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This ppt has all the chapters from

Krishna K Havaldar.
But we have only Chapters 1,2,3,4,7
Hope this helps ;)
CHAPTER 1 IM/1-1/5

  INDUSTRIAL
THE NATURE OF
MARKETING

Learning Objectives

• Understand What is industrial (or Business to


Business) Marketing?
• Know What are the differences in the characteristics of
industrial and consumer marketing?
• Find out Why the demand for industrial goods and
services are called “Derived demand” ?
(A)  What is Industrial (Business) marketing? IM/1-2/5
 It is marketing of products / Services to business firms.
 In contrast consumer marketing is marketing products /
services to individuals & households.

(B)  What is the difference between industrial marketing, B2B


marketing, Business marketing & Organizational Marketing?
No Difference!
(C) What are the differences between Industrial &
Consumer Marketing?
 Basic tasks of marketing are same difference Exists in the
characteristics shown next.
IM/1-3/5
AREAS / CHARCTERISTICS IND MARKETS CONSUMER MATKETS
Market GEO Concentrated GEO Disbursed
Few Buyers Large no. Of Buyers
(Mass
Markets
Products Technically Complex Non – Technical
Customized Standardized
Service Very Important Somewhat important
Buyer Behavior Various Functional Family members involved
specialists involved Physiological /
Mainly Rational buying Psychological Social need
decisions. based buying decisions
Interpersonal Non – Personal
relationship between Relationship.
buyers and sellers.
Channel More direct Indirect
Multi Channel Few Channels with many
layers
Promotional Importance to personal Importance to Advertising.
selling
Pricing Competitive bidding / MRP
Negotiated prices
IM/1-4/5
(D) Why Industrial Demand is called “Derived
Demand” ?

 Because Industrial demand is derived from (or


depends on) demand for consumer goods /
services.

 E.G. Steel is demanded for production of consumer


durable products like Cars & Refrigerators, which
are demanded by household consumers. Hence,
Demand for Steel is derived from forecast of
consumer demand for Cars, Refrigerators, Washing
Machines, Etc.,
SUMMARY OF CHAPTER-1 IM/1-5/5

 Industrial / Business Marketing is marketing


of products / services to business firms.

 Differences between Industrial & Consumer


marketing are seen in areas / Characteristics
like Market, Product, Buyer Behavior,
Channel, Promotion & Price.

 Industrial Demand is derived from demand


for consumer goods / services.
CHAPTER 2 IM/2-1/10
UNDERSTANDING INDUSTRIAL
MARKETS AND ENVIRONMENT

LEARNING OBJECTIVES
• Understand the types of industrial customers as
well as industrial goods and services.
• Know the marketing implications for different
types of customers and products.
• Understand the purchasing orientations and
practices of industrial customers.
• Know types of environment and strategies to
manage external environment.
IM/2-2/10
(A)  What are the types/classifications of
Industrial/Business customers?I N T E R M E D I A R IE S /
M ID D L E M E N ( D IS T R IB U T O R
C O M M E R C IA L
E N T E R P R IS E S O E M S

U S E R S

P U B L IC S E C T O R
U N IT S (B H E L )
G O V E R N M E N T
C U S T O M E R S
G O V T . U N D E R T A K IN G S
( R A IL W A Y S , D E F E N C E U N IT
IN D U S T R IA L /
B U S IN E S S
C U S T O M E R S P U B L IC IN S T IT U T IO N S
(G O V T . H O S P IT A L S )
IN S T IT U T IO N A L
C U S T O M E R S
P R IV A T E IN S T IT U T IO N S
(S C H O O L S , C O L L E G E S )

M A N U F A C T U R IN G
U N IT S (S U G A R , M IL K )
C O -O P E R A T IV E
S O C IE T IE S
N O N -M A N U F A C T U R IN G
U N IT S ( B A N K S , H O U S IN G )

F I G . T Y P E S O F I N D U S T R I A L / B U S I N E S S C
IM/2-3/10
(B)  How are Industrial Products / Services Classified?
Classification into 3 Groups shown below.

R A W M A T E R I A L S ( I R
M A T E R I A LM S A N U F A C T U R E D M A
& P A R T S ( S T E E L , F U E L O I L )
( E N T E R P R O D U C T
C O M P O N E N T P A R T S
D I R E C T L Y )
S U B A S S E M B L I E S ( E

I N D U S T R I AC LA PI T A L I LT IE G M H S T E Q P T ( C O M P U
P R O D U C T ( SU S/ E D I N
H E A V Y E Q P T ( M A C H
S E R V I C E S P R O D U C T I O N /
O P E R A T I O P N L SA ) N T / B U I L D I N G ( F A

S U P P L I E S S / U P P L I E S ( L U B R I C A
S E R V I C E S
( T O S U P P O R T
O P E R A T I O S N E SR ) V I C E S ( L E G A L , C

F I G . C L A S S I F I C A T I O N / T Y P E S O F I N D U S T
(C) Marketing Implications for differentIM/2-4/10
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 plays an
important marketing role, with quality & price of service as
key factors.
IM/2-5/10
(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
follows the practice of (a) selecting lowest price supplier, (b)
gaining power over suppliers and (c) avoiding risk of buying
from new suppliers. It has a Short-term focus.
(ii) Procurement Orientation : The purchasing firm with
procurement orientation has a long-term focus. It achieves the
objectives of quality improvement and cost reductions by
following the 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
firm focuses 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 collaborative relationships with major suppliers.
IM/2-6/10
(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 & contribute
to firm’s competitive advantage.
(ii) Purchasing in Govt. units
• DGS&D agency finalizes 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 in closed / limited tenders.
• Orders Finalised on lowest bidders (suppliers offering
Lowest prices / Landed Costs)
IM/2-7/10
(iii)  Purchasing in Institutions
• If the Institute is a Govt. Hospital Purchasing
practices of Govt. units Followed
• Similarly a private School / College follows
practices of commercial enterprises
• However, better to study each major
institution.

(iv) Purchasing in cooperative societies


• Similar to Institutional purchase.
(E) Types & Analysis of Environment
IM/2-8/10
A I R & W A T E R P O L L U T I O N

E C O L O G I C A SL O L I D W A S T E D I S P O S A L

C O N S E R V I N G N A T U R A L R

W A T E R , P O W E R , T R A N S P O
P H Y S I C A L
L O W - C O S T , S K I L L E D M A N P

C O M P A N Y L O C A T I O N , I M A
E N V I R O N M E I NN TT E R N A L R & D & P R O D U C T I O N F A C
( S & W A N A L Y H S RI S )& F I N A N C I A L R E S O U R
M A R K E T I N G E F F E C T I V E N E

M I C R O C U S T O M E R S &
( A F F E C T S A
P A R T I C U L A R
F I R M ) S U P P L I E R S
E X T E R N A L
( O & T A N A L Y S I S ) E C O N O M I C

M A C R O T E C H N O L O G I C A
( A F F E C T S
G O V T . , P O L I T I C A
A L L F I R M S )
C U L T U R A L & S O
P U B L I C - P R E S S
H O L D E R S , I N V E
P U B L I C I N T E R E S
(F)  Strategies for Managing Changing
IM/2-9/10
External
Environment.

(i)  Independent Strategies.


(ii) Cooperative Strategies.
(iii) Strategic Planning. It Aims at keeping
the firm
consistently successful in changing
marketing environment by market
oriented strategic management.
IM/2-10/10
SUMMARY OF CHAPTER - 2
Types /Classifications of Industrial/ Business Customers are
(i) Commercial Enterprises, (ii) Government
(iii) Institutional, (iv) Cooperative societies.

Industrial Products/Services are classified into


• (i) Materials & Parts, (ii) Capital Items, (iii) Suppliers & Services.
• Marketing strategies differ for different product & Customer types.
• Industrial / business Buyers follow one of the three purchasing orientations :
buying, procurement, or supply chain management.
• Purchasing practices vary for different types of customers. It is important to
understand it for each major customer.
• Types of environment are Ecological, Physical, Internal, & External,
Strategies used for managing changing external marketing environment
are : (i) Independent, (ii) Cooperative, (iii) Strategic Planning.
CHAPTER – 3 IM/3-1/16

THE NATURE OF INDUSTRIAL BUYING


AND BUYING BEHAVIOUR
Learning Objectives
• Understand Organizational buying objectives.
• Gain knowledge of buying activities, including different
phases in buying decision process, types of buying
situations; buygrid framework & its analysis.
• Identify members of buying centers.
• Understand organizational buying behavior.
• Know how industrial buyers choose and evaluate
suppliers.
IM/3-2/16
PURCHASING OBJECTIVES OF FIRMS

• Reliability in delivery.
• Consistent product Quality.
• Lowest price (If delivery & Quality objectives
are met)
• Excellent pre & post – sales services.
• Long – Term collaborative relationship.
Industrial buyers try to achieve organizational
purchasing objectives & personal objectives
like higher status, job security, salary
increments, promotions & social relationships.
Industrial Buying Decision
IM/3-3/16
Process
• Marketers must study this for developing effective marketing
strategy.
• In Consumer Marketing, Household / Individual consumer /
Buyer makes buying decisions based on certain mental stages
like (i) Problem (Need) Recognition,
(ii) Information Search (iii) Evaluation
(iv) Purchase decision (v) Post Purchase Behavior
• In Industrial Marketing, Buying Decision making process is
observable, involving many people in buying firm & includes
sequential activities / stages / phases, as follows:
IM/3-4/16
(A) PHASES IN INDUSTRIAL BUYING
DECISION MAKING PROCESS /
BUYPHASES
• PHASE –1 :- Recognising A problem / need.
• PHASE – 2 :- Determining Characteristics &
Quantity of needed product / Service*.
• PHASE – 3 :- Developing specifications of the product*.
• PHASE – 4 :- Searching & Qualifying Suppliers.
• PHASE – 5 :- Obtaining & Analyzing suppliers’ offers*
• PHASE – 6 :- Evaluating & Selecting Suppliers.
(shown on next slide)
• PHASE – 7 :- Selecting an order routine
• PHASE – 8 :- Post – Purchase evaluation
* These are in addition to five stages of consumer
buying decision process.
IM/3-5/16
A SUPPLIER EVALUATION SYSTEM.
ATTRIBUTE/ WEIGHT/ SUPPLIER’S SUPPLIER’S
FACTOR IMPORTANCE PERFORMANCE RATING
SCORE
PRICE 15 0.5 07.5

QUALITY 30 0.7 21.0

DELIVERY 25 0.6 15.0

SERVICE 20 0.7 14.0

FLEXIBILIY 10 0.4 04.0

TOTAL 100 61.5


(B) Buying Situations / Buyclasses
IM/3-6/16

3 Common types of purchases / buying situations


i.  New Task / New Purchase :
Here, buyers have limited knowledge and experience of
the new product/service. Hence, more information is
obtained, more people are involved, risks are more, and
decisions take longer time.
ii. Modified Rebuy / Change in supplier :
This situation occurs when the firm is not satisfied with the
performance of existing suppliers, or there is a change in
product specs. Hence, the need for searching alternate
suppliers.
iii. Straight Rebuy / Repeat purchase :
Here, the buying firm places repeat orders on suppliers
who are currently supplying certain products/services.
Such decisions are routine, with less risks and less
information needs, and can be taken by junior executives.
IM/3-7/16
(C) Buygrid Framework
BUYPHASES BUYCLASSES
New Task Modified Straight
Rebuy Rebuy
1. Problem Recognition Yes May Be No
2. Characteristics of Product Yes May Be No
3. Product Specification Yes May Be No
4. Supplier Search Yes Yes No
5. Analyzing Supplier Offers Yes Yes May Be
6. Supplier Selection Yes Yes No
7. Order – Routine Selection Yes Yes May Be
8. Post Purchase Review Yes Yes Yes
BUYGRID FRAMEWORK ANALYSIS
IM/3-8/16

• All Phases are Applicable for a New Task.


