Researching Industrial Markets

Industrial marketing (or business-to-business marketing) is the marketing of goods and services by one business to another.

Learning Objective

Explain the bidding process, non-tender purchasing, and features of successful B2B sales

Key Points

Main features of the B2B selling process are: Marketing is one-to-one in nature. It is relatively easy for the seller to identify a prospective customer and build a face-to-face relationship.
Industrial marketing can cross the border into consumer marketing. Many products are equally desired by business and consumers, such as audio products, furniture, paint, hardware, etc.
Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification (issued by the purchasing organization), designing a suitable proposal, and working out a price.
In industrial marketing, personal selling is still very effective because many products must be customized to suit the requirements of the individual customer.
The "art" of technical selling (solution selling) follows a three stage process... Stage 1: Sell the appointment: Never sell over the telephone. The aim of the first contact with a prospective purchaser is to sell the appointment. The reason is simple; industrial sales are complex, any attempt to sell over the phone will trivialise your product or service and run the risk of not fully understanding the customer's need. Stage 2: Understand their needs: The best method of selling is to minimise the information about your goods or services until you have fully understood your customer's requirements. Stage 3: Develop and propose a solution: The solution is (of course) developed from your (or the firm's) product or service offerings. In solution selling, it is essential not to sell the solution before you understand the customer's requirements. Otherwise you may unwittingly sell him on how ill-suited your solution is to his requirements.
Sales force management has a critical function in industrial selling, where it assumes a greater role than other parts of the marketing mix. Typical industrial organisations depend on the ability of their sales people to build relationships with customers. During periods of high demand (economic boom), sales forces often become mere order takers and struggle to respond to customer requests for quotations and information. However, when economic downturn hits it becomes critical to direct the sales force outward to sell.
In industrial marketing personal selling is still very effective because many products must be customized to suit the requirements of the individual customer. Indicators such as the sales tunnel give information on the expected sales in the near future, the hit rate indicates whether the sales organization is busy with promising sales leads or it is spending too much effort on projects that are eventually lost to the competition or that are abandoned by the prospect.

Term

Industrial Marketing
Industrial marketing (or business to business marketing) is the marketing of goods and services by one business to another.

Examples

An example of researching industrial markets would be a corporation that was researching new computers for the entire office. The company would have to learn about the key players in the industrial market for computers and study pros and cons of each provider. The process then includes many stages: request for information, request for proposal, request for tender, selection process, awarding the winner, contract negotiations, and signing of the final contract.
An example of the "art" of technical selling: Imagine a couple tells an architect, "We want to build a house. " If the architect immediately responds with a design without learning the details of the clients' desires and requirements, he will likely alienate them. If he patiently learns what the clients need, he has a much greater chance of successfully selling his services.

Full Text

Industrial marketing (or business-to-business marketing) is the marketing of goods and services by one business to another. Industrial goods are those an industry uses to produce an end product from one or more raw materials.

Industrial marketing can cross the border into consumer marketing. For example, an electronic component seller may distribute its products through industrial marketing channels, but also support consumer sales. Many products are equally desired by business and consumers—such as audio products, furniture, paint, hardware, etc. Nonetheless, manufacturers and service providers frequently maintain separate industrial and consumer marketing operations to reflect the different needs of the two channels.

Competitive tendering

Industrial marketing often involves competitive tendering. This is a process where a purchasing organization undertakes to procure goods and services from suitable suppliers. Due to the high value of some purchases and the complexity of such purchases, the purchasing organization will seek to obtain a number of bids from competing suppliers and choose the best offering. An entire profession that includes tertiary training and qualifications has been built around the process of making important purchases.

Bidding Process

Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification (issued by the purchasing organization), designing a suitable proposal, and working out a price.

Non-tender Purchasing

Not all industrial sales involve competitive tendering. Tender processes are time consuming and expensive, particularly when executed with the aim of ensuring probity. Government agencies are particularly likely to utilize elaborate competitive tendering processes due to the expectation that they should be seen at all times to be responsibly and accountably spending public monies. Private companies are able to avoid the complexity of a fully transparent tender process but are still able to run the procurement process with some rigour.

Successful Industrial Sales Organizations: Key Features

In industrial marketing, personal selling is still very effective because many products must be customized to suit the requirements of the individual customer. Indicators, such as the "sales tunnel," give information on the expected sales in the near future. The "hit rate" indicates whether the sales organization is busy with promising sales leads or it is spending too much effort on projects that are eventually lost to the competition or that are abandoned by the prospect.

The Internet and B2B Marketing

The dot com boom and bust of the late 90's saw significant attempts to develop online shopping. Many entrepreneurs (and their investors) discovered that merely having a website (no matter how innovative) was insufficient to generate sales. The amount of conventional media advertising required to promote the sites burnt cash at a faster rate than online sales generated. They also presumed that consumers would eschew the conventional shopping experience (driving, parking, poor service, etc.) for the convenience of shopping online. Some did, but for many companies, not in sufficient numbers. There were many unforeseen problems, and apart from some notable exceptions (Amazon.com and others), the business to consumer online shopping failed for many companies. B2B selling, however, more frequently achieved impressive results.

Digital marketing

Digital marketing structure

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