Agenda

• Introduction to Industrial Marketing

• Industrial Marketing Environment
• Industrial Buying Behavior
• Strategic Planning Process
• IM Research and Demand Forecasting
• Segmentation , Targeting and Positioning
• New Product Development/Services
• IM Channels
• Industrial Sales Force-planning and controlling
• IM Marketing Communication
• Industrial Pricing
 Introduction
• Marketing and industry
• Size and volume of the market
• B2B
• The markets are concentrated/fewer
channels/buyers well informed/highly
organized/complex buying process
 IM defined
• Human activity directed towards satisfying
wants and needs of organizations, through the
exchange process.
• The exchange transaction consists of
• Product/service exchange
• Information exchange
• Financial exchange
 The process of exchange in IM
Product exchange Quality
Suppliers Maintenance Customers
services

Information exchange Technical Customers

Suppliers economics

Financial Exchange Credit

leasing customers
Suppliers

Trust
Social Exchange Interpersonal Customers
Suppliers relationships
 Participants in the IM
• Commercial Organizations
• Government Agencies
• Non profit Organizations

• Do IM cater to Consumer Market?

• Do consumer goods firms offer their products
to the IM ?
 Differentiating IM from CM
Characteristics IM CM
Competition Oligopoly Monopolistic
Demand Derived Demand Direct Demand
Market Size Large,Geographic Smaller ,geographically
Concentration dispersed
Buyer/Seller Interaction high Low
Key Accounts Very important Insignificant
Buying Behaviour High involvement Low involvement
Product and Service Mix Short PLC,quality vital PLC is longer
Price Bidding and Work on List pricing
negotiation,leasing
Distribution Few levels and limited Large channels
channels
Promotion Personal selling/trade Mass advertising
fairs/catalogues
 A closer look at IM
• The Market(few sellers and buyers/derived
demand/geographically clustered/segmentation not
on basis of demographics/customization /high buyer
knowledge)
• Purchasing process( bulk, complex and time
consuming/suppliers as partners/technical expertise)
• 4 P’s(high product obsolescence/quality
centric/negotiated pricing/direct channels/personal
selling)
 Who are the customers in IM
• Commercial Enterprises
– Users(consumables)
– OEM(Original equipment Manufacturers-Ancillary
units)
– Industrial Distributors/Dealers
• Government Agencies
• Non profit Institutions
 Classifying Industrial Products
• Materials and parts(RM-
farm/natural,components)
• Foundation goods(capital goods)
• Facilitating goods(support operations-
paper/pen/consultancy)
Characteristics of organizational procurement

• Commercial Enterprises
• Multiple influencers
• Technical sophistication (planning/supplier rating/EOQ)
• Purchasing in govt units
• Widely dispersed markets
• Complicated procurement laws
• Mainly through contracts(fixed price contract/cost
reimbursement contracts
• Institutional Purchasing
• Varies between Commercial and Govt
 Components of IM Environment
• Natural Environment
• Internal Environment(SWOT)
• External Environment(changing
demographics/squeezing
margins/technological changes/Government
role)
 The IM Environment
• Buyer seller interface forms the core
• The next three levels are Publics/ Macro
environment and the Government
 The IM Environment
• Buyer Seller Interface
• It involves key participants facilitating production and
distribution—input
suppliers/distributors/warehousing/advertising
agencies
• Publics
• Financial Publics
• Independent Press
• Public Interest Groups
• General Publics
 The IM Environment
• The Macro environment
• Economic influences
• Ecological influences
• Cultural influences
• Demographic Influences
• Government Influence (influences as the Govt
administers and makes laws)
Industrial Buying and Buying
Behaviour
 Buying Center
Buying Motives •Users
•Organizational •Deciders
•Personal •Influencers
•Buyers
•Gatekeepers

Buying Decision Process

Need Recognition Buying
Types of Practices
Decision Identification of Alternatives
•Direct
•New Task •Frequency
•Straight rebuy Evaluation of Alternatives
•Order Size
•Modified rebuy •Negotiation
Purchase Decision
•Service
•Dependability
Post Purchase Behaviour
•leasing

