Industrial = Business

Various Classes of Consumer and Industrial Goods and Services
Goods and Services
Consumer Goods Consumer Services Industrial Goods Industrial Services
Convenience Goods Shopping Goods Specialty Services Convenience Services

Production Goods

Support Services

eg. Mac's Milk

eg. clothing

eg. banking

eg. fast foods

raw material grain, steel

component parts

materials nuts, bolts

accessory equipment tools, computers

installations

eg. newspaper

eg. groceries

eg. travel

eg. circuit board

eg. buildings

eg. wiring harness

Industrial Market Vs Consumer Market Market Structure

Understanding Industrial markets

Industrial Market Geographically concentrated Fewer buyers (relatively) Big buyers ( small number of large buyers)

Consumer Markets Geographically dispersed Mass markets Free Market (large number of buyers)

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Industrial Market Vs Consumer Market Buyer Behavior

Understanding Industrial markets

Industrial Market *Evaluated for functionality rational/task motive to buying. *Purchasers are experts & focus is more on performance/service. *Higher interaction with the supplier. * Formal processes.

Consumer Market *Social / psychological factors are important. *Family involvement & focus more on product per se. *Nor personal relationship with the supplier. * Less of formal processes.

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select. 6 .Example Understanding Industrial markets Industrial Buyer for AC *Evaluated for functionality ( evaluation by tech committee) *Purchase through tendering Process & brand less important. *Formal processes of documentation etc. * Less of formal processes.Industrial Market Vs Consumer Market Buyer Behavior . Customer for AC ‡Should look good & match the décor. negotiate pay & forget. price negotiation etc. *Want to buy LG only (because neighbor has) *Go to a shop. *Discuss technical details.

7 . delivery and availability is somewhat important. Customer Markets * Standardized.Industrial Market Vs Consumer Market Products Understanding Industrial markets Industrial Market * Technical complexity and customized. *. * Service. delivery and availability is very important. Service.

Understanding Industrial markets Customer for Samsonite soft Luggage * Standardized product range to select from. delivery and availability is somewhat important.Industrial Market Vs Consumer Market Products . 8 . Service.Example Samsonite Outsourcing soft luggage * Each component is as per Samsonite specification. can wait for a Specific color / size. delivery and availability is very important as it affects supply chain of the company. *. * Service.

Industrial Market Vs Consumer Market Decision making Understanding Industrial markets Industrial Market * Distinct observable stages * Multiple influencers and decision makers. not very clear pattern. Consumer Market * Unobservable mental stages. 9 .

Customer * Low involvement buying and impulse purchase (the exact choice criteria difficult to identify) & varies from situation to situation. purchase departments negotiation & placing order. procurement etc. * O. selection. 10 .K.Example Understanding Industrial markets Industrial Buyer ± Soaps for Workers canteen * Need identification.Industrial Market Vs Consumer Market Decision making . agreement by contractor. from the workers union.

more direct & fewer linkages between seller and buyers.Industrial Market Vs Consumer Market Distribution channel characteristics Understanding Industrial markets Industrial Markets * Shorter. Consumer Markets * Indirect and multiple linkages 11 .

Understanding Industrial Market Vs Consumer Market Industrial Distribution channel characteristics -Example markets Hotel buying Cold Drinks * Supplied directly by the distributor. 12 . Virtually no interaction with company. Customer for Cold drinks * Normal distribution style of distributor to retailer to customer. may even be serviced by company employee or a regular basis.

13 . You go and deal with Coke or Pepsi H. campaign to highlight decals and generate customer flow. Example : You plan an adv.O. Consumer Markets * Emphasis on mass market promotion. Example : Selling fridges with new technology.Industrial Market Vs Consumer Market Promotion Understanding Industrial markets Industrial Markets * Emphasis on personal selling or one to one dealing.

14 . * Sharing of cost data & budgeting of acceptable profits in many cases.Industrial Market Vs Consumer Market Pricing Understanding Industrial markets Industrial Markets * Competitive bidding & multistage negotiation. Consumer Markets * Normally MRP & MOP * Concept of list price & its implementation.

