Introduction to Industrial Marketing Industrial marketing consists of all activities involved in the marketing of products and services to organizations

(OEMs, commercial enterprises, profit and non profit institutions, government departments, exports & industrial distributors) that uses products and services in the production of consumer or industrial goods and services or to facilitate the operation of their enterprises more efficiently. The process of exchange in the industrial markets is Product or service exchange Information exchange Financial exchange Social exchange SERVICE

PRESALE Information exchange Quotation Presentation Demonstration

POST SALE Follow upon order Delivery Installation Training After sale service Collection Relationships

Industrial marketing system Participants Channels Relationship Participants Extractive industries Form Mines Forest and agriculture Industries Fisheries Channels 1. Manufacture to branch house to customer 2. Manufacture to distributor to customer 3. Manufacture to agent to customer 4. Manufacture to agent to distributor to customer 5. Mixed arrangement 1. Manufacture to branch house to customer (with stock facility) A branch house will be set up when it is difficult for the manufacture to provide the presale and post sale services to the customer efficiently. When the product is standardized, when the unit value of the product is less and product is not bulky, a branch house with stocking facility may be started. In this case stocks are transferred from the manufacture to the branch house and further billing is done by the branch house to the customer. manufacturing industries Manufacture sales to other manufacture using and consuming unit Households Government other business user Exporters

2. Manufacture to branch house (without stock facility) A branch house without stocking facilities is provided, when the product is customized, the product is bulky in nature and unit value of the product is high. Customized product means, although the basic product remains same, the product may differ in feature from customer to customer. Hence pricing also changes from one customer to another customer. In such situations the branch house will collect the order from the customer and send it to their plant. The plant dispatches directly to the customer, the branch is responsible for training and after sale service to the customer. 3. Manufacture to the industrial distributor to the customer This channel is similar to the earlier one i.e. manufactures to branch house with stock facilities and to the customer .However the marketing manger has to take a strategic decision with respect to cost benefit analysis. Usually if the customer base is large it may be justified for starting a branch house, otherwise a distributor may be appointed. The distributor performs the similar function as performed by branch with stocking facility. The distributor will take title to the goods. 4. Manufacture to manufacturing representative to customer This is similar to manufacture to branch house (without stock facility) and to the customer. In this case a representative will perform all the function as performed by branch house, he will generate the enquiry negotiate with the customer ,close the deal and follow up on the delivery, support for the installation and collect the payment. For the services rendered he will get a commission from the manufacturer as agreed upon previously. A representative will have a continuous relationship with the company unlike broker who will have a discontinuous relationship with the company. A representative usually

will have a lot of contact in the assigned territories and have very good product knowledge. 5. Mixed arrangement Most of the companies will have a mixed channel arrangement in the market, in the product range there may be highly customized products. For highly customized products the company may prefer to sell through branch house. For standardized products the company may prefer to go through industrial distributors. Sometime a representative may also be appointed to enhance the market share in the territory. Relationships Contract of sale Franchise agreement Loyalty Confidence Reciprocity Characteristics of Industrial Marketing External environment Customer External linkages Derived demand Complex business process Concentrated customer marketing internal environment Manufacture internal linkages Emphasis on technology High level of customization Order fulfillment mechanism

In a B to B environment the marketer has to understand both the external as well as the internal environment. The external environment consists of the customer and the internal environment is with respect to his own company. The internal linkages consists of derived demand, complex business process, and concentrated customer bases. Derived demand The business market demand is primarily derived in consumer market demand. For example- the demand for automotive tiers depend on number of cars being manufactured, the number of cars manufactured depend upon the demand for cars in the market, and demand for cars depend on the economic prosperity prevailing in the country. Thus demand for cars is a derived demand at each stage. The marketer should know the nature of demand in order to plan his own production. Complex business process In a business market the purchases are done through a purchase committee depending upon the nature of purchase. The purchase committee may change from purchase to purchase. The process involves enamors documentation and negotiation. Normally the process involves an indenter (who require the product) an influencer (who influence the purchase decision), gatekeeper (who may avoid the information flow), a purchaser (who ultimately make purchase order).The marketer should be intelligent enough to identity these people correctly and proceed. Concentrated customer The B-to-B customers are normally concentrated to geographical regions .The marketer has to identify these regions and provide the presale and post sale services as desired by the customer.

The internal linkage consists of Emphasis on technology High level of customization Order fulfillment process Emphasis of technology Since the marketer will be touch to the market, he has to understand the level of technology in his competitor and also customer prefers technology. He has to advice the company accordingly and se that latest technology is offered to the customer. High level of customization In B to B market the product feature changes from customer to customer even through basic product remain same. Hense the price strategic may very from customer to customer. Order fulfillment process The marketer has to follow up the order from the time he has received till the time consignment is dispatched and reaches the customer. He has to continuously coordinate with purchase and production department and see that materials are dispatched on time. The supply chain management coordination is a part of marketer responsibility. Supply chain management involve logistic of sourcing, logistic of manufacturing and logistic of distribution. The marketer will be partly responsible for sourcing and manufacturing, however they are fully responsible for logistic of distribution. Management challenges New product commercialization Market segmentation

 Product pricing Channels of distribution Cross functional and inter departmental coordination Characteristic of purchasing practices of different organizational customers 1. OEMs (original equipment manufacture) The purchase by OEM involves a lot of procedure, the requirement of OEM with respect to a part or component will be given in the form of technical specification or through a detailed drawing to a supplier .Usually only one or two suppliers may be considered for the development of component or part. The supplier should have a continuous intraction by developing the product. Once the product is developed according to the drawing or requirement sample will be sent to OEM for testing and approval. Once the samples are approved a pilot order will be placed and once the pilot order is accepted commercial order is placed. Marketing implication The marketer has to closely interact with the buyer for the new product development opportunity. The marketer has to use his intelligence to turn the problem into opportunity. 2. Government Organizations mandatory requirement says the tender has to publish in Government organizations usually purchase through tenders depending upon the order value national dailies. Usually there will be two parts, one is technical and another is commercial. Very higher order purchase goes through both the bids. However standardized product may be through only commercial bids or through rates contracts.

Central government organizations usually purchase through the DGS&D contract (directorate of government supplies and disposables).If the supplier has DGS&D contract he did not go through tenders of each departments. 3. Commercial organizations Commercial organizations include all other manufacturing organization and others, other than OEMs. These organizations purchase will be through a purchase committee .The indenting departments send the requirement to the purchase department and a committee will be formed. The committee may comprise of members from different functional departments depending upon the requirement. Marketing implication The marketer has to be intelligent enough to understand the structure of the committee and he should try to influence the committee. 4. Institutions The purchasing parctise will be similar to commercial organizations however price place a dominant role here. Marketing implication The marketer has to design his marketing mix strategy as per the requirement of the institutions. 5. Export Exports are usually through an exports agent or it may be direct also. The foreign companies mainly look for quality; some of the European organisation has made it mandatory for the organizations to have an ISO 9000 certification. US auto majors like General motors, Ford, and Chrysler have made it mandatory for QS 9000 certification for its suppliers .Japanese companies insist of Deming price award for its suppliers. Some of the US Companies other than auto companies insist on Malcolm Baldrige award.

Classification of industrial products 1. 2. 3. Materials & parts Capital items Suppliers & services Materials & Parts

Raw material Ores, agriculture product, chemical Fuel, gas, etc.

Components parts copper wires, nuts& bolts, Bearing, steel rods / frame, Extrusions, etc. Capital items

Machinery installation Cnc machine, convention machine Like drilling machine, textile machine, Grinding machines, etc.

