B2B for Students

INDUSTRIAL/B2B MARKETING

BYR B TANDAN

SYLLABUS1. Nature of B2B Marketing – slide 8 B2B V/S Consumer Marketing Rational approach to B2B The nature of Industrial demand and Industrial customer.2. Types of Industrial products – slide 45 Major equipment, Accessory equipment, Raw & Processed materials. Component parts & sub assemblies Operating supplies Standardized & Non-standardized parts.

SYLLABUS 3. Industrial ServicesFactors Influencing Organizational Buying –slide 57 Buying roles Organizational buying decision process. Environmental & Organizational influences The Buy Grid Model 4. Industrial Product Decisions – slide 137 Industrial PLC Industrial Product Mix determinants – technology, competition, operating capacity, shift in location of customers, government controls, changes in level of business activity.

SYLLABUS 5. Channel structure for Industrial Products –slide 159 Geographical size, operating characteristics. Manufacturers and sales agents & brokers Channel logistics6. Pricing for Industrial Products – Pricing objectives – Price decision analysis Breakeven analysis Net pricing. Demand pricing, trade discounts. Geographic pricing

SYLLABUS Factory pricing, freight allowance pricing, terms of sale. Purchase, Hire purchase, Leasing. 7. Purchasing systems – Auctions, bids, order placement, follow-up, receipt and inspection. 8. Promotion for Industrial Products – Supporting salesman Motivating distributors

SYLLABUS9. Stimulating primary demand – Sales appeal, publicity and sponsorships, trade shows, exhibits, catalogs, samples, promotional letters, promotional novelties.Case studies/Assignments

Reference Books1. Industrial Marketing By Krishna K Havaldar.2. Industrial Marketing By Richard M Hill, Ralph

S Alexander & James S Cross.3. Business Marketing By F Robert Dwyer & John

F Tanner.4. Internet.

Learning Objectives

To know what is Industrial/B2B Marketing?To know what are the differences in the characteristics of Industrial/B2B Marketing and Consumer Marketing?To learn why the demand for industrial goods and services are generally called ‘ derived demand’

INTRODUCTIONWhat is Industrial/B2B Marketing?It is the marketing of products and services to business organizations. Business or industrial organizations include manufacturing companies, government undertakings, private sector organizations, educational institutions, hospitals, distributors and dealers.In contrast, Consumer marketing is the marketing of products and services to individuals, families and households. The consumers buy products and services for their own consumption.

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Industrial Marketing

Also called: Business-to-Business (B2B) and Organizational Marketing.

Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers.

Customer can be private firm, public agency, or nonprofit organization.

B2B: goods or services are sold for any use other than personal consumption

Note: It is not the nature of the product; it is the reason

for the transaction.

What Distinguishes B2B from B2C?

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So what’s different about B2B?

Marketing Concept Marketing Mix Market Segmentation Product Life Cycle

All apply in both B2C and B2B.

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So what’s different about B2B?

The technical characteristics of the product are important.

These products directly affect the operations and economic health of the customer.

The customer is an organization rather than an individual consumer, or family.

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Five Major DifferencesBetween B2B and B2C

Products/Services being marketed Nature of demand How the customer buys Communication process Economic/Financial factors

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Products/Services

More complex Functional vs. Symbolic Attributes Large unit dollar value/Large quantities Custom/Tailored Various Stages from raw material to

finished goods. Foundation, Entering, Facilitating Goods

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Nature of Demand

Derived

Joint/Shared

Concentrated

Inelastic

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How Customer Buys?

Group Process

Formal

Lengthy

Loyal

Decisions based on risk and opportunity

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Communication

Personal selling is more important than mass paid advertising

Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW.

Message focused on technical, factual, and descriptive content.

Multiple audience members.

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Economic/Financial Factors

Competition oligopolistic Power/Dependency relationships Reciprocity: Doing business with

companies that do business with them. Economic variables: interest rates,

inflation, business cycle

Prof. A. K. Biswas 20

Are B2B and B2C Marketing Converging?

What is the Traditional Orientation? Consumer firms more transactional B2B firms more relational with long

term orientation B2B firms consider customers active Consumer firms consider customers

passive

Prof. A. K. Biswas 21

What is the Modern Orientation? Competition is more intense, and

customers are more demanding. Development and management of

relationship is now very important. Brand loyalty is brand relationship – a

high level of interdependence that involves frequent consumer/brand interactions.


22Prof. A. K. Biswas

Emergence of customizing consumer – a customer who takes elements of market offerings and crafts a customized consumption experience out of these.

Emergence of ‘consumer community’ in the consumer market is further transforming the so called passive and insignificant customers into a tribe capable of collective action.


You buy a gear to fix your mountain bike.

Ford buys the same gear to fix a machine.

Xerox buys soft drinks for its cafeterias.You start a landscaping business and

purchase a lawnmower. The Indian government buys…

anything.

Is it a B2C or a B2B Transaction?

B2B versus B2C MarketingCharacteristic B2B Market B2C Market

Sales volume Greater Smaller

Purchase volume Greater Smaller

Number of buyers Fewer Many

Size of individual buyers Larger Smaller

Location of buyers Concentrated Diffuse

Buyer-seller relationship Closer More Impersonal

Nature of channel More direct Less direct

Buying influences Multiple Single/Multiple

Type of negotiations More complex Simpler

Use of reciprocity Yes No

Use of leasing Greater Less

Key promotion method Personal Selling Advertising

Differences between Industrial and Consumer Marketing

AREAS INDUSTRIAL MARKETS

CONSUMER MARKETS

1. Market characteristics

Geographically concentrated

Geographically dispersed

Relatively fewer buyers

Mass markets

2. Product characteristics

Technical complexity Standardized

Customized

3. Service characteristics

Service timely & availability very important.