Buyer Seller Relationship(Supply Chain/Loyalty)

 Buying situations
• New Task(internal or external factors)—adding
a new product/changing demand
• Modified Rebuy(reevaluation of supplier)
• Straight Rebuy (routine buy)
 Phases in purchase decision
• Need Recognition (equipment
breakdown/replacement/new ideas to be
encashed)
• Determining the quantity needed
• Description of product characteristics
• Search for suppliers
• Acquisition of proposals
• Evaluation and selection of suppliers
• Performance feedback and evaluation
 The Purchasing Department
• Some important jobs:
– Uninterrupted flow of materials
– Manage inventory
– Quality control
– Managing supplier relationship
– Achieving low costs
 Performance evaluation of Suppliers

• Quality
• Delivery schedule
• Technical compliance/product development
• Price
• Responsiveness

• Evaluation method----weighted
 Organizational Buying Process..Steps

• Problem Recognition
• Determining Quantity/quality
• Specifying the requirement
• Search for suppliers
• Analysis of proposals
• Selecting the Suppliers
• Ordering
• Performance feedback and Evaluation
 Decision Making Unit in IM
• Users
• Deciders
• Buyers
• Influencers
• gatekeepers
 Building supplier Relationships
• Factors to consider while selecting suppliers
– Trust and commitment to long term goals
– Mutual benefit
– Top Management Support
– Compatible Organizational Culture
– Sharing of Information
• Contracts should be—simple/flexible/periodic
performance appraisal
Strategic Planning Process
 Key Concepts of Management Strategy
What business should the
Company be in External Analysis of
customers,competit
ors,suppliers and
partners
Develop
Competitive
Setting Goals Internal Analysis of Advantage
firm
• Cost (Economies)
• Market Driven
• Porter’s Model •Product differentiation
•Organization driven
•Industry Analysis •Transaction advantage
•Value driven
•Market Structure
•Barriers to entry
Design
Choose competitive
Organizational Strategy
•Horizontal vs vertical str
Structure
•Functional vs business str •Game Theory
•delegation •Nash Equilibrium
Industrial Marketing Research
Marketing Intelligence vs Marketing Research

Insight
MI

Competitive Market Analysis

Insight Insight
Data

Competitor Product Market Customer

Intelligence Intelligence Understanding Insight

The pyramid of Marketing Intelligence

MR--Defining the Problem & Research Objectives

•• Sheds
Shedslight
lighton
onproblem
problem--
Exploratory
suggest
suggestsolutions
solutionsor
or
Research
new ideas.
new ideas.

Descriptive •• Ascertain
Research Ascertainmagnitudes.
magnitudes.

•• Test
Testcause-and-effect
cause-and-effect
Causal relationships.
relationships.
•• Tests
Tests hypothesesabout
hypotheses aboutcause-
cause-
Research
and-effect
and-effectrelationships.
relationships.
 Uses of Marketing Research
• Studying the business trends
• New product studies
• Sales quota determination
• Market potential and market share analysis
Difference in Industrial & Consumer
Marketing research
Industrial Research Marketing Research
Population is small Population is large
Accessing a respondent is Accessing is simple and easy
difficult
Research personnel must be The personnel need not have
trained and technologically technical orientation
oriented
Personal ,in depth interview is There are other methods
followed
Difficult to define the Defining the respondent is
respondents as purchasing simple
involves a lot of people
The process of Marketing Research
• Identifying research objectives/problem
• Develop the research plan
– Activity and time planning
– Research questions
– Sources of information
• Collect information
– Primary(observation/questionnaire/interviewing)
• Analyze the information(regression and trend analysis)
• Presentation of findings(computers from MIS ,backward
looking to decision support systems,forward looking)
 Sampling
Probability Sampling Non Probability Sampling

•Simple Random Sampling •Convenience Sampling

•Cluster sampling •Judgment Sampling
•Stratified random sampling •Quota Sampling
 Demand Forecasting