Accessory equipment fuel injection, equipment, gear boxes, axles, special Attachments.

Supplies & Services

Supplies Consumable like lubricants oil Catalysts, greases, cotton wastes, Soaps, etc. Marketing Implications for different types of products & customers Machinery service,

Services Management Consultancy Service, Technical Consultancy Service.

For Materials & Parts, Direct selling is done to large OEMs (Original Equipment Manufacturers) and users, but indirect selling through industrial distributors / dealers become cost effective for smaller volume OEMs and users. For Capital items, direct selling through company sales force is common, with extensive interactions on technical & commercial factors. For Supplies Industrial distributors / dealers are mostly used but for marketing of services, word-of-mouth plays an important marketing role, with quality & price of service as key factors. Industrial Marketing Environment 1. At the core level we have buyer, seller interface. The supplier, the distributor, the transporter, agency, marketing research firm, bank & insurance company and warehouse firm, are involved. 2. At the second level the financial institutions; independent press, public interest group, general public and internal public are involved. 3. At the third level economic influence, ecological influence, physical environment influence, culture influence, technology, demography, political and legal influence.

4. At the fourth level government influence business is evident.

ORGANISATION BUYING BEHAVOIUR Purchasing Orientations of Business Buyers Business buyers/ Industrial customers follow one of the three purchasing orientations: (1) Buying, (2) Procurement, or (3) Supply chain Management
(i)

Buying Orientation: The firm with buying orientation follows the practice of (a) selecting lowest price supplier, (b) gaining power over suppliers and (c) avoiding risk of buying from new suppliers. It has a Short-term focus. Procurement Orientation: The purchasing firm with procurement orientation has a long-term focus. It achieves the objectives of quality improvement and cost reductions by following the practices of (a) collaborative relationship with major suppliers and (b) working closely with other functional areas in the company.

(ii)

(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) outsourcing non-core activities, (c) and supporting collaborative relationships with major suppliers. Buying situations 1. New Task When the organisation is buying any material, component, part or service for the first time in the market then it is known as task situations. Most of the R& D Purchases are new task situation only. All customized purchases are new task situations. 2. Modified re buy Over a period of time when the buyer want to upgrade the product or require the product with little modification then it becomes a modified rebuy situation.

In this situation the buyer would have already acquired sufficient knowledge with respect to buying process & product knowledge. At this stage apart from the current suppliers new supplies may also be considered. 3. Straight buy In this situation the customer might have be purchased the product repeatedly and hence the purchase becomes routine. Without negotiations the order may be placed directly. 4. In supplier An in supplier is one who is currently supplying the product to the company. In the new task situation all the suppliers are called as out suppliers only. In the modified rebuy situation the supplier has a better advantage over others because he is already into the organisation and knows the culture of the company. The in supplier has to strive hard to keep the relationship in a healthy way. 5. Out supplier An out supplier is one who is always waiting to sell his product to the company. He may be a person who has lost the order in a new task situation, but he may enter again in the modified rebuy situation Roles of buying center members

Buyers. Carry out purchase activities. They are purchase 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 purchase officer can decide.

Gatekeepers. They control / filter information & meetings with buying center members. Often, P.A. / Junior person attached to purchase head is the gatekeeper.

Buying phases
1. Anticipation or Recognition of a problem( need) and a general selection: This is the first phase of the buying process, in this phase buyer recognizes the problem of potential customer and provide a solution. For example: frequent power failure in an organization may be a problem. An intelligent marketer identifies the problem and tells the buyer to go for alternative power. The alternative power may be generator or UPS system. 2. Determination of characteristics and quantity of needed items In this phase the marketer has to give a specific solution to the potential customer with respect to quantities to be ordered. For example: if 10 computer systems are there either one single power backup system can be ordered or 10 different table top systems can be purchased. If the marketer is interested in selling table top models then he has to convince the customer as to why he has to go for table top models. 3. Description of characteristics of the needed items In this phase the marketer has to build his product specification into the purchase enquiry. 4. Search for and qualification of potential sources.

The quotations received from different suppliers are compared and comparative statement is prepared. The comparison is made at price, delivery, quantity, and service. Service includes presale service offered and post sale services. However post sale services are measured by reference given by suppliers. 5. Acquisition and analysis of proposals Purchased order will placed depending on evaluation, purchased order detail number of unit to be placed. The price of the product, the delivery schedule, the payment delivery mode (rail, road, or air), cost of transportations and warranty offered. 6. Evaluation of proposals and selection of suppliers At regular interval after purchase performance feedback is done with vendors. Criteria for feedback include deliveries as promised, training and other service offered like after sale service. Various methods are involved for vendor rating: Cost analysis Weighted average method Categorical method

Appropriate marketing strategies over various buying situation and phase PHASE Problem recognition NEW TASK Anticipate problem use advertising and creative sales people to convince buyer of problem solving capabilities MODIFIED REBUY In supplier maintain quality/service standards ,out supplier watch for developing trends STRAIGHT REBUY In supplier, maintain close relationship with users and buyers, out supplier convince firm to reexamine alternative.

Solution Provide technical In supplier and out determination assistance and suppliers: stress information capability, reliability and problem solving capabilities. Determining needed item Provide detailed product information to decision maker In supplier maintain dependability out supplier demonstrate ability to perform task. Understand detail of customer problem, make timely proposals. Same as phase 2

Same as phase 1

Same as phase 1

Searching for qualifying supplier

In suppliers: watch for problem; out supplier, demonstrate ability to perform task.

Same as phase 1

Analyzing proposals

Understand detail of customer problem /needs; make timely proposals.

Make timely proposal.

Buy grid model A buy grid model is a matrix of buying phase versus buying situation. It detail the marketing strategic adopted by a marketer in each phase and situation Buying centre A buying centre consists of group of individuals who may be within the organisation or outside. Some of these individual may be members of buying committee and some of the individual may not be the member of the committee, however they influence the purchase decision. Outside the individuals like consultants or other company executives may also influence the decision. Objectives in organization buying

Task oriented objectives Price Quality Service Assurance of supply Reciprocatory Non task objective Social consideration such as friendship, reputation, mutually beneficial interactions. The interpersonal dynamic of industrial buying behaviour: 1. How purchasing activities with in the organisation structure influence buying behavior? 2. The factor influencing the size and interaction of buying centers 3. How group and individual differ in their approach to buying? 4. How organization buyer chooses and evaluates suppliers? There are two type of customer: 1. Transaction customer 2. Collaboration customer Transaction customers They always exhibit a sharing behaviour .they share their business with several vendors. They are low in relationship, they prefer multiple supplier usually it is seen in standard products. Technology transfer is very easy, price dominate the purchase. Collaboration customer These kind of customers depends on the suppliers since products are customized and high level of technology is involved .They prefer continuous

relationships with the suppliers. If they switch over from one supplier to another, they encounter the switching cost of find a new supplier and adopting to him. However if for any reason a supplier looses his customer it is very difficult to regain again. Hence they are known as lost for good customers Buyer seller relationships Depend on their perceptions, behavior & roles. Buyers have two major perceptions of sales reps. (i) Stereotype talkative, manipulative, excitable (ii) Reputation of sales reps company. Buyer Behavior towards sales rep depends on organizational needs / objectives, buying center interactions and personal needs. Buyers are not always rational / logical in buying decisions. Role / behavior of sales rep. depends on his personal needs, and expectations of his boss, peers, customers Types and range of relationship between buyer and seller Transactional relationship is typically one time exchange of a product / service, with lowest price / economy and necessity as main factors. Some customers prefer it when many suppliers are available in a stable market. They switch purchases from one supplier to another. Marketers also choose least profitable customers for transactional relationships. Value added relationships/exchanges Here the focus is to understand customer needs and meet those needs better than Here competitors, to get maximum business share. These customers have medium sales and profit potentials and have Procurement Orientations. Collaborative relationships

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.

