This ppt has all the chapters from

Krishna K Havaldar.
But we have only Chapters 1,2,3,4,7
Hope this helps ;)

CHAPTER 1

IM/1-1/5

THE NATURE OF
INDUSTRIAL
MARKETING

Learning Objectives
Understand What is industrial (or Business to
Business) Marketing?
Know What are the differences in the characteristics of
industrial and consumer marketing?
Find out Why the demand for industrial goods and
services are called Derived demand ?

(A)

(B)

IM/1-2/5

What is Industrial (Business) marketing?

It is marketing of products / Services to
business firms.
In contrast consumer marketing is marketing
products / services to individuals & households.
What is the difference between industrial
marketing, B2B marketing, Business marketing
& Organizational Marketing?

No Difference!
(C)

What are the differences between Industrial

& Consumer Marketing?
Basic tasks of marketing are same difference
Exists in the characteristics shown next.

IM/1-3/5
AREAS / CHARCTERISTICS
Market

IND MARKETS
GEO Concentrated
Few Buyers

Products

Technically Complex
Customized
Very Important
Various Functional
specialists involved
Mainly Rational buying
decisions.
Interpersonal
relationship between
buyers and sellers.
More direct
Multi Channel

Service
Buyer Behavior

Channel
Promotional
Pricing

Importance to personal
selling
Competitive bidding /
Negotiated prices

CONSUMER MATKETS
GEO Disbursed
Large no. Of Buyers
(Mass
Markets
Non Technical
Standardized
Somewhat important
Family members involved
Physiological /
Psychological Social need
based buying decisions
Non Personal
Relationship.
Indirect
Few Channels with many
layers
Importance to Advertising.
MRP

IM/1-4/5

(D) Why Industrial Demand is called Derived

Demand ?
Because Industrial demand is derived from (or
depends on) demand for consumer goods /
services.
E.G. Steel is demanded for production of consumer
durable products like Cars & Refrigerators, which
are demanded by household consumers. Hence,
Demand for Steel is derived from forecast of
consumer demand for Cars, Refrigerators, Washing
Machines, Etc.,

SUMMARY OF CHAPTER-1

IM/1-5/5

Industrial / Business Marketing is marketing

of products / services to business firms.
Differences between Industrial & Consumer
marketing are seen in areas /
Characteristics like Market, Product, Buyer
Behavior, Channel, Promotion & Price.
Industrial Demand is derived from demand
for consumer goods / services.

CHAPTER 2

IM/2-1/10

UNDERSTANDING INDUSTRIAL
MARKETS AND ENVIRONMENT
LEARNING OBJECTIVES
Understand the types of industrial customers as
well as industrial goods and services.
Know the marketing implications for different
types of customers and products.
Understand the purchasing orientations and
practices of industrial customers.
Know types of environment and strategies to
manage external environment.

IM/2-2/10

(A) What are the types/classifications of

Industrial/Business customers?I N T E R M E D I A R I E S

/
M ID D L E M E N ( D IS T R IB U T O R S )

C O M M E R C IA L
E N T E R P R IS E S

O E M S
U S E R S

G O V E R N M E N T
C U S T O M E R S
IN D U S T R IA L /
B U S IN E S S
C U S T O M E R S
IN S T IT U T IO N A L
C U S T O M E R S

C O -O P E R A T IV E
S O C IE T IE S

P U B L IC S E C T O R
U N IT S (B H E L )
G O V T . U N D E R T A K IN G S
( R A IL W A Y S , D E F E N C E U N IT S )
P U B L IC IN S T IT U T IO N S
(G O V T . H O S P IT A L S )
P R IV A T E IN S T IT U T IO N S
(S C H O O L S , C O L L E G E S )
M A N U F A C T U R IN G
U N IT S ( S U G A R , M IL K )
N O N -M A N U F A C T U R IN G
U N IT S ( B A N K S , H O U S IN G )

F IG . T Y P E S O F IN D U S T R IA L / B U S IN E S S C U S T O M E R S

IM/2-3/10
(B) How are Industrial Products / Services Classified?
Classification into 3 Groups shown below.
R A W M A T E R IA L S (IR O N O R E , C R U D E O IL )

IN D U S T R IA L
PRODUCTS /
S E R V IC E S

M A T E R IA L S
& PARTS
(E N T E R P R O D U C T
D IR E C T L Y )

M A N U F A C T U R E D M A T E R IA L S
( S T E E L , F U E L O IL )

C A P IT A L IT E M S
(U S E D IN
P R O D U C T IO N /
O P E R A T IO N S )

L IG H T E Q P T (C O M P U T E R S , H A N D T O O L S )

S U P P L IE S /
S E R V IC E S
(T O S U P P O R T
O P E R A T IO N S )

S U P P L IE S ( L U B R IC A N T S , E L E C T R IC A L IT E M S )

C O M P O N E N T P A R T S (B E A R IN G S , T Y R E S )
S U B A S S E M B L IE S ( E X H A U S T P IP E IN M .C .)

H E A V Y E Q P T (M A C H IN E S , T U R B IN E S )
P L A N T /B U IL D IN G (F A C T O R IE S , O F F IC E S )

S E R V IC E S (L E G A L , C O U R IE R )

F IG . C L A S S IF IC A T IO N / T Y P E S O F IN D U S T R IA L P R O D U C T S / S E R V IC E S

(C) Marketing Implications for differentIM/2-4/10

types
of products & customers?
i.

For Materials & Parts, Direct selling is done

to large OEMs (Original Equipment
Manufacturers) and users, but indirect selling
through industrial distributors / dealers
becomes cost effective for smaller volume
OEMs and users.
ii. For Capital items, Direct selling through
company sales force is common, with extensive
interactions on technical & commercial factors.
iii. 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.

IM/2-5/10
(D) Purchasing Orientations of Business
Buyers

Business buyers/ Industrial customers follow one of the

three purchasing orientations:
(i) Buying, (ii) Procurement, or (iii) Supply chain
Management.
(i)Buying Orientation : The firm with buying orientation
follows the practice of (a) selecting lowest price supplier,
(b) gaining power over suppliers and (c) avoiding risk of
buying from new suppliers. It has a Short-term focus.
(ii)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.
(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.

IM/2-6/10
(E) Purchasing Practices of Different Types of
Industrial / Business Customers
(i)Purchasing in commercial enterprises
Involve Technical & Commercial depts.
Major Tasks / Procedure: identifying, negotiating,
selecting suppliers, building relationship.
Purchasing to improve operational efficiency &
contribute to firms competitive advantage.
(ii) Purchasing in Govt. units
DGS&D agency finalizes rate contracts for standard
products for Govt. units.
Main Tasks / Procedure : Registration of the firm & its
Products, Tender Advertisements, no negotiation in
Open tenders, negotiations done in closed / limited
tenders.
Orders Finalised on lowest bidders (suppliers offering
Lowest prices / Landed Costs)

IM/2-7/10
(iii) Purchasing in Institutions
If the Institute is a Govt. Hospital Purchasing
practices of Govt. units Followed
Similarly a private School / College follows
practices of commercial enterprises
However, better to study each major
institution.
(iv) Purchasing in cooperative societies
Similar to Institutional purchase.

IM/2-8/10
(E) Types & Analysis of Environment
A IR & W A T E R P O L L U T IO N
E C O L O G IC A L

S O L ID W A S T E D IS P O S A L
C O N S E R V IN G N A T U R A L R E S O U R C E S

P H Y S IC A L

E N V IR O N M E N T

W A T E R , P O W E R , T R A N S P O R T A T IO N
L O W -C O S T , S K IL L E D M A N P O W E R
C O M P A N Y L O C A T IO N , IM A G E / R E P U T A T IO N

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

R & D & P R O D U C T IO N F A C IL IT IE S
H R & F IN A N C IA L R E S O U R C E S
M A R K E T IN G E F F E C T IV E N E S S

EXTERNAL
( O & T A N A L Y S IS )

M IC R O
(A F F E C T S A
P A R T IC U L A R
F IR M )

C U S T O M E R S & C O M P E T IT O R S
S U P P L IE R S
E C O N O M IC

M ACRO
(A F F E C T S
A L L F IR M S )

T E C H N O L O G IC A L
G O V T ., P O L IT IC A L , L E G A L
C U L T U R A L & S O C IA L
P U B L IC - P R E S S , S H A R E
H O L D E R S , IN V E S T O R S &
P U B L IC IN T E R E S T G R O U P S

(F) Strategies for Managing Changing

IM/2-9/10
External
Environment.
(i)
Independent Strategies.
(ii)
Cooperative Strategies.
(iii) Strategic Planning. It Aims at keeping
the firm
consistently successful in changing
marketing
environment by market
oriented strategic
management.

