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Alliance University
Customer
Distributors
Manf.Rep
Broker
Comm. Agent
Jobber
Merchants
Customers
Channel Design
Channel Design is a dynamic process. It deals with developing new marketing channels and modifying the existing ones
Channel Design
Channel Objectives
Channel Objectives
The channel objectives are developed on the basis of 1) Marketing Objectives 2) Customer needs 3) Product Characteristics Examples : -If marketing objective is to expand to new markets , test the market and then make office investments then an agent / merchant is a must initially rather than a distributor -In case the new market has certain legal aspects like local businesses should get 10 % margin then distributors / dealers can be appointed
Customer Needs
Examples : -Local customers initiate business via local acquaintances then agents are required -Local customers need instant service then technical intermediaries are required -Customers emphasize on policies beyond an organizations ambit , intermediaries can act as risk absorbers
Product Characteristics
Examples : - Product has great demand and manufacturer cannot reach across markets - Product requires constant service support in different locations
Channel Constraints
While selecting a channel, an industrial marketer has to face many constraints : - Competitive actions ( Competition increasing channel penetration ) - Company policies ( E.g. Strong deadline in TOI Group) - External environment ( e.g. Low consumer confidence index) - Customer Preferences
Channel Alternatives
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Selective Distribution Intensive distribution Exclusive distribution Vertical Marketing System Corporate Administered Contractual
Selection of Channel
The need so the hour is to select channels basis customer needs and not merely company policy and financial considerations Market Forces : Example 1)Divya bhaskar direct selling debacle in Gujarat
Channel Management
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Managing channel members include : Selecting channel members Motivating channel members Managing channel conflicts Performance evaluation of channel members
The Channel members are selected on the following basis : Location of customers Experience in a particular genre Financial Standing Infrastructure Management reputation
Motivating Intermediaries
Management Services ( Example : Pride Hotel GroupFranchise Hotels) Vendor Managed Inventory Financial advantages Training services
INDUSTRIAL PRODUCT
An industrial product can be Machinery, manufacturing plants, materials, and other goods or component parts for use or consumption by other industries or firms. An industrial product , in addition of being a physical entity, is a bundle of economic, technical, legal and personal relationship between the buyer and the seller
I and G stages are long but maturity and decline stages is short due to rapidly changing technology
Sales
TIME
NPD
I/G STAGE
Sales
In a monopolistic situation the sales remain unaffected with passage of time due to absence of competition . As competition increases sales decline
TIME
Maturity Stage
As the product enters the maturity stage , the marketer must focus on 1) entering new markets 2) keep existing customer satisfied by excellent service standards 3) cut marketing, production and other costs to maintain profit margins Example : Wind energy 7 has tremendous potential in Indian markets owing to power shortages and large expanse of rural places where electricity has not reached and open spaces are widely available
Decline Stage
In this stage the competition is severe and sales and profits steadily decline The strategy adopted by industrial marketer is to either withdraw the product from the market or introduce a substitute product For industrial products the decline is pretty rapid owing to technical advancements and highly learned customer base
The steps involved in locating a product in its life cycle are as follows : - Develop a trend analysis for the past 3 to 5 years based on primary and secondary research based information - Analyse competitors market share and product performance - From the above analysis , fix the products position in life cycle
Brand Strategy
Brand building
Brand auditing
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Brand Strategy
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Brand Hierarchy has four levels in B2B marketing : Corporate brand Family brand Individual brand Combination of above
Brand Auditing
Business Organizations should periodically audit the performance of their brands The process of brand auditing is as follows : - Deciding the objectives of auditing - Internal description of how the brand has been marketed - Research - Analysis and reporting the brand score
Brand Auditing
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The brand score card has four components viz : The functional performance of a brand Ease of accessing the brand Brand Personality Brand Value
Revisiting Segmentation
Market Segmentation is a process of dividing a market into groups of customers who have similar requirements for a product or service offering Business Marketers task is to identify these segments and decide which segments to target
Micro Segmentation
Micro Segmentation can be done using micro variables like : - Buying situations - Purchasing Criteria - Buying Organizations - Personal characteristics of buying center members
Major Macro-variables Type of customer ( Govt, commercial, cooperative, institutional) or industry Size of customer companies Usage rate of customers Customers geographic location Application, end-use, or benefits of the product Major Micro-variables Buying situations(new task, modified rebuy, straight rebuy) Organizational capabilities ( Focus on firms needing finacial / technical support ) Purchasing criteria ( Focus on firms seeking quality / price) Personal characteristics of buying-center member ( Risk avoiders, risk takers)
Macro Segmentation
