Industrial Marketing - Hawaldar 1

8/3/2019 Industrial Marketing - Hawaldar 1

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www.a2zmba.com By Prof. Havaldar

H A P T E R 1H A P T E R 1 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 andservices are called “Derived demand” ?

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(A) What is Industrial (Business) marketing?

§ It is marketing of products / Services to

business firms.§ In contrast consumer marketing is marketing

products / services to individuals &households.

§

(B) What is the difference between industrialmarketing, B2B marketing, Businessmarketing & Organizational Marketing?

No Difference!(C) What are the differences between

Industrial & Consumer Marketing?

§ Basic tasks of marketing are same differenceExists in the characteristics shown next.

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AREAS / CHARCTERISTICS IND MARKETS CONSUMER MATKETS

Market GEO Concentrated

Few Buyers

GEO Disbursed

Large no. Of Buyers

(Mass

Markets

Products Technically Complex

Customized

Non – Technical

Standardized

Service Very Important Somewhat important

Buyer Behavior Various Functional

specialists involvedMainly Rational buying

decisions.

Interpersonal

relationship between

buyers and sellers.

Family members involved

Physiological /Psychological Social need

based buying decisions

Non – Personal

Relationship.

Channel More direct

Multi Channel

Indirect

Few Channels with many

layers

Promotional Importance to personal

selling

Importance to Advertising.

Pricing Competitive bidding /

Negotiated prices

MRP

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(D) Why Industrial Demand is called

“Derived Demand” ?

§ Because Industrial demand is derived from (ordepends on) demand for consumer goods /

services.

§ E.G. Steel is demanded for production of consumer durable products like Cars &

Refrigerators, which are demanded byhousehold consumers. Hence, Demand forSteel is derived from forecast of consumerdemand for Cars, Refrigerators, WashingMachines, Etc.,

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SUMMARY OF CHAPTER-1

§ Industrial / Business Marketing ismarketing of products / services tobusiness firms.

§

§ Differences between Industrial &Consumer marketing are seen in areas /Characteristics like Market, Product,Buyer Behavior, Channel, Promotion &

Price.§

§ Industrial Demand is derived from

demand for consumer goods / services.

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CHAPTER 2 UNDERSTANDING INDUSTRIAL

MARKETS AND ENVIRONMENT

LEARNING OBJECTIVES

Understand the types of industrial customers as

well as industrial goods and services.Know the marketing implications for different

types of customers and products.

Understand the purchasing orientations and

practices of industrial customers.Know types of environment and strategies to

manage external environment.

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http://slidepdf.com/reader/full/industrial-marketing-hawaldar-1 7/165www.a2zmba.com By Prof. Havaldar

(A) What are the types/classifications of Industrial/Business customers?I N T E R M E D I A R I E S /

M I D D L E M E N ( D I S T R I B U T O R

O E M S

U S E R S

P U B L I C S E C T O RU N I T S ( B H E L )

G O V T . U N D E R T A K I N G S( R A I L W A Y S , D E F E N C E U N I T

P U B L I C I N S T I T U T I O N S( G O V T . H O S P I T A L S )

P R I V A T E I N S T I T U T I O 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 I N GU N I T S ( S U G A R , M I L K )

N O N - M A N U F A C T U R I N GU N I T S ( B A N K S , H O U S I N G )

C O M M E R C I A LE N T E R P R I S E S

G O V E R N M E N TC U S T O M E R S

I N S T I T U T I O N A LC U S T O M E R S

C O - O P E R A T I V ES O C I E T I E S

I N D U S T R I A L /B U S I N E S SC U S T O M E R S

F I G . T Y P E S O F I N D U S T R I A L / B U S I N E S S

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(C) Marketing Implications for different types

of products & customers?i. For Materials & Parts, Direct selling is done

to large OEMs (Original EquipmentManufacturers) and users, but indirect

selling through industrial distributors /dealers becomes cost effective for smallervolume OEMs and users.

ii.For Capital items, Direct selling throughcompany sales force is common, with

extensive interactions on technical &commercial factors.

iii.For Supplies Industrial distributors / dealersare mostly used but for marketing of services, word-of-mouth plays an

important marketing role, with quality &

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(D) Purchasing Orientations of BusinessBuyers

Business buyers/ Industrial customers follow one of the

three purchasing orientations: (i) Buying, (ii) Procurement, or (iii) Supply chain

Management. (i) Buying Orientation: The firm with buying

orientation follows the practice of (a) selectinglowest price supplier, (b) gaining power oversuppliers and (c) avoiding risk of buying from newsuppliers. It has a Short-term focus.

(ii) Procurement Orientation : The purchasingfirm with procurement orientation has a long-termfocus. It achieves the objectives of quality

improvement and cost reductions by following thepractices of (a) collaborative relationship with majorsuppliers and (b) working closely with otherfunctional areas in the company.

(iii) Supply chain Management Orientation :Here, the firm focuses on improving the value chain

from raw materials to end users. This is achieved by(a) delivering superior value to end users, (b)

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(E) Purchasing Practices of Different Typesof Industrial / Business Customers

(i) Purchasing in commercial enterprises

Involve Technical & Commercial depts.

Major Tasks / Procedure: identifying, negotiating,selecting suppliers, building relationship.

Purchasing to improve operational efficiency &contribute to firm’s competitive advantage.

(ii) Purchasing in Govt. units

DGS&D agency finalizes rate contracts for standardproducts for Govt. units.

Main Tasks / Procedure : Registration of the firm & itsProducts, Tender Advertisements, no negotiation in “Open” tenders, negotiations done in closed / limitedtenders.

Orders Finalised on lowest bidders (suppliersoffering Lowest prices / Landed Costs)

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(iii) Purchasing in Institutions

If the Institute is a Govt. Hospital Purchasingpractices of Govt. units Followed

Similarly a private School / College followspractices of commercial enterprises

However, better to study each majorinstitution.

(iv) Purchasing in cooperative societies

Similar to Institutional purchase.

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(E) Types & Analysis of Environment

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A I R & W A T E R P O L L U T I O N

S O L I D W A S T E D I S P O S A L

C O N S E R V I N G N A T U R A L R

W A T E R , P O W E R , T R A N S P

C O M P A N Y L O C A T I O N , I M A

R & D & P R O D U C T I O N F A C

E C O L O G I C A L

P H Y S I C A L

I N T E R N A L( S & W A N A L Y S I S )

M I C R O( A F F E C T S AP A R T I C U L A RF I R M )

E N V I R O N M E N T

L O W - C O S T , S K I L L E D M A N

H R & F I N A N C I A L R E S O U R

M A R K E T I N G E F F E C T I V E N E

C U S T O M E R S &

S U P P L I E R S

E C O N O M I C

T E C H N O L O G I C A

G O V T . , P O L I T I C

C U L T U R A L & S O

P U B L I C - P R E S SH O L D E R S , I N V E

P U B L I C I N T E R E

E X T E R N A L( O & T A N A L Y S I S )

M A C R O( A F F E C T SA L L F I R M S )




(F) Strategies for Managing ChangingExternal

Environment.(i) Independent Strategies.(ii) Cooperative Strategies.

(iii) Strategic Planning. It Aims at keepingthe firm consistently successful in changing

marketing environment by marketoriented strategic management.

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SUMMARY OF CHAPTER - 2Types /Classifications of Industrial/ Business

Customers are (i) Commercial Enterprises, (ii) Government (iii) Institutional, (iv) Cooperative societies.

Industrial Products/Services are classified into

(i) Materials & Parts, (ii) Capital Items, (iii) Suppliers &

Services.

Marketing strategies differ for different product &

Customer types.

Industrial / business Buyers follow one of the three

purchasing orientations : buying, procurement, or

supply chain management.

Purchasing practices vary for different types of

customers. It is important to understand it for eachma or customer.

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CHAPTER – 3

THE NATURE OF INDUSTRIAL

BUYING AND BUYING BEHAVIOUR

Learning Objectives

Understand Organizational buying objectives.Gain knowledge of buying activities, including

different phases in buying decision process,

types of buying situations; buygrid

framework & its analysis.

Identify members of buying centers.

Understand organizational buying behavior.

Know how industrial buyers choose and

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PURCHASING OBJECTIVES OF FIRMS

Reliability in delivery.

Consistent product Quality.

Lowest price (If delivery & Quality objectives

are met)

Excellent pre & post – sales services.

Long – Term collaborative relationship.

Industrial buyers try to achieveorganizational purchasing objectives &

personal objectives like higher status, job

security, salary increments, promotions &

social relationships.

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Industrial Buying Decision

Process Marketers must study this for developing

effective marketing strategy.

In Consumer Marketing, Household /

Individual consumer / Buyer makes buyingdecisions based on certain mental stages like

(i) Problem (Need) Recognition,

(ii) Information Search (iii) Evaluation

(iv) Purchase decision (v) Post PurchaseBehavior

In Industrial Marketing, Buying Decision

making process is observable, involving

many people in buying firm & includes

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(A) PHASES IN INDUSTRIAL BUYINGDECISION MAKING PROCESS /

BUYPHASESPHASE –1 :- Recognising A problem / need.

PHASE – 2 :- Determining Characteristics &Quantity of needed product /

Service*.PHASE – 3 :- Developing specifications of theproduct*.

PHASE – 4 :- Searching & Qualifying Suppliers.

