MBM 6109 Revision Qns and Answers.docx final
- 1. REVISION PAPER INSTRUCTIONS: ANSWER QUESTION ONE COMPULSORY) AND ANY OTHER TWO Question One Answer Question One a) Evaluating the statement and defining of industrial and consumer marketing and highlighting the similarities and differences of industrial and consumer marketing Industrial marketing or B2B Marketing. Industrial marketing consists of all activities involved in the marketing of products and services to organizations which may be commercial, profit or non-profit institutions, government agencies or resellers that use products or services in the production of consumer or Business to Business good and service, and to facilitate the operations of the enterprise. There can be four different types of exchanges in Industrial marketing and these include; 1. Product exchange: Supply of raw materials to the organization to process the finished goods for the end user or consumer. Examples can be many. Supply of soap/ detergent powder to the manufacturers of soaps or detergents. 2. Information Exchange: When one organization gives the technical knowledge, economic consultancy, or giving replies to organizational questions to another organization it is termed as information exchange. To site an example we say that the installation of sophisticated software’s in an organization and operating system of that software can be termed as information exchange a). In an interview to appoint a marketing manager for an industrial firm, one of the interviewers argued that a marketer is a marketer regardless of whether he is marketing industrial or consumer Goods. Critically evaluate this statement, highlighting the similarities and differences of industrial and consumer marketing. (14 Marks) b). Define the term industrial products and show how they are classified. (4 Marks) c). Write brief Notes on the following industrial marketing concepts: i. Material Requirement planning (4Marks) ii. Niche Marketing (4 Marks) iii. Buying Center (4Marks)
- 2. 3. Financial Exchange: Grant of credit facilities to an organization is financial exchange. Exchange of currency from one organization to another country. Example of this we can say the functioning of African Development Bank (ADB), which grants loans to industries. 4. Social Exchange: Social exchange is important in areas of reducing uncertainty between buyer and seller, avoiding short-term difficulties and thus maintaining a better relation over a long period of time. Consumer Marketing or Business to Customer Marketing B2C Consumer marketing are all marketing activities which are targeting to sell a product to individuals who most likely purchasing the products or services for their own personal use, as opposed to buying it to sell themselves. Consumer marketing consist primarily of products that people use as part of their everyday lives and these include food, beverages, anytime someone purchases a product for their own use, they become part of the consumer market. The consumer market typically is divided into four different categories: food, beverages, transportation and retail. (Indeed Tutorial Team (2022). OR Consumer or B2C marketing refers to marketing finished products/services to the potential end-customers in a consumer market. It relies on gaining extensive knowledge about the tastes and preferences of the end customers. It focuses on generating demand through marketing tools such as advertising campaigns, attractive packaging, after-sales services, etc. It's in these Consumer markets market that consumers do the majority of their purchasing. Companies can target consumers by different characteristics, including demographics, behaviour or geographic location. By understanding the unique characteristics of consumers who purchase from them, companies can create more effective marketing campaigns and increase their overall profitability. Businesses use market segmentation to analyse characteristics of consumer markets and develop marketing plans that most effectively resonate with their target audience. For instance, companies may analyse data to target young adults between the ages of 18 to 25 for a clothing or smartphone offer. The targeted group may have other qualifying characteristics as well, such as interests and income level. Some examples of essential consumer traits include: Psychographic. Behavioristic. Geographic characteristics. Psychographic (attitudes, interests, values, opinions and activities). Elements of consumer markets. Businesses use market segmentation to analyze characteristics of consumer markets and develop marketing plans that most effectively resonate with their target audience. For instance, companies may analyze data to target young adults between the ages of 18 to 25 for a clothing or smartphone offer. The targeted group may have other qualifying characteristics as well, such as interests and income level.
