Designing and

managing the Industrial

Marketing Mix
Product, Price and Distribution

Ing. Denisa Kubaľová (Lipnická), PhD.

B2B marketing 2014-2015
L/O/G/O
www.themegallery.com
Content

1 Formulating Product Strategy

2 Formulating Pricing Strategy

3 Formulating Distribution Strategy

4 Discussion
„The essence of business is to deliver a product
which satisfies a need and whose market value
exceeds its costs.“

Formulating
Product
Strategy
 Product
• Product offer must ultimately satisfy customer needs
• Product decisions concern the specific attributes designed into a
product, its packaging, warranties, adjunct services, customer training
and installation – the core element of the mix in industrial markets
• Product decisions also dictate distribution requirements, establish
promotion needs and set the limits for price
• In developing product strategies:
– To ensure that the product mix is in accord with overall organizational and
marketing objectives,
– To set guidelines for developing product lines and items.
• Product strategies have an impact on the entire organizational system!
 Product in B2B marketing

• Product decisions ultimately rest on the marketer's

understanding of what constitutes a product for a
particular market.
• Products are not purchased for personal use – but as
component parts used in further production process
• Technical aspects of products, customer-generated
specifications, physical product itself
• The concept of a product to buyer is multidimensional,
involving more than its physical properties – from the
buyer's perspective, a product is combination of basic,
enhanced and augmented properties.
 Product properties
• Basic properties – those that constitute the
generic product – forklift, computers
• Enhanced properties – generic products are
made differentiable by adding enhanced
properties – additions to the generic product –
features, quality...
– Example: purchaser of computers – the ultimate
buying decision will be based on enhanced
properties, such as ease of use, availability of
sotware..
 Product properties
• Augmented/Extended properties – intangible
benefits and include training, technical
assistance, repair services, warranties, delivery
capabilities, financing terms..
– "Competition is not between what companies
produce in their factories, but between what they
add to their factory output in the form of packaging,
services, advertising, customer advice, financing,
delivery arrangements and other things that people
value.“
 Industrial product life-cycle
– PLC theory
• PLC – widely used concept for
determining appropriate product strategies
– products tend to go through different
stages that begin when they are
introduced and end when they are
removed from the market.
• Each stage requires different marketing
strategies
Industrial Product Life-
Cycle Strategies
 Industrial PLC strategies
• Introduction Stage – industrial product entail considerable
market development before reaching an appreciable
growth stage, product acceptance in the industrial market is
affected by how the product fits into the buyer's total use
system, developing widespread brand awareness

• Growth Stage – the emphasis on product strategy shifts to

improving product design, improving distribution service –
as market demand increases, the product design and other
aspects of the product offering must be changed to meet
both low and premium market segment needs; threat of
competitors
 Industrial PLC strategies
• Maturity Stage – marketing strategy should be directed
toward keeping current users satisfied; increased
promotional efforts, substantial benefits in product
modification

• Decline Stage – decline in sales and profits, looking for

opportunities to find new buyers or enter new markets
through product modification and changes in other
marketing mix variables
 Six categories of new industrial
products (newness to the company
and to the market place)
• New-to-the-world products – new products that create an
entirely new market.
• New product lines – new products that allow a company to enter
an established market for the first time.
• Additions to existing product lines – new products that
supplement a company's established product lines.
• Improvements in/revisions to existing products – new
products that provide improved performance or greater perceived
value and replace existing products.
• Repositionings – existing products that are targeted to new
markets or market segments.
• Cost reductions – new products that provide similar performance
at lower cost.
Formulating
Pricing
Strategy
 Industrial price
• The price of a product is a valuable marketing tool that can
be used in a number of ways to accomplish a variaty of
objectives.
• The actual price which must be paid includes delivery and
installation costs, discounts, training costs, financing costs..
– comprehensive view on price
• Pricing interacts with product, promotion and distribution
strategies to achieve the firm's overall marketing objectives.
• More flexible decision than deciding on product or
distribution.
• Different effects of price changes in different periods of
time.
 B2B Price characteristics

• Price is less critical in industrial buying decisions

• Purchasers are willing to pay a "premium price" for
products from a supplier who could provide superior
technical or after sales service – quality and consistency
of products, certainty of delivery, service, technical
support are often the most important criteria.
• Competitive bidding and negotiated prices are very
common
• Trade and quantity discounts off published price lists are
widely used
 Types of pricing strategies

• Cost-based strategies – Mark-up pricing;

Target return policy

• Market-based strategies – Floor pricing;

Penetration pricing, Premium pricing; Price
leadership pricing; Stay out pricing; Value-based
pricing; Cross-benefit pricing
 Factors in setting Industrial prices
• Market conditions
• Excess productive capacity
• Competitive prices
• What substitutes are available, at what price
• Product differentiation
• Phase of product's life cycle
• Whether other prices are rising, stable or falling
• Your market share
• The market's ability to buy
• The market's expectations about prices
• Competitors' typical responses to price changes in your industry
• ...
"A distribution system is a key external resource.
Normally it takes years to build and is not easy
changed.“

Formulating
Channel
Strategy
 What is a channel of distribution?
• A distribution channel can be defined as the set of interdependent
organizations that create value through the physical flow of goods
and services and the transfer of ownership.
• A channel includes organizations which provide specific functions
necessary to bridge the gap between the efficient production
orientation of a manufacturer and the efficient consumption
orientation of a buyer.
• These functions include: transportation, storage, inventory, sorting,
financing, selling, promoting, market feedback, training, service...
• Flow and movement – of psychical products, of information,
financial flows, risks through the channel
• Channel members add value to the product when they perform
functions!!!
 B2B channel characteristics

• Fewer channel alternatives than in consumer

markets
• Channels tend to be more direct
• Since there are relatively fewer buyers and they
tend to be concentrated, fewer layer of
intermediaries exist – where intermediaries are
used, manufacturers representatives and
industrial distributors or dealers facilitate the flow
of goods.
 Choosing the right distributor
Why companies/manufacturers use
distributors?
• The manufacturer must decide:
– What marketing functions will be assigned to or shared with
distributors?
– What portion of the product line will be sold through this channel?
– What size and type of distributor should be chosen?
– Should exclusive or multiple distribution be used?
– How should the selling function be divided between distributors and the
company sales force?
– What policies must be used to ensure effective, profitable, mutually
satisfying relationship?
Industrial marketing channels
 Distribution channels in B2B
marketing
• Generally shorter, place higher sales and service
expectations on the middlemen, involve different
types of intermediaries
• Two main types of intermediaries are
manufacturers' representatives and industrial
distributors
• Distribution strategy is concerned with the
determination of channel objectives, channel
length, channel members, market coverage and
resource allocation within the channel.
 Types of industrial Middlemen

• Manufacturer representatives

• Industrial distributors

• Jobbers

• Brokers

• Commission merchants
Thank You!
B2B marketing, 2014-2015

L/O/G/O
www.themegallery.com
Discussion
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