IM/1-1/5

THE NATURE OF INDUSTRIAL

MARKETING

Learning Objectives

• Understand What is industrial (or Business to

Business) Marketing?
• Know What are the differences in the characteristics of
industrial and consumer marketing?
• Find out Why the demand for industrial goods and
services are called “Derived demand” ?
 IM/1-2/5
(A) What is Industrial (Business) marketing?
 It is marketing of products / Services to business
firms.
 In contrast consumer marketing is marketing
products / services to individuals & households.

(B) What is the difference between industrial

marketing, B2B marketing, Business marketing &
Organizational Marketing?
No Difference!
(C) What are the differences between Industrial
& Consumer Marketing?
 Basic tasks of marketing are same difference Exists
in the characteristics shown next.
 IM/1-3/5
AREAS / CHARCTERISTICS IND MARKETS CONSUMER MATKETS
Market GEO Concentrated GEO Disbursed
Few Buyers Large no. Of Buyers
(Mass
Markets
Products Technically Complex Non – Technical
Customized Standardized
Service Very Important Somewhat important
Buyer Behavior Various Functional Family members involved
specialists involved Physiological /
Mainly Rational buying Psychological Social need
decisions. based buying decisions
Interpersonal Non – Personal
relationship between Relationship.
buyers and sellers.
Channel More direct Indirect
Multi Channel Few Channels with many
layers
Promotional Importance to personal Importance to Advertising.
selling
Pricing Competitive bidding / MRP
Negotiated prices
 IM/1-4/5
(D) Why Industrial Demand is called
“Derived Demand” ?

 Because Industrial demand is derived from (or

depends on) demand for consumer goods /
services.

 E.G. Steel is demanded for production of

consumer durable products like Cars &
Refrigerators, which are demanded by
household consumers. Hence, Demand for
Steel is derived from forecast of consumer
SUMMARY OF CHAPTER-1 IM/1-5/5

 Industrial / Business Marketing is

marketing of products / services to
business firms.

 Differences between Industrial &

Consumer marketing are seen in areas /
Characteristics like Market, Product,
Buyer Behavior, Channel, Promotion &
Price.

 Indus trial Demand is derived from

 CHAPTER 2 IM/2-1/10
UNDERSTANDING INDUSTRIAL
MARKETS AND ENVIRONMENT
LEARNING OBJECTIVES
• Understand the types of industrial customers
as well as industrial goods and services.
• Know the marketing implications for different
types of customers and products.
• Understand the purchasing orientations and
practices of industrial customers.
• Know types of environment and strategies to
manage external environment.
 IM/2-2/10
(A) What are the types/classifications of
Industrial/Business customers?

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 IM/2-3/10
(B) How are Industrial Products / Services
Classified?
Classification into 3 Groups shown below.

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 IM/2-4/10

i. For Materials & Parts, Direct selling is

done to large OEMs (Original Equipment
Manufacturers) and users, but indirect
selling through industrial distributors /
dealers becomes cost effective for smaller
volume OEMs and users.
ii. For Capital items, Direct selling through
company sales force is common, with
extensive interactions on technical &
commercial factors.
iii. For Supplies Industrial distributors /
dealers are mostly used but for marketing
of services, word-of-mouth plays an
 IM/2-5/10
(D) Purchasing Orientations of Business Buyers
• Business buyers/ Industrial customers follow one
of the three purchasing orientations:
(i) Buying, (ii) Procurement, or (iii) Supply chain
Management.
(i) Buying Orientation : The firm with buying
orientation follows the practice of (a) selecting
lowest price supplier, (b) gaining power over
suppliers and (c) avoiding risk of buying from new
suppliers. It has a Short-term focus.
(ii) Procurement Orientation : The purchasing
firm with procurement orientation has a long-term
focus. It achieves the objectives of quality
improvement and cost reductions by following the
practices of (a) collaborative relationship with
major suppliers and (b) working closely with other
functional areas in the company.
 IM/2-6/10
(E) Purchasing Practices of Different Types of Industrial /
Business Customers
(i) Purchasing in commercial enterprises
• Involve Technical & Commercial depts.
• Major Tasks / Procedure: identifying, negotiating,
selecting suppliers, building relationship.
• Purchasing to improve operational efficiency &
contribute to firm’s competitive advantage.
(ii) Purchasing in Govt. units
• DGS&D agency finalizes rate contracts for standard
products for Govt. units.
• Main Tasks / Procedure : Registration of the firm &
its Products, Tender Advertisements, no negotiation
in “ Open” tenders, negotiations done in closed /
limited tenders.
 IM/2-7/10

(iii) Purchasing in Institutions

• If the Institute is a Govt. Hospital Purchasing
practices of Govt. units Followed
• Similarly a private School / College follows
practices of commercial enterprises
• However, better to study each major
institution.

(iv) Purchasing in cooperative societies

• Similar to Institutional purchase.
 IM/2-8/10
(E) Types & Analysis of Environment
 IM/2-9/10

(i) Independent Strategies.

(ii) Cooperative Strategies.
(iii) Strategic Planning. It Aims at keeping
the firm
consistently successful in changing
marketing environment by market
oriented strategic management.
 IM/2-10/10
SUMMARY OF CHAPTER - 2
Types /Classifications of Industrial/ Business
Customers are
(i) Commercial Enterprises, (ii) Government
(iii) Institutional, (iv) Cooperative societies.

Industrial Products/Services are classified into

• (i) Materials & Parts, (ii) Capital Items, (iii) Suppliers &
Services.
• Marketing strategies differ for different product &
Customer types.
• Industrial / business Buyers follow one of the three
purchasing orientations : buying, procurement, or
supply chain management.
 CHAPTER – 3 IM/3-1/16

THE NATURE OF INDUSTRIAL BUYING AND BUYING

BEHAVIOUR

Learning Objectives
• Understand Organizational buying objectives.
• Gain knowledge of buying activities, including
different phases in buying decision process, types of
buying situations; buygrid framework & its analysis.
• Identify members of buying centers.
• Understand organizational buying behavior.
• Know how industrial buyers choose and evaluate
suppliers.
 IM/3-2/16

PURCHASING OBJECTIVES OF FIRMS

• Reliability in delivery.
• Consistent product Quality.
• Lowest price (If delivery & Quality objectives are met)
• Excellent pre & post – sales services.
• Long – Term collaborative relationship.
Industrial buyers try to achieve organizational
purchasing objectives & personal objectives like
higher status, job security, salary increments,
promotions & social relationships.
 IM/3-3/16

• Marketers must study this for developing effective marketing

strategy.
• In Consumer Marketing, Household / Individual consumer /
Buyer makes buying decisions based on certain mental stages
like (i) Problem (Need) Recognition,
(ii) Information Search (iii) Evaluation
(iv) Purchase decision (v) Post Purchase Behavior
• In Industrial Marketing, Buying Decision making process is
observable, involving many people in buying firm & includes
sequential activities / stages / phases, as follows:
 IM/3-4/16

(A) PHASES IN INDUSTRIAL BUYING DECISION MAKING

PROCESS / BUYPHASES
• PHASE –1 :- Recognising A problem / need.
• PHASE – 2 :- Determining Characteristics &
Quantity of needed product / Service*.
• PHASE – 3 :- Developing specifications of the product*.
• PHASE – 4 :- Searching & Qualifying Suppliers.
• PHASE – 5 :- Obtaining & Analyzing suppliers’ offers*
• PHASE – 6 :- Evaluating & Selecting Suppliers.
(shown on next slide)
• PHASE – 7 :- Selecting an order routine
• PHASE – 8 :- Post – Purchase evaluation
* These are in addition to five stages of consumer buying decision
process.
 IM/3-5/16

A SUPPLIER EVALUATION SYSTEM.