IM/2-10/10

SUMMARY OF CHAPTER - 2

Types /Classifications of Industrial/ Business Customers are

(i) Commercial Enterprises, (ii) Government
(iii) Institutional, (iv) Cooperative societies.
IndustrialProducts/Servicesareclassifiedinto
(i)Materials & Parts, (ii) Capital Items, (iii) Suppliers & Services.
Marketing strategies differ for different product & Customer types.
Industrial / business Buyers follow one of the three purchasing
orientations : buying, procurement, or supply chain management.
Purchasing practices vary for different types of customers. It is
important to understand it for each major customer.
Types of environment are Ecological, Physical, Internal, & External,
Strategies used for managing changing external marketing
environment are : (i) Independent, (ii) Cooperative, (iii) Strategic
Planning.

CHAPTER 3

IM/3-1/16

THE NATURE OF INDUSTRIAL BUYING

AND BUYING BEHAVIOUR
Learning Objectives
Understand Organizational buying objectives.
Gain knowledge of buying activities, including
different phases in buying decision process, types
of buying situations; buygrid framework & its
analysis.
Identify members of buying centers.
Understand organizational buying behavior.
Know how industrial buyers choose and evaluate
suppliers.

IM/3-2/16

PURCHASING OBJECTIVES OF FIRMS

Reliability in delivery.
Consistent product Quality.
Lowest price (If delivery & Quality objectives
are met)
Excellent pre & post sales services.
Long Term collaborative relationship.
Industrial buyers try to achieve organizational
purchasing objectives & personal objectives
like higher status, job security, salary
increments, promotions & social relationships.

IM/3-3/16
Industrial Buying Decision
Process
Marketers must study this for developing effective
marketing strategy.
In Consumer Marketing, Household / Individual
consumer / Buyer makes buying decisions based on
certain mental stages like (i) Problem (Need)
Recognition,
(ii) Information Search
(iii) Evaluation
(iv) Purchase decision
(v) Post Purchase Behavior
In Industrial Marketing, Buying Decision making
process is observable, involving many people in
buying firm & includes sequential activities / stages /
phases, as follows:

IM/3-4/16
(A) PHASES IN INDUSTRIAL BUYING
DECISION MAKING PROCESS /
BUYPHASES
PHASE 1 :- Recognising A problem / need.
PHASE 2 :- Determining Characteristics &
Quantity of needed product / Service*.
PHASE 3 :- Developing specifications of the product*.
PHASE 4 :- Searching & Qualifying Suppliers.
PHASE 5 :- Obtaining & Analyzing suppliers offers*
PHASE 6 :- Evaluating & Selecting Suppliers.
(shown on next slide)
PHASE 7 :- Selecting an order routine
PHASE 8 :- Post Purchase evaluation
* These are in addition to five stages of consumer buying
decision process.

IM/3-5/16

A SUPPLIER EVALUATION SYSTEM.

ATTRIBUTE/
FACTOR

WEIGHT/
IMPORTANCE

SUPPLIERS
PERFORMANCE

PRICE

15

0.5

SUPPLIERS
RATING
SCORE
07.5

QUALITY

30

0.7

21.0

DELIVERY

25

0.6

15.0

SERVICE

20

0.7

14.0

FLEXIBILIY

10

0.4

04.0

TOTAL

100

61.5

IM/3-6/16
(B) Buying Situations / Buyclasses
3 Common types of purchases / buying situations

i. New Task / New Purchase :

Here, buyers have limited knowledge and experience of
the new product/service. Hence, more information is
obtained, more people are involved, risks are more, and
decisions take longer time.
ii. Modified Rebuy / Change in supplier :
This situation occurs when the firm is not satisfied with
the performance of existing suppliers, or there is a
change in product specs. Hence, the need for searching
alternate suppliers.
iii. Straight Rebuy / Repeat purchase :
Here, the buying firm places repeat orders on suppliers
who are currently supplying certain products/services.
Such decisions are routine, with less risks and less
information needs, and can be taken by junior executives.

IM/3-7/16

(C) Buygrid Framework

BUYPHASES

BUYCLASSES
New Task

1. Problem Recognition

Yes

Modified
Rebuy
May Be

Straight
Rebuy
No

2. Characteristics of Product

Yes

May Be

No

3. Product Specification

Yes

May Be

No

4. Supplier Search

Yes

Yes

No

5. Analyzing Supplier Offers

Yes

Yes

May Be

6. Supplier Selection

Yes

Yes

No

7. Order Routine Selection

Yes

Yes

May Be

8. Post Purchase Review

Yes

Yes

Yes

IM/3-8/16
BUYGRID FRAMEWORK ANALYSIS
All Phases are Applicable for a New Task.
Some Phases are Applicable for modified /
Straight Rebury.
New task situation is most difficult since buyers
have less knowledge, no experience & more
people involved.
Modified Rebury is not difficult situation since it
has few activities.
Straight rebury situation is handled routinely,
as repeat purchases are made.

(D) Buying Center roles & key

IM/3-9/16
members.
Roles of Buying center members are
Initiators. First recognize problem / need. Any individual
in buying firm often, users.
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.

(E) Identifying key membersIM/3-10/16

of
buying centre

Sales / Marketing persons must identify important

members of buying centre.
Buying centre consists of individuals and groups who take
part in buying decision making process, have common
objectives & share common risks. It is also called purchase
committee, buying committee or decision making unit.
Members of buying centre are
(i) Technical persons. Represent
design,production/operations,
maintenance, Q.C., Industrial Engg. Depts.
(ii) Purchasers / Buyers. Purchase / Materials dept.
persons.
(iii) Accounts / Finance persons.
(iv) Marketing persons
(v) Top management persons. G. M. & above.

IM/3-11/16
(F) Organizational buying behavior
Industrial / business buyers are influenced by many
factors. Two most important factors are (i)
Organizational factors / task oriented
objectives, like best product quality, lowest price,
dependable delivery.
(i) Personal factors / Non-task oriented
objectives, such as good increments, promotion,
Job security, personal favors.
When suppliers offers are similar, buyers can
satisfy organizational objectives from any supplier.
Hence, personal factors become important.
However, when suppliers offers differ substantially,
buyers give importance to organizational
factors to satisfy organizational objectives.

IM/3-12/16

Many models have been developed to explain

organizational buying behavior. One of the
comprehensive models is the Sheth model, described
below.
The Sheth model of industrial buyer behavior,
shown below , focuses on (i) Psychological aspects of
individual buyers (Component 1), (ii) Conditions
causing joint decision making (Component 2), (iii)
Conflict among those involved in decision process &
resolution of conflict
(Component 3).
Situational factors include economic conditions,
labour disputes, mergers & acquisitions. The model
does not explain their influence on buying process.

