Industrialmarketinghawaldarppt 130225232605 Phpapp02

IM/1-1/5
THE NATURE OF INDUSTRIAL

MARKETING
Learning Objectives
Understand What is industrial (or Business to
Business) Marketing?
Know What are the differences in the characteristics of
industrial and consumer marketing?
Find out Why the demand for industrial goods and
services are called Derived demand ?
www.a2zmba.com By Prof. Havaldar
(A)WhatisIndustrial(Business)marketing?
IM/1-2/5
Itismarketingofproducts/Servicestobusiness
firms.
Incontrastconsumermarketingismarketing
products/servicestoindividuals&households.
(B)Whatisthedifferencebetweenindustrial
marketing,B2Bmarketing,Businessmarketing&
OrganizationalMarketing?
No Difference!
(C)
WhatarethedifferencesbetweenIndustrial
&ConsumerMarketing?
Basictasksofmarketingaresamedifference
Existsinthecharacteristicsshownnext.
IM/1-3/5
AREAS / CHARCTERISTICS
Market
IND MARKETS
GEO Concentrated
Few Buyers
Products
Technically Complex
Customized
Very Important
Various Functional
specialists involved
Mainly Rational buying
decisions.
Interpersonal
relationship between
buyers and sellers.
More direct
Multi Channel
Service
Buyer Behavior
Channel
Promotional
Pricing
Importance to personal
selling
Competitive bidding /
Negotiated prices
CONSUMER MATKETS
GEO Disbursed
Large no. Of Buyers
(Mass
Markets
Non Technical
Standardized
Somewhat important
Family members involved
Physiological /
Psychological Social need
based buying decisions
Non Personal
Relationship.
Indirect
Few Channels with many
layers
Importance to Advertising.
MRP
IM/1-4/5
(D)WhyIndustrialDemandiscalledDerived
Demand?
BecauseIndustrialdemandisderivedfrom(or
dependson)demandforconsumergoods/services.
E.G.Steelisdemandedforproductionofconsumer
durableproductslikeCars&Refrigerators,whichare
demandedbyhouseholdconsumers.Hence,
DemandforSteelisderivedfromforecastof
consumerdemandforCars,Refrigerators,Washing
Machines,Etc.,
SUMMARY OF CHAPTER-1
IM/1-5/5
Industrial/BusinessMarketingismarketing
ofproducts/servicestobusinessfirms.
DifferencesbetweenIndustrial&Consumer
marketingareseeninareas/
CharacteristicslikeMarket,Product,Buyer
Behavior,Channel,Promotion&Price.
IndustrialDemandisderivedfromdemand
forconsumergoods/services.
CHAPTER 2
IM/2-1/10
UNDERSTANDING INDUSTRIAL
MARKETS AND ENVIRONMENT
LEARNING OBJECTIVES
Understandthetypesofindustrialcustomersas
wellasindustrialgoodsandservices.
Knowthemarketingimplicationsfordifferent
typesofcustomersandproducts.
Understandthepurchasingorientationsand
practicesofindustrialcustomers.
Knowtypesofenvironmentandstrategiesto
manageexternalenvironment.
IM/2-2/10
(A)Whatarethetypes/classificationsof
Industrial/Businesscustomers? I N T E R M E D I A R I E S
/
M ID D L E M E N ( D IS T R IB U T O R S )
C O M M E R C IA L
E N T E R P R IS E S
O E M S
U S E R S
G O V E R N M E N T
C U S T O M E R S
IN D U S T R IA L /
B U S IN E S S
C U S T O M E R S
IN S T IT U T IO N A L
C U S T O M E R S
C O -O P E R A T IV E
S O C IE T IE S
P U B L IC S E C T O R
U N IT S (B H E L )
G O V T . U N D E R T A K IN G S
( R A IL W A Y S , D E F E N C E U N IT S )
P U B L IC IN S T IT U T IO N S
(G O V T . H O S P IT A L S )
P R IV A T E IN S T IT U T IO N S
(S C H O O L S , C O L L E G E S )
M A N U F A C T U R IN G
U N IT S ( S U G A R , M IL K )
N O N -M A N U F A C T U R IN G
U N IT S ( B A N K S , H O U S IN G )
F IG . T Y P E S O F IN D U S T R IA L / B U S IN E S S C U S T O M E R S
IM/2-3/10
(B)HowareIndustrialProducts/ServicesClassified?
Classificationinto3Groupsshownbelow.
R A W M A T E R IA L S (IR O N O R E , C R U D E O IL )
IN D U S T R IA L
PRODUCTS /
S E R V IC E S
M A T E R IA L S
& PARTS
(E N T E R P R O D U C T
D IR E C T L Y )
M A N U F A C T U R E D M A T E R IA L S
( S T E E L , F U E L O IL )
C A P IT A L IT E M S
(U S E D IN
P R O D U C T IO N /
O P E R A T IO N S )
L IG H T E Q P T (C O M P U T E R S , H A N D T O O L S )
S U P P L IE S /
S E R V IC E S
(T O S U P P O R T
O P E R A T IO N S )
S U P P L IE S ( L U B R IC A N T S , E L E C T R IC A L IT E M S )
C O M P O N E N T P A R T S (B E A R IN G S , T Y R E S )
S U B A S S E M B L IE S ( E X H A U S T P IP E IN M .C .)
H E A V Y E Q P T (M A C H IN E S , T U R B IN E S )
P L A N T /B U IL D IN G (F A C T O R IE S , O F F IC E S )
S E R V IC E S (L E G A L , C O U R IE R )
F IG . C L A S S IF IC A T IO N / T Y P E S O F IN D U S T R IA L P R O D U C T S / S E R V IC E S
IM/2-4/10
(C) Marketing Implications for different types of products &
customers?
i.
ii.
iii.
For Materials & Parts,Directsellingisdoneto

largeOEMs(OriginalEquipmentManufacturers)
andusers,butindirectsellingthroughindustrial
distributors/dealersbecomescosteffectivefor
smallervolumeOEMsandusers.
For Capital items,Directsellingthrough
companysalesforceiscommon,withextensive
interactionsontechnical&commercialfactors.
For SuppliesIndustrialdistributors/dealersare
mostlyusedbutformarketingofservices,wordof-mouthplaysanimportantmarketingrole,with
quality&priceofserviceaskeyfactors.
IM/2-5/10
(D) Purchasing Orientations of Business Buyers
Businessbuyers/Industrialcustomersfollowoneofthethree
purchasingorientations:
(i)Buying,(ii)Procurement,or(iii)SupplychainManagement.
(i)Buying Orientation:Thefirmwithbuyingorientationfollows
thepracticeof(a)selectinglowestpricesupplier,(b)gaining
poweroversuppliersand(c)avoidingriskofbuyingfromnew
suppliers.IthasaShort-termfocus.
(ii) Procurement Orientation :Thepurchasingfirmwith
procurementorientationhasalong-termfocus.Itachievesthe
objectivesofqualityimprovementandcostreductionsby
followingthepracticesof(a)collaborativerelationshipwithmajor
suppliersand(b)workingcloselywithotherfunctionalareasin
thecompany.
(iii) Supply chain Management Orientation : Here,thefirm
focusesonimprovingthevaluechainfromrawmaterialstoend
users.Thisisachievedby(a)deliveringsuperiorvaluetoend
users,(b)outsourcingnon-coreactivities,(c)andsupporting
collaborativerelationshipswithmajorsuppliers.
IM/2-6/10
(E) Purchasing Practices of Different Types of
Industrial / Business Customers
(i)Purchasing in commercial enterprises
InvolveTechnical&Commercialdepts.
Major Tasks / Procedure:identifying,negotiating,selecting
suppliers,buildingrelationship.
Purchasingtoimproveoperationalefficiency&contributeto
firmscompetitive advantage.
(ii) Purchasing in Govt. units
DGS&D agencyfinalizesratecontractsforstandardproducts
forGovt.units.
Main Tasks / Procedure :Registrationofthefirm&its
Products,TenderAdvertisements,nonegotiationinOpen
tenders,negotiationsdoneinclosed/limitedtenders.
Orders Finalised on lowest bidders(suppliersoffering
Lowestprices/LandedCosts)
IM/2-7/10
(iii) Purchasing in Institutions

IftheInstituteisaGovt.HospitalPurchasing
practicesofGovt.unitsFollowed
SimilarlyaprivateSchool/Collegefollows
practicesofcommercialenterprises
However,bettertostudyeachmajor
institution.
(iv) Purchasing in cooperative societies
SimilartoInstitutionalpurchase.
IM/2-8/10
A IR & W A T E R
(E) Types & Analysis of Environment
E C O L O G IC A L
P O L L U T IO N
S O L ID W A S T E D IS P O S A L
C O N S E R V IN G N A T U R A L R E S O U R C E S
P H Y S IC A L
E N V IR O N M E N T
W A T E R , P O W E R , T R A N S P O R T A T IO N
L O W -C O S T , S K IL L E D M A N P O W E R
C O M P A N Y L O C A T IO N , IM A G E / R E P U T A T IO N
IN T E R N A L
(S & W A N A L Y S IS )
R & D & P R O D U C T IO N F A C IL IT IE S
H R & F IN A N C IA L R E S O U R C E S
M A R K E T IN G E F F E C T IV E N E S S
EXTERNAL
( O & T A N A L Y S IS )
M IC R O
(A F F E C T S A
P A R T IC U L A R
F IR M )
C U S T O M E R S & C O M P E T IT O R S
S U P P L IE R S
E C O N O M IC
M ACRO
(A F F E C T S
A L L F IR M S )
T E C H N O L O G IC A L
G O V T ., P O L IT IC A L , L E G A L
C U L T U R A L & S O C IA L
P U B L IC - P R E S S , S H A R E
H O L D E R S , IN V E S T O R S &
P U B L IC IN T E R E S T G R O U P S
IM/2-9/10
(F) Strategies for Managing Changing External
Environment.
(i) IndependentStrategies.
(ii) CooperativeStrategies.
(iii) StrategicPlanning.ItAimsatkeeping
thefirm
consistentlysuccessfulinchanging
marketing
environmentbymarket
orientedstrategic management.
IM/2-10/10
SUMMARY OF CHAPTER - 2
Types /Classifications of Industrial/ Business Customers are

(i)CommercialEnterprises,(ii)Government
(iii)Institutional,(iv)Cooperativesocieties.
IndustrialProducts/Servicesareclassifiedinto
(i)Materials&Parts,(ii)CapitalItems,(iii)Suppliers&Services.
Marketingstrategiesdifferfordifferentproduct&Customertypes.
Industrial/businessBuyersfollowoneofthethreepurchasing
orientations:buying,procurement,orsupplychainmanagement.
Purchasingpracticesvaryfordifferenttypesofcustomers.Itis
importanttounderstanditforeachmajorcustomer.
TypesofenvironmentareEcological,Physical,Internal,&External,
Strategiesusedformanagingchangingexternalmarketingenvironment
are:(i)Independent,(ii)Cooperative,(iii)StrategicPlanning.
IM/3-1/16
CHAPTER 3
THE NATURE OF INDUSTRIAL BUYING AND