PHASE – 5 :- Obtaining & Analyzing suppliers’

offers*PHASE – 6 :- Evaluating & Selecting Suppliers. (shown on next slide)

PHASE – 7 :- Selecting an order routine

PHASE – 8 :- Post – Purchase evaluation

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A SUPPLIER EVALUATION SYSTEM.ATTRIBUTE/FACTOR

WEIGHT/IMPORTANCE

SUPPLIER’SPERFORMANCE

SUPPLIER’SRATINGSCORE

PRICE 15 0.5 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

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(B) Buying Situations / Buyclasses3 Common types of purchases / buying situationsi. New Task / New Purchase :

Here, buyers have limited knowledge andexperience of the new product/service. Hence,more information is obtained, more people areinvolved, risks are more, and decisions take longer

time.ii. Modified Rebuy / Change in supplier :

This situation occurs when the firm is not satisfiedwith the performance of existing suppliers, orthere is a change in product specs. Hence, the

need for searching alternate suppliers.iii. Straight Rebuy / Repeat purchase :

Here, the buying firm places repeat orders onsuppliers who are currently supplying certainproducts/services. Such decisions are routine,with less risks and less information needs, and canbe taken by junior executives.

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(C) Buygrid Framework

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BUYPHASES BUYCLASSES

New Task ModifiedRebuy

StraightRebuy

1. Problem Recognition Yes May Be No

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




BUYGRID FRAMEWORK ANALYSIS

All Phases are Applicable for a New Task.

Some Phases are Applicable for modified /

Straight Rebury.

New task situation is most difficult since buyershave less knowledge, no experience & more

people involved.

Modified Rebury is not difficult situation since it

has few activities.Straight rebury situation is handled routinely,

as repeat purchases are made.

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(D) Buying Center roles & key members.

Roles of Buying center members areInitiators. First recognize problem / need. Any

individual in buying firm – often, users.

Buyers. Carry out purchase activities. They arepurchase officers / executives.

User. Any person who uses the product / service.Influencers. Influence buying decision. Technical

people are often key influencers.Deciders. Make buying decisions. Senior executives

are deciders for high value & complex products. For

straight rebuy / routine purchase, junior purchaseofficer can decide.

Gatekeepers. They control / filter information &meetings with buying center members. Often, P.A. /

Junior person attached to purchase head is the

gatekeeper.

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(E) Identifying key members of buyingcentre

Sales / Marketing persons must identifyimportant members of buying centre.

Buying centre consists of individuals and groupswho take part in buying decision making process,have common objectives & share common risks.

It is also called purchase committee, buyingcommittee or decision making unit.

Members of buying centre are (i) Technical persons.Represent

design,production/operations,

maintenance, Q.C., Industrial Engg. Depts. (ii) Purchasers / Buyers. Purchase /

Materials dept. persons. (iii) Accounts / Finance persons.

(iv) Marketing persons

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(F) Organizational buying behavior

Industrial / business buyers are influenced by

many factors. Two most important factors are(i) Organizational factors / task –oriented objectives, like best productquality, lowest price, dependable delivery.

(i) Personal factors / Non-task oriented objectives, such as goodincrements, promotion, Job security, personalfavors.

When suppliers’ offers are similar, buyers cansatisfy organizational objectives from anysupplier. Hence, personal factors becomeimportant.

However, when suppliers’ offers differ

substantially, buyers give importance to

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Many models have been developed to explain

organizational buying behavior. One of the

comprehensive models is the Sheth model,

described below.

The Sheth model of industrial buyer

behavior, shown below , focuses on (i)Psychological aspects of individual buyers

(Component 1), (ii) Conditions causing joint

decision making (Component 2), (iii) Conflict

among those involved in decision process &resolution of conflict

(Component 3).

Situational factors include economic

conditions, labour disputes, mergers &

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F i g . : T H E S H E T H M O D E L

C o m p o n e n t ( 1 )C o m p o n e n t ( 2 )C o m p o n e n t ( 3 )S i t u a t i o

D i f f e r e n c e s a m o n gi n d i v i d u a l b u y e r sc a u s e d b y f a c t o r s :

B a c k g r o u n d o f i n d i v i d u a l s ( E d u c a t i o n ,

r o l e & l i f e s t y l e ) .T h e i r i n f o r m a t i o ns o u r c e s .A c t i v e S e a r c hP e r c e p t u a l D i s t o r t i o n

S a t i s f a c t i o n w i t hp a s t p u r c h a s e s

V a r i a b l e s t h a t D e t e r m i n ei f b u y i n g d e c i s i o n i sa u t o n o m o u s o r j o i n t :A ) P r o d u c t S p e c i f i cF a c t o r s :

T i m e P r e s s u r eP e r c e i v e d R i s kT y p e o f P u r c h a s e

B ) C o m p a n y S p e c i f i cF a c t o r s :

C o m p a n y S i z eC o m p a n y O r i e n t a t i o nD e g r e e o f C e n t r a l i s a t i o n

M e t h o d s u s e d f oc o n f l i c t r e s o l u t i oi n j o i n t - d e c i s i o nm a k i n g p r o c e s s

P r o b l e m S o l v i n gP e r s u a s i o nB a r g a i n i n gP o l i t i c k i n g

S u p p l i e rB r a n d C




E n v i r o n m e n t a l V a r i a b l e s

P h y s i c a l , T e c h n o l o g i c a l

E c o n o m i c , C u l t u r a l

P o l i t i c a l a n d L e g a l

L a b o u r u n i o n sC u s t o m e r d e m a n d s

C o m p e t i t i v e p r a c t i c e s

S u p p l i e r i n f o r m a t i o n

W E B S T E R A N D W I N D M O D E L

O r g a n i s a t i o n V a r i a b l e s

O b j e c t i v e s a n d g o a l s

O r g a n i s a t i o n S t r u c t u r e

P u r c h a s i n g P o l i c i e s / P r o c e d u r e s

E v a l u a t i o n & r e w a r d s y s t e m s

D e g r e e o f d e c e n t r a l i s a t i o n

B u y i n g C e n t r e V a r i a b l e s

A u t h o r i t y , S i z e

K e y i n f l u e n c e r s

I n t e r p e r s o n a l r e l a t i o n s h i p

C o m m u n i c a t i o n

O r g a n i s a t i o n B u y i n g D e c i s i o n s

C h o i c e o f S u p p l i e r s

D e l a y d e c i s i o n & g e t m o r e i n f o r m a t i o n

M a k e , L e a s e o r b u y

D o n o t b u y

I n d i v i d u a l V a r i a b l e s

P e r s o n a l G o a l s , V a l u e s

E d u c a t i o n , E x p e r i e n c e

E x p e r t i s e , J o b P o s i t i o n

L i f e s t y l e , I n c o m e

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CUSTOMER SERVICE Important Customer Service Elements. Carry

out market survey to understand which of thefollowing elements of customer service areimportant to customers, what service levels areexpected by customers, the service levels

offered by the firm and its competitors. (i) Pre – Sales Service :Advising,

Informing, Problem solving (ii) During – Sales Service : Product

availability,on–time delivery, order cycle time, andinformation.

(iii) Post – Sales Service :Warranty,AMC, Repair, Installation & Training.

Develo su erior service acka e.

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SUMMARY OF CHAPTER - 3

Industrial marketers should understand thatbusiness buyers try to achieve both

organizational & personal objectives.

Industrial buying decision process consists of eightsteps / stages (buyphases) & three types of

buying situations (buyclasses).Buygrid model combines buyphases & buyclasses.

Marketers must understand roles & key members of buying centre, including key buying influencers.

Many factors influence organizational buyingbehavior, but major factors are organizational ( ortask – oriented ) objectives and personal (non –task oriented ) objectives.

The Sheth model of industrial buyer behavior is

comprehensive, focusing of psychological & joint–

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CHAPTER - 4




CHAPTER - 4

BUYER SELLER RELATIONSHIP

LEARNING OBJECTIVES :

Understand buyer sales rep. interactions.

Types/range of relationships between buyer& seller firms.

Customer relationship management

(CRM) / relationship marketing.Methods used to influence industrial

customers.

Special dealings between buyer & seller.

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INDUSTRIAL BUYER-SALES REP.

INTERACTIONSDepend on their perceptions, behavior & roles.

Buyers have two major perceptions of sales

reps.

(i) Stereotype – talkative, manipulative,excitable

(ii) Reputation of sales rep’s company.

Buyer Behavior towards sales rep depends on

organizational needs / objectives, buyingcentre interactions and personal needs.

Buyers are not always rational / logical in

buying decisions.

Role / behavior of sales rep. depends on his

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BUYER-SELLER DYADIC INTERACTION

FRAMEWORK A Conceptual Framework by Dr. Sheth

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•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.

C o m p a t i b l e

C o n t e n t

I n c o m p a t i b l eC o n t e n t

I d e a l / S u c c e s s f u l

T r a n s a c t i o n

I n e f f i c i e n t

T r a n s a c t i o n

I n e f f i c i e n tT r a n s a c t i o n

N oT r a n s a c t i o n

C o m p a t i b l e S t y l eI n c o m p a t i b l e S




TYPES / RANGE OF RELATIONSHIP

BETWEEN BUYER & SELLER FIRMSWhen buyer (or customer) and seller (orsupplier) firms do business, they have thefollowing types and range of business /working relationships / exchanges.

Each business relationship is an exchange

process of obtaining a desired product /service by offering something of value isreturn.

T r a n s a c t i o n a lR e l a t i o n s h i p

V a l u e - A d d e dR e l a t i o n s h i p

P a r t n e r i n g /C o l l a b o r a t i v eR e l a t i o n s h i p

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TRANSACTIONAL RELATIONSHIP is typicallyone time exchange of a product / service,

with lowest price / economy and necessity asmain factors. Some customers prefer it whenmany suppliers are available in a stablemarket. They switch purchases from onesupplier to another. Marketers also choose

least profitable customers for transactionalrelationships.