Customer relationship management and Relationship marketing Conceptually same, methods / techniques to achieve objectives are different. Both CRM & RM aim at partnering / collaborative long-term relationships for mutual benefits of both parties. CRMS objectives are to improve customer loyalty and there by, companys profitability. For this, marketing strategy is first developed, then investment is made in software system to gather data / information on each valued customer, and the same is made available to all employees to give superior customer service. RM aims at building relationships with key customers, distributors, and suppliers. This is done through financial and social benefits, and in addition, structural ties. After 2-3 years, both firms evaluate their relationship using sales, profits, prices, costs, & technology factors. Methods used to influence industrial customers Major methods: Sales presentation and Negotiation Sales Presentations: For effective sales presentation, a sales person should follow some guidelines: i. Plan and collect information before sales presentation. ii. Identify customer needs and satisfy them better than competitors. iii.Use AIDAS theory or any other theory of selling (Attention, Interest, Desire, Action, Satisfaction)

Give importance to prompt customer service. Negotiations: For negotiation with customers use I win, you win or win win style, with following 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 not the size of concessions. e. Be responsive to corrections, if needed f. Avoid legalistic approach g. Be polite and humble h. Importance should be on end results and not on means Special dealings between buyer and seller Reciprocatory: It means buying a product / service from a customer and selling a product / service to a supplier. It occurs when products are similar and price competition is less. Generally, both purchase managers and sales managers dislike. In practice, the procedure becomes complex. It should be kept at minimum level. D ealing with customers customer: With coordination and planning, a business marketer can promote its products to customers customer, if a need arises. E.G. Aircraft engine manufactures promote their engines to Air lines (aircraft buyers), in addition to aircraft manufacturers

INDUSTRIAL MARKETING INTELLIGENCE AND MARKETING RESEARCH Nature of industrial marketing research 1. Business Marketers rely more on Secondary data, and exploratory research (Through expert opinion). 2. Descriptive (or Survey) method is used more often than experimental and Observation methods, for collecting primary data. 3. Sample size is small due to small population. 4. Difficult to define sampling unit (or respondents), since buying decisions are made by many members of buying centre. 5. Respondents Cooperation and accessibility are difficult for data collection. Scope of industrial marketing research i. Market share analysis. ii. National and Geographical area-wise market potential. iii. Competitors analysis. iv. New product acceptance and potential Marketing research process Steps involved are Identify the problem / opportunity and state research objectives. Develop research design / methodology. Collect data or information. Process and analyze the data. Prepare a research report. There is no major difference in the process or Steps involved in marketing research for consumer And industrial marketing.

INDUSTRIAL MARKET SEGMENTATION, TARGET MARKETING AND POSITIONING Procedure used in industrial market segmentation The procedure has 3 steps Conduct marketing research to collect data / information on existing and potential buyers, and competitors Carry out data analysis by using statistical techniques of factor and cluster analysis in order to identify different segments Profile each segment by its characteristics like application (or/use), location, volume of requirements, etc. Variables used in segmenting Business markets Industrial market segmentation is done first based on Macro Variables , and then subdivided into Micro Variables, if necessary. Macro Variables. These segmentation variables are identified based on industry/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. Micro Variables. Macro segments are further subdivided into micro segments, if needed. Micro Variables are 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 use more than one variable to subdivide the market. Evaluating marketing strength 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 selects one or more market segments as target segments. Next, the marketers should decide which of the following broad target market strategies the company should adopt: (a) Concentrated or Niche marketing strategy (b) Differentiated marketing strategy (c) Undifferentiated marketing strategy Procedure for developing a positioning strategy Following steps are involved (i) Identify which attributes / benefits target customers consider important while buying a product / service. This information is obtained through a market research study. The variables considered for differentiating a companys product from competing products are. (a) Product variables, (b) Service variables, (c) Personal variables, (d) Image variables (ii)Select one or more major benefits (or attributes) to differentiate the company from its competitors.

(iii)Use Perceptual Mapping Technique. To decide on positioning strategy, this technique is used, after getting customers perceptions through marketing research. (iv)Communicate Positioning Strategy. The firm should decide and communicate its positioning strategy to target customers, through sales force, advertising in journals, internet, and trade shows

PRODUCT STRATEGY AND NEW PRODUCT DEVELOPMENT Definition and meaning of an industrial product Definition: 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 augmented properties (with intangible benefits). In a competitive market, business marketers must understand target customers perceptions of a total product package and offer the same better than competitors. Changes in product strategy Business marketers must understand that a product strategy is dynamic and flexible. It changes due to changes in: (i) Customer needs (ii) Technology (iii) Government Policies / Laws (iv) Product Life Cycle Application of product life cycle strategy

Introduction Stage: Marketing Strategy should focus on market development for slowly accepted products. For rapidly accepted products, a competitive strategy (Skimming pricing or Competitive pricing or Superior quality product or Basic properties) should be evolved. Growth Stage: To take advantage of high growth of sales and profits, the marketing strategy should concentrate on (i) Improving product design or

adding product features (ii) Improving distribution and (iii) Reducing price, as increased sales and production reduce the costs. Maturity Stage: As competition increases and profits decline, marketing strategy should concentrate on (i) cutting costs, (ii) keeping existing customers satisfied (iii) entering new markets. (iv) modify product, thru improvements in quality / features / style. Decline Stage: Since both sales and profits decline, marketing strategy should focus on (i) substantial reduction in costs, (ii) develop a substitute product, (iii) withdraw the product slowly from the market. Product strategies for existing products Business marketers should take the following steps: Evaluate the performance of existing products by using product evaluation matrix Examine the relative strengths and weaknesses of the companys products by using perceptual mapping technique Decide the product strategies, based on above analysis Classification of new products (i) Products that are new to the world & innovative (ii) Products that are new to the company, but not new to the world (iii) Improvements / Revision to the existing products (iv) Addition to the existing products (v) Repositioning existing products to new market segments (vi) Products with substantial cost reductions without reduction in performance New product development process It consists of 7 Stages : (i) Idea generation (ii) Idea Screening (iii) Concept development and testing (iv) Business analysis

(v) Product development (vi) Market testing & (vii) Commercialization

Impact of technology Technological innovations create new products / services that are new to the world. Examples of these innovations, called break through technology are : (i) Technological inventions of 1940s of vacuum tube and amplifier circuit created new products / services like radio, wireless telegraphy, and telephone service (ii) Technological inventions of 1950s & 70s of transistor, integrated circuit (IC), and microprocessors have applications in new products like TV sets, movie Cameras, Computers, Calculators, Mobile phones, Printers etc.

(iii) Digital revolution of information technology and the internet have improved company and consumer capabilities High tech marketing strategy Target a niche market Plan whole product properties Develop partnerships Unique positioning strategy Effective Communication Strategy Multi Channel distribution strategy

Skimming pricing strategy

INDUSTRIAL DISTRIBUTIOIN CHANNELS AND MARKETING LOGISTICS Alternative Channel Structures Industrial channel structures include both direct and indirect 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 negotiations are held at various levels (iii) Buying process takes a long time (iv) Buyers want to buy directly from manufacturers. Indirect Channels Consists of intermediaries like distributors / dealers, manufacturers 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 manufacturers resources are limited, (iii) Customers are geographically dispersed, (iv) Buyers purchase many items in one transaction. Types of Intermediaries: 1. Industrial Distributors / Dealers They perform many functions like buying, storing, promoting, financing, selling, transporting and servicing certain geographic market, & are given discounts. Major categories are (i) General line distributors, (ii) Specialized distributors, and (iii) Combination house.

