Business marketing

1. Business Marketing

2. Nature of Business Marketing

3. Business marketing also referred to as “Industrial marketing” or “B2B marketing” or “Organizational marketing”. Business marketing is the marketing of products & services to business organizations. Business organizations include: Manufacturing companies Govt. undertakings Private sector organizations Educational institutions Hospitals Distributors / Dealers What is Business Marketing? Business organizations buy products & services to satisfy many objectives like production of other goods & services, making profits, reducing costs, & so on. Consumer marketing is the marketing of products & services to individuals, families, & households. The consumers buy products & services for their own consumption.

4. B2B Marketing vs. Consumer Marketing Areas Industrial Markets Consumer Markets 1. Market characteristics Geographically concentrated Relatively fewer buyers Geographically distributed Mass markets 2. Product characteristics Technical complexity Customized Standardized 3. Service characteristics Service, timely delivery & availability is very important Service, timely delivery & availability is somewhat important 4. Buying behavior Involvement of various functional areas in both buyer & supplier firms Purchase decisions are mainly made on rational/performance basis Technical expertise Stable interpersonal relationship between buyers & sellers Involvement of family members Purchase decisions are mostly made on physiological / social / psychological needs Less technical expertise Non-personal relationship

5. B2B Marketing vs. Consumer Marketing Areas Industrial Markets Consumer Markets 5. Channel characteristics More direct Fewer intermediaries Indirect Multiple layers of intermediaries 6. Promotional characteristics Emphasis on personal selling Emphasis on advertising 7. Price characteristics Competitive bidding & negotiated prices List prices for standard products List prices or maximum retail price (MRP)

6. Industrial Demand Derived Demand The demand for industrial products & services does not exist by itself. It is derived from the ultimate demand for consumer goods & services. Industrial customers buy goods & services for use in producing other goods & services. Joint Demand Joint demand occurs when one industrial product is useful if other product also exists. Demand for pen Demand for ink Cross-Elasticity Demand Demand is ‘elastic’ if the %age change in quantity demanded is more than the %age change in price. Cross elasticity of demand is the responsiveness of the sales of one product to a price change in another product. Price of Tea Demand for Coffee Back

7. Industrial Market & Environment Business / Industrial customers Commercial enterprise Govt. customers Institutional customers Cooperative societies Industrial distributors / dealers Original equipment manufacturers Users Public sector units Govt. undertakings Public institutions Private institutions Manufacturing units Non-manufacturing units Intermediaries / middlemen, reselling to OEMs, users, Govt. firms For Exide (battery manufacturer), Telco, is an OEM For HMT, TVS-Suzuki is the ‘user’ BHEL, ONGC, IOL Indian Railways, Defence units, State Elec. Boards Govt. hospitals, prisons Schools, colleges Maharashtra Sugar Cooperative Society Cooperative banks, housing cooperative societies

8. Industrial Market & Environment Industrial products & services Materials & parts Capital items Suppliers & services Raw materials Manufactured materials Component parts Subassemblies Light equipment or accessories Installations or heavy equipment Plant & building Supplies Services Basic products like iron ore, crude oil, fish, fruits, vegetables Acids, fuel oil, steel, chemicals Semi-finished parts like bearings, tyres , small motors, batteries Semi-finished goods like exhaust pipe in motorcycle Hand tools, dies, computer terminals Furnaces, machines, turbines Offices, plants, warehouses, parking lots, real estate property Operating & maintenance suppliers like fuels, packaging materials, lubricants, paints, elec. items Legal, auditing, advertising, courier, marketing research agency

9. Materials & Parts products, for large OEMs or users, selling is done directly from a seller organization to a buyer organization. For smaller volume OEMs & users, standard raw materials or components are sold through industrial dealers or distributors as it is cost effective. If the components are custom-made, considerable interaction takes place between technical & commercial persons from both buyer & seller organizations. Selling is direct . Industrial salesman remain in close touch with various departments like purchase, finance, R&D, marketing, production & quality of buyer organizations as they influence the buying or payment releasing decisions. Personal contacts, product leaflets/brochures help as industrial marketer in communicating product & other information. For standard products, the factors which influence buying decisions are: Marketing Implications for Different Customer & Product Types Product quality & performance Delivery dependability Price Payment terms Customer service Customer rapport