Non Quantitative Methods Quantitative Methods

•Executive opinion •Moving averages
•Delphi Method •Trend analysis
•Sales Force Composite
•Test Marketing
•Customer buying Intentions
Segmenting , Targeting and
Positioning
 Segmentation
• What is segmentation ?
• Process of segmentation
• Dividing the market into discrete customer groups basis
needs, similar characteristics
• Determine the profit potential of each segment
• Target segments as per profitability
• Devise 4 P’s as per segment
• Measure performance as per segment
 Segmentation to positioning model
Market Segmentation Target Marketing Product Positioning

•Evaluate resulting
•identify measurable, macro/micro
and relevant variables segments(Profitabilit
for segmenting the •Develop
y analysis and
markets product/market
competitive analysis)
•Define macro profiles positioning for each
•Decide on market
of the resulting target market selected
coverage(undifferen
segments •Develop marketing mix
tiated/differentiated
•Define micro profiles for each target market
/concentrated)
selected
of resulting micro •Selecting the target
segments market
 Basis for segmenting IM
• The IM can be segmented on
• Macro variables
• Micro variables

• Difficulties in segmenting IM
• Diversity among end users
• Differences in product application
• Different buying practices
• Different benefits sought
 Segmenting IM on Macro variables
variables Examples
Industry Agriculture/mining/electronics....
Organizational Size Basis sales/profits/locations
characteristics
Plant characteristics Size/vintage/inventory TO/automation
Location Distance
Economic features Cyclicality
Customers industry Growth rate of customers industry
Competitive forces Degree of competition
Purchasing factors Levels of purchasing authority
End use markets Banks/residential/miners….
Product Computer/television/aeroplane….
application
 Segmenting IM on Micro variables
variables Examples
ORGANIZATIONAL VARIABLES
Purchasing situation New task/modified/straight buy
Customer experience stage PLC stage of the customers product
Customer interaction needs Dependence on supplier in decision making
Product innovativeness Innovative firms vs followers
Organizational capabilities Operating,technical,financial capabilities
PURCHASE SITUATION
VARIABLES
Inventory requirements JIT systems
Purchase importance How important is the component in the final product
Structure of buying center Key influencers
INDIVIDUAL VARIABLES
Personal characteristics Demographics,personality,risk taking ability
 Evaluating potential Segments
• Market profitability Analysis
• Market potential
• Sales potential
• Sales forecast
• Profitability(ROI)
• Competitive Analysis(who are the
competitors)
 Evaluating the Segments
• Qualitative methods
• Expert opinion
• Delphi Method
• Panel consensus
• Sales force composite
• Historical Analogy
• Quantitative Methods
• Trend Projections(forecasting of margins/cash flows)
• Regression Analysis(forecast of sales)
 Target Marketing
• Broad strategies for Targeting
• Undifferentiated market selection( lubricants)-this
exposes the firm to competitive risk
• Differentiated market selection—increases cost
• Concentrated market selection– large share in one or
few markets
• Niche marketing—micro segmentation for micro needs
 Product Positioning
• Steps: identify the unique attribute to differentiate on
and then communicate
• Differentiation bases:
• Product variable
• Service variable
• Price variable
• Personnel variable
• Image variable
• What position do we own and what position do we
want to own. Does the product match the aimed
positioning
Formulating Product Planning

Developing Product strategy

New Product Development
 Attributes of a Product
Physical
Price
Product Characteristics
Quality
Brand

Sellers
Service
product Packaging

Sellers
Reputation

Colour Design
Product
Warranty

Product is an umbrella term covering goods , services ,places , persons and ideas . It is a set
Of tangible and intangible attributes
Product levels : the customer value hierarchy

Potential product

Augmented product

Expected product

Basic Product

Core Benefit
 Product differentiation
• A product can be differentiated from another on
the following parameters:
• Form
• Features
• Customization
• Performance quality
• Conformance quality
• Durability
• Reliability
• Reparability
• style
 Product mix and Product Line
Personal wash laundary Skin care Hair care
Lux Surf Fair and lovely Sunsilk
Lifebuoy Rin Ponds Clinic
Liril wheel vaseline
Hamam
Breeze
dove

