MODULE -3

Industrial Market Segmentation, Targeting & Positioning

and Relationship Marketing

Industrial Market Segmentation

Industrial market segmentation is a scheme for categorizing industrial and business

customers to guide strategic and tactical decision-making, especially in sales and marketing.
While government agencies and industry associations use standardized segmentation schemes
for statistical surveys, most businesses create their own segmentation scheme to meet their
particular needs.
Webster describes segmentation variables as “customer characteristics that relate to some
important difference in customer response to marketing effort”. He recommends the
following three criteria:

1. Measurability, “otherwise the scheme will not be operational” according to Webster.

While this would be an absolute ideal, its implementation can be next to impossible in
some markets. The first barrier is, it often necessitates field research, which is
expensive and time-consuming. Second, it is impossible to get accurate strategic data
on a large number of customers. Third, if gathered, the analysis of the data can be a
daunting task. These barriers lead most companies to use more qualitative and intuitive
methods in measuring customer data, and more persuasive methods while selling,
hoping to compensate for the gap of accurate data measurement.
2. Substantiality, i.e. “the variable should be relevant to a substantial group of customers”.
The challenge here is finding the right size or balance. If the group gets too large, there
is a risk of diluting effectiveness; and if the group becomes too small, the company
will lose the benefits of economies of scale. Also, as Webster rightly states, there are
often very large customers that provide a large portion of a suppliers business. These
single customers are sometimes distinctive enough to justify constituting a segment on
their own. This scenario is often observed in industries which are dominated by a
small number of large companies, e.g. aircraft manufacturing, automotive, turbines,
printing machines and paper machines.

3. Operational relevance to marketing strategy. Segmentation should enable a company to

offer the suitable operational offering to the chosen segment, e.g. faster delivery
service, credit-card payment facility, 24-hour technical service, etc. This can only be
applied by companies with sufficient operational resources. For example, just-in-time
delivery requires highly efficient and sizeable logistics operations, whereas supply-on
demand would need large inventories, tying down the supplier’s capital. Combining
the two within the same company - e.g. for two different segments - would stretch the
company’s resources.
Requirements for effective segmentation

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There are many ways to segment a market, but not all segmentations are effective. For
example, buyers of table salt could be divided into black and brown hair customers. But hair
color obviously does not affect the purchase of salt. Furthermore, if all salt buyers bought the
same amount of salt each month, believed that all salt is the same, and wanted to pay the
same
price, the company would not benefit from segmenting this market.

Measurable
The size, purchasing power, and profiles of the segments can be measured. Certain
segmentation variables are difficult to measure. For example, there are approximately 30.5
million lefthanded people in the United States, which is nearly the entire population of
Canada. Yet few products are targeted toward this left-handed segment.

Accessible
The market segments must be effectively reached and served. Suppose a fragrance company
finds that heavy users of its brand are single men and women who stay out late and socialize
a
lot. Unless this group lives or shops at certain places and is exposed to certain media, its
members will be difficult to reach.

Substantial
The market segments are large or profitable enough to serve. A segment should be the largest
possible homogeneous group worth pursuing with a tailored marketing program. It would not
pay, for example, for an automobile manufacturer to develop cars especially for people
whose height is greater than seven feet.

Differentiable
The segments are conceptually distinguishable and respond differently to different marketing
mix elements and programs. If men and women respond similarly to marketing efforts for
soft drinks, they do not constitute separate segments.
Actionable
Effective programs can be designed for attracting and serving the segments. For example,
although one small airline identified seven market segments, its staff was too small to
develop separate marketing programs for each segment.

Macro and micro segmentations

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Organizational markets can be segmented on the basis of various factors that can be broadly
classified into macro segmentation and micro segmentation.
Macro segmentation:
To segment organizational market, a company can use macro segmentation variables like an
organization’s size, its location and the industry it is a part of.

