Transcript Business marketing

Business marketing
defined
Industrial marketing consists
of all the activities involved in
marketing of products and
services to organizations that
uses products and services in

•Production of consumer or
industrial goods
•To facilitate the operation of
their enterprises
Business Marketing
Industrial Marketing is the marketing
of the products and services to
business organisations.
 Business organisation include
manufacturing companies,
government undertakings,privatre
sector, educational institution etc


Business marketing is the practice
of individuals, or organizations,
including commercial businesses,
governments and institutions,
facilitating the sale of their products
or services to other companies or
organizations that in turn resell
them, use them as components in
products or services they offer, or
use them to support their operations.
business marketing is also called
business-to-business marketing, or
B2B marketing.
THE SUPPLY CHAIN
Industrial versus consumer
marketing management
Less number of customers but large
customers
 Geographically concentrated market
 Channels of distribution are shorter
 Highly organized and well informed
buyers
 Promotional Characteristics (Business
mktg is focused on personal selling)
 Price Characteristics: Business mktg,
price is fixed as per competitive
bidding and negotiated prices.

Characteristics of Business
Maketing

Business may be defined as an
enterprise engaged in the production
and distribution of goods for sale in
the market or rendering service at a
price. The chief characteristics of the
business are:
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Creation of utilities: Business
denotes creation of utility and
service for satisfaction of human
wants. Business helps in the
creation, distribution and production
of utilities.
Recurring activities: Business
activities are recurring in nature.
Recurring purchase and sales are
regarded as identifying marks of the
business.

Transfer of title: The goods
produced or purchased by the
business are made with the intention
of sale or transfer of title from the
seller to the buyer. Because of this
reason goods acquired for the sake
of personal consumption are
excluded from business.
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Mutual benefit: Business activities
are not one sided affairs because
both the parties are benefited. The
buyer gets the benefit of having the
goods and the seller gets the benefit
of having money.
Expectation of earning: Business
provides a way of living to the
businessman because he intends to
earn profit.
Types of industrial customers
Commercial
enterprises
Industrial
suppliers
Government
agencies
Institutions
Hospitals,schools etc
Lubricants
Coal
paper
users
OEMs
Original equipment mfrs
Steel
Cement
Raw materials
Airplanes
Typewriters
guns
Products
Consumables

Commercial enterprise: it includes
private sector, profit-seeking
organisation consisting of : Industrial
distributors or dealers
Classification of industrial
products

Material and parts
• Raw materials
• Components

Capital items
• Installations(Heavy equipments)
• Accessory equipment (Light equipment)
Supplies and services
 Supplies items includes
paints,soaps,oil and grease

These items are generally
standardized & are marketed to a
wide cross-section of industrial
users.
 Services: It includes services like
building maintenance services,
auditing services, legal services,
marketing research services

Market Segmentation and B2B Marketing
company size
Behaviour or Needs
Certainly large companies may be of key or strategic value to a
business but some want a low cost offer stripped bare of all services
while others are demanding in every way
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Size Segmentation Examples
Targeting companies who see $500 million/year in revenue.
Only targeting the largest companies in your region based on
number of employees.

Segmenting By Vertical
A hanger warehouse may only target companies in the retail industry, a
graphic software firm may only target design departments or design
houses
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Segmenting by Geography
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Segmenting by Behavior
segmenting targets prospect groups based on their buying behavior. How
are your customers using your product, how often are they using it, and
what is the challenge your prospects face? Those questions, coupled with
the propensity of your prospect to actually pull the ‘buy’ trigger, is the
cornerstone of behavioral segmenting.

