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1.
Input goods such as the raw materials, labor and capital are supplied by organizations
to industrial firms for use in producing output goods and services.
The survival and success of a firm depends on the knowledge and relationship with its
input suppliers.
Interruptions in the flow of inputs cause repercussions in the entire industry affecting
not only production and marketing plans but also the production and marketing plans of
the suppliers.
B) Distributors
They are particularly important when joint demand is present because they bring
together the heterogeneous inputs needed for the production of end products.
C) Facilitators
Advertising agencies and public relations firms provide the necessary communication
flow between the sellers and buyers through the formulation of meaningful information
and media strategies.
The use of advertising in reaching potential buyers and the multitude of buying
influencers is vital in the overall communication strategy.
Transportation and warehouse companies facilitate the free flow of goods that must be
delivered in usable condition to industrial customers and distributors when and where
they are required.
When goods are not delivered on time and in usable conditions, buyers can be forced to
shut down production lines.
Resources as they move from the supply inputs to end users must be financed and
insured.
D) Competitors
Publics are distinct groups that have actual or potential interest or impact in each firms
ability to achieve its respective goals.
Publics have the ability to help or hinder a firms effort to serve is markets.
Financial Publics
Financial institutions such as investments firms and stock brokerage firms and
individual stakeholders invest in an organization on its ability to return profits
When they become unhappy with the management or dissatisfied with a companys
social policies they sell their shares.
Independent Press
Industrial organizations must be accurately sensitive to the role that the mass media
play and how they can affect the achievement of the marketing objectives.
The independent press is capable of publishing news that can boost or destroy the
reputation of a firm as well as the sales potential of a product.
These various public interest groups limit the freedom of the suppliers and buyers in the
industrial market.
While some organizations respond by fighting, others accept these groups as another
variable to be considered in developing strategic planning.
Working through public affairs departments to determine their interests and to express
favorably the companys goals and activities in the press.
The impact of these groups however is felt by all participants in the interface level.
General Public
Although the general public does not react in an organized way towards a firm or an
industry, as interest groups do, when sizeable portion of a population shifts attitude
towards a firm or industry, there is definite impact.
Internal Public
The board of directors and managers as well as blue and white collar workers are
important emissaries between an organization and other participants in the interface and
public levels.
Corporate policy must give consideration to employees and others who are held
responsible for the overall operation of the firm.
Employee morale is an important factor in all business decisions. And when morale is
low, organizational efforts suffer.
A firms employees spend more than two thirds of their time off the job, interacting with
their families and the community, so employees attitudes do influence the public.
3) Macro Environment
This level of the organization is made up of components that have less specific and less
immediate implications for managing the organization effectively.
1. Economic component
Economic conditions greatly influence an organizations ability and willingness to buy and sell.
Thus emerging changes in the economic environment both at home and abroad, must be
closely monitored. It includes the following factors;
Inflation rates
Balance of payment position
Debts and spending
Taxation rates
Interest rates
Consumers income
Corporate profits
2. Social component
This describes the characteristics of the society where an organization exists. It includes factors
such as;
Literacy levels
Values of people
Educational levels
Geographical distribution
Customs and believes
3. Legal component
This consists of legislations that have been passed. It describes the rules or the laws that all the
company members must follow. They include all laws affecting the organization e.g.
Consumer health policy
Energy policies and conservation Acts
Employment Acts, etc.
4. Political component
Comprise those elements related to the government affairs. This includes;
Type of government
Government attributes towards certain issues
Lobbying efforts from interest groups
Progress towards passing of laws affecting certain industries, etc.
5. Technological component
6. Demographic component
Industrial firms cannot ignore the demographic environments because of the derived nature of
industrial demand. World population explosion and changing population structure of the world
has a major impact on industrial demand
The business organizations, buy products and services to satisfy many objectives like
production of goods and services, making profits, reducing costs and so on.
The industrial markets are geographically concentrated; the customers are relatively
fewer; the distribution channels are short; the buyers (or customers) are well informed;
the buying organizations are highly organized
Product
Characteristics
Service
Characteristics
Industrial Market
Geographically concentrated
Relatively fewer buyer buyers
Technical complexity
Customized
Service, timely delivered
availability very important
Consumer Market
Geographically disbursed
Mass market
Standardized
&
Buyer
Behaviour
Channel
Characteristics
More direct
Fewer intermediaries/middlemen
Promotional
Characteristics
Price
Characteristics
Compared to the great number of households that constitute the mass market for
consumer goods and services, In the case of industrial markets, it is common to find
less than 20 companies to represent the total market for an industrial product or service.
In fact, only three or four customers may comprise the major portion of a total market.
Further, in industrial arena, oligopolistic buying organisations (very large firms) tend to
dominate many markets such as, large power transformers or high-tension switchgears,
there are limited numbers of customers-mainly State Electricity Boards, large private
and public sector organisations. While there are relatively few industrial customers,
they are larger in size, purchase larger quantities, and engage in this volume purchasing
on a repeat basis.
Geographical Concentration
For example, the geographic location of natural resources explains the concentration
patterns of most energy-producing firms.
In industrial marketing, the products or services are generally technically complex and
not purchased for personal use.
They are purchased as components parts of the products and services to be produced or
serve the operations of the organisations.
Because of the importance given to the technical aspects of products, the purchases are
made based on the specifications.
3) Buyer Behavior
The purchase decisions in industrial marketing are based on many factors, such as
compliance with product specifications product quality, availability, timely supply,
acceptable payment and other commercial terms cost effectiveness, after-sales service,
and so on
The buying decisions generally take a longer time and involve many individuals from
technical, commercial/materials, and finance departments.
After the initial offer made by a seller, there are negotiations and exchange of
information between the specialists and representatives from both the buyer and the
seller organisations.
The relationships between the sellers and buyers are highly valued and they become
stable in the long run because of a high degree of interdependence.
4) Channel Characteristics
Channel distribution in Industrial and Consumer market
Inventory or stock control is very much important factor in the business organisations
therefore the distribution channels are needed more direct from the manufacturer to the
customer in industrial marketing.
