Module 1

BUSINESS MARKETING
 Industrial marketing

Definition
All activities involved in the marketing of
products and services to organizations
that use products and services in the
production of consumer or industrial
goods and services, and to facilitate
the operation of their enterprises
Exchange transactions in
industrial market
Contrasting industrial and
consumer market
 Contrasting industrial and
consumer market

Market characteristics
The size
The geographic concentration
The competitive nature of market
Product characteristics
Buyer characteristics
Stable relationships
Buyer-seller interfaces
 Contrasting industrial and
consumer market

Channel characteristics
 Contrasting industrial and
consumer market

Promotional characteristics
Joint demand
Cross-elasticity of demand
 The resellers market
Consumer marketing
Resellers are element of marketing mix but not
customers
Market characteristics
Small& concentrated, strong buying power Ex:
Mc Donalds Food retail chain
Product characteristics
Customization: buyers private brand
enhance quality of materials
eliminate products that do not add retail value,
product differentiation by changing switches,
motors& batteries
Critical success factor: Delivery, availability of
spares and maintenance. Ex: TV, Computer
 Buyer characteristics
Compare technical features of products
Rational buying rather than psychological
Multiple influencers and decision makers for a
single purchase
Channel characteristics
Durable goods. Ex: Textile products (Short)
Basic commodities. Ex: Hardware (Lengthy)
Promotional characteristics
Advertisement to consumers (Pull strategy)
Manufacturers Personal sales force to sell
 Price characteristics
Final price and profit margin
Special discount for extra shelf-facings and in
store promotions
Economics of demand
Derived demand inventory levels of resellers
Ability to affect demand through increased
promotion, VAS or price discounts
Closest channel to consumers feedback of
customers desires and preferences
Joint demand supply entire product line. Ex:
meat, poultry and fish
The industrial marketing concept