ATTRIBUTE/ WEIGHT/ SUPPLIER’S SUPPLIER’S
FACTOR IMPORTANCE PERFORMANCE RATING
SCORE
PRICE 15 0.5 07.5

QUALITY 30 0.7 21.0

DELIVERY 25 0.6 15.0

SERVICE 20 0.7 14.0

FLEXIBILITY 10 0.4 04.0

TOTAL 100 61.5

 IM/3-6/16

3 Common types of purchases / buying situations

i. New Task / New Purchase :
Here, buyers have limited knowledge and experience of the
new product/service. Hence, more information is obtained,
more people are involved, risks are more, and decisions take
longer time.
ii. Modified Rebuy / Change in supplier :
This situation occurs when the firm is not satisfied with the
performance of existing suppliers, or there is a change in
product specs. Hence, the need for searching alternate
suppliers.
iii. Straight Rebuy / Repeat purchase :
Here, the buying firm places repeat orders on suppliers who
are currently supplying certain products/services. Such
decisions are routine, with less risks and less information
needs, and can be taken by junior executives.
 IM/3-7/16

(C) Buygrid Framework

BUYPHASES BUYCLASSES
New Task Modified Straight
Rebuy Rebuy
1. Problem Recognition Yes May Be No
2. Characteristics of Product Yes May Be No
3. Product Specification Yes May Be No
4. Supplier Search Yes Yes No
5. Analyzing Supplier Offers Yes Yes May Be
6. Supplier Selection Yes Yes No
7. Order – Routine Selection Yes Yes May Be
8. Post Purchase Review Yes Yes Yes
 IM/3-8/16

• All Phases are Applicable for a New Task.

• Some Phases are Applicable for modified / Straight
Rebuy.
• New task situation is most difficult since buyers have
less knowledge, no experience & more people
involved.
• Modified Rebuy is not difficult situation since it has
few activities.
• Straight rebuy situation is handled routinely, as
repeat purchases are made.
 IM/3-9/16

Roles of Buying center members are

• Initiators. First recognize problem / need. Any individual in buying
firm – often, users.
• Buyers. Carry out purchase activities. They are purchase officers
/ executives.
• User. Any person who uses the product / service.
• Influencers. Influence buying decision. Technical people are often
key influencers.
• Deciders. Make buying decisions. Senior executives are deciders
for high value & complex products. For straight rebuy / routine
purchase, junior purchase officer can decide.
• Gatekeepers. They control / filter information & meetings with
buying center members. Often, P.A. / Junior person attached to
purchase head is the gatekeeper.
 IM/3-10/16

(E) Identifying key members of buying centre

• Sales / Marketing persons must identify important members of

buying centre.
• Buying centre consists of individuals and groups who take part
in buying decision making process, have common objectives &
share common risks. It is also called purchase committee,
buying committee or decision making unit.
• Members of buying centre are
(i) Technical persons. Represent
design,production/operations,
maintenance, Q.C., Industrial Engg. Depts.
(ii) Purchasers / Buyers. Purchase / Materials dept. persons.
(iii) Accounts / Finance persons.
(iv) Marketing persons
(v) Top management persons. G. M. & above.
 IM/3-11/16
(F) Organizational buying behavior
• Industrial / business buyers are influenced by many
factors. Two most important factors are (i)
Organizational factors / task – oriented
objectives, like best product quality, lowest price,
dependable delivery.
(i) Personal factors / Non-task oriented
objectives, such as good increments, promotion, Job
security, personal favors.
• When suppliers’ offers are similar, buyers can satisfy
organizational objectives from any supplier. Hence,
personal factors become important.
• However, when suppliers’ offers differ substantially,
buyers give importance to organizational factors
to satisfy organizational objectives.
 IM/3-12/16
• Many models have been developed to explain organizational
buying behavior. One of the comprehensive models is the Sheth
model, described below.
• The Sheth model of industrial buyer behavior, shown below ,
focuses on (i) Psychological aspects of individual buyers
(Component 1), (ii) Conditions causing joint decision making
(Component 2), (iii) Conflict among those involved in decision
process & resolution of conflict
(Component 3).
• Situational factors include economic conditions, labour disputes,
mergers & acquisitions. The model does not explain their
influence on buying process.
IM/3-13/16
IM/3-14/16
 IM/3-15/16
CUSTOMER SERVICE
• Important Customer Service Elements. Carry out market survey
to understand which of the following elements of customer service
are important to customers, what service levels are expected by
customers, the service levels offered by the firm and its
competitors.
(i) Pre – Sales Service : Advising, Informing,
Problem solving
(ii) During – Sales Service : Product availability,
on–time delivery, order cycle time, and information.
(iii) Post – Sales Service : Warranty, AMC, Repair,
Installation & Training.
• Develop superior service package.
• Test, Set Goals, and Establish Control system
 IM/3-16/16
SUMMARY OF CHAPTER - 3
• Industrial marketers should understand that business buyers try
to achieve both organizational & personal objectives.
• Industrial buying decision process consists of eight steps /
stages (buyphases) & three types of buying situations
(buyclasses).
• Buygrid model combines buyphases & buyclasses.
• Marketers must understand roles & key members of buying
centre, including key buying influencers.
• Many factors influence organizational buying behavior, but major
factors are organizational ( or task – oriented ) objectives and
personal (non – task oriented ) objectives.
• The Sheth model of industrial buyer behavior is comprehensive,
focusing of psychological & joint – decision making aspects.
• Webster and wind model is also widely used & comprehensive
model on buyer behavior.
 IM/4-01/11
CHAPTER - 4

BUYER SELLER RELATIONSHIP

LEARNING OBJECTIVES :
• Understand buyer sales rep.
interactions.
• Types/range of relationships between
buyer & seller firms.
• Customer relationship management
(CRM) / relationship marketing.
• Methods used to influence industrial
 IM/4-02/11

INDUSTRIAL BUYER-SALES REP. INTERACTIONS

• Depend on their perceptions, behavior &
roles.
• Buyers have two major perceptions of sales
reps.
(i) Stereotype – talkative, manipulative,
excitable
(ii) Reputation of sales rep’s company.
• Buyer Behavior towards sales rep depends on
organizational needs / objectives, buying
centre interactions and personal needs.
 IM/4-03/11

A Conceptual Framework by Dr. Sheth

• A buyer and a seller interaction is called “Dyadic” – two persons’

interactions’, with above types of transactions.
• Content includes organizational and personal needs of a buyer and a
seller.
• Style includes manner and format of communication – task
oriented, self oriented, or social / personal oriented.
 IM/4-04/11

• When buyer (or customer) and seller (or

supplier) firms do business, they have the
following types and range of business /
working relationships / exchanges. P a r
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• Each business relationship is an exchange

process of obtaining a desired product /
service by offering something of value is
 IM/4-05/11
• TRANSACTIONAL RELATIONSHIP is
typically one time exchange of a product /
service, with lowest price / economy and
necessity as main factors. Some customers
prefer it when many suppliers are available in
a stable market. They switch purchases from
one supplier to another. Marketers also
choose least profitable customers for
transactional relationships.

VALUE – ADDED RELATIONSHIPS /

EXCHANGES.