Often, the manufacturers use their own sales/marketing personnel's to sell the products
directly to major customers. But, in case of selling to small-scale customers or
5) Promotional Characteristics
Advertising is used to lay a foundation for the sales call rather than serve as the primary
communication tool
Sales people act more as consultants and technical problem solvers, utilizing in-depth
product knowledge and technical understanding of the buyers needs, whereas
industrial advertising normally stresses more factual and technical data.
Sales promotion activities tend to center on trade shows, trade fairs, catalogs and
conducting technical seminars
6) Price Characteristics
5. Deciders:
Among the members, the marketing person must be aware of the deciders in the organisation
and try to reach them and maintain contacts with them. The organisational formal structure
might be deceptive and the decision might not even be taken in the purchasing department.
Generally, for routine purchases, the purchase executive may be the decider. But for high value
and technically complex products, senior executives are the deciders. People who decide on
product requirements/specifications and the suppliers are deciders.
6. Approvers:
People who authorise the proposed actions of deciders or buyers are approvers. They could
also be personnel from top management or finance department or the users.
7. Gate Keepers:
A gatekeeper is like a filter of information. He is the one the marketer has to pass through
before he reaches the decision makers.
Understanding the role of the gatekeeper is critical in the development of industrial marketing
strategies and the salespersons approach. They allow only that information favourable to their
opinion to flow to the decision makers.
By being closest to the action, purchasing managers or those persons involved in a buying
centre may act as gatekeepers. They are the people whom our industrial marketer would first
get in touch with. Hence, it so happens that information is usually routed through them.
The industrial market is characterized by both in customers served and products sold.
Component parts, spare parts, accessory equipment, and services are example of the
types of products purchased by the variety of customers in the industrial market.
Commercial
Enterprises
Industrial distributors
Industrial distributors and dealers take title of goods, thus they are the industrial
marketers intermediaries
The intermediaries not only serve the consumer market but also serve other business
enterprises .
They purchase industrial goods and resell them in the same form to other industrial
customers.
2 Governmental Agencies
In India, the largest purchasers of industrial products are Central and State Government
departments, undertakings, and agencies, such as railways, department of
telecommunication, defense, Director General of Supplies and Disposal (DGS&D),
State Transport Undertakings, State Electricity Boards, and so on.
These Government units purchase almost all kind of industrial products and services
and they represent a huge market.
3. Institutions
Public and private institutions such as hospitals, schools, colleges, and universities are
termed as institutional customers.
Some of these institutions have rigid purchasing rules and others have more flexible
rules.
An industrial marketing person needs to understand the purchasing practice of each
institute so as to be effective in marketing the products or services
4. Co-operative Societies.
6 Briefly explain the broad groups in which the Industrial products are
classified?
The industrial products and services are classified into three broad groups:
Materials and parts
Capital items
Supplies and services
1) Materials and Parts
Goods that enter the product directly consist of Raw materials, Manufactured materials, and
Component parts.
Raw Materials:
These are the basic products that enter in the production process with little or no
alternations. They may be marketed as either OEMs or user customer. For instance,
when a large bakery purchases natural gas to fire the ovens that are used to produce
cakes, it is a user customer. When the same firm purchases sugar for cake making, it is
an OEM.
Manufactured Materials:
Manufactured materials include those raw materials that are subjected to some amount
of processing before entering the manufacturing process e.g., Acids, fuel oil, and steel
that are the basic ingredients of many manufacturing activities
Component Parts :
Component parts such as electric motors, batteries and instruments can be installed
directly into products with little or no additional changes.
When these products are sold to customers who use them in their production processes,
they are marketed as OEM goods.
The component parts are also sold to the dealers or distributors, who resell them to the
replacement market.
For example, MICO spark plugs are sold to a truck or car manufacturer, as well as to
automotive dealers/distributors throughout India.
2) Capital items
Capital items are used in the production processes and they wear out over certain time frame.
Generally they are treated as a depreciation expense by the buying firm or user customers.
Installations/Heavy Equipment :
Installations are major and long-term investment items such as factories, office
buildings and fixed equipments like machines, turbines, generators, furnaces, and earth
moving equipment.
Accessories/Light Equipment:
Light equipment and tools which have lower purchase prices and are not considered as
part of fixed plant, like power operated hand tools, small electric motors, dies etc.
Plant and Buildings:
These are the real estate property of a business/ organisation. It includes the firms
offices, plants (factories), warehouses, housing, parking lots, and so on.
3) Supplies and Services
Supplies and services sustain the operation of the purchasing organisation. They do not become
a part of the finished product. They are treated as operating expenses for the periods in which
they are consumed
Supplies: Items such as paints, soaps, oils and greases, pencils, typewriter ribbons,
stationery and paper clips come under this category. Generally, these items are
standardized and marketed to a broad section of industrial users.
Services: Companies need a broad range of services like building maintenance
services, auditing services, legal services, courier services, marketing research services
and others.
Institutional Purchasing
If the demand for the consumer goods slackens so will the demand for all Industrial goods entering to
their production.
For this reason the industries must closely monitor the buying pattern of ultimate consumers.
The demand for steel and cement does not exists in itself. It is demand for constructed houses which
are purchased by customers.
The boom in apartments and flats in the mid 90s led to the surge in demand for those products.
Thus a forecast of the real estate scenario in general and construction industry in particular has to be
monitored, to understand the demand for steel and cement.
In case of capital goods such as equipment and machinery that are used to produce other goods the
purchases are made not only for the cement requirements but also in anticipation of profits from the
future usage.
Thus if the businessman foresee or feel that there may be a recession in near future, their purchases
will be drastically curtailed.
During the process of recession or reduced consumer demand, industrial firms reduce their inventories
or reduce production or both.
On the other hand during the period of prosperity there is an increased production and sales of
consumer goods, which results in an increased demand for industrial goods.
An industrial marketing firm must be in close touch with customers, purchase, finance, quality
standards etc. so as to get information on changes in customers demand.
New Housing Demand: Is a great leading indicator not only for construction jobs but also for all
kinds of building materials and derived demand for appliances like cooking ranges, refrigerators etc.