• Some Phases are Applicable for modified /
Straight Rebury.
• New task situation is most difficult since buyers
have less knowledge, no experience & more
people involved.
• Modified Rebury is not difficult situation since it
has few activities.
• Straight rebury situation is handled routinely, as
repeat purchases are made.
(D) Buying Center roles & key
IM/3-9/16
members.

Roles of Buying center members are


• Initiators. First recognize problem / need. Any individual
in buying firm – often, users.
• Buyers. Carry out purchase activities. They are purchase
officers / executives.
• User. Any person who uses the product / service.
• Influencers. Influence buying decision. Technical people
are often key influencers.
• Deciders. Make buying decisions. Senior executives are
deciders for high value & complex products. For straight
rebuy / routine purchase, junior purchase officer can
decide.
• Gatekeepers. They control / filter information &
meetings with buying center members. Often, P.A. / Junior
person attached to purchase head is the gatekeeper.
(E) Identifying key membersIM/3-10/16
of
buying centre
• Sales / Marketing persons must identify important
members of buying centre.
• Buying centre consists of individuals and groups who take
part in buying decision making process, have common
objectives & share common risks. It is also called purchase
committee, buying committee or decision making unit.
• Members of buying centre are
(i)  Technical persons. Represent
design,production/operations,
maintenance, Q.C., Industrial Engg. Depts.
(ii) Purchasers / Buyers. Purchase / Materials dept.
persons.
(iii) Accounts / Finance persons.
(iv) Marketing persons
(v)  Top management persons. G. M. & above.
IM/3-11/16
(F)  Organizational buying behavior
• Industrial / business buyers are influenced by many
factors. Two most important factors are (i)
Organizational factors / task – oriented
objectives, like best product quality, lowest price,
dependable delivery.
(i) Personal factors / Non-task oriented
objectives, such as good increments, promotion, Job
security, personal favors.
• When suppliers’ offers are similar, buyers can satisfy
organizational objectives from any supplier. Hence,
personal factors become important.
• However, when suppliers’ offers differ substantially,
buyers give importance to organizational factors
to satisfy organizational objectives.
IM/3-12/16
• Many models have been developed to explain organizational
buying behavior. One of the comprehensive models is the Sheth
model, described below.
• The Sheth model of industrial buyer behavior, shown
below , focuses on (i) Psychological aspects of individual buyers
(Component 1), (ii) Conditions causing joint decision making
(Component 2), (iii) Conflict among those involved in decision
process & resolution of conflict
(Component 3).
• Situational factors include economic conditions, labour disputes,
mergers & acquisitions. The model does not explain their
influence on buying process.
IM/3-13/16
C o m p o Cn eo n m t p ( 1o )Cn eo nm t p ( 2o S) n ie t nu ta t( i3 o )

D i f f e r e n Vc ea sr i a a b m l e o Ms n etg h t ha ot dD s e tu e s r e m d i n f oe
i n d i v i d u ai f l b b u u y y i ne gr sc od en fc l i cs it o r n e s i s o l u t i o
c a u s e d ab uy t of a n c o t om i r n os u j : o s i n o t r - d j o e i c n i ts :i o n
 B a c k g r oA u ) n P d r o o d f u m c a t k S i pn ge c p i f r i oc c e s s
i n d i v i d u F a a l s c t ( o E r ds u : c a t i o n ,
r o l e & l i f T e i m s t e y l Pe ) r  . Pe s r os bu lr e e m S o l v i n g
 T h e i r i n  f P o er m r c a e t i i v o  e Pn d e rR s i u s a k Ss i uo pn p l i e r
s o u r c e s  T. y p e o f  B P a u r r g c ah i a n B s i n er ag n d C
 A c t i v e S B e ) a C r co h m p  P a o n l y i t i Sc kp i e n c g i f i c
 P e r c e p t Fu a l c Dt o i r s s t o : r t i o n
 S a t i s f a c  C t i o o n m w p a i t nh y S i z e
p a s t p u  r C c ho am s p e a s n y O r i e n t a t i o n
 D e g r e e o f
C e n t r a l i s a t i o n

F i g . : T H E S H E T H M O D E L
W E B S T E R A N D W IN D M O D E L
IM/3-14/16
E n v ir o n m e n ta l V a r ia b le s
 P h y s ic a l, T e c h n o lo g ic a l
 E c o n o m ic , C u lt u r a l
 P o lit ic a l a n d L e g a l
 L a b o u r u n io n s
 C u s t o m e r d e m a n d s
 C o m p e t it iv e p r a c t ic e s
 S u p p lie r in f o r m a t io n

O r g a n is a t io n V a r ia b le s
 O b je c t iv e s a n d g o a ls
 O r g a n is a t io n S t r u c t u r e
 P u r c h a s in g P o lic ie s / P r o c e d u r e s
 E v a lu a t io n & r e w a r d s y s t e m s
 D e g r e e o f d e c e n t r a lis a t io n

B u y in g C e n t r e V a r ia b le s O r g a n is a t io n B u y in g D e c is io n s
 A u t h o r it y , S iz e  C h o ic e o f S u p p lie r s
 K e y in f lu e n c e r s  D e la y d e c is io n & g e t m o r e in f o r m a t io n
 I n t e r p e r s o n a l r e la t io n s h ip  M a k e , L e a s e o r b u y
 C o m m u n i c a t io n  D o n o t b u y

In d iv id u a l V a r ia b le s
 P e r s o n a l G o a ls , V a lu e s
 E d u c a t io n , E x p e r ie n c e
 E x p e r t i s e , J o b P o s it io n
 L if e s t y l e , I n c o m e
IM/3-15/16
CUSTOMER SERVICE
• Important Customer Service Elements. Carry out market
survey to understand which of the following elements of
customer service are important to customers, what service
levels are expected by customers, the service levels offered
by the firm and its competitors.
  (i)   Pre – Sales Service : Advising, Informing,
Problem solving
(ii) During – Sales Service : Product availability,
on–time delivery, order cycle time, and information.
(iii)  Post – Sales Service : Warranty, AMC, Repair,
Installation & Training.
• Develop superior service package.
• Test, Set Goals, and Establish Control system
IM/3-16/16
SUMMARY OF CHAPTER - 3
• Industrial marketers should understand that business buyers try to
achieve both organizational & personal objectives.
• Industrial buying decision process consists of eight steps / stages
(buyphases) & three types of buying situations (buyclasses).
• Buygrid model combines buyphases & buyclasses.
• Marketers must understand roles & key members of buying centre,
including key buying influencers.
• Many factors influence organizational buying behavior, but major
factors are organizational ( or task – oriented ) objectives and
personal (non – task oriented ) objectives.
• The Sheth model of industrial buyer behavior is comprehensive,
focusing of psychological & joint – decision making aspects.
• Webster and wind model is also widely used & comprehensive
model on buyer behavior.
IM/4-01/11
CHAPTER - 4
 
BUYER SELLER RELATIONSHIP

LEARNING OBJECTIVES :
• Understand buyer sales rep. interactions.
• Types/range of relationships between buyer & seller
firms.
• Customer relationship management (CRM) /
relationship marketing.
• Methods used to influence industrial customers.
• Special dealings between buyer & seller.
IM/4-02/11
INDUSTRIAL BUYER-SALES REP.
INTERACTIONS
• Depend on their perceptions, behavior & roles.
• Buyers have two major perceptions of sales reps.
(i)  Stereotype – talkative, manipulative, excitable
(ii) Reputation of sales rep’s company.
• Buyer Behavior towards sales rep depends on organizational
needs / objectives, buying centre interactions and personal
needs.
• Buyers are not always rational / logical in buying decisions.
• Role / behavior of sales rep. depends on his personal needs,
and expectations of his boss, peers, customers.
BUYER-SELLER DYADIC INTERACTION
IM/4-03/11
FRAMEWORK
A Conceptual Framework by Dr. Sheth
C o m p a t i b l eI n Sc to y m l e p a t i b l e S

C o m p a t Ii db el e a l / S u c c e s I s n f eu f l f i c i e n t
C o n t e n t T r a n s a c t i o nT r a n s a c t i o n

I n c o m p a t Ii nb el e f f i c i e n t N o
C o n t e n t T r a n s a c t i o nT r a n s a c t i o n

• A buyer and a seller interaction is called “Dyadic” – two persons’


interactions’, with above types of transactions.
• Content includes organizational and personal needs of a buyer and
a seller.
• Style includes manner and format of communication – task
oriented, self oriented, or social / personal oriented.
TYPES / RANGE OF RELATIONSHIP
IM/4-04/11
BETWEEN BUYER & SELLER FIRMS

• When buyer (or customer) and seller (or supplier) firms do


business, they have the following types and range of
business / working relationships / exchanges.

P a r t n e r i n g /
T r a n s a c t i Vo an l a u l e - A d d C e od l l a b o r a t i v e
R e l a t i o n s Rh ei p l a t i o n s h R i ep l a t i o n s h i p

• Each business relationship is an exchange process of


obtaining a desired product / service by offering
something of value is return.
IM/4-05/11
• TRANSACTIONAL RELATIONSHIP is typically one time
exchange of a product / service, with lowest price /
economy and necessity as main factors. Some customers
prefer it when many suppliers are available in a stable
market. They switch purchases from one supplier to
another. Marketers also choose least profitable
customers for transactional relationships.

VALUE – ADDED RELATIONSHIPS / EXCHANGES.


 
• Here the focus is to understand customer needs and
meet those needs better than competitors, to get
maximum business share.
• These customers have medium sales and profit
potentials and have “Procurement Orientations”.
COLLABORATIVE/ PARTNERING
IM/4-06/11
RELATIONSHIPS.

