A Career Path in Marketing For Fresh MBA/PGDM Graduates

Opportunity for International moves from here onwards

Regional Manager/V-P Sales and Marketing
Territory Sales Manager/Senior Manager - Sales/ Branch Manager

Area Sales Manager
Key Account Manager
Assistant Sales Manager/Relationship Manager

Sales Career Path in Marketing
‡ Advancement based on

performance, NOT tenure ‡ Responsibility is given from Day 1 - opportunity to learn and demonstrate ability ‡ Handling of large teams; multiple stakeholders


Job Skills and Management Skills that you will acquire in Year 1
‡ Time : ‡ Designation: ‡ Location of Work : 12 months (Year 1 of Service) Management Trainee or Sales Trainee (Trade) Non Metro town

‡ Training during the first 12 months of service will focus on two critical areas : job skills and management skills ‡ Job Skills : 1. Building sales knowledge and sales competencies 2. Business knowledge of the marketplace ‡ Management Skills : 1. Selling Skills 2. Client Management Skills 3. People Management Skills

1. Building sales knowledge and sales competencies to handle the basic task associated with field sales/non-field sales ‡ Product portfolio, value added services, tariffs and rate charts, personal selling, tele-calling, direct marketing, sales tie-up, sales budgeting ‡ sales targets, sales reporting, trade discount structure, services portfolio ‡ field visits and joint-calling with seniors to observe and learn on the job, Induction training

2. Training familiarizes the Management Trainee/Sales Trainee with the marketplace

‡ Sales structure (sales organization, reporting, and staffing) ‡ Product offerings ‡ Market place (customers, partners, franchisees, creditors, competitors, and investors)

‡ Selling skills (seven steps in personal selling, product knowledge, budgeting, demand forecasting, catchment area management, market development) ‡ Build client management and selling skills ‡ Company Policies and Processes (Manual of Service Rules) ‡ Physical, Electronic, and Digital Distribution Channels ‡ Foundation knowledge of people management

Job Skills and Management Skills that you will acquire in Years 2 and 3 ‡ Time: ‡ Designation : 36 months (Years 2 and 3 of Service) Assistant Sales Manager/Relationship Manager/Credit Officer (Executive Grade) ‡ Location of Work: (Trade) Metro Town

‡ Training during the first 24 -36 months of service will focus on two critical areas : advanced job skills and sales management skills ‡ Advanced Job Skills: 1. Sales Territory Management 2. HR Skills ‡ Sales Management Skills: 1. Sales data interpretation and analysis

‡ Advanced Job Skills: sales territory management and HR skills ‡ At the end of 36 months of service you should be competent to manage and direct a small team of reportees ( 5-10 sales executives) ‡ You will be required to assign annual targets, review sales reports, and monitor sales performance ‡ Sales territories: more complex and larger ‡ In terms of geographical dispersion, steeper achievement targets, generation of new customer leads, and monitoring reportee sales performance)

‡ HR Skills ‡ Sales Communication Skills; Sales Correspondence Skills ‡ Basic Sales Negotiation skills: customer management, grievance redressal, delighting preferred customers ‡ Team Coaching Skills: sales force motivation ‡ Foundation knowledge of Leadership skills: vision and direction to grow the business

‡Sales Management Skills ‡ Quantitative tools for market analysis ‡ Merchandising Procedures ‡ Handle multiple data sources from field sales and generate meaningful interpretations from the same to aid decision making ‡ Report sales performance of reportees and present analysis in prescribed sales formats to your immediate reporting officer

Job Skills and Management Skills that you will acquire in Years 4 and 5
‡ Time :

48-60 months (Years 4 and 5 of Service) Key Account Manager (Junior Management) (Trade) Metro Town

‡ Designation : ‡ Location of Work :

‡ Training during the next 48-60 months of service will focus on two critical areas : advanced job skills and sales management skills ‡ Advanced Job Skills: 1. Key Account Management Skills 2. Building Analytical Skill (market development and growing the business)

‡ At the end of your fifth year of service in an organization, you will enter the first managerial grade and scale and will be promoted to a key account manager

‡ Exposure to Key Account Management ‡ deepening the existing customer base, reaching out to satisfied and loyal customers ‡ scaling up value-added products and services ‡ fertilizing new leads and achieving conversion rates ‡ growing the business to new segments

‡ This will require building analytical abilities ‡ preparing self for negotiation meetings with large key accounts (Corporate, Institutional, Retail) ‡ Reporting responsibilities and accountability ‡ technically accurate and timely inputs to the next level of management ‡ sales forecasts, quarter on quarter performance ‡ market potential, new market opportunities ‡ competitor activity ‡ proactive business planning

‡ Presentation skills ‡ Advanced Negotiation Skills ‡ Foundation knowledge of Financial concepts: financial statement analysis, generating a profit and loss statement

Managerial Skill Acquisition Phase
‡ Time : ‡ Designation : 72 and 84 months (Years 6 and 7 of Service) Area Sales Manager

‡ Location of Work : State level sales responsibilities

‡ ASM function: handle the larger territory based accounts and functions with more sales reportees to manage ‡Planning and monitoring skills will become critical in this role ‡ last six months of year 5 will be dedicated to preparing the key account manager to handle an ASM role

‡ Advanced coaching skills: preparing the next line of sales executive to transit to managerial roles

‡ Demonstrating core values: applying ethical practices in business

‡ Logistics Management : planning for the distribution organization (Company owned vs Franchisees), identification and selection of commercial real estate ‡ negotiating rental agreements, distribution strategy, relocating office space, closing unprofitable outlets, branches, offices


Territory and Sales Planning

‡ growing the business (volume, value, product) in new segments and seeding new offerings ‡ handling integrated marketing communications, sales budgets, collection budgets ‡ accurate sales and collection forecasts, designing pricing, distribution, and promotion strategies

‡ Building customer management skills ‡ retaining satisfied customers and acquiring new customers ‡ collection of customer feedback ‡ acting on customer feedback in a prompt and timely manner ‡ µfiring¶ unprofitable customers

B2B Marketing

10 types of entities marketed
‡ Marketer are involved in marketing ten types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas 1. Goods: physical goods constitute the bulk of production and marketing efforts. 2. Services: the Indian business sector consists of a 60±40 services to goods mix. 3. Events: marketers promote time-based events such as trade shows, artistic performances, and the IPL. 4. Experiences: a firm can create and market experiences such as amusement parks, Wonder La, Innovative Film City, Walt Disney.

