2-Industrial Marketing

8/2/2019 2-Industrial Marketing

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INDUSTRIAL MARKETING-2


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INDUSTRIAL BUYING PROCESS

Purchasing Objective:Generally, the Purchase / Materials Management is defined as buying the right quantity, at the

right price, for delivery at the right time and place

It is the Managements job to define what is right for each dimension.

The objectives of the purchasing function are briefly given below.

1. Delivery / Availability:-One of the prime objectives is to ensure that purchased goods and services are available or

delivered as and when & where required.If not work will come to a grinding halt.This will reflect

baldly on the performance of the Purchase Function. The corollary to this that is that Vendor

Reliability in delivery is the most important criterion while evaluating vendors in the most of the

cases .

2. Product Quality:The Product Quality should be consistent with the Specifications and use of the Product. It is

important to ensure consistency in Product Quality to reduce the cost of inspection, interruptions

in production process due to rejections and replacement of rejected material. Hence, product

Quality is considered as one of the important objectives of purchasing.


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3. Lowest Price :-

Subject to availability in time, with good and consistent quality, buyers would

like to buy at the lowest price.

4. Supplier Relationship:-

To develop a good long term Supplier/ Vendor Relationship and to develop

new sources of supply.

5. Services:-Industrial Buyers need many types of services like prompt and accurate

information from supplier, application or technical assistance, spare part

availability, repairs and maintenance capability and training if required.

6. Personal Objectives:-Industrial Buyers try to achieve both organizational purchase objectives and

personal objectives. The Industrial Marketers should realize that it is

important to satisfy not only the purchasing objectives of an Industrial Firm

but also the personal objectives of the buying members.


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BUY - PHASES IN THE INDUSTRIAL BUYING-DECISION PROCESS.Buying is an organizational-decision making process. There are eight phases (or stages)

in the buying decision process, indicating the logical sequence of activities

1. Recognition of a problem or need.

2. Determination of the application or characteristics and quantity of needed product.3. Development of specifications or description of needed product.

4. Search for and qualifications of potential suppliers.

5. Obtaining and analyzing supplier proposals.

6. Evaluation of proposals and selection of suppliers.

7. Selection of an order routine.

8. Performance feed back and post-purchase evaluation.UNDERSTANDING THE VARIOUS PHASES OF BUYING-DECISION MAKING IS

USEFUL TO AN INDUSTRIAL MARKETER AS IT HELPS IN DEVELOPING AN

APPROPRIATE SELLING STRATEGY.

We will now study the above eight phases, one by one.

PHASE 1-RECOGNITION OF A PROBLEM OR NEED.

The Recognition of a problem or need may originate within the buying firm or mayalso be recognized by a smart marketer. When the quality of material supplied by the

existing supplier is not satisfactory, or the material is not available when required, or

the machine supplied by the Existing Supplier breaks down too often, the buying

organization recognizes the problem. If an Industrial Marketer identifies a problem in

the buying organization and suggests how the problem could be solved, there will be

a better possibility of it being selected as a supplier.


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PHASE- 2 :-DETERMINATION OF THE CHARACTERISTICS ANDQUANTITY OF NEEDED

PRODUCT.

Once the problem is recognized within or outside the buying organization, the next phase is to

resolve the problem. The buying firm will try to answer questions such as: what type of product

or services to be considered? What quantity of product needed & so on. For technical products,

the Technical Department, (R& D, Industrial Engg, Production or Quality Control) will suggestgeneral solutions of the needed product. For non technical goods or services, either the User

Dept or Purchase Dept may suggest product or services, based on experience and also

quantity required to solve the problem. Sometimes advice is taken from experts from outside.

PHASE- 3 : - DEVELOPMENT OF SPECIFICATION OF NEEDED PRODUCT.

Phases-2 & 3, are closely related. After general solution to the problem is determined in the 2ndphase, the buying organization, in the 3rd stage, develops precise statement of the

specifications or characteristic of the product or service required. During this stage the

purchase dept takes the help of their technical people, or if required, out side sources such as

suppliers or consultants. Industrial Marketers have a great opportunity to get involved at this

stage by helping the buyer organization to develop products specification and characteristic.

This will give a definite advantage to the marketer to incorporate his products specification &characteristics.

