BUSINESS MARKETING

CHAPTER-1

Business marketing is a marketing practice of individuals or organizations (including

commercial businesses, governments and institutions). It allows them to sell products or
services to other companies or organizations that resell them, use them in their products or
services or use them to support their works.

Business marketing is also known as industrial marketing or business-to-business (B2B)

marketing. Despite sharing dynamics of organizational marketing with marketing to
governments, business-to-government marketing is different.

 Business marketing is often directed to individuals within an organization, who act on

behalf of the needs of the organization.
 Business-to-business marketing involves any products or services a company
purchases to resell, use as components in their own products or services, or to support
their daily operations.
 Any given business-to-business transaction can involve years of complex marketing
efforts, including online and offline promotions.

Objectives:
 Explain each of the components of the business-to-business (B2B) market.
 Describe the major approaches to segmenting B2B markets.
 Identify the major characteristics of the business market and its demand.
 Discuss the decision to make, lease, or buy.
 Describe the major influences on business buying behavior.
 Outline the steps in the organizational buying process.
 Classify organizational buying situations.
 Explain the buying center concept.
 Discuss the challenges and strategies for marketing to government,
institutional, and international buyers

Demands for Industrial Marketing.

 Demand for Industrial goods and services are derived from expectations of the actions
of ultimate consumers.
 Demand for Industrial products is also often joint. Joint demand occurs when the
demand for a product depends upon its use in conjunction with another product or
products while cross elasticity of demand exists in both markets, it is more important
in Industrial marketing since it can have a major effect on a firm’s overall corporate
strategy.

Industrial Marketing: 6 Important Demands for Industrial Marketing are as follows.

1. Derived demand.

2. Stimulating industrial demand.

3. Joint Demand.

4. Fluctuating Demand.

5. Inelastic demand.

6. Cross elasticity of demand.

Important Demands for Industrial Marketing are as follows.

1. Derived demand:
The demand for Industrial goods is ultimately derived from the demand of consumer goods.
Thus animal hides are purchased because consumers want to buy shoes, purses and other
leather goods. If the demand for the consumer goods slackens so will the demand for all
Industrial goods entering to their production. For this reason the industries must closely
monitor the buying pattern of ultimate consumers.

For example, the demand for steel and cement does not exists in itself. It is demand for the
constructed houses which are purchased in turn by customers. The boom in apartments and
flats in the mid 90’s led to the surge in demand for those products. Thus a forecast of the real
estate scenario in general and construction industry in particular has to be monitored, to
understand the demand for steel and cement.

In case of capital goods such as equipment and machinery that are used to produce other
goods the purchases are made not only for the cement requirements but also in anticipation of
profits from the future usage. Thus if the businessman foresee or feel that there may be a
recession in near future, their purchases will be drastically curtailed.

During the process of recession or reduced consumer demand, industrial firms reduce their
inventories or reduce production or both. On the other hand during the period of prosperity
there is an increased production and sales of consumer goods, which results in an increased
demand for industrial goods. This may be the right time for price increases or building stock
as ready availability and shorter delivery period becomes very important.

An industrial marketing firm must be in close touch with customers, purchase, finance, quality
standards etc. so as to get information on changes in customers demand.

2. Stimulating industrial demand

Because of the nature of industrial demand the influence of final consumer is well recognised.
One way which industrial marketers attempt to increase sales is by stimulating increases in
demand of ultimate consumers.

By directing advertising to ultimate consumers, industrialists can often increase consumer

demand for final products, which in turn, increases their industrial sales. Industrial advertising
to ultimate consumers is also a method of increasing goodwill and achieving a favorable
position with an industrialists immediate customers.

3. Joint Demand:
Joint demand occurs when one product requires the existence of others to be careful while
exceptions may be found. Most products require several components, parts or ingredients.
Example; A bakery require flour, salt, preservatives, yeast in the production of bread. If one of
the ingredients cannot be obtained other purchases will be curtailed or discontinued. Joint
demand situations can also be affected by changes in product specifications.

Industrial customers often prefer to buy from one supplier rather than purchase individual
products from different suppliers. The individual products required do not have individual
demand, but are demanded only if the “other” products are available in the supplier line.

4. Fluctuating Demand:
The demand for business goods and services tends to be more volatile than the demand for
consumer goods and services. This is especially true of the demand for new plant and
equipment. A given percentage increase in consumer demand can lead to much larger
percentage increase in the demand for plant and equipment necessary to produce the
additional output.

Economists refer to this effect as the acceleration effect. Sometimes a rise of only 10% in
consumer demand can cause as much as 200% Industrial demand for products in the next
period. This sales volatility has led many business marketers to diversify their products and
markets to achieve more balanced sales over the business cycle.

5. Inelastic demand:
The total demand for many Industrial goods and services is inelastic that is not much affected
by price changes. Shoe manufacturers are not going to buy much less leather if the price of
leather rises unless they can find satisfactory leather substitutes.

Demand is especially inelastic in the short run because producers cannot make quick changes
in their production methods. Demand is also inelastic for Industrial products that represent a
small per cent of the total cost of the item.

6. Cross elasticity of demand:

Cross elasticity of demand is the responsiveness of the sales of one product to a price change
in another. It can have a dramatic impact on the marketing strategy of an Industrial firm.

Cross elasticity for substitutes is always positive i.e., the price of one good and the quantity
demanded of the other always more in the same direction. The more positive is this ratio the
larger the cross elasticity and more definite it is that the products compete in the same market.
Cross elasticity for complements is negative-price and quantity move in opposite directions.
The more negative this relationship the more closely the demand for the products is related.

The concept of cross elasticity of demand can be very useful to Industrial marketers. For
example the quantity of granite required for construction is related to the price of its close
substitute bricks or marble and vice-versa. It is important that a firm know how the demand
for its products is likely to be affected by changes in the prices of other goods and also the
interrelationship among industries.
Difference between Industrial marketing and consumer marketing.

Sl. Point in difference Industrial marketing Consumer marketing

no
1 Buyer  Fewer buyers.  Larger buyer base.
characteristics  High buyer  Low buyer
concentration. concentration.
 Close supplier customer  Non-personal
relationship. relationship.
 Technical expertise  Less technical expertise.
dominates.

3 Decision making Distinct observable Unobservable, mental.

4 channels
5 promotion
6 Product and
services
Direct, fewer links, shorter. Indirect, multiple linkages.
Emphasis on personal technical Emphasis on advertising selling
presentation. trade shows.
 Technically complex  Standardized and or
 To customer repetitive make.
specifications prompt  Service, delivery
service, timely. secondary.
 Delivery very essential

Organizational buying and buying behavior

Organization buying is the decision-making process by which formal organizations establish

the need for purchased products and services and identify, evaluate, and choose among
alternative brands and suppliers. Organization buying is the decision-making process by
which formal organizations establish the need for purchased products and services and
identify, evaluate, and choose among alternative brands and suppliers.

Some of the characteristics of organizational buyers are:

1. Consumer market is a huge market in millions of consumers where organizational buyers

are limited in number for most of the products.
2. The purchases are in large quantities.
3. Close relationships and service are required.
4. Demand is derived from the production and sales of buyers.
5. Demand fluctuations are high as purchases from business buyers magnify fluctuation in
demand for their products.
6. The organizational buyers are trained professionals in purchasing.
7. Several persons in organization influence purchase.
8. Lot of buying occurs in direct dealing with manufacturers.

Organizational Buying/Purchasing/Procurement Process

Steps in the Process

 Problem recognition
 General need description
 Product specification
 Supplier search
  Proposal solicitation
 Supplier selection
 Order routine specification
 Supplier performance review

Organizational Buying Situations

Straight rebuy
In this buying situation, only purchasing department is involved. That get an information from
inventory control department or section to reorder the material or item and they seek
quotations from vendors in an approved list.
The "in-suppliers" make efforts to maintain product and service quality. The "out-suppliers"
have to make efforts to get their name list in the approved vendors' list and for this purpose
they have to offer something new or find out any issues of dissatisfaction with current
suppliers and promise to provide better service.

Modified rebuy
In this buying situation, there is a modification to the specifications of the product or
specifications related to delivery. Executives apart from the purchasing department are
involved in the buying decisions. The company is looking for additional suppliers or is ready
to modify the approved vendors list based on the technical capabilities and delivery
capabilities.

New task buy

In this situation, the buyer is buying the product for the first time. As the cost of the product or
consumption value becomes higher, more number of executives are involved in the process.
The stages of awareness, interest, evaluation, trial, and adoption will be there for the products
of each potential supplier. Only the products which pass all the stages will be on the approved
list and price competition will follow subsequently.

Systems buy
Systems buying are a process in which the organization gives a single order to a single
organization for supplying a full system. The buying organization knows that no single party
is producing all the units in the system. But it wants the system seller to engineer the system,
procure the units from various vendors and assemble, fabricate or construct the system.
Buying Situations

In order to understand how to market to another business, a simple first step is understanding
how these types of clients approach the buying process. Business are quite different than
single consumers in regards to buying strategies, often pursuing much large contracts with
much greater care. To understand the buying situations, it is useful to consider the decision-
making process (spontaneity vs. strategy), differences in pricing, payment approaches, repeat
purchases, relationships, and the role of a purchaser at an organization.

Spontaneity: B2B buying situations are less likely to be spontaneous, and more likely to be
discussed carefully among various stakeholders. For example, a consumer may buy a soft
drink without over thinking the price, manufacturer, or business relationships (i.e. just to
satisfy their thirst). A grocery store, however, will carefully consider which types of soft
drinks to stock, how many to buy, how to ship them, how to price them, etc.

Pricing: B2B buying situations are often less concrete in terms of overall (or per unit) pricing.
Take the above example. An individual buying a soft drink will probably not barter the price
down with the cashier. However, a store purchasing 10 cases each month will discuss price
carefully with the soft drink producer, and likely pay a different price per unit than other
grocery stores (depending on volume, shipping, storage, etc.).
Payment: Payments between companies are generally predicated on monthly, quarterly or
annual invoices. Payments between consumers are immediate, or perhaps will rely on a credit
card. This changes the buying situation, particularly when factoring in the time value of
money.

Relationships: B2B purchasing situations often require the meeting of various groups in each
organization. A relationship will be built on these meetings, creating trust, alignment and
agreement on how the buying process will be planned and executed. B2C purchasing
situations are often much less personal, required little to no relationship between the
organization and the consumer.

Promotions: Finally, it's also worth noting that the method of promotion and the source of
interactions between prospective buyers and sellers are often different for B2B and B2C
exchanges. Trade shows, conferences, and meetings actually forms of marketing
communications and promotional strategy, as building one-to-one interactions between buyers
and sellers is necessary in building trust for high capital and high volume purchases.

Source: Boundless. “Buying Situations.” Boundless Marketing Boundless, 05 Dec. 2016.

Retrieved 17 Feb. 2017 from https://www.boundless.com/marketing/textbooks/boundless-
marketing-textbook/business-to-business-marketing-5/the-business-buying-decision-process-
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Consumer behaviour is the study of individuals, groups, or organizations and the processes
they use to choose, expend, and dispose of products, services, experiences, or ideas to satisfy
their needs and the impacts that these processes have on the consumer and society (Noel,
2009). Consumer behaviour mixes elements from psychology, sociology, social anthropology
and economics and it also intends to understand the buyer decision making process, both in
individual and in groups (Noel, 2009). There are various elements which can influence
consumer behaviour, recent research implies that it may vary depending on the buying
situation. This essay is going to define the main types of buying situations, outline the
characteristics of them and explain factors which are likely to impact customer involvement in
each situation.

In general, there are three major types of buying situations (BE, 2005).

• The new task is a business buying situation in which the buyer purchases a product or
service for the first time.

• The modified re buy is defined as a business buying situation in which the buyer wants to
modify product specifications, prices, terms, or suppliers.

• Straight re buy is a buying situation in which the buyer routinely reorders something without
any modifications.

The three types of buying situations could be significantly different. Various factors may
work in different situations. Every time when the buyer is to take a purchase decision, buying
situation can be different, it may or may not be the same as the previous one. The
differentiation between the two buying situations may be caused by the absence of any or all
of the following factors (LME, 2006).

• Awareness about competing brands in a product group.

• Customer has a decision criterion.

• Customer is able to evaluate and decide on his choice.

According to the factors above, the three major types of buying situation could be obviously
different.

The new task could also be defined as extensive problem solving situation (LME, 2006). In
this situation, the buyer has no past experience for products and he is totally new to buy the
products which require some and extensive efforts for a buyer to decide about the product
purchase. It may take customers longer time to make a decision because it could have a
greater risk or cost and take more time in getting know of the new products.

Modified re buy could also be called as limited problem solving situation in which supplies a
change and gives the customer with new experience and new preference (CM, 2005). It gives
a chance to the customer to try something new. If the introduction of a new brand or a product
shows many advantages to the customer, it could require a change in the customers' decision
criterion. For example, a housewife decides to buy a soap and she sees a new liquid toilet soap
which promises to keep her skin soft and moisturized, the brand also promises to give vitamin
E, which the manufacturer claims is required in temperate conditions. The liquid toilet soap
brand is available in four fragrances .The pack can be refilled every time the soap gets fully
consumed .Now this introduction is likely to change her decision and may be the choice
criterion. If she spends some time in evaluating the liquid toilet soap against the normal bar
soap and then decides to try it, we conclude that for her it was a limited problem solving
situation (CM, 2005). As can be seen, modified rebuy might often lead to a trial purchase. The
customer may even decide to continue with her current product choice. Generally it has been
admitted that brand extension strategy helps the customer to reduce the elements of newness
in the purchase decision.

Straight re buy is also known as extensive problem solving situation and it is characterized by
the presence of all three criterion for differentiation (CM, 2005). In other words, customers
are aware of his or her choices, they know what they are searching for, as his or her choice,
what exactly his need is and which is based on personal experience of either self or others
might be relatives, friends or the customers have heard about it that is known to be called as
good messages.

Generally, the customers spend little or no time choosing alternatives of the product and the
substitutes of the product .Brand loyalty is relatively higher here. Moreover, this is a buying
situation where a customer perceives a low risk in buying the product and/or the brand. For
example, a housewife goes to the shop or a supermarket and spends much less time in
choosing her toiletries, drinks like tea or coffee and other food products. For each time she
goes to buy the things for family requirements and needs, she generally finishes up buying the
same brand.

As it is shown above, the three factors which make the differentiations between the buying
situations appear different in each situation. Thus, there could be different factors which affect
customer involvement in each situation. In general, there are four of them (Song, J.H. and
Adams, C.R., 1993):

•Capacity: What it does for a buyer;

•Quality: How well or poorly it does the specified functions;

•Price: The amount paid by the buyer;

•Effort: The time and energy expended by the buyer.

These four factors are most likely to affect customers to make the decision when they are
doing a purchase, which could participate differently in the three buying situations.

In the new task buying situation, because customer has no experience for the products, it may
have more factors affecting the customer involvement. The customers could consider all the
factors: capacity, quality, price and also brand, it could take the customers more time than
other buying situations. It could be the buying situation which is most likely to affect
customer involvement. The firms have to set all the factors right if they want to attract new
customers or they want to develop a new product. In the modified re buy situation, customers
may contrast the previous products with the new ones. As the customers understand what they
need and what the products can do, the factors like quality and price are important to affect the
customer involvement. Sometimes, a good introduction of the capacity is important as well. In
this situation, the brand loyalty could also act as an important factor of affecting the customer
involvement. It also may take customers quite a long time before making a decision. In the
straight rebuy situation, the customers know exactly what they need; they have already known
the information about the products they want. Therefore, the most likely factors which could
affect the customer involvement are the capacity and the quality. Once the firms have done
well on the quality of their products and also make a good introduction of the capacity of
products, it could make customers spending less time on making a decision. It may let
customers feel easy to be involved in the consuming.

In conclusion, there are three major types of buying situations, which are new task, modified
re buy and straight re buy. Three factors make the buying situations be different from the
others; customers may face different problems in these situations. Thus, there are four main
factors which are likely to affect customer involvement. Each situation could also have
different types of factors which effect the customer involvement. All of the above suggests
that consumer behavior do vary depending on the buying situation. More research could be
done on what firms can do to improve the customer involvement while choosing their
products.

7 Different Members of the Buying Centre of an Organization

Different Members of the Buying Centre of an Organization are as follows: 1. Initiators 2.

Users 3. Buyers 4. Influencers 5. Deciders 6. Approvers 7. Gate Keepers.

As we have seen earlier under different situations of purchase, different personnel are
participating.

The Purchasing department is influential in straight rebuy and modified rebuy situations.
Engineering personnel usually have a major influence in selecting product components and
purchasing managers dominate in selecting suppliers.

Thus in new buy situations, the industrial marketer must first direct his product information to
the engineering personnel. In rebuy situations and at supplier-selection time, communication
must be directed at the purchasing department personnel.

A buying centre is comprised of all those individuals and groups who participate in the buying
decision-making process, who share some common goals and the risks arising from these
decisions. Before identifying the individuals and groups involved in the buying decision
process, a marketer must understand the roles of buying centre members. Understanding the
buying centre roles helps industrial marketers to develop an effective promotion strategy.

Within any organisation, the buying centre will vary in the number and type of participants for
different classes of products.
But on an average a buying center of an organisation has the following seven members or a
group of members who play these roles:

1. Initiators:

Usually the need for a product/item and in turn a supplier arises from the users. But there can
be occasions when the top management, maintenance or the engineering department or any
such recognise or feel the need. These people who “initiate” or start the buying process are
called initiators.

2. Users:

Under this category come users of various products. If they are technically sound like the
R&D, engineering who can also communicate well. They play a vital role in the buying
process. They also act as initiators.

3. Buyers:

They are people who have formal authority to select the supplier and arrange the purchase
terms. They play a very important role in selecting vendors and negotiating and sometimes
help to shape the product specifications.

The major roles or responsibilities of buyers are obtaining proposals or quotes, evaluating
them and selecting the supplier, negotiating the terms and conditions, issuing of purchase
orders, follow up and keeping track of deliveries. Many of these processes are automated now
with the use of computers to save time and money.

4. Influencers:

Technical personnel, experts and consultants and qualified engineers play the role of
influencers by drawing specifications of products. They are, simply put, people in the
organisation who influence the buying decision. It can also be the top management when the
cost involved is high and benefits long term. Influencers provide information for strategically
evaluating alternatives.

5. Deciders:

Among the members, the marketing person must be aware of the deciders in the organisation
and try to reach them and maintain contacts with them. The organisational formal structure
might be deceptive and the decision might not even be taken in the purchasing department.

Generally, for routine purchases, the purchase executive may be the decider. But for high
value and technically complex products, senior executives are the deciders. People who decide
on product requirements/specifications and the suppliers are deciders.

6. Approvers:

People who authorise the proposed actions of deciders or buyers are approvers. They could
also be personnel from top management or finance department or the users.

7. Gate Keepers:

A gatekeeper is like a filter of information. He is the one the marketer has to pass through
before he reaches the decision makers.
Understanding the role of the gatekeeper is critical in the development of industrial marketing
strategies and the salesperson’s approach. They allow only that information favourable to their
opinion to flow to the decision makers.

By being closest to the action, purchasing managers or those persons involved in a buying
centre may act as gatekeepers. They are the people whom our industrial marketer would first
get in touch with. Hence, it so happens that information is usually routed through them.

They have the power to prevent the sellers or information from reaching members of the
buying centre. They could be at any level and even be the receptionists and telephone
operators.

When a buying centre includes many participants, the industrial/ business marketer will not
have the time or resources to reach all of them. Small sellers could concentrate on reaching
the key buying influences. Large sellers on the other hand go for multi-level in-depth selling
to reach as many buying participants as possible.

It is important to note, that functional responsibilities and job titles are often not true
indicators of the relative influence of buying center members in a purchase decision task.

Buying center roles from the seller's perspective: evidence from the chemical industry and
managerial implications.

Buying decisions in a business-to-business (B2B) context differ substantially from those made
in the consumer market. Purchase decisions regularly need to be agreed upon between the
seller and a group of organisational members who have a stake in a purchase decision, the
buying centre . Besides these formalized processes across organisational units, informal
processes are important as organisation members may play different roles, i.e. they show
"characteristic behaviours, parts to be played, and scripts for behaviouf (Biddle, 1986) in
specific situations, with particular influences on and preferences for certain buying decisions.

Sales research has analysed sales on a rather aggregate level as an organisation's market
selection. Focusing on buying centre analysis, they regarded different roles and their influence
on the purchase decision.

The importance of understanding roles and their weight in B2B buying decisions results from
the large-scale efforts to optimize communicative processes made by transaction partners,
which can be ineffective if role behaviour in the buying centre is not understood by the seller.
In that case, sellers may find their offers not being forwarded by gatekeepers who have
different preferences. Sellers' attempts to persuade negotiation partners of the supremacy of
the offer may be in vain if the final decision is made by a powerful head of production (as an
example) who was neglected in the sales approach. Thus, to be able to adequately orchestrate
sales efforts, it is crucial for a selling organisation to understand which people influence the
purchase decision, the roles those people hold I PERSPECTIVES ON BUYING CENTRES

2.1 An Organisational Perspective on Buying Centres

Buying centres--defined as groups of organisational members who have a stake in a purchase

decision--are "ad hoc decision teams”of representatives from different organisational units,
such as purchasing, production, quality control, and marketing that influence the purchase
decision. Within the members' organisational unit the structure of buying centres may vary in
terms of its members' hierarchical level,, the buying centre's size , and the degree to which the
final decision is formalised and centralised. The tasks of a buying centre include information
acquisition, search processes, development of decision criteria, negotiations, and the choice
from among existing alternatives Due to their different organisational and disciplinary
backgrounds, buying centre members focus on different tasks (manufacturing, accounting,
marketing), they set different priorities (product quality, efficient production, customer value)
, they rely on their own specific information sources and they apply different problem
resolution approaches The diverse challenges for the buying centre resulting from these
multiple perspectives have been extensively Moreover, the structure of a buying centre has
particular relevance for the supplier's preparation of negotiations. It is not only necessary to
train the selling centre members but, for them to be able to customise their arguments, they
would have to understand which organisational units are involved and the tasks attributed to
those

2.2 A Role Perspective on Buying Centres

Besides the organisational attribution, the consideration of different roles in the buying centre
has been suggested summarises this approach and affirms that "each party in the buying
process has subtle roles and needs" and that "the involvement of many people in the purchase
decision creates a group dynamic that the selling company must factor into its sales planning."
We therefore include diverse perspectives on these "characteristic behaviours, parts to be
played, and scripts for behaviour" of people in specific situations, which have been the focus
of role theory. When considering roles, we cover the actual behaviour of a role holder (Burt,
1982), the expectations of the behaviour of someone taking a specific role role understanding
as a script for

Given the aim of understanding and characterizing people and their activities in a buying
centre, a particular focus of the role investigations in this article is that of the actual (in
contrast to organisationally intended) characteristics, behaviours, and influences of a role on
the purchase decision. With the same aim, Webster and Wind (1972) applied role theory to the
analysis of buying centres in business-to-business negotiations. They suggested five distinct
roles in a buying centre Buyers are responsible for pre-selecting suppliers, negotiating the
terms of a contract, and finalising transactions. Users use the purchased product, and provide
their experience to evaluate the quality of the product. Deciders have the formal or informal
power to ultimately selection
3. METHOD

3.1 Approach

In order to meet these aims, we want to understand how B2B sales managers match roles and
organisational units and what they think influences the relevance of each role holder in the
decision process. We chose to conduct qualitative in-depth interviews (McDaniel and Rogers,
2002) as our research goals were exploratory in 3.2 Sample

We focus our investigation on the chemical industry. It is the largest industry in Europe and
the fourth largest in the world (VCI, 2010), indicating their considerable economic
importance. Moreover, the chemical industry sells to a broad range of business customers.
This allowed us to include perceptions relating to diverse industries by interviewing sales
representatives who sell to agriculture, food, automotive, construction, perfume, and other
chemical companies. All of our interview partners had extensive sales experience with
industrial buying centres. Differences in company size were accounted for by interviewing
five sales managers who work for multinational corporations (MNCs), and three representing
small and medium enterprises (SMEs). As the answers reported by the interviewees presented
a structurally common picture, we focused on eight telephone interviews, of around 60
minutes' duration each.

MODEL OF ORGANISATIONAL BUYING BEHAVIOUR

Business buyers are influenced by many factors when they make buying decisions .Generally
,business buyers are influenced by organisational factors like best product quality, dependable
delivery ,lowest price and personal factors like promotions ,increments ,job security ,personal
treatment or favour .When the suppliers proposals are substantially similar ,organisational
buyers can satisfy organisational objectives with any supplier and hence personal factors
become more important .When suppliers offers differ substantially, business buyers pay more
attention to organisational factors in order to satisfy the organisational objectives.

There are two models available to explain the organisational behaviour. they are:

1.The Webster and wind model

2.The Sheth model

THE WEBSTER AND WIND MODEL OF ORGANISATIONAL BUYING BEHAVIOUR

A comprehensive model of the organisational buying behaviour is developed by Webster and

wind .This model considers four sets of variables : environmental, organisational ,buying
centre(or group forces),and individual.
ENVIRONMENTAL VARIABLES

These variables include physical , technological, economic , political, legal and cultural
factors. The environmental variables can change organisational buying plans.For
instance,political conflict in a nation can affect the growth rate of the economy which may
influence purchasing plans of companies.The economic environment influences a firm’s
willingness and ability to buy.

For example: The recession in bicycle industry in 1985 in India resulted in substantial
reduction in the purchase of steel components required for the manufacture of bicycles.

Technological changes influence buying decisions .One illustration is the change in

technology from jelly-filled telecommunication cables to fibre-optics cables .The department
of telecommunications (DOT) in India reduced the volume of purchase of jelly-filled cables
and increased buying of fibre-optics cables, which have many benefits. Similarly World Wide
Web(WWW) has changed the way business buyers and suppliers buy and sell to each other
.Recent research also suggests that buyers ,who understand the rapid rate of technological
change ,will conduct more serious research efforts.Marketing consequence of technological
changes include changing product life-cycles,new sources of competition and increased
globalisation of markets.

ORGANISATIONAL VARIABLES

The Webster and wind model give importance to four sets of organisational variables. These
are technology relevant to purchase,organisational structure,organisational goals and tasks and
members of buying centre.These four variables (or subsystems) interact with one another to
determine organisational functioning and buying centre individuals attitudes,goals and
assumption used in buying decision making.The business marketing firms need to be aware of
the following organisational trends in the purchasing area.

 Some multi-divisional companies identify materials purchased by several divisions

and buy them centrally,resulting in substantial savings.Centralised purchasing units
place more weight on long term supply availability and partnering relationships with
key suppliers.At the same time,buying firms are decentralising small-value
items.Decentralised buyers may give importance to short-term issues like costs and
profits.Thus,centralised and decentralised procurement differ substantially.
 Recent competitive pressure have resulted in upgradation of purchasing departments to
“strategic supply departments” with responsibility for global sourcing and partnering ,
instead of old-fashioned purchase departments concentration of buying at the lowest
cost .Some buying firms have changed the purchasing departments name to
“procurement departments” with focus on seeking the best value from better and fewer
suppliers.
 Buying tasks are increasingly getting focused on accepting long-term purchase
contracts with reliable suppliers .Besides ,business marketing firms are using the
internet with key buying firms to minimise the cost and time of transactions.In
fact,some suppliers manage their customer’s inventory through a system,called
“vendor-managed inventory”,and replenish inventory levels through ”continuous
replenishment programs”.

BUYING CENTRE VARIABLES

The functioning of buying centre is analysed by interpersonal or social interactions of
participants and group functioning.The interpersonal or social interactions depend on
the role of each participant or individual member of the buying centre.The group
functioning is influenced by
1. Individual member’s goals and personal characteristics,
2. The nature of leadership in the group,
3. The group tasks and structure, and
4. External influences, which include organisational and environmental variables.

The group functioning or process relate to buying tasks like best product quality,
dependable delivery, or lowest price and also non-task dimensions such as promotion,
job security, good increment or personal favour.
Johnston and Bonoma found that complexity of buying tasks and uncertainiy about
product attributes lead to vertical involvement (particularly, higher level executives)
and lateral involvement (other functions and departments) in the buying decision
process. In another study by McCabe, it was found that high levels of uncertainity lead
to narrowing of the structure of the buying centre.The concept of the buying centre,
one of the findings of this research, is useful in analysing business buying situations
and planning sales and marketing strategies. The structure of buying centre varies
from company to company.It also varies from one buying situation to another.

INDIVIDUAL VARIABLES
The Webster and wind model mentions that individuals make buying decisions in the
organisational and interactional settings .Only individuals can define problems make
buying decisions and act accordingly. The individual buying behaviour is motivated
by individual needs ,desires,perceptions,learning ,in complex interaction with
organisational objectives.One study confirms that individuals who perceive that they
have an important personal stake in the buying decision will participate more
powerfully than others members of the buying centre.
Individuals join companies for getting rewards for achieving organisational objectives
and tasks. Hence, there is a key interaction between individual member’s needs and his
or her perceptions about the performance,evaluation and rewards.
Individual decision making merges into a group decision- making process, which
includes bargaining, negotiation and persuasion. The Webster and Wind model does
not present in detail these group decision processes. The strengths of the model are
that it is comprehensive, analytical generally applicable and identifies many key
variables which could be considered for developing sales and marketing strategies.
However, the model is weak in explaining the specific influence of the key variables.

THE SHETH MODEL OF BUSINESS BUYER BEHAVIOUR

Professor Jagdish NSheth developed the Sheth model in 1973.This model emphasises
the joint decision-making by two or more individuals and the psychological aspects of
the decision making by individuals in the business buying behaviour.
The model includes three components and situational factors which determine the
choice of a supplier or a brand in the buying decision making process in an
organisation.

The differences among the individual buyers expectations are caused by the factors
such as
a. The background of individuals,
b. Their information sources,
c. Active search
d. Perceptual distortion
e. Satisfaction with past purchases
The background of individuals depends up on their education, role in the
organisation and lifestyle. The factor perceptual distortion means the extent to which
each individual participant modifies his perceptions to make it consistent with his
existing beliefs and previous experiences .It is difficult to measure perceptual
distortion, although techniques such as factor analysis and perceptual mapping are
available for this purpose.

In component (2) there are six variables which determine whether the buying
decisions are autonomous or joint. According to the Sheth Model, larger the size of the
organisation and higher the degree of decentralisation, more will be the possibilities of
joint decision making.

The component (3) in the model indicates the methods used for conflict resolution in
joint-decision making process. Problem solving and persuasion methods are used
when there is an agreement about the organisational objectives. If there is no such
agreement, bargaining takes place .Conflict about the style of decision making is
resolved by politicking.
Situation factors can be varied like economic conditions, labour disputes, mergers
and acquisitions. The model does not explain their influence on the buying process.

THE CHOFFRAY AND LILIEN MODEL

We have discussed earlier in the Webster and wind model that the organisational
buying behaviour is influenced by four major elements or factors such as
environmental, organisational, buyer centre or group and individual .The Choffray and
Lilien model helps to conceptualise the group decision process and also integrates the
important aspects of the organisational buying process. The Choffray and Lilien model
environmental factors like technological and economic and organisational factors such
 as technical. Physical are seen as constraints. These factors influencing the buying
process by limiting the number of product alternatives, which satisfy organisational
needs.
For instance, capital equipment like a material handling equipment has several
alternative product offers and those offers which exceed a particular initial cost may be
excluded from further consideration. The remaining product offers from suppliers
become likely alternative offers for the buying firm. Individual members have their
own sources of information and evaluation criteria, which are used to form their
preferences. The interaction structure of the individual members of the buying centre,
which includes negotiation and group problem solving leads to the formation of
organisational preferences and finally to organisational choice.
Choffary and Lillien have developed four models of multiperson decision making
process which make organisational decisions. In brief, these models are:
i. A weighted probability model, where weights show individual member’s
power or authority in the buying centre.
ii. A proportionality model, where all members of the buying centre have equal
weight.
iii. A unanimity model, where the negotiation process is continued until all the
members of the buying centre come to an agreement, and
iv. An acceptability model, where the final choice or the decision is such that it
has least problems to the individual member’s preferences.

CHAPTER-2 BUYER_SELLER RELATIONSHIP

BUYER AND SALES REPRESENTATIVES INTERACTION

The most important part of buyer-seller relationship is the interaction between a representative
of the buying organisation (buyer) and a representative of the selling organisation (sales
representative or sales rep). There are many other persons from both the organisations
involved in the relationship, but the basic building block of the relationship is based on buyer
and sales rep’ interactions.

When the buyer and the sales rep meet, the nature of their interactions depend upon their
roles, behaviour, and perceptions.

