The nuances of marketing

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  2. 2. an account of imaginary or real people and events told for entertainment
  4. 4. 1. Activity or a set of processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society.
  5. 5. 2.Set of businesses to plan & present an organization's product/service in ways that build effective customer relationships.
  6. 6. 3.Management process for identifying, anticipating and satisfying customer requirements Profitably.
  7. 7. 4. Social process by which individual/groups obtain what they need through creating and exchanging products with others
  8. 8. 5.Act of selling or purchasing in a market
  9. 9. Founded in 1931 Manufacturer of Burners Headquarters Paris, France Wide product line : 50+ models
  10. 10. 1.Domestic 2. Commercial 3. Industrial
  11. 11. Type Boiler Capacity Users 1. Domestic Upto 0.5 ton Unit heating applications 2. Commercial 0.5 ton to 2 ton Heating and sanitary water for small operations 3. Industrial < 2 tons Large absorption type chillers and boilers
  12. 12. Developed markets of Europe and US have become saturated Highest growth in Asia, Middle East and Africa Demand was increasing in domestic and commercial
  13. 13. Before 1990 : 1. China rich in coal-low efficiency and polluting coal combustion burners 2. No need for burners 1990 to 1995 : 1. Regulations on pollution control 2. Emergence of oil-combustion boilers 3. Established brands Weishaupt(Germany), Elco(Germany), Quenod(France).
  14. 14. 1995 to 1998 : 1. Demand for commercial burners increased 2. Ginos Beijing office 3. Price became an issue. 4. Gino price leader in domestic range 5. Domestic 14% , Commercial 8% , Industrial less than 3% 6. Weishaupt price leader in industrial burners Post 1999 : 1. Domestic burners price wars 2. Commercial burners mainstream market 3. Industrial burners growth expected at 20% for next 5 years
  15. 15. In-house production capability Well established channel network International Exposure
  16. 16. 1. Gino has cost advantage 2. Known for providing best value 3. Gino was best known for domestic burners 4. Margins were higher in developing countries
  17. 17. 1. DAVID ZHOU China marketing manager of Gino Sa 2. JEAN-MICHEL PIERRE Asia Pacific Area Manager 3. HENRY GONG Ginos largest distributor JINGHUAs general manager
  18. 18. Burner manufacturers Distributors Dealers OEM Original Equipment Manufacturers End-users
  19. 19. Jinghua Mechanical Engineering Ginos largest distributor in China Wayip Trading Co. FUNGs Co.
  20. 20. Three distributors were set up in 1995 Revenue came from burners/spares (80/20) 1. Wayip based in Guangzhou -100% Gino (HVAC) 2. Fung based in Shanghai Textile machinery (90% revenue) 3. Jinghua based in Beijing 50% boilers
  21. 21. Demand for better terms Stolen sales Reluctance to stock industrial burners
  22. 22. Become a leader in the industrial range Achieve annual combined sales volume of 15,000 units Industrial burners > 200 units Optimize distribution channels to cover more areas 2 OEM accounts + 2 end user accounts in 2 years Improve service and spare supply Build brand image
  23. 23. The Gino Burner Co emerged as one of the largest manufacturer of burners in the world, producing over 381,000 burners in 1999 Enlisted three distributors in China Wayip, FUNGs and Jinghua(largest distributor) Gino diversified in 1998 product line and geographic coverage
  24. 24. Gino faced changes in distributors behavior and their attitudes. Gino was becoming the hostage of its distributors. Tianjin Feima Boiler company had requested permission to Zhou, to purchase burners directly from Gino instead of from Jinghua, Ginos largest distributor. Gino had 6 weeks to decide between granting Feima OEM status, harming its relationship with current distributors or denying the request and risk losing Feima as a customer.