BUYING BEHAVIOUR
Learning Objectives
UnderstandOrganizationalbuyingobjectives.
Gainknowledgeofbuyingactivities,includingdifferent
phasesinbuyingdecisionprocess,typesofbuying
situations;buygridframework&itsanalysis.
Identifymembersofbuyingcenters.
Understandorganizationalbuyingbehavior.
Knowhowindustrialbuyerschooseandevaluate
suppliers.
IM/3-2/16
PURCHASING OBJECTIVES OF FIRMS
Reliabilityindelivery.
ConsistentproductQuality.
Lowestprice(Ifdelivery&Qualityobjectivesare
met)
Excellentpre&postsalesservices.
LongTermcollaborativerelationship.
Industrialbuyerstrytoachieveorganizational
purchasingobjectives&personalobjectiveslike
higherstatus,jobsecurity,salaryincrements,
promotions&socialrelationships.
IM/3-3/16
Industrial Buying Decision Process
Marketersmuststudythisfordevelopingeffective
marketingstrategy.
In Consumer Marketing,Household/Individualconsumer
/Buyermakesbuyingdecisionsbasedoncertainmental
stageslike(i)Problem(Need)Recognition,
(ii)InformationSearch(iii)Evaluation
(iv)Purchasedecision(v)PostPurchaseBehavior
In Industrial Marketing,BuyingDecisionmakingprocess
isobservable,involvingmanypeopleinbuyingfirm&
includessequentialactivities/stages/phases,asfollows:
IM/3-4/16
(A) PHASES IN INDUSTRIAL BUYING DECISION
MAKING PROCESS / BUYPHASES
PHASE1:-RecognisingAproblem/need.
PHASE2:-DeterminingCharacteristics&
Quantityofneededproduct/Service*.
PHASE3:-Developingspecificationsoftheproduct*.
PHASE4:-Searching&QualifyingSuppliers.
PHASE5:-Obtaining&Analyzingsuppliersoffers*
PHASE6:-Evaluating&SelectingSuppliers.
(shownonnextslide)
PHASE7:-Selectinganorderroutine
PHASE8:-PostPurchaseevaluation
*Theseareinadditiontofivestagesofconsumerbuying
decisionprocess.
IM/3-5/16
A SUPPLIER EVALUATION SYSTEM.
ATTRIBUTE/
FACTOR
WEIGHT/
IMPORTANCE
SUPPLIERS
PERFORMANCE
PRICE
15
0.5
SUPPLIERS
RATING
SCORE
07.5
QUALITY
30
0.7
21.0
DELIVERY
25
0.6
15.0
SERVICE
20
0.7
14.0
FLEXIBILIY
10
0.4
04.0
TOTAL
100
61.5
IM/3-6/16
(B) Buying Situations / Buyclasses
3Commontypesofpurchases/buyingsituations
i. New Task / New Purchase :

Here,buyershavelimitedknowledgeandexperienceofthe
newproduct/service.Hence,moreinformationisobtained,
morepeopleareinvolved,risksaremore,anddecisionstake
longertime.
ii. Modified Rebuy / Change in supplier :
Thissituationoccurswhenthefirmisnotsatisfiedwiththe
performanceofexistingsuppliers,orthereisachangein
productspecs.Hence,theneedforsearchingalternate
suppliers.
iii. Straight Rebuy / Repeat purchase :
Here,thebuyingfirmplacesrepeatordersonsupplierswho
arecurrentlysupplyingcertainproducts/services.Such
decisionsareroutine,withlessrisksandlessinformation
needs,andcanbetakenbyjuniorexecutives.
IM/3-7/16
(C) Buygrid Framework
BUYPHASES
BUYCLASSES
New Task
1. Problem Recognition
Yes
Modified
Rebuy
May Be
2. Characteristics of Product
Yes
May Be
No
3. Product Specification
Yes
May Be
No
4. Supplier Search
Yes
Yes
No
5. Analyzing Supplier Offers
Yes
Yes
May Be
6. Supplier Selection
Yes
Yes
No
7. Order Routine Selection
Yes
Yes
May Be
8. Post Purchase Review
Yes
Yes
Yes
Straight
Rebuy
No
IM/3-8/16
BUYGRID FRAMEWORK ANALYSIS
AllPhasesareApplicableforaNewTask.
SomePhasesareApplicableformodified/Straight
Rebury.
Newtasksituationismostdifficultsincebuyershave
lessknowledge,noexperience&morepeople
involved.
ModifiedReburyisnotdifficultsituationsinceithas
fewactivities.
Straightreburysituationishandledroutinely,as
repeatpurchasesaremade.
IM/3-9/16
(D) Buying Center roles & key members.
RolesofBuyingcentermembersare
Initiators. Firstrecognizeproblem/need.Anyindividualin
buyingfirmoften,users.
Buyers.Carryoutpurchaseactivities.Theyarepurchase
officers/executives.
User. Anypersonwhousestheproduct/service.
Influencers.Influencebuyingdecision.Technicalpeople
areoftenkeyinfluencers.
Deciders.Makebuyingdecisions.Seniorexecutivesare
decidersforhighvalue&complexproducts.Forstraight
rebuy/routinepurchase,juniorpurchaseofficercandecide.
Gatekeepers.Theycontrol/filterinformation&meetings
withbuyingcentermembers.Often,P.A./Juniorperson
attachedtopurchaseheadisthegatekeeper.
IM/3-10/16
(E)
Identifying key members of buying centre
Sales
/ Marketing personsmustidentifyimportantmembers
ofbuyingcentre.
Buying centreconsistsofindividualsandgroupswhotake
partinbuyingdecisionmakingprocess,havecommon
objectives&sharecommonrisks.Itisalsocalledpurchase
committee,buyingcommitteeordecisionmakingunit.
Members of buying centre are
(i)Technical persons.Represent
design,production/operations,
maintenance,Q.C.,IndustrialEngg.Depts.
(ii)Purchasers / Buyers.Purchase/Materialsdept.persons.
(iii)Accounts / Finance persons.
(iv)Marketing persons
(v)Top management persons.G.M.&above.
IM/3-11/16
(F) Organizational buying behavior
Industrial/businessbuyersareinfluencedbymany
factors.Twomostimportantfactorsare(i)
Organizational factors / task oriented objectives,
likebestproductquality,lowestprice,dependable
delivery.
(i) Personal factors / Non-task orientedobjectives,
suchasgoodincrements,promotion,Jobsecurity,
personalfavors.
Whensuppliersoffersaresimilar,buyerscansatisfy
organizationalobjectivesfromanysupplier.Hence,
personal factors become important.
However,whensuppliersoffersdiffersubstantially,
buyersgive importance to organizational factorsto
satisfyorganizationalobjectives.
IM/3-12/16
Manymodelshavebeendevelopedtoexplain
organizationalbuyingbehavior.Oneofthecomprehensive
modelsistheShethmodel,describedbelow.
The Sheth model of industrial buyer behavior,shown

below,focuseson(i)Psychologicalaspectsofindividual
buyers(Component1),(ii)Conditionscausingjoint
decisionmaking(Component2),(iii)Conflictamongthose
involvedindecisionprocess&resolutionofconflict
(Component3).
Situationalfactorsincludeeconomicconditions,labour
disputes,mergers&acquisitions.Themodeldoesnot
explaintheirinfluenceonbuyingprocess.
C o m p o n e n t (1 )
D iff e r e n c e s a m o n g
in d iv id u a lb u y e r s
c a u s e d b y fa c t o r s :
B a c k g r o u n d o f
in d iv id u a ls ( E d u c a tio n ,
r o le & life s ty le ) .
T h e ir in fo r m a tio n
s o u rc e s .
A c tiv e S e a r c h
P e r c e p tu a lD is t o r tio n
S a tis fa c tio n w ith
p a s tp u r c h a s e s
V a r ia b le s th a tD e te r m in e
ifb u y in g d e c is io n is
a u to n o m o u s o r jo in t:
A ) P r o d u c t S p e c ific
F a c to r s :
T im e P r e s s u r e
P e r c e iv e d R is k
T y p e o fP u r c h a s e
B ) C o m p a n y S p e c ific
F a c t o r s :
C o m p a n y S iz e
C o m p a n y O r ie n ta t io n
D e g r e e o f
C e n tr a lis a t io n
M e t h o d s u s e d fo r
c o n flic tr e s o lu tio n
in jo in t- d e c is io n
m a k in g p r o c e s s :
P r o b le m S o lv in g
P e r s u a s io n
B a r g a in in g
P o litic k in g
IM/3-13/16
S it u a t io n a l F a c t o r s
S u p p lie r o r
B r a n d C h o ic e
F ig . : T H E S H E T H M O D E L O F IN D U S T R IA L B U Y E R B E H A V IO U R
W E B S T E R A N D
W IN D
M O D E L
IM/3-14/16
E n v ir o n m e n ta l V a r ia b le s
P
E
P
L
C
C
S
h y s ic a l, T e c h n o lo g ic a l
c o n o m ic ,C u ltu r a l
o lit ic a l a n d L e g a l
a b o u r u n io n s
u s to m e rd e m a n d s
o m p e t it iv e p r a c tic e s
u p p lie r in f o r m a t io n
O r g a n is a tio n V a r ia b le s
O
O
P
E
D
b je c t iv e s a n d g o a ls
r g a n is a tio n S tr u c tu r e
u r c h a s in g P o lic ie s / P r o c e d u r e s
v a lu a tio n & r e w a r d s y s te m s
e g r e e o f d e c e n t r a lis a t io n
B u y in g C e n tr e V a r ia b le s
A u th o r ity ,S iz e
K e y in f lu e n c e r s
I n t e r p e r s o n a lr e la t io n s h ip
C o m m u n ic a tio n
O r g a n is a tio n B u y in g D e c is io n s
C
D
M
D
h
e
a
o
o ic e o f S u p p lie r s
la y d e c is io n & g e t m o r e in f o r m a t io n
k e ,L e a s e o rb u y
n o tb u y
In d iv id u a l V a r ia b le s
P
E
E
L
e r s o n a lG o a ls ,V a lu e s
d u c a t io n , E x p e r ie n c e
x p e r tis e ,J o b P o s itio n
if e s ty le ,In c o m e
IM/3-15/16
CUSTOMER SERVICE
Important Customer Service Elements.Carryout

marketsurveytounderstandwhichofthefollowing
elementsofcustomerserviceareimportanttocustomers,
whatservicelevelsareexpectedbycustomers,the
servicelevelsofferedbythefirmanditscompetitors.
(i) Pre Sales Service :Advising,Informing,
Problemsolving
(ii) During Sales Service :Productavailability,
ontimedelivery,ordercycletime,andinformation.
(iii) Post Sales Service :Warranty,AMC,Repair,
Installation&Training.
Develop superior service package.
Test,SetGoals,andEstablishControlsystem
IM/3-16/16
SUMMARY OF CHAPTER - 3
Industrialmarketersshouldunderstandthatbusinessbuyerstry
toachievebothorganizational&personalobjectives.
Industrialbuyingdecisionprocessconsistsofeightsteps/stages
(buyphases)&threetypesofbuyingsituations(buyclasses).
Buygridmodelcombinesbuyphases&buyclasses.
Marketersmustunderstandroles&keymembersofbuying
centre,includingkeybuyinginfluencers.
Manyfactorsinfluenceorganizationalbuyingbehavior,butmajor
factorsareorganizational(ortaskoriented)objectivesand
personal(nontaskoriented)objectives.
TheShethmodelofindustrialbuyerbehavioriscomprehensive,
focusingofpsychological&jointdecisionmakingaspects.
Websterandwindmodelisalsowidelyused&comprehensive
modelonbuyerbehavior.
IM/4-01/11
CHAPTER - 4
BUYER SELLER RELATIONSHIP
LEARNING OBJECTIVES :
Understandbuyersalesrep.interactions.
Types/rangeofrelationshipsbetweenbuyer&
sellerfirms.
Customerrelationshipmanagement(CRM)/
relationshipmarketing.
Methodsusedtoinfluenceindustrialcustomers.
Specialdealingsbetweenbuyer&seller.
IM/4-02/11
INDUSTRIAL BUYER-SALES REP. INTERACTIONS
Dependontheirperceptions,behavior&roles.
Buyershavetwomajorperceptionsofsalesreps.
(i)Stereotypetalkative,manipulative,excitable
(ii)Reputationofsalesrepscompany.
BuyerBehaviortowardssalesrepdependson
organizationalneeds/objectives,buyingcentre
interactionsandpersonalneeds.
Buyersarenotalwaysrational/logicalinbuyingdecisions.
Role/behaviorofsalesrep.dependsonhispersonal
needs,andexpectationsofhisboss,peers,customers.
IM/4-03/11
BUYER-SELLER DYADIC INTERACTION FRAMEWORK
AConceptualFrameworkbyDr.Sheth
C o m p a tib le
C o n te n t
In c o m p a tib le
C o n te n t
C o m p a t ib le S t y le
In c o m p a tib le S ty le
Id e a l/S u c c e s s fu l
T r a n s a c tio n
In e ffic ie n t
T r a n s a c t io n
In e f fic ie n t
T r a n s a c tio n
No
T r a n s a c t io n
A buyer and a seller interaction is called Dyadic two persons

