints

Understanding

Industrial

markets


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1. Large number of buying center : Government

departments are everywhere.A lot of them purchase locally.

2. Political interference :3. Specified govt. contracts :

a) Rate contracts

b) DRDO / ISRO Dev. Job cost + effort cost

c) 131 Orders


Procurement

Government purchases

Skills required are specialized

Understanding

Industrial

markets


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Industrial Marketing Environment

Buyer

Seller

Interface

Publics

Macro Environment

Govt. influences

Understanding

Industrial

markets


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Buyer seller interface

Labour

Capital

R.M.Components

Equipment

Mafg.

Dist. /

Dlrs.

Compt.

Manufacturer rep

Dist / DlrsTransporters

Warehousing firms

Mktg. Research firms

Bankers & insurers

Suppliers Buyers Facilitators Market

segments

Govt.

Commercial

Enterprises

IndustrialDistributors

Understanding

Industrial

markets


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Publics

1. Financial publicsFI / Stockbrokers / Individual Stock Holder

( Stock prices, confidence in company )

2. Independent pressImpact on reputation of company

( Dhabol power corporation )

3. Public interest groupsEnvironmentalists

( Euro II , CNG vehicles, Narmada bachao)

4. General publicsMacDonald's coating French fries with beef

tallow

Business serves the society

Understanding

Industrial

markets


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Macro Environment

1. Economics - Increased demand for oil led to increase in prices

of oil in the world markets. Changes the cost base of most

oil based companies. Also changed the demand pattern of

automobile ( petrol to diesel ).

Government policies like subsidizing diesel at the cost of petrol.

2. Ecological influences - The concern for the environment

so emission norms are stringent & industry has to adjust.Bhopal gas tragedy, changes in the law to use MIC as an

intermediary.

Right to Know Companies have to furnish details of the

hazardous products made & used by them.

Understanding

Industrial

markets


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Macro Environment

3. Physical environmental InfluencesSteel plants need iron

ore, water & lime stone deposits for setting up. MP, Bihar and

Orissa have the concentration of steel plants.

.

4. Politico / Cultural influencesHire and fire policy of west Vs

militant trade unionism & job protection in India.

5. Technological influencesTypewriters manufacturers had

to shift market focus, change products etc after PCs and wordprocessors became common.

Understanding

Industrial

markets


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Macro Environment

6. Government influences

Anticipating governments action: WTO treaty signing

and IMF loans linkages for govt. The govt. needs the

loan so it is likely to sign the treaty.

Influencing Govt. actions: Lobby for reduction in excise

duty (to create level playing field).

Lifting of Liquor ban in A.P. ( a lot of lobbying ).

CNG buses for Delhi .

Understanding

Industrial

markets


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Environment Management Strategies

Independent Strategies

1. Competitive aggression

a. Create Product differentiator (Bonding power of cement

Gujrat Ambuja Cementcompressive strength)

b. Aggressive pricing (coal based power plants Vs Gas based

power plants)

c. Comparative advertising - Dhabol Power Corporationcame up with the very good adv telling the good the

plant has brought about in the area, water supply,

school, employment, plus electricity generation cost

(compared with other plants etc.)

Understanding

Industrial

markets


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2. Competitive pacification

a. Improved competitive relations - (Auto companies do not

fight on discount to trade @4%, they

do not spoil the trade, focus on end users ).

b. Industry promotionDoodh, Egg & LPG campaign.

( Increase the pie rather than fight

for the same pie).

c. Price UmbrellasThe transporters union finalizing rates

for each destination ex- Mohali.

Understanding

Industrial

markets


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3. Building Public Opinion

a. Corporate Image advertisingISO 9000 Accreditation.

b. Voluntary environmental controlISO 14000 Accreditation

Making green products & advertising it.

c. Commitment to interest groupsArchies cards giving part

of institutional revenue to fund the NGOs.This help them charge higher & get business.

Understanding

Industrial

markets


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4. Political / Legal

a. Directly lobbying with the govt. & law enforcers.

Steel Industries lobbying for more development work,reduction in excise etc.

b. Issue advertising through the direct paid media or even

influencing the media to highlight the issue ( may or maynot be funded directly ).

Understanding

Industrial

markets


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Co-operative strategies

a. Contracting : Allwyn is part of Electrolux, but supplies

refrigerators to LG.

b. Co-optation : Absorption of relevant Publics on boardof directors. IIMC & XLRI directors

in the board of directors of XIM.

c. Coalition : Industry association ( Specially used tolobby with the government )

FMA decision to have max 7 years warrantee

on fans.

Understanding

Industrial

markets


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Strategic Maneuvering

a. Domain Selection : Focusing on areas of strong competitive

advantage. Cray Supercomputers

ICI Worldwide Light chemicals

with high margins.

b. Diversification : Reliance into telecom sector. May be the

idea is to be part of a high growth

industry which has good futurepotential.

Understanding

Industrial

markets

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