Products & Services for Businesses

Chapter 13 By Professor Riaz Khan

Chapter Learning Objectives

The importance of derived demand in industrial markets
How demand is affected by technology Characteristics of an industrial product

The importance of ISO 9000 certification

The growth of business services and nuances of their marketing The importance of trade shows in promoting industrial goods The importance of relationship marketing for industrial products and services

Demand in Global Business-to-business Markets

3 Factors the affect demand in international industrial markets vs. consumer markets 1. Volatility of Industrial Demand Due to such things as: Buyers tend to act and behave in the same manner Derived Demand (demand dependent on other sources) accelerates changes in the markets 2. Stages of Economic Development The stage a countrys economic development will affect the demand for industrial products. What is the degree of industrialization in that country? Stages Traditional society Pre-conditions for take off Take off (Russia, Romania) Drive to maturity (NICs like South Korea) Age of mass consumption (U.S., Japan, Germany)

Demand in Global Business-to-business Markets

3. Technology and Market Demand

Technology is critical in economic growth The 3 trends that will continue to spur demand for technologically advanced products
1. Expanding economic and industrial growth in Asia (especially China and India) 2. The disintegration of the Soviet empire 3. Privatization of government-owned industries

The Volatility of Industrial Demand

Measures to manage volatility:
Maintain broad product lines Raise prices faster and reduce advertising expenditures during booms Ignore market share as a strategic goal Eschew layoffs Focus on stability

Quality and Global Standards

Important Points about global standards of defining quality:
Quality is defined by the buyer One important dimension of quality is how well a product meets the specific needs of the buyer This pricequality relationship is an important factor in marketing industrial products Total quality management must be a part of all MNCs management strategy A lack of universal standards is another problem in international sales of industrial products Conflicting standards are encountered in test methods for materials and equipment, quality control systems, and machine specifications

ISO 9000 Certification:

1. ISO 9000s, a series of five international industrial standards (ISO 90009004) originally designed by the International Organization for Standardization in Geneva to meet the need for product quality assurances in purchasing agreements. Positively affects the performance and stock prices of firms ISO 9000 concerns the registration and certification of a manufacturers quality system It is a certification of the existence of a quality control system a company has in place to ensure it can meet published quality standards ISO 9000 standards do not apply to specific products It is a certification of the production process only, and does not guarantee that a manufacturer produces a quality product or service. A voluntary program that requires companies manufacturing or processing systems to pass the certification process

2. 3. 4. 5. 6. 7.

Business Services
Important points about business services:
Services offered other than the tangible product can be more profitable than the revenues gained from the sale of the product
After-sale services include: Prompt delivery Training Parts replacements Other Business services offered: Many international services have been created because companies need to serve their clients oversees (hotel chains, healthcare providers, advertising and accounting firms)

After-Sale Services
Installation Training Spare and replacement parts
Delivery time Cost of parts

Service personnel Crucial in building strong customer loyalty Almost always more profitable than the actual sale of the machinery or product

Trade Shows
Important points about trade shows
1. Trade shows are utilized more often in European and Asian countries than in the U.S.
Trade shows have become the primary method of selling and marketing products in most countries In Europe, companies spend on average of 22% of their total annual media budget on trade shows, vs. U.S. which spends less than 5%. Virtual trade shows are another way to bring customers to different products and services.

Trade Shows
Trade shows serve as the most important vehicles for selling products, reaching prospective customers, contacting and evaluating potential agents and distributors, and marketing in most countries Trade shows provide the facilities for a manufacturer to exhibit and demonstrate products to potential users and to view competitors products
Trade shows create an opportunity to create sales and establish relationships with agents, distributors, franchisees, and suppliers that can lead to more-permanent distribution channels in foreign markets

Relationship Marketing in Business-to-Business Contexts

Building long-term relationships with customers is a viable strategy for business-to-business marketing The objective of relationship marketing is to make the relationship an important attribute of the transaction, thus differentiating oneself from competitor It shifts the focus away from price to service and long-term benefits The reward is loyal customers that translate into substantial long-term profits Focusing on long-term relationship building will be especially important in most international markets where culture dictates stronger ties between people and companies