2. Manufactures Representatives / Agents :They perform functions like promoting manufacturers products / services, getting orders, and colleting market information. They are independent business firms, representing various manufacturers whose products complement one another but are not competitive. They are paid commission on the value of sales or orders booked. They do not buy store or finance transactions. 3. Value-added Resellers (VARs) They are new type of intermediaries from computer industry. They deal with computer hardware and software companies, customize the same to solve specific problems of buying firms. They are paid discounts. 4. Brokers : They bring together buyers and sellers, when information is not available completely. They represent either a buyer or a seller, and their relationship 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 perform functions like arranging inspection, transporting, negotiating and selling. They are paid commission on the value of sales.
Channel Design 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) (b) (c) Types of intermediaries Number of intermediaries Number of channels

(v) Evaluating the channel alternatives. The criteria used are: (a) Economic factor (b) Control factor

(c)

Adaptive factor

(vi) Selection of the channel (s)

Managing channel members

It includes: Selecting Intermediaries Motivating Intermediaries (a) Partnering relationships (b) Reasonable discounts and commission (c) Distributor councils (d) Other motivational tools 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) Evaluating Channel Members

Concept of Supply Chain Management (SCM) SCM includes activities of moving goods from raw material through operations to final consumers. Main aims of SCM are Reduce cost per unit Reduce waste & duplication Minimize order to delivery cycle, and Ensure superiority in delivery service. Firms adopting SCM gain competitive advantage. The aims are achieved by a network of interdependent firms working together with partnering relationships to manage and control various activities, in order to improve 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 processing firms.

Logistics Management (LM) LM plans and coordinates activities to achieve superior customer service levels at lowest costs. LM optimizes material flow within the firm, but SCM extends 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 distribution. Tasks of physical distribution
PD tasks are: (i) Transportation, (ii) Warehousing (iii) Inventory Control (iv) Customer Service (v) Packaging (vi) Material Handling (vii) Order Processing, (viii) Communication (ix) Locations of factory & Warehouses.

Customer service
Service Quality Gap: Gap between perceived service and expected service. A firm Gap: may have a strategy of giving superior quality service than competitors and exceeding customers expectations. Factors that determine service quality by customers are : (i) (ii) (iii) (iv) (v) Reliability Responsiveness Assurance Empathy Tangibles

Strategies followed by successful customer 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

MANAGING THE PERSONAL SELLING FUNCTION Role of Personal Selling in Business Marketing Personal selling or direct selling through company sales force Plays greater role in business marketing than consumer marketing Major roles of personal selling (i) A part of problems solving capabilities of the company (ii) A part of the companys communication or promotion mix (iii) Gives an effective customer service Business Selling Process No magic formula for making a sale. But chances of making a sale improve, if the following sales process is followed. The major steps in selling process are : (i) Prospecting: It is searching or identifying prospective or likely customers from various sources. (ii) Qualifying: Prospective customers are screened by qualifying criteria like - expected volume, location & financial strength.
(ii)

Preparation/Pre-approach: Sales person should prepare plan before making sales presentation by obtaining all relevant information about the customer and competitors through personal visits and websites.

Sales Presentation / Approach: Different methods are used like (AIDAS Approach Attention, Interest, Desire, Action, Satisfaction), or need satisfaction method (v) Overcoming Objections: Often prospects raise objections, which are real or practical and psychological or hidden. These should be answered satisfactorily by the sales person

(vi) Closing: Asking for an order or closing the sale is important. Sales person can use some of the closing techniques (vi) Post - Sales service and Follow-up This includes delivery, installation, training, payment collection, warranty service, and rejections /returns Characteristics of B2B Selling 1. Promotional strategy focuses more on personal selling through companys sales force. Hence, salespersons are active in getting orders. 2. Adverting is used as a support to personal selling. 3. The sales person sells technical and non-technical products, and uses problem solving approach 4. Typically, it takes a long time to know outcome of sales efforts. 5. System selling approach is used by some business marketers, as it is preferred in some large industrial projects or contracts. 6.Team selling approach is used for major customers and large value orders. Team Selling Approach More companies are using team selling approach for selling to major and national accounts (customers) and technically complex products and services. Sales team consists of sales representative, technical support person, inside sales person, and a senior sales/marketing manager. Coordination is done by a sales representative for a major customer and a national accounts manager for a national customer. Solution Oriented Effort A sales person is a part of selling firms problem-solving abilities. He should identify and analyse the buying firms problem. He should then show how his companys products and services can solve the buyers problems, better than competitors. This is called solution-oriented effort or approach.

INDUSTRIAL COMMUNICATION ADVERTISING, SALES PROMOTION PUBLICITY AND DIRECT MARKETING Developing an effective communication programme for business marketing The steps involved are: (i) Decide communication objectives (ii) Identify the target audience (iii) Decide the promotional budget (iv) Develop the message strategy (v) Select the media (vi) Evaluate the promotions results (vii) Integrate the promotions programme. Role of advertising in business markets While advertising is relatively less important than personal selling in business marketing, it is used as support to personal selling. The functions performed by advertising are (i) (ii) (iii) (iv) (v) (ii) Creating awareness Reaching members of buying center Increasing sales efficiency and effectiveness Efficient reminder media Sales lead generation Support channel members

Advertising media used and selection criteria The media generally used for industrial advertising are (i) Business Publications (ii) Trade journals/ publications Horizontal and Vertical publications (iii) Industrial directories published by government and private publishers (e.g. Tata Yellow pages) Criteria used for selection of advertising media are: (a) Target audience and their media habits

(b) Promotional objectives and goals Importance of sales promotion Sales promotion consists of short-term incentive tools to stimulate greater or faster purchase of a product / service by business customers. Some of the business promotion tools are: Trade shows (or exhibitions), sales contests, promotional novelties (or specialty advertising, or gifts), seminars, catalogues, promotional letters, demonstration, and entertainment. Some of the frequently used tools are trade shows, sales contests, catalogues, demonstrations, and promotional novelties (gifts). Importance role of direct marketing

Definition direct marketing is an interactive marketing system that seeks a measurable response and /or transaction. Direct marketing is also referred to as direct response marketing. Benefits For business marketers, benefits of DM are many : Can personalise / customize communication messages, builds a continues relationship with each customer, can measure responses from alternative media, and direct relationship marketing company strategy less visible to competitors. Main Channels or tools of DM. Direct mail, telemarketing and on-line marketing. In addition, kiosk marketing and catalog marketing are also DM channels, but are less popular in India. Direct mail is not only paper based postal service or courier service, but can be fax mail, e-mail, or voice mail. Direct marketers send not only letters, but also audio and videotapes, CDs, and diskettes. Response rate is about 2%. Telemarketing uses telephone to contact existing customers, to attract new customers, or to take orders. Telemarketing gives immediate feedback,

identifies and qualifies prospects, and reduces sales force travel costs. Both inbound (incoming calls from prospects / customers) and outbound (out going calls) are important. Practice, training, pleasant voices and right timing (late morning to afternoon) are needed for effective telemarketing.