15 .Industrial Market Vs Consumer Market Pricing . Consumer Markets for Rum * Normally MRP & MOP * Concept of list price & its implementation in the trade.Example Understanding Industrial markets Industrial (CSD purchase Of Rum ) * Competitive bidding & selection on basis of L1. * Sharing of production and overhead cost data with CSD and price based on cost + margin.

Purchase : Not for consumption but for business. Buyer characteristics : Technical evaluation / rational process / multiple buying influencers.Understanding A big reseller can be treated as a Industrial Industrial Buyer markets Example: Shoppers Stop / Ebony / Kids Kemp for an apparel manufacturer. 16 . Product characteristics : Specific private labels. Market characteristics : Very few of them and they are big in size and have centralized purchasing.

Understanding A big reseller can be treated as a Industrial Industrial Buyer markets Example: Shoppers Stop / Ebony / Kids Kemp for an apparel manufacturer. Channel characteristics : Direct service by the manufacturer. Price characteristics : Very hard on negotiation. If one design clicks. 17 . Economics of demand : Based on actual consumer off-take of the products and hence derived. if they get better price. it is stocked more in anticipation. it straight goes to profits.

These consumers use the products as component of their own output. they can make the vehicle & fit headlights later. ( relatively narrow scope ). Example: Eastern Coal Fields for Tisco. 18 .Organizational Customer Type of purchasing organization Understanding Industrial markets Commercial Enterprise 1. or OEM. OEM ± (An original equipment manufacturer. The stakes are high as their final output depends on your product. 3. Industrial Dealers & Distributors ± Essentially their objective is to trade on the items. ( Maruti as a user of headlights ).Users ( consumers ) ± They are the final consumers of the product and their total operation depends on you. 2. No coal => No Steel. manufactures products or components that are purchased by a company and retailed under that purchasing company's brand name). In emergency.

Public accountability ± everything by rule books as far as documentation. L1 etc. Tender.Organizational Customer Type of purchasing organization Government agency Understanding Industrial markets 1. 19 . Standard procurement processes ± Registration. 2.

3.Organizational Customer Type of purchasing organization Institutions ( Private & Public Sector ) Understanding Industrial markets 1. 2. non ± specialist buyers. 20 . watches as Diwali gifts. less of technical evaluation. XIM-B purchasing air-conditioners for faculty offices. Characteristics : Normally one time deals. large orders. Tisco giving its workers. DSP cooperative buying suitcases for their members.

Manufactured materials ( copper wire. Raw materials ( natural gas. 21 . Component parts ( switches. steel sheets ) 3.Organizational Customer Based on Type of products purchased Materials and parts Understanding Industrial markets 1. motors or customized gears ) Characteristics : Normally large custom made orders are sold By the manufacturers & standard products by industrial.) 2. distributors. HDPE etc.

Organizational Customer Based on Type of products purchased Capital Items Understanding Industrial markets 1.) 2. computers. 22 . Office furniture) Characteristics: Normally major installations. machinery etc. distributors. Installations ( buildings. Accessories ( PC. the manufacturers deal directly with the customer & accessories are sold by industrial. because of extensive interaction required and long negotiation time required.

Services ( maintenance.) Characteristics : Normally industrial distributors are used & services are provided by the individual contractors ). canteen etc.) 2. stationery etc. 23 .Organizational Customer Based on Type of products purchased Understanding Industrial markets Supplies and services 1. Supplies ( soaps.

availability of spares. 7. payment terms. Quality Assurance : Responsible for output consistency. installation needs. R & D : Designs the moulds which are to be used. Finance : Long & short term financial implication. delivery terms. 6. 24 . HRD : Manpower implications. 2. Production : Output levels. Maintenance : Ease of operation. 3. skills to be imparted. 4. AMC etc.Characteristics of Organizational Procurement Multiple Influences Understanding Industrial markets Example : Procurement of Injection Moulding Machine 1. Purchase department : Price. 5.

foreign exchange implication. delivery records . are planned so as to optimize the profitability of the organization. Economic order quantity : The quantity to order. price factor. frequency of ordering etc. 25 . Material Planning : Exact forecasting of demand. the suppliers are rated and 3. Supplier rating : Based on the the quality reports. factoring of international prices Vs domestic prices. inventory carrying cost etc.Characteristics of Organizational Procurement Technical sophistication Example : Procurement of Rutile for paints Understanding Industrial markets 1. payment terms etc. 2.

