Prepared By- Mathew Lawrence“Small changes in consumer demand can have big changes in therequirement for industrial parts, components and materials to makethose products”
Derived Demand & Joint demand- Introduction A term used in economic analysis that describes the demand placed on one good orservice as a result of changes in the price for some other related good or service. Example: demand for wood pulp is derived from the demand for paper, which isderived from the increase in people printing on paper Industrial demand is therefore called derived demand. Joint demand occurs when one industrial product is useful for other product. Other example: Demand medical shop is more where Clinic are situated.Demand fromsale of PaperDemand forWood pulpDemand fromPaperDerived DerivedDemand forCartridgesDemand fromPrinterDerived
Industrial Buying Behaviour- Introduction Buying is the other side of the industrial marketing coin otherthan the industrial selling. Just as industrial marketers seek customers, so the industrial buyers seek suppliers orvendors. Purchase department: Purchase department of a firm develops organizationalbuying objectives and perform certain activities so as to maintain an adequate flow ofgoods and services into the operation. Many people involved in the decision making process Industrial buying involves long time to take decisions as compared to consumerbuying. Need to get the approval of many people to get a final decision The volume of business to business trade is far greater than consumer marketing
Purchasing Objectives Purchase/Material Management objective is defined as “buying the right items in theright quantity, at the right price, for delivery at the right time and place” The objectives of the purchasing function are- Delivery/Availability of materials: One of the prime objective is toensure that purchased goods and services are available throughout. Product Quality : The product quality should be consistent with thespecification and use of the product. Example- ISI 9000. Lowest Price: Purchasing of any product is shortlisted on one of the basic parameter oflowest price. Services: Industrial buyers needs many types of services like- Training, AMC, Repairing, etc.
Purchasing Process The Industrial purchasing activities consists of various phases of buying decisionmaking process. Robinson Faris and Wind developed eight phases of buying decision process inindustrial market in 1967 called the process of Buying phases. Understanding the various phases of buying decision making is useful to an industrialmarketer as it helps in developing an appropriate product.
Stages in Purchasing ProcessProblem or Need RecognitionQuantity of ProductSpecification of ProductSearch for Potential SuppliersObtaining Supplier ProposalEvaluating ProposalsSelection of ProposalFeedback & Post Purchase Evaluation
Types of Purchases or Buying Situations New Purchase (New Task): In this situation the companyis buying the item for the first time. The need for a newpurchase may be due to internal or external factors.Reasons for New Purchase- Production of new product line, materials, modification.Hence in new purchase the company has to obtain a variety of information.Risks involved is more. Decision may take longer time and more people are involved. Change in Supplier (Modified Rebuy): A modified rebuy situation occurs when theorganization is not satisfied with the performance of the existing supplier, or needarise due to cost reduction or quality improvement, changes in the productionspecification Repeat Purchase (Straight Rebuy): This situation occurs when the buyingorganisation requires certain products or services continuously. Here the price, deiverymodel and payment terms remains same. .
Examples for types of PurchasesStraight Rebuy Modified Rebuy New Task
Buying Center Roles Initiators: This category includes individuals who firstrecognize a problem or a need, which could be solvedby purchase of a product or service. Eg: Managers,floor managers, Buyers: The major roles and responsibilities of buyersare- Obtaining quotation, supplier evaluation, negotiation,processing orders, implementing purchase policies. Eg: Purchase manager. Users: This includes individuals who use the actual product or service that is to bepurchased. They may define the exact specification, dimension etc. Eg: Floormanager, R&D team. Influencers: They are the individuals who could influence the buying decisionprocess. Eg: Designers, Quality control team, Consultants.
Deciders: The actual buying decisions are made by the deciders. The deciders maybe one or more individuals involved in the buying decisions. Eg: Top management,Board of directors, Gatekeepers: They are the individuals who could control the flow of the informationregarding products and services. They are often the assistants, Juniors involved in thepurchase department.
The Webster and Wind Model – Organizational Buying Behaviour In 1967, the Canadian, American and Israeli marketing researchers, Robinson, Farisand Wind, introduced the buy grid framework as a generic conceptual model forbuying processes of organizations. They saw industrial buying not as single events, but as organizational decision-makingprocesses where multiple individuals decide on a purchase.
Environmental Variables•Technological•Economic•Political•Labour union•Cultural•CompetitionOrganizational Variables•Objectives/goals•Ogr Structure•Purchasing policies•Degree of decentralizationBuying Center Variables•Authority•Size•Key Influencers•CommunicationIndividual Variables•Personal goals•Experience•Expertise•Values•Income•LifestyleOrganizational Buying Decisions•Choice of Suppliers•Delay in decisions•Make or lease or Buy•Do not buy.
