Industrial marketing

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Industrial marketing or business-to-business marketing is the marketing of goods and services by one business to another. Industrial goods are those an industry uses to produce an end product from one or more raw material. The term industrial marketing has largely been replaced by the term business-to-business marketing (B2B).

Contents

Origins and usage

Historically, the marketing discipline made a distinction between industrial marketing and consumer goods marketing. Recognising the importance of knowing who was responsible for industrial buying decisions, John Frederick wrote in 1934:

The major objective of all [industrial] marketing is to contact the man who actually brings about the purchase decision, regardless of his position or title. [1]

During the 1980s, businesses shifted from industrial marketing to business marketing, although in 1989 Daniel McQuiston was still able to claim that the primary marketing objective remained "virtually the same" as it had been in 1934. [2]

Within a decade, the term business marketing had largely displaced industrial marketing. By the late 1990s, the term B2B marketing came into widespread use. [3]

Industrial or business-to-business (B2B) marketing

Main features of the B2B selling process are:

Blurring between B2B and B2C

Industrial marketing can cross into consumer marketing (B2C). For example, an electronic component seller may distribute its products through industrial marketing channels (see Channel (marketing)), but also support consumer sales. Many products are equally desired by business and consumers, such as audio products, furniture, paint, hardware, etc. Nonetheless, manufactures and service providers frequently maintain separate industrial and consumer marketing operations to reflect the different needs of the two channels.

Competitive tendering

Industrial marketing often involves competitive tendering. This is a process where a purchasing organization undertakes to procure goods and services from suitable suppliers. Due to the high value of some purchases (for example buying a new computer system, manufacturing machinery, or outsourcing a maintenance contract) and the complexity of such purchases, the purchasing organization will seek to obtain a number of bids from competing suppliers and choose the best offering. An entire profession (strategic procurement) that includes tertiary training and qualifications has been built around the process of making important purchases. The key requirement in any competitive tender is to ensure that:

Because of the significant value of many purchases, issues of probity arise. Organisations seek to ensure that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence.

Bidding process

Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification (issued by the purchasing organization), designing a suitable proposal, and working out a price.

Industrial buying journey

Before industrial buyers engage in the bidding process, they go through a long and distinct buying journey. A 2018 study conducted by Thomasnet.com and the research firm Strategyn [4] revealed that the industrial buying process involves 15 distinct steps that ultimately align industrial manufacturers' and suppliers' marketing activities to the buying cycle, making it more successful. This is very similar to the inbound process of inbound marketing.

Non-tender purchasing

Tender processes are time consuming and expensive, particularly when executed with the aim of ensuring probity. Government agencies are particularly likely to utilise elaborate competitive tendering processes due to the expectation that they should be seen at all times to be responsibly and accountably spending public money. Private companies are able to avoid the complexity of a fully transparent tender process but are still able to run the procurement process with some rigour.

Solution selling

B2B firms make extensive use of solution selling where sales force identify the client's problem or needs and sell goods or services that specifically address those needs. [5] In solution selling, it is essential that sales staff explore the client's requirements in depth before presenting a solution.

Marketing supports solution selling through methods like account-based marketing understanding a specific target organization's requirements as the foundation of a marketing program. As research shows, sales success is heavily weighted towards suppliers who understand the customer. In UK research, 77 per cent of senior decision-makers believe new suppliers' marketing approaches are poorly targeted and make it easy to justify staying with current suppliers). [6]

Sales force management has a critical function in industrial selling, where it assumes a greater role than other parts of the marketing mix. Typical industrial organisations depend on the ability of their sales people to build relationships with customers. During periods of high demand (economic boom), sales forces often become mere order takers and struggle to respond to customer requests for quotations and information. However, when economic downturn hits it becomes critical to direct the sales force outward to sell.

From cannon fodder to preferred tenderer

The term "cannon fodder" derives from the World wars and refers to the massing of undertrained and recently recruited troops sent to the fronts to face the enemy. Such troops invariably had a poor survival rate but provided the tactical advantage of distracting the enemy while professional soldiers mounted more effective operations. In adopting the term to Industrial Marketing it means those bids being submitted that have no chance of winning but are involved to make up the numbers (you can't have only one bid in a "competitive" tender process; that wouldn't satisfy the requirements of probity) (for example in government tenders, or for private enterprise the requirement to "truly test the market" and to "keep them honest"). The reader might be wondering why anybody would go to all of the work of submitting a tender when they had no chance of winning; for the same reason that troops were sent into battle to die; they thought they had a real chance.

