Industrial marketing consists Industrial marketing consists of all the activities involved in of all the activities involved in marketing of products and marketing of products and services to organizations that services to organizations that uses products and services inuses products and services in

•Production of consumer or Production of consumer or industrial goodsindustrial goods•To facilitate the operation of To facilitate the operation of their enterprisestheir enterprises

Business marketing Business marketing defineddefined

Business MarketingBusiness Marketing

Industrial Marketing is the marketing Industrial Marketing is the marketing of the products and services to of the products and services to business organisations.business organisations.

Business organisation include Business organisation include manufacturing companies, manufacturing companies, government undertakings,privatre government undertakings,privatre sector, educational institution etcsector, educational institution etc

Business marketingBusiness marketing is the practice of is the practice of individuals, or individuals, or organizations, including , including commercial businesses, governments and commercial businesses, governments and institutions, facilitating the sale of their institutions, facilitating the sale of their products or services to other companies or products or services to other companies or organizations that in turn resell them, use organizations that in turn resell them, use them as components in products or services them as components in products or services they offer, or use them to support their they offer, or use them to support their operations. business marketing is also called operations. business marketing is also called business-to-business marketing, or B2B business-to-business marketing, or B2B marketing. marketing.

THE SUPPLY CHAIN

Industrial versus consumer Industrial versus consumer marketing managementmarketing management

Less number of customers but large Less number of customers but large customerscustomers

Geographically concentrated marketGeographically concentrated market Channels of distribution are shorterChannels of distribution are shorter Highly organized and well informed buyersHighly organized and well informed buyers Promotional Characteristics (Business mktg is Promotional Characteristics (Business mktg is

focused on personal selling)focused on personal selling) Price Characteristics: Business mktg, price is Price Characteristics: Business mktg, price is

fixed as per competitive bidding and fixed as per competitive bidding and negotiated prices. negotiated prices.

Characteristics of Business Characteristics of Business MaketingMaketing

Business may be defined as an Business may be defined as an enterprise engaged in the production enterprise engaged in the production and distribution of goods for sale in and distribution of goods for sale in the market or rendering service at a the market or rendering service at a price. The chief characteristics of the price. The chief characteristics of the business are:business are:

Creation of utilities: Creation of utilities: Business denotes Business denotes creation of utility and service for satisfaction creation of utility and service for satisfaction of human wants. Business helps in the of human wants. Business helps in the creation, distribution and production of creation, distribution and production of utilities.utilities.

Recurring activities: Recurring activities: Business activities Business activities are recurring in nature. Recurring purchase are recurring in nature. Recurring purchase and sales are regarded as identifying marks and sales are regarded as identifying marks of the business.of the business.

Transfer of title: Transfer of title: The goods produced The goods produced or purchased by the business are made or purchased by the business are made with the intention of sale or transfer of with the intention of sale or transfer of title from the seller to the buyer. title from the seller to the buyer. Because of this reason goods acquired Because of this reason goods acquired for the sake of personal consumption for the sake of personal consumption are excluded from business.are excluded from business.

Mutual benefit: Mutual benefit: Business activities are  Business activities are  not one sided affairs because both the not one sided affairs because both the parties are benefited. The buyer gets the parties are benefited. The buyer gets the benefit of having the goods and the seller benefit of having the goods and the seller gets the benefit of having money.gets the benefit of having money.

Expectation of earning: Expectation of earning: Business Business provides a way of living to the provides a way of living to the businessman because he intends to earn businessman because he intends to earn profit.profit.

Types of industrial customers

Industrial

suppliers

Commercialenterprises

InstitutionsHospitals,schools etc

Government agencies

users

OEMsOriginal equipment mfrs

LubricantsCoalpaper

SteelCement

Raw materials

AirplanesTypewriters

guns

ProductsConsumables

Commercial enterprise: it includes Commercial enterprise: it includes private sector, profit-seeking private sector, profit-seeking organisation consisting of : Industrial organisation consisting of : Industrial distributors or dealersdistributors or dealers

Classification of industrial Classification of industrial productsproducts

Material and partsMaterial and parts• Raw materialsRaw materials• ComponentsComponents

Capital itemsCapital items• Installations(Heavy equipments)Installations(Heavy equipments)• Accessory equipment (Light equipment)Accessory equipment (Light equipment)

Supplies and servicesSupplies and services Supplies items includes Supplies items includes

paints,soaps,oil and greasepaints,soaps,oil and grease

These items are generally These items are generally standardized & are marketed to a standardized & are marketed to a wide cross-section of industrial users.wide cross-section of industrial users.

Services: It includes services like Services: It includes services like building maintenance services, building maintenance services, auditing services, legal services, auditing services, legal services, marketing research servicesmarketing research services

Market Segmentation and B2B Marketing Market Segmentation and B2B Marketing

company sizeBehaviour or NeedsCertainly large companies may be of key or strategic value to a business but some want a low cost offer stripped bare of all services while others are demanding in every way

Size Segmentation ExamplesSize Segmentation Examples   Targeting companies who see $500 million/year in revenue.Targeting companies who see $500 million/year in revenue. Only targeting the largest companies in your region based on Only targeting the largest companies in your region based on

number of employees.number of employees.

Segmenting By VerticalSegmenting By Vertical A hanger warehouse may only target companies in the retail industry, a A hanger warehouse may only target companies in the retail industry, a

graphic software firm may only target design departments or design graphic software firm may only target design departments or design houseshouses

Segmenting by GeographySegmenting by Geography

Segmenting by BehaviorSegmenting by Behavior segmenting targets prospect groups based on their buying behavior. How segmenting targets prospect groups based on their buying behavior. How

are your customers using your product, how often are they using it, and are your customers using your product, how often are they using it, and what is the challenge your prospects face? Those questions, coupled with what is the challenge your prospects face? Those questions, coupled with the propensity of your prospect to actually pull the ‘buy’ trigger, is the the propensity of your prospect to actually pull the ‘buy’ trigger, is the cornerstone of behavioral segmenting. cornerstone of behavioral segmenting.