interactions, with above types of transactions.
Content includes organizational and personal needs of a buyer and
a seller.
Style includes manner and format of communication task
oriented, self oriented, or social / personal oriented.
IM/4-04/11
TYPES / RANGE OF RELATIONSHIP BETWEEN BUYER &
SELLER FIRMS
Whenbuyer(orcustomer)andseller(orsupplier)firms
dobusiness,theyhavethefollowingtypesandrangeof
business/workingrelationships/exchanges.
T r a n s a c tio n a l
R e la tio n s h ip
V a lu e -A d d e d
R e la tio n s h ip
P a r tn e r in g /
C o lla b o r a tiv e
R e la tio n s h ip
Eachbusinessrelationshipisanexchangeprocessof
obtainingadesiredproduct/servicebyoffering
somethingofvalueisreturn.
IM/4-05/11
TRANSACTIONAL RELATIONSHIP istypicallyone
timeexchangeofaproduct/service,withlowest
price/economyandnecessityasmainfactors.Some
customerspreferitwhenmanysuppliersareavailable
inastablemarket.Theyswitchpurchasesfromone
suppliertoanother.Marketersalsochooseleast
profitablecustomersfortransactionalrelationships.
VALUE ADDED RELATIONSHIPS / EXCHANGES.
Herethefocusistounderstandcustomerneedsand
meetthoseneedsbetterthancompetitors,toget
maximumbusinessshare.
Thesecustomershavemediumsalesandprofit
potentialsandhaveProcurementOrientations.
COLLABORATIVE/ PARTNERING
RELATIONSHIPS.
IM/4-06/11
Thefocusistobuildstrongsocial,economic,
serviceandtechnicaltiesbetweencustomerand
supplierfirmsinordertoachievemutualbenefits.
Thecriteriausedforselectingbusinesscustomers
forpartneringrelationshipsaretechnological
contributions,mutualdependence,supplychain
managementorientations,andhighsales&profit
potentials.
IM/4-07/11
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) /
RELATIONSHIP
(RM)/ techniques to achieve
Conceptually MARKETING
same, methods
objectivesaredifferent.
Both CRM & RM aim at partnering / collaborative longtermrelationshipsformutualbenefitsofbothparties.
CRMS objectives are to improve customer loyalty and
there by, companys profitability. For this, marketing
strategy is first developed, then investment is made in
software system to gather data / information on each
valued customer, and the same is made available to all
employeestogivesuperiorcustomerservice.
RM aims at building relationships with key customers,
distributors, and suppliers.This is done through financial
andsocialbenefits,andinaddition,structuralties.
After 2-3 years, both firms evaluate their relationship
usingsales,profits,prices,costs,&technologyfactors.
IM/4-08/11
METHODS USED TO INFLUENCE INDUSTRIAL
CUSTOMERS
Majormethods:SalespresentationandNegotiation
Sales Presentations:Foreffectivesalespresentation,a
salespersonshouldfollowsomeguidelines:
i.Planandcollectinformationbeforesalespresentation.
ii.Identifycustomerneedsandsatisfythembetterthan
competitors.
iii.UseAIDAStheoryoranyothertheoryofselling
(Attention,Interest,Desire,Action,Satisfaction)
Giveimportancetopromptcustomerservice.
IM/4-9/11
NEGOTIATION : Fornegotiationwithcustomersuse
I win, you win or win win style,withfollowing
guidelines:
a.Buildanenvironmentoftrust&understanding.
b.Identifytheproblemareas.
c.Bothsidesworktogether,poolingideas,information,
andresources.
d.Regularfrequencyofconcessionsareimportantandnot
thesizeofconcessions.
e.Beresponsivetocorrections,ifneeded.
f.Avoidlegalisticapproach.
g.Bepoliteandhumble.
h.Importanceshouldbeonendresultsandnoton
means.
SPECIAL DEALINGS BETWEEN

BUYER & SELLER
IM/4-10/11
RECIPROCITY. Itmeansbuyingaproduct/service
fromacustomerandsellingaproduct/servicetoa
supplier.Itoccurswhenproductsaresimilarandprice
competitionisless.Generally,bothpurchasemanagers
andsalesmanagersdislike.Inpractice,theprocedure
becomescomplex.Itshouldbekeptatminimumlevel.
DEALING WITH CUSTOMERS CUSTOMERS

Withcoordinationandplanning,abusinessmarketer
canpromoteitsproductstocustomerscustomer,ifa
needarises.
E.G.Aircraftenginemanufacturespromotetheir
enginestoAirlines(aircraftbuyers),inadditionto
aircraftmanufacturers.
IM/4-11/11
SUMMARY
OF CHAPTER
-4
BUYER SELLER
RELATIONSHIP
Industrialbuyerandsalesrep.sinteractionsdependontheir
perceptions,behavior,&roles.
Interactionbetweentwopersons(buyer&seller)iscalled
Dyadic,withvarioustypesoftransactions,asperDr.Sheths
framework.
Buyerandsellerfirmshavevarioustypesandrangeof
relationships:transactional,valueaddedandpartnering/
collaborative.
Customerrelationshipmanagement(CRM)andrelationship
management(RM)areconceptuallysame.Bothaimat
collaborative/partneringlongtermrelationshipformutual
benefitsofbothparties.
Salespromotionandnegotiationarethemajormethodsusedto
influenceindustrialbuyers.
Reciprocityanddealingwithcustomerscustomersarethe
specialdealingsbetweenabuyer&aseller.
IM/5-1/6
CHAPTER 5
INDUSTRIAL MARKETING INTELLIGENCE AND
MARKETING RESEARCH
1.
2.
3.
KnowNatureandScopeof
IndustrialMarketingresearch.
ExaminetheMarketingResearch
Process.
UnderstandIndustrialMarketing
IntelligenceSystem.
SCOPE OF INDUSTRIAL MARKETING

RESEARCH
IM/5-3/6
Scope is vast. Some of the areas are:

i.Marketshareanalysis.
ii.NationalandGeographicalarea-wise
marketpotential.
iii.Competitorsanalysis.
iv.Newproductacceptanceandpotential
MARKETING RESEARCH PROCESS
IM/5-4/6
STEPS INVOLVED ARE :

1. Identifytheproblem/opportunityandstate
researchobjectives.
2. Developresearchdesign/methodology.
3. Collectdata/information.
4. Processandanalyzethedata.
5. Prepareresearchreport.
Thereisnomajordifferenceintheprocessor
stepsinvolvedinmarketingresearchforconsumer
andindustrialmarketing.
INDUSTRIAL MARKEING INTELLIGENCE SYSTEM
IM/5-5/6
M a r k e t in g
R esea rch
s t u d ie s
Secondary
D a ta
S ou rce
I n d u s t r ia l
M a r k e t in g
I n t e llig e n c e
S y ste m
D e c is io n
Support
S y ste m
rk rch
M
esa
R
g
etin
i es
d
stu
s tria
u
d
In
l
e o
S
cD
ry
a
d
n
t In
rk ig
a
telM
ct D
en
rt
p
u
S
n
eciso
rce S
u
o
S
ste m S
y
stem
y
c e
n
o
sp
etR
rk
a
M
M arket
R esp on ce
Industrial marketing intelligence system is developed to meet the

needs of industrial marketers for timely and continuous information
for effective decision making .
IM/5-6/6
Industrialmarketingresearchrelymoreon
exploratoryanddescriptive(i.e.survey)methods.
Thescopeofindustrial/businessmarketing
researchisvast.
Thereisnomajordifferenceintheprocessor
stepsinvolvedinmarketingresearchfor
consumerandindustrialmarketing.
Industrialmarketingintelligencesystemis
developedtomeettheneedsofbusiness
marketingfortimelyandcontinuousinformation
foreffectivedecisionmaking.
IM/5-2/6
NATURE OF INDUSTRIAL
MARKETING RESEARCH
1.BusinessMarketersrelymoreonSecondarydata,
andexploratoryresearch(Throughexpertopinion).
2.Descriptive(orSurvey)methodisusedmoreoften
thanexperimentalandObservationmethods,for
collectingprimarydata.
3.Samplesizeissmallduetosmallpopulation.
4.Difficulttodefinesamplingunit(orrespondents),
sincebuyingdecisionsaremadebymanymembers
ofbuyingcentre.
5.RespondentsCooperationandaccessibilityare
difficultfordatacollection.
IM/6-1/9
CHAPTER 6
INDUSTRIAL MARKET SEGMENTATION, TARGET
MARKETING AND POSITIONING
1. KnowtheProcedurefollowedforsegmenting
industrialmarkets.
2. IdentifytheVariables(bases)usedfor
segmentingbusinessmarkets.
3. Evaluateandselectthetargetmarket
segmentsandstrategies.
4. Developeffectivepositioningstrategies.
IM/6-2/9
PROCEDURE USED IN MARKET
SEGMENTATION
The procedure has 3 steps.

Conduct marketing researchtocollect
data/informationonexistingandpotential
buyers,andcompetitors.
2. Carry out data analysisbyusingstatistical
techniquesoffactorandclusteranalysisin
ordertoidentifydifferentsegments.
3. Profile eachsegmentbyitscharacteristics
likeapplication(or/use),location,volumeof
requirements,etc.
1.
IM/6-3/9
VARIABLES (BASES) USED IN SEGMENTING
INDUSTRIAL (BUSINESS) MARKETS
Industrialmarketsegmentationisdonefirstbased
onMacroVariables,andthensubdividedinto
MicroVariables,ifnecessary.
Macro Variables.Thesesegmentationvariables
areidentifiedbasedonindustry/organizational
characteristicslike.
(i)Typeofindustry/Typeofcustomer.
(ii)Companysize/Usagerate.
(iii)Customerlocation/Geographicalarea.
(iv)End-use/Application/Benefitsofaproduct.
IM/6-4/9
Micro Variables.Macrosegmentsarefurther
subdividedintomicrosegments,ifneeded.
MicroVariablesarebasedonpurchasing
decisionslike
(a)Customerinteractionneeds,
(b)Organizationalcapabilities,
(c)Purchasingpolicies,
(d)Purchasingcriteria,
(e)Personalcharacteristics.
Sequential SegmentationProcess.Often,
businessmarketersusemorethanone
variabletosubdividethemarket.
EVALUATING MARKET SEGMENTS
IM/6-5/9
Criteria/factorsusedforevaluatingeachmarketsegmentare:
(i)SizeandGrowth.
(ii)ProfitabilityAnalysis.
(iii)CompetitiveAnalysis.
(iv)CompanyObjectivesandResources
TARGET MARKET STRATEGIES

Basedonabovecriteria,businessmarketerselectsoneormore
marketsegmentsastargetsegments.Next,themarketers
shoulddecidewhichofthefollowingbroadtargetmarket
strategiesthecompanyshouldadopt
(a)ConcentratedorNichemarketingstrategy,
(b)Differentiatedmarketingstrategy
(c)Undifferentiatedmarketingstrategy
IM/6-6/9
PROCEDURE FOR DEVELOPING A POSITIONING
STRATEGY
Following steps are involved :

(i)Identify which attributes / benefitstargetcustomers
considerimportantwhilebuyingaproduct/service.This
informationisobtainedthroughamarketresearchstudy.
Thevariablesconsideredfordifferentiatingacompanys
productfromcompetingproductsare.
(a)Productvariables,
(b)Servicevariables,
(c)Personalvariables,
(d)Imagevariables,
(ii)Select one or more major benefits (or attributes)to
differentiatethecompanyfromitscompetitors.
IM/6-7/9
(iii)
Use Perceptual Mapping Technique.

Todecideonpositioningstrategy,this
techniqueisused,aftergetting
customersperceptionsthrough
marketingresearch.
(iv)Communicate Positioning Strategy.

