INDUSTRIAL/B2B MARKETING BY R B TANDAN

SYLLABUS
1.

Nature of B2B Marketing slide 8

B2B V/S Consumer Marketing Rational approach to B2B The nature of Industrial demand and Industrial customer.
2.

Types of Industrial products slide 45

Major equipment, Accessory equipment, Raw & Processed materials. Component parts & sub assemblies Operating supplies Standardized & Non-standardized parts.

SYLLABUS
3. Industrial Services Factors Influencing Organizational Buying slide 57 Buying roles

Organizational buying decision process. Environmental & Organizational influences The Buy Grid Model Industrial PLC

4.

Industrial Product Decisions slide 137

Industrial Product Mix determinants technology, competition, operating capacity, shift in location of customers, government controls, changes in level of business activity.

SYLLABUS
5. Channel structure for Industrial Products slide 159

Geographical size, operating characteristics. Manufacturers and sales agents & brokers Channel logistics

6.

Pricing for Industrial Products Pricing objectives Price decision analysis Breakeven analysis Net pricing. Demand pricing, trade discounts. Geographic pricing

SYLLABUS
Factory pricing, freight allowance pricing, terms of sale. Purchase, Hire purchase, Leasing.

7. Purchasing systems

Auctions, bids, order placement, follow-up, receipt and inspection.

8. Promotion for Industrial Products

Supporting salesman Motivating distributors

SYLLABUS
9.

Stimulating primary demand

Sales appeal, publicity and sponsorships, trade shows, exhibits, catalogs, samples, promotional letters, promotional novelties.
Case

studies/Assignments

Reference Books
1.
2.

3.

4.

Industrial Marketing By Krishna K Havaldar. Industrial Marketing By Richard M Hill, Ralph S Alexander & James S Cross. Business Marketing By F Robert Dwyer & John F Tanner. Internet.

Learning Objectives
To

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

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

Also called: Business-to-Business (B2B) and Organizational Marketing. Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers. Customer can be private firm, public agency, or nonprofit organization.

10

B2B: goods or services are sold for any use other than personal consumption Note: It is not the nature of the product; it is the reason for the

transaction.

Marketing Concept Marketing Mix Market Segmentation Product Life Cycle All apply in both B2C and B2B.

12

The technical characteristics of the product are important. These products directly affect the operations and economic health of the customer. The customer is an organization rather than an individual consumer, or family.

13

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

14

More complex Functional vs. Symbolic Attributes Large unit dollar value/Large quantities Custom/Tailored Various Stages from raw material to finished goods. Foundation, Entering, Facilitating Goods
15

Derived Joint/Shared Concentrated Inelastic

16

Group Process Formal Lengthy Loyal Decisions based on risk and opportunity

17

Personal selling is more important than mass paid advertising Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW. Message focused on technical, factual, and descriptive content. Multiple audience members.

18

Competition oligopolistic Power/Dependency relationships Reciprocity: Doing business with companies that do business with them. Economic variables: interest rates, inflation, business cycle

19

What is the Traditional Orientation?

Consumer firms more transactional B2B firms more relational with long term orientation B2B firms consider customers active Consumer firms consider customers passive

Prof. A. K. Biswas

20

What is the Modern Orientation?

Competition is more intense, and customers are more demanding. Development and management of relationship is now very important. Brand loyalty is brand relationship a high level of interdependence that involves frequent consumer/brand interactions.

Prof. A. K. Biswas

21

Emergence of customizing consumer a customer who takes elements of market offerings and crafts a customized consumption experience out of these. Emergence of consumer community in the consumer market is further transforming the so called passive and insignificant customers into a tribe capable of collective action.

Prof. A. K. Biswas

22

 You

buy a gear to fix your mountain bike. Ford buys the same gear to fix a machine. Xerox buys soft drinks for its cafeterias. You start a landscaping business and purchase a lawnmower. The Indian government buysanything.

Characteristic
Sales volume Purchase volume

B2B Market
Greater Greater

B2C Market
Smaller Smaller

Number of buyers
Size of individual buyers Location of buyers

Fewer
Larger Concentrated

Many
Smaller Diffuse

Buyer-seller relationship
Nature of channel Buying influences Type of negotiations

Closer
More direct Multiple More complex

More Impersonal
Less direct Single/Multiple Simpler

Use of reciprocity
Use of leasing

Yes
Greater

No
Less

Differences between Industrial and Consumer Marketing AREAS

1. Market characteristics

INDUSTRIAL MARKETS
Geographically concentrated Relatively fewer buyers

CONSUMER MARKETS
Geographically dispersed Mass markets Standardized

2. Product characteristics

Technical complexity Customized

3. Service characteristics

Service timely & availability very important.

