I n t e r n a t i o n a l M a r k e t i n g I n t e r n a t i o n a l M a r k e t i n g

Products and Services for Businesses

Chapter 13

1 4 t h E d i t i o nP h i l i p R. C a t e o r a

M a r y C. G i l l yJ o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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What Should You Learn?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

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What Do I Need to Know?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

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. ExportsMajor Categories U.S. Exports

Exhibit 13.1

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Demand in Global Business-to-Business Markets

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

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 ExampleDerived Demand Example

Exhibit 13.2

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Stages of Economic DevelopmentStages 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 DemandTechnology 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 StandardsQuality 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 BuyerQuality 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 BuyerQuality 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

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

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 ServicesBusiness 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 ServicesAfter-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 ServicesOther 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

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 MarketingTrade 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 MarketingTrade 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 MarketingTrade 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

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 TeamThe Global Project Team

• Customer

• Sales engineer

• Application engineer

• Engineering and control systems

• Project manager

• Manufacturing technicians

• Customer services

• Suppliers

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SummarySummary

• 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 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