Industrial Marketing Q No. 3 In how many ways the industrial products can be classified?

Discuss the characteristics and the marketing plan for each class of the product. Ans : The industrial products can be classified into following: Major Equipment: This category includes large machines or other tools whose net purchase price are so great that expenditures for them are changed to capital account and not the current account. Major equipment is of two types:Multipurpose or standard machines which can be used by a no. of different industries or by many firms in the same industry. Single purpose machines are designed to perform one particular operation and no other. Since the net price of major equipment is sometimes very high, its purchase may involve financial problem for the buyer. Firms marketing such equipment must be prepared to loan for the buyers, to help them float issues of securities, to negotiate with investment concerns, or to lease equipment. Minor or accessory equipment: It is machinery used in an auxiliary capacity. Its price is lesser than that of major equipment and its cost is generally charged to the current account. These are purchased in routine manner and involve lesser negotiation. Minor equipment items are standardized and suited to the performance of a function involved in more

than one operation of a business. The organisation for marketing them must be more widespread and such items are sold through many outlets and the relation between the buyer and the maker can be less direct and immediate. Fabricating or Component part: Components are often bought on the basis of specifications prepared by the purchaser, although many items such as batteries of tyres in the automobile industry are standardized according to the specifications of the parts manufacturer. Some components retain their identity in the finished product; this offers the opportunity for the buyer of enhancing the sales appeal of these end products by including in them a component of market acceptance. Process Material: This closely resembles component part in that they usually enter into and form an undistinguished part of the finished product. For example a good manufacturer may buy a variety of ingredients, mix them in proper proportions and sell the resulting material on the market as a cake mix. Suppliers may build repulsion for these material for ensuring high quality and greater purity. The standardization is sufficient to throw considerable emphasis on price and service as a competitive factor in the sale of process material. Operating supplies: They do not become a part of the finished product, but are continuously worn out or used up in the process of operating or facilitating the operation of an enterprise. Such items are paints, soaps, detergents, etc. They are usually marketed through middleman and maintenance and repair supplies are supplied directly by the firm. Raw material: Raw material is the basic materials of industry and are supplied chiefly by agriculture, lumbering, mining and finishing industries.

Farm products like wheat, cotton, fruits which are seasonal, there branding takes lot of time to establish. Natural products like iron ore, crude oil, fish are limited in nature having low unit value but high transport cost. Raw materials are bought in the open market and sold on the basis of recognized standards.

Q. No. 5 Compare consumer goods marketing with industrial goods marketing. Ans: Elements of Comparison Market Structure Demand Products Consumer Marketing Geographically dispers- ed all over the country. Demand is directly Goods Industrial Goods Marketing Geographiocally concentrated to one part of The country. Demand is derived. 1.Large quantities or high value equipment is involved. are 2.Service important 3.Customised technically of is not products. 4.More focus on the cost of maintenance Functional department involvement. 2.Impulse buying not allowed, and 3.More 4.Customer manufacturer interdependent. Decision 1.The consumers 1.The consumers rational technical and are motive predominate. knowledge required. and complex is very

from Users. 1.Products are bought in ones and twos. 2. Services somewhat important. 3.Most products are standard. 4.Cost maintenance

Buyer Behaviour

important. 1.Family involvement. 2.Impulse buying. 3.No buying. 4.Consumer interdependent. manufacturer are not technical expertise needed for

making

conduct quality tests. 2.Consumers making 1.Long required 2.More retail outlets exists Advertising and sales promotion are more popular promotion pricing tools 1.Simple policies. 2.Negotiation on price is rarely made. are amateur in decision

check quality tests. 2.Consumers professional are in

Making Channels

channels

decision-making. 1.Short channel required 2.Less retail outlets. Personal selling is

Promotion

the promotion tool.

Price

1.Complex policies. 2.Negotiation

pricing on

price for all types of goods is made.

Q.No.7 Describe the characteristics of industrial buyers.

Ans The important characteristics of industrial buyers are:1.