Any business supplying parts to appliance makers can expect an increase in demand.
Digitization and services demand: As more and more activities have an increased digital component,
you hear of the need for programming skills to write and modify domain specific software programs.
These are derived demand scenarios that can be useful to software providing firms, education and
training providers as they try to map out the opportunities of the future
Demand for Industrial goods and services are derived from expectations of the actions
of the ultimate consumers.
Joint demand occurs when the demand for a product depends upon its use in
conjunction with another product or products
The demand for industrial products and services does not survive by itself. It is derived
from the ultimate demand for consumer goods and services.
Industrial customers buy goods and services for making use in producing other goods
and services and finally produced product/service sold to the consumers.
In industrial marketing, the demand for industrial goods and services is derived from
consumer goods and services. For example, the demand for precision steel tubes does
not exist in market. It is demanded for the production of bicycles, motorcycles,
scooters, which are consumed by the consumers.
Because of the nature of industrial demand the influence of final consumer is well
recognised.
3) Joint demand
Joint demand is common in the industrial market because it occurs when one industrial
product is useful if other product also exists.
Example, a pump set cannot be used for pumping water, if the electric motor or diesel
engine is not availab1e.
Joint demand occurs when one product requires the existence of others.
Example; A bakery requires flour, salt, preservatives, yeast in the production of bread.
If one of the ingredients cannot be obtained other purchases will be curtailed or
discontinued.
Industrial customers often prefer to buy from one supplier rather than purchase
individual products from different suppliers.
The individual products required do not have individual demand, but are demanded
only if the other products are available in the supplier line.
4) Fluctuating Demand
The demand for business goods and services tends to be more volatile than the demand
for consumer goods and services.
This is especially true of the demand for new plant and equipment.
A given percentage increase in consumer demand can lead to much larger percentage
increase in the demand for plant and equipment necessary to produce the additional
output.
Sometimes a rise of only 10% in consumer demand can cause as much as 200%
Industrial demand for products in the next period.
This sales volatility has led many business marketers to diversify their products and
markets to achieve more balanced sales over the business cycle.
5) Inelastic Demand
The total demand for many Industrial goods and services is inelastic that is not much
affected by price changes.
Shoe manufacturers are not going to buy much less leather if the price of leather rises
unless they can find satisfactory leather substitutes.
Demand is especially inelastic in the short run because producers cannot make quick
changes in their production methods.
Demand is also inelastic for Industrial products that represent a small per cent of the
total cost of the item.
Cross elasticity of demand is the responsiveness of the sales of one product to a price
change in another.
Cross elasticity for substitutes is always positive i.e. the price of one good and the
quantity demanded of the other always move in the same direction.
The more positive is this ratio the larger the cross elasticity and more definite it is that
the products compete in the same market.
For example the quantity of granite required for construction is related to the price of its
close substitute bricks or marble and vice-versa.
It is important that a firm know how the demand for its products is likely to be affected
by changes in the prices of other goods and also the interrelationship among industries.
Eg the demand for aluminum is related to the prices of wood and steel for the doors and
window frames, as they are close substitutes. Apart from other advantages of aluminum
doors and windows, the cost comparison with steel and wooden door and window
frames play an important role in the purchase decisions in the construction of houses,
commercial offices, factories, hotels, hospitals, and so on
Objectives of Pricing:
The pricing policy of the firm may vary from firm to firm depending on its objective. For
pricing decision, one has to define the price of the product very carefully. Pricing decision of a
firm in general will have considerable repercussions on its marketing strategies. This implies
that when the firm makes a decision about the price, it has to consider its entire marketing
efforts. Pricing decisions are usually considered a part of the general strategy for achieving a
broadly defined goal.
ii) Demand:
In pricing of a product, demand occupies a very important place. In fact, demand is more
important for effective sales. The elasticity of demand is to be recognised in determining the
price of the product. If the demand for the product is inelastic, the firm can fix a high price. On
the other hand, it the demand is elastic, it has to fix a lower price.
In the very short term, the chief influence on price is normally demand. Manufacturers of
durable goods always set a high price, even though sales are affected. If the price is too high, it
may also affect the demand for the product. They wait for arrival of a rival product with
competitive price. Therefore, demand for product is very sensitive to price changes.
(iv) Competition Factor in Pricing:
Market situation plays an effective role in pricing. Pricing policy has some managerial
discretion where there is a considerable degree of imperfection in competition. In perfect
competition, the individual producers have no discretion in pricing. They have to accept the
price fixed by demand and supply.
In monopoly, the producer fixes a high price for his product. In other market situations like
oligopoly and monopolistic competition, the individual producers take the prices of the rival
products in determining their price. If the primary determinant of price changes in the
competitive condition is the market place, the pricing policy can least be categorised as
competition based pricing.
11 What is the difference between Relevant and Sunk Cost? Explain with
example.
Sunk costs and relevant costs are two distinctive types of costs that firms frequently
incur in the running of businesses. Sunk costs and relevant costs both result in an
outflow of cash and can reduce the firms income and profitability levels. Despite the
fact that they both incur a cost to the firm, there are a number of major differences
between sunk cost and relevant cost, in terms of the timeline in which each is incurred,
and the impact that they have on making future decisions.
What is Sunk Cost?
Sunk costs refer to expenses that have already been incurred and arose as a result of decisions
taken in the past. Sunk costs are a type of irrelevant cost. Irrelevant costs are costs that do not
influence managerial decision making as they are a thing of the past. Since these costs and
investments have already been made they cannot be reversed or recovered, and irrelevant costs
such as sunk costs should not be used as a basis for making future decisions regarding a project
or investment.
A simple example of a sunk cost is: a company purchases a software program for $100.
However, the program does not work as the company intended to use it, and the seller does not
offer any refunds and does not accept any returns. In this case, the $100 is a cost that has
already been incurred and cannot be recovered, and it is referred to as a sunk cost.
In terms of a firm, research and development costs are referred to as sunk costs as there is no
way in which these costs can be reversed or recovered.
What is Relevant Cost?
Relevant costs are the costs that are able to impact and influence management decisions.
