Business Marketing VTU,Module 1

BUSINESS / INDUSTRIAL MARKETING…. By Prof. Raghavendran.V

Business Marketing.... Module 1, Prof Raghavendran.V

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Now, Why we have study or know about Industrial Marketing??

Any answers…..


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We need study BM due to….Lack of marketing orientation likeFailure of R&D of the new

products.Failure to exploit & develop

markets for new products.Failure to innovate in distribution

& keys areas of marketing.Inability to refine & modify the

product positioning.

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Define Business Marketing.Business marketing is referred as

Industrial marketing or B2B marketing or organizational marketing. It is defined as marketing of products & services to business organizations. Business organizations include Manufacturing companies, PSU’s, Pvt companies, Educational institutes, hospitals, distributors, and dealers.



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INDUSTRIAL MARKETING

Vs CONSUMER MARKETING

Diff….


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Task for both BM & CM• Target markets.• Finding out needs & wants of the

target markets.• Developing products and its

services.• Evolving marketing strategies to

reach and satisfy target customers, better and faster than competitors.


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Differences are…BM…..a) Geographically

concentrated.b) Technical

complexity.c) Customized.d) Service, timely

delivery and availability is very important

CM….a) Geographically

distributed.b) Standardized.c) Service,

delivery and availability is somewhat important.

Cont……


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Difference follows…..

e) Involvement of various functional areas in both buyer & supplier firms.

f) Purchase decisions are mainly made on rational/ performance basis

g) Technical expertiseh) Stable relationship

b/w buyer & Supplier

d) Involvement of family members.

e) Purchase decisions are mostly made on physiological/ social/ psychological needs.

f) Less technical expertise.

g) Non- personal relationship.

Cont…


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Difference follows…

i) More direct.j) Fewer

middlemen.k) Emphasis on

personal selling.

l) Competitive bidding & negotiable prices.

m) List prices for standard products.

h) Indirect.i) More layers of

Middlemen.j) Emphasis on

advertising.k) List prices or

MRP of the product.


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Characteristics:

Market characteristicsProduct characteristicsDistribution channel characteristics

Promotional characteristics

Price characteristics


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Industrial Demand

Demand for industrial products & services does not exist by itself. It is derived from the ultimate demand for consumer goods. So therefore we can say that Industrial demand is derived demand.


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Joint demand & Cross elasticity of demandJoint demand occurs when one

industrial product is useful if other products also exists.

Elasticity is the change in demand from a change in price. Percentages are used to measure the relative changes.

Demand is “inelastic” when the percentage change in quantity demanded is less than change in prices


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Demand is “unitary”, if the percentages changes in price is matched by an equal percentage of quantity.

Demand is “elastic” if the percentage change in quantity is than percentage change in price.

This concept is very important to understand the relationship between P & Q sold.


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Assignment time:

Explain the economics of industrial demand, with suitable examples. Minimum two examples should be citied in each category.


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Reseller’s Market:

Resellers, like industrial firms, do not purchase goods and services for personal consumption, but so to facilitate the operations of the business. That is everything that is purchased is purchased to make a profit .


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Assignment time:

Brief out the reseller’s market with following characteristics.

• Market• Product• Buyer• Channel• Promotional• Price


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The industrial marketing conceptThe IM concept involves more than

facilitating exchange with these customers, it is philosophical point of view that has its basis the formation of the partnership between buyer and supplier for the purpose achieving the organizational goals of the both.


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Given the nature & purpose of the industrial products, a seller literally becomes a part of buyer’s technology, productivity, end market satisfaction, and profit plan – in short total corporate strategy.

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The Marketing Concept

Creating value for customers with goods and services that address organizational needs and objectives.

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Marketing ConceptThree major components:

◦All company activities should begin with, and be based on, the recognition of a fundamental customer need.

◦A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D.

◦Customer satisfaction is viewed as the means to long-term profitability goals.

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Follower Interact

Isolate Shaper

Customer Focus

Low Technology Focus High

High

Low

Strategic Focus Grid


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Assignment time:

How would the desire for stable relationship in the industrial market affect a firm’s ability to sell its products to a manufacturer currently buying from another source?


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Type of Industrial Markets

Mainly classified into 4 types and they are

1. Commercial enterprises2. Government customers3. Institutional customers4. Cooperative societies.


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Types of Industrial customers

Industrial Customers

Commercial enterprises

Industrial Dealer

OEM

Users

Government

Customers

Public Sector

Govt Undertakin

gs

Institutional customers

Public

Pvt

Cooperative societies

Manufacturing

Non Manufacturi

ng


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Classification of Industrial Products

Industrial Products

Material Parts

Raw Materials

Manufactured Materials

Component Part

Subassemblies

Capital Items

Light Equipments

Installations or Heavy

equipment

Plant and Building

Supplies & Services

Supplies

Services


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Organizational Procurement characteristics

Raw Material Supplier

Component &

subassembly suppliers

Finally assembly

manufacturer

Intermediaries Consumers

Supply Chain Management orientation

Procurement Orientation

Buying Orientation


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Buyer orientation

Purchasing firm with buying orientation has narrow and short term focus. The buyers, in these firms, follow the practices under..

1. Lowest price2. Gain power3. Risk


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Procurement orientation

Purchasing firm has a strategic focus and it is proactive, to achieve these objectives the company adopts following practices.

1. Collaborative relationship with major suppliers.

2. Working closely with other functional areas


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Supply Chain Mgmt orientationRole of purchasing is further

expanded to become more value-adding, and strategic operations. It focuses on

1. Deliver Value to end users2. Outsource Non-core activities3. Support Collaborative

Relationships with major suppliers


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Purchasing in commercial EnterprisesGoods & services are purchased by

commercial enterprises depends on the nature of the business, the size of the firm, and the volume, variety, and technical complexity of the products purchased.

1. Multiple influencers2. Technical sophistication3. Value analysis


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Value analysis developed by GEA. SelectionB. Information gatheringC. Function definitionD. Generation of alternativesE. Evaluation of alternativesF. PresentationG. implementation


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Purchasing in Government unitsA. Widely dispersed marketsB. Complicated procurement lawsC. Understanding government

contracts


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Institutional & Cooperative societies Purchasing.Includes the practices of

Commercial enterprises and Government.


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Industrial Environment

Industrial Buyers and Suppliers operate in dynamic environment which changes continuously. Much emphasis discussion on environment are about ecological environment like air, water pollution & conserving natural resources.


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Types of Environment

Environment

Ecological &

Physical

Internal (S&W)

External (O&T)

Macro Micro

Air & water pollution,

solid waste disposal

Water, power,

manpower, labor&

transport

Location, R&D,

Production facilities,

HR, Finance,Marketing,

Brand

Customers & Competitors, Suppliers

TEMPLE-SD


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Strategies for managing industrial environmentEffective use of market variable such as

4P’s are not adequate for the survival & success of firms. Following steps are needful for the dynamic in nature and they are..

1. Collecting information on customers & competitors

2. Analyzing trade and govt publications.3. Carrying Market Research & Economic

forecasting within or consultancy


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Strategies will help company for the following:Understanding changes in

customersMonitor the competitors actions

& strategies.Technological innovationsChanges in TEMPLE effectIdentify the demand of the

customers and market.Changes in environmental factors


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Types of strategies

Independent strategiesCooperative strategiesStrategic planning

Backward integrationForward integrationHorizontal integration


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Case let..

End of Module one