•  The focus is to build strong social, economic,


service and technical ties between customer and
supplier firms in order to achieve mutual benefits.
• The criteria used for selecting business customers
for partnering relationships are technological
contributions, mutual dependence, “supply chain
management” orientations, and high sales & profit
potentials.
IM/4-07/11
CUSTOMER RELATIONSHIP MANAGEMENT
(CRM) / RELATIONSHIP MARKETING (RM)
• Conceptually same, methods / techniques to achieve objectives are
different.
• Both CRM & RM aim at partnering / collaborative long-term
relationships for mutual benefits of both parties.
• CRM’S objectives are to improve customer loyalty and there by,
company’s profitability. For this, marketing strategy is first
developed, then investment is made in software system to gather
data / information on each valued customer, and the same is made
available to all employees to give superior customer service.
• RM aims at building relationships with key customers, distributors,
and suppliers. This is done through financial and social benefits,
and in addition, structural ties.
• After 2-3 years, both firms evaluate their relationship using sales,
profits, prices, costs, & technology factors.
IM/4-08/11
METHODS USED TO INFLUENCE
INDUSTRIAL CUSTOMERS

• Major methods : Sales presentation and Negotiation


• Sales Presentations: For effective sales presentation, a
sales person should follow some guidelines :
i.  Plan and collect information before sales presentation.
ii. Identify customer needs and satisfy them better than
competitors.
iii.Use “AIDAS” theory or any other theory of selling
(Attention, Interest, Desire, Action, Satisfaction)
• Give importance to prompt customer service.
IM/4-9/11
• NEGOTIATION : For negotiation with customers use
“I win, you win” or “win win” style, with following
guidelines :
a. Build an environment of trust & understanding.
b. Identify the problem areas.
c. Both sides work together, pooling ideas, information,

and resources.
d. Regular frequency of concessions are important and
not
the size of concessions.
e. Be responsive to corrections, if needed.
f. Avoid legalistic approach.
g. Be polite and humble.
h. Importance should be on “end results” and not on
“means”.
SPECIAL DEALINGS BETWEEN
IM/4-10/11
BUYER & SELLER

• RECIPROCITY. It means buying a product / service


from a customer and selling a product / service to a
supplier. It occurs when products are similar and price
competition is less. Generally, both purchase
managers and sales managers dislike. In practice, the
procedure becomes complex. It should be kept at
minimum level.
 
DEALING WITH CUSTOMERS’ CUSTOMERS
•  With coordination and planning, a business marketer
can promote its products to customers’ customer, if a
need arises.
• E.G. Aircraft engine manufactures promote their
engines to Air lines (aircraft buyers), in addition to
aircraft manufacturers.
IM/4-11/11
SUMMARY OF CHAPTER - 4
BUYER – SELLER RELATIONSHIP
• Industrial buyer and sales rep.’s interactions depend on
their perceptions, behavior, & roles.
• Interaction between two persons (buyer & seller) is called
Dyadic, with various types of transactions, as per Dr.
Sheth’s framework.
• Buyer and seller firms have various types and range of
relationships: transactional, value added and partnering /
collaborative.
• Customer relationship management (CRM) and relationship
management (RM) are conceptually same. Both aim at
collaborative / partnering long – term relationship for
mutual benefits of both parties.
• Sales promotion and negotiation are the major methods
used to influence industrial buyers.
• Reciprocity and dealing with customers’ customers are the
special dealings between a buyer & a seller.
CHAPTER 5 IM/5-1/6

INDUSTRIAL MARKETING
INTELLIGENCE AND MARKETING
RESEARCH
LEARNING OBJECTIVES :
1. Know Nature and Scope of
Industrial Marketing research.
2. Examine the Marketing Research
Process.
3. Understand Industrial Marketing
Intelligence System.
SCOPE OF INDUSTRIAL IM/5-3/6
MARKETING RESEARCH
Scope is vast. Some of the areas are :
i. Market share analysis .
ii. National and Geographical area-wise
market potential.
iii. Competitors’ analysis.
iv. New product acceptance and potential
IM/5-4/6
MARKETING RESEARCH PROCESS

STEPS INVOLVED ARE :


1. Identify the problem / opportunity and state
research objectives .
2. Develop research design / methodology.
3. Collect data / information.
4. Process and analyze the data.
5. Prepare research report.

There is no major difference in the process or


steps involved in marketing research for consumer
and industrial marketing .
IM/5-5/6
INDUSTRIAL MARKEING INTELLIGENCE
SYSTEM
M a r k e t i n g
R e s e a r c h
s t u d i e s

I n d u s t r i a l
S e c o n d a r Dy e c i s i o n
M a r k e t i n g M a r k e t
D a t a S u p p o r t
I n t e l l i g e n c e R e s p o n c e
S o u r c e S y s t e m
ResarMkt ingch
studie s
Industr ial
DSeco InteligMark DecisonSuprt RespoMark atndry ngice ncet
So System System urce

S y s t e m

Industrial marketing intelligence system is developed to meet the


needs of industrial marketers for timely and continuous information
for effective decision making .
IM/5-6/6
SUMMARY OF CHAPTER-5
• Industrial marketing research rely more on
exploratory and descriptive (i.e. survey) methods .
• The scope of industrial / business marketing
research is vast .
• There is no major difference in the process or steps
involved in marketing research for consumer and
industrial marketing.
• Industrial marketing intelligence system is
developed to meet the needs of business marketing
for timely and continuous information for effective
decision making.
IM/5-2/6
NATURE OF INDUSTRIAL
MARKETING RESEARCH
1. Business Marketers rely more on Secondary data,
and exploratory research (Through expert opinion).
2. Descriptive (or Survey) method is used more often
than experimental and Observation methods, for
collecting primary data.
3. Sample size is small due to small population.
4. Difficult to define sampling unit (or respondents),
since buying decisions are made by many members
of buying centre.
5. Respondents’ Cooperation and accessibility are
difficult for data collection.
 
CHAPTER – 6 IM/6-1/9

INDUSTRIAL MARKET
SEGMENTATION, TARGET MARKETING
AND POSITIONING
LEARNING OBJECTIVES :
1. Know the Procedure followed for
segmenting industrial markets.
2. Identify the Variables (bases) used for
segmenting business markets.
3. Evaluate and select the target market
segments and strategies.
4. Develop effective positioning strategies.
IM/6-2/9
PROCEDURE USED IN MARKET
SEGMENTATION

The procedure has 3 steps .


1.Conduct marketing research to
collect data / information on existing and
potential buyers, and competitors.
2.Carry out data analysis by using
statistical techniques of factor and cluster
analysis in order to identify different
segments.
3.Profile each segment by its
characteristics like application (or/use),
location, volume of requirements, etc.
IM/6-3/9
VARIABLES (BASES) USED IN
SEGMENTING INDUSTRIAL
(BUSINESS) MARKETS
• Industrial market segmentation is done first
based on “Macro Variables” , and then
subdivided into “Micro Variables”, if necessary.
 
• Macro Variables. These segmentation
variables are identified based on
industry/organizational characteristics like.
(i) Type of industry / Type of customer.
(ii) Company size / Usage rate.
(iii) Customer location / Geographical area.
(iv) End-use / Application / Benefits of a
product.
IM/6-4/9
• Micro Variables. Macro segments are
further subdivided into micro – segments’, if
needed. Micro Variables are based on
purchasing decisions like
(a)    Customer interaction needs,
(b)   Organizational capabilities,
(c)    Purchasing policies,
(d)   Purchasing criteria,
(e)    Personal characteristics.

Sequential Segmentation Process.


Often, business marketers use more than
one variable to subdivide the market.
IM/6-5/9
EVALUATING MARKET SEGMENTS
Criteria / factors used for evaluating each market segment
are :
(i) Size and Growth .
(ii) Profitability Analysis .
(iii) Competitive Analysis .
(iv) Company Objectives and Resources
 
TARGET – MARKET STRATEGIES
Based on above criteria, business marketer selects one or
more market segments as target segments. Next , the
marketers should decide which of the following broad
target market strategies the company should adopt
 
(a)    Concentrated or Niche marketing strategy,
(b)   Differentiated marketing strategy
(c)    Undifferentiated marketing strategy
IM/6-6/9
PROCEDURE FOR DEVELOPING A
POSITIONING STRATEGY
Following steps are involved :
(i) Identify which attributes / benefits target customers
consider important while buying a product / service. This
information is obtained through a market research study .
The variables considered for differentiating a company’s
product from competing products are.
  (a) Product variables,
(b)   Service variables,
(c)   Personal variables,
(d)   Image variables,

(ii) Select one or more major benefits (or attributes) to


differentiate the company from its competitors .
IM/6-7/9

(iii)Use Perceptual Mapping


Technique. To decide on positioning
strategy, this technique is used, after
getting customers’ perceptions
through marketing research.

(iv) Communicate Positioning


Strategy. The firm should decide and
communicate its positioning strategy
to target customers, through sales
force, advertising in journals, internet,
and trade shows
Excellent
Product Quality
IM/6-8/9

1.0
.A1 0.8

0.6
.D

.C 0.4

Strong 1.0 0.8 0.6 0.4 0.2


0.2
- 0.2 - 0.4 - 0.6 - 0.8 - 1.0
Weak
Custome Custome
r r
- 0.2
Service .B Service
- 0.4

- 0.6

. - 0.8
A
- 1.0

Perceptual Mapping Low


Technique Product Quality
IM/6-9/9
SUMMARY OF CHAPTER 6
1. Procedure used in market segmentation includes (i) Marketing
research, (ii) Data analysis (iii) Profiling each segment.
2. Variables used for segmenting industrial markets include macro
variables and if needed, micro variables. Sequential segmentation
process is often used.
3. Criteria used for evaluating market segments are (i) size and
growth , (ii) Profitability (iii) Competitive analysis
(iv) Company Objectives and Resources.
4. Target market strategies are (a) Concentrated or Niche marketing,
(b) Differentiated marketing, (c) Undifferentiated marketing
strategy
5. Steps used for developing positioning strategy include :
(i) Identifying attributes / benefits, (ii) Selecting one / more major
benefits, (iii) Using perceptual mapping technique,
(iv) Communicating positioning strategy.
IM/7-1/20
CHAPTER – 7

PRODUCT STRATEGY &


NEW PRODUCT DEVELOPMENT
Learning Objectives
1. Define an Industrial Product.
2. Understand Changes in the product strategy.
3. Know Product Life cycle (PLC) Theory and its application.
4. Develop Product strategies for existing products.
5. Understand new product development.
6. Know impact of technology and high-tech marketing.
7. Learn Marketing of industrial services.
DEFINITION AND MEANING OF IM/7-2/20
AN
INDUSTRIAL PRODUCT

• Definition : Its is a physical thing as well as a Complex set


of economic, technical, legal and personal relationship
between a buyer and a seller.
• Meaning of a Total Product Package : It includes basic
properties (with fundamental benefits), enhanced
properties (with tangible benefits), and augmented
properties (with intangible benefits).
• In a competitive market, business marketers must
understand target customers’ perceptions of a total product
package and offer the same better than competitors.
IM/7-3/20
CHANGES IN PRODUCT STRATEGY

Business marketers must understand that a


product strategy is dynamic and flexible.
It changes due to changes in
(i) Customer needs.
(ii)  Technology.
(iii) Government Policies / Laws.
(iv) Product Life – Cycle.
IM/7-4/20
A General Model of Product Life –
Cycle (PLC)
I n d u s t r y
S a l e s

R u p e e s

I n d u s t r y
P r o f i t s

M a t u r i Dt y e c l i n e
IM/7-5/20
APPLICATION OF PRODUCT LIFE –
CYCLE THEORY TO MARKETING
STRATEGY
Introduction Stage : Marketing Strategy should
focus on market development for slowly accepted
products. For rapidly accepted products, a
competitive strategy (Competitive pricing or Superior
quality product ) should be evolved.
 
