Farm Electronics: The Business-to-Business Marketing Dilemma

Decision Sheet By

R Sai Meena

2227441

Summary:

In January 2019, the sole proprietor and the general manager of Farm Electronics met to discuss
critical options for the possible growth path of their company. Farm Electronics was a 42-year-
old, small-scale electrical and electronic industrial equipment manufacturer based in Indore, India.
The company's product portfolio consists of various transformers, relay coils, power supplies, and
direct-current motors designed according to its customer’s specifications. Farm Electronics'
customers consisted of small-, medium-, and large-scale businesses from both the organized and
unorganized sectors. Significant aspects of the company's value proposition included quality,
timely delivery, and after-sales service. However, most of Farm Electronics' revenue came from
only a few large accounts. The proprietor and the general manager wanted to expand their
company's reach and were thus contemplating targeting a new set of customers. The location of
the company adds to its strategic advantage.

Broader Problem Categories:

➢ Mode of Operations
➢ Business Model
➢ Customer Expectations

Issues Identified:

➢ High Competition because of the complex nature of customer requirements

➢ Relying on one specific set of customer groups.
➢ High expectations from customers & Customization
➢ Credit Policy

Problem Statement:
What would be the stable business plan for Farm Electronics in the future?

Keynotes:

Why is there an occurrence of customization?

Because of the modified rebuy, there is an occurrence of customization, and as a result, there is a
scope for new players coming because of varying customer requirements.

How is the company ensuring to achieve customization? (Important Pillars of

Customization)

➢ QC
➢ R&D
➢ The protagonist’s and the founder’s background and expertise in the field add value.

Buying Situation and Key Players involved in B2B Buying Process

Concept Framework:

➢ Buying Situation:

The business buyer faces many decisions in making a purchase. How many depends on the
complexity of the problem being solved, the newness of the buying requirement, the number of
people involved, and the time required. Three types of buying situations are straight rebuy,
modified rebuy, and new task.

Straight rebuy. In a straight rebuy, the purchasing department reorders supplies such as office
supplies and bulk chemicals on a routine basis and chooses from suppliers on an approved list.
The suppliers try to maintain product and service quality and often propose automatic
reordering systems to save time. “Out-suppliers” attempt to offer something new or
exploit dissatisfaction with a current supplier. They aim to get a small order and then
enlarge their purchase share over time.
Modified rebuy. The buyer wants to change product specifications, prices,
delivery requirements, or other terms in a modified rebuy. This usually requires additional
participants on both sides. The in-suppliers become nervous and want to protect the account. The
out-suppliers see an opportunity to propose a better offer to gain business.
New task. A new-task purchaser buys a product or service for the first time (an office building,
Or a new security system). The greater the cost or risk, the larger the number of participants,
and the greater their information gathering, the longer the time to decide.

➢ People involved in the B2B Buying Process:

1. Initiators: Users or others in the organization who request that something be purchased.
2. Users: Those who will use the product or service. The users often initiate the buying
proposal and help define the product requirements.
3. Influencers: People who influence the buying decision, often by helping define
specifications and providing information for evaluating alternatives. Technical personnel
is significant influencers.
4. Deciders: People who decide on product requirements or suppliers.
5. Approvers: People who authorize the proposed actions of deciders or buyers.
6. Buyers: People who have formal authority to select the supplier and arrange the purchase
terms. Buyers may help shape product specifications, but they play their central role in
determining vendors and negotiating. In more complex purchases, buyers might include
high-level managers.
7. Gatekeepers: People who can prevent sellers or information from reaching buying centre
members. For example, purchasing agents, receptionists, and telephone operators may
prevent salespersons from contacting users or deciders.
Application in the Case:
What is the typical buying cycle of a Farm Electronics client? Who are the
prominent participants in the purchase?

1. Anuj, the company's founder and owner, categorized Farm Electronics' current clients based
on criteria. He discovered that type A businesses were the company's typical clients because
they already had solid relationships.
2. Vendors would contact the prospective client's materials and procurement department,
anticipating an average response time of roughly two months.
3. Farm Electronics' design and engineering division would give the vendor the technical details
of the equipment needed for its operations if a buyer organization requested any components.
Following that, typically taking more than a month, the vendor created a prototype and
presented it to the materials and procurement department.
4. The quality assurance department was given the prototype to test for performance and quality
before sharing a report and recommendations with the management and finance departments.
5. The purchasing organization would then study the exact price quote and initiate final
discussions when the finance department contacts the vendor. Then, inquiries were produced
by the requirements and specifications. The vendor would then receive a schedule from the
customer's procurement division and reply with an estimate based on the cost of raw materials.
After completing each phase of the purchasing cycle, the goods were packaged and shipped.
6. Although not all customers would have particular product specifications and requirements and
instead seek standardized items, this formal process was followed for type B accounts.
7. PSU and government departments were another typical clientele for Farm Electronics, as they
would make direct purchases from suppliers listed on pre-existing vendor lists.
8. It is crucial to note that Farm Electronics' suppliers were suppliers-to-suppliers, meaning that
its customers would like to resale Farm Electronics' goods to companies that required them for
engineering projects like railway networks.

Value Proposition of Farm Electronics

Three critical components of Farm Electronics' value proposition were after-sales support, timely
delivery, and high quality. The firm's policies and procedures were designed to offer these
components. For instance, even 90 days after delivery, the company delivered 100% repair and
replacement of the equipment.

Farm Electronics provides testing and manufacturing facilities tailored to the requirements of its
primary customers as well as forgiving credit policies due to the intense competition in the
business-to-business industry.
Customers of Farm Electronics evaluated and audited the company's quality. As a result, the
company is obligated to uphold all standards for testing, production, housekeeping, and other legal
standard requirements, including those relating to the calibre of Farm Electronics' workplace safety
measures and its environmental responsibilities.