Buyer’s Perception of Sales Representative

There are two major perceptions held by buyers of sales representatives. One is the
stereotypical description of the sales reps, as “talkative”, easy going”,”manipulative”,
“competitive”,optimistic”,and “excitable”. An industrial buyer, who does not have previous
experience with a particular sales representative, may respond of the sales representative in
terms of the stereotype which he has of sales reps in the general. The second major perception
of the buyer depends on the reputation of the company which a sales representative represents.
Generally, the sales representative of a company with better reputation always gets a more
favourable initial response from the industrial purchasers. For example, a sales engineer
working with a reputed company like Larsen & Toubro (L&T), often got a positive response
from the industrial customers. However, when the same sales engineer change the job to a less
reputed company, as a sales executive, the response was not encouraging, as he had to wait for
along time before he was called in for discussions.
The Role Played by Industrial Buyer:-

An analysis of industrial buyer behaviour indicates that personal needs, interaction in the
buying centre, an organisational objectives (or needs) determine the response of a buyer to the
selling efforts by a sales rep. for example, an industrial buyer may be motivated by a personal
need for salary increment and promotion in his job, and also by a social or organisational need
to satisfy. the user department. A buying decision may allow the buyer to satisfy both the sets
of needs.

The specific personal and social needs will decide;-

(i) Whether the buyer meets with a sales representative.

(ii) Which parts of sales rep’s presentation he listens.

(iii) The influence of sales presentation on his decision to buy.

Relationship marketing

Relationship marketing was first defined as a form of marketing developed from direct
response marketing campaigns which emphasizes customer retention and satisfaction, rather
than a focus on sales transactions.
Relationship marketing differs from other forms of marketing in that it recognizes the long
term value of customer relationships and extends communication beyond intrusive advertising
and sales promotional messages.
With the growth of the internet and mobile platforms, relationship marketing has continued to
evolve as technology opens more collaborative and social communication channels. This
includes tools for managing relationships with customers that goes beyond demographic and
customer service data.
Relationship marketing refers to an arrangement where both the buyer and seller have an
interest in providing a more satisfying exchange. This approach tries to transcend the post
purchase-exchange process with a customer to make richer contact by providing a more
personalized purchase, and uses the experience to create stronger ties.

Scope of relationship management

Relationship marketing has also been strongly influenced by reengineering. According to
(process) reengineering theory, organizations should be structured according to complete tasks
and processes rather than functions. That is, cross-functional teams should be responsible for a
whole process, from beginning to end, rather than having the work go from one functional
department to another. Traditional marketing is said to use the functional department
approach. The legacy of this can still be seen in the traditional four P's of the marketing mix.
Pricing, product management, promotion, and placement. According to Gordon (1999), the
marketing mix approach is too limited to provide a usable framework for assessing and
developing customer relationships in many industries and should be replaced by the
relationship marketing alternative model where the focus is on customers, relationships and
interaction over time, rather than markets and products.
In contrast, relationship marketing is cross-functional marketing. It is organized around
processes that involve all aspects of the organization. In fact, some commentators prefer to
call relationship marketing "relationship management" in recognition of the fact that it
involves much more than that which is normally included in marketing.
Because of its broad scope, relationship marketing can be effective in many contexts. As well
as being relevant to 'for profit' businesses, research indicates that relationship marketing can
be useful for organizations in the voluntary sector and also in the public sector.

Sales presentation

Meaning: Formal and pre-arranged meeting, usually at a customer's place (or at a neutral
premises, such as a hotel) where a salesperson or a sales team presents detailed information
(often including live demonstration) about a product or product-line.

In selling technique a sales presentation or sales pitch is a line of talk that attempts to
persuade someone or something, with a planned sales presentation strategy of a product or
service designed to initiate and close a sale of the product or service.
A sales pitch is essentially designed to be either an introduction of a product or service to an
audience who knows nothing about it, or a descriptive expansion of a product or service that
an audience has already expressed interest in. Sales professionals prepare and give a sales
pitch, which can be either formal or informal, and might be delivered in any number of ways.
Sales presentation planning
Advance planning can make all the difference for a business presentation. To start with, you
need to know who your audience will be so that you can tailor your presentation to their wants
and interests. A technical briefing for experts will be quite different to a high-level sales
presentation to the customer's managing director.

Once you know the audience, you can decide what you can reasonably aim to achieve. Not all
sales presentations try to make an immediate sale: your objective might be to create interest.
Establish the overall message that you want the presentation to get across: for example, that
you offer something that your competitors don't.

Before getting into any detailed planning of the presentation, try to get an idea of what the
customer is expecting. Are you going to give a formal sales pitch or hold a more open
discussion? How long will the meeting be?

Structuring your sales presentation

A good selling presentation focuses on a few key points that you need to get across to support
your overall message. The key points are put together in a logical argument, together with any
supporting evidence or visual aids that will make your presentation more convincing.

One of the best known of all presentation tips is to say everything three times. So as well as
the main body of your presentation, you introduce your key points at the beginning and
summarize them again at the end.

Once you have the structure organized, it's worth drawing up notes you can speak from - not a
full script- and practicing. Try to build some flexibility into your presentation in case a
particular point doesn't work well, you run short of time or the system on which you planned
to show your visual aids isn't working.

Delivering an effective sales presentation

If you're delivering a formal sales presentation, you should aim to engage the audience rather
than just speaking at them. Regularly look for eye contact with your audience. If appropriate,
ask them questions and use their names to involve them. Try to avoid distractions such as
giving them handouts during the presentation or being interrupted by ringing phones.

If you're asked any questions, decide how best to deal with them. You may need to answer a
question straight away to overcome a potential objection, but detailed points can often be left
until after your planned presentation. In either case, you should try to stay in control of the
discussion. Once you have finished your presentation, you should encourage feedback and
any further questions.

Negotiation:

Meaning: Negotiation is a method by which people settle differences. It is a process by which

compromise or agreement is reached while avoiding argument and dispute.
Specific forms of negotiation are used in many situations: international affairs, the legal
system, government, industrial disputes or domestic relationships as examples. However,
general negotiation skills can be learned and applied in a wide range of activities. Negotiation
skills can be of great benefit in resolving any differences that arise between you and others.

Stages of Negotiation
In order to achieve a desirable outcome, it may be useful to follow a structured approach to
negotiation. For example, in a work situation a meeting may need to be arranged in which all
parties involved can come together.

The process of negotiation includes the following stages:

1.Preparation

2.Discussion

3.Clarification of goals

4.Negotiate towards a Win-Win outcome

5.Agreement

6.Implementation of a course of action

1. Preparation

Before any negotiation takes place, a decision needs to be taken as to when and where a
meeting will take place to discuss the problem and who will attend. Setting a limited time-
scale can also be helpful to prevent the disagreement continuing.

This stage involves ensuring all the pertinent facts of the situation are known in order to
clarify your own position. In the work example above, this would include knowing the ‘rules’
of your organisation, to whom help is given, when help is not felt appropriate and the grounds
for such refusals. Your organisation may well have policies to which you can refer in
preparation for the negotiation. Undertaking preparation before discussing the disagreement
will help to avoid further conflict and unnecessarily wasting time during the meeting.

2. Discussion

During this stage, individuals or members of each side put forward the case as they see it, i.e.
their understanding of the situation.

Key skills during this stage include questioning, listening and clarifying.

Sometimes it is helpful to take notes during the discussion stage to record all points put
forward in case there is need for further clarification. It is extremely important to listen, as
when disagreement takes place it is easy to make the mistake of saying too much and listening
too little. Each side should have an equal opportunity to present their case.

3. Clarifying Goals

From the discussion, the goals, interests and viewpoints of both sides of the disagreement
need to be clarified.

It is helpful to list these factors in order of priority. Through this clarification it is often
possible to identify or establish some common ground. Clarification is an essential part of the
negotiation process, without it misunderstandings are likely to occur which may cause
problems and barriers to reaching a beneficial outcome.

4. Negotiate Towards a Win-Win Outcome

This stage focuses on what is termed a 'win-win' outcome where both sides feel they have
gained something positive through the process of negotiation and both sides feel their point of
view has been taken into consideration.

A win-win outcome is usually the best result. Although this may not always be possible,
through negotiation, it should be the ultimate goal.

Suggestions of alternative strategies and compromises need to be considered at this point.

Compromises are often positive alternatives which can often achieve greater benefit for all
concerned compared to holding to the original positions.

5. Agreement

Agreement can be achieved once understanding of both sides’ viewpoints and interests have
been considered. It is essential to for everybody involved to keep an open mind in order to
achieve an acceptable solution. Any agreement needs to be made perfectly clear so that both
sides know what has been decided.

6. Implementing a Course of Action: From the agreement, a course of action has to be

implemented to carry through the decision.
 Special dealings between buyer and seller

There are two kinds of special dealings between a buyer and seller

i. Reciprocity
ii. Dealing with customer’s customer

Reciprocity

It is the practice of buying from one’s own customers and also using purchasing power to sell
to one’s supplier. In simple, it is a situation in which two businesses promote each other in
order to gain mutual benefit. When products are homogenous or products have little
differentiation and price competition is less, reciprocal dealings are likely to occur. Reciprocal
dealings have reduced recently. However, large industrial firms may not avoid buying small
volume from their customers. Reciprocity is a special case of buyer and seller relationship and
caution must be exercised to keep it at minimum level.

Dealing with customer’s customers

One of the complexities of industrial marketing is the need to deal with a customer’s
customers and therefore, become a competitor of such a customer. This is a sensitive matter,
as it may be viewed as interface in the customer’s relationship with his customers. However, it
can become effective if it is done with coordination and planning with the customer.
Successful retailers don’t just sell products. Today, quality customer service may be what
differentiates a company from its rivals. Retailers with poor customer service risk losing
revenues, profits and even going out of business. But retail pros know that they’re going to be
dealing with angry customers who make offering high quality service difficult. Dealing with
angry customers:

 Get Control of Yourself: Never argue with customers when they are angry, displeased or
complaining. If you allow a customer to push your buttons and lose control of yourself,
you've lost control of the situation. Remember, you can lose a good customer if you show
boredom, irritation, disdain or displeasure.
 Listen and Let the Customer Vent: Tune in to the customer; don't look for the nearest
exit. The customer wants to be listened to, acknowledged and understood. Maintain eye
contact. Show your attentiveness by standing or sitting up straight; lolling or slouching
makes you seem inattentive and disinterested. Uncross your arms -- this indicates you are
listening with an open mind. Let the person talk, and pay close attention. Repeat or
paraphrase some of what you hear.
 Show the Customer You Care: Show concern for the customer's feelings. Maintain a
concerned, sincere and interested facial expression. Your voice, as well as your body
language and expression, communicates your attitude. People respond more to how you say
something than what you say.
 Don't Blame the Customer or the Company: When explaining your store's policy or
trying to clarify what went wrong, use either the indirect approach ("There are a few
questions before I can give you a refund.") or "I" statements ("I need additional
information.") as much as possible. Don't acknowledge that you or your company is to
blame. That could lead to lawsuits.
 Try to Solve the Problem, or Get Someone Who Can: Even if solving the customer's
problem isn't among your job duties, never say this to the customer. Get all the facts you
can, and then tell the customer how you can help.
 Finally, don't make promises you can't keep. Get help from someone who knows more, is
calmer, or has more power and authority.
Customer service

In industrial marketing, the customer service is sometimes more important than the physical
product. The nature of customer service varies based on the type of product and the stage of
“product life cycle”. In case of mature markets and similar industrial products, the major part
of customer service, is “timely delivery”, and a minor part is the technical support service to
the customers. For example, Escorts motor cycle division has developed a large number of
ancillary units very near to their factory. These ancillary units manufacture a large number of
components which are required for the manufacture of motor cycles. Escorts were one of the
first units in India to develop ancillary units with long term business relationships and
contractual obligations.

Management of Major and National Accounts

Major accounts are companies which you develop on the supply side as partnerships,
alliances, joint ventures, or distribution agreements or customers or end users of your
products. Major account selling is about understanding that the decision makers
are, identifying those issues, processes, procedures, and pricing strategies which when
delivered will gain the long term loyalty of the customer. For example, purchasing managers
respond to purchasing requests from the field they are not strategic they are tactical. They
need it so buy it. In those cases field decision makers are the ones demanding the products or
services. However, products have a greater chance of being driven by local request than
services. Servicers can respond to “contracts” or to other issues which are NOT related to the
direct service. That is where the national account or major account sales person earns their
keep. Three phases of account development

There are three separate and distinct phases in every major account sale and relationship as
follows:

 Making the sale

 Fulfilling the promise of the sale
 Growing the customer

In other words, unlike old-school selling, which was mostly about getting front-end
commitment, major account selling is an ongoing process that only begins when the contract
gets signed. The business relationship is of utmost importance. The value of the business
relationship grows out of grooming the process. Each phase unfolds over time. As promises
are kept the business relationship grows. Major account selling or is it major account
managing? People always ask if major account selling is a selling position or a managing
position. The answer is that it’s both. It’s a selling position in that it requires the services of a
major accounts salesperson that opens doors and initiates new relationships with new
people—or new relationships with familiar people (existing customers). The hallmark skills of
major account selling are rapport building, persuasion, and the ability to get commitment. On
the other hand, it is a managing position because it is also about fulfilling the commitments of
the relationship—keeping promises and making things work. These are the skills of a planner,
thinker, and implementer who fulfill the role of the major accounts manager.

A national account has not only large business (or sales) potential, but is also complex to
serve and hence, needs a special programme. The complexity of a national account is due to
the following factors:

i. The customer’s operating unit are geographically dispersed,

 ii. The customer’s buying committee consists of two or more departments or functions
(e.g. materials, manufacturing maintenance)
iii. For high value items, buying is centralized, but for smaller value items operating units
are given

For a major account with simple purchase operations from one geographic location, a sale rep
need to be supported by visits by branch/regional managers as well as the head of marketing
to establish relationships at senior levels in the buying organization . Thus, a special attention
is given to the major account.

Complexity of customer

MAJOR NATIONAL
ACCOUNT ACCOUNT
Dyadic Minor
Interaction Account
Simple Complex
Major and national account management programmes vary from company to company, but
there are certain similarities in their operations and characteristics:

 The objective of the national account programme is to become the preferred or

sole supplier of a large and complex customer. This will provide adequate profits
to the industrial marketer
 The tasks involved to achieve the objective are:
o Obtaining enquiry letter with specifications for the company’s products from
the national customer’s headquarter where the centralized purchase committee
is generally located.
o Ensuring excellent customer service and rapport at the various servicing units
o Maintaining long term excellent relationship at various levels in the customer’s
organization
o Getting technical approval of the company’s products, negotiating, and
securing short term and long term orders.
 For performing above tasks, the national account programme includes the
following:
o Team selling is provided under a senior executive (may be designated
as national account manager)
o The team should include experienced individuals and should have
support not only from senior management, but also from functional
executives within the company.
o The team should have relationship marketing perspective which
includes building up long term, trusting. “win-win” relationship with
the national account.

RELATIONSHIP MARKETING

Relationship marketing is much about keeping customers as it is getting them in the first place.
The aim is to provide unique value in chose markets, sustainable over time. Relationship
marketing emphasizes both quality and customer services and how these can be managed towards
closing the ‘quality gap’ between what customers expect and what they get.
Relationship marketing is a process of identifying developing, maintaining, and terminating
relational exchanges with the purpose of enhancing performance.

Definition:

Berry (1993) from a service perspective “Relationship marketing is attracting, maintaining

and service perspective multiservice organizations enhancing customer relationship”

Jackson(1985) from an industrial marketing perspective “Marketing concentrated towards

strong, lasting relationship with individual accounts”

Berry and Parasuramen(1992) from service perspective “Attracting developing and retaining
customer relationships.”

Gronos (1995) from a network perspective

“To identify and establish, maintain and enhance relationship with customers and other
stakeholders, at profit so that the objectives of the partners interest are met, and this achieved
by a mutual exchange and fulfillment of promises.”

PRINCIPLES OF RELATIONSHIP MANAGEMENT

 Maximizing customer life time value (CLV) is a fundamental role of Relationship
Marketing. - future flow of net profit discounted back to the present.
 Focusing marketing action on multiple markets – six markets model.
 It must be cross-functional – “marketing is too important to be left to the marketing
department.”

Benefits RM to the firms

 To win a new customer is more expensive than to retain an existing customer
 Established customers tend to buy more (share of wallet)
 Satisfied customers are more likely to refer others (reduce cost of acquisition)
 Loyal customers can be less price sensitive and may be less likely to defect due to
price increases.
 Retaining customers makes market entry difficult for competitors.
THE ROLE OF RELATIONSHIP MARKETING TO COMPETITIVE MARKETING
STRATEGY
 Value as the central role to develop and implement relationship marketing strategy.
 Stakeholders interaction process.
 Key value activities.

Characteristics of Relationship marketing

 Emphasis a relationship, rather than a transactional approach to marketing;
 Extends the principles of traditional marketing to a range of diverse market
domains, not just customer markets;
 Recognises that quality, customer service and marketing need to be much more
closely integrated;

Bringing together Customer service, Quality and Marketing

 QUALITY

CUSTOMER
MARKETING
RELATIONSHIP

 Understands the economics of customer retention and so that resources are

appropriately allocated between the two tasks of retaining and attracting
customers;

 Highlights the critical role of internal marketing in achieving external marketing

success;
 Ensures that marketing is considered in a cross- functional context;
 Switch from focus on market share (volume) to share from the wallet of the
customer;

 RELATIONSHIP MARKETING: THE SIX MARKETS MODEL

• customers
• suppliers
• employees
• distributers
• alliance partners
• influencers

MANAGING BUYER SELLER RELATIONSHIP

If relationship marketing is the science or physics of relationships, then customer

relationships, then customer relationship management represents its application or engineering

THE CONTEXT OF BUYER-SELLER RELATIONSHIPS

The fact that buyers and sellers have relationships is nothing new. Relationships between
buyers and sellers have existed since humans began trading goods and services. These
relationships developed in a natural way over time as the buyers and sellers developed trust
and friendships supported by quality products and services. Today these relationships have
become “strategic” and the process of relationship development is accelerated as firms strive
to create relationships to achieve their goals. In this stressful environment of relationship
acceleration, there is less time for the participants not only to carefully explore the range of
long-term relationships development. The expectations of performance have increased,
making the development of a satisfactory relationship even more difficult.
An important phenomenon related to buyer-seller relationships is that many buyers are
developing
single source suppliers because of the pressure to increase quality, reduce inventory, develop
just-in-time
systems , and decrease time to market. The intensity of contact needed to accomplish high
quality , implement Just-In-Time, and reduce time to market could not be achieved with
multiple sources of supply. The ultimate goal in developing these capabilities is to reduce
costs.

Relationship marketing is an integral part of the developing network paradigm that recognises
that global competition occurs increasingly between networks of firms (Thorelli 1986).
Firms are establishing relationships with their suppliers
because it enables them to be more efficient and more effective (Kalwani and Narayandas
1995).
By developing relationships with their suppliers, buyers and sellers can both achieve cost
savings through reduced search and evaluation costs (Hakansson 1982),
Reduced transaction costs and the learning effects and relationship specific scale economies
(Gundlach et al 1995).
However, the primary reason for establishing relationships with suppliers is that customers
realise that suppliers create value. Developing long-term relationships can improve access to
markets and more reliable market information (Low 1996). Customers can anticipate
improved access to a more reliable supply of inputs, improved product quality and
performance (Hanetal 1993), and a higher level of technical interaction in the form of
information exchange, potential product adaptations and technical assistance (Cunningham
and Homse 1982)
Relationship marketing provides a stronger, longer-term customer benefit that is more
difficult for competitors to match and it becomes more difficult for competitors to enter the
market (Hakansson 1982).
Buyers may become less sensitive to price competition and suppliers may benefit from higher
prices (Kalwani and Narayandas 1995).
Suppliers benefit from being able to better plan and forecast production schedules, coordinate
deliveries and undertake joint promotions(Easton and Araujo 1994).

A typical problem with relationship management in a B2B

environment is that implementing companies often see the relationship only from their own
perspective. In
other words, the supplier decides which customer is worth treating as a key customer, without
involving the customer in this decision, or vice versa. As a result, even
resource-consuming key account customers might move to competitors if they do not value
the relationship in the same way as the supplier and see an opportunity to save
costs by switching sources.

Customer Relationship Management (CRM)

Business people started using the term Customer Relationship Management (CRM) since the
early 1990s when the concept of business started to change from being transactional to
relational. CRM directly contributes towards customer benefits and the growth of businesses.
Information Technology plays a very critical role in identifying, acquiring, and retaining the
customers, and thereby managing a healthy relationship with them.
What is CRM?
There can be multiple definitions of CRM from different perspectives:
an organized approach of
developing, managing, and maintaining a profitable relationship with customers.

ions define CRM as a software that

assists marketing, merchandising, selling, and smooth service operations of a business.

integrates internal processes and functions, and external networks, to create and deliver value
to a target customer at profit. It is grounded on high quality customer data and information
technology.

The primary goal of CRM is to increase customer loyalty and inturn increase improve
business profitability .

Ingredients of CRM
Take a look at the following illustration. It shows the ingredients that work together to form a
successful CRM system.
Here are some of the important ingredients of CRM:
Analytics – Analytics is the process of studying, handling, and representing data in various
graphical formats such as charts, tables, trends, etc., in order to observe market trends.

Business Reporting – Business Reporting includes accurate reports of sales, customer

care, and marketing.

Customer Service – Customer Service involves collecting and sending the following
customer-related information to the concerned department:

o Personal information such as name, address, age, etc.

o Previous purchase patterns.
o Requirements and preferences.
o Complaints and suggestions.

– Human Resource Management involves employing and

placing the most eligible human resource at a required place in the business.

– Lead Management involves keeping a track of the sales leads and

distribution, managing the campaigns, designing customized forms, finalizing the mailing
lists, and studying the purchase patterns of the customers.

– Marketing involves forming and implementing sales strategies by studying

existing and potential customers in order to sell the product.

– Sales Force Automation includes forecasting, recording sales,

processing, and keeping a track of the potential interactions.

– Workflow Automation involves streamlining and scheduling

various processes that run in parallel. It reduces costs and time, and prevents assigning the
same task to multiple employees.
 BUSINESS
REPORTS

CUSTOMER
ANALYTICS
CARE

WORKFLOW CRM HR
AUTOMATION MANAGEMENT
SYSTEM

SALESFORCE LEAD
AUTOMATION MANAGEMENT

MARKETIMG

Objectives of CRM
The most prominent objectives of using the methods of Customer Relationship Management
are as follows:
Improve Customer Satisfaction – CRM helps in customer satisfaction as the satisfied
customers remain loyal to the business and spread good word-of-mouth. This can be
accomplished by fostering customer engagement via social networking sites, surveys,
interactive blogs, and various mobile platforms.

Expand the Customer Base – CRM not only manages the existing customers but also
creates knowledge for prospective customers who are yet to convert. It helps creating and
managing a huge customer base that fosters profits continuity, even for a seasonal business.

Enhance Business Sales – CRM methods can be used to close more deals, increase sales,
improve forecast accuracy, and suggestion selling. CRM helps to create new sales
opportunities and thus helps in increasing business revenue.

Improve Workforce Productivity – A CRM system can create organized manners of

working for sales and sales management staff of a business. The sales staff can view
customer’s contact information, follow up via email or social media, manage tasks, and track
the salesperson’s performance. The salespersons can address the customer inquiries speedily
and resolve their problems.

TYPES OF CRM

Type Characteristic
Strategic CRM Customer-centric, based on acquiring and
maintaining profitable customers.
Operational CRM Based on customer-oriented processes such as
selling, marketing, and customer service.
Analytical CRM Based on the intelligent mining of the
 customer data and using it tactically for future
strategies.
Collaborative CRM Based on application of technology
across organization boundaries with a view to
optimize the organization and customers

Customer Relationships

“Relationship is a series of repeated interactions between dyadic parties over a time.”

Why a Business Wants Relationship with its Customers?

Every business regards its customers as a lifetime stream of revenue; losing a single customer
can cost the business very high. Lifetime Value (LTV) for a customer is considered to
analyze the effectiveness of a particular marketing channel.
For example, if the Churn Rate of a business X is 5% and that of business Y is 10%, then in
the long-term, business X would have a larger customer base than business Y, which places
business X at the position of competitive advantage and directly influences profit of both the
businesses.
A business can generate greater sales volume and in turn greater revenue if it knows its
customers well and have good relationship with them. Thus, solely for the economic purpose,
every business wants to have healthy relationships with their customer.

Managing Customers
Who is a Customer?
customers are those having the control to buy goods or services from a business when and
where they want it, by selecting from a vast range of available choice. customers access the
Internet and collect information about products, dealers, and prices. They take advice from
friends or at times from strangers too, before making a buying decision.

Types of Customers
There can be various types of customers a business have to deal with. Here are some
prominent types of customers:
 Loyal Customers – They are completely satisfied customers. Though they are less in
numbers, they can promote more sales and profit. They expect individual attention and
demand polite and respectful response from the supplier.

Discount Customers – They visit the business outlets frequently but transact only when
business offers discounts on regular products and brands. They are the ones who buy only low
cost
products. Their buying behavior changes according to the rate of discounts. They are
important to a business, as they contribute a significant portion of business profit.

Impulsive Customers – They are with the business in urge and buy on impulse. They don’t
plan for buying anything specific in advance, but they urge to buy anything that they find
good and productive at the time when they are in the store. These customers are challenging
and very difficult to convince. They are capable of bringing high profit when treated tactfully.

Need-Oriented Customers: They have a specific product on mind and they often plan
before buying. They only buy when they need a product. They are difficult to satisfy. They
need reasons to switch to another product or brand.

Wanderers: They are least profitable ones to a business. At times, they are not sure what to
buy. They are normally new in the industry and mostly visit the suppliers only to confirm their
needs on products. They like to find out the features of the products in the market but they are
least interested in buying.

High Volume Customers: They are the ones who consume a high volume of products.

High Future Lifetime Value Customers: The ones who can contribute profits in future.

Benchmark Customers: They are the ones whom other customers follow.

Door Openers: They can open doors to a new market for the supplier.
Inspiring Customers: They force the suppliers to change for betterment. They suggest
product improvements or inform the suppliers about opportunities of cost reduction.

Customer Management Strategies

There are seven core customer management strategies:
Start a relationship – When a customer is identified as having a high potential to bring
profits, start a relationship.

Protect the relationship – When the customer is significant for the business and when
there is a possibility of the competitor’s attraction, then the managers need to protect the
relationship.

Relationship re-engineering – This is necessary when the managers find that the customer
is not profitable as desired at the current stage. In such a case, serve the customer by low-cost
automated channels.

Enhance the relationship – The managers identify up-selling and cross-selling

opportunities and try to boost the customer on the scale of value

Harvest the relationship – When the managers do not want to spend much on the existing
customer development, they use the cash flow from these customers to develop new
customers.

End the relationship – It is good to end the relationship when the customer shows no sign
of contributing to future business profit.
 Regain the customer – When the customer goes to the competitor while choosing another
option to fulfill his requirement, then the managers need to implement win-back strategies to
regain the customer and understand the reason of departing the customer.

Emerging Trends in CRM

What is ECRM?
This is a new trend in CRM which exploits the power of internet. Electronic Customer
Relationship Management (ECRM) aims at developing and establishing all CRM functions
with the use of digital communication tools such as EMail, chatrooms, instant messaging,
forums, etc.
ECRM is motivated by the ease of internet access from various computing devices such as
desktops, laptops, tablets, and smartphones.
Features of ECRM

Difference between CRM and ECRM

CRM
 Conventional CRM uses telephone, fax, and retail store for contacting customers.
 It takes care of the customers via Internet.
 It needs the user to download supporting Apps to access web enabled applications.
 CRM system design is products
and functions oriented.
 Cost of maintenance is high.
 Time taken for maintenance is long.
ECRM
 ECRM uses internet with Personal Digital Assistant (PDA) devices
 The customer is able to take care of himself using internet.
 In ECRM environment, there is no such requirement of web enabled applications.
 ECRM system is customer oriented
 Cost of maintenance is lesser.
 Maintenance time is lesser

Future CRM Trends

Here are some upcoming trends the CRM solution vendors are following:
Integrating Data from Multiple Channels
The CRM solution providers are working on moving social media data to more secure
communication channel. They are also exploring how they can integrate unstructured data coming
from multiple channels such as Email and mobile smartphones.
Handling Big Data
As the data is penetrating from multiple channels with high volume, velocity, and variety, the
CRM solution providers are exploring how this big data can be managed well to be able to use
effectively.
Shifting to Cloud-based CRM
The businesses are preferring cloud-based CRM software to overcome the problems with on
premise CRM software (in which every new feature development requires an expensive upgrade).
The cloud-based CRM also lessens the burden of business for investing in infrastructure.
Social CRM
The customers are into the practice of reading reviews, recommendations, and judging the
product or service before deciding to purchase. The businesses are keen to employ social CRM
tools in their CRM software as the social media can bring an insight of customer preferences and
behavior.
The Mobile CRM is Expected to be Powerful
Today’s CRM solution providers are investing a handsome amount to bring more rigor in the
mobile platforms of CRM applications.

Using CRM data effectively

The historical and current data of the customers is so huge that the CRM users spend more time in
entering the same in the system than using it effectively for beneficial purpose. CRM solution
providers are also working on providing simpler and easier ways of handling customer data using
mobile devices.
CRM Software Systems with Wearables
It is the next big revolution in the development of CRM software systems. Wearable are the
devices worn by the consumers to track their health and fitness information.
If CRM applications are integrated with wearable computing devices, then the businesses can get
benefited by having real time information of customers and access to their account data. The
businesses can then engage with their customers effectively and discover opportunities of selling
and enhancing customer relationships.
Creating Best Customer Experiences
Though life is not all segregated between black and white moments; for the customers and
businesses it is. The customers remember business products and services by associating with best
and worst experiences. The businesses using CRM are placing the activities related to making
their customers feel good in their list of top priorities.
CRM to XRM
xRM is evolved CRM. There is little limitation in the word CRM which depicts Customer
Relationship Management. XRM is eXtreme Relationship Management, or Any (replace X with
any value) Relationship Management. The scope of XRM is different and larger than the scope of
CRM.
For example, a business is managing contracts, grievances, policies, building assets, parking
violations, property taxes, etc. The list is near to endless. This all management is catered by
XRM, a business can manage the relationship of anything within itself.

Defining e-commerce

E-commerce (electronic commerce or EC) is the buying and selling of goods and services, or
the transmitting of funds or data, over an electronic network, primarily the internet. These
business transactions occur either as business-to-business, business-to-consumer, consumer-
to-consumer or consumer-to-business.

There are 6 basic types of e-commerce:

1. Business-to-Business (B2B)
2. Business-to-Consumer (B2C)
3. Consumer-to-Consumer (C2C)
4. Consumer-to-Business (C2B).
5. Business-to-Administration (B2A)
6. Consumer-to-Administration (C2A)
 1. Business-to-Business (B2B)
Business-to-Business (B2B) e-commerce encompasses all electronic transactions of goods or
services conducted between companies. Producers and traditional commerce wholesalers
typically operate with this type of electronic commerce.

2. Business-to-Consumer (B2C)
The Business-to-Consumer type of e-commerce is distinguished by the establishment of
electronic business relationships between businesses and final consumers. It corresponds to
the retail section of e-commerce, where traditional retail trade normally operates.

3. Consumer-to-Consumer (C2C)
Consumer-to-Consumer (C2C) type e-commerce encompasses all electronic transactions of
goods or services conducted between consumers. Generally, these transactions are conducted
through a third party, which provides the online platform where the transactions are actually
carried out.

4. Consumer-to-Business (C2B)
In C2B there is a complete reversal of the traditional sense of exchanging goods. This type
of e-commerce is very common in crowd sourcing based projects. A large number of
individuals make their services or products available for purchase for companies seeking
precisely these types of services or products.

5. Business-to-Administration (B2A)
This part of e-commerce encompasses all transactions conducted online between companies
and public administration. This is an area that involves a large amount and a variety of
services, particularly in areas such as fiscal, social security, employment, legal documents and
registers, etc.

6. Consumer-to-Administration (C2A)
The Consumer-to-Administration model encompasses all electronic transactions conducted
between individuals and public administration.

ADVANTAGES OF ECOMMERCE
 Faster buying/selling procedure, as well as easy to find products.
 Buying/selling 24/7.
 More reach to customers, there is no theoretical geographic limitations.
 Low operational costs and better quality of services.
 No need of physical company set-ups.
 Easy to start and manage a business.
 Customers can easily select products from different providers without moving around
physically.
 DISADVANTAGES OF ECOMMERCE
 Any one, good or bad, can easily start a business. And there are many bad sites which
eat up customers’ money.
 There is no guarantee of product quality.
 Mechanical failures can cause unpredictable effects on the total processes.
 As there is minimum chance of direct customer to company interactions, customer
loyalty is always on a check.
 There are many hackers who look for opportunities, and thus an ecommerce site,
service, payment gate ways, all are always prone to attack.

