Download Derived demand

International Marketing
14th Edition
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham
Products
and Services
for Business
Chapter 13
McGraw-Hill/Irwin
International Marketing 14/e
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
What Should You Learn?
• 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
13-2
What Do I Need to Know?
• 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
• Issues of standardization versus adaptation
– Less relevance to marketing industrial goods than consumer
goods
• Factors accounting for greater market similarities
in customers of industrial goods versus
consumer goods
– The inherent nature of the product
– The motive or intent for the user differs
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Major Categories U.S. Exports
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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The Volatility
of Industrial Demand
• Cyclical swings in demand
– Professional buyers tend to act in concert
– Derived demand accelerates changes in markets
• Derived demand can be defined as demand
dependent on another source
• Minor changes in consumer demand mean
major changes in related industrial demand
– Boeing
►
►
Worldwide demand for travel services related to demand for new airplanes
Commercial aircraft industry one of the most volatile
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Derived Demand Example
Exhibit 13.2
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Stages of Economic Development
• 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
–
–
–
–
Level of technology reflected in the product
Compliance with standards that reflect customer needs
Support services and follow-through
Price relative to competitive products
• Quality standards vary with level of country’s
industrialization
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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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Quality is Defined by the Buyer
• 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
– Describes three quality system models
– Defines quality concepts
– Gives guidelines for using international standards in quality
systems
• Generally voluntary
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ISO 9000 Certification –
An International Standard of Quality
• EU Product Liability Directive
• Now a competitive marketing tool in Europe and
around the world
• The ACSI approach
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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
– Professional services (advertising, banking, healthcare, etc.)
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After-Sale Services
• Installation
• Training
• Spare and replacement parts
– Delivery time
– Cost of parts
• Service personnel
• Almost always more profitable than the actual
sale of the machinery or product
• Crucial in building strong customer loyalty
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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
Exhibit 13.3
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Trade Shows: A Crucial Part of
Business-to-Business Marketing
• Secondary methods for marketing:
–
–
–
–
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
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Trade Shows: A Crucial Part of
Business-to-Business Marketing
• 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-to-Business Marketing
• 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
• Not a matter of selling the right product the
first time
– Instead selling a continuously changed the product to keep it
right over time
• The objective of relationship marketing
– To make the relationship an important attribute of the transaction
►
Differentiating oneself from competitors
• Using the Internet to facilitate relationship
building and maintenance
– Cisco Systems
– Solar Turbines Inc.
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The Global Project Team
• Customer
• Sales engineer
• Application engineer
• Engineering and control systems
• Project manager
• Manufacturing technicians
• Customer services
• Suppliers
13-24
Summary
• Industrial marketing requires close attention to
the exact needs of customers
• Industrial goods marketers must pay close
attention
– To 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
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Summary
• Demand also varies by level of economic
development and the quality of educational
systems across countries
• Product or service quality is defined by customers
• Development of ISO 9000 global quality standards
• 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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