Service delivery & availability some what important

Differences between Industrial & Consumer Marketing


CONSUMER MARKETS

4. Buyer behavior Involvement of various functional areas in both buyer & supplier firms

Involvement of family members

Purchase decisions are easily made on rational/performance basis

Purchase decisions are mostly made on physiological/social/psychological needs

Technical expertise Less technical expertise

Stable interpersonal relationship between buyers & sellers

Non-personal relationship

Differences between Industrial & Consumer Marketing


CONSUMER MARKETS

5.Channel characteristics

More direct Indirect

Fewer intermediaries/middlemen

Multiple layers of intermediaries.

6. Promotional characteristics

Emphasis on personal selling

Emphasis on advertising.

7. Price characteristics Competitive bidding & negotiated prices

List price or MRP

List prices for standard products

BUSINESS MARKET DEMAND• Demand characteristics vary from market to market.

Relational approach to Industrial/B2B Marketing

Industrial DemandThe demand for industrial products and services does not exist by itself. It is derived from the ultimate demand for consumer goods and services. Industrial demand is therefore, called ‘Derived Demand’.Sometimes the demand for industrial products is called ‘Joint Demand’ when the demand for a product depends upon its along with the existence of other product or products. Cross elasticity of demand exists for some substitute products.

DERIVED DEMANDIndustrial customers buy goods and services for use in producing other goods and services. Ultimately, whatever is produced will be sold to the consumers. Hence, the demand for industrial goods and services is derived from consumer goods and services.Example – demand for ‘precision steel tubes’. It is demanded for production of bicycles, motorcycles, scooters and furniture.In case of capital goods, such as machinery and equipment( ex. Machine tools, textile machinery leather machinery etc.) that are used to produce other goods, the purchases are made not only for the current requirements, but also in anticipation of profits from the future range.

JOINT DEMANDJoint demand occurs when one industrial products useful if other products exist.Example - a pump set cannot be used for pumping water, if the electric motor or diesel engine is not available.

Cross-elasticity of Demand –Elasticity is simply the change in demand from a change in price. Percentages are used to measure the relative changes. Demand is ‘ Inelastic’ if the %age change in quantity demand is less than the %age change in price. Demand is ‘unitary’ if the %age change in price is matched by an equal %age change in quantity. Demand is ‘Elastic’ if the %age change in quantity demanded is more than the %age change in price.

JOINT DEMAND• Results when the demand for one business product is related to the demand for another business product used in combination with the first item.

• Example: If lumber supply falls, then decrease in construction will

affect concrete market.

INELASTIC DEMAND• Demand throughout an industry will not change significantly due to a price change.

• Example: Construction firms will not necessarily buy more lumber if

prices fall unless overall housing demand also increases.

INVENTORY ADJUSTMENTS

• Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and requiring vendors to deliver inputs as they are needed.

• Often use sole sourcing, buying a firm’s entire stock of a product from just one supplier.

• Latest inventory trend: JIT II, suppliers to place representatives at the customer’s facility to work as part of an integrated, on-site customer–supplier team.

• Inventory adjustments are also vital to wholesalers and retailers.

THE MAKE, BUY, OR LEASE DECISION

•Firms acquiring needed products can get them in one of three ways:

• Make the goods or provide the service in-house.

• Purchase it from another organization.

• Lease it from another organization.

• Producing the item may be cheapest route, but most firms cannot make all of the products they need.

• Many companies purchase many of the goods they need.

• Companies can spread out costs through leasing.

THE RISE OF OFFSHORING AND OUTSOURCING• Off shoring Movement of high-wage jobs from one country to lower-cost overseas locations.

• Example: China makes two-thirds of the world’s copiers, microwaves, DVD players, and shoes, and virtually all of the world’s toys.

• Allows firms to concentrate their resources on their core business and access specialized talent or expertise.

• Near shoring - Moving jobs to vendors in countries close to the business’s home country.

• U.S. firms often near shore in Canada or Mexico.

• Out shoring - Using outside vendors to provide goods and services formerly produced in-house.

• Commonly out shore for three reasons: cost reduction, quality and speed of software maintenance and development and greater value.

PROBLEMS WITH OFFSHORING AND OUTSOURCING

Many companies discover their cost savings are less than expected.

• Can raise security concerns over proprietary technology or customer data.

• Can reduce flexibility to respond quickly to marketplace.

• Can create conflicts with unions, even leading to shutdowns and strikes.

• Can negatively affect employee morale and loyalty.

Major Uses of B2B Products

For additional production (e.g., components are combined into subassemblies and become part of the finished product)

For use in operations, but not part of the finished product

For resale

Classifying Business Goods & Services

3 Main Categories of Products Entering Goods

Become part of the finished product Cost assigned to the manufacturing process

Foundation Goods Capital Items Typically depreciated over time

Facilitating Products Support organizational operations Handled as overhead expenses


Entering Goods Raw Materials

Farm products & natural products Only processed as necessary for handling &

transport Require extensive processing

Manufactured Materials & Parts Any product that has undergone extensive

processing prior to purchase Component Materials require additional

processing Component Parts generally do not require

additional processing


Foundation Goods Installations

Major long-term investment itemsBuildings, land, fixed equipment, etc.

Accessory EquipmentLess expensive & short-livedNot considered part of fixed plantPortable tools, PC’s, etc.


Facilitating Products Supplies

Any supplies necessary to maintain the organization’s operations

ServicesMaintenance & Repair supportAdvisory supportLogistical support

B2B – Business Market Demand

Demand within the business market: is often derived from demand for

consumer products Is generally price inelastic (demand does

not change due to price fluctuations) Tends to fluctuate more widely than

consumer markets Buyers tend to be better informed than

end consumers

B2B – Vertical and Horizontal

Vertical business market: the product is usable by virtually all firms in one or two industries

Horizontal business market: the product can be used by many industries

B2B Growth

Companies are making less and buying more

Intense quality and time pressures increases the need for reliable suppliers

Trend towards fewer suppliers and long-term partnering relationships with those suppliers

Understanding Industrial Markets & Environment

Learning objectives –To understand the types of industrial customers as well as industrial goods and services. To know what are the marketing implications for different types of customers and products?To understand the purchasing practices of industrial customers. To know the types of environment, their influences on the industrial organization and the strategies that are available to manage the environment.