C o m p o n e n t (1 )

C o m p o n e n t (2 )

C o m p o n e n t (3 )

D iff e r e n c e s a m o n g
in d iv id u a l b u y e r s
c a u s e d b y fa c t o r s :
B a c k g ro u n d o f
in d iv id u a ls ( E d u c a tio n ,
r o le & life s ty le ) .
T h e ir in fo r m a tio n
s o u rc e s .
A c tiv e S e a r c h
P e r c e p tu a l D is t o r tio n
S a tis fa c tio n w ith
p a s t p u rc h a s e s

V a r ia b le s th a t D e te r m in e
if b u y in g d e c is io n is
a u to n o m o u s o r jo in t :
A ) P r o d u c t S p e c ific
F a c to r s :
T im e P r e s s u r e
P e r c e iv e d R is k
T y p e o f P u rc h a s e
B ) C o m p a n y S p e c ific
F a c to rs :
C o m p a n y S iz e
C o m p a n y O r ie n ta t io n
D e g re e o f
C e n tr a lis a t io n

M e t h o d s u s e d fo r
c o n flic t r e s o lu tio n
in jo in t- d e c is io n
m a k in g p r o c e s s :

P r o b le m S o lv in g
P e r s u a s io n
B a r g a in in g
P o litic k in g

IM/3-13/16
S it u a t io n a l F a c t o r s

S u p p lie r o r
B r a n d C h o ic e

F ig . : T H E S H E T H M O D E L O F IN D U S T R IA L B U Y E R B E H A V IO U R

W E B S T E R A N D

W IN D

M O D E L

IM/3-14/16

E n v ir o n m e n ta l V a r ia b le s
P
E
P
L
C
C
S

h y s ic a l, T e c h n o lo g ic a l
c o n o m ic , C u ltu r a l
o lit ic a l a n d L e g a l
a b o u r u n io n s
u s to m e r d e m a n d s
o m p e t it iv e p r a c tic e s
u p p lie r in f o r m a t io n

O r g a n is a tio n V a r ia b le s
O
O
P
E
D

b je c t iv e s a n d g o a ls
r g a n is a tio n S tr u c tu r e
u r c h a s in g P o lic ie s / P r o c e d u r e s
v a lu a tio n & r e w a r d s y s te m s
e g r e e o f d e c e n t r a lis a t io n

B u y in g C e n tr e V a r ia b le s

A u th o r ity , S iz e
K e y in f lu e n c e r s
I n t e r p e r s o n a l r e la t io n s h ip
C o m m u n ic a tio n

In d iv id u a l V a r ia b le s

P
E
E
L

e r s o n a l G o a ls , V a lu e s
d u c a t io n , E x p e r ie n c e
x p e r tis e , J o b P o s itio n
if e s ty le , In c o m e

O r g a n is a tio n B u y in g D e c is io n s

C
D
M
D

h
e
a
o

o ic e o f S u p p lie r s
la y d e c is io n & g e t m o r e in f o r m a t io n
k e , L e a s e o r b u y
n o t b u y

CUSTOMER SERVICE

IM/3-15/16

Important Customer Service Elements. Carry out

market survey to understand which of the following
elements of customer service are important to
customers, what service levels are expected by
customers, the service levels offered by the firm and its
competitors.

(i) Pre Sales Service : Advising, Informing,

Problem solving
(ii) During Sales Service : Product availability,
ontime delivery, order cycle time, and information.
(iii) Post Sales Service : Warranty, AMC, Repair,
Installation & Training.
Develop superior service package.
Test, Set Goals, and Establish Control system

IM/3-16/16

SUMMARY OF CHAPTER - 3

Industrial marketers should understand that business buyers

try to achieve both organizational & personal objectives.
Industrial buying decision process consists of eight steps /
stages (buyphases) & three types of buying situations
(buyclasses).
Buygrid model combines buyphases & buyclasses.
Marketers must understand roles & key members of buying
centre, including key buying influencers.
Many factors influence organizational buying behavior, but
major factors are organizational ( or task oriented )
objectives and personal (non task oriented ) objectives.
The Sheth model of industrial buyer behavior is
comprehensive, focusing of psychological & joint decision
making aspects.
Webster and wind model is also widely used &
comprehensive model on buyer behavior.

CHAPTER - 4

IM/4-01/11

BUYER SELLER RELATIONSHIP

LEARNING OBJECTIVES :

Understand buyer sales rep. interactions.

Types/range of relationships between
buyer & seller firms.
Customer relationship management
(CRM) / relationship marketing.
Methods used to influence industrial
customers.
Special dealings between buyer & seller.

INDUSTRIAL BUYER-SALES REP.

INTERACTIONS

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 centre
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.

BUYER-SELLER DYADIC INTERACTION

FRAMEWORK
A Conceptual Framework by Dr. Sheth

C o m p a tib le
C o n te n t
In c o m p a tib le
C o n te n t

C o m p a tib le S ty le

In c o m p a t ib le S ty le

Id e a l/S u c c e s s fu l
T r a n s a c tio n

In e ffic ie n t
T r a n s a c tio n

In e ffic ie n t
T r a n s a c tio n

N o
T r a n s a c tio n

A buyer and a seller interaction is called Dyadic two persons

interactions, with above types of transactions.
Content includes organizational and personal needs of a buyer and
a seller.
Style includes manner and format of communication task
oriented, self oriented, or social / personal oriented.

TYPES / RANGE OF RELATIONSHIP

BETWEEN BUYER & SELLER FIRMS
When buyer (or customer) and seller (or supplier)
firms do business, they have the following types and
range of business / working relationships /
exchanges.
T r a n s a c tio n a l
R e la tio n s h ip

V a lu e -A d d e d
R e la tio n s h ip

P a r tn e r in g /
C o lla b o r a tiv e
R e la tio n s h ip

Each business relationship is an exchange process of

obtaining a desired product / service by offering
something of value is return.

IM/4-05/11
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 competitors, to
get maximum business share.
These customers have medium sales and profit
potentials and have Procurement Orientations.

COLLABORATIVE/ PARTNERING
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

(CRM) / RELATIONSHIP MARKETING (RM)
Conceptually same, methods / techniques to achieve
objectives are different.
Both CRM & RM aim at partnering / collaborative longterm 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.

IM/4-08/11
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.

IM/4-9/11
NEGOTIATION : 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.

IM/4-10/11
SPECIAL DEALINGS BETWEEN
BUYER & SELLER
RECIPROCITY. 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.
DEALING WITH CUSTOMERS CUSTOMERS
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.

SUMMARY OF CHAPTER - 4

IM/4-11/11

BUYER SELLER RELATIONSHIP

Industrial buyer and sales rep.s interactions depend on
their perceptions, behavior, & roles.
Interaction between two persons (buyer & seller) is
called Dyadic, with various types of transactions, as per
Dr. Sheths framework.
Buyer and seller firms have various types and range of
relationships: transactional, value added and
partnering / collaborative.
Customer relationship management (CRM) and
relationship management (RM) are conceptually same.
Both aim at collaborative / partnering long term
relationship for mutual benefits of both parties.
Sales promotion and negotiation are the major methods
used to influence industrial buyers.
Reciprocity and dealing with customers customers are
the special dealings between a buyer & a seller.

CHAPTER 5

IM/5-1/6

INDUSTRIAL MARKETING
INTELLIGENCE AND MARKETING
RESEARCH
LEARNING OBJECTIVES :

1. Know Nature and Scope of

Industrial Marketing research.
2. Examine the Marketing Research
Process.
3. Understand Industrial Marketing
Intelligence System.

SCOPE OF INDUSTRIAL
MARKETING RESEARCH
Scope is vast. Some of the areas are
:

i. Market share analysis .

ii. National and Geographical area-wise
market potential.
iii. Competitors analysis.
iv. New product acceptance and
potential

IM/5-4/6
MARKETING RESEARCH PROCESS

STEPS INVOLVED ARE :

1. Identify the problem / opportunity and
state research objectives .
2. Develop research design / methodology.
3. Collect data / information.
4. Process and analyze the data.
5. Prepare research report.
There is no major difference in the process or
steps involved in marketing research for
consumer
and industrial marketing .