In conclusion, Farm Electronics pledged to continually increase customer satisfaction by offering

high-quality products and services at affordable prices to strengthen its quality management
systems across the board.

Marketing environment for Farm Electronics using the 5-Cs framework

Company:

We start by examining the company and its operations. A successful company should possess a
long-term competitive edge within the sector, in Farm Electronics' case, industrial manufacturing
of electrical and electronic products.

In the example of Farm Electronics, the company offers goods and services that take advantage of
openings in the target market. The majority of India's economy is based on agriculture. Hence
Farm Electronics first focused on its vast customer base of farmers needing produced equipment.
Additionally, Farm Electronics made its equivalent for this kind of device for the Indian market,
which was immediately successful because India solely imported RTs. Since they constituted the
foundation for practically all the electrical and electronic equipment utilized by most industrial
companies, the company's goods were undoubtedly quite valuable. Resources are also crucial if
they enable the company to lower product prices or increase differentiation, raising the customer’s
perceived value.

Farm Electronics offered its primary customers a lenient credit policy, testing facilities tailored to
their specific requirements, and high quality, on-time delivery, and after-sales service. Farm
Electronics manufactures goods and resources that small enterprises only own, especially within
the local Indian manufacturing industry, even though the business-to-business markets are pretty
competitive. As the company's founder and owner first selected a market area with lots of
potentials for many different enterprises to expand and prosper, this was intentionally targeted at
the outset of operations. Although Farm Electronics' products might be in direct competition with
its rivals, other industry players may need help replicating the company's customized and highly
effective service.

There are no alternatives for some goods, such as transformers and relay coils. The business was
immediately organized into a structure with employees in various departments having distinct roles
and responsibilities, ensuring that the business maximizes its resources’ value. Administrative
managers, production supervisors, and sales executives are critical positions inside the company.

Customers:

The company primarily targeted businesses that required specific electrical components regularly,
either for production or as building pieces for larger machinery or railway networks. Customers of
Farm Electronics included small and large businesses of all sizes and organizational structures.

Collaborators & Competitors:

Other significant elements of the environment in which Farm Electronics operates relate to its
collaborators and competitors. Farm Electronics' ability to deliver its products in the manner it
does depends on the supplies of raw materials from other businesses, both local and worldwide,
such as copper. Except for a brief period when there was a global scarcity of copper due to the
closure of a significant copper smelter plant, Farm Electronics has not generally had considerable
supply chain challenges. RW copper is often offered by several suppliers, however. As previously
noted, there is plenty of room for different businesses to flourish in the electric and electronic
industrial manufacturing sector. However, to compete, Farm Electronics provided flexible
payment terms with its biggest customers and ensured a stable relationship with them for straight
repurchases (a sustainable business model).

Context:

Farm Electronics operates in a small-scale sector of the economy that, like other sectors, today, is
heavily influenced by outside forces over which no company has significant control. For instance,
economic situations connected to raw material shortages, tariffs on certain imported raw materials,
and a decline in demand for Farm Electronics' goods could impact the company's operations. Since
the company sells to suppliers who then sell to train networks, external environmental variables
are also important. For instance, a widespread ecological disaster can temporarily reduce demand
for the company's products. Due to the laws and regulations governing the company's production
activities, Farm Electronics' manufacturing facilities, procedures, and systems may be impacted
by external legal considerations.

Criteria:

• Cost
• Size of Order
• Sustainability & Growth
• Entry Barriers
• Cash Flows

Alternatives and Evaluation of Alternatives:

1. Target Type A Customer Segment: Historically, Farm Electronics catered to farmers and
larger businesses that constantly needed specialized electrical components for production
and railway networks and building blocks for larger machinery. Any new segment must be
targeted with significant effort on all fronts. Prospecting type A consumers cost about
$1,000, including developing prototypes, traveling, and creating educational literature.
Farm Electronics enjoyed great success in this sector and acquired several new clients.
Still, the company would have to develop specialized manufacturing facilities, which
would cost $50,000, and engage in numerous pricey extra processes to go even further.
These production facilities, however, might also be used for accounts of types B, C, and
D.
2. Target Type C and D Segment: For the first three years that the company pursued these
customer segments, the marketing costs necessary to target type C and type D customers
would equal 15% of the firm's sales. This sort of sector is vast, and the number of
transactions with a single consumer range from $500 to $1,500, even though the marketing
costs are very high in the short term and the revenue obtained from these tiny local firms
is little. In the long run, market share would be much more profitable for the company.
3. Targeting government agencies or PSUs: Targeting them as clients necessitate designing
procedures following the requirements, which is a time-consuming tendering process. It
may be worthwhile for Farm Electronics to invest in manufacturing equipment, application
 fees for several quality certifications, and workforce recruitment to become the direct seller
to Indian Railways. Indian Railways was one potential target customer that would bring
high revenues to Farm Electronics.
4. Target an untapped African Market Segment: Farm Electronics might go for the
Chinese-dominated international market in several African nations. Despite the rivalry, the
Indian business may create a durable advantage by consistently offering competitive prices
and exceptional after-sales services that set it apart from its Chinese rivals. This would
entail a substantial initial infrastructure expenditure, but opening up the global market
might be very profitable for the company.

Conclusion/Recommendation:

Farm Electronics implemented a macro-segmentation strategy in detail. At this stage, it is

recommended for the company to identify meaningful macro-segments and then divide them into
micro-segments.

Market development, market penetration, product development, and diversification are the four
strategies that make up the Ansoff Matrix. The business must strengthen the proper strategy to
expand into new and existing markets and determine what product portfolio can be created for
better growth. Alternative 3 is preferred to be carried out using the strategic planning tool from
the above-mentioned evaluation of alternatives.