• Here the focus is to understand customer

 IM/4-06/11

• The focus is to build strong social, economic,

service and technical ties between customer
and supplier firms in order to achieve mutual
benefits.
• The criteria used for selecting business
customers for partnering relationships are
technological contributions, mutual
dependence, “supply chain management”
orientations, and high sales & profit
 IM/4-07/11

CUSTOMER RELATIONSHIP MANAGEMENT (CRM) / RELATIONSHIP

• Conceptually same,
MARKETING (RM)
methods / techniques to
achieve objectives are different.
• Both CRM & RM aim at partnering /
collaborative long-term relationships for
mutual benefits of both parties.
• CRM’S objectives are to improve customer
loyalty and there by, company’s profitability.
For this, marketing strategy is first developed,
then investment is made in software system
to gather data / information on each valued
customer, and the same is made available to
all employees to give superior customer
service.
 IM/4-08/11

• Major methods : Sales presentation and

Negotiation
• Sales Presentations: For effective sales
presentation, a sales person should follow some
guidelines :
i. Plan and collect information before sales
presentation.
ii. Identify customer needs and satisfy them
better than competitors.
iii.Use “AIDAS” theory or any other theory of
selling (Attention, Interest, Desire, Action,
 IM/4-9/11
• NEGOTIATION : For negotiation with
customers use
“I win, you win” or “win win” style, with
following guidelines :
a. Build an environment of trust &
understanding.
b. Identify the problem areas.
c. Both sides work together, pooling ideas,
information,
and resources.
d. Regular frequency of concessions are
important and not
the size of concessions.
 IM/4-10/11

• RECIPROCITY. It means buying a product /

service from a customer and selling a
product / service to a supplier. It occurs when
products are similar and price competition is
less. Generally, both purchase managers and
sales managers dislike. In practice, the
procedure becomes complex. It should be
kept at minimum level.

DEALING WITH CUSTOMERS’ CUSTOMERS

• With coordination and planning, a business
marketer can promote its products to
customers’ customer, if a need arises.
 IM/4-11/11

BUYER – SELLER
SUMMARY OF CHAPTER - 4
RELATIONSHIP
• Industrial buyer and sales rep.’s interactions
depend on their perceptions, behavior, & roles.
• Interaction between two persons (buyer & seller) is
called Dyadic, with various types of transactions, as
per Dr. Sheth’s framework.
• Buyer and seller firms have various types and
range of relationships: transactional, value added
and partnering / collaborative.
• Customer relationship management (CRM) and
relationship management (RM) are conceptually
same. Both aim at collaborative / partnering long –
term relationship for mutual benefits of both parties.
• Sales promotion and negotiation are the major
methods used to influence industrial buyers.
 CHAPTER 5 IM/5-1/6
INDUSTRIAL MARKETING INTELLIGENCE AND MARKETING
RESEARCH

LEARNING OBJECTIVES :
1. Know Nature and Scope of
Industrial Marketing research.
2. Examine the Marketing Research
Process.
3. Understand Industrial Marketing
Intelligence System.
 IM/5-3/6

Scope is vast. Some of the areas

are :
i. Market share analysis .
ii. National and Geographical area-
wise
market potential.
iii. Competitors’ analysis.
 IM/5-4/6

STEPS INVOLVED ARE :

1. Identify the problem / opportunity and
state research objectives .
2. Develop research design /
methodology.
3. Collect data / information.
4. Process and analyze the data.
5. Prepare research report.

There is no major difference in the

 INDUSTRIAL MARKEING INTELLIGENCE SYSTEM IM/5-5/6

Industrial marketing intelligence system is developed to meet the

needs of industrial marketers for timely and continuous information
for effective decision making .
 SUMMARY OF CHAPTER-5
IM/5-6/6

• Industrial marketing research rely more

on exploratory and descriptive (i.e.
survey) methods .
• The scope of industrial / business
marketing research is vast .
• There is no major difference in the
process or steps involved in marketing
research for consumer and industrial
marketing.
• Industrial marketing intelligence system is
 IM/5-2/6
NATURE OF INDUSTRIAL MARKETING
RESEARCH
1. Business Marketers rely more on
Secondary data, and exploratory
research (Through expert opinion).
2. Descriptive (or Survey) method is used
more often than experimental and
Observation methods, for collecting
primary data.
3. Sample size is small due to small
population.
4. Difficult to define sampling unit (or
respondents), since buying decisions
 IM/6-1/9
CHAPTER – 6

INDUSTRIAL MARKET SEGMENTATION, TARGET MARKETING

AND POSITIONING

LEARNING OBJECTIVES :
1. Know the Procedure followed for
segmenting industrial markets.
2. Identify the Variables (bases) used for
segmenting business markets.
3. Evaluate and select the target market
segments and strategies.
4. Develop effective positioning
 IM/6-2/9

PROCEDURE USED IN MARKET SEGMENTATION

The procedure has 3 steps .

1.Conduct marketing research to
collect data / information on existing
and potential buyers, and competitors.
2.Carry out data analysis by using
statistical techniques of factor and
cluster analysis in order to identify
different segments.
3.Profile each segment by its
 IM/6-3/9
VARIABLES (BASES) USED IN SEGMENTING
INDUSTRIAL (BUSINESS) MARKETS

• Industrial market segmentation is done first

based on “Macro Variables” , and then
subdivided into “Micro Variables”, if necessary.

• Macro Variables. These segmentation

variables are identified based on
industry/organizational characteristics like.
(i) Type of industry / Type of customer.
(ii) Company size / Usage rate.
(iii) Customer location / Geographical area.
(iv) End-use / Application / Benefits of a
 IM/6-4/9
• Micro Variables. Macro segments are
further subdivided into micro –
segments’, if needed. Micro Variables
are based on purchasing decisions like
(a) Customer interaction needs,
(b) Organizational capabilities,
(c) Purchasing policies,
(d) Purchasing criteria,
(e) Personal characteristics.

Sequential Segmentation Process.

Often, business marketers use more
 IM/6-5/9
EVALUATING MARKET SEGMENTS
Criteria / factors used for evaluating each market
segment are :
(i) Size and Growth .
(ii) Profitability Analysis .
(iii) Competitive Analysis .
(iv) Company Objectives and Resources

TARGET – MARKET STRATEGIES

Based on above criteria, business marketer selects
one or more market segments as target
segments. Next , the marketers should decide
which of the following broad target market
strategies the company should adopt
 IM/6-6/9
PROCEDURE FOR DEVELOPING A POSITIONING
STRATEGY
Following steps are involved :
(i) Identify which attributes / benefits target
customers consider important while buying a
product / service. This information is obtained
through a market research study . The
variables considered for differentiating a
company’s product from competing products
are.
(a) Product variables,
(b) Service variables,
(c) Personal variables,
(d) Image variables,
 IM/6-7/9

(iii) Use Perceptual Mapping Technique.

To decide on positioning strategy, this
technique is used, after getting
customers’ perceptions through
marketing research.

(iv) Communicate Positioning

Strategy. The firm should decide and
communicate its positioning strategy to
target customers, through sales force,
advertising in journals, internet, and
 Excellent
Product Quality
IM/6-8/9

1.0
.A1 0.8

0.6
.D

.C 0.4

0.2 Weak
Strong 1.0 0.8 0.6 0.4 0.2 - 0.2 - 0.4 - 0.6 - 0.8 - 1.0
Customer Customer
Service Service
- 0.2
.B
- 0.4

- 0.6

. - 0.8
A
- 1.0

Perceptual Mapping Low

Technique Product Quality
 SUMMARY OF CHAPTER 6
IM/6-9/9

1. Procedure used in market segmentation includes

(i) Marketing research, (ii) Data analysis (iii)
Profiling each segment.
2. Variables used for segmenting industrial markets
include macro variables and if needed, micro
variables. Sequential segmentation process is
often used.
3. Criteria used for evaluating market segments are
(i) size and growth , (ii) Profitability (iii)
Competitive analysis
(iv) Company Objectives and Resources.
4. Target market strategies are (a) Concentrated or
Niche marketing, (b) Differentiated marketing, (c)
Undifferentiated marketing strategy
 IM/7-1/20
CHAPTER – 7

PRODUCT STRATEGY &

NEW PRODUCT DEVELOPMENT
Learning Objectives
1. Define an Industrial Product.
2. Understand Changes in the product strategy.
3. Know Product Life cycle (PLC) Theory and its
application.
4. Develop Product strategies for existing
products.
5. Understand new product development.
6. Know impact of technology and high-tech
marketing.
 IM/7-2/20

• Definition : Its is a physical thing as well as a

Complex set of economic, technical, legal
and personal relationship between a buyer
and a seller.
• Meaning of a Total Product Package : It
includes basic properties (with fundamental
benefits), enhanced properties (with
tangible benefits), and augmented
properties (with intangible benefits).
• In a competitive market, business
 IM/7-3/20

CHANGES IN PRODUCT STRATEGY

Business marketers must understand

that a product strategy is dynamic and
flexible.
It changes due to changes in
(i) Customer needs.
(ii) Technology.
(iii) Government Policies / Laws.
(iv) Product Life – Cycle.
 IM/7-4/20
A General Model of Product Life – Cycle (PLC)
 IM/7-5/20

APPLICATION OF PRODUCT LIFE – CYCLE THEORY

TO MARKETING STRATEGY

Introduction Stage : Marketing Strategy

should focus on market development for
slowly accepted products. For rapidly
accepted products, a competitive strategy
(Competitive pricing or Superior quality
product ) should be evolved.

