Industrial Marketing

Q No. 3 In how many ways the industrial products can be classified?

Discuss the characteristics and the marketing plan for each class of the
product.

Ans :

The industrial products can be classified into following:

Major Equipment: This category includes large machines or other tools

whose net purchase price are so great that expenditures for them are
changed to capital account and not the current account. Major equipment
is of two types:-

Multipurpose or standard machines which can be used by a no. of

different industries or by many firms in the same industry.

Single purpose machines are designed to perform one particular

operation and no other.

Since the net price of major equipment is sometimes very high, its
purchase may involve financial problem for the buyer. Firms marketing
such equipment must be prepared to loan for the buyers, to help them
float issues of securities, to negotiate with investment concerns, or to
lease equipment.

Minor or accessory equipment: It is machinery used in an auxiliary

capacity. Its price is lesser than that of major equipment and its cost is
generally charged to the current account. These are purchased in routine
manner and involve lesser negotiation. Minor equipment items are
standardized and suited to the performance of a function involved in more
than one operation of a business. The organisation for marketing them
must be more widespread and such items are sold through many outlets
and the relation between the buyer and the maker can be less direct and
immediate.

Fabricating or Component part: Components are often bought on the

basis of specifications prepared by the purchaser, although many items
such as batteries of tyres in the automobile industry are standardized
according to the specifications of the parts manufacturer. Some
components retain their identity in the finished product; this offers the
opportunity for the buyer of enhancing the sales appeal of these end
products by including in them a component of market acceptance.

Process Material: This closely resembles component part in that they

usually enter into and form an undistinguished part of the finished product.
For example a good manufacturer may buy a variety of ingredients, mix
them in proper proportions and sell the resulting material on the market as
a cake mix. Suppliers may build repulsion for these material for ensuring
high quality and greater purity. The standardization is sufficient to throw
considerable emphasis on price and service as a competitive factor in the
sale of process material.

Operating supplies: They do not become a part of the finished product,

but are continuously worn out or used up in the process of operating or
facilitating the operation of an enterprise. Such items are paints, soaps,
detergents, etc. They are usually marketed through middleman and
maintenance and repair supplies are supplied directly by the firm.

Raw material: Raw material is the basic materials of industry and are
supplied chiefly by agriculture, lumbering, mining and finishing industries.
Farm products like wheat, cotton, fruits which are seasonal, there
branding takes lot of time to establish. Natural products like iron ore, crude
oil, fish are limited in nature having low unit value but high transport cost.
Raw materials are bought in the open market and sold on the basis of
recognized standards.
Q. No. 5 Compare consumer goods marketing with industrial goods
marketing.
Ans:
Elements of Consumer Goods Industrial Goods
Comparison Marketing Marketing
Market Geographically Geographiocally
Structure dispers- ed all over concentrated to one
the country. part of The country.
Demand Demand is directly Demand is derived.
from Users.
Products 1.Products are bought 1.Large quantities or
in ones and twos. high value equipment
2. is involved.
Services are 2.Service is very
somewhat important. important
3.Most products are 3.Customised and
standard. technically complex
4.Cost of products.
maintenance is not 4.More focus on the
important. cost of maintenance
Buyer 1.Family involvement. Functional
Behaviour 2.Impulse buying. department
3.No technical involvement.
expertise needed for 2.Impulse buying not
buying. allowed, rational
4.Consumer and motive predominate.
manufacturer are not 3.More technical
interdependent. knowledge required.
4.Customer and
manufacturer are
interdependent.

Decision 1.The consumers 1.The consumers

making conduct quality tests. check quality tests.
2.Consumers are 2.Consumers are
amateur in decision professional in
making decision-making.
Making 1.Long channels 1.Short channel
Channels required required
2.More retail outlets 2.Less retail outlets.
exists
Promotion Advertising and sales Personal selling is
promotion are more the promotion tool.
popular promotion
tools
Price 1.Simple pricing 1.Complex pricing
policies. policies.
2.Negotiation on price 2.Negotiation on
is rarely made. price for all types of
goods is made.

Q.No.7 Describe the characteristics of industrial buyers.