10. Marketing Strategy for Capital Items, Supplies & Services Capital Items (heavy machinery, office buildings, construction of factories etc.) Direct selling with extensive interactions, involving top executives from both sides. Negotiations take considerable time on key factors such as price, ROI, credit facilities, delivery period, installation time etc. Personal selling is the primary promotional method used. Suppliers Direct selling is used for large-volume buying firms. Distributors or dealers are used to market to diverse markets consisting of small & medium size companies. The purchase or materials department generally make buying decisions based on dependable delivery, price, & location convenience. Advt. in magazines, trade journals, local newspapers, & yellow pages are used to create awareness of the company & its products to potential users & distributers/dealers. Services (consulting, advising etc.) Buying firms contact the selling firms who have their reputation by way of word-of mouth. Continuation of service depends upon the quality, price, & timeliness of service.

11. Business buyers choose one of the three purchasing orientations Buying Orientation - Firms has narrow & short-term focus. Lowest price They follow the practice of Lowest Price where they select the lowest price supplier. Quality & availability are the “qualifying factors” for a supplier. Negotiation style – “I win-you lose”. Gain power Buyer firm gain power over suppliers by applying tactics like Commoditization – all suppliers provide similar technical services, product quality & product features. Price is the only thing to be negotiated. Multisourcing – the buyer firm asks quotations from various suppliers, & after negotiations, places order with many suppliers, who compete to get more share of buying firms purchase. Purchasing Orientations of Industrial Customers

12. Risk Buyers avoid risk from buying from new suppliers. The tactics used for avoiding risks are Follow the standard purchasing procedure of the company. Depend on suppliers who have proved their performance earlier. Procurement Orientation – Purchasing firm has a strategic (i.e. long term) focus & is proactive. The buyers seek both quality improvement & cost reduction . Practices adopted by the company to fulfill the above objectives are: Collaborative relationship with major suppliers This results in quality improvements & cost reduction. The buyer & supplier have inter-firm teams who implement JIT delivery scheduling & quality assurance to attain zero defects level. Integrative negotiation – resources can be expanded to benefit both buyer & supplier. Working closely with other functional areas Buyers are involved in describing specifications of products & services ensuring quality & timely availability. Purchasing Orientations of Industrial Customers

13. Supply chain management (SCM) Orientation – Focus is on how to improve the value chain from raw-materials to end users. Purchasing philosophy Deliver value to end users Using market research, the supply managers would understand the requirements of end-users. Outsource non-core activities The firm would outsource those systems or sub-systems that have become non competitive, are non-strategic, involve mature technology, & have qualified suppliers. Support collaborative relationships with major suppliers Partnering relationship requires cooperation, communication, trust, & commitment between buyers & suppliers. The objective is to lower total cost and/or increase value in order to achieve mutual benefit. Purchasing Orientations of Industrial Customers

14. Purchasing Orientations of Industrial Customers Raw Material Suppliers Component & Subassembly Suppliers Final Assembly Manufacturer Intermediaries (dealers) Consumers / End users SCM Orientation Procurement Orientation Buying Orientation Back

15. Purchasing in Commercial Enterprise Depends on nature of business, size of the enterprise, volume, variety, & technical complexity of the products purchased. In large/medium organizations, purchase decision involves persons from departments like production, materials, quality, finance, engineering, & also senior management executives. Various techniques, such as material planning, supplier rating system, EOQ etc. are used by the buyer organization. Take use of in-house technical expertise when required. Major tasks in purchasing process are: Identifying potential suppliers Negotiating & selecting suppliers Ensuring right quality & quantity of material at right time A long-term business relationship with the suppliers Many commercial organizations have separated purchasing (material or purchase function) from manufacturing to form a distinct functional area, on the same level as marketing, finance, R&D etc. Purchasing Practices of Industrial Customers

16. Purchasing in Govt. Units Get the name of the company & the products registered with the govt. units. Registration involves the submission of duly filled standard forms, product leaflets, & company details certified by a chartered accountant. Some govt. units depute their inspectors to inspect the company’s manufacturing facilities before approving their registration. For standard products & services, tender notices are advertised in national newspapers, based on which suppliers procure tender fees. In closed & limited tender, tender inquiry is to only few (limited) suppliers who are registered with govt. unit for certain category of non-standard products. Based on the lowest price or the lowest landed cost, the orders are released on the lowest bidder. If the tender value is large, maximum order is placed on the lowest bidder (L1) & the balance order is distributed to more than two bidders (L2, L3, L4, .. etc) if they match the lowest bid. Purchasing Practices of Industrial Customers

