BBA 3006

INDUSTRIAL MARKETING

KHOO YU TING

921227015896

200080

MR. LOH YONG CHIANG

DECEMBER 2013
 TOPIC PAGES

1 Contents 2

2 1.0 Definition of industrial marketing 3-4

3 2.0 Difference and characteristics of industrial and 5-19

consumer marketing

2.1 Market

2.2 Product

2.3 Service

2.4 Buyer behaviours

2.5 Decision making

2.6 Channel

2.7 Promotion

2.8 Price
Conclusion
4 20

References
5 21

Coursework
6 22-24

TABLE OF CONTENT

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1.0 Definition of industrial marketing

The word industrial marketing is also treated as business-to- business

marketing, or Business Marketing, or Organizational Marketing. Industrialmarketing/busin

ess marketing is to market the products and services to business

organizations: manufacturing companies, government undertakings, private sector

organisations, educational institutions, hospitals, distributors, and dealers. The

business organizations, buy products and services to satisfy many objectives like

production of goods and services, making profits, reducing costs, and,

soon.In contrary, marketing of products and services to individuals, families, and marketing

industrial households is made in consumer marketing. The consumers buy products and

services for their own consumption.

Industrial marketing consist of all activities involved in the marketing of products services

to organization (commercial enterprise, profit & nonprofit institutions, government agencies

& resellers) that use products & services in the production of consumer or industrial goods &

services, & to facilitate the operation of their enterprise.

In simple IM is one where manufacture is selling its products to another business either in

the form of raw materials, component parts or selling its service for consumption, use, resale

or for value addition.

There is a great deal of misconception about marketing for industrial and manufacturing

firms, especially in todays internet age. It used to be that marketing for businesses and

consumers were two very different things. But now we find that people, whether searching

for consumer goods or industrial goods and services for their business, all rely on the same

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vehicle for information. Search engines. So these days, marketing for an industrial firm is

very similar to marketing a company that targets consumers. Of course the information is

presented differently, but the same marketing techniques apply. Unfortunately, most

industrial firms are way behind in this transformation and are still relaying on old outdated

means of advertising their products.

Consumer group composed of companies or organizations that purchase goods and services

for use in the production of other goods and services that are sold, rented, or supplied to

others. For example, the clothing manufacturing industry purchases fabric that is used in the

production of dresses and other apparel. Fabric manufacturers are also members of the

industrial market because they purchase other raw materials for use in the production of the

fabric. The industrial market is the largest and most diverse organizational market ,

consisting of more than 13 million organizations that buy more than $3 trillion worth of

products each year. Some of the major industries represented in the industrial market are

construction, agriculture, mining, manufacturing, communication, public utilities,

transportation, and finance.

"Customer market" is a term for the portion of available customers who currently patronize a

business, usually for a product or service. Most frequently used in business marketing, it can

sometimes be called the market or customer base for a business. This group of customers can

grow and shrink due to changes in the business environment. Maintaining a stable or

growing market ultimately depends on keeping the existing paying customers of the business

happy.

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 2.0 Difference and characteristics of industrial and consumer marketing

2.1 Difference and Characteristic of the consumers and the industrial markets

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

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

(1) The market populations: the market populations or buyers in the consumers market are

relatively larger than that of the industrial market. This is because the industrial market are

characterized with fewer organizations that either into production or selling of goods and or

rendering services, while the consumer market are the identified individuals of a larger

population that buys goods and services for personal consumption.

(2)size of buyers: in the size of purchases, the industrial market is larger than the consumers

market, the reasons are that; the industrial players buys in a very large quantities since they

are into reselling or productions, but the consumers buys in little assorted quantities since

their major aims is for personal or family consumptions.

(3) purchasing process: in terms of the processes that the two market undertakes in making a

final purchase, the industrial market seems to be more strategic, systematic and well guided

to compare to the consumer market, the reason is that players in the industrial markets are

business minded, even in the nonprofit organizations, they equally guild their process for

auditing reason. But the ultimate consumers are less strategic to compare with the industrial

players.

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(4) Level of relationships: there is always a closer relation that exists between an industrial

marketer and his industrial buyers since the industrial buyers are fewer in size compare to

the consumers market which are very large.