Length , breadth ,width and consistency of the product Mix

Line stretching/down market stretch/up market stretch/two

way stretch
 Classifications of products
Consumer products Business products
Convenience goods Raw Materials
Shopping goods(durables) Fabricating materials and
parts
Specialty goods(luxury Installations
items)
Unsought goods Accessory Equipments
Operating Supplies
 Business product characteristics
Raw Fabricating installations Accessory Operating
Materials materials/pa equipment supplies
rts
examples Iron ore piston Blast furnace Storage racks Paper clips
Characteristics
Unit price Very low low high medium Low
Length of life Very short Low to high medium Low
medium
Quantities large large Very small small small
purchased
Standardizatio high high average average low
n importance
 Business product Marketing
Considerations
Raw Fabricating installations Accessory Operating
Materials materials/pa equipment supplies
rts
examples Iron ore piston Blast furnace Storage racks Paper clips
Characteristics
Nature of No Generally no No Middlemen Middlemen
channel middlemen used used
Negotiation high Medium high average Low
period
Price yes Yes yes low Low
competition
Brand None Generally high high Low
preference low
Advance important important Not done Not done Not done
buying
 Industrial Goods PLC and strategy
introduction growth maturity Decline
Strategy Minimizing Establish market Defend market Milk the offer
Objective learning position position
requirements,br
and awareness
competition limited Early entrants Price Drop outs
distribution
squeeze

Product design Limited models Design to Product Pruning the

facilitate new development product line
segments focus

Price high Aggressive Defensive Maintenance

promotional pricing strategy pricing
pricing

Promotional Create Brand Strong dealer Phase out

objective awareness/trial preference ties

Distribution Exclusive dealers Increase of Keep dealers Phase out

objective dealers well supplied
 Locating an industrial good in PLC
• Trend information
• Sales/profit margins/market share/ROI/prices
• Nature and number of competitors
• Analyze similar or related product PLC
• Estimate the number of profitable years
remaining
 Product evaluation
• A product needs to be evaluated periodically
and the full alternatives may emerge
• Maintain the product and marketing strategy in the
present form
• Maintain the product but change the marketing
strategy
• Change the product and the marketing strategy
• Drop the product
• Add one or more items to the product line
 Product evaluation Matrix
Company Sales Decline Stable Growth
Industry Market B.T T AT BT T AT BT T AT
Sales Share
Growth Dominating P3
Average
Marginal
Stable Dominating P1
Average
Marginal
Decline Dominating
Average
Marginal P2

BT—Below Target
T---Target
AT----Above Target
 Industrial Services
• Services in the B2B may be broadly classified
as:
• Product with Service
• Pure Service
• Virtually all products are a mix of goods and
services located on a continuum

Canned food clothes automobiles hotel meal air travelconsulting

Mostly Goods Mostly Services

 Characteristics of Services
• Intangibility (technical/financial consultation)
• Inseparability—services cannot be separated
from the seller. Direct sale is the only channel
of distribution
• Heterogeneity– it is impossible for the seller of
the service to standardize the output
• Perishability– the service cannot be stored for
future use
 Pricing of Services
• The characteristics of services influences its
pricing
• The basic strategy is determining cost and
deciding on the mark up (opportunity cost of
manpower)
• Discounts and flexible pricing is common
 Services differentiation in IM
• Ordering ease
• Delivery
• Installation
• Customer training
• Maintenance and Repair
• Returns
Strategic Innovation and New
Product Development
 What is a new product
• Three distinct categories
• Innovative products(zipper/photocopier…)
• Replacement products—distinct from existing products
in form and functions(digital cameras/ball point
pens/walkman/mobiles)
• Initiative products--- new to a company but not new to
the market(new auto model)
 Types of new Products
High New Product Line New to the world
(20%) Products (10%)
N
e
w
n
Improvements to Additions to existing
e existing product line(25%)
s products(25%)
to
c
o
m
p
a Cost reductions Repositioning
n
y

