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Transcript of 56_b2b industrial mkts
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Industrial Market Vs Consumer Market
Market Structure
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)
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Market Structure - Example
Industrial Market ( Rutile for
Paints)
Major ten cities.
Fewer buyers (example 500)
Oligopolistic buyers with clout
To access international market(Asian, Nerolac, ICI etc.)
Consumer Markets
(paints)
Even in small villages
Mass markets ( 1 billion )
Small customers
normally competition iswithin the country.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
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 / psychological
factors are important.
*Family involvement & focus
more on product per se.
*Nor personal relationship
with the supplier.
* Less of formal processes.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
BuyerBehavior - Example
Industrial Buyer for AC
*Evaluated for functionality
( evaluation by tech committee)
*Purchase through tendering
Process & brand less important.
*Discuss technical details,price negotiation etc.
*Formal processes of
documentation etc.
Customer for AC
Should look good & match
the dcor.
*Want to buy LG only
(because neighbor has)
*Go to a shop, select, negotiate
pay & forget.
* Less of formal processes.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Products
Industrial Market
* Technical complexity and
customized.
* Service, delivery and
availability isv
eryimportant.
Customer Markets
* Standardized.
*. Service, delivery and
availability is somewhat
important.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Products - Example
Samsonite Outsourcing
soft luggage
* Each component is as perSamsonite specification.
* Service, delivery and
availability is very
important as it affects supply
chain of the company.
Customer for Samsonite soft
Luggage
*
Standardized product rangeto select from.
*. Service, delivery and
availability is somewhat
important, can wait for aSpecific color / size.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Decision making
Industrial Market
*Distinct observable stages
* Multiple influencers and
decision makers.
Consumer Market
* Unobservable mental
stages, not very clear
pattern.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Decision making - Example
Industrial Buyer Soaps for
Workers canteen
* Need identification, selection,
procurement etc.
* O.K. from the workers union,
agreement by contractor,purchase departments
negotiation & placing order.
Customer
* Low involvement buying
and impulse purchase
(the exact choice criteria
difficult to identify) & variesfrom situation to situation.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Distribution channel characteristics
Industrial Markets
* Shorter, more direct &
fewer linkages between seller
and buyers.
Consumer Markets
* Indirect and multiple
linkages
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Distribution channel characteristics -Example
Hotel buying Cold Drinks
* Supplied directly by the
distributor, may even be
serviced by company
employee or a regular basis.
Customer for Cold drinks
* Normal distribution style
of distributor to retailer to
customer. Virtually no
interaction with company.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Promotion
Industrial Markets
* Emphasis on personal selling
or one to one dealing.
Example : Selling fridges
with decals. You go and dealwith Coke orPepsi H.O.
Consumer Markets
* Emphasis on mass market
promotion.
Example : You plan an adv.
campaign to highlight decalsand generate customer flow.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Pricing
Industrial Markets
* Competitive bidding &
multistage negotiation.
* Sharing of cost data &
budgeting of acceptableprofits in many cases.
Consumer Markets
* Normally MRP& MOP
* Concept of list price & its
implementation.
Understanding
Industrial
markets
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Industrial Market Vs Consumer Market
Pricing - Example
Industrial (CSD purchase
Of Rum )
* Competitive bidding &
selection on basis of L1.
* Sharing of production andoverhead cost data with CSD
and price based on cost +
margin.
Consumer Markets for Rum
* Normally MRP& MOP
* Concept of list price & its
implementation in the trade.
Understanding
Industrial
markets
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A big reseller can be treated as a Industrial Buyer
Example: Shoppers Stop / Ebony / Kids Kemp for anapparel manufacturer.
Purchase : Not for consumption but for business.
Market characteristics : Very few of them and they are big in
size and have centralized purchasing.
Product characteristics : Specific private labels.
Buyer characteristics : Technical evaluation / rational process /
multiple buying influencers.
Understanding
Industrial
markets
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A big reseller can be treated as a Industrial Buyer
Example: Shoppers Stop / Ebony / Kids Kemp for anapparel manufacturer.
Channel characteristics : Direct service by the manufacturer.
Price characteristics : Very hard on negotiation, if they get
better price, it straight goes to profits.
Economics of demand : Based on actual consumer off-take
of the products and hence derived.If one design clicks, it is stocked
more in anticipation.
