Industrial Marketing Manajemen

The basic concepts of marketing ( in terms of exchange processes between buyers and seller ) remain the same for both the consumer marketing and industrial ( or business ) marketing. However, there are differences between consumer markets and industrial markets. These differences must be understood well by industrial marketers who want to reach and satisfy the costumers better and faster than their competitors, in order to achieve the corporate objective.
Industrial or business marketing is a dynamic and challenging area that present opportunities for the application of marketing concepts and principles. To market effectively in an industrial market, we must understand the nature of industrial marketing which functions differently, in many respects, from consumer marketing. It is there fore necessary to study industrial marketing for those who are planning a career in industrial marketing.

WHAT IS INDUSTRIAL ( BUSINESS ) MARKETING?

Industrial marketing is also referred to as business to “business marketing”, or “business marketing”, or ”organisations marketing. Industrial marketing ( or business marketing ) is the marketing of products and service to business organizations. Business (or industrial )organizations include manufacturing companies, government undertaking, private sector organization, educational institutions, hospital, distributors, and dealers. Business organizations buy products and services to satisfy many objectives like production of other goods and service, making profits, reducing cost, and soon. In contrast, costumers marketing is the marketing of products and service to individuals, families and households. The costumers buy product and service for their own consumption.
The companies ( selling organizations ) that sell steel, machine tools, computers, courier service, and other goods and service to business firms ( buying organizations ) need to understand the buyers’ needs, resources, polices, and buying procedures. The important point in business marketing is to creat value ( benefit ) for the buying organizational ( costumers ) with products and service that focus on buying organisional needs and objective. For example, a company manufacturing and marketing precision steel tubes to bicycle manufactures is doing business marketing. Industrial marketer of the precision steel tube company, must understand the needs of bicycle manufacturers such as hero cycle, in terms of their quality requirements, applications of tubes, availability or daily or weekly basis, and so on
Similarly, a small and proprietary firm, giving technical advice ( or services ) to paint-manufacturers is also doing business marketing.

INDUSTRIAL vs CONSUMER MARKETING

The basic task of marketing management apply to both consumer and industrial marketing. These tasks are: ( a ) deciding the target markets, ( b ) finding out the needs and wants of the target markets, ( c ) developing marketing programmers or strategy to reach and satisfy target costumers, better and faster than competitors.
However, there are differences in the characteristics of industrial an consumer market.

Differences between Industrial and consumer marketing

In industrial marketing, the market are geographically concentrated; the costumers are relatively fewer; the distribution channels are short; the buyers ( or customers ) are well informed; the buying organizations are highly organized and use sophisticated purchasing techniques; the purchasing decisions era based on observable stages.
In comparison to consumers marketing is more a responsibility of general management. Sometimes, it is difficult to separate industrial marketing strategy from the corporate ( company ) strategy. In consumers marketing, many times the changes in marketing strategy are carried out within the marketing department, trough changes in advertising, sales promotion, and packaging. However, the changes in industrial marketing strategy generally have company-wide implications.
For example, in 1983, a newly recruitment marketing manager of a precision steel tubes company wanted to evolve a marketing plan. He initially carried out a market survey to understand the needs and the requirements of the existing and new consumers. One of major findings of the market survey was, that out of seven different market segments, two segments namely Bicycle and Automotive required 70 per cent of the total market of precision steel tubes in India and that their future growth was much higher than the other segments. However, both the segments needed a higher volume of value added tubes (called “cold drawn welded tubes”), which were also giving a much higher contribution to fixed costs and profits. The marketing strategy of focusing (targeting) marketing efforts on Bicycle and Automotive segments could be achieved only when it become a part of corporate strategy, by investing Rs five crores for increasing the production of cold drawn welded (CDW) tubes from 80 metric tons per month 400 metric tons per month. The company could, therefore, achieve its objective of becoming the market leader by 1986.
While generally it is true the different between industrial and consumer marketing are of degrees, the degrees of differences are substantial. These differences can be seen by comparing the two markets.

Market characteristic a large of households, geographically dispersed all over country, are included in the mass market for consumer goods and service. But, in the case of industrial markets, it is common to find less than 1000 companies to represent the total market for an industrial product or service. For example, for a consumers product like tooth paste or soap, a mass market, consisting of all the household in India, exist. However, for industrial products, such as, large power transformers or high tension switchgears, there are limited numbers of customers mainly state electricity boards, large private and public sector organizations.