Relevant costs will differ depending on the alternatives and options that a company has to
choose among. Other features of relevant cost are that these costs are avoidable in the event
that the decision is not taken, can result in opportunity costs to a firm and are incremental costs
between the various options under consideration.
Businesses need to make the correct distinction between costs that are relevant and irrelevant,
as not taking into consideration the relevant costs in making business decisions can be
problematic to the companys future. Relevant costs greatly influence a companys future
business activities and, therefore, must be considered when making business decisions. While
taking relevant costs into consideration when making short term decisions can be useful,
caution must be exercised when only considering relevant costs for long-term financial
decisions. This is because relevant costs only consider the most immediate costs that affect
future cash flows and decisions and do not cover costs that have been incurred over time.
Example
Rubber Tire Company (RTC) received a request to provide a price quote for an order for the supply of
1000 custom made tires required for industrial vehicles. RTC is facing stiff competition from its
business rivals and is therefore hoping to secure the order by quoting the lowest price. RTC plans to
quote a price at 10% less due to this above its relevant cost
What is the difference between Sunk Cost and Relevant Cost?
Sunk costs and relevant costs are both expenses that result in an outflow of cash and reduce a
firms income and profitability. Since sunk costs are incurred in the past, they are a type of
irrelevant cost that do not affect future cash flows and, therefore, are not considered when
making decisions about a firms future. On the other hand, relevant costs are costs that will be
incurred in the future, as a result of a decision made presently and, therefore, must be
considered in managerial decision making.
It must however be noted that when making pricing decisions for a long term, all costs
including relevant and irrelevant must be taken into consideration. This is because in order for
a business to be afloat in the long term the prices quoted should offer a sufficient margin to
cover all costs incurred (relevant and irrelevant both). Therefore, total costs must be factored in
when making long-term financial decisions such as investment appraisal, expansion, new
ventures, selling off business units, etc.
$100,000
Variable expenses
30,000
Fixed expenses
60,000
$10,000
ABC has a contribution margin of 70% and net operating income of $10,000, which gives it a
degree of operating leverage of 7. ABCs sales then increase by 20%, resulting in the following
financial results:
ABCs sales then increase by 20%, resulting in the following financial results:
Revenues
$120,000
Variable expenses
36,000
Fixed expenses
60,000
$24,000
The contribution margin of 70% has stayed the same, and fixed costs have not changed.
Because of ABCs high degree of operating leverage, the 20% increase in sales translates into a
greater than doubling of its net operating income.
When using the operating leverage measurement, constant monitoring of operating leverage is
more important for a firm having high operating leverage, since a small percentage change in
sales can result in a dramatic increase (or decrease) in profits. A firm must be especially careful
to forecast its revenues carefully in such situations, since a small forecasting error translates
into much larger errors in both net income and cash flows.
Knowledge of the level of operating leverage can have a profound impact on pricing policy,
since a company with a large amount of operating leverage must be careful not to set its prices
so low that it can never generate enough contribution margin to fully offset its fixed costs.
13. What are the factors responsible for the failure of NPD in Industrial
Marketing?
Factors responsible for Failure of NPD in IM.
New products do not satisfy the needs of potential customers or
May be due to poor coordination of R&D and Marketing.
New products are not significantly different from existing products or
Takes Too Long to Enter Market Whatever it is youre doing to enter the market,
it took you too long. Competitors have out-gunned you, your customers needs
have changed, etc. This is to capture causes where even if everything else was good,
you simply didnt move quickly enough. At first blush, organizational problems (lack
of alignment, bureaucracy, and insufficient resources) will all land here.
i. Idea Generation:
Idea generation is a continuous, systematic search for new product opportunities. It involves
new-idea sources and ways to generate new ideas. Employees, channel members, competitors,
customers and others may constitute of sources of ideas. Methods for generating ideas include
brain-storming, market surveys and other avenues.
ii. Product Screening:
Potential ideas of products are scrutinised and in this product screening technique poor and
unsuitable ideas are not considered for further action. Every idea is weighed against a checklist
on 1-10 scale, 1 being outstanding and 10 being very poor in the rating. All production and
marketing attributes of the potential product is scrutinised before taking a suitable decision.
iii. Concept Testing:
Concept testing presents the consumers with a proposed product and measures attitudes and
intuitions at an early stage of the new-product planning process. Concept testing is a quick,
inexpensive way to assess consumer enthusiasm. It asks potential consumers to react to a
picture, written statement or oral product description. This lets a company learn initial attitudes
poor to costs, time-consuming product development.
iv. Business Analysis:
Business analysis involves the detailed review, projection and evaluating of such factors as
consumer demand, production costs, marketing costs, break-even points, competition, capitalinvestments, and profitability for each potential near product. Because the next, step is
experience and time-consuming product development, critical use of business analysis is
essential to eliminate undesirable items.
v. Product Development:
In product development, an idea for a new product is converted into a tangible form and a basic
marketing strategy is identified.
vi. Test Marketing:
This step involves placing a fully developed product in one or more selected areas or zones and
observing its actual performance under a proposed marketing plan. The purpose is to evaluate
the product and plan marketing efforts in a real setting prior to a full product launch. Test
marketing requires several decisions such aswhen and where to test, how long to test and
what test results are required etc.
vii. Commercialization:
Under this stage the product is introduced to its target market by adopting full scale production.
Commercialization may require large planned capital investment and long term commitment.
As well as focusing on marketing to make more sales and profit, companies also need to look
at ways of reducing cost throughout the manufacturing process.
Information: Whether its data about the potential market that will make a new product viable,
feedback about different marketing campaigns to see which are most effective, or monitoring
the growth and eventual decline of the market in order to decide on the most appropriate
response, information is crucial to the success of any product. Manufacturers that efficiently
manage their products along the product life cycle curve are usually those that have developed
the most effective information systems.
Most manufacturers accept their products will have a limited life. While there may not be much
they can do to change that, by focusing on the key business areas mentioned, product life cycle
management allows them to make sure that a product will be as successful as possible during
its life cycle stages, however long that might be.
16. What are the decision stages in developing the B2B Advertising
program?