2.2 Difference and Characteristic of the consumers and the industrial product

Industrial Market

* Technical complexity and customized.

* Service, delivery and availability is very important

Customer Markets

* Standardized.

* Service, delivery and availability is somewhat important.

In industrial marketing, the products or services are generally technically complex and not

purchased for personal use. They are purchased as components parts of the products and

services to be produced or serve the operations of the organisations. Because of the

importance given to the technical aspects of products, the purchases are made based on the

specifications evolved by the buyers. The real risk in falling in love with the technical

aspects of a product in industrial marketing is to ignore the flexibility in responding to

customer's needs in a competitive market. Some companies, as a result, commit the serious

mistake of trying to change the customer to fit the product. For example, the quality control

manager of a cold rolled (C.R.) steel strip manufacturing company informed an important

customer (who used C.R. steel strip for the manufacture of luggage bags) that the customer

was not justified in rejecting his company product, as it was as per the relevant Indian

standard specifications and that the customers product specifications were more rigorous

than the Indian standard specifications. However, the customer refused to accept the product,

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as it was failing at the shop floor operations. The customer, therefore, not only returned the

entire rejections but also cancelled the balance orders. Subsequently, other competitors

supplied the product as per the needs and specifications of the customer, who placed orders

with them. As compared to consumer marketing, industrial customers place a greater

importance on service, that is, timeliness, certainly delivery or availability of product,

because any delay in supply will have a significant impact on the production or operations.

1. A correct understanding of marketing models is wanting. At present, 90% of the current

manufacturers of industrial products adopt the sales mode of consumer goods. However,

since the deal between corporate buyers and suppliers is a business act, there are significant

differences between the industrial market and the consumer goods market:

2. A correct understanding of the concept of "relationship marketing" is lacking. A

misconception exists in Chinese industrial enterprises that industrial marketing equals

"relationship marketing" and that the relationship among people determines the success of

marketing, neglecting the fact that the most fundamental basis of relationship marketing is

"meeting the needs of customers with products and services". It goes without saying that if

products and services are not of high quality, any close relationship will be of no use. In

industrial marketing gray zones do exist, but they will never become a decisive factor.

3. A correct understanding of the concept of brand is needed. With the increasingly fierce

market competition, most businesses adapt themselves to market changes through

continuous product innovation, price adjustment and other ways, yet they hardly do things in

brand construction. Compared with consumer goods companies, Chinese enterprises of

industrial products have no knowledge of brand construction to a large extent. The first

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manifestation is that most enterprises of industrial products have no brand awareness; too

much competition among enterprises is focused on the product itself; and products of high

quality and with favourable prices are regarded as the key of success in the market. Even if

some enterprises have brand awareness, they may go some wrong ways in brand

construction.

2.3 Difference and Characteristic of the consumers and the industrial service

Industrial Market

*Service, timely delivery and availability very important

Customer Markets

* Service, delivery, and availability some what important

The Consumer, Industrial Products and Services sector covers a wide range of businesses.

This is a sector where a lot of companies in Indonesia operates and is very vital and

contributes significantly to the Indonesian economy. Our major clients include those major

players in the automotive, plantations, pharmaceuticals, retail and consumers products, port

operation and logistic sectors.

Perish ability

Services are deeds, performance or act whose consumption take place simultaneously; they

tend to perish me the absence of consumption. Hence, services cannot be stored. The

services go waste if they are not consumed simultaneously i.e. value of service exists at the

point when it is required.

The perishable character of services adds to the service marketer problems. The inability of

service sector to regulate supply with the changes in demand; poses many quality

management problems. Hence, service quality level deteriorates during peak hours in

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restaurants, banks, transportation etc. This is a challenge for a service marketer. Therefore, a

marketer should effectively utilize the capacity without deteriorating the quality to meet the

demand.

Variability

Services are highly variable, as they depend on the service provider, and where and when

they are provided. Service marketers face a problem in standardizing their service, as it

varies with experienced hand, customer, time and firm. Service buyers are aware of this

variability. So, the service firms should make an effort to deliver high and consistent quality

in their service; and this is attained by selecting good and qualified personnel for rendering

the service.

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2.4 Difference and Characteristic of the consumers and the industrial Buyer behavior

Industrial Market

*Evaluated for functionality rational/task motive to buying.