Low High
Newness to the Market
 New Product Ideas
• External environment(SWOT/Porters Model)…
changing customer trends
• Internal environment
• Customers
• Employees

• Technology has had the greatest impact on

innovations and new ideas
 Stages in new product development
• Stages
• Idea generation
• Screening of ideas
• Business analysis
• Prototype development
• Market tests
• Commercialization
• Three questions answered in sequence
• Is there a market for the idea
• Can the idea be transformed to a physical product
• Can the physical product be marketed profitably
 Stages in new product adoption
• Convincing an IM to adopt a new product
• Awareness—exposing to the inn
• Interest– prospect is interested in seeking information
• Evaluation– prospect compares advantages and
disadvantages of the product
• Trial– prospect is convinced for trial for a limited period
• Adoption– prospect decides to use the product on a
large scale
• Confirmation—the prospect gives confirmation of his
interest in the new product
 Adopter Categories
• Innovators
• Early adopters
• Early majority
• Late majority
• laggards
 Characteristics affecting adoption rate

• Relative advantage
• Compatibility
• Trialability
• observability

The example of tyres

Channels in Industrial Marketing
• why use Distributors
•Services expected of distributors
•Characteristics to consider in choosing a Distributor
•Manufacturers’ reps
•Making indirect channels effective
 Why Distributors
• Cost / benefit analysis
• Which important marketing functions are
critical –
• Quick delivery
• Local connect and networking
• Resource scarcity
• Financial resources/manpower/expertise/time
• Customer expectations
 The power of balance between partners

Distributor
High Dictates terms Mutual obligations and
opportunities
Manufacturer’s
Dependence on
distributor

Manufacturer dictates
Apathy
terms
Low

Distributor dependence
Low High
On Manufacturer

Sources of relationship instability: customer pull / Direct Sales

 Distributors serve buyers and suppliers
SELLER BENEFIT BUYER BENEFIT
• Carry inventory • Provide fast delivery
• Share credit risk • Provide local credit
• Share selling task • Assist in buying decisions
• Forecast market needs • Anticipate needs
• Provide market info • Provide product info
• Enhance customer • Enhance customer
service service
 Dual channel Strategies
• Direct and indirect distribution

• Distributors beneficial when:

• Product is simple and inexpensive
• Market is comprised of many customers

• Direct channel beneficial when:

• High tech product
• Generally capital equipments
• Product is customized/complex/price negotiation involved
• Few customers in the market
 Choosing the Right Distributor
• What marketing functions to assign
• Carry inventory
• Dividing who will tap prospects
• Credit liability when selling on credit
• Product line coverage
• Fragmenting the product line(basis product features and product
complexity)
• Distributor size
• Financials(when inventory is costly)
• Distributor type
• Will depend on type of product and market to be served
• Exclusive or multiple distribution
• Size of the market/market potential
 A sample distributor agreement
• Duties of the distributor
• Carry sufficient inventory to satisfy market needs
• Help to disseminate new product development
• Extend competitive credit
• Utilize cooperative marketing programs to enhance market share
• Follow up on all customer leads provided by manufacturer
• Duties of the manufacturer
• Provide products with a quality level necessary to meet market
penetration plans
• Devise promotional programs to stimulate market demand
• Provide distributor personnel with training and guidance
 Manufacturers’ Representatives
• Reps compared to distributors
• Both are independent entrepreneurs
• Both are selling organizations
• Distributors stock inventory .Reps do not
• Distributor is an indirect channel. Reps can be
considered a substitute of the direct sales force
• A firm is likely to sell through Reps for
• Financial constraints
• Many times works as an ideal corporate sales manager
• Limited market/declining market
 Problems in dealing through Reps
• Problems in dealing through reps
• Lack of control
• Competing product lines sold by a Rep
• Other channel participants
• Brokers : commissioned middlemen
• Value added resellers(VAR): local computer
manufacturer
Maintaining Indirect channel Effectiveness

