MBM_6109_CAT 1_Deliverable_Lamed.docx for coursework submission
- 1. DEPARTMENT OF MANAGEMENT MBM6109: INDUSTRIAL MARKETING CAT 1 NAME: AHIMBISIBWE LAMED REG No: MBA/3885/13 SCHOOL: MKU, NAIROBI CAMPUS. DATE: 18TH/OCTOBER, 2023 COURSE: MBM6109: INDUSTRIAL MARKETING LECTURER: Ms. MARIA WAMBUI MUNG’ARA QUESTIONS a) The marketing mix has been defined as the "set of marketing tools that the firm uses to pursue its marketing objectives in the target market." Critically explain how the marketing mix could be applied in an industrial environment as opposed to consumer market environment (10 Marks). b) Outline the major differences between strategic planning for industrial markets as compared to strategic planning for consumer markets (10 Marks).
- 2. Answer. (Part a) The Marketing Mix and how it applies to industrial and consumer market environment. Marketing mix can be defined as a set of marketing tools that the firm uses to pursue its marketing objectives in the target market. It is a general phrase used to describe the different kinds of choices Question Answering Approach a) Explanation of the marketing mix meaning. Explanation of Industrial market environment. Explanation of Consumer Market environment. Critical explanation of how the Marketing mix applies to industrial market environment and consumer market environment. b) Outline of the major differences between strategic planning for industrial markets as compared to strategic planning for consumer markets.
- 3. organizations have to make in the whole process of bringing a product or service to market. The 4Ps is one way and probably the best-known way of defining the marketing mix. It was first expressed in 1960 by E J McCarthy. The 4Ps are Product (or Service), Place, Price and Promotion. In the business sector, the marketing managers plan a marketing strategy taking into consideration all the 4Ps. However, nowadays, the marketing mix increasingly includes several other Ps for vital development. Product in Marketing Mix. A product is a commodity, produced or built to satisfy the need of an individual or a group. It can be intangible or tangible as it can be in the form of services or goods. A product has a life cycle that includes the growth phase, the maturity phase, and the sales decline phase. It is important for marketers to reinvent their products to stimulate more demand once it reaches the sales decline phase. There is an old saying for marketers, “what can I do to offer a better product to this group of people than my competitors”. This helps the company to build brand value. Within the industrial setting, the products are marketed and sold to businesses and organizations while within the consumer market environment, the product goes to final consumers. Price in Marketing Mix. The price of the product is basically the amount that a customer pays to enjoy it. Price is the most critical element of a marketing plan because it dictates a company’s survival and profit. Adjusting the price of the product, even a little bit has a big impact on the entire marketing strategy as well as greatly affecting the sales and demand of the product in the market. To keep on mind while determining the cost of the product are, the competitor’s price, list price, customer location, discount, terms of sale, etc., The price in the industrial environment are different from prices in consumer market environment since with the industrial environment it is business to business as opposed to business to consumer in consumer market. Place in Marketing Mix. Product placement or distribution is a very important part of the marketing mix. There is need to position and distribute product in a place that is easily accessible to potential buyers/customers. With industrial environment, the place is offices and addresses of businesses, companies and organizations while with consumer market, the place can be open markets, shops or individual homes for final consumers. Promotion in Marketing Mix. It is a marketing communication process which helps the company to publicize the product and its features to the public. It is the most expensive and essential component of the marketing mix which helps to grab the attention of the customers and influence
- 4. them to buy the product. Promotion may include among others direct marketing, advertising, personal branding and sales promotion. Promotion may be the same in both environments but with industrial market environment, more technical strategies and interventions are required to reach the businesses as opposed to consumer environment. As marketing mix 4P is becoming an old trend, nowadays marketing a business needs deep understanding of the rise in new technology and concept. Therefore, 3 more P’s were added in the old 4Ps model to give a deep understanding of the concept of the marketing mix through the 7p’s in marketing. The new 3P’s are; People in Marketing Mix. The company’s employees are important in marketing because they are the ones who deliver the service to clients. It is important to hire and train the right people to deliver superior service and products to clients, whether they run a support desk, customer service, copywriters, programmers etc. It is very important to find people who genuinely believe in the products or services that a particular business creates, as there is a huge chance of giving their best performance. Businesses should also accept honest feedback from the employees about the business and should input their own thoughts and passions which can scale and grow the business. Process in Marketing Mix. There is need to make sure that the business process is well structured and verified regularly to avoid mistakes and minimize costs. For a business to maximize profit, it’s important to tighten up the enhancement process. Physical Evidence in Marketing Mix. In the service industries, there should be physical evidence that the service was delivered. In concept, this is branding. For example, when you think of “fast food”, you think of KFC and when you think of sports, names like Nike and Adidas come to mind. Industrial market environment. According to Mukherjee, S, 2008, “Business buying is, “a process, by which the business defines its need for a product or service, finds out the various vendors supplying the product, scrutinizes each vendor carefully and then decides which the best-suited one is. The next step is the action step, of placing the order.” Business buying is distinguished from consumers as there are normally fewer buyers, large volume buyers and they tend to have a long-term commitment with the vendors/suppliers. The marketers therefore need to cultivate the buyers and build business relationships with them”.