*Purchasers are experts & focus is more on performance/service.

*Higher interaction with the supplier.

* Formal processes

Consumer Market

*Social or psychological factors are important.

*Family involvement & focus more on product per se.

*Nor personal relationship with the supplier.

* Less of formal processes.

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Five characteristics mark the organizational buying process:

1. In organizations, many individuals are involved in making buying decisions,

2. The organizational buyer is motivated by both regional and quantitative criteria dominant

in organizational decisions; the decision makers are people subject to many of the same

emotional criteria used in personal purchases

3. Organizational buying decisions frequently involve a range of complex technical

dimensions. A purchasing agent for Volvo Automobiles, for example, must consider a

number of technical factors before ordering a radio to go into the new model.

The electronic system, the acoustics of the interior, and the shape of the dashboard

are a few of these considerations.

4. The organizational decision process frequently spans a considerable time creating a

significant lag between the marketer's initial contact with the customer and the purchasing

decision. Since many new factors can enter the picture during this lag time, the marketer's

ability to monitor and adjust to these changes is critical

5. Organizations cannot be grouped into precise categories. Each organization has

a characteristic way of functioning and a personality

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2.5 Difference and Characteristic of the consumers and the industrial Decision making

Industrial Market

* Distinct observable stages

* Multiple influencers anddecision makers.

Consumer Market

* Unobservable mental stages, not very clear pattern

1. Perfectionist/high quality-conscious consumer : decision style of consumers who

systematically search for the best quality products possible. Consumers have high standards

and expectations for consumer goods, and are concerned with the function and quality of

products;

2. Brand consciousness: decision style of consumers concerned with getting the most

expensive, well-known brands. They feel that price is an indicator of quality.

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3. Novelty and fashion conscious: decision style of consumers who like new and innovative

products and who gain excitement from seeking out new things. They are conscious of new

fashions and fads.

4. Recreational and shopping conscious : decision style of consumers who take pleasure in

shopping and who shop just for the fun of it.

5. Price conscious : decision style of consumers who are concerned with getting lower

prices. They are likely to be comparison shoppers.

6. Impulsiveness/careless : decision style of consumers who never plan their shopping and

tend to buy spontaneously. They are not concerned about how much money they spend.

7. Confused by over choice : decision style of consumers who feel they have too many

brands and stores to choose from and who likely experience information overload in the

market. Consumers find the marketplace confusing, view brands as alike, and seek help from

friends

8. Habitual/brand loyal: decision style of consumers who are apt to have favorite brands and

stores. They shop at the same stores and tend to buy the same brands each time.

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2.6 Difference and Characteristic of the consumers and the industrial Channel

Industrial Markets

* Shorter, more direct &fewer linkages between seller and buyers

Consumer Markets

* Indirect and multiple linkages

Inventory or stock control is very much important factor in the business organisations

therefore the distribution channels are needed more direct from the manufacturer to the

customer in industrial marketing. There are a few channel alternatives, which are feasible in

the industrial market than the consumer market Often, the manufacturers use their own

sales/marketing personnels to sell the products directly to major customers. But, in case of

selling to small-scale customers or geographically scattered markets, many manufacturers

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use either distributors/dealers, or agents/representatives, which also helps in minimisingthe

cost of marketing. In case of consumer marketing, the channel of distribution is longer with

multiple levels of intermediaries/middlemen, since the household consumers are

geographically dispersed all over the country.

Marketing channels refers to the ways in which products move from the manufacturer to the

distributor to the end user. Also called distribution channels, the number and efficiency of a

company's marketing channel can have a strong impact on the company's success. If a

company does not have enough channels through which to market their goods, or if the

channels are inefficient and expensive, it can be difficult for a company to locate customers

for its products and to make a profit on sales of its products.

Some companies, often referred to as direct marketing companies, sell the product directly

from the manufacturer to the end user, or consumer. In such cases, the companies do not

create or establish marketing channels. Instead, the consumer orders directly and the item is

shipped to him, reducing costs for marketing and distribution. It can be difficult, however,

for a manufacturer to locate customers using this form of marketing, since it may be less

convenient if there is no storefront for a customer to go to or no local retailer a customer can

interface with; the Internet, however has reduced this problem somewhat and given rise to

more direct selling.