5. Persons: celebrity marketing is a major business: film stars regularly promote products and services. 6. Places: cities, states, regions, and whole nations compete actively to attract tourists: TTD, Tirupathi attracts 60 million pilgrims yearly. 7. Properties: intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds). 8. Organizations: actively work to build a strong, favorable, and unique image in the minds of their target publics. B-schools, companies, govt. agencies

9. Information: marketed as a product; databases, learning resources, market research reports, courseware; schools, universities, and others produce information and then market it. 10. Ideas: products and services are platforms for delivering some idea or benefit

‡ Marketer? ‡ a marketer is a business organization seeking a response (purchase) from another party called the prospect

‡ Market? ‡ a market as a collection of buyers and sellers who transact over a particular product or product class


Product classification and marketing mix essentials: industrial products and business markets

‡ ‡ ‡

Key Customer Markets Consumer Markets consumer goods and services sold to individual or family buyers (soft drinks, cosmetics, cars, clothing, personal care products)

‡ ‡

Business Markets Companies selling business goods and services to other organizations only ( business buyers such as Maruti Suzuki, Crompton Greaves, TVS India, Tata Motors, software companies, government agencies, PSUs, LCV manf.)

‡ Global Markets ‡ companies operate in global markets for products and services (Microsoft, IBM, Caterpillar, McDonald¶s, Novartis) and adapt their products/services to the country ‡ Governmental Markets ‡ companies selling industrial products to government departments (BMTC, Power Grid, BHEL)

‡ ‡ ‡

Marketing differences between consumer marketing and business marketing intended use of the product: consumer products vs industrial products Intended consumer: retail (households, individual) buyers vs industrial buyers (for manufacturing, operations, production requirements)


the most valued product brands in the world market to both retail consumers and business markets


General Motors, IBM, Hewlett Packard, GE, Caterpillar, Cisco, Intel, Tata, SAIL, Toyota Motors, DuPont, Maruti Suzuki, Hyundai Motors, FedEx etc: spend USD 60 million a day on industrial purchases to support operations

‡ ‡ ‡

two product categories: consumer and business consumer products classification: convenience, shopping, specialty, unsought business products classification: (i) Input Goods (ii) Equipment Goods (iii) Supply Goods ± function as inputs for finished goods


consumer product categories are classified based on characteristics of consumer buying behaviour


convenience products: staples; extensive distribution (retail outlets); minimal purchase effort; frequent purchase ± food and beverage, personal care products, home care products, fast food menus


shopping products: products for which consumers make a considerable effort in planning and making the purchase; infrequent purchase

‡ ‡

compare and evaluate brands, prices, product features, warranties consumer electronics, home appliances, furniture, footwear, ready-made apparel, automobiles

‡ ‡

websites, visits to outlet, word of mouth speciality products: possess one or more unique product feature; buyers plan the purchase and do not accept a substitute ± Mont Blanc pen, Ray Ban sunglasses, diamonds, designer suits and bags, luxury automobiles

‡ ‡ ‡

unsought products: products that customers do not seek for purchase or are unaware heavy promotion and brand awareness Encyclopaedia Britannia set of 32 volumes, high security safety systems for homes, garden equipment, emergency medical services, auto repair


business products classification: installations, accessory equipment, raw materials, component parts, process materials, MRO supplies, business services


TYPE 1 : INPUT GOODS (raw materials, semi-manufactured parts ± spare parts, compressors, motors, pumps, nuts, bolts, castings, forgings, and couplings, basic chemicals, plastics, iron and steel, rubber and finished goods ± computers, servers, tyres, tubes, rubber mats, steering wheels, etc.)


TYPE II ± EQUIPMENT GOODS (support the production process ± Installations and Accessory Equipment: CNC machines, machine tools, production line, boilers, separators, conveyor belts, blast furnaces, cranes, fork lifts, electric transformers, grinders)


TYPE III ± SUPPLY GOODS (maintenance, repair, operating materials ± machine oils, lubricants, paints)

‡ ‡ ‡

Why do business markets exist? business organizations do not only sell products and services to retail customers« each buys vast quantities from manufacturing organizations (B2B): raw materials, manufactured components, plant and equipment, suppliers, and business services

‡ ‡

principles of marketing also apply to business marketers business to business marketing; industrial marketing; organizational buying

‡ ‡

business marketers serve the largest market of all: industrial markets «for raw materials, components, parts, installations, office supplies, equipment, and business services

‡ ‡

some of the largest business customers or organizational buyers« General Motors, IBM, Hewlett Packard, GE, Caterpillar, Cisco, Intel, Tata, SAIL, Toyota Motors, DuPont, Maruti Suzuki, Hyundai Motors, FedEx etc: spend USD 60 million a day on industrial purchases to support operations

‡ What is a business market? ‡ business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others ‡ organizational buying or µbusiness buying is defined as the decisionmaking process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers

‡ ‡

What is business to business marketing? B2B marketing is defined as the process of marketing products and services that are bought and sold between three types of organizations: commercial, government, institutional


industrial marketing: products and services bought and sold among commercial organizations only ± Distributors, OEM, User Industries, Retailers

‡ ‡ ‡ ‡ ‡ ‡ ‡

Six µPs¶ of business to business marketing P1 : production specifications P2: Commercial terms P3: methods of distribution P4: promotion P5 : internal process P6: people

‡ P1: application specific product specifications; quality standards; production quantity per run (micron measures, viscosity, parts per million dilution) ‡ P2: Pricing and commercial terms need to be at par with competitive bidding and rolled in ‡ P3: distributor based vs direct delivery to customer premises (Ex Works): Heavy commercial vehicles, pumps, motors

‡ P4: promotion through product seeding in target segments (sampling of prospects with new products); channel and relationship management ‡ P5: cohesion and coordination between the manufacturing, marketing, and distribution divisions ± batch sizes, made-to-order, customized repeat orders (batteries, earth moving machinery) ‡ P6: professionally trained design and production engineers, site engineers, MRO technicians, and customized solutions teams

