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
What distinguishes both market
May be - Intended use of the product -Intended consumer
More technical in nature; customized service
Consumer goods Marketing
Competitive bidding for unique items;List prices on std. Items
Shorter; more direct channels to market
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
Emphasis on personal selling
A business marketing perspective
Direct suppliers Johnson controls
(power steering/car seats)
(sheet metal,mfd. Materials)
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
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.
Other business users
Using & Consuming units
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
producer controls the distribution of his products from factory to user or OEM customer
Independent middlemen who limit the control, a mfr. can exercise over the mkg. of his products.
Mfr. Mfr. Mfr. Mfr.
Branch office customer Distributor customer Agent customer Agent Distributor
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
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
when some form of protection is offered or implied, the agreement with independent middlemen is referred to as Franchise. Exclusive Franchise
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.
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.
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.
A mfr. Of industrial goods is both a seller & buyer from the same firm
Business Market Demand
Price sensitivity demand elasticity Environmental forces Influence demand International competition
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
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.
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
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
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.
Eg: Most Japanese Fax m/c include a key component produced by Rockwell at their Texas,Dallas plant.
INDUSTRIAL BUYING BEHAVIOR
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 – 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
Anticipation & recognition of problem & a general solution Determination of char. & qty. of needed item
Description of char. & 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
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.
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.
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
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
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
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.
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
Industrial safety Automatic drilling Engineer & VP of products mfr. m/c mfg.
Buying center Roles
Primary roles Deciders - CONTROLLER Influencers - R&D ENGINEER Secondary roles Users - WORKER Buyers - PURCHASER Gatekeepers - PURCHASING MANAGER