Industrial Marketing: An Overview

Discussion in 'CAT / MBA INDIA Forum' started by krishan, Aug 29, 2014.

  1. AbstractIndustrial marketing is a kind of marketing, but it is not the same as consumer marketing. Consumer marketing is the marketing of goods and services by manufacturer to final consumer, but industrial marketing is from one business to another.The industrial market focuses solely on the goods and services provided for producing a separate end product. This paper explains the meaning of industrial marketing and providesthe knowledge about industrial products, industrial markets, buying situations and growth in industrial market. This paper also sheds lighton career opportunities in the field of industrial marketing.

    Keywords:
    marketing, buying, growth, career, market

    IntroductionIndustrial marketing is the marketing of goods and services to industrial customers for use, in turn, in their own production of goods and services. It involves one business dealing goods or services to another business instead of a consumer base. Also known as the business-to-business market, this market encompasses three distinct variations, including businesses selling goods, businesses selling raw materials and businesses selling services. Each of these three happens in a variety of individual businesses. There are many advantages of this type of market over the traditional consumer market.The industrial market focuses solely on the goods and services provided for producing a separate end product. This is an organizational market with its own advertising, distribution and sales. From automobiles to food, clothes and more, consumer industrial products would not be available without the industrial market first being utilized. Many companies create and market products that have little to no application on the level of the individual customer, so their only clients will be other businesses. A company that makes large-scale manufacturing machinery, for example, is either unlikely or unable to sell that machinery to private individuals because those customers are unlikely to be able to afford it or won't need equipment of such size. The machinery would have to be sold to another business that has both the resources and need to produce large quantities of their own product, such as a mass-market toy factory that needs to create one million units of the same toy each year.

    If we talk about the marketing channels for industrial products, they are not same as of consumer products.Industrial distributors, manufacturers' representatives, agents etc. are the members of industrial marketing channels. The figure-1 represents the various marketing channels for industrial products.

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    Classification of Industrial ProductsIndustrial products can be categorized as Raw Material and Parts, Capital Items & Supplies and Services. Raw materials are those Industrial products that customers buy for the purpose of manufacturing other goods. In other word, raw materials are those products, which process in the business operation and become the part of other goods. For example; Natural products like coal, petroleum, iron, fish etc.; Farm products like cotton, vegetables, wheat, livestock etc.Manufacturing materials are the parts of those Industrial goods, which are complete in all respect and might have gone all the manufacturing process but ultimate consumer cannot use them until when they combine with another finished product. They become the part of finished goods. For example; yarn, semiconductor, tyres, zipper etc.An organization's major expensive, long-lived equipments (fixed assets) are called installation. For example; large generator used in Dam, large printing press, long live asset such as machinery etc. The accessory equipments are those industrial products, which are bought by the organization or individual to support the real business operations, they may be revenue nature, or capital nature. For example: typewriter, table, chairs, computer etc.Operating supplies are those products, which are essential for normal business operation. They do not become part of the finish goods. But they just facilitate the business operation. For example; oil, coal, fuel, stationary, cleaning material etc.Industrial services include maintenance and repair services and industrial advisory services. They are usually supplied under contract. For example: computer repairing, management consulting, advertising etc.