‡ ‡ ‡ ‡ ‡

Crompton Greaves Crompton Greaves is part of the Avantha Group Rs. 4200 crores (2009-10) India's largest private sector enterprise in the electrical engineering industry sector leadership position in a range of industrial products: power transmission and industrial solutions


power & industrial transformers, HT circuit breakers, LT & HT motors, DC motors, traction motors, alternators/ generators, railway signalling equipments


manufactures the widest range of Power & Distribution Transformers and Reactors in the world

‡ ‡

60kVA to 415MVA, 500kV Class five of the largest business buyer segments for industrial products: Power Utilities, Process Industries, Railways, Mines, Electricity Boards, Industrial users

‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡


‡ ‡ ‡ ‡

Fenner India Ltd. JK Singhania Group Company Fenner (India) Limited is the largest manufacturer Industrial and Automotive V-Belts, Oilseals and Power Transmission Accessories in India


Kinetic Motor Company; Indofarm Tractors; L & T - John Deere; LML Mahindra & Mahindra; Maruti Udyog; Punjab Tractors; Royal Enfield


Poly-V Belt and V-Belt Drive in a Wire Drawing Machine


Banded Belt drive for Gas Compressor Application


Poly-V Belt Drive for Dual Motors Application on Textile Ring Frame

‡ ‡ ‡

Finolex Cables Ltd flagship company of the Finolex Group was established in 1958 in Pune India's largest and leading manufacturer of electrical and telecommunication cables with a turnover in excess of Rs.16 Billion (about US $ 320 million)

‡ ‡ ‡ ‡ ‡ ‡

PVC insulated electrical wires and Flame Retardant Low Smoke electrical wires PVC insulated single core and multicore industrial flexible cables Rodent Repellent Multicore Flexible Cables PVC Insulated Winding Wires Power and Control Cables, High Voltage Power Cables (Upto 33 kV) Polyethylene Insulated Jelly Filled Telephone Cables


every cable is manufactured using bright annealed electrolytic grade copper ± 99.97% pure manufactured in house and is insulated with virgin grade PVC

‡ ‡ ‡ ‡ ‡

Market leader is polyvinylchloride (PVC) thermoplastic resin versatility of processing and application surpasses all other thermoplastic materials Suspension PVC FS-6701 Rigid and Semi Rigid applications: pipes, conduits, hoses and tubes, wire and cable coating, calendared films/sheets, extruded profiles cable/footwear compounds etc.

‡ ‡

Emulsion PVC FP-120 Leather, conveyor belting and tarpaulin coating

‡ Caterpillar ‡ champion among b2b marketers ‡ the world's largest maker of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines ‡ 300 machines products ‡ ‡ 500 engine products world's largest manufacturer of medium speed diesel engines and high speed diesel engines, with ratings available from 54 to 13,600 hp (40 to 10,000 kW) ‡ Shipping, trucks, construction and mining, petroleum machines

Backhoe Loaders


Wheel Loaders

Paving Equipment

Hydraulic Excavators


‡ GMMCO ‡ As Caterpillar¶s largest dealer in India, GMMCO offers world-class standards of sales, service and support for Cat products ‡ GMMCO is a part of the CK Birla group of companies ‡ 1967 ‡ GMMCO network includes: over a 100 establishments across the country, 29 warehouses that stock over 22,000 line items of inventory worth over US$ 20 million ‡ supports over 7000 machines and 8500 engines across its territory

‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡

GMMCO¶s range of Caterpillar Machines and Engines being sold and serviced in India include: Back Hoe Loaders Hydraulic Excavators Front Shovels Motor Graders Dumpers Front-end Loaders Track-type Tractors Asphalt Pavers Soil Compactors Tandem Rollers A complete range of gensets and engines for marine, petroleum and industrial applications


Escorts Group

‡ India's leading engineering conglomerates ‡ agri-machinery, construction & material handling equipment, railway equipment and auto components ‡ pioneered farm mechanization in the country

‡ a comprehensive range of farm tractors ‡ 45 variants starting from 25 to 80 HP

‡ material handling and construction equipment manufacturer ‡ ‡ ‡ cranes, loaders, vibratory rollers and forklifts railway equipment brakes, couplers, shock absorbers, rail fastening systems, composite brake blocks and vulcanized rubber parts ‡ ‡ auto components shock absorbers and telescopic front forks


FT 45

FT 45 DT


‡ Escorts Construction Equipment

Hydraulic Mobile Cranes Compactors Forklifts

‡ JCB India Limited ‡ India¶s largest manufacturer of Earthmoving and Construction equipment ‡ a fully owned subsidiary of JC Bamford Excavators Limited (U.K) ‡ Controlled by the Swaraj Paul Group of Companies ‡ JCB India Limited started operations in 1979 JCB India has the World¶s largest Backhoe Loader manufacturing facility at Ballabgarh in Haryana

Backhoe Loaders

Compact Excavators

Vibratory Single Drum Compactors

Wheeled Loaders

‡ TYPE 1 : ENTERING GOODS/INPUT GOODS: classification, industrial application, marketing mix parameters ‡ also called standard industrial products group of products

‡ standardized components and basic inputs to manufacture industrial products and consumer durables ‡ LDPE granules, rotary shafts, brake linings, rubber composite, welding rods, ball bearing, bearings, castings, forgings, couplings, armatures, wires, cables ‡ marketing mix parameters are standardised

B2C AND (B2B) Dell Inc.
Individuals & Households

Consumer Market Customers


Institutions ‡ Departments

‡ Global
‡ Large Corporations ‡ SMEs

‡ Universities
‡ Hospitals ‡ Laboratories


PC¶s Printers Consumer Electronics Simple Service Agreements

PC¶s Servers Routers

Business Product Classification
(metal ore, wheat, wood)

(buildings, factories, computers, machine tools)

