INDUSTRIAL MARKETING,EXCHANGE PROCESS CHARACTERISTICS & CHALLENGES
What is Industrial Marketing?
Industrial marketing or business marketing is to market the products and services to business organizations. Their buyers can be manufacturing companies, government undertakings, private sector organizations, educational institutions, hospitals, distributors, and dealers. The business organizations, buy products and services to meet their aims like maximizing profits, minimizing costs, use of latest technology, and so on.
Industrial marketing consists of all process involved in the marketing of products and services to organizations that use products and services in the production of consumer or industrial goods and services. The organizations selling goods like steel, machine tools, computers, courier services, and other goods and services to buying organizations.
For example, a company manufacturing and marketing tyre tubes to motorbike company, a manufacturer is doing industrial marketing. Industrial marketer of the tyre tubes company must understand the needs of motorbike manufacturers such as Hero Motocorp and Honda, Bajaj, Yamaha in terms of their quality standards, applications of tubes, availability or delivery on daily or weekly basis.
Types of Exchange process
The nature of any business organization of industrial buyer is to identify and define the needs and objectives of a target market. It is profound that industrial marketing is totally different than consumer marketing because Industrial customers like organization businesses, institutions, and government agencies having unique needs.
Thus industrial marketing concept consist of different exchange processes with these customers. The needs and objectives of industrial buyers are satisfied through the following exchange processes.
Product Exchange Process
The characteristics of the Product exchange process is any product or service involved have a significant impact on the industrial exchange process. The comfort of exchange is based upon the ability of the seller to identify the buyer’s needs and the product’s potential to meet those needs.
For example supply of soap or detergent powder to the manufacturers of soaps or detergents. To HUL there are suppliers of the raw materials of soap, detergent raw materials to give the end product s like Rin Detergent Bar or Surf Excel.
Information Exchange Process
When one organization gives the technical knowledge, economic consultancy, or giving replies to organizational questions to another organization it is termed as information exchange.
It consists of technical, economic, and organizational questions pre and post-sale maintenance and servicing information that must be exchanged to the participants of business organizations.
For example we can cite the installation of sophisticated software’s in an organization and operating system of that software can be termed as information exchange.
Financial Exchange Process
The yielding of credit or the need to exchange money from one currency to another at the time of dealing with foreign buyers is called as foreign exchange. Award of credit facilities to an organization is financial exchange. Exchange of currencies between two organizations in two different countries is financial exchange process.
For example we can say the functioning of Industrial Development Bank of India (IDBI), which grants loans to industries.
Societal Exchange Process
Social exchange is significant in areas of reducing ambiguity between buyer and seller. Avoiding short-term difficulties and thus maintaining a better relation over a long period of time. There are a number of factors in an agreement between buyers and sellers in the industrial market. They are based on arbitration and mutual trust, not completely official or based on legal criteria.
Types of Industrial Customers
Industrial customers are normally classified into four groups:
- Commercial Enterprises
- Governmental Agencies
- Institutions
- Co-operative Societies
These are as shown as follows:
Commercial Enterprises
Commercial enterprises are private sector, profit-seeking organisations such as IBM, General Motors, Computer Land, and Raven Company, purchase industrial goods and/or services for purposes other than selling directly to ultimate consumers.
However, since they purchase products for different uses, it is more useful from a marketing point of view to define them in such a way as to understand their purchasing needs at the time of examination of the varieties of products they purchase and how marketing strategy can be developed to meet their needs.
Thus, it is more logical to look at commercial enterprises:
- industrial distributors or dealers
- original equipment manufacturers (OEMs)
- users
As and when, these categories tend to overlap; are useful to the industrial marketer because they point out the ways of uses of products and services in buying firms.
Industrial Distributors and Dealers
Industrial distributors and dealers take title to goods; thus, they are the industrial marketer‘s intermediaries; acting in a similar capacity to wholesalers or even retailers. the intermediaries not only serve the consumer market but also they serve other business enterprises, government agencies, or private and public institutions. They purchase industrial goods and resell them in the same form to other industrial customers.