- 5. Industrial buyers and sellers operate in a dynamic environment which is constantly poising new opportunities and threats. The industrial marketing environment can be divided into three levels namely the interface level, the public’s level and the macro environment level. 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 firm’s interface with industrial distributors and dealers, manufacturers’ representatives and the company’s own sales people. That move is made possible by a firm’s interface with facilitating institutions such as banking, transportation, and research and advertising firms. The Participants in the interface level include are; Input suppliers. 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. Competitor’s actions whether domestic or foreign, ultimately influence the company’s choice of target markets, distributors, product mix, and in fact its entire marketing strategy.
- 6. 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 firm’s effort to serve is markets. The Participants in the Publics Level include are; 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 policies, 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 color 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. The macro environment level of the organization is made up of components that have less specific and less immediate implications for managing the organization effectively. The different components include;
- 7. Economic component. Economic conditions greatly influence an organization’s ability and willingness to buy and sell. Thus, emerging changes in the economic environment both at home and abroad, must be closely monitored including such factors like Gross National Product (GNP), Inflation rates, Balance of Payment Position, Debts and spending, Taxation rates, Interest rates, Consumer’s income and corporate profits. 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 and Customs and believes. Legal component. This consists of legislations 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., the Consumer health policy, Energy policies and conservation Acts and Employment Acts, etc. Political component. Comprise those elements related to the government affairs such as type of government, Government attributes towards certain issues, Lobbying efforts from interest groups and Progress towards passing of laws affecting certain industries, etc. 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 and addresses the issues of new equipment and new ways of improving production through the use of computers /robots. 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. The Government. The government is charged with administering and controlling nations and their subdivisions hence influencing the Business-to-Business marketing environment. (See handout functional government) It facilitates and also hampers Business to Business actions. In the interface environment the government Levis, regulations and activities affect all participants. The Business-to-Business manager should therefore beware that the government is a double-edged sword it facilitates and regulates.
- 8. The Consumer Market environment. A consumer market is a market when individuals purchase products or services for their own personal use, as opposed to buying it to sell themselves. Consumer markets consist primarily of products that people use as part of their everyday lives. 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). It's in these Consumer markets market that consumers do the majority of their purchasing. Companies can target consumers by different characteristics, including demographics, behavior 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 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. 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. 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.