IM/5-5/6
INDUSTRIAL MARKEING INTELLIGENCE
SYSTEM
M a r k e tin g
R esearch
s tu d ie s

Secon dary
D a ta
S ou rce

I n d u s tr ia l
M a r k e tin g
I n te llig e n c e
S y ste m

D e c is io n
Support
S y ste m
rk rch
M
esa
R
g
etin
i es
d
stu
s tria
u
d
In
l
e o
S
cD
ry
a
d
n
t In
rk ig
a
telM
ct D
en
rt
p
u
S
n
eciso
rce S
u
o
S
ste m S
y
stem
y

M ark et
R esp on ce

c e
n
o
sp
etR
rk
a
M

Industrial marketing intelligence system is developed to meet the

needs of industrial marketers for timely and continuous information
for effective decision making .

IM/5-6/6

SUMMARY OF CHAPTER-5

Industrial marketing research rely more on

exploratory and descriptive (i.e. survey)
methods .
The scope of industrial / business marketing
research is vast .
There is no major difference in the process or
steps involved in marketing research for
consumer and industrial marketing.
Industrial marketing intelligence system is
developed to meet the needs of business
marketing for timely and continuous
information for effective decision making.

IM/5-2/6

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.

CHAPTER 6

IM/6-1/9

INDUSTRIAL MARKET SEGMENTATION,

TARGET MARKETING AND
POSITIONING
LEARNING OBJECTIVES :
1. Know the Procedure followed for
segmenting industrial markets.
2. Identify the Variables (bases) used for
segmenting business markets.
3. Evaluate and select the target market
segments and strategies.
4. Develop effective positioning strategies.

IM/6-2/9

PROCEDURE USED IN MARKET

SEGMENTATION

The procedure has 3 steps .

1.Conduct marketing research to
collect data / information on existing and
potential buyers, and competitors.
2.Carry out data analysis by using
statistical techniques of factor and cluster
analysis in order to identify different
segments.
3.Profile each segment by its
characteristics like application (or/use),
location, volume of requirements, etc.

IM/6-3/9

VARIABLES (BASES) USED IN

SEGMENTING INDUSTRIAL
(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.

IM/6-4/9

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 MARKET SEGMENTS

IM/6-5/9

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

IM/6-6/9

PROCEDURE FOR DEVELOPING A

POSITIONING STRATEGY
Following steps are involved :
(i)

(ii)

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,
Select one or more major benefits (or attributes)
to differentiate the company from its competitors .

IM/6-7/9

(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

Excellent
Product Quality

IM/6-8/9

1.0

.A1

0.8
0.6

.C
Strong
Custome
r
Service

1.0

0.8

0.6

0.4

.D

0.4
0.2

0.2
- 0.2 - 0.4 - 0.6 - 0.8 - 1.0

- 0.2

.B

- 0.4
- 0.6

.
A

- 0.8
- 1.0

Low
Perceptual Mapping
Product Quality
Technique

Weak
Custome
r
Service

SUMMARY OF CHAPTER 6
1.
2.
3.
4.
5.

IM/6-9/9

Procedure used in market segmentation includes (i)

Marketing research, (ii) Data analysis (iii) Profiling each
segment.
Variables used for segmenting industrial markets include
macro variables and if needed, micro variables.
Sequential segmentation process is often used.
Criteria used for evaluating market segments are (i) size
and growth , (ii) Profitability (iii) Competitive analysis
(iv) Company Objectives and Resources.
Target market strategies are (a) Concentrated or Niche
marketing, (b) Differentiated marketing, (c)
Undifferentiated marketing strategy
Steps used for developing positioning strategy include :
(i) Identifying attributes / benefits, (ii) Selecting one /
more major benefits, (iii) Using perceptual mapping
technique,
(iv) Communicating positioning strategy.

CHAPTER 7

IM/7-1/20

PRODUCT STRATEGY &

NEW PRODUCT DEVELOPMENT
Learning Objectives
1. Define an Industrial Product.
2. Understand Changes in the product strategy.
3. Know Product Life cycle (PLC) Theory and its
application.
4. Develop Product strategies for existing products.
5. Understand new product development.
6. Know impact of technology and high-tech
marketing.
7. Learn Marketing of industrial services.

DEFINITION AND MEANING OF IM/7-2/20

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.

IM/7-3/20

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.

IM/7-4/20

A General Model of Product Life

Cycle (PLC)
In d u s tr y
S a le s

R upees
In d u s tr y
P r o fits

M a tu r ity

D e c lin e

IM/7-5/20

APPLICATION OF PRODUCT LIFE

CYCLE THEORY TO MARKETING
STRATEGY

Introduction Stage : Marketing Strategy should

focus on market development for slowly accepted
products. For rapidly accepted products, a
competitive strategy (Competitive pricing or
Superior quality product ) 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.

IM/7-6/20

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.
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.

IM/7-7/20

PRODUCT STRATEGIES FOR

EXISTING PRODUCTS
Business marketers should take the following
steps :
1.Evaluate the performance of existing
products by using product evaluation
matrix.
2.Examine the relative strengths and
weaknesses of the companys products by
using perceptual mapping technique.
3.Decide the product strategies, based on
above analysis.

IM/7-8/20

PERFORMANCE EVALUATION OF
EXISTING PRODUCTS

Example : A material handling Co.

(i) Product = P (Pallet Truck)
Last 3 years average performance figures are
Industry sales growth = 25%, Company sales growth =
30%
Market Share = 30% (Dominant) , Profitability = As per
Target.
(ii) Product = S (Stackers)
Industry Sales growth = 16% (Stable) ; Company Sales
Growth = 15% (Stakers)
Market Share = 12% (Average) ; Profitability = Below
Target.

IM/7-9/20

Product Evaluation Matrix

C o m p a n y S a le s
In d u s tr y
S a le s

M a rk e t
S h a re

P r o f ita b ility

D e c lin e
B e lo w
Ta rg e t

Ta rg e t

S ta b le
Above
Ta rg e t

B e lo w
Ta rg e t

A v e ra g e
M a rg in a l
D o m in a n t

S ta b le

A v e ra g e
M a rg in a l
D o m in a n t

D e c lin e

A v e ra g e
M a rg in a l

Above
Ta rg e t

B e lo w
Ta rg e t

Ta rg e t

D o m in a n t

G ro w th

Ta rg e t

G ro w th

Above
Ta rg e t

PERCEPTUAL MAPPING
TECHNIQUE

IM/7-10/20

H ig h P r ic e

B
H ig h
Q u a lity

*A

L o w P r ic e

Low
Q u a lity

IM/7-11/20
Firm As product quality is perceived to be
average by customers, compared to its
competitors B & C. Firm A should try to move to a
new position of superior quality at a reasonable
(average) price to improve its profitability.

DECIDE PRODUCT STRATEGIES

(i) Maintain / Continue the product and its
marketing strategy.
(ii) Modify the product & change marketing
strategy.
(iii) Drop / eliminate the product.
(iv)Add new product.

CLASSIFICATION OF NEW PRODUCTS

(i)Products that are new to the world & innovative.
IM/7-12/20
(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,

IM/7-13/20

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), 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.

IM/7-14/20

TYPES OF MARKETING SITUATIONS.

H ig h

B e tte r
M o u s e tra p
M a r k e tin g

H ig h - t e c h
M a r k e tin g

Low

L o w -te c h
M a r k e tin g

H ig h - f a s h io n
M a r k e tin g

Low

H ig h

T e c h n o lo g ic a l
U n c e r ta in t y

M a r k e t U n c e r ta in t y

IM/7-15/20

MODIFIED TECHNOLOGY ADOPTION

LIFE CYCLE
This is suited to hightech marketing

D eep G ap
In n o v a to rs
2 %

34%
13 %

34%

E a r ly
A d o p te r s

T im e o f A d o p t io n o f I n n o v a t io n s

16%
L a g g a rd s

IM/7-16/20

HIGH TECH MARKETING STRATEGY

1.
2.
3.
4.
5.
6.
7.

Target a niche market.

Plan whole product properties.
Develop partnerships.
Unique positioning strategy.
Effective Communication Strategy
Multi Channel distribution strategy.
Skimming pricing strategy.