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2.7 Difference and Characteristic of the consumers and the industrial Promotion

Industrial Markets

* Emphasis on personal selling or one to one dealing

Consumer Markets

* Emphasis on mass market promotion.

In consumer marketing, the emphasis is given on advertising whereas, in industrial (or

business) marketing, the importance is given to the personal selling through the companys

sales force. As a result, a much larger expenditure budget is provided for advertising in

consumer marketing in comparison to industrial marketing. Advertising is used to lay a

foundation for the sales call rather than serve as the primary communication tool. Sales

people act more as consultants and technical problem solvers, utilizing in-depth product

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knowledge and technical understanding of the buyers needs, whereas industrial advertising

normally stresses more factual and technical data. Some industrial advertisers use television

to reach potential consumers, the primary means of reaching the market is through business

magazines, traditional trade journals, and direct mail. Sales promotion activities tend to

center on trade shows, trade fairs, catalogs and conducting technical seminars.

2.8 Difference and Characteristic of the consumers and the industrial Price

Industrial Markets

* Competitive bidding &multistage negotiation.* Sharing of cost data & budgeting of accept

able profits in many cases

Consumer Markets

* Normally MRP & MOP* Concept of list price & its implementation

The products are sold through the intermediaries/middlemen to the consumers based on the

Price List of the manufacturer or the maximum retail price(MRP) for the packaged

products in consumer marketing. Sometimes, the retailer reduces the price by passing on to

the consumer a part of his discount due to different degrees of intensity of the competition.

In industrial marketing, price is less critical factors for purchase decisions. Competitive

bidding and price negotiations are very common in industrial marketing and financing

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arrangements are often considered part of pricing package. When there are no price

negotiations in certain Government tenders, the competitive bidding (quoting a competitive

price against a tender enquiry) becomes very important, as only the lowest bidders are

considered for placement of orders. Almost private sector and some Government

organisations, price negotiations are held to decide the prices and the volume of orders to be

placed on various supplier firms. The payment and other commercial terms are also

negotiated at the time of price negotiation. Dealer discounts, and volume discounts on the

price list of standard industrial products are widely used in industrial marketing. The above

discussion clarifies that there are many basic differences exist between consumer and

industrial marketing. But, these differences in terms characteristics do not make a complete

analysis. Therefore, it is necessary to understand the concept of industrial demand in the

market to analyses completely.

Price Elasticity

Industry pricing strategy usually takes price elasticity of demand into consideration, which is

the sensitivity consumers have to price changes. The more elastic the price, the more

sensitive consumers are to price changes. Therefore, companies that exceed a certain price

range for products will likely suffer a decrease in orders. Sometimes, consumers are not as

sensitive to price changes or the initial high price of a product. For example, a small cell

phone manufacturer may still receive many orders for a phone with a new technology,

despite the high prices.

Penetration Pricing Strategy

Some small companies in a specific industry will use a penetration pricing strategy. The

usual objective of penetration pricing is to increase market share, which is the percent of

sales a company has in a market or industry. The rationale behind penetration pricing is that

companies can both acquire and gain repeat business or brand loyalty with these customers.

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Small companies may also use a penetration pricing strategy if there is little difference

between their products and those of key industry competitors.

Price Skimming

Industry pricing strategy can also include price skimming, where companies price their

products relatively high. Companies will often use price skimming to rapidly recover

production costs, according to the article "Product Life Cycle" at QuickMBA.com. For

example, a small company may use a price skimming strategy with a new, unique product,

especially if it is the first company to enter a new market.

Discount Pricing

Some small companies within an industry will use discount pricing as either a permanent or

temporary pricing strategy. A small company will use a permanent discount strategy when it

wants to be the value leader in the industry. The value leader is the business where customers

know they can go for the lowest prices. Temporary discount strategies in an industry can

include price reductions, coupons, rebates and even "buy one, get one free" sales.

Geographic Pricing

Some small companies within an industry will use a geographic pricing strategy, charging

various prices in different regions. The cost of living is greater in certain areas, including

advertising and the cost of doing business. Therefore, charging more for products may help

generate more sales and profits. Contrarily, an equally effective strategy may include setting

lower prices where the cost of living is substantially lower.