Value Analysis : The option of using a lesser quantity of costly Rutile for getting the same output level by change of formulation is explored. Concept of optimization w. whether any alternative can be used is worked out.Characteristics of Organizational Procurement Technical sophistication Example : Procurement of Rutile for paints Understanding Industrial markets 4. In absence of the raw materials.r. is worked out before decision making. How the option of airlifting impact cost etc.t constraints 26 .

Large number of buying center : Government departments are everywhere. A lot of them purchase locally.Characteristics of Organizational Procurement Government purchases Understanding Industrial markets 1. Job cost + effort cost c) 131 Orders Skills required are specialized 27 . Political interference : 3. Specified govt. 2. contracts : a) Rate contracts b) DRDO / ISRO Dev.

influences 28 .Industrial Marketing Environment Understanding Industrial markets Buyer Seller Interface Publics Macro Environment Govt.

Bankers & insurers Commercial Enterprises Industrial Distributors Market segments Buyers Facilitators 29 . Dist. Research firms Compt.Industrial Marketing Environment Buyer seller interface Understanding Industrial markets Govt. Components Equipment Suppliers Manufacturer¶ rep Dist / Dlrs Transporters Warehousing firms Mktg.M. Labour Capital R. Mafg. / Dlrs.

Financial publics ± FI / Stockbrokers / Individual Stock Holder ( Stock prices. confidence in company ) 2. General publics ± MacDonald's coating French fries with beef tallow Business serves the society 30 .Industrial Marketing Environment Publics Understanding Industrial markets 1. Public interest groups ± Environmentalists ( Euro II . Narmada bachao) 4. CNG vehicles. Independent press ± Impact on reputation of company ( Dhabol power corporation ) 3.

Economics . 31 .Industrial Marketing Environment Macro Environment Understanding Industrial markets 1. ³Right to Know´ Companies have to furnish details of the hazardous products made & used by them. Also changed the demand pattern of automobile ( petrol to diesel ). 2. changes in the law to use MIC as an intermediary. Bhopal gas tragedy. Government policies like subsidizing diesel at the cost of petrol. Changes the cost base of most oil based companies. Ecological influences .Increased demand for oil led to increase in prices of oil in the world markets.The concern for the environment so emission norms are stringent & industry has to adjust.

4. Technological influences ± Typewriters manufacturers had to shift market focus. Physical environmental Influences ± Steel plants need iron ore. water & lime stone deposits for setting up. . 5. 32 . Bihar and Orissa have the concentration of steel plants. Politico / Cultural influences ± Hire and fire policy of west Vs militant trade unionism & job protection in India.Industrial Marketing Environment Macro Environment Understanding Industrial markets 3. change products etc after PC¶s and word processors became common. MP.

33 . actions: Lobby for reduction in excise duty (to create level playing field). The govt.Industrial Marketing Environment Macro Environment Understanding Industrial markets 6.P. Influencing Govt. ( a lot of lobbying ). Lifting of Liquor ban in A. Government influences ± Anticipating governments action: WTO treaty signing and IMF loans linkages for govt. CNG buses for Delhi «. needs the loan so it is likely to sign the treaty.

Environment Management Strategies Independent Strategies Understanding Industrial markets 1. employment. Aggressive pricing (coal based power plants Vs Gas based power plants) c.) 34 . plus electricity generation cost (compared with other plants etc. school. water supply. Comparative advertising . Competitive aggression a. Create Product differentiator (Bonding power of cement Gujrat Ambuja Cement ± compressive strength) b.Dhabol Power Corporation came up with the very good adv telling the good the plant has brought about in the area.

Competitive pacification a. focus on end users ). Industry promotion ± Doodh. Price Umbrella¶s ± The transporter¶s union finalizing rates for each destination ex. c. ( Increase the pie rather than fight for the same pie). Improved competitive relations . b.Mohali. 35 . Egg & LPG campaign.(Auto companies do not fight on discount to trade @4%.Environment Management Strategies Independent Strategies Understanding Industrial markets 2. they do not spoil the trade.