IM/7-17/20

Marketing of Industrial Services

Classifications of Industrial
Services
M a t e r i a ls
C o m p o n e n ts
( S t e e l, B a l l B e a r in g s )
P u re
T a n g i b le
P ro d u ct

P e rso n al
C o m p u te rs

M a jo r
P ro d u c t,
M in o r
S e r v ic e

H o t e ls
fo r
C o n fe re n c e s

Equal
P ro d u ct
&
S e r v ic e

G ood
T r a n s p o r ta t i o n

M a jo r
S e r v ic e ,
M in o r
P ro d u ct

P u re
i n t a n g ib l e
s e r v ic e

IM/7-18/20

Unique Characteristics of services

and
marketing Implications.
C h a r a c te r is tic s
M a r k e tin g Im p lic a tio n s
E x a m p le s

1 . In ta n g ib ility
B u y e r s s e e e v id e n c e o f s e r v ic e q u a lit y
M an age m en t
(c a n n o t b e s e e n /
f e lt , b e f o r e b u y in g )

2 . In s e p a r a b ility
( P r o d u c t io n &
c o n s u m p t io n a t th e
s a m e t im e )

3 . V a r ia b ility
( S e r v ic e q u a lit y
v a r ie s )
4 . P e r is h a b ilit y
(C a n n o t b e s to re d )

5 . N o n -o w n e r s h ip
(B u y e r u s e s a
s e r v ic e , b u t c a n n o t
o w n it)

S e lle r s t a n g ib ilis e t h e in ta n g ib le

E ffe c t iv e in t e r a c t io n d e p e n d o n s e r v ic e
p r o v id e r s .
R e q u ir e s e ff e c t iv e r e c r u it in g a n d t r a in in g
o f s e r v ic e p r o v id e r s .

U n if o r m q u a lity is d iff ic u lt
F o c u s o n q u a lit y & a u to m a t io n

D e m a n d flu c tu a te s .
U s e m e th o d s to m a tc h d e m a n d &
c a p a c ity .

A d v a n ta g e s o f n o n - o w n e r s h ip :
r e d u c t io n in c o s ts & f le x ib ilit y

C o n s u lta n c y & E D P s .
R e p a ir s to m a c h in e s
& C o u r ie r s e r v ic e .

M an age m en t
e d u c a t io n & m a r k e t in g
re s e a rc h .
A ir lin e s s e a ts &
W a re h o u s e s p a c e .

H o te l a n d c a r r e n ta l
s e r v ic e s .

IM/7-19/20

SUMMARY OF CHAPTER 7
PRODUCT STRATEGYS &
NEW PRODUCTS

DEVELOPMENT.
Industrial Product is a physical thing and also a
complex set of economic, technical, legal and
personal relationship between a buyer and a Seller.
Product Strategies are changed due to changes in
customers needs, technology, government policies or
laws, and product life cycle
Product life cycle (PLC) concept is used to develop
marketing strategies at different stages of PLC.
Product strategies for existing products are developed
by (i) evaluating the performance of existing
products, using product evaluation matrix , (ii)
Studying the strengths and weaknesses of existing
products, using perceptual mapping technique.

IM/7-20/20
It means, deciding if a product should be continued,
modified, dropped, or replaced.
New products are classified into six groups and consist of
seven stages of development process :- idea generation,
idea screening, concept development & testing, business
analysis, product development, market testing, and
commercialization.
In High tech marketing situation, technology application
and market needs are difficult to predict . The technology
adoption life cycle is modified to suit high-tech marketing.
Unique high tech marketing strategies include targeting a
niche market, planning whole product, developing
partnership, unique positioning, effective communication ,
multi channel distribution and Skimming pricing.
Industrial services are classified into various groups, and
include unique characteristics like intangibility,
inseparability, variability, perishability & non ownership.

CHAPTER 8

IM/8-1/14

INDUSTRIAL DISTRIBUTION
CHANNELS & MARKETING LOGISTICS
Learning objectives
1.
2.
3.
4.
5.

6.

Understand alternative channel structures.

Know types of industrial intermediaries.
Understand steps involved in designing a channel.
Learn how to manage channel members.
Understand concepts of supply chain
management, Logistics, and business logistics
system.
Learn the tasks of physical distribution and total
distribution cost.

IM/8-2/14
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.

IM/8-3/14

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.

IM/8-4/14
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

IM/8-5/14

It includes developing new channels and modifying the existing

channels.
The procedure / steps are as follows;
(i) Developing channel objectives;
(ii) Analyzing channel constraints;
(iii) Analyzing channel tasks;
(iv) Identifying channel alternatives. These include the following
issues :
(a) Types of intermediaries.
(b) Number of intermediaries.
(c) Number of channels.

(v) Evaluating the channel alternatives. The criteria used are:

(a) Economic factor
(b) Control factor
(c) Adaptive factor

(vi)Selection of the channel (s).

IM/8-6/14

MANAGING CHANNEL MEMBERS

It includes :
1.
2.

3.

4.

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

IM/8-7/14

Concept of Supply Chain Management

(SCM)
SCM includes activities of moving goods from raw material through
operations to final consumers, as shown in SCM Framework below.

IM/8-8/14
Main aims of SCM are (i) Reduce cost per unit, (ii)
Reduce waste & duplication, (iii) Minimize order to
delivery cycle, and (iv) Ensure superior 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.

IM/8-9/14

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.

IM/8-10/14

Business Logistics System

P h y s ic a l S u p p ly

In d u s tr ia l M a n u fa c tu e r

P h y s ic a l D is tr ib u tio n
(o r M a r k e tin g L o g is tic s )

Marketing Logistics (or Physical distribution)

consists of delivering finished products to
intermediaries and customers.

IM/8-11/14
TASKS OF PHYSICAL DISTRIBUTION (PD)
PD tasks are :
(i) Transportation, (ii) Warehousing, (iii) Inventory
Control, (iv) Customer Service, (v) Packaging, (vi)
Material Handling, (vii) Order Processing, (viii)
Communication, (ix) Locations of factory &
Warehouses.
Total Distribution cost and customer service are
balanced by
(i)Minimizing total distribution cost, or (ii) Total
systems approach through maximizing profits.

Total Distribution Cost = Transportation cost

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

IM/8-12/14
A firm must minimize total distribution cost, instead
of minimizing individual cost elements, to balance
customer service and total distribution cost.

Another approach, called total systems approach or

channel integration focuses on return on investment
(ROI). Here, a firms channel members work together to
improve customer service, in order to get higher sales
revenue.

S a l e s R e v e n u e - T o ta l P h y s i c a l D i s tri b u to r C o s t
C a p ita l In v e s tm e n t

SUMMARY OF CHAPTER 8

IM/8-13/14

INDUSTRIAL DISTRIBUTION CHANNELS &

MARKETING LOGISTICS.
1.
2.

3.

Industrial channel structures include direct and

indirect channels.
Types of industrial intermediaries are: industrial
distributors / dealers, manufacturers
representatives (or agents), value added resellers
(VARs), brokers, and commission merchants.
Procedure of channel design includes: developing
channel objectives, analyzing channel constraints
and tasks, identifying channel alternatives,
evaluating alternatives and selection of the channel
(s).

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

IM/8-13B/

Strategies followed by 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 .

IM/8-13C/

Developing customer service levels/ standards

Neither all customers nor all products need the same
level of service. Steps involved :
(i)Conduct marketing research study to find which
elements of customer service are important to
customers.
(ii)Find needs / expectations of customers in
quantitative
standards for the service elements.
(iii)Get information on actual performance of the
company and its competitors from customers.
(iv)Analyse variance of actual performance with
standards.
(v) Take corrective actions to minimise the
variance.
Outstanding delivery service levels are achieved by
integrating logistics and through supply chain
management.

IM/8-14/14
4.
5.

6.
7.