Ans

The important characteristics of industrial buyers are:-

1. Fewer Buyers: Industrial marketer deals with fewer buyers than
consumer marketer.

2. Larger Buyers: Many markets are characterized by a high buyer

concentration ratio. Few larger buyer do most of purchase.

3. Business Relationships: As industrial market has smaller

customer base and normally power is concentrated with heavy sellers.
Suppliers are frequently expected to customize their offerings to individual
buyer needs. Industrial buyers finalize orders with those suppliers who co-
operate with them on technical specifications and delivery schedule
requirements.

4. Geographic orientation of buyers: Industrial buyers are normally

concentrated in particular city, region or area. For e.g. Most of the
automobile producers are from Pune like Bajaj, Kinetic, Telco, etc,
likewise concentration of software business around Bangalore, Hyderabad
and Pune, etc. This geographic concentration of producer reduces selling
costs.

5. Professional purchasing: trained purchase officers, who spend

their professionalism in how to buy better, buy Industrial goods. Their
professional approach and greater ability to evaluate technical information
leads to more cost-effective buying.
6. Several buying influences: In industry buying, many people are
involved. Buying committees consist of technical and commercial experts
at senior and middle management levels. The communication mix needs
to be designed in such a way that all influences get enough information.

7. Other characteristics:
Direct Purchasing- Industrial buyers prefer to purchase directly
from producers.

Reciprocity: Buyers selects such suppliers, who also buy from

them.

Leasing: Industrial buyers purchase on lease or hire due to

various benefits of taxes and depreciation.

Q. no. What do you understand by negotiation? What is the importance

of negotiation skill in industrial marketing?

Ans:
Much of business-to-business selling involves negotiating skills. The two
parties need to reach agreement on the price and the other terms of scale.
Sales are need to win the order without making deep concessions that will
hurt profitability.

Industrial marketing is concerned with exchange activities and the manner

in which terms of exchange are established. Administered programs of
pricing and distribution establish the terms. In negotiated exchange, price
of other terms are set by bargaining behaviour, in which two or more
parties negotiate long term binding agreements (e.g. joint ventures,
franchisees, sub-contracts, etc)

In order to get sales and achieve profit and build a win-win situation, a
industrial salesman need to sort out the most frequently put forward
negotiated issues. In industrial marketing mainly the high price of industrial
product is the biggest issue, other issues include contract completion time,
quality of goods and services offered, responsibility for financing, risk
taking, etc

Marketers who find themselves in bargaining situations need certain tact

and skills to be effective. The moist important tacts are preparation and
planning skill, knowledge of subject matter being negotiated, ability to
think clearly and rapidly under pressure and uncertainty, ability to express
verbally, listening skills, judgment, general and technical intelligence,
ability to persuade others and patience. These will help an industrial
marketer in knowing when to negotiate and how to negotiate.
A marketer can make a successful sale only when there exists a zone of
agreement i.e. overlapping acceptable outcomes for the parties. This can
be explained with the following diagram:-

Zone of Agreement

Seller’s Buyer’s
Surplus Surplus

Rupees
Seller’s Final contract Buyer’s
Reservation price Reservation price

Good negotiation skills bring about an option for mutual gain. Inventing
options for mutual gains involves searching for a larger pie rather than
arguing over the size of each slice.
Efficient negotiation skill involves preparing a good strategic plan before
meeting the other party and making good tactical decisions during the
negotiation sessions so that the industrial marketer is able to focus on
interests and insist on objective criteria.
Q. No.11 Define and explain value analysis.

Ans

Value analysis is an intensive appraisal of all elements of the design,

manufacture or construction, procurement, inspection, installation and
maintenance of an item and its components including the specifications
and operational requirements in order to achieve the necessary
performance, maintenance and reliability of the items at minimum cost.
Value analysis comprises of two activities:-
1. Review of existing products.
2. Identification and elimination of unnecessary cost factors.

Review of existing products: Reviews recognize the ever present

possibility of improvement in specifications and design. They also
recognize the fact that in mass production no unit saving is too small to be
worthwhile. The purpose is to determine how equivalent performance can
be achieved at lower cost and how the combined knowledge of
engineering , manufacturing and purchasing can best utilize alternative
materials, new processes and abilities for specialized supplies to speed
the achievement.

