Sales Engineer's Impact on Complex Technical Product Marketing

The document provides a comprehensive overview of diverse strategies employed by industrial firms for sales promotions. Key aspects covered include the use of catalogs as reference materials aiding in product comparison, and tradeshows which serve as platforms for direct engagement with potential clients. The roles of publicity and public relations are discussed to highlight their significance in enhancing corporate image without direct payment for media space. Additionally, the document categorizes industrial salespersons into various types such as sales engineers, executive salespersons, and inside salespeople, each serving distinct functions based on product complexity and client interaction requirements. These insights offer a holistic understanding of marketing strategies within the industrial sector, emphasizing cost-effective approaches and technical expertise in driving sales success.

Industrial Marketing
Introduction
In its simplest term a market is composed of buyers and sellers, exchanging goods
and services and money. It is usually helpful, however, to also think of markets in
terms of the channels through which buyers and sellers contact as well as of the
relationship such contacts can establish. A market system, therefore, includes at
least three elements-participants (buyers and sellers), distribution channels and
relationships.
1.2 Definition of Industrial Marketing
There are various definitions of industrial marketing as there are authors of
industrial marketing. The following definition is proposed for this text. Industrial
marketing is a human activity directed towards satisfying need and wants of
professional buyers and other individuals influencing purchases in commercial,
institutional and governmental organizations through the process of exchange.
1.3 Who are Industrial Customers?
Based on the previous definition of industrial marketing, industrial customers are
all customers other than the Ultimate Consumer. Industrial customers are
classified into three groups, which, at times, may overlap. These three
classifications will be discussed as follows:
1.3.1 Commercial Enterprises
This group includes commercial business enterprises purchasing industrial good
and/or service for use other than selling directly to ultimate customers. In
industrial marketing, commercial enterprises are further classified into three as
follows:
1.3.1.1 Original Equipment Manufacturers
The original equipment manufacturers are more commonly referred to as the OEM.
OEMs' are commercial customers who buy products and sometimes service to
incorporate into the products, which can be sold either in the industrial market or
consumer market. In short OEMs' buy products, which becomes an integral part of
the final customers' product.
Example:
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An electronics company selling components to a manufacturer of television set
would consider the television firm as OEMs' customer.
1.3.1.2 User Customer
In industrial marketing, this term is used to refer to those commercial enterprises
purchasing goods and/or services, for use in producing other goods and/or
services, which are then sold into the industrial or consumer market or both.
Example: Manufacturing companies purchasing lathes, driving, bending and
forming machines that they use in their production. In a purely economic sense the
user customers are purchasers of capital goods.
In contrast to OEM, the industrial products purchased by user customers never end
up in the final products being produced.
1.3.1.3 Industrial Distributors
The third type of commercial enterprise customer is the industrial distributor.
Strictly speaking, these are not customers in the industrial market but rather
middle men who purchase products from the manufacturers or other distributors
and then, it turn, sell these same products to the OEM's to other distributors or to
user customers.
In a loose sense, distributors are very similar to industrial wholesaler but because
of the fact that they will take title to the products they purchase, many practicing
industrial managers treat them as customers.
N.B. Throughout this text, distributors shall be considered as middlemen rather
than as industrial customer.
1.3.2 Government Organizations
These are the federal state or local agencies that buy goods and services for the
constitutions they serve. Governmental agencies are the largest purchasers of
goods and services in any country. Besides this great variations occur amongst
governmental customers in their buying pattern, purchasing procedure and
volume of purchasing. Based on the above variations, governmental customers are
broadly classified into local governments, state governments and federal
governments.
 Local governments: these are the lowest administrative units of governments.
They serve specific populations in defined areas and are typically responsible for
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many government functions. They include municipalities, townships, special
distinct and kebeles.
 State governments: if there are states within a given nation, the states are also
customers for many industrial marketing firms. In our context there are 14 states
whose major expenditures are made in such areas as education, health, road and
so forth.
 Federal governments: are also large buyer of goods and services for civilian and
military purpose.
1.3.3 Institutional Customers
This market includes those customers not falling into commercial or government
classifications. Institutional buyers are a mixture of government and private
organizations and industrial marketers must consider them on individual basis to
respond successfully according to their unique characteristics, purchasing
practices and policies. Examples are schools, college and universities, churches,
hospitals, non-profit foundations etc. Some of these institutions follow rigid rule
and purchasing procedures, while others follow, far more causal procedures.
1.4 Classification of Industrial Products
Under this topic the main objective is to acquaint the student with the
characteristics of industrial product. There are several ways of classifying industrial
products. However, for our discussion, we will classify them into the following
major categories.