Managing channel members consist of selecting

and motivating intermediaries, controlling channel
conflicts, and evaluating channel members.
Supply chain management (SCM) includes
activities of moving goods from raw material
through operations to final consumers. Logistics
management optimizes material flow within the
firm, but SCM extends integration of material flow
to suppliers suppliers and customers customers.
Business logistics system includes physical supply
and physical distribution (or marketing logistics).
To balance total distribution cost and customer
service, a firm can use any of the approaches: (i)
Minimize total distribution cost, or (ii) Maximize
profits (ROI) through channel integration.

CHAPTER 9

IM/9-1/12

MANAGING THE PERSONAL

SELLING FUNCTION
Learning Objectives :
1. Understand the role of personal selling in
business marketing.
2. Know the business selling process.
3. Know characteristics of B2B selling , Team
selling approach, solution-oriented effort,
Entrepreneurial Philosophy.
4. Understand management of major and national
accounts.

IM/9-2/12

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 .

IM/9-3/12

Business Selling Process

No magic formula for making a sale. But chances of

making a sale improves, if the following sales
process is followed.
The major steps in selling process are :
(i) Prospecting. It is searching or identifying
prospective or likely customers from various sources.
(ii) Qualifying . Prospective customers are screened
by qualifying criteria like expected volume, location
& financial strength.
(iii) 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.

IM/9-4/12

(iv) 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

IM/9-5/12

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.

IM/9-6/12

Team Selling Approach

More companies are using team selling approach
for selling to major and national accounts
(customers) and technically complex products 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 rep, for a major
customer and a national accounts manager for a
national customer.

IM/9-7/12

Solution Oriented Effort

Two major roles of personal selling :

(1) A part of problem-solving capabilities,
(2) A part of communication ( or promotional)
mix.
A sales person is a part of selling firms problemsolving 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.

IM/9-8/12

Intrapreneurial Philosophy
Intrapreneurship means entrepreneur within
a company.
When sales and marketing persons, who are
employees, behave and act like owners of
the company, they have adopted
entrepreneurial philosophy. Such persons
take initiative, are proactive and creative,
and give superior value to customers.
Firms that follow Intrapreneurial
philosophy show consistently good
performance.

MANAGEMENT OF MAJOR AND

NATIONAL ACCOUNTS

IM/9-9/12

Both major and National accounts (or

customers) have large (sales and profit
potentials). But there is a difference.
S a le s
P o t e n tia l
of
C u s to m e r

L a rg e

M a jo r
A ccount

N a tio n a l
A ccount

S m a ll

D y a d ic
In te r a c tio n

M in o r
A ccount

S im p le

C o m p le x

Complexity of customer

IM/9-10/12

A major account has a large sales (and profit)

potential and is simple to serve or manage, as the
customer has only one unit .
A national account has also a large sales (and
profit Potential), and is complex or difficult to
serve, because operating units re geographically
dispersed. In addition, for small value items
operating units are autonomous, but for large
value items, buying is centralized.

IM/9-11/12

How to Manager Major & National Accounts

Objective. To become the preferred or sole supplier with
adequate profits.
Strategy / plan.
Team selling. For a major customer, the team should
include branch / regional managers, sales representative
and technical support person.
For a national account, the team consists of a national
accounts manager, branch sales representatives, logistics
executive, and technical person.
Relationship marketing. The teams build long-term
collaborative or partnering relationships by using
approaches like financial and social benefits, and structural
ties.
Support from top management and functional executives
should be assured.

IM/9-12/12

SUMMARY OF CHAPTER-9
Personal selling has a greater role in business marketing
than consumer marketing.
Business selling process consists of prospecting,
qualifying, preparation (or pre-approach), sales
presentation (or approach), overcoming objections,
closing, post-sales service and follow-up.
B 2 B selling characteristics include problem solving,
systems selling and team selling approaches.
Intrepreneurial philosophy results in consistently good
performance.
Management of major and national accounts is done by
team selling, relationship marketing and support from
top management and functional managers.

IM/10-1/10

CHAPTER 10
BUSINESS (INDUSTRIAL)
COMMUNICATION

Learning Objectives :
1. Develop an effective communication
(or promotional) program.
2. Understand the role of advertising
3. Understand the importance of sales
promotion, publicity, public relation
(PR), and direct marketing.

IM/10-2/10

DEVELOPING AN EFFECTIVE
COMMUNICATION / PROMOTIOAL
PROGRAMME FOR BUSINESS MARKETS

The steps involved are :

(i) Decide communication objectives.
(ii) Identify the target audience.
(iii) Decide the promotional budget.
(iv) Develop the message strategy.
(v) Select the media.
(vi) Evaluate the promotions results.
(vii) Integrate the promotions programme.

IM/10-3/10
Promotional Tools and Media in Business Markets

P r o m o tio n a l A d v e r tis in g
T o o ls
P r o m o tio n a l
M e d ia
&
S u p p o r ts

P r i n t M e d ia
B u s in e s s
P u b lic a tio n s
Trade
J o u r n a ls
I n d u s tr ia ls
d ir e c t o r ie s

S a le s
P r o m o tio n

P. R . and
P u b lic ity

D ir e c t
M a r k e tin g

P erso n a l
S e llin g

T rad e sh ow s
E x h ib itio n s
C a ta lo g u e s
S a le s C o n s e n t s
P r o m o tio n a l
n o v e l t i e s ( g if t s )
S e m in a r s
D e m o n s tr a tio n
P r o m o tio n a l
le tte r s
E n te r ta in m e n t

C h a r ita b le
d o n a tio n s
A d o p tin g
v illa g e s
C o m m u n ity
r e la t i o n s
N e w s ite m in
p ress
T e c h n ic a l
a r tic le s in
j o u r n a ls

D ir e c t m a il
T e le m a r k e tin g
O n - l in e
m a r k e tin g

S a le s c a lls
S a le s
p r e s e n ta tio n s
T e a m s e llin g
R e l a t i o n s h ip
m a r k e tin g

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

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)
(vi)

Creating awareness.
Reaching members of buying center.
Increasing sales efficiency and effectiveness.
Efficient reminder media.
Sales lead generation.
Support channel members.

IM/10-5/10
ADVERTIING 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.
(c) Expenditure budget, by using the following formula:
=

C ost per page

C ir c u la t io n in t h o u s a n d

IM/10-6/10

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).

IM/10-7/10
IMPORTANCE / ROLE OF DIRECT MARKETING (DM)
Definition Direct marketing is an interactive marketing system that
seeks a measurable response and /or transaction. Direct marketing is
also referred to as direct response marketing.
Benefits For business marketers, benefits of DM are many : Can
personalise / customise 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 online 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%.

IM/10-8/11
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 online, 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.

IM/10-9/11

Major Benefits to marketers are: Lower costs,

relationship building and quick adjustments to changing
market conditions. Major Benefits for buyers are:
convenience, information availability, and less hassle.
Although small & medium size marketers can 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

IM/10-10/11

ROLE OF PUBLICITY & PUBLIC RELATIONS

(PR)
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

Summary of Chapter 10

IM/10-11/11

Steps involved in developing an effective communication programme for

business markets 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 promotional Programme.

Advertising is used in business marketing mainly as a support to personal

selling.
Media used for industrial advertising are: business publications, trade
journals / Publications, and industrial directories.
Sales promotion consists of short term incentive tools to stimulate
greater or faster purchase of a product / service by business customers.
Direct marketing and publicity ( also called as marketing public relations
MPR) have important roles. However, public relations (PR) tends to
neglect marketing objectives, since it has to deal with several category of
people.

IM/11-1/29

CHAPTER 11
INDUSTRIAL (BUSINESS) PRICING
STRATEGIES & POLICIES

Learning Objectives
1. Understand the special meaning of price.
2. Know the factors that influence pricing
decisions, i.e. price determinants.
3. Understand pricing strategies for
different product/market situations.
4. Examine the pricing policies for various
types of customers.
5. Understand the role of leasing.

IM/11-2/ 29

SPECIAL MEANING OF PRICE

Some business customers follow Value-based
pricing by evaluating, suppliers offerings based
on the concept of 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.