17. Institutional Purchasing & Purchasing in Cooperative Societies Institutional buyers are either the government or the private organizations. For govt. organizations, it normally follows the govt. purchase procedure. An industrial marketer should study the purchasing practices of each institutional buyer so as be effective in marketing the company’s goods or services. Purchasing Practices of Industrial Customers Purchasing in Reseller’s Market Reseller market (replacement market) consists of industrial dealers/distributors whose main goals are profits & sales volume. Dealers / distributors select suppliers not only on product quality but also on the policies of the supplier’s product. Supplier related policies which affect competiveness of traders are Sharing local advt. cost by the supplier Providing product leaflets or display materials Competitive prices & trade discounts Flexible payment terms with credit facility etc. Both reseller & supplier has to work harmoniously to beat the competition.

18. Environmental Analysis in Business Marketing Environment Ecological & Physical Internal External Air & water pollution, solid waste disposal, conserving natural resources Water, power, skilled manpower, low-cost labor, transportation Company location, R&D facilities, production facilities, HR, Financial resources, marketing effectiveness, reputation or image of the company Micro Macro Economic Technological Govt. & political, & legal Cultural & social Public-press, institutional investors, shareholders, banks, public interest groups Customers & competitors Suppliers Strength & weaknesses analysis Opportunity & threat analysis Affects all firms Affect a particular firm

19. Strategies for Managing Industrial Environment Effective use of marketing mix such as 4Ps are not adequate for the survival & success in such a dynamic environment. The first step is the continuous gathering & monitoring of information on the relevant external environment. This is done by: Collecting information on customers & competitors through marketing & field sales persons. Analyzing trade & govt. publications. Carrying out marketing research & economic forecasting. These activities help the company to: Understand changes in customer needs. Monitor competitor’s actions & strategies. Identify technological innovations. Consider the changes talking place in govt., political, & legal factors. Identify changes in demand of major customers & the total market. Consider the changes in any other relevant environmental factors.

20. Strategies for Managing Industrial Environment The strategies to respond proactively & creatively for managing external environment Independent Strategies: These are the independent efforts of an industrial firm by using its own resources (or strengths). Pricing strategy based on competitors pricing. Product superiority through product development. Carry env . protection measure & creates awareness through corporate image advt. If the product is not performing well, a firm might decide to demarket in that geographic region. Cooperative Strategies: An industrial firm cooperates with other firms, industries, or groups in the environment. Industry associations like Confederation of Indian Industries (CII) & Federation of Indian Chamber of Commerce & Industries (FICCI) protect the Indian industries from unfair political or legal regulations of the govt.

21. Strategies for Managing Industrial Environment Strategic Planning: An industrial firm carries out strategic planning by identifying long-term product/markets, based on forecasts of external env ., analysis of its strengths & weaknesses, & its long-term objectives & goals. Backward integration – A company seeks ownership or control of its supply system. Eg ., Set up new manufacturing plant for the product which earlier was procured from other supplier. Forward integration – A company seeks ownership or increased control on its distribution system. Eg ., open own branches with warehousing facilities, in place of agents, in order to improve customer service. Horizontal integration – A company seeks ownership or control of some of its competitors. Eg ., Reduce the competition by acquiring the management control of some competing firm. Back

22. Organizational Buying & Buying Behavior

23. Purchasing Objectives The purchase / materials management objective is defined as buying the right items in the right quantity, at the right price, for delivery at the right time & place. Delivery / availability – Purchased goods are delivered when & where it is needed. Product quality – Consistent quality as per the specifications & product use. Lowest price – Lowest price consistent with availability & quality of the product. Services – Services accompanying the purchase of goods like: Prompt & accurate information from suppliers Technical assistance Spare-parts availability Repairs & maintenance capability Training (if required) Supplier relationship – Develop a good long-term supplier/vendor relationship & to develop new sources of supply. Buying members are influenced by both purchasing objectives of the firm & personal objectives like higher status, job security, salary increments, promotions, & social considerations (friendship, mutually beneficial relationships etc.)