Product Characteristics In industrial marketing, the products or services are generally technically complex. They are used for serving the operation of the organizations. Because of the importance given to technical aspects of products, the purchases are made based on the specifications evolved by the buyers.

The real risk in “falling in love with the technical aspects of a product” in industrial marketing is to ignore the flexibility in responding to customer’s needs in a competitive market. Some companies, as a result, commit the serious mistake of trying to change the customer to fit the product.

For example, the quality control manager of a cold rolled (CR) steelstrip manufacturing company informed an important customer that the customer was not justified in rejecting his company product, as it was as per the relevant Indian standard specifications and that the customers product specifications were more stringent than the Indian standard specifications. However, the customer refused to accept the product, as it was failing at the shop floor operations. The customer, therefore, not only returned the entire rejections but also cancelled the balance orders. Subsequently, other competitors supplied the product as per the needs and specifications of the customer, who placed orders with them.

Buyer behaviour in industrial marketing, the buying process is more complex as compared to consumer marketing. The purchase decisions in industrial marketing are based on many factors. Such as compliance with product specifications, product quality, availability or timely supply, acceptable payment on other commercial, and finance departments. After the initial offer made by a seller, there are negotiation and exchange of information between the specialists and representatives from each functional area, from both the buyer and the seller organizations.
In contrast, in consumer marketing, the relationship between a buyer and a seller as non-personal. The consumers change their purchasing habits frequently and the buying decisions are often based on physiological needs of the members of a family.



Distribution channel characteristics
1.1Channel of distribution in industrial and consumer markets
Because of the importance on inventory, the distribution channels are more direct from the manufacturer to the customer in industrial marketing. Often, the manufacturers use their own sales/marketing persons to self directly to major customer. However, for selling to small-scale customer, many manufacturers use either distributor, or agents, which also help s in minimizing the cost of marketing.

Promotional characteristics
While in consumer marketing the emphasis is on advertising, in industrial (or business) marketing, the importance is given to the personal selling through the company’ sales force. As result, a much large expenditure budget is provided for advertising in consumer marketing in comparison to industrial marketing.
In industrial marketing, apart from personal selling, the primary means of reaching the potential customers is through advertisements in trade journals and business magazine, as well as direct mailing of company leaflet/brochures to potential customers.

Price Characteristics
in consumer marketing, the products are sold through the retailers to the consumers based on the “price list” of the manufacturer or the maximum retail price for the packaged products. Sometimes, depending on the intensity of the competition, the reailer reduces the price by passing on to the consumer a part of his discount.

INDUSTRIAL DEMAND
The demand for industrial products and services does not exist by itself. It is derived from the ultimate demand for consumer goods and service. Industrial demand is, therefore, called derived demand. Sometimes the demand for industrial product is called joint demand, when the demand for a product depends upon its use along with the existence of other product or product Cross elasticity of demand exist for some substitute products. Let us examine these concepts in more details.

DERIVED DEMAND
industrial customers be goods and services for use in producing other goods and services. Ultimately, whatever is finally produced will be sold to the consumers. Hence, the demand for industrial goods and service is derived from consumers goods and service.

JOINT DEMAND
Joint demand occurs when one industrial product is useful if other products also exist. For example, a pumpset cannot be used for pumping water, if the electric motor or diesel engine is not available.

CROSS-ELASTICITY OF DEMAND
Elasticity is simply the change in demand from a change in price. Percentages are used to measure the relative changes. Demand is “inelastic” if the percentage change in quantity demanded is less than the percentage change in price. Demand is “unitary” if the percentage change in price is matched by in quantity demanded is more than the percentage change in price. This concept is useful as a starting point to understand the relationship between the price and the quantity sold (or demand).
PRICE ELASTICITY OF DEMAND
Cross elasticity of demand is the responsiveness of the sales of one product to a price change in another product. This concept is present in both consumer and industrial marketing, but it is far more important in industrial marketing as it can have a dramatic impact on the marketing strategy of an industrial firm. For example, the demand for aluminium is related to the price of wood and steel for the doors and window frames, as they are close substitutes. Apart from other advantages of alumunium doors and windows, the cost comparison with steel and wooden door and window farmes play an important role in purchase decision in the construction of house, commercial office, factories, hotels, hospital, and so on. .
If the cross elasticity of substitute product is high, it indicates that these product compete in the same market. An industrial marketer must know how the demand for his product is likely to be affected by the change in the price of substitute product.

