PISM 8

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Product, Industrial, andServices Marketing (PISM)

MMM V

Prof M.R.Koshti

Session 834 slides +1**

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Last session in brief

Industrial market research Difference between consumer and industrial market research /

Difference in survey methods

Scope of industrial market research

Marketing research process (same as consumer market)

Sources of secondary data

Industrial pricing

Factors influencing pricing decisions

Pricing strategies - Competitive bidding in competitivemarkets, Pricing new products, Pricing across the product lifecycle

Pricing policies Ex-factory, FOR Destination or FOB Destination

Commercial terms and conditions

Leasing**

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Industrial distributionchannels and marketing

logistics**

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Marketing channel

Marketing channel is defined as set of

interdependent organizations that make a

product or service available to customers for

use.**

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Distinctive nature of industrial channels as

against consumer goods channels

Geographical concentration because of concentration ofindustrial buyers

Channel size They are short. Ideally customers will like to buydirectly from the manufacturer for factors like product availability,technical expertise, and servicing capabilities

Characteristics of intermediaries Technically competent, musthave close relations with industrial buyers

Business happens mostly at customers place, therefore noneed to have jazzy road-facing showroom

Presentable office needed if customer visits the sellers office for

some purpose like demo, etc. Mixed system Mixture of direct and indirect channels to meet

requirements of different market segments **

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Services performed by middlemen

Buying / risk taking / financing

Promotion and selling

Assorting bring together several related items from

various sources to serve potential customers (Less innature compared to consumer products)

Warehousing

Grading inspect products and assign grades

Transportation Information

Technical service**

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Why industrial customers buy from

distributors?

Dependable delivery Fast and economical

deliveries (They keep buffer stock)

Information

Variety

Liberal credit and discounts**

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Types of industrial middlemen

Manufacturers representatives agents or

sales agents, paid only commission on

orders, suits small and medium firms

Distributors or dealers Handle ageographical region

Brokers brings the manufacturer and

consumer together, short term relationship

Value added resellers (VARs) customize

the product for satisfying customers needs**

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Distribution strategies

Intensive distributionThe objective is tomake product available from a large numberof retail outlets, Standard products with lessunit value (electric bulbs, cleaning powder,

Selective distribution Product madeavailable through relatively small number ofretail outlets. The outlet may have competingbrands also.

Exclusive distribution The retail outlet whichsells only your product, and none ofcompetitors**

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Managing channel members

Selection of intermediaries criteria, (min 3 yrs

experience in designing hydraulic circuits,

assembling power packs, marketing.), financial

standing, location, past experience

Motivating middlemen Partnership concept, vendor

managed inventory system (VMI) through EDI

(Electronic data interchange), reasonable discounts

and commissions, distributor councils, annual

retreats, Controlling channel conflicts next page

Evaluating channel members next page**

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Sources of channel conflicts (?)

Differences in objectives Manufacturers want longterm profitability and distributors prefer short termprofitability

Dealings with customers Distributors and agents

feel cheated when the manufacturer deals with largecustomers and asks intermediaries to serve smallcustomers

Differences in interests The manufacturer feels thatthe distributor is not giving adequate attention to

companys products. The distributor is interested inproducts that are fast moving and have higherprofits**

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Sources of channel conflicts.

Differences in perceptions The manufacturer wantsthe dealer to carry a higher inventory due toperception of good market conditions. The distributordoes not want to carry higher stocks as the dealersperception of the market is pessimistic

CompensationsManufacturers representative(agents) feels that the commission percentageoffered by the manufacturer is not adequate. Themanufacturer thinks otherwise.

Unclear territory boundaries The territory

boundaries between distributors are not clear,resulting in competition among companysintermediaries to secure business from the samecustomers**

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Managing channel conflicts

Effective communication network periodic formal

and informal meetings, distributor council, co-optation

(have intermediary member on advisory committee)

Joint goal meetings Agreement on super-ordinate

(fundamental) goals (leadership in market share)

Diplomacy discussion between persons from both

parties

Mediation Neutral third party tries to conciliate the

interest of both parties

Arbitration- Both parties agree to abide by arbitrators

decision (Legal process)**

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Evaluating channel members

Sales achieved vs sales quota

Average inventory levels

Customer delivery performance

Customer complaints

Co-operation in market feedback

Support for new products

New customers generated**

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Logistic management

Logistic management optimizes material flow withinthe organization

Supply chain management extends material flowintegration upstream to suppliers and down stream tocustomers

Physical distribution (ormarketing logisticmanagement) Movement of finished product from

the factory to customer, includes order processing,material handling, packaging, warehousing,transportation, customer service**

Supplier Manufacturer Customers

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Role of marketing logistics / physical

distribution

Physical distribution should be considered as a longterm strategic issue

It can be a source of creating a unique competitiveedge (Elpro HCL TIL)

The competitive advantage of superior customerservice at lower total distribution cost can not beeasily copied by competitors as it needs highinvestments in people, systems, time and technology.

