Prof. B.K.

Murty,
Bangalore, India

BUSINESS MARKETING

Also Known as :

Prof. B.K.Murty,

Bangalore, India

Industrial Marketing Or B 2 B Marketing

Recommended Books

Main
Industrial Marketing, Robert R Reeder & Reeder PHI
Prof. B.K.Murty,
Bangalore, India

Business Marketing Management, Michael D Hutt, Thomas W Speh Thomson, 8/e, 2004 Other

Industrial Marketing, Richard Hill, Alexander, James S Cross AITBS

 Prof. B.K.Murty,

Bangalore, India

Module 1
Dimensions of Industrial Marketing

VTU Syllabus Coverage Dimensions of Industrial Marketing: Nature of Industrial Marketing Industrial marketing Vs. Consumer Marketing, Economics of Industrial Demand The resellers market The industrial Marketing concept, Understanding Industrial markets, Types of Industrial markets, Classifying Industrial Products, Organizational Procurement Characteristics The Industrial Marketing Environment, Environment effect on industrial Market with special reference to government Rule.

Prof. B.K.Murty,

Bangalore, India

Industrial Marketing
Marketing aimed at bringing about an exchange in which a product is sold for any use other than personal consumption.

Prof. B.K.Murty,

Bangalore, India

Buyers can be: Manufacturers or resellers Governments Not-for-profit organizations

DEFINING INDUTRIAL MARKETING

Industrial marketing consists of all activities involved in the marketing of products and services to organizations ( commercial, profit or non profit institutions, government agencies or resellers) that use products or services in the production of consumer or industrial good and service, and to facilitate the operations of the enterprise.

Prof. B.K.Murty,

Bangalore, India

What is a Business Market?

Prof. B.K.Murty,
Bangalore, India

A business market comprises all the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others The B2B market is very large and involves much more money and goods than consumer markets.
(The purchasing dept. at GM spends more than $85 billion each year more than the GDPs of Ireland, Portugal, Turkey, or Greece.) At $200 billion, U.S. Govt. is largest customer in the world.

NATURE OF THE BUSINESS MARKET

Prof. B.K.Murty,
Bangalore, India

Like a final consumer, organizations purchase products and services to fill needs Their primary need is meeting the demands of their own customers Business buying decisions:

Are more formal Involve complex interactions among many people Must consider the organizations goals

TYPES OF TRANSCATIONS / EXCHANGES

Product exchange:
Prof. B.K.Murty,

Bangalore, India

Supply of raw materials to the organization to process the finished goods for the end user or consumer.
Examples : . Supply of soap/ detergent powder to the manufacturers of soaps or detergents. To HLL there must be suppliers of the raw materials of soap/detergent raw materials to give the end product s like Rin Detergent Bar or Surf Excel.

Information Exchange:
Prof. B.K.Murty,
Bangalore, India

When one organization gives the technical knowledge, economic consultancy, or giving replies to organizational questions

Example :
Installation of software Legal advise Consultancy services

Financial Exchange:
Prof. B.K.Murty,
Bangalore, India

Grant of credit facilities or exchange of currency from one organization to another country. Example: Industrial Development Bank of India (IDBI)

 Prof. B.K.Murty,

Social Exchange: Social exchange is important in areas of reducing uncertainty.& maintaining a better relation over a long period of time.

Bangalore, India

 Prof. B.K.Murty,
Bangalore, India

Characteristics of the Business Market

Prof. B.K.Murty,

Bangalore, India

Relatively few customers Derived demand for goods & services Expertise in buying

Prefer to buy direct from manufacturer Importance of repeat transactions

Some More Business market characteristics

Close supplier-customer relationship Geographically concentrated buyers Inelastic demand Fluctuating demand Several buying influences Multiple sales calls Reciprocity Leasing

Prof. B.K.Murty,

Bangalore, India

Industrial v/s Consumer Marketing

Prof. B.K.Murty,

Bangalore, India

Consumer marketing and industrial marketing have the same tenets but significant differences do exist. a. Market Size b. The Geographic Concentration

c. The Competitive Nature of the Market.

Business-to-Business Marketing
Product
Relatively technical in nature, exact form often variable, accompanying services very important

Consumer-Goods Marketing
Standardized form, service important but less than for business products

Price
Prof. B.K.Murty,
Bangalore, India

Competitive bidding for unique items, list prices for standard items
Emphasis on personal selling to market

List prices

Promotion

Emphasis on advertising Product passes through a number of intermediate links en route to consumer

Distribution Relatively short, direct channels

Customer relations Decisionmaking process

Relatively enduring and complex

Comparatively infrequent contact, relationship of relatively short duration Individual or household unit makes decision

Involvement of diverse group of organization members in decision

 Prof. B.K.Murty,
Bangalore, India

ECONOMICS OF INDUSTRIAL DEMAND: Demand for the industrial demand develops from the ultimate demand for consumer goods and services. Demand is derived from the choice and likes of consumers.
Prof. B.K.Murty,
Bangalore, India

There are principally three types of demands in industrial marketing. 1. Derived Demand. 2. Joint Demand. 3. Cross Elasticity of Demand.

