Need for Advertising Agencies in Industrial Marketing

An Advertising agency is an organisation whose business consists in the acquisition of the right to use space of time in advertising media and the administration of behalf of the advertisers of advertising appropriations made by them. It renders advice and creative services for its clients. It does not sell any tangible products, but sells creative talents and past experience. Thus it is an organisation specially created for rendering services in advertising.

The services of an advertising agency in general can be summarized as follows:

  1. It makes the advertisements pleasant and serves the purpose.
  2. It can get the advertisements published at the appropriate times.
  3. It can help the advertiser in the preparation of the advertising budget.
  4. It can free the advertiser from the botheration of contacting the media owners of all types as and when necessary.
  5. It can do market research for the advertiser at a lesser cost.
  6. It can also help the advertiser in designing the trade mark, packages and labels and wrappers for the goods to be sold. It can do all types of jobs connected with the printing work.
  7. It can do sales promotion work.
  8. It can design window displays and arrange for a systematic change in the arrangement of the things in the windows from time to time.
Advertising Agencies in Industrial Marketing Scenario

Manufacturers cannot look after all the promotional activities especially under the principle of specialization. Organisations with adequate financial resources set up a separate department for this purpose. Such an arrangement would be beyond the reach of medium or small scale producers.… Read the rest

Industrial Product Development

Industrial product is defined as a complex set of economic, technical, legal, and personal relationship between the buyer and the seller. A product is a combination of basic, enhanced, and augmented properties. Basic properties are included in the generic product, with fundamental benefits sought by customers. Generic products are made differentiable by adding tangible enhanced properties such as product features, styling and quality. The augmented properties include intangible benefits such as technical assistance, available of spare parts, maintenance and repair services, warranties, training, timely delivery, and attractive commercial terms. The product package as expected by the prospective customers should be well understood by the industrial marketer.

Industrial product development is the process by which the product ideas are generated, assessed, directed and converted into products. There are seven stages in the process of industrial product development.

  1. Idea Generation: The Industrial marketer should be consciously search for new product idea and to their sources both inside and outside the company. Internally the new product ideas may come from sales staff that is close to customers, R&D experts, from top management. An external source of ideas includes channel members such as distributors or customers. An industrial marketer can get good ideas by using techniques like brainstorming and attribute listing. In attribute listing technique, important attributes of existing products are listed. Ideas are invited from a group of employees to search for an improved product by modifying each attribute. An industrial firm should encourage the employees to present innovative and creative ideas by offering recognition or rewards to the employees submitting the best ideas.
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Long-Term Industrial Product Strategies

Industrial marketing firms have to adopt the following three important steps for developing long term product strategies for existing individual products and products lines.

  1. Assessing the performance of all the existing products or product lines by using product evaluation matrix.
  2. Examining the relative strengths and weakness of the firm’s products in comparison to competitors’ products by using perceptual mapping technique.
  3. Deciding the product strategies for the existing products based on the above analysis.
Product Evaluation Matrix

Yoran Wind & Henry Claycamp have developed a technique called product evaluation matrix to be used to assess the product performance. Performance parameters of a product such as industrial sales, company sales, market share and profitability are combined in the matrix. Industry sales are represented on vertical axis and are grouped as growth, stable or decline. Company sales are assessed on horizontal axis and are grouped as growth, stable or decline. In the same manner profitability is classified as below target and above target and market share as dominant, average or marginal. These classification need to be defined by the marketing manager depending on the situation prevailing in the industry. For example, if the market share is less than 10 percent, it is evaluated as marginal, market share between 10 and 30 percent is considered as average, and more than 30 percent as dominant. Let us apply the same classification of market share to a company having two products. Product P has a dominant market share of 50 percent. The average growth of company sales in the past three years is 40 percent.… Read the rest

Product Life Cycle and Industrial Pricing

Pricing strategies vary as the industrial product moves through its life cycle. The industrial pricing strategy is a key factor in each of the four cells of product life cycle.

  • Introductory Stage Pricing Strategy: There are two pricing strategies available for a new product which is in the introductory stage of its life cycle. These are: (a) Penetration Strategy, and (b) Skimming Strategy. An industrial marketer must analyze the price from the angle of the buyers. How soon the firm should try ton recover the investment on the new product is another important factor to be considered by the industrial marketer.
    1. Penetration Strategy: When the price elasticity of demand is high or the buyers are highly price sensitive, strong threat exists from potential competitors and opportunity exists to reduce the unit cost of production and distribution with increase in volumes the penetration strategy is effective. The firm can draw on experience curve effect and can also achieve the economies of scale. This would give the company a strategic advantage of cost leadership over the competitors. The firm can adopt the pricing objective of long term profit through large market share instead of short term profit objectives.
    2. Skimming Strategy: For distinctly new product meant for a market segment that is not sensitive to the initial high price the skimming strategy can be adopted. The greatest advantage of this strategy is that it focuses on recovering the investment at an early stage by generating more profits. The price will be reduced at the latter stages to reach other market segments that are more sensitivity to price.
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Cost-Benefit Analysis in Industrial Pricing

To formulate an appropriate industrial pricing strategy it is very essential to have an analysis of the costs and benefits of the industrial product from the customer’s point of view.

The benefits can be grouped into soft and hard benefits. Soft benefits includes those benefits which are very difficult to assess, such as customer training, warranty period, customer services, company reputation etc. Hard benefits are the physical attributes of the products such as production rate of machine, rejection rate of component and price/performance ratio.

The costs for an industrial customer mean price plus other expenses that are incurred in purchasing and using the product. For example, the cost of a new oil refinery machine purchased by oil mill includes price, freight, installation, energy usage, repair and maintenance. The cost of production stoppage due to failure of machine may also be included while calculating the machine cost though it is difficult to estimate such cost accurately. The life cycle costing concept can be used by the industrial buyer at the time of purchasing the capital items and estimate the total cost of the product over its life span. Life cycle costing takes into consideration the price, freight, transit insurance, maintenance’s, energy, material and labor costs over the useful life of the product.

The industrial marketer should evaluate the possible cost/benefit trade-off decisions made by the industrial buyer. If the quantum of discount offered by industrial marketer as an incentive for purchase of large stock can be considered by the industrial buyer if the quantum of discount is more then the cost of carrying the inventory.… Read the rest

Pricing of Industrial Products

The industrial marketers should understand the various aspects of the pricing, since pricing is the most critical part of industrial marketing strategy. Different strategies such as market segmentation strategy, product strategy, and promotion strategy are related to pricing strategy. In order to achieve the dual objective such as to meet the company objective and satisfy the market needs, the industrial marketer has to integrate the various strategies. When the members of buying committee of a buying firm, purchase a particular industrial product, they are buying a given level of technical service, product quality, and delivery reliability. The other elements such as the reputation of the supplier, friendship, a feeling of security and other personal benefits flowing from the buyer-seller relationship are also important. The bundle of attributes expecting by the buying committee are fall under three categories. (1) Product specific attributes (2) Company related attributes and (3) Sales personal related attributes. Therefore, the total product includes much more than its physical attributes. In the same way the cost of industrial products includes much more than the seller’s price. Hence, decisions on pricing and products are inseparable and must be balanced with in the firm’s market segmentation plan.

Characteristics of Industrial Prices
  1. Price is not an independent variable. It is intertwined with product promotion and distribution strategies.
  2. The real price an industrial customer pays is quite different from the list price; this is because of the factors like delivery and installation cost, training cost, discounts, financing cost, trade in allowances etc.
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