Growth Stage :To take advantage of high

growth of sales and profits, the marketing
strategy should concentrate on (i) Improving
product design or adding product features (ii)
 IM/7-6/20

• Maturity Stage As competition increases

and profits decline, marketing strategy
should concentrate on (i) cutting costs,
(ii) keeping existing customers satisfied
(iii) entering new markets.

• Decline Stage Since both sales and

profits decline, marketing strategy
should focus on (i) substantial
reduction in costs, (ii) develop a
substitute product, (iii) withdraw the
 IM/7-7/20
PRODUCT STRATEGIES FOR EXISTING
PRODUCTS
Business marketers should take the
following steps :
1.Evaluate the performance of existing
products by using “product evaluation
matrix”.
2.Examine the relative strengths and
weaknesses of the company’s products
by using “ perceptual mapping”
technique.
3.Decide the product strategies, based on
 IM/7-8/20
PERFORMANCE EVALUATION OF EXISTING
PRODUCTS
Example : A material handling Co.
(i) Product = P (Pallet Truck)
Last 3 year’s average performance figures are
• Industry sales growth = 25%, Company sales
growth = 30%
• Market Share = 30% (Dominant) , Profitability
= As per Target.

(ii) Product = S (Stackers)

• Industry Sales growth = 16% (Stable) ;
Company Sales Growth = 15% (Stakers)
• Market Share = 12% (Average) ; Profitability
Product Evaluation Matrix IM/7-9/20
 IM/7-10/20
PERCEPTUAL MAPPING TECHNIQUE
 IM/7-11/20
Firm A’s product quality is perceived to be
“average” by customers, compared to its
competitors B & C. Firm A should try to move
to a new position of superior quality at a
reasonable (average) price to improve its
profitability.

DECIDE PRODUCT STRATEGIES

(i) Maintain / Continue the product and its

marketing strategy.
(ii) Modify the product & change marketing
 IM/7-12/20

CLASSIFICATION OF NEW PRODUCTS

(i) Products that are new to the world & innovative.
(ii) Products that are new to the company, but not new to the world.
(iii) Improvements / Revision to the existing products.
(iv) Addition to the existing products.
(v) Repositioning existing products to new market segments
(vi) Products with substantial cost reductions without reduction in
performance.

NEW PRODUCT DEVELOPMENT PROCESS

It consists of 7 Stages :
(i) Idea generation, (ii) Idea Screening, (iii) Concept development and
testing, (iv) Business analysis, (v) Product development,
(vi) Market testing, & (vii) Commercialization.
 IMPACT OF TECHNOLOGY IM/7-13/20

Technological innovations create new products /

services that
are new to the world. Examples of these
innovations, called break through technology
are :
(i) Technological inventions of 1940s of
vacuum tube and amplifier circuit created
new products / services like radio, wireless
telegraphy, and telephone service.
(ii) Technological inventions of 1950s &
70s of transistor, integrated circuit (IC),
microprocessors have applications in new
products like TV sets, movie Cameras,
 IM/7-14/20
TYPES OF MARKETING SITUATIONS.
 IM/7-15/20
MODIFIED TECHNOLOGY ADOPTION
LIFE CYCLE

This is suited to high–tech marketing

 IM/7-16/20

1. Target a niche market.

2. Plan whole product properties.
3. Develop partnerships.
4. Unique positioning strategy.
5. Effective Communication Strategy
6. Multi – Channel distribution strategy.
7. Skimming pricing strategy.
 IM/7-17/20

Marketing of Industrial Services

Classifications of Industrial Services
 IM/7-18/20
Unique Characteristics of services and
marketing Implications.
 SUMMARY OF CHAPTER 7
IM/7-19/20

PRODUCT STRATEGYS & NEW

PRODUCTS DEVELOPMENT.
• Industrial Product is a physical thing and also
a complex set of economic, technical, legal
and personal relationship between a buyer
and a Seller.
• Product Strategies are changed due to
changes in customers needs, technology,
government policies or laws, and product life
– cycle
• Product life cycle (PLC) concept is used to
develop marketing strategies at different
stages of PLC.
• Product strategies for existing products are
 IM/7-20/20
It means, deciding if a product should be
continued, modified, dropped, or replaced.
 New products are classified into six groups and
consist of seven stages of development process
:- idea generation, idea screening, concept
development & testing, business analysis,
product development, market testing, and
commercialization.
 In High –tech marketing situation, technology
application and market needs are difficult to
predict . The “technology adoption life cycle” is
modified to suit high-tech marketing.
 Unique high – tech marketing strategies include
targeting a niche market, planning whole product,
developing partnership, unique positioning,
effective communication , multi – channel
 IM/8-1/14
CHAPTER – 8

INDUSTRIAL DISTRIBUTION CHANNELS & MARKETING

LOGISTICS

Learning objectives
1. Understand alternative channel structures.
2. Know types of industrial intermediaries.
3. Understand steps involved in designing a
channel.
4. Learn how to manage channel members.
5. Understand concepts of supply chain
management, Logistics, and business
logistics system.
 Alternative Channel Structures
IM/8-2/14

• Industrial channel structures include both direct and

indirect channels.
Direct Channels.
• Examples are direct selling through company sales
force and direct marketing through on-line marketing,
telemarketing and direct mail.
Direct channels are used typically when (i)
Transaction value is large, (ii) Technical &
commercial negotiations are held at various levels
(iii) Buying process takes a long time (iv) Buyers want
to buy directly from manufacturers.

Indirect Channels.
• Consists of intermediaries like distributors / dealers,
manufacturer’s reps / agents, value-added resellers
(VARs), brokers and commission merchants.
 Types of Intermediaries
IM/8-3/14

1. Industrial Distributors / Dealers.

• They perform many functions like buying, storing,
promoting, financing, selling, transporting and
servicing certain geographic market, & are given
discounts.

• Major categories are (i) General – line distributors,

(ii) Specialized distributors, and (iii) Combination
house.

2. Manufactures’ Representatives / Agents.

• They perform functions like promoting
manufacturers’ products / services, getting orders,
and colleting market information. They are
independent business firms, representing various
 IM/8-4/14
3. Value-added Resellers (VARs)
They are new type of intermediaries from
computer industry. They deal with computer
hardware and software companies, customize the
same to solve specific problems of buying firms.
They are paid discounts.

4. Brokers
They bring together buyers and sellers, when
information is not available completely. They
represent either a buyer or a seller, and their
relationship is short term. They do not buy products
& services and are paid on commission basis.

5. Commission Merchants.
 CHANNEL DESIGN
IM/8-5/14

• It includes developing new channels and modifying the

existing channels.

• The procedure / steps are as follows;

(i) Developing channel objectives;
(ii) Analyzing channel constraints;
(iii) Analyzing channel tasks;
(iv) Identifying channel alternatives. These include the
following issues :
(a) Types of intermediaries.
(b) Number of intermediaries.
(c) Number of channels.