    Characteristics of Industrial MarketThe Industrial market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented or supplied to others. The major industries making up the business market are agriculture, forestry and fisheries; mining; manufacturing; construction; transportation; communication; public utilities; banking, finance and insurance; distribution; and services. More money and items change hands in sales to Industrial buyers than to consumers. Considerthe process ofproducing and selling a simple pair ofshoes.Hide dealers must sell hides to tanners,who sell leather to shoe manufacturers,who sell shoes to wholesalers,who sell shoes to retailers,who finally sell them to consumers.Each party in the supply chain also buys many other goods andservices to support its operations.Industrialmarketers, however, have several characteristics that contrast sharply with those of consumer markets:
    • Fewer, larger buyers: The Industrial marketer normally deals with far fewer, much larger buyers than the consumer marketer does, particularly in such industries as aircraft engines and defense weapons. The fortunes ofGoodyear tires,Cummins engines,Delphi control systems,and other automotive part suppliers depends on getting big contracts from just a handful ofmajor automakers.
    • Close supplier–customer relationship: Because ofthe smaller customer base and the importanceand power ofthe larger customers,suppliers are frequently expected to customize their offerings toindividual Industrial customer needs.Industrial buyers often select suppliers that also buy from them.A papermanufacturer might buy from a chemical company that buys a considerable amount ofits paper.
    • Professional purchasing: Industrial goods are often purchased by trained purchasing agents, who must follow their organizations' purchasing policies, constraints and requirements. Many of the buying instruments—for example, requests for quotations, proposals and purchase contracts—are not typically found in consumer buying. Professional buyers spend their careers learning how to buy better. Industrial marketers must provide greater technical data about their product and its advantages over competitors' products.
    • Multiple buying influences: More people typically influence Industrial buying decisions. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. Industrial marketers need to send well-trained sales representatives and sales teams to deal with the well-trained buyers.
    • Multiple sales calls: A study by McGraw-Hill found that it took four to four and a half calls to close an average industrial sale. In the case of capital equipment sales for large projects, it may take many attempts to fund a project and the sales cycle—between quoting a job and delivering the product—is often measured in years.
    • Derived demand: The demand for Industrial goods is ultimately derived from the demand for consumer goods. For this reason, the Industrial marketer must closely monitor the buying patterns of ultimate consumers. Pittsburgh-based Consol Energy's coal business largely depends on orders from utilities and steel companies, which, in turn, depend on broader economic demand from consumers for electricity and steel-based products such as automobiles, machines and appliances. Industrial buyers must also pay close attention to current and expected economic factors, such as the level of production, investment, and consumer spending and the interest rate. In a recession, they reduce their investment in plant, equipment and inventories. Industrial marketers can do little to stimulate total demand in this environment. They can only fight harder to increase or maintain their share of the demand.
    • Inelastic demand: The total demand for many Industrial goods and services is inelastic—that is, not much affected by price changes. Shoe manufacturers are not going to buy much more leather if the price of leather falls, nor will they buy much less leather if the price rises unless they can find satisfactory substitutes. Demand is especially inelastic in the short run because producers cannot make quick changes in production methods. Demand is also inelastic for Industrial goods that represent a small percentage of the item's total cost, such as shoelaces.
    • Fluctuating demand: The demand for Industrial goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Economists refer to this as the acceleration effect. Sometimes a rise of only 10 percent in consumer demand can cause as much as a 200 percent rise in business demand for products in the next period; a 10 percent fall in consumer demand may cause a complete collapse in business demand.
    • Geographically concentrated buyers: Different types of industries in India tend to get concentrated in specific regions of different states: The hosiery industry, for instance, is concentrated in and around Coimbatore. The diamond cutting and polishing industry is concentrated in Surat. There are a large number of automobile and auto ancillary industries in Pune and Nasik. Similarly, there is a concentration of the pharmaceutical and chemical industry in industrial townships near Ahmedabad and a large number of software companies are located in Bangalore. The geographical concentration ofproducers helps to reduce sellingcosts.At the same time,Industrial marketers need to monitor regional shifts ofcertain industries.
    • Direct purchasing: Industrial buyers often buy directly from manufacturers rather than through intermediaries, especially items that are technically complex or expensive such as mainframes or aircraft.
    Industrial Buying Circumstances Business organizations do not only sell, they also buy vast quantities of raw materials, manufactured components, plant and equipment, supplies and Industrial services. To create and capture value, sellers need to understand these organizations' needs, resources, policies and buying procedures. Frederick E.Webster Jr. and Yoram Wind define organizational buying as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among alternative brands and suppliers.