Eg: selling enterprise software, you’ll probably have at least
4 sets of campaigns / messages aimed at different groups
within the company:
- business function: the department who’ll be using your
software the most, focus on use cases, user benefits,
features
- IT: how it’s technically superior, integration options,
reliability, security…
- Finance: return on investment, compliance, legal
requirements, financial credibility
- Executive: strategic, case studies, overviews, hospitality
Chapter 2
Nature of Demand in Industrial
Markets
 Purchasing orientation & Practice of
business customers
 Environmental analysis in
industrial/business
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Channel Characteristics
 Inventory or stock control is very
much important factor in the
business organizations' therefore the
distribution channels are needed
more direct from the manufacturer
to the customer in industrial
marketing.
 There are a few channel alternatives,
which are feasible in the industrial
market than the consumer market
Nature of Demand in
Industrial Markets
The demand for industrial products
and services does not exist by itself.
It is derived from the ultimate
demand for consumer goods and
services.
 Industrial demand is therefore, called
derived demand.

Derived Demand:–
Industrial Customer buys goods and
services for use in producing other
goods and services.
 Ultimately whatever is finally
produced will be sold to the
consumers. Hence the demand for
Industrial goods and services is
derived from consumer goods and
services.

Joint Demand;–
Joint demand occurs when one
industrial product is useful if other
product also exists.
 For eg: a computer cannot be
operated without the monitor.
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Cross Elasticity of Demand:–
 Elasticity is simply the change in
demand from a change in price.
Demand is “inelastic” if the %
change in quantity demand is less
than the % change in price.
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Complementary Goods
• Complementary goods are those that are often used together,
such as motor vehicles and gasoline or DVDs and DVD players.
Complementary Illustration
When the price of one good declines (or increases) and the
demand for a related good increases (or decreases), then the two
goods are considered complementary.
For example, if the price of computers increases and the demand
for software declines, computers and software can be considered
complementary.
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Substitute Goods
Substitutes are goods that are used in place of each other.
Examples include CDs and digital music files, such as MP3s
or ice cream and frozen yogurt.
Substitute Illustration
If a price increase for one good leads to an increase in
demand for a related good, then the two goods are
considered substitutes. An increase in beef prices, for
example, followed by higher demand for chicken or pork,
indicates that chicken or pork represent substitutes for
beef.
Purchasing orientation
& Practice of business
customers
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PURCHASING ORIENTATION
purchasing department occupied a low position in the
management hierarchy, in spite of often managing more
than half the company’s costs.
Recent competitive pressures have led many companies to
upgrade their purchasing department and elevate
administrators to vice presidential rank.
Today’s purchasing departments are staffed with MBAs
who aspire to be CEOs-like Thomas Stallkamp,
Chrysler’s former executive vice president of
procurement and supply, who cut costs and streamlined the
automaker’s manufacturing processes.
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Procurement Orientation:
Here buyers simultaneously seek quality improvements and
cost reduction. Buyers develop collaborative relationships
with major suppliers and seek savings through better
management of acquisition, conversion, and disposal costs.
They encourage early supplier involvement in materials
handling, inventory levels, just-in-time management, and
even product design.
They negotiate long-term contracts with major suppliers to
ensure the timely flow of material. They work closely with
their manufacturing group on materials requirement
planning (MRP) to make supplies arrive on time.
Types of Purchasing Processes
:
Four product related purchasing processes are distinguished,
 1. Routine product: These products have low value and cost
to the customer and involve little risk (e.g. office supplies).
Customers will seek the lowest price and emphasize routine
ordering. Suppliers will offer to standardize and consolidate
orders.
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2. Leverage products: These products have high value and
cost to the customer but involve little risk of supply (e.g.
engine pistons) because many companies make them. The
supplier knows that the customer will compare market
offerings and costs, and it needs to show that its offering
minimizes the customer’s total cost.
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3. Strategic products: These products have high
value and cost to the customer and also involve
high risk (e.g. mainframe computers). The
customer will want a well-known and trusted
supplier and be willing to pay more than the
average price. The supplier should seek strategic
alliances that take the form of early supplier
involvement, co-development programs, and coinvestment.
4. Bottleneck products: These products have low
value and cost to the customer but they involve
some risk (e.g. spare parts). The customer will
want a supplier who can guarantee a steady supply
of reliable products. The supplier should propose
standard parts and offer a tracking system,
delivery on demand, and a help desk.
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Buying Orientation:
The purchaser focus is short term and tactical. Buyers are
rewarded in their ability to obtain the lowest price from
suppliers for the given level of quality and availability.
Buyers use two tactics namely commoditization, where they
imply that the product is a commodity and care only about
price; and multi-sourcing where they use several sources
and make them compete for share of the company
purchases.
Environmental analysis in industrial/business
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Economic What economic trends might have an impact on business
activity? (Interest rates, inflation, unemployment levels, energy
availability, disposable income, etc)
Technological To what extent are existing technologies maturing? What
technological developments or trends are affecting or could affect our
industry?
Government What changes in regulation are possible? What will their
impact be on our industry? What tax or other incentives are being
developed that might affect strategy development? Are there political or
government stability risks?
Socio cultural What are the current or emerging trends in lifestyle,
fashions, and other components of culture? What are there implications?
What demographic trends will affect the market size of the industry?
(growth rate, income, population shifts) Do these trends represent an
opportunity or a threat?
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Future What are significant trends and future events? What are
the key areas of uncertainty as to trends or events that have the
potential to impact strategy?
Internal Analysis Understanding a business in depth is the goal
of internal analysis. This analysis is based resources and
capabilities of the firm.
Resources A good starting point to identify company resources is
to look at tangible, intangible and human resources.
Tangible resources are the easiest to identify and evaluate:
financial resources and physical assets are identifies and valued in
the firm’s financial statements.
Intangible resources are largely invisible, but over time become
more important to the firm than tangible assets because they can
be a main source for a competitive advantage. Such intangible
recourses include reputational assets (brands, image, etc.) and
technological assets (proprietary technology and know-how).
Human resources or human capital are the productive services
human beings offer the firm in terms of their skills, knowledge,
reasoning, and decision-making abilities.
Organizational
Buying
Characteristics of
organisational procurement
Multiple influencers
 Technical sophistication
 Value analysis
 Well established procedures
 Longer term and closer
relationships.
 Closer interactions among multiple
functions.
 Supplier proximity considerations.

