Multimedia Marketing/Marketing.iso/market/chapter3.6p

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SECTION 3.6 Selling Industrial Offerings

INSTRUCTIONS Think about how the process of selling industrial goods would differ
from selling most consumer items. Then pursue this section to refine your analysis.

EXAMPLE

The purchasing department for the machinery and equipment segment of
a potato chip manufacturer is the envy of the industry. This
department is a model of well-coordinated operations. Individuals in
production make purchase requisitions when they see the need for
new machinery and equipment. The requisitions, if and when they are
honored by production management and the finance department, are
forwarded to purchasing. This department has a well-trained staff
that is familiar with the needs of production and with the quality
of a number of suppliers with which it has done business in the
past.

Purchasing personnel seek out suppliers with a track record of
high quality and service at a reasonable price. They negotiate at
length in order to attain the best terms of sale. Finally, they
arrange for rapid and reliable delivery of the needed items. This
department is regarded by management as one of the best in the
company.

DETAILS

Most firms of any size employ buying specialists called purchasing
agents, or sometimes buyers or merchandise managers. These are the
company's acquisition experts.

The nature and scope of a purchasing agent's responsibilities
vary from one company to another and depend on factors such as the
size of the company, the variety of items purchased, and the technical
complexity of the products. In small companies the manager or some
other individual may handle purchasing on a part-time basis.

Professional purchasing agents are very well informed.They are
responsible for agressively seeking pertinent information about
both new and existing products and services.  Because purchasing
agents are avid information seekers, industrial marketers generally
place their promotion emphasis on top-quality personal selling, as
opposed to mass advertising. This does not mean that advertising and
other promotion methods are not important. Often these methods are
the most efficient at rapidly informing purchasing agents of new
products or improved features of old products.

Industrial purchasing tends to be highly systematic. The approach
that purchasing agents take is both purposeful and methodical. One
of their tools is a reference library of well-stocked reference
materials containing information on goods and services and on
suppliers. They have catalogs, specification books, price lists,
notes on past experiences, and many other detailed documents on file.
Many buyers also maintain Dun & Bradstreet or other financial
ratings of companies with which they might do business.

Like consumers, industrial buyers do not comprehensively evaluate
every possible supplier on each puchase occasion. Instead they develop
loyalties to certain suppliers, also termed vendors, especially
for frequently purchased items. Consequently, industrial buyers
generally maintain "approved supplier lists" from which they select
specific vendors for particular purchases. Firms included on these
lists are there because of favorable past evaluaions.

Marketers should direct their efforts toward getting on the
list, if they hope to do well in the long run. Similarly,
continued agressive marketing is warranted even if the firm
is on the list. Efforts should be made to continue to please
the buyer and to remain on the list.

Most professional buyers continually seek improved procedures in
their buying endeavors. Hence, they should remain fully aware of
new developments in the field. Reading "The Journal of Purchasing
and Materials Management" is a good start, since it explores new
techniques and buying models. Also the National Association of
Purchasing Managers is active in informing its members about new
buying techniques.

PROBLEM 1

A marketer of machinery that is sold to fire extenguisher
manufacturers is likely to emphasize what in its promotion mix?

A. Advertising in trade papers and magazines.
B. Sales promotion campaigns, especially two-for-one offers.
C. Publicity in the popular press.
D. Personal selling through a well-trained sales force.

WORKED

Generally, industrial marketers find that personal selling must
bear the brunt of the promotion burden. The experience of a
marketer of machinery that is sold to fire extinguisher manufacturers
illustrates this point.

Customers of the firm want considerable in-depth information about
equipment before they will buy it. This is understandable. The
equipment is expensive and it is one of the most significant
determinant of the quality of company products and the pace that
they can be produced. Further, there are major price variations
in the equipment, from one vendor to another.

Buyers in this industry want to engage in considerable discussions
with sales representatives and managers before they purchase
equipment. They want demonstrations, explanations, and answers to
pertinent questions. Advertising, personal selling, and sales
promotion cannot do this. They still have a role to play--that of
reinforcing the efforts of the sales force--however.

ANSWER  D

INSTRUCTIONS Think about how the process of selling industrial goods would differ
from selling most consumer items. Then pursue this section to refine your analysis.