Original Equipment Manufacturers (OEMs)
These industrial customers purchase industrial goods to incorporate OEMs into the products they produce. For instance, a tyre manufacturer (say, MRF), who sells tyres to a truck manufacturer (say, TELCO) in this case it would consider the truck manufacturer as an OEM. Thus, the product of the industrial marketer (MRF) becomes a part of the customer‘s (TELCO‘S) product.
Users
An industrial customer, who purchases industrial products or services, to support its manufacturing process or to facilitate the businessoperations is referred as a user.
For example, drilling machines, press, winding machines, and so on are the products which support the manufacturing process, whereas the products which facilitate the operations of business like computers, fax machines, telephones, and others.
Government Customers
In India, the largest purchasers of industrial products are Central and State Government departments, undertakings, and agencies, such as railways, department of telecommunication, defense, Director General of Supplies and Disposal (DGS&D), state transport undertakings, state electricity boards, and so on. These Government units purchase almost all kind of industrial products and services and they represent a huge market.
Institutions
Public and private institutions such as hospitals, schools, colleges, and universities are termed as institutional customers. Some of these institutions have rigid purchasing rules and others have more flexible rules. An industrial marketing person needs to understand the purchasing practice of each institute so as to be effective in marketing the products or services.
Cooperative Societies
An association of persons forms a cooperative society. It can be manufacturing units (e.g. Cooperative Sugar Mills) or non-manufacturing organisations (e.g. Cooperative Banks, Cooperative Housing Societies). They are also industrial customers.
Industrial Marketing Characteristics
Industrial marketing differs from other marketing industries, e.g., consumer-centric markets like travel, leisure, or food. This is obvious at first glance, as the products, services, and customers differ.
Overview of Industrial Marketing Characteristics
So, what precisely sets industrial marketing apart? And what strategies can you employ to ensure success? To answer these questions, we will explore business marketing’s core characteristics. From long-term relationships and high-value transactions to complex decision-making processes and highly targeted promotions – we will unravel the threads that weave the fabric of industrial marketing. Let us start with an overview of these industrial marketing features and characteristics:
- Industrial Product Complexity
- High Purchase Volumes
- Complex Purchase Process
- Longer Sales Cycle Time
- High Explanatory Effort
- Strong Buyer-Seller-Relationships
Industrial Product Complexity
The complexity of an industrial good typically increases with every manufacturing step. For example, the chassis of a vehicle is more complex than mining iron ore, which is the raw material for steel production.
This technical complexity of products requires a deep understanding of the industry to promote them effectively. Working principles and/or physical properties are often essential for the buyer. This is a distinction to a consumer good mainly sold because of its uses for the buyer. For example, the working principle of a mobile phone is less important than battery time, size, and camera resolution. The camera module’s mechanical, electro-optical, and electronic details are of utmost interest when Foxconn works with Apple on the iPhone camera specifications.
High Purchase Volumes
The purchase volumes in the B2B market are significantly larger than in the B2C market. This is due to the nature of industrial requirements, where items like screws, even though priced low per piece, are bought in large quantities to meet the demand. As a result, the number of clients in the B2B market may be fewer, but the overall volume of industrial purchases remains high. This emphasis on bulk purchasing highlights the unique dynamics of the B2B sector and the importance of catering to the specific needs of industrial customers.
Complex Purchase Process
The higher cost of each purchase increases the buyer’s risk. A more complex decision-making process focuses on objectifying the decision. To reason the decision, multiple people take different roles. A buying center consists of the Decision maker, the buyer, the consultant, the user, and the information gatekeeper. Each role fulfills a specific task to objectify the complex purchase decision.
Longer Sales Cycle Time
Regarding the purchasing process, B2B companies often require more time due to the complex decision-making process. Larger companies with complex demand tend to have longer purchasing decision timelines. This is primarily because evaluating various factors, such as budget, requirements, and internal processes, significantly impacts the sales cycle time. As a rule of thumb – the bigger the company and the more complex the product, the longer the purchasing decisions.
