Chapter 1 The Unique Nature of Industrial Marketing

Industrial Marketing Also called: Business-to-Business (B2B) and Organizational Marketing. Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers. Customer can be private firm, public agency, or nonprofit organization.

Also called: Business-to-Business (B2B) and Organizational Marketing.

Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers.

Customer can be private firm, public agency, or nonprofit organization.

The Marketing Concept Creating value for customers with goods and services that address organizational needs and objectives.

Creating value for customers with goods and services that address organizational needs and objectives.

Marketing Concept Three major components: All company activities should begin with, and be based on, the recognition of a fundamental customer need. A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D. Customer satisfaction is viewed as the means to long-term profitability goals.

Three major components:

All company activities should begin with, and be based on, the recognition of a fundamental customer need.

A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D.

Customer satisfaction is viewed as the means to long-term profitability goals.

Follower Interact Isolate Shaper Customer Focus Low Technology Focus High High Low Strategic Focus Grid

Market Orientation Acquire intelligence from the external environment. Disseminate that intelligence throughout the organization. Respond to the intelligence: take action. (Kohli and Jaworski 1990, Journal of Marketing)

Acquire intelligence from the external environment.

Disseminate that intelligence throughout the organization.

Respond to the intelligence: take action.

(Kohli and Jaworski 1990, Journal of Marketing)

Marketing Mission Statement State in terms of meeting customer needs, not in terms of products or technologies. Marketing Myopia (Levitt 1960 HBR)

State in terms of meeting customer needs, not in terms of products or technologies.

Marketing Myopia (Levitt 1960 HBR)

Marketing Activities Identify customer needs Research customer behavior Divide market into manageable segments Develop new products/services Establish/negotiate prices Deliver, install, service products Ensure adequate and timely supply of products at correct place Allocate resources across product lines Communicate with customers Evaluate/control marketing programs

Identify customer needs

Research customer behavior

Divide market into manageable segments

Develop new products/services

Establish/negotiate prices

Deliver, install, service products

Ensure adequate and timely supply of products at correct place

Allocate resources across product lines

Communicate with customers

Evaluate/control marketing programs

Marketing Mix Limited number of variables under Marketing’s control to create position that is attractive to the target market segment. Four Ps Product Price Promotion Place (Distribution)

Limited number of variables under Marketing’s control to create position that is attractive to the target market segment.

Four Ps

Product

Price

Promotion

Place (Distribution)

External Environment Characterized by: Degree of Stability Complexity Diversity Hostility

Characterized by:

Degree of Stability

Complexity

Diversity

Hostility

External Environment Six Environments Technological Economic Social/Cultural (Customer) Political/Legal Natural/Climatic Competitive

Six Environments

Technological

Economic

Social/Cultural (Customer)

Political/Legal

Natural/Climatic

Competitive

So what’s different about B2B? Marketing Concept Marketing Mix Market Segmentation Product Life Cycle All apply in both B2C and B2B.

Marketing Concept

Marketing Mix

Market Segmentation

Product Life Cycle

All apply in both B2C and B2B.

So what’s different about B2B? The technical characteristics of the product are important. These products directly affect the operations and economic health of the customer. The customer is an organization rather than an individual consumer, or family.

The technical characteristics of the product are important.

These products directly affect the operations and economic health of the customer.

The customer is an organization rather than an individual consumer, or family.

Five Major Differences Between B2B and B2C Products/Services being marketed Nature of demand How the customer buys Communication process Economic/Financial factors

Products/Services being marketed

Nature of demand

How the customer buys

Communication process

Economic/Financial factors

Products/Services More complex Functional vs. Symbolic Attributes Large unit dollar value/Large quantities Custom/Tailored Various Stages from raw material to finished goods. Foundation, Entering, Facilitating Goods

More complex

Functional vs. Symbolic Attributes

Large unit dollar value/Large quantities

Custom/Tailored

Various Stages from raw material to finished goods.

Foundation, Entering, Facilitating Goods

Raw Material Extraction Material Processing Manufacturing Parts/Subassembly Assembly Distribution Wholesale/Retail Trade Final Consumers Facilitators Firms in Production Chain

Nature of Demand Derived Joint/Shared Concentrated Inelastic

Derived

Joint/Shared

Concentrated

Inelastic

How Customer Buys Group Process Formal Lengthy Loyal Decisions based on risk and opportunity

Group Process

Formal

Lengthy

Loyal

Decisions based on risk and opportunity

Communication Personal selling more important than mass paid advertising Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW. Message focused on technical, factual, and descriptive content. Multiple audience members.

Personal selling more important than mass paid advertising

Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW.

Message focused on technical, factual, and descriptive content.

Multiple audience members.

Economic/Financial Factors Competition oligopolistic Power/Dependency relationships Reciprocity:Doing business with companies that do business with them. Economic variables: interest rates, inflation, business cycle

Competition oligopolistic

Power/Dependency relationships

Reciprocity:Doing business with companies that do business with them.

Economic variables: interest rates, inflation, business cycle