Types of Industrial Customers

Industrial customers are generally classified into Four Groups –1) Commercial enterprises.2) Government customers3) Institutional customers.4) Cooperative societies.

Commercial EnterprisesCommercial enterprises are private sector, profit making organizations, consisting of – a) Industrial distributors or dealersb) Original equipment manufacturers(OEM)c) Users.They include manufacturing firms and non-manufacturing

firms. Sometimes these classifications overlap, but they are useful to the industrial marketer because they indicate how the products and services are used by buying organizations.

Government CustomersThe largest purchases if industrial products in India is the Central Government departments, undertakings and agencies, such as – a) Railwaysb) DOTc) Defensed) DGS&De) State transport undertakingsf) State electricity boards, etc.

INSTITUTIONSPublic and private institutions such as - a) Hospitalsb) Schools/Collegesc) Universitiesd) PrisonsSome of these institutions have rigid purchasing rules and

some are flexible.

Cooperatives –This category was a part of the cooperative

movement in India. An association of persons form a cooperative society.

Classification of Industrial Products & Services.

There are many methods by which Industrial products and services are classified. The method that is most accepted classifies products and services based on how products or service enter the production process, and their relative costs.Based on this method they are classified into three broad groups –

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Business Products Classification

Materials and partsComponents

Process materials

Supplies/ business services

Capital itemsInstallations

Accessory Equip

Marketing Implications for different 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.

www.a2zmba.com By Prof. Havaldar

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.


Purchasing Practices of Different Types of Industrial / Business Customers

(i) Purchasing in commercial enterprises Involves Technical & Commercial depts. Major Tasks / Procedure: identifying, negotiating,

selecting suppliers, building relationship. Purchasing to improve operational efficiency &

contribute to firm’s 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 Finalized on lowest bidders (suppliers offering Lowest prices / Landed Costs)www.a2zmba.com By Prof.

Havaldar

(iii) Purchasing in Institutions If the Institute is a Govt. Hospital Purchasing

practices of Govt. units are followed Similarly a private School / College follows

practices of commercial enterprises However, it is better to study each major

institution practices.

(iv) Purchasing in cooperative societies Similar to Institutional purchase.


Strategies for Managing Changing External Environment.

(i) Independent Strategies.(ii) Cooperative Strategies.(iii) Strategic Planning - it Aims at

keeping the firm consistently successful in a changing marketingenvironment by market oriented strategic management.


Organizational Buying

B2B Marketing is Different!

There are fewer customers and they require dependable relationships and a high level of service.

Marketing tends to be done by personal selling ( one-on-one) calls to the customer.

Specialized media such as trade journals, sales brochures, web sites, trade shows are used rather than traditional mass media.

Business Customers

Fewer Concentrated

Need long-term relationships because they are not easy to replace

Emotional or Rational Buyers?(Considerations of B2B Buyers)

Buyers must purchase according to a set of purchasing specifications

Focus on Quality (including ISO 9000 certification)

Total costs to purchase and use Reliability Value in use Savings possible via e-commerce

What is ISO 9000?

A very detailed process for documenting quality according to internationally recognized standards.

Some international companies won’t buy from you if you aren’t ISO 9000 compliant.

Value

May not be tangible Value is PERCEIVED by the buyer Can enhance value:

Packaging Support services Reliability Warranties Training

Selling to Organizations I

Social as well as economic dimension Individual behavior contributes to the

mission. Formal reward system for individuals Bad purchasing decisions

Interruptions in production/operations Reduction in product quality Slowdown in distribution Dissatisfied customers Wasted resources Higher costs/lower sales and cash flow/lower

profit

Selling to Organizations II

Usually formal contracts Extensive search for suppliers Negotiation Long buying process Multiple suppliers Long-term and loyal relationships

Why?

Reduce risk of mistakes

Formal policies and informal culture

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.www.a2zmba.com By Prof.

Havaldar

Technical Complexities

Products and services, and their applications can be complex.

New technology Interface with existing technology Custom High standards (e.g. clean rooms,

surgical suites)

Commercial Complexities

So much is open to negotiation Product, price, terms, discounts,

warranties, delivery, training, service, returns, etc.

Liability, nonperformance POWER Size of deal, characteristics of parties,

the deal, # of parties involved, complexity of products

Behavioral Complexities

Negotiating not just with purchasing agent, but multiple parties from multiple functional areas in the organization

The more people involved, the more complicated it gets

Technical and commercial complexity can exacerbate the behavioral complexity

Who’s on first?

Key decision maker(s) Important Product/Vendor attributes Access to key decision makers Customer purchasing policies and

procedures

The Buying Center Roles Initiator Buyer User Influencer Decider Gatekeeper

Not really a center at all. Group decision process.

Rational Decision-Making?

Purchasing for business, not self Purchaser being judged on performance Fiduciary responsibility Formal structure and procedures

# bidders Evaluation criteria Multiple signatories


Emotional and Social Factors Friendship Like/Dislike vendor/rep Personal/Professional Favors Influence of others in organization (+/-)

Personal/Departmental Needs & Objectives may not match those of the organization.

Conflict


Manage process to control social & emotional influences.

Need to have good decisions being made.

THE BUSINESS BUYING PROCESS

• More complex than the consumer decision process.

• Takes place within formal organization’s budget, cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS

Environmental Factors• Economic, political, regulatory, competitive, and technological considerations influence business buying decisions.

• Example: Law freezing cable rates or introduction of new product by a competitor will affect demand.

• Natural disasters, such as Hurricane Katrina.