(v) Evaluating the channel alternatives. The criteria used are:

(a) Economic factor
(b) Control factor
(c) Adaptive factor
 IM/8-6/14
MANAGING CHANNEL MEMBERS
It includes :
1. Selecting Intermediaries.
2. Motivating Intermediaries.
(a) Partnering relationships.
(b) Reasonable discounts and commission.
(c) Distributor councils.
(d) Other motivational tools.

3. Controlling Channel Conflicts

(a) Sources of channel conflicts.
(b) Controlling conflicts by
(i) Effective communication network;
(ii) Joint goal – setting;
(iii) Diplomacy; Mediation; Arbitration.
(iv) Vertical marketing system (VMS).
 IM/8-7/14
Concept of Supply Chain Management (SCM)
SCM includes activities of moving goods from raw
material through operations to final consumers, as
shown in “SCM Framework” below.
 IM/8-8/14

• Main aims of SCM are (i) Reduce cost

per unit, (ii) Reduce waste & duplication,
(iii) Minimize order to delivery cycle, and
(iv) Ensure superior delivery service.
Firms adopting SCM gain competitive
advantage.
• The aims are achieved by a network of
interdependent firms working together
with partnering relationships to manage
and control various activities, in order to
improve flow of materials and information
from suppliers to end users.
 IM/8-9/14

Logistics Management (LM)

LM plans and coordinates activities to
achieve superior customer service
levels at lowest costs. LM optimizes
material flow within the firm, but SCM
extends integration of material flow to
suppliers’ suppliers and customers’
customers. For better understanding,
see figure on “ business logistics
system”, which has two product
 IM/8-10/14
Business Logistics System

Marketing Logistics (or Physical

distribution) consists of delivering finished
products to intermediaries and customers.
 IM/8-11/14
TASKS OF PHYSICAL DISTRIBUTION (PD)
PD tasks are :
(i) Transportation, (ii) Warehousing, (iii)
Inventory Control, (iv) Customer Service, (v)
Packaging, (vi) Material Handling, (vii) Order
Processing, (viii) Communication, (ix) Locations
of factory & Warehouses.

• Total Distribution cost and customer service are

balanced by
(i) Minimizing total distribution cost, or (ii) Total
systems approach through maximizing profits.

• Total Distribution Cost = Transportation cost

 IM/8-12/14
• A firm must minimize “total distribution cost”,
instead of minimizing individual cost
elements, to balance customer service and
total distribution cost.

• Another approach, called “total systems

approach or channel integration” focuses on
“return on investment” (ROI). Here, a firm’s
channel members work together to improve
“customer service”, in order to get higher
salesSrevenue
ale
s R e
v.e
nu
e- T
otal PhysicalD istr
ibu
t o
r C
o
s
t
=
C
a
p
i
t
al
In
v
es
t
m
en
t
 IM/8-13/14

SUMMARY OF CHAPTER – 8

INDUSTRIAL DISTRIBUTION CHANNELS & MARKETING LOGISTICS.

1. Industrial channel structures include direct

and indirect channels.
2. Types of industrial intermediaries are:
industrial distributors / dealers,
manufacturers’ representatives (or agents),
value – added resellers (VARs), brokers,
and commission merchants.
3. Procedure of channel design includes:
developing channel objectives, analyzing
 IM/8-13A/
CUSTOMER SERVICE
• Service Quality Gap : Gap between
perceived service and expected service.
A firm may have a strategy of giving
superior quality service than
competitors and exceeding customer’s
expectations.
• Factors that determine service
quality by customers are :
(i) Reliability
(ii) Responsiveness
(iii) Assurance
 IM/8-13B/
• Strategies followed by successful
customer service firms
(a) Top management commitment.
(b) Setting high-standards of service
quality.
(c) Monitoring system.
(d) Systematic approach to resolving
customer complaints.
(e) Satisfy both employees and
customers .
 IM/8-13C/
• Developing customer service levels/
standards
Neither all customers nor all products need
the same level of service. Steps involved :
(i) Conduct marketing research study to find
which elements of customer service are
important to customers.
(ii) Find needs / expectations of customers
in quantitative standards for the service
elements.
(iii) Get information on actual performance of
the company and it’s competitors from
customers.
(iv) Analyse variance of actual performance
with standards.
 IM/8-14/14
4. Managing channel members consist of
selecting and motivating intermediaries,
controlling channel conflicts, and evaluating
channel members.
5. Supply chain management (SCM) includes
activities of moving goods from raw material
through operations to final consumers.
Logistics management optimizes material
flow within the firm, but SCM extends
integration of material flow to suppliers’
suppliers and customers’ customers.
6. Business logistics system includes physical
supply and physical distribution (or
marketing logistics).
 IM/9-1/12
CHAPTER 9
MANAGING THE PERSONAL
SELLING FUNCTION
Learning Objectives :
1. Understand the role of personal selling in
business marketing.
2. Know the business selling process.
3. Know characteristics of B2B selling , Team
selling approach, solution-oriented effort,
Entrepreneurial Philosophy.
4. Understand management of major and national
accounts.
 IM/9-2/12
Role of Personal Selling in Business
Marketing
• Personal selling or direct selling through
company sales force plays greater role in business
marketing than consumer marketing
• Major roles of personal selling
(i) A part of problems – solving capabilities of the
company.
(ii) A part of the company’s communication or
promotion mix .
(iii) Gives an effective customer service .
 IM/9-3/12
Business Selling Process
 No magic formula for making a sale. But chances of
making a sale improves, if the following “sales
process” is followed.
 The major steps in selling process are :
(i) Prospecting. It is searching or identifying
prospective or likely customers from various sources.
(ii) Qualifying . Prospective customers are screened
by qualifying criteria like expected volume, location
& financial strength.
(iii) Preparation / Pre-approach. Sales person should
prepare plan before making sales presentation by
obtaining all relevant information about the customer
and competitors through personal visits and websites.
 IM/9-4/12
(iv) Sales Presentation / Approach . Different methods
are used like “(AIDAS Approach – Attention, Interest,
Desire, Action, Satisfaction), or “need –satisfaction
method’’.
(v) Overcoming Objections . Often prospects raise
objections, which are real or practical and
psychological or hidden. These should be answered
satisfactorily by the sales person.
(vi) Closing. Asking for an order or closing the sale is
important. Sales person can use some of the closing
techniques.
(vi) Post - Sales service and Follow-up This includes
delivery, installation, training, payment collection,
warranty service, and rejections /returns.
 IM/9-5/12
Characteristics of B2B Selling
1. Promotional strategy focuses more on “ personal
selling’’ through company’s sales force. Hence,
salespersons are active in getting orders.
2. Adverting is used as a support to personal selling.
3. The sales person sells technical and non-technical
products, and uses “problem solving’’ approach
4. Typically, it takes a long time to know outcome of
sales efforts.
5. “System selling” approach is used by some business
marketers, as it is preferred in some large industrial
projects or contracts.
6. “Team selling” approach is used for major customers
and large value orders.
 IM/9-6/12

Team Selling Approach

• More companies are using team selling approach
for selling to major and national accounts
(customers) and technically complex products and
services.
• Sales team consists of sales representative,
technical support person, inside sales person, and
a senior sales/marketing manager.
• Coordination is done by a sales rep, for a major
customer and a national accounts manager for a
national customer.
 IM/9-7/12
Solution – Oriented Effort
• Two major roles of personal selling :
(1) A part of problem-solving capabilities,
(2) A part of communication ( or promotional)
mix.
• A sales person is a part of selling firm’s problem-
solving abilities. He should identify and analyse
the buying firm’s problem. He should then show
how his company’s products and services can
solve the buyer’s problems, better than
competitors. This is called solution-oriented effort
or approach.
 IM/9-8/12
Intrapreneurial Philosophy
• Intrapreneurship means entrepreneur within
a company.
• When sales and marketing persons, who are
employees, behave and act like owners of
the company, they have adopted
entrepreneurial philosophy. Such persons
take initiative, are proactive and creative,
and give superior value to customers.
• Firms that follow Intrapreneurial philosophy
show consistently good performance.
 IM/9-9/12
MANAGEMENT OF MAJOR AND
NATIONAL ACCOUNTS
• Both major and National accounts (or
customers) have large (sales and profit
potentials). But there is a difference.