2. Manufactured Materials & Parts
-(steel, wire, tyres, microchips)

2. Accessory Equipment
-(light factory equipment ± cranes, pulleys, belts) (office equipment ± desks, PCs, phones)

lubricants, paper, paint, spare parts

2. Business Services
(computer repair, annual maintenance services, mgmt consulting)

‡ ‡ ‡ ‡ ‡ ‡

Entering Goods: raw materials and parts used in manufacturing finished products metal ore: becomes wire or rods sheet steel: becomes door panel of car GE spends $ 900 million a year on purchase of steel Black & Decker: hand tools leader, spends $ 100 million a year on plastic parts Foundation goods (fixed investment items used in manufacturing): machines, buildings, factories


Facilitating goods : supplies and services that support manufacturing

‡ Three types of business buyers ‡ Commercial Enterprises: direct purchase from suppliers ‡ ‡ Government departments : direct purchase from manufacturers Institutions: universities, hospitals directly purchase

Commercial Enterprises
Manufacturing Construction Transportation Wholesalers Retailers

Topic 2 B2B

Business Market Segmentation

‡ ‡

market segmentation in B2B markets business segment: a group of present or potential commercial, government, and institutional enterprises with common characteristics

‡ ‡ ‡ ‡

consumer product companies: demographic, psychographic variables business 2 business firms manufacturing firms (business vendors): size and end-use of buyer/customer business buyers : purchasing strategies/decision making process

‡ ‡ 1.

two segmentation variables in business-to-business markets used by business vendors to segment business buyers Macro level segmentation: done by Business Vendors of Business Buyers (Organizational Characteristics)

‡ 2.

size, end usage rate of bulk buyers, location, purchase situation Micro level segmentation: done by Business Vendors of Business Buyers (Buyer Characteristics)


Purchase department level process: preference for single or multiple supplier/vendors


20% of the segment delivers 80 per cent of profits


two stage approach to business segmentation (1) vendor firms identify macro segments of buyers based on size and usage (2) Divide macro segments into micro segments

Example Medical Equipment Market in India: BPL, Du Pont, Phillips, Ranbaxy (X Ray, BP, Intensive Care) Macro segmentation: Public hospitals, Private Healthcare

Sub segments (type of buyer) : Medical College Hospitals, Speciality, Super Speciality, Nursing Homes, Clinics

Micro segmentation (hospital departments): purchasing process of decision making departments Radiology, Oncology, Pathology, Renal, Cardio Vascular, Gastro, Hospital Administration

Advantages: Salespersons can tailor presentations to decision makers ensuring orders; advertising messages can be precisely targeted


BUSINESS BUYERS 1. SIZE: small, medium,

3. GEOGRAPHIC LOCATION OF BUYERS VENDOR: Design of sales territories Design of sales force Distributor selection 4. PURCHASING SITUATION Prospects (new buy) First Timers (< 3 months) Modified Rebuy (repeat buyers)

large 2. USAGE RATE: heavy, medium, low buying requirements


geographical concentration of buyers is based on regional demand and end use applications: case study


UCIL (the vendor): uses three segmentation variables to segment buyer-users of LDPE resin (30,000 plastic converters firms)


manufactures grades of LDPE resins ± a thermoplastic raw material supply LDPE granules in 50 kg paper bags to plastic converters

1. ‡ ‡ ‡ ‡ 2. ‡

Geographic location variables West zone converters (40% of business) Northern zone converters (30% of business) Southern zone converters (20 % of business) Other zones: 10% of business Application based variables (LDPE in three grades) LDPE: injection moulding, blow moulding, extrusion machinery

3. End-user market ‡ injection-moulded products (furniture, cup-plates, drinking glasses, nylon gears, bushes, auto parts) ‡ blow-moulded products (bottles, hollow products) ‡ extrusion machinery and moulds products (films, pipes, blocks, tanks)

Segmentation strategies for UCIL: LDPE resin product range Segmentation Variables of UCIL Geographical Locations Plastic Converter Segment
West: 40 % of volume North: 30 % of volume South: 20 % of volume East: 10 % of volume - Injection moulding products - Blow moulding products - Extrusion products

Applications-based variables

End-use market

- hand-operated segments - semi-automatic segments - automatic injection moulding segments




Intra-firm customers: departments generating orders (single vs multiple)

Satisficers: single regular supplier Optimizers: selection based on quotations bids




companies do not only sell

‡ also buy vast quantities of raw materials, manufactured components, plant and equipment, office supplies, and business services ‡ ‡ business market companies mining, manufacturing, construction, transportation, communication, distribution ‡ µ the decision-making process by which business organizations purchase products and services and identify, evaluate, and choose from alternative offers made by suppliers¶

‡ ‡

vendor firms submit offers to buyers: tender, proposal, bid typical purchase order for input/foundation/facilitating goods:

1. Production data: product, specifications, quantity, delivery schedule. 2. Commercial terms: pricing, credit terms, discounts. 3. Methods of distribution: transportation, warehousing, packing, storage and handling. 4. After-sales service: delivery, installation, servicing and maintenance.


Two simple concepts in organizational buying 1. Organizational buying behaviour 2. Decision Making Unit of the buyer


organizational buying behaviour (OBB) : 7 steps or buy phases and three buy classes or situations to complete a transaction


OBB: sequential activities through which DMU departments proceed when making purchasing decisions with vendors 1. Problem Recognition 2. Product specification 3. Supplier and Product Search 4. Evaluation of Proposals 5.Supplier Selection 6. Evaluation of vendors 7. Performance Review

‡ buy phases ‡ describes three buying situations in making a purchase by the µpurchase department¶ 1. Straight Rebuy: the purchasing department reorders on a routine basis from suppliers listed on an approved list of vendors. 2. Modified Rebuy: the buyer modifies product specifications, prices, delivery, after sales service terms. 3. New Task: a purchaser buys a product or service for the first time (product, price limits, delivery terms, service terms, order quantities) ± office buildings, new security systems, new equipment and machinery with no depreciation costs

‡ ‡ ‡ ‡

Decision making unit or buying centre group of professionals involved in the purchasing process input goods, foundation goods, facilitating goods from vendors engineering departments (production, design, quality, testing, inventory, supply chain, maintenance and after sales)

‡ ‡ ‡

marketing department international division buying centre personnel assume any one of the seven roles in the purchase decision process

1. Initiators: start the process of purchase via purchase indent engineering department (design, R&D) 2. Users: use the product or service and define the product requirement (production/manufacturing/factory) 3. Influencers: influence the buying decision by defining specifications of product (marketing, supply chain managers, quality and testing) 4. Deciders: departments that decide on product requirements or suppliers (new product development/R&D)

5. Approvers: departments that approve the purchase requirements of deciders (finance, senior management) 6. Buyers: departments with formal authority to select vendors/arrange for purchase terms (procurement and purchase department) 7. Gatekeepers: persons regulating the flow of information and access to the buying centre (purchase manager) - determine access of sales reps to members of the buying centre control budgets and commercial terms of the purchase order control specifications of the purchase order determine final vendor selection

Company example to illustrate buying centre
Madura Coats, Century Textiles, and Arvind Mills sell non-woven disposable surgical gowns to hospitals.

