Jul 14, 2017

INDUSTRIAL GOODS



Industrial goods are those goods which are destined to be sold primarily for use in producing other goods or rendering services as contrasted with goods destined to be sold primarily to the ultimate consumers. In other words, industrial goods are those which are intended for making other products or for rendering services in the operations of business of private or public institutional enterprise. It should be noted that industrial goods are not meant for final consumption. They include some manufactured products and agricultural raw materials, bulk chemicals and natural raw materials.

BUYING

Buying Motives of an Industrial Goods

Industrial goods are purchased by the industrial users. Their buying motives are rational and their purchases are methodical and are based on certain objects and well planned thought.

INDUSTRIAL GOODS ARE PURCHASED FOR VARIOUS REASONS LIKE:

EFFECIENCY AND ECONOMY IN PRODUCTION: the use of machines in production increases the production, brings down the cost of production and improves the quality of the products. Therefore, the industrial users prefer to use machines in production so as to maintain efficiency and economy in production.

UNIFORM PRODUCTS: manufacturers want to buy such goods that will enable them to produce uniform and standardized goods. The standardized goods are branded goods which maintain the confidence of the buyers in respect of quality and durability. Therefore, the manufactures always desire to use such machines and raw materials which will help him to produce standardized and branded goods.

LOWER PRICE: industrial users always prefer to buy those goods which are offered at lower prices, quality, quantity and other service conditions remaining constant.

REGULAR AND ADEQUATE SUPPLY: the manufacturers desire to purchase their requirements only from those sources which supply goods of right quality regularly and adequately. This will avoid any interruptions in production, eliminates the risk of losing business and ensures production of quality and products.

PROTECTION: many industrial goods are purchased by the industrial users from the point of protection and safety. For example, steel cupboards and cabinets are purchased in preference to wooden cupboards because the wooden cupboards will be burned down by fire if it breaks opt and even the papers kept in the cupboards also become ashes but if steel cupboards are used they will be protected.

SALES PROMOTION: manufacturers sometimes use certain products in production because their use in the products promotes sales.

TECHNICAL CONDITIONS: manufacturers are tempted to go in for those goods which provide sales service and after sales service.

MARKETING OF INDUSTRIAL GOODS

The market for manufactured industrial goods is very large. It consists of large industrial users of various classes such as manufacturers, transport service, mining companies, public utilities, insurance and banking companies, government agencies, public and private institutions, health and safety, warehousing corporations, wholesale and retail firms etc.

CHARACTERISED FEATURES OF THE MARKET

Market is concentrated in some geographical areas.

The number of prospective buyers is limited.

The individual purchase is relatively large.

Technical considerations play an important role.

The demand for industrial goods is a derived demand.

GEOGRAPHICAL CONCENTRATION OF THE MARKET:

The manufactured industrial goods are purchased by the manufactures. The manufacturers are generally concentrated in certain localities. Therefore, the market for industrial good, that are demanded by the manufacturers is also concentrated n those localities. Thus the market for industrial goods is geographically concentrated whereas the market for manufactured consumer goods is wide-spread. For example, the jute industry is concentrated in Kolkata and round about. The manufacturers of machinery, equipment, spare parts and service centers must also concentrate their only to meet the demands of the jute manufacturers.

Limited Number of Buyers: The number of buyers of industrial goods is very much limited as compared to the number of buyers of consumer goods. Moreover, the market for industrial goods is not actually a single market but it consists of various types of buyers. Problems of marketing different types of industrial goods are different. Moreover, a large numbers of sell their goods only to a small part of the market. Further the buyers of the industrial goods are well informed regarding the products they purchase as compared with those of consumer goods. The task of buying of industrial goods is generally entrusted to the experts who are well trained and competent, and who have full knowledge of the products and market conditions. They always try to purchase right quality goods from right place at right time and at right prices and in right quantities.

Large Individual Purchases: Since the industrial goods are purchased by the industrial users, they usually place big orders. Every order placed with the suppliers will be large orders. Even the small order of the smallest manufacturer is also relatively large when compared with the order of consumers. Moreover, the purchases are made at long intervals. Therefore, the suppliers of industrial goods cannot afford to lose sales or disappointment their customers. They should avoid poor salesmanship, uncertainty in delivering the goods, delivery of defective goods etc. Therefore they should always supply standardized and branded goods so as to maintain uniformity in respect of quality, durability etc. Further, since the buyers are concentrated in a place, the seller of industrial goods in an advantageous position to sell his goods directly to them.