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3.0 Conclusion

In all, the concept of industrial marketing may be referred as marketing of goods and

services to business organisations: manufacturing companies, service organisations,

institutions and middlemen in private and public sector organisations, and Government

undertakings. The differences between industrial and consumer marketing exist in certain

characteristics such as market, product, buyer behavior, channel, promotional, and price. The

demand for industrial products is derived from the ultimate demand for consumer goods and

services. It is, therefore, called as derived demand. Joint demand occurs when one industrial

product is required, if other product also exists. Cross-elasticity of demand is the reaction of

the sales of one product to a price change in another product.

Selling in the industrial market is complicated by a broad spectrum of customers.

Commercial enterprises, governmental organizations, and institutions give buying

responsibility to individuals who are quite knowledgeable in their

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Marketing particular markets. These individuals are often more realistic in assessing the

competitive value of a vendors product than the vendor. Thus, they normally identify,

evaluate, and select suppliers, domestic or foreign, who provide the greatest value. To

formulate a successful industrial marketing strategy, it is essential to know the administration

of buying function in a diversity of markets and situations; and also to know the bases viz.

nature of the business, the size of the firm, and the volume, variety, and technical complexity

of the products purchased by the industrial buyers.

4.0 References

1. http://mymarketingnotebook.blogspot.com
2. Text book
3. www.google.com
4. Hawaldar, K. Krishna (2002), Industrial Marketing(1sted.), TATAMcGraw-Hill
Publishing Company Limited, New Delhi.

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4.0 Coursework

THE DECISION-MAKING UNIT (PMU)

1. The decision-making unit (DMU)

The supplier will need to know who is involved in making the purchase decision, known as

the decision making unit (DMU) or the buying centre (TBC), what motivates them and how

their products and services are perceived. The DMU or TBC is a way of describing all the

people that might or might not be involved in some way in the ultimate decision to buy the

product. This could be one person, e.g. a small business owner, or it could be many, e.g.

buying for a large organisation. It could be argued that almost all buying decisions, whether

large or small, will involve more than one person. Even the autonomous entrepreneur will

turn to others, perhaps a solicitor or secretary, for advice when looking to make a purchase

of some kind. In organisational buying, several roles can be identified. The different roles

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can be performed through one person or they can be separate roles performed by many

people:

(a)Suggester. The suggested or initiator is the person (or persons) who begins the

purchasing process by recognizing that there is a need for a product or service and

makes a suggestion or request. This might be for an existing product or service, a

modified version, or something new.

(b)Purchaser. The purchaser or buyer is the person who makes the actual purchase. As

with many other factors, the role and power of the buyer will vary quite considerably

from situation to situation. In some companies the buyer will have little power to

initiate new orders and be told what to order and what not to order, and from whom. In

other companies buyers have full autonomy to buy at their own discretion. The

purchaser may or may not reside in an actual purchasing department and could be

played by many of the roles within the DMU. Purchasing managers have had to become

much more professional in the way they conduct themselves because of the intensity of

the competitive environment. Most will now have access to copious amounts of

information to help in supplier and product selection. Computer software enables buyers

to calculate almost immediately intricate cost benefit analysis where products and

services are under consideration.

(c)Advisor. Advisors are those who have been brought in to help the buying company in

some way. This might be somebody that works in the buyer organisation or it could be

an agency outside the organisation such as a consultant or marketing agency. Specialist

advisors will be used if technical products or services are wanted. B2B buyers wanting

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to purchase complex and highly technical services might use management consultants

because of their greater expertise, and also to safeguard their own position because of

the difficulties which might arise. Public sector organisations have been criticised in the

past for spending too much money on outside consulting agencies, especially in

circumstances where the advice given turns out to be both mistaken and costly.

(d)Decision maker. The decision maker is the person or the committee that has the power to

make the actual decision to purchase. This might be one or many in the buying centre

depending on the power structure and delegation of responsibility. Where strategic issues are

involved, the board of directors, particularly the chief executive officer, will probably be the

ultimate decision maker. In other cases it might the buyer or the end user.

(e)End user. Somebody and some department within the buying organisation will eventually

be the end user of the product or service under review for possible purchase. Whether the

user is consulted or not will depend on both the culture and structure of the organization and

the type of service to be purchased, but even if they are not part of the buying center they

will usually influence the decision.

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