Product, Industrial, and Services Marketing (PISM) MMM V

Prof M.R.Koshti Session 8 34 slides +1**

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Last session in brief

Industrial market research Difference between consumer and industrial market research / Difference in survey methods Scope of industrial market research Marketing research process (same as consumer market) Sources of secondary data Industrial pricing Factors influencing pricing decisions Pricing strategies - Competitive bidding in competitive markets, Pricing new products, Pricing across the product life cycle Pricing policies Ex-factory, FOR Destination or FOB Destination Commercial terms and conditions Leasing**
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Todays topics
Industrial distribution channels and marketing

logistics Industrial communication Market planning for industrial products**

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Industrial distribution channels and marketing logistics**

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Marketing channel
Marketing channel is defined as set of

interdependent organizations that make a product or service available to customers for use.**

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Distinctive nature of industrial channels as against consumer goods channels

Geographical concentration because of concentration of

industrial buyers Channel size They are short. Ideally customers will like to buy directly from the manufacturer for factors like product availability, technical expertise, and servicing capabilities Characteristics of intermediaries Technically competent, must have close relations with industrial buyers Business happens mostly at customers place, therefore no need to have jazzy road-facing showroom Presentable office needed if customer visits the sellers office for some purpose like demo, etc. Mixed system Mixture of direct and indirect channels to meet requirements of different market segments **

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Services performed by middlemen

Buying / risk taking / financing

Promotion and selling

Assorting bring together several related items from

various sources to serve potential customers (Less in nature compared to consumer products) Warehousing Grading inspect products and assign grades Transportation Information Technical service**
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Why industrial customers buy from distributors?

Dependable delivery Fast and economical

deliveries (They keep buffer stock) Information Variety Liberal credit and discounts**

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Types of industrial middlemen

Manufacturers representatives agents or

sales agents, paid only commission on orders, suits small and medium firms Distributors or dealers Handle a geographical region Brokers brings the manufacturer and consumer together, short term relationship Value added resellers (VARs) customize the product for satisfying customers needs**
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Distribution strategies
Intensive distribution The objective is to

make product available from a large number of retail outlets, Standard products with less unit value (electric bulbs, cleaning powder, Selective distribution Product made available through relatively small number of retail outlets. The outlet may have competing brands also. Exclusive distribution The retail outlet which sells only your product, and none of competitors**
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Managing channel members

Selection of intermediaries criteria, (min 3 yrs

experience in designing hydraulic circuits, assembling power packs, marketing.), financial standing, location, past experience Motivating middlemen Partnership concept, vendor managed inventory system (VMI) through EDI (Electronic data interchange), reasonable discounts and commissions, distributor councils, annual retreats, Controlling channel conflicts next page Evaluating channel members next page**
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Sources of channel conflicts (?)

Differences in objectives Manufacturers want long

term profitability and distributors prefer short term profitability Dealings with customers Distributors and agents feel cheated when the manufacturer deals with large customers and asks intermediaries to serve small customers Differences in interests The manufacturer feels that the distributor is not giving adequate attention to companys products. The distributor is interested in products that are fast moving and have higher profits**
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Sources of channel conflicts.

Differences in perceptions The manufacturer wants

the dealer to carry a higher inventory due to perception of good market conditions. The distributor does not want to carry higher stocks as the dealers perception of the market is pessimistic Compensations Manufacturers representative (agents) feels that the commission percentage offered by the manufacturer is not adequate. The manufacturer thinks otherwise. Unclear territory boundaries The territory boundaries between distributors are not clear, resulting in competition among companys intermediaries to secure business from the same customers**
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Managing channel conflicts

Effective communication network periodic formal

and informal meetings, distributor council, co-optation (have intermediary member on advisory committee) Joint goal meetings Agreement on super-ordinate (fundamental) goals (leadership in market share) Diplomacy discussion between persons from both parties Mediation Neutral third party tries to conciliate the interest of both parties Arbitration- Both parties agree to abide by arbitrators decision (Legal process)**
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Evaluating channel members

Sales achieved vs sales quota

Average inventory levels

Customer delivery performance Customer complaints Co-operation in market feedback Support for new products New customers generated**

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Logistic management
Logistic management optimizes material flow within

the organization Supply chain management extends material flow integration upstream to suppliers and down stream to customers
Supplier Manufacturer Customers