Key elements supporting e-commerce are:

1. Suppliers and supply chain management:

Suppliers meant a whole lot when ecommerce was not around. Now – even more so.
When it comes to ecommerce, suppliers can provide you with the right merchandise but they
can also take the stocks burden off your shoulders. Amazon, for example, relies heavily on its
marketplace partners to increase listed products number, without buying stocks for those
products.

2. Warehouse operations
A decent store with its own warehouse operations has thousands of products at any
time on its inventory, employs at least a couple of dozens of people to store products, pick
and pack, and prepare for delivery. That’s why so many large companies choose to outsource
their fulfillment operations to “third party logistics” suppliers.

3. Shipping and returns

Shipping is usually an outsourced service. Employ one of the shipping providers and
negotiate your way to a marketable shipping cost. Once you’ve contracted these shipping
providers integrate their system with yours so you can streamline packaging and delivery.

4. Client Relationship Management (CRM) – software and policies

CRM needs to be “customer-centric”. It just means that everything you do needs to be
done “for the customer, by the retailer”. You need to understand the customer purchase
patterns so you can recommend the most suited products. You need to record purchases,
interests, preferred channels and basically all there is to it when it comes to understanding
your customer.

5. E-commerce catalogue and product display

Online store catalogue. Of course, this one is important. Without one we would be back
to mail orders and inventing the wheel. However, as you’ve probably seen so far – it is just a
small part of the whole ecommerce store business.

6. Marketing and loyalty programs

Loyalty programs online are so important that they should be a separate item to
marketing. Because they are. Loyalty is really hard to acquire these days. Especially when
it comes to ecommerce. Most users will be searching for the lowest price and buy from
whomever the seller is.
But you can fight the trend with loyalty programs such as:

 rewarding purchases
 social shopping
 reward social media

7. Showroom and offline purchases

E-commerce is a complicated and highly competitive business. That’s why you need
great tech. Shopify is one of the best companies out there in the market of ecommerce
solutions for small to midsized online retailers.

Internal Strategy Implementation:

There are seven internal strategy implementation for e-commerce they are-

1. Contact your Strategic Customers and Suppliers:

Customers or suppliers may be a great source of knowledge and can help you understand
of the rewards and pitfalls of initiating an ecommerce program in your industry. Develop a
simple questionnaire with contacts, targeted transactions such as Purchase Orders, Invoices,
and Advanced Shipment Notices. Ask them which transactions they use or would like to
implement (There are hundreds with numerous business models).

2. Determine what your industry is doing:

Trading partners may be participating in industry focused groups. Find out how to join
and participate in the organization. Often you gather the best information informally
speaking to your peers over lunch or at the networking events. The “peer-to peer” sessions
are often informative. Beware of veiled sales pitches from software providers’ that may
oversell their solution and over simplify the process.

3. Evaluate and Purchase the Proper Tools :

Avoid the pitfall of developing a translator or parser process in house. There are a
variety of controls required that are not obvious to the uninitiated. Any decent translator
or parser should have these capabilities. Prepare a list requirements for your evaluation,
and interview a series of providers. There are many low cost solutions on the market.
However, ensure scalability if your company dramatically increases in size or the
number of transactions.

4. Start simple Prioritize:

The transactions you wish to implement. In most order management projects the
Purchase Order must be the first implementation in order to capture information required
for the outbound transactions. Evaluate your ERP system and research their
recommended method of integration of ecommerce into their applications. Do not
reinvent the wheel. Minimize customization. Send several of your key plays for training.

5. Create a Project Team:

Perform a Staffing Analysis and create a Communications Plan. In the case of the
implementation of your inbound PO process, for example, you may have the following
team members: Director of Order Management who is championing the project. He/she
needs to ensure the business requirements are documented, help define error procedures
and audit processes once the project is implemented.

6. Document your requirements:

Ecommerce tools exist for the development of specifications to give to your trading
partners. Intelligent, well developed specifications or guidelines can dramatically
 reduce testing times and avoid misunderstandings. It give the appearance to your
partners that your have a professional ecommerce program. If the tools are not within
your budget, still prepare a document to give to your customers or suppliers. With each
partner, you might perform a GAP analysis and specifically discuss and document what
you can or cannot do in relationship to their requirements.

7. Hire a consultant:
To jumpstart your process and avoid the common pitfalls of a new implementation,
hire a consultant that specializes in this area. Even if you are implementing a complete
ERP system with a large consulting company, ensure you can interview and – if
necessary reject -- the consultant assigned to the ecommerce implementation. Hire your
own resources if the firm is offering you someone with limited successful experience in
ecommerce. A four week internal training course does not make a successful
ecommerce expert.

'Supply Chain Management - SCM'

Supply chain management (SCM) is the active streamlining of a business' supply-side
activities to maximize customer value and gain a competitive advantage in the marketplace.

SCM represents an effort by suppliers to develop and implement supply chains that are as
efficient and economical as possible. Supply chains cover everything from production, to
product development, to the information systems needed to direct these undertakings.

Supply chain management (SCM), the management of the flow of goods and services,
involves the movement and storage of raw materials, of work-in-process inventory, and of
finished goods from point of origin to point of consumption.

Logistics is the . . . “process of planning, implementing, and controlling the efficient,

effective flow and storage of goods, services, and related information from point of origin to
point of consumption for the purpose of conforming to customer requirements.“

Logistics - An Integral Component of Supply Chain Management Supply Chain

Management encompasses, planning, design, control and implementation of all business
processes related to procurement, manufacturing, distribution and sales order fulfillment
functions of a business.

All these activities involve multiple networks of vendors and service providers which are
integrated and co-coordinated by the Supply Chain Experts of the organization to move raw
materials and finished goods from and to all distant locations across the globe.

Logistics is the backbone on which Supply Chains are driven. Logistics refers to the
management of the flow of goods and supplies involving information, data and documentation
between two entities or points.

Logistics plays important role in post procurement function of delivery of raw material from
the supplier to the point of production and Finished Goods Supply chain management from
the point of dispatch from factory to the point of delivery to the customer.

The flow of goods flows through a network of transportation by road, rail, air or ship and
intermediary warehouses to hold inventories before moving to the forward locations. The
entire activity involves multi-tier suppliers, agents, and agencies including freight forwarders,
packers, customs department, distributors and Logistics service providers, etc.

The main logistics activities

Certain major logistics activities can be identified with respect to the logistics operations and
management in a company and its supply chain. (Lambert, et al.1998; Stock & Lambert,
2001). These logistics activities are as follows:
• Customer service
• Traffic and transportation
• Warehousing and storage
• Plant and warehouse site selection
• Inventory management
• Order processing
• Logistics communications
• Procurement
• Materials handling
• Packaging
• Demand forecasting
• Parts and service support
• Salvage and scrap disposal Reverse
• Return goods handling logistics

Strategic Role for Logistics

For all the operational advances that have been achieved in chemical logistics in the past few
years, and for all the savings that have been realized by producers and shippers, large
opportunities for gaining efficiency and saving money remain. The most important advance
would be for logistics to be included in the strategic planning stages with an equal seat at the
table with production and sales.

"There has been a lot of work on logistics at the business-unit level," Manufacturing tends to
think in terms of yield out of the productive assets. Sales tends to think in terms of tonnage or
volume moved. This is where logistics can come in and help frame the planning in terms of
profitability."

For example, it is common for a plant manager to want to produce at the unit's optimum
operating rate, while at the same time the sales department wants either less volume to tighten
the market or more volume to stimulate sales.

"But what is the point of making 500 million pounds of product that nobody wants, or selling
less at a higher price, then having to pay a premium to move it or store it?" says Lange. "We
see that situation all the time."

What should happen, he says, is for the supply chain to sit in the middle. "If sales and
production sit down with supply chain and do the math together, they can work together to
determine what to produce, where to produce it, whom to sell to, and what services to provide.
But if sales and production just hand their decisions to the supply chain, there is a limited
ability for logistics to help."

And while Lange is very supportive of benchmarking, he adds that "this was not a
benchmarking study. The industry has been benchmarking for years. The question is now
what? How do we take those metrics and actually move the needle. The best use of ERP
systems is action oriented, not academic."
One step Accenture has taken to foster that action orientation is to incorporate the study to a
query tool. "This is not a static thing…here's your report. We are trying to combine gap
analysis and facilitate discussions within a company's business groups and across peer groups
around the company."

To that point the study found that only 37 percent of respondents said their companies had a
formal process for sharing logistics best practices. Fewer, just 11 percent, said best practices
were measured, documented, and translated into standard operating procedures.

Worst of all, only a paltry four percent of respondents said that their companies have gathered
best practices in one place and made them available to all supply-chain professionals within
the organization.

Role effective logistics: can provide a major source of

Competitive advantage to a company, ensuring that it is able to continuously respond more

effectively and efficiently than competitors, to customer requirements world-wide.

The various functions within a company are increasingly dependent on logistics management
in that, as the importance and role of logistics is recognized, the impact which these functions
have on the logistics function and vice versa must receive more focused attention.

It can be said that logistics system design and management affect many management
functions. These functions may be grouped and named in many different ways in individual
companies, but the functions that are affected certainly include finance and accounting,
marketing, and manufacturing.

Responsibilities for logistics activities such as warehouse management, production and

inventory control, or transportation may be scattered among several of these major functions.
For example, raw material stock control may be the responsibility of purchasing or
manufacturing, or a separate materials management group (or split among the three);
production planning and control may be the responsibility of manufacturing; and field
distribution of inventories and warehouses may be managed by the marketing organization.

Information systems and data processing for production planning and inventory control may
be a financial organization responsibility, or it may be handled by a separate information
systems function.

Transportation may be the responsibility of manufacturing, marketing, purchasing, or a

separate department; the choice often depends on whether the bulk of the transportation
expense is incurred in the supply or distribution system, i.e. whether it is inbound or outbound
transportation.

There is in business today, however, a growing tendency to recognize that the efficiency of
an individual activity or function examined in isolation may be quite different from the
effectiveness of the activity or function as part of the total logistics process. As has been
mentioned previously, the total cost concept of logistics management requires that
compromises must be found among all the functions to obtain a total system operation that
achieves a better cost-effectiveness balance. For example, low cost per ton shipped may be a
very expensive target for the system as a whole if the traffic function achieves this target by
sacrificing speed and particularly reliability of service, or if the mode of transportation chosen
makes special packaging necessary.
The impact of logistics on ancillary functions such as packaging, product design, or
manufacturing engineering is also important. Today for example, more attention is being
given to design that yields a product that is easy to pack, store, and ship or that can be tailored
by superficial or field modifications to individual customer needs. There must also, of
necessity, be close co-operation between the product designer and the logistics system
manager to achieve an effective integration of product and logistics system design. Logistics
will be affected by the standardization of components, fragility, packaging, and adjustment of
products. There are also important links and relationships between logistics management and
purchasing, materials management, transport, production planning, packaging, warehousing,
inventory control and information technology.

All of these links with and the impact of, logistics management emphasize the growing role
and importance of logistics in the company and the requirement for these interrelationships to
be considered in detail by any logistician or logistics manager of an organization, for example,
with respect to strategic decisions and initiatives such as outsourcing.

Objectives of logistics:

Reduction of inventory: Inventory is one of the key factors, which can affect the profit of
An enterprise to a great extent. In the traditional system, firms had to carry lot of inventory
For satisfying the customer and to ensure excellent customer service. But, when funds are
Blocked in inventory, they cannot be used for other productive purposes. These costs will
drain the enterprise’s profit. Logistics helps in maintaining inventory at the lowest level, and
Thus achieving the customer goal. This is done through small, but frequent supplies.

Economy of freight: Freight is a major source of cost in logistics. This can be reduced by
Following measures like selecting the proper mode of transport, consolidation of freight,
Route planning, long distance shipments etc.

Reliability and consistency in delivery performance: Material required by the customer

Must be delivered on time, not ahead of the schedule or behind the schedule. Proper
Planning of the transportation modes, with availability of inventory will ensure this.

Minimum damage to products: Sometimes products may be damaged due to improper

Packing, frequent handling of consignment, and other reasons. This damage adds to the
Logistics cost. The use of proper logistical packaging, mechanized material handling
Equipment, etc will reduce this damage.

Quicker and faster response: A firm must have the capability to extend service to the
Customer in the shortest time frame. By utilizing the latest technologies in processing
Information and communication will improve the decision making, and thus enable the
Enterprise to be flexible enough so that the firm can fulfill customer requirements, in the
Shortest possible time frame.

The various functions of logistics are as follows:

1. Order Processing: Processing the orders received from the customers is an activity,
Which is very important by itself and also consumes a lot of time and paperwork. It
Involves steps like checking the order for any deviations in the agreed or negotiated
Terms, price, payment and delivery terms, checking if the materials is available in stock,
producing and scheduling the material for shortages, and also giving acknowledgement
To the owner, by indicating any deviations.
2. Inventory Planning and management: Planning the inventory can help an organization
In maintaining an optimal level of inventory which will also help in satisfying the
customer. Activities like inventory forecasting, engineering the order quantity,
optimization the level of service, proper deployment of inventory etc. are involved in this.

3. Warehousing: This serves as the place where the finished goods are stored before they
are sold to the customers finally. This is a major cost center and improper warehouse
management will create a host of problems.

4. Transportation: Helps in physical movement of the goods to the customers place. This
is done through various modes like rail, road, air, sea etc.

5. Packaging: A critical element in the physical distribution of the product, which also
influences the efficiency of the logistical system.

LOGISTICS ROLE IN THE B2B

The scope and influence of logistics has evolved in the late 1940s. In the 1950s, and 60s,
military was the only organization which used logistics. The scope of logistics has been
extended beyond the army, as it has been recognized as one of the important tools for
developing competitiveness. Competitive advantage means the company has the ability to
differentiate itself, in the customer’s eyes, and also is operating at a lower cost and greater
profit.

Logistics facilitates in getting products and services as and when they are needed and
desired to the customer. It also helps in economic transactions, serving as a major enabler
of growth of trade and commerce in an economy.

Logistics has come to be recognized as a distinct function with the rise of mass production
systems. Production and distribution were earlier viewed as a sequential chain of extremely
specialized activities. The role of logistics is to ensure availability of all the required
materials before every step in this chain. Obviously inventory of raw materials, semi-finished
and finished goods is a must across this chain to ensure its smooth functioning.

The concept of logistics has its base upon the systems approach. There is a single chain,
with flow of materials starting from the supplier, then to the plant and finally to the end
customer, and also these activities are done sequentially in order to achieve customer
satisfaction at low cost. For this to be successful there has to be co-ordination in the
activities of the department.

With reference to an organization, an organization gets a concrete shape due to its

structure. In the earlier times, the suppliers in distribution activities were spread across the
entire structure, thus resulting in an overlapping of activities and finally in unaccountable
authority and responsibility. In today’s process driven organization, where the focus has
shifted from functions to process, logistics has become an essential part of the process.
 CHAPTER-3 MARKETING RESEARCH AND MARKETING INTELLIGENCE

INTRODUCTION

Market research is the process of collecting valuable information to help you find out if there
is a market for your proposed product or service. The information gathered from market
research helps budding entrepreneurs make wise and profitable business decisions.
The key to any successful business is to understand what it is that your customers want and
giving this to them in a way that is profitable for you.

Many entrepreneurs make the mistake early on of thinking that they know what their
customers want without ever asking them. This can result in some very expensive mistakes
later on.

In order to find out what exactly it is that your customers want you must undertake a process
called ‘Market Research’. This module will give you a basic understanding of the concept of
market research, its various uses and provide guidance on how you can design your own
market research questionnaire for your mini-company.

Market research is any organized effort to gather information about target markets or
customers. It is a very important component of business strategy. The term is commonly
interchanged with marketing research; however, expert practitioners may wish to draw a
distinction, in that marketing research is concerned specifically about marketing processes,
while market research is concerned specifically with markets.

Market research is one of the key factors used in maintaining competitiveness

over competitors. Market research provides important information to identify and analyze the
market need, market size and competition. Market-research techniques encompass both
qualitative techniques such as focus groups, in-depth interviews, and ethnography, as well as
quantitative techniques such as customer surveys, and analysis of secondary data.
Market research, which includes social and opinion research, is the systematic gathering and
interpretation of information about individuals or organizations using statistical and analytical
methods and techniques of the applied social sciences to gain insight or support decision
making.

Market Research - Benefits

Market Research is an essential tool which assists in making strategic decisions. It reduces the
risks involved in making decisions as well as strategies. Companies either do this research in
house or outsource this process to business experts or organizations who have dedicated and
trained resources to perform this. In the recent years an increasing trend of such market
research companies assisting business strategists have come up. Some major benefits are -
1. Marketing research assists in providing accurate and latest trends related to demand,
consumer behavior, sales, growth opportunities etc.
2. It helps in better understanding of the market, thus helps in product design, features and
demand forecasts
3. It assists in studying and understanding the competitors, thus identifying unique selling
propositions for a business
Market research is a way of getting an overview of consumers' wants, needs and beliefs. It can
also involve discovering how they act. The research can be used to determine how a product
could be marketed. Peter Ducker believed market research to be the quintessence of
marketing.
There are two major types of market research. Primary Research sub-divided
into Quantitative and Qualitative research and Secondary research.

Factors that can be investigated through market research include

Market information
Through Market information one can know the prices of different commodities in the market,
as well as the supply and demand situation. Market researchers have a wider role than
previously recognized by helping their clients to understand social, technical, and even legal
aspects of markets.

Market segmentation
Market segmentation is the division of the market or population into subgroups with similar
motivations. It is widely used for segmenting on geographic differences, personality
differences, demographic differences, techno graphic differences, use of product differences,
psychographic differences and gender differences. For B2B segmentation firm graphics is
commonly used.
Market trends
Market trends are the upward or downward movement of a market, during a period of time.
Determining the market size may be more difficult if one is starting with a new innovation. In
this case, you will have to derive the figures from the number of potential customers, or
customer segments.
SWOT analysis
SWOT is a written analysis of the Strengths, Weaknesses, Opportunities and Threats to a
business entity. Not only should a SWOT be used in the creation stage of the company but
could also be used throughout the life of the company. A SWOT may also be written up for
the competition to understand how to develop the marketing and product mixes.
Another factor that can be measured is marketing effectiveness. This includes

 Customer analysis
 Choice modeling
 Competitor analysis
 Risk analysis
 Product research
 Advertising research
 Marketing mix modeling
 Simulated Test Marketing

MARKET INTELLIGENCE

Market intelligence is the information relevant to a company’s markets, gathered and

analyzed specifically for the purpose of accurate and confident decision-making in
determining strategy in areas such as market opportunity, market penetration strategy,
and market development.
Market intelligence includes the process of gathering data from the company’s external
environment, whereas the Business intelligence process primarily is based on internal
recorded events – such as sales, shipments and purchases. The purpose of incorporating
Market Information or intelligence into the Business Intelligence process is to provide
decision makers with a more “complete picture” of ongoing corporate performance in a set of
given market conditions.

Market Intelligence from external data

Market intelligence from external data is normally gathered by looking at secondary
information sources, usually through desk research or carried out through a continuous or
semi-continuous monitoring process. Often this means sourcing and analyzing published
information to build a picture of a market and to try and answer some specific commercial
questions such as what is the market potential, what are competitor’s future plans likely to be,
what prices customers might be willing to pay, what's the best means of entering a market.
Central to successful desk research is the ability to track down sources of information and to
provide a skilled analysis to read the data and identify not just the data, but the story behind
the data. For example identifying who your competitors are and analysing their market
position against yours to find strengths and weaknesses and indications of new developments,
or identifying potential channel partners or locations to set up new offices. Market
Intelligence specialists usually have a nose for what they don't see and what is missing in the
data that they find. These can often translate into hidden market gaps and opportunities. They
also have a sharp sense of how to use partial data such as financial reports, in order to make
assessments about general performance - for example whether revenue growth is being led by
prices or by sales growth.
To help internal market intelligence or market analysts, many companies use external
resources like analyst houses that provide not just data, but also a commentary and advice on
the current market picture based on their contact with suppliers and other companies. Many of
the analyst houses act as brokers between suppliers, collating information and sharing it more
widely. In some industries the analyst house can have very specific and large sets of data such
as retail audit.

Social media monitoring

Increasingly, Market Intelligence can involve collecting data from posts, tweets and other
social media. This type of 'market intelligence' overlaps with some forms of market research
and with PR monitoring. For some companies, the volume of comment (Big Data) together
with the need to manage and monitor across multiple languages and multiple domains mean
that large scale software is used to capture and then text-analyse the data to produce what is
called sentiment analysis to gauge the general tone of the online commentary. Social media
can provide companies with good insights into the mood of a market about, for instance, a
new product that has been launched and it can provide very specific detail and suggestions for
product or service improvements. However, much of this monitoring is also about reputation
monitoring as part of a communication or PR campaign to allow companies to be alert to
negative comment or problems that are publicized via the social networks.

From a data point of view, obviously there are potentially very large sources of data and IT
tools for social media monitoring need to be large scale in order to scrape (i.e. capture) data
from a wide range of sites in a similar way to a search engine robot, and then mine this data
with text analytics to find useful information. The scraping of data also brings in some ethical
issues as some conversations may be deemed to be private particularly in jurisdictions like
Europe, where companies are only allowed to collect information to a legal limit. Obviously
this differs from the US where all information in the public sphere can be freely used by
businesses.

There is also some caution necessary over how representative views are. Not all sites can be
scraped (some like Face book do not allow social media listening) and those that can be
scraped might not be representative and commentators themselves tend to be more active and
enthusiastic (positively and negatively) and may not properly represent the views of the whole
market. The structure of discussions online also needs to be taken into consideration. For
instance more opinions are voiced where there is disagreement than where there is agreement.
Although online conversations might not be representative it is quite possible that they include
or influence important opinion leaders. For this reason it is advisable to cross-check and
validate how sentiments online translate into more representative forms of market research.

Market Intelligence from internal data

While much marketing intelligence is associated with collecting information externally, a
great deal of insight can come from making better use of existing information such as
customer databases, web-analytics and test-marketing - an area that is increasing being known
as 'Big Data' analysis. For instance by carrying out database analysis on orders taken it may be
possible to understand where you have cross-sale and up-sale opportunities, or to understand
what type of customers are your most profitable. Common database analysis includes tracking
regency, frequency and value of purchases. Looking for pare to segments. Augmenting
database lists with external data to identify purchasing patterns.
Database information is not the only source of market data. Your website may also include a
high degree of valuable information about who is looking for your products and services. Web
site traffic analysis can help you understand what customers are looking for and why, and can
be used in conjunction with test advertising and variations in site and page delivery (e.g.
varying landing pages) to provide direct measurement and enhancement of marketing
effectiveness.
One challenge is the increasing volume of data that is potentially available (Big Data). Large
sources of data have the potential for showing hidden patterns and correlations within the
data. Finding these patterns from a large dataset is a challenging statistical task both to handle
the data size and to be able to extract meaning from the potentially infinite number of cross-
relationships, without getting lost among false-correlations.

At the moment there is great hope for statistical analysis of Big Data, but it may be more
effective to use the flow of information as a means of carrying out more experiments. That is
testing something in the market and then seeing how the market reacts. Experiments online
can be carried out small scale and very rapidly to test for improvements and refinements - eg
A-B testing to see which advertising message works best, or experimental designs to look at
how landing page combinations deliver sales conversions. These experimental approaches
also translate directly into algorithmic marketing. That is, automated rule generation that
adjusts marketing communications and messages based on observed responses in a similar
way to Amazon's recommendation list, or Google's personalized search.
Finally, don't overlook knowledge about customers, markets and competitors that comes from
your staff. Often this is a poorly tapped source of information. Collecting and disseminating
such information falls into the realms of customer knowledge management and making better
use of this customer knowledge can help businesses focus far more on what the customer
wants and says.

Competitor intelligence
A specific form of Market Intelligence is competitive intelligence. This is typically
undertaken on an on-going basis and involves the collection of news, materials and other
information about competitors from a wide variety of sources. This may involve collecting
information about market positioning and market messages, core clients or contracts, size and
structure of the business and issues like pricing or typical deal structures. Examples might
include collecting price-check information, or details of promotional and advertising
campaigns, or monitoring news channels for information about new products or new
technologies (e.g. patents). Although competitor intelligence can be carried out as a one off
project, in reality, because of its on-going nature, competitive intelligence is often more about
putting structures in place to enable information about competitor behaviour to be fed-back
and monitored, than specifically finding one-off pieces of data. One key point is that for legal
and ethical reasons, competitor research should not be carried out in any underhand way (e.g.
misrepresentation) and so should rely only on openly available information sources.
Competitive intelligence can also use primary sources of data, such as feedback from sales
teams, suppliers or distribution channels or feedback based on direct win-loss research that are
often used to track bid performance.
The Purposes of Market Intelligence

Market intelligence can be used to assist with more or less every decision faced by a
company. The overriding purpose of most market intelligence, however, is to help the
company grow – to increase revenue, profit, or market share. Good market intelligence can
therefore have a huge return on investment - $40,000-$150,000 spent on intelligence can
generate or save many times that amount in extra customer revenue or the avoidance of a bad
investment decision.

The purposes of market intelligence are constantly evolving. Figure 2 shows the key purposes
of market intelligence, and the type of market research or market intelligence study that is
typically used to meet these requirements.

Figure 2: The Purposes of Market Intelligence

Type of study that typically
Purpose meets this purpose

Help enter new market, or expand Market entry research and market
presence in a market expansion studies

Minimize the risk of an investment Market assessment research or

decision being wrong acquisition studies

Keep ahead of the competition,

obtain first-mover advantage over
competitors Competitive intelligence research

Give the customers what they

want, expand market share Needs assessment studies

Establish and maintain a distinctive

corporate identity B2B branding research

Tailor products and marketing

effort around customer needs B2B segmentation research

Meaning

Marketing research is "the process or set of processes that links the producers, customers,
and end users to the marketer through information — information used to identify and define
marketing opportunities and problems; generate, refine, and evaluate marketing actions;
monitor marketing performance; and improve understanding of marketing as a process.
Marketing research specifies the information required to address these issues, designs the
method for collecting information, manages and implements the data collection process,
analyzes the results, and communicates the findings and their implications."[1]
It is the systematic gathering, recording, and analysis of qualitative and quantitative data about
issues relating to marketing products and services. The goal of marketing research is to
identify and assess how changing elements of the marketing mix impacts customer behavior.
The term is commonly interchanged with market research; however, expert practitioners may
wish to draw a distinction, in that market research is concerned specifically with markets,
while marketing research is concerned specifically about marketing processes.[2]
Marketing research is often partitioned into two sets of categorical pairs, either by target
market:

 Consumer marketing research, and

 Business-to-business (B2B) marketing research
Or, alternatively, by methodological approach:

 Qualitative marketing research, and

 Quantitative marketing research

Consumer marketing research is a form of applied sociology that concentrates on

understanding the preferences, attitudes, and behaviors of consumers in a market-based
economy, and it aims to understand the effects and comparative success of marketing
campaigns . The field of consumer marketing research as a statistical science was pioneered
by Arthur Nielsen with the founding of the ACNielsen Company in 1923.
Thus, marketing research may also be described as the systematic and objective identification,
collection, analysis, and dissemination of information for the purpose of assisting
management in decision making related to the identification and solution of problems and
opportunities in marketing
The task of marketing research (MR) is to provide management with relevant, accurate,
reliable, valid, and current market information. Competitive marketing environment and the
ever-increasing costs attributed to poor decision making require that marketing research
provide sound information. Sound decisions are not based on gut feeling, intuition, or even
pure judgment.
Managers make numerous strategic and tactical decisions in the process of identifying and
satisfying customer needs. They make decisions about potential opportunities, target market
selection, market segmentation, planning and implementing marketing programs, marketing
performance, and control. These decisions are complicated by interactions between the
controllable marketing variables of product, pricing, promotion, and distribution. Further
complications are added by uncontrollable environmental factors such as general economic
conditions, technology, public policies and laws, political environment, competition, and
social and cultural changes. Another factor in this mix is the complexity of consumers.
Marketing research helps the marketing manager link the marketing variables with the
environment and the consumers. It helps remove some of the uncertainty by providing
relevant information about the marketing variables, environment, and consumers. In the
absence of relevant information, consumers' response to marketing programs cannot be
predicted reliably or accurately. Ongoing marketing research programs provide information
on controllable and non-controllable factors and consumers; this information enhances the
effectiveness of decisions made by marketing managers.
Traditionally, marketing researchers were responsible for providing the relevant information
and marketing decisions were made by the managers. However, the roles are changing and
marketing researchers are becoming more involved in decision making, whereas marketing
managers are becoming more involved with research. The role of marketing research in
managerial decision making is explained further using the framework of the "DECIDE"
model.

Types of marketing research

Marketing research techniques come in many forms, including:

 Ad Tracking – periodic or continuous in-market research to monitor

a brand’s performance using measures such as brand awareness, brand preference, and
product usage. (Young, 2005)
 Advertising Research – used to predict copy testing or track the efficacy of advertisements
for any medium, measured by the ad’s ability to get attention (measured with Attention
Tracking), communicate the message, build the brand’s image, and motivate the consumer
to purchase the product or service. (Young, 2005)
 Brand awareness research — the extent to which consumers can recall or recognize a
brand name or product name
 Brand association research — what do consumers associate with the brand?
 Brand attributes research — what are the key traits that describe the brand promise?
 Brand name testing - what do consumers feel about the names of the products?
 Buyer decision making process— to determine what motivates people to buy and what
decision-making process they use; over the last decade, Neuromarketing emerged from
the convergence of neuroscience and marketing, aiming to understand consumer decision
making process
 Commercial eye tracking research — examine advertisements, package designs, websites,
etc. by analyzing visual behavior of the consumer
 Concept testing - to test the acceptance of a concept by target consumers
 Cool hunting (also known as trend spotting) - to make observations and predictions in
changes of new or existing cultural trends in areas such as fashion, music, films,
television, youth culture and lifestyle
 Copy testing – predicts in-market performance of an ad before it airs by analyzing
audience levels of attention, brand linkage, motivation, entertainment, and
communication, as well as breaking down the ad’s flow of attention and flow of emotion.
(Young, p 213)
 Customer satisfaction research - quantitative or qualitative studies that yields an
understanding of a customer's satisfaction with a transaction
 Demand estimation — to determine the approximate level of demand for the product
 Distribution channel audits — to assess distributors’ and retailers’ attitudes toward a
product, brand, or company
 Internet strategic intelligence — searching for customer opinions in the Internet: chats,
forums, web pages, blogs... where people express freely about their experiences with
products, becoming strong opinion formers.
 Marketing effectiveness and analytics — Building models and measuring results to
determine the effectiveness of individual marketing activities.
 Mystery consumer or mystery shopping - An employee or representative of the market
research firm anonymously contacts a salesperson and indicates he or she is shopping for
a product. The shopper then records the entire experience. This method is often used for
quality control or for researching competitors' products.
 Positioning research — how does the target market see the brand relative to competitors? -
What does the brand stand for?
 Price elasticity testing — to determine how sensitive customers are to price changes
 Sales forecasting — to determine the expected level of sales given the level of demand.
With respect to other factors like Advertising expenditure, sales promotion etc.
 Segmentation research - to determine the demographic, psychographic, cultural, and
behavioral characteristics of potential buyers
 Online panel - a group of individual who accepted to respond to marketing research online
 Store audit — to measure the sales of a product or product line at a statistically selected
store sample in order to determine market share, or to determine whether a retail store
provides adequate service
 Test marketing — a small-scale product launch used to determine the likely acceptance of
the product when it is introduced into a wider market
 Viral Marketing Research - refers to marketing research designed to estimate the
probability that specific communications will be transmitted throughout an
individual's Social Network. Estimates of Social Networking Potential (SNP) are
combined with estimates of selling effectiveness to estimate ROI on specific combinations
of messages and media.
All of these forms of marketing research can be classified as either problem-identification
research or as problem-solving research.

