Industrial Marketing What is Marketing is the science

Industrial Marketing

What is Marketing is the science and art of identifying, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services

Marketing is often performed by a department within the organization. This is both good and bad. It’s good because it unites a group of trained people who focus on the marketing task. It’s bad because marketing activities should not be carried out in a single department but they should be manifest in all the activities of the organization.

Marketing : DEFINITION Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. (Kotler) Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably The Chartered Institute of Marketing (CIM)

Industrial marketing The basic concept of marketing remain the same for both the consumer marketing and industrial marketing. However there are differences between consumer markets and industrial markets. These differences must be understood well by industrial marketers, who want to reach and satisfy the customer better and faster then their competitors in order to achieve the corporate objective.

What is Industrial Marketing Industrial marketing is also referred to as business to business (B 2 B) marketing or business marketing or organizational marketing. Industrial marketing is the marketing of products and services to business organizations. Business organizations include manufacturing companies, educational institutions, hospital, distributors and dealers.

Classification Of Industrial Product Industrial products and services are classified into three broad groups. (1) Material and Parts These goods enter the product directly Raw Material ( Basic Products like iron ore, crude oil, fruits, vegetables ) Manufactured Items ( Acids , fuel oil, steel, chemicals) Components Parts ( semi finished parts like bearings , TV Tubes , small motors , tyres) Subassemblies ( semi finished goods like exhaust pipe in motorcycle)

(2) Capital Items A capital good is a durable good (is a good that does not quickly wear out) that is used in production of goods or services. These goods are used in production process. Light equipment or accessories ( Hand tools, computer terminals. ) Installations or heavy equipment's ( machines , turbines) Plant and building ( Offices , plants, warehouses, parking lots , housing, which are real estate property)

(3) Supplies and Services These goods /services support the operations Supplies – These are operating maintenance supplies like fuels , packaging materials, lubricants, paints, electrical items Services – Companies need a wide range of services like Legal , auditing, advertising, courier, marketing research agency

Difference between Industrial Marketing & Consumer Market Sr. No 1 Areas Market Characteristics Industrial Marketing Geographically concentrated Consumer market Geographically disbursed Mass market Relatively fewer buyers 2 Product Characteristics Technical complexity Standardized Customized 3 Service Characteristics Service, timely delivered & availability somewhat very important

Difference between Industrial Marketing & Consumer Market Sr. No 4 Areas Industrial Marketing Buyer Behaviour Involvement of various functional areas in both buyer & supplier firms Purchase decisions are mainly made on rational/performance basis Consumer market Involvement of family members Purchase decisions are mostly made on physiological/social/ physiological needs Less technical expertise Technical expertise Non-personal relationship

Difference between Industrial Marketing & Consumer Market Sr. No 5 Areas Industrial Marketing Channel Characteristics More direct Consumer market Indirect Fewer Multiple layers of intermediaries/middlem intermediaries en 6 Promotional Characteristics Emphasis on personal selling Emphasis on Advertising 7 Price Characteristics Competitive bidding & negotiated prices List prices or maximum retail price (MRP) List prices for standard products

Characteristics of Industrial Market Customers Industrial Market customers comprise commercial enterprises, institutions and governments. HCL Computers customers can be Air India, Delhi University and State Governments A single purchase by an industrial customer may be far larger than individual customers. An individual may purchase one unit of Microsoftware or an upgrade but Citibank may buy 1000

Characteristics of Industrial Market Customers The demand for industrial products is derived from the ultimate demand for consumer products. Increase in demand for housing will stimulate demand for wood for making furniture and numerous other related products. Relationships between industrial marketers tend to be close and enduring. HCL Computers relationship with some key customers spans decades

Characteristics of Industrial Market Customers Buying decisions by industrial customers often involve multiple buying influences rather than a single decision maker. A textile producer will evaluate various textile machinery companies before buying from any particular company. Purchasing, engineering, material management and other division members may be involved in this purchase

Industrial Customers 1. Commercial Enterprises 2. Government Organisations 3. Institutions

FEATURES & IMPORTANCE OF INDUSTRIAL MARKETING

FEATURES OF INDUSTRIAL MARKETING FEWER; BUT LARGER MARKET: Business buyers will be very less as compared to consumer buyers; but they purchase in bulk or more quantities. CLOSE RELATIONS: Relation between seller and buyer have to be kept very close and professional. Because once the relations are build; can’t be changed easily as it reflects huge profit.

COMPLEX BUYING PROCESS: Very complex procedure is adopted by business buyers; because before purchasing, the approval is required from different officials and authorities. CONTINUOUS SALES CALLS: To finalize the deal, it requires constant follow-ups and continuous sales calls.