24. Purchasing Activities The industrial purchasing/buying activities consists of various phases/stages of buying decision making process called ‘ Buyphases ’. Phases in Buying Decision Process Recognition of a problem or need. Determination of the application or characteristics & quantity of needed product. Development of specifications or description of needed product. Early Supplier Involvement (ESI) Program: Involving purchasing persons as active members of cross-functional development teams . Search for & qualification of potential suppliers. Obtaining & analyzing supplier potential. Evaluation of proposals & selection of suppliers. Selection of an order routine. – Placements of orders, quantity, frequency, levels of inventory needed, follow-up of actual delivery to ensure delivery is as per schedule, payment. Performance feedback & post-purchase evaluation.

25. Supplier Evaluation System Attribute (Factors) Weight (Importance) Supplier performance Supplier Rating Quality 30 0.8 30 X 0.8 = 24 Delivery 25 0.4 25 X 0.4 = 10 Price 15 0.6 15 X 0.6 = 9 Service 20 0.6 20 X 0.6 = 12 Flexibility 10 0.2 10 X 0.2 = 2 Total 100 57 The supplier(s) who gets the highest total score receives the business or the order form from the buying organization.

26. Supplier Evaluation - Balanced Scorecards Technique The BSC is a new technique or framework that can be used to evaluate supplier performance in information age companies. It translates a company’s mission & strategy into a set of performance measurements. The Balanced Scorecard (BSC) Framework Financial To succeed financially, Company should focus on financial objectives that will satisfy shareholders. Learning & Growth How can company improve & change to achieve its mission? Customer Which customer value company should focus on to achieve its mission? Internal-Business-Process To satisfy shareholders & customers, what business process company must excel at? Mission & Strategy

27. Internal-Business-Process Identify Customer Needs & Market Design & Develop Product/Services Make/Buy Products/Services Market Products/Services Satisfy Customer Needs Innovation Processes Operations Processes Company executives should identify the key internal processes in which the company must excel in order to – deliver superior customer value satisfy shareholders with excellent financial performance

28. Buying Situations Three types of buying situations also called ‘ buyclasses ’. New purchase (or New Task) – In this situation the company is buying the item for the first time. Risk is more Decision takes longer time More people are involved in decision making Change in supplier (or Modified Rebuy ) – This situation occurs when the company is not satisfied with the performance of the existing supplier, or there is a need for cost reduction or quality improvement. Repeat Purchase (or Straight Rebuy ) – This situation occurs when the buying organization requires certain products or services continuously & when such products/services has been purchased in the past.

29. Buying Centre or Decision making Unit (DMU) The buying center is a useful tool which answers the question – Who are involved in buying decision in an industrial organization? Buying Center Roles Initiators – This category includes individuals who first recognize a problem or a need, which could be resolved by purchase of a product or service. Often users play this role. Buyers – Their major responsibility includes Obtaining quotations Supplier evaluation & selection Negotiation Processing purchase orders Expediting deliveries Implementing purchasing policies of the organization They are usually purchase officers. Users – Individuals who use the product or service that is to be purchased. They may be floor workers, R&D engineers etc.

30. Buying Centre or Decision making Unit (DMU) contd.. Influencers – People who can influence the buying decision like technical people (QC engineers, design engineers etc.) Deciders – People (Senior executives / purchase executives) who make the actual buying decisions. Gatekeepers – People who control/filter the flow of information regarding products/services to the members of buying center. Key members of Buying Centre Top Management Persons (MD, President, VP, GM etc.) Generally involved in - Purchase policy decisions like diversification into a new product/project Approval of purchase or materials department annual budgets & objectives Deciding the guidelines for purchase decisions Technical Persons (Design Engr., Prod. Mgr., Maintenance Mgr., QC Mgr., R&D Mgr., Industrial Engr. etc.) Generally involved in product specification, technical evaluation, negotiation with suppliers, performance feedback of product supplied etc.

31. Buying Centre or Decision making Unit (DMU) contd.. Key members of Buying Centre Buyer/Purchasers or Purchase Dept. (Sr. Exe., Managers, Purchase Officers or assistants) Generally involved in - Coordinate with Top Management, Technical persons, Finance persons within the org. as well as with suppliers. Maintain good relationship with Suppliers & Decision making members. Accounts/Finance Persons (or Dept.) The contribution of finance/accounts are seen while finalizing commercial terms such as mode of payment, financial approval of capital purchases, issuing payments to suppliers etc. Marketing Function Ensure the product is marketable (packaging).