Identification and elimination of unnecessary cost factors:-

Careful appraisal and analysis often point the way so as to eliminate and
modify the unnecessary features of design and the cost of manufacturing
operations they contain.
Operation of the value analysis system:

VALUE ANALYSIS
Formulation
Of recommendation

Testing
of each
alternatives
Performing
same
operation
Determination of Product Identification of alternative means
Q. No.13 Which factors influence industrial channel structure?

Ans

Marketing channels are set of independent, external organisations

involved in the process of marketing a product or service available to
consumer. Marketing channels satisfy the demand of customers by
supplying products and service at the right place, in the exact quantity
requirements and at correct price.

The factors influencing industrial channel structure are:-

 Type of market: If a manufacturer product can be sold only to the
members of one or few industries, and the number of firms in each
industry is small, direct distribution is profitable. On the other hand, if the
market is horizontal, the product must be sold to buyers in many
industries.

 Market financial: if the probable volume of sales in a market area

is quite large, direct marketing may prove profitable. On the other hand , if
the sales volume of a specific product is low, the direct method may be too
expensive.

 To what extent are the possible purchasers concentrated

geographically: If 70-80% of the total possible sales volume of a product
is concentrated to one or two limited market areas, the marketers of such
a product will find it profitable direct marketing of such products.

 Purchase Policies of the buyer: if the typical user of the industrial

goods, purchases in small orders and for quick delivery and its marketers
find it least costly and most satisfactory to sell through distribution.
 Gross Profit and price volatility: When the sales are combining
of the manufacturer goods, the gross profit is small, makes the item that
enjoy higher margins when sold to the users. The maker of items whose
price is highly volatile find it difficult to market through distributors, as there
is problem of adjusting the margins to compensate for shifts in price.

 Product installation: Products such as heavy complicate

machinery, which need to be installed by the maker itself, profit by using
direct channel of marketing. In case like selling of communication
equipment specialized contractors are given the task of installation. And
same is the case with highly technical product, which require trained
experts to guide the users.

 Quality: Different users of a material or component want a variety

of quality graduations. In such cases, lot for each customers order must
be produced to specifications and the right lot should be distributed. In
such situation, the direct channel is more effective.

 Weight of the product: If a product is bulky so that its user orders

it in truck loads, then direct delivery is recommended. Speed of delivery is
most important to the buyer. Manufacturer can sell direct through his own
salesman for factory shipment.

 Repair and maintenance requirements: If the product is so

complex that it must be serviced by highly skilled specialist, the
manufacturer must maintain some sort of service station from which
 they can operate and in which extra stock can be kept. This can be
accomplished through distributors.

 Size and financial position of industrial marketing and the marketing

objectives of the supplier who influence the industrial marketing channels.
Q. No. 14 Discuss the functions performed by advertising in industrial
marketing.

Ans

Industrial advertising is a viable and important tool of the whole industrial

marketing concept. It reduces selling costs and boosts turnover.

Advertising also performs the following functions:-

 Disseminating information: Most industrial products are
purchased per rational reasons, effective selling thus needs a support in
order to present all the relevant facts about the product. The primary
function of advertising is to inform people about the products and services
of the advertisers.

 Identifying new customers: Advertising generates enquiries from

potential customers that the firm might otherwise never know about.
Though an industrial buyer may not buy the product only by seeing the ad,
but the ad induces the buyer to ask for additional information. Effectively
planned advertising enhances the sales call by arousing interest.

 Establishing recognition: Advertising also helps to promote the

selling firms itself rather than any of its products. The reasons for the
above could be:-
1. The firm has a huge product line and cannot advertise all.
2. Slight difference between the firms of competitions products.
3. Firms lay more important at building corporate image.
4. There is no new market growth for the firms.
 Supporting salesperson: Advertising provides support to the
salesperson by building favourable altitudes about the company so that
salesperson finds it easy to make sales call. Where the market for the
industrial product is widespread, sales call made by salesman may be
infrequent. Advertising fills the gap between these calls.

 Motivating distributors: Industrial products are sometimes

distributed through distributors or manufactures, which may be handling
products of others, producers. The producers needs to convince them to
devote sufficient time of energy to sell his products and this is done by
providing middlemen with advertising literature that points out the
advantages of pushing the company’s product line etc.