Understanding
Industrial
markets
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Organizational Customer
Type of purchasing organization
Commercial Enterprise
1. Industrial Dealers & Distributors Essentially their objective
is to trade on the items. ( relatively narrow scope ).
2. OEM These consumers use the products as component of
their own output. The stakes are high as their final output
depends on your product. ( Maruti as a user of headlights ).
In emergency, they can make the vehicle & fit headlights later.
3. Users ( consumers ) They are the final consumers of the
product and their total operation depends on you. Example:
Eastern Coal Fields for Tisco. No coal => No Steel.
Understanding
Industrial
markets
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Organizational Customer
Type of purchasing organization
Government agency
1. Standard procurement processes Registration,
Tender, L1 etc.
2. Public accountability everything by rule books as far as
documentation.
Understanding
Industrial
markets
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Organizational Customer
Type of purchasing organization
Institutions ( Private & Public Sector )
1. Tisco giving its workers, watches as Diwali gifts.
2. XIM-B purchasing air-conditioners for faculty offices.
3. DSP cooperative buying suitcases for their members.
Characteristics : Normally one time deals, large orders,
less of technical evaluation, non specialist buyers.
Understanding
Industrial
markets
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Materials and parts
1. Raw materials ( natural gas, HDPE etc.)
2. Manufactured materials ( copper wire, steel sheets )3. Component parts ( switches, motors or customized gears )
Characteristics : Normally large custom made orders are sold
By the manufacturers & standard products by industrial. distributors.
Organizational Customer
Based on Type of products purchased
Understanding
Industrial
markets
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Capital Items
1. Installations ( buildings, computers, machinery etc.)
2. Accessories ( PC, Office furniture)
Characteristics: Normally major installations, because of
extensive interaction required and long negotiation time required,
the manufacturers deal directly with the customer & accessories are
sold by industrial. distributors.
Organizational Customer
Based on Type of products purchased
Understanding
Industrial
markets
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Supplies and services
1. Supplies ( soaps, stationery etc.)
2. Services ( maintenance, canteen etc.)
Characteristics : Normally industrial distributors are used &
services are provided by the individual contractors ).
Organizational Customer
Based on Type of products purchased
Understanding
Industrial
markets
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Example : Procurement of Injection Moulding Machine
1. R & D : Designs the moulds which are to be used.
2. Production : Output levels, installation needs.
3. HRD : Manpower implications, skills to be imparted.
4. Quality Assurance : Responsible for output consistency.
5. Maintenance : Ease of operation, availability of spares,
AMC etc.6. Finance : Long & short term financial implication.
7. Purchase department : Price, payment terms, delivery
terms.
Characteristics of Organizational
Procurement
Multiple Influences
Understanding
Industrial
markets
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Example : Procurement of Rutile for paints
1. Material Planning : Exact forecasting of demand,
factoring of international prices Vs domestic prices, foreign
exchange implication, inventory carrying cost etc.
2. Supplier rating : Based on the the quality reports, delivery
records , price factor, payment terms etc. the suppliers are
rated and3. Economic order quantity : The quantity to order,
frequency of ordering etc. are planned so as to optimize the
profitability of the organization.
Characteristics of Organizational
Procurement
Technical sophistication
Understanding
Industrial
markets
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Example : Procurement of Rutile for paints
4. Value Analysis : The option of using a lesser quantity of
costly Rutile for getting the same output level by change of
formulation is explored.
In absence of the raw materials, whether any alternative can
be used is worked out.H
ow the option of airlifting impactcost etc. is worked out before decision making.
Characteristics of Organizational
Procurement
Technical sophistication
Concept of optimization w.r.t constraints
Understanding
Industrial
markets
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1. Large number of buying center : Government
departments are everywhere. A lot of them purchase locally.
2. Political interference :
3. Specified govt. contracts :
a) Rate contracts
b) DRDO / ISRO Dev. Job cost + effort cost
c) 13
1 Orders
Characteristics of Organizational
Procurement
Government purchases
Skills required are specialized
Understanding
Industrial
markets
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Industrial Marketing Environment
Buyer
SellerInterface
Publics
Macro Environment
Govt. influences
Understanding
Industrial
markets
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Industrial Marketing Environment
Buyer seller interface
Labour
Capital
R.M.Components
Equipment
Mafg.
Dist. /
Dlrs.
Compt.
Manufacturer rep
Dist / Dlrs
Transporters
Warehousing firms
Mktg. Research firms
Bankers & insurers
Suppliers Buyers Facilitators Market
segments
Govt.