IM/11-3/ 29

Cost to the buying firm includes basic

Price, freight, transit insurance, installation,
risks of product failure, delayed delivery,
etc,
Some customers are price buyers.
Marketers, should follow 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.

IM/11-4/ 29

F R A M E W O R K O F P R IC IN G D E C IS IO N S
B e fo re ta k in g p ric in g
d e c is io n s , a b u y in g firm m u s t
fin d " p ric e d e te rm in a n ts " .
( i.e . f a c to r s th a t in f lu e n c e
p ric in g d e c is io n s )

(i) P ric in g o b je c tiv e s

(ii) C u s to m e r a n a ly s is
(iii) C o s t a n a ly s is
(iv ) C o m p e tito rs ' a n a ly s is
(v ) G o v t. r e g u la tio n / p o lic ie s

IM/11-5/ 29

T w o ty p e s o f p ric in g d e c is io n s .

P ric in g s tra te g ie s

P ric in g p o lic ie s
D is c o u n ts
G e o g ra p h ic a l
p ric in g

S e ttin g a p ric e
(p ro d u c t / m a rk e t
s itu a tio n s )

In itia tin g a
p ric e c h a n g e
R e s p o n d i n g t o a c o m p e t i t o r 's
p ric e c h a n g e
L e a s in g

IM/11-6/ 29

PRICE DETERMINANTS OR FACTORS

INFLUENCING PRICING DECISIONS
(i)Pricing objectives, (ii) customer analysis, (iii)
cost analysis, (iv) competitive analysis, (v)
Govt. policies.
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.

IM/11-7/ 29
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. The formula is:

% c h a n g e in q u a n tity d e m a n d e d
% C h a n g e in p r ic e

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

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

IM/11-8/ 29
(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) as
shown.

C o st
p er
U n it

E c o n o m ie s o f S c a le

IM/11-9/ 29

Q u a n tity P r o d u c e d p e r y e a r
C o st
p er
U n it

E x p e r ie n c e /
L e a r n in g
C u rv e.
A v . C o s t R e d u c tio n
= 1 0 -3 0 %

A c c u m u la te d P r o d u c tio n

IM/11-10/ 29
B r e a k - E v e n A n a ly s is is u s e fu l to c o n s id e r d iff e r e n t
p ric e s (P 1 , P 2 , P 3 ), a n d its e ffe c t o n s a le s re v e n u e a n d p ro fits .

S a le s R e v e n u e a t P 3

S a le s
&
C o s ts

S a le s R e v e n u e a t P 2
S a le s R e v e n u e a t P 1
T o ta l C o s t
F ix e d C o s t
S a le s V o lu m e

IM/11-11/ 29

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)

IM/11-12/ 29

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.

IM/11-13/ 29

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

IM/11-14/ 29
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.
Equation used : E (A) = P (A) x T(A),
where A=Bid price, E(A) = Expected profit
at bid price A, P(A) = Probability of
winning (or getting order ) at the bid price
A, T(A) = profit, if bid price A is accepted.

An Application (example) of probabilistic Bidding

IM/11-15/ 29
Strategy
B id
P r ic e
( R s) (A )

T o ta l C o st
P e r U n it
(R s) (C )

C o m p e tito r 's
L ast Ten d er
P r ic e
(R s) (B )

450

350

360

0 .0 0

100

430

350

360

0 .1 5

80

1 2 .0 0

410

350

360

0 .4 0

60

2 4 .0 0

400

350

360

0 .5 0

50

2 5 .0 0

380

350

360

0 .7 2

30

2 1 .6 0

360

350

360

0 .9 0

10

0 9 .0 0

340

350

360

0 .9 5

(1 0 )

( 9 .5 0 )

330

350

360

1 .0 0

(2 0 )

( 2 0 .0 0 )

P r o fit (R s )
T (A ) =
(A ) - (C )

Rs.60 corers tender from Dept. of Telecomm. (DOT) for underground cable jointing kits. The company
ghosted Rs.400/- per kit (expected maximum profit). Tender opening revealed, it was L4.L1 was Rs.
330/-, L2=350, L3=Rs 380/- The company estimates of B and P(A) were incorrect.

IM/11-16/ 29
(ii) 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, hightech, 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.

IM/11-17/ 29
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.

(iii) 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.

IM/11-18/ 29
(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.

Initiating price changes

IM/11-19/ 29
If a firm is a market leader and wants to change
the price, it must anticipate reactions from
customers and competitors.
The firm must study major competitors
objectives, financial situations, production
capacity utilizations, sales, costs, and profits. It
must also understand competitors mind-set, by
studying their business philosophy (or concepts),
culture, beliefs and past behaviors. Based on
above analysis the firm should predict
competitors response.
The firm must also understand that customers
generally prefer small price increases several
times, rather than one sharp increase. Of course,
customers would generally welcome price cuts.

IM/11-20/ 29
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 not respond.
(iv)What would be the reactions of other
competitors.

The responses can be in several ways:

(a) maintain price and value (benefits), (b) match
competitors price, (c) develop and launch low-price
product item, (d) maintain price. The right response
depends on the business situations faced by the
firm.

PRICING POLICIES

IM/11-21/ 29

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 norms or
functions performed). e.g. price list (100) trade discount
(15) = net price (85)

IM/11-22/ 29
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). For example,

S iz e o f e a c h
P u rch ase ord er

or

Y e a r ly T o ta l
P u rch ase

% Q u a n tity
D isc o u n t

L e s s t h a n 5 n o s .,

or

L e s s t h a n R s . 5 ,0 0 0

N il

5 - 1 0 n o s .,

or

R s . 5 ,0 0 0 - 1 0 ,0 0 0

u p to 3

1 1 - 1 5 n o s .,

or

R s . 1 0 ,0 0 0 - 1 5 ,0 0 0

u p to 6

> 1 5 n o s .,

or

> R s . 1 5 ,0 0 0

u p to 1 0

Above discounts are applicable for all types of customers

OEMs, users, and dealers / distributors.

IM/11-23/ 29
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 thru 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 :

IM/11-24/ 29
(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.

IM/11-25/ 29

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.

IM/11-26/ 29

Types of Leases :
(i) Financial (or full payment)
leases, and (ii) operating (service or
rental) leases
Financial leases. These are full
payment, non - cancellable, long >term contracts and fully amortised
(sum of lease payments purchase
price of capital item)

IM/11-27/ 29
Operating Leases are service/rental leases,
that are cancellable, short-term contracts or
agreements, and are not fully amortised. The
rates are higher than those of financial leases,
because risk of obsolescence are of the lessor
Pricing Strategy
It is based on the firms marketing and pricing
objectives. Three possible alternatives are :
(i) Decide lease rate to favor leasing
(ii) Decide lease rate to favor outright purchase
(iii)Achieve balance between lease rate & sale
rate. Some business marketing firms have
representatives for giving financial consultancy
services to buying firms on leasing or buying.

IM/11-28/ 29

SUMMARY OF CHAPTER 11
In business marketing, price has a special
meaning. For value buyers, value based
pricing is appropriate.
Factors that influence pricing decisions (or
price determinants) are: (i) pricing objectives,
(ii) customer analysis, (iii) competition
analysis, (iv) cost analysis (v) government
regulations/policies
Pricing strategies for different product-market
situations are: (a) competitive bidding in
competitive markets, (b) new product pricing
(c) pricing across product life cycle.

IM/11-29/ 29

Initiating price changes and responding to

competitors price changes are also parts of
pricing strategies
Pricing policies include adjustment of basic
prices (or price list) with different types of
discounts like volume, trade, and cash, as
well as geographical pricing.
Leasing or buying options are available to
business buyers for capital items like
machinery. Financial and operating are two
types of leases. Pricing strategies are made
either to favour leasing or outright purchase,
or balance between leasing and buying .

