Industrial Marketing

INDUSTRIAL MARKETING Lecture Notes for Industrial Marketing By CA Yatish Vernekar

THE MARKETING MIX

The Marketing Mix

The Marketing Mix  The

tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives  7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment  Traditional 4Ps extended to encompass growth of service industry

Price

Price  Pricing

Strategy  Importance of: – knowing the market – elasticity – keeping an eye

on rivals

Product

Product  Methods

used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g. – Extension strategies – Specialised versions – New editions – Improvements – real or otherwise! – Changed packaging – Technology, etc.

Promotion

Promotion  Strategies

to make the consumer aware of the existence of a product or service  NOT just advertising

Place

Place  The

means by which products and services get from producer to consumer and where they can be accessed by the consumer – The more places to buy the product and the

easier it is made to buy it, the better for the business (and the consumer?)

People

People  People

represent the business

– The image they present can be important – First contact often human – what is the lasting

image they provide to the customer? – Extent of training and knowledge of the product/service concerned – Mission statement – how relevant? – Do staff represent the desired culture of the business?

Process

Process  How

do people consume services?  What processes do they have to go through to acquire the services?  Where do they find the availability of the service? – Contact – Reminders – Registration – Subscription – Form filling – Degree of technology

Physical Environment

Physical Environment  The

ambience, mood or physical presentation of the environment – Smart/shabby? – Trendy/retro/modern/old fashioned? – Light/dark/bright/subdued? – Romantic/chic/loud? – Clean/dirty/unkempt/neat? – Music? – Smell?

The Marketing Mix  Blend

of the mix depends upon:  Marketing objectives  Type of product  Target market  Market structure  Rivals’ behaviour  Global issues – culture/religion, etc.  Marketing position  Product portfolio – Product lifecycle – Boston Matrix

SOCIETAL ROLE OF MARKETING

Societal Concept Societal

concept holds that the organization's task is to determine the needs, wants, and interests of target markets and to deliver in desired satisfaction more effectively and efficiently than competitors in a way that preserves or enhances the consumer's and society's well being. Build social & ethical considerations into marketing practices.

Types of Marketing Channels  Marketing channel: channel

system of marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producers to consumer or business user; also called a distribution channel  Marketing intermediary: intermediary wholesaler or retailer that operates between producers and consumers or business users; also called a middleman  Wholesaler: Wholesaler marketing intermediary that takes title to goods and then distributes these goods further; also called a jobber or distributor

 Direct Selling – Direct channel: channel marketing channel that moves

goods directly from a producer to ultimate user – Direct selling: selling strategy designed to establish direct sales contract between producer and final user

 Channels Using Marketing

Intermediaries – Producer to wholesaler to retailer to consumer – Producer to wholesaler to business user – Producer to agent to wholesaler to retailer to

consumer – Producer to agent to wholesaler to business user – Producer to agent to business user

 Dual Distribution: Distribution

Network that moves products to a firm’s target market through more than one marketing channel

 Reverse Channels: Channels

Channels designed to return goods to their producers

Channel Strategy Decisions  Selection

of a Marketing Channel  Factors which impact the selection of a marketing channel include: – Market factors – Product factors – Organizational factors – Competitive factors

DISTRIBUTION Channel of Distribution - a group of interrelated organization that directs the flow of products from producers to ultimate consumers  Marketing Intermediary - an individual or organization in marketing channel that provides a link among producers, other channel members, and final consumer

Distribution Overages Intensity Distribution - market coverage in which all available outlets are used for distributing a product Selective Distribution - Market coverage in which only some of the available outlets are used for distributing a product Exclusive Distribution - Market coverage in which one outlet is used in specific geographic area for distributing a product

MARKET SEGMENTATION

What is Market?

PEOPLE

PEOPLE BUT- Not just ANY people, they have to have  Willingness to buy  Purchasing power [money]  Authority to buy

Types of Markets  Consumer

Goods & Services  Industrial Goods & Services

Market Segmentation  With

large country  Many different types of people  It

is too difficult to create a product that will satisfy every body, that is why we focus on the segment of the total market.

Market Segmentation Definition “Grouping people according to their similarity related to a particular product category”

Market Segmentation Characteristics • Age • Gender • Geographic location • Income • Spending pattern

    

Marital status Education Mobility Demographics Cultural background

Market Segmentation 4 commonly used basis for segmentation Descriptive  Geographic location  Demographic Behavioral  Psychographic  Benefits

Market Segmentation Geographic location- based upon where people live [historically a popular way of dividing market] Demographic- based upon age, gender and income [very often used]

Market Segmentation Psychographic/ lifestyles- based on peoples opinions, interests, lifestyles. Benefits- based on the different expectation that customer have about what a product/ service can do for them.