Commercial
Enterprises
Industrial
Distributors
Understanding
Industrial
markets
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Industrial Marketing Environment
Publics
1. Financial publics FI / Stockbrokers / Individual StockHolder
( Stock prices, confidence in company )
2.Independent press
Impact on reputation of company( Dhabol power corporation )
3. Public interest groups Environmentalists
( Euro II , CNG vehicles, Narmada bachao)
4. General publics MacDonald's coating French fries with beef
tallow
Business serves the society
Understanding
Industrial
markets
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Industrial Marketing Environment
Macro Environment
1. Economics - Increased demand for oil led to increase in prices
of oil in the world markets. Changes the cost base of most
oil based companies. Also changed the demand pattern of
automobile ( petrol to diesel ).
Government policies like subsidizing diesel at the cost of petrol.
2. Ecological influences - The concern for the environment
so emission norms are stringent & industry has to adjust.Bhopal gas tragedy, changes in the law to use MIC as an
intermediary.
Right to Know Companies have to furnish details of the
hazardous products made & used by them.
Understanding
Industrial
markets
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Industrial Marketing Environment
Macro Environment
3. Physical environmental Influences Steel plants need iron
ore, water & lime stone deposits for setting up. MP, Bihar and
Orissa have the concentration of steel plants.
.4. Politico / Cultural influences Hire and fire policy of west Vs
militant trade unionism & job protection in India.
5. Technological influences Typewriters manufacturers had
to shift market focus, change products etc afterPCs and wordprocessors became common.
Understanding
Industrial
markets
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Industrial Marketing Environment
Macro Environment
6. Government influences
Anticipating governments action: WTO treaty signing
and IMF loans linkages for govt. The govt. needs theloan so it is likely to sign the treaty.
InfluencingGovt. actions: Lobby for reduction in excise
duty (to create level playing field).
Lifting of Liquor ban in A.P. ( a lot of lobbying ).
CNG buses forDelhi .
Understanding
Industrial
markets
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Environment Management Strategies
Independent Strategies
1. Competitive aggression
a. Create Product differentiator (Bonding power of cement
Gujrat Ambuja Cement
compressive strength)
b. Aggressive pricing (coal based power plants Vs Gas based
power plants)
c. Comparative advertising - Dhabol Power Corporationcame up with the very good adv telling the good the
plant has brought about in the area, water supply,
school, employment, plus electricity generation cost
(compared with other plants etc.)
Understanding
Industrial
markets
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Environment Management Strategies
Independent Strategies
2. Competitive pacification
a. Improved competitive relations - (Auto companies do not
fight on discount to trade @4%
, theydo not spoil the trade, focus on end users ).
b. Industry promotion Doodh, Egg & LPG campaign.
( Increase the pie rather than fight
for the same pie).
c. Price Umbrellas The transporters union finalizing rates
for each destination ex- Mohali.
Understanding
Industrial
markets
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Environment Management Strategies
Independent Strategies
3. Building Public Opinion
a. Corporate Image advertising ISO 9000 Accreditation.
b. Voluntary environmental control ISO 14000 Accreditation
Making green products & advertising it.
c. Commitment to interest groups Archies cards giving part
of institutional revenue to fund the NGOs.This help them charge higher & get business.
Understanding
Industrial
markets
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Environment Management Strategies
Independent Strategies
4. Political / Legal
a. Directly lobbying with the govt. & law enforcers.
Steel Industries lobbying for more development work,
reduction in excise etc.
b. Issue advertising through the direct paid media or even
influencing the media to highlight the issue ( may or maynot be funded directly ).
Understanding
Industrial
markets
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Environment Management Strategies
Co-operative strategies
a. Contracting : Allwyn is part of Electrolux, but supplies
refrigerators to LG.
b. Co-optation : Absorption of relevant Publics on board
of directors. IIMC & XLRI directors
in the board of directors of XIM.
c. Coalition : Industry association ( Specially used tolobby with the government )
FMA decision to have max 7 years warrantee
on fans.
Understanding
Industrial
markets
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Environment Management Strategies
Strategic Maneuvering
a. Domain Selection : Focusing on areas of strong competitive
advantage. Cray Supercomputers
ICIW
orldwide
Light chemicalswith high margins.
b. Diversification : Reliance into telecom sector. May be the
idea is to be part of a high growth
industry which has good futurepotential.
Understanding
Industrial
markets