Fewer Buyers: Industrial marketer deals with fewer buyers than

consumer marketer.
2.

Larger Buyers: Many markets are characterized by a high buyer

concentration ratio. Few larger buyer do most of purchase.
3.

Business Relationships: As industrial market has smaller

customer base and normally power is concentrated with heavy sellers. Suppliers are frequently expected to customize their offerings to individual buyer needs. Industrial buyers finalize orders with those suppliers who cooperate with them on technical specifications and delivery schedule requirements.
4.

Geographic orientation of buyers: Industrial buyers are normally

concentrated in particular city, region or area. For e.g. Most of the automobile producers are from Pune like Bajaj, Kinetic, Telco, etc, likewise concentration of software business around Bangalore, Hyderabad and Pune, etc. This geographic concentration of producer reduces selling costs.
5.

Professional purchasing: trained purchase officers, who spend

their professionalism in how to buy better, buy Industrial goods. Their professional approach and greater ability to evaluate technical information leads to more cost-effective buying.

6.

Several buying influences: In industry buying, many people are

involved. Buying committees consist of technical and commercial experts at senior and middle management levels. The communication mix needs to be designed in such a way that all influences get enough information. 7. Other characteristics: Direct Purchasing- Industrial buyers prefer to purchase directly from producers. Reciprocity: Buyers selects such suppliers, who also buy from them. Leasing: Industrial buyers purchase on lease or hire due to various benefits of taxes and depreciation.

Q. no.

What do you understand by negotiation? What is the importance

of negotiation skill in industrial marketing? Ans:

Much of business-to-business selling involves negotiating skills. The two parties need to reach agreement on the price and the other terms of scale. Sales are need to win the order without making deep concessions that will hurt profitability. Industrial marketing is concerned with exchange activities and the manner in which terms of exchange are established. Administered programs of pricing and distribution establish the terms. In negotiated exchange, price of other terms are set by bargaining behaviour, in which two or more parties negotiate long term binding agreements (e.g. joint ventures, franchisees, sub-contracts, etc) In order to get sales and achieve profit and build a win-win situation, a industrial salesman need to sort out the most frequently put forward negotiated issues. In industrial marketing mainly the high price of industrial product is the biggest issue, other issues include contract completion time, quality of goods and services offered, responsibility for financing, risk taking, etc Marketers who find themselves in bargaining situations need certain tact and skills to be effective. The moist important tacts are preparation and planning skill, knowledge of subject matter being negotiated, ability to think clearly and rapidly under pressure and uncertainty, ability to express verbally, listening skills, judgment, general and technical intelligence, ability to persuade others and patience. These will help an industrial marketer in knowing when to negotiate and how to negotiate.

A marketer can make a successful sale only when there exists a zone of agreement i.e. overlapping acceptable outcomes for the parties. This can be explained with the following diagram:Zone of Agreement

Seller’s

Buyer’s Surplus Surplus

Rupees Seller’s Reservation price Final contract Buyer’s Reservation price

Good negotiation skills bring about an option for mutual gain. Inventing options for mutual gains involves searching for a larger pie rather than arguing over the size of each slice. Efficient negotiation skill involves preparing a good strategic plan before meeting the other party and making good tactical decisions during the negotiation sessions so that the industrial marketer is able to focus on interests and insist on objective criteria.

Q. No.11 Define and explain value analysis. Ans Value analysis is an intensive appraisal of all elements of the design, manufacture or construction, procurement, inspection, installation and maintenance of an item and its components including the specifications and operational requirements in order to achieve the necessary performance, maintenance and reliability of the items at minimum cost. Value analysis comprises of two activities:1. 2. Review of existing products. Identification and elimination of unnecessary cost factors.

Review of existing products: Reviews recognize the ever present possibility of improvement in specifications and design. They also recognize the fact that in mass production no unit saving is too small to be worthwhile. The purpose is to determine how equivalent performance can be achieved at lower cost and how the combined knowledge of engineering , manufacturing and purchasing can best utilize alternative materials, new processes and abilities for specialized supplies to speed the achievement. Identification and elimination of unnecessary cost factors:Careful appraisal and analysis often point the way so as to eliminate and modify the unnecessary features of design and the cost of manufacturing operations they contain.

