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Thursday 23 February 2017

Industrial Marketing Environment

Industrial buyers and sellers operate in a dynamic environment. One constantly poises new opportunities and threats. The industrial marketing environment could be divided into four levels namely
  • Buyer Seller Interface
  •  Publics
  •  Macroenvironment
  •  Government

The Interface Level
This involves those key participants who immediately interface with an industrial firm (buyer or seller) in facilitating production, distribution and purchase of firm’s goods and services. Supply inputs are transformed by a company and its competitors into outputs with added value that move on to the end markets, the move being made through the firms interface with industrial distributors and dealers, manufacturers representatives and the company’s own sales people. That move is made possible by a firms interface with facilitating institutions such as banking, transportation, research and advertising firms.
Participants in the interface level include:
§  Input supplier– Input goods such as the raw materials, labor and capital are supplied by organizations to industrial firms for use in producing output goods and services. The survival and success of a firm depend on the knowledge and relationship with its input suppliers. Interruptions in the flow of inputs cause repercussions in the entire industry affecting not only production and marketing plans but also the production and marketing plans of the suppliers.
§  Distributors– Most organizational buyers buy from five or more industrial distributors. Industrial distributors, contact potential buyers, negotiate orders, provide buffer inventories, credit and technical advice to potential buyers. They are particularly important when joint demand is present because they bring together the heterogeneous inputs needed for the production of end products .
§  Facilitators– Advertising agencies and public relations firms provide the necessary communication flow between the sellers and buyers through the formulation of meaningful information and media strategies. The use of advertising in reaching potential buyers and the multitude of buying influencers is vital in the overall communication strategy. Transportation and warehouse companies facilitate the free flow of goods that must be delivered in usable condition to industrial customers and distributors when and where they are required. When goods are not delivered on time and in usable solutions, buyers can be forced to shut down production lines. Resources as they move from the supply inputs to end users must be financed and insured.
§  Competitors– Competitors actions whether domestic or foreign, ultimately influence the company’s choice of target markets, distributors, product mix, and in fact its entire marketing strategy.
The Publics Level
Publics are distinct groups that have actual or potential interest or impact in each firm’s ability to achieve its respective goals. Publics have the ability to help or hinder a firms effort to serve is markets.
§  Financial publics– Financial institutions such as investments firms and stock brokerage firms and individual stakeholders invest in an organization on its ability to return profits. When they become unhappy with the management or dissatisfied with a company’s social polices, they sell their shares.
§  Independent press – Industrial organizations must be accurately sensitive to the role that the mass media play and how they can affect the achievement of the marketing objectives. The independent press is capable of publishing news that can boost or destroy the reputation of a firm as well as the sales potential of a product.
§  Public interest groups– Industrial marketing decisions are increasingly affected by public interest groups. Clearly, these various public interest groups limit the freedom of the suppliers and buyers in the industrial market. While some organizations respond by fighting, others accept these groups as another variable to be considered in developing strategic planning, working through public affairs departments to determine their interests and to express favorably the company’s goals and activities in the press. The impact of these groups however is felt by all participants in the interface level.
§  General public— Although the general public does not react in an organized way towards a firm or an industry, as interest groups do, when sizeable portion of a population shifts attitude towards  a firm or industry, there is definite impact.
§  Internal public– The board of directors and managers as well as blue and white colour workers are important emissaries between an organization and other participants in the interface and public levels. Corporate policy must give consideration to employees and others who are held responsible for the overall operation of the firm. Employee morale is an important factor in all business decisions. And when morale is low, organizational efforts suffer. A firms employees spend more than two thirds of their time off the job, interacting with their families and the community, so employees attitudes do influence the public.
Macro Environment
This level of the organization is made up of components that have less specific and less immediate implications for managing the organization effectively.
1. Economic component
Economic conditions greatly influence an organizations ability and willingness to buy and sell. Thus emerging changes in the economic environment both at home and abroad, must be closely monitored. It includes the following factors;
§  GNP
§  Inflation rates
§  Balance of payment position
§  Debts and spending
§  Taxation rates
§  Interest rates
§  Consumer’s income
§  Corporate profits
2. Social component
This describes the characteristics of the society where an organization exists. It includes factors such as;
§  Literacy levels
§  Values of people
§  Educational levels
§  Geographical distribution
§  Customs and believes
3. Legal component
This consists of legislation’s that have been passed. It describes the rules or the laws that all the company members must follow. They include all laws affecting the organization e.g.
§  Consumer health policy
§  Energy policies and conservation Acts
§  Employment Acts, etc.
4. Political component
Comprise those elements related to the government affairs. This includes;
§  Type of government
§  Government attributes towards certain issues
§  Lobbying efforts from interest groups
§  Progress towards passing of laws affecting certain industries, etc.
5. Technological component
Given the rate of technological change in industries such as telecommunications, computers, and semi conductors, large buying firms are developing forecasting techniques to enable them to estimate time periods in which major technology developments might occur. Marketers must also monitor technological change if they hope to adapt marketing strategy with sufficient speed and accuracy to make the more scientific breakthroughs. This includes;
§  New procedures
§  Approaches to new plan of goods and services
§  Addresses the issues of new equipments and new ways of improving production through the use of computers /robots.
6. Demographic component
Industrial firms cannot ignore the demographic environments because of the derived nature of industrial demand. World population explosion and changing population structure of the world has a major impact on industrial demand.
Government
Every year government makes changes in its financial year policies or in five year plans. They provide subsidies to some sectors which are going down and increase taxes and duties to some sectors. Time to time government policies are changed for companies. It force industrial market to changes according to the government norms.