VALUE – ADDED RELATIONSHIPS /

EXCHANGES.

Here the focus is to understand customerneeds and meet those needs better thancompetitors, to get maximum business share.

These customers have medium sales and profit“

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COLLABORATIVE/ PARTNERINGRELATIONSHIPS.

The focus is to build strong social, economic,

service and technical ties between customer

and supplier firms in order to achieve mutual

benefits. The criteria used for selecting business

customers for partnering relationships are

technological contributions, mutual

dependence, “supply chain management”

orientations, and high sales & profit

potentials.

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CUSTOMER RELATIONSHIP MANAGEMENT(CRM) / RELATIONSHIP MARKETING (RM)

Conceptually same, methods / techniques toachieve objectives are different.

Both CRM & RM aim at partnering /collaborative long-term relationships formutual benefits of both parties.

CRM’S objectives are to improve customerloyalty and there by, company’s profitability.For this, marketing strategy is firstdeveloped, then investment is made insoftware system to gather data / information

on each valued customer, and the same ismade available to all employees to givesuperior customer service.

RM aims at building relationships with keycustomers, distributors, and suppliers. This is

done through financial and social benefits,

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METHODS USED TO INFLUENCE

INDUSTRIAL CUSTOMERS Major methods : Sales presentation and

Negotiation

Sales Presentations: For effective sales

presentation, a sales person should follow someguidelines :

i. Plan and collect information before salespresentation.

ii. Identify customer needs and satisfy thembetter than competitors.

iii.Use “AIDAS” theory or any other theory of selling (Attention, Interest, Desire, Action,

Satisfaction)

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NEGOTIATION : For negotiation withcustomers use

“I win, you win” or “win win” style, withfollowing guidelines : a. Build an environment of trust &

understanding. b. Identify the problem areas. c. Both sides work together, pooling ideas,

information,and resources.

d. Regular frequency of concessions are

important and notthe size of concessions.

e. Be responsive to corrections, if needed. f. Avoid legalistic approach. g. Be polite and humble.

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SPECIAL DEALINGS BETWEENBUYER & SELLER

RECIPROCITY. It means buying a product /service from a customer and selling aproduct / service to a supplier. It occurs whenproducts are similar and price competition isless. Generally, both purchase managers and

sales managers dislike. In practice, theprocedure becomes complex. It should bekept at minimum level.

DEALING WITH CUSTOMERS’ CUSTOMERS

With coordination and planning, a businessmarketer can promote its products tocustomers’ customer, if a need arises.

E.G. Aircraft engine manufactures promote

their engines to Air lines (aircraft buyers), inaddition to aircraft manufacturers.

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SUMMARY OF CHAPTER - 4BUYER – SELLER RELATIONSHIP

Industrial buyer and sales rep.’s interactions dependon their perceptions, behavior, & roles.

Interaction between two persons (buyer & seller) iscalled Dyadic, with various types of transactions, asper Dr. Sheth’s framework.

Buyer and seller firms have various types and range of relationships: transactional, value added andpartnering / collaborative.

Customer relationship management (CRM) andrelationship management (RM) are conceptually

same. Both aim at collaborative / partnering long –term relationship for mutual benefits of both parties.

Sales promotion and negotiation are the majormethods used to influence industrial buyers.

Reciprocity and dealing with customers’ customers are

the special dealings between a buyer & a seller.

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SCOPE OF INDUSTRIAL

MARKETING RESEARCH Scope is vast. Some of theareas are :

i. Market share analysis .ii. National and Geographical area-wisemarket potential.

iii. Competitors’ analysis.

iv. New product acceptance and

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MARKETING RESEARCH PROCESS

STEPS INVOLVED ARE :1.Identify the problem / opportunity and

state research objectives .

2.Develop research design /methodology.

3.Collect data / information.

4.Process and analyze the data.

5.Prepare research report.

There is no major difference in theprocess or

steps involved in marketing research for

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SYSTEM




SYSTEM

M a r k e t i n g

R e s e a r c h

s t u d i e s

S e c o n d a r y

D a t aS o u r c e

I n d u s t r i a l

M a r k e t i n g

I n t e l l i g e n c e

S y s t e m

D e c i s i o n

S u p p o r tS y s t e m

M a r k e t

R e s p o n c eMark etingRese archstu dies

Seco ndaryD ataSo urce

Indu strialMark etingIntell igenceSys tem

Deci sionSup portSyst em

Mark etRespon ce

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Industrial marketing intelligence system is developed to meet theneeds of industrial marketers for timely and continuous informationfor effective decision making .





SUMMARY OF CHAPTER 5

Industrial marketing research rely moreon exploratory and descriptive (i.e.survey) methods .

The scope of industrial / business

marketing research is vast . There is no major difference in the

process or steps involved in marketingresearch for consumer and industrialmarketing.

Industrial marketing intelligence system isdeveloped to meet the needs of

business marketing for timely and

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NATURE OF INDUSTRIAL




NATURE OF INDUSTRIALMARKETING RESEARCH

1. Business Marketers rely more onSecondary data, and exploratoryresearch (Through expert opinion).

2. Descriptive (or Survey) method is used

more often than experimental andObservation methods, for collectingprimary data.

3. Sample size is small due to small

population.4. Difficult to define sampling unit (or

respondents), since buying decisionsare made by many members of buying

centre.

IM/5-2/6




INDUSTRIAL MARKET SEGMENTATION,TARGET MARKETING AND

POSITIONING

LEARNING OBJECTIVES :1.Know the Procedure followed forsegmenting industrial markets.

2.Identify the Variables (bases) used for

segmenting business markets.3.Evaluate and select the target market

segments and strategies.

4.Develop effective positioning strategies.

IM/6-1/9

PROCEDURE USED IN MARKET




PROCEDURE USED IN MARKETSEGMENTATION

The procedure has 3 steps .

1.Conduct marketing research to

collect data / information on existingand potential buyers, andcompetitors.

2.Carry out data analysis by using

statistical techniques of factor andcluster analysis in order to identifydifferent segments.

3.Profile each segment by its

characteristics like application

IM/6-2/9

VARIABLES (BASES) USED IN/6 3/9




SEGMENTING INDUSTRIAL (BUSINESS)MARKETS

Industrial market segmentation is done firstbased on “Macro Variables” , and thensubdivided into “Micro Variables”, if necessary.

Macro Variables. These segmentationvariables are identified based onindustry/organizational characteristics like.

(i) Type of industry / Type of customer. (ii) Company size / Usage rate. (iii) Customer location / Geographical area. (iv) End-use / Application / Benefits of a

product.

IM/6-3/9

IM/6 4/9




Micro Variables. Macro segments arefurther subdivided into micro –segments’, if needed. Micro Variablesare based on purchasing decisions like

(a) Customer interaction needs,

(b) Organizational capabilities, (c) Purchasing policies, (d) Purchasing criteria, (e) Personal characteristics.

Sequential Segmentation Process.Often, business marketers usemore than one variable to subdivide the

market.

IM/6-4/9

IM/6 5/9




EVALUATING MARKET SEGMENTS Criteria / factors used for evaluating each market

segment are : (i) Size and Growth . (ii) Profitability Analysis . (iii) Competitive Analysis . (iv) Company Objectives and Resources

TARGET – MARKET STRATEGIES

Based on above criteria, business marketer selectsone or more market segments as target segments.

Next , the marketers should decide which of thefollowing broad target market strategies thecompany should adopt

(a) Concentrated or Niche marketing strategy,

(b) Differentiated marketing strategy

IM/6-5/9




PROCEDURE FOR DEVELOPING A

POSITIONING STRATEGY Following steps are involved :(i) Identify which attributes / benefitstarget

customers consider important while buying aproduct / service. This information is obtained

through a market research study . Thevariables considered for differentiating acompany’s product from competing productsare.

(a) Product variables, (b) Service variables, (c) Personal variables, (d) Image variables,

(ii) Select one or more major benefits (or

IM/6-6/9




3Use Perceptual Mapping

Technique. To decide on positioningstrategy, this technique is used, aftergetting customers’ perceptionsthrough marketing research.

4(iv) Communicate Positioning

Strategy. The firm should decide andcommunicate its positioning strategyto target customers, through salesforce, advertising in journals, internet,and trade shows

IM/6-7/9

Excellent




Excellent Product Quality

Strong

CustomerService

Low Product Quality

1.0

0.8

0.6

0.4

0.2

.D

.C

.B- 0.2

- 0.4

- 0.6

- 0.8

- 1.0

1.0 0.8 0.6 0.4 0.2 - 0.2 - 0.4 - 0.6 - 0.8 - 1.0

.A1

A

IM/6-8/9

WeakCustomerService

erceptual MappingTechnique

.






1.Procedure used in market segmentation includes (i)Marketing research, (ii) Data analysis (iii)Profiling each segment.

2.Variables used for segmenting industrial marketsinclude macro variables and if needed, microvariables. Sequential segmentation process is

often used.3.Criteria used for evaluating market segments are (i)

size and growth , (ii) Profitability (iii)Competitive analysis(iv) Company Objectives and Resources.

4. Target market strategies are (a) Concentrated orNiche marketing, (b) Differentiated marketing,(c) Undifferentiated marketing strategy

5.Steps used for developing positioning strategyinclude :

(i) Identifying attributes / benefits, (ii) Selectingone / more ma or benefits, (iii) Usin erce tual

IM/6-9/9




CHAPTER – 7

PRODUCT STRATEGY &NEW PRODUCT DEVELOPMENT

Learning Objectives

1.Define an Industrial Product.2.Understand Changes in the product strategy.