 Organizational size: A large organization may buy the same product as a smaller
one, but it would buy differently.A large organization will buy in larger lots and will
have a formal buying process. It will have specialized departments like those of
purchase and quality control, with each one having an individual mandate. It is also
likely to demand more services and discounts.The company’s list price should take
into account the volume discounts that large clients will inevitably ask for and its
salespeople should be good negotiators. A company may have to design a unique
marketing mix to serve each of its major clients, and it may need to have dedicated
salespeople to serve each one of them.It may happen that a company’s profitability in
serving large clients is low, and hence it is not wise to ignore smaller clients, who do
not want extensive services and deep discounts. A company may develop a business
model for serving large number of small clients, which may not necessarily be less
profitable than another company’s business model of serving few large clients.

 Industry: The industry that an organization is part of largely determines what it

would buy. An industry has a unique requirement of products, buys in a particular
manner and requires certain level of quality in the product that it buys. Therefore, a
company may be selling a product like computers to clients in different industries, but
it cannot sell in the same way and sell the same computer to its clients in different
industries. Though companies in an industry may buy slightly differently from each
other, it is possible to design a marketing mix for an industry, which a company can
then tweak for different buyers in the industry. Therefore, it is important that a
company makes an in depth study of the requirements of an industry, before it starts
to woo companies of that industry.

 Geographical segmentation: There are regional variations in purchasing practices

and needs. Companies operate within the constraints of their national cultures. In an
American company, a purchase manager may have the full authority to make a
purchase decision, whereas in a Japanese company, a purchase manager may have to
build consensus among various stakeholders before he can make a purchase decision.

Micro segmentation:
Each company buys differently from other companies in its industry, and a seller needs to
develop a detailed understanding of how each company buys. It is important that salespeople
spend considerable time in understanding the roles that different functions play in the buying
process and their individual mandate. It is also important to understand the buyer’s
philosophy in terms of its emphasis on quality, its view on price and its intent of developing
long term relationship with the sellers.

 Choice criteria: A company’s choice criteria will depend on how it has decided to
compete in its own market. Therefore, a buyer will not budge on quality because it is
making a premium product, and another will not budge on price because it is making
a value-for-money product.A seller needs to understand what each one of its buyers is

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 trying to achieve for its target market to know how it would buy—the buyer who is
buying premium products will be willing to pay a higher price if the seller offers to
increase quality of its products, and the buyer who is buying value-for – money
products will be willing to buy products of lower quality if the seller offers to reduce
its price.Therefore, a seller needs to have different marketing mix when its buyers
have different choice criteria, and salespeople will need to emphasize different
benefits with different clients.

 Decision making unit structure: In an organization, a large number of people

influence the purchase decision. Though a Decision Making Unit or a DMU does not
exist on a formal organizational chart, its members exert tremendous influence on
how a buying process will proceed and who will finally be selected as a supplier. Who
the members of DMU are, depends on what product is being bought and whether the
product has been bought earlier. For example, if a buyer is contemplating outsourcing
manufacturing of a component of a new product, the DMU may consist of product
developers, process engineers, quality engineers, manufacturing engineers, assembly
engineers and purchasers. But, if a buyer is contemplating buying grease for its
machines, the DMU may just consist of manufacturing engineers and purchasers. If
the product has been bought earlier, the DMU might just consist of quality engineers
and purchasers, because the supplier has already been evaluated on parameters which
are important to the buyer. Now, the task is to ensure that products of consistent
quality are delivered on time. It also depends on the industry the buyer is part of. In
one industry, top management may make the decision, in another, engineers may play
a role, and in yet another, purchasers may play a role. The selling approach that a
company will adopt will depend heavily on the priorities of the members of the DMU.

 Decision making process: The size of the DMU depends on the type of the product
which is being bought, and whether the product has been bought earlier. The buying
process will be longer if the size of the DMU is large because the suppliers will be
evaluated on all the parameters that are important to all the members of the DMU. For
example, quality engineers will ensure that the supplier is capable of meeting quality
standards, and product developers will ensure that the component serves the function
for which it has been designed. Therefore, a seller needs to be willing to expend
resources and time to deal with a large DMU. The buying process is short when the
size of the DMU is small, and also when the product has been bought earlier.