Service delivery & availability some what important

Differences between Industrial & Consumer Marketing AREAS INDUSTRIAL CONSUMER MARKETS MARKETS
4. Buyer behavior Involvement of various functional areas in both buyer & supplier firms Purchase decisions are easily made on rational/performanc e basis Technical expertise Involvement of family members

Purchase decisions are mostly made on physiological/social/ psychological needs Less technical expertise

Stable interpersonal Non-personal relationship relationship between buyers &

Differences between Industrial & Consumer Marketing AREAS INDUSTRIAL CONSUMER MARKETS MARKETS
5.Channel characteristics More direct Indirect

Fewer Multiple layers of intermediaries/middl intermediaries. emen

6. Promotional characteristics 7. Price characteristics Emphasis on personal selling Competitive bidding & negotiated prices List prices for standard products Emphasis on advertising. List price or MRP

BUSINESS MARKET DEMAND

Demand characteristics vary from market to market.

Relational approach to Industrial/B2B Marketing

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

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

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

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

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

Example: If lumber supply falls, then decrease in construction will affect concrete market.

INELASTIC DEMAND
Demand throughout an industry will not change significantly due to a price change. Example: Construction firms will not necessarily buy more lumber if prices fall unless overall housing demand also increases.

INVENTORY ADJUSTMENTS
Just-in-time (JIT) inventory policies boost

efficiency by cutting inventory and requiring vendors to deliver inputs as they are needed. Often use sole sourcing, buying a firms entire stock of a product from just one supplier.

Latest inventory trend: JIT II, suppliers to place representatives at the customers facility to work as part of an integrated, onsite customersupplier team.
Inventory adjustments are also vital to wholesalers and retailers.

THE MAKE, BUY, OR LEASE DECISION

Firms acquiring needed products can get them in one of three ways: Make the goods or provide the service inhouse. Purchase it from another organization. Lease it from another organization. Producing the item may be cheapest route, but most firms cannot make all of the products they need. Many companies purchase many of the goods they need.

Companies can spread out costs through leasing.

THE RISE OF OFFSHORING AND OUTSOURCING

Off shoring Movement of high-wage jobs from one country to lowercost overseas locations. Example: China makes two-thirds of the worlds copiers, microwaves, DVD players, and shoes, and virtually all of the worlds toys. Allows firms to concentrate their resources on their core business and access specialized talent or expertise. Near shoring - Moving jobs to vendors in countries close to the businesss home country. U.S. firms often near shore in Canada or Mexico. Out shoring - Using outside vendors to provide goods and services formerly produced in-house. Commonly out shore for three reasons: cost reduction, quality and speed of software maintenance and development and greater value.

PROBLEMS WITH OFFSHORING AND OUTSOURCING

Many companies discover their cost savings are less than expected.

Can raise security concerns over proprietary technology or customer data.

Can reduce flexibility to respond quickly to marketplace. Can create conflicts with unions, even leading to shutdowns and strikes.

Can negatively affect employee morale and loyalty.

For additional production (e.g., components are combined into subassemblies and become part of the finished product) For use in operations, but not part of the finished product For resale

3 Main Categories of Products Entering Goods

Become part of the finished product Cost assigned to the manufacturing process Capital Items Typically depreciated over time Support organizational operations Handled as overhead expenses

Foundation Goods

Facilitating Products

Entering Goods Raw Materials

Farm products & natural products Only processed as necessary for handling & transport Require extensive processing
Any product that has undergone extensive processing prior to purchase Component Materials require additional processing Component Parts generally do not require additional processing

Manufactured Materials & Parts

Foundation Goods Installations

Major

long-term investment items Buildings, land, fixed equipment, etc.

Accessory Equipment
Less

expensive & short-lived Not considered part of fixed plant Portable tools, PCs, etc.

Facilitating Products Supplies

Any

supplies necessary to maintain the organizations operations

Services
Maintenance

& Repair support Advisory support Logistical support

Demand within the business market: is often derived from demand for consumer products Is generally price inelastic (demand does not change due to price fluctuations) Tends to fluctuate more widely than consumer markets Buyers tend to be better informed than end consumers

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

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

Companies are making less and buying more Intense quality and time pressures increases the need for reliable suppliers Trend towards fewer suppliers and long-term partnering relationships with those suppliers

Understanding Industrial Markets & Environment

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

Types of Industrial Customers

Industrial customers are generally classified into Four Groups 1) Commercial enterprises. 2) Government customers 3) Institutional customers. 4) Cooperative societies.

Commercial Enterprises
Commercial enterprises are private sector, profit making organizations, consisting of a) Industrial distributors or dealers b) Original equipment manufacturers(OEM) c) Users. They include manufacturing firms and nonmanufacturing firms. Sometimes these classifications overlap, but they are useful to the industrial marketer because they indicate how the products and services are used by buying organizations.

Government Customers
The largest purchases if industrial products in India is the Central Government departments, undertakings and agencies, such as a) Railways b) DOT c) Defense d) DGS&D e) State transport undertakings f) State electricity boards, etc.

INSTITUTIONS
Public and private institutions such as a) Hospitals b) Schools/Colleges c) Universities d) Prisons Some of these institutions have rigid purchasing rules and some are flexible.