1) Informative advertising:
The prime objective of the advertising is to inform the existing and potential customers about
the product.
2) Persuasive advertising:
It aims to create liking preference, conviction and purchase of a product or service. Persuasion
will create demand of the product.
3) Reminder advertising:
It aims to simulate repeat purchase of products and services.
This will remind the customers that the product may be needed in the near future.
4) Reinforcement advertising:
It aims to convince current purchases that they made the right choice.
2) ADVERTISING BUDGET.
After determining advertising objectives the company next sets its advertising budget for each
product.
Specific factors that should be considered when setting the advertising budget.
1) Stage in the product life cycle:
New products typically need large advertising Budgets to build awareness and to gain
consumer trial. Mature brands usually require lower budgets as the ratio to sales.
4) DECIDING ON MEDIA
After choosing the message, the advertisers next task is to chose media to carry it. Major
steps in media selection are as under:
1) Deciding on reach, frequency, and impact:
Reach is a measure of the percentage of people in the target market who are exposed to the
ad campaign during a given period of time.
Frequency is a measure of how many times the average percent in the target market is
exposed to the message.
The advertiser must also decide on the desired media impact-the qualitative value of a
message exposure through a given medium.
2) Choosing among major media types:
The major media types are newspapers, televisions, direct mail, radio, magazines, outdoor
and online. The media habits of the target consumers will affect media choice. Advertisers
look for media that reach target consumers effectively. Different types of messages may
require different media. Cost is another major factor in media choice. The media planner
looks at the total cost of using a medium. Media impact an cost must be reexamined
regularly. As a result, advertisers are increasingly turning to alternative media, ranging
from cable television and outdoor advertising to parking meters and shopping cards.
3) Selecting specific vehicles:
The media planner now must chose the best media vehicles and specific media within each
general media type, media planners must complete the cost per thousand percents reached
by a vehicle. The media planners must also consider the cost of producing ads for different
media. Whereas, newspaper ads may cost very little to produce flashy television ads may
cost millions.
Communication-Effect Research:
It seeks to determine whether an ad is communicating effectively. There are three
major methods of pre testing.
PORTFOLIO TEST:
It ask consumers to view or listen to a portfolio of advertisements. Consumers are
than asked to recall all the ads on their contains, aided or unaided by the
interviewer.
LABORATORY TEST:
It use equipment to measure physiological reactions like heartbeat, blood pressure,
perspiration to an ad; or consumers may be ask to turn a knob to indicate their
moment to moment liking or interest while viewing sequence material.
17) Describe the methods of organizing the sales force in an Industrial Organization?
1. Line Organizations (& Line/Staff)
2. Functional Organizations
3. Specialization Organization
Sales Activities
Geographic Areas
Products
Customers
the other end. The complaints and suggestions of lower authority are not communicated
back to the top authority. So there is one way communication.
4. Lack of Co-ordination- Whatever decisions are taken by the line officials, in certain
situations wrong decisions, are carried down and implemented in the same way.
Therefore, the degree of effective co-ordination is less.
5. Authority leadership- The line officials have tendency to misuse their authority
positions. This leads to autocratic leadership and monopoly in the concern.
Line and staff organization is a modification of line organization and it is more complex than
line organization. According to this administrative organization, specialized and supportive
activities are attached to the line of command by appointing staff supervisors and staff
specialists who are attached to the line authority. The power of command always remains with
the line executives and staff supervisors guide, advice and council the line executives. Personal
Secretary to the Managing Director is a staff official.
a. Line Authority
b. Staff Authority
7. Power of command remains with the line executive and staff serves only as counselors.
3. Line and staff conflicts- Line and staff are two authorities which are flowing at the
same time. The factors of designations, status influence sentiments which are related to
their relation, can pose a distress on the minds of the employees. This leads to
minimizing of co-ordination which hampers a concerns working.
4. Costly- In line and staff concern, the concerns have to maintain the high remuneration
of staff specialist. This proves to be costly for a concern with limited finance.
5. Assumption of authority- The power of concern is with the line official but the staff
dislikes it as they are the one more in mental work.
6. Staff steals the show- In a line and staff concern, the higher returns are considered to
be a product of staff advice and counseling. The line officials feel dissatisfied and a
feeling of distress enters a concern. The satisfaction of line officials is very important
for effective results.
2) Functional Organization
Functional organization has been divided to put the specialists in the top position throughout
the enterprise. This is an organization in which we can define as a system in which functional
department are created to deal with the problems of business at various levels. Functional
authority remains confined to functional guidance to different departments. This helps in
maintaining quality and uniformity of performance of different functions throughout the
enterprise.
The concept of Functional organization was suggested by F.W. Taylor who recommended the
appointment of specialists at important positions. For example, the functional head and
Marketing Director directs the subordinates throughout the organization in his particular area.
This means that subordinates receives orders from several specialists, managers working above
them.
1. The entire organizational activities are divided into specific functions such as
operations, finance, marketing and personal relations.
2. Complex form of administrative organization compared to the other two.
3. Three authorities exist- Line, staff and function.
4. Each functional area is put under the charge of functional specialists and he has got the
authority to give all decisions regarding the function whenever the function is
performed throughout the enterprise.
5. Principle of unity of command does not apply to such organization as it is present in
line organization.
Characteristics
Advantages
Disadvantages
Implications
Use when there is a significant difference in the skills needed in each separate
area
Use when fast growth through new account acquisition is deemed necessary
B)
Characteristics
Salespeople sell all the companys present products to all customers within their
assigned territories
Advantages
Sales force can rapidly react to changes in the local competitive environment
Disadvantages
Implications
Characteristics
Advantages
Allows for decentralization of both authority & responsibility for each product
line
Allows decisions to be made closer to the problems with any particular product
line
Disadvantages
Implications
Best used if have a wide variety of customers with quite different needs
Characteristics
Advantages
Control remains at the management level (which customers to call on, etc)
Disadvantages
Implications
18) What are the 7 ways to bid and win an Industrial contract?
Seven Ways To Score Contracts
1. BUILD RELATIONSHIPS BEFOREHAND
Not knowing the buyers, understanding whats driving the opportunity or how many
other bidders youre up against is a random way of growing your business.