Buying situations
New task
 Modified rebuy
 Straight rebuy

organisational buying
Buying phases
Recognition of a problem
 Solution determination
 Determining the needed item
 Search for and qualification of
potential sources
 Acquisition and analysis of proposals
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The Buy grid Framework for Organizational Buying Situations
Buying center
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The decision making unit
Group of individuals who come
together to make a particular
purchase decision
Power base
Buying center roles
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Primary roles
• Decision makers
• Influencers
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Secondary roles
• Users
• Buyers
• Gatekeepers
Objectives in organisational
buying
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Task oriented
• Price
• Services
• Quality
• Assurance of supply
• Reciprocity
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Non task objectives
How purchasing activities
influence buying behavior…
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Material requirement planning (MRP)
• Demand management
• Production management
• Material management
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Just-in-time purchasing (JIT)
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Only one supplier
Long term relationships
Frequent supplies
Precise quantity at precise time
Centralized purchasing
Buyer technology
• On-line DSS, on-line order processing etc
Factors influence the size of the
buying Centre
Characteristics of the firm
 Purchasing situation
 Perceived importance of the product

Psychological factors
influencing decision making
Difference in role orientation
 Difference in information exposure
 Perceived risk

Conflict resolution strategies
competing
collaborating
Own
concern
compromising
accommodating
avoiding
Others concern
Sources of power in conflict resolution

Reward power
• Ability to influence by granting monetary
benefits

Coercive power
• Ability to impose punishment
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Legitimate power
• Formal authority

Personality power
• Ability to influence with personal charm
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Expertise power
• Information or knowledge power
Evaluation of supplier
performance
The categorical method
 Weighted point method
 Cost ratio method

