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)  What is Industrial (Business) marketing? IM/1-2/5
 It is marketing of products / Services to business
firms.
 In contrast consumer marketing is marketing
products / services to individuals & households.

(B)  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 IND MARKETS CONSUMER MATKETS
Market GEO Concentrated GEO Disbursed
Few Buyers Large no. Of Buyers
(Mass
Markets
Products Technically Complex Non – Technical
Customized Standardized
Service Very Important Somewhat important
Buyer Behavior Various Functional Family members involved
specialists involved Physiological /
Mainly Rational buying Psychological Social need
decisions. based buying decisions
Interpersonal Non – Personal
relationship between Relationship.
buyers and sellers.
Channel More direct Indirect
Multi Channel Few Channels with many
layers
Promotional Importance to personal Importance to Advertising.
selling
Pricing Competitive bidding / MRP
Negotiated prices
 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
  INDUSTRIAL
UNDERSTANDING
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? IN T E R M E D IA R IE 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

P U B L IC S E C T O R
U N IT S (B H E L )
G O V E R N M E N T
C U S T O M E R S
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 )
IN D U S T R IA L /
B U S IN E S S
C U S T O M E R 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 )
IN S T IT U T IO N A L
C U S T O M E R 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 )
C O -O P E R A T IV E
S O C IE T IE S
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 )
M A T E R IA L S M A N U F A C T U R E D M A T E R IA L S
& PARTS ( S T E E L , F U E L O IL )
(E N T E R P R O D U C T
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 )
D IR E C T L Y )
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 .)

IN D U S T R IA L C A P IT A L IT E M S
PRODUCTS / (U S E D IN
S E R V IC E S 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 )
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 U P P L IE 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 )
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 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
 IM/2-4/10

(C) 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.
 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
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 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

W A T E R , P O W E R , T R A N S P O R T A T IO N
P H Y S IC A L
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
E N V IR O N M E N T IN T E R N A L R & D & P R O D U C T IO N F A C IL IT IE S
(S & W A N A L Y S IS ) 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

M IC R O C U S T O M E R S & C O M P E T IT O R S
(A F F E C T S A
P A R T IC U L A R
F IR M ) S U P P L IE R S
EXTERNAL
( O & T A N A L Y S IS ) E C O N O M IC

M ACRO T E C H N O L O G IC A L
(A F F E C T S
G O V T ., P O L IT IC A L , L E G A L
A L L F IR M S )
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
 IM/2-9/10

(F)  Strategies for Managing Changing 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.

Industrial Products/Services are classified into

 (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
Marketers must Decision Process
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/ WEIGHT/ SUPPLIER’S SUPPLIER’S
FACTOR IMPORTANCE PERFORMANCE RATING
SCORE
PRICE 15 0.5 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) 3Buying Situations / Buyclasses

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 Modified Straight
Rebuy Rebuy
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
 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.
 IM/3-9/16

(D) 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
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.
 IM/3-10/16

(E) Identifying
 Sales key members of buying centre
/ 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 )
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 to r tio n
 S a tis fa c tio n w it h
p a s t p u rc h a s e s
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
C o m p o n e n t (2 )
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 if ic
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 tio n
IM/3-13/16
C o m p o n e n t (3 ) S it u a t io n a l F a c t o r s
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 S u p p lie r o r
 B a r g a in in g B r a n d C h o ic e
 P o litic k in g
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 h y s ic a l, T e c h n o lo g ic a l
 E c o n o m ic , C u lt u r a l
 P o lit ic a l a n d L e g a l
 L a b o u r u n io n s
 C u s to m e r d e m a n d s
 C o m p e t it iv e p r a c tic e s
 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 b je c t iv e s a n d g o a ls
 O r g a n is a tio n S t r u c tu r e
 P u r c h a s in g P o lic ie s / P r o c e d u r e s
 E v a lu a tio n & r e w a r d s y s te m s
 D 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 O r g a n is a t io n B u y in g D e c is io n s
 A u th o r ity , S iz e  C h o ic e o f S u p p lie r s
 K e y in f lu e n c e r s  D e la y d e c is io n & g e t m o r e in f o r m a t io n
 In te r p e r s o n a l r e la t io n s h ip  M a k e , L e a s e o r b u y
 C o m m u n ic a tio n  D o n o t b u y

In d iv id u a l V a r ia b le s
 P e r s o n a l G o a ls , V a lu e s
 E d u c a t io n , E x p e r ie n c e
 E x p e r tis e , J o b P o s itio n
 L if e s ty le , I n c o m e
 IM/3-15/16
CUSTOMER SERVICE
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,
on–time 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.
 IM/4-02/11

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.
 IM/4-03/11

BUYER-SELLER DYADIC INTERACTION

A Conceptual Framework by Dr. Sheth FRAMEWORK
C o m p a tib le S ty le In c o m p a tib le S ty le

C o m p a tib le Id e a l/S u c c e s s fu l In e ffic ie n t

C o n te n t T r a n s a c tio n T r a n s a c t io n

In c o m p a tib le In e f fic ie n t No
C o n te n t T r a n s a c tio n T r a n s a c t io 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.
 IM/4-04/11

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.