Eg: selling enterprise software, you’ll probably have at least Eg: selling enterprise software, you’ll probably have at least 4 sets of campaigns / messages aimed at different groups 4 sets of campaigns / messages aimed at different groups within the company:within the company:- business function: the department who’ll be using your - business function: the department who’ll be using your software the most, focus on use cases, user benefits, software the most, focus on use cases, user benefits, featuresfeatures- IT: how it’s technically superior, integration options, - IT: how it’s technically superior, integration options, reliability, security…reliability, security…- Finance: return on investment, compliance, legal - Finance: return on investment, compliance, legal requirements, financial credibilityrequirements, financial credibility- Executive: strategic, case studies, overviews, hospitality - Executive: strategic, case studies, overviews, hospitality

Chapter 2Chapter 2

Nature of Demand in Industrial MarketsNature of Demand in Industrial Markets Purchasing orientation & Practice of business customersPurchasing orientation & Practice of business customers Environmental analysis in industrial/businessEnvironmental analysis in industrial/business

Channel CharacteristicsChannel Characteristics Inventory or stock control is very much Inventory or stock control is very much

important factor in the business important factor in the business organizations' therefore the distribution organizations' therefore the distribution channels are needed more channels are needed more direct from direct from the manufacturer to the customerthe manufacturer to the customer in in industrial marketing. industrial marketing.

There are a few channel alternatives, There are a few channel alternatives, which are feasible in the industrial which are feasible in the industrial market than the consumer marketmarket than the consumer market

Nature of Demand in Nature of Demand in Industrial MarketsIndustrial Markets

The demand for industrial products The demand for industrial products and services does not exist by itself. and services does not exist by itself. It is derived from the ultimate It is derived from the ultimate demand for consumer goods and demand for consumer goods and services. services.

Industrial demand is therefore, called Industrial demand is therefore, called derived demand.derived demand.

Derived DemandDerived Demand:–:–Industrial Customer buys goods and Industrial Customer buys goods and services for use in producing other goods services for use in producing other goods and services.and services.

Ultimately whatever is finally produced Ultimately whatever is finally produced will be sold to the consumers. Hence the will be sold to the consumers. Hence the demand for Industrial goods and services demand for Industrial goods and services is derived from consumer goods and is derived from consumer goods and services.services.

Joint Demand;–Joint Demand;–Joint demand occurs when one Joint demand occurs when one industrial product is useful if other industrial product is useful if other product also exists. product also exists.

For eg: a computer cannot be For eg: a computer cannot be operated without the monitor.operated without the monitor.

Cross Elasticity of Demand:–Cross Elasticity of Demand:– ElasticityElasticity is simply the change in is simply the change in

demand from a change in price. demand from a change in price. Demand is “inelastic” if the % Demand is “inelastic” if the % change in quantity demand is less change in quantity demand is less than the % change in price. than the % change in price.

Complementary GoodsComplementary Goods• Complementary goods are those that are often used together, such as Complementary goods are those that are often used together, such as

motor vehicles and gasoline or DVDs and DVD players.motor vehicles and gasoline or DVDs and DVD players. Complementary IllustrationComplementary Illustration When the price of one good declines (or increases) and the demand for a When the price of one good declines (or increases) and the demand for a

related good increases (or decreases), then the two goods are considered related good increases (or decreases), then the two goods are considered complementary. complementary.

For example, if the price of computers increases and the demand for software For example, if the price of computers increases and the demand for software declines, computers and software can be considered complementary.declines, computers and software can be considered complementary.

Substitute GoodsSubstitute Goods Substitutes are goods that are used in place of each other. Substitutes are goods that are used in place of each other.

Examples include CDs and digital music files, such as MP3s or ice Examples include CDs and digital music files, such as MP3s or ice cream and frozen yogurt.cream and frozen yogurt.

Substitute IllustrationSubstitute Illustration If a price increase for one good leads to an increase in demand for If a price increase for one good leads to an increase in demand for

a related good, then the two goods are considered substitutes. An a related good, then the two goods are considered substitutes. An increase in beef prices, for example, followed by higher demand increase in beef prices, for example, followed by higher demand for chicken or pork, indicates that chicken or pork represent for chicken or pork, indicates that chicken or pork represent substitutes for beef.substitutes for beef.

Purchasing orientation Purchasing orientation & Practice of business & Practice of business

customerscustomers

PURCHASING ORIENTATIONPURCHASING ORIENTATION purchasing department occupied a low position in the purchasing department occupied a low position in the

management hierarchy, in spite of often managing more management hierarchy, in spite of often managing more than half the company’s costs. than half the company’s costs.

Recent competitive pressures have led many companies to Recent competitive pressures have led many companies to upgrade their purchasing department and elevate upgrade their purchasing department and elevate administrators to vice presidential rank. administrators to vice presidential rank.

Today’s purchasing departments are staffed with MBAs Today’s purchasing departments are staffed with MBAs who aspire to be CEOs-like Thomas Stallkamp, who aspire to be CEOs-like Thomas Stallkamp, Chrysler’s former executive vice president of Chrysler’s former executive vice president of procurement and supply, who cut costs and streamlined the procurement and supply, who cut costs and streamlined the automaker’s manufacturing processes.automaker’s manufacturing processes.

Procurement Orientation:Procurement Orientation: Here buyers simultaneously seek quality improvements and Here buyers simultaneously seek quality improvements and

cost reduction. Buyers develop collaborative relationships cost reduction. Buyers develop collaborative relationships with major suppliers and seek savings through better with major suppliers and seek savings through better management of acquisition, conversion, and disposal costs. management of acquisition, conversion, and disposal costs. They encourage early supplier involvement in materials They encourage early supplier involvement in materials handling, inventory levels, just-in-time management, and handling, inventory levels, just-in-time management, and even product design. even product design.

They negotiate long-term contracts with major suppliers to They negotiate long-term contracts with major suppliers to ensure the timely flow of material. They work closely with ensure the timely flow of material. They work closely with their manufacturing group on materials requirement their manufacturing group on materials requirement planning (MRP) to make supplies arrive on time.planning (MRP) to make supplies arrive on time.