Growth Stage :To take advantage of high growth
of sales and profits, the marketing strategy should
concentrate on (i) Improving product design or
adding product features (ii) Improving distribution
and (iii) Reducing price, as increased sales and
production reduce the costs.
IM/7-6/20

• Maturity Stage As competition increases and


profits decline, marketing strategy should
concentrate on (i) cutting costs, (ii) keeping
existing customers satisfied (iii) entering new
markets.

• Decline Stage Since both sales and profits


decline, marketing strategy should focus on
(i) substantial reduction in costs, (ii) develop
a substitute product, (iii) withdraw the product
slowly from the market.
IM/7-7/20
PRODUCT STRATEGIES FOR
EXISTING PRODUCTS
Business marketers should take the following steps :
1.Evaluate the performance of existing products by using
“product evaluation matrix”.
2.Examine the relative strengths and weaknesses of the
company’s products by using “ perceptual mapping”
technique.
3.Decide the product strategies, based on above analysis.
IM/7-8/20
PERFORMANCE EVALUATION OF
EXISTING PRODUCTS
Example : A material handling Co.
(i) Product = P (Pallet Truck)
Last 3 year’s average performance figures are
• Industry sales growth = 25%, Company sales growth = 30%
• Market Share = 30% (Dominant) , Profitability = As per Target.

(ii) Product = S (Stackers)


• Industry Sales growth = 16% (Stable) ; Company Sales Growth
= 15% (Stakers)
• Market Share = 12% (Average) ; Profitability = Below Target.
IM/7-9/20
Product Evaluation Matrix
C o m p a n y S D a e l ec sl i n e S t a b l e G r o w t h
P r o f i t a B b e i ll io t yw
I n d u s M t r ay r k e t T a r g eA t b o v B e e l o T w a r g eA t b o Bv e l o T w a r g eA t b o v e
S a l e s S h a r e T a r g e t T a r g eT ta r g e t T a r g Tea t r g e t T a r g e t

D o m i n a n t P

G r o w A t hv e r a g e

M a r g i n a l

D o m i n a n t

S t a b l Ae v e r a g e

M a r g i n a l S

D o m i n a n t

D e c l i An ve e r a g e

M a r g i n a l
IM/7-10/20
PERCEPTUAL MAPPING
TECHNIQUE
H i g h P r i c e

H i g h L o w
Q u a l i t y Q u a l i t y
*
A
1 *A
C

L o w P r i c e
IM/7-11/20
Firm A’s product quality is perceived to be “average”
by customers, compared to its competitors B & C. Firm
A should try to move to a new position of superior
quality at a reasonable (average) price to improve its
profitability.

DECIDE PRODUCT STRATEGIES

(i)   Maintain / Continue the product and its marketing


strategy.
(ii) Modify the product & change marketing strategy.
(iii)  Drop / eliminate the product.
(iv)  Add new product. 
CLASSIFICATION OF NEW PRODUCTS
(i)   Products that are new to the world & innovative.
IM/7-12/20
(ii)  Products that are new to the company, but not
new to the world.
(iii) Improvements / Revision to the existing products.
(iv) Addition to the existing products.
(v)  Repositioning existing products to new market
segments
(vi) Products with substantial cost reductions without
reduction in
performance.
 
NEW PRODUCT DEVELOPMENT
PROCESS
It consists of 7 Stages :
(i) Idea generation, (ii) Idea Screening, (iii) Concept
development and testing, (iv) Business analysis, (v)
Product development,
IM/7-13/20
IMPACT OF TECHNOLOGY
Technological innovations create new products / services that
are new to the world. Examples of these innovations, called break
through technology are :
(i)  Technological inventions of 1940s of vacuum tube
and amplifier circuit created new products / services like radio,
wireless telegraphy, and telephone service.
(ii) Technological inventions of 1950s & 70s of
transistor, integrated circuit (IC), microprocessors have
applications in new products like TV sets, movie Cameras,
Computers, Calculators, Mobile phones, Printers etc.,
(iii) Digital revolution of information technology and the
internet have improved company and consumer capabilities.
 
IM/7-14/20

TYPES OF MARKETING SITUATIONS.

B e t t e r H i g h - t e c h
H i g hM o u s e t r M a pa r k e t i n g
T e c h n o l o g i c M a al r k e t i n g
U n c e r t a in t y
L o w - t e c Hh i g h - f a s h i o
L o w M a r k e t i nM g a r k e t i n g

L o w H ig h
M a r U k en tc e r t a in t y
IM/7-15/20
MODIFIED TECHNOLOGY ADOPTION
LIFE CYCLE

This is suited to high–tech marketing

D e e p G a p

3 4 %
I n n o v a 1
t 3o ½
r s% 3 4 %

E a r l y 1 6 %
2 ½ % A d o p t e r s L a g g a r

T i m e o f A d o p t i o n o f
IM/7-16/20
HIGH – TECH MARKETING STRATEGY

1. Target a niche market.


2. Plan whole product properties.
3. Develop partnerships.
4. Unique positioning strategy.
5. Effective Communication Strategy
6. Multi – Channel distribution strategy.
7. Skimming pricing strategy.
IM/7-17/20
Marketing of Industrial Services
Classifications of Industrial
Services
M a t e r i a l Ps e r s o n H a o l t e l s
C o m p o n C e on mt s p u t f eo r r s G o o d
( S t e e l , B a l l B e a rC i n o gn s f e ) Tr e r an nc se ps o r t a t i o n

P u
r e P u
r e
T a n g i b l e i n t a n g
P r o d u c t s e r v i c
M a j o r E q u a l M a j o r
P r o d u cP t r , o d u cS t e r v i c e ,
M i n o r & M i n o r
S e r v i c S e e r v i c Pe r o d u c t
IM/7-18/20
Unique Characteristics of services
and
marketing Implications.
C h a r a c t e r i s t ic s M a r k e t in g Im p li c a t i o n s E x a m p l e s

1 . I n t a n g i b i l i t y B u y e r s s e e

  e v i d e n c e o f s eM r va i nc ae g q e u m a el i tn y t 
( c a n n o t b e s e e n /
f e lt , b e f o r e b  u S y ei n l lg e ) r s t a n g i b ilis e t h e i n t a nC g o i bn ls e u l t a n c y & E D

2 . I n s e p a r a b i l i t y E f f e c t iv e in t e r a c t io n d e p e  nR d e po an i r s s e tr ov i cm e a c h i n
( P r o d u c t i o n &
c o n s u m p t io n a p t r to h v e i d e r s . & C o u r ie r s e r v ic e
s a m e t im e )  R e q u ir e s e f f e c t iv e r e c r u it i n g a n d t r a in in g
o f s e r v i c e p r o v id e r s .

3 . V a r i a b il i t y  U n if o r m q u a l i t y i s d i f f i c u l t M a n a g e m e n t
( S e r v ic e q u a l i t Fy o c u s o n q u a lit y & a u t o m e ad t ui o c n a t i o n & m a r k e
v a r ie s )
r e s e a r c h .

4 . P e r i s h a b i l it y  D e m a n d f lu c t u a t e s . A ir lin e s s e a t s &
( C a n n o t b e s t o r e d )
 U s e m e t h o d s t o m a t c h d eW m a ar en hd o &u s e s p a c e .
c a p a c it y .

5 . N o n - o w n e r s h  i pA d v a n t a g e s o f n o n - o w n e  r Hs ho i t p e l : a n d c a r r e n
( B u y e r u s e s a
s e r v i c e , b u t c ar e n d n u o c t t i o n in c o s t s & f l e x i b i sl i et y r v i c e s .
o w n it )
IM/7-19/20
SUMMARY OF CHAPTER 7
PRODUCT STRATEGYS & NEW PRODUCTS DEVELOPMENT.
• Industrial Product is a physical thing and also a complex set of
economic, technical, legal and personal relationship between a
buyer and a Seller.
• Product Strategies are changed due to changes in customers needs,
technology, government policies or laws, and product life – cycle
• Product life cycle (PLC) concept is used to develop marketing
strategies at different stages of PLC.
• Product strategies for existing products are developed by (i)
evaluating the performance of existing products, using “product
evaluation matrix ,” (ii) Studying the strengths and weaknesses of
existing products, using “perceptual mapping” technique.
IM/7-20/20
It means, deciding if a product should be continued, modified,
dropped, or replaced.
•   New products are classified into six groups and consist of seven
stages of development process :- idea generation, idea screening,
concept development & testing, business analysis, product
development, market testing, and commercialization.
•   In High –tech marketing situation, technology application and
market needs are difficult to predict . The “technology adoption life
cycle” is modified to suit high-tech marketing.
•   Unique high – tech marketing strategies include targeting a niche
market, planning whole product, developing partnership, unique
positioning, effective communication , multi – channel distribution
and Skimming pricing.
•   Industrial services are classified into various groups, and include
unique characteristics like intangibility, inseparability, variability,
perishability & non – ownership.
IM/8-1/14
CHAPTER – 8

INDUSTRIAL DISTRIBUTION
CHANNELS & MARKETING LOGISTICS
Learning objectives
1. Understand alternative channel structures.
2. Know types of industrial intermediaries.
3. Understand steps involved in designing a channel.
4. Learn how to manage channel members.
5. Understand concepts of supply chain management,
Logistics, and business logistics system.
6. Learn the tasks of physical distribution and total
distribution cost.
IM/8-2/14
Alternative Channel Structures
• Industrial channel structures include both direct and indirect channels.
Direct Channels.
• Examples are direct selling through company sales force and direct
marketing through on-line marketing, telemarketing and direct mail.
Direct channels are used typically when (i) Transaction value is large, (ii)
Technical & commercial negotiations are held at various levels
(iii) Buying process takes a long time (iv) Buyers want to buy directly from
manufacturers.
 
Indirect Channels.
• Consists of intermediaries like distributors / dealers, manufacturer’s reps /
agents, value-added resellers (VARs), brokers and commission merchants.
 
• Indirect channels are generally used when (i) Value of transaction / sales
is low, (ii) The manufacturer’s resources are limited,
(iii) Customers are geographically dispersed, (iv) Buyers purchase many
items in one transaction.
IM/8-3/14
Types of Intermediaries
1. Industrial Distributors / Dealers.
• They perform many functions like buying, storing, promoting, financing,
selling, transporting and servicing certain geographic market, & are
given discounts.
 