Complexity of customer
 IM/9-10/12

• A major account has a large sales (and profit)

potential and is simple to serve or manage, as the
customer has only one unit .
• A national account has also a large sales (and
profit Potential), and is complex or difficult to
serve, because operating units re geographically
dispersed. In addition, for small value items
operating units are autonomous, but for large
value items, buying is centralized.
 IM/9-11/12
How to Manager Major & National Accounts
Objective. To become the preferred or sole supplier with
adequate profits.
Strategy / plan.
• Team selling. For a major customer, the team should
include branch / regional managers, sales representative
and technical support person.
For a national account, the team consists of a national
accounts manager, branch sales representatives, logistics
executive, and technical person.
• Relationship marketing. The teams build long-term
collaborative or partnering relationships by using
approaches like financial and social benefits, and structural
ties.
• Support from top management and functional executives
should be assured.
 IM/9-12/12

SUMMARY OF CHAPTER-9
• Personal selling has a greater role in business marketing
than consumer marketing.
• Business selling process consists of prospecting,
qualifying, preparation (or pre-approach), sales
presentation (or approach), overcoming objections,
closing, post-sales service and follow-up.
• B 2 B selling characteristics include problem solving,
systems selling and team selling approaches.
• Intrepreneurial philosophy results in consistently good
performance.
• Management of major and national accounts is done by
team selling, relationship marketing and support from
top management and functional managers.
 IM/10-1/10
CHAPTER –10
BUSINESS (INDUSTRIAL)
COMMUNICATION
Learning Objectives :
1. Develop an effective communication
(or promotional) program.
2. Understand the role of advertising
3. Understand the importance of sales
promotion, publicity, public relation
(PR), and direct marketing.
 IM/10-2/10
DEVELOPING AN EFFECTIVE
COMMUNICATION / PROMOTIOAL
PROGRAMME FOR BUSINESS MARKETS
The steps involved are :
(i) Decide communication objectives.
(ii) Identify the target audience.
(iii) Decide the promotional budget.
(iv) Develop the message strategy.
(v) Select the media.
(vi) Evaluate the promotion’s results.
(vii) Integrate the promotion’s programme.
 IM/10-3/10
Promotional Tools and Media in Business Markets
 IM/10-4/10
ROLE OF ADVERTISING IN BUSINESS MARKETING
While advertising is relatively less important than
personal selling in business marketing, it is used
as support to personal selling. The functions
performed by advertising are

(i) Creating awareness.

(ii) Reaching members of buying center.
(iii) Increasing sales efficiency and effectiveness.
(iv) Efficient reminder media.
(v) Sales – lead generation.
(vi) Support channel members.
 IM/10-5/10
ADVERTIING MEDIA USED AND SELECTION
CRITERIA
• The media generally used for industrial advertising are:
(i) Business Publications.
(ii) Trade journals/ publications – Horizontal and Vertical
publications.
(iii) Industrial directories – published by government and private
publishers (e.g. Tata Yellow pages).

• Criteria used for selection of advertising media are:

(a) Target audience and their media habits.
(b) Promotional objectives and goals.
(c) Expenditure budget, by using the following formula:

Cos
tp
erp
ag
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=
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r
cul
at
i
oni
nt
ho
u
sa
n
d
 IM/10-6/10
IMPORTANCE OF SALES PROMOTION
• Sales promotion consists of short-term incentive
tools to stimulate greater or faster purchase of a
product / service by business customers.

• Some of the business promotion tools are :

Trade shows (or exhibitions), sales contests,
promotional novelties (or specialty
advertising, or gifts), seminars, catalogues,
promotional letters, demonstration, and
entertainment. Some of the frequently used tools
are trade shows, sales contests, catalogues,
demonstrations, and promotional novelties (gifts).
 IM/10-7/10
IMPORTANCE / ROLE OF DIRECT MARKETING (DM)
• Definition Direct marketing is an interactive marketing system that
seeks a measurable response and /or transaction. Direct marketing is
also referred to as direct response marketing.
• Benefits For business marketers, benefits of DM are many : Can
personalise / customise communication messages, builds a continues
relationship with each customer, can measure responses from
alternative media, and direct relationship marketing company strategy
less visible to competitors.
• Main Channels or tools of DM. Direct mail, telemarketing and on-
line marketing. In addition, kiosk marketing and catalog marketing are
also DM channels, but are less popular in India.
• Direct mail is not only paper based postal service or courier service,
but can be fax mail, e-mail, or voice mail. Direct marketers send not
only letters, but also audio and videotapes, CDs, and diskettes.
Response rate is about 2%.
 IM/10-8/11
• Telemarketing uses telephone to contact existing
customers, to attract new customers, or to take orders.
Telemarketing gives immediate feedback, identifies and
qualifies prospects, and reduces sales force travel costs.
Both inbound (incoming calls from prospects / customers)
and outbound (out going calls) are important. Practice,
training, pleasant voices and right timing (late morning to
afternoon) are needed for effective telemarketing.

• On-Line Marketing can be done by establishing an

electronic presence (by opening own website or buying
space on a commercial on-line service), placing ads on-
line, and using e-mail. A web site should be attractive on
first view and interesting enough to encourage repeat
visits. Marketers use on-line marketing to find, reach,
communicate and sell to business customers.
 IM/10-9/11
• Major Benefits to marketers are: Lower costs,
relationship building and quick adjustments to changing
market conditions. Major Benefits for buyers are:
convenience, information availability, and less hassle.
Although small & medium size marketers can reach
global markets at affordable costs, there is chaos and
clutter as the internet offers millions of web sites, and
also as concerns on security and privacy
 IM/10-10/11
ROLE OF PUBLICITY & PUBLIC RELATIONS
(PR)
Public Relations (PR) performs certain tasks to promote or
protect a company’s image or its products. The tasks / functions
performed by PR are: press relations, corporate communication,
lobbying, and counseling. PR department deals with various
categories of people like press, legislators, Govt. officials,
public, employees, suppliers, customers, and hence it tends to
neglect marketing objectives.

Publicity or Marketing Public Relations (MPR) has more

credibility and lower cost compared to advertising, MPR
includes placing technical articles from the company’s technical
persons in trade journals, business magazines, and / or news
papers. MPR should be planned with advertising and should be
given larger budget allocation
 IM/10-11/11
Summary of Chapter – 10
• Steps involved in developing an effective communication programme for
business markets are (i) decide communication objectives, (ii) identify the
target audience, (iii) decide the promotional budget, (iv) develop the
message strategy, (v) select the media, (vi)evaluate the promotions results,
(vii) integrate the promotional Programme.

