Chapter 3 Marketing of Industrial Goods

Meaning of Industrial Goods

Machinery, manufacturing plants, materials, and other goods or component parts for use or consumption by other industries or firms.
Demand for industrial goods is usually based on the demand for consumer goods they help produce (called derived 2 demand).

They are classified as (1) Production goods, that enter the production of a final product, such as the raw materials and component parts, or (2) Support goods, that assist in the production process, such as fixed equipment and machinery, instruments, jigs, tools, etc.
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Types of Industrial Goods

Installations Installations are major capital items that are typically used directly in the production of goods. Accessory Equipment Goods that fall into the subcategory of accessory equipment are capital items that are less expensive and have shorter lives than installations. Examples include hand tools, computers, desk calculators, and forklifts. While some types of accessory equipment, such as hand tools, are involved directly in the production process, most are only indirectly involved.
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Contd
Raw Materials Raw materials are products that are purchased in their raw state for the purpose of processing them into consumer or industrial goods. Examples are iron ore, crude oil, diamonds, copper, timber, wheat, and leather.
Fabricated Parts and Materials Fabricated parts are items that are purchased to be placed in the final product without further processing.

Industrial Marketing
Also called: Business-to-Business (B2B) and Organizational Marketing.
Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers. Customer can be private firm, public agency, or nonprofit organization.
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The Marketing Concept

Creating value for customers with goods and services that address organizational needs and objectives.

Marketing Concept
Three major components:
All company activities should begin with, and be based on, the recognition of a fundamental customer need. A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D. Customer satisfaction is viewed as the means to long-term profitability goals.
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Marketing Mission Statement

State in terms of meeting customer needs, not in terms of products or technologies.

Marketing Activities
Identify customer needs Research customer behavior Divide market into manageable segments Develop new products/services Establish/negotiate prices Deliver, install, service products Ensure adequate and timely supply of products at correct place Allocate resources across product lines Communicate with customers Evaluate/control marketing programs 10

So whats different about B2B?

Marketing Concept Marketing Mix Market Segmentation Product Life Cycle All apply in both B2C and B2B.
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So whats different about B2B?

The technical characteristics of the product are important.
These products directly affect the operations and economic health of the customer. The customer is an organization rather than an individual consumer, or family.
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Five Major Differences Between B2B and B2C

Products/Services being marketed Nature of demand How the customer buys Communication process Economic/Financial factors
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Products/Services
More complex Large unit dollar value/Large quantities Custom/Tailored Various Stages from raw material to finished goods.

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Raw Material Extraction

Material Processing Manufacturing Parts/Subassembly Assembly Distribution Facilitators

Wholesale/Retail Trade

Final Consumers
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Firms in Production Chain

Nature of Demand
Derived
Joint/Shared

Concentrated
Inelastic

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How Customer Buys

Group Process
Formal

Lengthy
Loyal

Decisions based on risk and opportunity

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Communication
Personal selling more important than mass paid advertising Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW. Message focused on technical, factual, and descriptive content. Multiple audience members.
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Economic/Financial Factors
Competition oligopolistic Power/Dependency relationships Reciprocity:Doing business with companies that do business with them. Economic variables: interest rates, inflation, business cycle

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