 Buy class: It is helpful to categorize organizational purchases into straight rebuy,

modified rebuy and new task. Whether a particular purchase is straight rebuy,
modified rebuy, or new task, will affect how long the buying process will take, who
the members of the DMU will be and what would be their choice criteria. Once a
seller has categorized a purchase into one of the buy class, he can estimate the amount
of time and resources he will have to expend to clinch a deal. When a company is
buying an item for the first time, it will prefer suppliers who will have the patience to
educate the buyer company. It will also be suspicious of sellers as it does not really
know the credibility of the sellers.

The sellers will have to demonstrate a lot of patience as the buyer will evaluate lots of
options and get into a lot of consultation before settling on a supplier (new task). When
the company is already buying the item but only wants to alter the specifications of the
product or the conditions of purchase, it will expect the incumbent supplier to make the

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 required changes and retain the order. New suppliers can make a pitch but they have to
compete hard against the incumbent supplier because of its proximity to the buyer
(modified rebuy). The incumbent supplier should get the order when the buyer
continues to buy the same item in the same way. New suppliers can make a pitch but
they have to prove that they are decisively better than the incumbent (straight rebuy).

 Purchasing organization: Decentralized versus centralized purchasing is an

important variable due to its influence on the purchase decision. Centralized
purchasing is associated with purchasing specialists who become experts in buying a
product or range of products. They are more familiar with cost factors, and strengths
and weaknesses of suppliers than decentralized generalists. The opportunity for
volume buying means that their power to demand price concessions from suppliers is
enhanced. In centralized purchasing systems, purchasing specialists have greater
power within the DMU with respect to technical people like engineers. In
decentralized purchasing, users and technical personnel have a lot of influence and it
is important to understand their requirements. A purchaser may ultimately negotiate
the price and place the order, but the choice of the user and technical person is
respected by the purchaser. Centralized purchasing segment could be served by a
national account team whereas decentralized purchasing segment might be covered by
territory representatives.

 Organizational innovativeness: Marketers need to identify the specific

characteristics of the innovator segment since these are companies that should be
targeted first when new products are launched. Follower firms buy
the product but only after innovators have approved it.

Intermediate segmentation

Explained by Shapiro and bonoma in nested approach ,which postulate 5 step

approach . mainly consist of operating variables,purchasing approach and situational
factors.

Nested approach to segmentation

Taking the Wind & Cardozo model, Bonoma & Shapiro[2] extended this into a multi-step
approach in 1984. As the application of all the criteria recommended by Wind and Cardozo
and subsequent scholars who expanded upon their two-stage theory became increasingly
difficult due to the complexity of modern businesses, Bonoma and Shapiro suggest that the
same / similar criteria be applied in multi-process manner to allow flexibility to marketers in
selecting or avoiding the criteria as suited to their businesses. “They proposed the use of the
following five general segmentation criteria which they arranged in a nested hierarchy:

1. Demographics: industry, company size, customer location, customer size

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2. Operating variables: customer technology, product/brand use status, customer capabilities
3. Purchasing approaches: purchasing function, power structure, buyer-seller relationships,
purchasing policies, purchasing criteria

 Purchasing function of organization : centralized or de centralized

approach ,global key counts.
 Power structure : identifying right DMU, finance debt over purchase
 Buyer seller relationship : partner ,joit venture,bindustrial alliances.
 General purchasing policies : credit and cash customer,long term –short term
policies,purchase patterns,
 Purchase criteria : mix of all above

4. Situational factors: urgency of order, product application, size of order

 Urgency of order fulfillment :diff between routine replacement and emergency

replacement ,hot order shop ( factory for urgent orders)
 Product application : standby machiney vs critical machinery ,routine vs
special scenario
 Size of order : volume, min order,