 Stimulating primary demand: Industrial products advertising can

be used as an effective means to boost the sales of the products. For
example: steel, rubber and computer hardware manufactures often place
advertisements in consumers media promoting products like furniture,
tyres and computers respectively.

 Sales Appeals: A sales appeal is an argument, a fact, an idea or

an extension of attitude or emotion that the advertises tints will compel a
prospective buyer to react favourably to his message. A good industrial
advertisement should have about it a car of province for the reader and
inspire belief. Hence an important task of advertising is to contact others
on the network and lead there to a fullers appreciation of the product and
convince them to buy it from there company.

Q No-15 Which discussions are involved in industrial sales from

management
Answer

Once the company has established the sales force objectives,

strategy, structure, size and compensation, it has to move to selecting,
training and supervising, motivating, & evaluating sales
representations. Various policies and procedures guide these
decisions.

Recruiting and selecting sales representatives:

Selecting sales representative would be single if one knows what traits
to look for. One good starting point is to ask customers what traits they
like and prefer in sales people. Most customers say that they want the
sales representative to be honest, reliable, knowledgeable, & helpful.
Another aspect is to look for these traits when selecting the
candidates, traits common to the most successful sales people in the
company.

After development of selection criteria, it must recount, the human

resource department seeks applicants by various means, including
soliciting names from current sales representatives, using employment
agencies, placing job adds and contacting college students.
Recruitment procedures if successful will attract applicants and the
company will need to select the best ones. There can be a single
informal interview or prolonged testing & formal tests.

Training sales representatives

Today customers who are more demanding and deal with many
suppliers, cannot put up with insufficient sales people. Customers
expect sales people to have deep product knowledge, to add ideas to
 inspire customer operations and to be efficient and reliable. These
demands have required companies to make such higher investment in
sales training. The medium training period is 28 weeks in industrial
product companies. Training time varies with the complexity of sales
task. For e.g., IBM self-study system called Info Window where a sales
trainee can practice sales call with an on screen actor whop portrays a
buying executive.

Supervising sales representatives

Supervision is the fate of everyone who works for someone else. It is
the expression of those employers natural and continuous interest in
their employees activities. Sales representatives who are salaried
receive substantial supervision as compared to those who are paid on
commission. There are also discussions as to whether the magnitude
of sales increase justified the additional cost. Companies often specify
how much time should be spent for prospecting new accounts Unless
sales representative are rewarded for opening new accounts, they
spend more of their time with current customers. Time and duty
analysis is carried out which helps representatives understand how to
spend time efficiently and ways that might increase their productivity.

Motivating sales representatives

Majority of sales representatives require encouragement and special
incentives to work at their best level. The higher the sales person
motivation the greater is his / her efforts. Greater effort would lead to

greater performance, greater performance will lead to greater rewards,

greater rewards will lead to greater satisfaction and satisfaction will
reinforce motivation

Motivation Effort Performance Rewards Satisfaction

Evaluating Sales Representatives
Management obtains information about its sales representatives in
several ways. The most important source is sales reports. Additional
information comes through personal observations, customers’ letters
and complaints, customer’s surveys and conversations with other sales
representatives. Reports like call reports, expenses reports, lost
business reports etc provides raw data, which sales managers can
extract, key indicators of sales performance.

Q no. 16 Explain industrial marketing research process. How

industrial marketing research differs to consumers marketing research.

Answer
 Research is undertaken to obtain valuable input on variables marketing
reach is conducted to gather reliable in formations that will enhance
planning and control of marketing activity. The basic steps constructs
the marketing research process:

1. Defining the problem: It is very important because the purpose

of marketing research is to solve the problem and understand it better.
Both the researchers and decision makers have to take time to describe
the problem clearly and precisely. Researchers should question the
decision makers on the specific of the problem.

2. Research Objectives: These are the statements that outline

the aim of the above step. Objectives are the tasks on which the research
is carried on. Objectives can be:
 Determining the number of firms in different industries
that would desire the product.
 Estimating the consumption of these firms of similar
products.
 Estimate the potential sales possible.

The research objectives are put in writing so that they may

be received and improved further and also one has to
choose a research methodology.