Thefirmshoulddecideand
communicateitspositioningstrategyto
targetcustomers,throughsalesforce,
advertisinginjournals,internet,and
tradeshows
Excellent
Product Quality
IM/6-8/9
1.0
.A1
0.8
0.6
.C
Strong
Custome
r
Service
1.0
0.8
0.6
0.4
.D
0.4
0.2
0.2
- 0.2 - 0.4 - 0.6 - 0.8 - 1.0
- 0.2
.B
- 0.4
- 0.6
.
A
- 0.8
- 1.0
Low
Perceptual Mapping
Product Quality
Technique
Weak
Custome
r
Service
SUMMARY OF CHAPTER 6
1.
2.
3.
4.
5.
IM/6-9/9
Procedureusedinmarketsegmentationincludes(i)Marketing
research,(ii)Dataanalysis(iii)Profilingeachsegment.
Variablesusedforsegmentingindustrialmarketsinclude
macrovariablesandifneeded,microvariables.Sequential
segmentationprocessisoftenused.
Criteriausedforevaluatingmarketsegmentsare(i)sizeand
growth,(ii)Profitability(iii)Competitiveanalysis
(iv)CompanyObjectivesandResources.
Targetmarketstrategiesare(a)ConcentratedorNiche
marketing,(b)Differentiatedmarketing,(c)Undifferentiated
marketingstrategy
Stepsusedfordevelopingpositioningstrategyinclude:
(i)Identifyingattributes/benefits,(ii)Selectingone/more
majorbenefits,(iii)Usingperceptualmappingtechnique,
(iv)Communicatingpositioningstrategy.
IM/7-1/20
CHAPTER 7
PRODUCT STRATEGY &
NEW PRODUCT DEVELOPMENT
Learning Objectives
1. DefineanIndustrialProduct.
2. UnderstandChangesintheproductstrategy.
3. KnowProductLifecycle(PLC)Theoryandits
application.
4. DevelopProductstrategiesforexistingproducts.
5. Understandnewproductdevelopment.
6. Knowimpactoftechnologyandhigh-techmarketing.
7. LearnMarketingofindustrialservices.
IM/7-2/20
DEFINITION AND MEANING OF AN INDUSTRIAL
PRODUCT
Definition :ItsisaphysicalthingaswellasaComplex
setofeconomic,technical,legalandpersonal
relationshipbetweenabuyerandaseller.
Meaning of a Total Product Package :Itincludes

basicproperties(withfundamentalbenefits),enhanced
properties(withtangiblebenefits),andaugmented
properties(withintangiblebenefits).
In a competitive market,businessmarketersmust
understandtargetcustomersperceptionsofatotal
productpackageandofferthesamebetterthan
competitors.
IM/7-3/20
CHANGES IN PRODUCT STRATEGY
Businessmarketersmustunderstandthata
productstrategyisdynamicandflexible.
Itchangesduetochangesin
(i)Customerneeds.
(ii)Technology.
(iii)GovernmentPolicies/Laws.
(iv)ProductLifeCycle.
IM/7-4/20
A General Model of Product Life Cycle (PLC)
In d u s tr y
S a le s
R upees
In d u s tr y
P r o fits
M a tu r ity
D e c lin e
IM/7-5/20
APPLICATION OF PRODUCT LIFE CYCLE
THEORY TO MARKETING STRATEGY
Introduction Stage:MarketingStrategyshould
focusonmarketdevelopmentforslowlyaccepted
products.Forrapidlyacceptedproducts,a
competitivestrategy(CompetitivepricingorSuperior
qualityproduct)shouldbeevolved.
Growth Stage:Totakeadvantageofhighgrowthof
salesandprofits,themarketingstrategyshould
concentrateon(i)Improvingproductdesignor
addingproductfeatures(ii)Improvingdistribution
and(iii)Reducingprice,asincreasedsalesand
productionreducethecosts.
IM/7-6/20
Maturity StageAscompetitionincreases
andprofitsdecline,marketingstrategy
shouldconcentrateon(i)cuttingcosts,(ii)
keepingexistingcustomerssatisfied(iii)
enteringnewmarkets.
Decline StageSincebothsalesandprofits
decline,marketingstrategyshouldfocuson
(i)substantialreductionincosts,(ii)
developasubstituteproduct,(iii)withdraw
theproductslowlyfromthemarket.
IM/7-7/20
PRODUCT STRATEGIES FOR EXISTING

PRODUCTS
Businessmarketersshouldtakethefollowing
steps:
1. Evaluatetheperformanceofexisting
productsbyusingproductevaluationmatrix.
2. Examinetherelativestrengthsand
weaknessesofthecompanysproductsby
usingperceptualmappingtechnique.
3. Decidetheproductstrategies,basedon
aboveanalysis.
IM/7-8/20
PERFORMANCE EVALUATION OF EXISTING
PRODUCTS
Example:AmaterialhandlingCo.
(i)Product=P(PalletTruck)
Last3yearsaverageperformancefiguresare
Industrysalesgrowth=25%,Companysalesgrowth=30%
MarketShare=30%(Dominant),Profitability=Asper
Target.
(ii)Product=S(Stackers)
IndustrySalesgrowth=16%(Stable);CompanySales
Growth=15%(Stakers)
MarketShare=12%(Average);Profitability=BelowTarget.
IM/7-9/20
Product Evaluation Matrix

C o m p a n y S a le s
In d u s tr y
S a le s
M a rk e t
S h a re
D e c lin e
P r o f ita b ility
B e lo w
Ta rg e t
Ta rg e t
S ta b le
Above
Ta rg e t
B e lo w
Ta rg e t
A v e ra g e
M a rg in a l
D o m in a n t
S ta b le
A v e ra g e
M a rg in a l
D o m in a n t
D e c lin e
Above
Ta rg e t
B e lo w
Ta rg e t
Ta rg e t
D o m in a n t
G ro w th
Ta rg e t
G ro w th
A v e ra g e
M a rg in a l
Above
Ta rg e t
PERCEPTUAL MAPPING TECHNIQUE
IM/7-10/20
H ig h P r ic e
B
H ig h
Q u a lity
*A
L o w P r ic e
Low
Q u a lity
IM/7-11/20
FirmAsproductqualityisperceivedtobeaverage
bycustomers,comparedtoitscompetitorsB&C.Firm
Ashouldtrytomovetoanewpositionofsuperior
qualityatareasonable(average)pricetoimproveits
profitability.
DECIDE PRODUCT STRATEGIES
(i)Maintain/Continuetheproductanditsmarketing
strategy.
(ii) Modifytheproduct&changemarketingstrategy.
(iii)Drop/eliminatetheproduct.
(iv)Addnewproduct.
IM/7-12/20
CLASSIFICATION OF NEW PRODUCTS
(i)Products that are new to the world & innovative.
(ii)Products that are new to the company, but not new to
the world.
(iii)Improvements / Revision to the existing products.
(iv)Addition to the existing products.
(v)Repositioning existing products to new market segments
(vi)Products with substantial cost reductions without
reduction in
performance.
NEW PRODUCT DEVELOPMENT PROCESS

It consists of 7 Stages :
(i) Idea generation, (ii) Idea Screening, (iii) Concept
development and testing, (iv) Business analysis, (v) Product
development,
www.a2zmba.com
By Prof.
Havaldar
(vi) Market testing,
& (vii)
Commercialization.
IMPACT OF TECHNOLOGY
IM/7-13/20
Technologicalinnovationscreatenewproducts/servicesthat
arenewtotheworld.Examplesoftheseinnovations,called
breakthroughtechnologyare:
(i) Technological inventions of 1940sofvacuumtube
andamplifiercircuitcreatednewproducts/services like
radio,wirelesstelegraphy,andtelephoneservice.
(ii) Technological inventions of 1950s & 70sof
transistor,integratedcircuit(IC),microprocessorshave
applicationsinnewproductslikeTVsets,movie Cameras,
Computers,Calculators,Mobilephones,
Printersetc.,
(iii) Digital revolutionofinformationtechnologyandthe
internethaveimprovedcompanyandconsumer
capabilities.
IM/7-14/20
TYPES OF MARKETING SITUATIONS.
H ig h
B e tte r
M o u s e tra p
M a r k e tin g
H ig h - t e c h
M a r k e tin g
Low
L o w -te c h
M a r k e tin g
H ig h - f a s h io n
M a r k e tin g
Low
H ig h
T e c h n o lo g ic a l
U n c e r ta in t y
M a r k e t U n c e r ta in t y
IM/7-15/20
MODIFIED TECHNOLOGY ADOPTION
LIFE CYCLE
Thisissuitedtohightechmarketing
D e e p G a p
In n o v a to rs
2 %
34%
13 %
34%
E a r ly
A d o p te rs
T im e o f A d o p t i o n o f I n n o v a t i o n s
16%
L a g g a rd s
IM/7-16/20
HIGH TECH MARKETING STRATEGY
1.
2.
3.
4.
5.
6.
7.
Targetanichemarket.
Planwholeproductproperties.
Developpartnerships.
Uniquepositioningstrategy.
EffectiveCommunicationStrategy
MultiChanneldistributionstrategy.
Skimmingpricingstrategy.
IM/7-17/20
Marketing of Industrial Services
Classifications of Industrial Services
M a t e r i a ls
C o m p o n e n ts
( S t e e l, B a l l B e a r in g s )
P u re
T a n g i b le
P ro d u ct
P e rso n al
C o m p u te rs
M a jo r
P ro d u c t,
M in o r
S e r v ic e
H o t e ls
fo r
C o n fe re n c e s
Equal
P ro d u ct
&
S e r v ic e
G ood
T r a n s p o r ta t i o n
M a jo r
S e r v ic e ,
M in o r
P ro d u ct
P u re
i n t a n g ib l e
s e r v ic e
IM/7-18/20
Unique Characteristics of services and
marketing Implications.
C h a r a c te r is tic s
M a r k e tin g Im p lic a tio n s
1 . In ta n g ib ility
(c a n n o tb e s e e n /
f e lt , b e f o r e b u y in g )
2 . In s e p a r a b ility
( P r o d u c t io n &
c o n s u m p t io n a t th e
s a m e t im e )
3 . V a r ia b ility
( S e r v ic e q u a lit y
v a r ie s )
4 . P e r is h a b ilit y
(C a n n o tb e s to re d )
5 . N o n -o w n e r s h ip
(B u y e ru s e s a
s e r v ic e ,b u t c a n n o t
o w n it)
E x a m p le s
B u y e r s s e e e v id e n c e o f s e r v ic e q u a lit y
S e lle r s t a n g ib ilis e t h e in ta n g ib le
E ffe c t iv e in t e r a c t io n d e p e n d o n s e r v ic e
p r o v id e r s .
R e q u ir e s e ff e c t iv e r e c r u it in g a n d t r a in in g
o f s e r v ic e p r o v id e r s .
U n if o r m q u a lity is d iff ic u lt
F o c u s o n q u a lit y & a u to m a t io n
D e m a n d flu c tu a te s .
U s e m e th o d s to m a tc h d e m a n d &
c a p a c ity .
A d v a n ta g e s o fn o n - o w n e r s h ip :
r e d u c t io n in c o s ts & f le x ib ilit y
M a n a g e m e n t
C o n s u lta n c y & E D P s .
R e p a ir s to m a c h in e s
& C o u r ie r s e r v ic e .
M a n a g e m e n t
e d u c a t io n & m a r k e t in g
re s e a rc h .
A ir lin e s s e a t s &
W a re h o u s e s p a c e .
H o te la n d c a r r e n ta l
s e r v ic e s .
IM/7-19/20
PRODUCT STRATEGYS & NEW PRODUCTS

DEVELOPMENT.
IndustrialProductisaphysicalthingandalsoacomplex
setofeconomic,technical,legalandpersonalrelationship
betweenabuyerandaSeller.
ProductStrategiesarechangedduetochangesin
customersneeds,technology,governmentpoliciesor
laws,andproductlifecycle
Productlifecycle(PLC)conceptisusedtodevelop
marketingstrategiesatdifferentstagesofPLC.
Productstrategiesforexistingproductsaredevelopedby
(i)evaluatingtheperformanceofexistingproducts,using
productevaluationmatrix,(ii)Studyingthestrengthsand
weaknessesofexistingproducts,usingperceptual
mappingtechnique.
IM/7-20/20
Itmeans,decidingifaproductshouldbecontinued,
modified,dropped,orreplaced.
Newproductsareclassifiedintosixgroupsandconsistof
sevenstagesofdevelopmentprocess:-ideageneration,
ideascreening,conceptdevelopment&testing,business
analysis,productdevelopment,markettesting,and
commercialization.
InHightechmarketingsituation,technologyapplication
andmarketneedsaredifficulttopredict.Thetechnology
adoptionlifecycleismodifiedtosuithigh-techmarketing.
Uniquehightechmarketingstrategiesincludetargetinga
nichemarket,planningwholeproduct,developing
partnership,uniquepositioning,effectivecommunication,
multichanneldistributionandSkimmingpricing.
Industrialservicesareclassifiedintovariousgroups,and
includeuniquecharacteristicslikeintangibility,inseparability,
variability,perishability&nonownership.
IM/8-1/14
CHAPTER 8
INDUSTRIAL DISTRIBUTION CHANNELS &
MARKETING LOGISTICS
Learning objectives
1.
2.
3.
4.
5.
6.
Understandalternativechannelstructures.
Knowtypesofindustrialintermediaries.
Understandstepsinvolvedindesigningachannel.
Learnhowtomanagechannelmembers.
Understandconceptsofsupplychainmanagement,
Logistics,andbusinesslogisticssystem.
Learnthetasksofphysicaldistributionandtotal
distributioncost.
Alternative Channel Structures
IM/8-2/14
Industrialchannelstructuresincludebothdirectandindirectchannels.
Direct Channels.
Examplesaredirectsellingthroughcompanysalesforceanddirect
marketingthroughon-linemarketing,telemarketinganddirectmail.
Directchannelsareusedtypicallywhen(i)Transactionvalueislarge,
(ii)Technical&commercialnegotiationsareheldatvariouslevels
(iii)Buyingprocesstakesalongtime(iv)Buyerswanttobuydirectly
frommanufacturers.
Indirect Channels.
Consistsofintermediarieslikedistributors/dealers,manufacturers
reps/agents,value-addedresellers(VARs),brokersandcommission
merchants.
Indirectchannelsaregenerallyusedwhen(i)Valueoftransaction/
salesislow,(ii)Themanufacturersresourcesarelimited,
(iii)Customersaregeographicallydispersed,(iv)Buyerspurchase
manyitemsinonetransaction.
Types of Intermediaries
1.
IM/8-3/14
Industrial Distributors / Dealers.