5. Buyers’ personal characteristics: character, approach

The idea was that the marketers would move from the outer nest toward the inner, using as
many nests as necessary”. As a result, this model has become one of the most adapted in the
market, rivalling the Wind & Cardozo model head-on. One of the problems with the nested
approach “is that there is no clear-cut distinction between purchasing approaches, situational
factors and demographics". Bonoma and Shapiro are aware of these overlaps and argue that
the nested approach is intended to be used flexibly with a good deal of managerial judgment”

Other bases of segmentation

Stages in purchase decision process:

1. First time prospects : there are customers who are planning for 1st purchase .They
want salesperson to understsnd their business and explains things well
2. novices : these are customers who have some experience in purchasing the
product.they want easy to read manual ,high training ,knowledgable sales person
3. sophisticates : they want speed in maintenance and repair,product customization

Price service variable

1. Programmed buyers : the product is routine purchased system.its very imp for
operation.pay full price nd receive below avg service .
2. Relationship buyers : knowledgable abt competitive offerings and maintain
relationship with vendors.moderate imp products ,small discount,modest
service.2nd most profitable one .
3. Transaction buyers : view product as imp ,know abt competitive offering ,price
sensitive .
4. Bargain hunters : bargain hard for deepest discount and highest service.

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Benefits of market segmentation

Criteria for segmentation variables

Segmentation variables are customer characteristics that relate to some differences in

customer response to marketing efforts . Webster – 3 criteria :
1. The variable should be operation also that the scheme will help make the
segmentation scheme operational.
2. The segmentation variable should be substantial grouping of customer so that the
resulting segments are substantially large enough to warrant attention and
substantially enough to warrant distinctive marketing strategies.
3. The segmentation variable chosen ought to have operational relevance for
marketing strategywith reference to the different components o\f the marketing
mix so that a distinctive and right marketing strategy and approach can be
formulated for each market segment.

 Geographic Market Segmentation

The first group of market segmentation criteria is based on geographic variables. Geographic
market segmentation divides the market into geographical units, which can be nations, states,
regions, cities or even neighborhoods.

 Demographic Market Segmentation

Demographic market segmentation is all about people. It divides the market into segments
based market segmentation criteria that tell us something about the population: age, gender,
family size etc. Worthy of note is the fact that demographic market segmentation variables
are the most popular bases for consumer market segmentation. The reason is that consumer
needs and wants are often interrelated with demographic variables. Also, demographic
variables are rather easy to measure in contrast to many others.

 Psychographic Market Segmentation

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Market segmentation criteria of psychographic nature allow to divide the market into
segments
based on variables such as social class, lifestyle and personality.

 Behavioral Market Segmentation

Behavioral market segmentation divides a market into segments on basis of consumer
knowledge, attitudes, uses or responses to a specific product.

 Multiple Criteria Market Segmentation

In order to segment markets appropriately, you must combine the most relevant segmentation
criteria for your company and product. The combination of market segmentation criteria
should lead to market segments that are measurable, accessible, substantial and actionable.
The result should be precise, better-defined target groups.

Market targeting

A target market is the market a company wants to sell its products and services to, and it
includes a targeted set of customers for whom it directs its marketing efforts. Identifying the
target market is an essential step in the development of a marketing plan. A target market can
be separated from the market as a whole by geography, buying power, demographics and
psychographics. Market targeting is a process of selecting the target market from the entire
market. Target market consists of group/groups of buyers to whom the company wants to
satisfy or for whom product is manufactured, price is set, promotion efforts are made, and
distribution network is prepared.

Process:

Market targeting procedure consists of two steps:

1. Evaluating Market Segments:

Evaluation of market segments calls for measuring suitability of segments. The segments are
evaluated with certain relevant criteria to determine their feasibility.
To determine overall attractiveness/suitability of the segment, two factors are used:
i. Attractiveness of Segment:
In order to determine attractiveness of the segment, the company must think on
characteristics/conditions which reflect its attractiveness, such as size, profitability,
measurability, accessibility, actionable, potential for growth, scale of economy,
differentiability, etc. These characteristics help decide whether the segment is attractive.
ii. Objectives and Resources of Company:
The firm must consider whether the segment suit the marketing objectives. Similarly, the firm
must consider its resource capacity. The material, technological, and human resources are
taken into account. The segment must be within resource capacity of the firm.