Weighted point method
Factor
Weight
Actual performance
Score
Quality
40
90% acceptable
40*0.9=36
Delivery
30
90% on schedule
30*0.9=27
Price
20
125% of lowest bidder
100/125=0.8
20*0.8=16
After sales
10
60% on time
10*0.6=6
Total score
85
Cost ratio method
Strategic Management
in Business marketing
McKinseys 7S model
structure
strategy
systems
Shared
values
skills
style
staff
Strategic
Management Process
Opportunity matrix
10
Potential
H
attractiveness
L
0
L
Probability of success
H
10
Threat matrix
10
Potential
H
severity
L
0
L
Probability of occurrence
H
10
Boston consulting group model
H
Market
growth
rate
Question
Star
mark
L
Cash cow
Dogs
H
L
Market Share
Business growth strategies
Intensive growth
 Integrative strategies
 Diversification strategies

Intensive Growth strategies
Current
market
New
markets
Market penetration
strategy
Market
development
strategy
Current products
Product
development
strategy
Diversification
strategy
New products
Integrative growth strategies
Forward Integration
 Backward integration
 Horizontal integration

Diversification growth strategies
Concentric diversification
 Horizontal diversification
 Conglomerate diversification

Assessing market
opportunities
Marketing research
Marketing research system

Marketing research is the systematic
design, collection, analysis and
reporting of data and findings
relevant to a specific marketing
situation facing the company
Suppliers of marketing research
Students and professors
 Internet
 Syndicated research firms
 Specialty marketing research firms

Marketing research process
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Define the problem and research
objectives
Develop the research plan
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Data sources
Research approaches
Research instruments
Sampling plan
Contact methods
Collect the information
Analyse the information
Present Findings
Characteristics of good marketing
research
Scientific method
 Research creativity
 Multiple method
 Value and cost of information
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Market demand

Market demand for a product is the
total volume that would be bought
by the defined customer group in a
defined geographical area in a
defined time period in a defined
marketing environment under a
defined marketing programme
Demand measurement and
forecasting
Types of demand measurement
Geographical
Product level
Time level
Segmentation, targeting and
positioning in Industrial
marketing
Segmentation, Targeting &
Positioning

Levels of Market segmentation
• Individual marketing
• Segment marketing
• Niche marketing
• Mass marketing
Requirements for effective
segmentation
Measurable
 Substantial
 Accessible
 Differentiable
 Actionable

Basis of segmentation in business
marketing
Macro segmentation
 Micro segmentation

Some Macro variables
Industry
 Plant characteristics
 Location
 Purchasing process
 End use markets

Some Micro variables

Organizational variables
• Purchasing situation / phase
• Product innovativeness
• Organizational capabilities
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Purchase situation variables
• Inventory practices
• Purchasing policies
• Structure of buying centre
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Individual variables
Market targeting

Process of market targeting
• Evaluating the market segments
• Selecting the market segments
Product planning
What is an industrial product…
Basic properties
 Enhanced properties
 Augmented properties

Product strategy involves
continuous change

Product strategy issues revolves
around
• Changes needed in current products
• Whether products should be added or
dropped(product mix management)
Industrial product manager
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Forecasting sales
Product planning
Pricing
Product conceptualizations
Initiating product changes
Product re-engineering decisions
Product mix management
Production planning and capacity
management
Technical support to the selling team
Product life cycle
– Course that a products sales and profits take over it’s
life time
– The PLC has four phases
•
•
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Introduction
Growth
Maturity
Decline
– The PLC concept can be applied to
• Product class
• Product form
• Brand
Introduction stage
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Characteristics
• Low sales
• High cost per customer
• Negative profits
• Innovators customers
• Few competitors

Marketing objective
• Create product awareness and trial
Introduction stage
 Strategies
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Product : Offer basic product
Pricing : Cost plus pricing
Distribution : Build selective distribution
Advertising : Build awareness among early
adopters and dealers
Sales promotion : Heavy sales promotion to
entice trial
Growth stage

Characteristics
• Rapidly rising sales
• Average cost per customer
• Rising profits
• Early adopters
• Growing competitors
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Marketing objective
• Maximize market share
Growth stage