• Major categories are (i) General – line distributors, (ii) Specialized
distributors, and (iii) Combination house.
 
2. Manufactures’ Representatives / Agents.
• They perform functions like promoting manufacturers’ products /
services, getting orders, and colleting market information. They are
independent business firms, representing various manufacturers whose
products complement one another but are not competitive.
 
• They are paid commission on the value of sales or orders booked. They
do not buy, store or finance transactions.
IM/8-4/14
3. Value-added Resellers (VARs)
They are new type of intermediaries from computer industry.
They deal with computer hardware and software companies,
customize the same to solve specific problems of buying firms.
They are paid discounts.
 
4. Brokers
They bring together buyers and sellers, when information is not
available completely. They represent either a buyer or a seller,
and their relationship is short term. They do not buy products &
services and are paid on commission basis.
 
5. Commission Merchants.
They represent sellers / manufactures, mostly with bulk
commodities like raw materials, to perform functions like
arranging inspection, transporting, negotiating and selling. They
are paid commission on the value of sales.
 
IM/8-5/14
CHANNEL DESIGN
• It includes developing new channels and modifying the existing
channels.
 
• The procedure / steps are as follows;
(i) Developing channel objectives;
(ii) Analyzing channel constraints;
(iii) Analyzing channel tasks;
(iv) Identifying channel alternatives. These include the following
issues :
(a) Types of intermediaries.
(b)  Number of intermediaries.
(c)   Number of channels.
 
 (v) Evaluating the channel alternatives. The criteria used are:
(a)    Economic factor
(b)   Control factor
(c)    Adaptive factor
 
(vi)  Selection of the channel (s).
IM/8-6/14
MANAGING CHANNEL MEMBERS
It includes :
1. Selecting Intermediaries.
2. Motivating Intermediaries.
(a)   Partnering relationships.
(b)   Reasonable discounts and commission.
(c)   Distributor councils.
(d)   Other motivational tools.
 
3. Controlling Channel Conflicts
(a)   Sources of channel conflicts.
(b)  Controlling conflicts by
(i)   Effective communication network;
(ii) Joint goal – setting;
(iii) Diplomacy; Mediation; Arbitration.
(iv) Vertical marketing system (VMS).
 
4. Evaluating Channel Members
IM/8-7/14
Concept of Supply Chain Management
(SCM)
SCM includes activities of moving goods from raw material through operations
to final consumers, as shown in “SCM Framework” below.
IM/8-8/14
• Main aims of SCM are (i) Reduce cost per unit, (ii)
Reduce waste & duplication, (iii) Minimize order to
delivery cycle, and (iv) Ensure superior delivery
service. Firms adopting SCM gain competitive
advantage.
• The aims are achieved by a network of interdependent
firms working together with partnering relationships to
manage and control various activities, in order to
improve flow of materials and information from
suppliers to end users.
• Firms involved in SCM are suppliers of raw materials &
components, transporters, distributors, material
handling & information processing firms.
IM/8-9/14
Logistics Management (LM)
LM plans and coordinates activities to achieve
superior customer service levels at lowest
costs. LM optimizes material flow within the
firm, but SCM extends integration of material
flow to suppliers’ suppliers and customers’
customers. For better understanding, see
figure on “ business logistics system”, which
has two product movement; physical supply
and physical distribution.
IM/8-10/14
Business Logistics System
P h y s i c I an ld Su us pt r p i P a l y hl My s a i nc ua
( o r M a r k

Marketing Logistics (or Physical distribution)


consists of delivering finished products to
intermediaries and customers.
IM/8-11/14
TASKS OF PHYSICAL DISTRIBUTION (PD)
PD tasks are :
(i) Transportation, (ii) Warehousing, (iii) Inventory
Control, (iv) Customer Service, (v) Packaging, (vi)
Material Handling, (vii) Order Processing, (viii)
Communication, (ix) Locations of factory &
Warehouses.

• Total Distribution cost and customer service are


balanced by
(i) Minimizing total distribution cost, or (ii) Total
systems approach through maximizing profits.
 
• Total Distribution Cost = Transportation cost
(Freight) + Warehouse cost + Inventory cost + Cost
of lost sales due to delayed delivery.
 
IM/8-12/14
• A firm must minimize “total distribution cost”, instead of
minimizing individual cost elements, to balance customer
service and total distribution cost.
 
• Another approach, called “total systems approach or channel
integration” focuses on “return on investment” (ROI). Here, a
firm’s channel members work together to improve “customer
service”, in order to get higher sales revenue.
 
 

S a le s R e v e n u e - T o t a l P h y
=
C a p i t a l I n v e s t m e n t
IM/8-13/14
SUMMARY OF CHAPTER – 8

INDUSTRIAL DISTRIBUTION CHANNELS &


MARKETING LOGISTICS.
1. Industrial channel structures include direct and indirect
channels.
2. Types of industrial intermediaries are: industrial
distributors / dealers, manufacturers’ representatives (or
agents), value – added resellers (VARs), brokers, and
commission merchants.
3. Procedure of channel design includes: developing channel
objectives, analyzing channel constraints and tasks,
identifying channel alternatives, evaluating alternatives
and selection of the channel (s).
IM/8-13A/
CUSTOMER SERVICE
• Service Quality Gap : Gap between
perceived service and expected service. A
firm may have a strategy of giving superior
quality service than competitors and
exceeding customer’s expectations.
• Factors that determine service quality
by customers are :
(i)    Reliability
(ii)   Responsiveness
(iii)  Assurance
(iv)  Empathy
(v)   Tangibles
IM/8-13B/
• Strategies followed by successful
customer service firms
(a) Top management commitment.
(b) Setting high-standards of service
quality.
(c) Monitoring system.
(d) Systematic approach to resolving
customer complaints.
(e) Satisfy both employees and customers .
IM/8-13C/
• Developing customer service levels/ standards
Neither all customers nor all products need the same level
of service. Steps involved :
(i)   Conduct marketing research study to find which
elements of customer service are important to
customers.
(ii)   Find needs / expectations of customers in
quantitative standards for the service elements.
(iii)  Get information on actual performance of the
company and it’s competitors from customers.
(iv)  Analyse variance of actual performance with
standards.
(v)  Take corrective actions to minimise the variance.
• Outstanding delivery service levels are achieved by
integrating logistics and through supply chain
management.
IM/8-14/14
4. Managing channel members consist of selecting and motivating
intermediaries, controlling channel conflicts, and evaluating
channel members.
5. Supply chain management (SCM) includes activities of moving
goods from raw material through operations to final consumers.
Logistics management optimizes material flow within the firm,
but SCM extends integration of material flow to suppliers’
suppliers and customers’ customers.
6. Business logistics system includes physical supply and physical
distribution (or marketing logistics).
7. To balance total distribution cost and customer service, a firm
can use any of the approaches: (i) Minimize total distribution
cost, or (ii) Maximize profits (ROI) through channel integration.
 
IM/9-1/12
CHAPTER 9
MANAGING THE PERSONAL
SELLING FUNCTION
Learning Objectives :
1. Understand the role of personal selling in
business marketing.
2. Know the business selling process.
3. Know characteristics of B2B selling , Team
selling approach, solution-oriented effort,
Entrepreneurial Philosophy.
4. Understand management of major and national
accounts.
IM/9-2/12
Role of Personal Selling in Business
Marketing
• Personal selling or direct selling through
company sales force plays greater role in business
marketing than consumer marketing
• Major roles of personal selling
(i) A part of problems – solving capabilities of the
company.
(ii) A part of the company’s communication or
promotion mix .
(iii) Gives an effective customer service .
IM/9-3/12
Business Selling Process
• No magic formula for making a sale. But chances of
making a sale improves, if the following “sales
process” is followed.
• The major steps in selling process are :
(i) Prospecting. It is searching or identifying
prospective or likely customers from various sources.
(ii) Qualifying . Prospective customers are screened
by qualifying criteria like expected volume, location
& financial strength.
(iii) Preparation / Pre-approach. Sales person should
prepare plan before making sales presentation by
obtaining all relevant information about the customer
and competitors through personal visits and websites.
IM/9-4/12
(iv) Sales Presentation / Approach . Different methods
are used like “(AIDAS Approach – Attention, Interest,
Desire, Action, Satisfaction), or “need –satisfaction
method’’.
(v) Overcoming Objections . Often prospects raise
objections, which are real or practical and
psychological or hidden. These should be answered
satisfactorily by the sales person.
(vi) Closing. Asking for an order or closing the sale is
important. Sales person can use some of the closing
techniques.
(vi) Post - Sales service and Follow-up This includes
delivery, installation, training, payment collection,
warranty service, and rejections /returns.
IM/9-5/12
Characteristics of B2B Selling
1. Promotional strategy focuses more on “ personal
selling’’ through company’s sales force. Hence,
salespersons are active in getting orders.
2. Adverting is used as a support to personal selling.
3. The sales person sells technical and non-technical
products, and uses “problem solving’’ approach
4. Typically, it takes a long time to know outcome of
sales efforts.
5. “System selling” approach is used by some business
marketers, as it is preferred in some large industrial
projects or contracts.
6. “Team selling” approach is used for major customers
and large value orders.
IM/9-6/12

Team Selling Approach


• More companies are using team selling approach
for selling to major and national accounts
(customers) and technically complex products and
services.
• Sales team consists of sales representative,
technical support person, inside sales person, and
a senior sales/marketing manager.
• Coordination is done by a sales rep, for a major
customer and a national accounts manager for a
national customer.
IM/9-7/12
Solution – Oriented Effort
• Two major roles of personal selling :
(1) A part of problem-solving capabilities,
(2) A part of communication ( or promotional)
mix.
• A sales person is a part of selling firm’s problem-
solving abilities. He should identify and analyse
the buying firm’s problem. He should then show
how his company’s products and services can
solve the buyer’s problems, better than
competitors. This is called solution-oriented effort
or approach.
IM/9-8/12
Intrapreneurial Philosophy
• Intrapreneurship means entrepreneur within
a company.
• When sales and marketing persons, who are
employees, behave and act like owners of
the company, they have adopted
entrepreneurial philosophy. Such persons
take initiative, are proactive and creative,
and give superior value to customers.
• Firms that follow Intrapreneurial
philosophy show consistently good
performance.
IM/9-9/12
MANAGEMENT OF MAJOR AND
NATIONAL ACCOUNTS
• Both major and National accounts (or
customers) have large (sales and profit
potentials). But there is a difference.