Operation of the value analysis system:

VALUE ANALYSIS Formulation Of recommendation Testing of each alternatives Performing same operation Determination of Product Identification of alternative means

Q. No.13 Which factors influence industrial channel structure? Ans Marketing channels are set of independent, external organisations involved in the process of marketing a product or service available to consumer. Marketing channels satisfy the demand of customers by supplying products and service at the right place, in the exact quantity requirements and at correct price. The factors influencing industrial channel structure are:

Type of market: If a manufacturer product can be sold only to the

members of one or few industries, and the number of firms in each industry is small, direct distribution is profitable. On the other hand, if the market is horizontal, the product must be sold to buyers in many industries. Market financial: if the probable volume of sales in a market area

is quite large, direct marketing may prove profitable. On the other hand , if the sales volume of a specific product is low, the direct method may be too expensive. To what extent are the possible purchasers concentrated

geographically: If 70-80% of the total possible sales volume of a product is concentrated to one or two limited market areas, the marketers of such a product will find it profitable direct marketing of such products. Purchase Policies of the buyer: if the typical user of the industrial

goods, purchases in small orders and for quick delivery and its marketers find it least costly and most satisfactory to sell through distribution.

Gross Profit and price volatility: When the sales are combining

of the manufacturer goods, the gross profit is small, makes the item that enjoy higher margins when sold to the users. The maker of items whose price is highly volatile find it difficult to market through distributors, as there is problem of adjusting the margins to compensate for shifts in price. Product installation: Products such as heavy complicate

machinery, which need to be installed by the maker itself, profit by using direct channel of marketing. In case like selling of communication equipment specialized contractors are given the task of installation. And same is the case with highly technical product, which require trained experts to guide the users. Quality: Different users of a material or component want a variety

of quality graduations. In such cases, lot for each customers order must be produced to specifications and the right lot should be distributed. In such situation, the direct channel is more effective. Weight of the product: If a product is bulky so that its user orders

it in truck loads, then direct delivery is recommended. Speed of delivery is most important to the buyer. Manufacturer can sell direct through his own salesman for factory shipment. Repair and maintenance requirements: If the product is so

complex that it must be serviced by highly skilled specialist, the manufacturer must maintain some sort of service station from which

they can operate and in which extra stock can be kept. This can be

accomplished through distributors. Size and financial position of industrial marketing and the marketing

objectives of the supplier who influence the industrial marketing channels.

Q. No. 14 Discuss the functions performed by advertising in industrial marketing. Ans Industrial advertising is a viable and important tool of the whole industrial marketing concept. It reduces selling costs and boosts turnover. Advertising also performs the following functions:

Disseminating

information:

Most

industrial

products

are

purchased per rational reasons, effective selling thus needs a support in order to present all the relevant facts about the product. The primary function of advertising is to inform people about the products and services of the advertisers. Identifying new customers: Advertising generates enquiries from

potential customers that the firm might otherwise never know about. Though an industrial buyer may not buy the product only by seeing the ad, but the ad induces the buyer to ask for additional information. Effectively planned advertising enhances the sales call by arousing interest. Establishing recognition: Advertising also helps to promote the

selling firms itself rather than any of its products. The reasons for the above could be:1. 2. 3. 4. The firm has a huge product line and cannot advertise all. Slight difference between the firms of competitions products. Firms lay more important at building corporate image. There is no new market growth for the firms.