3. Information Collection: There are basically two source of

information primary source and secondary source. Primary data is
data that is specifically collected for the problem to aid decisions
making. Method available to collect primary data are the surveys,
observations and experimentations. Surveys can be unstructured,
consisting of straightforward questions so as to bring out motives,
 priorities etc of the respondents. Structured surveys are quantifiable
and are used for measuring consumers and knowledge of buyer’s
behaviour.

Primary data collection should never be undertaken before

exploring the secondary data resources, which are already existing
and published by various agencies.

4. Analyzing the data: With the advent of computers, huge

amount of data can be analysed handled with ease. SPSS is a standard
statistical software package used by almost all the marketing research
firms for better analysis.

5. Presentation of findings: Computer system has entered the

field of presentation of research findings. They help in the presentations of
the findings as per the need of each decision market. These system are
called Management Information Systems (MIS) and Decision Support
System (DSS).

The difference between industrial and consumer marketing

research is as follows:

S Elements Industrial Consumer

. of marketing marketing
N comparis research research
o on
.
1 Type of More reliance More reliance
 data on secondary on primary
data. Marketing data.
information is Marketing
concentrated information is
among few special
experts. geographically
.

2 Sample Sample size is Sample size is

size small because large due to
small sample large sample
universe & universe and
concentration buyers
of industrial geographically
buyers dispersed.
3 Frequenc Marketing Marketing
y research is research is
conductin conducted less conducted
g frequently. more
research frequently.
4 Research Identifying Identifying
output clear-cut market
market segment is
segments is relatively
very difficult. simple.
Maintaining Maintaining
customers customers
satisfaction satisfaction
may be easy of may be difficult
quality, price & due to high
lower of degree of
 payment are brand
maintained switches.
5 Type of For established For
research products more established as
emphasis is well as new
green to products,
discipline emphasis is
method. green to
experimental &
discretional
research

Q 18:- Briefly discuss industrial pricing policies?

Ans :-

Basic requirements of a pricing policy for many industrial materials is to

fulfill the need to quote prices in a feasible and simple manner to all the
customers vis-à-vis the competitor method of quoting prices. The major
pricing policies are:-

List pricing: it is the published figure distributed to all customers,

regardless of their type or classification. This method is used for two
reasons:-

Prevent printing of new catalog each time the price is revised.

Provide a common base from where a variety of discounts can be

adjusted.

Net pricing: net price refers to list price with allowance for trade-ins ,
order pick-up (eliminate delivery), volume purchased and other cost-
significant concessions made by the buyer. The system of pricing
eliminates much of the cost confusion associated with quoting a price less
a discount. Industrial sellers prefer this method since it eliminated the
need for bargaining by the purchasing officer of the customers
organization.

Discount pricing: The term discount means deduction from the published
list price of manufacturers. In some industries, industrial manufacturers
quote the same discount as their competitors.
Three alternative discount policies are:-
Trade discounts: Since manufacturers sell products to distributors it
controls the resale price in a uniform price to the final risers.

Quantity discounts: These are price deductions that vary according to

the amount or volume purchased. These discounts are very useful for
manufacturers and suppliers in dealing with small-order problems. These
discounts are may also be used as means of classifying customer into
large quantity buyers, whom the seller wishes to serve directly and small
quantity buyers whom the seller can serve through distributors. These
may be further classified as:-

Cumulative- based upon total business purchases over a period of time

like one year or one month.

Non cumulative- based on the amount of a single order.

Cash discounts:- These are deductions, allowed by the seller, to be

made by the buyer from the face value of a hell in return for an early
payment before the due date. The main purpose is to encourage
immediate payment, thus enabling the seller to avoid the burden of
extending credit. It helps the seller to get faster turnover of working capital,
increases sales and eliminates friction between the company and slow
paying customers.

Geographic pricing:- the ultimate price to the buyer is affected by the

bulk and weight-of a product-and the cost of transporting the product to
the buyers plant, warehouse or site. As a result, many industrial
manufacturers include an allowance for transportation cost in their price
quotations. Quotations that include transportation cost allowances may
take two general forms:

Factory pricing and freight allowance pricing.

In case of factory pricing the buyers pay full freight-charges and is
responsible for all the associated with the transport of the material.