- 9. Behavioristic 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). (Part b) The major differences between strategic planning for industrial markets as compared to strategic planning for consumer markets are; Strategic planning is a formal, long term planning process that focuses on an organization's basic mission, objectives, and the long-term strategies needed to carry them out. Strategic planning process for industrial markets involves organization in recognizing, anticipating, and responding to changes in the marketplace to ensure that resources are directed toward achieving opportunities that are consistent with the firm's objectives and capabilities. (MBA Knowledge Base, 2021). The directing force of any successful company in the Development of Strategy for industrial market strategy planning is the company’s Corporate Mission. Corporate mission is a distinct and widely shared culture that directs corporate strategy of a company or organization, a corporation's culture. This culture is reflected in the attitudes and values, the management style, and the problem-solving behavior of its people. The foundation for the development of that culture lies in a systematically and comprehensively developed mission statement. The company mission, or purpose provides the basis for the culture that guides executive action and directs the formulation
- 10. and implementation of strategy. In strategic planning for Industrial markets and consumer markets, most of the components are the same but strategic planning for industrial markets is more technical and tasking than for consumer markets. The following are the general components of Strategic planning; Product Planning and Development. a) Product from that of competitors as viewed by customers. b) Offer only one product and try to attract all buyers (i.e., using undifferentiated strategy) c) Develop separate products and marketing programs for each market segment (use differentiated strategy). d) Create new uses for existing products through improved performances and/or exclusive features. e) Diversify into new markets with new products. f) Establish product leadership through development of quality products. g) Develop new products for commercialization each year, beating competition to marketplace and establishing a reputation for innovation. Distribution Planning. a) Warehouse products at locations that enable quick delivery to each distributor and customer. b) Provide additional outlets to reduce distribution cost per sale. c) Use only one warehouse to minimize inventory control problems. Sales / Service Planning. a) Expand geographic area of operations to penetrate new high potential regions not currently approached. b) Reshape distribution channels (dealers, distributors, agents, and company sales force) to satisfy market-buying preferences more closely. c) Develop more competent sales force and/or dealer/distributor organization. d) Require sales force to improve its knowledge of customers and their products. e) Employ target marketing to identify and reach high-potential customers and prospects. f) Minimize reciprocal purchases with suppliers. g) Increase sales effort on most profitable products and customers. Promotion/ Advertising Planning. a) Employees push strategy to encourage dealers, distributors, and company sales force to move product lines by ensuring good margins, bonuses. services, advertising. and promotional subsidies.
- 11. b) Employ pulls strategy to stimulate customer demand through increased brand concept and product acceptance. c) Maximize advertising and promotion coverage to increase volume, which will permit mass production and distribution. d) Address advertising and promotion to key customers and best prospects to maximize the benefits of these expenditures in a limited market segment. Pricing Planning a) Set low price for new products to discourage competitive entry into market. b) Set low, price for products to encourage high sales volume which permits mass production and low-cost unit. c) Provide minimum extra services to permit lower prices. d) Price parts service, and repairs at cost or with slight markup to gain maximum good will. e) Price products to obtain principal profit on original sale rather than on follow-up service and parts. f) Offer quantity discounts to encourage larger unit purchases. Implementing and Controlling Marketing Plans. After marketing strategies and plans have been determined, they must be implemented and carried out. In order to evaluate and control their performance, standards for control must also be established. Marketing strategies and plans are formulated to achieve objectives, so these same objectives can be used to establish standards against which performance can be measured, such as objectives regarding profit, market share, and sales penetration. (MBA Knowledge Base, 2021). Evaluation and control methods. Evaluation and control measures make it possible to determine better the impact of current marketing activities on costs, revenues, and profits and also to respond more quickly to opportunities and threats. There are several performance measures available for purposes of control and these include; a. Sales analysis. This provides valuable data and serves as an early warning system for identifying declining or rapidly growing sales. b. Sales performance analysis. This compares sales volume to predetermined objectives or quotas and provides a benchmark against which to evaluate sales. Sales can also be compared to last year's sales, competitors' sales, forecasted sales, or industry sales. c. Marketing cost analysis. This measures marketing expenses against their magnitude and gives insight into the costs of doing business and the patterns of these costs. d. Contribution margin analysis. This subtracts direct costs from sales to determine contribution to overhead and profits.