Buying centre: vice president of purchasing, the operating room administrator, surgeons.

Vice President, Purchasing plays the role of the initiator by analyzing the need for purchasing disposable vs reusable surgical gowns.

Sends recommendations for purchase to operating room administrator who evaluates vendor products and commercial terms and then recommends one or more preferred vendors (user and decider)

The administrator evaluates parameters of quality such as absorbency, antiseptic quality, design, competitive cost (buyer).

Surgeons influence the decision by reporting their satisfaction with a particular brand of gown.



‡ profitable relationships rather than commercial transactions form the basis of vendor-buyer B2B relationships ‡ relationship between vendors and buyers is characterized by: 1. Customer retention 2. Performance: quality, delivery, cost competitiveness 3. High importance to collaborative exchange

‡ Key strategies : vertical coordination of vendors into a buyers supply chain and inventory systems ‡ collaborative exchange

‡ Pantaloons, Shopper¶s Stop

‡ Pantaloons and Shopper¶s Stop: two largest retail companies in India ‡ closely integrated vendors supply (quality, volumes, delivery schedules) with the buyer¶s routine-order purchase cycle ‡ vertical coordination between vendor supplies and buyer¶s inventory and production cycles ‡ achieved by software tool that efficiently manages supply chain management systems

‡ software tool: Automatic Replenishment System ‡ objective: reduce inventory to match store level demand on a daily basis; reduce cost of storing unsold stock; improve operational margins ‡ software tracks stock levels at 200 stores and 50 product categories of Pantaloons (Big Bazaar, Home Town, e-zone, Central) and Stopper¶s Stop across the country

‡ automatically triggers stock replenishment orders from the central warehouse located in Mumbai as and when the stock levels of product categories reach the re-order level ‡ chain repeats continuously ‡ off-takes from store (sale) ± store stocks reach re-order level ± triggers replenishment of orders from warehouse to store ± stock orders from warehouse to vendors

‡ the software links the warehouse manager to store manager
and supplier to warehouse manager ‡ vertically coordinated vendor-buyer relationship ensures zero stock out situation ‡ depleted store stocks are replenished within 24 hours of sale ‡ ensures that customers do not go away disappointed

‡ Shopper¶s Stop has been able to reduce stock levels from 5 weeks per store to 2 weeks per store ‡ Pantaloons improved on-time deliveries to stores of stock by an accuracy of 3 weeks per store ‡ resulting in a reduction of warehousing and storage costs for unsold stock by 15 % ‡ efficient management of stocks

‡ collaborative exchange ‡ buying firm seek out vendors ‡ few, highly qualified vendors ‡ complexity of purchase decision ‡ close and long term supply relationship for routine order purchases ‡ buyers of manufacturing equipment, enterprise software, and critical component parts

ClSCO is a champion of collaborative exchange ‡ Cisco ensure is that the networking equipment and enterprise software built is the preferred choice of its buyers ‡ Cisco is the world¶s largest manufacturer and supplier of networking equipment ‡ created a virtual organization for business buyers ‡ designed to provide efficiencies to the value chain processes of its buyers (customers) ‡ uses the internet, intranet, and extranet applications designed to link all business buyer DMUs directly

‡the company invites the engineers stationed at the buyers premises to solve technical problems using Cisco¶s self help web-based technical support pages and network configurator software ‡ user-friendly web support pages reduce down time at buyer¶s installations due to technical breakdowns ‡ allow customer¶s engineers to operate in a real time trouble shooting environment with instant solutions at hand ‡ http://www.cisco.com/cisco/web/support/index.html

IBM¶s customer satisfaction strategy for collaborative B2B relationships IBM deploys a number of employees to serve a customer organization better through assigning customer contact roles.

Specialists: The IBM client representative is the relationship owner; project leader is the project owner; problem solver troubleshoots for Customer (problem resolution owner) Now consider an IBM technical manager assigned responsibility for installing CRM software in a bank.

IBM the vendor builds a collaborative relationship with the buyer based on: 1. Responsiveness of vendor in meeting buyer needs. 2. Product quality and technical expertise. 3. Delivery reliability.


‡ discussion on price takes place between buyer and seller ‡ best commercial decision: win-win situation ‡ DMU or buying centre managers play a critical role in price negotiations with vendor and purchase process ‡ pricing of B2B products are determined by two criteria ‡ commercial terms: 1. Pricing Strategies 2. Tendering Contracts and Bidding Contracts

‡ DMU managers and role in pricing and purchase
Buying Centre Role of Caterpillar for purchase of PanasonicToughBook HD Laptops for Field Engineers

Initiator Influencer Gatekeeper

General Manager (IT) proposes to replace all portable computer systems on field Corporate Financial Controller and Vice President, Electronic Data Processing Purchasing and data processing departments analyze company needs for ToughBooks and recommend identified vendors Vice President, Administration & Facilities and Senior Commercial Manager (Purchase) finalize vendors and laptop configurations for purchase Senior Commercial Manager (Purchase) negotiates terms of sales via negotiated pricing for specific agreements All engineer divisions use the computers