32. Models of Organizational Buying Behavior - The Webster and Wing Model Environmental Variables Physical Technological Economic Political & legal Labor unions Cultural Customer demands Competitive practices & pressures Supplier information Organizational Variables Objectives/goals Organization structure Purchasing policies & procedures Evaluating & reward systems Degree of decentralization in purchasing Buying Centre Variables Authority Size Key influencers Interpersonal relationship Communication Individual Variables Personal Goals Education Experience Expertise Values Job Position Lifestyle Income Organizational Buying Decisions Choice of suppliers Delay decision & search for more information Do not buy

33. Models of Organizational Buying Behavior - The Sheth Model Component (1) Component (2) Component (3) Situational Factors Differences among individual buyers caused by factors: Background of individuals Their information sources Active search Perceptual distortion Satisfaction with past purchases Variables that determine if the buying decision is autonomous or joint: (A) Product specific factors - Time pressure Perceived risk Type of purchase (B) Company specific factors – Company size Company orientation Degree of centralization Methods used for conflict resolution in joint-decision making process Problem solving Persuasion/influence Politicking Supplier or Brand choice Situational Factors Economic condition Labor disputes Mergers & acquisition

34. Buyer-Seller Relationship

35. Buyer-Seller Relationship Development of mutually satisfying, profitable, long-term relationships with customers is a major business asset of an industrial marketer.

36. Buyer-Seller Interaction – A Conceptual Framework Compatible Style Incompatible Style Compatible Content Incompatible Content

37. Relationship Marketing Relationship marketing is a task of creating strong customer bond or loyalty. Transaction marketing is transaction oriented buyer-seller interaction, which focuses on closing a sale with a customer. This is achieved by single sales person. For large customer, companies are moving towards team selling & relationship marketing.

38. Methods used to influence Industrial Customers

39. Methods used to influence Industrial Customers contd..

40. Customer Service

41. Types of Relationship

42. Marketing Strategies Concentrated Marketing - is a market segmentation and market coverage strategy whereby a product is developed and marketed for a very well-defined, specific segment of the consumer population. The marketing plan is highly specialized one catering to the needs of that specific consumer segment. Concentrated marketing is particularly effective for small companies with limited resources because it enables the company to achieve a strong market position in the specific market segment it serves without mass production, mass distribution, or mass advertising. Differentiated Marketing - also called multisegment marketing. It is a market coverage strategy whereby a company attempts to appeal to two or more clearly defined market segments with a specific product and unique marketing strategy tailored to each separate segment. Undifferentiated Marketing - market coverage strategy whereby a company ignores differences within a market and attempts to appeal to the whole market with a single basic product line and marketing strategy. Undifferentiated marketing relies on mass distribution and mass advertising, aiming to give the product a superior image in the minds of consumers. It is cost effective because there is only one product line to be produced, inventoried, distributed, and advertised. Also the absence of segmented market research lowers the costs of consumer research and product management.

43. Marketing Strategies 4 criteria - mostly used in Business Marketing: Technological Contributions Dependence Purchasing Orientations Sales Potential (or Business Potential) Information for each customer is obtained by the sales person Customer are categorized into A, B, & C based on high, medium, & low business potential Type A – Collaborative relationship Type B – Value-added Type C – Transaction relationship

44. B2B Marketing through E-commerce

45. What is E-commerce? E-commerce is defined as a modern business methodology that addresses the needs of organizations & consumers to cut costs, improve the quality of goods & services, & increase the speed of service. It is also defined as the process of using digital technology for transmitting information between organizations. Important parts of E-commerce Internet World Wide Web (WWW) Intranet Extranet

46. Marketing Strategy for Electronic Market Place Major Components of Marketing Strategy Segmenting & Targeting Product Differentiation & Positioning Identifying the target customers’ wants in terms of major benefits Selecting one or more benefits or niche for differentiation based on company’s strengths or distinctive competencies Communicating the company’s positioning to the target market Marketing-mix Strategies, i.e., Product, Price, Promotion & Distribution Strategies Web-design Domain name Distribution channel