Methods
Methodologically, marketing research uses the following types of research designs:
Based on questioning

 Qualitative marketing research - generally used for exploratory purposes — small

number of respondents — not generalizable to the whole population — statistical
significance and confidence not calculated — examples include focus groups, in-
depth interviews, and projective techniques
 Quantitative marketing research - generally used to draw conclusions — tests a
specific hypothesis - uses random sampling techniques so as to infer from the
sample to the population — involves a large number of respondents — examples
include surveys and questionnaires. Techniques include choice
modeling, maximum difference preference scaling, and covariance analysis.
Based on observations

 Ethnographic studies — by nature qualitative, the researcher observes social

phenomena in their natural setting — observations can occur cross-sectionally
(observations made at one time) or longitudinally (observations occur over several
time-periods) - examples include product-use analysis and computer cookie traces.
See also Ethnography and Observational techniques.
 Experimental techniques - by nature quantitative, the researcher creates a quasi-
artificial environment to try to control spurious factors, then manipulates at least
one of the variables — examples include purchase laboratories and test markets
Researchers often use more than one research design. They may start with
secondary research to get background information, and then conduct a focus group
(qualitative research design) to explore the issues. Finally they might do a full
nationwide survey (quantitative research design) in order to devise specific
recommendations for the client.
 Some of the positions available in marketing research include vice president of
marketing research, research director, assistant director of research, project
manager, and field work director, statistician/data processing specialist, senior
analyst, analyst, junior analyst and operational supervisor.
The most common entry-level position in marketing research for people with
bachelor's degrees (e.g., BBA) is as operational supervisor. These people are
responsible for supervising a well-defined set of operations, including field work,
data editing, and coding, and may be involved in programming and data analysis.
Another entry-level position for BBAs is assistant project manager. An
assistant project manager will learn and assist in questionnaire design, review
field instructions, and monitor timing and costs of studies. In the marketing
research industry, however, there is a growing preference for people with master's
degrees. Those with MBA or equivalent degrees are likely to be employed as
project managers.
A small number of business schools also offer a more specialized Master of
Marketing Research (MMR) degree. An MMR typically prepares students for a
wide range of research methodologies and focuses on learning both in the
classroom and the field.
The typical entry-level position in a business firm would be junior research
analyst (for BBAs) or research analyst (for MBAs or MMRs). The junior analyst
and the research analyst learn about the particular industry and receive training
from a senior staff member, usually the marketing research manager. The junior
analyst position includes a training program to prepare individuals for the
responsibilities of a research analyst, including coordinating with the marketing
department and sales force to develop goals for product exposure. The research
analyst responsibilities include checking all data for accuracy, comparing and
contrasting new research with established norms, and analyzing primary and
secondary data for the purpose of market forecasting.
As these job titles indicate, people with a variety of backgrounds and skills are
needed in marketing research. Technical specialists such as statisticians obviously
need strong backgrounds in statistics and data analysis. Other positions, such as
research director, call for managing the work of others and require more general
skills. To prepare for a career in marketing research, students usually:

 Take all the marketing courses.

 Take courses in statistics and quantitative methods.
 Acquire computer skills.
 Take courses in psychology and consumer behavior.
 Acquire effective written and verbal communication skills.
 Think creatively

DEFINITION OF MARKETING INTELLIGENCE

Definition: Marketing intelligence is the external data collected by a company about a
specific market which it wishes to enter, to make decisions. It is the first set of data which the
company analyses before making any investment decision.

Description: Marketing intelligence is usually the first data set analysed by a company about
a specific market. It could be related to population age in that area, infrastructure facilities,
spending habits of consumers, state or government regulations etc. Marketing intelligence is
all about gathering information on various data sets, analyzing the information, breaking
down the data into small subsets and the distribution of information to the relevant department
of the company.

A purchase department in a company would need a different data set under marketing
intelligence, while a sales department would need something different. There are four main
corner stone’s of marketing intelligence. The first one is competitor intelligence the others are
product intelligence, market understanding and customer understanding. Let's understand each
one of them in detail. Competitor intelligence is a legal method of obtaining information about
products in a competitor's portfolio. It is about analyzing strengths and weaknesses of the
competitor.

The basic goal of competitive intelligence is to make better business decisions. Product
Intelligence is related to gathering information about your own product. The focus around
product intelligence is on gathering information about the quality and performance of the
product. This is usually an automated process. With the help of this knowledge, the company
tries and makes the user experience better or makes changes in the product itself to make it
safer or add new features. Market Understanding is a concept wherein the company tries to
understand the performance of the product in which it is already operating as well as looks at
other markets where it wants to launch its product thoroughly.

Marketing Research is of use to the following:-

1. Producers
a. To know about his product potential in the market vis-à-vis the total product;
b. New Products;
c. Various brands;
d. Pricing;
e. Market Structures and selection of product strategy, etc.
2. Business and Government

Marketing Research helps businesses and government in focusing attention on the

complex nature of problems faced by them. For example:

a. Determination of Gross National Product; Price indices, and per capita income;
b. Expenditure levels and budgeting;
c. Agricultural Pricing;
d. The economic policies of Government; and
e. Operational and planning problems of business and industry.
3. Market Research Agencies

Marketing Research is being used extensively by professionals to help conducting

various studies in Marketing Research. Most prominent agencies being:-

a. Lint India Ltd;

b. British Market Research Bureau (BMRB);
c. Hindustan Thompson Associate Ltd;
d. ESurveysPro.com;
e. MARG

NATURE AND SCOPE OF INDUSTRIAL MARKETING RESEARCH

The scope of marketing research could cover the business problems relating to the
followings:

 Types of consumer that compromise present and potential market

 Buying and habits and pattern of consumption
 Size and location of different market, not only in India but also overseas
 The prospects for growth or construction for the current markets being served
 New mantras of emerging segments
  Marketing and manufacturing capabilities of competitors
 Most suitable entry timing
 The current and prospective competitive position
 Chance of improvement of current channels
 Optimum use of promo-tools.
 Market share analysis
 Sales analysis

The Internet and B2B marketing

The dot-com boom and bust of the late 90's saw significant attempts to develop online
shopping. Many entrepreneurs (and their investors) discovered that merely having a website
(no matter how innovative) was insufficient to generate sales. The amount of conventional
media advertising required to promote the sites burnt cash at a faster rate than on-line sales
generated. They also presumed that consumers would eschew the conventional shopping
experience (driving, parking, poor service etc.) for the convenience of shopping on-line. Some
did, but for many companies, not in sufficient numbers. There were many unforeseen
problems, and apart from some notable exceptions (Amazon.com and others) the business to
consumer online failed for many companies. B2B selling, however, more frequently achieved
impressive results.

The five steps of an effective marketing research are as follows

1. Research Projects may be specific, i.e., for a specific study/problem or exploring, i.e., its

goal is to shed light on the real nature of the problem and to suggest possible solutions or new

idea or project maybe descriptive, i.e., + it seeks to ascertain certain magnitudes, such as how
many people will buy a shirt for Rs. 500/- per piece.

Some research project may be casual, i.e., to test a cause and effect relationship, such as

whether young college students would buy more soft drink bottles if they are available in the
college canteen.

This step calls for decisions on the data sources, research approaches, research instruments,
sampling plan and contact methods.
The researcher can gather both primary and secondary data and both. Primary data are

gathered for a specific purpose and secondary data may already exit somewhere. Usually, a

research starts the investigation by examining secondary data before, resorting to collect
costlier primary data, if required.

Important secondary data source is the customer data base. Even though, secondary data is

valuable, sometime it may be inaccurate, incomplete or very old, in such case, the researcher

has to collect primary data. A researcher can collect primary data for marketing research in
five ways, i.e., Observation, Focus Groups, Surveys, Behavioral Data and Experiments.

Many companies now-a-days conduct focus groups on the internet to take advantage of the

lower cost and faster feedback. In the case of Behaviour Data, customers leave traces of their

purchasing behaviour in a Retail Store’s Scanning Data, catalogue and Internet purchase
records or customer data bases.

(a) Research Instruments:

Two main research instruments are used in collecting primary data, i.e., Questionnaires which

consists of a set of questions to be presented to respondents for their answers; and Mechanical

devices like Galvanometers, Infrared eye-tracking systems etc. are used to measure the
consumers view websites respectively.

2. Sampling Plan:

After deciding on the research approach and instruments, the researcher must design a

sampling plan based on the following:

(i) Sampling Unit, i.e., who is to be surveyed – the researcher must define the target
population to be sampled.

(ii) Sample size—i.e., how many people should be surveyed? Large samples give reliable
results.

(iii) Sampling Procedure i.e., how should the respondents be chosen? To obtain a

representative sample, a probability sample of the population should be drawn. After

determining the sampling plan, the researcher should use contact methods for contacting

subjects; these are mail questionnaire, telephone interview, personal interview and online
interview.
3. Collect the Information:
Due to advancement of technology and communication systems, the data collection methods,
have improved.

4. Analyze the Information:

Analysis is done by tabulating the data and then applying various statistical techniques.

5. Present the Findings:

The researcher presents the major findings that are relevant to the key marketing decisions
facing the management.

MARKETING RESEARCH PROCESS; INDUTRIAL MARKETING,

INTELLIGENCE SYSTEM.

1. MARKETING RESEARCH PROCESS

MEANING:

Marketing research process is a set of steps which defines the tasks to be accomplished in
conducting a marketing research study. These include problem definition, developing an
approach to problem, research design formulation, field work, data preparation and analysis,
and report generation and presentation.

STEPS in marketing research process are as under:

Identify the
problem and Develop the Collect the Process and Present the
define research data (or analyses the research
research design(or information) data findings (or
objectives plan) report)

A. Identifying the problem/opportunity and defining research objectives:

The first step in any marketing research project is to identify the marketing problem and
define the objective of marketing research. In defining the problem, the researcher should
take into account the purpose of the study, the relevant background information, what
information is needed, and how it will be used in decision making. Problem definition
involves discussion with the decision makers, interviews with industry experts, analysis of
secondary data, and, perhaps, some qualitative research, such as focus groups. Once the
problem has been precisely defined, the research can be designed and conducted properly.

B. Develop the research design/plan:

A research design is a framework or blueprint for conducting the marketing research

project. It details the procedures necessary for obtaining the required information, and its
purpose is to design a study that will test the hypotheses of interest, determine possible
answers to the research questions, and provide the information needed for decision making.
Conducting exploratory research, precisely defining the variables, and designing appropriate
scales to measure them are also a part of the research design. The issue of how the data should
be obtained from the respondents (for example, by conducting a survey or an experiment)
must be addressed. It is also necessary to design a questionnaire and a sampling plan to select
respondents for the study.
More formally, formulating the research design involves the following steps:

1. Secondary data analysis

2. Qualitative research
3. Methods of collecting quantitative data (survey, observation, and experimentation)
4. Definition of the information needed
5. Measurement and scaling procedures
6. Questionnaire design
7. Sampling process and sample size
8. Plan of data analysis.

C. Collect the data or information:

Data collection involves a field force or staff that operates either in the field, as in the
case of personal interviewing (in-home, mall intercept, or computer-assisted personal
interviewing), from an office by telephone (telephone or computer-assisted telephone
interviewing), or through mail (traditional mail and mail panel surveys with prerecruited
households). Proper selection, training, supervision, and evaluation of the field force help
minimize data-collection errors.
Data collection methods are as:
1. Questionnaire
2. Mechanical instruments: These devices are used more in consumer research to
collect information directly. The instruments used are eye cameras, psycho-
galvanometer, and motion picture cameras.
3. Personal interview
4. Survey research methods
5. Structured direct interview.

D. Process and analyse the data :

Data analyses include the editing, coding, transcription, and verification of data. Each
questionnaire or observation form is inspected, or edited, and, if necessary, corrected.
Number or letter codes are assigned to represent each response to each question in the
questionnaire. The data from the questionnaires are transcribed or key-punched on to
magnetic tape, or disks or input directly into the computer. Verification ensures that the
data from the original questionnaires have been accurately transcribed, while data
analysis, guided by the plan of data analysis, gives meaning to the data that have been
collected.
Univariate techniques are used for analyzing data when there is a single
measurement of each element or unit in the sample, or, if there are several measurements
of each element, each RCH variable is analyzed in isolation. On the other hand,
multivariate techniques are used for analyzing data when there are two or more
measurements on each element and the variables are analyzed simultaneously.
 Data analysis data analysis can be categorized into: 1.Descriptive analysis, 2. Inferential
analysis, 3. Differences analysis, 4. Associative analysis, 5. Predictive analysis.

E. Present the research findings or report :

The final stage of business marketing research study is report preparation, including
communication of the research findings. The entire project should be documented in a
written report which addresses the specific research questions identified, describes the
approach, the research design, data collection, and data analysis procedures adopted, and
present the results and the major findings. The findings should be presented in a
comprehensible format so that they can be readily used in the decision making process. In
addition, an oral presentation should be made to management using tables, figures, and
graphs to enhance clarity and impact. While making written or oral presentation, the
researcher should keep the following points in mind.
1. The researcher should collect the information about the profile of the executives
who would be interested in the research report from the user company.
2. The major research findings should be relevant to the marketing research
objectives.
3. The researcher should logically justify the choice of research method, data
collection method, data analysis techniques, etc.
4. The researcher must not try to satisfy the personal likes or dislikes of the
executives in the user company.

2. INDUSTRIAL MARKETING INTELLIGENCE SYSTEM

Industrial marketing (or business-to-business marketing) is the marketing of

goods and services by one business to another. Industrial goods are those an industry uses to
produce an end product from one or more raw materials.

Main features of the B2B selling process are:

 Marketing is one-to-one in nature. It is relatively easy for the seller to identify a

prospective customer and build a face-to-face relationship.
 Highly professional and trained people in buying processes are involved. In many cases,
two or three decision makers must approve a purchase plan.
 Often the buying or selling process is complex, and includes many stages (for example,
request for proposal, request for tender, selection process, awarding of tender, contract
negotiations, and signing of final contract).
 Selling activities involve long processes of prospecting, qualifying, wooing, making
representations, preparing tenders, developing strategies, and contract negotiations.

The needs and objectives of industrial buyers are satisfied through the following
exchange processes.

1. Product Exchange

The features of a product or service involved have a significant impact on the industrial
exchange process. The ease of exchange depends upon the ability of the seller to identify the
buyer‘s needs and the product‘s potential to satisfy those needs. If the exchange is good in
terms of price, quality, quantity, and after sale services then it will give a positive symbol for
the customer loyalty in terms of product/service loyalty.
2. Information Exchange

The information consists of technical, economic, and organisational questions: pre and
post sale maintenance and servicing must be exchanged to the participants of business
organizations. Products and services must be planned and designed to serve customers
efficiently. To achieve it, buyers and sellers tend to work together, exchanging product
specific information over long periods of time.

3. Financial Exchange

The granting of credit or the need to exchange money from one currency to another at the
time of dealing with foreign buyers/customers are included in this exchange.

4. Societal Exchange

Societal exchange is important to reduce uncertainty between buyer and seller, avoiding
short-term difficulties, and maintaining the long-term exchange relationship to one another. A
number of aspects of an agreement between buyers and sellers in the industrial market are
based on arbitration and mutual trust, not fully formalized or based on legal criteria until the
end of the transaction period.

Components of MIS

1. Marketing research studies

2. Internal information system

3. Secondary data sources

Key elements of industrial marketing intelligence system:

1.Information
A continuous flow of information is the lifeblood of a good market intelligence system -
information about new technologies, markets, customers, the economic and regulatory
environment etc. Both formal (routine reporting, factual) and informal information (gossip,
opinions) must be tapped.

2. Information Management Processes

With many professionals having external information delivered to their desktops, from
online services such as Reuters or MAID, and increasingly from the Internet is easy to believe
that users have all the information they need on tap. However, this is raw information and will
need transforming into intelligence. Before that, however, this information must be classified,
stored and made accessible - applying good practice principles of Information Resources
Management (IRM).

3. Intelligence Development Processes

A good intelligence system is more than information. It is a recurring cycle of
linking the needs of decision makers to the processes of turning the information into
actionable intelligence.
Strategic Planning, Implementing And Controlling In Industrial Marketing

Strategic planning is the process of developing and maintaining a feasible fit between
the organisation’s objectives, skills, and resources and its changing marketing opportunities.
According to Kotler, Company- wide strategic planning guides marketing strategy and
planning. Like marketing strategy, the company’s broad strategy must also be customer
oriented

Role of marketing in strategic planning

Marketing strategy is a process that can allow an organization to concentrate its
limited resources on the greatest opportunities to increase sales and achieve a sustainable
competitive advantage. A marketing strategy should be centered on the key concept that
customer satisfaction is the main goal.
Marketing plays an important role in the strategic planning process for many
organizations. Although some marketing positions are represented at the corporate level, most
are at the functional level within the business units of an organisation. Marketing is involved
in strategic planning at all organizational levels.
 Role of
marketing

strategic
marketing marketing
management

corporate
Marketing
Analysis and business and Develop product execute product
philosophy
information marketing marketing plans marketing plans
execution
strategy decisions

Figure 1 role of marketing in strategic planning

Strategic marketing describes marketing activities that affect corporate, business, and
marketing strategic plans. Strategic marketing activities can be classified into three basic
functions. First, marketers help orient everyone in the organization towards markets and
customers. Thus, they are responsible for helping organizations execute a marketing
philosophy throughout the strategic planning process.
Second, marketers help gather and analyze information required to examine the current
situation, identify trends in the marketing environment, and assess the potential impact on
these trends. This information and analysis provides input for corporate, business and
marketing strategic plans.
Third, marketers are involved the development of corporate, business, and marketing
strategic plans. Marketing’s influence varies across organizations. For organizations driven by
a marketing philosophy, marketing necessarily plays a key role in strategic decision making.
The trend toward pushing strategic planning responsibility further down the organization is
increasing marketing’s clout in an organization’s strategic planning process.
Marketing management relates to specific product marketing strategies. It differs from
strategic marketing in its basic orientations. Strategic marketing focuses on broad strategic
decisions at corporate and business levels.
Marketing management is concerned, by contrast, with specific strategic decisions for
individual products and the day-to-day activities needed to execute these strategies
successfully. At the operating level, marketing managers must focus on the four P’s of the
marketing mix: price, product, promotion, and place (distribution).
The strategic role of marketing and marketing management is now in a period of
considerable change and evolution. These changes are due to number of important
environmental phenomena that are affecting the way many firms do business. To begin, many
well-know companies work closely with dedicated partners on the supply side (often using
single supply partners) and the distributor side of their business, expecting their distributors to
play proactive roles in the development of services and marketing strategy. For example, on
the supply side the modern-day Nike does very little manufacturing of its own and focuses
largely on marketing. In this vein, companies such as this are actually embedded in business
networks, comprising strategic alliances among suppliers, distributors, and the marketing
firm.
 Other influences on marketing include the connected-knowledge economy; globalized
and consolidated industries; fragmented markets; and demanding customers and consumers.
With these changes, new kinds of competitors will emerge, markets will continue to become
homogenized across the country boundaries, and mass markets will erode in the face of mass
customization. Business customers and individual consumers expect diversity and have
multiple means of obtaining products, as well as learning about company offerings. Some
observers foresee a future in which the web will enable automated purchasing, anonymous
transactions and the by-passing of most intermediaries.
The role of marketing within the firm is in transition as well. For example, some
scholarly observers have argued that the marketing function will be reduced as the values
embodied in the firm’s market orientation permeate the firm. That is, a cross- functional
dispersion of marketing activities will occur as the firm becomes market-oriented throughout.
In a test of this premise, one study of managers across functions (i.e., marketing, human
relations, operations, accounting, and finance) within their firms related that marketing as a
separate function still contributes to a firm’s financial performance, customers-relationship
performance, and new-product performance beyond the performance attributable to the firm’s
general market orientation. Therefore, an understanding of strategic planning, process is even
more important in today’s ever-changing marketplace.

Strategic planning at corporate level

The corporate office of a business organisation has the responsibility to set up strategic
planning process. It prepares the time schedule, the formats, and the guidelines for business
units or SBUs to prepare their strategic plans including business strategies.
The major steps involved in carrying out the strategic planning at corporate level are:

Developing corporate mission and

objective

Defining strategic business units

(SBUs)

Allocation of resources to SBUs

Developing corporate strategies to

fill the strategic planing gap

1. Corporate mission and objective

According to jack Welch, mission statement should say where exactly the
company is going how the company intends to win in the business.
 An organisation must define its mission or its purpose of existence. Successful
organizations develop mission statements for:
a) Providing company’s employees with a shared sense of purpose, direction and
opportunity
b) Guiding geographically dispersed employees to work independently and yet
collectively towards realising the company’s business mission;
c) Providing a vision and direction for the company

Factors shaping a company’s mission

According to Philip kotler, a company’s mission is shaped by five factors:

1) Company history
2) Current preferences
3) Market environment
4) Company resources
5) Company core competence

Corporate objectives indicate general statement of the company’s outlook with

respect to shareholders, and environment. There are no universally accepted
procedures for setting objectives. The basic inputs required to set objectives at
corporate level are:
1) Expectations of corporate public consisting of owners,
employees, customers, suppliers, banks/lenders, government, and
community/society
2) Value system of top management
3) Corporate resources
4) Performance of SBUs
5) External environment
Most of companies pursue more than one objective. The objectives may include
profitability, growth in sales, Environment, technological leadership, innovativeness, and
company image. In such cases, the objectives should be arranged hierarchically, that is from
the most important to the least important. The objectives and goals must be realistic,
consistent, and unambiguous. In the final analysis, setting objectives and goals is a creative
exercise.

2) Defining strategic Business Units (SBUs)

Many large companies have several businesses. Some companies define their
businesses in terms of products.
The purpose of defining the businesses is to manage them strategically. Companies
call their business units as strategic business units (SBUs). A SBU has the following
characteristics:
1. It has an independent product or product lines with a set of competitors and
markets.
2. It can have a separate business strategy or strategic planning
3. It is headed by a senior executive responsible to achieve long-term business
objectives and goals.
3) Allocation of resources to SBUs- portfolio Analysis
Strategic plans of SBUs are reviewed at corporate office and decisions are taken on
which of their SBUs should be maintained, expanded, phased out, and new business to be
pursued. Based on these decisions, the corporate headquarter allocated its resources. To assist
corporate office to make these decisions, certain analytical model or tools are used. Two
widely used portfolio analysis models are:
 1. Boston consulting group (BCG) model, called Growth-Share Matrix
2. General Electric (GE) Model, called Business Screen Matrix.

4) Developing corporate strategies

Once a company determine it s mission, long-term objectives and goals, defines its
strategic business units (SBUs) at the corporate level, and allocate resources to SBUs, the next
step is to develop appropriate strategies to achieve the projected sales and profit goals.
Sometimes the total sales of all the SBUs put together are less than what the corporate
management wants to achieve. If there is a substantial gap between the futures desired sales
and the projected sales over the same period, such a gap is called strategic planning gap. This
strategic planning gap can be filled in by three alternative strategies:
1. Intensive growth
2. Integrative growth
3. Diversification growth

Strategic Planning Process at Business Unit Level

After describing the strategic planning at corporate level, we can now understand the strategic
planning process at business unit or SBU level. The head of the business unit involves the
business strategy by developing the long term mission, goals, and strategies in changing the
environment. For developing the business strategy, the business-unit head follows the
following steps;

1. Defining the business unit’s mission.

2. Scanning the external environment (for opportunities and threats analysis).
3. Analyzing the internal environment (for assessment of strengths and weaknesses).
4. Developing the objectives and goals.
5. Formulating strategies for achieving the goals.
6. Preparing programme or action-plan from the strategies.
7. Implementing the strategies and action-plans.
8. Monitoring results and taking corrective actions (i.e. control).

 The Business Unit’s Mission

We had earlier seen that defined company mission or purpose of an

organization. Within the corporate mission, each business unit or SBU is
required to define its mission which is called the business mission.
A business mission should specify what activities the organization intends to
pursue, and how differently it intends doing these activities, so as to distinguish
it from the competitors.
A business mission statement should have the following components;
1. It should state (a) what business the company is in, and (b) what business it
intends to be in.
2. What methods would be uniquely followed in pursuing the business
activities?
3. What is the social standing of the organization as a business entity?

 Scanning of External Environment (For Opportunities and Threat Analysis)

An analysis or scanning of external environment is useful to a business unit or

a company for recognizing opportunities and threats. Scanning or monitoring
 the external environment on a continuous basis is necessary since the external
environment changes continuously. To achieve its objectives and goals, a
company must develop a systematic approach to scanning the external
environment.
An environment scanning can be done at the three different levels in the
organization;
(a) Corporate ;
(b) Strategic business unit (SBU); and
(c) Product/market.

Types of external environment;

A business unit has to monitor important and relevant macro-environmental factors

and micro-environmental factors. The major types of macro-environmental factors
which affect all the firms in business marketing are;
 Technological,
 Political,
 Economic,
 Regulatory or legal, and
 Social.

The major types of micro-environmental factors which affect all the firms in business
marketing are;
 Customers,
 Competitors, and
 Suppliers.
The major purpose of scanning external macro- and micro-environmental
factors for a company is to have insight into marketing opportunities and
threats.

A marketing opportunity is an area of buyer need or potential interest in which

a company can perform profitably.

Some external environmental developments represent threats to an

organization. An environmental threat is a challenge posed to a company by an
unfavorable trend or development that may lead to reduction in sales and or
profit, if a company does not take a corrective action.

 Analyzing the Internal Environment (for assessment of strengths and

weaknesses)
We have seen that a company should determine opportunities in the external
environment. Attractive opportunities need to be matched with the strengths of
the company to ensure success. An assessment of strengths and weaknesses is,
therefore, an essential task that is performed at different levels of an
organization-corporate, SBU, and product/market.
Strengths are the competitive advantages which a company can use to gain
leverage in the marketplace.
Weaknesses are constraints that hinder movements in certain directions.
 Assessment of strengths and weaknesses should be done by a firm in
comparison to its competitors. There are many ways to measure a company’s
strengths and weaknesses relative to competitors. These are;
i. Current marketing strategy.
ii. Past performance.
iii. Marketing effectiveness or orientation and
iv. Marketing environment.

Current marketing strategy will answer questions like what are our target
markets and how each target market is served. It will also indicate which
of the marketing-mix elements (4ps) dominate in the current marketing
strategy and how the company’s marketing strategy compares with that of
competitors.

To measure past performance 3 types of analysis should be undertaken;

i. Product performance.
ii. Market performance
iii. Financial analysis.

Marketing orientation or effectiveness indicates to what extent the

company is market- or customer oriented.

Marketing environment, as discussed earlier includes macro- and

micro-external environmental factors. Not all the environmental
factors are relevant to a business unit. The company should first
select those environmental factors that are relevant to its business
and then monitor the impact of those factors on its business.

 Developing SBU’S Objectives and goals

We have already discussed the corporate objectives and goals. We shall now
discuss development of objectives and goals at business unit or SBU level. To
understand the relationship between corporate level mission objectives and
goals, and SBU level mission, objectives and goals.
The framework is applicable to large companies who have many SBU’S. Each
SBU may have one or more products or markets. However, for a small
company with a few related products, corporate and SBU mission, objectives
and goals may be the same.

Formulating strategies at business unit level

The objectives and goals indicate what a business unit wants to achieve. A
strategy answers the question-How to achieve the objectives and goals? Each
business unit should formulate its business strategy. There are many types of
strategies available. These are summarized Michael Porter into three generally-
applicable (i.e. generic) strategies. They are: (a) Overall cost leadership; (b)
differentiation; and (c) focus. Porter’s choice of strategy is based on two
factors; (a) the strategic target the business unit aims at, and (b) the strategic
advantage that the business unit has in aiming at the target.

 Strategic alliance
 Strategic alliances are beginning to have an important role in the strategy of
leading companies. Strategic alliances include a formal long-term linkage,
funded with direct co-investments by two or more companies, that pool
complementary capabilities and resources to achieve generally agreed
objectives.
Some of the strategic reasons for the partnering companies to enter into
alliances are:
1. Fill gaps and have access to markets and technology;
2. Achieve economies of scale by combining manufacturing, marketing,
or R&D activities;
3. Reduce risk and entry costs into new markets;
4. Move quickly to introduce new products to markets;
5. Overcome legal and trade barriers. Because of these reasons strategic
alliances are booming across various products and services.

DEVELOPING A INDUSTRIAL MARKETING PLAN

After the corporate and the business unit (or SBU) strategy, the marketing
plan (which includes marketing strategy) should be developed at the
functional level. A guide to business marketing plan is shown below;

The marketing plan is normally prepared by the head of the marketing

function in the business firm. A marketing plan is an output of marketing
planning process which includes the following steps:

(a) Analyzing marketing situations;

(b) Segmenting, targeting and positioning in business marketing;
(c) Developing marketing strategies;
(d) Implementing and controlling the marketing plan.

A marketing plan is a written document that is prepared after a

business marketer goes through the four steps of the marketing
planning process. Ideally, to prepare an effective marketing plan, the
head of marketing may need five to six months. But sometimes, in
practice, lesser time is given to the marketing head due to certain
prevailing situations. For this, the marketing head has to depend on the
information obtained from the company’s past data on sales, prices,
existing customers, and also, on business magazines, journals and the
internet.

Guide to Business Marketing Plan

Section Contents
Situational analysis Market situation includes data on market size,
growth, sales, market share and profits (or
contributions) for the past 3/5 years.
SWOT and issues analysis SWOT analysis includes identifying major
strengths, weaknesses, opportunities, and
threat faced by the product.
Objectives and goals Determine sales, market share, and profit
goals considering the environmental and
 issues analysis done earlier.
Marketing strategy Selection of target market segments,
positioning strategy relative to competitors.
Action plan Each marketing strategy element is broken
down to specific actions to answer: who will
take the specific action, by when and at what
cost?

Marketing budget Building the revenue and expenditure budget.

Implementation and control Building marketing organization to

implement the marketing plan. Control
includes periodic review of actual
performance against goals and taking
corrective actions, if required.
Contingency plans Some firms prepare contingency plans in case
uncertain situations arise.

Industrial Market Segmentation

The process of separating an industrial market (business market) into groups of
customers or prospects such that the members of each resulting group are more like the other
members of that group than they are like members of other segments.

Industrial market segmentation is a complex procedure. The market segmentation provides

benefits like determining market attractiveness and opportunities by analyzing the market.
The segmentation should be based on important criteria like measurability, potential,
compatibility, stability, and accessibility. Segmentation can be based on macro and micro
variables.

The macro bases of segmentation are based on the industry and organizational characteristics.
Organizational characteristics include demographics, end-use markets, and product
applications. Micro bases for segmentation include purchasing situations, and customer-
oriented variables such as customer experience, customer interaction needs, and customer
benefits.

The nested approach divides the market on the basis of five basic criteria like demographics,
operational variables, purchasing approaches, situational factors, and buyer's personal
characteristics.

A market segment is commonly defined as "a group of present or potential customers with
some common characteristics which is relevant in explaining / predicting their response to a
supplier's marketing stimuli". This definition originated by Wind and Cardozo in 1974. In
another definition "segmentation is about identifying and targeting customer groups through
their needs and wants, as well as determining which customers and needs to address and with
what manner and intensity".

A Generic Principle

One of the recommended approaches in segmentation is for a company to decide whether it

wants to have a limited number of products offered too many segments or many products
offered to a limited number of segments. Businesses are encouraged not to offer many product
lines to many segments, as this would dilute their focus and stretch their resources too much.

The advantage in attempting this approach is that although it may not work at all times
Eg.s: Coca Cola and some of the General Electric businesses. The drawback is that the
business would risk loosing business as soon as a weakness in its supply chain or in its
marketing forces it to withdraw from the market. Coca Cola's attempt to sell its Mineral
bottled water in the UK turned out to be a flop mainly because it tries to position this "purified
tap water" alongside mineral water of other brands

Two-Stage Market Segmentation

Industrial market segmentation based on broad two-step classifications of macro-segmentation

and micro-segmentation. This model is one the most common methods applied in industrial
markets today. It is sometimes extended into more complex models to include multi-step and
three- and four-dimensional models.