Strategies
• Product : Product extensions, service,
warranty
• Price : Competitive pricing
• Distribution : Intensive distribution
• Advertising : Build awareness and
interest in mass market
• Sales promotion : Reduce
Maturity stage
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Characteristics
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Peak sales
Low cost per customer
High profits
Middle majority customers
No of competitors begin to decline
Marketing objective
• Defend the market share while maximizing
profits
Maturity stage
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Strategies
• Product : Features
• Price : match or beat the competitors
• Distribution : more intensified
distribution
• Advertising : Stress brand differences
• Sales promotion : Increase to achieve
brand switching
Decline stage
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Characteristics
• Declining growth rate
• Low cost per customer
• Declining profits
• Laggards customers
• Declining competitors
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Marketing objective
• Reduce expenditure and milk the brand
Decline stage
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Strategies
• Product : Phase out weak items
• Price : Cut price
• Distribution : Selective
• Advertising : Reduce to minimal level
Product revitalization decisions

Identifying the causes for poor
performance
• Uncompetitive price
• Production problems
• Uneconomic batches
• High cost of production
• Wrong assessment of customer
expectations
• Low selling price
Product revitalization decisions
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Corrective actions
• Product modifications (cost reduction)
• Increase the price
• Product improvement
• Decrease the price
• Development of new market
• Increased promotional expenditure
• Revamping distribution channels
Product elimination decisions
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Factors to be considered during
product elimination decision
• Full line policy
• Corporate image
• Sales of other products
• Profitability of other products
Service marketing

Include all economic activities whose
output is not a physical product , is
generally consumed at the time it is
produced and provides added value
in
forms
that
are
essentially
intangible

Some service sectors …
• Transportation
• Communication
• Retail trade
• Finance, insurance and banking
• Hotels and lodging
• Government
• Universities and educational
institutions
Services are …
Intangible
 Inseparability
 Heterogeneity
 Perishability
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The services marketing triangle
Company
(management)
Internal marketing
External Marketing
Delivery
Employees
Customers
GAPS model of service quality
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Gap 1- Difference between customer
expectation and perception
Gap 2 – Not knowing what customers
expect
Gap 3- Not selecting the right service
designs standards
Gap 4- Not delivering the service
standards
Gap 5- Not matching performance to
promise
Strategic innovation and
new product development
What is new product
New to the world
 New product lines
 Product variants
 Improvements in the existing
products
 Repositioning

Where do new ideas come from
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Within the company
Customers
New product development process
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Idea generation
Idea screening
Idea evaluation and preliminary
business analysis
Product development and testing
Formal business planning
commercialization
Organisational aspects in new
product development
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Product managers
New product managers
New product committees
New product departments
Formulating channel
strategy
Channel participants
What is a marketing channel

A marketing channel is a set of
interdependent
organisations
involved in the process of making a
product or service available for use
or consumption
Key members of marketing
channels

Manufacturer
• Producer of product or service being
sold

Intermediaries
• Means channel member other than
manufacturer or end user (wholesaler,
retailer)

End users
Why marketing channels
Demand-side
factors
• Facilitating the
search
• Assortment
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Sorting
Accumulation
Bulk breaking
Supply side factors
• Routinisation of
transactions
• Reduction in no. of
contacts
• Carry inventory
• Demand creation
• Extend credit to end
users
• service
Marketing flows
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Physical possession
Ownership
Promotion
Negotiation
Financing
Risking
Ordering
Payment
“Service outputs”
Value added services created by
channel members along with the
product purchased by consumers are
called service outputs
 Typical service outputs include bulk
breaking, spatial convenience,
waiting and delivery time,
assortment etc.
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Choosing the right distributor
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What marketing functions to assign
Product line
• Fragmented channels
• Specialized products

Size and type of the distributor
• Large and reputed distributors
• Small distributors
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Exclusive or multiple distribution
How to divide selling function b/w
company sales team and distributors
• House accounts and distributor accounts
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Distribution policies
Marketing logistics
Physical distribution and
customer care
Logistics