Organizational Factors• Successful marketers understand their customers’ organizational structures, policies, and purchasing systems.

• Some firms have centralized procurement, others delegate it throughout the units.

• Many companies use multiple sourcing to avoid depending too heavily on a sole supplier.

Interpersonal Influences• Many different people influence B2B buying decisions, sometimes as individuals and sometimes as part of a committee.

• Marketers must know who the influencers are and understand their priorities.

• Sales personnel must be flexible and have a good technical understanding of their products.

The Role of the Professional Buyer• Many organizations rely on professionals, often called merchandisers, who implement systematic buying procedures.

• Firms usually buy expense items with little delay but carefully consider capital purchases.

• May rely on systems integration, centralization of the procurement function.

• Corporate buyers often use the Internet to identify sources of supplies.

MODEL OF THE ORGANIZATIONAL BUYING PROCESS

Stage 1: Anticipate a Problem/Need/Opportunity and a General Solution

• Example: Need to provide employees with a good cup of coffee to enhance productivity.Stage 2: Determine the Characteristics and Quantity of a Needed Good or Service

• Example: Offering a coffee system that brews one cup of coffee at a time according to each employee’s preference.Stage 3: Describe Characteristics and the Quantity of a Needed Good or Service

• Example: Firms need a simple system for brewing a good cup of coffee; quantity requirements are easily correlated to the number of coffee drinkers.

Stage 4: Search for Qualify Potential Sources

• Choice of supplier may be fairly straightforward or very complex.Stage 5: Acquire and Analyze Proposals

• May involve competitive bidding, especially if the buyer is the government or a public agency.Stage 6: Evaluate Proposals and Select Suppliers

• Buyers choose proposal best suited to their needs.

• Final choice may involve trade-offs between features - such as price, reliability, quality, and order accuracy.

Stage 7: Select an Order Routine

• Buyer and vendor work out best way to process future purchases.Stage 8: Obtain Feedback and Evaluate Performance

• Buyers measure vendors’ performance.

• Larger firms are more likely to use formal evaluation procedures.

• Some firms rely on outside organizations to gather quality feedback and summarize results.

CLASSIFYING BUSINESS BUYING SITUATIONS

• Business buying behavior involves degree of effort involved in the decision and the levels within the organization in which these decisions are made.

Straight Re-buying

• A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past.

• Purchaser see little reason to assess competing options.

• Marketers who maintain good relationships with customers can go a long way toward ensuring straight re-buys.

• High-quality products.

• Superior service.

• Prompt delivery.

Modified Re-buying

• Purchaser willing to reevaluate available options.

• May occur if supplier has let a re-buy circumstance deteriorate because of poor service or delivery performance.New-Task Buying

• First-time or unique purchase situations that require considerable effort by the decision makers.

• Most complex category of business buying.

• Often requires purchaser to consider alternative offerings and vendors.

Reciprocity• Practice of buying from suppliers that are also customers.

ANALYSIS TOOLS

• Value analysis—examines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute.

• Vendor analysis—an ongoing evaluation of a supplier’s performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.

Buying Scenarios Newness and past experience with

product Amount/Type of information needed by

influencers/deciders Number of alternatives Common buying situations (buy

classes) Straight re buy Modified re buy New task purchase

Problem-Solving Perspective

Routine orders: little risk Procedural: How to use product.

Learning/training Performance: Can product meet need? Political: Internal politics, departmental

squabbles (legitimate and petty)

Reward Perspective

Individual motivation Influenced by evaluation & reward Individual values and objectives; brought

from department to buying center Agency Theory

External EnvironmentalInfluences

Buyer CenterDynamics

IndividualInfluences

OrganizationalInfluences

Buyer Center Model

Buying Situations

3 Common types of purchases / buying situationsi. 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 Re buy / 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 Re buy / 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.


Buy grid Framework


BUY PHASES BUY CLASSES

New Task Modified Re buy

Straight Re buy

1. Problem Recognition Yes May Be 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

BUYGRID FRAMEWORK ANALYSIS

All Phases are Applicable for a New Task. Some Phases are Applicable for modified /

Straight Re buy. New task situation is most difficult since

buyers have less knowledge, no experience & more people involved.

Modified Re buy is not difficult situation since it has few activities.

Straight re buy situation is handled routinely, as repeat purchases are made.


THE BUYING CENTER CONCEPT

• Buying center Participants in an organizational buying action.BUYING CENTER ROLES

Buying Center roles & key 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 re buy / 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. www.a2zmba.com By Prof.

Havaldar

Identifying key members 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.www.a2zmba.com By Prof.

Havaldar

The “Buying Center”

Business purchases often involve multiple influence

"Buying center"—all people who participate in or influence a particular purchase

Buying center varies from purchase to purchase

Does not appear on the "organizational chart"

Structure may be formal or informal

INTERNATIONAL BUYING CENTERS

• Marketers may have difficulty identifying members of foreign buying centers.

• Foreign buying centers often include more participants than those in U.S.

• Marketers who can quickly identify decision makers have an advantage over competition.

TEAM SELLING

• Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision.

• May include members of the seller firm’s own supply network in the sales situation.

• Example: Reseller of specialized computer applications whose clients require access to training.

DEVELOPING EFFECTIVE BUSINESS-TO-BUSINESS MARKETING STRATEGIES

• Marketer must develop strategy based on particular organization’s buying behavior and on the buying situation.

CHALLENGES OF GOVERNMENT MARKETS

• Government agencies make up the largest customer group in India.

• More than 85,000 government units buy products.

• Purchases typically involve dozens of interested parties.

• Influenced by social goals, such as minority subcontracting programs.

• Can have either fixed-price contracts or cost-reimbursement contracts.

CHALLENGES OF INSTITUTIONAL MARKETS

• Institutional buyers include schools, hospitals, libraries, foundations, and others.

• Have widely diverse buying practices among, and even within, institutions.