Macro-segmentation

This approach consists of identifying the macro-variables on the basis of industry

characteristics or organizational characteristics such as type, size, geographic location or
product application. Most of the macro-segmentation variables are easy to identify. The
information on macro-variables can be obtained though secondary sources of information
such as the internet, trade directories, business magazines, government publications and
company sources. It centers on the characteristics of the buying organization, thus dividing the
market by:

 Company / organization size: One of the most practical and easily identifiable criteria,
it can also be good rough indicator of the potential business for a company. However,
it needs to be combined with other factors to draw a realistic picture.
 Geographic location: Is equally as feasible as company size. It tells a company a lot
about culture and communication requirements. For eg. A company would adapt a
different bidding strategy with an Asian company than an American customer.
Geographic location also relates to culture, language and business attitudes. For eg.,
Middle Eastern, European, North American, South American and Asian companies
will all have different sets of business standards and communication requirements.
 SIC core (standard industry classification): Which originated in the US, can be a
good indicator for application-based segmentation. However it is based only on
relatively standard and basic industries, and product or service classifications such as
sheet metal production, springs manufacturing, construction machinery, legal services,
cinema's etc. Many industries that use a number of different technologies or have
innovative products are classified under the 'other' category, which does not bring
much benefit if these form the customer base. Eg.s is access control equipment,
thermal spray coatings and uninterruptible power supply systems.
 Purchasing situation: New task, modified re-buy or straight re-buy. This is another
relatively theoretical and unused criterion in real life. As a result of increased
competition and globalization in most established industries, companies tend to find
focus in a small number of markets, get to know the market well and establish long-
term relationship with customers. The general belief is, it is cheaper to keep an
existing customer than to find a new one. When this happens, the purchase criteria are
more based on relationship, trust, technology and overall cost of purchase, which
dilutes the importance of this criterion.
 Decision-making stage. This criterion can only apply to newcomers. In cases of long-
term relationship, which is usually the objective of most industrial businesses, the
qualified supplier is normally aware of the purchase requirement, i.e. they always get
into the bidding process right at the beginning. & "with increasing turbulence in the
marketplace, it is clear that firms have to move away from transaction-oriented
marketing strategies and move towards relationship-oriented marketing for enhanced
performance".
  Benefit segmentation: The product's economic value to the customer, which is one of
the more helpful criteria in some industries. It "recognizes that customers buy the same
products for different reasons, and place different values on particular product
features. For eg. The access control industry markets the same products for two
different value sets: Banks, factories and airports install them for security reasons, i.e.
to protect their assets against. However, sports stadiums, concert arenas and the
London Underground installs similar equipment in order to generate revenue and/or
cut costs by eliminating manual ticket-handling.
 Type of institution: Banks would require designer furniture for their customers while
government departments would suffice with functional and durable sets. Hospitals
would require higher hygiene criteria while buying office equipment than utilities.
And airport terminals would need different degrees of access control and security
monitoring than shopping centers. However, type of buying institution and the
decision-making stage can only work on paper. As institutional buyers cut
procurement costs, they are forced to reduce the number of suppliers, with whom they
develop long-term relationships. This makes the buying institution already a highly
experienced one and the suppliers are normally involved at the beginning of the
decision-making process. This eliminates the need to apply these two items as
segmentation criteria.
 Customers' business: Potential assuming supply can be guaranteed and prices are
acceptable by a particular segment. For eg., 'global accounts' would buy high
quantities and are prepared to sign long-term agreements; 'key accounts' medium-sized
regional customers that can be the source of 30% of a company's revenue as long as
competitive offering is in place for them; 'direct accounts' form many thousands of
small companies that buy mainly ob price but in return are willing to forego service.
 Purchasing strategies: Global vs. local decision-making structure, decision-making
power of purchasing officers vs. engineers or technical specifies.
 Supply Chain Position: A customer' business model affects where and how they buy.
If he pursues a cost leadership strategy, then the company is more likely to be
committed to high-volume manufacturing, thus requiring high-volume purchasing. To
the supplier, this means constant price pressure and precise delivery but relatively
long-term business security, e.g. in the commodities markets. But if the company
follows a differentiation strategy, then it is bound to offer customised products and
services to its customers. This would necessitate specialised high-quality products
from the supplier, which are often purchased in low volumes, which mostly eliminates
stark price competition, emphasises on functionality and requires relationship-based
marketing mix.

Micro-segmentation

On the other hand requires a higher degree of knowledge. While macro-segmentation put
the business into broad categories, helping a general product strategy, micro-segmentation is
essential for the implementation of the concept. "Micro-segments are homogenous groups of
buyers within the macro-segments" Macro-segmentation without micro-segmentation cannot
provide the expected benefits to the organization. Micro-segmentation focuses on factors that
matter in the daily business.The most common criteria include the characteristics of the
decision-making units within each macro-segment

E.g. - Buying decision criteria (product quality, delivery, technical support, price, and supply
continuity). "The marketer might divide the market based on supplier profiles that appear to
be preferred by decision-makers, e.g. high quality – prompt delivery – premium price vs.
standard quality – less-prompt delivery – low price".

 Purchasing strategy: Which falls into two categories, according to Hutt and Speh:
First, there are companies who contact familiar suppliers (some have vendor lists) and
place the order with the first supplier that fulfils the buying criteria. These tend to
 include more OEM's than public sector buyers. Second, organizations that consider a
larger number of familiar and unfamiliar suppliers, solicit bids, examine all proposals
and place the order with the best offer. Experience has shown that considering this
criterion as part of the segmentation principles can be highly beneficial, as the supplier
can avoid unnecessary costs by, for eg. Not spending time and resources unless
officially approved in the buyer's vendor list.
 Structure of the decision-making: Unit can be one of the most effective criteria.
Knowing the decision-making process has been shown to make the difference between
winning and losing a contract. If this is the case, the supplier can develop a suitable
relationship with the person / people that has / have real decision-making power. For
eg., the medical equipment market can be segmented on the basis of the type of
institution and the responsibilities of the decision makers, according to Hutt and Speh.
A company that sells protective coatings for human implants would adapt a totally
different communication strategy for doctors than hip-joint manufacturers.
 Perceived importance of the product: To the customer's business (e.g. automotive
transmission, or peripheral equipment, e.g. manufacturing tool)
 Attitudes towards the supplier: Personal characteristics of buyers (age, education, and
job title and decision style) play a major role in forming the customers purchasing
attitude as whole. Is the decision-maker a partner, supporter, neutral, adversarial or an
opponent? Industrial power systems are best "sold" to engineering executive than
purchasing managers; industrial coatings are sold almost exclusively to engineers;
matrix and raw materials are sold normally to purchasing managers or even via web
auctions.

The above criteria can be highly beneficial depending on the type of business. However, they
may be feasible to measure only in high-capital, high-expense businesses such as corporate
banking or aircraft business due to high cost associated with compiling the desired data.
"There are serious concerns in practice regarding the cost and difficulty of collecting
measurements of these micro-segmentation characteristics and using them".

The prerequisite to implementing a full-scale macro- and micro-segmentation concept is the

company's size and the organizational set-up. A company needs to have beyond the certain
number of customers for a segmentation model to work. Smaller companies would not need a
formal segmentation model as they know their customers in person.

Ironically, Webster states that "the strategic implications of micro-segmentation lie primarily
in promotional strategy. ….. Decisions influenced by micro-segments include selecting
individuals for the sales call, design of sales presentations and selecting the advertising
media". However, promotion should not be seen in isolation, as it cannot facilitate log-lasting
success, unless supported on all the relevant functions such as product, price and place. One
only needs to consider that purchasing criteria (part of micro-segmentation) includes factors
such as product quality, price and delivery, which are directly relevant to product, price and
place.

Nested Approach to Segmentation

The application of all the criteria recommended by Wind and Cardozo and subsequent
scholars who expanded upon their two-stage theory became increasingly difficult due to the
complexity of modern businesses, Bonoma and Shapiro suggest that the same / similar criteria
be applied in multi-process manner to allow flexibility to marketers in selecting or avoiding
the criteria as suited to their businesses. "They proposed the use of the following five general
segmentation criteria which they arranged in a nester hierarchy:

i) Demographics: industry, company size, customer location

ii) Operating variables: company technology, product/brand use status, customer capabilities
iii) Purchasing approaches: purchasing function, power structure, buyer-seller relationships,
purchasing policies, purchasing criteria
iv) Situational factors: urgency of order, product application, size of order.

 Demographics

The outermost nest contains the most general segmentation criteria, demographics. These
variables give abroad description of the company and relate to general customer needs and
usage patterns. They can be determined without visiting the customer and include industry,
company size, and customer location.

 The Industry.

Knowledge of the industry affords a broad understanding of customer needs and perceptions
of purchase situations. Some companies, such as those selling paper, office equipment,
business-oriented computers, and financial services, market to a wide range of industries. For
these, industry is an important basis for market segmentation. Hospitals, for example, share
some computer needs and yet differ markedly as a customer group from retail stores.

Marketers may wish to subdivide individual industries. For example, although financial
services are in a sense a single industry, commercial banks, insurance companies, stock
brokerage houses, and savings and loan associations all differ dramatically. Their differences
in terms of product and service needs, such as specialized peripherals and terminals, data
handling, and software requirements, make a more detailed segmentation scheme necessary to
sell computers to the financial services market.

 Company Size.

The fact that large companies justify and require specialized programs affects market
segmentation. It may be, for example, that a smaller supplier of industrial chemicals, after
segmenting its prospective customers on the basis of company size, will choose not to
approach large companies whose volume requirements exceed its own production capacity.
  Customer Location.

The third demographic factor, location, is an important variable in decisions related to

deployment and organization of sales staff. A manufacturer of heavy-duty pumps for the
petrochemical industry, for example, would want to provide good coverage in the Gulf Coast,
where customers are concentrated, while putting little effort into New England. Customer
location is especially important when proximity is a requirement for doing business, as in
marketing products of low value-per-unit-weight or volume (such as corrugated boxes or
prestressed concrete), or in situations where personal service is essential (as in job shop
printing).

A marketer can determine all of these demographic variables easily. Industry-oriented and
general directories are useful in developing lists of customers in terms of industry, size, and
location. Government statistics, reports by market research companies, and industry and trade
association publications provide a great deal of demographic data.

Many companies base their industrial marketing segmentation approach on demographic data
alone. But while demographics are useful and easily obtained, they do not exhaust the
possibilities of segmentation. They are often only a beginning.

 Operating Variables

The second segmentation nest contains a variety of segmentation criteria called “operating
variables.” Most of these enable more precise identification of existing and potential
customers within demographic categories. Operating variables are generally stable and
include technology, user/nonuser status (by product and brand), and customer capabilities
(operating, technical, and financial).

 Company Technology.

A company’s technology, involving either its manufacturing process or its product, goes a
long way toward determining its buying needs. Soda ash, for example, can be produced by
two methods that require different capital equipment and supplies. The production of Japanese
color televisions are highly automated and use a few large, integrated circuits. In the United
States, on the other hand, color TV production once involved many discrete components,
manual assembly, and fine tuning. In Europe, production techniques made use of a hybrid of
integrated circuits and discrete components. The technology used affects companies’
requirements for test gear, tooling, and components and, thus, helps determine a marketer’s
most appropriate marketing approach.

 Product and Brand-Use Status.

One of the easiest ways and in some situations the only obvious way, to segment a market is
by product and brand use. Users of a particular product or brand generally have some
characteristics in common; at the very least, they have a common experience with a product or
brand.

Manufacturers who replace metal gears with nylon gears in capital equipment probably share
perception so frisk, manufacturing process or cost structure, or marketing strategy. They
probably have experienced similar sales presentations. Having used nylon gears, they share
common experiences including, perhaps, similar changes in manufacturing approaches

Current customers are a different segment from prospective customers using a similar product
purchased elsewhere. Current customers are familiar with a company’s product and service,
and company managers know something about customer needs and purchasing approaches.
Some companies’ marketing approaches focus on increasing sales volume from existing
customers, either by customer growth or by gaining a larger share of the customer’s business,
rather than on additional sales volume from new customers. In these cases, industrial sales
managers often follow a two-step process: first they seek to gain an initial order on trial, and
then they seek to increase the share of the customer’s purchases. Banks are often more
committed to raising the share of major customers’ business than to generating new accounts.

Sometimes it is useful to segment customers not only on the basis of whether they buy from
the company or from its competitors, but also, in the latter case, on the identity of competitors.
This information can be useful in several ways. Sellers may find it easier to lure customers
from competitors that are weak in certain respects. When Bethlehem Steel opened its state-of-
the-art Burns Harbor plant in the Chicago area, for example, it went after the customers of one
local competitor known to offer poor quality.

 Customer Capabilities.

Marketers might find companies with known operating, technical, or financial strengths and
weaknesses to be an attractive market. For example, accompany operating with tight materials
inventories would greatly appreciate a supplier with are liable delivery record. And customers
unable to perform quality-control tests on incoming materials might be willing to pay for
supplier quality checks. Some raw materials suppliers might choose to develop a thriving
business among less sophisticated companies, for which lower-than-usual average discounts
well compensate added services.

Technically weak customers in the chemical industry have traditionally depended on suppliers
for formulation assistance and technical support. Some suppliers have been astute in
identifying customers needing such support and in providing it in a highly effective manner.

Technical strength can also differentiate customers. Digital Equipment Corporation for many
years specialized in selling its minicomputers to customers able to develop their own
software, and Prime Computer sold computer systems to business users who did not need the
intensive support and “hand holding” offered by IBM and other manufacturers. Both
companies used segmentation for market selection.

 Purchasing Approaches

One of the most neglected but valuable methods of segmenting an industrial market involve
consumers’ purchasing approaches and company philosophy. The factors in this middle
segmentation nest include the formal organization of the purchasing function, the power
structures, the nature of buyer-seller relationships, the general purchasing policies, and the
purchasing criteria.

 Purchasing Function Organization.

The organization of the purchasing function to some extent determines the size and operation
of a company’s purchasing unit. A centralized approach may merge individual purchasing
units into a single group, and vendors with decentralized manufacturing operations may find it
difficult to meet centralized buying patterns. To meet these different needs, some suppliers
handle sales to centralized purchasers through so-called national account programs and those
to companies with a decentralized approach through field-oriented sales forces.

 Power Structures.

These also vary widely among customers. The impact of influential organizational units varies
and often affects purchasing approaches. The powerful financial analysis units at General
Motors and Ford may, for example, have made these companies unusually price-oriented in
their purchasing decisions. Or a company may have a powerful engineering department that
strongly influences purchases; a supplier with strong technical skills would suit such a
customer. A vendor might find it useful to adapt its marketing program to customer strengths,
using one approach for customers with strong engineering operations and another for
customers lacking these.

 Buyer-Seller Relationships.

A supplier probably has stronger ties with some customers than with others. The link may be
clearly stated. A lawyer, commercial banker, or investment banker, for example, might define
as an unattractive market segment all companies having as a board member the representative
of a competitor.

 General Purchasing Policies.

A financially strong company that offers a lease program might want to identify prospective
customers who prefer to lease capital equipment or who have meticulous asset management.
When AT&T could lease but not sell equipment, this was an important segmentation criterion
for it. Customers may prefer to do business with long-established companies or with small
independent companies, or may have particularly potent affirmative action purchasing
programs (minority-owned businesses were attracted by Polaroid’s widely publicized social
conscience program, for example). Or they may prefer to buy systems rather than individual
components.

A prospective customer’s approach to the purchasing process is important. Some purchasers

require an agreement based on supplier cost, particularly the auto companies, the U.S.
government, and the three large general merchandise chains—Sears, Roebuck; Montgomery
Ward; and J.C. Penney. Other purchasers negotiate from a market-based price, and some use
bids. Bidding is an important method for obtaining government and quasi-government
business, but because it emphasizes price, bidding tends to favor suppliers that, perhaps
because of a cost advantage, prefer to compete on price. Some vendors might view purchasers
who choose suppliers via bidding as desirable, while others might avoid them.

 Purchasing Criteria.

The power structure, the nature of buyer-seller relationships, and general purchasing policies
all affect purchasing criteria. Benefit segmentation in the consumer goods market is the
process of segmenting a market in terms of the reasons why customers buy. It is, in fact, the
most insightful form of consumer goods segmentation because it deals directly with customer
needs. In the industrial market, consideration of the criteria used to make purchases and the
application for these purchases, which we consider later, approximate the benefit
segmentation approach.

 Situational Factors

Up to this point we have focused on the grouping of customer companies. Now we consider
the role of the purchase situation, even single-line entries on the order form.

Situational factors resemble operating variables but are temporary and require a more detailed
knowledge of the customer. They include the urgency of order fulfillment, product
application, and the size of order.
  Urgency of Order Fulfillment.

It is worthwhile to differentiate between products to be used in routine replacement or for

building a new plant and those for emergency replacement of existing parts. Some companies
have found a degree of urgency useful for market selection and for developing a focused
marketing-manufacturing approach leading to a “hot-order shop”—a factory that can supply
small, urgent orders quickly.

A supplier of large-size, heavy-duty stainless steel pipe fittings, for example, defined its
primary market as fast-order replacements. A chemical plant or paper mill needing to replace
a fitting quickly is often willing to pay a premium price for a vendor’s application
engineering, for flexible manufacturing capacity, and for installation skills that would be
unnecessary with routine replacement parts.

 Product Application.

The requirements for a 5-horsepower motor used in intermittent service in a refinery will
differ from those of a 5-horsepower motor in continuous use. Requirements for an
intermittent-service motor will vary depending on whether its reliability is critical to the
operation or safety of the refinery. Product application can have a major impact on the
purchase process and purchase criteria and thus on the choice of vendor.

 Size of Order.

Market selection can begin with the individual line entries on the order form. A company with
highly automated equipment might segment the market so that it can concentrate only on
items with large unit volumes. A non-automated company, on the other hand, might want only
small-quantity, short-run items. Ideal for these vendors would be an order that is split up into
long-run and short-run items. In many industries, such as paper and pipe fittings, distributors
break up orders in this way.

Marketers can differentiate individual orders in terms of product uses as well as users. The
distinction is important; users may seek different suppliers for the same product under
different circumstances. The pipe-fittings manufacturer that focused on urgent orders is a
good example of a marketing approach based on these differences.

Situational factors can greatly affect purchasing approaches. General Motors, for example,
makes a distinction between product purchases—that is, raw materials or components for a
product being produced—and non-product purchases. Urgency of order fulfillment is so
powerful that it can change both the purchase process and the criteria used. An urgent
replacement is generally purchased on the basis of availability, not price.

The interaction between situational factors and purchasing approaches is an example of the
permeability of segmentation nests. Factors in one nest affect those in other nests. Industry
criteria, for instance, an outer-nest demographic description, influence but do not determine
application, a middle-nest situational criterion. The nests are a useful mental construct but not
a clean framework of independent units because in the complex reality of industrial markets,
criteria are interrelated.

The nesting approach cannot be applied in a cookbook fashion but requires, instead, careful,
intelligent judgment.
  Buyers’ Personal Characteristics

People, not companies, make purchase decisions, although the organizational framework in
which they work and company policies and needs may constrain their choices. Marketers for
industrial goods, like those for consumer products, can segment markets according to the
individuals involved in a purchase in terms of buyer-seller similarity, buyer motivation,
individual perceptions, and risk-management strategies.

Some buyers are risk averse, others risk receptive. The level of risk a buyer is willing to
assume is related to other personality variables such as personal style, intolerance for
ambiguity, and self-confidence. The amount of attention a purchasing agent will pay to cost
factors depends not only on the degree of uncertainty about the consequences of the decision
but also on whether creditor blame for these will accrue to him or her. Buyers who are risk
averse are not good prospects for new products and concepts. Risk-averse buyers also tend to
avoid untested vendors. Some buyers are meticulous in their approach to buying—they shop
around, look at a number of vendors, and then split their order to assure delivery. Others rely
on old friends and past relationships and seldom make vendor comparisons. Companies can
segment a market in terms of these preferences.

Data on personal characteristics are expensive and difficult to gather. It is often worthwhile to
develop good, formal sales information systems to ensure that sales people transmit the data
they gather to the marketing department for use in developing segmented marketing strategies.
One chemical company attributes part of its sales success to its sales information system’s
routine collection of data on buyers. Such data-gathering efforts are most justified in the case
of customers with large sales potential.

Target marketing

Refers to a concept in marketing which helps the marketers to divide the market into
small units comprising of like-minded people. Such segmentation helps the marketers to
design specific strategies and techniques to promote a product amongst its target market. A
target market refers to a group of individuals who are inclined towards similar products and
respond to similar marketing techniques and promotional schemes.

Target markets can include end user companies, procurement managers, company bosses,
contracting companies and external sales agents. Audiences, however, can include individuals
that have influence over purchasing decision, but may not necessarily buy a product
themselves, e.g. design engineers, architects, project managers and operations managers, plus
those in target markets. Basis of target marketing is as follows:

 Age
 Gender
 Interests
 Geographic location
 Need
 Occupation
Why target marketing is needed
 Organizations can use similar kind of strategies to promote their products within a
target market
 They can adopt a more focused approach in case of target marketing. They know their
customers well and thus can reach out to their target audience in the most effective
way.
How to select the target market
It is essential for the organizations or marketers to identify the set of people whom they
want to target. Marketers must understand the needs and expectations of the individuals to
create its target market. The target audience must have similar needs, interests and
expectations. Similar products and brands should entice the individuals comprising the target
market. Same taglines and advertisements attract the attention of the target audience and
prompt them to buy.
To select a target market, it is essential for the organizations to study the following factors:

 Understand the lifestyle of the consumers

 Age group of the individuals

 Income of the consumers

 Spending capacity of the consumers

 Education and profession of the people

 Gender

 Mentality and thought process of the consumers

 Social status

 Kind of environment individuals are expressed

Positioning

The process of creating an image of a product in the minds of the consumers is called as
positioning. Positioning helps us to create first impression of brands in the minds of target
audience. In simple words positioning helps in creating a perception of a product or service
amongst the consumers. Positioning is a marketing concept that outlines what a business
should do to market its product or service to its customers. In positioning, the marketing
department creates an image for the product based on its intended audience. This is created
through the use of promotion, price, place and product. The more intense a positioning
strategy, typically the more effective the marketing strategy is for a company. A good
positioning strategy elevates the marketing efforts and helps a buyer move from knowledge of
a product or service to its purchase.

Target Market Analysis

The best start for any positioning analysis is gaining a thorough knowledge of a product or
service's target market. This is the group of people or businesses that will best benefit from the
use of the product or service. With a good idea of the wants, needs and interests of a product
or service's target market, a good marketing team can help develop a positioning statement to
help reach as much of the target market as possible.
 Positioning in Advertisements
Advertisements are usually the first places businesses position themselves. A cosmetics
marketing department, for example, must determine who they are targeting and what
consumer need is being met. If the intended target is African American teenagers, what type
of need should the cosmetics fill? If the cosmetics line is trying to help teenage girls overcome
acne issues, the person in the ad might be one of a younger African American physician who
teaches girls how to battle acne with the use of these cosmetics. To note the importance of
positioning, this same type of advertisement might not work if the intended audience of the
cosmetics line was older Caucasian women trying to look younger.
 Positioning in Sales Locations
Reaching the customer is not simply a matter of advertising, it is also a matter of choosing the
right channels for distribution. If a majority of your target market lives in an urban area with
only public transportation available to them, having your product in rural areas where a
private automobile is needed for transport would not equal sales success. Place or position
your product or service as close to the target market as possible. Create similar advertisements
in store as the ones seen out of store to create an overall identity for your brand.
 Positioning through Price
It should be noted that there is a large amount of research on the psychology of pricing in
marketing. Simply put, the price of an item tells the buyer more about the item than most
realize. Many associate a higher price with higher quality and the opposite with a lower price.
Additionally, if a product is positioned as a good alternative to high-priced brands, the
marketing department must price it in the middle of the market to avoid a comparison to the
cheapest end of the spectrum.

CHAPTER-4 PRODUCT, PRICING STRATEGIES AND NEW PRODUCT

DEVELOPMENT

STRATEGIES FOR EXISTING PRODUCTS

A successful marketing methods used for many years can provide diminishing returns
once firm saturated an audience. Inorder to reaching new customer they should review
marketing mix to determine how they can increase sales by adding new promotions or
modifying existing strategies. The following are strategies,

 Review the four P’s

 Increase customer contact
 Review distribution channels
 Segment the market
 Test new media

1.REVIEW THE FOUR P’S:

Review the four P’s of product, price, promotion and place to determine if firm need to
make any strategic changes to how they sell before they make any tactical changes to how
they advertise.

2.INCREASE CUSTOMER CONTACT:

If firm have strategy of keeping direct communication with customers, consider doing so,
generate email and physical address lists through the use of surveys, contests, rebates and
other promotions.
3.REVIEW DISTRIBUTION CHANNELS:
Examine the pros and cons of using wholesalers, retailers, distributors, sales agencies or
reps, online selling, direct mail and response print , Television and radio strategies . Analyze
the expense involved in each approach.

4.SEGMENT THE MARKET:

Target different customers demographics while protecting brand by segmenting the market
.

5.TEST NEW MEDIA:

A magazine or radio station that brought lots of customers may have reached its saturation
point and will only deliver incremental sales results going forward.

STAGES OF PRODUCT LIFE CYCLE AND STRATEGIES:

The stages of product life cycle are as follows,
 Introduction
 Growth
 Maturity
 Decline

1.INTRODUCTION:
Introduction stage is marked with slow growth in sales and very little or no profit.
Following are the strategies,

 Rapid skimming strategy

 Slow skimming strategy
 Rapid penetration
 Slow penetration

2.GROWTH :
This is the stage of rapid market acceptance. The strategies are aimed at sustaining market
growth as long as possible. Following are the strategies,

 Product quality and features improvement

 Adding new models and improving styling
 Entering the market segments
 Designing , improving, widening distribution network
 Shifting advertising and additional promotional efforts

3.MATURITY:
 In this stage, competitors are entered the market. This is severe fight among them for
more market share. The following are strategies,

 To do nothing
 Market modification
 Product modification
 Marketing mix modification

4.DECLINE:
Companies formulates various strategies to manage the decline stage . The strategies are,

 Continue with the original product

 Continue products with improvement
 Drop the product

PRICING STRATEGIES
One of four major elements of the marketing mix is price. Pricing is an important
strategic issues because it is related to product positioning . furthermore ,pricing affects other
marketing mix elements such as product features, channel decisions, and promotion.

Meaning:
A pricing strategy takes into account segments, ability to pay, market conditions,
competitor actions, trade margins and input costs, among others. It is targeted at the defined
customers and against competitors.

The following is the general sequence of steps that might be followed for developing the
pricing of a new product:

1.Developing marketing strategy:

Perform marketing analysis, segmentation, targeting, and positioning

2. Make marketing mix decisions:

Define the product , distribution, and promotional tactics.

3.Estimate the demand curve:

Understand how quantity demand varies with price

4.Calculate cost:
Include fixed and variable costs associated with the product
5.Undestand environmental factors:
Evaluate likely competitor actions , understand legal constraints, etc

6.Set pricing objectives:

For example , profit maximization, revenue maximization, or price stabilization

7.Determine pricing:
Using information collected in the above steps, select a pricing method, develop the pricing
structure and define discounts.

PRICING POLICIES
The different pricing policies for the products are,

 Skim pricing
 Penetration pricing
 Pricing methods
 Price discounts

1.Skim pricing:
Attempts to “skim the cream” off the top of the market by setting a high price and
selling to those customers who are less price sensitive, skimming is more appropriate
when,
 Demand is expected to be relative
 Large cost savings are not expected at high volumes
 The company does not have the resources to finance the large capital expenditures

2.Penetration pricing:
Pursues the objectives of quantity maximization by means of a low price. It is most
appropriate when ,

 demand is expected to be highly elastic

 large decreases in cost are expected as cumulative volume increases
 there is a threat of impending completion

3.Pricing methods:
To set the specific price level that achieves their pricing objectives, mangers may make use
of several pricing methods these methods include ,

 Cost plus pricing

 Target return pricing
 Value based pricing
  Psychological pricing

4.Price discounts:
The normally quoted price to end users is known as the list price .This price usually is
discounted for distribution channel members and some end users .like

 Quantity discount
 Cumulative quantity discount
 Seasonal discount
 Cash discount
 Trade discount
 Promotional discount

According to O’Conner (1998), the impact of technology on marketing is dramatic. The

industrial countries of today represent a growing information society which is based on
technology. For an organisation “information is the most precious of modern corporate
resources and its exploitation the key to competitive survival, the spotlight falls on marketing”
(Mazur, 1994). To gather, handle and analyse the high amount of information, companies rely
on technology. 1.5 billion pounds are invested on marketing related IT applications just in the
UK (Leverick, 1998), which makes 15 percent of the total amount spent on IT, and this
percentage is still increasing.

The aim of this paper is to evaluate the impact of all potential technologies on the marketing
strategy, using a variety of industry and organisational examples, and addressing the
implications and potentials for the future.

Therefore, it is necessary to firstly consider the range of current and potential future
technologies that may or can be utilised in the company’s marketing function. Examples of
how ‘real’ companies use this technology need to be provided and appropriate legal issues
have to be discussed. Finally, possible technologies for the fictitious Business Technology
PLC’s marketing function are suggested including a financial plan.

A wide range of technologies could be identified including hardware, software and

communication technology. It could be shown that technology has a strong impact on the
marketing strategy in terms of collect, handle, interchange, communicate, analyse, personalise
and customise information, leading to cost reductions, more effective marketing procedures
and improved customer satisfaction. The paper shows the technology-driven changes
regarding the marketing mix.

The use of technology by marketers is regulated by the national Data Protection Act and
European laws.
Finally, it is suggested that Business Technology PLC requires an internet presence, a
database and a multimedia presentation of its products as a first step to increase sales,
estimated set-up cost are approximately 5,500 pounds.

1 Range of current Technologies

When the first modern computer was invented, experts from IBM forecast the market demand
for such a machine for no more than half a dozen world-wide. This demonstrates that
information technology can exceed all expectations when it matures (O’Conner et al., 1998).
However, it is necessary to define the term information technology (IT). It is a “generic term
encompassing a range of technologies to capture, store, process and transmit information”
(O’Conner et al., 1998). It includes the three main technology groups of hardware, software
and telecommunications. Thus, IT includes computers, internet, videotext, mobile telephones,
digital communications, personal digital assistants (PDA) and many more.

This section presents a range of mature and emerging technologies, and provides
organisational/industrial examples of their implications and potentials.

1.1 E-commerce

The Internet allows the buying and selling of goods and services online which has led to an
enormous increase in e-commerce. In the UK, consumers spend over one billion pounds a
month online. Additionally, British firms bought goods and services for 23 billion pounds in
2001. An e-commerce website offers various benefits such as access to a global market as
goods can be sold and bought from every corner in the world. The products and services are
directly sold to the customer, making the middleman redundant. Having installed a website
that accepts payment online, customers can order and pay at any time. It also leads to
improved customer satisfaction and customer information. A well-designed homepage allows
the customer to buy, browse and ask for help. Statistical tools enable the marketers to learn
about the buying habits of their customers to provide them with the right products (DTI, e-
commerce, 2004).

A good example for personalised marketing is Amazon’s website which suggests products
based on the customer’s and other people’s previous purchases (DTI, e-marketing, 2004).
Many companies even integrate their business processes into the website. This means that
“orders come into their website, card details are processed, goods dispatched and stock re-
ordered seamlessly, dramatically reducing the costs of each sale” (DTI, e-commerce, 2004).

A further example is Rapid Racking, one of the UK’s leading suppliers of storage, racking and
shelving systems for business, commercial and industrial use. First, the company launched a
website. Later, they noticed that this was an excellent additional sales channel to sell their
storage solutions. Their fully transactional website allows customers to view stock, place
orders and pay online. A personalised login system is used to accessing orders. It also includes
the option to modify details such as customer delivery address and payment information. The
online orders now account for 8 percent of the turnover (DTI, Rapid Racking, 2004).
Another example, demonstrating the effect of the Internet and especially the use of search
engines is the small enterprise Bluesky Experience. It organises outward bound and team
building activities on their 700-acre site in Perth. To increase sales, the company launched a
website but the site only received 16 hits a week and the leads were not converting into sales.
With the help of search engines such as Google, the right search words and a pay-per-click
advertising campaign, the company increased their hits to an average of 1,000 users a week.
For each pound the company spends on marketing they receive a return of 22 pounds (DTI,
Bluesky Experience, 2004).

1.2 Email

Email offers companies a “fast, flexible and effective way of getting marketing messages
through” (DTI, e-marketing, 2004). Half of the UK’s population already has a mail account.
This channel seems to be less intrusive compared to telephone marketing. It also provides the
option to link the customer to a specific page to purchase a product immediately and to
forward or reply to the message. However, marketers need to handle this tool with caution
with respect to the company’s reputation as customers are already confronted by unsolicited
mails. To inform the customer through email incurs virtually no costs, which is one of its most
important benefits.

1.3 CD ROM

Besides computer disks, CD ROMs offer a marketers excellent opportunities to market their
products. Apple Computer, for example, developed a CD ROM which included a software
store. The user could browse for the needed program, install it and test the product. If the
customer wanted to buy the product he or she just needed to call a 800-number to provide his
credit card details. Afterwards, he received a special code which unlocked the already
installed programme (Direct Marketing, 1994).

1.4 Broadband

Broadband describes a “high capacity data-transmission system” (O’Conner et al., 1998).

Typically, speeds higher than two million bps are regarded as broadband. The communication
technology includes modems (14.4 Kbps), ISDN (144 Kbps) and ATM (up to 622 000 Kbps).