Cooperatives This category was a part of the cooperative movement in India. An association of persons form a cooperative society.

Classification of Industrial Products & Services.

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

Materials and parts

Components Process materials

Capital items
Installations Accessory Equip

Supplies/ business services

10-51

i.

ii.

iii.

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. For Capital items, Direct selling through company sales force is common, with extensive interactions on technical & commercial factors. For Supplies Industrial distributors / dealers are mostly used but for marketing of services, word-of-mouth plays an important marketing role, with quality & price of service as key factors.
www.a2zmba.com By Prof. Havaldar

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.
www.a2zmba.com By Prof. Havaldar

(i) Purchasing in commercial enterprises Involves Technical & Commercial depts. Major Tasks / Procedure: identifying, negotiating, selecting suppliers, building relationship. Purchasing to improve operational efficiency & contribute to firms competitive advantage. (ii) Purchasing in Govt. units DGS&D agency finalizes rate contracts for standard products for Govt. units. Main Tasks / Procedure : Registration of the firm & its Products, Tender Advertisements, no negotiation in Open tenders, negotiations done in closed / limited tenders. Orders Finalized on lowest bidders (suppliers offering Lowest prices / Landed Costs)
www.a2zmba.com By Prof. Havaldar

(iii) Purchasing in Institutions If the Institute is a Govt. Hospital Purchasing practices of Govt. units are followed Similarly a private School / College follows practices of commercial enterprises However, it is better to study each major institution practices.

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

www.a2zmba.com By Prof. Havaldar

(i) Independent Strategies. (ii) Cooperative Strategies. (iii) Strategic Planning - it Aims at keeping the firm consistently successful in a changing marketing environment by market oriented strategic management.
www.a2zmba.com By Prof. Havaldar

Organizational Buying

There are fewer customers and they require dependable relationships and a high level of service. Marketing tends to be done by personal selling ( one-on-one) calls to the customer. Specialized media such as trade journals, sales brochures, web sites, trade shows are used rather than traditional mass media.

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

Buyers must purchase according to a set of purchasing specifications Focus on Quality (including ISO 9000 certification) Total costs to purchase and use Reliability Value in use Savings possible via e-commerce

A very detailed process for documenting quality according to internationally recognized standards. Some international companies wont buy from you if you arent ISO 9000 compliant.

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

Packaging Support services Reliability Warranties Training

Social as well as economic dimension Individual behavior contributes to the mission. Formal reward system for individuals Bad purchasing decisions

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

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

Reduce risk of mistakes Formal policies and informal culture

Reliability in delivery. Consistent product Quality. Lowest price (If delivery & Quality objectives are met) Excellent pre & post sales services. Long Term collaborative relationship. Industrial buyers try to achieve organizational purchasing objectives & personal objectives like higher status, job security, salary increments, promotions & social relationships.
www.a2zmba.com By Prof. Havaldar

Products and services, and their applications can be complex. New technology Interface with existing technology Custom High standards (e.g. clean rooms, surgical suites)

So much is open to negotiation

Product, price, terms, discounts, warranties, delivery, training, service, returns, etc.

Liability, nonperformance POWER Size of deal, characteristics of parties, the deal, # of parties involved, complexity of products

Negotiating not just with purchasing agent, but multiple parties from multiple functional areas in the organization The more people involved, the more complicated it gets Technical and commercial complexity can exacerbate the behavioral complexity

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

Initiator Buyer User Influencer Decider Gatekeeper Not really a center at all. Group decision process.

Purchasing for business, not self Purchaser being judged on performance Fiduciary responsibility Formal structure and procedures
# bidders Evaluation criteria Multiple signatories

Emotional and Social Factors

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

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

Manage process to control social & emotional influences. Need to have good decisions being made.

THE BUSINESS BUYING PROCESS

More complex than the consumer decision process. Takes place within formal organizations budget, cost, and profit considerations.

INFLUENCES ON PURCHASE DECISIONS Environmental Factors

Economic, political, regulatory, competitive, and technological considerations influence business buying decisions.
Example: Law freezing cable rates or introduction of new product by a competitor will affect demand. Natural disasters, such as Hurricane Katrina.

Organizational Factors
Successful marketers understand their customers organizational structures, policies, and purchasing systems. Some firms have centralized procurement, others delegate it throughout the units. Many companies use multiple sourcing to avoid depending too heavily on a sole supplier.

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

Marketers must know who the influencers are and understand their priorities.
Sales personnel must be flexible and have a good technical understanding of their products.

The Role of the Professional Buyer

Many organizations rely on professionals, often called merchandisers, who implement systematic buying procedures. Firms usually buy expense items with little delay but carefully consider capital purchases. May rely on systems integration, centralization of the procurement function. Corporate buyers often use the Internet to identify sources of supplies.

MODEL OF THE ORGANIZATIONAL BUYING PROCESS

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

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

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

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

Stage 4: Search for Qualify Potential Sources

Choice of supplier may be fairly straightforward or very complex.