PHASES- 4: - SEARCH FOR AND QUALIFICATIONS OF SUPPLIERS.

The search for potential suppliers is based on various sources like trade journals, sales calls,

word of mouth, catalogues, trade shows, industrial directories, yellow pages etc. generally the

factors such as quality of product or service, reliability in delivery & service are considered.


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PHASES IN THE INDUSTRIAL BUYING DECISION PROCESS

PHASE 5 :- OBTAINING AND ANALYZING SUPPLIERS PROPOSALS.Once the qualified suppliers are decided, the buying organization obtains proposals by

sending enquiries to the qualified suppliers.

The suppliers offer should include the product specification, price, delivery period,payment terms, taxes and duties applicable transportation cost ( or fright), cost of transit

insurance and any other relevant cost or free services provided.For purchases of routine products or services, the phases 4 & 5 may occur

simultaneously, as the buyer may contact qualified suppliers to get the latest information

on prices and delivery periods.

For technically complex products and services a lot of time is spent in analyzing

proposals in terms of comparison on products, services, deliveries & landed costs.

PHASE6:- EVALUATION OF PROPOSALS & SELECTION OF SUPPLIERSThe buying organization evaluates the proposals of competing suppliers and selects

one or more suppliers.Further negotiations may continue with selected suppliers on price, payment terms,

deliveries etc.The decision makers may evaluate each suppliers on a set of agreed upon attributes

or factors.For instance, each supplier is evaluated on each attribute by giving a weightage ( or

importance) to each attribute and using a rating scale of 100 percentage point asshown in the table in the next slide.


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A SUPPLIER EVALUATION SYSTEM.

ATTRIBUTE

(OF FACTOR)

WEIGHT

(IMPORTANCE)

SUPPLIER

PERFORMANCE

SUPPLIER

RATING( OR SCORE)

1) Quality 30 0.8 30 X 0.8 = 24

2) Delivery 25 0.4 25 X 0.4 = 10

3) Price 15 0.6 15 X 0.6 = 9

4) Service 20 0.6 20 X 0.6 = 12

5) Flexibility 10 0.2 10 X 0.2 = 2

6) TOTAL 100 57


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PHASES IN THE INDUSTRIAL BUYING DECISION PROCESS

PHASE 7:- SELECTION OF AN ORDER ROUTINE:-In this stage the mechanics of exchange of goods and services between a

buyer and a seller is worked out.The activities include placement of purchase orders with selected suppliers,

the quantity to be purchased from each supplier, frequency of order placement

by buyers and delivery schedules to be adhered to by the supplier, levels ofinventory needed, follow up of actual delivery to ensure it to be as per delivery

schedule, and the payment terms to be adhered by the buyer.

PHASE 8:- PERFOMANCE FEED BACK AND POST PURCHASEEVALUATION

In this final phase a formal or informal review about the performance of each

supplier ( or vendor) takes place.The user dept gives a feed back on whether the purchased item solved the

problem or not. If not , the members of the decision making unit review the

earlier decision and decide to give a chance to a previously rejected supplier.


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MARKETING IMPLICATIONS:- While understanding the various phases in buying decision making process ( or buy

phases), the individual sales person should recognize that marketing effort is not

over after the order is received or even after order is executed.

He should monitor the feedback and evaluation process in the customer ( buyer)organization

In particular the user satisfaction levels or complaints must be monitored by the

Industrial Marketer so that immediate corrective actions can be taken before a major

damage is done.

In fact a good and quick response to customer complaints can result in good buyer seller relationship.

The Marketing Strategy to be adopted, will depend on the type of products, the

phase of buying- decision making process and purchasing situations.

To better understand the buying process, it is necessary to consider different types of

purchases or buying situations.

TYPES OF BUYING SITUATIONS

There are three common types buying situations called buy classes

1. NEW PURCHASE ( OR NEW TASK)

2. CHANGE IN SUPPLIER( OR MODIFIED REBUY)

3. REPEAT PURCHASE ( OR STRAIGHT REBUY)


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1. NEW PURCHASE (OR NEW TASK):- In this situation the company is buying the item for the first time. When a firm decides to diversify into new products or services it necessitates the purchase

of a new machine, materials or parts. In the new purchase situation the buyers have limited knowledge and lack of previous

experience. Hence they have to obtain a variety of information about the product, the suppliers, the

prices etc. In the new task decisions, the risks are more, decisions may take longer time, and more

people are involved in decision making.