Types of Purchasing ProcessesTypes of Purchasing Processes:: Four product related purchasing processes are distinguished,Four product related purchasing processes are distinguished, 1. Routine product: These products have low value and cost to the 1. Routine product: These products have low value and cost to the

customer and involve little risk (e.g. office supplies). Customers customer and involve little risk (e.g. office supplies). Customers will seek the lowest price and emphasize routine ordering. will seek the lowest price and emphasize routine ordering. Suppliers will offer to standardize and consolidate orders.Suppliers will offer to standardize and consolidate orders.

2. Leverage products: These products have high value and cost to 2. Leverage products: These products have high value and cost to the customer but involve little risk of supply (e.g. engine pistons) the customer but involve little risk of supply (e.g. engine pistons) because many companies make them. The supplier knows that the because many companies make them. The supplier knows that the customer will compare market offerings and costs, and it needs to customer will compare market offerings and costs, and it needs to show that its offering minimizes the customer’s total cost.show that its offering minimizes the customer’s total cost.

3. Strategic products: These products have high value and 3. Strategic products: These products have high value and cost to the customer and also involve high risk (e.g. cost to the customer and also involve high risk (e.g. mainframe computers). The customer will want a well-known mainframe computers). The customer will want a well-known and trusted supplier and be willing to pay more than the and trusted supplier and be willing to pay more than the average price. The supplier should seek strategic alliances average price. The supplier should seek strategic alliances that take the form of early supplier involvement, co-that take the form of early supplier involvement, co-development programs, and co-investment.development programs, and co-investment.

4. Bottleneck products: These products have low value and 4. Bottleneck products: These products have low value and cost to the customer but they involve some risk (e.g. spare cost to the customer but they involve some risk (e.g. spare parts). The customer will want a supplier who can guarantee parts). The customer will want a supplier who can guarantee a steady supply of reliable products. The supplier should a steady supply of reliable products. The supplier should propose standard parts and offer a tracking system, delivery propose standard parts and offer a tracking system, delivery on demand, and a help desk.on demand, and a help desk.

Buying Orientation:Buying Orientation: The purchaser focus is short term and tactical. Buyers are The purchaser focus is short term and tactical. Buyers are

rewarded in their ability to obtain the lowest price from rewarded in their ability to obtain the lowest price from suppliers for the given level of quality and availability. suppliers for the given level of quality and availability.

Buyers use two tactics namely commoditization, where Buyers use two tactics namely commoditization, where they imply that the product is a commodity and care only they imply that the product is a commodity and care only about price; and multi-sourcing where they use several about price; and multi-sourcing where they use several sources and make them compete for share of the company sources and make them compete for share of the company purchases.purchases.

Environmental analysis in industrial/businessEnvironmental analysis in industrial/business

EconomicEconomic What economic trends might have an impact on business What economic trends might have an impact on business activity? (Interest rates, inflation, unemployment levels, energy availability, activity? (Interest rates, inflation, unemployment levels, energy availability, disposable income, etc)disposable income, etc)

TechnologicalTechnological To what extent are existing technologies maturing? What To what extent are existing technologies maturing? What technological developments or trends are affecting or could affect our technological developments or trends are affecting or could affect our industry?industry?

GovernmentGovernment What changes in regulation are possible? What will their What changes in regulation are possible? What will their impact be on our industry? What tax or other incentives are being developed impact be on our industry? What tax or other incentives are being developed that might affect strategy development? Are there political or government that might affect strategy development? Are there political or government stability risks?stability risks?

Socio culturalSocio cultural What are the current or emerging trends in lifestyle, What are the current or emerging trends in lifestyle, fashions, and other components of culture? What are there implications? fashions, and other components of culture? What are there implications? What demographic trends will affect the market size of the industry? (growth What demographic trends will affect the market size of the industry? (growth rate, income, population shifts) Do these trends represent an opportunity or rate, income, population shifts) Do these trends represent an opportunity or a threat?a threat?

FutureFuture What are significant trends and future events? What are the key areas of What are significant trends and future events? What are the key areas of uncertainty as to trends or events that have the potential to impact strategy?uncertainty as to trends or events that have the potential to impact strategy?

Internal AnalysisInternal Analysis Understanding a business in depth is the goal of internal Understanding a business in depth is the goal of internal analysis. This analysis is based resources and capabilities of the firm.analysis. This analysis is based resources and capabilities of the firm.

ResourcesResources A good starting point to identify company resources is to look at A good starting point to identify company resources is to look at tangible, intangible and human resources.tangible, intangible and human resources.

Tangible resources are the easiest to identify and evaluate: financial resources and Tangible resources are the easiest to identify and evaluate: financial resources and physical assets are identifies and valued in the firm’s financial statements.physical assets are identifies and valued in the firm’s financial statements.

Intangible resources are largely invisible, but over time become more important to Intangible resources are largely invisible, but over time become more important to the firm than tangible assets because they can be a main source for a competitive the firm than tangible assets because they can be a main source for a competitive advantage. Such intangible recourses include reputational assets (brands, image, advantage. Such intangible recourses include reputational assets (brands, image, etc.) and technological assets (proprietary technology and know-how).etc.) and technological assets (proprietary technology and know-how).

Human resources or human capital are the productive services human beings offer Human resources or human capital are the productive services human beings offer the firm in terms of their skills, knowledge, reasoning, and decision-making the firm in terms of their skills, knowledge, reasoning, and decision-making abilities.abilities.