Stage 5: Acquire and Analyze Proposals

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

Buyers choose proposal best suited to their needs. Final choice may involve trade-offs between features such as price, reliability, quality, and order accuracy.

Stage 7: Select an Order Routine

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

Buyers measure vendors performance.

Larger firms are more likely to use formal evaluation procedures.

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

CLASSIFYING BUSINESS BUYING SITUATIONS

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

A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. Purchaser see little reason to assess competing options. Marketers who maintain good relationships with customers can go a long way toward ensuring straight re-buys. High-quality products. Superior service. Prompt delivery.

Modified Re-buying
Purchaser willing to reevaluate available options. May occur if supplier has let a re-buy circumstance deteriorate because of poor service or delivery performance.
New-Task Buying

First-time or unique purchase situations that require considerable effort by the decision makers. Most complex category of business buying.
Often requires purchaser to consider alternative offerings and vendors.

Reciprocity
Practice of buying from suppliers that are also customers.

ANALYSIS TOOLS
Value analysisexamines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute. Vendor analysisan ongoing evaluation of a suppliers performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.

Newness and past experience with product Amount/Type of information needed by influencers/deciders Number of alternatives Common buying situations (buy classes)
Straight re buy Modified re buy New task purchase

Routine orders: little risk Procedural: How to use product. Learning/training Performance: Can product meet need? Political: Internal politics, departmental squabbles (legitimate and petty)

Individual motivation Influenced by evaluation & reward Individual values and objectives; brought from department to buying center Agency Theory

External Environmental Influences

Organizational Influences

Buyer Center Dynamics

Individual Influences
Buyer Center Model

3 Common types of purchases / buying situations

i. New Task / New Purchase : Here, buyers have limited knowledge and experience of the new product/service. Hence, more information is obtained, more people are involved, risks are more, and decisions take longer time. ii. Modified Re buy / Change in supplier : This situation occurs when the firm is not satisfied with the performance of existing suppliers, or there is a change in product specs. Hence, the need for searching alternate suppliers. iii. Straight Re buy / Repeat purchase : Here, the buying firm places repeat orders on suppliers who are currently supplying certain products/services. Such decisions are routine, with less risks and less information needs, and can be taken by www.a2zmba.com By Prof. Havaldar junior executives.

BUY PHASES
1. Problem Recognition

BUY CLASSES
New Task Yes Yes Yes Yes
Modified Re buy

May Be May Be May Be Yes

Straight Re buy No No No No

2. Characteristics of
Product

3. Product Specification 4. Supplier Search

5.

6. Supplier Selection
7. Order Routine Selection

Analyzing Supplier Offers

Yes
Yes

Yes
Yes

May Be
No

Yes
Yes
www.a2zmba.com By Prof. Havaldar

Yes
Yes

May Be
Yes

8. Post Purchase Review

All Phases are Applicable for a New Task.

Some Phases are Applicable for modified / Straight Re buy.

New task situation is most difficult since buyers have less knowledge, no experience & more people involved. Modified Re buy is not difficult situation since it has few activities.

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

www.a2zmba.com By Prof. Havaldar

THE BUYING CENTER CONCEPT

Buying center Participants in an

organizational buying action.

BUYING CENTER ROLES

Roles of Buying center members are Initiators. First recognize problem / need. Any individual in buying firm often, users. Buyers. Carry out purchase activities. They are purchase officers / executives. User. Any person who uses the product / service. Influencers. Influence buying decision. Technical people are often key influencers. Deciders. Make buying decisions. Senior executives are deciders for high value & complex products. For straight re buy / routine purchase, junior purchase officer can decide. Gatekeepers. They control / filter information & meetings with buying center members. Often, P.A. / Junior person attached to purchase head is the gatekeeper.
www.a2zmba.com By Prof. Havaldar

Sales / Marketing persons must identify important members of buying centre. Buying centre consists of individuals and groups who take part in buying decision making process, have common objectives & share common risks. It is also called purchase committee, buying committee or decision making unit. Members of buying centre are (i) Technical persons. Represent design, production/operations, maintenance, Q.C., Industrial Engg. Depts. (ii) Purchasers / Buyers. Purchase / Materials dept. persons. (iii) Accounts / Finance persons. (iv) Marketing persons (v) Top management persons. G. M. & above.
www.a2zmba.com By Prof. Havaldar

Business purchases often involve

multiple influence

"Buying center"all people who participate in or influence a particular purchase Buying center varies from purchase to purchase Does not appear on the "organizational chart" Structure may be formal or informal

INTERNATIONAL BUYING CENTERS

Marketers may have difficulty identifying members of foreign buying centers. Foreign buying centers often include more participants than those in U.S. Marketers who can quickly identify decision makers have an advantage over competition.
TEAM SELLING

Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision. May include members of the seller firms own supply network in the sales situation. Example: Reseller of specialized computer applications whose clients require access to training.