3.Know Product Life cycle (PLC) Theory and itsapplication.

4.Develop Product strategies for existingproducts.

5.Understand new product development.

6.Know impact of technology and high-techmarketing.

7.Learn Marketing of industrial services.

IM/7-1/20

/ /




DEFINITION AND MEANING OF AN

INDUSTRIAL PRODUCTDefinition : Its is a physical thing as well as a

Complex set of economic, technical, legal

and personal relationship between a buyer

and a seller.Meaning of a Total Product Package : It

includes basic properties (with fundamental

benefits), enhanced properties (with

tangible benefits), and augmentedproperties (with intangible benefits).

In a competitive market, business

marketers must understand target

customers’ perceptions of a total product

IM/7-2/20

/ 3/20




CHANGES IN PRODUCT STRATEGY

Business marketers must understandthat a product strategy is dynamic andflexible.

It changes due to changes in (i) Customer needs. (ii) Technology.

(iii) Government Policies / Laws. (iv) Product Life – Cycle.

IM/7-3/20

A General Model of Product Life –IM/7 4/20




Cycle (PLC) IM/7-4/20

R u p e e s

I n d u s t r yS a l e s

I n d u s t r yP r o f i t s

M a t u r i t yD e c l i n e

APPLICATION OF PRODUCT LIFE –IM/7 5/20




CYCLE THEORY TO MARKETINGSTRATEGY

Introduction Stage : Marketing Strategyshould focus on market development forslowly accepted products. For rapidly

accepted products, a competitive strategy(Competitive pricing or Superior qualityproduct ) should be evolved.

Growth Stage :To take advantage of highgrowth of sales and profits, the marketingstrategy should concentrate on (i) Improvingproduct design or adding product features (ii)Improving distribution and (iii) Reducing price,

as increased sales and production reduce the

IM/7-5/20

IM/7 6/20




Maturity Stage As competition

increases and profits decline, marketingstrategy should concentrate on (i)cutting costs, (ii) keeping existingcustomers satisfied (iii) entering new

markets.

Decline StageSince both sales andprofits decline, marketing strategyshould focus on (i) substantialreduction in costs, (ii) develop asubstitute product, (iii) withdraw the

product slowly from the market.

IM/7-6/20

PRODUCT STRATEGIES FOR EXISTINGIM/7 7/20




PRODUCT STRATEGIES FOR EXISTINGPRODUCTS

Business marketers should take thefollowing steps :

1.Evaluate the performance of existingproducts by using “product evaluationmatrix”.

2.Examine the relative strengths and

weaknesses of the company’s productsby using “ perceptual mapping”technique.

3.Decide the product strategies, based onabove anal sis.

IM/7-7/20

PERFORMANCE EVALUATION OF IM/7 8/20




PERFORMANCE EVALUATION OFEXISTING PRODUCTS

Example : A material handling Co. (i) Product = P (Pallet Truck)Last 3 year’s average performance figures are

Industry sales growth = 25%, Company sales

growth = 30%Market Share = 30% (Dominant) , Profitability

= As per Target.

(ii) Product = S (Stackers)Industry Sales growth = 16% (Stable) ;

Company Sales Growth = 15% (Stakers)

Market Share = 12% (Average) ; Profitability =Below Target.

IM/7-8/20

Product Evaluation Matrix IM/7 9/20




Product Evaluation Matrix IM/7-9/20

C o m p a n y S a l e sD e c l i n e S t a b l e G r o w t h

P r o f i t a b i l i t yI n d u s t r yS a l e s

M a r k e tS h a r e

B e l o wT a r g e t

T a r g e tA b o v eT a r g e t



T a r g e t T a r g e tA b o v eT a r g e t

A b o v eT a r g e t

G r o w t h

D o m i n a n t

A v e r a g e

M a r g i n a l

S t a b l e

D e c l i n e

D o m i n a n t

D o m i n a n t

A v e r a g e

A v e r a g e

M a r g i n a l

M a r g i n a l

P

S

PERCEPTUAL MAPPINGIM/7 10/20




TECHNIQUEIM/7-10/20

H i g hQ u a l i t y

H i g h P r i c e

L o w P r i c e

L o wQ u a l i t

* *AA1

B

C

IM/7 11/20




Firm A’s product quality is perceived to be“average” by customers, compared to its

competitors B & C. Firm A should try to move toa new position of superior quality at areasonable (average) price to improve itsprofitability.

DECIDE PRODUCT STRATEGIES

(i) Maintain / Continue the product and its

marketing strategy. (ii) Modify the product & change marketing

strategy. (iii) Drop / eliminate the product. (iv) Add new product.

IM/7-11/20

(iii) Improvements / Revision to the existing products.(iv) Addition to the existing products IM/7 12/20




(iv) Addition to the existing products.

(v) Repositioning existing products to new market

segments

(vi) Products with substantial cost reductions withoutreduction in

performance.

NEW PRODUCT DEVELOPMENT

PROCESSIt consists of 7 Stages :

(i) Idea generation, (ii) Idea Screening, (iii) Concept

development and testing, (iv) Business analysis, (v)

Product development,

(vi) Market testing, & (vii) Commercialization.

IM/7-12/20

IMPACT OF TECHNOLOGY IM/7 13/20




IMPACT OF TECHNOLOGY

Technological innovations create new products /services thatare new to the world. Examples of theseinnovations, called break through technologyare :

(i) Technological inventions of 1940s of vacuum tube and amplifier circuit creatednew products / services like radio, wirelesstelegraphy, and telephone service.

(ii) Technological inventions of 1950s

& 70sof transistor, integrated circuit (IC),microprocessors have applications in newproducts like TV sets, movie Cameras,Computers, Calculators, Mobile phones,Printers etc.,

(iii) Digital revolution of information

IM/7-13/20

IM/7 14/20




TYPES OF MARKETING SITUATIONS.

IM/7-14/20

B e t t e r M o u s e t r a p

M a r k e t i n g

H i g h - t e c hM a r k e t i n g

H i g h - f a s h iM a r k e t i n g

L o w - t e c hM a r k e t i n g

H i g h

L o w

L o w

M a r k e t

H i g h

U n c e r t a i n t y

T e c h n o l o g i c a lU n c e r t a i n t y

MODIFIED TECHNOLOGY ADOPTIONIM/7 15/20




MODIFIED TECHNOLOGY ADOPTIONLIFE CYCLE

This is suited to high–tech marketing

IM/7-15/20

D e e p G a p

I n n o v a t o r s

2 ½ %

1 3 ½ %

E a r l yA d o p t e r s

3 4 %3 4 %

1 6 %

L a g g a r

T i m e o f A d o p t i o n o f

IM/7 16/20




HIGH – TECH MARKETING STRATEGY 1. Target a niche market.

2.Plan whole product properties.

3.Develop partnerships.

4.Unique positioning strategy.

5.Effective Communication Strategy

6.Multi – Channel distribution strategy.

7.Skimming pricing strategy.

IM/7-16/20

Marketing of Industrial ServicesIM/7 17/20




Classifications of IndustrialServices

IM/7-17/20

M a t e r i a l sC o m p o n e n t s

( S t e e l , B a l l B e a r i n g s )

P e r s o n a lC o m p u t e r s

H o t e l sf o r

C o n f e r e n c e s

G o o dT r a n s p o r t a t i o n

P u r eT a n g i b l eP r o d u c t

M a j o rP r o d u c t ,

M i n o rS e r v i c e

E q u a lP r o d u c t

&S e r v i c e

M a j o rS e r v i c e ,

M i n o rP r o d u c t

P u r ei n t a n g

s e r v i

IM/7-18/20




marketing Implications.

IM/7-18/20

C h a r a c t e r i s t i c s M a r k e t i n g I m p l i c a t i o n s E x a m p l e s

1 . I n t a n g i b i l i t y( c a n n o t b e s e e n /

f e l t , b e f o r e b u y i n g )

B u y e r s s e e e v i d e n c e o f s e r v i c e q u a l i t y

S e l l e r s t a n g i b i l i s e t h e i n t a n g i b l e

M a n a g e m e n t

C o n s u l t a n c y & E

2 . I n s e p a r a b i l i t y( P r o d u c t i o n &

c o n s u m p t i o n a t t h es a m e t i m e )

E f f e c t i v e i n t e r a c t i o n d e p e n d o n s e r v i c e

p r o v i d e r s .

R e q u i r e s e f f e c t i v e r e c r u i t i n g a n d t r a i n i n g

o f s e r v i c e p r o v i d e r s .

R e p a i r s t o m a c h i n

& C o u r i e r s e r v i c e

3 . V a r i a b i l i t y( S e r v i c e q u a l i t yv a r i e s )

U n i f o r m q u a l i t y i s d i f f i c u l t

F o c u s o n q u a l i t y & a u t o m a t i o n

M a n a g e m e n t

e d u c a t i o n & m a r k e

r e s e a r c h .

4 . P e r i s h a b i l i t y( C a n n o t b e s t o r e d )

D e m a n d f l u c t u a t e s .U s e m e t h o d s t o m a t c h d e m a n d &

c a p a c i t y .

A i r l i n e s s e a t s &W a r e h o u s e s p a c e

5 . N o n - o w n e r s h i p( B u y e r u s e s a

s e r v i c e , b u t c a n n o to w n i t )

A d v a n t a g e s o f n o n - o w n e r s h i p :

r e d u c t i o n i n c o s t s & f l e x i b i l i t y

H o t e l a n d c a r r e n

s e r v i c e s .

SUMMARY OF CHAPTER 7IM/7-19/20




PRODUCT STRATEGYS & NEW

PRODUCTS DEVELOPMENT.Industrial Product is a physical thing and also a

complex set of economic, technical, legal andpersonal relationship between a buyer and aSeller.