- 3. Some examples of essential consumer traits include: Demographic characteristics mean consumers’ age, income, social and economic background, gender, size of their family, ethnicity, religion, culture, education level, job type, social class, and nationality. Marketers collect all of such information through a survey, telephonic interviews, and from the local public office where such information is easily available. Behaviouristic characteristic requires a lot of marketing research to find out the product and brand loyalty level of consumers. How people react towards certain offers; when company offers them certain benefits and packages. The number of times people visit the market, stores, or the mall for the same product. It tells us the loyalty of the people towards the product and brand. Geographic characteristics. Geographic characteristic means the location of the consumers and where they are situated. It includes population density, size of the market, region, rural, urban, and climate of the market because it’s very important to know the size, density and location of the market before jumping into it. Psychographic (attitudes, interests, values, opinions and activities) Psychographic characteristics mean values, interests, opinions, attitudes, and activities of the consumers. They tell us the psychological nature of an individual in terms of his thinking, and it’s very important to know these things because you set your marketing strategies based on their views. Brands can also target consumers based on specific or general opinions. Focus group interviews or surveys enable businesses to understand consumers' attitudes and opinions. They can then use that information to modify marketing plans or even make changes to their products or services to better meet the needs of their audiences. (Indeed Tutorial Team (2022). The similarities and differences of industrial and consumer marketing. Industrial market Consumer Market Relationship-Oriented: Industrial marketing relies heavily on building enduring relationships between companies. The emphasis is on trust, reliability, and effective communication. Rational Decision-Making: B2B transactions often involve complex purchasing decisions, emphasising cost- effectiveness, efficiency, and long-term benefits. Customised Solutions: Industrial advertising often requires tailored products or services to address specific Emotion-Driven: Consumer marketing leverages emotions, aspirations, and psychological triggers to connect the product or service with the individual consumer. Impulsive Purchases: B2C transactions often involve more spontaneous buying decisions driven by advertising, branding, and perceived benefits. Mass Appeal: Consumer marketing targets a broader audience, focusing on reaching as many potential buyers as possible through various channels.
- 4. business needs, resulting in long-term partnerships. Multiple Stakeholders: Purchasing decisions in industrial marketing involve several stakeholders within the buying organisation, necessitating targeted communication. Brand Loyalty: Building brand loyalty and a strong customer base is crucial in consumer marketing to ensure repeat business and positive word-of-mouth. Comparative Analysis: Industrial Marketing vs Consumer Marketing Criteria Industrial Marketing Consumer Marketing Type of Products Products are complex and highly specialized that require expert knowledge. Products are simple and easy-to-use that can be straightforwardly mass- marketed. Target Audience Professional and trained business owners who use the product of your industrial company as a factor of production, i.e. as an input in their production process. End-users who purchase the product or avail the services for final consumption and gratification. Motives of Sellers To influence institutional buyers throughout their complete industrial buying process. To create awareness of the availability of a product or service by a particular brand and generate demand by highlighting the salient features Strategic Focus Developing and nurturing partnerships that focus on building long-term relations with business partners by gaining their trust. Dynamic advertising that induces the impulsive buying behavior of the customers and makes them loyal to the brand. Customers may or may not be the long-term users of the products/services. Marketing Strategies Digital Content marketing (posting blogs, white papers, case studies on informational Various online and offline advertising and marketing tools including print, television, and
- 5. websites), personalized presentations to clients, distributing product samples, etc. several online or social media platforms. Marketing Elements Encompasses all the operational competencies and processes employed by the company in delivering value to their customers. Encompasses only highlighting the benefits/utilities that customers will derive by using the product/service. Market Reach Narrow and constricted as industrial marketers deal with the limited magnitude of businesses requiring products/services of their clients. Wide and extensive as consumer marketers market the products/services to potential mass customers. b) Industrial products or Business to Business products are the products, which are used for processing or for use in conducting a business. Thus the distinction between a consumer product and a Business to Business product is based on the purpose for which the product is bought. Example of the statement above we can say a customer buys a mixer/juicer/grinder for domestic use it is a consumer product, but when the same mixer/juicer/grinder is purchased for the use of a fruit juice vender it is termed as an Business to Business product. Business to Business Products can be classified in three broad categories: 1. Materials & Parts. 2. Capital Items. 3. Supplies and Services. Material & Parts: These include raw material, finished material & parts. Raw materials are mostly farm products namely cotton, wheat, vegetables etc. They can be some natural products also, namely meat, petroleum product, iron etc. Manufactured material and parts could be iron rods, linen yarns, wires and cables etc. Component and parts are the items like household appliance motors, components of PC‟s, component parts of motor vehicles etc. Selling Method: Mostly they are sold directly to Business to Business users. Define the term industrial products and show how they are classified