DEVELOPING EFFECTIVE BUSINESS-TOBUSINESS MARKETING STRATEGIES

Marketer must develop strategy based on particular organizations buying behavior and on the buying situation.
CHALLENGES OF GOVERNMENT MARKETS

Government agencies make up the largest customer group in India. More than 85,000 government units buy products. Purchases typically involve dozens of interested parties. Influenced by social goals, such as minority subcontracting programs. Can have either fixed-price contracts or costreimbursement contracts.

CHALLENGES OF INSTITUTIONAL MARKETS

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

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

Multiple buying influences can affect buying decisions, such as conflicts between professional staff and purchasing departments.
CHALLENGES OF INTERNATIONAL MARKETS

Marketers must consider buyers attitudes and cultural patterns. Local industries, economic conditions, geographic characteristics, and legal restrictions must also be considered.

Remanufacturing, or restoring worn-out products to like-new condition, can be an important strategy in places that cannot afford new products.
Foreign governments are also an important market.

Building Customer Relationships

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.

Depend on their perceptions, behavior & roles. Buyers have two major perceptions of sales reps. (i) Stereotype talkative, manipulative, excitable (ii) Reputation of sales reps company. Buyer Behavior towards sales rep depends on organizational needs / objectives, buying centre interactions and personal needs. Buyers are not always rational / logical in buying decisions. Role / behavior of sales rep. depends on his personal needs, and expectations of his boss, peers, customers.

A Conceptual Framework by Dr. Sheth

Compatible Style

Incompatible Style

Compatible Content Incompatible Content

Ideal/Successful Transaction Inefficient Transaction

Inefficient Transaction No Transaction

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 www.a2zmba.com By Prof. Havaldar oriented.

When buyer (or customer) and seller (or supplier) firms do business, they have the following types and range of business / working relationships / exchanges.

Transactional Relationship

Value-Added Relationship

Partnering / Collaborative Relationship

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

Take longer to establish Last longer More difficult to dissolve

Task Concerns

Quality, Delivery, Service, Price

Politically safe, minimal benefit for change Makes it easier, too much trouble to change Buyers attitude toward company and people

Organizational Concerns

Work Simplification Concerns

Attitudes Toward Source

Strong, Lasting Ties Earned Trust Successful Long-Term Exchanges Structural and Social Bonds Cooperation/Collaboration Long-Term, personalized, mutually beneficial, based in deep understanding of customer needs and characteristics

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

Requires more commitment than most are willing to make. Most take tactical steps rather than strategic Shortcomings observed:

Locking in the customer: Needs to be winwin Informality: legal, strategic, outcomes Primarily non-financial investments: Capital equipment is important Avoiding Dependency: Flexibility over commitment Unilateral: Buyers should initiate Not all customers are worth the investment One size never fits all

Volume of purchases Frequency of contact Extent of collaboration in product development Technical distance Physical distance

Industrial Marketing Research and Intelligence

The external environment is dynamic. Knowledge becomes outdated. To gather more information Better Information Better Decisions

Managers NEVER have all of the relevant information that they need. Constraints of time and money

Desired information is often more costly than its worth. Decisions are time sensitive. Cant wait for all of the information.

Good research has already been done. When decisions have been made and they wont be altered by new information. When management does not understand the necessity for research and wont commit finance.

Dont have talent - wont hire.

Uncertainty reduction justifies cost.

Estimate market potential Analyze market share/share of customer Track competitors Identify market characteristics & trends Analyze sales data Sales forecasting: Existing/new products

Primary

New information generated for specific task. Can be expensive/time consuming. Gather by survey, tests, observation, focus groups, interviews.

Secondary

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

Sample vs. Census Probability

Random, equal chance Random, stratified Convenience Judgment

Non-Probability

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

Data entry tedious.

Mistakes are made Need to clean data

Use statistical tools to analyze data.

SPSS/SAS Can data mine What results means Limitations of method

Important to understand analysis

Technology

Need to understand technical needs of customers Quality/Price trade-off very important

Understand multiple players, in sociopolitical setting

Direct economic effect

Organization, professionals

Smaller #s of buyers to study Smaller sample sizes Secondary data often exists Tough to get buyers attention for research Need to know which buyer(s) to study Need technical knowledge for research Surveys take longer, cost more

Continuous flow of information

Strategic and Tactical Systematic and periodic

Better understanding of environment over time Collect from variety of sources Customers, competitors, regulators, etc. Constant vigilance

People, Procedures, Computers Acquires, Disseminates, Interprets, Stores information about internal and external environments

Transform raw data to useful information Can organize information by customer, competitor, product line, territory, activity Sources

Output

Internal: sales, service, accounting External: government, trade associations, competitor literature, customers, publications Periodic reports Special information needs

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

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

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.
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Segmentation and Targeting Of Business Markets

EVALUATING MARKET SEGMENTS

Criteria / factors used for evaluating each market segment are : (i) Size and Growth . (ii) Profitability Analysis . (iii) Competitive Analysis . (iv) Company Objectives and Resources

TARGET MARKET STRATEGIES

Based on above criteria, business marketer selects one or more market segments as target segments. Next , the marketers should decide which of the following broad target market strategies the company should adopt
(a) (b) (c) Concentrated or Niche marketing strategy, Differentiated marketing strategy Undifferentiated marketing strategy
r

Group by customer organization characteristics

Size Usage rate Industry Organization structure Location End Market New/Repeat purchase

Characteristics of decision-making process and buying structure of customer organization.