• Realistic Goals
• Two way communication
• Essential Training
• Compatibility(similar thinking on importance
of growth/pricing philosophy/target
markets/customer service levels)
• Compensation and Support
The selling function in Industrial
Marketing
• Choice available to an IM
• Own sales force
• Manufacturer Reps
• Distributors
• Dealers
• Choice of the channel will depend on
• Composition of the market
• Type of products marketed
• Financial capability of the firm
• IM is characterized by heavy reliance of sales
force
• Number of potential customers is small
• High rupee value associated with each sale
• Buyers purchasing costly products prefer to deal
directly with the company
 An ideal Salesman
• The art of successfully persuading prospects to
buy products or services from which they can
derive suitable benefits
• One who analyzes buyer needs,communicates
effectively the firms offering,skillfully manages
interpersonal relationships and successfully
negotiates over areas of differences to bring
about a mutual satisfaction of goals.
 Some characteristics ….
• Usually has no one he’s trying to impress. He feels his work
speaks for itself
• Doesn’t get involved in internal politics
• Is not afraid to ask for suggestions from other departments as
long as the suggestions will help him in accomplishing his goals
• Truly feels he has more insight into customer needs than
anybody else
• His competitive drive comes naturally
• Shows genuine enthusiasm
• Feels all customers are important
 Areas of sales training
• Company knowledge:
• Products/market share/quality/service/post purchase service
• Product knowledge
• Product applications and customer benefits
• Industry and market trends
• Business cycles effects on purchasing
• Competitive knowledge
• SWOT
• Selling Skills
• Human relation skills
• Negotiating skills(from self interest towards mutual advantage)
• Identifying leads and prospects
• Ethical selling
 Motivating the Sales Force
• Content theories
• Maslow theory
• Hezberg theory
• Process theories
• Expectancy theory(M= perceived probability of performing a
task * perceived probability of obtaining an output * Valence)
• Attribution theory(individuals are motivated or demotivated
as a result of their perception regarding who is in control of
their actions)
• The Japanese style
• Trust/subtlety/Intimacy
Managing Advertising, Sales
Promotion and Publicity
 Advertising
• Use of Advertising in IM
• Reaching out to the buying influencers
• Creating Awareness: helpful when the buyer is looking
for alternatives
• Enhancing the sales call:the buyer is aware of the
company/its products/quality and service .closing the
case becomes easier
• Supporting the channel members
 Mediums
• The mediums of advertising
• Business and trade publications(horizontal when its cuts across
industries/vertical when it is specific to an industry): eg business
today/auto drive/advertising age
• Directory advertising(horizontal/vertical):normally published by an
independent agency and distributed free
• Consumer media(TV/radio/newspapers—generally used by seller
who targets small buyers who are geographically scattered)
• Direct Marketing
– Mails(cheap,give new product info..Disadvantage of being treated as junk mail
– Telemarketing(lead generation)
– Catalogs
– Datasheets(provide detailed technical data of products)
 Sales Promotions
• Trade shows
• Organized by independent event managers
• Common platform where buyers/sellers can meet
• Gives an opportunity to the seller to display his current
products and the projected ones
• The buyer has the opportunity to meet a variety of sellers
under one roof ..helps him in comparison
• Increases awareness of both buyers and sellers
• In an excellent method of generating leads/prospects
• Incentives and Specialty advertising:
• Care should be taken so that it is not misunderstood
 Publicity
• Advantages
• High credibility/helps lead generation/credible source
of information for technical products
• Importance of signed articles
• Help to improve companys technical image
• Helps to presell products
• Important source of information to customers
• Does publicity have costs associated with it?
Variables affecting promotional budgeting