Critical Success Factors (CSF)

CSFs, also known as Key Results Areas (KRAs), are the essential areas of activity that must be performed well if you are to achieve the mission, objectives or goals for your business or project. By identifying your Critical Success Factors, you can create a common point of reference to help you direct and measure the success of your business or project.
As a common point of reference, CSFs help everyone in the team to know exactly what's most important. And this helps people perform their own work in the right context and so pull together towards the same overall aims.
About CSFs
The idea of CSFs was first presented by D. Ronald Daniel in the 1960s. It was then built on and popularized a decade later by John F. Rockart, of MIT's Sloan School of Management, and has since been used extensively to help businesses implement their strategies and projects.
Inevitably, the CSF concept has evolved, and you may have seen it implemented in different ways. This article provides a simple definition and approach based on Rockart's original ideas.
Rockart defined CSFs as: "The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization's efforts for the period will be less than desired."
He also concluded that CSFs are "areas of activity that should receive constant and careful attention from management."
Critical Success Factors are strongly related to the mission and strategic goals of your business or project. Whereas the mission and goals focus on the aims and what is to be achieved, Critical Success Factors focus on the most important areas and get to the very heart of both what is to be achieved and how you will achieve it.
Using the Tool: An Example
CSFs are best understood by example. Consider a produce store "Farm Fresh Produce", whose mission is:
"To become the number one produce store in Main Street by selling the highest quality, freshest farm produce, from farm to customer in less than 24 hours on 75% of our range and with 98% customer satisfaction."
(For more on this example, and how to develop your mission statement, see our article on Vision Statements and Mission Statements.)
The strategic objectives of Farm Fresh are to:
·         Gain market share locally of 25%.
·         Achieve fresh supplies of "farm to customer" in 24 hours for 75% of products.
·         Sustain a customer satisfaction rate of 98%.
·         Expand product range to attract more customers.
·         Have sufficient store space to accommodate the range of products that customers want.
In order to identify possible CSFs, we must examine the mission and objectives and see which areas of the business need attention so that they can be achieved. We can start by brainstorming what the Critical Success Factors might be (these are the "Candidate" CSFs.)
Objective
Candidate Critical Success Factors
Gain market share locally of 25%
Increase competitiveness versus other local stores
Attract new customers
Achieve fresh supplies of “farm to customer” in 24 hours for 75% of products
Sustain successful relationships with local suppliers
Sustain a customer satisfaction rate of 98%
Retain staff and keep up customer-focused training
Expand product range to attract more customers
Source new products locally
Extend store space to accommodate new products and customers
Secure financing for expansion
Manage building work and any disruption to the business
Once you have a list of Candidate CSFs, it's time to consider what is absolutely essential and so identify the truly Critical Success Factors.
And this is certainly the case for Farm Fresh Produce. The first CSF that we identify from the candidate list is relationships with local suppliers". This is absolutely essential to ensure freshness and to source new products.
Another CSF is to attract new customers. Without new customers, the store will be unable to expand to increase market share.
A third CSF is financing for expansion. The store's objectives cannot be met without the funds to invest in expanding the store space.
Figure 1: Critical Success Factors, Missions and Goals for "Farm Fresh Produce"




Tip: How Many CSFs?
Whilst there is no hard and fast rule, it's useful to limit the number of CSFs to five or fewer absolute essentials. This helps your CSFs have maximum impact, and so give good direction and prioritization to other elements of your business or project strategy.
Using the Tool: Summary Steps
In reality, identifying your CSFs is a very iterative process. Your mission, strategic goals and CSFs are intrinsically linked and each will be refined as you develop them.
Here are the summary steps that, used alliteratively, will help you identify the CSFs for your business or project:
Step One: Establish your business's or project's mission and strategic goals.
Step Two: For each strategic goal, ask yourself "what area of business or project activity is essential to achieve this goal?" The answers to the question are your candidate CSFs.