36 . b. This help them charge higher & get business. Building Public Opinion a. Voluntary environmental control ± ISO 14000 Accreditation Making green products & advertising it.Environment Management Strategies Independent Strategies Understanding Industrial markets 3. Commitment to interest groups ± Archies cards giving part of institutional revenue to fund the NGO¶s. c. Corporate Image advertising ± ISO 9000 Accreditation.

37 . b.Environment Management Strategies Independent Strategies Understanding Industrial markets 4. & law enforcers. reduction in excise etc. Political / Legal a. Issue advertising through the direct paid media or even influencing the media to highlight the issue ( may or may not be funded directly ). Directly lobbying with the govt. Steel Industries lobbying for more development work.

Environment Management Strategies Co-operative strategies Understanding Industrial markets a. but supplies refrigerators to LG. Co-optation : Absorption of relevant Publics on board of directors. Contracting : Allwyn is part of Electrolux. IIMC & XLRI directors in the board of directors of XIM. b. c. Coalition : Industry association ( Specially used to lobby with the government ) FMA decision to have max 7 years warrantee on fans. 38 .

Domain Selection : Focusing on areas of strong competitive advantage. May be the idea is to be part of a high growth industry which has good future potential. Cray Supercomputers ICI Worldwide Light chemicals with high margins.Environment Management Strategies Strategic Maneuvering Understanding Industrial markets a. b. Diversification : Reliance into telecom sector. 39 .

the final customer Industrial Goods and Services .are used in making consumer goods and services Industrial = Business .are for consumers.Consumer Goods and Services .

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G.´ Beckman TEXT ³People who buy stuff to make other things.T. . directly or indirectly.Industrial Market / BUSINESS PRODUCTS ³Individuals and organizations that acquire goods and services to be used.R. in the production of other goods and services or to be resold.´ W.

governments Not in the text .producers and manufacturers ..trade industries (wholesalers and retailers) .

‡ producers and manufacturers Those who transform goods and services. banks. through production. rail) ‡ public utilities. computers) ‡ farms ‡ mining and forest industries ‡ construction and building companies ‡ service companies (trucking. air. into other goods and services ‡ manufacturing firms (eg. Auto parts. insurance companies .

fabric wholesalers.‡ Trade Industries ‡ Organizations such as wholesalers and retailers that buy things for resale to customers ‡ Examples. building materials ‡ metal and electrical products .

Dept.. Municipal governments and agencies ‡ examples: Dept.‡ Governments (zheng fu) ‡ Federal Ministries and Crown Corporations. Royal Canadian Mint buying paper and ‡ Provincial agencies buy services such as snow clearance. Provincial Ministeries and Crown Corporations. .. of Revenue buying computers. Not in the text cellular phone service «. of Defense buying trucks from GM.

which is derived from the increase in people printing on paper .demand for wood pulp is derived from the demand for paper.demand for lithium is ³derived´ from the demand for lithium batteries. which is in turn ³derived´ from the demand for cell phones . or linked to) demand for a consumer item .1. Derived Demand means the demand is derived (or caused by.

is linked to the demand for an ISP account Not in the text .05 . the demand for Netscape 4. Joint Demand means the demand is related to the demand for other industrial things eg. The demand for printer cartridges is linked to the demand for printer paper for services.2.

Supplies (MRO Items) . Professional Services .. Accessory Equipment .Classifying Industrial Products 1. factories.major assets.short-lived items eg.maintenance.finished units which. Component Parts and Materials . Raw Materials 4.used in production . Installations . tools 3. Maintenance. when assembled.cleaning fluids 6. law firms . heavy machinery 2. make the complete product 5.accounting firms.

Capital Items things that last a long time.Categories of Industrial Products 1.machinery and equipment . and become less and less in value over time ex ± car office building .

Categories of Industrial Products 2. Expense Items .parts for the machinery .some types of raw materials. materials in production ex .things that are used within a short period of time . office supplies.washing the windows for the building .gas for the car .

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