It involves more than facilitating

exchanges with customers
(business/institutions/Govt. agencies) ;
it is a philosophical point of view that
has as its basis the formation of a
partnership between buyer& seller for
the purpose of achieving the
organizational goals of both.
Understanding industrial
markets
 Industrial market types
Organizational customers
Commercial enterprises
Industrial distributors& dealers
OEMs
User
Overlap of categories
Ex: Forklift mfr can be a user of metal cutting
machine tools and can be a OEM in gear drive and
transmissions component of forklift
Governmental agencies
Central, state and local Govt
Buys both goods services
Contributes to 37% of national GDP in US
Procurement practices are highly specialized
and often confusing
 Institutions
Public and private
Rigid Vs casual purchasing procedures
Effective marketing lies on identifying each
institutions typical buying process
 Purchasing in Commercial Enterprises
Multiple influencers
For large companies
Production people, engineers, cost accountant,
middle& upper Mgt and purchasing agents
Technical sophistication
MRP, EOQ, value analysis and supplier rating
system are used
Purchasing managers
Make greater use of firms internal engineering
capability to evaluate competitors products
More knowledge of price trends
 Quite expert in the art of negotiation
Tend to be a specialist capable of developing
detailed knowledge of manufacturing process
and design specifications of products&
materials
Knowledge of buyers needs (Value analysis),
products to fulfill the needs and capabilities of
existing and potential competition is required
 Purchasing in Govt. units
Widely dispersed markets
Defense, space, interior, transportation and
postal service
70,000 buying centers in Federal, state and
municipal levels
Large number of internal buying influencers
Numerous interest groups who specify,
legislate, evaluate and use goods& services
purchased
 Complicated procurement laws
Legal requirements that establish guidelines for
contractual arrangements
Lesser focus on product/service under
consideration
Focus on contractor to give preference to
small sub-contractors, to employ certain % of
minorities, minimum wages
Federal govt. provisions include product
inspection requirement, payment methods,
actions to be taken as a result of default and
disputes etc
 Understanding Govt. contracts
Fixed-price contract: agreed price
Cost-reimbursement contract: cost plus profit
(fixed fee or % of total cont ract fee) is
allowed. Reimbursed for allowable costs
incurred in performing the contract.
 Institutional purchasing
Mixture of govt. and private organizations
Practices lying between commercial
enterprises& Govt.
Public institutions Vs Pvt. Institutions
Purchasing agent:
entire school system (formal bidding) Vs Pvt.
health care system
Ex: Multicampus state university can have
centralized purchasing like govt. customers; or
decentralized purchasing like commercial
customers
 Purchasing in resellers market
Primary: Sellers evaluated on sales
volume& profit
Marketing policies of the seller
Supplier choice of intensive, selective or
exclusive distribution
Co-operative advertising
Point-of-Purchase displays
Both products& policies affect reseller
But some of the well-known brands are
chosen based on customer acceptance
rather than supportive policies
Industrial products
 Materials and parts
Cost is treated as manufacturing expenses
Raw materials
Agricultural products, natural gas
manufactured materials
Latex can be processed into giant tyres
Copper formed into wire
Aluminium into extruded shapes
Plastic powder into molded parts
Leather or chemicals (processing for shoe or
drug manufacturer)
 Component parts (OEM goods)
Switches, motors and customized gears
After sale or replacement market through
distributors
Marketing implications
Standardized component parts and materials
Direct selling: large quantities on contractual basis
by large OEMs;
Distributor selling: smaller OEMs or user
 Influencers: purchase dept of buying firm
Engineers and production people develop
product specifications that limits choice of
suppliers target& communicate
Communicate through Trade advertising or
personal contact
Product quality& performance, Delivery
dependability, Price& Supportive service
Customized component parts
Direct selling: Since it requires considerable
interaction and direct selling
Component parts for replacement market
Tires& batteries
Product or price differentiation
Consumer advertising
 Capital items
Buyers are generally user customers
Outright purchase (treated as depreciation
expenses)
Lease (treated as expense by buyer for the
purpose of tax)
Installations
Major, long-term investments
Office buildings, fixed equipments such as generators,
lathes, furnaces, computers and custom-made
equipment
 Accessories
Light equipment& tools
Portable power drillers, computer
Comparatively wider usage and Less expensive
but not considered as a part of fixed plant
Marketing implications
Direct selling : Extensive interaction involved;
high cost, negotiation, custom made. Ex:
buildings and custom made installations
Marketing intermediaries: less expensive
installations& accessories; advertising in trade
journals and manufacturers representative
 Supplies and services
Treated as operating expenses
Supplies
soap, paper, paperclips
Generally standardized for all
Services
Operating services: facilitate firm functioning
Primary: Accounting services to a firm
Secondary: updating online database for multiple
customers and not intend for ones original use
Maintenance services: Annual maintenance
Repair services:
 Marketing implications
Buyers: Many organization in almost all industries
Direct marketing: Major resellers& Large users
Marketing intermediaries: small& diverse market
Purchasing agents: dependability of delivery,
convenience, price and breadth of assortment
Sellers reputation for dependability is most
important for success
Promotion: Advertising and use of catalogs and
trade journals
Professional services: word-of-mouth reputation,
consultative approach
Industrial marketing
environment
 Industrial marketing
environment

Interface level

Long-term buyer seller relationship

Researchers, engineers& production meet
their counterpart and exchange information
on technological developments and
processing innovations synergic effect -
 Industrial marketing
environment
Publics

Financial publics: Investment house, stock

broking firms and individual stockholders
Independent press: negative publicity
Public interest group: environment
protection, rights of women, black& senior
citizens
 General public: sizable proportion - unorganized
way attitude towards a company impacts
Internal public: board-of-directors, managers&
blue and white collar workers corporate policy
employee morale employee attitude do
influence the public
Marketing implications:
Ultimate mission of business to serve society and be
sensitive to publics
 Industrial marketing
environment

The macroenvironment

Economic influences
Derived demand consumer income change
influences industry
Exchange rates fluctuation
Industry wise difference profit Vs nonprofit
purchasing decisions
 Ecological influence:
waste materials disposal public& Govt.
intervention
Code of conduct for chemical companies
coalition of 24 nations organization for
Economic Cooperation and Development
Physical environmental influences:
Raw materials, water, power, skilled
management, low-cost labor and
transportation facilities
 Cultural influences:
Cultural mores, customs, habits, norms
Japanese Vs American
Decision making, long-term employment and
quality circles
Technological influences
telecommunication, computer& semi
conductor
CAD, CAM and robotics
Demographic influences
Increasing population demands more earth's
exhaustible resources
India will double in 25 Yrs
Govt influence on the industrial
marketing environment
Strategies for managing
industrial marketing
environment