S a l e s L a r g e M a j o r N a t i o n a l
P o t e n t i a l A c c o u n tA c c o u n t
o f D y a d i c M i n o r
S
C u s t o m e r m a l l
I n t e r a c t i oA n c c o u n t

S i m p l e C o m p l e x

Complexity of customer
IM/9-10/12

• A major account has a large sales (and profit)


potential and is simple to serve or manage, as the
customer has only one unit .
• A national account has also a large sales (and
profit Potential), and is complex or difficult to
serve, because operating units re geographically
dispersed. In addition, for small value items
operating units are autonomous, but for large
value items, buying is centralized.
IM/9-11/12
How to Manager Major & National Accounts
Objective. To become the preferred or sole supplier with
adequate profits.
Strategy / plan.
• Team selling. For a major customer, the team should
include branch / regional managers, sales representative
and technical support person.
For a national account, the team consists of a national
accounts manager, branch sales representatives, logistics
executive, and technical person.
• Relationship marketing. The teams build long-term
collaborative or partnering relationships by using
approaches like financial and social benefits, and structural
ties.
• Support from top management and functional executives
should be assured.
IM/9-12/12
SUMMARY OF CHAPTER-9
• Personal selling has a greater role in business marketing
than consumer marketing.
• Business selling process consists of prospecting,
qualifying, preparation (or pre-approach), sales
presentation (or approach), overcoming objections,
closing, post-sales service and follow-up.
• B 2 B selling characteristics include problem solving,
systems selling and team selling approaches.
• Intrepreneurial philosophy results in consistently good
performance.
• Management of major and national accounts is done by
team selling, relationship marketing and support from
top management and functional managers.
IM/10-1/10
CHAPTER –10
BUSINESS (INDUSTRIAL)
COMMUNICATION
Learning Objectives :
1. Develop an effective communication
(or promotional) program.
2. Understand the role of advertising
3. Understand the importance of sales
promotion, publicity, public relation
(PR), and direct marketing.
IM/10-2/10
DEVELOPING AN EFFECTIVE
COMMUNICATION / PROMOTIOAL
PROGRAMME FOR BUSINESS MARKETS
The steps involved are :
(i) Decide communication objectives.
(ii) Identify the target audience.
(iii) Decide the promotional budget.
(iv) Develop the message strategy.
(v) Select the media.
(vi) Evaluate the promotion’s results.
(vii) Integrate the promotion’s programme.
IM/10-3/10
Promotional Tools and Media in Business Markets
P r o m A o d t v i o e nrS t a a i l sl e i P ns . g R . D a i n r d e P c et r s o
T o o l s P r o m P o u t b i o Ml i n c ai t r y k S e e t l i l n i n g

P r o m  Po tr i i o n n t T a M r l a e d d e C i a s h h a o r  w iD t s a i r b e l  c e S t a m l e as i c
M e d Bi a u s i  n E e x s hs i d b o i t n i oa nt  i Ts o e n l s e m S a a r l e- s
& P u b l i  c C a a t i t o a n l A o s gd u o ep k s t e i tn i gn p g r e s e n
S u p p T o r r at s d  Se a l e s v i C l l oa ng  es O es n n t - s l  i T n e e a m
J o u r n P a rl s o m  C o t o i mo n m m a a l u r n k i e tR yt i e n l ag t i
 I n d u n s o t vr ie a l r tl sie e l sa t ( i g o i n f t s s ) m a r k e t
d i r e c t So er mi e s i n N a e r w s s i t e m i n
 D e m p o rn e s s t sr a t i o n
 P r o m  T o e t c i ho n ai c l a l
l e t t e r as r t i c l e s i n
 E n t e j r o t u a ri n n m a l e s n t
IM/10-4/10
ROLE OF ADVERTISING IN BUSINESS MARKETING

While advertising is relatively less important than


personal selling in business marketing, it is used
as support to personal selling. The functions
performed by advertising are

(i) Creating awareness.


(ii) Reaching members of buying center.
(iii) Increasing sales efficiency and effectiveness.
(iv) Efficient reminder media.
(v) Sales – lead generation.
(vi) Support channel members.
IM/10-5/10
ADVERTIING MEDIA USED AND SELECTION
CRITERIA
• The media generally used for industrial advertising are:
(i) Business Publications.
(ii) Trade journals/ publications – Horizontal and Vertical
publications.
(iii) Industrial directories – published by government and private
publishers (e.g. Tata Yellow pages).

• Criteria used for selection of advertising media are:


(a) Target audience and their media habits.
(b) Promotional objectives and goals.
(c) Expenditure budget, by using the following formula:
C o s t p e r p a g e
=
C i r c u l a t i o n i n t h o u s
IM/10-6/10

IMPORTANCE OF SALES PROMOTION


• Sales promotion consists of short-term incentive
tools to stimulate greater or faster purchase of a
product / service by business customers.

• Some of the business promotion tools are :


Trade shows (or exhibitions), sales contests,
promotional novelties (or specialty
advertising, or gifts), seminars, catalogues,
promotional letters, demonstration, and
entertainment. Some of the frequently used tools
are trade shows, sales contests, catalogues,
demonstrations, and promotional novelties (gifts).
IM/10-7/10
IMPORTANCE / ROLE OF DIRECT MARKETING (DM)
• Definition Direct marketing is an interactive marketing system that
seeks a measurable response and /or transaction. Direct marketing is
also referred to as direct response marketing.
• Benefits For business marketers, benefits of DM are many : Can
personalise / customise communication messages, builds a continues
relationship with each customer, can measure responses from
alternative media, and direct relationship marketing company strategy
less visible to competitors.
• Main Channels or tools of DM. Direct mail, telemarketing and on-
line marketing. In addition, kiosk marketing and catalog marketing are
also DM channels, but are less popular in India.
• Direct mail is not only paper based postal service or courier service,
but can be fax mail, e-mail, or voice mail. Direct marketers send not
only letters, but also audio and videotapes, CDs, and diskettes.
Response rate is about 2%.
IM/10-8/11
• Telemarketing uses telephone to contact existing
customers, to attract new customers, or to take orders.
Telemarketing gives immediate feedback, identifies and
qualifies prospects, and reduces sales force travel costs.
Both inbound (incoming calls from prospects / customers)
and outbound (out going calls) are important. Practice,
training, pleasant voices and right timing (late morning to
afternoon) are needed for effective telemarketing.

• On-Line Marketing can be done by establishing an


electronic presence (by opening own website or buying
space on a commercial on-line service), placing ads on-
line, and using e-mail. A web site should be attractive on
first view and interesting enough to encourage repeat
visits. Marketers use on-line marketing to find, reach,
communicate and sell to business customers.
IM/10-9/11
• Major Benefits to marketers are: Lower costs,
relationship building and quick adjustments to changing
market conditions. Major Benefits for buyers are:
convenience, information availability, and less hassle.
Although small & medium size marketers can reach
global markets at affordable costs, there is chaos and
clutter as the internet offers millions of web sites, and
also as concerns on security and privacy
IM/10-10/11
ROLE OF PUBLICITY & PUBLIC RELATIONS
(PR)
Public Relations (PR) performs certain tasks to promote or
protect a company’s image or its products. The tasks / functions
performed by PR are: press relations, corporate communication,
lobbying, and counseling. PR department deals with various
categories of people like press, legislators, Govt. officials,
public, employees, suppliers, customers, and hence it tends to
neglect marketing objectives.

Publicity or Marketing Public Relations (MPR) has more


credibility and lower cost compared to advertising, MPR
includes placing technical articles from the company’s technical
persons in trade journals, business magazines, and / or news
papers. MPR should be planned with advertising and should be
given larger budget allocation
IM/10-11/11
Summary of Chapter – 10
• Steps involved in developing an effective communication programme for
business markets are (i) decide communication objectives, (ii) identify
the target audience, (iii) decide the promotional budget, (iv) develop the
message strategy, (v) select the media, (vi)evaluate the promotions
results, (vii) integrate the promotional Programme.

• Advertising is used in business marketing mainly as a support to personal


selling.
• Media used for industrial advertising are: business publications, trade
journals / Publications, and industrial directories.
• Sales promotion consists of short – term incentive tools to stimulate
greater or faster purchase of a product / service by business customers.
• Direct marketing and publicity ( also called as marketing public relations
– MPR) have important roles. However, public relations (PR) tends to
neglect marketing objectives, since it has to deal with several category of
people.
IM/11-1/29
CHAPTER 11
INDUSTRIAL (BUSINESS) PRICING
STRATEGIES & POLICIES

Learning Objectives
1. Understand the special meaning of price.
2. Know the factors that influence pricing
decisions, i.e. price determinants.
3. Understand pricing strategies for different
product/market situations.
4. Examine the pricing policies for various
types of customers.
5. Understand the role of leasing.
IM/11-2/ 29
SPECIAL MEANING OF PRICE
• Some business customers follow “Value-based
pricing” by evaluating, suppliers’ offerings based
on the concept of the suppliers offering equal to the
difference between the perception of value (or
benefits) and the cost to the buying firm. These are
“value buyers”, and marketers should attempt to
have value added relationship, if suppliers have
“purchasing orientations”.
• Perception of value in value-based pricing is made
up of several elements like customers perceptions of
product quality / performance, reliable delivery,
warranty / after-sales service, reputation of the
supplier, etc which are enhanced and augmented
properties.
IM/11-3/ 29

• Cost to the buying firm includes basic


Price, freight, transit insurance, installation,
risks of product failure, delayed delivery,
etc,
• Some customers are “price buyers”.
Marketers, should follow transactional
relationships & offer “basic properties”.
• Some other buyers are “loyal buyers”, for
whom marketers should follow “relationship
marketing” with partnering / collaborative
approach and mutually acceptable prices.
IM/11-4/ 29

F R A M E W O R K O
B e f o r e t a k ( i i n) g P r p i c r ii nc gi n o
d e c i s i o n s , a ( i b i ) u C y ui n s tg o mf i e
f i n d " p r i c e ( d i i ei ) t e C r o m s t i na na
( i . e . f a c t o r s ( i tv h ) a C t o i mn f p l eu t
p r i c i n g d e ( cv i) s Gi o o n v s t .) r e
T w o t y p e s o f p r i c i n g IM/11-5/
d e c i s 29
i o n s .

P r i c i n g s t r a t e g Pi e r si c i n g p o l i c i e s
D i s c o u n t s
G e o g r a p h i c a
p r i c i n g
S e t t i n g a p r i c e
( p r o d u c t / m a r k e t
s i t u a t i o n s )

I n i t i a t i n g a
p r i c e c h a n g e

R e s p o n d i n g t o a c o m p e t i t o r 's
p r i c e c h a n g e

L e a s i n g
IM/11-6/ 29
PRICE DETERMINANTS OR FACTORS
INFLUENCING PRICING DECISIONS
(i) Pricing objectives, (ii) customer analysis, (iii) cost
analysis, (iv) competitive analysis, (v) Govt. policies.