2. CHANGE IN SUPPLIER (OR MODIFIED REBUY)

A modified re buy situation occurs when the organization is not satisfied with the

performance of the existing suppliers or the need arises for cost reduction or quality

improvement. The change in supplier may become necessary due to suggestion from technical people for

additional product features. As a result, search for information about an alternate source of supply becomes necessary.

3. REPEAT PURCHASE (OR STRAIGHT REBUY) The situation occurs when the buying organization requires certain products or services

continuously and when such products / services have been purchased in the past. In such situations the buying firm places repeat orders on suppliers who are currently

supplying such goods. Minimum risk, routine decision

Annual rate contracts.


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THE BUYGRID FRAME WORK

Understanding organizational buying becomes easier if it is divided

into different buying phases ( buy phases) and these phases are

analyzed under different buying situations ( buy classes). Robinson formulated the buy grid framework which combined three

types of buying situations (buy classes) with eight phases of buying

decision process (buy phases). An analysis of the buy-phases in

relation to the buy-classes gave interesting results, which are

summarized below.

1. All eight phases of industrial buying process are applicable to a new

buying solution however, in case of modified re buy and straight re buy

situations, only some of the buy phases are applicable.

2. The most difficult buying situation occurs for a new task in buy phasesof problem recognition, and determination of product characteristics

and specification. This is because; maximum number of decision

makers and influencers are involved.

3. Modified Re buy situation are not very difficult to handle.

4. Straight Re buy situation are handled in a routine matter. Decision can

be taken by junior executive in the purchase dept.


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BUYING CENTER ROLES.

Before identifying the individuals and groups involved in the buying decision

process, it is important to understand the roles of buying-center members. Understanding the buying center roles helps the Industrial Marketer to

develop an effective Marketing Strategy.

There are six roles of buying center members.

1. INITIATORS :-These are the individuals who first recognize a problem or need, which

could be resolved by purchase of a product or service. Often, the users of

the product / service play the role of the initiators.

2. BUYERS :-

The Major roles or responsibilities of buyers are obtaining quotation from

suppliers, supplier evaluation and selection, negotiation, processing

purchase orders, expediting delivery and generally implementing purchasing

policies of the firm. Usually they are purchase [or materials] officers &

executives.


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3. USERS:-

These individuals use the product or service that is to be purchased. Often

users play the role of initiators. They may define the specifications of the

needed Product .They may be shop floor workers, maintenance engineers,

or R & D Engineers.4. INFLUENCERS:-

They influence the buying decision. Generally technical people have a

substantial influence on purchase decisions. Sometimes outside

Consultants or Experts play the role of influencers by drawing specifications

of products or services.5. DECIDERS:-

Actual buying decisions are made by the deciders. They may be one or

more Individuals involved in the buying decisions. Generally for routine

purchases, the buyer or purchase executive may be the decider. But for high

value and technically complex products, senior executives are the deciders.

6. GATE KEEPERS:-They are individuals controlling flow of information regarding products &

services to the buying centre. They also control sales peoples meetings

with members of buying of buying centre. They are normally assistants or

junior persons in the purchase dept.


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IDENTIFYING KEY MEMBERS OF BUYING CENTRE

(DICISION MAKING UNIT)

1. TOP MANAGEMENT PERSONS:- They consist of Managing Director, Director, President, Vice President and

General Manager. They are generally involved in purchase policy decisions

such as diversification into a new product / project, approval of Purchase

Dept Annual budgets and objectives and deciding guidelines for purchase

decisions. For purchases of high value capital equipment the top management in most

firms gets involved in the supplier selection, as it may have a major impacton the firm's operations.

2. TECHNICAL PERSONS:- (OR FUNCTIONS) The Technical Persons are Design Engineers, Production Manager

Maintenance Manger, Quality Control Manger, R & D manager andIndustrial Engineers.

They are generally involved in product specification or description, technical

evaluation of offers received from suppliers, negotiations with suppliers,

performance feed back on products supplied etc. They also visit supplier's

factory to assess their capabilities, quality, testing facilities etc.