- 6. Capital Items: These are the Business to Business products that aid the buyer’s productions and operations. They can be accessory equipment, installations or may be buildings, complex computer systems. There are also some other items which can be added to this are the accessory equipment which can be like tools for work in the production, fork lift trucks for material handling, equipment & furniture etc. Supplies & Services: This is the final group of products and services in Business to Business marketing. Supplies are the items, which have a continuous use in the plant or in office. Cleaning equipment, paints, pencils, printer inks, photocopy papers, etc. Supplies are the convenience products and are purchased with ease. Maintenance and repair services are the items like window and furniture cleaning material computer repair etc. Lastly are the business advisory services like legal, management consulting, advertising etc. c). Material Requirement planning Material requirements planning (MRP) is a system for calculating the materials and components needed to manufacture a product. It consists of three primary steps: taking inventory of the materials and components on hand, identifying which additional ones are needed and then scheduling their production or purchase. MRP gives businesses visibility into the inventory requirements needed to meet demand, helping your business optimize inventory levels and production schedules. Without this insight, companies have limited visibility and responsiveness, which can lead to: Ordering too much inventory, which increases carrying costs and ties up more cash in inventory overhead that could be used elsewhere. Inability to meet demand because of insufficient raw materials, resulting in lost sales, cancelled contracts and out-of-stocks. Disruptions in the production cycle, delaying sub-assembly builds that result in increased production costs and decreased output. Niche Marketing Niche marketing is a form of marketing geared towards targeting a specific audience, united by needs, preferences, and identity. In the simplest sense, niche marketing is a specific portion of the market's demographics and target audience. For example, in the marketplace of shoes, there can be different segments attached to the same. For example, shoes for casual wear, shoes for the office, shoes for women, shoes for men, or shoes for parties. All of these examples are the type of niche markets, and every market is defined and divided in meeting the particular needs and preferences of its constituents. Importance of niche marketing: 1. Reduced marketing costs Write brief Notes on the following industrial marketing concepts: i. Material Requirement planning (4Marks) ii. Niche Marketing (4 Marks) iii. Buying Center (4Marks)
- 7. 2. Reduced competition 3. Increased profit rates 4. Cater trust and credibility 5. Enhanced Marketing Operations Buying Center It is composed of all those individual and groups who participate in the purchase-decision process. It includes members of the organizations who play any of the following roles in the purchase-decision process. Members of the buying center approach the selection of a vendor with uncertainty. Many other dimensions of uncertainty exist and include product attributes such as quality, and vendor attributes such as delivery on time. The basis of this uncertainty is the lack of perfect information and the consequence is fear. Alleviation of uncertainty is achieved by several mechanisms. If a buyer is motivated to reduce or minimize uncertainty, he can be expected to be loyal to reliable sources of the past and or to split every order between two or more sources. Often he will employ a strategy of short- run decisions involving a short-run reaction to daily feedback information. Another mechanism of arranging a negotiated environment is also prevalent in Business to Business selling. a) Digital Revolution and impact on industrial Marketing The shift from mechanical and analogue electronic technology to digital electronics as a means of storing, transferring and utilising information is credited as the starting point of what we refer to as the digital revolution. Question Two a) The last decade has witnessed a digital revolution. Discuss the impact of this development on industrial marketing (10 marks) b) Government makes up one of the major elements of industrial marketing. i. Discuss the roles played by the government in industrial marketing. (5marks) ii. Describe the procurement procedures that are used by Government institutions. (5marks)
