RURAL

MARKETING
MODULE – 1

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 Industrial marketing
Industrial marketing is the marketing of
goods and services from one business to
another. The word "industrial" has connotations
of heavy machinery, mining, construction etc.
but "industrial marketing" is not confined to
these types of business activities. Broadly (and
inadequately) marketing could be split into
consumer marketing (B2C "Business to
Consumer") and industrial marketing (B2B
"Business to Business").

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 Business to Business (B to B)
(or "Industrial")
 An organization is seeking to build a new warehouse building. After
carefully documenting their requirements, it obtains three proposals
from suitable construction firms and after a long process of
evaluation and negotiation it places an order with the organization
that it believes has offered the best value for money.
 An organization has significant need for legal services and obtains
submissions from two law firms. Analysis of the proposals and
subsequent discussions determines that there is no price advantage
to placing all of the work with one firm and the decision is made to
split the work between the two firms based on an evaluation of
each firm's capabilities.
 A sales representative makes an appointment with a small
organization that employs 22 people. He demonstrates a
photocopier/fax/printer to the office administrator. After discussing
the proposal with the business owner it is decided to sign a contract
to obtain the machine on a fully maintained rental and consumables
basis with an upgrade after 2 years.

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 main features of the Business to
Business (B to B)
 Marketing is one-to-one in nature. It is relatively easy for
the seller to identify a prospective customer and to build
a face-to-face relationship.
 High value .
 Purchase decision is typically made by a group of people
("buying team") not one person.
 Often the buying/selling process is complex and includes
many stages (for example; request for expression of
interest, request for tender, selection process, awarding
of tender, contract negotiations, and signing of final
contract).
 Selling activities involve long processes of prospecting,
qualifying, wooing, making representations, preparing
tenders, developing strategies and contract negotiations.

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 Business to Consumer (B to C)
(or "Consumer")
 A family are at home on a Sunday night and are
watching television. An advertisement appears
that advertises home delivered pizza. The family
decides to order a pizza.
 Walking down a supermarket aisle, a single man
aged in his early 30's sees a hair care product
that claims to reduce dandruff. He pick's the
product and adds it to his shopping cart.
 A pensioner visits her local shopping mall. She
purchases a number of items including her
favourite brand of tea. She has bought the same
brand of tea for the last 18 years.

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 main features of the Business to
Consumer (B to C) selling process
 Marketing is one-to-many in nature. It is not practical for
sellers to individually identify the prospective customers nor
meet them face-to-face.
 Lower value of purchase.
 Decision making is quite often impulsive (spur of the
moment) in nature.
 Greater reliance on distribution (getting into retail outlets).
 More effort put into mass marketing (One to many).
 More reliance on branding.
 Higher use of (television, radio, print media) advertising to
build the brand and to achieve top of mind awareness.

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 Industrial Buying
Process

How organizations buy

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 6 Steps in Industrial Buying
Process
 Problem recognition
 planning
 Assignment of buying authority
 Search procedures, information search
 Evaluation, selection, choice and
 negotiations

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 Step 1 Problem Recognition

 What is the need?

 Who has the need?

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 Step 2 Planning
 Where to buy?
 How to buy?
 What & at what time to buy?
 What amount of money is required?
 Is Enterprise Resource Planning (ERP)
required?
 Finalization of procedure of buying?

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 Step 3 Assignment of
Buying Authority

 Who knows the most about the product?

 Who has the problem?
 Who is in the position of responsibility?

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 Step 4 Search Procedures

 Locate the product

 Company salespeople
 Other purchasing agents
 Trade associations
 Advertisements in journals, web
 Product literature
 Company employees
 Develop a rating system for selection
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 Step 5 Evaluate and Select

 Lowest bid
 Most specs met
 Other criteria

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 97% of industrial purchases are
initiated by the buyer
 The buyer may be anyone performing here
(e.g., owners, engineers, purchasing agents,
etc.) specifying and buying functions.
 To be available 24/7 - at exactly the time the
buyer's checkbook is open and they're looking
for suppliers, there's no better place to be than
online. 
 The Buyer initiates 97% of all industrial
purchases.  If you're doing 3% response in
direct marketing purchases, you're doing very
well.  That's the flip side...

which would you rather

focus on: 97% or 3%?