Supporting salesperson: Advertising provides support to the

salesperson by building favourable altitudes about the company so that salesperson finds it easy to make sales call. Where the market for the industrial product is widespread, sales call made by salesman may be infrequent. Advertising fills the gap between these calls. Motivating distributors: Industrial products are sometimes

distributed through distributors or manufactures, which may be handling products of others, producers. The producers needs to convince them to devote sufficient time of energy to sell his products and this is done by providing middlemen with advertising literature that points out the advantages of pushing the company’s product line etc. Stimulating primary demand: Industrial products advertising can

be used as an effective means to boost the sales of the products. For example: steel, rubber and computer hardware manufactures often place advertisements in consumers media promoting products like furniture, tyres and computers respectively. Sales Appeals: A sales appeal is an argument, a fact, an idea or

an extension of attitude or emotion that the advertises tints will compel a prospective buyer to react favourably to his message. A good industrial advertisement should have about it a car of province for the reader and inspire belief. Hence an important task of advertising is to contact others on the network and lead there to a fullers appreciation of the product and convince them to buy it from there company.

Q No-15 Which discussions are involved in industrial sales from management

Answer Once the company has established the sales force objectives, strategy, structure, size and compensation, it has to move to selecting, training decisions. Recruiting and selecting sales representatives: Selecting sales representative would be single if one knows what traits to look for. One good starting point is to ask customers what traits they like and prefer in sales people. Most customers say that they want the sales representative to be honest, reliable, knowledgeable, & helpful. Another aspect is to look for these traits when selecting the candidates, traits common to the most successful sales people in the company. After development of selection criteria, it must recount, the human resource department seeks applicants by various means, including soliciting names from current sales representatives, using employment agencies, placing job adds and contacting college students. Recruitment procedures if successful will attract applicants and the company will need to select the best ones. There can be a single informal interview or prolonged testing & formal tests. and supervising, motivating, and & evaluating guide sales these representations. Various policies procedures

Training sales representatives Today customers who are more demanding and deal with many suppliers, cannot put up with insufficient sales people. Customers expect sales people to have deep product knowledge, to add ideas to

inspire customer operations and to be efficient and reliable. These demands have required companies to make such higher investment in sales training. The medium training period is 28 weeks in industrial product companies. Training time varies with the complexity of sales task. For e.g., IBM self-study system called Info Window where a sales trainee can practice sales call with an on screen actor whop portrays a buying executive. Supervising sales representatives Supervision is the fate of everyone who works for someone else. It is the expression of those employers natural and continuous interest in their employees activities. Sales representatives who are salaried receive substantial supervision as compared to those who are paid on commission. There are also discussions as to whether the magnitude of sales increase justified the additional cost. Companies often specify how much time should be spent for prospecting new accounts Unless sales representative are rewarded for opening new accounts, they spend more of their time with current customers. Time and duty analysis is carried out which helps representatives understand how to spend time efficiently and ways that might increase their productivity. Motivating sales representatives Majority of sales representatives require encouragement and special incentives to work at their best level. The higher the sales person motivation the greater is his / her efforts. Greater effort would lead to greater performance, greater performance will lead to greater rewards, greater rewards will lead to greater satisfaction and satisfaction will reinforce motivation Motivation Effort Performance Rewards Satisfaction

Evaluating Sales Representatives Management obtains information about its sales representatives in several ways. The most important source is sales reports. Additional information comes through personal observations, customers’ letters and complaints, customer’s surveys and conversations with other sales representatives. Reports like call reports, expenses reports, lost business reports etc provides raw data, which sales managers can extract, key indicators of sales performance.

Q no. 16

Explain industrial marketing research process. How

industrial marketing research differs to consumers marketing research. Answer

Research is undertaken to obtain valuable input on variables marketing reach is conducted to gather reliable in formations that will enhance planning and control of marketing activity. The basic steps constructs the marketing research process:
1.

Defining the problem: It is very important because the purpose

of marketing research is to solve the problem and understand it better. Both the researchers and decision makers have to take time to describe the problem clearly and precisely. Researchers should question the decision makers on the specific of the problem.
2.