Product Strategies are changed due to changesin customers needs, technology, governmentpolicies or laws, and product life – cycle

Product life cycle (PLC) concept is used todevelop marketing strategies at differentstages of PLC.

Product strategies for existing products aredeveloped by (i) evaluating the performanceof existing products, using “product

evaluation matrix ,” (ii) Studying the

IM/7-19/20

IM/7-20/20




It means, deciding if a product should becontinued, modified, dropped, or replaced.

• New products are classified into six groups andconsist of seven stages of development process :-idea generation, idea screening, conceptdevelopment & testing, business analysis, productdevelopment, market testing, and

commercialization.• In High –tech marketing situation, technology

application and market needs are difficult to predict. The “technology adoption life cycle” is modified tosuit high-tech marketing.

•

Unique high – tech marketing strategiesinclude targeting a niche market, planning wholeproduct, developing partnership, uniquepositioning, effective communication , multi –channel distribution and Skimming pricing.

• Industrial services are classified into variousgroups, and include unique characteristics like

IM/7 20/20

CHAPTER – 8 IM/8-1/14




CHAPTER – 8 INDUSTRIAL DISTRIBUTION CHANNELS

& MARKETING LOGISTICS

Learning objectives

1.Understand alternative channel structures.2.Know types of industrial intermediaries.

3.Understand steps involved in designing achannel.

4.Learn how to manage channel members.5.Understand concepts of supply chain

management, Logistics, and businesslogistics system.

6.Learn the tasks of physical distribution and

IM/8 1/14

Alternative Channel StructuresIM/8-2/14




Industrial channel structures include both direct andindirect channels.

Direct Channels.Examples are direct selling through company sales force

and direct marketing through on-line marketing,telemarketing and direct mail.

Direct channels are used typically when (i) Transaction

value is large, (ii) Technical & commercial negotiationsare held at various levels(iii) Buying process takes a long time (iv) Buyers want tobuy directly from manufacturers.

Indirect Channels.

Consists of intermediaries like distributors / dealers,manufacturer’s reps / agents, value-added resellers(VARs), brokers and commission merchants.

Indirect channels are generally used when (i) Value of

transaction / sales is low, (ii) The manufacturer’s

IM/8 2/14



IM/8-4/14




3. Value-added Resellers (VARs) They are new type of intermediaries from computer

industry. They deal with computer hardware andsoftware companies, customize the same to solvespecific problems of buying firms. They are paiddiscounts.

4. Brokers They bring together buyers and sellers, wheninformation is not available completely. Theyrepresent either a buyer or a seller, and theirrelationship is short term. They do not buy products &services and are paid on commission basis.

5. Commission Merchants. They represent sellers / manufactures, mostly with

bulk commodities like raw materials, to performfunctions like arranging inspection, transporting,

negotiating and selling. They are paid commission onthe value of sales.

IM/8 4/14

CHANNEL DESIGN IM/8-5/14




It includes developing new channels and modifying the

existing channels. The procedure / steps are as follows; (i) Developing channel objectives; (ii) Analyzing channel constraints; (iii) Analyzing channel tasks; (iv) Identifying channel alternatives. These include the

following issues : (a) Types of intermediaries. (b) Number of intermediaries. (c) Number of channels.

(v) Evaluating the channel alternatives. The criteria

used are: (a) Economic factor (b) Control factor (c) Adaptive factor

IM/8 5/14

IM/8-6/14




MANAGING CHANNEL MEMBERSIt includes :1.Selecting Intermediaries.

2.Motivating Intermediaries. (a) Partnering relationships. (b) Reasonable discounts and commission. (c) Distributor councils.

(d) Other motivational tools.

3.Controlling Channel Conflicts (a) Sources of channel conflicts. (b) Controlling conflicts by (i) Effective communication network; (ii) Joint goal – setting; (iii) Diplomacy; Mediation; Arbitration. (iv) Vertical marketing system (VMS). 4. Evaluating Channel Members

IM/8 6/14

Concept of Supply Chain ManagementIM/8-7/14




Concept of Supply Chain Management(SCM) SCM includes activities of moving goods from raw

material through operations to final consumers, as

shown in “SCM Framework” below.

IM/8-8/14




Main aims of SCMare (i) Reduce cost perunit, (ii) Reduce waste & duplication, (iii)Minimize order to delivery cycle, and (iv)Ensure superior delivery service. Firmsadopting SCM gain competitive advantage.

The aims are achieved by a network of interdependent firms working together withpartnering relationships to manage andcontrol various activities, in order toimprove flow of materials and information

from suppliers to end users.Firms involved in SCM are suppliers of raw

materials & components, transporters,distributors, material handling &

information rocessin firms.

IM/8-9/14




Logistics Management (LM)

LM plans and coordinates activitiesto achieve superior customer service

levels at lowest costs. LM optimizes

material flow within the firm,but SCMextends integration of material flow to

suppliers’ suppliers and customers’

customers. For better understanding,

see figure on “ business logistics

system”, which has two product

movement; physical supply and physical

Business Logistics SystemIM/8-10/14




Marketing Logistics (or Physicaldistribution) consists of delivering finishedproducts to intermediaries and customers.

P h y s i c a l S u p p l yI n d u s t r i a l M a n uP h y s i c a

( o r M a r k

IM/8-11/14




TASKS OF PHYSICAL DISTRIBUTION (PD)PD tasks are : (i) Transportation, (ii) Warehousing, (iii)

Inventory Control, (iv) Customer Service, (v)Packaging, (vi) Material Handling, (vii) OrderProcessing, (viii) Communication, (ix) Locationsof factory & Warehouses.

Total Distribution cost and customer service arebalanced by

(i) Minimizing total distribution cost, or (ii) Total

systems approach through maximizing profits.

Total Distribution Cost = Transportation cost(Freight) + Warehouse cost + Inventory cost +Cost of lost sales due to delayed delivery.

IM/8-12/14




A firm must minimize “total distribution cost”,instead of minimizing individual cost

elements, to balance customer service andtotal distribution cost.

Another approach, called “total systemsapproach or channel integration” focuses on“return on investment” (ROI). Here, a firm’schannel members work together to improve“customer service”, in order to get highersales revenue.

=

S a l e s R e v e n u e - T o t a l P h y

C a p i t a l I n v e s t m e n t

SUMMARY OF CHAPTER – 8IM/8-13/14




INDUSTRIAL DISTRIBUTION CHANNELS &MARKETING LOGISTICS.

1.Industrial channel structures include direct andindirect channels.

2. Types of industrial intermediaries are: industrialdistributors / dealers, manufacturers’representatives (or agents), value – addedresellers (VARs), brokers, and commission

merchants.3.Procedure of channel design includes:

developing channel objectives, analyzingchannel constraints and tasks, identifying

channel alternatives, evaluating

IM/8-13A/




CUSTOMER SERVICEService Quality Gap : Gap between

perceived service and expectedservice. A firm may have a strategy of giving superior quality service thancompetitors and exceeding customer’s

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 successfulcustomer service firms

(a) Top management commitment. (b) Setting high-standards of service

quality. (c) Monitoring system. (d) Systematic approach to resolving

customer complaints. (e) Satisfy both employees and

customers .

IM/8-13C/




Developing customer service levels/standards

Neither all customers nor all products needthe same level of service. Steps involved : (i) Conduct marketing research study to

find which elements of customer service areimportant to customers.

(ii) Find needs / expectations of customers in quantitative standards for theservice elements.

(iii) Get information on actual performanceof the company and it’s competitors from

customers. (iv) Analyse variance of actual

performance with standards. (v) Take corrective actions to minimise

the variance.

IM/8-14/14




4. Managing channel members consist of selecting and motivating intermediaries,

controlling channel conflicts, and evaluatingchannel members.

5. Supply chain management (SCM) includesactivities of moving goods from raw materialthrough operations to final consumers.

Logistics management optimizes materialflow within the firm, but SCM extendsintegration of material flow to suppliers’suppliers and customers’ customers.

6. Business logistics system includes physicalsupply and physical distribution (ormarketing logistics).

7. To balance total distribution cost andcustomer service, a firm can use any of the

approaches: (i) Minimize total distribution

IM/9-1/12




CHAPTER 9

MANAGING THE PERSONALSELLING 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 nationalaccounts.

IM/9-2/12




Role of Personal Selling in BusinessMarketing

•Personal selling or direct selling through companysales force plays greater role in businessmarketing than consumer marketing

•Major roles of personal selling

(i) A part of problems – solvingcapabilities of thecompany.

(ii) A part of the company’s communicationor promotion mix .

(iii) Gives an effective customer service .

B i S lli P 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 arescreened by qualifying criteria like expected volume,location & financial strength.

(iii) Preparation / Pre-approach. Sales person should

prepare plan before making sales presentation byobtaining all relevant information about the customer and competitors through personal visits and websites.

IM/9-4/12




(iv) Sales Presentation / Approach. Differentmethods are used like “(AIDAS Approach – Attention,

Interest, Desire, Action, Satisfaction), or “need – satisfaction method’’.

(v) Overcoming Objections . Often prospectsraise 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 theclosing techniques.

(vi) Post - Sales service and Follow-up Thisincludes delivery, installation, training, paymentcollection, warranty service, and rejections /returns.

Characteristics of B2B SellingIM/9-5/12




Characteristics of B2B Selling

1. Promotional strategy focuses more on “ personalselling’’ through company’s 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’’ approach4. 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 largeindustrial 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 andservices.