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 The average buyer seeks four
potential suppliers
 The average buyer looks at two suppliers they
know (done business with, met at
shows, were referred to, etc.) and two
new potential vendors (to learn the latest
technology, get competitive pricing, etc.).

"New Sources" and "Known Sources."

Naturally, when buyers find you, you should look
like the kind of company they'd like to deal with.

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 Educated buyers are the best

kind
Buyers want detailed, printed information before
they buy.  You no longer have to print and
distribute that information.  Now, buyers find you
and print exactly the information they need.
 Rule of thumb:  If they can't
find what they're looking for in
three clicks, they'll be tempted
to find a place where they can.
 The buyer is confident enough to call and ask, "I
need something that can do such-and-such."  We
believe that's a great inquiry for a manufacturer.
 Give buyers all the information they need to buy
from you.  Gather all the information you need
from buyers to sell them.

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 Macro Flow of Industrial Buying
Simulation

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 Competitive tendering
 Industrial marketing often involves competitive tendering (see tender, tendering). This is a
process where a purchasing organisation undertakes to procure goods and services from suitable
suppliers. Due to the high value of some purchases (for example buying a new computer system,
manufacturing machinery, or outsourcing a maintenance contract) and the complexity of such
purchases, the purchasing organisation will seek to obtain a number of bids from competing
suppliers and choose the best offering. An entire profession () that includes tertiary training and
qualifications has been built around the process of making important purchases. The key
requirement in any competitive tender is to ensure that...
 The business case for the purchase has been completed and approved.
 The purchasing organisation's objectives for the purchase are clearly defined.
 The procurement process is agreed upon and it conforms with fiscal guidelines and organisational
policies.
 The selection criteria have been established.
 A budget has been estimated and the financial resources are available.
 A buying team (or committee) has been assembled.
 A specification has been written.
 A preliminary scan of the market place has determined that enough potential suppliers are
available to make the process viable (this can sometimes be achieved using an process).
 It has been clearly established that a competitive tendering process is the best method for
meeting the objectives of this purchasing project. If (for example) it was known that there was
only one organisation capable of supplying; best to get on with talking to them and negotiating a
contract.
 Because of the significant value of many purchases, issues of arise. Organisations seek to ensure
that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption,
or incompetence

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 Bidding process
 Suppliers who are seeking to win a competitive tender go
through a bidding process. At its most primitive, this
would consist of evaluating the specification (issued by
the purchasing organization), designing a suitable
proposal, and working out a price. This is a "primitive"
approach because...
 There is an old saying in industrial marketing; "if the first
time you have heard about a tender is when you are
invited to submit, then you have already lost it."
 While flippant, the previous point illustrates a basic
requirement for being successful in competitive tendering;
it is important to develop a strong relationship with a
prospective customer organization well before they have
started the formal part of their procurement process.

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 Non-tender purchasing
 Not all industrial sales involve competitive tendering.
Tender processes are time consuming and expensive,
particularly when executed with the aim of ensuring
probity. Government agencies are particularly likely to
utilise elaborate competitive tendering processes due to
the expectation that they should be seen at all times to
be responsibly and accountably spending public monies.
Private companies are able to avoid the complexity of a
fully transparent tender process but are still able to run
the procurement process with some rigour.

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 Influences in Industrial Buying

 Product / Purchase Influences

 Organizational / Structural Influences
 Behavioral Influences

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 What is a Marketing Channel?
 This is a set of interdependent
organizations involved in the process of
making a product or service available for
use or consumption

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 Intermediaries involved in this
process
 Agents – acting on behalf of buyer or
seller but do not take title of the goods
 Facilitators – transporters, C&Fs, banks,
ad agencies

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 Advantages of a distribution
system
 Key external resource
 Takes years to build
 Significant corporate commitment to a
large no. of firms
 Commitment to a set of policies that
nourishes long term relationships

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 Why would a manufacturer not
like to do his own distribution?
 Lacks the financial resources to do direct
marketing
 Cannot have the infrastructure to make
the product widely available and near the
customer
 Trading profits could be less than
manufacturing profits

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 Manufactures typically
produce a large quantity
of a limited variety of
goods

Consumers usually desire a small

quantity of a wide variety of
goods

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 If all manufacturers tried to
reach all consumers

