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INDUSTRIAL MARKETING. Defn……. Marketing of goods & services to commercial enterprises, govt., & other non profit institutions for resale to other industrial.

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Presentation on theme: "INDUSTRIAL MARKETING. Defn……. Marketing of goods & services to commercial enterprises, govt., & other non profit institutions for resale to other industrial."— Presentation transcript:


2 Defn……. Marketing of goods & services to commercial enterprises, govt., & other non profit institutions for resale to other industrial customers or for use in the goods & services that they, in turn, produce. Large firms producing – steel, production equipments,computer memory chips caters – Business Market IBM – B2B marketer Consumer marketer – computer evolution


4 What distinguishes both market May be - Intended use of the product -Intended consumer

5 Distinguishing Characteristics B usiness Marketing Consumer goods Marketing Product More technical in nature; customized service Standardized service Price Competitive bidding for unique items;List prices on std. Items List prices Distribution Shorter; more direct channels to market Pass thro’ no. of intermediary links to consumer Consumer- Decision making Include diverse group of org. members in decision Individual /household makes decision Promotion Emphasis on personal selling Emphasis on advertising

6 A business marketing perspective Business marketing Upstream suppliers Du pont ( sheet metal,mfd. Materials) Direct suppliers Johnson controls (power steering/car seats) Auto mfrs. Ford,GM (reqd. inputs) Auto buyers consumers (automobiles) Business marketing Consumer marketing & Business mkg.

7 Classification of Industrial products Materials & Parts Raw Materials Manufactured Materials & components Capital Items Installations Accessory equipment Plant & building Supplies & Services Supplies Business services

8 Industrial marketing system A market system holds Participants Distribution channels & Relationships

9 Participants Identify Industrial marketing participants: - Extractive industries - Manufacturing industries - using & consuming Units

10 Farms Mines Forest &other Agricultural industries Fisheries Mfr. Sales To Other mfrs. Product flow diagram Extractive industries Mfg. Industries Households Govt. Other business users Exporters Using & Consuming units

11 Participants Agents participation in the marketing of industrial products # Manufacturers agents # Industrial distributors or dealers # Brokers # commission merchants # others- Advt. Agencies,consulting firms,Logistics & financial institutes

12 Channels Direct channel producer controls the distribution of his products from factory to user or OEM customer Indirect channel Independent middlemen who limit the control, a mfr. can exercise over the mkg. of his products.

13 Common channels Mfr. Branch office customer Mfr. Distributor customer Mfr. Agent customer Mfr. Agent Distributor Customer Mixed arrangements

14 Relationships The relationship existing among participants in various distribution channels for industrial products are identified as INFORMAL RELATIONSHIPS - Loyalty -Confidence - Reciprocity FORMAL RELATIONSHIPS -Contracts of sale - Franchise agreements

15 Formal Relationships Contracts of sale E xchanges of industrial goods involve a formal contract to stimulate the responsibility & liability of each party. complexity of sales contract varies with Characteristics of products Amount of sale Nature of services to be rendered No. & behavior of parties involved

16 Formal Relationships Franchise agreements when some form of protection is offered or implied, the agreement with independent middlemen is referred to as Franchise. 1. Exclusive Franchise Designates the distributor as the sole outlet for the mfrs. Products in the middlemen mkg. Area &commits the producer to supply the substantial aids. 2. Selective Franchise Mfr. Limits the no. of distributors who carry his products in the market area.

17 Informal Relationships Loyalty Suppliers who can be depended on to deliver what is ordered when it is needed, to render good service, & to cooperate with the buyer in meeting special requirements – buyers tend to be loyal. Confidence A feeling of certainty that the supplier will do what he promises & claims w.r.t his products & services can be accepted without serious questions. Mfr.must earn confidence by performance over a period of time & also buyer – seller relationship must be cemented by confidence on both sides. Reciprocity A mfr. Of industrial goods is both a seller & buyer from the same firm

18 Business Market Demand D erivative Demand Price sensitivity demand elasticity Environmental forces Influence demand International competition

19 Derived Demand Demand derived form ultimate consumers Business mkg. Manager must carefully monitor demand patterns, changing buying preferences in the final consumer markets & also develop mkg. Pgm. For ultimate consumers. GM spends more than $5 billion annually on steel, $7 billion on metal components, & $600 million on tires.This demand for industrial products is derived from buying org’s. customers(car buyers), not from buying org. (GM) itself. By purchasing a GE or Whirlpool appliances, the customer is stimulating demand for Al, Brass, paint & other products by business mkg. Firms.