Therefore Pre-empt the bidding process by pursuing your own business development
strategy.
Identify the organisations you want to do business with, then build relationships with
the buyers, ideally before they even think of issuing a tender.
Invite them to lunch, send them articles or even ask them to speak at an event.
Youre not stalking them, but giving them the opportunity to get to know you, your
organisation and the value you can add.
Is It Winnable - do you know all the buyers well enough to tailor your response to
them?
The Boss - As the most senior decision-maker, they are interested in results.
The Money Person - Typically the finance director, they will assess your bid in terms
of value for money and return on investment.
The Expert - Sometimes cast as the geek, they will scrutinise the detail of your
proposal with their deep technical knowledge.
The End-User - This person wants to know how your product or service will affect
them and their team.
The Guide - Often a procurement person, they focus on cost and rationalising
suppliers.
Tailor your bid to each one and theyll be more open to your proposition.
4 RUN IT LIKE A PROJECT
But, like any project, a bid is only as good as the person managing it
5. MAKE IT ABOUT THEM
To make your bid compelling, talk more about them than you.
Every aspect of your bid structure, language, focus and content should have the
client at its heart.
As for language, convert all the features of your product or service into benefits for
each buyer.
The client is more interested in what they will get when they appoint you, than in what
you will do.
As such summarise all those benefits in a compelling executive summary at the front.
6) PRACTISE PITCHING
The pitch is your last chance to persuade the client to give you the green light, So ensure they
answer Yes to these questions about you:
1. Do they offer us more value for money than any other bidder?
2. Do they understand us and our business?
3. Are they a team?
4. Are they keen to work with us?
5. And, finally, Can we work with them?
(This should last be the deal-breaker.)
Once the client has made their decision, get candid feedback.
Understanding how being on the receiving end of your bid made them think, feel and
behave, and how that shaped their decision
This will help you refine your approach and improve your submissions.
Know about the party you're negotiating with so you can capitalize on your strengths
and the party's weaknesses.
If the other party is very experienced, that means he also has a history that could
contain useful information.
Talk to business associates who have dealt with the person before.
Many negotiators develop patterns and certain styles that you may be able to use to
your advantage.
If you are a buyer, make sure you are thoroughly familiar with the product or service
that will be the subject of the negotiation.
If the other party senses you are weak on such details, you may be a prime target for a
bluff or another technique designed to create anxiety and uncertainty.
Psychology plays a crucial role in your ability to make the most of the other party's lack
of preparation and anticipate their next move.
Most negotiators have a price target or goal in mind before they start.
It should be based on realistic expectations considering all the constraints that will
undoubtedly surface.
The budget limits, direction from management, pressure to make sales goals, and a
myriad of other external forces need to be addressed.
During the course of the negotiation, the goal may change based on changes in scope
and other unforeseen actions by either party.
While youre ultimate goal should be realistic, this should not constrain your first offer
or counteroffer.
Before the start of negotiation, ensure that the other party is fully empowered to make
binding commitments.
You should not land in a position where you believe you've struck a deal, and then
discover that the agreement needs approval from some higher authority.
2) Have A Strategy
The first offer is usually the most important and the benchmark by which all
subsequent offers will be judged and compared.
You'll never get what you don't ask for, so make your first offer bold and aggressive.
The asking price is just that, and will typically include a pad or margin to give away
during negotiations.
Don't worry about insulting the other party. As long as your offer is not ridiculous, the
other side will continue the negotiations in hopes of settling at a better number.
You want the best product you can get for the money you have to spend, so employ an
approach that maintains the possibility of spending less than you had originally
planned.
Always have something to give away without hurting your negotiating position
Watch for clues such as body movement, speech patterns and reactions to what you
say.
Be prepared to suspend or cancel negotiations if you feel things are getting nowhere or
the other party seems stuck in their position.
Indicate your reluctance to continue under those conditions and make the other side
wonder if you are ever coming back.
If they are on the hook to cut a deal, they will feel the pressure to move. Be patient
even if the other party isn't.
Once an offer is made, you should expect an acceptance or rejection of your offer, or a
counteroffer that keeps the negotiation open.
If your offer is rejected and you are asked to submit a new and better offer, do not fall
into that trap.
If you're the only source available for a particular product, you have tremendous
leverage across the board.
If economic conditions have created a market in which the product you're selling is in
great demand and low supply, that gives you more bargaining power to name your
price.
4) The Offer
It must encompass all of the elements of the bargain and will normally comprise the
basis for a contract that formalizes the agreement.
If you make an offer without nailing down all of the specifics, you may find out later
that there was no meeting of the minds with the other party.
The basis of the bargain should include: offer price (in proper denomination), statement
of work (scope), identification and quantities of goods or services, delivery schedule,
performance incentives (if any), express warranties (if any), terms and conditions, and
any documents incorporated by reference.
It's a good idea to keep notes containing the rationale for each offer. While these notes
won't be disclosed to the other party, they will prove to be invaluable should things go
hay way and you need to restart negotiations.
If you work for a company or the government, those notes are usually required to
document the negotiated outcome and complete the contract file.
It may be a combination of different things that aren't necessarily tied solely to price.
For example, the delivery date may be the most important thing to the other party, while
product quality may be your primary driver.
When constructing your offers, attempt to satisfy some of his priorities if doing so
doesn't weaken your overall position.
Be prepared to give up the little things in exchange for the big things you don't want to
concede.
Know your limits and how far you're willing to go on all aspects of the deal.
While you have the power to influence the negotiation process in your favor, your goal
should be to secure a good deal without extracting the last pound of flesh from the other
party.
The most effective negotiators are professionals who know their business and don't let
personalities and irrational behavior interfere with their mission
Once the negotiation is completed, you wont to be able to work effectively with those
in the other party during contract performance.
If they are threatened and pounded into submission, they probably won't negotiate with
you again, possibly cutting off any future business.
Negotiation is also like chess in that each move should be designed to set up not only
your next move, but several moves down the line.
Generally, your moves should get progressively smaller, and you can expect the same
from the other party.