  25. 25. Cost advantage in domestic & industrial burners Ginos prices were the lowest & competitors set their prices in ref to Ginos prices Industrial burner segment becoming price conscious Strong channel network Global presence and good brand image
  26. 26. Excessive reliance on few distributors Distributors reluctance to stock industrial burners leading to poor presence in the market Becoming a hostage of its distributors Stronghold of Weishaupt in industrial burner category
  27. 27. 1. Despite offering prices 10 percent lower than Weishaupt, Gino claimed a market share of less than three percent. 2. The 80/20 rule where 10 models accounted for over 80% of the orders 3. The demand for more marketing support by the distributors 4. The problem of Stolen sales and the lack of service and technical support to new customers 5. Reluctance of distributors to stock industrial burners due to high cost and difficulty in forecasting demand 6. Lack of replacement distributors
  28. 28. 95 percent of Ginos sales in China is done through distributors The various functions of Distributors are : 1. Credit function 2. Stock function 3. Sales and Service function Distributors have high Cohesive power especially in domestic markets They have high influencing power Gino should have co-operative relationship with the distributors because 1. Distributors will help in achieving its long time goal (in three years ) optimize distribution channel, build brand image and increase industrial burners sale 2. Scarcity of efficient distributors 3. Distributors are the main players who help in maintaining brand value and managing the product cost
  29. 29. Formulate key account policy for future clients 1. Purchase of large number of units qualifies for direct customers 2. For existing OEM accounts go through Distributor OEM model Set margin targets for distributors 1. Expanding industrial segment 2. Gross margin in industrial segment was 35% (commercial 25% and domestic less than 20%) Decrease cost of stocking industrial burners 1. Discontinue slow moving models 2. Incentivize distributors multiple product line volume discounts & incentives for stocking industrial burners
  30. 30. Set up its own warehouse 1. Restrict it to key end users and OEM accounts 2. Backup for distributor stocks Eventually develop & expand own sales force for industrial burners. Build stronger relationship with distributors 1. Provide incentives 2. Mutual respect 3. Better credit terms
  31. 31. Relationship with Jinghua The possible response from other distributors Wayip and FUNGs Feimas response The message about decision that will reach its competitors The attitude of Ginos corporate management
  32. 32. CHOICE 1 Proceed with Feima as an OEM CHOICE 2 Deny Feimas request and refuse to by pass distributors CHOICE 3 Approve Feimas request but only for its industrial Burners segment
  33. 33. CHOICE 1 Proceed with Feima as an OEM PROS 1. Initiate OEM business in China 2. Combat the increasing bargaining power of distributors 3. Good opportunity to break into industrial burner segment 4. Avoid middlemen 5. Eliminate the distributors bad behavior and changing attitude CONS 1. Destroys relationship with distributors 2. Destroy confidence in co- operating with Gino 3. Difficult to determine prices 4. Outside core competencies
  34. 34. CHOICE 2 Deny Feimas request and refuse to by pass distributors PROS 1. Meet the annual sales target 2. Maintain 40% of Ginos revenue in China 3. Loyalty earned 4. Maintains relationship with distributors CONS 1. Impact on Feimas relationship 2. Cannot achieve its goal to set up 2 OEMs 3. Cannot optimize the distribution channel 4. Face the changing behavior of distributors
  35. 35. PROS 1. Meet the annual sales target 2. Impact on relationship with distributors 3. Earn Feimas promise and establish success 4. Set up OEM in other territories CHOICE 3 Approve Feimas request but only for its industrial Burners segment CONS 1. Destroys relationship with distributors 2. Destroy confidence in co- operating with Gino 3. Difficult to determine prices 4. Outside core competencies
  36. 36. CRITERIA WEIGHT CHOICE 1 CHOICE 2 CHOICE 3 Impact on relationships 35% 1 4 2 Price 25% 4 3 3 Brand Image 20% 2 4 3 Core Competencies 10% 2 5 4 Growth potential 10% 4 3 4 Total 100% 2.5 3.8 3.15
  37. 37. CHOICE 2 Deny Feimas request and refuse to by pass distributors
  38. 38. No Control and Monitoring over undercutting, discounts on List price, after sales service, technical support, stocking , inventory control, CRM. Dont keep all the eggs in one basket A manufacturer should maintain a co-operative relationship with his distributors. Direct Customer Feedback on timely intervals should be taken Customer Care was controlled by Jinghua instead of Gino No marketing support in form of price & commercial promotion
  39. 39. Harvard Business Review (HBR) is a general management magazine publishe d by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. It is published 10 times a year and is headquartered in Watertown, Massachusetts.
  40. 40. Harvard Business Review's mission is to improve the practice of management in a changing world. HBR provides professionals around the world with rigorous insights and best practices to lead themselves and their organizations more effectively
  41. 41. Created by Vaishnavi Ketharnathan, SVCE Chennai, during an internship by Prof. Sameer Mathur, IIM Lucknow.