• Multiple buying influences can affect buying decisions, such as conflicts between professional staff and purchasing departments.

CHALLENGES OF INTERNATIONAL MARKETS

• Marketers must consider buyers’ attitudes and cultural patterns.

• Local industries, economic conditions, geographic characteristics, and legal restrictions must also be considered.

• Remanufacturing, or restoring worn-out products to like-new condition, can be an important strategy in places that cannot afford new products.

• Foreign governments are also an important market.

Building Customer Relationships

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 rep’s 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


• 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.

CompatibleContent

IncompatibleContent

Ideal/Successful Transaction

InefficientTransaction

InefficientTransaction

NoTransaction

Compatible Style Incompatible Style

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.

Each business relationship is an exchange process of obtaining a desired product / service by offering something of value is return.

TransactionalRelationship

Value-AddedRelationship

Partnering / CollaborativeRelationship

1

Industrial Loyalties

Take longer to establish

Last longer

More difficult to dissolve

Loyalty Factors

Task Concerns Quality, Delivery, Service, Price

Organizational Concerns Politically safe, minimal benefit for change

Work Simplification Concerns Makes it easier, too much trouble to change

Attitudes Toward Source Buyer’s attitude toward company and people

Relationship Marketing

Strong, Lasting Ties Earned Trust Successful Long-Term Exchanges Structural and Social Bonds Cooperation/Collaboration Long-Term, personalized, mutually

beneficial, based in deep understanding of customer needs and characteristics

Relationship Marketing

Strategic Orientation Both Buyer and Seller are committed Long-Term Mutually Beneficial Collaboration Win-Win

Relationship Marketing:Reality or Lip Service?

Requires more commitment than most are willing to make.

Most take tactical steps rather than strategic

Shortcomings observed: Locking in the customer: Needs to be win-win Informality: legal, strategic, outcomes Primarily non-financial investments: Capital

equipment is important Avoiding Dependency: Flexibility over

commitment Unilateral: Buyers should initiate Not all customers are worth the investment One size never fits all

Relationship StrengthAffected By:

Volume of purchases Frequency of contact Extent of collaboration in product

development Technical distance Physical distance

Industrial Marketing Research and Intelligence

Why do research?

The external environment is dynamic.

Knowledge becomes outdated.

To gather more information

Better Information Better Decisions

Limitations

Managers NEVER have all of the relevant information that they need.

Constraints of time and money Desired information is often more costly than

it’s worth. Decisions are time sensitive. Can’t wait for all

of the information.

When NOT to do research? Good research has already been done.

When decisions have been made and they won’t be altered by new information.

When management does not understand the necessity for research and won’t commit finance.

Don’t have talent - won’t hire.

Uncertainty reduction justifies cost.

Marketing Research Tasks

Estimate market potential

Analyze market share/share of customer

Track competitors

Identify market characteristics & trends

Analyze sales data

Sales forecasting: Existing/new products

Types of Data Primary

New information generated for specific task.

Can be expensive/time consuming. Gather by survey, tests, observation, focus

groups, interviews.

Secondary Existing information. May not be in useful form. Sources: government, trade/professional

associations, company records

Sampling Issues

Sample vs. Census Probability

Random, equal chance Random, stratified

Non-Probability Convenience Judgment

Questionnaires

Ask what you want to know? Watch length Aesthetics Easily understood; watch vernacular Social desirability bias Non-response bias Question order effects

Coding-Analysis-Interpretation

Data entry tedious. Mistakes are made Need to clean data

Use statistical tools to analyze data. SPSS/SAS Can data mine

Important to understand analysis What results means Limitations of method

B2B vs. B2C Research I Technology

Need to understand technical needs of customers

Direct economic effect Quality/Price trade-off very important

Organization, professionals Understand multiple players, in socio-

political setting

B2B vs. B2C Research II

Smaller #s of buyers to study Smaller sample sizes Secondary data often exists Tough to get buyer’s attention for

research Need to know which buyer(s) to study Need technical knowledge for research Surveys take longer, cost more

Marketing Intelligence Continuous flow of information

Strategic and Tactical Systematic and periodic

Better understanding of environment over time

Collect from variety of sources Customers, competitors, regulators,

etc. Constant vigilance

Marketing Intelligence System I

People, Procedures, Computers

Acquires, Disseminates, Interprets, Stores information about internal and external environments

Marketing Intelligence System II

Transform raw data to useful information Can organize information by customer,

competitor, product line, territory, activity Sources

Internal: sales, service, accounting External: government, trade associations,

competitor literature, customers, publications Output

Periodic reports Special information needs

Decision Support Systems

Computer-aided decision-making Involve analysis, not just retrieval Database: Repository of data Statistics: Analyze data Model: Patterns in the data; relationships Optimization: Decisions leading to best

outcome given model

Some Helpful Criteria for Selecting Partners

High risk of losing account Important customer Customer open to partnership Can improve relationship Potentially mutually beneficial Can add benefits in service Good competitive position

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.


Segmentation and Targeting

Of Business Markets

EVALUATING MARKET SEGMENTS 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

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Macro Strategy

Group by customer organization characteristics Size Usage rate Industry Organization structure Location End Market New/Repeat purchase

Micro Strategy

Characteristics of decision-making process and buying structure of customer organization. Perceived importance of purchase Relative importance: product/vendor

attributes Attitudes toward vendors Vendor selection rules Buying center structural Power of key departments in buying center Key member: personality, demographics

Nested Approach

Hierarchical structure

Start with macro and work down to micro

PROCEDURE FOR DEVELOPING A POSITIONING STRATEGY

Following steps are involved :(i) Identify which attributes / benefits target

customers consider important while buying a product / service. This information is obtained through a market research study . The variables considered for differentiating a company’s product from competing products are.