CHAPTER 12

IM/12-1/19

STRATEGIC PLANNING,
IMPLEMENTING, AND CONTROLLING
IN INDUSRIAL MARKETING
Learning Objectives
Understand the characteristics of market
oriented organization.
Know the role of marketing in strategic planning
Examine the strategic planning process at
business unit level.
Understand preparation implementation and
control of industrial (or business )marketing
plan.

IM/12-2/19

CHARACTERISTICS OF MARKET
ORIENTED ORGANISATIONS
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.

H ie ra rc h y o f S tra te g ie s

IM/12-3/19

B e fo re u n d e rs ta n d in g th e ro le o f m a rk e tin g in s tra te g ic p la n n in g , w e
s h a ll firs t e x a m in e h ie ra rc h y o f s tra te g ie s .
O r g a n is a tio n a l
L e v e ls

O r g a n is a t io n a l
S tr u c tu re

S tr a te g y h ie r a r c h y
(T y p e o f M a n a g e m e n t)

C o rp o ra te

C o rp o ra te
O ffic e

D iv is io n a l/
B u s in e s s S tra te g y
(S tra te g ic
M a n a g e m e n t)

D iv is io n a l /
B u s in e s s U n it
/SBU

SBU
I

SBU
II

SBU
III

P ro d u c tio n

M a rk e tin g

F in a n c e

F u n c tio n a l

F u n c tio n a l
S tra te g y
(O p e ra tio n s
M a n a g e m e n t)

IM/12-4/19
The earlier figure shows hierarchy of strategies
and organization structure of a large company.
Strategic management gives a direction to the
firm and focuses on developing strategies to
achieve long term objectives & goals
A Strategic business unit (SBU) consists of an
independent business or related business that has
its own competitors and specific markets. In some
large companies there are (product ) divisions
and each division has a divisional plan. Each SBU
is headed by a manager who is responsible for
strategic planning and performance of the SBU.
Operational Management maintains the
direction given by strategic management, and
concentrates on day-to-day issues of costs,
revenue and profits.

IM/12-5/19

ROLE OF MARKETING IN STRATEGIC

PLANNING IN A FIRM
C om pany
L evel

F o rm a l
N am e

C o rp o rte

C o rp o rte
M a rk e tin g

R o le o f M a rk e tin g
T o g iv e in fo rm a tio n o n m a rk e ts a n d
to e n s u re c u s to m e r o rie n ta tio n , fo r
c o r p o ra te s tra te g y d e v e lo p m e n t.
l N
ev
L
y
an
p
m
o
C
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am
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,colin
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. d
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d

D iv is io n a l /
B u s in e s s
U n it le v e l

S tra te g ic
M a rk e tin g

F u n c tio n a l

M a rk e tin g
M anagem ent

T o c a rr y o u t c u s to m e r & c o m p e titio n
a n a ly s is , f o r d e v e lo p in g b u s in e s s
s tra te g y , in c lu d in g c o m p e titiv e
a d v a n ta g e , s e g m e n tin g , ta rg e tin g , a n d
p o s itio n in g s tra te g ie s .
T o d e v e lo p s h o rt - te rm m a rk e tin g
p la n a n d s tra te g y , c o o rd in a tio n , a n d
re s o u rc e a llo c a tio n .

STRATEGIC PLANNING PROCESS

AT
IM/12-6/19
CORPORATE LEVEL
The major steps involved are
1. Deciding corporate mission and objectives.
2. Establishing strategic business units ( SBUs.)
3. Allocation of resources to SBUs.
4. Developing corporate strategies.
ALLOCATION OF RESOURCES TO SBUs.
Two widely used models /tools are : (i) Boston
Consulting group (BCG) model, called Growth
share matrix, (ii) General electric (GE) model,
called Business Screen matrix.

IM/12-7/19

BCG Model : Growth Share

Matrix
R a p id

Q u e s tio n m a r k s

8
C ash C ow

S lo w

M a rk e t G ro w th R a te

S ta r s

Dogs

2
L a rg e

S m a ll

R e la tiv e M a r k e t S h a r e

IM/12-8/19
GE Model : Business Screen Matrix
B u s in e s s S tr e n g th
5

H ig h

M e d iu m

Low

S e le c tiv ity /
E a r n in g s

H ig h

M e d iu m

Low

IM/12-9/19

Major Business Strength factors :

Market share, product quality, unit
costs, R&D performance, brand
reputation, share growth.
Major Market Attractiveness
factors : Overall market size, annual
market growth rate, historic profit
margin, competitive intensity,
technological requirements.

IM/12-10/19

DEVELOPING CORPORATE
STRATEGIES

Strategic planning gap. It is the gap

between future (5 years) desired sales and the
projected sales (of all SBUs ) of a company.
D e s ir e d S a le s

S a le s

S tr a te g ic
P la n n in g g a p

B
C
P r o je c t e d S a le s

T im e (Y e a rs )

IM/12-11/19
The strategic planning gap can be filled by three
alternative strategies : (A) Diversification growth, (B)
Integrative growth, (C) Intensive growth

(C) Intensive Growth Strategy. Corporate

management should first review existing business,
using Ansoffs product-market expansion grid, shown
hereafter :

C u rre n t P ro d u c ts

N e w P ro d u c ts

C u rre n t
M a rk e ts

M a rk e t P e n e tra tio n
S tra te g y

P ro d u c t d e v e lo p m e n t
S tra te g y

N ew
M a rk e ts

M a rk e t d e v e lo p m e n t
S tra te g y

( D iv e rs ific a tio n
S tra te g y )

IM/12-12/19

( B) Integrative Growth Strategy

includes increase in a firms sales and
profits by integrating backward,
forward, or horizontally within that
industry.
(A) Diversification growth strategy
is considered when (B) & (C) strategies
are inadequate to achieve desired
growth and also good opportunities are
found outside the present businesses.

IM/12-13/19

STRATEGIC PLANNING PROCESS AT

BUSINESS UNIT LEVEL
The following steps are followed by the business
unit
head.
1. Defining the business units mission.
2. Scanning the external environment (O.T. Analysis)
3. Analyzing the internal environment (S.W. Analysis)
4. Developing objectives and goals.
5. Formulating strategies (See hereafter)
6. Preparing programme or action plan.
7. Implementing strategies and action plan.
8. Feedback and control.

IM/12-14/19

* PORTERS Generic Strategies

Framework for Business unit

L o w - c o s t p o s itio n
In d u s try
w id e
P a rtic u la r
s e g m e n t o n ly

O v e ra ll c o s t
le a d e rs h ip

D iffe re n tia tio n

Focus

IM/12-15/19

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)Analyzing marketing opportunities.
(ii)Segmenting and selecting target
market segments.
(iii)Developing marketing strategies.
(iv)Implementing and controlling the
marketing plan.
The head of marketing now prepares the
writhen document, called marketing plan,
with the following steps.

IM/12-16/19

Business ( Industrial ) Marketing

Plan
1.
2.
3.
4.
5.
6.
7.

8.

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.

IM/12-17/19

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) setting goals, (b)
measuring actual performance, (c) comparing goals
and actual performance, (d) analyzing causes of
deviations, if any (e) taking corrective actions, if
needed.
Types of controls : (i) Strategic control , (ii) annual
plan control (iii) efficiency control , (iv) profitability
control.

IM/12-18/19

SUMMARY OF CHAPTER 12
Marketing orientation is achieved by firms
by managing shared values, organization
structure, policies and cultures, strategic
planning, needs and expectations of
stakeholders.
Before understanding the role of marketing
in strategic planning, it is necessary to
examine hierarchy of strategies.
Major role of marketing is at business unit
and functional levels, and less at corporate
level.
Strategic planning process at corporate
level includes corporate mission &
objectives, establishing and allocation of
resources to SBUs and developing
corporate strategies.

IM/12-19/19

Strategic planning process at SBUs level

includes mission, SWOT analysis,
objectives and goals, strategies, action
plan, implementation and control.
The marketing head should go through
marketing planning process, before
preparing the marketing plan.
Implementation and control of marketing
plan are important for achievement of
marketing objectives and goals.