    The business buyer faces many decisions in making a purchase. How many depends on the complexity ofthe problem being solved,newness ofthe buying requirement,number of people involved andtime required.Three types ofbuying situations are the straight rebuy,modified rebuyand new task.There are three common types of buying situations as given below:-

    • New purchase - The industrial buyers buy the item for the first time in this situation. The need for a new purchase may be due to internal or external factors.
    • Change in supplier - This situation occurs when the organization is not satisfied with the performance of the existing suppliers, or the need arises for cost reduction or quality improvement. The change in supplier may also be necessary if technical people in the buying organization ask for changes in the product specification, or marketing department asks for redesigning the product to gain some competitive advantage.
    • Repeat purchase - If the buying organization requires certain products or services continuously and products/services had been purchased in the past then the situation of repeat purchase occurs.
    Growth in Industrial MarketThe tremendous growth and change that industrial marketing is experiencing is due in large part to three "revolutions" occurring around the world today. First is the technological revolution. Technology is changing at an unprecedented pace, and these changes are speeding up the pace of new product and service development. A large part of that has to do with the Internet. Second is the entrepreneurial revolution. To stay competitive, many companies have downsized and reinvented themselves. Adaptability, flexibility, speed, aggressiveness and innovativeness are the keys to remaining competitive today. Marketing is taking the entrepreneurial lead by finding market segments, untapped needs and new uses for existing products, and by creating new processes for sales, distribution and customer service. The third revolution is one occurring within marketing itself. Companies are looking beyond traditional assumptions and adopting new frameworks, theories, models and concepts. They're also moving away from the mass market and the preoccupation with the transaction. Relationships, partnerships and alliances are what define marketing today. The cookie-cutter approach is out. Companies are customizing marketing programs to individual accounts. The production of Paints of all kinds, synthetic resins and printing ink during 2012-13 were 7,83,703.71 tones; 1,67,286.00 tones and 2,00,345.41 tons respectively. During 2013-14, the production have been 7,72,075.00 tones; 2,12,639.65 tones and 1,80,520.00 tones respectively.India is tenth in the world in factory output manufacturing sector in addition to mining, quarrying, electricity and gas together account for 27.6% of the GDP and employs 34% of the total workforce. Steel industry has been considered the backbone of India's industrialization programme. During 2012, India maintained its ranking as the 4th largest steel producing country in the world behind China, Japan and the US with a crude steel production of 76.7 million tons (MT) representing a 4.3% growth over 2011. Being a core sector, steel industry tracks the overall economic growth in the long term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries. Aluminium industry is of strategic importance in the development of the Indian economy. The electrical sector in India is the most important consumer of Aluminium products with over 50% of the offtake of total production. Cement industry belongs to the core sector of the economy. The production and dispatch figures of cement for the year 2012-13 are 251.96 Million Tones (MT) and 237.63 Million Tones (MT) respectively. The production and dispatch figures for the year 2013-14 are 256.04 MT and 248.70 MT respectively. Fertilizer industry plays a critical role in the growth of the agriculture in the country. Paper and paper products are considered basic to the development of social and general infrastructure of the economy. Besides the industry has an important role in packaging. With rising population, increasing disposable income and the spread of literacy, demand for paper will increase substantially.

    Career Opportunities in Industrial MarketingIn the present scenario, world needs marketing managers and executives with competitive skills, who can readily take up the challenges in a fast-changing industrial environment. Companies are generating higher sales volume from industrial sales than from consumer sales. Therefore, it is imperative for them to have marketing experts to serve their industrial customers effectively. It indicates the emergence of a number of career opportunities. There are many different roles at managerial and executive level, which can be assumed in various organizations like; Hindalco Industries, Tata Chemicals, National Steel & Agro Industries, Kribhco Shyam Fertilizers, ACC, Jindal Steels, and many more. These roles may be at different positions as; Manager/Executive- Corporate Sales, Branch Manager-Industrial Sales Division, Manager/Executive- Industrial Marketing, Marketing Executive- Industrial Products, Sales Officer/Executive- Industrial Goods, Brand Executive/Manager, Account/Product Executive, and other related profiles.Participants would also be capable of becoming successful entrepreneurs.

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