(a) Product variables,(b) Service variables,

(c) Personal variables, (d) Image variables,

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

(iii) Use Perceptual Mapping Technique. To decide on positioning strategy, this technique is used, after getting customers’ perceptions through marketing research.

(iv) Communicate Positioning Strategy. The firm should decide and communicate its positioning strategy to target customers, through sales force, advertising in journals, internet, and trade shows

PRODUCT STRATEGY & NEW PRODUCT DEVELOPMENT

Learning Objectives1. 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.

Product: bundle of physical, service, and symbolic attributes designed to enhance buyers’ want satisfaction

WHAT IS A PRODUCT?

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• Good: the tangible components of a product offering

• Service: intangible task that satisfies consumer or business user needs

Characteristics that distinguish services from goods: Intangibility Inseparability Perish ability Difficulty of standardization Frequent requirement of interaction

between buyer and Seller

The Difficulty of Marketing Services

© PhotoDisc

Convenience product: good or service that consumers want to purchase frequently, immediately, and with minimal effort

Shopping product: good or service purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and color

Specialty product: good or service with unique characteristics that cause the buyer to value it and make a special effort to obtain it

Unsought product: good or service marketed to consumers who may not yet recognize the need for it

Types of Consumer Products

Product Systems and Mixes

Product line Product mix Product

assortment Depth Length Width Consistency

http://www.kitchenaid.com/

DEFINITION AND MEANING OF AN INDUSTRIAL PRODUCT

Definition : Its is a physical thing as well as a Complex set of economic, technical, legal and personal relationship between a buyer and a seller.

Meaning of a Total Product Package : It includes basic properties (with fundamental benefits), enhanced properties (with tangible benefits), and augmented properties (with intangible benefits).

In a competitive market, business marketers must understand target customers’ perceptions of a total product package and offer the same better than competitors.

10-140

Business Products Classification

Materials and partsComponents

Process materials

Supplies/ business services

Capital itemsInstallations

Accessory Equip

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.

Product life cycle: progression of products through introduction, growth, maturity, and decline stages

THE PRODUCT LIFE CYCLE

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Product Life Cycle

10-144

Stages of the Product Life Cycle

PLC Stages

Introduction Growth Maturity Decline

Low sales High costs per

customer Negative profits Innovator

customers Few competitors

10-145

PLC Objectives and Strategies

PLC Stages


Objective: to create awareness and trial

Offer a basic product Price at cost-plus Selective distribution Awareness–dealers

and early adopters Induce trial via heavy

sales promotion

10-146


PLC Stages


Rising sales Average costs Rising profits Early adopters,

customers Growing

Competition

10-147


PLC Stages


Objective: maximize market share

Offer service, product extensions, warranty

Price to penetrate Intensive

distribution Awareness and

interest–mass market

Reduce promotions due to heavy demand

10-148


PLC Stages


Peak sales Low costs High profits Middle majority

customers Stable/declining

competition

10-149


PLC Stages


Declining sales Low costs Declining profits Laggard

customers Declining

competition

10-150


PLC Stages


Objective: reduce costs and milk the brand

Phase out Cut prices Selective

distribution Reduce promotions

to minimal levels

Marketers usually try to expand each stage of the life cycle for their products as long as possible

Marketers seek to extend product life cycles through strategies to:◦ Increase the purchase quantity or frequency

of use by current customers◦ Increase the number of users for the product◦ Find new uses◦ Change package sizes, labels, or product

quality

STRATEGIC IMPLICATIONS OF THE PRODUCT LIFE CYCLE CONCEPT

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 company’s products by using “ perceptual mapping” technique.

3. Decide the product strategies, based on above analysis.

CLASSIFICATION OF NEW PRODUCTS(i) Products that are new to the world & innovative.

(ii) Products that are new to the company, but not new to the world.

(iii) Improvements / Revision to the existing products.(iv) Addition to the existing products.

(v) Repositioning existing products to new market segments(vi) Products with substantial cost reductions without

reduction in performance.

NEW PRODUCT DEVELOPMENT PROCESSIt consists of 7 Stages :

(i) Idea generation, (ii) Idea Screening, (iii) Concept development and testing, (iv) Business analysis, (v) Product

development, (vi) Market testing, & (vii) Commercialization.

IMPACT OF TECHNOLOGY

Technological innovations create new products / services that are new to the world. Examples of these innovations, called break through technology are :(i) Technological inventions of 1940s of vacuum tube and amplifier circuit created new products / services like radio, wireless telegraphy, and telephone service.(ii) Technological inventions of 1950s & 70s of

transistor, integrated circuit (IC), 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.

The Consumer Adoption Process

Awareness

Stages in the Adoption Process

Interest

Evaluation

Trial

Adoption

10-156

Factors Influencing Adoption Process

Communicability

Observability

Compatibility

Complexity

Relative advantage

http://www.apple.com/ipod/ipod.html

10-157

Adopter Categorization

HIGH – TECH MARKETING STRATEGY

1. Target a niche market.2. Plan whole product properties.3. Develop partnerships.4. Unique positioning strategy.5. Effective Communication Strategy6. Multi – Channel distribution strategy.7. Skimming pricing strategy.

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INDUSTRIAL DISTRIBUTION CHANNELS & MARKETING LOGISTICS

Learning objectives1. Understand alternative channel structures.2. Know types of industrial intermediaries.3. Understand steps involved in designing a

channel.4. Learn how to manage channel members.5. Understand concepts of supply chain

management, Logistics, and business logistics system.

6. Learn the tasks of physical distribution and total distribution cost.

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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,

manufacturer’s 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 manufacturer’s resources are limited,(iii) Customers are geographically dispersed, (iv) Buyers purchase many items in one transaction.

Types of Intermediaries1. Industrial Distributors / Dealers. They perform many functions like buying, storing,

promoting, financing, selling, transporting and servicing certain geographic markets & are given discounts.

Major categories are (i) General – line distributors, (ii)

Specialized distributors, and (iii) Combination house.