Perceived importance of purchase Relative importance: product/vendor attributes Attitudes toward vendors Vendor selection rules Buying center structural Power of key departments in buying center Key member: personality, demographics

Hierarchical structure
Start with macro and work down to micro

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 companys product from competing products are. (a) Product variables, (b) Service variables, (c) Personal variables, (d) Image variables,
Select one or more major benefits (or attributes) to differentiate the company from its competitors .

(ii)

(iii)

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

(iv)

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.

Product: bundle of physical,

service, and symbolic attributes designed to enhance buyers want satisfaction

Good: the tangible components of a product offering Service: intangible task that satisfies consumer or business user needs
PhotoDisc

Characteristics that distinguish services from goods:

Intangibility Inseparability Perish ability Difficulty of standardization Frequent requirement of interaction between buyer and Seller

PhotoDisc

Convenience product: good or service that consumers want to purchase frequently, immediately, and with minimal effort Shopping product: good or service purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and color Specialty product: good or service with unique characteristics that cause the buyer to value it and make a special effort to obtain it Unsought product: good or service marketed to consumers who may not yet recognize the need for it

Product line Product mix Product assortment Depth Length Width Consistency

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.

Materials and parts

Components Process materials

Capital items
Installations Accessory Equip

Supplies/ business services

10-140

Business marketers must understand that a product strategy is dynamic and flexible. It changes due to changes in (i) Customer needs. (ii) Technology. (iii) Government Policies / Laws. (iv) Product Life Cycle.

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

10-143

PLC Stages

Introduction Growth Maturity Decline

Low sales High costs per customer Negative profits Innovator customers Few competitors

10-144

PLC Stages

Objective: to create
awareness and trial Offer a basic product Price at cost-plus Selective distribution Awarenessdealers and early adopters Induce trial via heavy sales promotion
10-145

Introduction Growth Maturity Decline

PLC Stages

Introduction Growth Maturity Decline

Rising sales Average costs Rising profits Early adopters, customers Growing Competition

10-146

PLC Stages

Introduction Growth Maturity Decline

Objective: maximize market share Offer service, product extensions, warranty Price to penetrate Intensive distribution Awareness and interestmass market Reduce promotions due to heavy demand
10-147

PLC Stages

Introduction Growth Maturity Decline

Peak sales Low costs High profits Middle majority customers Stable/declining competition

10-148

PLC Stages

Introduction Growth Maturity Decline

Declining sales Low costs Declining profits Laggard customers Declining competition

10-149

PLC Stages

Introduction Growth Maturity Decline

Objective: reduce costs and milk the brand Phase out Cut prices Selective distribution Reduce promotions to minimal levels
10-150

Marketers usually try to expand each stage of the life cycle for their products as long as possible
Increase the purchase quantity or frequency of use by current customers Increase the number of users for the product Find new uses Change package sizes, labels, or product quality

Marketers seek to extend product life cycles through strategies to:

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

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.

Stages in the Adoption Process

Adoption Trial

Evaluation
Interest

Awareness

Relative advantage

Complexity
Compatibility Observability Communicability

10-156

10-157

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

7.

Target a niche market. Plan whole product properties. Develop partnerships. Unique positioning strategy. Effective Communication Strategy Multi Channel distribution strategy. Skimming pricing strategy.
r

Learning objectives
1. 2. 3.

4. 5.

6.

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

Industrial channel structures include both direct and indirect 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.

Direct Channels.

Indirect Channels.

Consists of intermediaries like distributors / dealers, manufacturers reps / agents, value-added resellers (VARs), brokers and commission merchants. Indirect channels are generally used when (i) Value of transaction / sales is low, (ii) The manufacturers resources are limited, (iii) Customers are geographically dispersed, (iv) Buyers purchase many items in one transaction.

1.

Industrial Distributors / Dealers.

They perform many functions like buying, storing, promoting, financing, selling, transporting and servicing certain geographic markets & are given discounts. Major categories are (i) General line distributors, (ii) Specialized distributors, and (iii) Combination house.

2.

Manufactures Representatives / Agents.

They perform functions like promoting manufacturers products / services, getting orders, and colleting market information. They are independent business firms, representing various manufacturers whose products complement one another but are not competitive. They are paid commission on the value of sales or orders booked. They do not buy, store or finance transactions.

3.

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.

Value-added Resellers (VARs)

4.

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.

Brokers

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.

It includes developing new channels and modifying the existing channels.

The procedure / steps are as follows;

(i) (ii) (iii) (iv) Developing channel objectives; Analyzing channel constraints; Analyzing channel tasks; 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).