In the business area, Logistics refers
to the interrelation and management
of all the activities involved in
making products and raw materials
available for manufacturing and in
providing finished products to the
customers when, where and how
they are desired
Various logistical cost centres are
Transportation
 Inventory management
 Warehousing
 Material handling
 Order processing

transportation
• Mode and carrier selection
Road
 Rail
 Air
 Pipeline
 waterways

• Carrier routing
• Vehicle scheduling
Inventory management

Inventory carrying cost
• Inventory acquisition cost
• Inventory service cost such as insurance
• Storage space costs
• Inventory risk cost
warehousing
• Private or public facilities
• Site location
Market centered
 Production centered
 Intermediate
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Marketing communication
Advertising and sales promotion
Sales management
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Advertising in business
marketing

In business marketing advertising is
required for
• Reaching the buying influencers
• Creating awareness
• Enhancing the sales call effectiveness
• Increasing overall marketing efficiency
• Supporting channel members
Industrial advertising media
Business and trade publications
 Directory advertising
 Consumer media
 Direct marketing

• Mailers
• Telemarketing
• Catalogues and datasheets
Sales promotion in business
marketing
Trade shows
 Premiums
 Specialty advertising
 Incentives
 Publicity in business marketing

Advertising funds
What can we afford
 Objective and task
 Percentage of sales
 Experimentation
 Match the competition

Developing message strategy
Identifying the audience needs
 Keep the message to important
specifics
 Case histories
 Testimonials
 Comparison Ads
 Straight exposition
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Developing media plan
Media class
 Media vehicle
 Reach
 Frequency
 Continuity (Length of the campaign)
 Scheduling
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Advertisement evaluation
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Advertisement impact assessment
• Aided recall
• Un aided recall
TOM
 SIM
 OIM
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• Message recall
• Content recall
Sales management

The
analysis,
planning,
implementation and control of sales
force activities. It includes setting
and designing sales force strategy,
recruiting,
selecting,
training,
compensating, routing, supervising,
and motivating the personal sales
force
Sales management
Selling
 Sales management
 Salesmanship

Sales as a career
Good remuneration
 Shortest route to the top
 Other privileges
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Selling process

The steps that the sales person
follows when selling, which include
prospecting and qualifying, preapproach, approach, presentation,
handling objections, closing and
follow ups.
Prospecting methods
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Inquiries from advertising
Centers of influence
Chain of leads
Cold calls
Directories and mailing lists
Group meetings and parties
Internal records
Observation
Service personnel
Trade shows
Pre approach or planning sales call




Planning
Planning
Planning
Planning
reflects professionalism
develops goodwill
builds confidence in sales person
increases sales probability
Approaching

Types of approaches
• Complimentary approach
• Reference approach
• Sample approach
• Customer benefit approach
Preparing sales presentations

An effective sales presentation
should
• Attention
• Interest
• Desire
• Conviction
• action
Recruiting
Attracting the potential employees
and making them apply for the job
 Sources of people

• Persons within the company
• Competitors
• Non competing companies
• Educational institutions
• Advertisements
• Employment agencies
The recruitment process
Conducting job analysis
 Preparing job description
 Preparing the set of job qualifications

• Personality traits
• Qualification levels
Compensating sales personnel

Various compensation elements
• Fixed element
• Variable element (commission, bonus,
etc.)
• Fringe elements (paid holiday, sickness
etc.)
• Reimbursement element
Selection process



Initial screening interviews
Application forms
Tests
•
•
•
•


Intelligence tests
Knowledge tests
Personality tests
Drug tests
In-depth interviews
Reference checks
Sales training
Initial sales training
 Refresher training

Designing the sales training
programme

Training objectives
• Initial sales training
• Refresher training

Contents of the sales training programme
•
•
•
•
•
Company knowledge
Product knowledge
Sales techniques and selling process
Interpersonal skills
Market and industry knowledge

Methods of group training






Lectures
Group discussions
Role playing
Video conferencing
CDs
Methods of individual training




On job training
Personal conference
Correspondence courses
Interactive video discs

