INTRODUCTION & CONCEPT

Industrial marketing is the marketing of goods and services to the industrial customer. Industrial customers are those customers who purchase the goods for processing or as a part a processing. Industrial goods are those goods, which are destined to be sold primarily for use in producing other goods or rending services.

A product may be a consumer good for a consumer, may be industrial goods for another customer depending upon how the product is being used.

For example, if white cement is being used by a person for his own house it is a consumer product but it white cement is used by a cement paint manufacturer for manufacturing cement paint then the cement would be the industrial product for the manufacturer and the manufacturer would be called as industrial customer.

According to Philip Kotler,

The business market consists of all the organizations that acquire goods and services that are sold, rented or supplied to other.

According

Association,

to

American

marketing

Industrial goods are those products which are destined to sold primarily for use in producing other goods or rendering services as contrasted with goods destined to be sold primarily for consumption to the ultimate consumer.

CHARACTERISTIC OF INDUSTRIAL MARKET

Industrial markets have the following characteristics as contrasted with consumer markets. 1. Derived Demand: The demand for industrial products is a derived demand from the demand for consumer products. For example, the demand for aluminum depends upon in part on the demand of automobiles, home appliances, containers etc. Thus, the change in the demand for automobiles or home appliances, for example, would lead to the change in the demand of aluminum.

2. Small

Number of Buyers:

A typical industrial marketer sells to much smaller number of buyers than a typical consumer products marketer. 3. Large Volume Purchases: The industrial marketer are characterized by a high buyer concentration ratio i.e., few buyers do the most purchasing. 4. Geographical Concentration of Customer: Industrial buyers concentrated. are geographically

5.Direct Buying:

Most ultimate consumers purchase products from retailers while most industrial consumers purchase goods directly from the manufacturer of that industrial goods.

6. Professional Buying:

Industrial buyers are professional buyers and selling to them requires professional sales people. The professionals who handle the buying for their organizations are called purchasing agents or purchase managers.

7. Complex

Negotiation:

Considerable buyer seller negotiation exits in the purchase and sale of more expensive industrial products.

In additions to product specifications, delivery dates, payment terms and price may be subject to negotiation.
8. Greater Use of Leasing: Leasing is an arrangement in which a lesser grants use of a product to a lessee for a period of time in return for regular payments. The lessee rents, not owns, the product. Thus, leasing is an alternative to purchasing. Many industrial buyers lease their equipment instead of buying it especially in the case of heavy machinery.

A lessee can enjoy several benefits from leasing: it may eliminate the need to borrow funds to buy the product, which can be very important when interest rates are high, borrowing power is limited or better uses exist for the funds that otherwise would be committed in an outright purchase.

a lessee can replace leased equipment with more modern equipment without the losses involved in selling obsolete equipment.
lease payments may offer a tax advantage because they are deductible business expenses. Maintenance and repair service usually is provide as a part of the lease payment. Equipment can be leased only when needed, unlike purchased equipment, which may lie idle for extended periods.

CLASSIFICATION OF INDUSTRIAL PRODUCTS

Installations- large , expensive and capital goods, non portable, expensive, high degree of decision making, e.g. blast furnace, major equipments Accessories- less expensive, standardized, portable, moderate decision making e.g. drills, storage racks

Raw materials- items which require processing before they are incorporated into the final product e.g. iron ore, minerals
Component parts or materials- semi manufactured goods that undergo further changes e.g. steel, cement, wire etc Supplies- they are purchased routinely and fairly in large quantities, act as a catalyst e.g light bulbs, stationery, lubricants etc

Characteristics & Features of organizational buying behavior are: 1. More individuals are involved in buying process 2. It is a rational process 3. Extensive contact between buyers and sellers

4. Purchase criteria are well defined

5. Purchases are in large quantities.

1.

More individuals are involved buying process: Purchasing is not one mans responsibility or one man show. Instead, good many individuals drawn from departments are responsible for the purchase decision. It is more a committee decision than an individuals. Regular and more extensive contact between organizational buyer and sellers is warranted because, the industrial goods market is localized and a few buyers are seen; such sales are not regular, and the sellers representatives very often visit and contact these buyers.

2. Extensive contact between buyers and sellers:

3. Purchase

criteria are well defined:

Generally, organizational buyer have a fewer brands to choose than the individuals and their purchases are subject to evaluation according to the predetermined criteria that are specific to the over all needs of the organization.