- 12. e. Net profit analysis. This subtracts both direct and indirect costs from sales to determine profitability. f. Return on investment analysis. This compares profits to the assets involved in generating profits to measure marketing productivity. (MBA Knowledge Base, 2021). The major differences between marketing in Industrial environment compared to Consumer market environment. While the basic principles of marketing planning apply in both markets, many organizations have found that what works well in the consumer market fails to do so in the industrial market. There are basically two significant differences between these markets that appear to account for this phenomenon. Industrial marketing face diverse markets. Unlike the consumer market where products are normally’ marketed through one or two channels, most industrial marketers face diverse markets that must be reached through a multiplicity of channels-each requiring a different marketing approach. For example, a producer of communication equipment may market to such diverse segments as the commercial, institutional, and governmental market, and each of them will require a unique marketing approach. Dependence on functional areas. In contrast to consumer marketing, successful industrial marketing strategy depends more on other functional areas. Where the elements of planning in consumer marketing can often be contained within specific areas of marketing, such as advertising, selling, and product management, planning in the industrial market is largely dependent on, or constrained by, the activities of other functional areas. For example, engineering, manufacturing, and technical services. When marketing emphasizes tailor-made products and fast deliveries, for instance, manufacturing must be prepared to follow through with product output. This means that Planning in the industrial marketing arena requires a higher degree of integrated effort across functional areas and a closer relationship with overall company corporate strategy than in the consumer market. Functional Isolation. Here also lies a difference in the two environments. While planning in the industrial market is as sophisticated as it is in the consumer arena, too often industrial firms concentrate planning efforts in the marketing department, failing to recognize the inter- dependency between marketing and other functional areas. Perhaps this is due to what may be referred to as functional isolation. That is, not only does marketing tend to ignore its interface with
- 13. other areas such as finance, manufacturing, and R&D, but marketing concepts, methods and inputs are frequently ignored in the decision perspectives of other business function. While marketing should take the lead in defining market segments, needs, and opportunities and in determining what it will take to satisfy the various markets and, segments, planning in the industrial arena must be a collaborative effort between all key functional areas. Unfortunately, the isolation between marketing and other functional areas may continue until we find solutions to the inherent conflict between marketing and other functional areas. Develop organizational structures that explicitly incorporate marketing and non-marketing considerations. Begin using marketing decision models that are based on relevant input from other functional areas besides marketing. (MBA Knowledge Base, 2021). Functional Conflict. Within industrial marketing environment, there is functional conflict between departments and functional areas. While successful planning depends on cooperation between the different functional areas, whenever tasks and objectives are different or unclear between two or more departments a strong tendency for disharmony exists. Potentials conflict also exists between marketing and manufacturing in such areas as sales casting and production planning, and between marketing and R&D in the new product development. We’re limited in what we can design because we have to keep it simple for marketing. Neither the customer nor our marketing department understand the product and how it is supposed to work. Avoiding conflicts begins with developing an understanding of the basic causes of interdepartmental conflict. (MBA Knowledge Base, 2021). Conflicts arises due to the fact that each area is evaluated and rewarded on the different criteria, the inherent complexities of the different functional areas and the different perceptions of the individuals involved. Marketing executives can assist in alleviating conflict by building their marketing plans around each functional area’s ability to service the firm’s markets and customers and by analyzing the strengths, weaknesses, and competitiveness of each respective area, similar to analyzing customers and competitors. (MBA Knowledge Base, 2021). Conclusion In conclusion therefore, much as the factors related to the effect of marketing mix to marketing for industrial and consumer markets may appear to possess some similarities, the two market settings have different demands and dynamics. While the consumer market demands marketing to the final consumer, industrial market is broad and demands a lot, industrial marketing is expensive and wide for marketers to handle since it involves doing business with other businesses in a very competitive and delicate environment which marketers need to master in order to survive in business.
- 14. References Murkejee Hory Sankar, 2008. Industrial Marketing, Excel Books. Retrieved fromfile:///C:/Users/Adil%20E/Desktop/MKU%20FOLDER/MBM6109%20Industrial%20 Marketing/MBM6109+INDUSTRIAL+MARKETING.pdf Indeed, Tutorial Team, 2022. The Guide to Consumer Markets Examples. Retrieved fromhttps://www.indeed.com/career-advice/career-development/consumer-markets- examples MBA Knowledge Base, 2021. Strategic Planning in the Industrial Market. Retrieved fromhttps://www.mbaknol.com/industrial-marketing/strategic-planning-in-the-industrial- market/