Industrial Market vs Consumer Market

8/9/2019 Industrial Market vs Consumer Market

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Industrial Market Vs Consumer Market

Market Structure

Industrial Market

Geographically conc.

Fewer buyers (relatively)

Big buyers

( small number of large buyers)

Consumer Markets

Geographically dispersed

Mass markets

Free Market

(large number of buyers)

Understanding

Industrial

markets


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Market Structure - Example

Industrial Market ( Rutile for

Paints)

Major ten cities.

Fewer buyers (example 500)

Oligopolistic buyers with clout

To access international market(Asian, Nerolac, ICI etc.)

Consumer Markets

(paints)

Even in small villages

Mass markets ( 1 billion )

Small customers

normally competition iswithin the country.

Understanding

Industrial

markets


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Buyer Behavior

Industrial Market

*Evaluated for functionalityrational/task motive to buying.

*Purchasers are experts & focus

is more on performance/service.

*Higher interaction with thesupplier.

* Formal processes.

Consumer Market

*Social / psychologicalfactors are important.

*Family involvement & focus

more on product per se.

*Nor personal relationshipwith the supplier.

* Less of formal processes.

Understanding

Industrial

markets


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Buyer Behavior - Example

Industrial Buyer for AC

*Evaluated for functionality( evaluation by tech committee)

*Purchase through tendering

Process & brand less important.

*Discuss technical details,price negotiation etc.

*Formal processes of

documentation etc.

Customer for AC

Should look good & matchthe dcor.

*Want to buy LG only

(because neighbor has)

*Go to a shop, select, negotiatepay & forget.

* Less of formal processes.

Understanding

Industrial

markets


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Products

Industrial Market

* Technical complexity and

customized.

* Service, delivery and

availability is veryimportant.

Customer Markets

* Standardized.

*. Service, delivery and

availability is somewhat

important.

Understanding

Industrial

markets


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Products - Example

Samsonite Outsourcing

soft luggage

* Each component is as perSamsonite specification.

* Service, delivery and

availability is very

important as it affects supply

chain of the company.

Customer for Samsonite soft

Luggage

* Standardized product range

to select from.

*. Service, delivery and

availability is somewhat

important, can wait for aSpecific color / size.

Understanding

Industrial

markets


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Decision making

Industrial Market

* Distinct observable stages

* Multiple influencers and

decision makers.

Consumer Market

* Unobservable mental

stages, not very clear

pattern.

Understanding

Industrial

markets


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Decision making - Example

Industrial Buyer Soaps for

Workers canteen

* Need identification, selection,

procurement etc.

* O.K. from the workers union,

agreement by contractor,purchase departments

negotiation & placing order.

Customer

* Low involvement buying

and impulse purchase

(the exact choice criteria

difficult to identify) & variesfrom situation to situation.

Understanding

Industrial

markets


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Distribution channel characteristics

Industrial Markets

* Shorter, more direct &

fewer linkages between seller

and buyers.

Consumer Markets

* Indirect and multiple

linkages

Understanding

Industrial

markets


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Distribution channel characteristics -Example

Hotel buying Cold Drinks

* Supplied directly by the

distributor, may even be

serviced by company

employee or a regular basis.

Customer for Cold drinks

* Normal distribution styleof distributor to retailer to

customer. Virtually no

interaction with company.

Understanding

Industrial

markets


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Promotion

Industrial Markets

* Emphasis on personal selling

or one to one dealing.

Example : Selling fridges

with decals. You go and dealwith Coke or Pepsi H.O.

Consumer Markets

* Emphasis on mass marketpromotion.

Example : You plan an adv.

campaign to highlight decalsand generate customer flow.

Understanding

Industrial

markets


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Pricing

Industrial Markets

* Competitive bidding &

multistage negotiation.

* Sharing of cost data &

budgeting of acceptableprofits in many cases.

Consumer Markets

* Normally MRP & MOP

* Concept of list price & its

implementation.

Understanding

Industrial

markets


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Pricing - Example

Industrial (CSD purchase

Of Rum )

* Competitive bidding &

selection on basis of L1.

* Sharing of production andoverhead cost data with CSD

and price based on cost +

margin.

Consumer Markets for Rum

* Normally MRP & MOP

* Concept of list price & its

implementation in the trade.

Understanding

Industrial

markets


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A big reseller can be treated as a Industrial Buyer

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 in

size and have centralized purchasing.

Product characteristics : Specific private labels.

Buyer characteristics : Technical evaluation / rational process /

multiple buying influencers.

Understanding

Industrial

markets


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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 get

better price, it straight goes to profits.

Economics of demand : Based on actual consumer off-take

of the products and hence derived.If one design clicks, it is stocked

more in anticipation.

Understanding

Industrial

markets


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Organizational Customer

Type of purchasing organization

Commercial Enterprise

1. Industrial Dealers & Distributors Essentially their objective

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

2. OEM These 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 processes Registration,

Tender, L1 etc.

2. Public accountability everything 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, non specialist 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 and3. 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 impactcost 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 costc) 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

SuppliersBuyers Facilitators Market

segments

Govt.

Commercial

Enterprises

IndustrialDistributors

Understanding

Industrial

markets


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Publics

1. Financial publics FI / Stockbrokers / Individual Stock

Holder

( Stock prices, confidence in company )

2. Independent press Impact on reputation of company

( Dhabol power corporation )

3. Public interest groups Environmentalists

( Euro II , CNG vehicles, Narmada bachao)

4. General publics MacDonald's coating French fries with beef

tallowBusiness 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 Influences Steel plants need iron

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

Orissa have the concentration of steel plants.

.

4. Politico / Cultural influences Hire and fire policy of west Vs

militant trade unionism & job protection in India.

5. Technological influences Typewriters 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 Cement compressive 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 promotion Doodh, Egg & LPG campaign.

( Increase the pie rather than fight

for the same pie).

c. Price Umbrellas The transporters union finalizing rates

for each destination ex- Mohali.

Understanding

Industrial

markets


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3. Building Public Opinion

a. Corporate Image advertising ISO 9000 Accreditation.

b. Voluntary environmental control ISO 14000 Accreditation

Making green products & advertising it.

c. Commitment to interest groups Archies 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 board

of 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

Date post:	30-May-2018
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Industrial Market vs Consumer Market

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