Purchaser User

‡ B2B Pricing Strategy 1: Geographical Pricing (International) ‡ vendor negotiates prices with the buyer on the basis of where customers are located ‡ negotiations on price are fixed based on the distance of location of buyer (includes shipping and transportation costs) ‡ Indian pharmaceutical companies often use geographical pricing to market products in to hospitals in Africa, Nepal, Middle East, South East Asia ‡ Life saving drugs, OTC drugs, veterinary drugs

‡ Pricing Strategy 2: New Buy Situation- Negotiated Pricing Strategy ‡ business firms must decide to source components and parts or manufacture in house ‡ new buy is a situation requiring the buyer to purchase of a product for the first time for a new vendor ‡ Ashok Leyland¶s is a champion of product sourcing and actively encourages new vendors to approach the purchase department ‡ let us first understand the new buy situation and then the pricing strategy

‡ DMU at Ashok Leyland ‡ Decider & Purchaser: Corporate Materials Department (CMD) ‡ Influencer/Gatekeeper: Supplier Quality Assurance Cell clear vendor components (21 components outsourced) recommends vendor selection 1. Dash Board Instruments 2. Front / rear engine oil seals, water pump seal 3. Distributor, Diesel Injection Pump (Rotary FIP), fuel filter, timer 4. Laminated safety glass for windshield & glasses for other cab surfaces 5. Rubber mounted propeller shaft centre bearings (Hardy Spicer type) 6. Air brake equipment (compressor, flick valve, spring brake chamber, slack adjuster) 7.Water and oil pumps

‡ Key role of DMU: Vendor Development and Strategic Sourcing
‡ Task of DMU: identifies the vendors, rates the vendors based on feedback received from quality, sends drawings / specifications, calls for quotes with detailed break-up of operation-wise costs, and negotiates the price at which the parts will be supplied

‡ Negotiated pricing commonly used in new buy situations ‡ pricing is set according to specific agreements between a buyer and vendor ‡ complex, large volume sales ‡ sales and marketing managers of the vendor are required to understand product and service needs accurately ‡ quantities ordered, prices, and delivery schedules are set by the buyer annually

‡ Metals and Minerals Trading Corporation and National Mineral Development Corporation negotiate iron ore price increases of 80-97% with Japanese and South Korean steel mills ‡ iron ore price: USD 71 per tonne ‡ iron fines price: USD 61 per tonne ‡ iron ore fines: a powdery material that is converted into pellets before being used by blast furnaces (80 % increase) ‡ iron ore lumps: used directly in furnaces without much processing (96.5% increase)

‡ MMTC and NMDC (vendors) have negotiated 5 year contracts (2005) with Japanese steel mills and South Korea¶s POSCO till 2010 under which the quantities and prices are decided annually ‡ Exports to mills in Japan and POSCO would remain at last year¶s level of 4.27 million tonnes

‡ CT 1:
‡ CT 2:

Tendering Bidding

‡ Tender is best suited for purchase of business products and services in straight rebuy buying situation from preferred vendors ‡ straight rebuy: buyer is not searching for new vendors and goes ahead with a purchase contracts with selected vendors on a routine re-order basis as per previous terms ‡ the buyers floats a tender to preferred vendors for routine re-order

‡ preferred vendor companies bid for the right to supply products and
services to a buyer for a fixed period of time ‡ a buyer sets up a tender for procurement of input goods, foundation goods, and facilitating goods from selected vendor (preferred suppliers)

‡ ensures that the tender is awarded to the best competing vendor among who meets all vendor selection criteria of cost, quality, technical expertise, delivery ‡ tender document is published in daily newspapers or post on website ‡ preferred vendors prepare and submit tenders as per specifications ‡ e-tenders

‡ Bidding

‡ bidding is a procurement process by which buyer purchase business products and services in a modified rebuy buying situation ‡ modified rebuy bids are open only to new vendors (tender: preferred vendors) ‡ buyer uses this strategy to ensure that new terms with new vendors are competitive ‡ opens bidding to any number of vendors of to evaluate price/quality offerings

‡ bid: a proposal submitted by vendors to a buyer for the sale of business goods; bid is submitted by a set deadline ‡ pricing strategy of buyer: discount pricing from vendor ‡ discount pricing : vendor reduces the price of a good or service on the basis that a buyer is committed to buying in bulk and on specified credit terms ‡ payment terms to buyer: vendor to offer price discount on quantities delivered in return for quicker payment cycles ‡ 5 % discount for payment within 7 days ‡ 2.5 % discount for payment within 14 days

Buying Situation of Buyer

Pricing Strategy of Buyer

New Buy Straight Rebuy Modified Rebuy

Negotiated pricing with Vendor Tender pricing Bid pricing



Motorola¶s Distribution Strategy for Consumers in India: B2C Marketing Innovative distribution strategy to reach rural consumers for mobile phone sets as 72 % of rural consumer have good access to mobile Networks but poor access to distribution: mobile phone dealers and connectivity. To reach out to India¶s rural consumer, Motorola has forged alliances with rural retailers such as ITC eChoupal, DCM groups Haryali Kisaan Bazaar, and Godrej¶s Adhaar outlets for sales and distribution of handsets. This distribution alliance offers consumers direct, over-the-counter handsets through a direct channel of distribution. Motorola covers 248 districts out of a total of 593 districts in India.

‡marketing channel: set of intermediaries (distributors, agents, salesforce) who distribute a product or service for the place of production (vendor) to the place of consumption (buyer) ‡ two types of business marketing channels: direct & indirect ‡ Direct channels of distribution: vendor (manufacturer) makes, distributes, and delivers input goods, foundation goods, and facilitating goods to the buyer ‡ distribution and delivery of the purchase order is carried out by the salesforce to buyer premises or electronically via online marketing (B2B portal)

‡ indirect: vendor distributes products to the buyer via channel intermediaries (industrial distributors and dealers) who sells or handles the products and delivers to buyer ‡ direct channel or direct distribution in business marketing does not use intermediaries ‡ indirect channel or indirect distribution uses at least one type of intermediary

B2B Marketing Channels Manufacturer (Vendor)