On-Line Marketing can be done by establishing an electronic presence (by opening own website or buying space on a commercial on-line service), placing ads on-line, and using e-mail. A web site should be attractive on first view and interesting enough to encourage repeat visits. Marketers use on-line marketing to find, reach, communicate and sell to business customers. Major Benefits to marketers are: Lower costs, relationship building and quick adjustments to changing market conditions. Major Benefits for buyers are: convenience, information availability, and less hassle. Although small & medium size marketers can reach global markets at affordable costs, there is chaos and clutter as the Internet offers millions of web sites, and also as concerns on security and privacy. Role of publicity and publication Public Relations (PR) performs certain tasks to promote or protect a companys image or its products. The tasks / functions performed by PR are: press relations, corporate communication, lobbying, and counseling. PR department deals with various categories of people like press, legislators, Govt. officials, public, employees, suppliers, customers, and hence it tends to neglect marketing objectives. Publicity or Marketing Public Relations (MPR) has more credibility and lower cost compared to advertising, MPR includes placing technical articles from the companys technical persons in trade journals, business magazines, and / or news papers. MPR should be planned with advertising and should be given larger budget allocation.

INDUSTRIAL PRICING STRATEGIES AND POLICIES

Special meaning of price

Some business customers follow Value-based pricing by evaluating, suppliers offerings based on the concept of the suppliers offering equal to the difference between the perception of value (or benefits) and the cost to the buying firm. These are value buyers, and marketers should attempt to have value added relationship, if suppliers have purchasing orientations. Perception of value in value-based pricing is made up of several elements like customers perceptions of product quality / performance, reliable delivery, warranty / after-sales service, reputation of the supplier, etc which are enhanced and augmented properties. 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 transactional relationships & offer basic properties. Some other buyers are loyal buyers, for whom marketers should follow relationship marketing with partnering / collaborative approach and mutually acceptable prices.

Price determinants or factors for influencing pricing decisions. 1. Pricing Objectives Are derived from corporate and marketing objectives.

Some of the pricing objectives are survival, maximum short term profits, maximum short term sales, maximum sales growth, product quality leadership, etc.

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

Demand analysis. Using experimental research, it measures relationship between price and demand (or sales volume). It sums up how sensitive customers are to the price changes.

(ii) Cost Benefit Analysis 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, company reputation, warranty period, etc. Cost includes price, duties and taxes, freight, installation, maintenance. 3. Cost Analysis A firms 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 a product / service. Costs vary based on production capacity (i.e. economies of scale), and accumulated experience (i. e. learning curve). 4. Analyzing Competition Many marketers have competitive level Pricing as a pricing objective. Marketers should get Competitors prices, discounts, costs, product quality, service, etc for cost/benefit analysis, pricing and positioning strategy. Competitors information can be obtained from various sources. 5.Government Regulation/Policies

Govt. regulations are necessary to ensure fair play and to protect consumers and small scale suppliers. Price-fixing / price cartels, price discrimination (e.g. different discounts to distributors/dealers), and predatory pricing (e.g. dominant firm aiming to finish competitors) are not permitted (illegal as per MRTP act, for example)

Pricing strategies Pricing strategies vary as per product-market situations such as (i) Competitive bidding in competitive markets, (ii) New product pricing, (iii) Pricing across product life-cycle. (i) Competitive Bidding In business markets, large volume of purchasing is done through competitive bidding, using either closed (or sealed) bidding or open (or negotiated) bidding method. In closed bidding, often used by the Govt. buyer, sealed bids are invited through 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 negotiates technical and commercial parts with suppliers, and then places orders. This method is often followed by commercial enterprises in private sector. Strategy / Model Used for Competitive Bidding One of the often used strategies is Probabilistic Bidding, which makes two assumptions: (i) Pricing objective is profit maximizations; (ii) Lowest price bidder will get the order

New Product Pricing Strategy In the introduction stage of a new product, two alternative pricing strategies are 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, or capital intensive, and purchased by a market segment that is not sensitive to the initial high price. The advantage is faster recovery of investment by generating larger profits. The disadvantage is that it attracts competitors due to high profits. The firm reduces prices after some time to reach other segments. Penetration strategy is appropriate when (i) buyers are highly price sensitive, (ii) strong threat exists from potential competitors (due to low entry barrier). The selling firms objective is to achieve long term profits through high market share. The firm can also achieve cost leadership thru economies of scale and experience curve, which gives competitive advantage. Pricing across Product Life Cycle (PLC) Marketing and pricing strategies vary as the product moves across 4 stages of PLC. a) Introduction stage: We have discussed pricing strategy in this stage earlier in pricing a new product. (b) Growth stage: The firm lowers the prices to attract the next layer of price sensitive buyers. Also more suppliers enter the market and buying firms put pressure on the existing suppliers to lower prices. (c) Maturity stage: The firm may cut the prices to match aggressive competitors prices by giving volume discounts, absorbing freight costs, or more credit. If industrial customers do cost - benefit analysis, a selling firm may increase prices or not make any change in prices due to its superior product quality. (d) Decline stage: Pricing strategy varies depending on conditions. (i) If buyers perceptions about the firms quality of product / service is good, then the price need not be lowered, but costs should be reduced to earn profits, (ii) if the quality of product / service is equal of lower than competitors, a firm may cut prices, to increase sales volume above break even volume, (iii) if some

competitors have withdrawn, a firm may selectively increase prices to less price sensitive segments. Responding to competitors price changes 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 companys sales and profits, if it does 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 price. The right response depends on the business situations faced by the firm. Pricing policies Purpose: A firm evolves pricing policies to adjust basic prices (or price list) for different types of customers (like OEMs, users, and dealers) who buy various quantities and are located at different locations. The price list is adjusted with different types of discounts and allowances. Price list is a statement of basic prices of a product, having various sizes/specifications. Net price = price list (or list-price) less discount (or allowances). Business buyers are more interested in net price Types of discounts: Trade, quantity (or volume), and cash. Trade discounts: It is offered to traders or intermediaries (dealers / distributors / stockiest) and it should be equal and sufficient (as per industry

not

norms or functions performed). E.g. price list (100) trade discount (15) = net price (85) Volume / Quantity discounts: Here, the objective is to encourage customers to buy larger quantities, which would reduce the costs of selling, inventory carrying and transportation. The quantity (or volume) discounts are given either on single orders over a period, usually one year (cumulative basis). Cash Discounts: The objective is to get prompt payments. If a credit customer pays the bill before dispatch or within 7-days of dispatch, the customer is given cash discount on the gross amount of bill. The extent of cash discount depends on the bank rate of interest. Give cash discounts through credit notes and the cheques, instead of including it in the bills. Geographical Pricing It includes decisions on how to price the companys products to customers located in different geographic areas. There are two alternatives: (i) Ex Factory Pricing: It means prices quoted are based on the prices at the factory gate, i.e. freight (Transportation costs) and transit insurance costs are to the customers accounts. Hence, the landed price (or costs) to customers vary depending on their geographic locations. (ii) F.O.R. Destination Pricing: Here, the quoted prices include freight costs. Transit insurance is a small amount to be covered by the customers open insurance policy. Hence, all customers get the product almost at the same price, despite different geographic locations. Marketer adds the average freight cost to the basic prices and then prepares the price list, or absorbs the freight cost, if competition demands. Taxes and Duties: Knowledge of excise duty, sales tax, octroi, entry tax, road permits etc is essential for sales and marketing persons, since they have an impact on the landed price (or costs) to business buyers. Role of leasing

Business buyers have options of either leasing or buying capital items like machinery. The advantages for the lessee (asset user) are : (i) conserving capital, (ii) gaining tax advantages, (iii) getting the latest products. The lessor (asset owner) often earns good income from buying firms who can not afford outright purchase. A lease is a contract (or an agreement) by which the asset owner (lessor) gives the right to use the asset to another party (lessee) in return for payment, over a specified period.