P a r tn e r in g /
T r a n s a c tio n a l V a lu e -A d d e d C o lla b o r a tiv e
R e la tio n s h ip R e la tio n s h ip 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”.
 IM/4-06/11

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.
 IM/4-07/11
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) /
RELATIONSHIP
ConceptuallyMARKETING (RM) / techniques to achieve
same, methods
objectives are different.
Both CRM & RM aim at partnering / collaborative long-
term relationships for mutual benefits of both parties.
CRM’S objectives are to improve customer loyalty and there
by, company’s 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.
 IM/4-11/11

SUMMARY OF CHAPTER
BUYER – SELLER -4
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. Sheth’s 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.
 IM/5-3/6

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 t in g
R esea rch
s t u d ie s

I n d u s t r ia l
Secondary D e c is io n
M a r k e t in g M arket
D a ta Support
I n t e llig e n c e R esp on ce
S ou rce S y ste m
ResaMrk rcheting
studi es
Indus trial
Se Dat condary IntelMark igenct DecisonSuprt MarketRsponc e
Source Syste m System

S y ste m

Industrial marketing intelligence system is developed to meet the

needs of industrial marketers for timely and continuous information
for effective decision making .
SUMMARY OF CHAPTER-5 IM/5-6/6

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.
NATURE OF INDUSTRIAL MARKETING
IM/5-2/6
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.
PROCEDURE USED IN MARKET IM/6-2/9
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.
 IM/6-5/9
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
 IM/6-6/9
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 .
 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
.D

.C 0.4

Strong 1.0 0.8 0.6 0.4 0.2

0.2
- 0.2 - 0.4 - 0.6 - 0.8 - 1.0
Weak
Customer Customer
Service Service
- 0.2
.B
- 0.4

- 0.6

. - 0.8
A
- 1.0

Perceptual Mapping Low

Technique Product Quality
SUMMARY OF CHAPTER 6 IM/6-9/9

1. Procedure used in market segmentation includes (i)

Marketing research, (ii) Data analysis (iii) Profiling each
segment.
2. Variables used for segmenting industrial markets include
macro variables and if needed, micro variables. Sequential
segmentation process is often used.
3. Criteria used for evaluating market segments are (i) size and
growth , (ii) Profitability (iii) Competitive analysis
(iv) Company Objectives and Resources.
4. Target market strategies are (a) Concentrated or Niche
marketing, (b) Differentiated marketing, (c) Undifferentiated
marketing strategy
5. 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.
 IM/7-2/20

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.
 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 company’s 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 year’s 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.
Product Evaluation Matrix IM/7-9/20

C o m p a n y S a le s D e c lin e S ta b le G ro w th
P r o f ita b ility
In d u s tr y B e lo w Ta rg e t Above B e lo w Ta rg e t Above B e lo w Ta rg e t Above
M a rk e t
S a le s Ta rg e t Ta rg e t Ta rg e t Ta rg e t Ta rg e t Ta rg e t
S h a re

D o m in a n t P

G ro w th A v e ra g e

M a r g in a l

D o m in a n t

S ta b le A v e ra g e

M a r g in a l S

D o m in a n t

D e c lin e A v e ra g e

M a r g in a l
 IM/7-10/20
PERCEPTUAL MAPPING TECHNIQUE

H ig h P r ic e

H ig h Low
Q u a lity Q u a lity
*
A
1 *A
C

L o w P r ic e
 IM/7-11/20
Firm A’s 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 IM/7-12/20
(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 PROCESS
It 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.
 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.

B e tte r H ig h - t e c h
H ig h M o u s e tra p M a r k e tin g
T e c h n o lo g ic a l M a r k e tin g
U n c e r ta in t y
L o w -te c h H ig h - f a s h io n
Low M a r k e tin g M a r k e tin g

Low H ig h
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 high–tech marketing

D eep G ap

34%
In n o v a to rs 13½ %
34%

E a r ly 16%
2½ % A d o p te rs L a g g a rd s

T im e o f A d o p t i o n o f I n n o v a t i o n s
 IM/7-16/20

HIGH – TECH MARKETING STRATEGY

1. Target a niche market.
2. Plan whole product properties.
3. Develop partnerships.
4. Unique positioning strategy.
5. Effective Communication Strategy
6. Multi – Channel distribution strategy.
7. Skimming pricing strategy.
 IM/7-17/20
Marketing of Industrial Services
Classifications of Industrial Services