1. Pricing Objectives
• Are derived from corporate and marketing objectives.
• Some of the pricing objectives are survival, maximum
short – term profits, maximum short – term sales,
maximum sales growth, product quality leadership, etc.
IM/11-7/ 29
2.  Customer (Demand) analysis
It includes demand analysis & cost - Benefit analysis
(i) Demand analysis. Using experimental research, it measures
relationship between price and demand (or sales volume). It sums up
how sensitive customers are to the price changes. The formula is:

% c h a n g e i n q u a n
=
% C h a n g e in p

If PED is > 1, demand is elastic, & customers are price


sensitive
If PED is < 1, demand is inelastic, customers are less
sensitive to prices.
(ii) Cost – Benefit Analysis IM/11-8/ 29
• Necessary to know target customers’ perceptions of benefits (or
value) and costs.
• Benefits are categorized into hard (or tangible) benefits like
quality, production rate, performance, etc. and soft (or
intangible) benefits like customer service, company
reputation, warranty period, etc.
• Cost includes price, duties and taxes, freight, installation,
maintenance.
 
3. Cost Analysis.
• A firm’s total cost of a product is the lowest point on the price
range. Hence, for pricing decisions, the marketer must know the
various types of costs like fixed, variable, total, direct, etc. for a
product / service.
• Costs vary based on production capacity (i.e. economies of
scale), and accumulated experience (i. e. learning curve) as
shown.
 
IM/11-9/ 29
C o s t E c o n o m i e s o f S c a l e
p e r
U n i t

Q u a n t i t y P r o d u c e d p e r y e a r

C o s t Ex p e r i e n c e /
p e r L e a r n i n g
U n i t
C u r v e .
A v . C o s t R e d u c
= 1 0 - 3 0 %

A c c u m u l a t e d P r o d u c t i o n
IM/11-10/ 29
B r e a k - E vi s e nu s Ae f n u al lt yo s c i so n
p r i c e s ( P 1 , P 2 , P 3 ) , a n d i t s

S a l e s R e v
S a l e s
&
C o s t s S a l e s R e v

S a l e s R e v
T o t a l C o s t
F i x e d C o s

S a l e s V o l u m e
4. Analyzing Competition
IM/11-11/ 29
• Many marketers have “competitive level” Pricing as a
pricing objective.
• Marketers should get “Competitors’ prices, discounts,
costs, product quality, service, etc for cost/benefit
analysis, pricing and positioning strategy.
• Competitors’ information can be obtained from various
sources.
 
5.Government Regulation/Policies
• Govt. regulations are necessary to ensure fair play and
to protect consumers and small scale suppliers.
• Price-fixing / price cartels, price discrimination (e.g.
different discounts to distributors/dealers), and
predatory pricing (e.g. dominant firm aiming to finish
competitors) are not permitted (illegal as per MRTP act,
for example)
IM/11-12/ 29
PRICING STRATEGIES
Pricing strategies vary as per product-market
situations such as (i) Competitive bidding in
competitive markets, (ii) New product pricing,
(iii) Pricing across product life-cycle.
 
(i) Competitive Bidding
• In business markets, large volume of
purchasing is done through competitive
bidding, using either closed (or sealed) bidding
or open (or negotiated) bidding method.
IM/11-13/ 29

• In closed bidding, often used by the Govt.


buyer, sealed bids are invited through
newspaper tender notices. Sealed bids are
opened in presences of suppliers and orders
are placed on the lowest price bidder(s).
• In open bidding, after receiving bids
(quotations), the buyer negotiates technical
and commercial parts with suppliers, and then
places orders. This method is often followed by
commercial enterprises in private sector .
Strategy / Model Used for Competitive
IM/11-14/ 29
Bidding

One of the often used strategies is “Probabilistic


Bidding”, which makes two assumptions :
(i) Pricing objective is profit maximizations,
(ii) Lowest price bidder will get the order.
Equation used : E (A) = P (A) x T(A), where A=Bid
price, E(A) = Expected profit at bid price ‘A’, P(A) =
Probability of winning (or getting order ) at the bid
price ‘A’, T(A) = profit, if bid price ‘A’ is accepted.
An Application (example) of probabilistic Bidding
IM/11-15/ 29
Strategy

C o m p e t i t o r ' s
B i d T o t a l C o s t P r o f i t ( R s )
L a s t T e n d e r
P r i c e P e r U n i t T ( A= )
P r i c e
( R s ) ( A ( )R s ) ( C ) ( A ) - ( C )
( R s ) ( B )

4 5 0 3 5 0 3 6 0 0 . 0 0 1 0 0 0
4 3 0 3 5 0 3 6 0 0 . 1 5 8 0 1 2 . 0 0
4 1 0 3 5 0 3 6 0 0 . 4 0 6 0 2 4 . 0 0
4 0 0 3 5 0 3 6 0 0 . 5 0 5 0 2 5 . 0 0
3 8 0 3 5 0 3 6 0 0 . 7 2 3 0 2 1 . 6 0
3 6 0 3 5 0 3 6 0 0 . 9 0 1 0 0 9 . 0 0
3 4 0 3 5 0 3 6 0 0 . 9 5 ( 1 0 ) ( 9 . 5 0 )
3 3 0 3 5 0 3 6 0 1 . 0 0 ( 2 0 ) ( 2 0 . 0 0 )

Rs.60 corers tender from Dept. of Telecomm. (DOT) for underground cable jointing kits. The company
ghosted Rs.400/- per kit (expected maximum profit). Tender opening revealed, it was L4.L1 was Rs. 330/-,
L2=350, L3=Rs 380/- The company estimates of B and P(A) were incorrect.
 
IM/11-16/ 29
(ii) New Product Pricing Strategy
In the introduction stage of a new product, two
alternative pricing strategies are available
(i) Skimming (high initial price) strategy, and
(ii) Penetration (low initial price) strategy.
 
Skimming Strategy is appropriate for a new
product that is distinct, high–tech, or capital
intensive, and purchased by a market segment that
is not sensitive to the initial high price. The
advantage is faster recovery of investment by
generating larger profits. The disadvantage is that
it attracts competitors due to high profits. The firm
reduces prices after some time to reach other
segments.
 
IM/11-17/ 29
Penetration strategy is appropriate when (i) buyers are highly
price sensitive, (ii) strong threat exists from potential competitors
(due to low entry barrier). The selling firm’s objective is to achieve
long – term profits through high market share. The firm can also
achieve “cost leadership” thru’ economies of scale and experience
curve, which gives “ competitive advantage”.
(iii) Pricing Across Product Life – Cycle (PLC)
Marketing and pricing strategies vary as the product moves across 4
– stages of PLC.
(a) Introduction stage. We have discussed pricing strategy in this
stage earlier in pricing a new product.
(b) Growth stage. The firm lowers the prices to attract the next
layer of price – sensitive buyers. Also more suppliers enter the
market and buying firms put pressure on the existing suppliers to
lower prices.
IM/11-18/ 29
(c) Maturity stage. The firm may cut the prices to match
aggressive competitors’ prices by giving volume discounts,
absorbing freight costs, or more credit. If industrial customers
do cost - benefit analysis, a selling firm may increase prices or
not make any change in prices due to its superior product
quality.
(d) Decline stage. Pricing strategy varies depending on
conditions. (i) If buyers’ perceptions about the firm’s quality of
product / service is good, then the price need not be lowered,
but costs should be reduced to earn profits, (ii) if the quality of
product / service is equal of lower than competitors, a firm
may cut prices, to increase sales volume above break – even
volume, (iii) if some competitors have withdrawn, a firm may
selectively increase prices to less price – sensitive segments.
Initiating price changes
IM/11-19/ 29

• If a firm is a market leader and wants to change the


price, it must anticipate reactions from customers
and competitors.
• The firm must ‘study major competitors’
objectives, financial situations, production capacity
utilizations, sales, costs, and profits. It must also
understand competitors’ mind-set, by studying their
business philosophy (or concepts), culture, beliefs
and past behaviors. Based on above analysis the
firm should predict competitor’s response.
• The firm must also understand that customers
generally prefer small price increases several times,
rather than one sharp increase. Of course,
customers would generally welcome price cuts.
IM/11-20/ 29
Responding to competitors’
price changes
A marketer should respond after answering the
following questions.
(i)  Why the competitor has changed the price?
(ii)  Is the price change temporary or permanent?
(iii) What will happen to the company’s sales and
profits, if it does not respond.
(iv) What would be the reactions of other competitors.
 
The responses can be in several ways:
(a) maintain price and value (benefits), (b) match
competitors price, (c) develop and launch low-price
product item, (d) maintain price. The right response
depends on the business situations faced by the firm.
PRICING POLICIES IM/11-21/ 29
Purpose. A firm evolves pricing policies to adjust basic prices
(or price list) for different types of customers (like OEMs, users,
and dealers) who buy various quantities and are located at
different locations. The price list is adjusted with different types
of discounts and allowances.
Price list is a statement of basic prices of a product, having
various sizes/specifications.
Net price = price list (or list-price) less discount (or
allowances). Business buyers are more interested in net price
Types of discounts : Trade, quantity (or volume), and cash.
Trade discounts. It is offered to traders or intermediaries
(dealers / distributors / stockiest ) and it should be equal and
sufficient (as per industry norms or functions performed). e.g.
price list (100) – trade discount (15) = net price (85)
IM/11-22/ 29
Volume / Quantity discounts. Here, the objective is to encourage
customers to buy larger quantities, which would reduce the costs of
selling, inventory carrying and transportation. The quantity (or
volume) discounts are given either on single orders over a period,
usually one year (cumulative basis). For example,
 

S i z e o f e a Y c eh a r l y T
o% t a Ql u a
P u r c h a s o er o P r u d r e c r h a s eD i s c o u
L e s s t h a n o 5 r n L o e s s . s, t h a n ,R s . 5 , N0 0 i l0
5 - 1 0 n oo s r . , R s . 5 , 0 0 0 -, 1 0 , 0 u 0 p0 t o 3
1 1 - 1 5 n oo s r . , R s . 1 0 , 0 0 0 , - 1 5 , u0 p0 0t o 6
> 1 5 n o s .o , r > R s . 1 5 , ,0 0 0 u p t o 1 0

Above discounts are applicable for all types of customers –


OEMs, users, and dealers / distributors.
IM/11-23/ 29
Cash Discounts. The objective is to get prompt
payments. If a credit customer pays the bill before
dispatch or within 7-days of dispatch, the customer is
given cash discount on the gross amount of bill. The
extent of cash discount depends on the bank rate of
interest. Give cash discounts thru’ credit notes and
the cheques, instead of including it in the bills.
 
Geographical Pricing
 
It includes decisions on how to price the company’s
products to customers located in different geographic
areas. There are two alternatives :
IM/11-24/ 29
(i)  Ex – Factory Pricing. It means prices quoted are based on
the prices at the factory gate, i.e. freight
( transportation costs) and transit insurance costs are to the
customer’s accounts. Hence, the landed price (or costs) to
customers vary depending on their geographic locations.
(ii) F.O.R. Destination Pricing. Here, the quoted prices include
freight costs. Transit insurance is a small amount to be covered
by the customer’s “open insurance policy”. Hence, all customers
get the product almost at the same price, despite different
geographic locations. Marketer adds the average freight cost to
the basic prices and then prepares the price – list, or absorbs the
freight cost, if competition demands.
Taxes and Duties. Knowledge of excise – duty, sales tax, octroi,
entry – tax, road – permits etc is essential for sales and
marketing persons, since they have an impact on the landed price
(or costs) to business buyers.
IM/11-25/ 29
ROLE OF LEASING.
Business buyers have options of either leasing or
buying capital items like machinery. The
advantages for the lessee (asset user) are : (i)
conserving capital, (ii) gaining tax advantages,
(iii) getting the latest products. The lessor (asset
owner) often earns good income from buying firms
who can not afford outright purchase.
 