•Sales team consists of sales representative,technical support person, inside sales person, anda senior sales/marketing manager.

•Coordination is done by a sales rep, for a major customer and a national accounts manager for anational 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 firm’s problem-solving abilities. He should identify and analysethe buying firm’s problem. He should then showhow his company’s products and services cansolve the buyer’s problems, better than

competitors. This is called solution-oriented effortor approach.

IM/9-8/12




Intrapreneurial Philosophy

•Intrapreneurship means entrepreneur withina company.

•When sales and marketing persons, who areemployees, behave and act like owners of

the company, they have adoptedentrepreneurial philosophy. Such personstake initiative, are proactive and creative,and give superior value to customers.

•Firms that follow Intrapreneurial philosophyshow consistently good performance.

MANAGEMENT OF MAJOR ANDIM/9-9/12




MANAGEMENT OF MAJOR ANDNATIONAL ACCOUNTS

•Both major and National accounts (or customers) have large (sales and profit

potentials). But there is a difference.

Complexity of customer

L a r g e

S m a l l

M a j o r A c c o u n t

N a t i o n a lA c c o u n t

D y a d i c

I n t e r a c t i o n

M i n o r

A c c o u n t

S a l e s

P o t e n t i a l

o f

C u s t o m e r

S i m p l e C o m p l e x

IM/9-10/12




•A major account has a large sales (and profit)

potential and is simple to serve or manage, as thecustomer has only one unit .

•A national account has also a large sales (and profitPotential), and is complex or difficult to serve,

because operating units re geographicallydispersed. In addition, for small value itemsoperating units are autonomous, but for largevalue items, buying is centralized.

•

H t M M j & N ti l A tIM/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 shouldinclude branch / regional managers, sales representativeand technical support person.

For a national account, the team consists of a nationalaccounts manager, branch sales representatives, logisticsexecutive, and technical person.

•Relationship marketing. The teams build long-termcollaborative or partnering relationships by using

approaches like financial and social benefits, and structuralties.

•Support from top management and functional executivesshould be assured.

IM/9-12/12





•Personal selling has a greater role in business marketingthan 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 byteam selling, relationship marketing and support fromtop 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 EFFECTIVECOMMUNICATION / 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 promotion’s results.

(vii) Integrate the promotion’s programme.

P ti l T l d M di i B i M k t

IM/10-3/10




Promotional Tools and Media in Business Markets

P r o m o t i o n a l

T o o l sA d v e r t i s i n g

S a l e s

P r o m o t i o n

P . R . a n d

P u b l i c i t y

D i r e c t

M a r k e t i n

P e r s o

S e l l i n

P r i n t M e d i a

B u s i n e s s

P u b l i c a t i o n sT r a d e

J o u r n a l s

I n d u s t r i a l s

d i r e c t o r i e s


M e d i a

&

S u p p o r t s

T r a d e s h o w s

E x h i b i t i o n s

C a t a l o g u e sS a l e s C o n s e n t s


n o v e l t i e s ( g i f t s )

S e m i n a r s

D e m o n s t r a t i o nP r o m o t i o n a l

l e t t e r s

E n t e r t a i n m e n t

C h a r i t a b l e

d o n a t i o n s

A d o p t i n gv i l l a g e s

C o m m u n i t y

r e l a t i o n s

N e w s i t e m i n

p r e s sT e c h n i c a l

a r t i c l e s i n

j o u r n a l s

D i r e c t m a i

T e l e m a r -

k e t i n gO n - l i n e

m a r k e t i n g

S a l e s

S a l e s

p r e s e nT e a m

R e l a t i

m a r k e

ROLE OF ADVERTISING IN BUSINESS MARKETING IM/10-4/10




ROLE OF ADVERTISING IN BUSINESS MARKETING

While advertising is relatively less importantthan personal selling in business marketing, it isused as support to personal selling. The functions

performed by advertising are

(i) Creating awareness.

(ii) Reaching members of buying center.

(iii) Increasing sales efficiency and

effectiveness.(iv) Efficient reminder media.

(v) Sales – lead generation.

(vi) Support channel members.

IM/10-5/10




ADVERTIING MEDIA USED AND SELECTIONCRITERIA

•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 t p e r p a g e

C i r c u l a t i o n i n t h o u s

IM/10-6/10




IMPORTANCE OF SALES PROMOTION

•Sales promotion consists of short-term incentivetools 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 specialtyadvertising, or gifts), seminars, catalogues,

promotional letters, demonstration, andentertainment. Some of the frequently used toolsare 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 isalso referred to as direct response marketing.

•Benefits For business marketers, benefits of DM are many : Can personalise / customise communication messages, builds a continuesrelationship with each customer, can measure responses fromalternative media, and direct relationship marketing company strategyless visible to competitors.

•Main Channels or tools of DM. Direct mail, telemarketing and on-linemarketing. In addition, kiosk marketing and catalog marketing are alsoDM channels, but are less popular in India.

•Direct mailis not only paper based postal service or courier service, but

can be fax mail, e-mail, or voice mail. Direct marketers send not onlyletters, but also audio and videotapes, CDs, and diskettes. Responserate is about 2%.

•

•Telemarketing uses telephone to contact existing IM/10-8/11




Telemarketing uses telephone to contact existingcustomers, 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 toafternoon) are needed for effective telemarketing.

•On-Line Marketing can be done by establishing anelectronic presence (by opening own website or buyingspace on a commercial on-line service), placing ads on-line, and using e-mail. A web site should be attractive on

first view and interesting enough to encourage repeatvisits. Marketers use on-line marketing to find, reach,communicate and sell to business customers.

•

M j B fit t k t L

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 reachglobal markets at affordable costs, there is chaos andclutter as the internet offers millions of web sites, and

also as concerns on security and privacy

ROLE OF PUBLICITY & PUBLIC RELATIONS

IM/10-10/11




ROLE OF PUBLICITY & PUBLIC RELATIONS

(PR)

Public Relations (PR) performs certain tasks to promoteor protect a company’s image or its products. The tasks /functions performed by PR are: press relations, corporatecommunication, lobbying, and counseling. PR department dealswith various categories of people like press, legislators, Govt.

officials, public, employees, suppliers, customers, and hence ittends to neglect marketing objectives.

Publicity or Marketing Public Relations (MPR) hasmore credibility and lower cost compared to advertising, MPR

includes placing technical articles from the company’s technical persons in trade journals, business magazines, and / or news papers. MPR should be planned with advertising and should begiven larger budget allocation

S f Ch t 10

IM/10-11/11




Summary of Chapter – 10•Steps involved in developing an effective communication programme for

business markets are (i) decide communication objectives, (ii) identifythe target audience, (iii) decide the promotional budget, (iv) develop themessage strategy, (v) select the media, (vi)evaluate the promotionsresults, (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 toneglect marketing objectives, since it has to deal with several category of

people.

CHAPTER 11INDUSTRIAL (BUSINESS) PRICING

IM/11-1/29




INDUSTRIAL (BUSINESS) PRICINGSTRATEGIES & POLICIES

Learning Objectives

1.Understand the special meaning of price.

2.Know the factors that influence pricingdecisions, i.e. price determinants.

3.Understand pricing strategies fordifferent product/market situations.

4.Examine the pricing policies for varioustypes of customers.

5 Understand the role of leasing

IM/11-2/ 29




SPECIAL MEANING OF PRICE Some business customers follow “Value-

based pricing” by evaluating, suppliers’offerings based on the concept of thesuppliers offering equal to the differencebetween the perception of value (or

benefits) and the cost to the buying firm. These are “value buyers”, andmarketers should attempt to have valueadded relationship, if suppliers have“purchasing orientations”.

Perception of value in value-basedpricing is made up of several elementslike customers perceptions of productquality / performance, reliable delivery,

warranty / after-sales service, reputation

IM/11-3/ 29




Cost to the buying firm includes basic

Price, freight, transit insurance,installation, risks of product failure,delayed delivery, etc,

Some customers are “price buyers”.

Marketers, should follow transactionalrelationships & offer “basicproperties”.

Some other buyers are “loyal buyers”,for whom marketers should follow“relationship marketing” withpartnering / collaborative approach

and mutually acceptable prices

IM/11-4/ 29




F R A M E W O R K O( i ) P r i c i n g o

( i i ) C u s t o m

( i i i ) C o s t a n

( i v ) C o m p e

( v ) G o v t . r e

B e f o r e t a k i n g p r i c i n

d e c i s i o n s , a b u y i n g f i

f i n d " p r i c e d e t e r m i n a( i . e . f a c t o r s t h a t i n f l u

p r i c i n g d e c i s i o n s )

T w o t y p e s o f p r i c i n g d e c i s i o n sIM/11-5/ 29




P r i c i n g s t r a t e g i e sP r i c i n g p o l i c i e s

S e t t i n g a p r i c e

( p r o d u c t / m a r k e ts i t u a t i o n s )

I n i t i a t i n g a

p r i c 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 r i c e c h a n g e

D i s c o u n t s

G e o g r a p h i c

p r i c i n g

L e a s i n g

PRICE DETERMINANTS OR FACTORSINFLUENCING PRICING DECISIONS

IM/11-6/ 29




INFLUENCING PRICING DECISIONS

(i) Pricing objectives, (ii) customeranalysis, (iii) cost analysis, (iv)competitive analysis, (v) Govt. policies.

1. Pricing Objectives

Are derived from corporate andmarketing objectives.