High Explanatory Effort
Due to their complexity, industrial goods have a higher explanatory effort towards the end of the value-added chain. For example, the endurance of your garden table against UV radiation. Details about how synthetic plastic withstands influences are harder to understand and explain than the crude oil quality from which the plastic originates. In the consumer market, the customer only wants to know if the table looks the same after years.
Strong Buyer-Seller-Relationships
Due to their complexity, industrial goods have a higher explanatory effort towards the end of the value-added chain. For example, the endurance of your garden table against UV radiation. Details about how synthetic plastic withstands influences are harder to understand and explain than the crude oil quality from which the plastic originates. In the consumer market, the customer only wants to know if the table looks the same after years.
Industrial Marketing vs Consumer Marketing
Marketing is an essential element in the growth and success of any business. The difference between these two marketing disciplines is to whom you market. As mentioned above, in industrial marketing, your target group is another company. In consumer marketing, you target consumers.
Based on the specifics of industrial markets, business marketing, and consumer marketing have the following differences:
Marketing Aim: Relationship and Trust Building
Industrial marketing usually involves a longer sales process than consumer marketing. It is because the products or services sold in the industrial market are of high value, complex, and require more time for evaluation. Therefore, the industrial marketer must establish a long-term relationship with the target clients to build trust. In contrast, consumer marketing emphasizes impulse buying, and the sales process happens instantaneously. Establishing a relationship with the consumer is not necessarily a priority; instead, the focus is on creating an emotional connection with the brand.
Storytelling and Product Complexity
In industrial marketing, the products and services offered are usually more technical, sophisticated, and complex. The target audience needs to understand the technical and working principles of the products. Further, they need to know their functioning before making a purchase decision. Industrial marketing involves lengthy negotiations and consultations and requires marketers with industry-specific knowledge. Industrial marketers need to support potential consumers throughout the whole buying journey. The stories you have to tell sometimes last a year or longer. Conversely, consumer marketing involves less technical products and services that only require basic knowledge to operate. Storytelling can focus on emotions and short-term results. Main USPs are easier to catch and, hence, to communicate.
Communication
As a result, industrial communication is often highly technical, with complex language and jargon to meet the target audiences’ specific needs. Industrial marketing communication is more personalized than consumer marketing, which can use various mass communication tools such as TV, radio, billboards, newspapers, Facebook, and Instagram. It may include on-site visits, seminars, and customer conferences to close deals and build long-lasting relationships. Social media and online communications are equally important in industrial marketing. The communication style must be adapted, and content quality is most important.
These three aspects are only the tip of the iceberg when comparing industrial marketing vs consumer marketing. This whole article on B2B vs. B2C outlines all relevant details.
Industrial Marketing Management
You already know that B2B marketing strongly differs from consumer marketing. This fact also impacts managing a marketing team of industrial companies.
While there are several challenges, industrial marketing managers can leverage existing consumer marketing principles.
Let us have a closer look at both aspects:
Challenges of Industrial Marketing Management
As a direct result of business marketing specifics, these are the main challenges for marketing management:
- Need for specialized teams: The complexity of decision-making and the necessity for technical product knowledge requires specialized marketing teams with a deep understanding of industry specifics and technical nuances.
- Strategic long-term planning: Given the length of sales cycles in industrial marketing, strategic long-term planning becomes crucial, focusing on nurturing relationships and building trust over time.
- Navigating regulatory landscapes: Marketing managers must navigate the regulatory landscapes of their industry. Including global requirements and understanding how these laws impact marketing efforts.
- Price positioning: In highly competitive markets with price pressures, marketing managers must carefully strategize their product’s price positioning, balancing profitability with market competitiveness.
- Effective stakeholder communication with a focus on top management: Given the involvement of multiple stakeholders in decision-making, effective, clear, and timely communication becomes crucial. This ensures meeting all parties’ needs and expectations.
- Global challenges: As many industrial companies act globally, marketing teams must handle multiple languages and cultures. Local specifics demand local marketing teams. This increases the management duties of a centrally organized marketing approach. Culture affects marketing messages, which results in localized content of global campaigns.
Comments
Post a Comment