Implementing sales training programme






location
home office
Field office
Regional office
Central training facility
Non company site (hotel, resort etc.)
Types of compensation plans
Straight salary plan
 Straight commission plan
 Combination of salary and incentive
plan
 Bonuses
 Fringe benefits

Sales meetings
Sales meetings are important for
communication
and
motivational
purposes
 Exchange of information and ideas
 Occasions
for
management
to
stimulate the sales force to raise the
performance standards

Evaluating sales performance

Quantitative performance standards
• Quotas
• Selling expense ratios
• Net profit ratio
• Territorial market share
• Sales coverage index
• Calls frequency / calls per day
• Average cost per call
Qualitative performance
standards

Job factors
• Product knowledge
• Understanding customer needs
• Service

Personal factors
•
•
•
•
•
Punctuality
Attitude
Cooperation
Adaptability
Reliability
CRM and CB
CRM and CB

There are three ways to increase the
profitability
• Acquire more customers
• Optimize the value from existing customers
• Retain the right customers longer


Of these three choices above, acquiring
new customers is the most expensive
affair and retaining the existing
customer is the most economical
Before we understand CRM, we should
know the concepts of “life time value of
customer” and “consumer touch points”
CRM
While organizations should continue
looking
for
customers
new
customers, they should also know it
is worth a significant investment to
keep them. CRM is the way to it.
 With CRM suppliers generate loyalty,
this in turn translates in to additional
business at increasingly higher
margins.

Evolution of CRM
Mass marketing
 Target marketing
 CRM

Types of CRM
Win back or save
 Prospecting
 Loyalty
 Cross selling / upselling





CRM is a multifaceted strategy that helps
companies understand, anticipate and
manage customer needs.
CRM
comprises
the
acquisition
and
deployment of knowledge about customers
to enable a company to sell more of their
product or services more efficiently
Major thrust of CRM involves segmenting
the customers on their value and offering
appropriate differentiated services for each
of these levels
CRM ensures that individual customer
needs are profitably satisfied at the right
time in the right channel with right offer
The CRM begins with
 In-depth
analysis
of
customer
behavior and attributes to achieve
the complete knowledge of the
customers, their habits and desires,
and their needs.
 Then applying the knowledge to the
formulation of marketing campaigns
and strategies
The CRM cycle
An assessment phase
 A planning phase
 An execution phase

Benefits of CRM
With CRM practice, both suppliers
and customers win
 Prevents overspending on low value
customers and under spending on
high value customers
 Improves customer retention
 Inoculates
customers
from
competition
 Improves
marketing
return
on
investment







Customers get the best offer to meet their
needs at the right time
Customers get more appropriate mix of
marketing
message
balanced
with
information
Offers are made based on understanding
customer profitability
Products are packed according customer
purchase patterns
Service channels are customized to
customer needs
Sales and point of contact staff have
detailed information about customer
value, needs and attitude
Implementation of CRM

Strategy
• Channel, segmentation, pricing,
branding and advertising
Segmentation
 Technology
 Process
 organization

Pricing policies
Pricing

Factors that influence pricing
strategy
• Customer demand
• Competition
• Cost and profit relationships
• Government regulations
Cost analysis
Fixed cost and variable cost
 Economies of scale
 The learning curve

Scale of economy
uc
Production rate
Learning curve
10,000 units
20,000 units
unit
cost
30,000 units
Production rate
Pricing strategies

New product introduction
• Market skimming
Product has a patent protection
 Highly valuable innovation
 Product has a short life span
 Potential competitors are distant in time
 Uncertainty regarding markets price
sensitivity

• Market penetration
Market is highly price sensitive
 Strong competition exist
 Company’s goal is high market share

Pricing policies

Discount pricing
• Trade discounts
• Quantity discounts
• Cash discounts

Geographical pricing
Major and national accounts
Centralised
purchasing
Large
customers
small
customers
Major
A/c
Minor
A/c
Decentralised
purchasing
National
A/c
?