Theyperformmanyfunctionslikebuying,storing,promoting,
financing,selling,transportingandservicingcertaingeographic
market,&aregivendiscounts.
Majorcategoriesare(i)Generallinedistributors,(ii)Specialized
distributors,and(iii)Combinationhouse.
2.
Manufactures Representatives / Agents.

Theyperformfunctionslikepromotingmanufacturersproducts/
services,gettingorders,andcolletingmarketinformation.Theyare
independentbusinessfirms,representingvariousmanufacturers
whoseproductscomplementoneanotherbutarenotcompetitive.
Theyarepaidcommissiononthevalueofsalesorordersbooked.
Theydonotbuy,storeorfinancetransactions.
IM/8-4/14
3.Value-added Resellers (VARs)
Theyarenewtypeofintermediariesfromcomputerindustry.They
dealwithcomputerhardwareandsoftwarecompanies,customizethe
sametosolvespecificproblemsofbuyingfirms.Theyarepaid
discounts.
4.Brokers
Theybringtogetherbuyersandsellers,wheninformationisnot
availablecompletely.Theyrepresenteitherabuyeroraseller,and
theirrelationshipisshortterm.Theydonotbuyproducts&services
andarepaidoncommissionbasis.
5. Commission Merchants.
Theyrepresentsellers/manufactures,mostlywithbulkcommodities
likerawmaterials,toperformfunctionslikearranginginspection,
transporting,negotiatingandselling.Theyarepaidcommissionon
thevalueofsales.
CHANNEL DESIGN
IM/8-5/14
Itincludesdevelopingnewchannelsandmodifyingtheexisting
channels.
The procedure / steps are as follows;
(i)Developingchannelobjectives;
(ii)Analyzingchannelconstraints;
(iii)Analyzingchanneltasks;
(iv)Identifyingchannelalternatives.Theseincludethefollowingissues:
(a)Typesofintermediaries.
(b)Numberofintermediaries.
(c)Numberofchannels.
(v)Evaluatingthechannelalternatives.Thecriteriausedare:
(a)Economicfactor
(b)Controlfactor
(c)Adaptivefactor
(vi)Selectionofthechannel(s).
IM/8-6/14
MANAGING CHANNEL MEMBERS
It includes :
1.
2.
Selecting Intermediaries.
Motivating Intermediaries.
(a)Partneringrelationships.
(b)Reasonablediscountsandcommission.
(c)Distributorcouncils.
(d)Othermotivationaltools.
3.
4.
Controlling Channel Conflicts

(a)Sourcesofchannelconflicts.
(b)Controllingconflictsby
(i)Effectivecommunicationnetwork;
(ii)Jointgoalsetting;
(iii)Diplomacy;Mediation;Arbitration.
(iv)Verticalmarketingsystem(VMS).
Evaluating Channel Members
IM/8-7/14
Concept of Supply Chain Management (SCM)
SCMincludesactivitiesofmovinggoodsfromrawmaterialthrough
operationstofinalconsumers,asshowninSCMFrameworkbelow.
IM/8-8/14
Main aims of SCMare(i)Reducecostperunit,(ii)

Reducewaste&duplication,(iii)Minimizeorderto
deliverycycle,and(iv)Ensuresuperiordelivery
service.FirmsadoptingSCMgaincompetitive
advantage.
Theaimsareachievedbyanetworkof
interdependentfirmsworkingtogetherwithpartnering
relationshipstomanageandcontrolvariousactivities,
inordertoimproveflowofmaterialsandinformation
fromsupplierstoendusers.
FirmsinvolvedinSCMaresuppliersofrawmaterials
&components,transporters,distributors,material
handling&informationprocessingfirms.
IM/8-9/14
LogisticsManagement(LM)
LMplansandcoordinatesactivitiestoachieve
superior customer service levels at lowest
costs. LM optimizes material flow within the
firm,butSCMextendsintegrationofmaterial
flow to suppliers suppliers and customers
customers. For better understanding, see
figure on business logistics system, which
has two product movement; physical supply
andphysicaldistribution.
Business Logistics System
P h y s ic a l S u p p ly
In d u s tr ia l M a n u fa c tu e r
IM/8-10/14
P h y s ic a l D is tr ib u tio n
(o r M a r k e tin g L o g is tic s )
Marketing Logistics(orPhysicaldistribution)consists
ofdeliveringfinishedproductstointermediariesand
customers.
IM/8-11/14
TASKS OF PHYSICAL DISTRIBUTION (PD)
PD tasks are :
(i)Transportation,(ii)Warehousing,(iii)Inventory
Control,(iv)CustomerService,(v)Packaging,(vi)
MaterialHandling,(vii)OrderProcessing,(viii)
Communication,(ix)Locationsoffactory&Warehouses.
TotalDistributioncostandcustomerserviceare
balancedby
(i)Minimizingtotaldistributioncost,or(ii)Totalsystems
approachthroughmaximizingprofits.
TotalDistributionCost=Transportationcost(Freight)+
Warehousecost+Inventorycost+Costoflostsalesdue
todelayeddelivery.
IM/8-12/14
Afirmmustminimizetotaldistributioncost,insteadof
minimizingindividualcostelements,tobalancecustomer
serviceandtotaldistributioncost.
Anotherapproach,calledtotalsystemsapproachorchannel
integrationfocusesonreturnoninvestment(ROI).Here,a
firmschannelmembersworktogethertoimprovecustomer
service,inordertogethighersalesrevenue.
S a le s R e v e n u e - T o ta lP h y s ic a l D is t r ib u t o r C o s t
C a p ita lIn v e s tm e n t
IM/8-13/14
INDUSTRIAL DISTRIBUTION CHANNELS & MARKETING
LOGISTICS.
1.
2.
3.
Industrialchannelstructuresincludedirectand
indirectchannels.
Typesofindustrialintermediariesare:industrial
distributors/dealers,manufacturersrepresentatives
(oragents),valueaddedresellers(VARs),brokers,
andcommissionmerchants.
Procedureofchanneldesignincludes:developing
channelobjectives,analyzingchannelconstraintsand
tasks,identifyingchannelalternatives,evaluating
alternativesandselectionofthechannel(s).
IM/8-13A/
CUSTOMER SERVICE
Service Quality Gap:Gapbetweenperceived

serviceandexpectedservice.Afirmmayhave
astrategyofgivingsuperiorqualityservice
thancompetitorsandexceedingcustomers
expectations.
Factors that determine service quality by
customers are:
(i)Reliability
(ii)Responsiveness
(iii)Assurance
(iv)Empathy
(v)Tangibles
IM/8-13B/
Strategies followed by successful

customer service firms
(a)Topmanagementcommitment.
(b)Settinghigh-standardsofservice
quality.
(c)Monitoringsystem.
(d)Systematicapproachtoresolving
customercomplaints.
(e)Satisfybothemployeesand
customers.
IM/8-13C/
Developing customer service levels/ standards
Neitherallcustomersnorallproductsneedthesame
levelofservice.Stepsinvolved:
(i)Conductmarketingresearchstudytofindwhich
elementsofcustomerserviceareimportantto
customers.
(ii)Findneeds/expectationsofcustomersin
quantitative standardsfortheserviceelements.
(iii)Getinformationonactualperformanceofthe
companyanditscompetitorsfromcustomers.
(iv)Analysevarianceofactualperformancewith
standards.
(v)Takecorrectiveactionstominimisethevariance.
Outstandingdeliveryservicelevelsareachievedby
integratinglogisticsandthroughsupplychain
management.
IM/8-14/14
4. Managingchannelmembersconsistofselectingand
motivatingintermediaries,controllingchannelconflicts,
andevaluatingchannelmembers.
5. Supplychainmanagement(SCM)includesactivitiesof
movinggoodsfromrawmaterialthroughoperationsto
finalconsumers.Logisticsmanagementoptimizes
materialflowwithinthefirm,butSCMextends
integrationofmaterialflowtosupplierssuppliersand
customerscustomers.
6. Businesslogisticssystemincludesphysicalsupplyand
physicaldistribution(ormarketinglogistics).
7. Tobalancetotaldistributioncostandcustomerservice,
afirmcanuseanyoftheapproaches:(i)Minimizetotal
distributioncost,or(ii)Maximizeprofits(ROI)through
channelintegration.
CHAPTER 9
IM/9-1/12
MANAGING THE PERSONAL

SELLING FUNCTION
Learning Objectives :
1. Understand the role of personal selling in
business marketing.
2. Know the business selling process.
3. Know characteristics of B2B selling , Team
selling approach, solution-oriented effort,
Entrepreneurial Philosophy.
4. Understand management of major and national
accounts.
IM/9-2/12
Role of Personal Selling in Business

Marketing
Personal selling or direct selling through
company sales force plays greater role in business
marketing than consumer marketing
Major roles of personal selling
(i) A part of problems solving capabilities of the
company.
(ii) A part of the companys communication or
promotion mix .
(iii) Gives an effective customer service .
IM/9-3/12
Business Selling Process
No magic formula for making a sale. But chances of

making a sale improves, if the following sales
process is followed.
The major steps in selling process are :
(i) Prospecting. It is searching or identifying
prospective or likely customers from various sources.
(ii) Qualifying . Prospective customers are screened
by qualifying criteria like expected volume, location
& financial strength.
(iii) Preparation / Pre-approach. Sales person should
prepare plan before making sales presentation by
obtaining all relevant information about the customer
and competitors through personal visits and websites.
IM/9-4/12
(iv) Sales Presentation / Approach . Different methods

are used like (AIDAS Approach Attention, Interest,
Desire, Action, Satisfaction), or need satisfaction
method.
(v) Overcoming Objections . Often prospects raise
objections, which are real or practical and
psychological or hidden. These should be answered
satisfactorily by the sales person.
(vi) Closing. Asking for an order or closing the sale is
important. Sales person can use some of the closing
techniques.
(vi) Post - Sales service and Follow-up This includes
delivery, installation, training, payment collection,
warranty service, and rejections /returns.
Characteristics of B2B Selling
IM/9-5/12
1. Promotional strategy focuses more on personal

selling through companys sales force. Hence,
salespersons are active in getting orders.
2. Adverting is used as a support to personal selling.
3. The sales person sells technical and non-technical
products, and uses problem solving approach
4. Typically, it takes a long time to know outcome of
sales efforts.
5. System selling approach is used by some business
marketers, as it is preferred in some large industrial
projects or contracts.
6. Team selling approach is used for major customers
and large value orders.
IM/9-6/12
Team Selling Approach
More companies are using team selling approach

for selling to major and national accounts
(customers) and technically complex products and
services.
Sales team consists of sales representative,
technical support person, inside sales person, and
a senior sales/marketing manager.
Coordination is done by a sales rep, for a major
customer and a national accounts manager for a
national customer.
IM/9-7/12
Solution Oriented Effort
Two major roles of personal selling :

(1) A part of problem-solving capabilities,
(2) A part of communication ( or promotional)
mix.
A sales person is a part of selling firms problemsolving abilities. He should identify and analyse
the buying firms problem. He should then show
how his companys products and services can
solve the buyers problems, better than
competitors. This is called solution-oriented effort
or approach.
IM/9-8/12
Intrapreneurial Philosophy
Intrapreneurship means entrepreneur within
a company.
When sales and marketing persons, who are
employees, behave and act like owners of
the company, they have adopted
entrepreneurial philosophy. Such persons
take initiative, are proactive and creative,
and give superior value to customers.
Firms that follow Intrapreneurial
philosophy show consistently good
performance.
MANAGEMENT OF MAJOR AND