The logistics will play a more important role in futuredue to important factors of global competition,worldwide sourcing, JIT system, and total qualitymanagement.**

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Just in time (JIT) system

All suppliers of materials must deliver products few hours beforethey are used

The system expects the supplier to deliver the products at theprecise time and in the exact quantity needed by the customer

.therefore .

The suppliers must have warehouses near the customer place

The quality of the product must be perfect as there is noinspection

The suppliers must coordinate with the customers productionschedule

The frequency of deliveries are more The customer benefits in terms of reduced inventory carrying

cost**

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Industrial

communication**

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Promotion mix for industrial products

(in the order of importance)

1. Personal selling

2. Advertising

3. Sales promotion

4. Direct marketing5. Publicity

6. Public relations

Reasons - Technical nature of industrialproducts, smaller number of industrialbuyers, complex nature of industrial buyingprocess**

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Developing industrial communication

program

Determine communication objectivesBuyers awareness level (sales leadgeneration / coupons), change in buyersattitude, buying action

Identify target audience Level 1 Buyingorganizations, level 2 Buying centers

Determine promotional budget affordable,

percentage, competitive parity, objective andtask

Develop the message**

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Developing industrial communication

program.

Selecting media General business publications

(Business India, Business World), Trade journals /

publications (vertical publications directed towards

specific industry e.g. Textile trend, Iron and steel age,

chemical week) (Horizontal- directed towardsfunctions which cut across the organizations e.g.

Purchase, Advertising and marketing, Modern

material Handling)

Evaluate promotions results Integrate the promotional program to provide clarity,

consistency**

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Sales promotion / business promotion

In industrial marketing the objectives of sales

promotion are..

1. Rewarding customers (Pull)

2. Stimulating sales force to greater efforts(Push)**

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Methods of business promotion

Trade shows / exhibitions next page

Catalogues / mailers For standard products

Sales contests

Promotional novelties / gifts

Entertainment

Promotional letters personalized

Seminars

Demonstrations**

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Trade shows / trade fairs

Organized by industry or trade associations

Marketer company buys space and sets up

stall to demonstrate their products**

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Advantages

Opportunity to introduce new products to a large audience in ashort duration

Establishing personal contacts with new customers

Increasing company awareness with key members of decision

making units who cannot otherwise be contacted

Making direct sales

Display and demonstrate products

Evaluating competitors products

Discovering new suppliers and distributors

Obtaining new product ideas

Training for new sales persons

Getting sales leads (WIE, Pune)**

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Disadvantages

Increasing costs of construction and exhibits

Personnel travel, lodging, and boarding

Pre-trade promotion costs

Your product is exposed to the competition

Sales people are locked, their clients get

neglected during this time**

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Market planning for

industrial markets**

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Marketing plan outline

Where are we?

Where do we want to go?

How will we get there?

How will we stay on course?**

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Where are we?

Situational analysis Market situation,

competitive situation, product situation, macro

environmental situation

SWOT and issues analysis**

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Where do we want to go?

Objectives and goals**

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How will we get there?

Marketing strategy

Identifying market segments,

Choosing market segments to focus (targeting),

Positioning strategy relative to competition (STP) Marketing mix strategy 4Ps

Action plan who will do what, by when

Marketing budget estimated profits

Implementation building marketing organization toimplement the marketing plan**

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How will we stay on course?

Control Periodic review of actual

performance against goals and taking

corrective actions, Marketing research

Contingency plans In case uncertainsituation arises**

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Competition oriented strategies

Also called interactive strategies

Porters 5 forces model

1. Existing direct competition product differentiation, costleadership, reverse engineering

2. Threat of Suppliers (forward integration)- Develop more than

one supplier3. Threat of Buyer (backward integration) Develop more than

one buyer

4. New entrants Entry barriers (technology, investment, legal /Political issues)

5. Substitutes Face it up (decline stage strategies), keep aneye on competitors activities at the patents office, phase out,enhance your own R & D to develop substitutes***

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Presentations

Sessions 12, 13, 14 (29/9, 6/10, 13/10)

17 (1), 36(4), 18(3), 46(5)

2(5), 42(4), 9(5)

21(5), 31(5),27(4)**

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Documents

PISM 8