One example of a successful installation of broadband is the online retailer IrishWear.net. The
company strongly increases its internal operating efficiencies using broadband instead of a
56K dial-up internet connection. The ability to keep their website up-to-date is of prime
importance. Uploading of the website content represents a major task. The manager of
IrishWear.net states that the uploading takes a lot of time and this could even mean that the
website becomes disconnected. Broadband could reduce the time and costs involved and,
therefore, ensure that the business window does not go off-line (DTI, Irishwear.net, 2004).
1.5 Phone, Mobile Phone, Short Messaging Service

Telemarketing is another type of direct sales channel, based on a regular or cellular phone. It
can be used in two different ways: either the customer phones up the organisation e.g. calling
a free number of an insurance company (inbound), or the company phones the customer e.g.
to inform him about new products (outbound) (O’Conner, 1998).

Short Messaging Service (SMS) can be used as a further channel to reach the customer. 70
percent of the population in the UK already has a mobile phone and most people carry them
with them all of time. On the other hand, as mobile phones are a personal thing, people can
respond very negatively, to receiving unsolicited messages. Also the length of the text is
limited to 160 characters.

One positive example is the Adidas SMS campaign. The company used the 24/7 Media
Europe opt-in SMS database to send text messages to a specific demographic group. This
enabled the company to increase brand awareness and to drive users to watch the Adidas
television advertising in the first break of the Brit Awards. Through this method a precise
target audience (people in the UK aged under 30) could be contacted at a specific time (Mort
and Drennan, 2002).

Another innovative development is the Multi Messaging Service (MMS) which allows
sending more interesting multimedia messages including pictures, video-clips and music
(DTI, e-marketing, 2004).

1.6 Management Software and Database Marketing

Marketers need management information software to manage the high amount of daily data
(O’Conner, 1998). The software includes operating systems, Management Information
Systems (MIS), Decision Support Systems (DSS), Executive Information Systems (EIS) and
application software (word processing, databases, and integrated packages).

Database marketing refers to “all uses of databases for marketing purposes” (O’Conner et al.,
1998), which has become an integral part of today’s marketing function (Tapp, 2001). Data
warehouses present very large databases that hold “operational, historical and customer data
and makes it available for decision making purposes”. It is an analytical system “where the
information is a snapshot at a particular point in time”.

Most supermarket chains obtain this data through bar-code data from the checkout points.
Often the checkout systems are integrated into the entire ordering, stocking and replenishment
systems.

An interesting example of the use of data warehouses is a large US retailer. With the help of
its database, the company identified that a distinct correlation between the sales of nappies
and beer exists, just after work hours. In response, the retailer merchandised nappies closer to
beer and could increase the sales of both items.

High Technology Marketing

This unique concentration prepares future high-tech marketers to succeed in a dynamic
industry. In high-tech industries, rapid, discontinuous change is often more the norm than the
exception. Marketers have to successfully manage whirlwind product introductions, often
while simultaneously guiding the phase-out of other products within the same product line.
The Marketer's greatest value is shaping the technological products produced by the firm into
solutions that truly benefit potential customers while setting them apart from the ever-
expanding competition. High-technology marketers engage in classic marketing activities like
segmentation, targeting, positioning, and ongoing marketing support for the rest of the firm's
products. In some industries high-technology marketing resembles consulting, and some
companies may actually have internal consulting business units (3M, for example).

NEW PRODUCT CLASSIFICATION, DEVELOPMENT PROCESS AND

STRATEGY

INTRODUCTION:

New product refers to original products, product improvements, product

modifications, and new brands developed from the firm’s own research and development. One
of the major challenges in marketing planning is to develop ideas for new products and to
launch them successfully. The company will have to find replacements for its products that
have entered the declining stage. Because of changes in the customer’s tastes, technology and
competition, there is a need for marketing companies to develop new products.

For example, the old radio become obsolete and transistors, CD players were launched.
Also, many new products fall in the market for various reasons and need replacements.
Customers always want new products, and competitors will do their best to supply them,
unless the company acts fast. Once a company has carefully segmented the market, chosen its
target customers, identified their needs, and determined its market positioning, it is better to
develop new products. Marketers play a key role in the new-product ideas and working with
research and development and others in every stage of development. Every company must
develop new products. New product development shapes the company’s future. Improved or
replacement products must be created to maintain or build sales.

A company can add new products through acquisition or development. The

acquisition route can take three forms. The company can buy other companies, it can acquire
patents from other companies, or it can buy a license or franchise from another company. The
development route can take two forms, the company can develop new products in its own
laboratories, or it can contract with independent researches or new product development firms
to develop specific new products.

Booz, Allen and Hamilton identified six categories of new products:

 NEW TO THE WORLD:

An invention in the product will be done by inventor who knows how to make it
work. The average person on the street is hardly aware of anything about this new product. He
needs to be educated about it. This instantly puts the invention under this category called new-
to-the-world. It needs to be released with a manual so people know how to benefit from it.
When it starts to gain popularity it creates a whole new market of its own.

There are some advantages and disadvantages to focusing on new to the

world category. Popularity of the new products can boost the reputation of the company.
Additionally, it is possible to protect the designs through patents. In this way, the company
can make sure that the business they are getting from the products will not be stolen by
potential competitors. The disadvantage, however, is that it costs money to research and
invent. On the top of that, nothing happens overnight, it can take several months or years for
the product to fully form, yet risk is associated with its release. Sometimes the product is so
new that even its inventor has less idea about it. That can mean not being able to foresee fault.
Once released, this faulty product can leave the consumers unsatisfied and angry.

 NEW TO THE FIRM:

If a company decides to start making new products, its category will be new to
the firm. Another marketing term for it is new product line . New to the firm category can be
far more relieving than new to the world in the sense that the company does not require to
create knowledge to work on its products. But when it comes to utilizing the new to the firm
category, it is always important to choose the product carefully. It must fit the image of what
the company specialize in new products may allow a company to enter an established market
for the first time. A new category product is when a company diversified his product range
into a product area which it has never operated before. There is nothing new about these types
of products to the market , they are only new to the company.

A simple example here could be coca-cola. As we know, coca-cola is primarily a

beverage manufacturer throughout the world. Let’s assume that they decide to diversify into
snack foods and cookies. Then these types of new products would be a new category entry for
coca-cola.

 ADDITION TO EXISTING PRODUCT LINE:

New products can supplement a company’s established product lines. These are
simple line extensions, designed to flash out the product line as offered to the firm’s current
markets. For instance, MC Donald’s introduced pudina flavored burgers for Indian
consumers. The product line extension is when the company introduces an additional product
which is similar to its existing range of products. A common example of a product line
extension is when a well-known brand brings out a variation of its product in terms of size,
color, taste and so on.

The advantage of focusing on this category is that it can bring in some good
profits. At this moment, however most companies do the same through sales of Headset and
Bluetooth. One disadvantage associated with this category is that if the main product is
already expensive people may choose to get the generic version of such accessories.

 IMPROVEMENTS AND REVISIONS OF EXISTING PRODUCTS:

These are the new products that replace existing products by providing improved
performance or greater perceived value. When it comes to offering the best it is important to
improve the product for re release. Current products made better. A product improvement is
making one or more changes to an existing product that is already in the marketplace. The
change may be minor or more significant and typically involves only one or two of the
product features, in an attempt to either update the product or make it more competitive or
offer a greater consumer benefits.

For example: cars, the manufacturers tend to modify them for annual re release. Same
can be seen in all electronic items such as phones, computers and televisions. On the way, the
consumers enjoy some new additions.

Keeping with such revision can be quite tiring for a company. Huge financial
investment is also another problem. But if the industry itself has such tradition there is nothing
much the company can do. The only thing that can save them is sophistication of the product.
Example: BMW, from many years its overall shape remained constant. People did not
complain about it because they saw it as something that be owned simply because of its high-
end air.

 REPOSITIONING:

Existing products can be targeted to new markets or market segments. A

company may discover that one of its products already existing in the market has another
good usage. To make sure that profit flows from this, they can release it with the revelation.
This would put the product in the category of repositioning. Repositioned products are
products that can be targeted or changed slightly to increase sales. A product repositioning
involves taking an existing product in the marketplace and substantially changing its image or
its target market. Product repositioning is also supported by the change in the product design
and product packaging. Product repositioning is a little bit less common and usually
undertaken when the underlying product is poorly performing but has significant potential
benefits for consumers.

The advantage of repositioning a product is that it secures a firm place for it in the
market. Additionally, it attracts new customers who before did not buy it for its original
features. Moreover, researching for such aim is not at all difficult. But very few companies
actually take time to focus on this category.

 COST REDUCTIONS:

Cost reductions refers to new products that simply replace existing products in
the line, providing the customer similar performance but at a lower cost. The final new
product category really has no impact in the marketplace, as it is a cost reduction of the
existing product. This may be achieved by changing manufacturing or suppliers. New
products may be developed that provide similar performance at lower cost. This category has
to do with products that are expensive, but can be made affordable for both the company and
consumers.

Change in materials or outsourcing the jobs to developing countries is the strategy.

Such a turn can certainly bring in more consumers who before could not afford its price. The
main disadvantage is low quality, cheap materials can force the product to expire quicker. In
some cases, it may simply be tough to use.
NEW PRODUCT DEVELOPMENT PROCESS:

New product development is a task taken by the company to introduce newer

products in the market. Regularly there will arise a need in the business for new product
development. Improving and updating products is an ongoing task as consumer needs and
wants continuously change. Developing and ultimately launching a product can often make or
break a business, especially a startup business. Actually developing the tangible product or
service is only a small part of the new product development process, which includes the
complete journey from generating the initial idea to bringing the product to market.

Every entrepreneur knows that productivity is one of the key ingredients for
successful product development. The objective of product development is to cultivate,
maintain and increase a company’s market share by satisfying a consumer demand. Product
development steps vary based on the nature of the business and the management style, but
most businesses follow seven main steps in the development process. They are as follows:

1) IDEA GENERATION:

The new product development process starts with the search for ideas. New product
ideas can come from interacting with various groups and from using creativity generating
techniques. Ideas for new products can come from customers, scientists, competitors,
employees, channel members and top management. Customers needs and wants are the
logical place to start the search for ideas. The major sources of new product ideas include
internal sources customers, distributors and suppliers. Almost 55% of all new product ideas
come from internal sources according to one study. And 28% of new product ideas come from
watching and listening to customers.

Generation is the continuous and systematic quest for new product opportunities,
including updating or changing an existing product.

2) IDEA SCREENING:

The second step in new product development is idea screening. Companies have
different methods for doing this from product review committees to formal market research. It
is helpful at this stage to have a checklist that can be used to rate each idea based on the
factors required for successfully launching the product in the marketplace and their relative
importance. Against these, management can assess how well the idea fits with the company’s
marketing skills and experience and other capabilities. Finally, the management can obtain an
overall rating of the company’s ability to launch the product successfully.

A company should motivate its employees through rewards to submit their new ideas
to an idea manager. Ideas should be written down and reviewed each week by an idea
committee. The company, then sorts the proposed ideas into three groups: promising ideas,
marginal ideas and rejects. Each promising idea is researched by a committee. The surviving
ideas then move into a full scale screening process.

3) CONCEPT DEVELOPMENT AND TESTING:

The third step in new product development is concept development and testing. An
attractive idea has to be developed into a product concept. Attractive ideas must be refined
into testable product concepts. A product idea is a possible product the company might offer
to the market. As opposed to a product idea that is an idea for a product that the company can
see itself marketing to customers, a product concept is a detailed version of the idea stated in
meaningful consumer terms. This is different again from a product image which is the
consumer’s perception of an actual or potential product. Once the concepts are developed,
these need to be tested with consumers either symbolically or physically. For some concept
tests, a word or a picture may be sufficient, however a physical presentation will increase the
reliability of the concept test.

After being exposed to the concept, consumers are asked to respond to it by answering
a set of questions designed to help the company decide which concept has the strongest
appeal. The company can then project these finds to the full market to estimate sales volume.
In fact, in addition to the specific advantage of getting the customer’s response to the product
idea, this exercise incidentally helps the company to bring the product concept into clearer
focus. Concept testing helps the company to choose the best among the alternative product
concepts. Consumers are called upon to offer their comments on the precise written
description of the product concept, the attributes and expected benefits.

4) BUSINESS ANALYSIS/MARKET ANALYSIS:

This is the next step in new product development. This stage is of special importance
in the new product development process, because several vital decisions regarding the project
are taken based on the analysis done at this stage. Estimates of sales, costs and profits are
important components of business analysis and forecasts of market penetration and market
potential are essential. The strategy statement consists of three parts: the first part describes
the target market, the planned product positioning and the sales, market share and profit goals
for the first few years. The second part outlines the product’s planned price, distribution, and
marketing budget for the first year. The third part of the marketing strategy statement
describes the planned long-run sales, profit goals and the marketing mix strategy.

After management develops the product concept and marketing strategy, it can
evaluate the proposal’s business attractiveness. Management needs to prepare sales, cost and
profit projections to determine whether they satisfy company objectives. If they do, the
concept can move to the development stage. As new information comes in, the business
analysis will undergo revision and expansion. Market analysis involves a projection of future
demand, financial commitment and return. Financial specialists analyse the situation by
applying break-even analysis, risk analysis. Business analysis will prove the economic
prospects of the new product.

Analyze the product idea from a business perspective. Determine how much, if any,
competition exists for similar products. Determine the demand for the product and estimate all
costs affiliated with the product, such as development costs and operational costs to help
determine the profit margin. This analysis needs to include: whether there is a demand for the
product, a full appraisal of the costs, competition and identification of a break-even point.

5) PRODUCT DEVELOPMENT:

Product development is the introduction of new products in the present markets.

New or improved products are offered by the firm to the market so as to give better
satisfaction to the present customers, laboratory tests, technical evaluations are made strictly.
“The production department will make plans to produce the product. The marketing
department will make plans to distribute the product. The finance department will provide the
finance for introducing the new product. The advertising department will plan the
advertisements for the new product. However, all this is done as a small scale for test
marketing”.
 In this stage research and development or engineering develops the product concept
into a physical product. This step calls for a large investment. It will show whether the
product idea can be developed into a full-fledged workable product. First, R&D will develop
prototype that will satisfy and excite customers and that can be produced quickly and at
budgeted costs. When the prototypes are ready, they must be tested. Functional tests are then
conducted under laboratory and field conditions to ascertain whether the product performs
safely and effectively.

Develop a prototype of the product, then share it with a handful of good customers and
key partners. Ask them to try it out and provide feedback. The marketing team should use that
feedback to craft marketing messages and developing marketing campaign ideas, such as
email campaigns, websites, bill boards or posters, base the marketing messages on the most
common positive comments or reactions from customers and partners during the prototype
evaluation.

6) TEST MARKETING:

Test marketing means to introduce the new product on a very small scale in a very
small market. If the new product is successful in this market, then it is introduces on a large
scale. However, if the product fails in the test market, then the company finds out the reasons
for its failure. It makes necessary changes in the new product and introduces it again in a
small market. If the new product fails again the company will reject it. Test marketing reduces
the risk of large scale marketing. It is a safety device. It is very time-consuming. It must be
done especially for costly products. By test marketing, we mean what is likely to happen, by
trial and error method when a product is introduced commercially into the market. These tests
are planned and conducted in selected geographical areas, by marketing the new products. The
reactions of consumers are watched.

If the product passes the functional tests, the next step is test marketing: the stage at
which the product and the marketing program are introduced to a marketing gives the
marketer an opportunity to improve the marketing mix before going into the expense of a
product launch. The amount of test marketing varies with the type of product. Costs of test
marketing can be enormous. Make adjustments to the prototype or develop a new version, if
necessary. Develop additional prototypes for market testing. Do a small product release in
selected areas. See whether the product sells well, and evaluate why sales are high or low.
Evaluate the price and the effectiveness of the marketing messages. A small launch helps to
determine what needs to be done before an official launch.

7) COMMERCIALIZATION:

The final step in new product development is commercialization. Introducing the

product to the market, it will face high costs for manufacturing, advertising and promotion.
When the concept has been developed and tested, final decisions need to be made to move the
product to its launch into the market. Pricing and marketing plans need to be finalized and the
sales teams and distribution briefed, so that the product and company is ready for the final
stage.

At this stage production starts, marketing programme begins to operate and products
flow to the market for sale. It has to compete with the existing products to secure maximum
share in the market; and like human beings, has a life span-product life cycle. The company
will have to decide on the timing of the launch and the location. This depends a lot on the
ability of the company to bear risk and the reach of its distribution network. Today, in order to
increase speed to market; many companies are dropping this sequential approach to
development and are adopting the faster, more flexible, simultaneous development approach.
Under this approach, many company departments work closely together, overlapping the steps
in the product development process to save time and increase effectiveness.

Consider the following before launching a new product:

 Effective market research

 Ensure product quality
 Differentiation of product
 Identification of consumer needs
 Effective promotion
 Proper distribution system
 Correct pricing strategy
 Knowledge of local needs
 Choose correct time &
 Strength of sales force
New product development can be made much simpler and focused, with a higher
likelihood of success by following these steps to guide.

CONCLUSION:

Every year millions of rupees are being spent on research and development for
new products development. Huge investment is necessary as new products are the only means
of survival of a firm. New product development is a journey. It’s the road which leads to the
actual product to the market. As it is said, it all starts with an idea. Every product goes through
a number of stages before being introduced in the market. New product development will
always be a high risk undertaking. But much can be learned about effective new product
management from a review of the experiences in past new product projects and in other firms.

DISTRIBUTION CHANNELS AND MARKETING LOGISTICS

Alternative structures of Industrial Channels

Channel

A channel is an institution through which goods and services are marketed. Channels give
place and time utilities to consumers. In order to provide these and other services, channels
charge a margin. The longer the channel the more margins are added.

Channels are an integrative part of the marketer's activities and as such are very important.
They also give a very vital information flow to the exporter. As seen in chapter seven, the
degree of control one has over a channel depends on the channel type which is employed.
Whilst for developing countries, as stated earlier, channels are almost given, this is not always
the case, and as exporting becomes more and more necessary, it will not always be the case.
In deciding on channel design the following have to be considered carefully:

Market needs and preferences

The cost of channel service provision

Incentives for channel members and methods of payment

The size of the end market to be served

Product characteristics required, complexity of product, price, perishability,

packaging

Middlemen characteristics - whether they will push products or be passive

Market and channel concentration and organisation

Appropriate contractual agreements

Degree of control.

Channel structure varies considerably according to whether the product is consumer or

business to business oriented. The former tends to have a variety of formats, whereas the latter
is less complicated.

Industrial channels:

Industrial channels are usually shorter than consumer channels. Direct selling is prevalent due to
closer relationship between the manufacturer and the customer, as well as due to the nature of
the products sold.
 Figure 1

1. Manufacturer to industrial customers:

This is a common channel for expensive industrial products like heavy equipments and
machines. There needs to be close relationship between the manufacturer and the customer,
because the product affects the operations of the buyer.

The seller has to participate in many activities like installation, commissioning, quality control
and maintenance jointly with the buyer. The seller is responsible for many aspects of the
operations of the product long after the product is sold.

The nature of the product requires a continuing relationship between the seller and the buyer.
The large size of the order makes direct selling and distribution economical.

2. Manufacturer to agent to industrial customer:

A company that sells industrial products can employ the services of an agent who may sell a
range of products from several producers on a commission basis. Such an arrangement
spreads selling costs and is beneficial to companies who do not have the resources to set up
their own sales and distribution operation.

The arrangement allows the seller to reach a large number of customers without having to
invest in a sales team. But the company does not have much control over the agent, who does
not devote the same amount of time and attention as a company’s dedicated sales team.
3. Manufacturer to distributor to industrial customer:

For less expensive, more frequently purchased products, distributors are used. The company
has both internal and field sales staff. Internal staff deals with customer and distributor
generated enquiries and order placing, order follow-up and checking inventory levels. Outside
sales staff is proactive.

They find new customers, get product specifications, distribute catalogues and gather market
information. They also visit distributors to address their problems and keep them motivated to
sell the company’s products. Distributors enable customers to buy small quantities locally.

4. Manufacturer to agent to distributor to industrial customers:

The manufacturer employs an agent rather than a dedicated sales force to serve distributors
mainly because it is less expensive to do so.

The agent may sell the goods of several suppliers to an industrial distributor, who further sells
it to the business user. This type of channel may be required when business customers require
goods rapidly, and when an industrial distributor can provide storage facilities.

Alternative Structures of Business Channels

Industrial channels can be structured in various ways, shown in Figure 2. some channel
structures are direct and some are indirect.

Direct Channel - In direct channel structures, the manufacturers perform all the functions or
the tasks necessary to create sales and to deliver the products to industrial customers. These
tasks include contacting potential customers, negotiating, communicating, selling, financing,
product storage, transportation, and servicing.

The examples of direct channels are direct sales through the company’s sales force, and direct
marketing through direct mail, telemarketing and electronic business through computers ( i.e
online marketing).

The direct distribution (or direct channels) approach is viable when

(a) the value of each transaction is large

 (B) the selling includes extensive technical and commercial negotiations at various levels,
including top management,

(c) the buying process is lengthy, and

(D) the industrial buyers insist on buying directly from the manufacturers.

Figure 2 channel alternatives in Industrial marketing

Manufacturer

Manufacturer's Manufacturer's Value Distributor Commissio

representatives Added Direct s or Brokers n
sales force/
Reseller Marketing Dealers Merchants
or agents Branches s

Distributor Telemark Direct Online

s/Dealers eting Mail marketing

Industrial Customers

Note: Direct sales includes the manufacturer’s own sales force dealing directly, or through
the manufacturer’s branch/regional sales offices, with business customers.

Indirect channel -In indirect channel structures, the manufacturer and the intermediaries
share the tasks between them.

Examples of the types of intermediaries in indirect channels are independent dealers or

distributors, manufacturer’s representatives (or agents), commission merchants, value-added
resellers and brokers. An indirect distribution (or indirect channels) approach is appropriate
when

(a) the value of transactions or sales are low,

(b) the manufacturer has limited resources,

(C) the industrial buyers are widely dispersed,

(d) the industrial buyers purchase many product items in one transaction.

The examples of the products where indirect distribution are used include industrial
chemicals, construction materials, electrical wiring materials and supplies, general industrial
machinery, iron and steel products, and so on.

A channel alternative is described by three elements:

1.Type of intermediaries
2.No. of intermediaries
—a)Exclusive distribution
—b)Selective distribution
c)Intensive distribution

3. Terms and responsibilities of channels members:

—a)Price policy
—b)Condition of sale
—c)Mutual services and responsibilities

Introduction to business intermediaries

Firm or person (such as a broker or consultant) who acts as a mediator on a link between
parties to a business deal, investment decision, negotiation, etc. In money markets, for
example, banks act as intermediaries between depositors seeking interest income and
borrowers seeking debt capital. Intermediaries usually specialize in specific areas, and serve
as a conduit for market and other types of information. Also called a middleman. See also
intermediation.

Types of business intermediaries

Marketing intermediaries, also known as middlemen or distribution intermediaries are an

important part of the product distribution channel. Intermediaries are individuals or businesses
that make it possible for the product to make it from the manufacturer to the end user,
essentially facilitating the sales process. According to Business Dictionary, the four basic
types of marketing interAgentsSome businesses need "middlemen" to get their products to the
public. Market intermediaries, part of the supply chain between the manufacturer and the
ultimate consumer, keep the channels of distribution open and flowing. They create place,
time and possession benefits for manufacturers by ensuring market coverage, reducing market
coverage cost, increasing availability of cash flow through financing and credit, providing
storage, ensuring products are available on a timely basis, linking the manufacturer with the
customer and increasing customer convenience.

Wholesalers

Wholesalers are independently owned firms that take title to the merchandise they handle. In
other words, the wholesalers own the products they sell. Wholesalers purchase product in bulk
and store it until they can resell it. Wholesalers generally sell the products they have
purchased to other intermediaries, usually retailers, for a profit.
Wholesalers typically are independently owned businesses that buy from manufacturers and
take title to the goods. These intermediaries then resell the products to retailers or
organizations. If they're full-service wholesalers, they provide services such as storage, order
processing and delivery, and they participate in promotional support. They generally handle
products from several producers but specialize in particular products. Limited-service
wholesalers offer few services and often serve as drop shippers where the retailer passes the
customer's order information to the wholesaler, who then packages the product and ships it
directly to the customer.

Distributors

Distributors are similar to wholesalers, but with one key difference. Wholesalers will carry a
variety of competing products, for instance Pepsi and Coke products, whereas distributors
only carry complementary product lines, either Pepsi or Coke products. Distributors usually
maintain close relationships with their suppliers and customers. Distributors will take title to
products and store them until they are sold.

Distributors are generally privately owned and operated companies, selected by

manufacturers, which buy product for resale to retailers, similar to wholesalers. These
intermediaries typically work with many businesses and cover a specific geographic area or
market sector, performing several functions, including selling, delivery, extending credit and
maintaining inventory. Although main roles of distributors include immediate access to goods
and after-sales service, they typically specialize in a narrower product range to ensure better
product knowledge and customer service.

Retailers

A retailer takes title to, or purchases, products from other market intermediaries. Retailers can
be independently owned and operated, like small “mom and pop” stores, or they can be part of
a large chain, like Walmart. The retailer will sell the products it has purchased directly to the
end user for a profit.mediaries is agents, wholesalers, distributors and retailers

Retailers work directly with the customer. These intermediaries work with wholesalers and
distributors and often provide many different products manufactured by different producers all
in one location. Customers can compare different brands and pick up items that are related but
aren't manufactured by the same producer, such as bread and butter. Purchasing bread or
medications directly from a manufacturer or pharmaceutical company would be time-
consuming and expensive for a customer. But buying these products from a local retail
"middleman" is simple, quick and convenient.

Agents and brokers

The agent as a marketing intermediary is an independent individual or company whose main

function is to act as the primary selling arm of the producer and represent the producer to
users. Agents take possession of products but do not actually own them. Agents usually make
profits from commissions or fees paid for the services they provide to the producer and users.

Agents and brokers sell products or product services for a commission, or a percentage of the
sales price or product revenue. These intermediaries have legal authority to act on behalf of
the manufacturer or producer. Agents and brokers never take title to the products they handle
and perform fewer services than wholesalers and distributors. Their primary function is to
bring buyers and sellers together. For example, real estate agents and insurance agents don’t
own the items that are sold, but they receive a commission for putting buyers and sellers
together. Manufacturers’ representatives that sell several non-competing products and arrange
for their delivery to customers in a certain geographic region also are agent intermediaries.

Channel design

Distribution channels in marketing are one of the classic “4 Ps” (product, promotion, price,
placement a.k.a. “distribution”). They’re a key element in your entire marketing strategy —
they help you expand your reach and grow revenue.

B2B and B2C companies can sell through a single distribution channel or through multiple
channels that may include:

Wholesaler/Distributor

Direct/Internet

Direct/Catalog

Direct/Sales Team

Value-Added Reseller (VAR)

Consultant

Dealer

Retail

Sales Agent/Manufacturer’s Rep

Distribution channels in marketing are one of the classic “4 Ps” (product, promotion, price,
placement a.k.a. “distribution”). They’re a key element in your entire marketing strategy —
they help you expand your reach and grow revenue.

B2B and B2C companies can sell through a single distribution channel or through multiple
channels that may include:

Wholesaler/Distributor

Direct/Internet

Direct/Catalog

Direct/Sales Team

Value-Added Reseller (VAR)

Consultant

Dealer

Retail Distribution Channels Concepts & Steps

Before you begin

You can evaluate a new distribution channel or improve your channel marketing /
management at any time. It’s especially important to think about distribution when you’re
going after a new customer segment, releasing a new product, or looking for ways to
aggressively grow your business.

Evaluate how your end-users need to buy

Your distribution strategy should deliver the information and service your prospects need. For
each customer segment, consider:

How and where they prefer to buy

Whether they need personalized education and training

Whether they need additional products or services to be used along with yours

Whether your product needs to be customized or installed

Whether your product needs to be serviced

Match end-user needs to a distribution strategy

If your end-users need a great deal of information and service, your company can deliver it
directly through a sales force. You can also build a channel of qualified resellers or
consultants. The size of the market and your price will probably dictate which scenario is best.

If the buying process is fairly straightforward, you can sell direct via a website/catalog or
perhaps through a wholesale/retail structure. You may also use an inbound telemarketing
group or a field sales team.

If you need complete control over your product’s delivery and service, adding a channel
probably isn’t right for you.

Identify natural partners

If you want to grow beyond the direct model, look for companies that have relationships with
your end-users. If consultants, wholesalers or retailers already reach your customer base,
they’re natural partners.

Build your distribution channel

If you’re setting up a distribution channel with one or more partners, treat it as a sales process:
Approach the potential channel partner and “sell” the value of the partnership.

Establish goals, service requirements and reporting requirements.

Deliver inventory (if necessary) and sales/support materials.

Train the partner.

Run promotions and programs to support the partner and help them increase sales.

Minimize pricing conflicts

If you use multiple channels, carefully map out the price for each step in your channel and
include a fair profit for each type of partner. Then compare the price that the end-user will
pay; if a customer can buy from one channel at a lower price than from another, your partners
will rightfully have concerns. Pricing conflict is common, and it can jeopardize your entire
strategy, so do your best to map out the price at each step and develop the best solution
possible.

Drive revenue through the channel

Service your channel partners as you’d service your best customers and work with them to
drive revenue. For example, provide them with marketing funds or materials to promote your
products; run campaigns to generate leads and forward them to your partners.

After Designing Your Distribution Channels

As you’re creating a new channel you’ll need a pricing strategy and a sales process. When
your channel is up and running, you can start launching marketing campaigns to channel
partners and end-users.

MANAGING THE CHANNEL MEMBERS

INTRODUCTION:-

Most producers do not sell their goods directly to the final users. Between producers and the
final users stands a marketing channel. The channels of

distribution furnish bridge between the producer and the consumer.

Marketing channel or channel of distribution or trade channel is a group of interrelated

individuals or organizations that direct the flow of products to consumer.

Stern and El-Ansary defines marketing channels as ―"sets of interdependent

organizations involved in the process of making a product or service available for use or
consumption". Marketing intermediary is an individual or organisation that facilitates
exchanges between producers, others intermediaries, and the final consumer of products.
Middlemen are channel intermediaries. A middlemen is an independent business concern that
operates as a link between producers and ultimate consumers or industrial users. Middlemen
refer to wholesalers, retailers and marketing specialists.

The marketing intermediaries can be divided into major classifications.

1) Merchants – Assumes ownership of product and resells them for a profit.

2) Agent or Brokers – An intermediary who searches for customers and negotiates on a

producer‘s behalf but does not take title to the goods.

3) Retailers – A business enterprise that sells goods or services directly to the final consumer
for his or her personal, nonbusiness use.

4) Wholesaler – A business enterprise that sells goods or services to those who buy for resale
or business use

5) Facilitators – An intermediary who assists in the distribution process but neither takes title
to goods nor negotiates purchase or sales.

FUNCTIONS OF MARKETING CHANNELS:

Distribution

Marketing Research

Buying

Functions performed in a channel of Distribution

Pricing

Product Planning

Promotion Customer Services

Marketing Research:

Middlemen provide information regarding the needs and characteristics of customers,

Competitors and other actors and forces in the marketing environment.

Buying:

In buying merchandise, middlemen sometimes pay when items are received; at other time,
they accept item on consignment and do not pay for them until after a sale has been made,
thus purchase terms may range from cash or credit. In buying function, the middlemen put
order with the manufacture with intension to buy.

Promotion:
The middlemen do promotion to attract customers to the offer. A large portion of the
promotional activities behind the final sale of a product to the consumer is performed by
middlemen.

The actual point of purchase display of merchandise in the store is almost completely in the
hands of the retailers. The retailer also does a great deal of the

advertising, selling and promoting of the wares he sells. Wholesalers help to coordinate local
promotion among retailers and sometimes motivate and train retailer‘s sales staff.

Manufactures undertake a multitude of activities to assist their middlemen‘s promotional

effort.

Consumer Services:

Consumer services include delivery, credit, in-office and in-home purchase, training

programs, warranties and guarantees and return privileges. These services can be

provided by one channel member or a combination of channel members.

Managing channel members

- Reward power

- Coercive power

- Legitimate power

- Referent power

- Expert power

Reward power

Refers to the capacity of one channel member to reward another if the latter conforms to the
influence of the former.

- Coercive power

The opposite of reward power – the expectation that the former will be able to punish the
latter upon failure to conform to the former’s influence attempts.

- Legitimate power

Stems from internalized norms in one channel member which dictate that another channel
member has a legitimate right to influence the first, and that an obligation exists to accept that
influence. In an intraorganizational system, legitimate power is pervasive and routinely
accepted.
- Referent power

channel member perceives his or her goals to be closely allied to, or congruent with, those of
another member, a referent power base is likely to exist.

