BUS 122_ business INDUSTRIAL MARKETING .pptx

Business marketing notes

1. BUS 122: INDUSTRIAL MARKETING By Hawa Petro Tundui (PhD) [email protected] [email protected] 0754825860

2. Learning Outcomes At the end of the course, students should be able to: Compare and contrast the differences and similarities with the consumer market; Understand Demand Issues in Industrial marketing Understand the characteristic of business-to-business marketing and decision process. Critically analyse firm specific industrial marketing issues. Integrate and apply various mechanisms related to segmentation, targeting and positioning strategies.

3. REQUIRED READINGS Mukerjee , Hory Sankar (2009). Industrial Marketing, New Delhi: Excel Books Havaldar , K. K. (2005). Industrial marketing: text and cases. Tata McGraw-Hill Education. Webster, F. J. Jr. (1995). Industrial Marketing Strategy. New York: Wiley. Phadtare , Milind T. (2008). Industrial Marketing, New Delhi: PHI Learning Any Recent Book and Journal articles about Industrial Marketing

4. Evaluation Course Work Group Assignment (10%) Individual (10%) Test 1 (15%) Test 2 – 15% TOTAL CW – 50% FE – 50% PROGRESSION: GPA of at least 2.0- PASSED; GPA of 1.8 – SUPPLEMENTARY CASE; GPA below 1.8 – DISCONTINUATION CASE

5. USE OF ELEARNING PLATFORM Make sure you enrol to the course to access course materials

6. Course Contents BUS 122 COURSE CONTENTS

7. Introduction to Industrial Marketing Defining Industrial Marketing Industrial Marketing vs. Consumer Marketing Industrial Marketing Environment Products Characteristics

8. Industrial Marketing Before defining “Industrial Marketing” we need familiarize ourselves with the key terms: Industrial Markets Industrial Markets products Consumer Goods Markets

9. Industrial Markets These are organizations / businesses (local or international) that buy goods and /or services for industrial use They use goods /services (products) for conversion into other products ( i.e., used to make other goods)

10. Industrial Markets Businesses firms (e.g. TIGO, TBL, Dangote cement factory, Coca-Cola, etc.) Government organizations (Ministries, armies, government hospitals, etc.) Institutions (e.g. universities, schools and religious organizations (such as mosques, churches, etc.

11. Industrial M arkets P roducts What is a Product? A Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy needs, wants and demand of a customer or a consumer

12. What is a Product? Product Tangible (good) Intangible (service) Consumer Industrial Consumer Industrial

13. Industrial Products Industrial products are goods that are converted into other goods or facilitate production of other goods Examples:

14. Consumer Goods M arkets Consumer Markets are markets in which products are offered for final or end use or personal use Note: The differen ce between a consumer product and an industrial product is depending on the purpose for which the product is bought for. Examples?

15. What is Indutrial Marketing? The marketing of products by one organization to another whereby the products are used in the production of other products, for resale purposes or in support of service offerings provided to other customers It is a marketing channel that specializes in selling goods and services to other business organizations

16. Industrial Marketing Note: Industrial Marketing is also known as: Business-to-Business Marketing, or Business Marketing, or Organizational Marketing

17. Industrial Marketing Industrial marketing are all activities involved in the marketing of products to organizations that use them for production of consumer or industrial goods and services, and to facilitate the operation of enterprises

18. T ypes of Transactions in Industrial Marketing Product exchange: Supply of raw materials to the organization to process the finished goods for the end user or consumer In this transaction, Satisfaction is derived from The features of a product such as quality, quantity, price and after sale services The easiness of exchange - ability of the seller to identify the buyer‘s needs

19. Information Exchange This kind of exchange involve availability of information in terms of: Technical Economic Organizational questions Post sale maintenance and servicing

20. Financial Exchange The need to exchange money from one currency to another (for foreign buyers/customers) Granting of credits Permission to pay in installment Type of currency accepted for payment

21. Social Exchange Social Exchange Social exchange is important in areas of reducing uncertainty between buyer and seller, avoiding short-term difficulties and thus maintaining a better relation over a long period of time

22. Transaction in Industrial Market Note: A number of aspects of an agreement between buyers and sellers in the industrial market are based on arbitration and mutual trust, not fully formalized or based on legal criteria until the end of the transaction period

23. Industrial Marketing vs. Consumer Marketing Markets Products Complexity Channels Decision Making Buyer Behavior Promotion Pricing Relationship

24. Industrial and Consumer Markets Base Industrial Markets Consumer Markets Market Geographically concentrated, Relatively fewer buyers Geographically disbursed, Mass markets Products complexity Technical complexity, customized standardized Channel Shorter and direct, Indirect, Multiple layers of intermediaries

25. Base Industrial Markets Consumer Markets Decision-making Observable stages, Distinct Unobservable, Mental stages Buyer behavior Involvement of various functional areas in both buyer and supplier firms (done by team) Purchase decisions are mainly made on rational/performance basis Technical expertise required Involvement of family members Purchase decisions are mostly made on physiological/social/ psychological needs Less technical expertise Industrial and Consumer Markets

26. Base Industrial Markets Consumer Markets Relationship Stable inter-personal relationship between sellers and buyers) Non-personal relationship Promotion Emphasis on personal selling Emphasis on advertising Price setting Competitive bidding and negotiated prices Retail prices (less negotiation) Industrial and Consumer Markets

27. Base Industrial Markets Consumer Markets Market information very difficult to gain, It requires quality and extensive industrial experience. Information on the consumer market is easily available ( b’se of consumer demographic database availability Industrial and Consumer Markets

28. Characteristics of Industrial Market (Summary) It's extremely complex Longer sales cycle. The variety of marketing. Low market information. Advertising generally doesn't follow trends. The buyers and their behaviors . Bidding is customary. The geographical and demographical distribution.

