Industrial Marketing

Industrial Marketing
In the first chapter reference was made to the loss of direct contact between producer and consumer, and it was noted that, as the distance between them increased with the emergence of intermediary distributors, so the need for a structured approach to the identification of the consumer’s requirements became increasingly apparent. The notable difference between the marketing of consumer products and those destined for industrial outlets is the vastly greater distance that many industrial product manufacturers stand from their ultimate consumers, who are the buying public.

At one time it was common practice for a manufacturer to accept raw material at one end of his production line and despatch a finished consumer product at the other. In between he conducted a variety of processes to create the various components from which the product was assembled. With rising labour and overhead costs, however, it was found that the production of such components on the necessarily limited scale dictated by an individual company’s requirements had ceased to be economic. Owing to the benefits derived from the economies of scale (the more units one makes of any specific item, the lower the unit cost), it was cheaper to buy component parts in from outside firms.

As the result of this situation, there has been an increasing movement within manufacturing industry towards process specialization. Today a large number of manufacturing firms limit their production very largely to the assembly of component parts bought-in from specialist processors. This has inevitably increased the number of links in the manufacturing chain, and companies within the processing, as distinct from the final assembly, stage often are far removed from the consumers of the ultimate product.

Companies in this situation court potential danger if they rely solely upon information drawn from their immediate market for guidance on long-term levels of demand. Many large-scale national and international organizations regularly monitor markets for consumer goods in which their intermediary products are incorporated, with a view to assessing the future pattern of demand. This is not, however, necessarily common practice among producers of raw materials and manufactured components.

Owing to the technological complexity of many manufacturing processes and the heavy capital investment they need, today’s management decisions may take three, five or even ten years to mature. The question that all long-term manufacturing investment must inevitably raise is whether the market one seeks to exploit will still be there. The purpose of marketing, which is to set long-term objectives and to initiate strategies by which they can be achieved, implies this need to look into the future. It is in the practice of marketing that a company should seek to ensure that this projected view is as accurate as circumstances allow.

Discussion questions

  1. Describe the dangers faced by processing firms distanced by the manufacturing chain from their ultimate consumer.
  2. If a company is not achieving its objectives by means of its current activities, how may it redeploy its resources expeditiously?
  3. What are the basic ingredients of an industrial marketing plan?
  4. A company specializes in the injection moulding of plastics components destined for the automotive industry. Describe appropriate methods of market research that will assist its management decision-making.

 

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