Physical distribution (or marketing logistic

management) Movement of finished product from the factory to customer, includes order processing, material handling, packaging, warehousing, transportation, customer service**

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Role of marketing logistics / physical distribution

Physical distribution should be considered as a long

term strategic issue It can be a source of creating a unique competitive edge (Elpro HCL TIL) The competitive advantage of superior customer service at lower total distribution cost can not be easily copied by competitors as it needs high investments in people, systems, time and technology. The logistics will play a more important role in future due to important factors of global competition, worldwide sourcing, JIT system, and total quality management.**
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Just in time (JIT) system

All suppliers of materials must deliver products few hours before

they are used The system expects the supplier to deliver the products at the precise time and in the exact quantity needed by the customer .therefore . The suppliers must have warehouses near the customer place The quality of the product must be perfect as there is no inspection The suppliers must coordinate with the customers production schedule The frequency of deliveries are more The customer benefits in terms of reduced inventory carrying cost**

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Industrial communication**

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Promotion mix for industrial products (in the order of importance)

1. 2. 3. 4. 5. 6.

Personal selling Advertising Sales promotion Direct marketing Publicity Public relations Reasons - Technical nature of industrial products, smaller number of industrial buyers, complex nature of industrial buying process**
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Developing industrial communication program

Determine communication objectives

Buyers awareness level (sales lead generation / coupons), change in buyers attitude, buying action Identify target audience Level 1 Buying organizations, level 2 Buying centers Determine promotional budget affordable, percentage, competitive parity, objective and task Develop the message**
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Developing industrial communication program.

Selecting media General business publications

(Business India, Business World), Trade journals / publications (vertical publications directed towards specific industry e.g. Textile trend, Iron and steel age, chemical week) (Horizontal- directed towards functions which cut across the organizations e.g. Purchase, Advertising and marketing, Modern material Handling) Evaluate promotions results Integrate the promotional program to provide clarity, consistency**
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Sales promotion / business promotion

In industrial marketing the objectives of sales

promotion are.. 1. Rewarding customers (Pull) 2. Stimulating sales force to greater efforts (Push)**

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Methods of business promotion

Trade shows / exhibitions next page

Catalogues / mailers For standard products

Sales contests Promotional novelties / gifts Entertainment Promotional letters personalized Seminars Demonstrations**
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Trade shows / trade fairs

Organized by industry or trade associations

Marketer company buys space and sets up

stall to demonstrate their products**

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Trade shows / trade fairs

Advantages Opportunity to introduce new products to a large audience in a

short duration Establishing personal contacts with new customers Increasing company awareness with key members of decision making units who cannot otherwise be contacted Making direct sales Display and demonstrate products Evaluating competitors products Discovering new suppliers and distributors Obtaining new product ideas Training for new sales persons Getting sales leads (WIE, Pune)**
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Trade shows / trade fairs

Disadvantages

Increasing costs of construction and exhibits

Personnel travel, lodging, and boarding Pre-trade promotion costs Your product is exposed to the competition Sales people are locked, their clients get

neglected during this time**

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Market planning for industrial markets**

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Marketing plan outline

Where are we?

Where do we want to go?

How will we get there? How will we stay on course?**

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Where are we?

Situational analysis Market situation,

competitive situation, product situation, macro environmental situation SWOT and issues analysis**

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Where do we want to go?

Objectives and goals**

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How will we get there?

Marketing strategy

Identifying market segments,

Choosing market segments to focus (targeting), Positioning strategy relative to competition (STP)

Marketing mix strategy 4Ps

Action plan who will do what, by when Marketing budget estimated profits Implementation building marketing organization to

implement the marketing plan**

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How will we stay on course?

Control Periodic review of actual

performance against goals and taking corrective actions, Marketing research Contingency plans In case uncertain situation arises**

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Competition oriented strategies

1. 2.

3.
4. 5.

Also called interactive strategies Porters 5 forces model Existing direct competition product differentiation, cost leadership, reverse engineering Threat of Suppliers (forward integration)- Develop more than one supplier Threat of Buyer (backward integration) Develop more than one buyer New entrants Entry barriers (technology, investment, legal / Political issues) Substitutes Face it up (decline stage strategies), keep an eye on competitors activities at the patents office, phase out, enhance your own R & D to develop substitutes***

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

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

2(5), 42(4), 9(5) 21(5), 31(5),27(4)**

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