- 8. b) The role of Government in Promoting Industrial Marketing. The role of government in promoting industrial development in developing countries is vital for the following reasons: 1. The government has to see the rules of the game, which define the use, owner ship, and conditions of transfer of physical, financial and intellectual assets. Irrespective of the type of economy - whether it favours private enterprise or is a command - economy - these rules impinge on economic activity. The more they are certain, well defined, and well understood, the more smoothly the economy can work and the greater the chance of success of industrialization.( 2. The government must play a major role in education, including providing the basic skills of literacy and numeracy that are vital in modern industrial labour force. Lack of education, rather than physical assets, is the main bottle neck in industrialization. The transition from a primarily agricultural and trading economy to an industrial economy requires, at least in the initial stages, an increase in the skills of the labour force. To use foreign technology effectively, producers must examine the choices available, make intelligent selections and adapt them to local conditions. All of this calls for education. Also, the government can help, at least in the early period of industrialization, to promote industrial research and technological change, for example by setting up demonstration factories. Education spurs the process of industrialization by imparting skills, improving health, and allowing more women to enter the labour force. Education and investment in technological knowledge go hand in hand. Countries that neglect any one of these forms of investment may not be efficient in industrializing. China, Hong Kong, Korea and Singapore have all achieved a significant level of economic growth. All adapted a balanced investment strategy that included education along with increased physical capital and technological transfer. 3. The government may have to play an important role in advancing technology which is vital to the industrialization process. Often technological knowledge is a commodity that can be traded like many others, but it has some peculiarities which sometimes make trade difficult. These are frequently used to justify government intervention. Producers of technology often face high risks, since the outcome of innovation is uncertain and technologies can sometimes be easily copied. Purchasers of technology also face risks, because they often cannot know just what they have bought until they acquired and used it. Thus firms may expend less technological effort than desirable if they are unable to reap the outcome for themselves. Governments can deal with the externality problem in several ways. a) The government may allow firms to register patents. b) The government may subsidize technological effort. c) The government may attempt to promote specialised agents for technological development, usually publicly supported research and development institutes. d) The government may seek to establish technology information centres which could charge private users a small fee for access to their data bank. 4. The government must provide the physical infrastructure of industry; transport, communications and power systems. Although some parts of such systems can be, and are, profitably operated in the private sector in many countries, government provision of large systems in most developing countries is usually the only feasible option. Government involvement in the provision of transport, communication and power occurs for several reasons: a) There is a public goods argument in cases where user fees are difficult to collect, although governments can sometimes levy indirect user charges-they might finance roads, for example, from the revenues derived from gasoline taxes and license fees. b) Large projects, telecommunications, railways and electricity and gas production, for instance - may involve economies of scale. In other words, a single investment might be more efficient than a number of competing investments. c) The preference in most countries for public enterprises may reflect a belief that control is better exercised through ownership than through regulation. d) For large projects, underdeveloped financial markets or political risks might deter private investments.
- 9. 5. Virtually all governments provide at least some commercial goods and services through state- owned enterprises. These enterprises are important producers of a broad range of industrial products such as steel, fertilizers, automobiles and petrochemicals. Governments have created them for a variety of reasons. To spearhead industrialization in countries with virtually no large-scale industry. b) To promote industries deemed to be of strategic importance. c). To save threatened jobs. d) To reduce the presence or prevent the entry of foreign-owned firms. The state-owned enterprises would seem to operate efficiently when competition has been greater, when managers have had more financial autonomy, when poor performers have been removed and good ones have been rewarded, and when government interference with day-to-day operations has been reduced.(6) 6. Governments often intervene in markets to improve economic performance, to limit abuses (such as fraud and pollution), and to protect public health. 7. The government must take steps to increase the information available to producers and to protect consumer welfare. Governments have a comparative advantage in collecting and disseminating certain kinds of information, especially in developing countries, where information is scarce and education is poor. All governments provide basic statistical and other information on their own activities and on the economy in general. The government may also play a useful role as a clearing house for information and forecasts on domestic and foreign markets and technologies. 