2. Manufactures’ Representatives / Agents. They perform functions like promoting manufacturers’

products / services, getting orders, and colleting market information. They are independent business firms, representing various manufacturers whose products complement one another but are not competitive.

They are paid commission on the value of sales or orders

booked. They do not buy, store or finance transactions.

3. Value-added Resellers (VARs) They are new type of intermediaries from computer

industry. They deal with computer hardware and software companies, customize the same to solve specific problems of buying firms. They are paid discounts.

4. Brokers They bring together buyers and sellers, when information

is not available completely. They represent either a buyer or a seller, and their relationship is short term. They do not buy products & services and are paid on commission basis.

5. Commission Merchants. They represent sellers / manufactures, mostly with bulk

commodities like raw materials, to perform functions like arranging inspection, transporting, negotiating and selling. They are paid commission on the value of sales.

CHANNEL DESIGN It includes developing new channels and modifying the existing

channels. The procedure / steps are as follows; (i) Developing channel objectives; (ii) Analyzing channel constraints;

(iii) Analyzing channel tasks; (iv) Identifying channel alternatives. These include the following issues : (a) 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).

MANAGING CHANNEL MEMBERSIt includes :1. Selecting Intermediaries.2. Motivating Intermediaries.

(a) Partnering relationships.(b) Reasonable discounts and commission. (c) Distributor councils.(d) Other motivational tools.

3. 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).

4. Evaluating Channel Members

Logistics and Supply Chain Management

Supply (value) chain: sequence of suppliers that contributes to the creation and delivery of a goods or service. Upstream management Downstream management

13-165

The Supply Chain of a Manufacturing Company

13-166

SCM DEFINED

The supply chain is the network of organizations that are involved through upstream and down stream linkages, in different processes and activities that produce value in the form of products and services in the hands of the ultimate customer.

Supply Chain may be defined as “flow of materials through procurement, manufacturing, distribution, sales & disposal”.

Dynamics of Material Flow

Supplier Plant RS Logistics Retailer

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http://images.google.co.in/imgres?imgurl=dmoz.org/img/moz/factory.gif&imgrefurl=http://dmoz.org/Business/&h=150&w=200&prev=/images?q=factory&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8&sa=N

http://images.google.co.in/imgres?imgurl=www.objectwarehouse.com/images/splash/warehouse.gif&imgrefurl=http://www.objectwarehouse.com/&h=141&w=163&prev=/images?q=warehouse&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8&sa=N

http://images.google.co.in/imgres?imgurl=www.beammacktrucks.com/truck.jpg&imgrefurl=http://www.beammacktrucks.com/&h=222&w=278&prev=/images?q=truck&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8

Traditional SCM

Cost

Reduced inventories Reduced waste Reduced total system costs Service

Establishment of a collaborative framework Near real time information flow Reduced variation and increased

quality Business growth opportunities

Preferred source for new opportunities Expanded benefits to other customers

Supply Chain Benefits

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.


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.

www.a2zmba.com By Prof.

Havaldar

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 firm’s channel members work together to improve “customer service”, in order to get higher sales revenue.


=Sa les R evenue - To ta l P hys ical D istributor C ost

C apita l Investm ent

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 customer’s expectations.

Factors that determine service quality by customers are :(i) Reliability (ii) Responsiveness (iii) Assurance (iv) Empathy (v) Tangibles www.a2zmba.com By Prof.

Havaldar

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 .


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 it’s competitors from customers.(iv) Analyze 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. www.a2zmba.com By Prof.

Havaldar

4. Managing channel members consist of selecting and motivating intermediaries, controlling channel conflicts, and evaluating channel members.

5. 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.

6. Business logistics system includes physical supply and physical distribution (or marketing logistics).

7. 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.


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.


Role of Personal Selling in Business Marketing

• Personal selling or direct selling through company sales force plays a greater role in business marketing than consumer marketing

• Major roles of personal selling are (i) A part of problem – solving capabilities of

the company.(ii) A part of the company’s communication or promotion mix .(iii) Provide effective customer service .


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 :


Step 1. Prospecting and Qualifying Step 1. Prospecting and Qualifying

Step 2. Pre-approach Step 2. Pre-approach

Step 3. Approach Step 3. Approach

Step 4. Presentation/ Demonstration Step 4. Presentation/ Demonstration

Identifying and Screening For Qualified Potential Customers.

Learning As Much As Possible About a Prospective Customer Before Making a Sales Call.

Knowing How to Meet the Buyer to Get the Relationship Off to a Good Start.

Telling the Product “Story” to the Buyer, and Showing the Product Benefits.

Steps in the Selling ProcessSteps in the Selling Process

Step 5. Handling Objections Step 5. Handling Objections

Step 6. Closing Step 6. Closing

Step 7. Follow-Up Step 7. Follow-Up

Seeking Out, Clarifying, and Overcoming Customer Objections to Buying.

Asking the Customer for the Order.

Following Up After the Sale to Ensure Customer Satisfaction and Repeat Business.

Steps in the Selling ProcessSteps in the Selling Process

Characteristics of B2B Selling 1. Promotional strategy focuses more on “ personal

selling’’ through company’s sales force. Hence, salespersons are active in getting orders.

2. Adverting is used as a support to personal selling.3. The sales person sells technical and non-technical

products, and uses “problem solving’’ approach 4. Typically, it takes a long time to know outcome of sales

efforts.5. “System selling” approach is used by some business

marketers, as it is preferred in some large industrial projects or contracts.

6. “Team selling” approach is used for major customers and large value orders.

Team Selling Approach• More companies are using team selling

approach for selling to major and national accounts (customers) and technically complex products and services.

• Sales team consists of sales representative, technical support person, inside sales person, and a senior sales/marketing manager.

• Coordination is done by a sales rep, for a major customer and a national accounts manager for a national customer.