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3. BUYERS /PURCHASERS:- They are persons in purchase dept. They may be Senior Executives /

Managers and also juniors like Purchase Officers or Assistants. Theycoordinate with technical people, Top management, Accounts Persons

within an organization, as well as with vendors externally. Their

influence on selection of suppliers is considerable.

4. ACCOUNTS / FINANCE PERSONS:- Their contribution is seen while finalizing commercial terms such as

terms of payment, bank guarantees, financial approval of capital

purchases, making payments to suppliers etc.

5. MARKETING FUNCTION:-

When a purchase decision has an impact on the marketability of a firm'sproduct, marketing people become influencers in the buying decision

process. The Marketing manger may suggest some changes /

improvements in packing, finish, painting etc.

Th W b t d


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Models of Organizational Buying

Behavior

There are two models available to

provide a comprehensive and

integrated picture of the majorfactors that combine to explain

organizational buying behavior.

These are

1) The Webster and wind model

2) The Jagdish Sheth Model

The Webster and

Wind Model of

Organizational

Buying Behavior.


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Conflict Resolution Strategies : [In Joint Decision Making]

1. Competing Let us to it my way.

2. Accommodating I see your point of view.

3. Collaborating May be we can work this one out.4. Avoiding Better let situation cool down before we act.

5. Compromising Let us split the difference.

6. Coalition formation among certain buying center members.

7. Power in conflict resolution.

8. Reward versus coercive power.

9. Legitimate power.10. Expert Power.

The Jagdish Sheth Model of

Industrial Buyer Behavior

This model emphasizes the

joint decision making by two

or more individuals, and the

psychological aspects of thedecision making individuals

in the industrial buying

behavior.

The model includes three

components and situational

factors, which determine the

choice of a supplier or brand

in the decision making

process in an organization.


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CONTEMPORARY PURCHASE ACTIVITESJUST- IN TIME (JIT) DELIVERY:-It means the materials arrive at the buyers factory exactly when needed by the

buyer.It minimizes the inventory, and increases the quality and productivity.This goal of JIT delivery is zero inventory and excellent quality of the materials

delivered by the supplier.This ensures nil rejection at the buyers factory.

The JIT delivery means that the buying and selling organization work togetherclosely to reduce costs.

SINGLE SOURCING:-Some of the Industrial Customers place orders with only one supplier.

This is against the old concept of placing orders with two or three suppliers,so that all the eggs are not in one basket.However single sourcing practice makes it possible for the buying and selling

organizations to work closely together, involve the supplier from the design

stage, and utilise the suppliers expertise.


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VALUE ANALYSIS:- The objective of value analysis is to reduce cost while maintaining quality and

reliabilityIt involves analyzing a product item by the function it performs, the value of

function and alternate methods of performing the same function.Some of the questions to be answered are given below.

Can the weight or thickness of the item be reduced?

Does the item has greater capacity than required?Is unnecessary machining performed on the item?If the item is non-standard, can a standard item be used?

BUYING COMMITEE:-

A formalized buying center (decision making unit) is the Buying Committee. It isused in many Industrial Organizations, Institution and Government Depts. The

Industrial Marketer should identify individuals in the committee, who dominate

in decision making by their technical & commercial expertise.

BUYER SELLER RELATIONSHIP


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BUYER SELLER RELATIONSHIPThe nature of buyer-seller relationship is an important factor which

differentiates Industrial Marketing from Consumer Marketing.The Focus of Industrial Marketing should be on buyer-seller relationship.Development of mutually satisfying, profitable, long term relationship with

customers is a major business asset of an Industrial Marketer.

BUYERS AND SALES REPRESENTATIVE INTERACTION:-An important part of the buyer-seller relationship is the interaction between a

member of a buyer and representative of selling organization

There are many other persons from both organizations involved in therelationship but the basic building block of relationship is based on buyer and

sales representative interactions.

BUYERS PERCEPTION OF SALES REPRESENTATIVE:-

There are two types of perceptions held by buyers of Sales Representatives:Talkative, easy going, manipulative, competitive, optimistic, excitable etc.The second perception of the buyer depends on the reputation of the

company, which the sales Rep represents. Generally, the Sales Rep of a

company with better reputation always gets a more favorable initial response

from the industrial buyers.


