Unit 4 Flashcards
Common features of industrial goods sector AKA B2B
Marketing industrial goods is characterized by the fact that the consumers are organizations (e.g. industrial companies, public authorities, etc.) rather than individuals.
Marketing of industrial goods can be undertaken directly or indirectly through intermediaries.
Purchases of industrial products tends to involve multiple people often working across multiple organizations.
It is common to see project-specific cooperations (or communities) arising between industrial goods providers. Such communities often emerge as a result of the sheer complexity of the product being produced.
Market development is not directed towards an anonymous market but towards individual consumers, which requires a more interactive style of marketing. Business relationships beyond individual transactions often grow in importance.
Industrial goods producers operating internationally, even those with a traditionally strong orientation towards technology, realize the need to consistently optimize benefits to their consumers, given the ever-increasing changes to the market landscape.
Industrial Goods Sector : PRODUCT Business type
These producers supply prefabricated, standardized products which are purchased by consumers for use at their own discretion. The level of product specificity is low and consumers are generally not known prior to supply. When marketing such products, it is useful to select national markets and employ typical exporting strategies. Which markets to select depends on the locations of potential consumers and the general attractiveness of market conditions.
Industrial Goods Sector : INVESTMENT Business type
These producers supply complex products which are generally sold prior to manufacture. Customised components are usually assembled into functioning products at the location of the consumer. These products naturally have a high level of specificity. The option of becoming active in a market may result from previous projects that the producer can showcase or via the process of tendering. Depending on complexity and extent of the investment, a “follow the customer strategy” could also be an option where the components are made according to the consumer’s specifications.
Industrial Goods Sector : SYSTEMS Business type
Systems: These producers supply products designed for either an unknown consumer or a specific market segment. The products are interlinked and designed to be bought in gradual succession by consumers. The strategies of “follow the customer” and customer segmentation tend to play a significant role for systems producers. Market expansion is often connected to national markets selected by the respective consumer.
Industrial Goods Sector : SUPPLY Business type
Supply: These producers supply specific products developed for individual customers. Producers aim to establish long-term business relationships characterized by an ongoing supply of products. Depending on the focus of the producer—directed toward important customers or general market potential—the “follow the customer” strategy or active selection of markets with potential for growth may be utilized. The customer-supplier relationship is usually paramount for this type of producer.
The buying center roles
user, buyer, influencer, gatekeeper, and decider.
An important feature is that one person can play several roles and several people can play the same role at any one time.
Important point about Industrial Goods Sector
The importance placed on establishing long-term relationships is why international relationship marketing is especially important in this sector
the marketing of consumer goods producers is increasingly directed towards
both consumers as well as the trade sector
Consumer-oriented marketing measures include the use of sales instruments in the areas of product, communication, distribution and, to a limited extent, pricing
Trade sector-oriented marketing measures include the coordination of all marketing activities in order to secure important players within the trade sector who will work with consumer good producers to promote their products
Vertical Marketing System
In a vertical marketing system, the main members of a distribution channel—producer, wholesaler, and retailer—work together to meet consumer needs. This type of system can be contrasted with conventional marketing systems, where all members of a distribution system see themselves as separate businesses that aim to maximize profits.
Vertical marketing systems can take several forms:
one member of the distribution system owns the other members or independent firms are joint by a contract, e.g. a franchising contract.
Position of Power of the trading companies
When it comes to the position of power, the trading companies dominate in many cases. This is supported by the way that information is distributed in the sales channel. Trading companies realize information advantages as they are in direct contact with the consumers on the respective markets. These advantages are further pushed through the establishment of POS systems, loyalty cards and the like, as such instruments enable the trade sector to collect detailed national market-related information on the customers (Palmer, 1996).
Producer (controlled distribution)
Producers seek to secure their sales channels through controlled distribution. Controlled distribution concepts significantly contribute to strengthening a brand, as vertical systems improve the producers’ implementation of sales and marketing strategies.
Direct distribution (secured distribution)
Direct distribution systems (i.e. secured distribution) give producers even more possibilities to enforce their measures. These systems are types of integrative distribution approaches.
HOME COUNTRY STRATEGY
This strategy aims to address different markets in a standardized way; a single business concept and product range is selected for all foreign markets. Under a home country oriented strategy, a company multiplies the wholesale or retail concept utilized for its domestic market. This standardized strategy not only creates economies of scale, spillover effects, and image effects, but also enables companies to benefit from synergy effects by developing and producing standardized store brands or cross-border sales promotion measures (Zentes & Morschett, 2002).
Multinational Strategy
Under this type of strategy, product range and business concepts are optimized for each market. They are adjusted according to country-specific consumer needs and accommodate for differences in communication, pricing and distribution conditions, and legal frameworks. Such a differentiated approach seems to make sense for trading companies that take over local companies that are already well-established and positioned on respective foreign markets (Zentes & Morschett, 2002).
Differentiated product ranges enable companies to be closer to customers and services can be adjusted to local needs. This is why the trade sector primarily pursues quality- and service-oriented formats. A multinational strategy may influence the actual retail brand on local markets, e.g. by using national or regional store names, which convey the character of the company in that specific area (Zentes, Swoboda, & Schramm-Klein, 2010).
