INDUSTRIAL MARKETING DEMAND Demand for industrial or business products and services does not exist by itself.

. It is normally derived from the ultimate demand of consumer goods and services The demand therefore is derived from the expectations / forecasts of the requirements by the industry or business houses The demand for industrial products are joint as well Cross elasticity of demand plays a very important role on the entire corporate strategy

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INDUSTRIAL MARKETING Concepts of Demand 1. Derived Demand The business customers buy goods for the production of goods and services to be ultimately sold to the consumers. Depending upon the demand of the consumer, the quantity shall be produced . This in turn will decide the quantum of the raw materials or the other goods that will be required. This is therefore the derived demand of the industrial products depending upon the consumer products. The industrial goods producers therefore need to be in touch with the customers/buyers to know their requirement, study the environment and plan to produce and supply the goods.

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INDUSTRIAL MARKETING 2. Fluctuating Demand the demand for certain industrial products fluctuate more than consumer demand. This is purely on account of following;

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While the demand of consumer goods are normally stable, but in the days of recession, the customers would cut down the expenses and the demand for certain products would fall more than the consumer products. E.g. refrigerators demand is growing higher due to growth of economy or vice versa

INDUSTRIAL MARKETING 3. Stimulating Demand the producers teach or explain their products to customers to use their products or alternate use is created. E.g. stainless steel use for other novelty products or Intel advertising so that customers ask for computers with Intel chips only 4. Joint Demand In the case of building townships and colonies, demand for steel, cement and other building materials will be joint demand since all the items would be used. 5. Bull Whip Effect - Bullwhip effect is due to in-accurate demand forecasting, inaccurate batching, price fluctuations and distortion of information in supply chain network or some sudden demand occurs

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INDUSTRIAL MARKETING FACTORS INFLUENCING DEMAND

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1. End consumers The ingredients/products sometimes are not liked by the ultimate user and the manufacturers need to change the product Sudden change of preference from one product to another (semi automatic to fully automatic washing machine or direct cool to frost free refrigerators, one model of car is suddenly liked by the market A Maruti or Nano effect)

INDUSTRIAL MARKETING 2. Business conditions General economic conditions taking a dip or jump

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The customer losing business to competition Seasonal demand sometimes hampered by changes (rains in May/June affecting sales of ACs or room coolers 3. Financial conditions of the customers A firm may be supplying goods to some customers and not to others and suddenly the financial position of the customer goes bad.

INDUSTRIAL MARKETING 4. Price

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For consumer products the demand may increase if the prices are reduced i.e. an inverse relationship exists while in the case of industrial products the demand normally does not change unless the reflection of price on the finished product is very high and the demand for the ultimate product goes up Case of Tetra Pack However in the case of equipments and machineries the change in prices do not impact the demand

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Short term demand Purpose of short-term forecasting 1. Appropriate production scheduling 2. Controlling various costs of inputs including raw materials, man power etc 3. Determining appropriate price policy 4. Setting sales targets and establishing controls and incentives 5. Evolving a suitable advertising and promotional campaign 6. Forecasting short term financial requirements. Normally short term demand is calculated by projecting the sales based on the previous data available and the expected demand pattern of the ultimate product
Contd..

INDUSTRIAL MARKETING

Introduction

Though it a crude method, but with the least variables and the experience of the executives working in industry, helps in setting the short term demand of the product. For consumer products the demand may increase if the prices are reduced i.e. an inverse relationship exists while in the case of industrial products the demand normally does not change unless the reflection of price on the finished product is very high and the demand for the ultimate product goes up

Case of Tetra Pack

However in the case of equipments and machineries the change in prices do not impact the demand

INDUSTRIAL MARKETING Long term demand

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Purpose of long term planning 1. Achieving the long-term objectives of the organisation 2. Planning of a new unit or expansion of an existing unit 3. Planning long term financial requirements 4. Planning man-power requirements Long term demand would involve many factors not only at micro but macro level as well such as; The growth of the GDP of the country Growth of the industry itself and the related industry

INDUSTRIAL MARKETING Spending pattern of the people

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Study of the consumer behaviour for the end product Expected increase in the earnings Socio-economic pattern and the changes expected (middle class and the upper and lower middle class and the change of this pattern over time depending upon the government policies with regard to employment and other social securities)

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Policy of the government towards existing industry and the external factors like imports (including the duties imposed by the government and FTA (free trade agreements) with the countries Developments in the field which force customers to replace products faster (of course also depends on the price of the products - products getting cheaper with enhanced technology and competition).

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It is therefore very necessary that the forecasting of the demand is made as scientifically as possible

The seller needs to take care of the following;

Keep a proper record of the past performances of 1. Own company 2. The customers Competitors past performance as well as activities on developments and investments (including new entrants) Global developments of new products and alternative products if any

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Technological innovations and developments which may affect present products Close liaison with customers, suppliers and markets Regular scheduled meetings with customers Relate demand to the ultimate demand and study the impact