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 firm’s

problem-solving abilities. He should identify and analyze the buying firm’s problem. He should then show how his company’s products and services can solve the buyer’s problems, better than competitors. This is called solution-oriented effort or approach.


Entrepreneurial Philosophy• Entrepreneurship 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 Entrepreneurial philosophy show consistently good performance.


• 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.


How to Manage 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.


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.

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 promotion’s results.(vii) Integrate the promotion’s program.

Promotional Tools and Media in Business Markets

P ro m o tio n a l To o ls

A d v e r t is in g S a le sP ro m o tio n

P. R . a n dP u b lic ity

D ire c tM a r k e t in g

P e r so n a lS e l lin g

P rin t M ed ia B u sin e ss

P u b lica tion s Tr ad e

Jo u r n a ls In d u str ia ls

d ire ctor ie s

P ro m otion a l M ed ia

&S u p p or ts

Tr ad e sh ow s E xh ib ition s C ata log u e s S a le s C o n sen ts P ro m otio n a l

n o ve lties (g ifts ) S e m in ar s D em o n str a tion P ro m otio n a l

le tte rs E n ter ta in m e n t

C h a rita b le d o n a tion s A d o p tin g

v illage s C om m u n ity

re la tion s N ew s ite m in

p ressTec h n ic a l

ar tic le s in jou r n a ls

D irec t m ail Te le m ar-

k e tin g O n -lin e

m ar k e tin g

S a le s ca lls S a le s

p resen ta tion s Te am se llin g R ela tion sh ip

m ar k e tin g

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) Creating awareness.(ii) Reaching members of buying center.(iii) Increasing sales efficiency and effectiveness.(iv) Efficient reminder media.(v) Sales – lead generation.(vi) Support channel members.

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 irculation in thousand

IMPORTANCE OF SALES PROMOTION

• Sales promotion consists of short-term incentive tools to stimulate greater or faster purchase of a product / service by business customers.

• Some of the business promotion tools are :Trade shows (or exhibitions), sales contests, promotional novelties (or specialty advertising, or gifts), seminars, catalogues, promotional letters, demonstration, and entertainment. Some of the frequently used tools are trade shows, sales contests, catalogues, demonstrations, and promotional novelties (gifts).

IMPORTANCE / ROLE OF DIRECT MARKETING (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 on-line marketing. In addition, kiosk marketing and catalog marketing are also DM channels, but are less popular in India.

• Direct mail is not only paper based postal service or courier service, but can be fax mail, e-mail, or voice mail. Direct marketers send not only letters, but also audio and videotapes, CDs, and diskettes. Response rate is about 2%.

• Telemarketing uses telephone to contact existing customers, to attract new customers, or to take orders. Telemarketing gives immediate feedback, identifies and qualifies prospects, and reduces sales force travel costs. Both inbound (incoming calls from prospects / customers) and outbound (out going calls) are important. Practice, training, pleasant voices and right timing (late morning to afternoon) are needed for effective telemarketing.

• On-Line Marketing can be done by establishing an electronic presence (by opening own website or buying space on a commercial on-line service), placing ads on-line, and using e-mail. A web site should be attractive on first view and interesting enough to encourage repeat visits. Marketers use on-line marketing to find, reach, communicate and sell to business customers.

• Major Benefits to marketers are: Lower costs, relationship building and quick adjustments to changing market conditions. Major Benefits for buyers are: convenience, information availability, and less hassle. Although small & medium size marketers can reach global markets at affordable costs, there is chaos and clutter as the internet offers millions of web sites, and also as concerns on security and privacy

ROLE OF PUBLICITY & PUBLIC RELATIONS (PR)

Public Relations (PR) performs certain tasks to promote or protect a company’s 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 company’s technical persons in trade journals, business magazines, and / or news papers. MPR should be planned with advertising and should be given larger budget allocation

INDUSTRIAL (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.

BCG Model : Growth – Share Matrix

Stars

Mark

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row

th R

ate

Large Small

Rap

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low

1

5Question marks

6

8

4

Cash Cow

3

2 7

Dogs

R ela tiv e M a rk et S h a re

GE Model : Business Screen Matrix


High Medium Low

B u sin ess Stren g th

High

Medium

Low

S elec tiv ity / E arn in g s

1

1

5

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.

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.


Sal

es

T im e (Ye a rs )

A

0 5

B

C

P ro jec ted S a les

StrategicP lann ing gap

D esired S a les

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 Ansoff’s product-market expansion grid, shown hereafter :

C u rre n t P ro d u c ts

M ark e t P en e tra tio nS tra te g y

P ro d u c t d e v e lo p m en tS tra te g y

M ark e t d ev e lo p m en tS tra te g y

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

C u rre n t M ark e ts

N e wM ark e ts

N e w P ro d u c ts

( B) Integrative Growth Strategy includes increase in a firm’s 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.

STRATEGIC PLANNING PROCESS AT BUSINESS UNIT LEVEL

The following steps are followed by the business – unithead.

1. Defining the business unit’s 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 program or action – plan.7. Implementing strategies and action plan.8. Feedback and control.

* PORTER’S Generic Strategies Framework for Business unit

D iffe ren tia tio nO v e ra ll co s tlea d e rsh ip

F o cu s

In d u s tryw id e

P articu la rseg m e n t o n ly

L o w - co s t p o s itio n

Marketing Planning ProcessThe 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.


Business ( Industrial ) Marketing Plan

1. Situational analysis. Market, competitive, product, and macro – environmental analysis.

2. SWOT and Issues analysis3. Marketing Objectives and goals4. Marketing Strategy. Selection of target market

segments, positioning, marketing mix, customer service and marketing research.

5. Action plans / Tactics6. Marketing Budget7. Implementation and control. Building marketing

organization and control process.8. Contingency plan.

IMPLEMENTATION OF MARKETING PLANIt 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.

Documents

B2B for Students