PRODUCT DEVELOPMENT

Stages in New- Product Development • Expensive, time consuming, and risky. • Only one third of the new products become success stories. • Each step requires a “go or no go” decision

Process of Developing New Goods & Services Commercialization Test marketing Product development Concept development & business analysis Screening Generate new product ideas

PRICING STRATEGY

PRICING  Price

- the value that buyer exchange for a product in the marketing transaction  Pricing Objective: – – – –

Market share Profit Return on Investment Status Quo

Pricing Decision and Methods •

Factors in Pricing Decisions:  Price

and non-price competition  Supply and demand  Consumer perception of price •

Pricing Methods:  Cost-Oriented

Pricing - Mark-up Pricing  Demand-Oriented Pricing - Break event point  Competition Oriented Pricing

Pricing Strategies

Marketing Concepts Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of idea, goods, and service to create exchanges that satisfy individual and organizational objective Marketing Mix is the combination of products, price, promotion, and distribution, used to satisfy the needs of the target market

Marketing Mix Product Variety Quality Design Features Brand Name Packaging Services

Promotion Advertising Personal Selling Sales Promotion Public Relations

Price List price Discounts Allowances Credit Terms

Target Costumers Intended Positioning

Place Channels Coverage Assortments Locations Inventory Transportation Logistics

Marketing Activities Product:  Develop new products  Modify existing products  Test-market products  Select brand name  Package product

Pricing:  Establish price objectives  Conduct cost analysis  Analyze competitor’s price  Set actual prices

Marketing Activities Promotion:  Determine types of promotion  Design the advertising massage  Selecting advertising media  Schedule the advertisements

Distribution:  Select wholesalers and retailers  Establish procedures for handling and moving products  Find the best locations for plants, warehouses and retail outlets

Market Market is people with the authority, financial ability, and willingness to purchase a product Types of Market:  Consumer market - for personal use  Industrial market - to use in the production or resell

Target Marketing Target market - a group of people that has similar wants and needs which a firm directs its marketing activities  Undifferentiated approach – one marketing mix for a product to the total market  Market Segmentation approach – the division of the total market into segment with marketing mix directed to different segment

Market Segmentation Market segment – division of heterogonous market into homogonous market based on different characteristics Segmentation Based:  Geographic bases - city, region  Demographic bases - sex, race, marital  Psychographics - a person’s attitude, lifestyle  Product-related - brand loyalty

PRODUCT Product - a good, service or idea, including all attributes provided in an exchange between buyer and seller Product Classification:  Consumer goods – products purchased by consumers for personal use  Industrial goods – product purchased by companies to produce other products

Classifying Goods Consumer Goods:  Convenience good – inexpensive and regularly consumed  Shopping goods – moderately expensive and infrequently  Specialty goods – expensive and rarely

Industrial goods:  Raw material  Components parts  Equipment and installations  Services

Product Line and Product Mix  Product

Line - a group of related products that are considered a unit because of marketing, technical or use similarity  Product Mix - the total group of product offer sale, or all of the firm’s product lines  Product Differentiation – creation of product or product image that differs from existing product to attract consumers

Product Attributes  Brand

- a name, sign, symbol, design, or combination a company’s product to distinguish it product from others  Packaging - the development of a container and graphic design for a product  Labeling - the display of important information on a product package

PRICING  Price

- the value that buyer exchange for a product in the marketing transaction  Pricing Objective: – Market share – Profit – Return on Investment – Status Quo

Pricing Decision and Methods  Factors

in Pricing Decisions:

– Price and non-price competition – Supply and demand – Consumer perception of price

 Pricing

Methods:

– Cost-Oriented Pricing - Mark-up Pricing – Demand-Oriented Pricing - Break event point – Competition Oriented Pricing

Pricing Strategies  Pioneer

pricing – leadership pricing in the market  Price skimming – setting an initial high price to cover new product cost and generate a profit  Penetration pricing – setting an initial low price to establish a new product in the market  Psychological Pricing – setting an initial high price to respond irrationally consumers  Price Discounting – Price reduction offered as an incentive to purchase

PROMOTION Promotion - the communication of favorable, persuasive information about a firm or product in order to influential buyers Promotional Objectives:  Informing  Increasing sales  Stabilizing sales  Positioning the product  Building a public image