29. Review Questions With examples, differentiate industrial products and consumer products With examples differentiate between Consumer Markets and Industrial Markets

30. REVISION

31. Industrial Products

32. Classification of industrial products Industrial products can be classified as follows; Materials and parts Capital items Supplies and services

33. Materials and parts This class include; Raw materials used to manufacture other products (like iron ore, cotton, crude oil, etc.) Manufacturing items (such steel, chemicals, etc.)

34. Material and Parts Components parts such as spare parts and parts ( tyres in car industries) Subassembly – semi-finished products (e.g. engines and gear boxes for cars)

35. Capital Items A capital good is a durable (does not quickly wear out) that is used in production of goods or services They are used in production process They include : Light Equipment or Accessories Installations or heavy equipment Plant and Buildings

36. Supplies and Services These are items that support operations in organizations Supplies: These are operating maintenance items (e.g. fuel, oils in transport oriented organization, packaging in production firms, electric items in construction firms

37. Supplies and Services Services Legal services Auditing services , Advertising services Transport services, Research services Courier services

38. Characteristics of Industrial Products Heavy investment in Industrial goods The production of industrial goods calls for heavy capital investment. (Use of Shareholders and Loans to raise capital) Complex nature of products Industrial goods always appear to be complex in view of their technical nature. (Machines) Derived demand for Industrial goods The demand for industrial goods is a derived demand. i.e., it is influenced by the demand for the goods they help to manufacture.

39. Characteristics of Industrial Products… Limited number of Buyers When compared to consumer markets, the number of buyers of industrial goods is limited. Inelastic demand The demand for industrial goods is relatively inelastic, i.e., it is not affected by changes in price. Buying is always a group process Industrial goods are purchased by a team of experts. The team may consist of engineers, financial experts and others.

40. Characteristics of Industrial Products… Higher purchase value of Industrial goods Industrial goods are very highly priced. After-sale service of Industrial goods The seller must ensure regular repair and maintenance service to the buyer. Seller’s Reputation The reputation of the seller is vital for the industrial goods. The buyers would always prefer to buy from reputed suppliers rather than from an unknown source.

41. Characteristics of Industrial Products… Leasing Most of the Industrial goods are purchased by using contracts or agreements. Rational and not emotional buying For Consumer goods, the buying decision is influenced by status, prestige and such other emotional factors. The buyer of industrial goods, makes an objective analysis of the utility of the product before taking the purchase decision.

42. Characteristics of Industrial Products… Greater awareness of the buyers The buyers of industrial goods must have thorough knowledge of the product, its source of supply, the alternative models available, the price of the competing models, etc. Shorter channel of distribution The marketers of industrial goods usually supply the goods directly to their customers.

43. T ypes of B uyers of Industrial Goods Those who buy components A car manufacturer may, for example, buy tyres, radiators, batteries, etc., from the manufacturers of these components. Those who buy and install machines The same car manufacturer may install a machinery to check the wheel alignment. Here, the machine is purchased for service purposes. Those who buy for resale These are distributors of industrial goods.

44. Industrial Marketing Environment

45. Marketing Environment A Marketing environment is about internal and external factors that drive and influence an organization's marketing activities.  Monitoring Marketing is very important because: It helps identifying opportunities and Threats Managing Changes

46. Features of Marketing Environment Dynamic : constantly change over time Relative : Specific and unique to each organization Uncertain : Market forces are unpredictable Complex : m any internal and external forces

47. Industrial Marketing Environment I ndustrial marketing environment  can be divided into three levels: I nterface level (Micro Level), T he   P ublic’s  level and T he M acro environment level.

48. Interface Level The interface level involves key participants who immediately interact (contact) with an industrial firm (buyer or seller). The participants interact to facilitate production, distribution, and purchase a firm’s goods and services

49. Interface Level participants The company's suppliers, Industrial customers competitors, substitute products, distributors, Facilitators , etc.

50. Publics Level Publics are different groups that have actual or potential interest or impact in each firm’s ability to achieve its respective goals. Financial Publics- Investment firms, Shareholders Independent Press Public groups Internal Public Trade Unions, Board of Directors

51. Macro Level Political –Legal Factors Policies, and Acts Economic Factors Inflation rate, Taxation rates, Interest rates Social Cultural factors Literacy levels, Values, Traditions Technological factors C hanges in design, innovations

52. POLITICAL –LEGAL FACTORS Forces which allocate/give power and provide constraining and protection laws and regulations These refer to government policies and laws such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidising firms? What are its priorities in terms of business support? Political Decisions and their impact on business Education, Health, Infrastructure

53. Economical factors Economic forces , which regulate the exchange of materials, money, energy and information. These include interest rates, taxation changes, money supply, inflation rates, unemployment levels, exchange rates How can these factors affect business environment?

54. Socio-cultural factors Sociocultural forces , which regulate the values, morals and customs of society. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. Demographic changes Social values Lifestyles How does these affect business activities?

55. Technological forces Technological forces , which generate problem-solving inventions. New technologies create new products and new processes Online shopping What is the impact technological changes on business?

56. Environmental forces Environmental factors: environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. Climate changes occurring due to global warming