Organizational Organizational BuyingBuying

Characteristics of Characteristics of organisational procurementorganisational procurement

Multiple influencersMultiple influencers Technical sophisticationTechnical sophistication Value analysisValue analysis Well established proceduresWell established procedures Longer term and closer Longer term and closer

relationships.relationships. Closer interactions among multiple Closer interactions among multiple

functions.functions. Supplier proximity considerations.Supplier proximity considerations.

organisational buyingorganisational buying

Buying situationsBuying situations

New taskNew task Modified rebuyModified rebuy Straight rebuyStraight rebuy

Buying phasesBuying phases

Recognition of a problemRecognition of a problem Solution determinationSolution determination Determining the needed itemDetermining the needed item Search for and qualification of Search for and qualification of

potential sourcespotential sources Acquisition and analysis of proposalsAcquisition and analysis of proposals

The Buy grid Framework for Organizational Buying Situations

Buying centerBuying center

The decision making unitThe decision making unit Group of individuals who come Group of individuals who come

together to make a particular together to make a particular purchase decisionpurchase decision

Power base Power base

Buying center rolesBuying center roles

Primary rolesPrimary roles• Decision makersDecision makers• InfluencersInfluencers

Secondary rolesSecondary roles• UsersUsers• BuyersBuyers• Gatekeepers Gatekeepers

Objectives in organisational Objectives in organisational buyingbuying

Task orientedTask oriented• PricePrice• ServicesServices• QualityQuality• Assurance of supplyAssurance of supply• ReciprocityReciprocity

Non task objectivesNon task objectives

Material requirement planning (MRP)Material requirement planning (MRP)• Demand managementDemand management• Production managementProduction management• Material managementMaterial management

Just-in-time purchasing (JIT)Just-in-time purchasing (JIT)• Only one supplierOnly one supplier• Long term relationshipsLong term relationships• Frequent suppliesFrequent supplies• Precise quantity at precise timePrecise quantity at precise time

Centralized purchasingCentralized purchasing Buyer technologyBuyer technology

• On-line DSS, on-line order processing etcOn-line DSS, on-line order processing etc

How purchasing activities How purchasing activities influence buying behavior…influence buying behavior…

Factors influence the size of the Factors influence the size of the buying Centrebuying Centre

Characteristics of the firmCharacteristics of the firm Purchasing situationPurchasing situation Perceived importance of the productPerceived importance of the product

Psychological factors Psychological factors influencing decision makinginfluencing decision making

Difference in role orientationDifference in role orientation Difference in information exposureDifference in information exposure Perceived risk Perceived risk

Conflict resolution strategiesConflict resolution strategies

Others concern

Own concern

competing collaborating

compromising

accommodatingavoiding

Sources of power in conflict resolutionSources of power in conflict resolution

Reward powerReward power• Ability to influence by granting monetary Ability to influence by granting monetary

benefits benefits Coercive powerCoercive power

• Ability to impose punishmentAbility to impose punishment Legitimate powerLegitimate power

• Formal authorityFormal authority Personality powerPersonality power

• Ability to influence with personal charmAbility to influence with personal charm Expertise powerExpertise power

• Information or knowledge powerInformation or knowledge power

Evaluation of supplier Evaluation of supplier performanceperformance

The categorical methodThe categorical method Weighted point methodWeighted point method Cost ratio methodCost ratio method

Weighted point method

Factor Weight Actual performance Score

Quality 40 90% acceptable 40*0.9=36

Delivery 30 90% on schedule 30*0.9=27

Price 20 125% of lowest bidder100/125=0.8

20*0.8=16

After sales 10 60% on time 10*0.6=6

Total score 85

Cost ratio method

Strategic ManagementStrategic Managementin Business marketingin Business marketing

structure

Shared

values

staff

systems

styleskills

strategy

McKinseys 7S model

Strategic Management Process

Opportunity matrixOpportunity matrix

Potential

attractiveness

Probability of success

H

L

L H0

10

10

Threat matrixThreat matrix

Probability of occurrence

H

L

L H0

10

10

Potential

severity

Boston consulting group modelBoston consulting group model

Star Question

mark

Cash cow Dogs

Market growth

rate

H

L

H LMarket Share

Business growth strategiesBusiness growth strategies

Intensive growthIntensive growth Integrative strategiesIntegrative strategies Diversification strategiesDiversification strategies

Intensive Growth strategies Intensive Growth strategies

Market penetration

strategy

Product development strategy

Market development strategy

Diversification strategy New

markets

Current market

Current products New products

Integrative growth strategiesIntegrative growth strategies

Forward IntegrationForward Integration Backward integrationBackward integration Horizontal integration Horizontal integration

Diversification growth strategiesDiversification growth strategies

Concentric diversificationConcentric diversification Horizontal diversificationHorizontal diversification Conglomerate diversificationConglomerate diversification

Assessing market Assessing market opportunitiesopportunities

Marketing researchMarketing research

Marketing research systemMarketing research system

Marketing research is the systematic Marketing research is the systematic design, collection, analysis and design, collection, analysis and reporting of data and findings reporting of data and findings relevant to a specific marketing relevant to a specific marketing situation facing the companysituation facing the company

Suppliers of marketing researchSuppliers of marketing research

Students and professorsStudents and professors InternetInternet Syndicated research firmsSyndicated research firms Specialty marketing research firmsSpecialty marketing research firms

Marketing research processMarketing research process

Define the problem and research objectivesDefine the problem and research objectives Develop the research planDevelop the research plan

• Data sourcesData sources• Research approachesResearch approaches• Research instrumentsResearch instruments• Sampling planSampling plan• Contact methodsContact methods

Collect the informationCollect the information Analyse the informationAnalyse the information Present FindingsPresent Findings

Characteristics of good marketing Characteristics of good marketing researchresearch

Scientific methodScientific method Research creativityResearch creativity Multiple methodMultiple method Value and cost of informationValue and cost of information

Market demandMarket demand

Market demand for a product is the Market demand for a product is the total volume that would be bought by total volume that would be bought by the defined customer group in a the defined customer group in a defined geographical area in a defined geographical area in a defined time period in a defined defined time period in a defined marketing environment under a marketing environment under a defined marketing programmedefined marketing programme

Types of demand measurementTypes of demand measurement

GeographicalGeographical

Product levelProduct level

Time levelTime level

Demand measurement and Demand measurement and forecastingforecasting

Segmentation, targeting and Segmentation, targeting and positioning in Industrial positioning in Industrial

marketingmarketing

Segmentation, Targeting & Segmentation, Targeting & PositioningPositioning

Levels of Market segmentationLevels of Market segmentation• Individual marketingIndividual marketing• Segment marketingSegment marketing• Niche marketingNiche marketing• Mass marketingMass marketing