8. Governments also need to regulate to protect welfare through various regulations such as checking weights and measures, establishing health standards for food and drugs and air, land and water pollution, requiring product safety standards and product guarantees and imposing safety standards in the work place.(7) 9. The government may have to regulate financial markets to prevent abuses such as insider trading, to require companies to disclose more information and to require financial institutions to insure their smaller depositors. Fiscal and monetary policies are often employed to promote economic health and to achieve a variety of desirable social goals. Experience suggests that the governments of market economies which have efficiently industrialized have, by and large, observed the hierarchy of priorities described above. They have established clear rules of the game, contributed judiciously to the construction of an industrial infrastructure, and otherwise intervened sparingly and carefully. c) The procurement procedures that are used by Government institutions
- 10. a) The industrial buying Procedure The purchasing activities of industrial buyers consist of various steps/phases in buying decision making process. The importance of each step depends upon the type of buying situation. The industrial marketers should understand both (step in decision-making process and the type of buying situations) to market the product or service. In 1967, Robinson, Faris, and Wind developed a process “buy-phases” having eight steps in buying-decision process in industrial market. These phases or steps in industrial buying process are elaborated as follows: 1. Recognition of Need of Industrial Buyer A smart marketer recognizes the need/problem of industrial buyer originated within the firm. If the material supplied by the existing supplier is not satisfactory in terms of quality, or the material is not available as per requirement, or the machine supplied by him breaks down too often, the buying organisation recognizes the problem. If an industrial marketer identifies a problem in the buying organisation and suggests how the problem could be solved, there will be a better possibility of it being selected as a supplier. Question Three a). Kisima Agencies is a manufacturing company based in Mombasa. The company intends to buy some equipment to be used in production. However, the company director has no knowledge on industrial buying and therefore has contacted you to assist in carrying out this exercise. Explain to him the procedure they need to follow when making industrial purchase decision (10marks) b). Briefly discuss the Macro and Micro segmentation variables used in segmenting industrial markets (10 marks)
- 11. 2. Determination of the Characteristics and Quantity of Needed Product If the problem is recognized within or outside the buying organisation, then the buying firm will try to answer questions such as: What type of products or services to be considered? What quantity of the product needed? and so on. For technical products, the technical departments (R&D, industrial engineering, production, or quality control) will suggest general solutions of the needed product. For non-technical goods or services, either the user department or purchase department may suggest products or services, based on experience and also the quantity required to solve the problem. Nevertheless, if the required information is not available internally within the buying organization, the same can be obtained from the outside sources. 3. Development of Specification of Needed Product Stage 2 and 3 are closely related. After the general solution to the problem is determined in the second phase, the buying organisation, in the third stage, develops a precise statement of the specifications or characteristics of the product or service needed. During this stage the purchase department takes the help of their technical personnel, or if required, outside sources such as suppliers or consultants. Industrial marketers have a great opportunity to get involved at this stage by helping the buyer organisation to develop product specifications and characteristics. It would give a definite advantage by ensuring that the needed product includes his or her company’s product characteristics and specifications. 4. Search the Qualified Potential Suppliers In this stage, the buying organisation searches for acceptable suppliers or vendors. Firstly, they have to obtain information about all available suppliers and secondly, they have to decide the qualifying suppliers. The search for potential suppliers is based on the various sources of information like trade journals, sales calls, work-of-mouth, catalogues, trade-shows, industrial directories. The qualifications of acceptable supplies may depend on the type of buying organization such as government undertaking, private sector commercial organisation, or institutions, and the buying situation, and the decision-making members. Furthermore, the factors like quality of product or service, reliability in delivery, and service are considered in qualifications of suppliers. 5. Obtaining and Analyzing Supplier Proposals If the qualified suppliers are decided then the buying organisation obtains the proposals by sending enquiries to the qualified suppliers. A supplier’s proposal can be in the form of a formal offer, quotation, or a formal bid, submitted by the supplier to the buying organisation. It must include the product specification, price, delivery period, payment terms, taxes and duties applicable, transportation cost (or freight), cost of transit insurance, and any other relevant cost or free service provided. For purchases of routine products or services, the stages 4 and 5 may occur simultaneously, as the buyer may contact the qualified suppliers to get the latest information on prices and delivery periods. For technically complex products and services, a lot of time is spent in analysing proposals in terms of comparisons on products, services, deliveries, and the landed costs: includes the price after discount plus excise duty, sales tax, freight, and insurance. 6. Evaluation of Proposals and Selection of Suppliers The industrial buyers evaluate the proposals of competing suppliers and selects one or more suppliers. Further negotiations may continue with selected suppliers on prices, payment terms, deliveries, and so