Macro Variables are classified into : - Industry Characteristics - Organizational Characteristics
Industry Characteristics
Many industrial firms market their products or services to different types of industries For example : Tata Steel sells steel to Automotive, construction, rail , consumer goods, shipbuilding industries
Organizational Characteristics
Size of the customer organization Location of the customer organization ( Example : Ad agencies setting up satellite offices to service big and key accounts )
Micro Segmentation
Micro segments are the homogenous group of customers within the macro segments. Thus industrial marketers divide macro segments into micro segments only if necessary The micro variables used in the micro segmentation are as follows : - Buying situations - Purchasing Policies - Purchasing criteria - Personal characteristics of the buying center members
Targeting
After segmenting the market , the firm should engage in selecting the right target segments These segments are selected on the basis of :1) size and growth 2) profitability analysis 3) Competitive analysis 4) Company objectives and resources
Profitability Analysis
There are 3 elements involved in analyzing the profitability of each segment : - Market Potential - Sales Forecast - Profitability
Competitive Analysis
Competitive analysis should be done basis manufacturing facilities, financial strength, marketing prowess, product quality and management reputation
Company Objectives
An industrial firm should ask itself whether each potential segment is in line with the firms long term objectives Examples
Positioning
Positioning is defined as the distinct place a product or service occupies in the minds of the customers relative to competing products
Ideal Transaction
Inefficient Transaction
Incompatible Style
Inefficient Transaction
No Transaction
Types of Relationship
Transactional relationship Value Added / Exchanges relationship Collaborative / Partnering relationship
Transactional Exchanges
Basically One time exchange with economy and necessity at the center of the process Buyers look a transaction based relationship in situations when the product / service is less specialized and not very important for the overall achievement of the objective Transactional buyers exhibit very less loyalty towards the suppliers The company sales force should try and extend this genre of customers to the next level i.e. Value added exchanges
Collaborative Partnership
The core focus is on building commitment and trust between the manufacturer and the customer Example : TOI Private Treaty Model
Business Marketers have a range of relationship with different set of customers viz. transactional , value added and collaborative. It is important that these businesses develop effective relationship marketing strategies by going through the following steps : - Linking CRM with customer database - Selecting customers - Developing relationship marketing strategies and objectives - Implementing relationship strategies - Evaluating relationship objectives and strategies
For an effective relationship marketing strategy , a firm should build database of each customer firm by including CLV, key decision influential, specific needs of goods and services, past purchases of various products and services
Selecting customers
Business Markets segment customers on the basis of various variables ( example : Value , Service level) After this primary segmentation , the business markets look into individual customer firms Example : Refer to Excel Sheet- Final Data
Strategies by establishing from amongst transactional,collborative or value added relationship with each customer Implementing the relationship strategy involves bifurcating sales focus into key accounts and transactional accounts The culmination of these relations should be monitored on a periodic basis
Relationship Marketing
Berry and Parasuraman have identified 3 approaches for forming stronger ties : - Financial : Adding financial benefits to key customers by offering special prices or volume discounts - Social : This is done by individualizing and personalizing customer relationships - Structural ( Times of India Classifieds software)
BUSINESS MARKETING
ALLIANCE UNIVERSITY
Consumer Marketing is the marketing of products and services to individuals , families, and households. The consumers buy products and services for their own consumption or use
BUSINESS MARKETS
Geographically concentrated and relatively fewer buyers Technical in nature and customized Service, timely delivery and availability very important
CONSUMER MARKETS
Geographically dispersed and mass market Non or less technical and lesser degree of customization Important to a lesser degree
Buyer behaviour
Multiple functions involved in a rational decision making, stable and long term interpersonal relationship between the buyer and seller
More direct , fewer channel members involved Bidding / negotiated prices
Family dynamics, emotional decision making involved , lesser degree of personal relationship involved
Indirect and multiple intermediaries involved Best price or MRP
Promotional
Economics
Personal selling
Derived demand, inelastic demand
Emphasis on advertising
More elastic and direct demand
Value = Benefits / Cost To estimate the customer value a mix of executive opinion and statistical methods are used
Derived demand Fluctuating demand Stimulating demand ( SAIL Video) Joint demand Cross-Elasticity of demand ( Eg: Al v/s wood and steel) Reverse elasticity of demand
Capital Items
Capital Items : are those which are used in the production processes and they wear out over a certain period of time. Capital Items are usually classified as : - Heavy equipment : Major and Long term investments example is a turbine machine in a power plant. - Accessories : Light equipment which have lower purchase price and not considered pert of heavy equipment. Example : Computer terminals - Plants and buildings : These are the real estate property of a company. Example ; MUL has plants in Gujarat , Gurgaon.
