UNIT 1 - Introduction to MIG - Copy

7/29/2019 UNIT 1 - Introduction to MIG - Copy

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MARKETING OF INDUSTRIAL

GOODS Industrial Goods

The Demand for Industrial Goods

The Industrial Customer Purchasing System

Marketing Intelligence

Marketing Strategy

Marketing Control


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Industrial Goods

Meaning

Characteristics

The Industrial Marketing System

Participants

Channels

The Relationships: Contract of Sale

Franchise Agreements, Loyalty Confidence

Reciprocity


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Industrial Marketing

Also called: Business-to-Business (B2B)and Organizational Marketing.

Definition: the creation and managementof mutually beneficial relationshipsbetween organizational suppliers andorganizational customers.

Customer can be private firm, publicagency, or nonprofit organization.


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An Overview of IndustrialMarketing

Industrial goods, also known as businessgoods, include goods used for businesspruposes and consumer goods which are

bought for organisational consumption orwhich are in the distribution channelinvolving middlemen.


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Industrial Marketing includes the

following1. Marketing of industrial goods2. Marketing of consumer goods to:

Marketing middleman Organisations for in-house consumption

Organisations for giving away as

gifts/compliments Organisations for charitable distribution


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Consumer goods & Business

goodsThe major factors of differences betweenconsumer goods & business goods are:

Market characteristics

Customer characteristics

Demand characteristics

Product characteristics


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Customer Characteristics

The salient features of the business buyercharacterisitics vis-a-vis consumer buyercharcteristics are the following:

Number of Customer

Order size & frequency

Decision making

Buying motives

Contractual penalties


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Reciprocity

Buyer-Seller relationship Vendor loyalty

Bargaining power

Product/Service mix Product Life Cycle

Product Specification

Equipment Compatibility

Consistency of Quality

Service


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Systems selling

Branding

Product line

Degree of Fabrication

Packaging & Labelling

Market Characteristics

Market structure

Market size Horizontal & Vertical Markets

Marketing mix characteristics


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Geographic concentration

Product & demand characteristics


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So whats different about B2B?

Marketing Concept

Marketing Mix

Market SegmentationProduct Life Cycle

All apply in both B2C and B2B.


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So whats different about B2B?

The technical characteristics of theproduct are important.

These products directly affect theoperations and economic health of thecustomer.

The customer is an organization rather

than an individual consumer, or family.


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Five Major Differences

Between B2B and B2C

Products/Services being marketed

Nature of demandHow the customer buys

Communication process

Economic/Financial factors


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Products/Services

More complex

Functional vs. Symbolic Attributes

Large unit dollar value/Large quantitiesCustom/Tailored

Various Stages from raw material tofinished goods.

Foundation, Entering, Facilitating Goods


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Raw Material Extraction

Material Processing

ManufacturingParts/Subassembly

Assembly

Distribution

Wholesale/Retail Trade

Final Consumers

Facilitators

Firms in

Production

Chain


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Nature of Demand

Derived

Joint/Shared

Concentrated

Inelastic


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How Customer Buys

Group Process

Formal

Lengthy

Loyal

Decisions based on risk and opportunity


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Communication

Personal selling more important thanmass paid advertising

Support sales with other promotionalactivities: advertising in trade journals,catalogs, trade shows, direct mail, WWW.

Message focused on technical, factual,

and descriptive content.Multiple audience members.


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Economic/Financial Factors

Competition oligopolistic

Power/Dependency relationships

Reciprocity:Doing business withcompanies that do business with them.

Economic variables: interest rates,inflation, business cycle


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Difference between Consumer &Business Marketing

Personalconsumption

Direct demand

Buyers areindividuals &households

Impulse buying

No. of buyers arelarge

Production of othergoods & services

Derived demand

Buyers are firms &other organisations

Impulse buying is

almost absent

No. of businessbuyers are

relatively small.


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Decision making processis informal & simple

Technical specificationsare less important

Order size is very small

Service aspects aregenerally less important

Sales promotion is very

common Distribution channels are

generally lengthy

Decision making processtends to be complex &

formal

Technical specificationsare important

Order size is very largeService aspects are

generally very important.

Sales promotion is notcommon

Distribution channels aredirect or short & the no.Of resellers small


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Branding plays agreat role

Packaging also playsa promotional role

Consumers aredispersed

geographically Demand for consumer

goods is price elastic

Conformity to productspecifications &

reputation of themanufacturer are moreimportant

Packaging hardly has apromotional role

Business buyers in manycases are

geographicallyconcentrated.

Price sensitivity ofdemand is low.


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AREAS / CHARCTERISTICS IND MARKETS CONSUMER MATKETS

Market GEO Concentrated

Few Buyers

GEO Disbursed

Large no. Of Buyers

(Mass

Markets

Products Technically ComplexCustomized

Non

TechnicalStandardized

Service Very Important Somewhat important

Buyer Behavior Various Functional

specialists involved

Mainly Rational buying

decisions.Interpersonal

relationship between

buyers and sellers.

Family members involved

Physiological /

Psychological Social need

based buying decisionsNonPersonal

Relationship.

Channel More direct

Multi Channel

Indirect

Few Channels with many

layersPromotional Importance to personal

selling

Importance to Advertising.