- 12. on. The decision makers in the buying organization may evaluate each supplier on a set of agreed-upon attributes or factors. Each supplier is evaluated on each attribute by giving a weightage to each attribute proportionately or on rating scale basis. The supplier(s) who get the highest total score receives the business or the order from the buying organisation. If a buying firm faces a make-or-buy decision, the supplier’s proposals are compared with the cost of producing the needed item within the buying organization. If it is decided to make the item within the buying organization, the buying process is stopped at this stage. 7. Routine Order Selection In this stage the procedure of exchange of goods and services between a buyer and a seller is worked out. The activities include placement of orders (i.e. purchase orders) with the selected suppliers, the quantity to be purchased from each supplier, frequency of order placement by buyers and delivery schedules to be adhered to by the supplier, schedule, and the payment terms to be adhered to by the buyer. The user department would not be satisfied until the supplier delivers the required item as per delivery schedule, and with acceptable quality. 8. Performance Feedback and Post-Purchase Evaluation In this final phase a formal or informal review regarding the performance of each supplier (or vendor) takes place. The user department gives a feedback on whether the purchased item solved the problem or not. If not, the members of the decision-making unit review their earlier decision and decide to give a chance to the previously rejected supplier. The industrial vendor should recognize that marketing effort is no over after the order is received. He or she must check the feedback and evaluation process in the customer (buyer) organisation. In particular, the industrial marketer must monitor the user satisfaction levels or complaints so that immediate corrective action can be taken before a major damage. In fact, a quick response to customers’ complaints can result in good buyer-seller relationship. The type of products, the phase of the buying-decision making process of customer firms, and the purchasing situations also influence the marketing strategy of industrial seller. b) The Macro and Micro segmentation variables used in segmenting industrial markets. B2B market segmentation involves dividing your entire customer base into smaller user segments with shared characteristics, such as industry, location or in-product behavior. There are two different approaches to the segmentation process – macro segmentation and micro- segmentation. In macro segmentation, you divide customers into segments based on their company’s characteristics, such as business size, location, or industry. Micro-segmentation is specific to the actual customers using your product, not their business as a whole. It involves creating user segments based on variables such as product behavior, purchasing preferences, and loyalty. It’s the best option for delivering hyper-personalized content and in-app experiences.
- 13. The most common variables for business segments include demographics or business size, operating variables, purchasing approaches, and situational factors. While micro-segmentation takes a lot of resources and time to implement, it’s the better of the two segmentation strategies since it’s more granular being based on individual user behavior. To complete micro-segmentation in B2B SaaS, you can monitor and tag feature usage, choose from a variety of criteria to keep segments precise, and group users into cohorts to visualize patterns within segments. After segmenting your customers, create hyper-personalized experiences by offering help to inactive users and using modals to offer account upgrades to segments of heavy users. Use Userpilot and Baremetrics to create segments and personalized experiences for them. Userpilot is a product adoption platform that has feature tagging capabilities, real-time insights and the ability to create contextual in-app guidance. Baremetrics is a subscription analytics software that can track vital SaaS metrics and help you analyze them. Top of Form Bottom of Form What is B2B market segmentation? B2B market segmentation involves organizing an entire B2B company’s target market into sub- categories of people that share certain characteristics, such as in-product behavior, industry type, or job role. Market segmentation helps to improve the effectiveness of marketing campaigns, sales, and product development by delivering hyper-personalized experiences that speak directly to a user segment. What are the two approaches to B2B market segmentation? There are two different approaches to B2B market segmentation: Macro segmentation Micro-segmentation What is macro segmentation in B2B marketing? Macro segmentation in B2B marketing is the process of dividing a company’s entire market into smaller segments using the entire company’s organizational characteristics.
