Products and Services
for Businesses
Learning Objectives
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The importance of derived demand in industrial markets
How demand is affected by technology
Characteristics of an industrial product
The importance of ISO 9000 certification
The growth of business services and nuances of their marketing
The importance of trade shows in promoting industrial goods
The importance of relationship marketing for industrial products
and services
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Global Perspective
Intel, the Boom and the Inescapable Bust
• In industrial markets, including global ones, what goes up must
come down
• The majority of export sales for industrialized countries is
technology
• Issues of standardization versus adaptation have less relevance to
marketing industrial goods than consumer goods
• Factors accounting for greater market similarities in industrial
goods customers versus consumer goods customers:
- The inherent nature of the product
- The motive or intent for the user differs
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Major Categories U.S. Exports
• Insert Exhibit 13.1
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Demand in Global Business-to-Business
Markets
• Demand in industrial markets is by nature more volatile
• Stages of industrial and economic development affect demand for
industrial products
• The level of technology of products and services make their sales
more appropriate for some countries than others
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Current Microsoft Ads in Mexico and Germany
“Your Potential. Our Passion”
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The Volatility of Industrial
Demand
• Cyclical swings in demand
- Professional buyers tend to act in concert
- Derived demand accelerates changes in markets
• Measures to manage volatility:
- Maintain broad product lines
- Raise prices faster and reduce advertising expenditures during
booms
- Ignore market share as a strategic goal
- Eschew layoffs
- Focus on stability
Derived demand can be defined as demand dependent on
another source.
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Derived Demand Example
• Insert Exhibit 13.2
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Stages of Economic Development
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Stage 1 – the traditional society
Stage 2 – preconditions for takeoff
Stage 3 – take off
Stage 4 – drive to maturity
Stage 5 – the age of mass consumption
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Technology and Market Demand
• Trends spurring demand for technologically advanced products:
- Expanding economic and industrial growth in Asia
- The disintegration of the Soviet empire
- The privatization of government-owned industries worldwide
• The companies with the competitive edge will be those whose
products are:
- Technologically advanced
- Of the highest quality
- Accompanied by world-class service
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Quality and Global Standards
• Perception of quality rests solely with the customer
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Level of technology reflected in the product
Compliance with standards that reflect customer needs
Support services and follow-through
Price relative to competitive products
• Relevant quality features
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Quality is Defined by the Buyer
• How well a product meets the specific needs of the buyer
• The price-quality relationship
• Product design must be viewed from all aspects of use
- Climate
- Terrain
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Total Quality Management (TQM)
Lack of universal standards
Country-specific standards
The metric system
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ISO 9000 Certification: An International
Standard of Quality
• Positively affects the performance and stock prices of firms
• Certification of the existence of a quality control system a
company has in place to ensure it can meet published quality
standards
• Generally voluntary
• EU Product Liability Directive
• Now a competitive marketing tool in Europe and around the world
• The ACSI approach
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ISO 9000 Certification: An International
Standard of Quality
Japanese Bridgestone/Firestone Plant in Costa Rica
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Business Services
• For many industrial products the revenues from associates services
exceed the revenues from the products
- Cellular phones
- Printers
• Leasing capital equipment
• Services not associated with products
- Boeing at-sea-satellite-launch services
- Ukrainian cargo company space rental on giant jets
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After-Sale Services
• Installation
• Training
• Spare and replacement parts
- Delivery time
- Cost of parts
• Service personnel
• Crucial in building strong customer loyalty
• Almost always more profitable than the actual sale of the
machinery or product
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Other Business Services
• Client followers
• Mode of entry
- Licensing
- Franchising
- Direct investment
• Protectionism
• Restrictions on cross-border data flows
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Expansion of U.S. Law Firms in Selected Cities
Worldwide
• Insert Exhibit 13.3
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Trade Shows: A Crucial Part of Business-toBusiness Marketing
Want to buy a jet
fighter? The Paris
Air Show is the
largest in the world.
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Trade Shows: A Crucial Part of Business-toBusiness Marketing
• Secondary methods for marketing:
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Advertising in print media
Catalogs
Web sites
Direct mail
• Trade shows have become the primary and most important
vehicle for doing business in many foreign countries
• Total annual media budget spent on trade events:
- Europeans – 22 percent
- Americans – 5 percent
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Trade Shows: A Crucial Part of Business-toBusiness Marketing (continued)
• Trade shows:
- Provide the facilities for a manufacturer to exhibit and demonstrate
products to potential users
- Allow manufacturers to view competitors products
- Are an opportunity to create sales and establish relationships with
agents, distributors, franchisees, and suppliers
• Online trade shows:
- Become useful in difficult economic and/or political circumstances
- Are obviously a less than adequate substitute for live trade shows
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Relationship Marketing in Business-to-Business
Contexts
• It is not a matter of selling the right product the first time, but
rather of continuously changed the product to keep it right over
time.
• The objective of relationship marketing is to make the
relationship an important attribute of the transaction, thus
differentiating oneself from competitors.
• Using the Internet to facilitate relationship building and
maintenance
- Cisco Systems
- IBM
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Solar Turbines Inc.
Caterpillar
subsidiary,
Caterpillar is one of
the US largest
exporters
A supplier to
the Russian oil
& gas industry
for over 30
years
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Solar Turbines Inc.
Trade shows
are critical to
international
sales
Large projects
like $60 M
Venezuelan oil
and gas
platform are
typical
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Summary
• Industrial marketing requires close attention to the exact needs of
customers.
• Industrial goods marketers must pay close attention to the level of
economic and technological development of each market to
determine the buyer’s assessment of quality.
• The demand for products and services in business-to-business
markets is by nature more volatile than in most consumer markets.
• The demand also varies by level of economic development and the
quality of educational systems across countries.
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Summary (continued)
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Product or service quality is defined by customers.
Global quality standards such as ISO 9000 are being developed.
After-sale services are an important aspect of industrial sales.
Trade shows are an especially important promotional medium in
business-to-business marketing.
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