Prepared By- Mathew Lawrence“Effective marketing decisions are based on information in market placerather than on intuition or hunches.”
In a changing market place, the industrial marketers mustcontinuously gather information on customers, competitorsand environment. Industrial marketing research is one of the parts or components of industrial marketingintelligence. Marketing Intelligence is an ongoing activity to provide continuous information fordecision making. Definition: Marketing Research is defined as the objective and systematic process ofobtaining, analyzing and reporting of data for decision making in marketing. Examples of Firms: CRISIL, Some of the projects or studies on industrial marketing research are – salesforecasting, Market share, Market potential, Competitive analysis, New Productdevelopment, Benchmarking.Industrial Marketing Research - Introduction
Industrial Marketing Research ProcessIdentify theproblem/opportunityand define researchobjectivesDevelop theresearch designCollect the data (orinformationCollect the data (orinformationProcess andanalyze the dataPresent theresearch findings orreports
1 Step- Identify the problem/opportunity and define research objectives. The first step in the marketing research process is to identify themarketing problems or opportunity accurately and define the objective. The problem identification is very important and to avoid any controversy at a latterstage the marketing manager prepares a “Research Brief” Research brief explains the background information about the problem and how thefinding of marketing research will be useful for making decision to solve problems.2 Step- Develop the Research Design/Plan. The industrial marketing research or the marketing research agency develops theresearch design which basically indicates the problem and the cost of conducting theresearch study. The research design includes the decision area -
Decision Areas ParticularsInformation type Prepare a list of information required from researchobjective.Sources of data Primary, Secondary, CommericalResearchMethodsObservational, Exploratory, SurveySampling Plan Sample unit, size, procedureMethod ofContactsMail, telephone, personal interview.Data Collection Questionnaire,Decision Areas in Research Design
3. Collect the data Although industrial market depends substantially on the secondary data, primary datais often collected if the research objective are not achieved by secondary.Research Methods Brief descriptionObservational People and their behavior are observed and theinformation is recorded.Exploratory Exploratory research methods such as focusgroup and in-depth interview are usedSurvey Descriptive method by asking questions4. Process and Analysis the data This process include activities like- Editing, Coding, Classification, Tabulating.5. Presenting the research report The complete research report should be presented in awritten format explaining the findings .
Prepared By- Mathew Lawrence“It is the product or service offer from an industrial firm that mustultimately satisfy customer”
New Product Development- Introduction Product decisions are both important and complex, and bindtogether various departments such as R&D, Engineering,Materials, Manufacturing. Definition: The industrial product is defined not only as a physical entity, but also as acomplex set of economic, technical, legal and personal relationship between the buyerand seller Example: For instance a company as a buyer of an industrial product- MCCB(moulded case circuits) can consider economic (i.e price) technical (i.e specification)legal (delivery time) and personal relationship between them. In this competitive world every industrial companies should be aware of whatconstitutes a total product package in the minds of customers.
Factors demanding change in Industrial product Customer Needs: Products are made to satisfy certain needs and wants of targetcustomers. To survive and succeed in a competitive market, an individual firm mustcontinuously monitor changes in the needs of its target customers. Eg: Automobiles Technology: The changes in technology can require product modification or makeexisting product obsolete. Eg: Floppy drive, I pad, Government Policies: The changes in government policies and laws enacted byIndian Parliament requires changes in the product strategy. Eg: Tobacco, Cigarette,liberalization. Product Life –Cycle: Companies do take decisions regarding the product in its PLCstage of Maturity and Decline stage. Eg: Mobile models
Industrial Product Life cycle and Strategies The product life cycle (PLC) theory or concept is the basic underlining theory used todetermine marketing strategies. Industrial PLC is studies with in relation with Sales and Profits. Acc to the theory products tend to go through different cycles or stages that beginwhen they are launched in the market (introduction stage) and end when they areeliminated from the market (decline stage) At the dividing line between the Growth and Maturity stage, the profit curve is at itspeak. In maturity stage sales volumes continues to increase (decreasing rate) but profits fall. Many studies on PLC concept are carried out in consumer marketing. However astudy conducted on 1148 industrial business confirmed that industrial productstypically follow the patter of sales and profits.
IndustryProfitsSales & ProfitTimeRupees0+-IntroductionGrowth MaturityDeclineIndustrySalesA General Model of the Product life Cycle – In relation with Sales & Profits
NPD I&G M DSalesTimeProduct Life Cycle for High- tech Product