NATIONAL ACCOUNTS
IM/9-9/12
Both major and National accounts (or

customers) have large (sales and profit
potentials). But there is a difference.
S a le s
P o t e n tia l
of
C u s to m e r
L a rg e
M a jo r
A ccount
N a tio n a l
A ccount
S m a ll
D y a d ic
In te r a c tio n
M in o r
A ccount
S im p le
C o m p le x
Complexity of customer
IM/9-10/12
A major account has a large sales (and profit)

potential and is simple to serve or manage, as the
customer has only one unit .
A national account has also a large sales (and
profit Potential), and is complex or difficult to
serve, because operating units re geographically
dispersed. In addition, for small value items
operating units are autonomous, but for large
value items, buying is centralized.
IM/9-11/12
How to Manager Major & National Accounts

Objective. To become the preferred or sole supplier with
adequate profits.
Strategy / plan.
Team selling. For a major customer, the team should
include branch / regional managers, sales representative
and technical support person.
For a national account, the team consists of a national
accounts manager, branch sales representatives, logistics
executive, and technical person.
Relationship marketing. The teams build long-term
collaborative or partnering relationships by using
approaches like financial and social benefits, and structural
ties.
Support from top management and functional executives
should be assured.
IM/9-12/12
Personal selling has a greater role in business marketing
than consumer marketing.
Business selling process consists of prospecting,
qualifying, preparation (or pre-approach), sales
presentation (or approach), overcoming objections,
closing, post-sales service and follow-up.
B 2 B selling characteristics include problem solving,
systems selling and team selling approaches.
Intrepreneurial philosophy results in consistently good
performance.
Management of major and national accounts is done by
team selling, relationship marketing and support from
top management and functional managers.
IM/10-1/10
CHAPTER 10
BUSINESS (INDUSTRIAL)
COMMUNICATION
Learning Objectives :
1. Develop an effective communication
(or promotional) program.
2. Understand the role of advertising
3. Understand the importance of sales
promotion, publicity, public relation
(PR), and direct marketing.
IM/10-2/10
DEVELOPING AN EFFECTIVE
COMMUNICATION / PROMOTIOAL
PROGRAMME FOR BUSINESS MARKETS
The steps involved are :

(i) Decide communication objectives.
(ii) Identify the target audience.
(iii) Decide the promotional budget.
(iv) Develop the message strategy.
(v) Select the media.
(vi) Evaluate the promotions results.
(vii) Integrate the promotions programme.
IM/10-3/10
Promotional Tools and Media in Business Markets
P r o m o tio n a l A d v e r tis in g
T o o ls
P r o m o tio n a l
M e d ia
&
S u p p o r ts
P r i n t M e d ia
B u s in e s s
P u b lic a tio n s
Trade
J o u r n a ls
I n d u s tr ia ls
d ir e c t o r ie s
S a le s
P r o m o tio n
P. R . and
P u b lic ity
D ir e c t
M a r k e tin g
P erso n a l
S e llin g
T rad e sh ow s
E x h ib itio n s
C a ta lo g u e s
S a le s C o n s e n t s
P r o m o tio n a l
n o v e l t i e s ( g if t s )
S e m in a r s
D e m o n s tr a tio n
P r o m o tio n a l
le tte r s
E n te r ta in m e n t
C h a r ita b le
d o n a tio n s
A d o p tin g
v illa g e s
C o m m u n ity
r e la t i o n s
N e w s ite m in
p ress
T e c h n ic a l
a r tic le s in
j o u r n a ls
D ir e c t m a il
T e le m a r k e tin g
O n - l in e
m a r k e tin g
S a le s c a lls
S a le s
p r e s e n ta tio n s
T e a m s e llin g
R e l a t i o n s h ip
m a r k e tin g
IM/10-4/10
ROLE OF ADVERTISING IN BUSINESS MARKETING
While advertising is relatively less important than

personal selling in business marketing, it is used
as support to personal selling. The functions
performed by advertising are
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Creating awareness.
Reaching members of buying center.
Increasing sales efficiency and effectiveness.
Efficient reminder media.
Sales lead generation.
Support channel members.
IM/10-5/10
ADVERTIING MEDIA USED AND SELECTION
CRITERIA
The media generally used for industrial advertising are:

(i) Business Publications.
(ii) Trade journals/ publications Horizontal and Vertical
publications.
(iii) Industrial directories published by government and private
publishers (e.g. Tata Yellow pages).
Criteria used for selection of advertising media are:
(a) Target audience and their media habits.
(b) Promotional objectives and goals.
(c) Expenditure budget, by using the following formula:
=
C o s tp e rp a g e
C ir c u la t io n in t h o u s a n d
IM/10-6/10
IMPORTANCE OF SALES PROMOTION

Sales promotion consists of short-term incentive
tools to stimulate greater or faster purchase of a
product / service by business customers.
Some of the business promotion tools are :
Trade shows (or exhibitions), sales contests,
promotional novelties (or specialty
advertising, or gifts), seminars, catalogues,
promotional letters, demonstration, and
entertainment. Some of the frequently used tools
are trade shows, sales contests, catalogues,
demonstrations, and promotional novelties (gifts).
IM/10-7/10
IMPORTANCE / ROLE OF DIRECT MARKETING (DM)
Definition Direct marketing is an interactive marketing system that
seeks a measurable response and /or transaction. Direct marketing is
also referred to as direct response marketing.
Benefits For business marketers, benefits of DM are many : Can
personalise / customise communication messages, builds a continues
relationship with each customer, can measure responses from
alternative media, and direct relationship marketing company strategy
less visible to competitors.
Main Channels or tools of DM. Direct mail, telemarketing and online marketing. In addition, kiosk marketing and catalog marketing are
also DM channels, but are less popular in India.
Direct mail is not only paper based postal service or courier service,
but can be fax mail, e-mail, or voice mail. Direct marketers send not
only letters, but also audio and videotapes, CDs, and diskettes.
Response rate is about 2%.
IM/10-8/11
Telemarketing uses telephone to contact existing
customers, to attract new customers, or to take orders.
Telemarketing gives immediate feedback, identifies and
qualifies prospects, and reduces sales force travel costs.
Both inbound (incoming calls from prospects / customers)
and outbound (out going calls) are important. Practice,
training, pleasant voices and right timing (late morning to
afternoon) are needed for effective telemarketing.
On-Line Marketing can be done by establishing an
electronic presence (by opening own website or buying
space on a commercial on-line service), placing ads online, and using e-mail. A web site should be attractive on
first view and interesting enough to encourage repeat
visits. Marketers use on-line marketing to find, reach,
communicate and sell to business customers.
IM/10-9/11
Major Benefits to marketers are: Lower costs,

relationship building and quick adjustments to changing
market conditions. Major Benefits for buyers are:
convenience, information availability, and less hassle.
Although small & medium size marketers can reach
global markets at affordable costs, there is chaos and
clutter as the internet offers millions of web sites, and
also as concerns on security and privacy
IM/10-10/11
ROLE OF PUBLICITY & PUBLIC RELATIONS

(PR)
Public Relations (PR) performs certain tasks to promote or
protect a companys image or its products. The tasks / functions
performed by PR are: press relations, corporate communication,
lobbying, and counseling. PR department deals with various
categories of people like press, legislators, Govt. officials,
public, employees, suppliers, customers, and hence it tends to
neglect marketing objectives.
Publicity or Marketing Public Relations (MPR) has more
credibility and lower cost compared to advertising, MPR
includes placing technical articles from the companys technical
persons in trade journals, business magazines, and / or news
papers. MPR should be planned with advertising and should be
given larger budget allocation
Summary of Chapter 10
IM/10-11/11
Steps involved in developing an effective communication programme for

business markets are (i) decide communication objectives, (ii) identify the
target audience, (iii) decide the promotional budget, (iv) develop the
message strategy, (v) select the media, (vi)evaluate the promotions
results, (vii) integrate the promotional Programme.
Advertising is used in business marketing mainly as a support to personal

selling.
Media used for industrial advertising are: business publications, trade
journals / Publications, and industrial directories.
Sales promotion consists of short term incentive tools to stimulate
greater or faster purchase of a product / service by business customers.
Direct marketing and publicity ( also called as marketing public relations
MPR) have important roles. However, public relations (PR) tends to
neglect marketing objectives, since it has to deal with several category of
people.
IM/11-1/29
CHAPTER 11
INDUSTRIAL (BUSINESS) PRICING STRATEGIES &
POLICIES
Learning Objectives
1. Understandthespecialmeaningofprice.
2. Knowthefactorsthatinfluencepricing
decisions,i.e.pricedeterminants.
3. Understandpricingstrategiesfordifferent
product/marketsituations.
4. Examinethepricingpoliciesforvarious
typesofcustomers.
5. Understandtheroleofleasing.
IM/11-2/ 29
SPECIAL
MEANING OF PRICE
SomebusinesscustomersfollowValue-based
pricingbyevaluating,suppliersofferingsbasedon
theconceptofthesuppliersofferingequaltothe
differencebetweentheperceptionofvalue(or
benefits)andthecosttothebuyingfirm.Theseare
value buyers,andmarketersshouldattemptto
havevalueaddedrelationship,ifsuppliershave
purchasingorientations.
Perception of valueinvalue-basedpricingismade
upofseveralelementslikecustomersperceptionsof
productquality/performance,reliabledelivery,
warranty/after-salesservice,reputationofthe
supplier,etcwhichareenhancedandaugmented
properties.
IM/11-3/ 29
Costtothebuyingfirmincludesbasic Price,
freight,transitinsurance,installation,risksof
productfailure,delayeddelivery,etc,
Somecustomersareprice buyers.
Marketers,shouldfollowtransactional
relationships&offerbasicproperties.
Someotherbuyersareloyal buyers,for
whommarketersshouldfollowrelationship
marketingwithpartnering/collaborative
approachandmutuallyacceptableprices.
IM/11-4/ 29
F R A M E W O R K O F P R IC IN G D E C IS IO N S
B e fo re ta k in g p ric in g
d e c is io n s , a b u y in g firm m u s t
fin d " p ric e d e te rm in a n ts " .
( i.e . f a c to r s th a t in f lu e n c e
p ric in g d e c is io n s )
(i) P ric in g o b je c tiv e s

(ii) C u s to m e r a n a ly s is
(iii) C o s t a n a ly s is
(iv ) C o m p e tito rs ' a n a ly s is
(v ) G o v t. r e g u la tio n / p o lic ie s
IM/11-5/ 29
T w o ty p e s o f p ric in g d e c is io n s .
P ric in g s tra te g ie s
P ric in g p o lic ie s
D is c o u n ts
G e o g ra p h ic a l
p ric in g
S e ttin g a p ric e
(p ro d u c t / m a rk e t
s itu a tio n s )
In itia tin g a
p ric e c h a n g e
R e s p o n d i n g t o a c o m p e t i t o r 's
p ric e c h a n g e
L e a s in g
IM/11-6/ 29
PRICE DETERMINANTS OR FACTORS INFLUENCING
PRICING DECISIONS
(i)Pricingobjectives,(ii)customeranalysis,(iii)cost
analysis,(iv)competitiveanalysis,(v)Govt.policies.
1. Pricing Objectives
Arederivedfromcorporateandmarketing
objectives.
Someofthepricingobjectivesaresurvival,
maximumshorttermprofits,maximumshort
termsales,maximumsalesgrowth,productquality
leadership,etc.
IM/11-7/ 29
2. Customer (Demand) analysis
Itincludesdemandanalysis&cost-Benefitanalysis
(i)Demand analysis.Usingexperimentalresearch,itmeasures
relationshipbetweenpriceanddemand(orsalesvolume).It
sumsuphowsensitivecustomersaretothepricechanges.The
formulais:
% c h a n g e in q u a n tity d e m a n d e d
% C h a n g e in p r ic e
If PED is > 1, demand is elastic, & customers are price