The Promotion Mix Promotion Mix - the combination of advertising, personal selling, sales promotion, publicity used to promote a specific product

Advertising  Non-personal

communication to a target audience through a mass medium, such as TV, Radio, newspapers, or magazines, and outdoor display

 Types

of Advertising:

– Primary-Demand Advertising: for all products – Selective Brand Advertising: for specific products – Institutional Advertising: create public image

Advertising Promotion  Advertising

Media – variety of communication devices for carrying massage to potential customers  Direct Mail – delivery massage directly to customer places  Internet Advertising – put the massage into website or mailed directly to customer email

Personal Selling  Person-to-person

communication with one or more prospective customers in order to make sale  Telemarketing – using telephone to perform the personal selling process  Types of Salespeople: – Order Getter – Order taker – Support salespeople

Sales Promotion  An

activity that offers customers or marketing intermediaries direct incentives for purchasing a product  Type of Sales Promotion: – Coupon: reduces the price of a product by stated – – – –

amount at the time of purchase Rebate: an extra discount Free Sample Contest: consumer compete for prizes Trade show

Publicity and Public Relation  Publicity

- a non-personal form of communication transmitted in news story form and not paid for directly sponsor

 Public

Relations - a set of communication activities designed to create and maintain a favorable public image for firm

Major Public Relation Tools Web Site News

Corporate Identity Materials

Speeches Public Service Activities

Audiovisual Materials

Written Materials

Special Events

Promotional Strategy:  Push

Strategy: promotion of a product to wholesaler or retailers in the marketing channel, who in turn promote the product to consumers  Pull Strategy: promotion of a product direct to consumers to stimulate strong consumer demands

DISTRIBUTION Channel of Distribution - a group of interrelated organization that directs the flow of products from producers to ultimate consumers  Marketing Intermediary - an individual or organization in marketing channel that provides a link among producers, other channel members, and final consumer

Type of Marketing Channels: Consumer Products:  Producer-consumer: plant and flower, services  Producer-retailer-consumer: automobile, furniture  Producer-wholesaler-retailer-consumer: e.g. convenience goods  Producer-Agent/broker-wholesaler-retailerconsumer: e.g. consumer products

Type of Marketing Channels Industrial Products: producer-industrial user: heavy equipment and machinery producer-wholesaler-industrial user: tools and automotive parts

Distribution Overages Intensity Distribution - market coverage in which all available outlets are used for distributing a product Selective Distribution - Market coverage in which only some of the available outlets are used for distributing a product Exclusive Distribution - Market coverage in which one outlet is used in specific geographic area for distributing a product

Wholesaling The marketing activities of intermediates who sell to retailer, industrial users, and other wholesalers. Types of Wholesalers:  Merchant Wholesaler: takes ownership of goods and the risks associated with ownership  Sales Branch: a manufacture-owned wholesaler that take title to products, risks, and provides service  Agent: a wholesaler hired by a buyer or seller on a permanent basis and paid commissions  Broker: a wholesaler who bring together buyers and seller on temporary basis

Retailing The marketing activities involved in selling products to final consumers for personal or household use  Department Store: a large retailer organized into separate departments and offering a full line of services and wide product mix  Supermarket: a large self-service retailer that stock a wide variety of groceries and a limited assortment of nonfood products

Retailing  Catalog

Showroom: a form of warehouse showroom where customers select products from catalogs sent to customers’ homes or available in the store  Direct Marketing: non-store retailing that uses non-personal media to introduce products to consumers who then purchase the product by mail, telephone, computer, or TV

Physical Distribution Those activities that involve the movement of products through marketing channels from manufacturer to customer, including:    

Transportation: shipping goods to customers by rail, air, truck, water, and pipeline Warehousing: the receiving, storing, and shipping activities involved in the physical distribution of goods Order Processing: the receipt and preparation of an order for shipment Material Handling: the physical handling of products during transportation and warehousing

Basic Channels of Distribution Manufacturers/products

Agents/brokers Wholesalers/distributors Retailers

Retailers

Consumers and organizational end users

Typical Distribution of Drugs Man ufa ctu re rs Mar ket ing Ag ent s Re ta ile rs /W ho les alers /Dis tr ibu to rs Priv ate GPs /spe ciali sts

Gro up Pro cur em ent Off ice

Re ta il Ph ar ma cy

Pu blic Ho sp ita ls / Ins titut ion s