Industrial marketing system

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					 INDUSTRIAL

MARKETING

Defn…….
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Marketing of goods & services to commercial enterprises, govt., & other non profit institutions for resale to other industrial customers or for use in the goods & services that they, in turn, produce. Large firms producing – steel, production equipments,computer memory chips caters – Business Market IBM – B2B marketer

Consumer marketer – computer evolution

BUSINESS & CONSUMER MARKETING: A CONTRAST

GUESS WHAT!

What distinguishes both market

May be - Intended use of the product -Intended consumer

Distinguishing Characteristics

Business Marketing
Product
More technical in nature; customized service

Consumer goods Marketing

Standardized service

Price

Competitive bidding for unique items;List prices on std. Items
Shorter; more direct channels to market

List prices

Distribution

Pass thro’ no. of intermediary links to consumer Individual /household makes decision Emphasis on advertising

Include diverse ConsumerDecision making group of org. members in decision

Promotion

Emphasis on personal selling

A business marketing perspective

Business marketing

Upstream suppliers
Du pont

Direct suppliers Johnson controls
(power steering/car seats)

(sheet metal,mfd. Materials)

Business marketing

Auto buyers
consumers
(automobiles)

Auto mfrs.
Ford,GM
(reqd. inputs)

Consumer marketing & Business mkg.

Classification of Industrial products
Materials & Parts Raw Materials Manufactured Materials & components
Capital Items Installations Accessory equipment Plant & building

Supplies & Services Supplies Business services

Industrial marketing system
A market system holds  Participants  Distribution channels &  Relationships

Participants
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Identify Industrial marketing participants: - Extractive industries - Manufacturing industries - using & consuming Units

Product flow diagram
Extractive industries Mfg. Industries

Farms Mines Forest &other Agricultural industries Fisheries

Mfr. Sales To Other mfrs.

Households

Govt.

Other business users

Exporters

Using & Consuming units

Participants
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Agents participation in the marketing of industrial products # Manufacturers agents # Industrial distributors or dealers # Brokers # commission merchants # others- Advt. Agencies,consulting firms ,Logistics & financial institutes

Channels
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Direct channel
producer controls the distribution of his products from factory to user or OEM customer

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Indirect channel
Independent middlemen who limit the control, a mfr. can exercise over the mkg. of his products.

Common channels
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Mfr. Mfr. Mfr. Mfr.

Branch office customer Distributor customer Agent customer Agent Distributor

Customer
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Mixed arrangements

Relationships
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The relationship existing among participants in various distribution channels for industrial products are identified as
FORMAL RELATIONSHIPS -Contracts of sale - Franchise agreements INFORMAL RELATIONSHIPS - Loyalty -Confidence - Reciprocity

Formal Relationships
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Contracts of sale Exchanges of industrial goods
involve a formal contract to stimulate the responsibility & liability of each party. complexity of sales contract varies with Characteristics of products Amount of sale Nature of services to be rendered No. & behavior of parties involved

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Formal Relationships
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Franchise agreements
when some form of protection is offered or implied, the agreement with independent middlemen is referred to as Franchise. Exclusive Franchise

1.

2.

Designates the distributor as the sole outlet for the mfrs. Products in the middlemen mkg. Area &commits the producer to supply the substantial aids. Selective Franchise Mfr. Limits the no. of distributors who carry his products in the market area.

Informal Relationships
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Loyalty
Suppliers who can be depended on to deliver what is ordered when it is needed, to render good service, & to cooperate with the buyer in meeting special requirements – buyers tend to be loyal.

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Confidence
A feeling of certainty that the supplier will do what he promises & claims w.r.t his products & services can be accepted without serious questions. Mfr.must earn confidence by performance over a period of time & also buyer – seller relationship must be cemented by confidence on both sides.

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Reciprocity
A mfr. Of industrial goods is both a seller & buyer from the same firm

Business Market Demand
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Derivative Demand
Price sensitivity demand elasticity Environmental forces Influence demand International competition

Derived Demand
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Demand derived form ultimate consumers Business mkg. Manager must carefully monitor demand patterns , changing buying preferences in the final consumer markets & also develop mkg. Pgm. For ultimate consumers. GM spends more than $5 billion annually on steel, $7 billion on metal components, & $600 million on tires.This demand for industrial products is derived from buying org’s. customers(car buyers), not from buying org. (GM) itself. By purchasing a GE or Whirlpool appliances, the customer is stimulating demand for Al, Brass, paint & other products by business mkg. Firms.

Price Sensitivity Demand Elasticity
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Refers to the quantity demanded to a change in
price. Demand is elastic
If a % change in price brings about larger % change in quantity demanded.