Indicators

In industrial marketing personal selling is still very effective because many products must be customized to suit the requirements of the individual customer. Indicators such as the sales tunnel give information on the expected sales in the near future, the hit rate indicates whether the sales organization is busy with promising sales leads or it is spending too much effort on projects that are eventually lost to the competition or that are abandoned by the prospect.

The Internet and B2B marketing

The dot-com boom and bust of the late 1990s saw significant attempts to develop online shopping. Many entrepreneurs (and their investors) discovered that merely having a website (no matter how innovative) was insufficient to generate sales. The amount of conventional media advertising required to promote the sites burnt cash at a faster rate than on-line sales generated. They also presumed that consumers would eschew the conventional shopping experience (driving, parking, poor service etc.) for the convenience of shopping on-line. Some did, but for many companies, not in sufficient numbers. There were many unforeseen problems, and apart from some notable exceptions (Amazon.com and others) the business to consumer online failed for many companies. B2B selling, however, more frequently achieved impressive results.

See also

Related Research Articles

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In commerce, supply chain management (SCM) deals with a system of procurement, operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally". This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

<span class="mw-page-title-main">Marketing</span> Study and process of exploring, creating, and delivering value to customers

Marketing is the act of satisfying and retaining customers. It is one of the primary components of business management and commerce.

<span class="mw-page-title-main">Wholesaling</span> Sale of goods or merchandise to retailers rather than end consumers

Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers and related subordinated services. In general, it is the sale of goods in bulk to anyone, either a person or an organization, other than the end consumer of that merchandise. Wholesaling is buying goods in bulk quantity, usually directly from the manufacturer or source, at a discounted rate. The retailer then sells the goods to the end consumer at a higher price making a profit.

<span class="mw-page-title-main">Sales</span> Activities related to the exchange of goods

Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. A period during which goods are sold for a reduced price may also be referred to as a "sale".

<span class="mw-page-title-main">Customer</span> Recipient of a good, service, product, or idea from a vender or seller

In sales, commerce, and economics, a customer is the recipient of a good, service, product, or an idea, obtained from a seller, vendor, or supplier via a financial transaction or an exchange for money or some other valuable consideration.

<span class="mw-page-title-main">Distribution (marketing)</span> Making products available to customers

Distribution is the process of making a product or service available for the consumer or business user who needs it, and a distributor is a business involved in the distribution stage of the value chain. Distribution can be done directly by the producer or service provider or by using indirect channels with distributors or intermediaries. Distribution is one of the four elements of the marketing mix: the other three elements being product, pricing, and promotion.

<span class="mw-page-title-main">Pricing</span> Process of determining what a company will receive in exchange for its products

Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of product.

Marketing management is the strategic organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of marketing resources and activities. Compare marketology, which Aghazadeh defines in terms of "recognizing, generating and disseminating market insight to ensure better market-related decisions".

Business-to-government (B2G), also known as business-to-public-administration (B2PA) or business-to-public-sector (B2PS) refers to trade between the business sector as a supplier and a government body as a customer playing a major impact in public procurement. Business-to-government also includes the segment of business-to-business (B2B) marketing known as public sector marketing — a form of business-to-business-to-government (B2B2G) phenomenon, which encompasses marketing products and services to various government levels—local, state/provincial, and national—through integrated marketing communications techniques such as strategic public relations, branding, marketing communications, advertising, and web-based communications.

Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obligation to "procure", i.e. to "ensure" that something is done. When a government agency buys goods or services through this practice, it is referred to as government procurement or public procurement.

<span class="mw-page-title-main">Business-to-business</span> Commercial transaction between businesses

Business-to-business is a situation where one business makes a commercial transaction with another. This typically occurs when:

Complex sales, also known as Enterprise sales, can refer to a method of trading sometimes used by organizations when procuring large contracts for goods and/or services where the customer takes control of the selling process by issuing a Request for Proposal (RFP) and requiring a proposal response from previously identified or interested suppliers. Complex sales involve long sales cycles with multiple decision makers. Multiple stakeholders and stakeholder groups contribute to every complex sale. These types of sales can take up to 8 to 18 months as multiple people from higher management are involved.