II. UNDERSTANDING INDUSTRIAL MARKETS AND ENVIRONMENT
2.1. TYPE OF INDUSTRIAL CUSTOMERS
Commercial Enterprises
Commercial Enterprises are private sector, profit seeking organizations, consisting of (i) industrial distributors, or dealers, (ii) original equipment manufactures (OEMs), and (iii) users. They include manufacturing firms and non manufacturing firms.
1. Industrial Distributors and Dealers
They purchase industrial goods and resell them in the same form to other industrial customers such as commercial enterprises, governmental and institutional customers.
2. Original Equipment Manufactures (OEMs)
These industrial customers purchase industrial goods to incorporate them into the product they produce.
3. User
When a commercial enterprise purchases industrial product or service to support its manufacturing process or to facilitate the business operations, we classify it as a user.
Overlapping of categories
Sometimes a manufactures can be a user or an OEM.

Government Customers
The largest purchases of industrial product in india are central and state government departments, undertakings, and agencies, such as railway, department of telecommunication, defence Director General of Supplier and Disposal.

Institutions
Public and private institutions such as hospital, school, collage, universities, and prisons, are classified as institutional customers. Some of these institutions have rigid purchasing rules and other have more flexible rule.

Cooperative Society
This category is unique and was a part of the cooperative movement in india. An association of person from a cooperative society.

CLASSIFICATION OF INDUSTRIAL PRODUCTS AND SERVICE
There are many methods by which industrial product and services are classified. The method that is most accepted classifies product and services based on how product or services enter the production process, and their relative cost. Based on this method, industrial product and service are classified: (i) materials and parts, (ii) capital items, (iii) supplies and service.
2.2. Classification of Industrial Product and Service
Materials and Part
Goods that enter the product directly consist of raw materials, and component parts. The cost of these item are treaded by the purchasing company as part of manufacturing cost.

Raw Materials
These are the basic product that enter the production process with little or no alternations. They may be marketed to OEMs or user customers.

Manufactured Materials and Component Parts
Manufactured materials include those raw materials that are subjected to some amount of processing before entering the manufacturing process. Acids, oil, and steel are the examples of manufacturing or processed material that are the basic ingredients of many manufacturing activities.

Capital Items
Capital Items are those which are used in the production processes and they wear out over certain times frame. Capital items are classified into three group: (i) Heavy equipment/installations, (ii) Accessories/light equipment (iii) plant and building.
1. Heavy equipment/installations
These are major and long term investment items such as general purpose and special purpose machines, turbines, generators, furnaces, and earth moving equipment. These items are shown in the balance sheet as plant and equipment, and are fixed assets to be depreciated over a period of year if they are purchased outright.
2. Accessories/light equipment
Light equipment and tools which have lower purchase prices and are not considered as part of heavy equipment. Are power operated hand tools, small electric motors, dies, jigs, type writers and computer terminals.
3. plant and building
These are the real estate property of a company. It includes the firm’s offices, plants (factories), werehouses, housing, parking lots, and so on.

Supplies and Services
Supplies and Services support the operation of the purchasing organization. They do not become a part of finished product. They are treated as offering expenses for the periods they are consumed.

Supplies
Items such as paints, soaps, oils and greases, pencils, typewriter rebons, stationery and paper clips belong to this category. These items are generally standardized and are marketed to a wide cross sections of industrial users.

Services
Companies needed a wide range of service like building maintenance services, auditing services, legal services, courier services, marketing research service and other.

MARKETING IMPLICATIONS FOR DIFFERENTS CUSTOMER AND PRODUCT TYPE
In case of material and parts product, for large OEMs or users, selling is mostly done directly from a seller to a buyer organization. However, for smaller volume OEMs and user, the standard raw materials or component are sold trough industrial dealers or distributors as it is cost effective. In case the components are custom made, considerable interaction takes place between technical and commercial persons from both buyer and seller organization, and obviously selling is done directly. It is therefore, important for an industrial salesman to remain in close touch with not only purchase or materials department persons, but also with quality, production, R&D, marketing, and accounts/finance persons of buyer organizations as they influence buying or payment releasing decision. Apart from personal contact, product leafiets/brochures. Help an industrial marketer in communicating product and other information. In case of standard product, the factors which influence buying decisions, with differing share of business for various suppliers , are product quality and performance, delivery dependability, price, payment terms, costumer service, and costumer rapport. When component parts such as batteries and tyres are sold in the consumers replacement market, marketers either create a product differentiation trough consumer advertising. ( e.g. JK tyre’s TV advertisement for radial tyres) or sell on a competitive price basis. For this, advertising and distribution through multiple channels all over the country becomes an important part of marketing strategy.