STRATEGIC PLANNING, IMPLEMENTING AND CONTROLLING IN INDUSTRIAL MARKETING Characteristics of market oriented organizations Firms achieve market orientation by Managing the following factors. (i) Shared values (ii) Organization structure, policies and culture (iii) Strategic Planning (iv) Needs or expectations of stakeholders Strategic planning process at corporate level The major steps involved are: Deciding corporate mission and objectives Establishing strategic business units (SBUs) Allocation of resources to SBUs Developing corporate strategies Marketing Planning Process The head of marketing prepares the marketing plan (short-term up to one year) after going through Marketing Planning Process, which includes the following steps: (i) (ii) (iii) Analyzing marketing opportunities Segmenting and selecting target market segments Developing marketing strategies\

(iv) Implementing and controlling the marketing plan

The head of marketing now prepares the writhen document, called marketing plan, with the following steps. Situational analysis: Market, competitive, product, and macro environmental analysis. SWOT and Issues analysis Marketing Objectives and goals Marketing Strategy: Selection of target market segments, positioning, marketing mix, customer service and marketing research. Action plans / Tactics Marketing Budget Implementation and control: Building marketing organization and control process. Contingency plan Implementation of marketing plan It is a process that turns marketing plans into action plans and ensures that the tasks or activities of action plan are executed in as manner that achieves the marketing objectives and goals. For this the necessary organization structure and people are selected. Marketing resource management (MRM) software will help marketers to improve their decisions, and also in implementation and controls. Control Process includes (a) (b) (c) (d) setting goals measuring actual performance comparing goals and actual performance analyzing causes of deviations, if any (e) Taking corrective actions, if needed. Types of controls: (i) Strategic control (ii) annual plan control

(iii) (iv)

efficiency control Profitability control.

BUSINESS-to-BUSINESS (INDUSTRIAL) MARKETING THROUGH ELECTRONIC COMMERCE What is e-commerce? E commerce (or Electronic Commerce) is selling goods and services over the Internet. Virtually all products are made available on the Internet. Customers can access pictures of goods, see the specs, find prices and other commercial terms of on line suppliers, place orders and pay electronically. Business to business (B2B) commerce is growing fastest, compared to business to consumers (B2C) and consumers to consumers (C2C) E commerce is also defined as business transactions that are conducted on line. Role of e -commerce 1. By use of the web, it has become level playing field for small and large suppliers, as well as, local and foreign suppliers. The location of a web site does not make a difference to the cost or speed of access. 2. E mail is a major new communication tool that is instant, cheap, and can be read any time. It has a power of one on one message for B2B and B2C communication. Applications of E commerce: on - line marketing, including advertising Communication with business partners like customers, suppliers & distributors Managing logistics process (Physical movements of goods)

Processing orders, invoices, & transfer of funds

Reasons for E-Commerce Convenience: Online buying can be done at any convenient time. Saving: Large saving in cost by using Internet to link to business partners, like customers suppliers & distributors. Information: Good web sites provide more information and it flows two ways between buyers and sellers. Personalization: of sales/advertising messages and products. Many Alternatives: or choices are available to buyers from markets all over the world. Key elements supporting e-commerce

These are: The Internet & world wide web (www) Intranets & Extranets 1. The Internet: It is inter connected networks of computers. It has made possible instant and global communication. The Internet users can send e mail, exchange information, and buy products / services. The Internet itself is free, but users need to pay to Internet service provider. The Internet users are several millions & the number is growing. 2. World wide web (www): It is the most popular Internet navigation tool, which makes the Internet more accessible and easier to use by non-experts. Technically it is a system of hypermedia linking text, graphics, sounds, & video on computers it finds and gets information in a multimedia format.

Intranet A computer network that links users in a single organization. Access to an intranet is limited to authorized users, who are employees or members of an organization / company. Extranet It is set up to allow business partners like major suppliers, customers, & distributors to connect to the company internal network (intranet). The purpose is to allow information exchange, orders, transactions, and payments. Business partners are given the unique password to access the companys Intranet.

Question 1: Explain briefly the main differences between consumer and industrial marketing. Answer : The main differences between consumer & business marketing are in the characteristics of market, product, channel, price, and buyer behavior. (i) In business marketing, there are relatively few buyers compared to mass markets (or large number of buyers). (ii) In business marketing products are typically customized and technically complex, as compared to standard products in consumer markets. (iii) Interpersonal relationships between buyers and sellers are stable in business markets, as compared to nonpersonal relationship in consumer markets between manufacturers and buyers. Purchase decisions in business markets are mainly on rational or performance basis compared to physiological, psychological or social needs basis in consumer markets. (iv) Distribution channels are more direct, and multi-channel strategies are practiced in business markets, as compared to indirect channels and a few channels in consumer markets. (v) Competitive bidding and negotiated prices are widely used in business markets, as compared to price-list and maximum retail price (MRP) used in consumer markets. Question 2: Illustrate with an example why industrial demand is called derived demand. Answer: The demand for industrial products / services depends upon (or derived from) the demand for consumer products / services. For example, demand for steel depends upon (or derived from) the demand for automobiles, refrigerators, furniture, etc where steel is used. Hence, demand for steel is derived from the demand for consumer products like automobiles, refrigerators, furniture, etc. Question 3: In what manner do the purchasing practices in government organizations differ in comparison to commercial enterprises in private sector? Answer: In government organizations, purchasing is done by first issuing the tender notices in the newspapers. Approved suppliers submit their bids to the government organization. In

open tender, the bids of approved suppliers are opened in their presence; prices and other terms are read. The orders are placed on the supplier (s) who has (have) quoted the lowest prices. However, in closed tender, tender enquiry is sent to a few limited suppliers and orders are finalized generally after negotiations on suppliers whose prices are lowest. In contrast, purchasing in commercial organizations are done based on negotiations and performance evaluation of suppliers on various parameters like quality, delivery, service, prices etc. The decisions are made by buying centre (or purchase committee) members from technical and commercial departments. Questions 4: Explain with examples the different strategies that can be used by business marketers to manage external environment. Answer: Business marketers can manage external environment by managing one or more of the following three strategies. (i) Independent strategies. Here, the firm makes independent efforts in managing an external environment by using its own resources. e.g. a factory manufacturing chemicals, installs equipments to treat the effluent, before discharging it into the field. (ii) Cooperative strategies. The firm cooperates with other companies, or groups to manage environment. For instance, Confederation of Indian Industries (CII) was formed with one of the purposes of protecting Indian industries and firms from political and legal regulations of the government. All firms are members of CII, the objectives of which are to protect the Internet of all members. (iii) Strategic planning. A company adapts to a changing environment by practicing market-oriented strategic planning, which aims to achieve targeted profits and growth even when unexpected marketing environment may adversely affect its businesses. Question 5: At what stage (s) of business buying process the industrial marketers should get involved and what are the benefits of such an involvement? Answer: If a business marketer or a sales person identifies a problem in the customer organization (i.e. phase 1 of buying process) and suggests a solution to the problem with his companys products / services, he has a good probability of getting selected as a supplier. During phase 3, when buying firm is developing specifications of needed product, if a sales person of supplying firm gets involved, he can include his companys product specifications and characteristics. This would give an advantage to the supplying firm in getting the order. Question 6: If you were to market textile machinery to a large textile mill, who could be the members of buying centre and what role each member may play is buying decision making? Answer: The buying centre would consist of the following members, whose roles are also indicated. Technical persons like production manager, design engineer, maintenance manager, and quality control manager could be the members with the roles of initiator, user and influencer respectively.