Pricing Competitive bidding /

Negotiated prices

MRP

www.a2zmba.com By Prof. Havaldar

/ /


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(A) What are the types/classifications of Industrial/Businesscustomers?


INTERMEDIARIES /MIDDLEMEN (DISTRIBUTORS)

OEMS

USERS

PUBLIC SECTORUNITS (BHEL)

GOVT. UNDERTAKINGS(RAILWAYS, DEFENCE UNITS)

PUBLIC INSTITUTIONS(GOVT. HOSPITALS)

PRIVATE INSTITUTIONS(SCHOOLS, COLLEGES)

MANUFACTURINGUNITS (SUGAR, MILK)

NON-MANUFACTURINGUNITS (BANKS, HOUSING)

COMMERCIALENTERPRISES

GOVERNMENTCUSTOMERS

INSTITUTIONALCUSTOMERS

CO-OPERATIVESOCIETIES

INDUSTRIAL /BUSINESSCUSTOMERS

FIG. TYPES OF INDUSTRIAL / BUSINESS CUSTOMERS

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FIG. CLASSIFICATION / TYPES OF INDUSTRIAL PRODUCTS / SERVICE

(B) How are Industrial Products / Services Classified?

Classification into 3 Groups shown below.


RAWMATERIALS(IRONORE, CRUDEOIL)

MANUFACTUREDMATERIALS

(STEEL, FUELOIL)

COMPONENTPARTS(BEARINGS, TYRES)

LIGHTEQPT(COMPUTERS, HANDTOOLS)

PLANT/BUILDING(FACTORIES, OFFICES)

SUPPLIES(LUBRICANTS, ELECTRICALITEMS)

SERVICES(LEGAL, COURIER)

MATERIALS&PARTS

(ENTERPRODUCT

DIRECTLY)

CAPITALITEMS(USEDIN

PRODUCTION/OPERATIONS)

SUPPLIES/SERVICES(TOSUPPORT

OPERATIONS)

INDUSTRIAL

PRODUCTS/SERVICES

SUBASSEMBLIES(EXHAUSTPIPEINM.C.)

HEAVYEQPT(MACHINES, TURBINES)

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(C) Marketing Implications for different types of products &

customers?i. For Materials & Parts, Direct selling is done to large

OEMs (Original Equipment Manufacturers) and users,but indirect selling through industrial distributors /dealers becomes cost effective for smaller volume OEMs

and users.ii. For Capital items, Direct selling through company sales

force is common, with extensive interactions on technical& commercial factors.

iii. For Supplies Industrial distributors / dealers are mostly

used but for marketing of services, word-of-mouth playsan important marketing role, with quality & price ofservice as key factors.


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(D) Purchasing Orientations of Business Buyers Business buyers/ Industrial customers follow one of the three

purchasing orientations:

(i) Buying, (ii) Procurement, or (iii) Supply chain Management.

(i)Buying Orientation : The firm with buying orientation followsthe practice of (a) selecting lowest price supplier, (b) gaining powerover suppliers and (c) avoiding risk of buying from new suppliers. Ithas a Short-term focus.

(ii) Procurement Orientation : The purchasing firm withprocurement orientation has a long-term focus. It achieves theobjectives of quality improvement and cost reductions by followingthe practices of (a) collaborative relationship with major suppliers and(b) working closely with other functional areas in the company.

(iii) Supply chain Management Orientation : Here, the firmfocuses on improving the value chain from raw materials to end users.This is achieved by (a) delivering superior value to end users, (b)outsourcing non-core activities, (c) and supporting collaborativerelationships with major suppliers.


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(E) Purchasing Practices of Different Types of Industrial /

Business Customers

(i)Purchasing in commercial enterprises Involve Technical & Commercial depts.

Major Tasks / Procedure: identifying, negotiating, selecting suppliers,building relationship.

Purchasing to improve operational efficiency & contributeto firms

competitive advantage.(ii) Purchasing in Govt. units

DGS&D agencyfinalizes rate contracts for standard products for Govt.units.

Main Tasks / Procedure : Registration of the firm & its Products, Tender

Advertisements, no negotiation in Open tenders, negotiations done inclosed / limited tenders.

Orders Finalised on lowest bidders (suppliers offering Lowest prices /Landed Costs)


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(iii) Purchasing in Institutions

If the Institute is a Govt. Hospital Purchasing practices ofGovt. units Followed

Similarly a private School / College follows practices ofcommercial enterprises

However, better to study each major institution.

(iv) Purchasing in cooperative societies

Similar to Institutional purchase.


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CLASSIFICATION


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CLASSIFICATIONThere are different bases of classification of

industrial goods:

On the basis ofhow the goods are usedare classified as:

1. Capital Equipment & Investments

2. Manufactured Materials & Componentparts.

3. MRO Supplies

4. Process Materials

5. Business Services

6. Raw Materials


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On the basis of the nature of theoutput & its use,

Basic industries

Capital goods industries

Intermediate goods Consumer goods industries


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THE INDUSTRIAL MARKETINGSYSTEM

Industrial buyers

Sellers

Marketing intermediaries


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Industrial Customers

CommercialOrganisations

Non CommercialOrganisations


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UNIT 1 - Introduction to MIG - Copy

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