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IS THE INDUSTRIAL BUYER RATIONAL OR IRRATIONAL?In most of the cases the industrial buying decisions are rational or logical. But

sometimes they tend to become irrational.

The word Rational, here, is defined as a long term and fully considered viewof all possible alternatives, in order to obtain maximum company profitability.In a major study based on interviews of 137 managers in 70 companies, Shoaf

brought out two behavioral patterns of Industrial Buyers.

The Industrial Buyer is likely to be a conformist, that is, an organization man.This produces a conflict, because although he wants to grow and help his

company to grow, he is also job security minded, wishing to play safe and

impress the boss.

As product and services, offered by various suppliers become more objectively

alike, a buyers final decision is more and more based on subjective factors (or

personal factors) such as personal treatment or favors from suppliers.In industrial Buying, the organization culture demands analysis of suppliers

proposals and justification for selection of suppliers. Even when decision is

based on subjective factors, buyers rationalize their decision by giving formal

analysis and justification.


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BUYER SELLER RELATIONSHIP

Based on the research carried out by Dr. Jagdish sheth, the buyer seller

interaction or relationships are based on the following two factors.

1. The content of information.

2. The style in which that information is exchanged. The content of information includes product features, prices ,services

as well as , Individual needs, of a buyer or seller The style of interaction includes mannerisms, and the format used by

a buyer and a seller in their communication (interaction) There are Three styles of interactions

I. Task oriented

II. Interaction oriented ( social and personal interaction)III. Self oriented (pre occupied with ones self interest)


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The figure given below shows the various types of transactions based on

style and content

Compatible Style Incompatible Style

CompatibleContent

IdealTransaction

InefficientTransaction

IncompatibleContent

InefficientTransaction

NoTransaction

Buyer Seller interaction A conceptual frame workThe buyer seller transaction is a dyadic (two persons) interaction consisting of

transaction between a buyer and a seller. The transaction oriented buyer- seller

interaction focuses on pre-sales activities and during sales activities and not on post

sales activities.Both the sales person and the buyer have personal needs, and organizational

needs to satisfy. These needs become the starting point of their interaction.Generally, transaction oriented buyer-seller interactions help in creating new

customers.Today more companies are recognizing the importance of retaining existing

customers, by investing in relationship marketing


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REALTIONSHIP MARKETING

The task of creating strong customer bond or loyalty is called relationship

marketing.

There are three approaches for developing strong customer bond.

1. First approach is to add financial benefits to the customer

relationship. For Example, giving volume discounts or rewarding

customers with free spare parts kit. However these benefits can be

imitated by competitors and hence cannot be used to differentiate

permanently.2. The second approach is to give social benefits, in addition to

financial benefits. The company sales persons learn buyers needs

and wants, and then individualize their services .For Example,

depending on individual needs and wants, use problem solving

language, including solving personal problems, such as hotelbooking or making travel arrangements.

3. The third approach is adding structural ties to financial and social

benefits. For example, supplying special equipment or service,

such as training customers maintenance engineers.


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TRANSACTION MARKETING may be described as transaction oriented buyer seller

interaction, which focuses on closing a sale with a customer. This is achieved by a

single sales person. For large customers instead of transaction marketing, more and

more companies are moving towards team selling and relationship marketing.

The team selling includes technical and commercial persons who can visit customers

different locations, work with customers teams, and solve their product or process

related problems.

RELATIONSHIP MARKETING FOCUSES ON MANAGING CUSTOMERS

However it is not effective in all situations. Heavy investment in relationship marketingwill pay off if it is made applicable to important and high sales potential customers who

value good service

For other customers, who want lowest price, transaction marketing is appropriate.

METHODS USED TO INFLUENCE INDUSTRIAL BUYERS.Industrial Marketers can use a number of methods to influence the existing

Customers to increase the share of their business or to influence potential customers to

buy their products or service

The Major Methods are

1) SALES PRESENTATION

2) NEGOTIATION


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SALES PRESENTATION:-

Before a sales presentation is made, an Industrial Sales Rep must plan to find out,

1. Who are the potential customer firms

2. Get information about buying centre members in each firm.

3. Identify the needs or problems of the potential customer firms.The above planning is required for getting orders from new customers. The source of

information about new/potential customers are company sources, Industry

Directory, Exhibitions or Trade Shows, Direct Mailing, Telemarketing etc.