20 Price Sensitivity Demand Elasticity Re fers to the quantity demanded to a change in price. Demand is elastic If a % change in price brings about larger % change in quantity demanded. Demand is inelastic If the % change in demand is less than the % change in price. Business marketer being sensitive to trends in the consumer mkt., can often identify both problems & opportunities for growth & diversification.

21 Environmental forces influence demand Business marketer must be alert to factors in the competitive, economic, political, & legal envt. That directly or indirectly influence demand. Eg:Rising interest rates may alter the purchasing plans both of home buyers and of commercial enterprises contemplating expansion.

22 Monitoring International Competition C ompanies now have to choose markets whose needs thy can satisfy and whose competitors they can handle. Japanese steel makers are formidable competitors & enjoy cost & quality advantages over their major US counterparts. In turn, many US based firms (IBM, Rockwell International & Motorola) have to establish a position of strength for selected products in Japan. Eg: Most Japanese Fax m/c include a key component produced by Rockwell at their Texas,Dallas plant.

23 INDUSTRIAL BUYING BEHAVIOR Decision making phases vary in their degree of importance, depending on the buying situation(routine or new). Effective industrial mkg. Strategy, then requires that marketers focus their attention - on the type of buying situation a firm is facing, - where it is in its decision making process( which phase), - what criteria influencers emphasize in the purchasing decision.

24 Buygrid Model Buygrid model – useful in analyzing the purchasing decision process over various buying situations. Model incorporates - 3 buying situations The “new task” The “straight rebuy” The “modified rebuy” - also, 8 phases in the buying decision process

25 A Buygrid analytic framework for industrial buying situations No. Buying phases Buyclasses New task Modified task Straight rebuy 1. Anticipation & recognition of problem & a general solution YESMAY BENO 2. Determination of char. & qty. of needed item YESMAY BENO 3. Description of char. & qty. of needed item YES 4. Search for & qualification of potential sources YESMAY BENO 5. Acquisition & analysis of proposals YESMAY BENO 6. Evaluation of proposals & selection of suppliers YESMAY BENO 7. Selection of an order routine YES 8. Performance f/b & evaluation YES

26 Buying situations New Task * Problem or Need perceived by organizations is different from past experience. * Problem recognition – triggered by internal / external factors. * Decision makers & influencers enter into pbm. Solving activity. * Obtain a variety of information to explore alternative soln. before a purchase can be made. * Successful business marketer must carefully monitor the changing needs of the org. & be prepared to respond to the needs of new task buyers.

27 Buying situations Modified Rebuy * Buyers may feel that significant benefits like quality improvements or cost reductions may be derived from reevaluating supply alternatives. * Situation occurs often when the firm is displeased with the performance of present suppliers.

28 Buying situations Straight Rebuy * When purchases are continuing or recurring, little or no info. is required; routine response is the normal buying pattern. * If delivery is prompt, quality is consistent, & price is reasonably competitive, buyers will not switch suppliers – straight rebuy situation.

29 Purchasing decision process -Phases 1. Anticipation or Recognition of a problem( need ) 2. Determination of characteristics & qty. of needed item. 3. Description of characteristics & qty. of needed item. 4. Search for & qualification of potential sources 5. Acquisition & analysis of proposals. 6. Evaluation of proposals & selection of suppliers. 7. Selection of an order routine. 8. Performance f/b & evaluation.

30 Buying center concept Major task industrial marketer facing is identifying those individuals who are involved in purchasing decision process. In industrial marketing, group of individuals involved in purchasing decision process are referred to as - Buying center

31 Identifying Buying center members Who is really involved? Buying center is an “ informal, cross-departmental decision unit in which primary objective is the acquisition, impartation, & processing of relevant info.” People in buying center involve for reasons like They may have formal responsibility (or) They may be a source of information. Various org. group members that exert influence on purchasing decision are - Marketing - Manufacturing - R & D - General management - Purchasing

32 Buying center influence matrix PhaseNew BuyModified Rebuy Straight Rebuy Need Identification Engg. Purchasing R&D Production Purchasing Production Engg. Production Purchasing Supplier selection Purchasing Engg. R&D Quality control Purchasing Production Engg. Purchasing Production Engg.

33 Influence patterns vary Type of company Equipment purchase Central Figure Chemical manufacturer Heat exchangerPurchasing manager Industrial safety products mfr. Automatic drilling m/c Engineer & VP of mfg.

34 Buying center Roles Primary roles Deciders - CONTROLLER Influencers - R&D ENGINEER Secondary roles Users - WORKER Buyers - PURCHASER Gatekeepers - PURCHASING MANAGER

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