It includes :
1. 2.

Selecting Intermediaries. Motivating Intermediaries. (a) Partnering relationships. (b) Reasonable discounts and commission. (c) Distributor councils. (d) Other motivational tools. Controlling Channel Conflicts (a) Sources of channel conflicts. (b) Controlling conflicts by (i) Effective communication network; (ii) Joint goal setting; (iii) Diplomacy; Mediation; Arbitration. (iv) Vertical marketing system (VMS). Evaluating Channel Members

3.

4.

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

Upstream management Downstream management

13-165

The Supply Chain of a Manufacturing Company

13-166

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

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

Dynamics of Material Flow

Supplier

Plant

RS

Logistics

Retailer

Traditional SCM

Supply Chain Benefits

Cost

Reduced inventories Reduced waste Reduced total system costs

Service

Establishment of a collaborative framework

Near real time information flow Reduced variation and increased quality Preferred source for new opportunities Expanded benefits to other customers

Business growth opportunities

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.

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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.

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A firm must minimize total distribution cost, instead of minimizing individual cost elements, to balance customer service and total distribution cost. Another approach, called total systems approach or channel integration focuses on return on investment (ROI). Here, a firms channel members work together toSales Revenuecustomer service, in improve - Total Physical Distributor Cost = order to get higher sales revenue. Capital Investment
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Service Quality Gap : Gap between perceived service and expected service. A firm may have a strategy of giving superior quality service than competitors and exceeding customers expectations. Factors that determine service quality by customers are : (i) Reliability (ii) Responsiveness (iii) Assurance (iv) Empathy (v) Tangibles
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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 .

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Developing customer service levels/ standards Neither all customers nor all products need the same level of service. Steps involved : (i) Conduct marketing research study to find which elements of customer service are important to customers. (ii) Find needs / expectations of customers in quantitative standards for the service elements. (iii) Get information on actual performance of the company and its competitors from customers. (iv) Analyze variance of actual performance with standards. (v) Take corrective actions to minimise the variance. Outstanding delivery service levels are achieved by integrating logistics and through supply chain management.
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4.

5.

6. 7.

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

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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.
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Role of Personal Selling in Business Marketing

Personal selling or direct selling through company sales force plays a greater role in business marketing than consumer marketing Major roles of personal selling are (i) A part of problem solving capabilities of the company. (ii) A part of the companys communication or promotion mix . (iii) Provide effective customer service .
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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 :

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Steps in the Selling Process

Identifying and Screening For Qualified Potential Customers. Learning As Much As Possible About a Prospective Customer Before Making a Sales Call. Knowing How to Meet the Buyer to Get the Relationship Off to a Good Start. Telling the Product Story to the Buyer, and Showing the Product Benefits.

Step 1. Prospecting and Qualifying

Step 2. Pre-approach

Step 3. Approach

Step 4. Presentation/ Demonstration

Steps in the Selling Process

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

Step 5. Handling Objections

Step 6. Closing

Asking the Customer for the Order.

Step 7. Follow-Up

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

Characteristics of B2B Selling

1. Promotional strategy focuses more on personal selling through companys sales force. Hence, salespersons are active in getting orders. 2. Adverting is used as a support to personal selling. 3. The sales person sells technical and non-technical products, and uses problem solving approach 4. Typically, it takes a long time to know outcome of sales efforts. 5. System selling approach is used by some business marketers, as it is preferred in some large industrial projects or contracts. 6. Team selling approach is used for major customers and large value orders.

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.
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Solution Oriented Effort

Two major roles of personal selling : (1) A part of problem-solving capabilities, (2) A part of communication ( or promotional) mix. A sales person is a part of selling firms problem-solving abilities. He should identify and analyze the buying firms problem. He should then show how his companys products and services can solve the buyers problems, better than competitors. This is called solutionoriented effort or approach.
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Entrepreneurial Philosophy
Entrepreneurship means entrepreneur within a company. When sales and marketing persons, who are employees, behave and act like owners of the company, they have adopted entrepreneurial philosophy. Such persons take initiative, are proactive and creative, and give superior value to customers. Firms that follow Entrepreneurial philosophy show consistently good performance.
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 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. www.a2zmba.com By Prof. Havaldar

How to Manage Major & National Accounts

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

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

DEVELOPING AN EFFECTIVE COMMUNICATION / PROMOTIOAL PROGRAMME FOR BUSINESS MARKETS

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

Promotional Tools and Media in Business Markets

Promotional Advertising Tools

Promotional Media & Supports Print Media Business Publications Trade Journals Industrials directories

Sales Promotion
Trade shows Exhibitions Catalogues Sales Consents Promotional novelties (gifts) Seminars Demonstration Promotional letters Entertainment

P. R. and Publicity
Charitable donations Adopting villages Community relations News item in press Technical articles in journals

Direct Marketing
Direct mail Telemarketing On-line marketing

Personal Selling
Sales calls Sales presentations Team selling Relationship marketing

ROLE OF ADVERTISING IN BUSINESS MARKETING While advertising is relatively less important than personal selling in business marketing, it is used as support to personal selling. The functions performed by advertising are (i) Creating awareness. (ii) Reaching members of buying center. (iii) Increasing sales efficiency and effectiveness. (iv) Efficient reminder media. (v) Sales lead generation. (vi) Support channel members.