- 14. These could be anything from the industry they’re in, to the company size or location. What are the benefits of macro segmentation? Macro segmentation is beneficial because it helps you see the bigger picture of your customer base. You can get a better understanding of common industries, company sizes, or geographical locations that you serve, helping you to make better marketing decisions. It’s also a great starting point to deliver personalized in-app experiences that drive adoption and retention. What is micro-segmentation in B2B marketing? Micro-segmentation in B2B marketing involves breaking down a company’s target market or customer base into smaller sub-groups that share common characteristics. These shared characteristics are specific to individual customers, not the company they represent as a whole. What are the benefits of micro-segmentation? Micro-segmenting your target audience is beneficial for many reasons: It helps B2B companies share hyper-relevant marketing content that’s interesting and helpful for a specific micro-segment. Marketers can more easily speak to a customer’s needs, challenges and wishes by crafting marketing campaigns with one specific segment in mind. Micro-segmentation helps you group users by behavioural patterns. With this information, you can boost product adoption by prioritizing which features to promote to each segment. It helps with budget allocation for your marketing campaigns. With segmentation, you can better identify who your highest-value segments are, based on CLV (customer lifetime value). Spending more resources on acquiring more of these types of customers will produce a better ROI.
- 15. What are the most common variables for B2B market segments? Let’s cover the most common variables that B2B companies consider when segmenting their market. Demographic segmentation Organizing your market segments by demographics, such as by industry, geographical location or an organization’s size, helps you make future decisions on the areas you should serve. For example, if you have a large segment of customers who live in Europe, you should prioritize expansion in Europe. Product usage segmentation Defining segments based on product usage, such as feature usage or user/non-user status, can help you organize your marketing efforts. Purchasing behavior segmentation Purchasing behavior is another common way to organize B2B market segments. For example, which customers prefer monthly plans vs. annual plans? If you notice patterns swinging one way or another, you can make pricing adjustments. Do your customers have a centralized or decentralized purchasing approach? Your sales team can make strategy adjustments based on these factors. Situational factors segmentation
- 16. Situational factors cover variables such as urgency, order size, and product use cases. Understanding your market’s situational factors will also help you to prioritize marketing and product development. B2B market segmentation variables. Macro and micro-segmentation (B2B): which one should you use? Micro-segmentation is the better option for B2B marketing and will generate better results. Why? Macro segmentation is not as precise as micro-segmentation. Since macro segmentation is based on high-level company data, such as geographical location or industry, the segments end up being larger and less granular. On the other hand, micro-segmentation relies on customer-specific data such as in-app behavior, purchasing patterns, and preferred products. These signals are more useful for delivering highly-personalized content that’s the most relevant to the customer. That being said, micro-segmentation is a more difficult task that requires more time, effort, and resources. But, the precise segments you create will make your marketing campaigns more effective at generating revenue.