• PLC: As PLC progresses, both M/S and A/S decreases

• Product variables: products that are high in quality,
unique or strongly identifiable have a high M/S and A/S
ratio
• Market Share: with increasing MS,both M/S and A/S
tend to decrease
• Customer concentration: With a few large buyers, both
M/S and A/S will be low
• Customer Base: with increase in number of customer,
both M/S and A/S will increase.
 The Integrated Promotion Plan
Marketing Objective Increase companys market share in the industry from
10% to 15% over the next 12 months
Advertising Objectives Existing market—increase awareness from 30 % to 50 %
over the next 12 months
New Market– create awareness from 0% to 20% over the
next 12 months
Communication Strategies
Advertising Message to focus on production benefits
Specify medium and frequency(details to be submitted by
20th dec.Responsibility : Company Media Cell
Direct Mail Product brochure to be distributed to all prospects by 10th
jan
The new brochure to be distributed to all distributors by
15th jan(total brochures required 500 to be printed by 5th
jan. Responsibility Product Team
 The Integrated Promotion Plan
Telemarketing 50 telemarketing consultants to be hired by 25th Dec: Responsibility:
HR and Sales
Office space identification responsibility with Admin
Training to be completed by 5th Jan : Responsibility : Product Team and
HR
Telecalling to launch by 7th Jan
Sales Participate in trade show in Pragati Maidan on 10th Feb. Space 20 by 20
Promotion ft.
Responsibility for displays with Product. Deal finalization with Sales and
Admin.
Complete invitation and trade show schedule outline by 20th Jan:
Responsibility with sales
Publicity Target papers: ET/Business Today
Editorial to focus on production benefits of the company’s products and
wide range
Timelines for editorial is 31st March. Responsibility with media Team.
Price Determination
• Factors considered when deciding on price
• Customer demand
• Customer benefits(functional/operational/financial)
• Competition
• Cost(Fixed/variable/direct/indirect/allocated/sunk)
• Economic conditions
• Channel cost
 Pricing Strategies
• The pricing strategy can be
• Survival Pricing
• Cost plus pricing
• Break even pricing
• Discount pricing(trade credit/quantity discounts)
• Perceived Value based pricing
• Pricing based on demand
• Pricing set in relation to competitors alone/geographic pricing
• Price discrimination
• Skimming pricing
• Penetration pricing
• Leader pricing
 Market entry Strategies
• Conditions favoring price skimming
• Product has a strong patent protection
• Genuine product innovation that will result in substantial buyer benefit
• Buyers who are willing to pay a premium
• When product has a short life span,so that quick recovery of investment
happens
• Potential competitors are weak/slow reactors
• Conditions favoring penetration pricing
• Unit cost of production falls with increasing output
• Strong potential competitors
• Firms primary goal is enhanced market share
• The product has hidden or subtle benefits that will become obvious only
after use
 Price Negotiation
• Similar to open bidding
• Items of negotiation-price/service/delivery
terms/technical assistance/product
characteristics/quality
• Types of negotiation strategies
• Negotiated strategy
• Dictatorial strategy
• Defensive strategy
• Gamesmanship strategy
 Strategy Quadrangle
Buyers strengths
100%

Defensive
Negotiated
strategy
strategy

5% 50% 100%

Sellers strengths

Gamesmanship Dictatorial
strategy strategy

5%
 Measurement of strengths
Measurement of buyer strengths Seller strengths
strengths strengths
criteria scale(1-10) weights score criteria scale(1-10) weights score

delivery
org size 9 3 27 service 4 3 12

sales company
potential 7 2 14 image 6 3 18

size of past
purchase 3 4 12 quality 3 2 6

future
potential 8 5 40 price 8 2 16

trade in policy 6 1 6

  after sales 5 2 10
      93       68

total possible
score     140       130
% score     66.4       52.3
 Pricing Tactics Matrix
Buyer
Seller Acute need Moderate need Marginal need

Acute need Neutral ground Buyer has leeway Buyer in control

Moderate need Seller has leeway Neutral ground Buyer has leeway

Marginal need Seller in control Seller has leeway Neutral ground

 leasing
• Capital lease and operating lease
• Advantages
• If the product need is cyclical or for a short duration
• Taken when facing financial constraints
• Off balance sheet financing(maintains low D/E)
• Useful in industries where technology obsolescence is
high