Direct Sales

Online Marketing

Industrial Distributors



‡ direct distribution strategy: bulk supplies of input goods/SIP ‡ distribution of goods from the point of production (vendor¶s factory) to the point of installation and use (buyer¶s factory) ‡ vendor contracts a distributor to provide localized servicing \ facilities for goods and replacement parts and spares ‡ preferred mode for bulk : chemicals (naphtha, industrial acids, pharmaceutical formulations, furnace oil, coal, sheet and rod metal, wire, cables)

‡ ‡

non-bulk SIP: indirect channel of distribution of goods compressors, motors, pumps, nuts and bolts, equipment components and parts, raw materials

‡ ‡

indirect channel: vendor-distributor-buyer buyer purchases non-bulk items in small lots from industrial distributors


distributor buys goods in bulk, stores, repacks, organizes the loading and unloading of goods from vendor¶s factory and delivers to stockists and agents in smaller unit sizes

‡ types of intermediaries: indirect distribution channel ‡ channel/organization involved in the distribution process of the physical delivery of business goods from the vendor to the buyers ‡ manufacturers¶ agents (vendor) ‡ sales agent ‡ industrial distributor ‡ broker ‡ commission agent

‡ Manufacturers¶ agents are a distribution channel appointed by the seller (vendor) on a contract basis ‡ role: represents one or more sellers and single or multiple product lines ‡ operates on a commission basis for stock consignment ‡ handles smaller lot orders and frequent re-supply of stocks to buyer (OEM, institution, govt)

‡ sales agent: appointed by vendor for distribution and delivery of business goods to the buyer ‡represents sellers only ‡commission basis for consignments ‡long term selling contract with the principal

‡ manufacturers¶ agent and sales agent channels have identical roles in the indirect distribution process ‡ significant differences as well: in terms of scope and function 1. Manufacturers¶ agents sell only a portion of the vendor¶s output and limit activities to a geographical sales territory. 2. Sales agents on the other hand sell the entire output of the vendor to the buyer and are contracted to sell and distribute across larger sales territories. 3. Sales agents carry large volume stocks and inventories of the vendor as the agent covers the entire market. 4. Manufacturers¶ agent do not carry inventories and contract for smaller volume of distribution.

Three-tier system of indirect channel distribution: industrial products
‡ Indian manufacturers (vendors) use a three tier selling and distribution structure Tier 1: Redistribution Stockists Tier 2: Distributors (wholesalers) Tier 3: retailers


Hydraulic and Pneumatic Pumps PAINTS (decorative & industrial)
‡ Vendor company operating on an all-India basis could have between 4 and 8 redistribution stockists (RS)

‡ The RS will sell the product to between 10 and 45 wholesalers (distributors)

‡ RS and wholesalers will service between 250-500 industrial retailers throughout the country

ASIAN PAINTS: distribution strategy B2C
‡ Asian Paints (AP) is the market leader in the Indian paint industry (1000 cr company, Choksi, Dani, and Vakil promoter families) ‡ 38 percent share in decorative paints and 33 percent overall (industrial + decorative) = industrial product distributed via retail channels ‡ manufactures coatings and ancillaries: decoratives, production paints, and heavy duty coatings


ASIAN PAINTS: distribution strategy ‡ Goodlass Nerolac the nearest rival commands an overall share of 14 percent only

‡ Asian Paints, Goodlass Nerolac, ICI, Berger, Shalimar

‡ 4,000 crore industry; 5 lakh tonnes in volume


Asian Paints success stories

‡ a story of distribution excellence

‡ AP in the early years of its existence AP introduced a wide product range in the decorative range in terms of colour and pack size : a crucial factor for success

‡ Company leapfrogged and overtook all its competitors with colours and customising the paint mixture for customers at retail outlets

Asian Paints success story
‡ brands: Tractor, Apcolite, Utsav, Apex, and Ace well entrenched ‡ small packing size proliferated the product depth: competitors were supplying paints in 500 ml or larger sizes ‡ Business opportunity: 200 ml, 100 ml, 50 ml packs suited for paints jobs of different requirements ‡ 2000 distinct items of paints: none of which was strictly a substitute for the other

Competitor focus: bulk buyer segment
‡ key challenge: foreign companies and their wholesalers distributors dominated the business (1980-1990) ‡ J&N, ICI, Berger appointed a few traders as their wholesale distributors and allowed them to perpetuate a situation of a monopoly ‡ Each distributor was assigned a large territory and was given the right to operate as an exclusive channel of the company in the assigned territory

Competitor focus
‡ Credit term liberal with credit outstanding for supplies made year round ‡ Low motivation for traders to invest in distribution infrastructure and did not extend to semi-urban and rural areas ‡ Poor market development by restricting sales: prevented entry of new companies and controlled the paint business in cities

Elements of AP¶s distribution strategy
‡ By passed the bulk buyer segment dominated by foreign companies and w/s distributors ‡ entered individual customer segments: semi-urban and rural ‡ went retail: established direct contact with hundreds of retail dealers in the late eighties ‡ Open-door dealer policy: continuous expansion of dealer network by enlisting dealers in II and III tier towns

AP¶s distribution strategy

‡ 1990: 7,000 dealers; 2000: 12,000 dealers; 250 new dealers annually ‡ endorsed nation-wide marketing and distribution strategy: all geographical zones, states, and business territories versus established paint business practice of marketing to limited territories and in the vicinity of point of production

Implementation process: the key to success

‡ Creation of vast network of retail dealers: 15,000 dealers in 3,500 towns ensures easy of availability of products to end consumers in the decorative paints segment

‡ Establishes a network of company depots: no wholesalers distributors only company-operated stock points supplying stocks to retailers

Managing high cost distribution

‡ Created a marketing organization that matched its distribution strategy ‡ 4 regional sales offices and 35 branch sales offices effectively controlled 6 regional distribution centres supplying stock to 55 company-operated depots ‡ 2000 strong product line and three pack sizes resulted in a massive distribution task accompanied by a high cost of service

High cost distribution: a challenge
‡ Successful management of cost-service conflict in costdistribution ‡ achieved through effective inventory management of stock and strict credit controls on trade ‡ high level of service delivery ± 28 days inventory level versus industry¶s 51 days; stock of finished goods as a percent of net sales is 7 percent compared to 14 percent of industry