Always have the endgame in mind as you plot your strategy, and be prepared at some
point to split the remaining difference.
It's almost inevitable when the parties are close but can't seem to make that last leap to
a single number.
It's completely arbitrary, but it gets the job done. That's why all the offers leading up to
that point are so important: they will set the stage for the final handshake.
A service is any act or performance that one party can offer to another that is intangible
and does not result in the ownership of anything.
When a service is completed, the customer is not left with a tangible product but rather
with feelings satisfaction, frustration, disappointment, anger and so on.
In industrial marketing, there are two ways in which services are provided to the customers
All industrial marketers are legally responsible for fulfilling a buyers normal or
reasonable expectations.
Guarantees work best when the terms are clearly stated without loopholes. The
customer should find them easy to act upon and the companys redress should be swift.
Otherwise it will lead to customers being dissatisfied.
The first is where the company and/or the product is not well known.
The second situation is where the products quality is superior to competition. Here the
company can gain by guaranteeing superior performance because it knows that
competitors cannot offer the same guarantee.
Apart from guarantees and warranties, industrial marketers are turning more towards
after sales service support.
Large organizations have either outsourced this operation or have a separate
department called the customer service department.
Technical Assistance and Involvement
In the industrial market, service now serves as a tool for differentiating the product
offering.
When a customer goes in for a new product development, it requires the assistance of
key supplies.
Before Hero Honda launched Ambition, a 130 CC bike, it had the complete support of
its suppliers. The piston, rings, blocks etc. have been sourced from Indian suppliers.
They provided support to Hero Honda and worked with them to make sure that the
materials that went into the manufacture of these components would reduce friction to a
minimum. The industrial suppliers work with the customers much before the product is
launched and this forms a part of the service they provide.
Pidilite Industries the makers of the Fevicol brand of adhesive whose customers are the
carpenters.
The sales force approach them directly, not only to market the product but also to
provide technical tips.
This is just a service to keep in touch with the customers. Such services are also termed
as non-standardised.
Some organisations provide such services on a continuous basis without any change to
the customer but to maintain a relationship or to differentiate their product offerings.
Companies also try to make more money on the services they provide.
Auto dealers today make most of their profit financing, insurance and repair services,
as compared to selling automobiles.
arrangement allows the seller to reach a large number of customers without having to invest in
a sales team. But the company does not have much control over the agent, who does not devote
the same amount of time and attention as a companys dedicated sales team.
Selection
Management
Motivation
Evaluation
Involves determining the characteristics that distinguish the better ones by evaluating
channel members
Years in business
Lines carried
Profit record
Market segment - must know the specific segment and target customer
Selecting intermediates that are retail stores that want exclusive or selective distribution
involves evaluating
Stores customers
Store locations
Growth potential
Members must work together appropriately and perform the tasks they are best
suited for
The company must sell not only through the intermediaries but also to/with them
Understand the partners business operationally and financially and whats really
important to them
Look at the partners needs in terms of customer support, technical support, and
training
What is working?
So, careful choice & evaluation of each & every channel partner is a necessity.
Exclusive Distribution
Selective Distribution
Intensive Distribution
Integrated Distribution
Channel intensity: the number of intermediaries at each level of the marketing channel.
Intensive: Used when convenience products are sold through virtually every available
retail outlet in a particular market, e.g. soft drinks, candy, gum, cigarettes
Selective: Selectively distributed bands are available in multiple retail outlets in a
particular market. Shopping products, or those that consumers seek out, are sold
through selective distribution.
Exclusive: Practiced when a manufacturer restricts product distribution to a single
retailer in a particular market or just a relatively few retailers. Products that are
expensive, infrequently purchased, are sought after by consumers (i.e. specialty goods),
or which require considerable after-sale servicing are the most likely candidates for
exclusive distribution
Intensive Distribution
Intensive distribution aims to provide saturation coverage of the market by using all available
outlets. For many products, total sales are directly linked to the number of outlets used (e.g.,
cigarettes, beer). Intensive distribution is usually required where customers have a range of
acceptable brands to choose from. In other words, if one brand is not available, a customer will
simply choose another
The objective is complete market coverage and the ultimate goal is to sell to as many
customers as possible, wherever they choose to shop.
Ex. Motor oil is sold in quick-lube shops, Fuel pumps, farm stores, auto parts retailers,
supermarkets, drugstores, hardware stores, warehouse clubs, and other mass
merchandisers.
Selective Distribution
Limited number of outlets in a given geographical area are used to sell the product.
Very important to select channel members that maintain the image of the product & are
good credit risks, aggressive marketers & good inventory planners.
Ex. Armani & Lucky Brand sell their clothing only through top department stores that
appeal to the affluent customers who buy its merchandise. It does not sell in a chain
megastore or a variety store.
Exclusive Distribution
Integrated Distribution
Manufacturer acts as wholesaler and retailer for its own products.
The GAP or Ann Taylor sells its clothing in company-owned retail stores.
They do this by providing better value for the customer than the competition.
Marketing management constantly have to assess which customers they are trying to
reach and how they can design products and services that provide better value
Marketing Planning
The main problem with this process is that the environment in which businesses
operate is constantly changing.
So a business must adapt to reflect changes in the environment and make decisions
about how to change the marketing mix in order to succeed.
It is the job of marketing management to understand and manage the links between the
business and the environment.
At times this is a straightforward task. For example, in many small businesses there is
only one geographical market and a limited number of products (may be only one
product).
27. What are the key issues in Marketing Planning? Why is marketing
planning essential?
Key issues in Marketing Planning
The following questions lie at the heart of any marketing (or indeed strategic) planning
process:
Where are we now?
How did we get there?
Where are we heading?
Where would we like to be?
Are we on course?
Why is marketing planning essential?
A marketing plan is useful in a business. It helps to:
Identify sources of competitive advantage
Gain commitment to a strategy
Get resources needed to invest in and build the business
Inform stakeholders in the business
Set objectives and strategies
Measure performance
A Product does not sell by itself; It needs the best of strategies. After drawing a strong
strategy plan, we need to develop a target market .Developing a target market strategy
has three phases:
(Undifferentiated)
(Concentrated )
(Multi-segmented)
Demand is the quantity of a commodity that consumers are not only willing to purchase
but also have the capacity to buy at the given price. For example, a consumer may be
willing to purchase 2 Kgs of Onions if the price is Rs.30 per kg. However, the same
consumer may be willing to purchase only 1 Kg if the price is Rs.60 per Kg.