EXPERTISE SELLING SKILLS: Sharp selling skill is required to sell the product to industrial buyers. As they are purchasing in bulk, they will not be easily convinced. Deep product knowledge is required. INFLUENCES: To finalize the product, different authorities and officials will interfere and influence the decision to purchase the product.

DERIVED DEMAND The demand for industrial goods is ultimately derived from the demand for consumer goods. Thus animal hides are purchased because consumers buy shoes, purses, and other leather goods. If the demand for these consumer goods slackens, so will the demand for all the industrial

IMPORTANCE OF INDUSTRIAL MARKETING MAJOR SHARE OF REVENUE: Major share of revenue is generated by selling the product to business buyers as they purchase in bulk therefore it is important to take care of business deals. LESS EXPENDITURE: as the business buyer are very few, no much expenditure is required to reach and to contact them.

LESS PROMOTIONAL EFFORTS: Free gifts, demonstration etc is not required; because the product is not to be shown to mass audience. PERMANENT CUSTOMERS: Once the relations are built, business buyers will purchase the products for longer period of time. Therefore the future is secured if existing buyers are satisfied properly.

INDUSTRIAL BUYING BEHAVIOU R

INDUSTRIAL BUYING BEHAVIOUR Meaning: Industrial buying behavior refers to the study of the motives and actions of, and influences upon, industrial buyers while engaged in the purchasing of goods and services

Factors Influencing Buying Behaviors There are number of external and internal factors that directly or indirectly effect organizational buying behavior. Economic factors are considered very important role in buying. Other factors are political influencers that are dominant. Organizational buying is also situational and situations play an important role. Most thinkers feel that these influencers can be grouped under four major headings.

External Environmental Factors Under this heading we have social, political, legal, cultural, economic factors that interact with each other, for example they could be power shortages, credit squeezes, political and economic changes, which govern many of the rules regulations. The shortage of raw materials leads excessive tariffs and taxes for a particular item. These affect the buyer behavior and the industry has to adapt itself to these changes.

Organizational Factors An organization is purposefully created and deliberately structured to attain specific objectives. These objectives and polices differ in every organization. Every organization had a climate and culture of its own. The organization is interested in selling its products to the industries that have a “buying center” or, a group of people who have the authority to buy. The marketer of industrial products thus wants to know who constitutes this “power center”,

Interpersonal Factors The buying center consists of a number of persons who are involved in buying. It is an inter Personal activity. Those people come from various levels of the organization . They have different backgrounds, different expiries, different values and considerations. They play different roles and make the buying more complex. In some cases this leads to a conflict, which has to be solved, and uniformity and harmony is made to prevail between members involved in buying.

Individual Factors The buying center consists of individual factors such as, income, education, job, position and risk taking.

PARTICIPANTS IN BUYING PROCESS

Buyer Formal authority to sign contracts Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and conditions of the contract

User Person working with the product Interested in benefits and unobstructed function of the product to buy Large knowhow and preconceived opinion

Influencer A person with high technical knowledge and practical experience definition of minimum requirements on technical or company standards

Gatekeeper Controls the flow of information within the buying center Assistant of decision maker Influence by preparing the decision and the relevant documents

Decider Right to say yes or no Mightiest person Rajnish Kumar Accman Institute of management PGDM-MKT (2011 -13)

Initiator Person who brings new ideas and solutions into the company Rajnish Kumar Accman Institute of management PGDM-MKT (2011 -13)

BUYING SITUATIONS

BUYING SITUATIONS The business buyer faces many decisions in making a purchase. The number depends on the buying situations. Ø Complexity of the problem being solved. Ø Newness of the buying requirement. Ø Number of people involved Ø Time Required

buying situations in B 2 B Straigtht rebuy – routine decision, repetitive process (energy, office supplies, raw materials, wood, cigarettes), component suppliers for the automotive industry – little or no new information Modified rebuy – more complicated but less sophisticated: cars, trucks, computers, consulting – modified rebuys are often treated too uncautious New task – calls for thorough research – industrial plant – highest level of uncertainty. Strategic new tasks are of extreme strategic and financial importance (aircrafts, military equipment, infrastructure) – re-evaluation of alternatives and search for new information and new alternatives

Buying phases Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review

Stages of decision in B 2 B procurement Backhaus developed a widely usable model to distinguish between 5 phases of procurement Preliminary Tender application (initiation phase) proposal Negotiation Processing Warranty of order and services

THANK YOU… PRESENTED BY ANAND MURALI