Industrial marketing


Industrial marketing is the marketing of goods and services by one business to another. Industrial goods are those an industry of uses to produce an end product from one or more raw materials. The term, industrial marketing has largely been replaced by the term B2B marketing.

Origins and usage

Historically, the marketing discipline made a distinction between industrial marketing and consumer goods marketing. During the 1980s, businesses shifted from industrial marketing to business marketing. Within a decade, the term business marketing had largely displaced industrial marketing. By the late 1990s, the term, B2B marketing, came into widespread use.

Industrial, or business-to-business (B2B) marketing

Main features of the B2B selling process are:
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, manufactures 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. The key requirement in any competitive tender is to ensure that:
Because of the significant value of many purchases, issues of probity arise. Organisations seek to ensure that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence.

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, designing a suitable proposal, and working out a price. This is a "primitive" approach because...
Before industrial buyers engage in the bidding process, they go through a long and distinct buying journey. A 2018 study conducted by Thomasnet.com and the research firm Strategyn revealed that the industrial buying process involves 15 distinct steps:
  1. Establish the business need for acquiring a specific product or service.
  2. Define the requirements the product or service must meet.
  3. Determine what products or services to consider.
  4. Determine if a new product or service is necessary to address the business need.
  5. Determine if buying a new product or service is financially justifiable and affordable.
  6. Define the criteria to use to evaluate the products or services under consideration.
  7. Prioritize the criteria to use to evaluate the products or services under consideration.
  8. Evaluate alternative products or services against the prioritized criteria.
  9. Select the product or service to acquire.
  10. Define the criteria to use to evaluate the suppliers that offer the needed product or service.
  11. Prioritize the criteria used to evaluate suppliers offering the needed product or service.
  12. Determine what suppliers to consider.
  13. Evaluate alternative suppliers against the prioritized criteria.
  14. Select the supplier from which to acquire the product or service.
  15. Initiate the product or service purchase.
By aligning their marketing activities to the buying cycle, industrial manufacturers and suppliers can be more successful. This is very similar to the inbound process of inbound marketing.

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 utilise elaborate competitive tendering processes due to the expectation that they should be seen at all times to be responsibly and accountably spending public money. 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.

Solution selling

B2B firms make extensive use of solution selling where sales force identify the client's problem or needs and sell goods or services that specifically address those needs. In solution selling, it is essential that sales staff explore the client's requirements in depth before presenting a solution.
Marketing supports solution selling through methods like account-based marketing—understanding a specific target organization's requirements as the foundation of a marketing program. As research shows, sales success is heavily weighted towards suppliers who understand the customer. In UK research, 77 per cent of senior decision-makers believe new suppliers' marketing approaches are poorly targeted and make it easy to justify staying with current suppliers).
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, 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.

From cannon fodder to preferred tenderer

The term "cannon fodder" derives from the World Wars and refers to the massing of undertrained and recently recruited troops sent to the fronts to face the enemy. Such troops invariably had a poor survival rate but provided the tactical advantage of distracting the enemy while professional soldiers mounted more effective operations. In adopting the term to Industrial Marketing it means those bids being submitted that have no chance of winning but are involved to make up the numbers . The reader might be wondering why anybody would go to all of the work of submitting a tender when they had no chance of winning; for the same reason that troops were sent into battle to die; they thought they had a real chance.

Indicators

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 1990s saw significant attempts to develop online shopping. Many entrepreneurs discovered that merely having a website was insufficient to generate sales. The amount of conventional media advertising required to promote the sites burnt cash at a faster rate than on-line sales generated. They also presumed that consumers would eschew the conventional shopping experience for the convenience of shopping on-line. Some did, but for many companies, not in sufficient numbers. There were many unforeseen problems, and apart from some notable exceptions the business to consumer online failed for many companies.
B2B selling, however, more frequently achieved impressive results.