- Expert power

channel member’s attempts to influence the other’s behavior is based on superior expertise

Channel management

 Selecting channel members

 Training channel members
 Motivating channel members

Business Logistics System

Introduction:

Supply chain management, physical distribution, materials management are names that have
been given to the field of business logistics. Regardless of the name, business logistics is a
vital area of management within most firms, whether they are manufacturing or service firms.
Logistics has been defined by the Council of Logistics Management as the process of
planning, implementing, and controlling the efficient, cost-effective flow and storage of raw
materials, in-process inventory, finished goods and related information from point of origin to
point of consumption for the purpose of conforming to customer requirements.

The stated mission for business logistics is to get the right goods or services to the right place,
at the right time, and in the desired condition, while making the greatest contribution to the
firm.

Logistics Management involves two issues namely, movement of raw materials to the plant
known as physical supply or material management and second, flow of finished products from
the plant to the customers, known as physical distribution. Logistics management activities
can be grouped as primary and secondary activities.

Primary Activities Secondary Activities

Transportation Product packaging
Warehousing Product handling
Order processing Acquisition
Inventory Maintenance Product Scheduling
Information Maintenance
Components of Logistics Management

LOGISTICS MANAGEMENT

Physical
Physical
Distribution
Supply
(Material
Handling)

Source of Plants Customers

Supply

ROLE OF LOGISTICS IN PRODUCTION AND SALES

Logistics Management system plays a significant role in the production and sales process of
an organization. It also serves as a profit centre. It helps in collecting customer information,
developing transportation schedules and helps in making a shift from mass production to
batch production to take care of demands of different segments. Logistics is the management
function that controls all departments, but is not a sub system that connects every department.
The manufacturer can supply or distribute any kind of goods in any place under a good
logistics system. There is a growing importance of logistics management due to increase in
completion, entry of newer methods of distribution and storage and increasing cost of
distribution. Emergence of customer service as an important factor for customer satisfaction
has made companies spend millions of rupees in upgrading their logistics and distribution
management system, by adopting newer methods and technologies.

TYPES OF LOGISTICS

There are different kinds of logistics system or subsystems used in organizations. They can be
classified as supplier logistics, organization or corporate logistics and customer logistics. The
supplier logistics takes care of the flow of supplies and raw materials from vendor to the
company; the corporate logistics takes care of the flow of goods to the customer point whereas
customer logistics takes care of how customer handle the product from company’s source to
his consumption point.

1. Supplier Logistics: The key issue in supplier logistics is to buy the right things. This needs
to address two critical issues i.e., supplier evaluation and ordering of the final product. The
manager should be able to evaluate the quality of the supplier, prior to issuing purchase orders
and he should be able to clearly describe the products to be ordered in order to make sure that
the supplier knows exactly what the firm wants. For physical distribution management, the
product transportation and delivery services have to be evaluated. The company may procure
transportation and product storage services from the supplier. The suppliers should be
evaluated on their capability to provide required services of acceptable quality level.

2. Production/Corporate Logistics: To cater to growing market needs, the company needs to

establish a new production system for logistics as well as modified production systems to
accomplish the true ‘real time sales’ system. For this, a new revolutionary production project
team should be formed whose sole purpose is to establish a ‘production, sales and logistics
total linkage system’ that will eventually eliminate overstock and shortage problems.

3. Customer Logistics: It involves a seven ‘R’ framework namely; it should be a process of

right quantity of the right product or service to the right place in the right conditions at the
right cost and at the right time with the right impression. If these seven aspects are taken care
of, customer logistics process will be able to create higher levels of customer satisfaction. It
will also show that the company is concerned about the customers and their logistics
requirements. The focus of customer logistics should be on speedy and timely delivery,
shorter lead time, safety of goods and users and lowering of distribution costs. The objective
of this process should be to achieve on time delivery and realize higher customer satisfaction
by implementing a flexible and swift customer logistics system.

IMPORTANCE OF BUSINESS LOGISTICS:

Logistics is important because it creates value–value for customers and suppliers of the firm,
and value for the firm's stakeholders. Value in logistics is expressed in terms
of time and place. Products and services have little or no value unless they are in the
possession of customers when (time) and where (place) they wish to consume them. To many
firms throughout the world, logistics has become an increasingly important value-adding
process for a number of reasons.

1 Costs Are Significant

According to the International Monetary Fund, logistics costs average about 12 percent of
the world's gross domestic product. Examples of logistics costs within individual
economies show variation. In the European Economic Community, logistics costs were 21
percent on a value added basis . In the United States, logistics costs for the typical firm are
about 10.5 percent of sales (DAVIS & DRUMM, 1995). Depending on the particular
industry, logistics costs may range from 4 percent of sales (pharmaceuticals) to over 30
percent of sales (food and food products). It has been noted that for many firms, after the
cost of goods sold, logistics represents the highest cost of doing business.

The economic forces of change are further acting to alter logistics cost relationships and
force careful re-planning of logistics systems around the world. Trade barriers are falling
as free trade is encouraged in countries that previously had strictly managed economies.
Tariffs are being eliminated to allow the free flow of goods across political boundaries,
giving firms the opportunity to reposition their logistics networks for lower costs and
higher customer service. Finally, the world economies seem to be on a wave of economic
deregulation that will heighten competition. Since transportation is frequently a target for
deregulation, logistics system costs will be affected.

2. Globalization of Industries
The trend is towards an integrated world economy. Firms are seeking, or have developed,
global strategies where either their products are designed for a world market or they are
produced wherever the low-cost raw materials, components, and labour can be found, or
they simply produce locally and sell internationally. In either case, supply and distribution
lines are stretched, as compared with the producer who wishes to manufacture and sell
locally. Not only has the trend occurred naturally by firms seeking to cut costs or expand
markets, but it is also being encouraged by political arrangements that promote trade.
Examples are the formation of the European Economic Community (EC92), the signing of
the North America Free Trade Agreement (NAFTA) between Canada, United States, and
Mexico, and the creation of a new economic trade agreement among several countries of
South America (MERCOSUL).

Globalization/internationalization of industries everywhere will depend heavily on

logistics performance and costs, as companies take more of a world view of their
operations. As this happens, logistics takes on increased importance within the firm since
logistics costs, especially the transportation component, become a significant part of the
total cost structure. For example, if a firm seeks foreign suppliers for the materials
entering its product or foreign locations to build its products, the motivation is to increase
profit. Material and labour costs may be reduced, but logistics costs are likely to increase
due to increased transportation and inventory costs.

3. Logistics is important to strategy

Firms spend a great deal of time finding ways to differentiate their product offerings from
those of their competitors. When management recognizes that logistics impacts on a
significant portion of a firm's costs and that the result of decisions made about the supply
chain yields different levels of customer service, it is in a position to use this information
effectively to penetrate new markets, increase market share, and increase profits.

To illustrate, a company selling its merchandise through a catalogue has its inventory and
operations centralized at one location in the country. It wishes to compete effectively with
retail stores operating in local market areas. Although the company benefits from low
overhead, buying economies, and good product availability, it was at a disadvantage in
being time responsive to customers. To overcome the disadvantage, the company
developed a marketing strategy based primarily on logistics. Delivery time and its
variability were at the heart of the strategy. First, a toll-free telephone number and 24-hour
order taking were established so that customers could place their orders free of charge any
time of the day or night. Next, orders were filled the same day that they were received,
even as late as 6:30PM. Finally, orders were shipped using an overnight delivery service
such as FedEx. The result was that customers could place orders late in the day and
receive them at their home or business by 10:30AM the next morning. The company was
able to compete effectively on both price and service dimensions.

4 Logistics Is Key to Customer Service

Research over the years has shown that logistics variables are dominant in the minds of
customers when they evaluate the service offerings for a product. Frequently, one-half of
the customer service variables are logistics related and delivery time typically ranks the
highest among all service variables. Since customers respond to a company's service
offerings with their patronage, revenues are a frequently determined by logistics variables.

5 Customers Increasingly Want Quick Customized Response

 Customers have been increasingly sensitized to expect quick response to their demands.
Fast food restaurants, overnight package delivery, and instant access to information on the
Internet are examples of what customers might anticipate in the way of service from a
wide range of product and service offerings. In addition, improved information technology
and flexible manufacturing systems have led the marketplace towards mass customization.
Rather than consumers having to accept the "one size fits all" philosophy in their
purchases, suppliers are increasingly offering products that meet individual customer
needs. This has placed growing demands on production and logistics systems to achieve
ever higher performance levels.

PHYSICAL DISTRIBUTION

Physical distribution refers to the movement of goods from producers to customers. It

encompasses order processing, inventory management, materials handling, warehousing
and transportation. Physical distribution strategy is concerned with the actual storage of
products after their production and before their consumption, and also their transportation
to the consumers or actual users. Physical distribution systems play an important role in
product design, pricing and brand promotion.

Objectives of Physical Distribution:

Physical distribution has two major objectives, namely decreasing the cost of delivery and
increasing customer satisfaction. The customers of Physical distribution include
wholesalers, retailers and end consumers. Meeting these goals can be a complex problem
that involves technological, marketing, and administrative decisions.

1. Total Cost Goals: Total cost concept refers to the practice of considering all the
costs associated with distribution, inorder to attain the best balance among all the cost
factors. A physical distribution system encompasses many cost elements, including
transportation, storage, materials handling and the cost of sales lost due to inventory
shortages. Often, these cost elements are inversely related.

2. Customer Service Goals: More and more companies are realizing that cutomer
service is an integral part of their operations. The customer service goals that are
influenced by distribution fall into six categories, namely time, dependability,
communication, convenience, product protection, and accuracy in filling the order.

TASKS AND APPROACHES IN PHYSICAL DISTRIBUTION:

The physical distribution process comprises two inter related efforts, ie., goods flow and
information flows. Information from and about customer’s flows through the enterprise in the
form of sales activity, forecasts and orders. This information is refined into manufacturing and
procurement plans. A value-added inventory flow results in transfer of finished products to
customers. There are five major components of physical distribution operations:

 Physical distribution: physical distribution refers to those activities, which are related
to provide customer service. It requires performing order receipt and processing,
deploying inventories, storage, handling and outbound transportation within a channel
of distribution. It coordinates with market planning such as pricing, promotional
support, customer service levels, delivery standards, handling returns and lifecycle
 support. Its main objective is to assist in revenue generation by providing desired
customer service levels at the lowest total cost.

 Manufacturing support: the activities are related to planning, scheduling and

supporting manufacturing operations. It requires master schedule planning and
performing work-in-progress storage, handling, transportation and time phasing of
components. It is responsible for storage of inventory at manufacturing site and
maximum coordination between manufacturing and physical distribution activities.

 Procurement: It is related to obtaining products and materials from outside suppliers.

It performs resource planning, supply sourcing, negotiation, order placement, inbound
transportation, and receiving and inspection, storage and handling quality assurance. It
is responsible for coordination with suppliers for better scheduling, supply continuity,
hedging and speculation as well as research leading to new sources or programs. Its
main objective is to support manufacturing or resale organizations by providing timely
purchase at the lowest total cost.

 Inventory Flows: It is concerned with the movement and storage of materials and
finished products. It starts with the shipment of materials or component parts from a
supplier and ends when a manufactured or processed product is delivered to a
customer.
The physical distribution process adds value by moving inventory when and where
needed. Work-in-process inventory must be moved to support final assembly, thereby
gaining value at each step of its transportation into finished inventory.

 Information Flows: Information integrates these three operating components. These

components contain the actual physical distribution work and information facilities,
coordination of planning and control of day-to-day operations.

Conclusion:
Physical distribution strategy is concerned with the actual storage of products after their
production and before their consumption and also their transportation to the consumers or
actual users. Physical distribution systems play an important role in product design, pricing
and brand promotion. Economies achieved in physical distribution of goods will go a long
way in reducing total costs of goods and increasing profits. A successful physical distribution
system will always lead towards higher customer satisfaction for the organization.

CHAPTER-5 BUSINESS COMMUNICATION

COMMUNICATION:

Any act by which one person gives to or receives from another person, the information
about that’s person’s needs, desires, perception, knowledge or affective states. Communication
may be intentional or unintentional; it may involve conventional or unconventional signs, may
take linguistic or non-linguistic forms and may occur through spoken or other modes.

Communication is the exchange of ideas, opinions and information through written or

spoken words, symbols or actions. Communication is a dialogue, not a monologue. In fact,
communication is more concerned with a dual listening process. For communication to be
effective, the message must mean the same thing to both the sender and the receiver.

BUSINESS COMMUNICATION:
 Business communication is the sharing of information between people within and outside the
organization that is performed for the commercial benefit of the organization. It can also be
defined as relaying of information within a business by its people.

Business communication is any communication used to promote a product, service or

organization with the objective of making sale. In business communication, message is
conveyed through various channels of communication including internet, print (publication),
radio, television, outdoor and word of mouth. In business, communication is considered core
among business, interpersonal skills and etiquette.

There are two types in communication:

1. Internal communication
 upward communication
 downward communication
 horizontal/ literal communication
2. External communication

Characteristics of business communication:

Business communication around successful communication, be it non-verbal, written,

analogue or digital. Managers, leaders and salespeople all need to be skilled communicators in
order to perform their roles effectively.

1. Proactive participation

Good communicators proactively seek out opportunities to develop their skills by, for
example, appropriately contributing their opinions and knowledge in group discussions or
meetings rather than simply sitting back and letting the conversation flow around them.
Other opportunities might include volunteering to chair a meeting or steering group or to
give a speech or presentation. Being proactive rather than waiting to be asked to contribute
suggests a communicator that is both capable and confident in their abilities.

2. Ability to learn from others

Improving business communication is a journey rather than a destination; there are always
effective skills and strategies that can be learned from others and adopted for an individual's
own use. Successful business communicators are willing to be mentored by those with
greater skills and experience, will seek out training and development opportunities and will
actively further their knowledge by reading around the subject.

3. Listening, rather than hearing

Being a good listener is a hallmark of a successful communicator. Unlike simply 'hearing',

listening involves taking in information, processing it, understanding its context and
meaning and using these to form reasoned, intelligent responses. Often an unskilled
communicator will only 'hear' what is being said and will second-guess the context and
meaning in a bid to interject with a response. An inability or unwillingness to listen properly
can lead to misunderstanding and a breakdown in business communications.
4. Willingness to practice communication skills

Every communicator can improve with practice, and the most successful communicators
will practice every aspect of their daily communications from refining their telephone
technique and manner to honing their public speaking or presenting skills to drafting and re-
drafting documents and emails until the tone, style and content are optimal.

5. Staying focused

Communicating effectively in the typical work environment demands that you pay attention
to whoever you are communicating with and don't lose focus as a result of distractions such
as a ringing phone or incoming email. In group communication situations such as meetings
or presentations, nerves or anxiety can cause loss of focus that is detrimental to
communication; successful communicators will adopt strategies to help them overcome
these distractions.

DEVELOPING BUSINESS COMMUNICATION PROGRAMME

The major steps in developing an effective communication or promotional programme are:

 Determine the communication objectives

 Identify the target audience
 Determine the promotional budget
 Develop the message strategy
 Select the media
 Evaluate the promotion’s results
 Integrate the marketing communications

 DETERMINING THE COMMUNICATION OBJECTIVES:

Communication objectives cannot be formulated in isolation. They are

formulated based on the firm’s overall corporate and marketing objectives. Once the
objectives are established, a business organization chooses the strategies and actions
required to achieve the objectives.
Before determining communication objectives, the business marketer should
find out the communication problems. This can be done by collecting the date on the
existing levels of awareness and attitudes of the existing and prospective customers.
Such data would help in setting specific communication goal.
For the purpose of determining communication objectives, there are three stages
of buyer behavior:
I. Buyer’s awareness levels
II. Changes in buyer’s attitudes
III. Buying action
These stages of buying are described by different models called response hierarchy
models

 IDENTIFYING THE TARGET AUDIENCE

 A business marketer must be clear about the target audience is identified at two
levels:-
I. Identify the buying organizations based on the target market segments
II. Identification of the attitudes and buying factors used by the buying centre members
in the organizations identified in the first level.

 DETERMINING THE PROMOTION BUDGET

One of the most difficult decisions the companies are facing is the question as to
how much to spend on promotion or what should be the promotional or
communications budget. It is not surprising that there is a considerable variation in
how much company spend on promotion or communication. The promotional budgets
consisting of advertising, sales promotion, direct marketing and publicity of
companies marketing industrial products or services are not large enough in
comparison with those of the consumer products.
There are four common methods used to set a promotion budget:
I. Affordable method:-
Many companies set the promotion budget based on what they think the
company can afford. This method ignores the role of promotion as an
investment and its impact on sales volume.
II. Percentage-of-sales method:-
The most common method used in business marketing to set the expenditure
budget for promotion is a specified percentage of sales, either sales in the
previous year or in the current year budgeted or forecast sales.
III. Competitive-parity method:-
Some companies set their promotion budget by spending the same percentage
of the sales on promotion as that of competitors.
IV. Objective-task method:-
In this method, business marketers develop their promotion budgets by
defining promotional objectives, determining the tasks that should be
performed to achieve the promotional objectives and estimating the costs of
performing the tasks.

 DEVELOPING THE MESSAGE STRATEGY

The message strategy indicates how to achieve the communication

objectives. The message is developed to determine “what to say” to the target
audience so as to achieve the desired results.
In business marketing, the most common way of communicating the
message is through rational appeal. Unlike household consumers, where emotional
or moral appeals are sometimes used, the business buyers are most responsive to
rational appeals. The marketing research studies find out problem-solving benefits
or the satisfaction of needs sought by the target audience.
Business marketers should remember two important points while developing
communication message:-
I. Typical business buyers are fairly well-informed or knowledgeable.
II. Instead of the message discussing product features, the message should
focus on customer benefit.

 selecting the media:-

Selection of the appropriate media depends on the target audience to be
reached, the statement of the communication objectives, and the promotional
budget. The media selection also depends on whether the advertiser wishes to
penetrate a particular industry or cut across various industries.
Selection of media also depends on the circulation and the cost of
advertising space. The media planners use the data published by circulation
 Audits Bureau of Circulation, which not only give data on circulation figures but
also define the type of readers of particular publications.

 Evaluating promotion’s results:-

After implementing the promotional plan it is necessary for the business
marketer to evaluate its impact on the target audience. An evaluation is done by
measuring the awareness, attitude and actual purchase before and after the
promotional plan is implemented.
The evaluation task becomes easier if the data on awareness, attitude and
purchase have been collected by conducting a market research study before the
promotional plan is implemented.
The marketing research study, conducted after the promotional plan is
implemented, involves asking the target audience whether they are aware of the
company’s products, whether they recall the promotional message, their previous
and current attitudes (favorable, indifferent, or unfavorable), whether and in how
much quantity they have purchased the company’s products during the period.

 Integrating the marketing communications:-

Many organizations have started moving towards the process of

integrating communication elements and other marketing activities. The integrated
marketing communications (IMC) approach shows an improvement over the
traditional method of treating the various marketing and communication elements
as separate activities. The move toward IMC happened during 1990s and the IMC
approach has been adopted by both large and small companies.

They understand the value of strategically integrating the various

communication functions and developing efficient and effective marketing
communication programmes.

BUSINESS COMMUNICATION

Business communication (or simply "communication," in a business context) encompasses

topics such as marketing, brand management, customer relations, consumer behavior,
advertising, public relations, corporate communication, community engagement, reputation
management, interpersonal communication, employee engagement, and event management. It
is closely related to the fields of professional communication and technical communication.

Media channels for business communication include the Internet, print media, radio,
television, ambient media, and word of mouth.

Business communication can also be said to be the way employees, management and
administration communicate in order to reach to their organizational goals.

Business communication is a common topic included in the curricula of Undergraduate and

Master's degree programs at many colleges and universities.

There are several methods of business communication, including:

 Web-based communication - for better and improved communication, anytime

anywhere...
 Video conferencing which allow people in different locations to hold interactive
meetings;
 Reports - important in documenting the activities of any department;
  Presentations - very popular method of communication in all types of organizations,
usually involving audiovisual material, like copies of reports, or material prepared in
Microsoft PowerPoint or Adobe Flash;
 Telephone meetings, which allow for long distance speech;
 Forum boards, which allow people to instantly post information at a centralized
location; and
 Face-to-face meetings, which are personal and should be succeeded by a written
follow up.

Effective business communication

A two way information sharing process which involves one party sending a message that is
easily understood by the receiving party. Effective communication by business managers
facilitates information sharing between company employees and can substantially contribute
to its commercial success.[1]

For business communication to be effective these qualities are essential:

1. Establish clear hierarchy

2. Use visual communication
3. Conflict Management
4. Consider Cultural Issues
5. Good Written communication.

Developing The Business Communication Programme

The major steps in developing an effective communication or promotional programme are:

 Determining the communication objectives.

 Identify the target audience.
 Determine the promotional budget.
 Developing the message strategy.
 Select the media.
 Evaluate the promotion’s results.
 Integrate the promotional programme.

We shall now discuss each of these seven steps.

Determine the communication objectives:

Communication objectives cannot be formulated in isolation. They are formulated based on

firm’s overall corporate and marketing objectives. Once the objectives are established, an
industrial organization chooses the strategies and actions required to achieve the objectives.

Before determining communication objectives, the industrial marketer should find out
the communication problems. This can be done by collecting the data (through research) on
the existing levels of awareness and attitudes of the existing and prospective customers. Such
data would help in setting special communication goal.

Besides, the data collection permits measurement of the quantified communication

objectives (reforms as communication goals) before and after the promotional programme is
implemented.

A mix of communication media is required to achieve certain communication

objectives. Like, if the communication objective is to create awareness among the prospective
customers or to enter new market segments, advertising in business magazines or journals or
direct mail of company catalogues may be the appropriate media. However, if the
communication objective is to create preferences for the company’s products over the
competing products, the communication mix would rely more o0n personal selling through
the company’s sales forces, advertisements in trade journals and participation in trade shows
or exhibitions.

Identifying the Target Audience:

When developing a communication strategy, one of the most critical steps after
determining the goals and objectives is the identification of the target audience for the project.
An industrial marketer must be clear about the target audience. In industrial marketing the
target audience is identified at two levels. First, identify the buying organizations based on the
target segments. The second level is the identification of the attitudes and buying factors used
by the buying Centre members in the organizations identified in the first level.

It is important to assess the target audience’s current image of the company, its
products and its competitors. The company management should them propose a desired image
in contrast to the current image. This information can be obtained by conducting a marketing
research study to understand the awareness levels and attitudes of the buying center members
towards the company and its products in relation to its competitors. The data will also be
useful in developing message strategy and media plan.

The target audience refers to the group a manager is trying to influence. Some key
audiences that reef managers commonly target for communication efforts include resource
users, community groups, or policy/decision makers.

The key thing to remember is that, for the purposes of communication, there is no such thing
as the “general public.” In other words, outreach materials aimed at the “general public” are
too general to be effective in their messaging.

Managers responsible for communicating about coral reef health and resilience often need to
be creative and innovative to gain support from different audiences. Whether dealing with
school children, community members, government officials, fishers, the media, industry, or
academics, a well-planned communication strategy or campaign tailored to the target audience
is needed.

Determining the Promotional Budget:

One of the most difficult decisions the companies are facing is the question as to how
much to spend on promotional or what should be the promotional or communication budget. It
is, therefore, not surprising that there is a considerable variation in how much companies
spend on promotion or communication. The promotional budgets consisting of advertising,
sales promotion, direct marketing and publicity of companies marketing industrial products or
services are not large enough in comparison with those of the consumer products. There are
four common methods used to set a promotion budget. There are:

 Affordable method
 Percentage of sales method
 Competitive parity method
 Objective task method.

Affordable Method:

The affordable method, or what you think you can afford, is a method used often by
small businesses. Unfortunately, things often cost more than anticipated, and you may not
have enough money. Many small businesses think they’re going to have money for
promotion, but they run out and cannot spend as much on promotion as they had hoped. Such
a situation may have happened to you when you planned a weekend trip based on what you
thought you could afford, and you did not have enough money. As a result, you had to modify
your plans and not do everything you planned.

Competitive parity

That is, they try to keep their promotional spending comparable to the competitors’
spending level. This method is designed to keep a brand in the minds of consumers. During a
recession, some firms feel like they must spend as much if not more than their competitors to
get customers to buy from them. Other companies are forced to cut back on their spending or
pursue more targeted promotions. When Kmart faced bankruptcy, they cut back on
expenditures, yet they kept their advertising inserts (free-standing inserts or FSI) in Sunday
newspapers to remain competitive with other businesses that had an FSI.

A more rational and ideal approach is the objective and task method, whereby marketing
managers first determine what they want to accomplish (objectives) with their
communication. Then they determine what activities commercials, sales promotions, and so
on are necessary to accomplish the objectives. Finally, they conduct research to figure out
how much the activities, or tasks, cost in order to develop a budget.

Part of the budgeting process includes deciding how much money to allocate to different
media. Although most media budgets are still spent predominantly on traditional media, shifts
in spending are occurring as the media landscape continues to change. Mobile marketing
continues to become more popular as a way to reach specific audiences. Over one-third of cell
phone users were exposed to mobile advertising in 2009 and 16 percent of the people exposed
to mobile advertising responded to the ads via text messaging. Younger people are typically
the most accepting of mobile advertising (Loechner, 2009). Spending on mobile ads is
expected to grow 80% from $1.45 billion in 2011 to $2.61 billion in 2012. A big part of the
growth is due to the mobile search business of Google (Cotton, 2012).

The manufacturers of most major brands use texting and multimedia messages. Mobile
marketing allows advertisers to communicate with consumers and businesses on the go. Over
half of Chinese, Korean, Indian, and Thai Internet users access social media sites through their
phones rather than through computers. While many marketers plan to use electronic devices
for their mobile-marketing strategies, other firms may use movable or mobile promotions.

Developing the Message Strategy:

The message strategy indicates how to achieve the communication objectives. The
message is developed to determine “what to say” to the target audience so as to achieve the
desired results.

In industrial marketing, the most common way of developing the message or appeal is
through rational appeal. Unlike household consumers, where emotional or moral appeals are
sometimes used, the industrial buyers are most responsive to rational appeals. The rational
appeals are developed either from the ……. Strategy, or by conducting marketing research
studies. The marketing research studies find out problem solving benefits or the satisfaction of
needs sought by the target audience. The examples of these benefits would be a product’s
superior quality, versatility.

Industrial marketers should remember two important points while developing

communication message. First, typical industrial buyers are fairly well-informed or
knowledge. Secondly instead of the message discussing product features, the message should
focus on customers benefits.
 An interesting study of the message strategy in industrial markets revealed that
industrial marketers often did not have a good understanding of their target customers and
what was important to them. The results of this research stressed the importance of collecting
data on target audience predispositions and buying criteria, based on which the advertising
messages should be developed.

Select the Media:

Selection of the appropriate media depends on the target audience to be reached, the
statement of the communication objectives and the promotional budget.

The media selection also depends on whether the advertiser wishes to penetrate a
particular industry or across various industries. For example, a manufacturer of textile
machinery can select “textile journals” which are directed to the textile industry, for the
advertisement of its products, production and logistics who also read the business magazines.

Selection of media also depends on the circulation and the cost of advertising space.
The media planners on the data published by circulation audits such as Audit Bureau of
Circulation, which not only give data on circulation figures but also define the type of readers
of particular publications. The difference communication or promotion tools, promotion
media and support that are used in industrial marketing.

With an objective and a budget in place, the advertising campaign will next need to focus on
developing the message. However, before effort is placed in developing a message the
marketer must first determine which media outlets will be used to deliver their message since
the choice of media outlets guides the type of message that can be created and how frequently
the message will be delivered.

An advertising message can be delivered via a large number of media outlets. These range
from traditional outlets, such as print publications, radio and television, to newly emerging
outlets, such as the Internet and mobile devices. However, each media outlet possess different
characteristics and, thus, offer marketers different advantages and disadvantages.

The characteristics by which different media outlets can be assessed include the following
seven factors:

1. Creative Options
2. Creative Cost
3. Market Reach of Media
4. Message Placement Cost
5. Length of Exposure
6. Advertising Clutter
7. Response Tracking

Evaluate the Promotional Results:

Sales promotions result in an upward bump in sales during the promotion period.
Because customers buy during sales promotions for reasons that may affect their purchases
before and after the promotion, the company should evaluate the volume of sales for the sales
promotion period plus an equal period before, and at least two equal periods after, the
promotion. If the sales promotion lasts a week, the evaluation period should be at least four
weeks, including one week before and two weeks after the promotion. This methodology
catches possible dips before the promotion, if customers are waiting for the sale, as well as
any continuing increase or decrease in sales volume after the promotion. The evaluation must
also include the costs of the promotion over the evaluation period. If the company wishes to
evaluate brand awareness, it must include a customer survey in the evaluation.
Sales

To determine the increase in sales due to the sales promotion, the company must
establish the level of sales that would have taken place without the promotion. Such a base
level must avoid the effects of any variation in sales volume during the evaluation period. The
best estimate is usually the average level of sales of the months prior to the evaluation period,
adjusted for seasonal factors obtained from previous years. The company must compare this
estimated level of sales to the actual sales that took place over the evaluation period to get the
increase resulting from the sales promotion.

Profits

Sales promotions can generate increased profits. The volume of additional sales must
be large enough to generate profits greater than the cost of the sales promotion. This cost has
several components. There are the costs of producing the promotional signs, coupons and
publicity. There are additional costs for processing the coupons, discounts or other incentives.
Finally, there are the costs of the promotion itself, such as a discount or rebate. The company
must subtract these costs from the additional profits generated by the extra sales to get the true
net additional profit that can be attributed to the sales promotion.

Brand Awareness

Sometimes sales promotions are good public-relations vehicles, and can generate
interest and return customers. They may be able to add to consumer brand awareness at a
lower cost than other promotional means. In this case, the goal is not additional profits but
rather additional sales over the long term, as more consumers become familiar with the
advantages of the particular brand. Customer surveys to determine brand familiarity before
and after the sales promotion give an accurate evaluation of the immediate success of the
promotion. In the longer term, though, the measure of success must be continued higher sales.
Such sales increases should already appear following the sales promotion, and a continued
evaluation of the level of sales will give a good indication of the success of the promotion as
far as brand awareness is concerned.

Integrate the Promotional Programme:

Integrated Marketing Communication (IMC) involves the idea that a firm’s promotional
efforts should be coordinated to achieve the best combined effects of the firm’s
efforts. Resources are allocated to achieve those outcomes that the firm values the most.
Promotion involves a number of tools we can use to increase demand for our The most well
known component of promotion is advertising, but we can also use tools such as the
following:

 Public relations (the firm’s staff provides information to the media in the hopes of
getting coverage). This strategy has benefits (it is often less expensive and media
coverage is usually more credible than advertising) but it also entails a risk in that we
can’t control what the media will say. Note that this is particularly a useful tool for
small and growing businesses—especially those that make a product which is
inherently interesting to the audience.
 Trade promotion: Here, the firm offers retailers and wholesalers temporary
discounts, which may or may not be passed on to the consumer, to stimulate sales.
 Sales promotion. Consumers are given either price discounts, coupons, or rebates.
 Personal selling. Sales people either make “cold” calls on potential customers and/or
respond to inquiries.
 In-store displays. Firms often pay a great deal of money to have their goods
displayed prominently in the store. More desirable display spaces include: end of an
 aisle, free-standing displays, and near the check-out counter. Occasionally, a
representative may display the product.
 Samples

INDUSTRIAL ADVERTISING BUSINESS TO BUSINESS

INTRODUCTION

The most popular terminology used for industrial advertising is business to business
advertising. This type of advertising generally includes a company advertising its products or
services for the companies which actually uses same or similar products or services or we can
say that the advertising company should produce the products which the other company needs
for its productions or functions. For example. some mineral water companies which work on
a smaller scale outsource the packaging bottles, the caps for bottles, the cover with name
printed on it, etc. so for this, the advertisements of the manufacturers of bottles, caps and
outer packing paper can work.

MEANING

Industrial advertising, other wise known as business to business advertising, is a form

of advertising to other busines , this can include the advertising of parts or raw materials for
their products or equipment used in their manufacturing process.

FUNCTIONS

 Creating Awareness
 Reaching members of Buying Centre
 Increasing Sales Efficiency and Effectiveness
 Efficient Reminding
 Sales Lead Generation
 Supporting Distribution Channel members
 Sales Growth during Recession

Media used for Industrial Advertising The media genearally used in the industrial
advertising

 Print media and

 Direct marketing

Print media

Includes business magazines, trade publications, news papers, technical

journals, etc, to make print media work efficiently, there are some do’s don’ts to be
keep in mind
 Visual images of the ad should be very sharp and prominent
 The ad should be so impressive that readers get attracted towards reading it
 The highlights should be on the service or product offered and not the
source by which it is being offered
  Let the ad be simple to be read
 The picture shown should not be irrelevant with the product.
 The ad should reflect the company’s image.
 The ad should be in logical sequence if it is of two or more pages.
 Headline should be catchy and suiting the product image
 And lastly, at the bottom of the page, the company name, address and
phone number of the respected office should be mentioned clearly without
fail.