1. Heavy Equipment Products
Heavy equipment products are basically capital items used in the production
process and wear out over time. They can be purchased outright or leased by user
customers. It includes metal cutting machine tools, metal forming machines,
(hydraulic and forging process), forklifts, blast furnace etc.
The marketing implication of these products include:
 Time taking negotiation is involved because of the heavy expenditure associated
with the equipment.
 The distribution system is usually direct i.e., from the producer to customer
 Purchasing decision is influenced by cost, return on investment and desire for
industry leadership.
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2. Light Equipment’s
The light equipment classification industrial product includes portable power tools
like drills, saws, grinders, polishers and so forth, measuring instruments, type
writers, calculators and other similar products.
The market of light equipment is also normally comprised of user customers but
transaction values are considerably lower than heavy equipment’s.
3. Consumable Supplies
Consumable supplies do not become part of the finished product but most parts
are continuously worn out or used up in the process of operating or facilitating the
operation of an enterprise. Such items as paints, soaps and detergents, oils,
cleaning materials and stationary belongs to this category.
4. Component Parts
Component parts are those products that are purchased for the purpose of
inclusion into the final products of an industrial company. They can be installed
directly in to the products with no additional changes and end up within the
product of the purchaser.
5. Raw Materials
It includes all those products generated by the extractive industry, which is subject
to some amount of processing before becoming a final product. Typical of these
products include coal, iron ore, gypsum, crude oil, fish, lumber, field crop and other
similar products. These products at times be marketed to users or OEm's.
6. Processed Materials
Processed materials resemble component parts in that they usually enter in to and
form an indistinguishable part of the finished product. Process materials differ from
component parts chiefly in that most of them cannot be identified so that they
cannot be recognized in the finished product.
7. Industrial Services
Many companies also operate in the service market and organizations require a
wide range of services. Industrial services are of a great variety and differ
considerably in terms of cost and sophistication. Common examples of service
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include janitorial or cleaning service, repair and maintenance, installation service,
delivery & warehousing consulting, advertising, accounting service etc.
1.5 The Industrial Marketing System
The industrial marketing system can be described by identifying its components.
The basic components are:
1. producers of industrial products
2. suppliers to these producers
3. customers for industrial products
4. channel components between buyers and sellers
5. Environmental & facilitating forces that affect the relationship among the above
parties.
Chapter 2: Understanding Industrial Markets and Environment
2.1 The Demand for Industrial Goods
2.1.1 Introduction
To market effectively into the industrial market requires a thorough understanding
of demand mechanisms in that market. As it was pointed out in the preceding unit,
the industrial market differs appreciably from the consumer market and many of
the key differences can be traced to differences in demand in the two market.
2.1.2 The Total Demand for Industrial Goods
Estimating the total demand for the producer of industrial goods and services is
relatively difficult to accomplish. There is no single source that provides such data
on the total market for industrial products as reflected by commercial enterprises,
government customers and institutions. Here for the practicing industrial
marketing manager, it is not important to know the total industrial market, it is
more of an academic interest than it is a practical decision – making factor.
2.1.3 Demand characteristics related to Industrial Products
The marketing manager has to understand a number of demand characteristics,
which are peculiar to the industrial market. These characteristics may be classified
as follows:
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I. Those Characteristics Related to the Concept of Derived Demand
The term, derived demand refers to the indirect way in which the need for
industrial good is generated i.e., from the demand for consumer goods and
services they are used to make or provide. In other words, industrial customers do
not purchase goods and services because of their own personal need or desires
but rather to produce other goods and/or service for their own customers.
For example, the demand for cotton is dependent upon the demand of the textile
industry, which, in turn is dependent up on the demand of the garment industry,
which is ultimately dependent up on the demand ultimate consumer for clothing in
general and for cotton products in particular.
II. Characteristics Related to the Concept of Joint Demand
Joint demand occurs when the demand of one product depends upon that
product's being used in conjunction with another product. In such a situation the
products are demanded jointly, or they may not be demanded at all. Joint demand
is very common in the industrial market, particularly with OEm customers. A
fabricator purchasing 500 component parts for assembly into a finished product
has a joint demand for all those components. For lack of a single component, no
matter how large or small, the final product cannot be assembled.
III. Characteristics Related to the Types of Products
Demand in the industrial market will also vary depending up on the types of
products being marketed. To illustrate, the demand for processed materials may
differ considerably from the demand for capital equipment primarily because of the
characteristics of the products themselves.