RESELLERS MARKET
Market Characteristics Large number ( e.g. Foodworld)
Prof. B.K.Murty,

Bangalore, India

Product Characteristics Purchasers brand ( e.g. ITC ) Buyers Characteristics Choice based on sellers offer Channel Characteristics Depends on types of product Promotion Characteristics Personal Selling Price Characteristics Purchasers profit based directly on cost

Industrial Marketing Concept

Key Task of the organization is to define the needs of the target market and adapt organizations product or service to satisfy those needs more effectively than its competitors.
-- Kotler

Prof. B.K.Murty,

Bangalore, India

 Prof. B.K.Murty,
Bangalore, India

UNDERSTANDING INDUSTRIAL MARKETS

OBJECTIVES
The diversity of industrial customers and the types of products and services they purchase. The type of customer being served and the product or service being marketed influences marketing strategy. The unique characteristics of organizational purchasing.

Prof. B.K.Murty,

Bangalore, India

Components of the Business Market

Commercial Market: Individuals and firms that acquire goods and services to support, directly or indirectly, production of other goods and services

Commercial Market

Prof. B.K.Murty,

Bangalore, India

Industrial Distributors & Dealers

Original Equipment Manufacturers ( OEM)

Users

Categories can overlap

Components of the Business Market

Commercial Market

Prof. B.K.Murty,
Bangalore, India

Trade Industries: Retailers and wholesalers who purchase goods for resale to others. Reseller: often used to describe the wholesalers and retailers that operate in the trade sector

Components of the Business Market

Government
Government Organizations

Organizations: Include domestic units of federal, state, local and foreign governments

Prof. B.K.Murty,

Bangalore, India

Components of the Business Market

Institutions: Public & private Profit / non profit
Institutions

Prof. B.K.Murty,

Bangalore, India

Hospitals,

schools, prisons, clubs

The Diversity of Industrial Markets and Products Purchased

Prof. B.K.Murty,

Bangalore, India

CLASSIFYING INDUSTRIAL PRODUCTS

Prof. B.K.Murty,

Bangalore, India

Materials and Parts

goods that enter the product directly;

Capital Items

goods that affect the cost structure of the firm

Supplies and Services goods that facilitate the firm's

operation.

Materials and Parts

Raw Materials
Prof. B.K.Murty,
Bangalore, India

Manufactured materials & parts

Gears ( for cars ) Packaging ( for foods )

Lime stone ( for cement) Sugar ( for chocolates)

Marketing Implications Standardization ( Bolts, bearings - ISI) Custom made Replacement markets

Capital Items
Installations
Prof. B.K.Murty,
Bangalore, India

Accessories
Drills Computers

Buildings Computer center

Marketing Implications Direct interaction Negotiations

Intermediate channels

Supplies & Services

Supplies
Soaps Lubricants
Prof. B.K.Murty,
Bangalore, India

Services
Travel agencies House keeping

Marketing Implications

Across organizations Purchasing agents

Word of mouth Past reputation Consultative

DISCUSSIONS
Same product as consumer & industrial product Same product with multi-classifications Cars Salt Tea Travel agency Security Services
Examples of products or services which are never: Consumer Industrial

Prof. B.K.Murty,

Bangalore, India

UNIQUE CHARACTERISTICS OF ORGANIZATIONAL PROCUREMENT

Prof. B.K.Murty,

Bangalore, India

How goods and services are purchased by commercial enterprises depends on Nature of the business, Size of the firm, Volume, Variety Technical complexity

UNIQUE CHARACTERISTICS OF ORGANIZATIONAL PROCUREMENT Multiple Influencers.

several people share the purchasing decision.
Prof. B.K.Murty,
Bangalore, India

Technical Sophistication.
materials requirement planning, supplier rating systems, economic order quantity and value analysis
systematized techniques for reducing costs and improving the performance value of materials, components, and manufacturing processes.

Purchasing in Government Units

Widely Dispersed Markets.

Complicated Procurement Laws.

Prof. B.K.Murty,
Bangalore, India

Government Contracts.
Fixed price contracts Cost re-imbursement contracts Negotiated contract

Institutional Purchasing
Somewhere between commercial enterprises and government.
Prof. B.K.Murty,
Bangalore, India

Purchasing in the Reseller's Market

Primarily on the expected contribution toward increased sales volume and profits.

 Prof. B.K.Murty,

Bangalore, India

The Industrial Marketing Environment

The Industrial Marketing Environment

Prof. B.K.Murty,

Bangalore, India

Buyer Seller Interface

Publics
Macro Environment

Government

Input Suppliers

Facilitators

Buyer Seller Interface

Prof. B.K.Murty,
Bangalore, India

Distributors

Competitors

Communities of interested parties who are not direct participants in a market as customers, channel members, suppliers, or competitors.

Prof. B.K.Murty,

Bangalore, India

Public Interest Groups Financial Publics General Publics

Publics
Independent Press

Internal Publics

The Macro environment

Political Environment ???

Demographic Environment

Prof. B.K.Murty,

Bangalore, India

Physical Environment Technological Environment

Economic Environment Cultural Environment

Ecological Environment

GOVERNMENT INFLUENCE Both enabler & regulator Rules & laws

Taxes & duties ( e.g VAT) Labor laws Classifications ( e.g SSI) Impex barriers ( e.g WTO) Safety standards ( e.g. mines safety) Environmental regulations (e.g. Euro III) Funding methods ( e.g. WB aid) Social responsibility Industry protection ( MRTP etc)
Prof. B.K.Murty,

Bangalore, India

Anticipating Governmental Actions

Influencing Governmental Actions ( e.g. CII)

End of Module 1