DIRECT MARKETING includes

Direct Mail: here, the newsletters, data sheets, and the brochures of the company are directly
mailed to the customer’s postal address.

Telephonic Advertising: the advertising is done by calling up the customers on there

telephones, giving messages on mobile phones, etc.

Online Advertising: include companies sending e-mails to the customers or other companies
enclosing information about their products and services, putting online banners, providing e-
shopping options, etc.

The advertiser also use other way for promoting their products like participating in trade
shows, trade export, and fairs.

Promotion

In industrial marketing ,the objectives of sales promotion are gathering business

leads,impressing and rewarding customers ,and stimulating the sales force to gather effort.The
methods used in industrial marketing for sales promotion are:

1)Trade Shows

2)catalogues

3)sales contests

4)promotional novelties

5)Entertainment

6)promotional letters

7)seminars and

8)demonstrations

TRADE SHOWS

for some industrial marketing firms ,trade shows are the second most important marketing
promotional expenditure after personal selling. industry or trade associations organise annual
trade fairs or exhibitions . companies selling products and services to a particular industry buy
space and set up displays or stalls to demonstrate their products at the trade shows. The
benefits from trade shows are many:
1)an opportunity to introduce new product to a large audience at a short duration

2)establishing personal contacts with new customers

3)establishing contacts and increasing company awareness with key members of decision
making units who cannot be otherwise reached

4)making direct sales(by booking orders at the trade fair)

5)display and demonstration of the products

6)evaluating competitors products

7)discovering new suppliers and distributors

8)obtaining new product ideas

9)training for new sales person and

10)generating new sales leads which help salesperson to close sales

To ensure success at trade shows, industrial marketers should have specific objectives
such:

1)overall purpose for participation

2)creating actual sales

3)identifying potential customers

4)obtaining sales leads

5)gathering competitive intelligence

6)target audience to be reached

Based on specific objectives, a firm can decide which trade shows to

participate

SEMINARS

Some industrial marketers conduct educational(or technical) seminars for buying

organisations about state-of-the-art developments .The benefits for conducting technical
seminars are creating favourable image and establishing contacts with technical people (from
design, research and development, production, maintenance, and/or quality control) who are
the member of buying centres or purchase committees in the buying organisations. Audio
visual presentations are made by the company technical experts, followed by question -
answers sessions on technical matters. These seminars give good result in terms of sales for
the new products and establishing contacts with technical members of buying organisations

DEMONSTRATION

The industrial salespersons improve their sales presentations by using demonstration aids.
These are flip charts, product photographs, slides, audio, video cassettes, movies, and actual
product samples(if it is possible to carry them). The purpose of using the demonstration aids is
to improve the buyers attention and interest during the sales presentation. It also helps the
buyers to remember the product features and benefits. However, if the product is bulky or
large, the product demonstration is done during the trade shows or exhibitions. Sometimes
the product demonstration are done when the potential industrial buyers visit the seller's
factory, or when the product is shown in operation at another(existing) customer's premises.
A demonstration is particularly effective when the prospective industrial buyer is buying an
equipment or a machine for the first time

ROLE OF INDIRECT MARKETING

Indirect marketing is way for a business to market their product, idea, or service without
having to use the methods of SPAM or direct advertising and marketing.

Indirect marketing in which is no direct communication to customers by the companies is

called indirect marketing. Basically it is treated as the next stage for brand recognition and
awareness.

When customers are aware of the product and only require to be reminded about the product
than indirect marketing will be used. Indirect marketing is generic in nature and no
segmentation and targeting is required.

The retention to customers is made by presenting them in symbolic representation without

discriminating within the customers. In indirect marketing we cannot record the immediate
response of the customers but questionnaire can be used to take response in future.

This is a chain of intermediaries through which a product moves in order to be made available
for purchase by a customer. An indirect channel of distribution typically involves a product
passing through additional steps as it moves from the manufacturing business via distributors
to wholesalers and then retail stores.

ONLINE MARKETING OR E-MARKEING

It means using digital technologies to help sell our goods or services. These technologies are a
valuable complement to traditional marketing methods whatever the size of company or
business model.

The Benefits of E-marketing

E-marketing gives businesses of any size access to the mass market at an affordable price and,
unlike TV or print advertising, it allows truly personalized marketing. Specific benefits of e-
marketing include:

1. Global reach – A website can reach anyone in the world who has internet access. This
allows you to find new markets and compete globally for only a small investment.
2. Lower cost-A properly planned and effectively targeted e-marketing campaign can reach
he right customers at a much lower cost than traditional marketing methods.
3. Track able measurable results-Marketing by email or banner advertising makes it easier
to establish how effective your campaign has been. You can obtain detailed information
about customers responses to your advertising.
4. 24-hour marketing-With a website your customers can find out about your products even
if your office is closed.
5. Personalization-If your customer database is linked to your website, then whenever
someone visits the site. you can greet them with targeted offers. The more they buy from
you, the more you can refine your customer profile and market effectively to them.
6. One-to-one marketing-E-marketing lets you reach people who want to know about your
products and services instantly.
7. More interesting campaigns-E-marketing lets you create interactive campaign using
music, graphics and videos. You could send your customers a game or a quiz-whatever
you think will interest them.
8. Better conversion rate-If you have a website , then your customers are only ever a few
completing a purchase. Unlike other media which require people to get up and make a
phone call, post a letter or go to a shop, e-marketing is seamless.

TELEMARKETING

Telemarketing is an act of marketing goods or services to potential customers over the

telephone. Telemarketing may either by carried out by telemarketers or increasingly, by
automated telephone calls or “robocalls”.

Telemarketing can be effective tool for your business and it can be an easy and effective way
to increase your profits and promote your product or service.

ADVANTAGES OF USING TELEMARKETING

1. Provide a more interactive and personal sale service.

2. Create an immediate rapport with your customers.
3. Explain technical issues more clearly.
4. Generate leads and appointments.
5. Sell from a distance to increase your sales territory.
6. Reach more customers than with in-persons sales calls.
7. Sell to both existing and new customers.
8. Achieve results that are measurable.

DISADVANTAGES OF TELEMARKETING

1. Telemarketing can be resented particularly when dealing with business-to-customers,

and when calls are made in the evenings.
2. Customer lists may not always be clean and opted-out this leaves you with a potential
risk of breaking the law.
3. Customer lists can be very costly.
4. Telemarketing has a negative image that could damage your business reputation if
carried out poorly.
5. Telemarketing has the potential to replace a sales team and this could lead to negative
feelings among employees.
6. Training staff can be time-consuming and costly.
7. An outside service provider can result in your losing control over your sales processes
because the people doing the work aren’t your employees.

DIRECT MAIL

Direct mail is a marketing effort that uses a mail service to deliver a promotional
printed piece to your target audience. Direct mail encompasses a wide variety of marketing
materials, including brochures, catalogs, postcards, newsletters and sales letters. Major
corporations know the direct mail advertising is one of the most effective and profitable ways
to reach out to new and existing clients.
Unlike other forms of advertising in which you’re never sure just who’s getting your message,
direct mail lets you communicate one-on-one with your target audience. That allows you to
control who receives your message, when its delivered. what’s in the envelope and how many
people you reach.

The most effective direct-mail inserts often use key words and colors. Make sure the colors
you use promote the appropriate image. Neon colors, fox example can attract attention for
party planner or gift basket businesses. On the other hand, ivory and gray are usually the
colors of choice for lawyers, financial planners and other business services.

To involve the reader in the ordering process, many mailers enclose “yes” or “no” stickers that
are tobe stuck onto the order form. Companies such as Publishers Clearing House take this
technique farther by asking recipients to find hidden stickers throughout the mailing and stick
them on the sweepstakes entry. It also asks customers to choose their prizes, which gets them
even more involved.

PUBLICITY

Publicity is the movement of information with the effect of increasing public awareness of a
subject. The subjects of publicity include people , goods and services, organizations of all
kinds, and works of art or entertainment.

ADVANTAGES

Benefits to the Manufacturer:

1.Increase in demand of the product caused by advertising and introducing of new techniques.
2. Advertising maximizes the production level in the enterprise.
3. Reduce the slumps in profit margin of the products.
4.Large amount of production may lead to stabilize the value of the product.

Benefits to the Retailer:

1.Reduces the risk dead stock.
2.Since advertising helps in finding a way to stabilize the price. Retailer will be confident of
selling the product with more profits.
3. It also reduces the percentage overhead of the retailer.

Benefits to the Consumer:

1.Well-advertised goods are normally better.
2.It helps in educating the customer and also acts as an information service.
3.Advertising also makes it possible to sell direct to the consumer by mail order business.

DISADVANTAGES

1.Developing Newsworthy Stories

One of the main goals of a public relations campaign is to provide potential customers
with timely, newsworthy information. Businesses often issue press releases for grand
openings, product launches, employee recruitment or participation in an event promoting a
cause.
2. Hard to Measure Success
Companies often find it difficult to measure a campaign's success. Mark Nowlan,
"Entrepreneur" Magazine's public relations columnist, notes that measuring and evaluating the
impact of public relations efforts is often subjective. He suggests that it's hard to compare and
contrast impact across publications.
3. Need a Publicist
You'll need an in-house or freelance publicist to launch a successful public relations
campaign. A publicist can identify the best media to pitch, build media lists, develop press
releases and write stories. Business owners incur an expense for public relations services,
which will vary depending on your location, the publicist's level of experience and the amount
of time the publicist spends on your project.
4. Appropriate Media
Selecting the appropriate media to pitch your stories to may prove to be problematic, as you
try to review their readership to see if they match your target market. This takes time, which
may pull you away from other tasks, unless you hire a consultant to assist you. Pitching to
relevant media increases your chances of getting coverage.
5. Inaccurate Message or Storytelling
When you distribute a press release, it falls into the hands of many journalists, who may use it
to create a newsworthy story. While it can be advantageous to have a story written about your
business, you can be at a disadvantage if the story is inaccurate, incomplete or misleading. A
writer may see a negative angle that can damage your company's reputation.
PUBLIC RELATION
The part of public relations that is most directly related to promoting a company’s product or
services is called publicity.
The main function of public relation is to encourage and develop attitude and behavior which
will create understanding between an organization and its public and healthy growth. Thus
public relation is a form of communication.
Public relation is an activity carried on between advertising, to make the public understand
what the product actually is and thus posing a confidence in prospects about the product.

OBJECTIVES OF PUBLIC RELATION

1. Building Product Awareness – When introducing a new product or relaunching an

existing product, marketers can use a PR element that generates consumer attention
and awareness through media placements and special events.
2. Creating Interest – Whether a PR placement is a short product article or is included
with other products in “round up” article, stories in the media can help entice a
targeted audience to try the product. For example, around the holiday season, a special
holiday food may be promoted with PR through promotional releases sent to the food
media or through special events that sample the product.
3. Providing Information – PR can be used to provide customers with more in depth
information about products and services. Through articles, collateral materials,
newsletters and websites, PR delivers information to customers that can help them
gain understanding of the product.
 4. Stimulating Demand – A positive article in a newspaper, on a TV news show or
mentioned on the Internet, often results in a discernable increase in product sales.
5. Reinforcing the Brand – In many companies the public relations function is also
involved with brand reinforcement by maintaining positive relationships with key
audiences, and thereby aiding in building a strong image. Today it is ever more
important for companies and brands to build a good image. A strong image helps the
company build its business and it can help the company in times of crises as well.

TYPES OF PUBLIC RELATION

1. The types of key tools available to carryout the public relations function include:
2. Media Relations.
3. Media Tours.
4. Newsletters.
5. Special Events.
6. Speaking Engagements.
7. Sponsorships.
8. Employee Relations.
9. Community Relations and Philanthropy.

FUNCTIONS OF PUBLIC RELATIONS

1. Public relations functions are categorized by the publics with which relationships are
established and to whom appeals are made to understand and/or accept certain
policies, procedures, individuals, causes, products or services. Practitioners who
perform specialized functions may play a management role, operate as a
communications technician, or function in a dual role.

2. Community Relations – A public relations function consisting of an organization’s

planned, active and continuing participation with and within a community to maintain
and enhance its environment to the benefit of both the organization and the
community. This can involve partnerships, volunteer activities, philanthropic
contributions and public participation.

3. Employee Relations – Employee Relations Dealing and communicating with the

employees of an organization. This can include team building and employee
empowerment.

4. Government Relations – Dealing and communicating with legislatures and

government agencies on behalf of an organization.

5. Financial Relations – Dealing and communicating with firms and interest groups
within the organization’s industry.
 6. Media Relations – Dealing and communicating with the news media when seeking
publicity or responding to reporters’ questions. It also involves setting up and
maintaining a professional and mutually beneficial working relationship with news
gatherers and gatekeepers, in part by becoming known as a credible source and as a
provider of factual, expert information whether or not that information results in media
coverage.

7. Public Affairs – Dealing and communicating with government and groups with regard
to societal (public) policies, action and legislation. Unlike government relations, where
the practitioner works strictly on behalf of an organization, public affairs also is
concerned with the effect of public policies, actions and legislation on its publics.

Business-to-business, or B2B, sales differ in many ways from business-to-consumer sales. In

this lesson, we'll learn why they differ and how the selling process works when selling to a
business customer.

Business-to-Business Sales
Business-to-business sales (B2B) are just that, sales from one business entity to another. This
type of sale is likely to be larger than a business-to-consumer sale, since the company may
purchase your product for multiple sites or employees, and tends to be more financially
driven, since the buyer must justify the purchase to other members of the organization.

The B2B Sales Process

The process for selling to businesses is a bit different than the traditional consumer sales. To
understand the process, we'll listen in on a selling situation by Hank, who sells business phone
systems. Here are the steps in a business-to-business (B2B) selling process:

 Understand Need and Ability to Pay

The first step is to understand the problem your prospective customer is trying to solve, and
their ability to pay for your product or service. Hank starts off the conversation by asking the
prospect questions about their reasons for purchasing a phone system (New facility? Replace
old system? Add stations to the current system?) and what they currently have in place. He
discusses the features of the current system that are used, and any not available that they wish
they had. He also asks about their budget for the implementation, so he proposes a solution
that the company can afford.

 Develop a Solution

Once you understand the prospects needs and financial means, you need to evaluate the
various products you have to offer and develop a customized solution for them that meets both
their needs and budget. Hank now takes the information provided in the initial meeting and
compares it to the various systems he has available, and selects one that he thinks would best
meet their needs. He then puts together an information package and quote for this system,
along with a customized checklist comparing the customer's 'wish list' to the proposed
hardware.

 Evaluate Solution with the Customer

The customized solution is now shared with the prospective customer, generally in a sit-down
meeting where the solution is presented and all customer questions can be addressed. The
solution may be modified with customer input prior to finalizing. Hank meets with the
customer again, and walks them through the proposal he's developed. After a lengthy
discussion, Hank heads back to his office to revise the proposal to reflect a few modifications
that came out of the meeting.

 Finalize Sale

Once the terms are agreed on, a purchase agreement, or contract, is signed to finalize the
agreement. Hank sends the final proposal over to the client, along with a contract they can
sign and return to begin the process. Once the signed document is received, the sale is
complete and the implementation process will begin
Selling business to business (B2B) requires a different mindset that selling to consumers. Yet,
many business owners don't know how to customize their sales approach to a business
customer.

Mike Whitney, chief learning officer at The Morris Group Inc., an industrial B2B sales
company, has 45 years of experience in B2B industrial sales. He gives us advice on what
mistakes B2B sales people must learn to avoid.

Thinking cold calls will get business. – There was a time when due to lack of information,
cold calls served a purpose in B2B sales. Not anymore. Before a sales encounter, take the
time to do research on the Web and learn whether it is worth your time to pursue an account,
how profitable the account might be and what challenges the industry faces. Just these three
pieces of information will help you maximize your B2B sales success. Have at least three
good business reasons to meet with an account before doing so. The B2B salesperson that
wins the information battle usually wins the order.

Thinking that you are on a sales call instead of a business interview. – The term “sales
call” is out of place in successful B2B selling. No one has time for a social “call” or a drop-in
“call” by a salesperson. However, a business interview is an entirely different matter. An
interview has a business purpose in mind that is clear to all participants. The term “interview”
implies preparation for the interview – both by the interviewer and the
interviewee. Interviews are results-oriented for all parties. Interviews have a very clear
beginning, middle and end no matter where a B2B salesperson is in the sales process.

Thinking that your company will support your B2B endeavors. – Not only do you have
competitors for business in the general marketplace, you also have competitors within your
own company. In the majority of B2B sales organizations, you are only one of many voices
crying for resources that are needed to help you win orders. One sure way to get noticed
within your company is to have a track record that shows that you can turn those resources
into orders.

Having no clear vision of what it will take for you to obtain business from your
prospect. – Visions are a lot like goals — they are the way you want the world to look after
you apply your resources. When you are in the early stages of a B2B sales process, figure out
how your customer wants the world to look after they invest with you and your
company. Once you have this vision clearly defined, then your job as a B2B sales leader is to
list the steps required to help your customer reach the world they envision. Work backward
from the desired outcome and list each step sequentially to fulfill that vision. Your challenge
now is to provide that outcome profitably for your company and your prospect.
Forgetting you are working with people, not companies, as you pursue an order. – What
do you look for in the people and companies you choose to do business with? Your B2B
sales prospect is probably applying a similar set of criteria to the people and the companies
they prefer to do business with. Certainly companies have challenges that require solutions,
but it is the people within those companies that are charged with finding the solutions and
putting them in place. People have emotions, likes, dislikes, biases, preferences, blind spots,
irrationalities, and a hundred other things that drive their decision-making process.

Advantages of Team Selling

by Voss Graham

In the traditional selling world, the lone wolf is the most common sales person and the “lone
wolf” basically works alone. This lone wolf sales person controls their customer list, seldom
invites others to join on a sales call and MUST be in attendance when technical people are
necessary.
The new model of team selling is gaining momentum in the world of sales and for good
reason. Today, complexity is everywhere impacting the ability of a lone wolf sales person to
do everything necessary to make successful sales. Thus, the role of team selling is gaining
speed and acceptance. In fact, some industries are looking for more team capable sales people
to join their ranks.

The team selling sales person is more of a coordinator of people and meetings – of like
minded people – in order to solve the complexity of systems, technology, product
requirements, etc. The progressive customers are looking for sales teams who practice team
selling.

So what are the advantages of team selling? Here is a list of key advantages…
Advantages of Team Selling

1. Concerns and Needs are Met – Due to having more people involved in the sales
process, questions and concerns are addressed faster with more credible resources –
like tech people working with tech people talking geek stuff! Credibility carries more
weight with certain decision makers or key influences to the buying decision.
2. Obtain a “Bigger Picture” of Offerings – Many times sales people only see a short
term sale rather than a total (and larger) solution. When others are involved,
particularly executives interacting with other executives higher level points of view
spring into the picture. Now these actions may increase the size of the complexity, yet,
the flip side is an substantial increase in dollar size of the project. Remember, your
time is the same rather the sale is small or large – go for the larger reward.
3. Different Departments Working Together – Here is a bigger relative to
collaboration between cross functional groups or departments. When you spend more
time with other people in your own organization you have a greater opportunity of
building rapport and bonds with key people who can help you be more successful –
now and in the future. Build those internal relationships, then watch how fast things
get done.
4. Obtain Specific Recommendations – Now we are looking at specialty groups who
can advise the sales person on better ways to get things done. Which systems match
the customer’s systems, or technical issues needing to be resolved for a smooth and
quiet transition to your services or products.
5. Better Agreements on Price, Deliverable’s and Terms & Conditions – The more
people or departments involved in a sales process, the more they have in the game –
the more willing they are to commit and agree to non-standard situations. I have found
 this to be very true when involving certain vendors in my larger sales projects –
pricing becomes more flexible (not cheaper here – flexible) and thus doable for the
client as well as the vendor – everybody wins!
6. Better Exchange of Vital Technical and Business Information – This one area is
critical to the success of a collaborative partnership or relationship. Critical
information is usually necessary for complex situations to run smoothly. When clients
who are involved in Inventory Management as a method of selling their products,
usually need important production forecasts and other information to make the system
work properly. This is achieved in various ways – from open lines of communication
to actually placing an operations person on the customer’s manufacturing floor to
monitor the needs and availability of parts.
There you have the Key Advantages to Team Selling. I have seen companies set up “sales
teams” for major accounts using a “cradle to grave” approach of handling major customers.
The team is responsible and accountable for everything with their assigned customer. The
team members are trained in decision making and all necessary skills for handling their major
account.

Over the next couple of weeks, I will add more information to the team selling concept.
Remember, the larger and more complex your sales are becoming, the more a team selling
approach may be needed.

Entrepreneurial philosophy

An Entrepreneur and a Philosopher are on opposite ends of the activity scale. The Philosopher
is all thinking no doing, and the Entrepreneur is mostly doing and not a lot of thinking. That
doesn’t mean Entrepreneurs don’t have Philosophies of their own – we’ve compiled a few
below.

1. Be passionate about what you do. Passion gives you a reason to get up in the morning
and the energy to burn the midnight oil.
2. I’m not always right. A lot of the time I’m wrong about what my customers want, but
if I listen to them then I’m right about what they want 100% of the time.
3. We use our products. If you use a product yourself, you see all the problems.
4. Nothing beats hard work.
5. I don’t take myself too seriously. Make sure you are enjoying what you are doing –
every day is fun if you enjoy what you are working on.
6. We’re continually trying new things and rolling them out quickly – get immediate
feedback and then refine your idea.
7. A lot of people get stuck in the cycle of reading blog posts and Hacker news all day
trying to hone their skills without ever actually trying any of the things they read
about. I’m a believer in doing and then learning from the results.
8. I don’t view risk as something that’s to be feared – It’s something to try to mitigate,
but not avoid; the worst thing you can do is not trying to do something. Try things that
are hard to pull off, take chances.
9. I’m a big believer in being surrounded by “smart” people in an entrepreneurial sense.
That’s why we moved to the Silicon Valley from the UK. There is a strong density of
“smart” people here. You absorb the knowledge of those around you, so envelope
yourself in intelligence.
10. Taking risks is not easy, but the reward is so worth it. Both my co-founder and I had to
give up good jobs to launch Cater2.me, but it’s so much more rewarding to be your
own boss
11. Focus on the positive things that could happen, not the negative things that might
happen.
12. Work with other people on exciting things.
 13. Never Mix Business & Personal Life – if something BAD happens in your Personal
life, it is not the end of the world, always keep that in mind.
14. Trying to do it all by yourself is a recipe for failure.
15. Talk to other entrepreneurs who have gone through what you are going through. Talk
to people who have “been there and done that”

Every one of these startups has over 1M in funding and they are all growing at an exponential
rate. A startup is only as good as its founders, and the founders are only as good as the rules
they live by. Maybe Entrepreneurs and Philosophers aren’t so different after all.

Entrepreneur Stories wants to connect you with successful business owners. Whether you’re
an aspiring Entrepreneur or just want to get some awesome lessons about life, you’ll find it.
Our goal is to give you the inspiration and knowledge you need to take life by storm and be
successful.

B2b selling Solution oriented efforts

1. Consider the Customer’s Pain Points

Understanding your prospects’ business pain is key. The better your understand, the better
your ability will be to service their needs. A customer may call in with a simple issue like, “I
can’t access my wireless router.” A very simple answer could be “reset your router”.
However, the same challenge could be the result of a larger business pain. Perhaps their wifi
network isn’t producing a signal. This can lead to a considerable amount of lost productivity.
It would only be through probing questions and simply inquiring as to the extent of the
challenge that you can gain a better grasp of the prospects needs.
2. Engage, Then Inform

When first contacting your prospect, ensure your message targets the business pains the
prospect is facing right at the beginning. You want to try to capture that person’s eye (or ear)
right away whether it be via email, In Mail or telephone. The goal is to encourage your
prospect to read and/or hear more about what you have to offer.

3. Focus on Solutions, not Products

A product or service sale results from solving a problem. Whether it be a person or a

company, you don’t buy the bottle of vitamin water because you like the color. You purchase
it as a means to quench your thirst. The drink is a solution to being thirsty.

4. Highlight Your Differences

Just because your solution can solve their business challenge, it doesn’t mean you have the
only solution on the market. You need to be able to position yourself against your competitors
and convince the prospect that your solution is the best one. Be sure to highlight how you can
help, your differences and be specific. Don’t make statements like, “We have the best
customer service.” These statements mean little and are overused. Add some quantitative
measures into your pitch. This could be a customer service rating or perhaps a link to the
product reviews on Google+ or Yelp.

A better example is: “We have 12 customers in the healthcare space and on average each
customer we have been able to reduce their utility expenses by 54% with no capital cost. This
is a tremendous savings.”
 The other point to make is that even if there is not a direct competitor to your solution,
remember, there are indirect competitors and everyone is vying for a share of the budget.
5. Sell the true value

We often recommend to customers that when building your value proposition focus your
attention on hitting core items that show a business value. We believe a solid value
proposition needs to be underpinned on one or more of these four fundamental business
drivers.

1. Drive revenues
2. Reduce expenses
3. Crate an efficiency
4. Mitigate a risk

When building your story, quantitatively include metrics that would resonate with the
customer and are hitting on one or more of the four key areas above. One of our industrial
clients has developed a new solution to an industrial challenge that is 50% more expensive.
The traditional solution cost $500,000 while their new solution cost $750,000. That sounds
negative, but it isn’t. In this case, when the customer needs to have this aspect of their plant
fixed, it costs $1 million per day when the operation is down. Under the traditional method, to
repair and then get this part of the plant up and running again it can take 6 to 10 days. So that
downtime cost is between $6 and 10 million plus the $500,000. The new solution reduces
plant downtime to 3 days. So the total downtime cost of the new solution is $3 million plus
the $750,000. So what is the better option for the plant owner – $6.5 million as a best case
using traditional technology or $3.75 million using this new solution? The answer is pretty
clear but the key here is that you have to explore the whole story, the real value to the
customer.

Companies can execute their selling strategies with a sound sales force organization structure.
The sales force organizational design should be consistent with the selling and marketing
strategies.

The two most important factors influences design of sales organization. They are:

1. Different or similar needs of customers, and

2. Simple or complex products and length of products.

DESIGNS OR TYPES OF SALES ORGANIZATION: Based on above two factors, there are
major types of organizational designs.

Different customer

needs

Market oriented Combination of product/

 organization market organization

Simple and less Complex and/

number of large number of

products products

Geographical Product

Organization organization

Similar customer needs

They are explained as follows:

 Geographical organizations:

In this organization, a salesperson is assigned a particular territory, branch or region for

promoting all the products of the company, to all the customers located in that geographical area.
This type of sales organization is most economical and it ensures that all the customers in the
territory are covered. It is beneficial to customers because one salesperson selling all the products
of the company is responsible for efficient service and communication. This organization is
suited to a small or medium-size company with less number of products.

 Product organization:

Here salespersons are assigned a few products out of the various products of a company. Thus,
different salespersons specialize in selling different group of products. This is suited to a large
organization having several products or need different type of product knowledge, application
knowledge and selling skills. Besides, the customers’ buying behaviour for various products may
be different.

The major advantage of product oriented sales organization is that it gives a competitive
advantage due to the greater product knowledge permitted by product specialization, which in
turn improves the value of the total offer to the customers.

Disadvantages of product organization:

 Higher selling expenses and customers may have difficulties in dealing with more number
of sales persons, dealing with different product groups of the same organization.
 However, if the higher cost of selling is offset by higher volume of sales, it can result in
reasonable profit margins for each product group.

 Market (or customer) oriented organization:

This type of organization is generally combined with geographic specialization. It is found

suitable whenever there are distinct customer groups who are not only large in size and potential,
but also have different buying behaviour. It helps salespersons to develop a detailed knowledge
of a particular group of customers. With this kind of customer/market segment specialization,
different salespersons sell the same products of the company, but their strategies of selling,
customer service, and buyer-seller relationships are different for different market segments.

 Organizational hierarchy:

A sales force consists of field selling and inside salespersons (or representatives). Both the
positions have important roles to play. In a typical sales organization, sales representatives report
to a first line supervisor, referred to as sales supervisor, or a branch manager, or an area manager.
The designations vary from organization to organization. The management levels in the
hierarchy between sales reps and the head of marketing depends on size of the organization and
the span of control (i.e., number of persons reporting to a manager). The concept of optimum
span of control is now outdated (because of effectiveness of flatter organization structure). The
trend in the organization structure is to have minimum possible hierarchical levels (switch over
to flatter organization structure). These kinds of organizations have competitive advantages in
minimizing communication delays, faster decision making, resulting in speed and accuracy in
responding to the demands or problems of the customers.

DIRECT SALES FORCE:

Direct sales force is a division of Pareto, is a nationwide market leader in providing results
driven outsourced sales and marketing services through face-to-face marketing, acquisition
based marketing and sales service etc.

SALES COVERAGE THROUGH MANUFACTURERS’ REPRESENTATIVES:

A manufacturers’ representative (rep), also known as independent sales representatives or

sales agent, is an individual, sales agency or company that sells a manufacturers’ products to
wholesale and retail customers. They are independent contractors who develop long-term
relationships with their client companies to sell the latter’s products.

Certain features of manufacturers’ representatives (MR) are:

 MR does not function under the immediate supervision of the manufacturers they sell for
 The relationship between them (MR) is not like a boss and employee, but is a business-
to-business relationship.
 An MR firm, sometimes called as a multi-line field sales company, can be run by one
person or can be much more extensive organization with numerous sales person covering
specific territories.
 The firm represents every conceivable product line, from automotive to rubber products,
from arts and crafts to jewellery, from electronics to energy, from food and beverage
processing equipment to furniture.
 Virtually any product that is made and sold can be handled by MR firms.
 Beyond sales duties, however, MR provides an array of services to for their clients in an
effort to strengthen the relationship between representative and manufacturer and to
increase the mutual benefits of the relationship.
 The services include (depending on the size, scope and specialization of the particular
sales agency) warehousing, installation and maintenance activities etc.
 Most rep firms provide one or more of these services in addition to their specialization in
field of sales etc.

SALES COVERAGE THROUGH DISTRIBUTORS:

 Going to market through distributors is one of the strategies to adopt for marketing the
products; other strategies utilize channels such as a direct sales force or the internet to
reach the customers.
 A network of distributors enables to reach large numbers of geographically dispersed
customers that would be difficult and costly to get to though a direct sales force.
 Distributors can also add value to the products by customizing them or adding
specialist services or support using sales management tools. They are as follows:
 Segmenting the target market into customers and prospects which wanted to be dealt
with directly and those that can be reached through distributors.
 Determine market by size of customer or geographical location.
 Communicate with larger customers directly so that to maintain strong relationships.
 Identify territories with good sales potential that distributors could cover if you have a
small sales force and do not want to waste their sales time travelling.
 Select the members of the distributor network. Choose distributors with the experience
in the market sectors, which are targeted.
 Prepare a presentation to outline the market opportunity for the distributor and setout
requirements for the business relationship.
 Appoint distributors who meet requirements for market experience and provide
geographical coverage.
 Prepare a set of customer service standards that distributors must meet.
 Appoint a member of sales team to work with distributors to build sales etc.

SUSTAINING CUSTOMER RELATIONSHIP:

The most important thing in sales and marketing is to attract and retain most profitable
business customers. Some are mentioned as follows:

Communicate frequently:

It is important to communicate frequently and vary the types of messages, which is sent to the
customer.

Offer customer rewards:

Customer loyalty or reward programs work well for many types of businesses, from retail to
cruise and travel. The more customers spend, the more they earn as graduated rewards are
offered.
 Build two way communication:

When it comes to customer relations, “listening”, can be every bit as important as “telling”
and hence use every tool and opportunity to create interaction including asking for feedback
through website, e-newsletters, sending customer surveys and providing online message
boards or blogs.

Enhance customer service:

One of the best ways to add value and standout from the competition is to have superior
customer service. Customers often make choices between parity products and services based
on the perceived “customer experience”.

Effective negotiation skills:

It is a powerful tool for sales people, involving analysis, problem-solving, personal influence
and persuasion.

Ability to Scale:
Global and multi-line marketers expect brand consistency and in-market effectiveness from
their subsidiaries.

Applying Creativity Across the Marketing Process:

Beyond compelling content, creativity today means making a brand’s promises real – in
presence and experience.