sensitive
If PED is < 1, demand is inelastic, customers are less
sensitive to prices.
IM/11-8/ 29
(ii)Cost Benefit Analysis
Necessarytoknowtargetcustomersperceptionsofbenefits(or
value)andcosts.
Benefitsarecategorizedintohard (or tangible) benefitslike
quality,productionrate,performance,etc.andsoft (or intangible)
benefitslikecustomerservice,companyreputation,warranty
period,etc.
Cost includesprice,dutiesandtaxes,freight,installation,
maintenance.
3. Cost Analysis.
Afirmstotalcostofaproductisthelowestpointontheprice
range.Hence,forpricingdecisions,themarketermustknowthe
varioustypesofcostslikefixed,variable,total,direct,etc.fora
product/service.
Costsvarybasedonproductioncapacity(i.e.economiesofscale),
andaccumulatedexperience(i.e.learningcurve)asshown.
C o st
p er
U n it
E c o n o m ie s o f S c a le
IM/11-9/ 29
Q u a n tity P r o d u c e d p e r y e a r
C o st
p er
U n it
E x p e r ie n c e /
L e a r n in g
C u rv e.
A v . C o s t R e d u c tio n
= 1 0 -3 0 %
A c c u m u la te d P r o d u c tio n
IM/11-10/ 29
B r e a k - E v e n A n a ly s is is u s e fu l to c o n s id e r d iff e r e n t
p ric e s (P 1 , P 2 , P 3 ), a n d its e ffe c t o n s a le s re v e n u e a n d p ro fits .
S a le s R e v e n u e a t P 3
S a le s
&
C o s ts
T o ta l C o s t
F ix e d C o s t
S a le s V o lu m e
IM/11-11/ 29
4. Analyzing Competition
ManymarketershavecompetitivelevelPricingasa
pricingobjective.
MarketersshouldgetCompetitorsprices,discounts,
costs,productquality,service,etcforcost/benefit
analysis,pricingandpositioningstrategy.
Competitorsinformationcanbeobtainedfromvarious
sources.
5. Government Regulation/Policies
Govt.regulationsarenecessarytoensurefairplayand
toprotectconsumersandsmallscalesuppliers.
Price-fixing/pricecartels,pricediscrimination(e.g.
differentdiscountstodistributors/dealers),andpredatory
pricing(e.g.dominantfirmaimingtofinishcompetitors)
arenotpermitted(illegalasperMRTPact,forexample)
PRICING STRATEGIES
IM/11-12/ 29
Pricingstrategiesvaryasperproduct-market
situationssuchas(i)Competitivebiddingin
competitivemarkets,(ii)Newproductpricing,
(iii)Pricingacrossproductlife-cycle.
(i) Competitive Bidding
Inbusinessmarkets,largevolumeof
purchasingisdonethroughcompetitive
bidding,usingeitherclosed(orsealed)bidding
oropen(ornegotiated)biddingmethod.
IM/11-13/ 29
Inclosed bidding,oftenusedbytheGovt.
buyer,sealedbidsareinvitedthrough
newspapertendernotices.Sealedbidsare
openedinpresencesofsuppliersandorders
areplacedonthelowestpricebidder(s).
Inopen bidding,afterreceivingbids
(quotations),thebuyernegotiatestechnical
andcommercialpartswithsuppliers,and
thenplacesorders.Thismethodisoften
followedbycommercialenterprisesinprivate
sector.
IM/11-14/ 29
Strategy / Model Used for Competitive Bidding
Oneoftheoftenusedstrategiesis
Probabilistic Bidding,whichmakestwo
assumptions:
(i)Pricingobjectiveisprofitmaximizations,
(ii)Lowestpricebidderwillgettheorder.
Equation used:E(A)=P(A)xT(A),where
A=Bidprice,E(A)=Expectedprofitatbidprice
A,P(A)=Probabilityofwinning(orgetting
order)atthebidpriceA,T(A)=profit,ifbid
priceAisaccepted.
IM/11-15/ 29
An Application (example) of probabilistic Bidding Strategy
B id
P r ic e
( R s) (A )
T o ta l C o st
P e r U n it
(R s) (C )
C o m p e tito r 's
L ast Ten d er
P r ic e
(R s) (B )
450
350
360
0 .0 0
100
430
350
360
0 .1 5
80
1 2 .0 0
410
350
360
0 .4 0
60
2 4 .0 0
400
350
360
0 .5 0
50
2 5 .0 0
380
350
360
0 .7 2
30
2 1 .6 0
360
350
360
0 .9 0
10
0 9 .0 0
340
350
360
0 .9 5
(1 0 )
( 9 .5 0 )
330
350
360
1 .0 0
(2 0 )
( 2 0 .0 0 )
P r o fit (R s )
T (A ) =
(A ) - (C )
Rs.60corerstenderfromDept.ofTelecomm.(DOT)forundergroundcablejointingkits.The
companyghostedRs.400/-perkit(expectedmaximumprofit).Tenderopeningrevealed,itwas
L4.L1wasRs.330/-,L2=350,L3=Rs380/-ThecompanyestimatesofBandP(A)wereincorrect.
IM/11-16/ 29
(ii) New Product Pricing Strategy

Intheintroductionstageofanewproduct,two
alternativepricingstrategiesareavailable
(i)Skimming(highinitialprice)strategy,and
(ii)Penetration(lowinitialprice)strategy.
Skimming Strategyisappropriateforanewproduct
thatisdistinct,hightech,orcapitalintensive,and
purchasedbyamarketsegmentthatisnotsensitiveto
theinitialhighprice.The advantageisfasterrecovery
ofinvestmentbygeneratinglargerprofits.The
disadvantageisthatitattractscompetitorsduetohigh
profits.Thefirmreducespricesaftersometimetoreach
othersegments.
IM/11-17/ 29
Penetration strategyisappropriatewhen(i)buyersare
highlypricesensitive,(ii)strongthreatexistsfrompotential
competitors(duetolowentrybarrier).Thesellingfirms
objectiveistoachievelongtermprofitsthroughhigh
marketshare.Thefirmcanalsoachievecost leadership
thrueconomiesofscaleandexperiencecurve,whichgives
competitiveadvantage.
(iii) Pricing Across Product Life Cycle (PLC)

Marketingandpricingstrategiesvaryastheproductmoves
across4stagesofPLC.
(a)Introduction stage.Wehavediscussedpricingstrategy
inthisstageearlierinpricinganewproduct.
(b)Growth stage.Thefirmlowersthepricestoattractthe
nextlayerofpricesensitivebuyers.Alsomoresuppliers
enterthemarketandbuyingfirmsputpressureonthe
existingsupplierstolowerprices.
IM/11-18/ 29
(c)Maturity stage.Thefirmmaycutthepricestomatch
aggressivecompetitorspricesbygivingvolume
discounts,absorbingfreightcosts,ormorecredit.If
industrialcustomersdocost-benefitanalysis,aselling
firmmayincreasepricesornotmakeanychangein
pricesduetoitssuperiorproductquality.
(d)Decline stage.Pricingstrategyvariesdependingon
conditions.(i)Ifbuyersperceptionsaboutthefirms
qualityofproduct/serviceisgood,thenthepriceneed
notbelowered,butcostsshouldbereducedtoearn
profits,(ii)ifthequalityofproduct/serviceisequalof
lowerthancompetitors,afirmmaycutprices,to
increasesalesvolumeabovebreakevenvolume,(iii)
ifsomecompetitorshavewithdrawn,afirmmay
selectivelyincreasepricestolesspricesensitive
segments.
Initiating price changes
IM/11-19/ 29
Ifafirmisamarketleaderandwantstochangethe
price,itmustanticipatereactionsfromcustomersand
competitors.
Thefirmmuststudy major competitorsobjectives,
financialsituations,productioncapacityutilizations,
sales,costs,andprofits.Itmustalsounderstand
competitorsmind-set,bystudyingtheirbusiness
philosophy(orconcepts),culture,beliefsandpast
behaviors.Basedonaboveanalysisthefirmshould
predictcompetitorsresponse.
Thefirmmustalsounderstandthatcustomers
generallyprefersmallpriceincreasesseveraltimes,
ratherthanonesharpincrease.Ofcourse,customers
wouldgenerallywelcomepricecuts.
IM/11-20/ 29
Responding to competitors price changes
Amarketershouldrespondafteransweringthe
followingquestions.
(i)Whythecompetitorhaschangedtheprice?
(ii)Isthepricechangetemporaryorpermanent?
(iii)Whatwillhappentothecompanyssalesand
profits, ifitdoesnotrespond.
(iv)Whatwouldbethereactionsofothercompetitors.
Theresponsescanbeinseveralways:
(a)maintainpriceandvalue(benefits),(b)match
competitorsprice,(c)developandlaunchlow-price
productitem,(d)maintainprice.Therightresponse
dependsonthebusinesssituationsfacedbythefirm.
PRICING POLICIES
IM/11-21/ 29
Purpose.Afirmevolvespricingpoliciestoadjustbasicprices
(orpricelist)fordifferenttypesofcustomers(likeOEMs,
users,anddealers)whobuyvariousquantitiesandare
locatedatdifferentlocations.Thepricelistisadjustedwith
differenttypesofdiscountsandallowances.
Price listisastatementofbasicpricesofaproduct,having
varioussizes/specifications.
Net price=pricelist(orlist-price)lessdiscount(or
allowances).Businessbuyersaremoreinterestedinnet
price
Types of discounts:Trade,quantity(orvolume),andcash.
Trade discounts.Itisofferedtotradersorintermediaries
(dealers/distributors/stockiest)anditshouldbeequaland
sufficient(asperindustrynormsorfunctionsperformed).e.g.
pricelist(100)tradediscount(15)=netprice(85)
IM/11-22/ 29
Volume / Quantity discounts.Here,theobjectiveistoencouragecustomersto
buylargerquantities,whichwouldreducethecostsofselling,inventory
carryingandtransportation.Thequantity(orvolume)discountsaregiveneither
onsingleordersoveraperiod,usuallyoneyear(cumulativebasis).For
example,
S iz e o f e a c h
P u rch ase ord er
or
Y e a r ly T o ta l
P u rch ase
% Q u a n tity
D isc o u n t
L e s s t h a n 5 n o s .,
or
L e s s t h a n R s . 5 ,0 0 0
N il
5 - 1 0 n o s .,
or
R s . 5 ,0 0 0 - 1 0 ,0 0 0
u p to 3
1 1 - 1 5 n o s .,
or
R s . 1 0 ,0 0 0 - 1 5 ,0 0 0
u p to 6
> 1 5 n o s .,
or
> R s . 1 5 ,0 0 0
u p to 1 0
Above discounts are applicable for all types of customers