Supply Chain
Supply chain management is a set of activities and techniques , a firm employs to efficiently and effectively manage the flow of merchandise from the vendors to the retailers customers
Supply Chain
Manufacturer
Distributor / Dealer
Representative agent
Customer
Commercial Enterprise
Commercial enterprises are private sector, profit seeking organizations consisting of : - Industrial distributors - OEMs - Users
Government Customers
The largest purchases in India are done by various Government bodies Example : Health Ministry , DMRC ( Delhi Metro Rail Corporation ) etc.
Institutions
Public and Private institutions such as hospitals, schools, universities etc. are the institutions These institutions have a very structured purchase mechanism Example : Relevant Examples
Cooperative Societies
Cooperative banks, cooperative housing etc. are examples of cooperative societies GCMMF ( Gujarat Cooperative Milk Marketing Federation ) is one well known name across India Example : Amuls Media Purchase mechanism
Buying Orientation
The purchasing firm with a buying orientation has a narrow and short term focus. The buyers in these firms follow the practices as under : - Lowest Price - Gain Power ( Commodification / multisourcing) - Risk ( risk reducing standard buying from regular suppliers)
Procurement Orientation
Collaborative relationship with major suppliers Working closely with other functional areas
Institutional Purchasing
Institutional Purchasing : These are either the government or the private buyers. If they are government , then the procedure followed is as discussed. If they are institutions like education , charity then the procedure is similar to commercial buying.
Replacement market consists of industrial dealers or distributors whose main goal are profit and sales volume Hence the intermediaries select the supplier on the basis of product quality and also suppliers Selling policy as they have to abide by it Example : Car Tyres Market
Environmental Analysis
Micro and Macro Environment
Robinson and Faris developed an eight phase buying decision process in industrial market in 1967 and called the process buy phases. These stages are as follows : - Recognition of a problem or need - Determination of the application and quantity of the needed product also developing specifications - Search for qualified suppliers - Obtaining suppliers proposals - Selection of suppliers - Order routine specification - Performance feedback and post purchase evaluation
Recognition of a Problem
Rolls-Royce ,a truly global business, offers a range of rst class world leading products. It has facilities over 14 different countries and also offers rst rate after sales services, covering mechanical overhauls and spare part distribution. Rolls-Royce used over 1500 systems before the ERP project was started, many of which were developed internally by Rolls-Royce over the last two decades.
Some of the legacy systems were so old that they had year 2000 compliance problems. Work within RollsRoyce was functionally orientated and various departments worked in isolation. The legacy systems did not allow Rolls-Royce to establish direct, on-line communication with customers, partners and suppliers.
Buy classes are bifurcated as : New Task Modified rebuy Straight rebuy Sales strategies for each differ and will be discussed in class
Buygrid framework
Buy Phases
New task
Modified rebuy
Straight rebuy
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Buying Roles
Buying Centre Buying center roles : Users Buyers Influential Deciders Gate keepers
Buying centre variables: Interpersonal interactions, Group functioning : Buying and non-buying tasks, external influences. Individual variables
Buying Decision Process : Bargaining, negotiation, persuasion
Buying Decision