2. Selecting Market Segments:

When the evaluation of segments is over, the company has to decide in which market
segments
to enter. That is, the company decides on which and how many segments to enter. This task is
related with selecting the target market. Target market consists of various groups of buyers to
whom company wants to sell the product; each tends to be similar in needs or characteristics.
Philip Kotler describes five alternative patterns to select the target market. Selection of a

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suitable option depends on situations prevailing inside and outside the company.

Alternative Strategies (Methods) for Market Targeting:

Basically five alternative patterns/strategies are available.
Company may opt for any one of the following strategies for market targeting based on
the situations:
1. Single Segment Concentration:
It is the simplest case. The company selects only a single segment as target market and offers
a single product. Here, product is one; segment is one. For example, a company may select
only higher income segment to serve from various segments based on income, such as poor,
middleclass, elite class, etc. All the product items produced by the company are meant for
only a single segment.
Single segment offers some merits like:
(1) Company can gain strong knowledge of segment’s needs and can achieve a strong market
position in the segment.
(2) Company can specialize its production, distribution, and promotion.
(3) Company, by capturing leadership in the segment, can earn higher return on its
investment.
It suffers from following demerits like:
(1) Competitor may invade the segment and can shake company’s position.
(2) Company has to pay high costs for change in fashion, habit, and attitude. Company may
not survive as risk cannot be diversified.
Mostly, company prefers to operate in more segments. Serving more segments minimizes the
degree of risk.
lOMoARcPSD|35417228

2. Selective Specialization:
In this option, the company selects a number of segments. A company selects several
segments
and sells different products to each of the segments. Here, company selects many segments to
serve them with many products. All such segments are attractive and appropriate with firm’s
objectives and resources.
There may be little or no synergy among the segments. Every segment is capable to promise
the profits. This multi-segment coverage strategy has the advantage of diversifying the firm’s
risk. Firm can earn money from other segments if one or two segments seem unattractive. For
example, a company may concentrate on all the income groups to serve.
3. Product Specialization:
In this alternative, a company makes a specific product, which can be sold to several
segments.
Here, product is one, but segments are many. Company offers different models and varieties
to
meet needs of different segments. The major benefit is that the company can build a strong
reputation in the specific product area. But, the risk is that product may be replaced by an
entirely new technology. Many ready-made garment companies prefer this strategy.
4. Market Specialization:
This strategy consists of serving many needs of a particular segment. Here, products are
many
but the segment is one. The firm can gain a strong reputation by specializing in serving the
specific segment. Company provides all new products that the group can feasibly use. But,
reduced size of market, reduced purchase capacity of the segment, or the entry of competitors
with superior products range may affect the company’s position.

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5. Full Market Coverage:
In this strategy, a company attempts to serve all the customer groups with all the products
they
need. Here, all the needs of all the segments are served. Only very large firm with overall
capacity can undertake a full market coverage strategy.

Analyse market and

cutomer characteristics

Identify relevant variables

for segmentation

Segment the market

and draw up profiles of
the segment

Evaluate the segments

Select the target

segment

Market differentiation
A promotional strategy employed to create a particularly strong hold in a specific market.
While adopting market differentiation method, a firm would produce several variations of the
basic product which will be marketed in different sections of the market under the same
umbrella brand, which provides the parent brand a wide range of coverage and thus helps in
creating a sense of dominance across the various segments of the market.
It helps the brand to acquire a large mind share amongst the prospective and current
consumers due to its presence in as many categories as possible. With the technology
reaching masses and rise in disposable income, there is a market demand of various version
of the product so that the different needs of different type of consumers is satiated. Every
market and its corresponding customers are important.