M a t e r i a ls P e rs o n a l H o t e ls
C o m p o n e n ts fo r G ood
C o m p u te rs T r a n s p o r ta t i o n
( S t e e l, B a l l B e a r in g s ) C o n fe re n c e s

P u re P u re
T a n g i b le i n t a n g ib le
P ro d u ct s e r v ic e
M a jo r Equal M a jo r
P ro d u c t, P ro d u ct S e r v ic e ,
M in o r & M in o r
S e r v ic e S e r v ic e P ro d u ct
 Unique Characteristics of services and
marketing Implications.
C h a r a c te r is tic s
1 . In ta n g ib ility
(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 tio 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)
IM/7-18/20
M a r k e t in g Im p lic a tio n s E x a m p le s
 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
 S e lle r s t a n g ib ilis e t h e in ta n g ib le C o n s u lta n c y & E D P s .
 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  R e p a ir s to m a c h in e s
p r o v id e r s . & C o u r ie r s e r v ic e .
 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  M an age m en t
 F o c u s o n q u a lit y & a u to m a t io n e d u c a t io n & m a r k e t in g
re s e a rc h .
 D e m a n d flu c tu a te s . A ir lin e s s e a ts &
 U s e m e th o d s to m a tc h d e m a n d & W a re h o u s e s p a c e .
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 :  H o te l a n d c a r r e n ta l
r e d u c t io n in c o s ts & f le x ib ilit y s e r v ic e s .
SUMMARY OF CHAPTER 7 IM/7-19/20
 
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. 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.
Alternative Channel Structures IM/8-2/14
 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 Intermediaries IM/8-3/14

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. 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
 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.
Business Logistics System IM/8-10/14

P h y s ic a l S u p p ly In d u s t r 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 firm’s channel members work together to improve
“customer service”, in order to get higher sales revenue.
 
 

S a le s R e v e n u e - T o ta l P h y s ic a l D is t r ib u t o 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. Industrial channel structures include direct and

indirect channels.
2. Types of industrial intermediaries are: industrial
distributors / dealers, manufacturers’ representatives
(or agents), value – added resellers (VARs), brokers,
and commission merchants.
3. Procedure of channel design includes: developing
channel objectives, analyzing channel constraints and
tasks, identifying channel alternatives, evaluating
alternatives and selection of the channel (s).
 IM/8-13A/
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
 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 it’s 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. 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.
 
 IM/9-1/12
CHAPTER 9
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 company’s 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.
 IM/9-5/12
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.
 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 firm’s problem-
solving abilities. He should identify and analyse
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.
 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.
 IM/9-9/12
MANAGEMENT OF MAJOR AND
NATIONAL ACCOUNTS
• Both major and National accounts (or
customers) have large (sales and profit
potentials). But there is a difference.

S a le s L a rg e M a jo r N a tio n a l
P o t e n tia l A ccount A ccount
of D y a d ic M in o r
C u s to m e r S m a ll
In te r a c tio n 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 promotion’s results.
(vii) Integrate the promotion’s 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 S a le s P. R . and D ir e c t P erso n a l
T o o ls P r o m o tio n P u b lic ity M a r k e tin g S e llin g

P r o m o tio n a l  P r i n t M e d ia  T rad e sh ow s  C h a r ita b le  D ir e c t m a il  S a le s c a lls

M e d ia  B u s in e s s  E x h ib itio n s d o n a tio n s  T e le m a r -  S a le s
& P u b lic a tio n s  C a ta lo g u e s  A d o p tin g k e tin g p r e s e n ta tio n s
S u p p o r ts  Trade  S a le s C o n s e n t s v illa g e s  O n - lin e  T e a m s e llin g
J o u r n a ls  P r o m o tio n a l  C o m m u n ity m a r k e tin g  R e la tio n s h ip
 I n d u s tr ia ls n o v e l t i e s ( g if t s ) r e la tio n s m a r k e tin g
d ir e c t o r ie s  S e m in a r s  N e w s ite m in
 D e m o n s tr a tio n p ress
 P r o m o tio n a l  T e c h n ic a l
le tte r s a r tic le s in
 E n te r ta in m e n t jo u r n a ls
 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)     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.
 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 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%.
 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 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.
 