Heavy Equipment
When industrial customers purchase heavy or major equipment, their ultimate
selection of suppliers may be influenced by factors such as:
1. Strict conformance of the equipment to buyer’s specifications
2. Service capabilities of the supplier in case of breakdown or malfunction
3. Technical assistance provided by the supplier at the time of installation
4. Product warranties
5. Price, price conditions and other financing arrangements
Light Equipment
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The demand for light equipment in the industrial market is often influenced by the
following factors.
1. Price and price considerations such as quality and trade discounts
2. Speed and certainty of delivery
3. Personal preference of those who use the equipment’s – personal like and dislikes
of users
4. Product warranties
5. Service capabilities of the suppliers
Component Parts
The demand for component parts may be influenced by factors quite different from
those affecting the demand for capital equipment, heavy or light. One major
difference is that heavy or light equipment is sold to user customers, whereas
components are typically marketed to OEm customers. The impact of this
difference is on derived demand nature of component parts.
The selected process by OEm customers among possible suppliers is often made
on the basis of factors such as the following
1. Strict conformance to buyer specifications
2. The quality and uniformity of the purchased components.
3. Certainty of delivery
4. Price and price considerations
5. Capability of the suppliers to provide the required quality of parts
Processed Materials
The demand for process materials is also influenced by the OEm market, but this
differs in two major ways from the demand for component parts. First, there is
usually no replacement market for processed materials. Second, processed
materials are usually not used in the same form by the purchasing OEm as are
components parts.
In choosing among suppliers of processed materials, industrial buyers are
influenced by factor such as the following:
1. Strict conformance to buyer specifications
2. Price and price considerations
3. Quality and uniformity of the materials
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4. Certainty of delivery
5. Capability of the supplier to provide the quantity required
Consumable Supplies
Consumable supplies have probably the simplest demand mechanism of all
industrial goods. Normally, they are standardized products that can be sold to all
different types of industrial consumers.
In choosing among possible suppliers of consumable supplies, industrial customers
base their decision to purchase on such factors as:
1. Price and price consideration such as quantity and trade discount
2. Certainty of delivery
3. Brand name of the supplier
4. Capability of the supplier to provide the required quantity
5. Past experience with the supplier
 Raw Materials
In choosing among suppliers of raw materials, industrial customers base their
decisions on factors as the following:
1. Standard and grades of the material
2. Certainty of delivery
3. Capability of the supplier to provide the quantity required overtime
4. Price and price considerations
5. Freight rates and charges involved in buying from different suppliers
IV. Characteristics Related to the Nature of the Market
In addition to the demand characteristics discussed thus far, another factor that
must be considered by the industrial marketing manager is whether he is selling
goods and/or services into a horizontal or a vertical market and the degree of
concentration in that market.
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A vertical market exists when a company sells its product and/or service to one
specific industry, whereas a horizontal market exists when a firm is able to market
its good and/or services to a broad spectrum of industries. To illustrate, the market
for the manufacturers of blast furnaces is quite vertical where as the market for
manufacturers of machines tool might be horizontal. Vertical or horizontal markets
may exist for all types of products and services in the industrial market.
V. Characteristics Related to the Nature of Industrial Buyers
Because industrial goods and services are purchased by people, it is difficult to
generalize about the nature of industrial buyers. Nevertheless, some
generalizations will help us to understand what influences industrial purchasers in
their buying as follows.
 Price is often not the major determinant of demand as buyers would be willing to
pay more if certainty of delivery, quality, service, technical assistance, and so forth
were assured.
 Buyers will often split purchases of product rather than buy from a single source of
supply to assure themselves of having at least one source of reliable supply.
 Many buyers prefer to purchase from those firms they perceive to hold positions of
technical leadership with the logic that this allows the buying firm to keep up to
date with new technological innovations.
 Reverse elasticity of demand often occur in the short run owing to buyer
expectation. A price increase by a supplier brings about an increase quantity
demanded as buyers expect even further price increase and thus purchase and
keep them in their store to protect themselves against anticipated price increase.
VI. Characteristics Related to the Geographic Concentration of Customers
The demand for industrial goods and services is not spread evenly in any country,
but is often concentrated in some specific areas. It is important that the industrial
marketing manager recognize the important location demand characteristics for
individual goods and/or services. The rationale behind this is to save or
economically use our effort in areas where no demand exists and invest our
maximum potential in other areas where the demand is largest.
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2.2 The Industrial Customer
Introduction
As it was developed in the opening unit, customers in the industrial market fall into
three basic classification: (1) commercial enterprises, (2) government, and (3)
institutions.