 Nature of industry and scope of differentiation :

Volume industry : few bt large differentiation
Stalemated industry : limited scope of differentiation
Fragmented industry : many segments of small size
Specialized industry : nr of differentiation on basis of specialization.
 Product differentiation : characteristics of physical product
Feature : characteristic that supplement function
Performance quality :level at which product primary character operate
Conformance quality : confoprmance to standards like iso,isi…

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 Durabliyty
Reliability
Repairability
Style
Design
 Service differentiation
Quality of delivery
Installation
Customer training
Consulting service
Repair
Miscellaneous
 Personal differentiation
 Image differentiation
Market Positioning
What is market position? In marketing and business strategy, market position refers to the
consumer’s perception of a brand or product in relation to competing brands or
products. Market positioning refers to the process of establishing the image or identity of a
brand or product so that consumers perceive it in a certain way.
 Attribute positioning : based on attributes of product
 Benefit positioning : benefit or use of product
 Cost positioning
 Segment positioning
 User positioning
 Competitor positioning ; against competitor
 Quality positioning
 Product category positioning
 Variety based positioning : based on producing a subset of industrys product or
service
 Needs based positioning : needs of grp of customer
 Access based positioning :
Trade off
 Porter emphasizes that choosing a unique position, however, is not enough to
guarantee a sustainable advantage.
 There are two more essential conditions for ensuring sustain advantage by preventing
imitations.
 There are trade-offs and fit.
 Trade-offs create the need for choice and purposefully limit what a company Fit looks
out for imitators by creating a chain that is as strong as its strongest link.
 Instead of commiting itself fully to the chosen strategic position, if the company to
mix with its tactics or elements of some other strategy, it would become self-defeating
Therefore, trade-offs which create the need for choice and purposefully limit what a
com offers are essential to strategy.

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  Porter points out that trade-offs arise for three reasons.
 The first is inconsistencies in image or reputation.
 Secondly, trade-offs arise from activities themselves.
 Third trade offs arise from limits on internal coordination and control activities and
approaches makes coordination and control difficult.
Fit
 Porter explains that positioning choices determine not only which activities but how
activities relate to one another.
 Porter identifies three types of fit, although they are not mutually exclusive.
 One is Simple Consistency between each activity (function) and the overall strategy.
 The second order fit occurs when Activities are Reinforcing.
 The third-order fit goes beyond activity minimization to what Porter calls
optimization of effort.
 Competitive advantage grows out of the fit among the entire system of activities
which substantially reduces costs or increases differentiation.
 Porter points out that while operational effectiveness in achieving excellence in
individual activities, or functions, which may be easily copied, strategy is about
combining activities which is fundamental not only to competitive advantage but also
to the sustainability of that advantage - it is harder for a rival to match an array of
interlocked activities than it is merely to imitate a particular activity or approach.

Partnering/Relationship Marketing and CRM

 Partner relationship management (PRM) is a combination of the software, processes

and strategies companies use to streamline business processes with partners who sell
their products.
Definition
Partner relationship management (PRM) is a business process by which an
organization incorporates policies, procedures and methodologies to deliver, manage
and maintain its relationships with external business partners.
PRM systems are often web- or cloud-based and typically include a partner portal,
customer database, and other tools that allow companies and partners to manage
leads, revenues, opportunities and sales metrics. Partner relationship management
systems also track inventory, pricing, discounting and operations.
PRM systems are a set of tools that can allow you to better organize and manage
channel relationships. A PRM system can be looked at as both a technology solution
and a business philosophy. The core functional components of PRM should include:
1) Training & Certification Management
2) Marketing Communications Support
3) New Product Introduction
4) Sales Productivity Tools
5) New Partner Ramp-up (Channel Partner On-Boarding)
6) New Hire Ramp-up
Companies today are struggling to meet increasing customer expectations and needs,
while dealing with shifting market conditions and economic swings. Working to