Requirements for effective Requirements for effective segmentationsegmentation

MeasurableMeasurable SubstantialSubstantial AccessibleAccessible DifferentiableDifferentiable ActionableActionable

Basis of segmentation in business Basis of segmentation in business marketingmarketing

Macro segmentationMacro segmentation Micro segmentationMicro segmentation

Some Macro variablesSome Macro variables

IndustryIndustry Plant characteristicsPlant characteristics LocationLocation Purchasing processPurchasing process End use marketsEnd use markets

Some Micro variablesSome Micro variables

Organizational variablesOrganizational variables• Purchasing situation / phasePurchasing situation / phase• Product innovativenessProduct innovativeness• Organizational capabilitiesOrganizational capabilities

Purchase situation variablesPurchase situation variables• Inventory practicesInventory practices• Purchasing policiesPurchasing policies• Structure of buying centreStructure of buying centre

Individual variablesIndividual variables

Market targetingMarket targeting

Process of market targetingProcess of market targeting• Evaluating the market segmentsEvaluating the market segments• Selecting the market segmentsSelecting the market segments

Product planningProduct planning

What is an industrial product…What is an industrial product…

Basic propertiesBasic properties Enhanced propertiesEnhanced properties Augmented propertiesAugmented properties

Product strategy involves Product strategy involves continuous changecontinuous change Product strategy issues revolves Product strategy issues revolves

aroundaround• Changes needed in current productsChanges needed in current products• Whether products should be added or Whether products should be added or

dropped(product mix management)dropped(product mix management)

Industrial product managerIndustrial product manager Forecasting salesForecasting sales Product planningProduct planning PricingPricing Product conceptualizationsProduct conceptualizations Initiating product changesInitiating product changes Product re-engineering decisionsProduct re-engineering decisions Product mix managementProduct mix management Production planning and capacity Production planning and capacity

managementmanagement Technical support to the selling team Technical support to the selling team

Product life cycle

– Course that a products sales and profits take over it’s life time

– The PLC has four phases• Introduction• Growth• Maturity• Decline

– The PLC concept can be applied to• Product class• Product form• Brand

Introduction stage Introduction stage CharacteristicsCharacteristics

• Low salesLow sales• High cost per customerHigh cost per customer• Negative profitsNegative profits• Innovators customersInnovators customers• Few competitorsFew competitors

Marketing objectiveMarketing objective• Create product awareness and trialCreate product awareness and trial

Introduction stageIntroduction stage

StrategiesStrategies Product : Offer basic productProduct : Offer basic product Pricing : Cost plus pricingPricing : Cost plus pricing Distribution : Build selective distributionDistribution : Build selective distribution Advertising : Build awareness among early Advertising : Build awareness among early

adopters and dealersadopters and dealers Sales promotion : Heavy sales promotion to Sales promotion : Heavy sales promotion to

entice trialentice trial

Growth stageGrowth stage

Characteristics Characteristics • Rapidly rising salesRapidly rising sales• Average cost per customerAverage cost per customer• Rising profitsRising profits• Early adoptersEarly adopters• Growing competitorsGrowing competitors

Marketing objectiveMarketing objective• Maximize market shareMaximize market share

Growth stageGrowth stage

StrategiesStrategies• Product : Product extensions, service, Product : Product extensions, service,

warrantywarranty• Price : Competitive pricingPrice : Competitive pricing• Distribution : Intensive distributionDistribution : Intensive distribution• Advertising : Build awareness and Advertising : Build awareness and

interest in mass marketinterest in mass market• Sales promotion : Reduce Sales promotion : Reduce

Maturity stageMaturity stage

Characteristics Characteristics • Peak salesPeak sales• Low cost per customerLow cost per customer• High profitsHigh profits• Middle majority customersMiddle majority customers• No of competitors begin to declineNo of competitors begin to decline

Marketing objectiveMarketing objective• Defend the market share while maximizing Defend the market share while maximizing

profitsprofits

Maturity stageMaturity stage

StrategiesStrategies• Product : FeaturesProduct : Features• Price : match or beat the competitorsPrice : match or beat the competitors• Distribution : more intensified Distribution : more intensified

distributiondistribution• Advertising : Stress brand differencesAdvertising : Stress brand differences• Sales promotion : Increase to achieve Sales promotion : Increase to achieve

brand switchingbrand switching

Decline stageDecline stage

CharacteristicsCharacteristics• Declining growth rateDeclining growth rate• Low cost per customerLow cost per customer• Declining profitsDeclining profits• Laggards customersLaggards customers• Declining competitorsDeclining competitors

Marketing objectiveMarketing objective• Reduce expenditure and milk the brandReduce expenditure and milk the brand

Decline stageDecline stage

StrategiesStrategies• Product : Phase out weak itemsProduct : Phase out weak items• Price : Cut pricePrice : Cut price• Distribution : SelectiveDistribution : Selective• Advertising : Reduce to minimal levelAdvertising : Reduce to minimal level

Product revitalization decisionsProduct revitalization decisions

Identifying the causes for poor Identifying the causes for poor performanceperformance• Uncompetitive priceUncompetitive price• Production problemsProduction problems• Uneconomic batchesUneconomic batches• High cost of productionHigh cost of production• Wrong assessment of customer Wrong assessment of customer

expectationsexpectations• Low selling price Low selling price

Product revitalization decisionsProduct revitalization decisions

Corrective actionsCorrective actions• Product modifications (cost reduction)Product modifications (cost reduction)• Increase the priceIncrease the price• Product improvementProduct improvement• Decrease the priceDecrease the price• Development of new marketDevelopment of new market• Increased promotional expenditureIncreased promotional expenditure• Revamping distribution channelsRevamping distribution channels

Product elimination decisionsProduct elimination decisions

Factors to be considered during Factors to be considered during product elimination decisionproduct elimination decision• Full line policyFull line policy• Corporate imageCorporate image• Sales of other productsSales of other products• Profitability of other productsProfitability of other products