ADVERTIING MEDIA USED AND SELECTION CRITERIA

The media generally used for industrial advertising are: (i) Business Publications. (ii) Trade journals/ publications Horizontal and Vertical publications. (iii) Industrial directories published by government and private publishers (e.g. Tata Yellow pages). Criteria used for selection of advertising media are: (a) Target audience and their media habits. (b) Promotional objectives and goals. (c) Expenditure budget, by using the following formula:

Cost per page = Circulation in thousand

IMPORTANCE OF SALES PROMOTION

Sales promotion consists of short-term incentive tools to stimulate greater or faster purchase of a product / service by business customers. Some of the business promotion tools are : Trade shows (or exhibitions), sales contests, promotional novelties (or specialty advertising, or gifts), seminars, catalogues, promotional letters, demonstration, and entertainment. Some of the frequently used tools are trade shows, sales contests, catalogues, demonstrations, and promotional novelties (gifts).

IMPORTANCE / ROLE OF DIRECT MARKETING (DM)

Definition Direct marketing is an interactive marketing system that seeks a measurable response and /or transaction. Direct marketing is also referred to as direct response marketing. Benefits For business marketers, benefits of DM are many : Can personalise / customise communication messages, builds a continues relationship with each customer, can measure responses from alternative media, and direct relationship marketing company strategy less visible to competitors. Main Channels or tools of DM. Direct mail, telemarketing and on-line marketing. In addition, kiosk marketing and catalog marketing are also DM channels, but are less popular in India. Direct mail is not only paper based postal service or courier service, but can be fax mail, e-mail, or voice mail. Direct marketers send not only letters, but also audio and videotapes, CDs, and diskettes. Response rate is about

 Telemarketing uses telephone to contact existing customers, to attract new customers, or to take orders. Telemarketing gives immediate feedback, identifies and qualifies prospects, and reduces sales force travel costs. Both inbound (incoming calls from prospects / customers) and outbound (out going calls) are important. Practice, training, pleasant voices and right timing (late morning to afternoon) are needed for effective telemarketing. On-Line Marketing can be done by establishing an electronic presence (by opening own website or buying space on a commercial on-line service), placing ads on-line, and using e-mail. A web site should be attractive on first view and interesting enough to encourage repeat visits. Marketers use on-line marketing to find, reach, communicate and sell to business customers.

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

ROLE OF PUBLICITY & PUBLIC RELATIONS (PR)

Public Relations (PR) performs certain tasks to promote or protect a companys image or its products. The tasks / functions performed by PR are: press relations, corporate communication, lobbying, and counseling. PR department deals with various categories of people like press, legislators, Govt. officials, public, employees, suppliers, customers, and hence it tends to neglect marketing objectives. Publicity or Marketing Public Relations (MPR) has more credibility and lower cost compared to advertising, MPR includes placing technical articles from the companys technical persons in trade journals, business magazines, and / or news papers. MPR should be planned with advertising and should be given larger budget allocation

Learning Objectives
1. 2.

3.
4.

5.

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

Stars

Question marks

Rapid

Market Growth Rate

5 3
Cash Cow

6 8
Dogs

Slow

1
Large

2
Small

Relative Market Share

Business Strength
5
High Medium Low

High

Selectivity / Earnings

Medium

Low

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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.

Strategic planning gap. It is the gap between future (5 years) desired sales and the projected sales (of all SBUs ) of a company.
Desired Sales

Sales

A B C
Projected Sales

Strategic Planning gap

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The strategic planning gap can be filled by three alternative strategies : (A) Diversification growth, (B) Integrative growth, (C) Intensive growth (C) Intensive Growth Strategy. Corporate management should first review existing business, using Ansoffs product-market expansion grid, shown hereafter :

Current Products Current Markets New Markets Market Penetration Strategy Market development Strategy

New Products Product development Strategy ( Diversification Strategy )

( B) Integrative Growth Strategy includes increase in a firms sales and profits by integrating backward, forward, or horizontally within that industry.

(A) Diversification growth strategy is considered when (B) & (C) strategies are inadequate to achieve desired growth and also good opportunities are found outside the present businesses.

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

Low - cost position Industry wide Particular segment only Overall cost leadership Focus

Differentiation

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.
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1. 2. 3. 4.

5. 6. 7.

8.

Situational analysis. Market, competitive, product, and macro environmental analysis. SWOT and Issues analysis Marketing Objectives and goals Marketing Strategy. Selection of target market segments, positioning, marketing mix, customer service and marketing research. Action plans / Tactics Marketing Budget Implementation and control. Building marketing organization and control process. Contingency plan.

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.