EXAMPLE

The purchasing department for the machinery and equipment segment of
a potato chip manufacturer is the envy of the industry. This
department is a model of well-coordinated operations. Individuals in
production make purchase requisitions when they see the need for
new machinery and equipment. The requisitions, if and when they are
honored by production management and the finance department, are
forwarded to purchasing. This department has a well-trained staff
that is familiar with the needs of production and with the quality
of a number of suppliers with which it has done business in the
past.

Purchasing personnel seek out suppliers with a track record of
high quality and service at a reasonable price. They negotiate at
length in order to attain the best terms of sale. Finally, they
arrange for rapid and reliable delivery of the needed items. This
department is regarded by management as one of the best in the
company.

DETAILS

Industrial buyers do not devote equal amounts of attention to each
purchase. Instead, different situations demand different amounts
of time and effort.

There are three major classes of buying situations. First, some
purchases represent new tasks, in that buyers lack experience with
a product or service they have not purchased before. These situations
are the most complex. Of all the classes," new tasks" require the
greatest amount of information search, evaluation, deliberation,
and advice from others. As a result, they offer the greatest
opportunity for a marketer to obtain new accounts. Buyers are open
to advice from sales representatives in these situations. A
representative can make a mark by helping to reduce uncertainty
through providing needed information about how the firm's offerings
can help solve the customer's problems.

PROBLEM 2

A toy store buyer is about to purchase electronic games, which is
a new task for the buyer. Companies selling to this store should:

A. Keep their prices at moderate levels.
B. Use sales reps to provide advice to the buyer.
C. Devote heavy advertising to the games.
D. Assure the store that no other retailer in the area will stock
   the company's games.

WORKED

A toy store buyer is about to purchase electronic games, which is
a new task for the buyer. Companies selling to this store should
use sales reps to provide advice to the buyer. The buyer will
probably perceive considerable risk in this new task. He or she will
require further information on the products, how to sell them, how
their quality varies, and related matters. Members of the sales
force can supply needed information and reduce perceived risk.

ANSWER  B
INSTRUCTIONS Think about how the process of selling industrial goods would differ
from selling most consumer items. Then pursue this section to refine your analysis.

EXAMPLE

The purchasing department for the machinery and equipment segment of
a potato chip manufacturer is the envy of the industry. This
department is a model of well-coordinated operations. Individuals in
production make purchase requisitions when they see the need for
new machinery and equipment. The requisitions, if and when they are
honored by production management and the finance department, are
forwarded to purchasing. This department has a well-trained staff
that is familiar with the needs of production and with the quality
of a number of suppliers with which it has done business in the
past.

Purchasing personnel seek out suppliers with a track record of
high quality and service at a reasonable price. They negotiate at
length in order to attain the best terms of sale. Finally, they
arrange for rapid and reliable delivery of the needed items. This
department is regarded by management as one of the best in the
company.

DETAILS

The opposite of new task is the situation termed a "straight
rebuy", where an organization conducts buying automatically by
computer or by exclusive use of an approved supplier list. The only
decisions to be made are how much and what kind of items to buy.
Realistically, there is little chance of obtaining new accounts in
these situations. Experienced sales representatives learn the art
of detecting these low-potential customers and finding more promising
prospects.

Finally, there is a broad group of situations between the two
extremes, termed " modified rebuy", where buyers are willing to consider
new information, new sources of supply, and slightly different
products or services. Those on approved supplier lists are most
likely to obtain eventual orders, but there is some degree of
opportunity for astute marketers capable of zeroing in on unsatisfied
needs.

Most straight-rebuy situations periodically slip into modified-
rebuy ones. This gives buyers the opportunity of reconsidering their
acquisitions at some desired regularity. Marketers need to be alert
to these opportunities and be ready to respond quickly. Further,
existing suppliers also need to be ready to respond, in order to
avoid the loss of customers. Marketers should develop potential
alternative strategies  ahead of time in anticipation of altered
buyer needs, so that they are ready to respond rapidly and effectively.
Frequent contacts with customers are useful as a means of detecting
when buying situations may change.

PROBLEM 3

The owner and manager of a large bicycle shop has decided that the
store should start selling skis. In turn, his purchases of skis will
represent what kind of buying situation?

