What is Industrial Marketing?
Industrial marketing or business marketing is to market the products and services to business organizations. Their buyers can be manufacturing companies, government undertakings, private sector organizations, educational institutions, hospitals, distributors, and dealers. The business organizations, buy products and services to meet their aims like maximizing profits, minimizing costs, use of latest technology, and so on.
On the other hand, consumer marketing involves the marketing of products and services to individuals, families, and households. The consumers buy products and services for their own consumption.
Table of Content
- 1 What is Industrial Marketing?
- 2 Definition of Industrial Marketing
- 3 Concept of Industrial Marketing
- 4 Types of Industrial Product
- 5 Supplies & Services
- 6 Types of Exchange process
- 7 Types of Industrial Customers
Industrial marketing consists of all process involved in the marketing of products and services to organizations that use products and services in the production of consumer or industrial goods and services. The organizations selling goods like steel, machine tools, computers, courier services, and other goods and services to buying organizations.
They also need to recognize and define the buyers needs, purchasing power, trade policies, and buying procedures. The selling organizations should also focus on offering value-added product and services.
For example, a company manufacturing and marketing tyre tubes to motorbike company, a manufacturer is doing industrial marketing. Industrial marketer of the tyre tubes company must understand the needs of motorbike manufacturers such as Hero Motocorp and Honda, Bajaj, Yamaha in terms of their quality standards, applications of tubes, availability or delivery on daily or weekly basis, and so on.
Definition of Industrial Marketing
Industrial marketing is the marketing of goods and services by one business to another. The term, industrial marketing has largely been replaced by the term B2B marketing.
The word Industrial Marketing is also used for Business-to- Business Marketing, or Business Marketing, or Organizational Marketing.
Concept of Industrial Marketing
The marketing concept is useful and important for both the industrial and consumer markets due to the differences in terms of the nature of markets. The marketing theory for the business organization of industrial buyer is to identify and define the needs of a target market and change the organizations product or service to satisfy those needs.
It is proved that consumer marketers have embrace the marketing concept more holistically than their industrial complement because Industrial customers like organization businesses, institutions, and government agencies have unique needs. The industrial marketing concept consists more than facilitating exchange with these customers. This is because it is based upon the relation between buyer and seller.
Good relationship between buyer and seller is must for achieving the organizational goals of both. Many of the technically oriented companies focus on the technical part of their products besides in its place of concentrating on the added value for their customers.
An industrial marketer can create added value by providing training of technical knowledge in an efficient and effective way. This effective marketing not only helps to increase sales – it leads to the creation of a more valuable asset, recognized brand something firms might want to sell someday.
Normally industrial marketing involves large orders and long-term relationships between the producer and supplier, the process of transaction is too difficult or more complex than the transaction between business to an individual customer. The B2C sales has focuses on interactions between two parties.
While B2C sales might focus on one-on-one interactions between two parties, while business-to-business (B2B) refers to a situation where one business makes a transaction with other business.
This typically occurs when:
- A business is sourcing materials for their production process (e.g. a car manufacturer purchasing tyre)
- A business needs the services of another for operational reasons (e.g. a car manufacturer employing an accountancy firm to audit their finances)
- A business re-sells goods and services produced by others (e.g. a dealer buying the end product from the car manufacturer)
Types of Industrial Product
Industrial products are defined as the products, which are used for processing or for carrying out a business. Thus, the peculiarity between a consumer product and an industrial product is depending on the purpose for which the product is bought.
For example, we can say a customer buys a mixer or juicer or grinder for domestic use it is a consumer product, whereas when the same mixer/juicer/grinder is sold to a fruit juice vendor it is termed as an industrial product. Industrial marketing can also be carried out in Business Services.
Industrial Products can be classified in three broad categories:
- Materials & Parts
- Capital Items and
- Supplies and Services
Material & Parts
These consists raw material, finished material & parts. Raw materials are generally farm products namely cotton, wheat, vegetables etc. Some natural products like namely meat, petroleum product, iron etc. whereas finished material and parts are items like iron rods, linen yarns, wires and cables etc. and component and parts can be household appliance motors, components of PC’s, component parts of motor vehicles etc.
The industrial products which assist the buyer’s production and operations are termed as capital items. These include accessory equipments, installations or may be buildings, complex computer systems. Some other items which can be added to this are the accessory equipment which can aid the production Process.
For example, forklift trucks for material handling, equipments & furniture etc. These products like forklift trucks for material handling, equipments & furniture etc., have a shorter life span than buildings, complex computer systems as mentioned at the beginning.
Supplies & Services
This is also another type of industrial products and services in industrial marketing. This includes the items that have a constant use in the plant or in office. Cleaning equipments, paints, pencils, printer inks, photocopy papers, etc. are the convenience products and are purchased with no difficulty.