Topic 7 New Industrial Product Development


a key fact that we learn from the PLC concept is that products do not last forever


value to consumer segments to diminish as products reach higher levels of market penetration during the growth and maturity stages

‡ technological changes render products obsolete: cast iron pipes vs PVC pipes; mechanical meters and gauges vs digital meters; fractional distillation technology vs microencapsulation technology crude oil and lubricants ‡ adoption life cycles shorter: product reach higher penetration levels faster due to strong distribution, adopt sooner

‡ new industrial products are planned, development, and introduced into the market ‡ new product development is a complex process guided by a six stage product development process 1. Idea generation 2. Screening 3. Specifying features 4. Product development 5. Beta testing 6. Launch


‡ Objective is to customize a product for a customer to exceed their expectations ‡ the first step in product management is to understand that a product is viewed by the customer in terms of augmentation benefits ‡ product can achieve a significant competitive advantage ‡ augmentation benefits are added at four levels that transform a product into a superior value offering 1. Product level. 2. Technology platform. 3. Product line. 4. Product category.

‡ Case of Minolta office photocopiers ‡ product: Minolta EP 300 copier (direct competition to RICOH and Canon copiers in India) ‡ technology: micro toning system of inkjet distribution used in copier ink cartridges ensured even and economical use of ink (water proof and antismudge) ‡ product line: EP line of value for money copiers ‡ product category: plain paper copiers and colour copiers



Product Development R&D Test Marketing Introduction Growth Maturity Decline

Kill the product Find New Uses Find New Markets Repeat Life Cycle



‡ ‡ ‡

idea generation basic idea of new product and a constant flow of new ideas 3M and Caterpillar are market champions in new product idea generation for the engine and machinery segment


3M launches over a 1000 new products a year ( current portfolio is 50,000 products)


approaches employees and customers


screening and preliminary investigation stages : examine new product ideas and factors that contribute to market success


customers and suppliers work together to create value through new products and augmented services

‡ achieved via quality function deployment: is a process of creating a product that links customer needs to product form, features and benefits ‡ Eicher Motors India Limited is a champion of co-creating product benefits after studying user behaviour ‡ ‡ maker of HCV trucks 2 to 12 tonnes gross vehicle weight reduced development time for truck by 30 per cent by mining customer data on use and acceptance of a truck

‡ ‡ ‡ ‡

Eicher trucks transport over 80 per cent of live poultry in India each day India consumers over 5 million chicken and over 30 million eggs daily Namakal in TN is the poultry capital of India EM learned that chicken mortality is directly proportionate to the time of the day of transport


truck drivers transport poultry at night as the temperature is cool but are forced to stop often due to driving fatigue and poor cabin design


resulting in higher poultry mortality due to longer waiting in cramped cage conditions

‡ ‡ ‡

EM re-worked chicken truck cabins with more comfort features anti-glare wind shields, softer seats, air conditioning, sleeper bunks buyers were willing to pay more for driver comfort


± ± ±

From Customers From Competitors About Market Forces

DETERMINING THE SALES STRATEGY OPTION TO FIT YOUR CUSTOMER 1. SCRIPT-BASED SELLING²Used when all customers¶ needs are similar 2. NEEDS SATISFACTION SELLING²Identifying buyers¶ needs and selling to them 3. CONSULTATIVE SELLING²Bring specialized expertise for a customized solution 4. STRATEGIC PARTNER SELLING²Seller-Customer joint effort for developing product solutions

‡ Secure

Expansion Exploration Awareness
‡ Generate

reorders ‡ Upgrade ‡ Set correct expectations ‡ Full-line ‡ Ensure proper sell initial use ‡ Follow up ‡ Make personal visits ‡ Handle complaints ‡ Achieve customer satisfaction

complete commitment from both companies ‡ Manage change


‡ Limited relationships ‡ Failure to monitor competitors or industry ‡ Complacency

Buying Company Production Marketing Purchasing Department Finance Accounting Shipping & Receiving Before Partnering Selling Company Engineering Marketing Sales Finance Credit and Billing Shipping & Receiving

Purchasing Agent


After Partnering Buying Company Selling Company Production Marketing Purchasing Finance Accounting Shipping & Receiving Engineering Marketing Sales Purchasing Finance Credit & Billing Shipping & Receiving

BUYING AND SELLING TEAMS STREAMLINE MULTILEVEL SELLING Buying Company Vice President Of Purchasing Selling Company Vice President Of Sales

Director of Purchasing

Account Manager


Product Specialist


Customer Retention and Maximization

THE CUSTOMER RELATIONSHIP CONTINUUM Customer Relationships can be found at any level

Always-A-Share Customer

Highest Level Relationship THE KEY FACTOR: SWITCHING COSTS The Direct and Indirect costs a buyer will have to pay to go to another supplier

Lost-For-Good Customers

Lowest Level Relationship



GROWS ADDITIONAL BUSINESS OPPORTUNITIES for new products or increased purchases PREMIUM PRICES result from giving first-rate service and product quality REDUCED SELLING COSTS from tighter coordination of production and logistics ADDITIONAL REVENUES POSSIBLE from customers¶ referrals and joint sales calls with customers





TO BUILD CUSTOMER LOYALTY, DEVELOP A COMPETITIVE ADVANTAGE BY PROVIDING 1. 2. 3. Superior performance Quality products and support as defined by the customer Distinctive and reliable service


REQUIREMENTS FOR A USEFUL SURVEY: 1. 2. CHOOSE MAIL OR TELEPHONE TO DO THE SURVEY DETERMINE THE KIND OF INFORMATION YOU NEED ‡ Ascertain satisfaction with overall relationship ‡ Measure specific aspects of the relationship ‡ The unspoken concerns of customers ‡ Determine what will get measured regarding customer expectations (The TERRA model works well) ‡ Having meaningful and measurable ratings and scores

1 General overall Satisfaction question

Process 1 (Parts handling) Attribute 1 Attribute 2 Attribute 3 2 Suggest change for improvement

Process 2 (Parts reps) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement

Process 3 Process 4 (Service manuals (Technical Support) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement

Process 5 (etc.) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement

Loyalty questions 3 ‡ Willingness to recommend ‡ Repurchase intentions 4

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