A. Straight-rebuy
B. Modified-rebuy
C. Automatic.
D. New task

WORKED

New task buying situations are much more common at the retail level
than they are in manufacturing and wholesaling. This is because
retailers can easily change the composition of the products that
they market. This can be done rather easily, simply by changing
buying and some promotion plans. In the case of wholesaling and
especially manufacturing, changing buying plans can be very expensive.

A bicycle retailer that plans to sell skis may be making a smart
move. Bicycles sell well mainly during the spring and summer, leaving
flat sales for the fall and winter. Skis should take up some of the
slack and provide revenues during these off months. This will place
store buyers in a new task buying situation, however. Bicycles and
skis are quite different and have different marketing needs.

ANSWER  D

INSTRUCTIONS Think about how the process of selling industrial goods would differ
from selling most consumer items. Then pursue this section to refine your analysis.

EXAMPLE

The purchasing department for the machinery and equipment segment of
a potato chip manufacturer is the envy of the industry. This
department is a model of well-coordinated operations. Individuals in
production make purchase requisitions when they see the need for
new machinery and equipment. The requisitions, if and when they are
honored by production management and the finance department, are
forwarded to purchasing. This department has a well-trained staff
that is familiar with the needs of production and with the quality
of a number of suppliers with which it has done business in the
past.

Purchasing personnel seek out suppliers with a track record of
high quality and service at a reasonable price. They negotiate at
length in order to attain the best terms of sale. Finally, they
arrange for rapid and reliable delivery of the needed items. This
department is regarded by management as one of the best in the
company.

DETAILS

Value analysis is a procedure utilized by some buyers to improve
their purchasing. It attempts to reduce costs by carefuly analyzing
components of items to see if they can be standardized, redesigned,
or made by less expensive means. The approach requires that purchasing
agents become knowledgable in areas such as production, physical
distribution, and engineering. By understanding the technical aspects
of their purchases, they are often able to more efficiently specify
their company's needs.

There are five steps involved in value analysis:

1. Determine if  a standard item can be used instead of some
specially ordered one. For example, can standard sized nuts and
bolts be used rather than custom ones, as per engineering's
specifications?.
2. Determine if a product can be slightly redesigned to include
standardized parts. To illustrate, can the product be reduced in
weight to enable using standard shipping containers rather than
specially built ones?.
3. Determine if the number of parts can be reduced by combining
two or more into one. For example, can a door handle be combined
with a lock?
4. Determine if  a less expensive substitute material can be used.
To illustrate, is it possible to replace a brass part with one
made of aluminum or plastic?
5. Ask suppliers if parts can be made for less by tooling or production
changes and/or by ordering larger quantities. For example, ask supplier
A if it would buy a larger machine and cut its price if a greater
share of the business were directed its way.

Many purchasing agents utilize value analysis. Industrial marketers
can use value analysis as an effective means of guiding their
efforts. By carefully assessing buyers' purchases through an
examination of their particular value analysis methodology, a
firm can more effectively shape its offerings around satisfying
potential customer needs. This aids the marketer in developing a
tailor-made marketing program for particular buyers and potential
buyers.

PROBLEM 4

A purchasing agent for a plant that produces parts for and assembles
refrigerators uses value analysis. Which of the following steps is
an example of this analysis.

A. Buying raw materials in large lots in order to obtain lower
   shipping costs.
B. Ordering parts so that they arrive exactly when they are needed
   for production.
C. Determine if a less expensive substitute material can be used
   in the refrigerators.
D. Determine if more efficient procedures can be used in the production
   line.

WORKED

Basically value analysis is an effort to reduce costs by analyzing
components of products to determine if they can be standardized,
redesigned, or made by less expensive means. A refrigerator producer
might make an effort to find out if a less expensive substitute
material can be used in the refrigerators. It might be possible,
for example, to substitute plastic or aluminum for steel on door
handles or in some of the internal components.

The manufacturer should be aware, however, that a replacement of
less expensive substitute material may lower the quality of the
product and alienate consumers. This being the case, the firm should
conduct technical and marketing research to make sure that the
change would not bring about a lesser quality product and consumer
alienation.

ANSWER C