Purchase executive could also be a member with the role of a buyer to coordinate buying activities internally (within the firm) and externally with suppliers top management (General Manager / VP / Director) may be a member of buying centre, with a role of a decider or the leader of the buying centre. Question 7: Why the Win Win style is recommended while negotiating with customers? What guidelines would you follow to adopt this style? Answer: Win Win style is used for customers because the marketer wants to develop a long-term mutually satisfying relationship with customers, based on trust and understanding. The guidelines followed for this style are: (i) Be polite and humble; (ii) Before negotiations are held, build trust and confidence with a number of visits to the customer; (iii) At the start of negotiation, identify the problem(s) or issue(s) and have an agreement on that; (iv)Then both supplier and buyer should work together, pooling their ideas, information, and resources; (v) Regular frequency of concession and avoidance of legal and defensive approaches are other guidelines to be followed. Question 8: How would you recognize, if your customer uses I win, you lose style? How would you defend your position? Answer: You can recognize if your customer uses I win, you lose style, based on the following guidelines: (i) The customer makes a ridiculous / laughable demands; (ii) The customer raises his voice, or becomes emotional; (iii) Does not reciprocate or makes a very small concession, when you (the marketer) make substantial concession. You can defend your position by (a) Stating why you hold your position, without getting emotional; (b) Ask why the customer is holding his position; (c) Indicate to the customer the result of the failure to solve the problem or the issue. The objective is to move the customer from I win, you lose style to Both of us win style. Question 9: For what types of marketing decisions, conducting industrial marketing research studies would be useful and why? Answer: Marketing research studies in business markets help in getting information that are useful in decision making. Some of them are as follows: (i) Market share analysis of a product for a company and its competitors is useful information that helps to decide future sales and market share goals of the company. (ii) Competitors analysis is useful for a firm as it gives information about the customers perceptions on the competitors strengths and weaknesses in

(iii)

relation to product quality, service, distribution, prices, discounts, promotion, etc. The firm can make effective marketing strategies on positioning, pricing, promotion and distribution. New product acceptance, sales quota determination, benchmarking, market potential analysis, etc. are some of the other market research studies carried out by business marketers.

Question 10: Describe how industrial marketing research is a part of industrial marketing intelligence system and how it helps the industrial marketers in decision-making. Answer: Industrial marketing research is one of the parts or components of industrial marketing intelligence system. Other components are internal information system, secondary data sources, and decision support system. Industrial marketing intelligence system provides relevant, accurate, and timely information on a continuous basis to the marketing manager for decision making. The system gathers, stores, analyses, interprets and disseminates relevant marketing information, which is used for decision-making. Question 11: Which target market strategy would you recommend to Steel Authority of India (SAIL), a large public sector company, manufacturing and marketing steel products in domestic market in India and also in International markets and why? Answer: Assuming target market segments of automotive, construction & cold rolled coils, the target market strategy to be used by SAIL would be differentiated marketing with separate marketing strategy (like product, pricing, distribution) for different target market segments. There may be some difference in domestic and international markets, in terms of customer needs and hence the marketing strategy may differ to that extent. Question 12: Describe the steps you will follow to develop a positioning strategy for a smallscale motor manufacturer in a competitive market and how will you communicate the positioning strategy to the target segments? Answer: The steps followed will be as follows: (i) I would conduct a market survey to know the major factors (or attributes) considered by the target market segments (i.e. small & medium scale manufacturers, and dealers) when they decide to buy motors. Assume these are: low/competitive prices & reasonable quality. (ii) Based on the strength of my company, I would select one or more factors for differentiation. Here, reasonably good quality product at a competitive price are the differentiating factors, using the perceptual mapping technique. (iii) The company will communicate the same message through the different promotional media used, namely, sales persons, industrial directories, product catalogues and dealer sign boards. Question 13: Why industrial marketers have to make changes in the product strategy?

Answer: Product strategy is dynamic and changes are required in product strategy due to changes in (i) customer needs, (ii) technology, (iii) government policies / laws, (iv) product life-cycle. For example, change in technology from main frame computers to personal computers (PC), and change is customer needs to save cost on storage of raw materials and finished products by stacking material from 2 meters to 6 meters high vertically, instead of spreading horizontally, as the cost of land has gone up substantially. Question 14: How can the industrial marketer change the marketing strategies when the product enters maturity stage from the growth stage? Answer: In maturity stage, the strategies followed are (a) Expand the market by entering new market segments (e.g. domestic to international markets), or attracting competitors customers and holding on to the existing customers with superior quality and competitive pricing. (b) Modify the product through quality improvement, adding new product features, and improvement in style or design. (c) Cut the costs, wherever possible, to maintain profits. Question 15: Describe with at least one example the industrial products and markets that use (a) direct channel of distribution, and (b) indirect channel of distribution. Answer: Direct channel structure is used by the manufacturers of power transformers, machine tools, and furnaces, because some of the critical functions like promotion, selling, providing information, and technical service can be performed more effectively by the manufacturer than the intermediaries. The manufacturer uses direct channels like the companys sales force (i.e. direct selling), and direct marketing through online marketing, telemarketing and direct mail. The direct channel is typically used by the manufacturer when the value of each transaction is large, selling includes technical and commercial negotiations with business customers at senior levels, buying process takes a long time, and sometimes the business buyers want to deal with the manufacturers only and not with intermediaries. Indirect channel structures are used by steel, electrical equipment (motors, alternators) and industrial chemical manufacturers because some of the critical functions like promotion, selling, warehousing, financing, and providing information are shared between the manufacturers and the intermediaries. The type of intermediaries are manufacturers representatives or agents, distributors / dealers, and commission merchants, who are typically used when the business buyers are widely dispersed and the manufacturers resources are not adequate to perform the critical functions effectively. Question 16: Explain how total cost approach is useful in managing the complexities in relationship between various activities of marketing logistics. Answer: The major activities of marketing logistics are transportation, inventory carrying, warehousing, and customer service. If the firm wants to achieve a high level of customer service (i.e. perfect order execution), the cost of physical distribution (or marketing logistics)

goes up, due to increase in inventory, warehousing and transportation costs, which are individual cost elements. Instead of minimizing individual cost elements, a firm should minimize the total cost of physical distribution. Individual cost elements have complex relationship with other cost elements. For example, if a firm tries to minimize inventory cost, the cost of lost orders and the total cost would go up. Hence, the company should select a system that minimizes total distribution cost. Question 17: Assume you have taken over as a manager of a branch which was not performing well. What steps will you initiate to improve the sales and profit performance of the branch? Answer: Before initiating any steps for improvement, the new branch manager should talk with sales persons, a few major customers, and other functional staff. He should also analyse the branch sales performance with respect to sales quota of sales persons, customers, and products. Thereafter, the branch manager would be in a position to understand the areas needing corrective actions. Some of the possible areas of improvements could be: (i) Training sales persons depending on their deficiencies; (ii) Clarifying the responsibilities or expectations clearly to the sales people; (iii) Creating a favorable work environment and working relationship with sales persons; (iv) Ensuring high potential customers are visited with adequate frequency and for more duration of time, by implementing a system like ABC Analysis; (v) Superior quality of customer service, as required by customers. Question 18: What are the differences in establishing special sales management programmes for major accounts and national accounts? Answer: Both major accounts (customers) and national accounts (customers) have high sales and profit potential. The difference is that the major customer has operations at one location and hence relatively simple to serve. The national customer has operations at various geographic locations and hence relatively complex or difficult to serve. The special sales programme or strategy may have some common elements as well as some differences. The common objective of both major and national account is to become a preferred or sole supplier. The similarity in strategy or sales programme includes (i) Team selling, (ii) Relationship marketing, (iii) Support from senior and functional managers. The difference is only in terms of composition of team members, which would include branch manager, sales rep., inside sales person and technical support person (for technically complex products / services) for a major customer. For a national customer, the team would be headed by a national account manager and would include branch sales reps., branch managers, logistics executive, inside salesperson, and technical support person (if needed). Question 19: What kind of promotional tools and media will you suggest to the manufacturer of machine tools and why?