Maintenance and repair services are the items like window and furniture cleaning material computer repair etc. There are also the business consultative services like legal, management consulting, promotional etc. The needs and objectives of industrial buyers are satisfied through the following exchange processes. There can be four different types of exchanges in industrial marketing
Types of Exchange process
The nature of any business organization of industrial buyer is to identify and define the needs and objectives of a target market. It is profound that industrial marketing is totally different than consumer marketing because Industrial customers like organization businesses, institutions, and government agencies having unique needs.
Thus industrial marketing concept consist of different exchange processes with these customers. The needs and objectives of industrial buyers are satisfied through the following exchange processes.
Product Exchange Process
The characteristics of the Product exchange process is any product or service involved have a significant impact on the industrial exchange process. The comfort of exchange is based upon the ability of the seller to identify the buyer’s needs and the product’s potential to meet those needs.
For example supply of soap or detergent powder to the manufacturers of soaps or detergents. To HUL there are suppliers of the raw materials of soap, detergent raw materials to give the end product s like Rin Detergent Bar or Surf Excel.
Information Exchange Process
When one organization gives the technical knowledge, economic consultancy, or giving replies to organizational questions to another organization it is termed as information exchange.
It consists of technical, economic, and organizational questions pre and post-sale maintenance and servicing information that must be exchanged to the participants of business organizations.
For example we can cite the installation of sophisticated software’s in an organization and operating system of that software can be termed as information exchange.
Financial Exchange Process
The yielding of credit or the need to exchange money from one currency to another at the time of dealing with foreign buyers is called as foreign exchange. Award of credit facilities to an organization is financial exchange. Exchange of currencies between two organizations in two different countries is financial exchange process.
For example we can say the functioning of Industrial Development Bank of India (IDBI), which grants loans to industries.
Societal Exchange Process
Social exchange is significant in areas of reducing ambiguity between buyer and seller. Avoiding short-term difficulties and thus maintaining a better relation over a long period of time. There are a number of factors in an agreement between buyers and sellers in the industrial market. They are based on arbitration and mutual trust, not completely official or based on legal criteria.
Types of Industrial Customers
Industrial customers are normally classified into four groups:
- Commercial Enterprises
- Governmental Agencies
- Co-operative Societies
These are as shown as follows:
Commercial enterprises are private sector, profit-seeking organisations such as IBM, General Motors, Computer Land, and Raven Company, purchase industrial goods and/or services for purposes other than selling directly to ultimate consumers.
However, since they purchase products for different uses, it is more useful from a marketing point of view to define them in such a way as to understand their purchasing needs at the time of examination of the varieties of products they purchase and how marketing strategy can be developed to meet their needs.
Thus, it is more logical to look at commercial enterprises:
- industrial distributors or dealers
- original equipment manufacturers (OEMs)
As and when, these categories tend to overlap; are useful to the industrial marketer because they point out the ways of uses of products and services in buying firms.
Industrial Distributors and Dealers
Industrial distributors and dealers take title to goods; thus, they are the industrial marketer‘s intermediaries; acting in a similar capacity to wholesalers or even retailers. the intermediaries not only serve the consumer market but also they serve other business enterprises, government agencies, or private and public institutions. They purchase industrial goods and resell them in the same form to other industrial customers.
Original Equipment Manufacturers (OEMs)
These industrial customers purchase industrial goods to incorporate OEMs into the products they produce. For instance, a tyre manufacturer (say, MRF), who sells tyres to a truck manufacturer (say, TELCO) in this case it would consider the truck manufacturer as an OEM. Thus, the product of the industrial marketer (MRF) becomes a part of the customer‘s (TELCO‘S) product.
An industrial customer, who purchases industrial products or services, to support its manufacturing process or to facilitate the businessoperations is referred as a user.
For example, drilling machines, press, winding machines, and so on are the products which support the manufacturing process, whereas the products which facilitate the operations of business like computers, fax machines, telephones, and others.
In India, the largest purchasers of industrial products are Central and State Government departments, undertakings, and agencies, such as railways, department of telecommunication, defense, Director General of Supplies and Disposal (DGS&D), state transport undertakings, state electricity boards, and so on. These Government units purchase almost all kind of industrial products and services and they represent a huge market.
Public and private institutions such as hospitals, schools, colleges, and universities are termed as institutional customers. Some of these institutions have rigid purchasing rules and others have more flexible rules. An industrial marketing person needs to understand the purchasing practice of each institute so as to be effective in marketing the products or services.
An association of persons forms a cooperative society. It can be manufacturing units (e.g. Cooperative Sugar Mills) or non-manufacturing organisations (e.g. Cooperative Banks, Cooperative Housing Societies). They are also industrial customers.