• Advertising is used in business marketing mainly as a support to personal

selling.
• Media used for industrial advertising are: business publications, trade
journals / Publications, and industrial directories.
• Sales promotion consists of short – term incentive tools to stimulate
greater or faster purchase of a product / service by business customers.
• Direct marketing and publicity ( also called as marketing public relations
– MPR) have important roles. However, public relations (PR) tends to
neglect marketing objectives, since it has to deal with several category of
people.
 IM/11-1/29

CHAPTER 11
INDUSTRIAL (BUSINESS) PRICING STRATEGIES & POLICIES

Learning Objectives
1. Understand the special meaning of
price.
2. Know the factors that influence pricing
decisions, i.e. price determinants.
3. Understand pricing strategies for
different product/market situations.
4. Examine the pricing policies for
various types of customers.
 IM/11-2/ 29

SPECIAL MEANING OF PRICE

• Some business customers follow
“Value-based pricing” by evaluating,
suppliers’ offerings based on the
concept of the suppliers offering equal
to the difference between the perception
of value (or benefits) and the cost to the
buying firm. These are “value buyers”,
and marketers should attempt to have
value added relationship, if suppliers
have “purchasing orientations”.
• Perception of value in value-based
pricing is made up of several elements
 IM/11-3/ 29

• Cost to the buying firm includes basic

Price, freight, transit insurance,
installation, risks of product failure,
delayed delivery, etc,
• Some customers are “price buyers”.
Marketers, should follow transactional
relationships & offer “basic properties”.
• Some other buyers are “loyal buyers”,
for whom marketers should follow
“relationship marketing” with partnering /
collaborative approach and mutually
IM/11-4/ 29
IM/11-5/ 29
 IM/11-6/ 29
PRICE DETERMINANTS OR FACTORS INFLUENCING PRICING
DECISIONS

(i) Pricing objectives, (ii) customer

analysis, (iii) cost analysis, (iv)
competitive analysis, (v) Govt. policies.

1. Pricing Objectives
• Are derived from corporate and
marketing objectives.
• Some of the pricing objectives are
survival, maximum short – term profits,
maximum short – term sales, maximum
 IM/11-7/ 29
2. Customer (Demand) analysis
It includes demand analysis & cost - Benefit
analysis
(i) Demand analysis. Using experimental
research, it measures relationship between
price and demand (or sales volume). It sums
up how sensitive customers% are
chato
ngethe
in price
q
uantity
d
e
ma
n
d
changes. The formula is:=
%
C
h
a
n
g
e
in
p
r
ic
e
If PED is > 1, demand is elastic, & customers are price
sensitive
If PED is < 1, demand is inelastic, customers are less
sensitive to prices.
 IM/11-8/ 29
(ii) Cost – Benefit Analysis
• Necessary to know target customers’ perceptions
of benefits (or value) and costs.
• Benefits are categorized into hard (or tangible)
benefits like quality, production rate,
performance, etc. and soft (or intangible)
benefits like customer service, company
reputation, warranty period, etc.
• Cost includes price, duties and taxes, freight,
installation, maintenance.

3. Cost Analysis.
• A firm’s total cost of a product is the lowest point
on the price range. Hence, for pricing decisions,
the marketer must know the various types of
costs like fixed, variable, total, direct, etc. for a
IM/11-9/ 29
IM/11-10/ 29
 IM/11-11/ 29
4. Analyzing Competition
• Many marketers have “competitive level”
Pricing as a pricing objective.
• Marketers should get “Competitors’ prices,
discounts, costs, product quality, service, etc
for cost/benefit analysis, pricing and
positioning strategy.
• Competitors’ information can be obtained
from various sources.

5. Government Regulation/Policies
• Govt. regulations are necessary to ensure fair
play and to protect consumers and small
scale suppliers.
 IM/11-12/ 29
PRICING STRATEGIES

Pricing strategies vary as per product-

market situations such as (i)
Competitive bidding in competitive
markets, (ii) New product pricing, (iii)
Pricing across product life-cycle.

(i) Competitive Bidding

• In business markets, large volume of
purchasing is done through competitive
bidding, using either closed (or sealed)
 IM/11-13/ 29

• In closed bidding, often used by the

Govt. buyer, sealed bids are invited
through newspaper tender notices.
Sealed bids are opened in presences of
suppliers and orders are placed on the
lowest price bidder(s).
• In open bidding, after receiving bids
(quotations), the buyer negotiates
technical and commercial parts with
suppliers, and then places orders. This
method is often followed by commercial
 IM/11-14/ 29

One of the often used strategies is

“Probabilistic Bidding”, which makes two
assumptions :
(i) Pricing objective is profit maximizations,
(ii) Lowest price bidder will get the order.
Equation used : E (A) = P (A) x T(A), where
A=Bid price, E(A) = Expected profit at bid
price ‘A’, P(A) = Probability of winning (or
getting order ) at the bid price ‘A’, T(A) =
profit, if bid price ‘A’ is accepted.
 IM/11-15/ 29

Rs.60 corers tender from Dept. of Telecomm. (DOT) for

underground cable jointing kits. The company ghosted Rs.400/-
per kit (expected maximum profit). Tender opening revealed, it was
L4.L1 was Rs. 330/-, L2=350, L3=Rs 380/- The company estimates
of B and P(A) were incorrect.
 IM/11-16/ 29
(ii) New Product Pricing Strategy
In the introduction stage of a new
product, two alternative pricing
strategies are available
(i) Skimming (high initial price) strategy,
and
(ii) Penetration (low initial price)
strategy.

Skimming Strategy is appropriate for a

new product that is distinct, high–tech,
or capital intensive, and purchased by a
market segment that is not sensitive to
 IM/11-17/ 29
Penetration strategy is appropriate when (i)
buyers are highly price sensitive, (ii) strong
threat exists from potential competitors (due
to low entry barrier). The selling firm’s
objective is to achieve long – term profits
through high market share. The firm can also
achieve “cost leadership” thru’ economies of
scale and experience curve, which gives “
competitive advantage”.
(iii) Pricing Across Product Life –
Cycle (PLC)
Marketing and pricing strategies vary as the
product moves across 4 – stages of PLC.
(a) Introduction stage. We have discussed
 IM/11-18/ 29
(c) Maturity stage. The firm may cut the
prices to match aggressive competitors’
prices by giving volume discounts, absorbing
freight costs, or more credit. If industrial
customers do cost - benefit analysis, a selling
firm may increase prices or not make any
change in prices due to its superior product
quality.
(d) Decline stage. Pricing strategy varies
depending on conditions. (i) If buyers’
perceptions about the firm’s quality of product
/ service is good, then the price need not be
lowered, but costs should be reduced to earn
profits, (ii) if the quality of product / service is
equal of lower than competitors, a firm may
 IM/11-19/ 29

• If a firm is a market leader and wants to

change the price, it must anticipate reactions
from customers and competitors.
• The firm must ‘study major competitors’
objectives, financial situations, production
capacity utilizations, sales, costs, and profits.
It must also understand competitors’ mind-
set, by studying their business philosophy (or
concepts), culture, beliefs and past
behaviors. Based on above analysis the firm
should predict competitor’s response.
• The firm must also understand that customers
generally prefer small price increases several
 Responding to competitors’ price changes
IM/11-20/ 29

A marketer should respond after answering

the following questions.
(i) Why the competitor has changed the
price?
(ii) Is the price change temporary or
permanent?
(iii) What will happen to the company’s sales
and profits, if it does not respond.
(iv) What would be the reactions of other
competitors.

The responses can be in several ways:

 IM/11-21/ 29
PRICING POLICIES
Purpose. A firm evolves pricing policies to
adjust basic prices (or price list) for different
types of customers (like OEMs, users, and
dealers) who buy various quantities and are
located at different locations. The price list is
adjusted with different types of discounts and
allowances.
Price list is a statement of basic prices of a
product, having various sizes/specifications.
Net price = price list (or list-price) less
discount (or allowances). Business buyers are
more interested in net price
Types of discounts : Trade, quantity (or
volume), and cash.
 IM/11-22/ 29
Volume / Quantity discounts. Here, the
objective is to encourage customers to buy
larger quantities, which would reduce the
costs of selling, inventory carrying and
transportation. The quantity (or volume)
discounts are given either on single orders
over a period, usually one year (cumulative
basis). For example,

Above discounts are applicable for all types of customers –

OEMs, users, and dealers / distributors.
 IM/11-23/ 29
Cash Discounts. The objective is to get
prompt payments. If a credit customer pays
the bill before dispatch or within 7-days of
dispatch, the customer is given cash
discount on the gross amount of bill. The
extent of cash discount depends on the
bank rate of interest. Give cash discounts
thru’ credit notes and the cheques, instead
of including it in the bills.