A good quality of sales presentation is an important factor in getting favorable first

hearing and in influencing buying decision.

A sales presentation should be tailored to fit the needs and expectations of thepotential buyer.

A sales rep should first raise the interest and identify needs of the buyer

He should then show how his products & services can satisfy those needs.

Thus the key to a successful sales presentation is based on the ability of the sales

person to identify and respond to customers needs.

Another important point in a good sales presentation is that a sales rep should first

present positive points about his product, service and keep the difficult points

towards the end. In a competitive situation a sales rep should show the buyer why

his product or service has greater value, as against competitors claims.

He should sum up advantages of his product or service & how it will satisfy the needs of

the buyer, better than competitor.


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HOW TO NEGOTIATE WITH INDUSTRIAL CUSTOMERS :

Negotiation is a process that tries to maximize the benefit to both buyer

and seller, and takes a long term view of their relationshipThe basic marketing concept focuses on customer satisfaction or

customer service, which is one of the key factors for success of a business unit.

Industrial customers are different from house hold consumers. The buyingdecisions in industries are made by professionals, who are knowledgeable on

technical and commercial aspects of buying.However the decision makers are also human beings with certain degrees

of Egos, Likes & Dislikes.

Hence sometimes decisions are partly subjective and partly objective.It is therefore necessary that the sales /marketing persons should possess

the skills of negotiation in addition to the commercial and technical knowledge


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PURPOSE OF NEGOTIATION

Purpose could be severalCould be for price increaseFor getting higher share of businessFor getting better payment terms.For introducing new products etc.

Whatever may be the purpose it helps the sales/marketing persons, if they have right

kind of approach or style of Negotiation

COLLECTION OF INFORMATION BEFORE FINAL NEGOTIATION:-

Before final negotiation ,it is important to collect information about customer needs,

key decision making people , customers perceptions about companys and competitors,

quality, service, prices, payment terms Customers style of negotiation etc.

CUSTOMER TRUST AND CONFIDENCE:-Much before final negotiation sales/marketing persons should try & build an

environment of trust, understanding and rapport with Industrial Customer at various

levels. Without proper rapport or good relationship; it is difficult to collect the required

information.

STYLES OF NEGOTIATION


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There are four different styles of negotiation

1. I Win, You Lose

2. Win-Win ( I Win , You Win)3. You Win, I Lose

4. I Lose, You Lose

In practice, styles (1) & (2) are used predominantly, style (3) is sometimes

used and style (4) is rarely used.

1. I Win, You Lose style (wining at all costs): - This is a competitive approach. It may use methods from intimidation to subtle forms of manipulation. This style is used when strong competition prevails, for example

litigation, beating competition or during election. It is not recommended to be used while negotiating with customers, but

one should recognize ,based on the tips given below, if the other side

uses this style.


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1. They start with tough demands or ridiculous offers

2. The negotiators have little or no authority to make any concessions

3. They raise their voice or make emotional outbursts.4. If you make a concession they, do not reciprocate, or are stingy in making

concessions.

5. They ignore deadlines and act as if time is of no significance to them.

How to defend against I WIN, YOU LOSE style.You have recognized that your customer is using this style against you. In such

a case; you defend your position, as follows.

1. Take up an equally tough or strong position by presenting a clear but

unemotional opposition to their demand.

2. Seek information from the customer as to way he holds that position.

Explain why you hold your position.

3. Stress the consequences to the customer of a failure to resolve the issue.

The objective of the above procedure is to increase mutual respect. Thereafter,

try problem-solving approach, with the purpose of moving the other party

from WIN-LOSE situation to WIN-WIN situation.

TYPES OF NEGOTIATION


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TYPES OF NEGOTIATION

2. Win-Win style (I WIN, YOU WIN):- This style is generally used for customers, suppliers, employees, relatives

etc. where long term healthy relationships and mutual satisfaction are

important, Here the negotiations are held for mutual satisfaction, With emphasis on

development of genuine Relationships based upon trust and understanding,

where both sides win.

This is achieved by following the guidelines given:1. Build an environment of trust and confidence, much before the final negotiation. Be

polite and humble, which helps the customer to communicate easily.2. The initials focus, during the final negotiation, should be on getting the agreement to

the general statement of the problems. In other words initially, identify the problems,

rather than solutions.