- 17. Most companies start with macro segmentation in the early days when time and resources are limited. As they grow, they get more granular with their marketing segmentation and move on to micro-segmenting their target audience and existing customers. Macro and micro-segmentation (B2B) example Let’s use the project management software, ClickUp, as an example to demonstrate macro and micro-segmentation. If ClickUp wanted to use macro segmentation to divide their users, they would consider these variables: Location – ClickUp can create segments based on location, such as one group for U.S. users, another for Canadian users, and so on. Industry –They could divide their users by industry: finance, software, agency, etc. Company Size – Customers can be divided by their organizational size. For example, companies with 1-10 employees, 10-50 employees, and so on. If ClickUp wanted to use micro-segmentation to organize their customers, they would consider various factors like: Feature Usage – Example: Who is using the Goals feature 3+ times per week? Integrations – Example: Which users connected Slack to their ClickUp account? Product Behaviour – Example: Who uses the mobile app and desktop version vs. exclusively the desktop version? Question Four a). Buying center in industrial marketing have some challenges, discuss the strategies that are used in solving conflicts with a buying center (12 Marks) b). write brief Notes on any TWO of the following industrial marketing concepts: i. Just in Time purchasing (JIT) (2marks) ii. Derived Demand (2marks) iii.Internal company analysis (2marks) iv. Marketing Segmentation (2marks)
- 18. Just in Time purchasing JIT Purchasing is referred to the procedure of buying, involving determining the material requirement, selecting the suppliers, agreement on price, delivery, and other terms and conditions. JIT purchasing is carried out in small lots and recurrent deliveries in small-sized containers of equivalent quantity and specifications from local suppliers with long term contracts. JIT is broadly defined as an integrated set of activities designed to achieve high volume production using minimal inventories of raw materials, work-in-process, and finished goods. Parts arrive at the next workstation “just in time” and are completed and move through the operation quickly. Just-in-time is also based on the logic that nothing will be produced until it is needed. Need is created by actual demand for the product. When an item is sold, in theory, the market pulls a replacement from the last position in the system – final assembly in this case. This triggers an order to the factory production line, where a worker then pulls another unit from an upstream station in the flow to replace the unit taken. This upstream station then pulls from the next station further upstream and so on back to the release of raw materials. To enable this pull process to work smoothly, JIT demands high levels of quality at each stage of the process, strong supplier relations, and a fairly predictable demand for the end product. Internal company analysis An internal analysis is the thorough examination of a company's internal components, both tangible and intangible, such as resources, assets and processes. An internal analysis helps the company decision- makers accurately identify areas for growth or revision to form a practical business strategy or business plan. A few of the most common examples of internal analysis frameworks include: Gap analysis: A gap analysis identifies the gap between a business goal and the current state of operations. Companies use gap analyses when they need to identify weaknesses in the business. Strategy evaluation: A strategy evaluation is an ongoing internal assessment tool used at regular intervals to establish if a company is meeting its objectives as outlined in a business strategy or plan. SWOT analysis: A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis helps to give companies a broad overview of all internal functions. SWOT analyses are ideal for evaluating the full range of a company's abilities. VRIO analysis: A VRIO (Valuable, Rare, Inimitable and Organized) analysis helps organize business resources. It is ideal for assessing and categorizing a company's resources. OCAT: An OCAT (Organizational Capacity Assessment Tool) assesses internal performance in a variety of specific dimensions. Companies can use the OCAT to establish specific areas of strength or growth. McKinsey 7S framework: The seven S's are strategy, structure, systems, shared values, skills, style and staff. The McKinsey 7S framework ensures that businesses align these seven elements for maximum success.
- 19. Core competencies analysis: The core competencies analysis identifies the unique combination of qualities that separates the business from competitors. It's best used when determining ways to improve business operations over a direct competitor. Derived Demand Derived demand occurs when the demand for a product or service is dependent on the demand for another product or service that is further down the supply chain. It is typically observed in business-to- business (B2B) relationships and industrial markets. For example, consider the demand for steel. Steel is not directly consumed by end consumers but is rather used as an input in various industries, such as construction, automotive manufacturing, and machinery production. The demand for steel is derived from the demand for these industries' final products. If the demand for automobiles increases, it will lead to an increase in the demand for steel to produce the necessary components. Another example is the demand for labour. The demand for labour is derived from the demand for goods and services that require human resources for production. If a company experiences higher demand for its products, it may need to hire more workers to meet that demand. Marketing Segmentation Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another. Companies can generally use three criteria to identify different market segments: 1. Homogeneity, or common needs within a segment 2. Distinction, or being unique from other groups 3. Reaction, or a similar response to the market Market segmentation seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group. Markets can be segmented in several ways such as geographically, demographically, or behaviourally. Market segmentation helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market. With risk minimized and clarity about the marketing and delivery of a product heightened, a company can then focus its resources on efforts likely to be the most profitable. Market segmentation can also increase a company's demographic reach and may help the company discover products or services they hadn't previously considered.