A lease is a contract (or an agreement) by which
the asset owner (lessor) gives the right to use the
asset to another party (lessee) in return for
payment, over a specified period.
 
IM/11-26/ 29
Types of Leases :
(i) Financial (or full – payment)
leases, and (ii) operating (service or
rental) leases

Financial leases. These are full –


payment, non - cancellable, long> -
term contracts and fully amortised
(sum of lease payments purchase
price of capital item)
IM/11-27/ 29
Operating Leases are service/rental leases, that
are cancellable, short-term contracts or
agreements, and are not fully amortised. The
rates are higher than those of financial leases,
because risk of obsolescence are of the lessor
Pricing Strategy
It is based on the firm’s marketing and pricing
objectives. Three possible alternatives are :
(i)   Decide lease rate to favor leasing
(ii)  Decide lease rate to favor outright purchase
(iii)  Achieve balance between lease rate & sale
rate. Some business marketing firms have
representatives for giving financial consultancy
services to buying firms on leasing or buying.
 
IM/11-28/ 29
SUMMARY OF CHAPTER – 11
• In business marketing, price has a special
meaning. For value buyers, value based pricing
is appropriate.
• Factors that influence pricing decisions (or price
determinants) are: (i) pricing objectives, (ii)
customer analysis, (iii) competition analysis, (iv)
cost analysis (v) government regulations/policies
• Pricing strategies for different product-market
situations are: (a) competitive bidding in
competitive markets, (b) new product pricing (c)
pricing across product life – cycle.
IM/11-29/ 29
• Initiating price changes and responding to
competitors’ price changes are also parts of
pricing strategies
• Pricing policies include adjustment of basic
prices (or price list) with different types of
discounts like volume, trade, and cash, as well
as geographical pricing.
• Leasing or buying options are available to
business buyers for capital items like
machinery. Financial and operating are two
types of leases. Pricing strategies are made
either to favour leasing or outright purchase, or
balance between leasing and buying .
IM/12-1/19
CHAPTER – 12
STRATEGIC PLANNING,
IMPLEMENTING, AND CONTROLLING
IN INDUSRIAL MARKETING
Learning Objectives
• Understand the characteristics of market –
oriented organization.
• Know the role of marketing in strategic planning
• Examine the strategic planning process at
business unit level.
• Understand preparation implementation and
control of industrial (or business )marketing
plan.
IM/12-2/19

CHARACTERISTICS OF MARKET –
ORIENTED ORGANISATIONS
Firms achieve market – orientation by
managing the following factors.
(i)    Shared values.
(ii)   Organization structure, policies and
culture.
(iii)  Strategic Planning.
(iv)  Needs or expectations of stakeholders.
 
H i e r a r c h y o f S t r a t
IM/12-3/19 e g
B e f o r e u n d e r s t a n d i n g t h e r
s h a l l f i r s t e x a m i n e h i e r a r c h

O r g a n i s a t i o On a r l g a n i s a t i o S n t ar la t e g y h
L e v e l s S t r u c t u r e ( T y p e o f M

C o r p o r a t e C o r p o r a t e D i v i s i o n
O f f i c e B u s i n e s s
D i v i s i o n a l / ( S t r a t e g i
B u s i n e s s U n i t M a n a g e m
/ S B U S B U S B U S B U
I I I I I I
F u n
c t i o n
F u n c t i o n a l S t r a t e g y
( O p e r a t i o
P r o d u M c ta i r o k n F e it ni n a g n cM e a n a g e m
IM/12-4/19
The earlier figure shows hierarchy of strategies and
organization structure of a large company.
Strategic management gives a direction to the firm and
focuses on developing strategies to achieve long – term
objectives & goals
A Strategic business unit (SBU) consists of an independent
business or related business that has its own competitors and
specific markets. In some large companies there are (product )
divisions and each division has a divisional plan. Each SBU is
headed by a manager who is responsible for strategic planning
and performance of the SBU.
Operational Management maintains the direction given by
strategic management, and concentrates on day-to-day issues
of costs, revenue and profits.
IM/12-5/19
ROLE OF MARKETING IN STRATEGIC
PLANNING IN A FIRM
C o m p a F n oy r m a lR o l e o f M a r k e t i n g
L e v e l N a m e

C o r p o r T t eo g i v e i n f o r m a t i o n
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M a r k e t t i on g e n s u r e c u s t o m e r o
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eting

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B u s i n eM s s a r k e t s i t r
n g
a t e g y , i n c l u d i n g c o
U n i t l e v e l a d v a n t a g e , s e g m e n t i n
p o s i t i o n i n g s t r a t e g i e s

T o d e v e l o p s h o r t - t e
M a r k e t i n g
F u n c t iM o n a a n l a g e p m l a n
e n t
a n d s t r a t e g y , c o
r e s o u r c e a l l o c a t i o n .
STRATEGIC PLANNING PROCESS AT
IM/12-6/19
CORPORATE LEVEL

The major steps involved are


1. Deciding corporate mission and objectives.
2. Establishing strategic business units ( SBUs.)
3. Allocation of resources to SBUs.
4. Developing corporate strategies.

ALLOCATION OF RESOURCES TO SBUs.


Two widely used models /tools are : (i)
Boston Consulting group (BCG) model, called
Growth –share matrix, (ii) General electric
(GE) model, called Business Screen matrix.
IM/12-7/19
BCG Model : Growth – Share
Matrix
S t a r s Q u e s t i o n m a r k s
5
R a p id

6 4
M a rk e t G ro w th R a te

3 8
C a s h C o w D o g s
S lo w

1 2 7

L a r g e S m a l l

R e l a t i v e M a r k e t S
IM/12-8/19
GE Model : Business Screen Matrix
B u s i n e s s S t r e n g t h
5 H i g h M e d i u m L o w 1

S e l e c t i v
H i g h
E a r n i n g

M e d i u m

L o w

1
IM/12-9/19
• Major Business Strength factors : Market
share, product quality, unit costs, R&D
performance, brand reputation, share growth.
• Major Market Attractiveness factors :
Overall market size, annual market growth
rate, historic profit margin, competitive
intensity, technological requirements.
IM/12-10/19
DEVELOPING CORPORATE
STRATEGIES
• Strategic planning gap. It is the gap
between future (5 years) desired sales and the
projected sales (of all SBUs ) of a company.
D e s i r e d S a l e s

A S t r a t e g i
S a le s

P l a n n i n g
B

P r o je c t e d S a le s

0 T i m e ( Y e a r5 s )
IM/12-11/19
The strategic planning gap can be filled by three alternative
strategies : (A) Diversification growth, (B) Integrative growth,
(C) Intensive growth
 
(C) Intensive Growth Strategy. Corporate management
should first review existing business, using Ansoff’s product-
market expansion grid, shown hereafter :

C u r r e n t P rNo de wu c tP s r o d u
C u r r eM n ta r k e t P Pe nr o e dt r u a c t it o d n e v
M a r k S e t tr s a t e g y S t r a t e g y

N e w M a r k e t d e ( v D e l i ov pe mr s i e f n i c t a
M a r kS e t r t as t e g y S t r a t e g y )
IM/12-12/19
( B) Integrative Growth Strategy includes
increase in a firm’s sales and profits by
integrating backward, forward, or
horizontally within that industry.

(A)   Diversification growth strategy is


considered when (B) & (C) strategies are
inadequate to achieve desired growth and
also good opportunities are found outside the
present businesses.
IM/12-13/19
STRATEGIC PLANNING PROCESS AT
BUSINESS UNIT LEVEL
The following steps are followed by the business – unit
head.
1. Defining the business unit’s mission.
2. Scanning the external environment (O.T. Analysis)
3. Analyzing the internal environment (S.W. Analysis)
4. Developing objectives and goals.
5. Formulating strategies (See hereafter)
6. Preparing programme or action – plan.
7. Implementing strategies and action plan.
8. Feedback and control.
IM/12-14/19
* PORTER’S Generic Strategies
Framework for Business unit

L o w - c o s

I n d u s t r y O v e r a l l c
D i f f e r e n t il ae ta i do en r s h i
w i d e
P a r t i c u l a r
s e g m e n t o n l y F o c u s
IM/12-15/19
Marketing Planning Process
The head of marketing prepares the
marketing plan (short-term up to one
year) after going through “Marketing
Planning Process”, which includes the
following steps :
(i)   Analyzing marketing opportunities.
(ii)  Segmenting and selecting target
market segments.
(iii) Developing marketing strategies.
(iv) Implementing and controlling the
marketing plan.

The head of marketing now prepares the


writhen document, called marketing plan,
with the following steps.
IM/12-16/19
Business ( Industrial ) Marketing
Plan
1. Situational analysis. Market, competitive, product,
and macro – environmental analysis.
2. SWOT and Issues analysis
3. Marketing Objectives and goals
4. Marketing Strategy. Selection of target market
segments, positioning, marketing mix, customer
service and marketing research.
5. Action plans / Tactics
6. Marketing Budget
7. Implementation and control. Building marketing
organization and control process.
8. Contingency plan.
IM/12-17/19
IMPLEMENTATION OF MARKETING
PLAN
It is a process that turns marketing plans into action plans
and ensures that the tasks or activities of action plan are
executed in as manner that achieves the marketing
objectives and goals. For this the necessary organization
structure and people are selected. Marketing resource
management (MRM) software will help marketers to
improve their decisions, and also in implementation and
controls.
Control Process includes (a) setting goals, (b)
measuring actual performance, (c) comparing goals and
actual performance, (d) analyzing causes of deviations, if
any (e) taking corrective actions, if needed.

Types of controls : (i) Strategic control , (ii) annual plan


control (iii) efficiency control , (iv) profitability control.
IM/12-18/19
SUMMARY OF CHAPTER 12
• Marketing orientation is achieved by firms
by managing shared values, organization
structure, policies and cultures, strategic
planning, needs and expectations of
stakeholders.
• Before understanding the role of marketing
in strategic planning, it is necessary to
examine hierarchy of strategies.
• Major role of marketing is at business unit
and functional levels, and less at corporate
level.
• Strategic planning process at corporate level
includes corporate mission & objectives,
establishing and allocation of resources to
SBUs and developing corporate strategies.
IM/12-19/19
• Strategic planning process at SBUs level
includes mission, SWOT analysis, objectives
and goals, strategies, action plan,
implementation and control.
• The marketing head should go through
marketing planning process, before
preparing the marketing plan.
• Implementation and control of marketing
plan are important for achievement of
marketing objectives and goals.