OEMs, users, and dealers / distributors.
IM/11-23/ 29
Cash Discounts.Theobjectiveistogetprompt
payments.Ifacreditcustomerpaysthebillbefore
dispatchorwithin7-daysofdispatch,thecustomeris
givencashdiscountonthegrossamountofbill.The
extentofcashdiscountdependsonthebankrateof
interest.Givecashdiscountsthrucreditnotesand
thecheques,insteadofincludingitinthebills.
Geographical Pricing
Itincludesdecisionsonhowtopricethecompanys
productstocustomerslocatedindifferentgeographic
areas.Therearetwoalternatives:
IM/11-24/ 29
(i) Ex Factory Pricing.Itmeanspricesquotedare
basedonthepricesatthefactorygate,i.e.freight
(transportationcosts)andtransitinsurancecostsaretothe
customersaccounts.Hence,thelandedprice(orcosts)to
customersvarydependingontheirgeographiclocations.
(ii) F.O.R. Destination Pricing.Here,thequotedprices
includefreightcosts.Transitinsuranceisasmallamountto
becoveredbythecustomersopeninsurancepolicy.
Hence,allcustomersgettheproductalmostatthesame
price,despitedifferentgeographiclocations.Marketeradds
theaveragefreightcosttothebasicpricesandthen
preparesthepricelist,orabsorbsthefreightcost,if
competitiondemands.
Taxes and Duties.Knowledgeofexciseduty,salestax,
octroi,entrytax,roadpermitsetcisessentialforsales
andmarketingpersons,sincetheyhaveanimpactonthe
landedprice(orcosts)tobusinessbuyers.
ROLE OF LEASING.
IM/11-25/ 29
Businessbuyershaveoptionsofeitherleasingor
buyingcapitalitemslikemachinery.The advantages
forthelessee(assetuser)are:(i)conservingcapital,
(ii)gainingtaxadvantages,(iii)gettingthelatest
products.Thelessor(assetowner)oftenearnsgood
incomefrombuyingfirmswhocannotaffordoutright
purchase.
A leaseisacontract(oranagreement)bywhichthe
assetowner(lessor)givestherighttousetheasset
toanotherparty(lessee)inreturnforpayment,overa
specifiedperiod.
IM/11-26/ 29
Types of Leases:
(i)Financial(orfullpayment)leases,
and(ii)operating(serviceorrental)leases
Financial leases.Thesearefull
payment,non-cancellable,long-term
contractsandfullyamortised(sumoflease
>
paymentspurchasepriceofcapitalitem)
IM/11-27/ 29
Operating Leasesareservice/rentalleases,thatare
cancellable,short-termcontractsoragreements,and
arenotfullyamortised.Theratesarehigherthan
thoseoffinancialleases,becauseriskof
obsolescenceareofthelessor
Pricing Strategy
Itisbasedonthefirmsmarketingandpricing
objectives.Threepossiblealternativesare:
(i)Decideleaseratetofavorleasing
(ii)Decideleaseratetofavoroutrightpurchase
(iii)Achievebalancebetweenleaserate&salerate.
Somebusinessmarketingfirmshaverepresentatives
forgivingfinancialconsultancyservicestobuying
firmsonleasingorbuying.
IM/11-28/ 29
Inbusinessmarketing,pricehasaspecial
meaning.Forvaluebuyers,valuebasedpricing
isappropriate.
Factorsthatinfluencepricingdecisions(orprice
determinants)are:(i)pricingobjectives,(ii)
customeranalysis,(iii)competitionanalysis,(iv)
costanalysis(v)government
regulations/policies
Pricingstrategiesfordifferentproduct-market
situationsare:(a)competitivebiddingin
competitivemarkets,(b)newproductpricing(c)
pricingacrossproductlifecycle.
IM/11-29/ 29
Initiatingpricechangesandrespondingto
competitorspricechangesarealsopartsof
pricingstrategies
Pricingpoliciesincludeadjustmentofbasic
prices(orpricelist)withdifferenttypesof
discountslikevolume,trade,andcash,aswell
asgeographicalpricing.
Leasingorbuyingoptionsareavailableto
businessbuyersforcapitalitemslike
machinery.Financialandoperatingaretwo
typesofleases.Pricingstrategiesaremade
eithertofavourleasingoroutrightpurchase,or
balancebetweenleasingandbuying.
IM/12-1/19
CHAPTER 12
STRATEGIC PLANNING, IMPLEMENTING, AND
CONTROLLING IN INDUSRIAL MARKETING
Learning Objectives
Understandthecharacteristicsofmarket
orientedorganization.
Knowtheroleofmarketinginstrategicplanning
Examinethestrategicplanningprocessat
businessunitlevel.
Understandpreparationimplementationand
controlofindustrial(orbusiness)marketingplan.
IM/12-2/19
CHARACTERISTICS OF MARKET ORIENTED
ORGANISATIONS
Firmsachievemarketorientationby
managingthefollowingfactors.
(i)Sharedvalues.
(ii)Organizationstructure,policiesand
culture.
(iii)StrategicPlanning.
(iv)Needsorexpectationsofstakeholders.
H ie ra rc h y o f S tra te g ie s
IM/12-3/19
B e fo re u n d e rs ta n d in g th e ro le o f m a rk e tin g in s tra te g ic p la n n in g , w e
s h a ll firs t e x a m in e h ie ra rc h y o f s tra te g ie s .
O r g a n is a tio n a l
L e v e ls
O r g a n is a t io n a l
S tr u c tu re
S tr a te g y h ie r a r c h y
(T y p e o f M a n a g e m e n t)
C o rp o ra te
C o rp o ra te
O ffic e
D iv is io n a l/
B u s in e s s S tra te g y
(S tra te g ic
M a n a g e m e n t)
D iv is io n a l /
B u s in e s s U n it
/SBU
SBU
I
SBU
II
SBU
III
P ro d u c tio n
M a rk e tin g
F in a n c e
F u n c tio n a l
F u n c tio n a l
S tra te g y
(O p e ra tio n s
M a n a g e m e n t)
IM/12-4/19
Theearlierfigureshowshierarchyofstrategiesand
organizationstructureofalargecompany.
Strategic managementgivesadirectiontothefirm
andfocusesondevelopingstrategiestoachieve
longtermobjectives&goals
A Strategic business unit (SBU)consistsofan
independentbusinessorrelatedbusinessthathas
itsowncompetitorsandspecificmarkets.Insome
largecompaniesthereare(product)divisionsand
eachdivisionhasadivisionalplan.EachSBUis
headedbyamanagerwhoisresponsiblefor
strategicplanningandperformanceoftheSBU.
Operational Managementmaintainsthedirection
givenbystrategicmanagement,andconcentrates
onday-to-dayissuesofcosts,revenueandprofits.
IM/12-5/19
ROLE OF MARKETING IN STRATEGIC PLANNING IN

A FIRM
C om pany
L evel
F o rm a l
N am e
C o rp o rte
C o rp o rte
M a rk e tin g
R o le o f M a rk e tin g
T o g iv e in fo rm a tio n o n m a rk e ts a n d
to e n s u re c u s to m e r o rie n ta tio n , fo r
c o r p o ra te s tra te g y d e v e lo p m e n t.
l N
ev
L
y
an
p
m
o
C
r ealR o
o
F
am
a rk
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te C
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o
rteT en
iv fo
g
rco
su
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rm
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etsn
ark
, an
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ark etin
M
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erag
m
tcso
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p
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co
t. tio
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D
tra eg
icstan rateg
lsfo clu
,in
y
p p
rev
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o
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etiv
tlv M
eU
sin
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B
ark etin
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ad sito
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lp esh
ev
d
rt- m
o
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ark
g
al M
cito
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F
erk etin
g
an
gm
l an
rp
sto
d
rcel rateg
u
,colin
y
. d
, an
ato
in
d
D iv is io n a l /
B u s in e s s
U n it le v e l
S tra te g ic
M a rk e tin g
F u n c tio n a l
M a rk e tin g
M anagem ent
T o c a rr y o u t c u s to m e r & c o m p e titio n
a n a ly s is , f o r d e v e lo p in g b u s in e s s
s tra te g y , in c lu d in g c o m p e titiv e
a d v a n ta g e , s e g m e n tin g , ta rg e tin g , a n d
p o s itio n in g s tra te g ie s .
T o d e v e lo p s h o rt - te rm m a rk e tin g
p la n a n d s tra te g y , c o o rd in a tio n , a n d
re s o u rc e a llo c a tio n .
IM/12-6/19
STRATEGIC PLANNING PROCESS AT CORPORATE

LEVEL
Themajorstepsinvolvedare
1.
Decidingcorporatemissionandobjectives.
2.
Establishingstrategicbusinessunits(SBUs.)
3.
AllocationofresourcestoSBUs.
4.
Developingcorporatestrategies.
ALLOCATION OF RESOURCES TO SBUs.
Twowidelyusedmodels/toolsare:(i)Boston
Consultinggroup(BCG)model,calledGrowth
sharematrix,(ii)Generalelectric(GE)model,
calledBusinessScreenmatrix.
BCG Model : Growth Share Matrix IM/12-7/19
R a p id
Q u e s tio n m a r k s
8
C ash C ow
S lo w
M a rk e t G ro w th R a te
S ta r s
Dogs
2
L a rg e
S m a ll
R e la tiv e M a r k e t S h a r e
IM/12-8/19
GE Model : Business Screen Matrix
B u s in e s s S tr e n g th
H ig h
M e d iu m
Low
S e le c tiv ity /
E a r n in g s
H ig h
M e d iu m
Low
IM/12-9/19
Major Business Strength factors:

Marketshare,productquality,unitcosts,
R&Dperformance,brandreputation,share
growth.
Major Market Attractiveness factors:
Overallmarketsize,annualmarketgrowth
rate,historicprofitmargin,competitive
intensity,technologicalrequirements.
DEVELOPING CORPORATE STRATEGIES
Strategic planning gap.Itisthegapbetween

future(5years)desiredsalesandthe
projectedsales(ofallSBUs)ofacompany.
D e s ir e d S a le s
A
S a le s
IM/12-10/19
S tr a te g ic
P la n n in g g a p
B
C
P r o je c t e d S a le s
T im e (Y e a rs )
IM/12-11/19
Thestrategicplanninggapcanbefilledbythree
alternativestrategies:(A)Diversificationgrowth,(B)
Integrativegrowth,(C)Intensivegrowth
(C) Intensive Growth Strategy.Corporatemanagement

shouldfirstreviewexistingbusiness,usingAnsoffs
product-marketexpansiongrid,shownhereafter:
C u rre n t P ro d u c ts
N e w P ro d u c ts
C u rre n t
M a rk e ts
M a rk e t P e n e tra tio n
S tra te g y
P ro d u c t d e v e lo p m e n t
S tra te g y
N ew
M a rk e ts
M a rk e t d e v e lo p m e n t
S tra te g y
( D iv e rs ific a tio n
S tra te g y )
IM/12-12/19
(B)Integrative Growth Strategy

includesincreaseinafirmssalesand
profitsbyintegratingbackward,forward,or
horizontallywithinthatindustry.
(A)Diversification growth strategyis
consideredwhen(B)&(C)strategiesare
inadequatetoachievedesiredgrowthand
alsogoodopportunitiesarefoundoutside
thepresentbusinesses.
IM/12-13/19
STRATEGIC PLANNING PROCESS AT BUSINESS

UNIT LEVEL
Thefollowingstepsarefollowedbythebusinessunit
head.
1.
Definingthebusinessunitsmission.
2.
Scanningtheexternalenvironment(O.T.Analysis)
3.
Analyzingtheinternalenvironment(S.W.Analysis)
4.
Developingobjectivesandgoals.
5.
Formulatingstrategies(Seehereafter)
6.
Preparingprogrammeoractionplan.
7.
Implementingstrategiesandactionplan.
8.
Feedbackandcontrol.
IM/12-14/19
* PORTERS Generic Strategies
for Business unit
Framework
L o w - c o s t p o s itio n
In d u s try
w id e
O v e ra ll c o s t
le a d e rs h ip
D iffe re n tia tio n
P a rtic u la r
s e g m e n t o n ly
Focus
Marketing Planning Process
IM/12-15/19
Theheadofmarketingpreparesthemarketingplan
(short-termuptooneyear)aftergoingthrough
MarketingPlanningProcess,whichincludesthe
followingsteps:
(i)Analyzingmarketingopportunities.
(ii)Segmentingandselectingtargetmarketsegments.
(iii)Developingmarketingstrategies.
(iv)Implementingandcontrollingthemarketingplan.
Theheadofmarketingnowpreparesthewrithen
document,calledmarketingplan,withthefollowing
steps.
IM/12-16/19
Business ( Industrial ) Marketing
Plan
Situationalanalysis.Market,competitive,product,
andmacroenvironmentalanalysis.
2.
SWOTandIssuesanalysis
3.
MarketingObjectivesandgoals
4.
MarketingStrategy.Selectionoftargetmarket
segments,positioning,marketingmix,customer
serviceandmarketingresearch.
5.
Actionplans/Tactics
6.
MarketingBudget
7.
Implementationandcontrol.Buildingmarketing
organizationandcontrolprocess.
8. Contingencyplan.
1.
IM/12-17/19
IMPLEMENTATION OF MARKETING PLAN
Itisaprocessthatturnsmarketingplansintoactionplans
andensuresthatthetasksoractivitiesofactionplanare
executedinasmannerthatachievesthemarketing
objectivesandgoals.Forthisthenecessaryorganization
structureandpeopleareselected.Marketingresource
management(MRM)softwarewillhelpmarketersto
improvetheirdecisions,andalsoinimplementationand
controls.
Control Processincludes(a)settinggoals,(b)measuring
actualperformance,(c)comparinggoalsandactual
performance,(d)analyzingcausesofdeviations,ifany(e)
takingcorrectiveactions,ifneeded.
Types of controls:(i)Strategiccontrol,(ii)annualplan
control(iii)efficiencycontrol,(iv)profitabilitycontrol.
IM/12-18/19
Marketingorientationisachievedbyfirmsby
managingsharedvalues,organizationstructure,
policiesandcultures,strategicplanning,needsand
expectationsofstakeholders.
Beforeunderstandingtheroleofmarketingin
strategicplanning,itisnecessarytoexamine
hierarchyofstrategies.
Majorroleofmarketingisatbusinessunitand
functionallevels,andlessatcorporatelevel.
Strategicplanningprocessatcorporatelevel
includescorporatemission&objectives,
establishingandallocationofresourcestoSBUs
anddevelopingcorporatestrategies.
IM/12-19/19
StrategicplanningprocessatSBUslevel
includesmission,SWOTanalysis,objectives
andgoals,strategies,actionplan,
implementationandcontrol.
Themarketingheadshouldgothrough
marketingplanningprocess,beforepreparing
themarketingplan.
Implementationandcontrolofmarketingplan
areimportantforachievementofmarketing
objectivesandgoals.

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Product Evaluation Matrix

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