A purchasing cooperative is a type of cooperative arrangement, often among businesses, to agree to aggregate demand to get lower prices from selected suppliers. Retailers' cooperatives are a form of purchasing cooperative. Cooperatives are often used by government agencies to reduce costs of procurement. Purchasing Cooperatives are used frequently by governmental entities, since they are required to follow laws requiring competitive bidding above certain thresholds. In the United States, counties, municipalities, schools, colleges and universities in the majority of states can sign interlocal agreements or cooperative contracts that allow them to legally use contracts that were procured by another governmental entity. The National Association of State Procurement Officials (NASPO) reported increasing use of cooperative purchasing practices in its 2016 survey of state procurement.

Business marketing is a marketing practice of individuals or organizations. It allows them to sell products or services to other companies or organizations, who either resell them, use them in their products or services, or use them to support their work.

<span class="mw-page-title-main">Retail marketing</span> Economic concept

Once the strategic plan is in place, retail managers turn to the more managerial aspects of planning. A retail mix is devised for the purpose of coordinating day-to-day tactical decisions. The retail marketing mix typically consists of six broad decision layers including product decisions, place decisions, promotion, price, personnel and presentation. The retail mix is loosely based on the marketing mix, but has been expanded and modified in line with the unique needs of the retail context. A number of scholars have argued for an expanded marketing, mix with the inclusion of two new Ps, namely, Personnel and Presentation since these contribute to the customer's unique retail experience and are the principal basis for retail differentiation. Yet other scholars argue that the Retail Format should be included. The modified retail marketing mix that is most commonly cited in textbooks is often called the 6 Ps of retailing.

Industrial market segmentation is a scheme for categorizing industrial and business customers to guide strategic and tactical decision-making. Government agencies and industry associations use standardized segmentation schemes for statistical surveys. Most businesses create their own segmentation scheme to meet their particular needs. Industrial market segmentation is important in sales and marketing.

Business-to-employee (B2E) electronic commerce uses an intrabusiness network which allows companies to provide products and/or services to their employees. Typically, companies use B2E networks to automate employee-related corporate processes. B2E portals have to be compelling to the people who use them. Companies are competing for eyeballs of their employees with eBay, yahoo and thousands of other web sites. There is a huge percentage of traffic to consumer web sites comes from people who are connecting to the net at the office.

<span class="mw-page-title-main">Vendor</span> Supplier of goods or services

In a supply chain, a vendor, supplier, provider or a seller, is an enterprise that contributes goods or services. Generally, a supply chain vendor manufactures inventory/stock items and sells them to the next link in the chain. Today, these terms refer to a supplier of any goods or service.

<span class="mw-page-title-main">Reverse auction</span> Auction with one buyer and many potential sellers

A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers. In an ordinary auction also known as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.

There are many types of e-commerce models, based on market segmentation, that can be used to conducted business online. The 6 types of business models that can be used in e-commerce include: Business-to-Consumer (B2C), Consumer-to-Business (C2B), Business-to-Business (B2B), Consumer-to-Consumer (C2C), Business-to-Administration (B2A), and Consumer-to-Administration

References

  1. Frederick, J. H. (1934), Industrial Marketing, New York: Prentice-Hall, Inc.
  2. 1 2 McQuiston, D. H., Novelty, Complexity, and Importance as Causal Determinants of Industrial Buyer Behavior, Journal of Marketing, Vol. 53, April 1989, p. 66, accessed on 20 August 2024
  3. Hunt, S.D., "A General Theory of Business Marketing: R-A theory, Alderson, the ISBM framework, and the IMP Theoretical Structure", Industrial Marketing Management, Vol. 42, 2013, pp 283-293
  4. Scheer, Jason (April 23, 2018). "Casting a Light on Procurement". Inbound Logistics. Retrieved October 24, 2018.
  5. Spiro, Roseann; Gregory Rich; Stanton, William (2007). Management of a Sales Force (12th ed.). McGraw-Hill Irwin.
  6. Malaval: "Strategy and Management of Industrial Brands: Business to Business Products and Services", page 16. 2001