47. Logistics

48. Distribution Channels Manufacturer Mfg’s Rep / Agents Mfg’s Sales force / Branches Value-added Resellers Distributor / Dealer Direct Marketing Brokers Commission Merchants Distributor / Dealer Industrial Customers Telemarketing Direct Mail Online Marketing

49. Channel Design Framework Channel Objective Channel Alternatives Evaluation of Alternative Selection of Channel Channel tasks Channel Constraints External environment Competition Company Product Characteristics Customer The type of intermediaries VARs Industrial distributors / dealers Manufacturer’s agents Brokers Commission merchants No. of intermediaries / channels Selective distribution Intensive distribution Exclusive distribution Terms & responsibility of channel members Economic factors Control factors Adaptive factors

50. Logistics Management – Business Logistics System Raw materials Components Supplies Material Storage Manufacturing Finished goods storage Physical supply Industrial manufacturer Physical distribution Industrial customers Industrial distributors / dealers Tasks Transportation Warehousing Inventory control Packaging Material handling Order processing Communication Factory & warehouse locations Customer service Total Distribution Cost = Freight + Warehouse Cost + Inventory Cost + Cost of Lost Sales due to Delayed Delivery

51. Marketing Research & Intelligence

52. Marketing Research & Marketing Intelligence Marketing research is defined as the objective & systematic process of obtaining, analyzing, & reporting of data (or information) for decision making in marketing. It undertakes periodic projects to collect & analyze data with specific objectives. Marketing Intelligence is an ongoing activity to provide continuous information for decision making. Areas of survey methods Industrial Research Consumers Research Sample size Small sample due to small universe (or population) & concentration of buyers Large sample due to large dispersed population Respondent cooperation & accessibility More difficult due to time constraints; accessibility is limited to working hours Less difficult to obtain data; accessibility is easier Defining respondent More difficult as buying decisions are made by several members of the buying committee Simple, as individuals or household users are the buyers Difference between survey method

53. Scope of Industrial Marketing Research Development of Market potential Market Share Analysis Sales Analysis Forecasting Competitor Analysis Benchmarking New Product Acceptance & Potential Business Trend Studies Sales Quota Determination

54. Information type Sources of data Research methods Sampling plan Method of contacts Data collection method Marketing Research Process Primary data Secondary data Observational | Exploratory | Survey | Experimental

55. Industrial marketing Intelligence Secondary data sources Marketing Intelligence System Decision Support System Marketing Strategy Development Market response Internal Information System Marketing research studies

56. Components of DSS Statistics Marketing Manager Database Decision models Display Environment Question Answer Action

57. Strategic Planning, Implementing & Controlling

58. Market-Oriented Organizations Market-oriented organizations stay close to the customers & ahead of the competitors. They understand the basic principle that the purpose of a business is to attract & satisfy customers at a profit. An effective strategic planning includes market-oriented strategies in which marketing function has an important role. Factors Affecting the Market Orientation

59. Marketing in Strategic Planning Strategy hierarchy (Type of management) Organization structure

60. Role of Marketing in an Organization Organizational Level Role of Marketing Formal Name Corporate Provide information on competition & customer, & advocate customer orientation for developing long-term corporate strategy Corporate marketing Business Unit / SBU Provide competition & customer analysis for developing long-term business strategy, including competitive advantage Develop segmenting, targeting, & positioning strategies Take product-line decisions Strategic marketing Functional Evolve & implement marketing-mix strategy in short-term to achieve business unit objective Coordinate marketing activities Allocate resources Marketing management

61. Developing Corporate Strategies Current products New products Current markets New markets Strategic planning gap is filled by: Intensive growth Integrative growth Diversification growth Concentric diversification: consists of searching for new products that have technological / marketing synergies with firm’s existing products. Horizontal diversification: consists of adding new products technologically unrelated to the existing products. Conglomerate diversification: consists of seeking new product-markets that are unrelated to existing products.

