im chapter 13pp

7/29/2019 IM Chapter 13PP

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Products & Services for

Businesses

Chapter 13By

Professor Riaz Khan


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Chapter Learning Objectives

The importance of derived demand in industrial markets

How demand is affected by technology

Characteristics of an industrial productThe importance of ISO 9000 certification

The growth of business services and nuances of theirmarketing

The importance of trade shows in promoting industrial goods

The importance of relationship marketing for industrialproducts and services


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Demand in Global Business-to-business Markets

3 Factors the affect demand in international industrial marketsvs. consumer markets

1. Volatility of Industrial Demand Due to such things as:

Buyers tend to act and behave in the same manner

Derived Demand (demand dependent on othersources) accelerates changes in the markets

2. Stages of Economic Development The stage a countrys economic development will affect

the demand for industrial products. What is the degreeof industrialization in that country?

Stages Traditional society Pre-conditions for take off Take off (Russia, Romania) Drive to maturity (NICs like South Korea) Age of mass consumption (U.S., Japan,

Germany)


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Demand in Global Business-to-business Markets

3. Technology and Market Demand

Technology is critical in economic growth The 3 trends that will continue to spur demand

for technologically advanced products

1. Expanding economic and industrial growth in Asia(especially China and India)

2. The disintegration of the Soviet empire

3. Privatization of government-owned industries


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The Volatility of Industrial Demand

Measures to manage volatility:

Maintain broad product lines

Raise prices faster and reduce advertisingexpenditures during booms

Ignore market share as a strategic goal

Eschew layoffsFocus on stability


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Quality and Global StandardsImportant Points about global standards of defining quality:

Quality is defined by the buyer

One important dimension of quality is how well a productmeets the specific needs of the buyer

This pricequality relationship is an important factor inmarketing industrial products

Total quality management must be a part of all MNCsmanagement strategy

A lack of universal standards is another problem ininternational sales of industrial products

Conflicting standards are encountered in test methods formaterials and equipment, quality control systems, andmachine specifications


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ISO 9000 Certification:

1. ISO 9000s, a series of five international industrial standards(ISO 90009004) originally designed by the InternationalOrganization for Standardization in Geneva to meet the needfor product quality assurances in purchasing agreements.

2. Positively affects the performance and stock prices of firms

3. ISO 9000 concerns the registration and certification of amanufacturers quality system

4. It is a certification of the existence of a quality control system acompany has in place to ensure it can meet published qualitystandards

5. ISO 9000 standards do not apply to specific products6. It is a certification of the production process only, and does not

guarantee that a manufacturer produces a quality product orservice.

7. A voluntary program that requires companies manufacturingor processing systems to pass the certification process


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Business ServicesImportant points about business services:

Services offered other than the tangible product can bemore profitable than the revenues gained from the sale

of the product After-sale services include:

Prompt delivery

Training

Parts replacements

Other Business services offered: Many international services have been created

because companies need to serve their clientsoversees (hotel chains, healthcare providers,advertising and accounting firms)


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After-Sale ServicesInstallation

Training

Spare and replacement partsDelivery time

Cost of parts

Service personnel

Crucial in building strong customer loyalty

Almost always more profitable than the actualsale of the machinery or product


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Trade ShowsImportant points about trade shows

1. Trade shows are utilized more often in

European and Asian countries than in the U.S. Trade shows have become the primary method of

selling and marketing products in most countries

In Europe, companies spend on average of 22% oftheir total annual media budget on trade shows, vs.

U.S. which spends less than 5%.

Virtual trade shows are another way to bringcustomers to different products and services.


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Trade Shows

Trade shows serve as the most important vehicles forselling products, reaching prospective customers,contacting and evaluating potential agents and distributors,

and marketing in most countriesTrade shows provide the facilities for a manufacturer toexhibit and demonstrate products to potential users and toview competitors products

Trade shows create an opportunity to create sales andestablish relationships with agents, distributors, franchisees,and suppliers that can lead to more-permanent distributionchannels in foreign markets


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Relationship Marketing

in Business-to-Business Contexts

Building long-term relationships with customers is a viablestrategy for business-to-business marketing

The objective of relationship marketing is to make the

relationship an important attribute of the transaction, thusdifferentiating oneself from competitor

It shifts the focus away from price to service and long-termbenefits

The reward is loyal customers that translate into substantiallong-term profits

Focusing on long-term relationship building will beespecially important in most international markets whereculture dictates stronger ties between people andcompanies

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