Marketing Strategy for Capital Items, supplies and service
A.Capital items for capital items, consisting of heavy machinery and construction of factories office buildings, direct selling with extensive interactions, involving top executives in both buying and selling organization are very common. Negotiations take considerable time on key factors such as price, return on investment, credit facilities, delivery period, installation time, third party certificate for previous jobs done, and so on. Personal selling is the primary promotional method used.
B. Supplies for marketing supplies, direct selling is used for large volume buying firms, and distributors or dealer are used to market to diverse markets consisting of small and medium size. The purchase or materials department persons generally make buying decisions based on dependable delivery price and locational convenience.
C.Service marketing strategy for service is more subtle. Buying firms generally contact the selling firms who have their reputation by way of word of month. The selling firm’s efforts are on consultative or advisory nature, and continuation of the service depends upon the quality, price, and timeliness of service to meet the costumers need.

INDUSTRIAL CUSTOMERS’ PURCHASING ORIENTATIONS
Industrial marketers are aware that all business buyers do not have the same purchasing orientation, or overall purchasing philosophy, which guides them through their buying decisions.

2.3. Purchasing Orientations of Industrial Customers (or Business Buyers)
Business buyers choose three purchasing orientations:
a.Buying Orientations
The purchasing firm with buying orientation has narrow and short term focus. The buyers, in these firm, follow the practice as under:
Lowest Price The buying firm usually selects the lowest price supplier. Quality and availability are the factors that are considered as qualifiers for a supplier to be considered.
b.Gain Power The buying gain power over supplier by using tactics like commoditisation
In commoditization, buyers argue that there are no differences between various suppliers offers in terms of technical service, product quality, or product features.
Risk Buyers avoid risk altogether, in order to reduce the chance of criticism and penalization for making a mistake. The tactics used for avoiding risk are: (a) follow the standard purchase procedure established by company and (b) depend on suppliers who have proved their performance earlier.

Procurement Orientation
Here, the purchasing firm has a strategic focus and is proactive. The span of influence of purchasing is more with integration of other activities like order processing, material handling and logistic. The buyers, with procurement orientation, seek both quality improvements and cost reductions.

Collaborative Relationship with Major Suppliers This result in quality improvement and cost reduction. For this, both suppliers and buyer firms must trust one another to a greater extent, and should agree to share the rewards of working together.

Working Closely with Other Functional Areas This is an important attribute of buyers with procurement orientation. Buyers are involved in describing the specification of the products or services that the firm is looking for, ensuring quality of purchased goods, and timely availability of products and services.

Supply Chain Management Orientation
Here, the role of purchasing is further expended to become more value adding, and strategic operations. It includes coordination and integration of purchasing function with other functions within the company and also with other organization in the whole value chain, like customers, intermediaries, suppliers.

Deliver Value to End Users Using marketing research, the supply manager would understand the requirements of end users and direct the entire supply chain to deliver superior value to end users.

Outsource Non core Activities The top management of the firm identifies the core competences of the company. Thereafter the firm would group its products and services into strategic and nonstrategic system and subsystems.

Applications of Purchasing Orientation
Through a proper understanding of a business customers purchasing orientation, and industrial marketer could gain important insight. For example, most government organization place orders on the suppliers who quote the lowest price against government tenders.

PURCHASING PRACTICE OF INDUSTRIAL CUSTOMERS
The industrial marketers market industrial goods or service to different types of customer commercial enterprises, governmental customers and institutional customers.

Purchasing in Commercial Enterprises
The purchasing practices depend upon the nature of business and the size of the commercial enterprise as well as the volume, variety, and technical complexity of the product purchased. In large and medium size organization, the purchase decision involve persons from departments like productions, materials, quality, finance/cost accountant, engineering, and also senior management executives.

2.4. Purchasing in Government Unit
As mentioned earlier, the government units are the largest purchasers of industrial goods and service. To compete successfully and to get business, an industrial marketer must understand the complexities involved in selling to government units.