62. Strategic Planning Process at BU Level Define the business unit’s mission Scanning the ext. env . (Opportunity & threats) Analysis of the int. env . (Strength & weaknesses) Developing objectives & goals Formulating strategies for achieving the goals Preparing programme or action-plan from the strategies Implementing the strategies & action-plan Monitoring results & taking corrective actions (i.e., control)

63. Business Unit’s Mission The business mission statement should have the following components: What business the company is in, & What business it intends to be in? What methods would be uniquely followed (which are different from competitors) in pursuing business activities? What is the social standing of the organization as a business entity? What business the company is in? [Thermometer manufacturer] Customer groups/segments: Who are being satisfied? Which customer groups an SBU intends to satisfy? [Household/Hotels/Health care/ Factories] Customer needs or functions: What needs of customers are being satisfied? [Body temperature/Cooking temperature/Atmospheric temperature/ Process temperature] Technologies used: How customer needs are satisfied? [Mercury-base/Alcohol-base/Digital]

64. SBU’s Objective & Goals Corporate mission SBU Mission Corporate objectives & goals SBU objectives & goals SBU’s business strategy Marketing strategy Company history Current preferences Market environment Company’s resources Company’s core competence

65. Formulating Strategies at BU Level Uniqueness perceived by the customer Low-cost position Strategic Advantage Strategic Target Industry wide Particular segment only Porter’s Generic Strategies Framework

66. Developing Industrial Marketing Plan Section Contents Situational analysis Market situation Includes data on market size, growth, projections, sales, market share , & profits for past 3/5 years. It also indicate target customer needs, buying behavior, buying stage, & buying situations. Competitive situation Consists of identifying, ranking, market share, objectives & strategies, strength & weaknesses, & reaction patterns of major competitors. Product situation Includes data on sales, unit price, profits for each major product item in the product line for past 3/5 years. Macro- env . situation Consists of identifying PEST factors & then forecasting the future trends & the impact on the product. SWOT & issues analysis SWOT analysis Includes identifying major strengths, weaknesses, opportunities, & threats faced by the product. Issues analysis Consists of determining major issues faced by the firm, based on situational & SWOT analysis. Objectives & goals Determine sales, market share, & profit, considering the env . & issues analysis done earlier.

67. Developing Industrial Marketing Plan Section Contents Marketing strategy Selection of target market segments. Positioning strategy relative to competitors. Marketing-mix strategy. Customer service & marketing research strategy. Action plan Each marketing element is broken down to specific actions to answer: Who will take the specific action, by when, & at what cost? Marketing budget Building the revenue & expenditure budget. Revenue budget includes forecasted sales in units, average unit price, & sales revenue. Expenditure budget includes estimated marketing expenses on personal selling, promotion, distribution, etc. Implementation & control Building marketing org. to implement the marketing plan. Control includes periodic review of actual performance against goals & taking corrective actions. Contingency plans Some firms prepare contingency plans in case uncertain situation arise.

68. Controlling Marketing Performance

69. Types Marketing Controls

70. Product Strategy & New Product Development

71. What is an Industrial Product? The industrial product is defined not only as a physical entity, but also as a complex set of economic, technical, legal, & personal relationship between the buyer & the seller. From customer’s point of view, a product is a combination of basic, enhanced, & augmented properties. Basic properties are included in the generic product, with fundamental benefits sought by the customer. Generic products are made differentiable by adding tangible enhanced properties like product features, styling, & quality. Augmented properties include intangible benefits such as technical assistance, availability of spare parts, maintenance & repair services, warranties, training, timely delivery, & attractive commercial payment terms.

72. Changes in Product Strategy

73. Industrial Product Life Cycle – General Model The behavior of PLC depends on three factors on which management has little or no control. Industrial products typically follow the pattern of sales & profits. Different marketing strategies are needed at different stages of PLC. The PLC concept highlights the importance of long-term planning for a new product. Time Introduction Growth Maturity Decline -1 +1 Sales & Profits (Rupees) Industry profits Industry sales

74. Industrial Product Life Cycle – High-tech Products Time NPD I&G Decline Sales M NPD = New Product Development I&G = Introduction & Growth M = Maturity Period

75. Locating Industrial Products in their Life-Cycle

76. Developing Product Strategies for Existing Products

77. Product Evaluation Matrix Decline Stable Growth Below Target Target Above Target Below Target Target Above Target Below Target Target Above Target Growth Dominant P Average Marginal Stable Dominant S1 Average S Marginal Decline Dominant Average Marginal Industry Sales Mkt Share Company Sales Profitability Market Share less than 10% = Marginal Market Share between 10% to 30% = Average Market Share greater than 30% = Dominant Product ‘P’ (Last 3 years) Market Share = 40% Company Share = 30% Industry Sales = 25% Profitability = as / target Product ‘S’ (Last 3 years) Market Share = 12% Company Share = 15% Industry Sales = 16% Profitability = below target

78. Perceptual Mapping Technique B* C* High Quality Low Quality Weak Service Strong Service A1* A* Old Position New Position This technique is used to study the strengths & weaknesses of a firm’s product in comparison to that of its competitors. Deciding Product Strategies Maintain the product & its marketing strategy. Modify the product & change the marketing strategy. Eliminate the product or product line. Add new products or product lines.