Within this classification the purchasing decision vary with the type of industrial
goods and services under consideration. So the industrial marketing must know
his/her customers explicitly and perform detailed research and analysis into
market segmentation, organizational behavior, purchasing policies and
procedures, and formal & informal buying influences appropriately.
2.2.1 How to Define Industrial Customers to be reached
The first and most important issue that should be addressed by the industrial
marketing manager is to define the customer groups to be reached.
1. The Standard Industrial Classification (SIC): is the tool used to obtain data
about industrial customers to be reached by classifying them into various groups.
SIC is a uniform numbering system by classifying the establishments according to
their economic activity. It divides the economy into sub-classification as:
 Agriculture, forestry and fishing, cattle breading 01 - 03
 Mining 04 – 06
 Construction 07 – 10
 Manufacturing 11 – 13
 Transportation, Communication, gas & sanitary 14 – 16
 Trade (Wholesale & Retail trade) 17 – 19
 Finance & Insurance, real estate service 20 – 22
 Public administration 23 – 27
Within each major industry group, detailed sub groups and industries can be
defined. Then, each group will be assigned two digit numbers. Each major two-digit
SIC industry groups are then defined by a third digit and detailed industries are
defined by a fourth. Thus, the longer the number, the more detailed the industry
being defined.
Here the standard industrial classification is a tool for classifying those customers
to be reached. By itself, SIC will not necessary tell the industrial marketing
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manager who the industrial customers are or who they should be or where they
are or how big they are, and so forth. There are ways, however, of finding out
these things and then using the standard industrial classification system to refine
market segments further.
2. Input-output Analysis: this method is based on the simple concept that the
sales or output of one industry are the purchases or inputs of another industry or
an industry's inputs are a function of a supplier's output.
Input-output analysis is a useful tool for the industrial marketing managers. It
provides an objective and practical way to determine prospective customers by the
quantity of purchases. It helps to know which industries are major customers and
enables the marketer to compare company market segments with industry market
segments in terms of sales percentages.
Once major customers segments are found through input-output analysis, the
industrial marketing manager must now locate specific industrial customers, find
specific information on such customers and direct marketing effort towards them.
The information may include:
Firm name, address and phone number
Corporate officers by name, title and positions
Directors by name
Annual Sales Volume
Number of employees
Product and service produced
2.2.2 Understanding Organizational Characteristics
Once industrial customers have been defined and located, each must be further
analyzed in terms of characteristics that will have an effect on its purchasing.
Typically, this involves researching each of the customers located in the preceding
section with regard initially to the purchasing functions of the particular firm in
question. Purchasing functions differ among industries and among companies in
the same industry. Thus, it is important that the marketing manager gain insight in
to the purchasing behavior of each and every present and prospective customer
firm. It is generally conceded that the first step in understanding the very complex
area of corporate industrial purchasing behavior is to understand the organization
of the particular firm involved.
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The major factors influencing organizational purchasing are discussed as
follows:
1. Size of the Customer Firm and Specialization of Purchasing
Although there is no hard-and-fast rules, the size of the company generally has an
effect on the way in which it purchases goods and services, and thus size has an
effect on the marketing approach to be used. For example, in smaller firms,
purchasing is often a part time responsibility held by someone such as office
manager or owner/manager. This implies that the purchaser is normally not a
specialist, and educational selling on the part of the marketing manager is
required. However, in large industrial firms, it is very common to find a great deal
of purchasing specialization in very formalized departments. There are definite
lines of authority and responsibility and highly specialized buyers are the rule.
2. Purchasing Positions in the Customer Organizations
Another extremely important characteristics that must be determined for each and
every customer is the position of the purchasing department in the formal
organization of each customer firm. In attempting to determine the position of
purchasing in the customer organization, the following questions are extremely
important.
A) Is the purchasing department line or staff?
In some companies, purchasing is a line position, whereas in other it may be a staff
position. The importance of this to the industrial marketing manager is vital. Line
purchasing departments possess the authority to decide, what will be purchased
and from who it will be bought. Staff purchasing departments, on the other hand,
usually operate in an advisory capacity, advising such other departments as
production, engineering and so on, on what they might buy and from whom; but
the authority is vested in the other departments. If the marketing firm is spending
its time cultivating a staff purchasing department when the decision are actually
made elsewhere, that firm will lose orders if the recommendations of purchasing
as an advisor are not followed.
B) Where is the level of the purchasing department in the organization?
In addition to determining whether purchasing is a line or staff position, the
industrial marketing manager must also discover how high or low the purchasing
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