Service marketingService marketing

Include all economic activities whose Include all economic activities whose output is not a physical product , is output is not a physical product , is generally consumed at the time it is generally consumed at the time it is produced and provides added value produced and provides added value in forms that are essentially in forms that are essentially intangibleintangible

Some service sectors …Some service sectors …• TransportationTransportation• CommunicationCommunication• Retail tradeRetail trade• Finance, insurance and bankingFinance, insurance and banking• Hotels and lodgingHotels and lodging• GovernmentGovernment• Universities and educational Universities and educational

institutionsinstitutions

Services are …Services are …

IntangibleIntangible InseparabilityInseparability HeterogeneityHeterogeneity PerishabilityPerishability

The services marketing triangleThe services marketing triangle

Company

(management)

Employees Customers

External MarketingInternal marketing

Delivery

GAPS model of service qualityGAPS model of service quality Gap 1- Difference between customer Gap 1- Difference between customer

expectation and perceptionexpectation and perception Gap 2 – Not knowing what customers Gap 2 – Not knowing what customers

expectexpect Gap 3- Not selecting the right service Gap 3- Not selecting the right service

designs standardsdesigns standards Gap 4- Not delivering the service Gap 4- Not delivering the service

standardsstandards Gap 5- Not matching performance to Gap 5- Not matching performance to

promisepromise

Strategic innovation and Strategic innovation and new product developmentnew product development

What is new productWhat is new product

New to the worldNew to the world New product linesNew product lines Product variantsProduct variants Improvements in the existing Improvements in the existing

productsproducts RepositioningRepositioning

Where do new ideas come fromWhere do new ideas come from

Within the companyWithin the company CustomersCustomers

New product development processNew product development process

Idea generationIdea generation Idea screeningIdea screening Idea evaluation and preliminary Idea evaluation and preliminary

business analysisbusiness analysis Product development and testingProduct development and testing Formal business planningFormal business planning commercializationcommercialization

Organisational aspects in new product development

• Product managers

• New product managers

• New product committees

• New product departments

Formulating channel Formulating channel strategystrategy

Channel participantsChannel participants

What is a marketing channelWhat is a marketing channel

A marketing channel is a set of A marketing channel is a set of interdependent organisations interdependent organisations involved in the process of making a involved in the process of making a product or service available for use product or service available for use or consumptionor consumption

Key members of marketing Key members of marketing channelschannels

ManufacturerManufacturer• Producer of product or service being Producer of product or service being

soldsold IntermediariesIntermediaries

• Means channel member other than Means channel member other than manufacturer or end user (wholesaler, manufacturer or end user (wholesaler, retailer)retailer)

End usersEnd users

Why marketing channelsWhy marketing channels

Demand-side Demand-side factorsfactors• Facilitating the Facilitating the

searchsearch• AssortmentAssortment

SortingSorting AccumulationAccumulation Bulk breakingBulk breaking

Supply side factorsSupply side factors• Routinisation of Routinisation of

transactionstransactions• Reduction in no. of Reduction in no. of

contactscontacts• Carry inventoryCarry inventory• Demand creationDemand creation• Extend credit to end Extend credit to end

usersusers• serviceservice

Marketing flowsMarketing flows

Physical possessionPhysical possession OwnershipOwnership PromotionPromotion NegotiationNegotiation FinancingFinancing RiskingRisking OrderingOrdering PaymentPayment

““Service outputs”Service outputs”

Value added services created by Value added services created by channel members along with the channel members along with the product purchased by consumers are product purchased by consumers are called service outputscalled service outputs

Typical service outputs include bulk Typical service outputs include bulk breaking, spatial convenience, breaking, spatial convenience, waiting and delivery time, waiting and delivery time, assortment etc. assortment etc.

Choosing the right distributorChoosing the right distributor

What marketing functions to assignWhat marketing functions to assign Product lineProduct line

• Fragmented channelsFragmented channels• Specialized productsSpecialized products

Size and type of the distributorSize and type of the distributor• Large and reputed distributorsLarge and reputed distributors• Small distributorsSmall distributors

Exclusive or multiple distributionExclusive or multiple distribution How to divide selling function b/w company How to divide selling function b/w company

sales team and distributorssales team and distributors• House accounts and distributor accountsHouse accounts and distributor accounts

Distribution policiesDistribution policies

Marketing logisticsMarketing logistics

Physical distribution and Physical distribution and customer carecustomer care

LogisticsLogistics

In the business area, Logistics refers In the business area, Logistics refers to the interrelation and management to the interrelation and management of all the activities involved in of all the activities involved in making products and raw materials making products and raw materials available for manufacturing and in available for manufacturing and in providing finished products to the providing finished products to the customers when, where and how customers when, where and how they are desired they are desired

Various logistical cost centres areVarious logistical cost centres are

TransportationTransportation Inventory managementInventory management WarehousingWarehousing Material handlingMaterial handling Order processingOrder processing

transportationtransportation

• Mode and carrier selectionMode and carrier selection RoadRoad RailRail AirAir PipelinePipeline waterwayswaterways

• Carrier routingCarrier routing• Vehicle schedulingVehicle scheduling

Inventory managementInventory management

Inventory carrying costInventory carrying cost• Inventory acquisition costInventory acquisition cost• Inventory service cost such as insuranceInventory service cost such as insurance• Storage space costsStorage space costs• Inventory risk costInventory risk cost

warehousingwarehousing

• Private or public facilitiesPrivate or public facilities• Site location Site location

Market centeredMarket centered Production centeredProduction centered Intermediate Intermediate

Marketing communicationMarketing communication

Advertising and sales promotionAdvertising and sales promotionSales management Sales management

Advertising in business Advertising in business marketingmarketing

In business marketing advertising is In business marketing advertising is required forrequired for• Reaching the buying influencersReaching the buying influencers• Creating awarenessCreating awareness• Enhancing the sales call effectivenessEnhancing the sales call effectiveness• Increasing overall marketing efficiencyIncreasing overall marketing efficiency• Supporting channel membersSupporting channel members