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Demand is inelastic If the % change in demand is less than the % change in price. Business marketer being sensitive to trends in the consumer mkt., can often identify both problems & opportunities for growth & diversification.

Environmental forces influence demand
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Business marketer must be alert to factors in the competitive, economic, political, & legal envt. That directly or indirectly influence demand.

Eg:Rising interest rates may alter the purchasing plans both of home buyers and of commercial enterprises contemplating expansion.

Monitoring International Competition
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Companies now have to choose markets whose
needs thy can satisfy and whose competitors they can handle. Japanese steel makers are formidable competitors & enjoy cost & quality advantages over their major US counterparts.
In turn, many US based firms (IBM, Rockwell International & Motorola) have to establish a position of strength for selected products in Japan.

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Eg: Most Japanese Fax m/c include a key component produced by Rockwell at their Texas,Dallas plant.

INDUSTRIAL BUYING BEHAVIOR
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Decision making phases vary in their degree of importance, depending on the buying situation(routine or new). Effective industrial mkg. Strategy, then requires that marketers focus their attention - on the type of buying situation a firm is facing, - where it is in its decision making process(which phase), - what criteria influencers emphasize in the purchasing decision.

Buygrid Model
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Buygrid model – useful in analyzing the purchasing decision process over various buying situations. Model incorporates - 3 buying situations The “new task” The “straight rebuy” The “modified rebuy” - also, 8 phases in the buying decision process

A Buygrid analytic framework for industrial No. buying situations phases Buying Buyclasses
New task Modified task MAY BE Straight rebuy NO

1. 2.

Anticipation & recognition of problem & a general solution Determination of char. & qty. of needed item

YES

YES

MAY BE

NO

3.
4. 5.

Description of char. & qty. of needed item Search for & qualification of potential sources
Acquisition & analysis of proposals

YES

YES

YES

YES

MAY BE

NO

YES

MAY BE

NO

6.
7.

Evaluation of proposals & selection of suppliers
Selection of an order routine

YES

MAY BE

NO

YES YES

YES YES

YES YES

Buying situations
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New Task * Problem or Need perceived by
organizations is different from past experience. * Problem recognition – triggered by internal / external factors. * Decision makers & influencers enter into pbm. Solving activity. * Obtain a variety of information to explore alternative soln. before a purchase can be made. * Successful business marketer must carefully monitor the changing needs of the org. & be prepared to respond to the needs of new task buyers.

Buying situations
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Modified Rebuy * Buyers may feel that significant benefits like quality improvements or cost reductions may be derived from reevaluating supply alternatives. * Situation occurs often when the firm is displeased with the performance of present suppliers.

Buying situations
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Straight Rebuy * When purchases are continuing or recurring,

little or no info. is required; routine response is the normal buying pattern. * If delivery is prompt, quality is consistent, & price is reasonably competitive, buyers will not switch suppliers – straight rebuy situation.

Purchasing decision process -Phases
1.
2.

3.

4.

5.

6.

7.

Anticipation or Recognition of a problem( need ) Determination of characteristics & qty. of needed item. Description of characteristics & qty. of needed item. Search for & qualification of potential sources Acquisition & analysis of proposals. Evaluation of proposals & selection of suppliers. Selection of an order routine.

Buying center concept
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Major task industrial marketer facing is identifying those individuals who are involved in purchasing decision process. In industrial marketing, group of individuals involved in purchasing decision process are referred to as - Buying center

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Identifying Buying center members
Who is really involved?
Buying center is an “ informal, cross-departmental decision unit in which primary objective is the acquisition, impartation, & processing of relevant info.” People in buying center involve for reasons like  They may have formal responsibility (or)  They may be a source of information. Various org. group members that exert influence on purchasing decision are - Marketing - Manufacturing -R&D - General management - Purchasing

Buying center influence matrix
Phase New Buy Modified Rebuy
Purchasing Production Engg.

Straight Rebuy
Production Purchasing

Need Engg. Identification Purchasing R&D Production Supplier selection Purchasing Engg. R&D Quality control

Purchasing Production Engg.

Purchasing Production Engg.

Influence patterns vary
Type of company
Chemical manufacturer

Equipment purchase
Heat exchanger

Central Figure
Purchasing manager

Industrial safety Automatic drilling Engineer & VP of products mfr. m/c mfg.

Buying center Roles
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Primary roles Deciders - CONTROLLER Influencers - R&D ENGINEER Secondary roles Users - WORKER Buyers - PURCHASER Gatekeepers - PURCHASING MANAGER


				
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