The main determinants of the quantity is willing to purchase will typically be the price
of the good, one's level of income, personal tastes, the price of substitute goods, and the
price of complementary goods.
Do all potential customers have similar needs/desires or are there clusters? What are the
demand patterns?
Homogeneous Demand- uniform, everyone demands the product for the same
reason(s).
After analyzing the demand lets us identify how the consumers can be targeted. This
would include 3 approaches.
1 Pricing strategy
1 Promotional program aimed at everybody
1 Type of product with little/no variation
1 Distribution system aimed at entire market
Examples include Staple foods-sugar and salt and farm produce. This approach is
popular when large-scale production began. In todays competitive market this
approach is out-dated and could cause a product to fail, as the competition is very high
and the availability of alternatives are very extensive.
Market Segmentation Approach
Indians are very price conscious people. They would like the best of products at a very
economical price. Well there is another set of people who believe the higher the price
better he quality of product. It can be understood that Individuals with diverse product
needs have heterogeneous needs.
29 What the different marketing strategies adopted for Industrial products at various stages of
the PLC?
Marketing strategies for Industrial Products at different stages of PLC
Introduction Stage:
Depending upon the changes in the users habits some of the industrial products are
accepted rapidly after introduction and others are accepted slowly.
Growth Stage
During the growth state the marketing strategies of an industrial marketer should focus on three
important areas;
1. Improve Product design to offer more benefits
2. Improve distribution network to enable the customers easy availability of the product.
3. As a result of increased volume of production the cost will be lowered. Hence price should
be reduced.
If these strategies are not implemented by industrial marketers in the growth stage, it becomes
easy for competition to enter the market because of non-availability of the product and high
profits due to high prices.
Maturity Stage
In maturity stage the number of competitors entering the market will increase. As a result of
increased competition the profits will be reduced. The marketing strategies to be adopted for an
industrial product in the maturity stage are;
1. To enter the new market
2. To find out the ways and means of satisfying the existing customers
3. To cut production, marketing and other costs to maintain profit margins.
Decline Stage
This stage is characterized by sever price competition and concurrent decline in sales and
profit. Under this stage an industrial marketer should adopt the strategy of withdrawing the
existing product from the market or introduce a new product as a replacement or reduce
marketing or other costs to make some profits.
30. What is leasing? What are the various types of leasing options available
for Industrial products?
Leasing
Leasing is an arrangement between the leasing firm or the lessor and the user or the
lessee, the former arranging to purchase the capital equipment for the use of the latter.
The lessee has to pay the lessor in the form of rentals and the lessor remains owner of
the equipment during the specified period
1. Operating lease: Operating Lease refers to a short-term lease of an asset for an hour, a day
etc.
2. Financial Lease: The financial lease is for a basic term during which the lease is noncancellable. The length of this basic period is determined primarily by the economic life of the
asset, and is usually shorter than the expected life.
3. The sale and lease back transaction: The sale and lease back transaction provides for an
arrangement by which an entity that owns a given asset may sell it to the leasing company, and
lease it back. This enables the lessee to immediately defreeze the money that it had locked into
the original asset, which becomes available to it for working capital or further expansion
4 Leveraged lease: Leveraged lease is an arrangement where two or more lessors may jointly
acquire the asset and lease it to the lessee. This is so in case of very large assets, where a single
lessor may not be capable of acquiring it or may not be willing to shoulder the whole risk
associated with it.
List price: List price is a base price or the basic price of a product consisting of various
sizes or specifications. It is the published statement of basic prices which is sometimes
distributed to the customers.
2. Trade Discounts: The trade discounts are offered to the intermediaries such as dealers and
distributors. The amount of trade discount depends on the particular industry norms or the
functions performed by the intermediaries.
3. Quantity Discounts: A quantity discount is granted to industrial customers who buy large
volumes. It is a price reduction given by subtracting the volume discount from the list price.
The quantity discounts are justified as they reduce the cost of selling, inventory carrying, and
transportation.
4. Cash discount: To ensure prompt payments cash discounts are offered to customers in
industrial marketing. It is the discount applicable on the gross amount of the bill, provided
customer pays the bill within the stipulated period from the date of invoice
5. Geographical Pricing: Geographical pricing refers to the location at which the price is
applicable. Geographical pricing strategy is influenced by a number of factors such as the
location of the companys plant, the location of the competitors plants and their pricing
strategies, dispersion of customers, extent of transport costs, demand and supply conditions and
competitive environment. These are (i) Ex-factory and (ii) FOR destination.
(i) Ex-Factory: Ex-factory means the prices prevailing at the factory gate. When a seller
quotes to a buyer ex-factory price, it means that the freight and transit insurance costs are to
the buyers account
(ii) FOR Destination or FOB Destination: When a seller quotes to a buyer FOR
destination or FOB destination (free on road/free on board destination), it means the freight
costs are absorbed by the seller or included in the quoted prices.
However, transit insurance costs, which are small amounts, are generally absorbed by the
seller, but sometimes the goods are dispatched under the open insurance policy of the buyer.
If the quotation or the price list is on FOR destination basis, generally the industrial marketer
estimates the average freight and insurance costs and adds the same to the basic product prices.
Absorbing these costs is rarely done by a seller.
Advertising
Time
Definitio
n
Long term
One-way communication of a
persuasive message by an identified
sponsor, whose purpose is nonpersonal promotion of
products/services to potential
customers.
Price
Suitable
for
Sales
Example
Purpose
Result
Promotion
Short term
A Promotion usually involves an
immediate incentive for a buyer
(intermediate distributor or end
consumer). It can also involve
disseminating information about a
product, product line, brand, or
company.
Not very expensive in most cases.
Small to large companies
Directly related to sales.
Giving free products, coupons etc.
Increase sales.
very Soon