Industrial advertising mediaIndustrial advertising media

Business and trade publicationsBusiness and trade publications Directory advertisingDirectory advertising Consumer mediaConsumer media Direct marketingDirect marketing

• MailersMailers• TelemarketingTelemarketing• Catalogues and datasheetsCatalogues and datasheets

Sales promotion in business Sales promotion in business marketingmarketing

Trade showsTrade shows PremiumsPremiums Specialty advertisingSpecialty advertising IncentivesIncentives Publicity in business marketingPublicity in business marketing

Advertising funds Advertising funds

What can we affordWhat can we afford Objective and taskObjective and task Percentage of salesPercentage of sales ExperimentationExperimentation Match the competitionMatch the competition

Developing message strategyDeveloping message strategy

Identifying the audience needsIdentifying the audience needs Keep the message to important Keep the message to important

specifics specifics Case historiesCase histories Testimonials Testimonials Comparison AdsComparison Ads Straight exposition Straight exposition

Developing media planDeveloping media plan

Media classMedia class Media vehicleMedia vehicle ReachReach FrequencyFrequency Continuity (Length of the campaign)Continuity (Length of the campaign) SchedulingScheduling

Advertisement evaluationAdvertisement evaluation

Advertisement impact assessmentAdvertisement impact assessment• Aided recallAided recall• Un aided recallUn aided recall

TOMTOM SIMSIM OIMOIM

• Message recallMessage recall• Content recallContent recall

Sales managementSales management

The analysis, planning, The analysis, planning, implementation and control of sales implementation and control of sales force activities. It includes setting force activities. It includes setting and designing sales force strategy, and designing sales force strategy, recruiting, selecting, training, recruiting, selecting, training, compensating, routing, supervising, compensating, routing, supervising, and motivating the personal sales and motivating the personal sales forceforce

Sales managementSales management

SellingSelling Sales managementSales management SalesmanshipSalesmanship

Sales as a careerSales as a career

Good remuneration Good remuneration Shortest route to the topShortest route to the top Other privileges Other privileges

Selling process Selling process

The steps that the sales person The steps that the sales person follows when selling, which include follows when selling, which include prospecting and qualifying, pre-prospecting and qualifying, pre-approach, approach, presentation, approach, approach, presentation, handling objections, closing and handling objections, closing and follow ups.follow ups.

Prospecting methodsProspecting methods Inquiries from advertisingInquiries from advertising Centers of influenceCenters of influence Chain of leadsChain of leads Cold callsCold calls Directories and mailing listsDirectories and mailing lists Group meetings and partiesGroup meetings and parties Internal recordsInternal records ObservationObservation Service personnelService personnel Trade shows Trade shows

Pre approach or planning sales callPre approach or planning sales call

Planning reflects professionalismPlanning reflects professionalism Planning develops goodwillPlanning develops goodwill Planning builds confidence in sales personPlanning builds confidence in sales person Planning increases sales probability Planning increases sales probability

Approaching Approaching

Types of approachesTypes of approaches• Complimentary approachComplimentary approach• Reference approachReference approach• Sample approachSample approach• Customer benefit approachCustomer benefit approach

Preparing sales presentationsPreparing sales presentations

An effective sales presentation An effective sales presentation shouldshould• AttentionAttention• InterestInterest• DesireDesire• ConvictionConviction• actionaction

Recruiting Recruiting

Attracting the potential employees Attracting the potential employees and making them apply for the joband making them apply for the job

Sources of peopleSources of people• Persons within the companyPersons within the company• CompetitorsCompetitors• Non competing companiesNon competing companies• Educational institutionsEducational institutions• AdvertisementsAdvertisements• Employment agenciesEmployment agencies

The recruitment processThe recruitment process

Conducting job analysisConducting job analysis Preparing job descriptionPreparing job description Preparing the set of job qualificationsPreparing the set of job qualifications

• Personality traitsPersonality traits• Qualification levelsQualification levels

Compensating sales personnelCompensating sales personnel

Various compensation elementsVarious compensation elements• Fixed elementFixed element• Variable element (commission, bonus, Variable element (commission, bonus,

etc.)etc.)• Fringe elements (paid holiday, sickness Fringe elements (paid holiday, sickness

etc.)etc.)• Reimbursement elementReimbursement element

Selection processSelection process

Initial screening interviewsInitial screening interviews Application formsApplication forms TestsTests

• Intelligence testsIntelligence tests• Knowledge testsKnowledge tests• Personality testsPersonality tests• Drug testsDrug tests

In-depth interviewsIn-depth interviews Reference checksReference checks

Sales trainingSales training

Initial sales trainingInitial sales training Refresher trainingRefresher training

Designing the sales training Designing the sales training programmeprogramme

Training objectivesTraining objectives• Initial sales trainingInitial sales training• Refresher trainingRefresher training

Contents of the sales training programmeContents of the sales training programme• Company knowledgeCompany knowledge• Product knowledgeProduct knowledge• Sales techniques and selling processSales techniques and selling process• Interpersonal skillsInterpersonal skills• Market and industry knowledgeMarket and industry knowledge

Methods of group trainingMethods of group training LecturesLectures Group discussionsGroup discussions Role playingRole playing Video conferencingVideo conferencing CDsCDs

Methods of individual trainingMethods of individual training On job trainingOn job training Personal conferencePersonal conference Correspondence coursesCorrespondence courses Interactive video discsInteractive video discs

Implementing sales training programmeImplementing sales training programme locationlocation home officehome office Field officeField office Regional officeRegional office Central training facilityCentral training facility Non company site (hotel, resort etc.)Non company site (hotel, resort etc.)

