UNDERSTANDING INDUSTRIAL

MARKETS AND ENVIRONMENT

Introduction
 Industrialmarketing is related to business
to business marketing. It is the marketing
serve to business organization like- private
sector, govt. organization, manufacturing
companies, hospital, etc.
Types of Industrial customer
 Commercial enterprises
 Govt. customers
 Institutional customers
 Cooperative societies
 Commercial Enterprises
Commercial enterprises are private sector, profit
seeking organization. It consists:
 Industrial Distributors or Dealers
 Original Equipment Manufacturers (OEMs)- E.g.
MRF (Seller) and TELCO (OEM).
 Users- E.g. drilling machine, winding machine,
computers, fax machine and so on.
 Overlapping of categories- E.g. car manufacturer
buys a drilling machine to support the manufacturing
operation and is referred to as a “user”. The same
car manufacturer also buys batteries which are
incorporated into cars and hence, it can be also
referred to as an OEM.
Government customers

 The largest purchases of industrial

products in India are central and state govt
departments, undertakings, and agencies,
such as railways, defence etc
Institutions

 Public and private institutions such as

hospitals, schools, collages,
universities, and prisons, are classified
as institutional customers.
Cooperative societies

 An association of persons forms a

cooperative society. It can be
manufacturing units (cooperative sugar
mills) or non-manufacturing
organisations (cooperative banks).
Classification of Industrial Products
and Services

 The method most accepted classifies

products and services based on how
products or services enter the production
process, and their relative costs.
Materials and Parts
Goods that enter the product directly. Cost of
these items treated as part of manufacturing
cost.
 Raw Materials- e.g. when a large bakery
purchases natural gas to fire the ovens.
 Manufactured Materials and Component Parts-
Manufactured material include those raw
materials that are subjected to some amount of
processing before entering the manufacturing
process. E.g. oil, fuel oil and steel. Component
parts such as electric motors, batteries and
instruments can be installed directly into
products with little or no additional changes.
Capital Items
Those items which are wear out over certain
time frame. These are classified as follow:
 Installation/Heavy Equipment- Major and long
term investment e.g. machine, turbines,
generators, furnaces and earth moving
equipment.
 Accessories/ Light Equipment- Light Tools
and equipment and not consider as part of
heavy equipment e.g. jigs, typewriter and
computer.
 Plant and building- These are real estate
property of a company, include- office, plants,
housing, parking and so on.
Supplies and Services

Do not become a part of the finished product.

But they support the purchasing operation.
 Supplies- paints, soaps, oil and greases,
pencils, typewriter, stationary and paper
clips. These are generally standardized.
 Services- building maintenance services,
auditing services, legal services, others.
Marketing Implications for different types of
products & customers

i. For Materials & Parts

Direct selling is done to large OEMs
(Original Equipment Manufacturers) and
users, but indirect selling through
industrial distributors / dealers becomes
cost effective for smaller volume OEMs
and users.

i. For Capital items

Direct selling through company sales force
is common, with extensive interactions on
technical & commercial factors.
Cont…….

iii For Supplies

Industrial distributors / dealers are mostly used but for
marketing of services, word-of-mouth plays an important
marketing role, with quality & price of service as key factors.
 Purchasing Orientations of Business
Buyers
• Business buyers/ Industrial customers follow one of
the three purchasing orientations:
(i)  Buying, (ii) Procurement, or (iii) Supply chain
Management.

(i) Buying Orientation
The firm with buying orientation follows the
practice of (a) selecting lowest price supplier, (b)
gaining power over suppliers and (c) avoiding
risk of buying from new suppliers. It has a Short-term
focus.
(ii)Procurement Orientation
The purchasing firm with procurement orientation
has a long-term focus. It achieves the objectives of
quality improvement and cost reductions by following
the practices of (a) collaborative relationship with
major suppliers and (b) working closely with other
functional areas in the company.
Cont……..

(iii) Supply chain Management Orientation

Here, the firm focuses on improving the value chain
from raw materials to end users. This is achieved by
(a) delivering superior value to end users, (b)
outsourcing non-core activities, (c) and supporting
collaborative relationships with major suppliers.