Tip:
To make sure you consider all types of possible CSFs, you can use Rockart's CSF types as a checklist.
·         Industry – these factors result from specific industry characteristics. These are the things that the organization must do to remain competitive.
·         Environmental – these factors result from macro-environmental influences on an organization. Things like the business climate, the economy, competitors, and technological advancements are included in this category.
·         Strategic – these factors result from the specific competitive strategy chosen by the organization. The way in which the company chooses to position themselves, market themselves, whether they are high volume low cost or low volume high cost producers, etc.
·         Temporal – these factors result from the organization's internal forces. Specific barriers, challenges, directions, and influences will determine these CSFs.
Step Three: Evaluate the list of candidate CSFs to find the absolute essential elements for achieving success – these are your Criticial Success Factors.
As you identify and evaluate candidate CSFs, you may uncover some new strategic objectives or more detailed objectives. So you may need to define your mission, objectives and CSFs iteratively.
Step Four: Identify how you will monitor and measure each of the CSFs
Step Five: Communicate your CSFs along with the other important elements of your business or project's strategy.
Step Six: Keep monitoring and reevaluating your CSFs to ensure you keep progressing towards your aims. Indeed, whilst CSFs are sometimes less tangible than measurable goals, it is useful to identify as specifically as possible how you can measure or monitor each one.



Wednesday 22 February 2017

Industrial Marketing


Industrial Marketing is marketing of goods and services to industrial and institutional customers (business to business marketing).
   The institutional customers use purchased goods and and services in their own production of goods and services. Consumer marketing, in contrast, is marketing of goods and services to individuals, families and households purchasing goods and services for their own consumption.



The Nature of Industrial Markets
Industrial/ B-to-B marketing involves the process of providing goods and services to industrial market intermediaries, as opposed to ultimate (final) consumers.
Industrial goods are differentiated from final consumer goods based on their ultimate use.
Types of Industrial Goods
Raw Materials –These are products destined to become part of another product, subject to further processing.
Fabricated Materials –In contrast to raw materials, these have already been processed but may require further processing.
Installations – Major equipment with long lives, such as buildings and machineries.
Accessory Equipment – Such equipment is used to aid and implement production and includes office machines as well as machine tools.
Operating Supplies – Materials used in producing goods & services.(Are similar to convenience goods in that they are consumable)

The nature of Industrial goods and services

They are often more complex than consumer goods and services
They can be categorized as:
·        Construction
·        Heavy equipment
·        Light equipment
·        Components and subassemblies
·        Integrated system, e.g., production line, power generator
·        Raw material
·        Processed material
·        Maintenance, Repair and Operating (MRO) supplies and services

Some Examples of Organizational Buying
·        Paper cups by McDonald's
·        Computer chips by Toshiba
·        Concrete by Local Authorities
·        Oil by Electricity Generators
·        Fertilizer by Farmers
·        Accountancy services by Ltd. Companies
Nature of Industrial Customers
·        Industrial customers: consisting of manufacturing and processing firms
·        Institutional customers: consisting of institutions such as hospitals, educational institutes.
·        Governmental customers: agencies, municipalities at different levels.
·        Industrial customers tend to be relatively few
·        They buy higher volume (comparing to individual customer)
·        Decision making is more complex
·        Formal purchasing procedures/routines
·        Many actors involved in purchasing process
·        The buying decision making may takes long time
·        They are less emotional and more rational

How industrial Marketing Differs from Consumer Marketing
·        Differences in basic assumptions.
·     Different theories
·        Aiming for improved profit and performance
·     Different customer’s needs
·        High degree of buyer-seller interdependence
·        Long lasting buyer-seller relationship
·        Very often special design for special customers
·        System solution/project


How Industrial Marketing differs...

•Higher functional dependence, particularly manufacturing and R & D, much closer relations with overall corporate strategy.
•More customer-oriented
•Technical product complexity, different sales techniques and different salesmanship.


Industrial Customers Type
Market Segments
Organisational Missions
Buying Behaviour
1. Commercial enterprises
Raw material producers Construction Manufacturers Services and professions Wholesalers and retailers Transportation Communication and other public Utilities
Serve a customer needs at a profit
Multiple influencers Multiple buying motives Complex purchasing process
2. Government
Federal, State, Local
Provide for the welfare, defense, education, crime, prevention, transportation, infrastructure, etc. needs of its citizens
Negotiated buying Precise specifications Bid buying
3. Institutions
Hospitals Nursing homes Schools College and universities Religious organisations Non-profit foundations
Social concerns Charitable concerns
Professional influencers




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