Some of the pricing objectives aresurvival, maximum short – term profits,maximum short – term sales,maximum sales growth, product

quality leadership etc

IM/11-7/ 29




2. Customer (Demand) analysis It includes demand analysis & cost -

Benefit analysis (i) Demand analysis. Using experimental

research, it measures relationship betweenprice and demand (or sales volume). It sumsup how sensitive customers are to the pricechanges. The formula is:

If PED is > 1, demand is elastic, & customers are pricesensitive

If PED is < 1, demand is inelastic, customers are lesssensitive to prices.

=% c h a n g e i n q u a

% C h a n g e i n p

(ii) Cost – Benefit AnalysisIM/11-8/ 29




Necessary to know target customers’ perceptions of benefits (or value) and costs.

Benefits are categorized into hard (or tangible)benefits like quality, production rate,performance, etc. and soft (or intangible)benefits like customer service, companyreputation, warranty period, etc.

Cost includes price, duties and taxes, freight,installation, maintenance. 3. Cost Analysis.A firm’s total cost of a product is the lowest point

on the price range. Hence, for pricing decisions,the marketer must know the various types of costs like fixed, variable, total, direct, etc. for aproduct / service.

Costs vary based on production capacity (i.e.

economies of scale), and accumulated experience

C o s t

E c o n o m i e s o f S c a lIM/11-9/ 29




C o s t

p e r

U n i t

Q u a n t i t y P r o d u c e d p e r y e a r

C o s t

p e r

U n i t

A c c u m u l a t e d P r o d u c t i o n

E x p e r i e n c e /

L e a r n i n g

C u r v e .A v . C o s t R e d u

= 1 0 - 3 0 %

IM/11-10/ 29

B r e a k - E v e n A n a l y s i si s u s e f u l t o c o n




S a l e s

&

C o s t s

S a l e s V o l u m e

S a l e s R e v

S a l e s R e v

S a l e s R e v

T o t a l C o s tF i x e d C o s

B r e a k - E v e n A n a l y s i si s u s e f u l t o c o n

p r i c e s ( P 1 , P 2 , P 3 ) , a n d i t s

4. Analyzing CompetitionIM/11-11/ 29




Many marketers have “competitive level”Pricing as a pricing objective.

Marketers should get “Competitors’ prices,discounts, costs, product quality, service, etcfor cost/benefit analysis, pricing andpositioning strategy.

Competitors’ information can be obtained fromvarious sources. 5. Government Regulation/Policies

Govt. regulations are necessary to ensure fairplay and to protect consumers and smallscale suppliers.

Price-fixing / price cartels, price discrimination(e.g. different discounts to

distributors/dealers), and predatory pricing

PRICING STRATEGIES

IM/11-12/ 29




PRICING STRATEGIES

Pricing strategies vary as perproduct-market situations such as (i)Competitive bidding in competitivemarkets, (ii) New product pricing, (iii)

Pricing across product life-cycle.

(i) Competitive Bidding

In business markets, large volume of purchasing is done throughcompetitive bidding, using eitherclosed (or sealed) bidding or open (or

negotiated) bidding method

IM/11-13/ 29




In closed bidding, often used by the

Govt. buyer, sealed bids are invitedthrough newspaper tender notices.Sealed bids are opened in presences of suppliers and orders are placed on the

lowest price bidder(s).In open bidding, after receiving bids

(quotations), the buyer negotiatestechnical and commercial parts with

suppliers, and then places orders. Thismethod is often followed bycommercial enterprises in privatesector .

IM/11-14/ 29




Strategy / Model Used for CompetitiveBidding One of the often used strategies is

“Probabilistic Bidding”, which makes twoassumptions :(i) Pricing objective is profit maximizations,

(ii) Lowest price bidder will get the order. Equation used : E (A) = P (A) x T(A), where

A=Bid price, E(A) = Expected profit at bid price‘A’, P(A) = Probability of winning (or getting

order ) at the bid price ‘A’, T(A) = profit, if bidprice ‘A’ is accepted.

An Application (example) of probabilistic BiddingStrategy

IM/11-15/ 29




Rs.60 corers tender from Dept. of Telecomm. (DOT) forunderground cable jointing kits. The company ghosted Rs.400/-per kit (expected maximum profit). Tender opening revealed, itwas L4.L1 was Rs. 330/-, L2=350, L3=Rs 380/- The company

estimates of B and P(A) were incorrect.

B i d

P r i c e( R s ) ( A )

T o t a l C o s t

P e r U n i t( R s ) ( C )

C o m p e t i t o r ' sL a s t T e n d e r

P r i c e( R s ) ( B )

P r o f i t ( R s )

=( A ) - ( C )

T ( A )

4 5 0

4 3 0

4 1 0

3 8 0

3 6 0

3 4 0

3 3 0

4 0 0

3 5 0

3 5 0

3 5 0

3 5 0

3 5 0

3 5 0

3 5 0

3 5 0

3 6 0

3 6 0

3 6 0

3 6 0

3 6 0

3 6 0

3 6 0

3 6 0

0 . 0 0

0 . 1 5

0 . 4 0

0 . 5 0

0 . 7 2

0 . 9 0

0 . 9 5

1 . 0 0

1 0 0

8 0

6 0

5 0

3 0

1 0

( 1 0 )

( 2 0 )

0

1 2 . 0 0

2 4 . 0 0

2 1 . 6 0

0 9 . 0 0

( 9 . 5 0 )

( 2 0 . 0 0 )

2 5 . 0 0

(ii) New Product Pricing Strategy

IM/11-16/ 29




(ii) New Product Pricing Strategy In the introduction stage of a new

product, two alternative pricing strategiesare available(i) Skimming (high initial price) strategy,and(ii) Penetration (low initial price) strategy.

Skimming Strategy is appropriate for

a new product that is distinct, high–tech, orcapital intensive, and purchased by amarket segment that is not sensitive to theinitial high price. The advantage is fasterrecovery of investment by generatinglarger profits. The disadvantage is that it

attracts competitors due to high profits



(c) Maturity stage. The firm may cut the

IM/11-18/ 29




(c) Maturity stage. The firm may cut theprices to match aggressive competitors’ pricesby giving volume discounts, absorbing freightcosts, or more credit. If industrial customers docost - benefit analysis, a selling firm mayincrease prices or not make any change inprices due to its superior product quality.

(d) Decline stage. Pricing strategy variesdepending on conditions. (i) If buyers’perceptions about the firm’s quality of product / service is good, then the price neednot be lowered, but costs should be reduced to

earn profits, (ii) if the quality of product /service is equal of lower than competitors, afirm may cut prices, to increase sales volumeabove break – even volume, (iii) if somecompetitors have withdrawn, a firm may

selectively increase prices to less price –

Initiating price changesIM/11-19/ 29




If a firm is a market leader and wants tochange the price, it must anticipate reactionsfrom customers and competitors.

The firm must ‘study major competitors’ objectives, financial situations, production

capacity utilizations, sales, costs, and profits.It must also understand competitors’ mind-set, by studying their business philosophy (orconcepts), culture, beliefs and pastbehaviors. Based on above analysis the firm

should predict competitor’s response. The firm must also understand that customers

generally prefer small price increases severaltimes, rather than one sharp increase. Of course, customers would generally welcome

price cuts

espon ng to compet tors pr cechanges IM/11-20/ 29




A marketer should respond after answering

the following questions. (i) Why the competitor has changed the

price? (ii) Is the price change temporary or

permanent? (iii) What will happen to the company’s

sales and profits, if it does not respond. (iv) What would be the reactions of other

competitors. The responses can be in several ways: (a) maintain price and value (benefits), (b)

match competitors price, (c) develop and

launch low-price product item (d) maintain

PRICING POLICIES

Purpose A firm evolves pricing policies to

IM/11-21/ 29




Purpose. A firm evolves pricing policies toadjust basic prices (or price list) for different

types of customers (like OEMs, users, anddealers) who buy various quantities and arelocated at different locations. The price list isadjusted with different types of discounts andallowances.

Price list is a statement of basic prices of aproduct, having various sizes/specifications.

Net price = price list (or list-price) lessdiscount (or allowances). Business buyers aremore interested in net price

Types of discounts : Trade, quantity (orvolume), and cash.

Trade discounts. It is offered to traders orintermediaries (dealers / distributors / stockiest )

and it should be equal and sufficient (as per



Cash Discounts The objective is to get

IM/11-23/ 29




Cash Discounts. The objective is to getprompt payments. If a credit customer pays

the bill before dispatch or within 7-days of dispatch, the customer is given cashdiscount on the gross amount of bill. Theextent of cash discount depends on the bankrate of interest. Give cash discounts thru’

credit notes and the cheques, instead of including it in the bills.

Geographical Pricing It includes decisions on how to price the

company’s products to customers located indifferent geographic areas. There are two

alternatives :



ROLE OF LEASING.

IM/11-25/ 29




ROLE OF LEASING. Business buyers have options of either

leasing or buying capital items like machinery.The advantagesfor the lessee (asset user) are: (i) conserving capital, (ii) gaining taxadvantages, (iii) getting the latest products.

The lessor (asset owner) often earns goodincome from buying firms who can not affordoutright purchase.

A lease is a contract (or an agreement) bywhich the asset owner (lessor) gives the rightto use the asset to another party (lessee) inreturn for payment, over a specified period.

Types of Leases :

IM/11-26/ 29




Types of Leases : (i) Financial (or full – payment) leases,

and (ii) operating (service or rental) leases

Financial leases. These are full –payment, non - cancellable, long - termcontracts and fully amortised (sum of leasepayments purchase price of capital item)

>

Operating Leases are service/rental

IM/11-27/ 29




Operating Leases are service/rentalleases, that are cancellable, short-term

contracts or agreements, and are not fullyamortised. The rates are higher than those of financial leases, because risk of obsolescenceare of the lessor

Pricing Strategy It is based on the firm’s marketing and

pricing objectives. Three possible alternativesare :

(i) Decide lease rate to favor leasing

(ii) Decide lease rate to favor outrightpurchase

(iii) Achieve balance between lease rate& sale rate. Some business marketing firmshave representatives for giving financial

S O C

IM/11-28/ 29




SUMMARY OF CHAPTER – 11

In business marketing, price has aspecial

meaning. For value buyers, valuebased pricing is appropriate.

