Industrial marketing

Industrial Buying Behaviour

Prepared By- Mathew Lawrence

“Small changes in consumer demand can have big changes in the requirement for industrial parts, components and materials to make

those products”

Derived Demand & Joint demand- Introduction

A term used in economic analysis that describes the demand placed on one good or

service 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 is derived

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 from sale of Paper

Demand forWood pulp

Demand from Paper

Derived Derived

Demand forCartridges

Demand from Printer

Derived

Industrial Buying Behaviour- Introduction

Buying is the other side of the industrial marketing coin other

than the industrial selling.

Just as industrial marketers seek customers, so the industrial buyers seek suppliers or

vendors.

Purchase department: Purchase department of a firm develops organizational buying

objectives and perform certain activities so as to maintain an adequate flow of goods

and services into the operation.

Many people involved in the decision making process

Industrial buying involves long time to take decisions as compared to consumer

buying.

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 the

right 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 to

ensure that purchased goods and services are available throughout.

Product Quality : The product quality should be consistent with the

specification and use of the product. Example- ISI 9000.

Lowest Price: Purchasing of any product is shortlisted on one of the basic parameter of

lowest 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 decision

making process.

Robinson Faris and Wind developed eight phases of buying decision process in

industrial market in 1967 called the process of Buying phases.

Understanding the various phases of buying decision making is useful to an industrial

marketer as it helps in developing an appropriate product.

Stages in Purchasing ProcessProblem or Need RecognitionProblem or Need Recognition

Quantity of ProductQuantity of Product

Specification of ProductSpecification of Product

Search for Potential Suppliers Search for Potential Suppliers

Obtaining Supplier ProposalObtaining Supplier Proposal

Evaluating ProposalsEvaluating Proposals

Selection of ProposalSelection of Proposal

Feedback & Post Purchase EvaluationFeedback & Post Purchase Evaluation

Types of Purchases or Buying Situations

New Purchase (New Task): In this situation the company

is buying the item for the first time. The need for a new

purchase 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 the

organization is not satisfied with the performance of the existing supplier, or need arise

due to cost reduction or quality improvement, changes in the production specification

Repeat Purchase (Straight Rebuy): This situation occurs when the buying

organisation requires certain products or services continuously. Here the price, deivery

model and payment terms remains same. .

Examples for types of Purchases

Straight Rebuy Modified Rebuy New Task

Gas, W

ater,

Electricity

Cleaning Materials

Statio

nary

Spare

par

ts

Com

pute

rs

Printing

vendor

Raw

materials

Off

ice

InfrastructureProduction M

achinery

Com

puter system

Printers

Buying Center Roles

Initiators: This category includes individuals who first

recognize a problem or a need, which could be solved

by purchase of a product or service. Eg: Managers,

floor managers,

Buyers: The major roles and responsibilities of buyers

are- 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 be

purchased. They may define the exact specification, dimension etc. Eg: Floor

manager, R&D team.

Influencers: They are the individuals who could influence the buying decision

process. Eg: Designers, Quality control team, Consultants.

Deciders: The actual buying decisions are made by the deciders. The deciders may

be 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 information

regarding products and services. They are often the assistants, Juniors involved in the

purchase department.

The Webster and Wind Model – Organizational Buying Behaviour

In 1967, the Canadian, American and Israeli marketing researchers, Robinson, Faris

and Wind, introduced the buy grid framework as a generic conceptual model for

buying processes of organizations.

They saw industrial buying not as single events, but as organizational decision-making

processes where multiple individuals decide on a purchase.

Environmental Variables•Technological•Economic•Political•Labour union•Cultural•Competition

Organizational Variables•Objectives/goals•Ogr Structure•Purchasing policies•Degree of decentralization

Buying Center Variables•Authority•Size•Key Influencers•Communication

Individual Variables•Personal goals•Experience•Expertise•Values•Income•Lifestyle

Organizational Buying Decisions •Choice of Suppliers•Delay in decisions•Make or lease or Buy•Do not buy.

Industrial Marketing Research

Prepared By- Mathew Lawrence

“Effective marketing decisions are based on information in market place rather than on intuition or hunches.”

In a changing market place, the industrial marketers must

continuously gather information on customers, competitors

and environment.

Industrial marketing research is one of the parts or components of industrial marketing

intelligence.

Marketing Intelligence is an ongoing activity to provide continuous information for

decision making.

Definition: Marketing Research is defined as the objective and systematic process of

obtaining, 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 – sales

forecasting, Market share, Market potential, Competitive analysis, New Product

development, Benchmarking.

Industrial Marketing Research - Introduction

Industrial Marketing Research Process Identify the problem/opportunity and define research objectives

Develop the research design

Collect the data (orinformation

Collect the data (orinformation

Process and analyze the data

Present the research findings or reports

1 Step- Identify the problem/opportunity and define research objectives.

The first step in the marketing research process is to identify the

marketing problems or opportunity accurately and define the objective.

The problem identification is very important and to avoid any controversy at a latter

stage the marketing manager prepares a “Research Brief”

Research brief explains the background information about the problem and how the

finding 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 the

research design which basically indicates the problem and the cost of conducting the

research study.

The research design includes the decision area -

Decision Areas

Particulars

Information type

Prepare a list of information required from research objective.

Sources of data

Primary, Secondary, Commerical

Research Methods

Observational, Exploratory, Survey

Sampling Plan Sample unit, size, procedure

Method of Contacts

Mail, 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 data

is often collected if the research objective are not achieved by secondary.

Research Methods

Brief description

Observational People and their behavior are observed and the information is recorded.

Exploratory Exploratory research methods such as focus group and in-depth interview are used

Survey Descriptive method by asking questions 4. 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 a

written format explaining the findings .

New Product Development

Prepared By- Mathew Lawrence

“It is the product or service offer from an industrial firm that must ultimately satisfy customer”

New Product Development- Introduction

Product decisions are both important and complex, and bind

together various departments such as R&D, Engineering,

Materials, Manufacturing.

Definition: The industrial product is defined not only as a physical entity, but also as a

complex set of economic, technical, legal and personal relationship between the buyer

and 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 what

constitutes 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 target

customers. To survive and succeed in a competitive market, an individual firm must

continuously monitor changes in the needs of its target customers. Eg: Automobiles

Technology: The changes in technology can require product modification or make

existing product obsolete. Eg: Floppy drive, I pad,

Government Policies: The changes in government policies and laws enacted by

Indian Parliament requires changes in the product strategy. Eg: Tobacco, Cigarette,

liberalization.

Product Life –Cycle: Companies do take decisions regarding the product in its PLC

stage 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 to

determine 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 begin

when they are launched in the market (introduction stage) and end when they are

eliminated from the market (decline stage)

At the dividing line between the Growth and Maturity stage, the profit curve is at its

peak.

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 a

study conducted on 1148 industrial business confirmed that industrial products

typically follow the patter of sales and profits.

Industry Profits

Sales & Profit

Time

Ru

pees

0+

-

Introduction

Growth Maturity

Decline

Industry Sales

A General Model of the Product life Cycle – In relation with Sales & Profits

NPD I&G

M D

Sales

Time

Product Life Cycle for High- tech Product

Sales

Time

Product Life Cycle- for Commodity

Thank You