Geographical Pricing

It includes decisions on how to price the

 IM/11-24/ 29
(i) Ex – Factory Pricing. It means prices
quoted are based on the prices at the factory
gate, i.e. freight
( transportation costs) and transit insurance
costs are to the customer’s accounts. Hence,
the landed price (or costs) to customers vary
depending on their geographic locations.
(ii) F.O.R. Destination Pricing. Here, the
quoted prices include freight costs. Transit
insurance is a small amount to be covered by
the customer’s “open insurance policy”.
Hence, all customers get the product almost
at the same price, despite different
geographic locations. Marketer adds the
average freight cost to the basic prices and
 ROLE OF LEASING. IM/11-25/ 29

Business buyers have options of either

leasing or buying capital items like machinery.
The advantages for the lessee (asset user)
are : (i) conserving capital, (ii) gaining tax
advantages, (iii) getting the latest products.
The lessor (asset owner) often earns good
income from buying firms who can not afford
outright purchase.

A lease is a contract (or an agreement) by

which the asset owner (lessor) gives the right
to use the asset to another party (lessee) in
 IM/11-26/ 29
Types of Leases :
(i) Financial (or full – payment) leases,
and (ii) operating (service or rental)
leases

Financial leases. These are full –

payment, non - cancellable, long - term
>
contracts and fully amortised (sum of
lease payments purchase price of
capital item)
 IM/11-27/ 29
Operating Leases are service/rental
leases, that are cancellable, short-term
contracts or agreements, and are not fully
amortised. The rates are higher than those
of financial leases, because risk of
obsolescence are of the lessor
Pricing Strategy
It is based on the firm’s marketing and
pricing objectives. Three possible
alternatives are :
(i) Decide lease rate to favor leasing
(ii) Decide lease rate to favor outright
purchase
 IM/11-28/ 29
SUMMARY OF CHAPTER – 11

• In business marketing, price has a

special
meaning. For value buyers, value based
pricing is appropriate.
• Factors that influence pricing decisions
(or price determinants) are: (i) pricing
objectives, (ii) customer analysis, (iii)
competition analysis, (iv) cost analysis
(v) government regulations/policies
• Pricing strategies for different product-
market situations are: (a) competitive
 IM/11-29/ 29
• Initiating price changes and responding
to competitors’ price changes are also
parts of pricing strategies
• Pricing policies include adjustment of
basic prices (or price list) with different
types of discounts like volume, trade,
and cash, as well as geographical
pricing.
• Leasing or buying options are available
to business buyers for capital items like
machinery. Financial and operating are
two types of leases. Pricing strategies
are made either to favour leasing or
 IM/12-1/19

CHAPTER – 12
STRATEGIC PLANNING, IMPLEMENTING, AND CONTROLLING
IN INDUSRIAL MARKETING

Learning Objectives
• Understand the characteristics of
market – oriented organization.
• Know the role of marketing in strategic
planning
• Examine the strategic planning process
at business unit level.
 IM/12-2/19

CHARACTERISTICS OF MARKET – ORIENTED

ORGANISATIONS

Firms achieve market – orientation by

managing the following factors.
(i) Shared values.
(ii) Organization structure, policies
and culture.
(iii) Strategic Planning.
(iv) Needs or expectations of
stakeholders.
IM/12-3/19
 IM/12-4/19
The earlier figure shows hierarchy of
strategies and organization structure of a
large company.
Strategic management gives a direction to
the firm and focuses on developing
strategies to achieve long – term objectives
& goals
A Strategic business unit (SBU) consists
of an independent business or related
business that has its own competitors and
specific markets. In some large companies
there are (product ) divisions and each
division has a divisional plan. Each SBU is
headed by a manager who is responsible for
 IM/12-5/19
ROLE OF MARKETING IN STRATEGIC PLANNING IN A FIRM
 IM/12-6/19

The major steps involved are

1. Deciding corporate mission and
objectives.
2. Establishing strategic business units (
SBUs.)
3. Allocation of resources to SBUs.
4. Developing corporate strategies.

ALLOCATION OF RESOURCES TO
SBUs.
 IM/12-7/19
BCG Model : Growth – Share Matrix
 IM/12-8/19
GE Model : Business Screen Matrix
 IM/12-9/19

• Major Business Strength factors :

Market share, product quality, unit
costs, R&D performance, brand
reputation, share growth.
• Major Market Attractiveness factors :
Overall market size, annual market
growth rate, historic profit margin,
competitive intensity, technological
requirements.
 IM/12-10/19
DEVELOPING CORPORATE STRATEGIES

• Strategic planning gap. It is the gap

between future (5 years) desired sales and
the projected sales (of all SBUs ) of a
company.
 IM/12-11/19
The strategic planning gap can be filled by
three alternative strategies : (A)
Diversification growth, (B) Integrative growth,
(C) Intensive growth

(C) Intensive Growth Strategy. Corporate

management should first review existing
business, using Ansoff’s product-market
expansion grid, shown hereafter :
 IM/12-12/19

( B) Integrative Growth Strategy

includes increase in a firm’s sales and
profits by integrating backward, forward,
or horizontally within that industry.

(A) Diversification growth strategy is

considered when (B) & (C) strategies
are inadequate to achieve desired
growth and also good opportunities are
found outside the present businesses.
 IM/12-13/19
STRATEGIC PLANNING PROCESS AT BUSINESS UNIT LEVEL

The following steps are followed by the

business – unit
head.
1. Defining the business unit’s mission.
2. Scanning the external environment
(O.T. Analysis)
3. Analyzing the internal environment
(S.W. Analysis)
4. Developing objectives and goals.
5. Formulating strategies (See hereafter)
 IM/12-14/19

* PORTER’S Generic Strategies Framework for

Business unit
 IM/12-15/19
Marketing Planning Process

The head of marketing prepares the

marketing plan (short-term up to one
year) after going through “Marketing
Planning Process”, which includes the
following steps :
(i) Analyzing marketing opportunities.
(ii) Segmenting and selecting target
market segments.
(iii) Developing marketing strategies.
(iv) Implementing and controlling the
marketing plan.
 IM/12-16/19
Business ( Industrial ) Marketing Plan

1. Situational analysis. Market, competitive,

product, and macro – environmental
analysis.
2. SWOT and Issues analysis
3. Marketing Objectives and goals
4. Marketing Strategy. Selection of target
market segments, positioning, marketing
mix, customer service and marketing
research.
5. Action plans / Tactics
6. Marketing Budget
 IM/12-17/19
IMPLEMENTATION OF MARKETING PLAN
It is a process that turns marketing plans into
action plans and ensures that the tasks or
activities of action plan are executed in as
manner that achieves the marketing
objectives and goals. For this the necessary
organization structure and people are
selected. Marketing resource management
(MRM) software will help marketers to
improve their decisions, and also in
implementation and controls.
Control Process includes (a) setting goals,
(b) measuring actual performance, (c)
comparing goals and actual performance, (d)
analyzing causes of deviations, if any (e)
 IM/12-18/19
SUMMARY OF CHAPTER 12
• Marketing orientation is achieved by
firms by managing shared values,
organization structure, policies and
cultures, strategic planning, needs and
expectations of stakeholders.
• Before understanding the role of
marketing in strategic planning, it is
necessary to examine hierarchy of
strategies.
• Major role of marketing is at business
unit and functional levels, and less at
 IM/12-19/19

• Strategic planning process at SBUs

level includes mission, SWOT analysis,
objectives and goals, strategies, action
plan, implementation and control.
• The marketing head should go through
marketing planning process, before
preparing the marketing plan.
• Implementation and control of marketing
plan are important for achievement of
marketing objectives and goals.