Answer: The criteria used for selecting the promotional tools and media by a firm are: (a) target audience to be reached, (b) objectives of communication (or promotion), and (c) Promotional budget. For a firm manufacturing and marketing machine tools, the promotional tools and media could be (i) advertising in machine tools journal and industrial directories; (ii) sales promotion through trade shows / exhibitions conducted by machine tools association; (iii) direct marketing by using online marketing & direct mail; (iv) personal selling by use of team selling and relationship marketing strategies. The extent to which these promotional tools and media are used by the company will depend on the promotional budget. Question 20: Which sales promotion tools and media would you suggest to the company in courier service and why? Answer: The criteria used for selecting the promotional tools and media are the same i.e. (a) target audience to be reached, (b) promotional objectives, and (c) promotional budget. In addition, while selecting the print media in advertising, the courier service company should select general business publications like Business India or Businessworld, which cut across many industries and functional areas. Promotional novelties (gifts), promotional letters and entertainment would be useful sales promotion methods; direct marketing methods like direct mail, telemarketing, and on-line marketing could also be used; personal selling through the company sales force would be useful for getting business from business customers, where relationship marketing and team selling techniques could be used for major and national customers. Question 21: If a major competitor reduces the prices of steel by 10 percent, how would you respond, assuming you are marketing similar products to the same market segment and why? Answer: Steel being from non-homogeneous product market, there are many alternative ways to respond to the price cut of the major competitor. However, before responding, we should consider the following questions or issues: (a) Why did the competitor reduce the price? (b) Is it a permanent or temporary price change? (c) What will happen to our sales, market share, and profits, if we do not respond? (d) What would be the response of other competitors? Depending on the answers to above questions, my company would select one of the following alternative decisions: (i) No change in price (or maintain the price); (ii) maintain price and add value, by improving the quality of the product; (iii) reduce the price by 10 %, or more than 10 %, or less than 10%. The factors considered while selecting the alternative are: (x) customers sensitivity towards price and quality, (y) products stage in the life-cycle, (z) competitors resources and intentions. Question 22: What kind of pricing strategy would you suggest to a leading computer software company which wants to introduce a new high-tech software package to industrial market segments for the first time? Make suitable assumptions, it needed. Answer: There are basically two alternative pricing strategies available for a new product: (a) skimming (high initial price) strategy, and (b) penetration (low initial price) strategy. For a new high-tech product, skimming strategy is appropriate because (i) high-tech product is a

strong barrier to market entry for competitors, (ii) innovators and early adopters are not price sensitive for a high-tech product. Later on, as the product gets established and the competition increases over a time period, price may have to be brought down for marketing to price-sensitive majority group of potential customers. Question 23: If you are asked to develop a marketing plan for a company manufacturing a wide range of electric motors from 0.5 HP to 3000 H.P., how will you go about it? What are the elements of your marketing plan? Answer: Most marketing plans are for one year. The marketing plan is an output of the marketing planning process, which consists of the following steps. (a) Analyzing market opportunities. Assuming the company has an industrial marketing intelligence system to obtain information about market potential, companys and competitors market shares, types of customers and products, buying behaviour of customers, competitors and the companys strengths and weakness and marketing environment. (b) Developing marketing strategies. The company has to decide which segments of markets it wants to target for different product groups. For fractional horsepower (FHP) motors, original equipment manufacturers (OEMs) like mixers, washing machines, room-air conditioners may be the target segments, for high horsepower and high voltage motors (also called High Tension (HT) motors), the target segments may be power generation units and large factories. Other marketing mix elements the 4Ps strategies like product, pricing, distribution, and promotion have to discussed and decided. (c) Planning marketing expenditures to achieve the objectives. The marketing expenditure budget is generally a percentage of the sales goal, which is linked to the companys market share. The expenditure budget is then allocated to various marketing entities like products, channels, branches, promotional tools, etc. (d) Organizing, implementing and controlling is the last step in the marketing process. It reviews the marketing organization that is needed to implement and control the marketing plan. The outcome of marketing process is the written document called marketing plan, which has the following elements: (i) Situational analysis, containing market, product, competitive and macro environmental situations; (ii) SWOT and issues analysis; (iii) Objectives and goals; (iv) Marketing strategy; (v) Action plan, (vi) Marketing budget; (vi) Implementation and control; (vii) Contingency plans. Question 24: Many good marketing strategies fail, because of poor implementation. Do you agree to this statement? Explain with reasons. What skills are required by a marketing manager for an effective implementation of marketing plans? Answer: Yes, the statement is correct, because if a good strategy is not properly translated into specific action plans and implemented on priority basis, the strategy only remains on

paper. For example, the company decides on the strategy of relationship marketing for its major customers. However, the action plan indicates the responsibility of building strong, long-term, and mutually beneficial relationship to the branch managers, without specifically mentioning approaches such as financial and social benefits, as well as structural ties. A strong support from top management and functional heads is also lacking. No wonder that the strategy does not increase the firms sales and profits from its major customers, due to poor implementation. The skills required for effective implementation of the marketing plan are allocating, monitoring organizing, and interacting skills. Question 25: What are the benefits available from electronic markets to industrial marketers? Answer: Electronic commerce (or e-commerce) in addition to providing information to visitors about the company, its history, policies, products, the company or its web-site, offers to transact or facilitate the selling of products and services online. The benefits of ecommerce are (i) substantial reduction in the cost of conducting business on the Internet, (ii) improved customer service, (iii) improved corporate image, (iv) finding prospective customers, (v) meeting expectations of customers, and (vi) expanding markets through international reach. Question 26: What changes are required in the marketing strategies when industrial marketers plan to change from non-electronic to electronic environment? Answer: Many non-electronic (brick-and-click) companies moved to open web sites to change over to electronic environment. However, they struggled to conduct online sales, as the move created a channel conflict with offline agents and distributors. These channel conflicts are a part of multi-channel strategy and they can be resolved. The major issues regarding changes in the marketing strategies and tactics are: (i) Designing an attractive web site, (ii) Communicating product positioning and product information through the website with interactive contents, (iii) Channel strategy will include online marketing as one of the multi-channels to meet the requirements of the buyers who are interested in e-purchasing, (iv) With one-to-one marketing method that is followed on the Internet, each customer will ask for a specific product and price to meet his/her individual needs, (v) E-commerce will enable marketers to capture behavioral data and update the database. Question 27: Indian software companies are now trying to become multinational by acquiring local companies in various countries. What are the advantages and disadvantages of this strategy? Answer: The advantages are the local companys knowledge of the market and its reputation in the local market. However, the selection of the company for acquisition is important, as a wrong selection can be costly and painful, particularly if local laws favour local companies. The advantage of getting business quickly from existing local company can be sustained if the selection of the company and its people are made correctly.

Question 28: If you are heading an Indian manufacturing company, explain what your strategy will be to establish your companys brand name in the overseas markets like Europe, SE Asia, etc. Answer: One of the effective ways to establish the companys brand name at a law cost and risk is to participate in the international fairs and exhibitions. Many of these trade-shows are product or industry specific. The contacts developed at these shows can then be followed up and commercial relationships built up.