OVERVIEW OF MARKETING

OVERVIEW OF MARKETING

FOR ENGINEERS/SCIENTIFIC PERSONNEL

Facts:

1. Engineering employment is dependent on customer demand for their services.

2. In most cases there is a competitive environment with more available suppliers than demanders

3. While liking for and an interest in marketing varies with the individual engineer, it is necessary that all maintain a marketing mind set.

Marketing – All activities involved in getting product/service from firm to consumer

Major categories of activities considered part of the marketing function.

1. Selling

2. Logistics ( warehousing, transportation)

3. Advertising

4. Market research

5. Consumer service and after sales support

6. Credit policy

7. Pricing

Marketing is done by all organizations

Profit

Non Profit

Public

Basic categories and distinguishing characteristics

Consumer

Industrial/Technical

Marketing is most crucial and the major determinant of success in consumer product firms. (I.e. airlines, cosmetics, food, etc.)

Message: Nothing gets produced unless there is a market demand by customers who are willing and able to pay for the goods or services provided.

Our interest in this course is technical marketing.

Major characteristics of this market:

§ Products or services that have a large technical component

§ In most cases knowledgeable customers

§ Meeting a specified need not promotable as an impulse sale

§ Often very competitive and price sensitive environment

§ A large percent made to order in accordance to specification

§ Long lead time required

§ Unit sales amount large companies to consumer product sale

Examples: Technical marketing being performed.

1. Sale of standard products (i.e. the shelf)

2. Sales of customer/specialized equipment

3. Service provision- Utilities, waste disposal, computer related activities

4. Contract R&D and testing

5. Consulting

6. Construction/Program Management

7. Information Technology/ Systems Integration

While each of these required a different marketing strategy there are many similarities. If the firm is a large one than the activities done by one person in a small firm is divided among a number of persons.

Engineers/ Technical Persons Role in marketing is primarily a cooperative and supportive one:

1. Develop products/service that will meet consumer needs at the right cost and right time. ( R&D Function)

2. Write proposals for use by marketing to compete for revenue producing projects.

3. Supply technical knowledge required by marketing. ( Selling)

4. Identify potential new products or services. ( Market Research)

5. Once the order/project has been received, produce it so the customer will be satisfied. Lead to repeat business and recommendation for new. (Project/Operations Mgt.)

6. Supply customer service where technical aspects are involved. (I.e. Quality Defects, Installation Usage, etc.)

Demand for Engineering Services can come from:

Business units inside the firm- other division plants

here supplied by in-house engineering- Corporate/Division-staff function.

In some firms, divisions, and plants they can buy from the outside in some they can’t.

If they can and the trend is in this direction, then marketing has to be done by in-house engineers, which then are in effect competing with outside vendors on the basis of :

Price

Quality of service

While always utilized to cope with special needs now outsourcing is often considered as a means for reducing a firm’s engineering/technical service cost.

Additional reasons:

Facilities Restructuring

Personnel and overtime reduction

Improved facility utilization

Access to broader know how

Flexibility

In any case the engineering department manager has to market its service by illustrating competence, get work for his people and opportunity for growth. This requires that this person not only needs technical but also marketing/business skill.

A. From business/enterprises outside the firm.

With an increasing global economy for some concerns this could mean not only seeking orders in the U.S but in all the other continents. This has given rise to:

International marketing

i.e. currency fluctuations, credit,

transportation, cultural

difference,language needs.

The Marketing Process

Engineering Services

A general observation based on experience: In most cases customers are selective, take their time and want quality while being cost conscious.

When the project under consideration involves a large capital outlay this is even more so the case.

1. Identification of the potential customers for the product or service.

2. Development of market plan

3. Contacting the potential customer

4. Making a preliminary presentation

5. Working on solution to customer problems learned at prior presentation.

6. Presentation of solution to get feedback.

7. Submission of proposal

8. Negotiation of contract

Difference between public and private industry

Identification/Source of Potential Customers

Sales force

Dodge distributors published reports, trade lists

Contacts- Professional societies

Reputation

Advertising

Public relations

Commerce business daily

Internet

Considerations- Whether to bother for the business

Who are the potential competitions?

What actions are they going to take in response to ours?

Is anything happening that can impact the demand for the project?

Is cancellation/postponement likely?

Does it have high or low priority with customers?

How secure is the funding?

Is the project magnitude sufficiently large?

Do we have the strength (technical and financial resources)?

Any legal constraints?