3. The emphasis during negotiation should be on end results or needs rather than on

the on the means.

4. Both sides should then work together, pooling their resources, ideas and sharinginformation to solve the problems stated earlier.

5. Regular frequency of concessions (and not the size of concessions) is conducive to

this style.

6. Avoid defensive posture. Be amenable(i.e. Responsive to correction) if negotiation

climate is favorable.

7. If possible, avoid legalistic or contractual approach.


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3. YOU WIN, I LOSE:-

This style is some times used by sales/ marketing persons with demanding

and highly cost-conscious Industrial Customer, who feel satisfied if they have

driven the buyer to lose in the bargain.

Once a sales person knows such an approach by the Industrial Customer, he

creates an environment, at the final stage of negotiation, that he has lost in the

deal (although he has actually gained), but he is accepting the terms in view of

the long term business relationship

Thus actually it is a WIN WIN situation, where both parties win.



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4. I LOSE, YOU LOSE

This style is adopted by people, who are either unskilled negotiators or

have philosophy of war. For example, in an Industrial Relation dispute, if both workers union and

management become unrealistic, it results in strike. In such a situation,

both workers and managements may lose in some respect.

To avoid the possibility of Lose Lose situation, we should maintain an

Adult mental attitude which (in transactional analysis ) means a well

Balanced, Unemotional, and Factual Attitude towards the other party, if the

other party provokes you with childlike emotional and immature behavior,

or parental judgment and bossy behavior.

TIME FACTOR:- It is important to know the industrial customers deadline on time,

particularly the delivery time from the date of placement of order.

It is good strategy to indicate realistic delivery time at the time of

negotiations, to maintain the customer trust and confidence and for getting

repeat orders in future.

IMPORTANT POINTS ON NEGOTIATIONS: -


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1. PREPARE AND PLAN FOR NEGOTIATION Decide what you have to offer, its cost or limit beyond which you will not make

concessions , and its value (benefit) to customer. Gather information about real needs of customer, who are the negotiators and their

power or authority to make decisions.

If you have a negotiating team, nominate a leader ,members with technical andcommercial skills and a note taker.

Decide what your style or approach will be WIN-WIN or WIN-LOSE.

1. OPENING Be warm and positive in your opening remark. State what you want to achieve & introduce your team members.

Signal your intentions of WIN-WIN style. If customers approach is cordial, continue to be polite & courteous.

1. EXPLORING Identify customers decision maker. If he is not present, request him to join you. Ask the customer what is the agenda, what they want most. Explore the areas of common ground, where you both agree.

1. BIDDING Remember, only proposals can be negotiated. If you are in a strong position, aim high with your proposals. If you are going to argue against customers proposals do so logically & calmly. Make concessions slowly and in small amounts. Search as many variables as you can & use same to get more concessions.

While concluding, make minutes of the meeting & both parties should sign the same.


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SPECIAL DEALING BETWEEN BUYER & SELLER

There are two kinds of special dealing between buyer & seller

RECIPROCITY:-Reciprocity means reciprocal dealings between a buyer and a seller.

It is the practice of buying from ones own customers and also using

purchasing power to sell to ones suppliers.

The procedure involved becomes complex in practice.

Many purchase mangers dislike reciprocity, as it reduces chances of obtainingcompetitive prices, and also sales managers oppose reciprocity.

Reciprocity is a special case of buyer and seller Relationship and caution

must be exercised to keep it at minimum level.


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DEALING WITH CUSTOMERS CUSTOMERS:-One of the complexities of Industrial Marketing is the need to deal with a

customers customers, and therefore, become a competitor of such a

customer.

This is a sensitive matter, as it may be viewed as interference in thecustomers relationship with his customers.However, it can become effective if it is done with co-ordination and

planning with the customer.

CUSTOMER SERVICE:-In Industrial Marketing, the customer service is sometimes more important

than the physical product.The customer service supplements the sales of physical product and

creates a total value for customer.The major part of customer service is Timely Delivery and technical

service to customers.If Prices, Quality & other aspects are equal, customers will prefer to buy

from firms which give better technical service and Timely Delivery.For large equipment or machines, the important elements of customer

service are installation, maintenance and repair, including availability of

spare parts & replacement units

Date post:	05-Apr-2018
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