Institutional Purchasing
Institutional buyers are either the government or the private organization. If it is a government hospital or collage, it normally follows the government purchase procedures. However, in cases of privately owned educational or other types of institutions, the purchase procedures are similar to those followed by commercial enterprises described earlier.

Purchasing in the Reseller’s Market
Reseller market consists of industrial dealers or distributors whose main goals are profit and sales volume. Hence, the dealers/distributor select a supplier based not only on product quality but also on the policies of the suppliers product.

Purchasing in Cooperative Societies
This is similar to institutional purchasing. Industrial marketers should study the purchasing practices of each cooperative society in order to be effective in marketing their goods and services. For examples, the cooperative sugar factories in maharastra and UP may adopt different buying practice while purchasing sugar machinery, pumpsets, compressors, etc.

ENVIRONMENTAL ANALISIS IN INDUSTRIAL MARKETING
Industrial buyers and sellers operate in a dynamic environment which changes continuously. However, much of the discussions on environment are which environment like air and water pollution, disposal of solid waste, and conserving, natural resources. We shall use the word ‘environment’ in broader sense.

Physical and Ecological Environment industrial organizations manufacturing chemicals and pesticides pose serious threats to government due to the disposal of untreated waste. The Delhi high court delivered a judgment in 1997 asking a number factories to close down because they failed to treat the effluent they discharge as a waste product therefore, the industrial organization must be responsive to the welfare of the society.

Internal Environment The purpose of carrying out the internal environment analysis is to identify periodically the specific strengths and weaknesses of a company.

External Environment in Industrial Marketing Successful companies recognize the importance of continuously scanning the external environment factors. Both macro and micro external environment factors change continuously. These changes spin out new opportunities and threats.

Competitors In today’s markets, understanding competition is as important as understanding customers. An industrial marketer need to gather information on competitor strategies, objectives, strengths and weaknesses, and reactions patterns.

Suppliers Raw materials, component parts, and capital goods are supplied by supplier firms to buyer firms as inputs for the use in productions of goods and services.

Macro Environmental Factors
Economic Changes in economic environment needs to be monitored as it effects the willingness and ability of the industrial organization to buy and sell. If industrial marketers serve domestic and international markets, it would be necessary for them to examine to change in the economic environment, both at home and overseas market.

Technological Technological development and change have major impact on both industrial buyers and sellers. There are rapid technological change in some of the industries such as telecommunication, computers, and semi conductors.

Governmental, Political and legal As the global competition in creases, industrial marketers have to understand the action of their government as well as those of the governments around the world.

Public It consist of various groups who help or hinder an industrial organization effort to serve its markets. Some of these groups are press, institutional investors, shareholders, banks, public interest groups, and general public.

Cultural and Social The impact of changes in cultural and social environment is felt more for consumer markets than industrial markets.

Strategy for Managing Industrial Environment
Effective use of marketing mix variables such as product, place, price and promotion are not adequate for the survival and success of industrial firm in a dynamic external environment. The first step is the continues gathering and monitoring of information on the relevant external environment.

Independent strategies These are the independent efforts of industrial firm by using its own resources. There era several examples of independent strtegies depending upon an organizations initiative and strength.

Cooperative Strategies In these strategies, an industrial firm cooperates with other firms, industries, or groups in the environment. For example, industry associations such as confederation of Indian industries ( FICCI ) protect the Indian industries from unfair political or legal regulations of the government.

Strategic Planning an industrial firm carries out strategic planning by identifying long term product/market, based on its forecasts of external environment, analysis of its strengths an weaknesses, and its long term objective and goals.

In backward Integration, a company seeks ownership or control of it supply system. For instance, Crompton greaves when for backward integration by setting up its manufacturing plan for still stampings, which were earlier supplied by GKW.

In Forward Integration, a company seeks or increased control of its distribution system. A material handling company, for example opened its own branches with ware housing facilities, in place of it agents, in order to improve costumer services.

In horizontal Integration, A company seeks or increased control of some it of competitor. For instance, VIP company reduced competition by acquiring the management control of some of its competing firms.

Sumber:Industrial Marketing, Karangan:Krisna
Kelompok Manajemen Pemasaran Industri
Gema mochamad
Haditya Saputra
Moc.Hery Irawan