4. Purchases are in large quantities:

Bulk purchase are common in case of organization. Large scale buying is a regular feature because of large-scale operations so that production schedules can be met and sufficient stock levels are maintained to avoid stock outs

It is economical and efficient to make large quantity purchases.

FACTORS INFLUENCING BEHAVIOUR

INDUSTRIAL

BUYING

Factor influencing industrial buying behavior can be categorized into following categories:

(a)Organizational factors
(b)Environment factors (c)Psychology Factors

Organization Factors: The organizational factors that influence purchase decisions are:

The company structure Technology Capabilities Objectives

The company Structure:

The company structure has two dimensions namely, the size and dimension degree of concentrations. The size of the company plays an important role in purchasing behavior. Generally, more and more people are involved in purchase decision if the company is larger in size because, big company means more and more departments.

Technological capabilities :

The purchasing decisions of the company are to be geared to the companys resources and technological capabilities. The companys buying technology involves information systems that help to co-ordinate its purchases and allied functions.

Objectives : In any engineering company that thinks as the leader in innovative products its purchasing decisions will be strongly influenced by engineers and other technocrats. Thus, purchase decisions are influenced by goal related decision made by top management, Every organization defines the specific buying tasks in order to achieve its goal presets.

Environmental Factors :
Industrial buyers are greatly influenced by the expediting and expected economic environment namely the level of primary demand, the economic outlook and cost of money (move value). If there is increased economic uncertainty, the industrial buyers would prefer to reduce their inventories and will not invest in new plants and equipment.

Another important environmental factors is the availability of key materials. Other environmental factors affecting the industrial buying behavior are rate of technological changes taking place, political stability and regulatory developments and competitive developments in the environment.

Psychological Factors :

The people under very heavy psychological pressure are the buyers because each decision the organizational buyers make will affect the entire company. They are praised or criticized on company wide scale for their actual performance. As a result organizational buyers identify their desire for reward and recognition with the needs of the company. The tasks of organizational ladder, more severe will be the stress that the organizational buyers are to face.

Types of Industrial Buying / Buying Situations

Robinson and others distinguished three types of buying situations, which they call, buy classes : Straight re-buy buying New task buying Modified re-buy buying

(a) (b) (c)

(a)

Straight Rebuy Buying :

It means buying a product that has been purchased before with satisfactory results from an established vendor. It describes the buying situation where the purchasing department reorders on a routine basis. Such order reorder buying requires less time than new task or modified rebuy buying and often is automated because of its repetitive and routine nature.

b.New Task Buying :

In new task buying the firm faces a new need or problem and the buyer gathers information from vendors who can offer products to satisfy the need or solve the problem. This type of buying decision is nonprogrammed and involves extensive problem solving.

(c) Modified Rebuy Buying :

In modified rebuy buying, the buyer seeks to modify product specifications, delivery schedules, prices or suppliers. The modified rebuy usually involves additional decision participants on both the buyer and seller sides, These buying situations cause the present vendor to be concerned about losing the customer, Potential vendor consider it an opportunity to win new business.

Buying Centers / Buying Roles in Industrial Buying Process

According to Webster and Win, the decision making unit of a buying organization are called buying center. Buying centers are defined as all those individuals and groups who participate in purchasing decision-making process, who share some common goals and the risks arising from the decisions.

Buying center includes all members of the organization who play the following roles: 1. Users : Users are the people who will use the product. In many cases the users initiate the buying proposal and help define the product specifications. 2. Influences : Influencers are people inside and outside the organization who help to shape buying decision criteria. They have some voice in setting product specifications or evaluating vendor offerings. Technical personnel are particularly important as influencer. 3. Deciders : Deciders are persons authorized to make the final choice of what would be bought. For the costly products, the deciders may be members of top management.

4. Approvers : Approvers are persons who authorize the proposed actions of deciders or buyers. 5. Buyers : Buyers are those persons authorized to handle the details of contracting with suppliers. A buyer often is called purchasing agent. If the contract involves long-term commitment then the members of top management actually may participate as buyers. 6. Gatekeepers : Gatekeepers control the flow of information into, within and out of the buying organization. A sales person may never get to the other participants if he cannot deal effectively with gatekeepers. This often requires considerable human relations skill.