 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 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
 IM/10-11/11
Summary of Chapter – 10
• 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
Some business OF PRICE
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 (i) P ric in g o b je c tiv e s
d e c is io n s , a b u y in g firm m u s t ( ii) C u s to m e r a n a ly s is
fin d " p ric e d e te rm in a n ts " . (iii) C o s t a n a ly s is
( i.e . f a c to r s th a t in f lu e n c e (iv ) C o m p e tito rs ' a n a ly s is
p ric in g d e c is io n s ) ( v ) G o v t. r e g u la tio n / p o lic ie s
 T w o ty p e s o f p ric in g d e c is io n s . IM/11-5/ 29

P r ic in g s tra te g ie s P r ic 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 r ic 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. 
 (ii) Cost – Benefit Analysis IM/11-8/ 29
 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 firm’s 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.
 
 IM/11-9/ 29
C o st E c o n o m ie s o f S c a le
p er
U n it

Q u a n tity P r o d u c e d p e r y e a r

C o st E x p e r ie n c e /
p er L e a r n in g
U n it
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 .
 IM/11-14/ 29

Strategy / Model Used for Competitive 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.
 IM/11-15/ 29

An Application (example) of probabilistic Bidding Strategy

C o m p e tito r 's
B id T o ta l C o st P r o fit (R s )
L ast Ten d er
P r ic e P e r U n it T (A ) =
P r ic e
( R s) (A ) (R s) (C ) (A ) - (C )
(R s) (B )

450 350 360 0 .0 0 100 0

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 )

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, high–tech, 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 firm’s
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 firm’s
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.
 IM/11-19/ 29
Initiating price changes
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 competitor’s 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 company’s 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 Y e a r ly T o ta l % Q u a n tity
P u rch ase ord er or P u rch ase 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 company’s
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
customer’s 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 customer’s “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.
 IM/11-25/ 29
ROLE OF LEASING.
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 firm’s 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 .
 IM/12-1/19

CHAPTER – 12
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 O r g a n is a t io n a l S tr a te g y h ie r a r c h y
L e v e ls S tr u c tu re (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 D iv is io n a l/
O ffic e B u s in e s s S tra te g y
D iv is io n a l / (S tra te g ic
B u s in e s s U n it M a n a g e m e n t)
/SBU SBU SBU SBU
I II III
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
P ro d u c tio n M a rk e tin g F in a n c e 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 F o rm a l R o le o f M a rk e tin g
L evel N am e

C o rp o rte T o g iv e in fo rm a tio n o n m a rk e ts a n d
C o rp o rte to e n s u re c u s to m e r o rie n ta tio n , fo r
M a rk e tin g
c o r p o ra te s tra te g y d e v e lo p m e n t.
CompanyLevl NamFor R eal olefMa rketing
Corpte Corp toT orte ensurcogiv ustomerifan ntaio,mrkes forand
Mark Tco eting ocaryptes utcsomeragydv &compelnt. tion
Divsonal /Stra stan egic rategy,inlsfo cludingomrevp petivgbusn s
BusineUtlv Mark poad eting sitongvae, straegi.mn ,targein g,and
T odevlp eshort- marke ting
Funcitoal Mangerk repl mentig sourcealndt locatin.regy, dinato, and

T o c a rr y o u t c u s to m e r & c o m p e titio n
D iv is io n a l / 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 ic
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
M a rk e tin g
U n it le v e l 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
M a rk e tin g
F u n c tio n a l p la n a n d s tra te g y , c o o rd in a tio n , a n d
M anagem ent
re s o u rc e a llo c a tio n .
 IM/12-6/19

STRATEGIC PLANNING PROCESS AT 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

S ta r s Q u e s tio n m a r k s
5 4
R a p id

6
M a rk e t G ro w th R a te

3 8
C ash C ow Dogs
S lo w

1 2 7

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 1

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

M e d iu m

Low

1
 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

A S tr a te g ic
S a le s

P la n n in g g a p
B

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

0 T im e (Y e a rs ) 5
 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 Ansoff’s
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 t P e n e tra tio n P ro d u c t d e v e lo p m e n t
M a rk e ts S tra te g y S tra te g y

N ew M a rk e t d e v e lo p m e n t ( D iv e rs ific a tio n
M a rk e ts S tra te g y S tra te g y )
 IM/12-12/19
( 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.
 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 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 programme or action – plan.
7. Implementing strategies and action plan.
8. Feedback and control.
 IM/12-14/19
* PORTER’S Generic Strategies Framework
for Business unit

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

In d u s try O v e ra ll c o s t
D iffe re n tia tio n le a d e rs h ip
w id e
P a rtic u la r
s e g m e n t o n ly F ocus
 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. Situational analysis. Market, competitive, product,
and macro – environmental analysis.
2. SWOT and Issues analysis
3. Marketing Objectives and goals
4. Marketing Strategy. Selection of target market
segments, positioning, marketing mix, customer
service and marketing research.
5. Action plans / Tactics
6. Marketing Budget
7. Implementation and control. Building marketing
organization and control process.
8. 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.