Contacting the Customer

1. Often first done by phone or exchange information.

2. First contact is important. You can tell if there is any business and the extent.

3. Try to get agreement to make presentation helpful to know who will be there and to have a chance afterwards to discuss and get a feel for what is going on and the problems.

To make an effective presentation you need to know

How your potential customer is organized.

What procedure they use

Which individuals are involved in the decision making?

Which person makes the final approval?

Whether customer already has approval to proceed.

How much is available to be spent

Where there is competition

Don’t send people who don’t interface well.

Proposal Preparation and Submission

Should provide information that will

§ Promote the bidder

§ Allow determination how well needs are being met

§ Enable comparison of competing bids

Generally includes sections that focus on

Management

§ Who is and how it will be managed

§ Statement about bidder and their /experience and qualifications

§ People and management resumes

Technical Plan

§ Proposed plan of work that will meet customer needs as noted in R.F.P

§ Cost and time schedule

§ Alternative approaches and cost comparison

Business Aspects

§ Payment schedules

§ Change orders, contingency, extras

§ TYPE OF CONTRACT AND CONTRACT PROVISIONS

Administration:

§ Customer rights and obligations

§ Vendors rights and obligations

§ Legal process in case of disputes

§ Meeting times

Preferable to:

§ Attend bidders conference if held because this will enable:

§ Seeing your competition

§ Gaining information helpful in proposal preparation

1. Pick a theme that you think will sell- (i.e. best in business, strongest technologically can offer the most options etc.

2. Emphasize past performance- with this client or similar clients and with similar projects. Only give references that will be positive. Include samples or example of similar work you have done. Provide a positive reason for customer to pick you.

3. Use subcontractors when you don’t have skill need to join with to be able to compete for contract. Have to exercise care in the selection and allow enough time for the proposal preparation to enable sub-contractor to do a good job on his part.

4. Reviews- should be done by those areas who are going to work on the-job for technical and cost accuracy. The financial dept. legal and mgt., to see if organization will commit the firm.

GENERAL ADVICE WHEN SUBMITTING PROPOSAL

A.)Check carefully to see no:

§ Mathematical errors

§ Illogical, conflicting unsubstantiated statements are included

B.)Should be neat, follow requirements,be submitted at time specified.

C.) Before submitting have proposal reviewed by:

§ All those responsible for carrying out or affected by the work

D.) Do Risk Assessment

§ Done as part of the marketing process to decide whether to take the job. Task is to define:

a.) Short time risks involved in not meeting contract requirements.

b.) Long term risk in terms of potential liabilities after the job is contemplated.

And weigh these in terms of the potential profit and other benefits involved.

Can be done in a mathematically detailed manner. Conditional probabilities simulation, etc. As a practical matter a group consisting of cost estimators, design engineers, the project manager and lawyers get together, look at the work components required, identify those having a wide variability of outcome i.e. cost can be three times the estimate depending on future conditions and unknowns.

Then three estimates are prepared

Good Practice

Do post mortem to learn

What was done right?

What was done wrong?

What should be done same or different in the future?

Worst expected and best case with a subjective judgement of likely occurrence by the group. As part of this process, consideration is given to what might be done to reduce the risks involved. For instance:

a.) Shift of others, Owner

Contractors

Vendors

b.) Adjust contract time

Cost

c.) Ask for price that will yield appropriate profit

d.) Insurance to cover warranties/future liabilities

As can be seen people doing this must be senior experienced people. It is probably prudent to turn down projects where risks incurred are too great for the firm to handle (i.e. bankruptcy).

e.) Make sure that statement of work and proposal responds to RFP

f.) If oral submission is involved prepare sufficiently and have backup to deal with equipment failure

§ FIXED PRICE LUMP SUM BIDDING

Usually requires submitting an offer to do work at stated price with lowest (qualified) bidder likely to get the job.

The issue to be decided

§ Should we compete

§ What price to charge to obtain the contract in view of the competition

Factor that influence the decision:

§ Are the required resources available

§ Do we have the technical experience

§ Is there potential future additional business

§ Will obtaining this contract provide visibility for the firm

§ What is the need for this work

§ Can it be fitted into existing work structure with inconsequential interruption.

These factors can be considered formally with evaluation sheet. Most likely done in management conference.

Probabilistic models for bidding have been proposed that utilize past behavior of competitors

If your bid price is % of cost	If the past % of competitors bidding lower	Probability of winning
90	0	100 =1 100
95	0	100 = 1 100
100	4	96 = .96 100
105	10	90 = .90 100
110	20	80 = .8 100
120	50	50 = .5 100