Types of compensation plansTypes of compensation plans

Straight salary planStraight salary plan Straight commission planStraight commission plan Combination of salary and incentive Combination of salary and incentive

planplan BonusesBonuses Fringe benefitsFringe benefits

Sales meetingsSales meetings

Sales meetings are important for Sales meetings are important for communication and motivational communication and motivational purposespurposes

Exchange of information and ideasExchange of information and ideas Occasions for management to Occasions for management to

stimulate the sales force to raise the stimulate the sales force to raise the performance standardsperformance standards

Evaluating sales performanceEvaluating sales performance

Quantitative performance standardsQuantitative performance standards• QuotasQuotas• Selling expense ratiosSelling expense ratios• Net profit ratioNet profit ratio• Territorial market shareTerritorial market share• Sales coverage indexSales coverage index• Calls frequency / calls per dayCalls frequency / calls per day• Average cost per callAverage cost per call

Qualitative performance Qualitative performance standardsstandards

Job factorsJob factors• Product knowledgeProduct knowledge• Understanding customer needsUnderstanding customer needs• ServiceService

Personal factorsPersonal factors• PunctualityPunctuality• AttitudeAttitude• CooperationCooperation• AdaptabilityAdaptability• ReliabilityReliability

CRM and CBCRM and CB

CRM and CBCRM and CB There are three ways to increase the There are three ways to increase the

profitabilityprofitability• Acquire more customersAcquire more customers• Optimize the value from existing customersOptimize the value from existing customers• Retain the right customers longerRetain the right customers longer

Of these three choices above, acquiring Of these three choices above, acquiring new customers is the most expensive new customers is the most expensive affair and retaining the existing affair and retaining the existing customer is the most economicalcustomer is the most economical

Before we understand CRM, we should Before we understand CRM, we should know the concepts of “life time value of know the concepts of “life time value of customer” and “consumer touch points”customer” and “consumer touch points”

CRMCRM

While organizations should continue While organizations should continue looking for customers new looking for customers new customers, they should also know it customers, they should also know it is worth a significant investment to is worth a significant investment to keep them. CRM is the way to it.keep them. CRM is the way to it.

With CRM suppliers generate loyalty, With CRM suppliers generate loyalty, this in turn translates in to additional this in turn translates in to additional business at increasingly higher business at increasingly higher margins. margins.

Evolution of CRMEvolution of CRM

Mass marketingMass marketing Target marketingTarget marketing CRMCRM

Types of CRMTypes of CRM

Win back or saveWin back or save ProspectingProspecting LoyaltyLoyalty Cross selling / upsellingCross selling / upselling

CRM is a multifaceted strategy that helps CRM is a multifaceted strategy that helps companies understand, anticipate and manage companies understand, anticipate and manage customer needs.customer needs.

CRM comprises the acquisition and deployment CRM comprises the acquisition and deployment of knowledge about customers to enable a of knowledge about customers to enable a company to sell more of their product or services company to sell more of their product or services more efficientlymore efficiently

Major thrust of CRM involves segmenting the Major thrust of CRM involves segmenting the customers on their value and offering customers on their value and offering appropriate differentiated services for each of appropriate differentiated services for each of these levelsthese levels

CRM ensures that individual customer needs are CRM ensures that individual customer needs are profitably satisfied at the right time in the right profitably satisfied at the right time in the right channel with right offerchannel with right offer

The CRM begins withThe CRM begins with In-depth analysis of customer In-depth analysis of customer

behavior and attributes to achieve behavior and attributes to achieve the complete knowledge of the the complete knowledge of the customers, their habits and desires, customers, their habits and desires, and their needs. and their needs.

Then applying the knowledge to the Then applying the knowledge to the formulation of marketing campaigns formulation of marketing campaigns and strategiesand strategies

The CRM cycleThe CRM cycle

An assessment phaseAn assessment phase A planning phaseA planning phase An execution phaseAn execution phase

Benefits of CRMBenefits of CRM

With CRM practice, both suppliers and With CRM practice, both suppliers and customers wincustomers win

Prevents overspending on low value Prevents overspending on low value customers and under spending on high customers and under spending on high value customersvalue customers

Improves customer retentionImproves customer retention Inoculates customers from competitionInoculates customers from competition Improves marketing return on Improves marketing return on

investmentinvestment

Customers get the best offer to meet their Customers get the best offer to meet their needs at the right timeneeds at the right time

Customers get more appropriate mix of Customers get more appropriate mix of marketing message balanced with informationmarketing message balanced with information

Offers are made based on understanding Offers are made based on understanding customer profitabilitycustomer profitability

Products are packed according customer Products are packed according customer purchase patternspurchase patterns

Service channels are customized to customer Service channels are customized to customer needs needs

Sales and point of contact staff have detailed Sales and point of contact staff have detailed information about customer value, needs and information about customer value, needs and attitudeattitude

Implementation of CRMImplementation of CRM

StrategyStrategy• Channel, segmentation, pricing, Channel, segmentation, pricing,

branding and advertisingbranding and advertising SegmentationSegmentation TechnologyTechnology ProcessProcess organizationorganization

Pricing policiesPricing policies

PricingPricing

Factors that influence pricing Factors that influence pricing strategystrategy• Customer demandCustomer demand• CompetitionCompetition• Cost and profit relationshipsCost and profit relationships• Government regulationsGovernment regulations

Cost analysisCost analysis

Fixed cost and variable costFixed cost and variable cost Economies of scaleEconomies of scale The learning curveThe learning curve

Scale of economyScale of economy

Production rate

uc

Learning curveLearning curve

unitcost

Production rate

10,000 units

20,000 units

30,000 units

Pricing strategiesPricing strategies New product introductionNew product introduction

• Market skimmingMarket skimming Product has a patent protectionProduct has a patent protection Highly valuable innovationHighly valuable innovation Product has a short life spanProduct has a short life span Potential competitors are distant in timePotential competitors are distant in time Uncertainty regarding markets price Uncertainty regarding markets price

sensitivity sensitivity

• Market penetrationMarket penetration Market is highly price sensitiveMarket is highly price sensitive Strong competition existStrong competition exist Company’s goal is high market shareCompany’s goal is high market share

Pricing policiesPricing policies

Discount pricingDiscount pricing• Trade discountsTrade discounts• Quantity discountsQuantity discounts• Cash discountsCash discounts

Geographical pricingGeographical pricing

Major and national accountsMajor and national accounts

Large customers

small customers

Centralised

purchasing

Decentralised purchasing

Major A/c

National A/c

Minor A/c ?