M1 C1

M2 C2

M3 C3

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 If they tried to go through an
intermediary

M1 C1

M2 D1 C2

M3 C3

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 Channel functions
 Gathers information on customers,
competitors and other external market
data
 Develop and disseminate persuasive
communication to stimulate purchases
 Agreement on price and other terms so
that transfer of ownership can be effected
 Placing orders with manufacturers

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 Channel functions (cont’d)
 Acquire funds to finance inventories and credit in
the market
 Assume responsibility of all risks of the trade
 Successive storage and movement of products
 Helps buyers in getting their payments through
with the banks
 Oversee actual transfer of ownership

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 Channels can be
 Forward
 Backward

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 Channel Alternatives
 Types of available business intermediaries
 No. of intermediaries needed
 Terms and responsibilities of each channel
member

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 Types of intermediaries
 Distributors
 Wholesalers
 Retailers
 Department stores

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 What kind of distribution?
 Exclusive
 Selective
 Intensive

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 Terms and Responsibilities
 Rights and responsibilities are drawn up
 Territorial rights are fixed
 Pricing policies and conditions of sales are
fixed

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 Evaluating alternatives
 Economic
 Control
 Adaptive

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 Channel management
 Selecting channel members
 Training channel members
 Motivating channel members

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 Managing channel members
 Coercive
 Reward
 Legitimate
 Expert
 Referent

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 Channel modification
 With time channels need to change along
with product as it get older in the PLC
 Introduction – boutiques,company
showrooms
 Growth – chain stores, departmental
stores
 Maturity – Mass merchandisers
 Decline – ‘sales stores’, discount stores
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 Adding channels
Advantages
 Increased market coverage

 Lower channel costs

 More customised selling

Disadvantages
 Increases selling costs

 Increases channel control

 Breeds channel conflict

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 Roles of individual channel
member firms
 Insiders
 Strivers
 Complementers
 Transients
 Outside innovators

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 Channel conflict
 Interest of different business interests do
not necessarily coincide
 Conflicts can occur at various levels
vertical
horizontal
multichannel

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 Conflict causes
 Goal incompatibility
 Differences in perception
 Great dependence

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 Legal and ethical issues
 Exclusive dealings
 Exclusive territories
 Tying agreements
 Dealer rights

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 Retailing
Includes all activities involved in
selling goods or services directly
to final consumers.

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 Types of Retailers
 Self – service – discount stores (no assistance)
 Self – selection – dept. store (assistance is
available if required)
 Limited service – counter sales men are there
 Full service – Co. showrooms. Salesmen are
available to explain, demonstrate, give technical
help and promote the products

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 The target market will define
 Assortment of goods to be stocked
 Store atmospherics and services
 Pricing decision
 Promotion decision
 Place decision

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 Retail sales effectiveness
 No. of people passing by on an average
day
 % who enter the store (footfalls)
 %entering who buy
 Amount spent per buyer

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 Store Brands
 With the increase in size and buying
strength of retailers, companies are forced
to now customize products for them.
These are known as store brands. They
may compete at the store with the
company’s own brands.

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 What is wholesaling?
 It includes all activities involved in selling
goods and services for resale or business
use. They are the intermediaries between
manufacturers and retailers.

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 Characteristics of wholesalers
 Less attention to promotion, atmosphere
and location
 Transactions are usually large and cover a
wider geographical area
 Could have different tax implications,
regulations,etc. because of its status as a
wholesaler

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 Functions of a wholesaler
 Financing  Selling and promoting
 Risk bearing  Buying and
 Market information assortment building
 Management services  Bulk breaking
and counselling  Warehousing
 Transportation

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 Market Logistics
 Involves the planning, implementing and
controlling the physical flows of materials
and final goods from point of origin to
points of use to meet customer
requirements at a profit.
 It involves materials management,
distribution systems and IT systems
interlinked with one another

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 Logistics objective
 Getting the right goods at the right
place at the right time for the least
cost
 ‘the last frontier for cost economies’.

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 Market Logistics decisions
 Order processing
 Warehousing
 Inventory
 Transportation

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 Inventory vs Service levels
Service level

100%
cost

Reorder point should balance

the risks of stockouts against
costs of overstocking
Company needs to balance ordering costs vs
inventory carrying costs

inventory
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