79. Product Elimination Dropping the product or product line is the most controversial decision as many stakeholders are threatened by this decision. Factors to be considered: Will the customer relationships be affected? Will the profitability be affected due to change in overhead allocation? What will be the reaction of the employees? Will the sales of other products get affected? Is there a new product to replace the eliminated product? Will the company’s image be affected? What will be the possible competitive reactions?

80. New Product Development Classification of New Products: Products that are innovative & new to the world. Products that are new to the company, but not new to the world. Revisions or improvements to the existing products in the existing markets. Additions to the existing product lines with additional markets. Repositioning existing products to new market segments. Products with substantial cost reductions without reduction in performance.

81. New-Product Development Process Is the new product in line with the long-term objectives & strategies? Do we have adequate resources? Is it useful to the customers? What is the future growth, market size, & competition? A detailed version of the product idea that is stated in a meaningful customers’ terms. The purpose is to develop an estimated projection of the sales, costs, & profitability of the new product for 5-7 years. Design Process Engr. Tooling Mfg Final product Testing Alfa & Beta testing Introduction at trade shows Testing at distributors/dealers showroom Test marketing

82. High-Tech Marketing High-Tech includes a wide range of industries such as telecommunications, computers, software, biotech, & consumer electronics. Two major characteristics that distinguish hi-tech marketing are: High Technological Uncertainties High Market Uncertainties Other characteristics that distinguish hi-tech marketing are: High Competitive Volatility Short life or High-tech products High Development Cost

83. High Technological Uncertainties Sources of High Technological Uncertainties

84. High Market Uncertainties Sources of High Market Uncertainties

85. Classification of Marketing Situations Low High Low High Market Uncertainty Technological Uncertainty Low-tech marketing includes known technology applications to meet clear & well known market needs. E.g., Pump sets Hi-fashion marketing consists of known & slow changing technology applications to meet difficult to predict consumer needs. E.g., Motion pictures, fashion clothes. Hi-tech marketing consists of difficult to predict both technology applications & market. E.g., Biotechnology products. Better mousetrap marketing includes a new technology to meet well-established market. E.g., Water purifying system.

86. Technology Adoption Life Cycle Innovators (3%) Early adaptors (14%) Early majority (34%) Late majority (34%) Laggards (16%) Time of Adoption of Innovation

87. Unique nature of High-tech Marketing Strategy

88. Business Communication

89. Steps to Develop Effective Communication

90. Role of Advertising in Industrial Marketing Creating awareness Reaching members of buying centre Increasing sales efficiency & effectiveness Efficient reminding Sales lead generation Supporting distribution channel members

91. Promotional Tools & Media Promotion Tools Advertising Sales Promotion PR & Publicity Direct marketing Personal Selling Promotion Media, & Promotion Support Print media Trade shows Charitable donations Direct mail Sales calls General business publications Exhibitions Adopting villages Telemarketing Sales presentation Trade journals Catalogues Community relations On-line marketing channels Team selling Industrial directories Sales contests News item in press Relationship marketing Promotional novelties (gifts) Seminars Promotional letters Entertainment

92. Pricing Strategies & Policies

93. Pricing & Factors Influencing Pricing Decision Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing objectives Survival Maximum short-term profits Maximum short-term sales Maximum sales growth (Market penetration) Maximum marketing skimming Product-quality leadership Demand analysis Cost analysis Break-even analysis Competitive analysis Government regulations Price discrimination Predatory pricing

94. Cost Behavior at Different Production Levels – Economies of Scale 100 200 300 200 100 300 240 Quantity Produced / Year (in thousand) Cost / Unit (in rupees)

95. The Pricing Strategies Competitive bidding in competitive markets Probabilistic bidding Pricing new products Skimming strategy Penetration strategy Pricing across the product life-cycle Growth stage pricing Maturity stage pricing Decline stage pricing

96. Thank You