Technical Consideration: Since industrial goods are required for use in production, their supply in adequate quantity and uniform quality is quite essential. The raw materials, machinery, spare parts etc. should be of highly standardized quality so as enable the manufacturers to maintain the high quality of the finished products and avoid any variations in their quality. Sometimes, goods have to be produced according to the specifications of the buyers. Therefore the manufacturers insist upon the quality of raw materials, spare parts, machines etc. The marketing of such special products necessitates the following sales efforts on the part of the manufacturer. For example, he should make an appeal to the rational buying motives of the buyer. In other words, he should appeal to the technical and business sense of the buyers. He must impress upon the buyers as how his goods are superior to others and how they meet the particular needs of the buyers. Therefore, he must utilize the services of highly trained salesman to see all his products. They should visit the buyers concerns, demonstrate the use of the products and convince them of the superiority, quality and durability of these products.

The technical services are also important both before and after sales. Because many manufacturers prefer to get such technical services before and after the sales made. Therefore the sellers of such industrial goods which are highly technical have to maintain the skilled engineers or trained technicians who should personally go the buyers, concerns, install them, demonstrate, their working and carry out any technical troubleshooting, faults or adjustments. The sellers of new labor saving devices like accounting machines, franking machines, computers, automated machines or any other such devices used in factories etc., must arrange for services before and after the sale. Everything should be systematically updated following companies software applications. The provision of such technical services is sure to promote sales and business growth. But the cost of maintaining the engineers and the technical hands and providing their services before and after sales is likely to be considerable to the seller of such technical goods and such cost will add to the usual marketing expenses. But the seller of such goods has to incur these expenses so as to maintain an assured market for his products. However such expenses are likely to be offset by single orders of large volume and the certainty and continuity of an assured market. Therefore, the percentage of such expenses to total sales will be low in the long run.

DERIVED DEMAND FOR INDUSTRIAL GOODS: The demand for industrial goods is derived from the demand for consumer goods for the manufacture of which industrial goods are used. If the demand for the consumer goods increases, the demand for industrial goods also increases. The demand for cements depends upon the demand for buildings. If the demands for buildings of houses increase, the demand for cement also increases. Thus the demand for industrial goods changes more or less closely according to the changes in the demand for consumer goods.

Moreover, if the demand for consumer goods is seasonal, then the demand for industrial goods required will also be seasonal. For example, the demand for rain coat is seasonal. And the demand for woolen goods is also seasonal. Therefore the demands for industrial goods required for manufacture of either rain-coats or woolen goods is also seasonal, similarly, fluctuations in the demand for industrial goods. But since the industrial goods like equipment (i.e., plant machineries, turbine, boiler, valves, pumps etc.) have long life, any decrease in the demand for consumer goods manufactured by the equipments affects he demand for that equipment immediately while any increase in the demand for consumer goods influences the demand for equipment only after a long period. Therefore, equipment industries suffer greatly during bad years but have to work overtime during good years.

Therefore, the marketing of industrial goods has special problems. The characteristic of derived demand for industrial good influences in a great extent the marketing policies of the producers of industrial goods. For e.g., the producer of wool may have to undertake the advertisement for the use of woolen clothes etc. Only by increasing the demand for woolen goods, he can increase the demand for wool. But, he cannot increase the demand for his products only by reducing the prices. But if the prices of industrial goods rise, they add to the cost of production of consumer goods and this will raise their prices and reduce demand also. Thus, a rise in the prices of industrial goods leads to rise in the prices of consumer goods and a fall in the demand for them, while a fall in the prices of industrial goods may or may not increase the demand for consumer’s goods. That is why the sellers of industrial goods help the manufacturers of consumer goods in their advertisement and sales promotion activities.

ADDITIONAL FEATURES OF INDUSTRIAL GOODS

INFREQUENT PURCHASES: Industrial goods are not purchased frequently like the consumer goods. They are purchased after long interval and that too in very big quantities. Costly machines, machinery parts for plants, or extension of new plants, erecting and commissioning of new turbine or boiler are purchased once in many years.

LONG PERIOD OF NEGOTIATIONS: Industrial goods are purchased only after negotiating for a longer period since the quantity to be purchased is usually large or decisions are to be taken after considering the specification, future requirements etc.

RECIPROCAL TRADING: Reciprocal trading means the seller of industrial goods sells his goods to the manufacturer and buys from him some other goods required by him. Thus it is an exchange of goods for goods between the seller and the buyer.

LEASING: The buyer of industrial goods must get them on lease basis instead of buying them completely. The buyer becomes the lease and the seller becomes leaser. Large capital equipment like textile machinery, heavy constructions machinery, automobiles, machines, tools, pumps etc are now sold on lease basis by the seller to the buyers. Such leasing is beneficial to both leaser as well as the lease. (This depends upon the type and policy of the manufacturer)

It is needless to emphasize that every salesperson must have such basic knowledge before entering into Manufacturing Plants for contacts and building up relations and preparing for selling goods according to the needs of the buyers to retain long term business with Industrial Manufacturers...



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