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 outmaneuver competitors these days involves building highly effective internal and
external relationships that ensure that you have the ability to support your company’s
mission and meet evolving growth initiatives. The strategy of maintaining open
dialogue among your channel partners has become crucial for innovation and overall
success. In today’s economy you must develop and maintain connections that provide
the resources your channel partners need to grow and strengthen their business, which
translates into success for your company. CRM or Customer Relationship
Management is a strategy for managing an organization’s

Pattern of buyer supplier relationship

I. supplier pattern
II. preferred suppliers
III. commercial suppliers

3 type trust

 contractual trust –both parties keep promise

 competence –both perform role competently
 goodwill –mutual expectation of open commitment to each other or the
willingness to do more than expected

characteristic of adversial and partnership models

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 Life cycle models of buyesr supplier relationship

 pre relationship stage – awareness stage

 early stage – exploration stage
 development stage – expansion stage
 long term stage – commitment stage
 final stage – dissolution stage

1. The Three-Stage Model

This is the simplest and most widely used model, which divides the relationship into three stages:

 Initiation: In this stage, the buyer and supplier are getting to know each other and establishing the
foundation for the relationship. This is often a time of high communication and information
sharing as both parties work to define expectations and roles.
 Growth: In the growth stage, the relationship becomes more mature and collaborative. The buyer
and supplier begin to work together more closely to improve performance and efficiency. This
may involve joint problem-solving, information sharing, and technology integration.
 Decline: In the decline stage, the relationship begins to deteriorate. This may be due to a number
of factors, such as changes in the market, changes in the needs of the buyer or supplier, or poor
performance by one or both parties. The buyer and supplier may begin to look for alternative
partners.

2. The Five-Stage Model

This model adds two additional stages to the three-stage model:

 Selection: In this stage, the buyer is identifying and evaluating potential suppliers. This is a
critical stage, as the decision of who to partner with will have a significant impact on the success
of the relationship.
 Termination: In this stage, the buyer and supplier end their relationship. This may be done for a
number of reasons, such as poor performance, changes in the market, or a merger or acquisition.

3. The Relationship Life Cycle Matrix

This model is a more complex model that takes into account a number of different factors, such as
the level of trust, commitment, and interdependence between the buyer and supplier. The model
identifies four different types of relationships:

 Transactional: This is a low-trust, low-commitment relationship. The buyer and supplier are
simply interested in exchanging goods or services.
 Contractual: This is a higher-trust, higher-commitment relationship. The buyer and supplier have
a formal contract that outlines their expectations and obligations.
 Collaborative: This is a high-trust, high-commitment relationship. The buyer and supplier work
together closely to achieve common goals.
 Partnership: This is the highest level of trust and commitment. The buyer and supplier see each
other as strategic partners and are willing to share resources and information.

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Selection of firms for collaboration :

 Segment the market by product application and customer capability

 Assess the value of the product offerings to customers in each segment
 Target segment and customer firms within segments,for various relationship
 Develop and implement relationship-specific product offerings
 Evaluate relationship outcomes and reassign accounts
 Periodically update the value of relationship offerings

Production linkage and industrial marketing

Backward linkage exist when foreign affliates acquire goods and service from domestic
firms, forward is when foreign affiliates sell in domestic
Horizontal involve interaction with domestic firms engaged in competing activity

Differences between CRM and PRM

PRM is similar to customer relationship management (CRM) in that companies use CRM
systems to monitor the marketing, sales and service process of customer relationships. When
working directly with a customer, a sales rep can target the consumer and work one-to-one
with that potential customer. While CRM does help with the relationship between a business
and a customer, it's much more focused on the C and M of CRM -- once it converts a lead
into a customer, it's about managing that next purchase. When working with partners,
companies need to put more emphasis on the relationship aspect, as it's the goal of both the
partner and the managing company to profit from the relationship. To effectively do that
requires a different type of management and thinking, including more negotiation in the
selling process.

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