Research Objectives: These are the statements that outline

the aim of the above step. Objectives are the tasks on which the research is carried on. Objectives can be:  Determining the number of firms in different industries Estimating the consumption of these firms of similar Estimate the potential sales possible. The research objectives are put in writing so that they may be received and improved further and also one has to choose a research methodology. 3. Information Collection: There are basically two source of that would desire the product.  products. 

information primary source and secondary source. Primary data is data that is specifically collected for the problem to aid decisions making. Method available to collect primary data are the surveys, observations and experimentations. Surveys can be unstructured, consisting of straightforward questions so as to bring out motives,

priorities etc of the respondents. Structured surveys are quantifiable and are used for measuring consumers and knowledge of buyer’s behaviour. Primary data collection should never be undertaken before exploring the secondary data resources, which are already existing and published by various agencies.
4.

Analyzing the data:

With the advent of computers, huge

amount of data can be analysed handled with ease. SPSS is a standard statistical software package used by almost all the marketing research firms for better analysis.
5.

Presentation of findings: Computer system has entered the

field of presentation of research findings. They help in the presentations of the findings as per the need of each decision market. These system are called Management Information Systems (MIS) and Decision Support System (DSS). The difference between industrial and consumer marketing research is as follows:

S . N o . 1

Elements of comparis on Type of

Industrial marketing research

Consumer marketing research

More

reliance

More reliance

data

on

secondary is few

on data.

primary

data. Marketing information concentrated among experts.

Marketing information special geographically . is

2

Sample size

Sample size is small because small sample & universe concentration of industrial buyers Marketing research frequently. Identifying clear-cut market segments very Maintaining customers satisfaction may be easy of quality, price & lower of is difficult. is conducted less

Sample size is large due large buyers geographically dispersed. Marketing research conducted more frequently. Identifying market segment relatively simple. Maintaining customers satisfaction may be difficult due to high of degree is is universe to and sample

3

Frequenc y conductin g research Research output

4

payment 5 Type of

are

brand switches. For established as well as new is to products, emphasis green discretional research

maintained For established products more emphasis green discipline method. is to

research

experimental &

Q 18:- Briefly discuss industrial pricing policies? Ans :Basic requirements of a pricing policy for many industrial materials is to fulfill the need to quote prices in a feasible and simple manner to all the

customers vis-à-vis the competitor method of quoting prices. The major pricing policies are:List pricing: it is the published figure distributed to all customers, regardless of their type or classification. This method is used for two reasons:Prevent printing of new catalog each time the price is revised. Provide a common base from where a variety of discounts can be adjusted. Net pricing: net price refers to list price with allowance for trade-ins , order pick-up (eliminate delivery), volume purchased and other costsignificant concessions made by the buyer. The system of pricing eliminates much of the cost confusion associated with quoting a price less a discount. Industrial sellers prefer this method since it eliminated the need for bargaining by the purchasing officer of the customers organization. Discount pricing: The term discount means deduction from the published list price of manufacturers. In some industries, industrial manufacturers quote the same discount as their competitors. Three alternative discount policies are:Trade discounts: Since manufacturers sell products to distributors it controls the resale price in a uniform price to the final risers. Quantity discounts: These are price deductions that vary according to the amount or volume purchased. These discounts are very useful for manufacturers and suppliers in dealing with small-order problems. These discounts are may also be used as means of classifying customer into

large quantity buyers, whom the seller wishes to serve directly and small quantity buyers whom the seller can serve through distributors. These may be further classified as:Cumulative- based upon total business purchases over a period of time like one year or one month. Non cumulative- based on the amount of a single order. Cash discounts:- These are deductions, allowed by the seller, to be made by the buyer from the face value of a hell in return for an early payment before the due date. The main purpose is to encourage immediate payment, thus enabling the seller to avoid the burden of extending credit. It helps the seller to get faster turnover of working capital, increases sales and eliminates friction between the company and slow paying customers. Geographic pricing:- the ultimate price to the buyer is affected by the bulk and weight-of a product-and the cost of transporting the product to the buyers plant, warehouse or site. As a result, many industrial manufacturers include an allowance for transportation cost in their price quotations. Quotations that include transportation cost allowances may take two general forms:

Factory pricing and freight allowance pricing. In case of factory pricing the buyers pay full freight-charges and is responsible for all the associated with the transport of the material.

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