Factors that influence pricing decisions(or price determinants) are: (i) pricingobjectives, (ii) customer analysis, (iii)competition analysis, (iv) cost analysis

(v) government regulations/policiesPricing strategies for different product-

market situations are: (a) competitivebidding in competitive markets, (b)

new product pricing (c) pricing across



CHAPTER – 12IM/12-1/19




STRATEGIC PLANNING,

IMPLEMENTING, AND CONTROLLING ININDUSRIAL MARKETING

Learning Objectives

Understand the characteristics of market – oriented organization.

Know the role of marketing in strategicplanning

Examine the strategic planning processat business unit level.

Understand preparation implementation

and control of industrial (or business )

CHARACTERISTICS OF MARKET

IM/12-2/19




CHARACTERISTICS OF MARKET –

ORIENTED ORGANISATIONSFirms achieve market – orientation bymanaging the following factors.

(i) Shared values. (ii) Organization structure, policies

and culture.

(iii) Strategic Planning. (iv) Needs or expectations of

stakeholders.

IM/12-3/19H i e r a r c h y o f S t r a t e

B f d d i h




B e f o r e u n d e r s t a n d i n g t h e rs h a l l f i r s t e x a m i n e h i e r a r c h

O r g a n i s a t i o n a lL e v e l s

O r g a n i s a t i o n a lS t r u c t u r e

S t r a t e g y h( T y p e o f M

C o r p o r a t eD i v i s i o n

B u s i n e s s( S t r a t e g i

M a n a g e mD i v i s i o n a l /

B u s i n e s s U n i t/ S B U

C o r p o r a t eO f f i c e

S B U

I I

S B U

I I I

S B U

I

M a r k e t i n gF i n a n c eP r o d u c t i o n

F u n c t i o nS t r a t e g y

( O p e r a t iM a n a g e m

F u n c t i o n a l

The earlier figure shows hierarchy of

IM/12-4/19




g ystrategies and organization structure of a

large company. Strategic management gives a

direction to the firm and focuses ondeveloping strategies to achieve long – termobjectives & goals

A Strategic business unit(SBU)consists of an independent business orrelated business that has its own competitorsand specific markets. In some large

companies there are (product ) divisions andeach division has a divisional plan. Each SBUis headed by a manager who is responsiblefor strategic planning and performance of theSBU.

Operational Management maintains

ROLE OF MARKETING IN STRATEGIC

IM/12-5/19




ROLE OF MARKETING IN STRATEGICPLANNING IN A FIRM

C ompanyLevelF or mal Na meRoleo f Market ingC orporteCorp orte

Mark etingTogiv einf orm ationon markets andtoensu recustom erorien tation,f o rcorpora testrate gydevel opment.

Div isional/B usinessU nitlevel

Stra tegicMark etingTocar ryoutcu stomer& compe titionanalysi s,f ordev eloping businessstrateg y,includi ngcomp etitiveadvant age,segm enting, targeting ,andpositio ningstra tegies.

Fu ncitonalMark etingManag ementTode velopesh ort-term market ingplanan dstrateg y,coordi nation,a ndresourc eallocat ion.

C o m p a n yL e v e l

F o r m a l N a m e

R o l e o f M a r k e t i n g

C o r p o r t eC o r p o r t e

M a r k e t i n g

T o g i v e i n f o r m a t i o nt o e n s u r e c u s t o m e r oc o r p o r a t e s t r a t e g y d e

D i v i s i o n a l /B u s i n e s s

U n i t l e v e l

S t r a t e g i cM a r k e t i n g

T o c a r r y o u t c u s t o m ea n a l y s i s , f o r d e v e l o ps t r a t e g y , i n c l u d i n g c oa d v a n t a g e , s e g m e n t i p o s i t i o n i n g s t r a t e g i e

F u n c t i o n a lM a r k e t i n g

M a n a g e m e n t

T o d e v e l o p s h o r t - t e p l a n a n d s t r a t e g y , c or e s o u r c e a l l o c a t i o n .

STRATEGIC PLANNING PROCESS AT

IM/12-6/19




STRATEGIC PLANNING PROCESS ATCORPORATE LEVEL

The major steps involved are1.Deciding corporate mission and

objectives.

2.Establishing strategic business units

( SBUs.)3.Allocation of resources to SBUs.

4.Developing corporate strategies.

ALLOCATION OF RESOURCES TOSBUs.

Two widely used models /tools are :

(i) Boston Consulting group (BCG)

BCG Model : Growth – ShareMatrix

IM/12-7/19




Matrix

S t a r s

M

a

r k

e

t

G

r o

w

t h

R

a

t e

L a r g e S m a l l

R

a

p

i d

S

l o

w

1

5

Q u e s t i o n m a r k s

6

8

4

C a s h C o w

3

2 7

D o g s

R e l a t i v e M a r k e t S

GE Model : Business Screen MatrixIM/12-8/19

B u s i n e s s S t r e n g t h




H i g h M e d i u m L o w

B u s i n e s s S t r e n g t h

H i g h

M e d i u m

L o w

S e l e c t i v

E a r n i n

1

1

5

Major Business Strength factors :

IM/12-9/19




Major Business Strength factors :Market share, product quality, unit costs,

R&D performance, brand reputation,share growth.

Major Market Attractiveness factors :Overall market size, annual market

growth rate, historic profit margin,competitive intensity, technologicalrequirements.

DEVELOPING CORPORATE STRATEGIES

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DEVELOPING CORPORATE STRATEGIESStrategic planning gap. It is the gap

between future (5 years) desired sales andthe projected sales (of all SBUs ) of acompany.

S

a

l

e

s

T i m e ( Y e a r s )

A

0 5

B

C

P r o j e c t e d S a l e s

S t r a t e gP l a n n i n g

D e s i r e d S a l e s

The strategic planning gap can be filled byth lt ti t t i (A) Di ifi ti

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three alternative strategies : (A) Diversification

growth, (B) Integrative growth, (C) Intensivegrowth (C) Intensive Growth Strategy.

Corporate management should first reviewexisting business, using Ansoff’s product-market expansion grid, shown hereafter :

C u r r e n t P r o d u c t s

M a r k e t P e n e t r a t i o n

S t r a t e g y

P r o d u c t d e v

S t r a t e g y

M a r k e t d e v e l o p m e n tS t r a t e g y

( D i v e r s i f i c aS t r a t e g y )

C u r r e n t

M a r k e t s

N e wM a r k e t s

N e w P r o d u

( B) Integrative Growth Strategy

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( B) Integrative Growth Strategy includes increase in a firm’s sales and

profits by integrating backward, forward, orhorizontally within that industry.

(A) Diversification growth strategy

is considered when (B) & (C) strategies areinadequate to achieve desired growth andalso good opportunities are found outsidethe present businesses.



* PORTER’S Generic Strategies

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gFramework for Business unit

D i f f e r e n t i a t i o nO v e r a l l cl e a d e r s h i

F o c u s

I n d u s t r yw i d e

P a r t i c u l a rs e g m e n t o n l y

L o w - c o s

Marketing Planning Process

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g g

The head of marketing prepares themarketing plan (short-term up to one year)after going through “Marketing PlanningProcess”, which includes the following steps:

(i) Analyzing marketing opportunities. (ii) Segmenting and selecting target

market segments. (iii) Developing marketing strategies. (iv) Implementing and controlling the

marketing plan.

The head of marketing now prepares

the writhen document called marketin

Business ( Industrial )Marketing Plan

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Marketing Plan

1.Situational analysis. Market, competitive,product, and macro – environmentalanalysis.

2.SWOT and Issues analysis

3.Marketing Objectives and goals4.Marketing Strategy. Selection of target market

segments, positioning, marketing mix,customer service and marketing research.

5.Action plans / Tactics

6.Marketing Budget

7.Implementation and control. Buildingmarketing organization and controlprocess.

8 Contin enc lan

IMPLEMENTATION OF MARKETINGPLAN

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It is a process that turns marketing plans

into action plans and ensures that the tasks oractivities of action plan are executed in asmanner that achieves the marketing objectivesand goals. For this the necessary organizationstructure and people are selected. Marketing

resource management (MRM) software will helpmarketers to improve their decisions, and alsoin implementation and controls.

Control Process includes (a) settinggoals, (b) measuring actual performance, (c)

comparing goals and actual performance, (d)analyzing causes of deviations, if any (e) takingcorrective actions, if needed.

Types of controls : (i) Strategic control ,


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Marketing orientation is achieved by firmsby managing shared values, organizationstructure, policies and cultures, strategicplanning, needs and expectations of stakeholders.

Before understanding the role of marketingin strategic planning, it is necessary toexamine hierarchy of strategies.

Major role of marketing is at business unitand functional levels, and less atcorporate level.

Strategic planning process at corporatelevel includes corporate mission &objectives, establishing and allocation of

Strategic planning process at SBUs level

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g p g pincludes mission, SWOT analysis,

objectives and goals, strategies, actionplan, implementation and control.

The marketing head should go throughmarketing planning process, before

preparing the marketing plan.Implementation and control of

marketing plan are important forachievement of marketing objectives

and goals.

Documents

Industrial Marketing - Hawaldar 1