how to print notes

ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR

I. THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS

Business Marketing

Marketing of goods and services to  commercial enterprises,  governments, and  other profit and  not-for-profit organizations

o o

for use in the creation of goods and services that they market to other busine consumers. More than half of all U.S. business school graduates take jobs in firms that e Manufacturers Wholesalers Retailers Government agencies

Organizational Buyers

o o o o

Buy goods and services for their own u

Organizational Market Divisions

o

Industrial Markets

Reprocess a product or service they buy before selling it again to the next buyer. The industrial markets include over  11 million firms,  26% selling physical products and  73% selling diverse services. Wholesalers and retailers who buy physical products and resell them again without any reprocessing. 1.6 million retailers in the U.S. 521,000 wholesalers in the U.S. Federal, state, and local agencies that buy goods and services for the constituents they serve. 88,000 government units in the U.S. The largest U.S. exporting industries focus on organizational customers, not ultimate consumers. The majority of world trade involves manufacturers, resellers, and government agencies

Reseller Markets

o o

Government Markets

Global Organizational Markets

II.

MEASURING DOMESTIC AND GLOBAL INDUSTRIAL, RESELLER, AND GOVERNMENT MAR The North American Industry Classification System (NAICS)
o o o o o o

Provides a common industry classification system for the NAFTA partners. A valuable tool for business marketers in analyzing, segmenting, and targeting markets. A detailed, U.S. government numbering system to classify business and government organizations Industries and sub-industries are identified by numeric codes. Information about businesses is gathered by the federal government and categorized by NAISC co

Link To NAICS DATA

o o o

Facilitates the measurement of economic activity in NAFTA. Consistent with the International Standard Industrial Classification of All Economic Activity, pub facilitate measurements of global activity. NAICS groups economic activity to permit studies of market share, demand for goods and service markets, and similar data.

III. CHARACTERISTICS OF ORGANIZATIONAL BUYING

Derived demand

Demand for industrial products and services is driven by, or deriv products and services.

purchasing policies or p constraints on buyers. Size of the Order or Purchase much larger than that in consumer buying.
o o o

Competitive bid Participants in th Time required fo

Number of Potential Buyers Firms Organizational Buying Objectives

far fewer buyers.

o o

For business firms, the buying objective is usually to incre increasing revenues. For nonprofit firms and government agencies the objective

the groups they serve.

o o o o o o o

Organizational Buying Criteria

Price. Ability to meet the quality specifications required for the i Ability to meet required delivery schedules. Technical capability. Warranties and claim policies in the event of poor perform Past performance on previous contracts. Production facilities and capacity.

o o

ISO 9000 standards

o

Developed by the International Standards Organization (IS Standards for registration and certification of a manufactu assurance system based on an on-site audit of practices and procedures

Reverse marketing,

o o

Transforming and communicating buying criteria into spe Building relationships that shape suppliers to fit a buyer's

Buyer-Seller Relationships and Supply Partnerships Relationships

o o

Usually long-term relationships between industrial buyers Sometimes these relationships lead to reciprocal arrangem

Reciprocity

o o

Two organizations agree to purchase each other's products The U.S. Justice Department frowns on reciprocal buying operation of the free market

supply partnership

Buyer and its supplier adopt mutually beneficial  objectives,  policies, and  procedures for the purpose of  lowering the cost and/or  increasing the value of products and services delivered to the ultimate consume

The Buying Center

o o

Cross-Functional Group

individuals sharing common goals, risks, and knowledge i In large multistore chains, the buying center is highly form committee. A firm marketing to many industrial firms and governmen structure, technical and business functions represented, an Composition depends on the item being bought.

People in the Buying Center

o o

A buyer or purchasing manager is almost always a membe individuals from other functional areas are included depen

Users
o o

people in the organization who actually use the product or service. affect the buying decision, usually by helping define the specifications for what is bought. have the formal authority and responsibility to select the supplier and negotiate the terms of the contract. have the formal or informal power to select or approve the supplier that receives the contract. control the flow of information to other members of the buying center. Buyer reorders an existing product or service from the list of acceptable suppliers. Users, influencers, or deciders in the buying center want to change the product specifications, price, delivery schedule, or supplier. Organization is a first-time buyer of the product or service. This involves greater risks, so the buying center is enlarged to include all who have a stake in the new buy.

Influencers

Buyers

Deciders
o

Gatekeepers

Straight Rebuy

Buying S

Modified Rebuy

New Buy

IV. CHARTING THE ORGANIZATIONAL BUYING PROCESS Organizational buying behavior

o

Decision-making process that organizations use  to establish the need for products and service

 o o

to and identify, evaluate, and choose among a

Stages in the Organizational Buying Process Example: Buying a Machine Vision System

Same five stages as the consumer buying decision pr Key differences, illustrated by the decision-making p machine vision systems.

The purchase of components and assemblies for machine vision systems produced by the Industrial Autom Siemans
o

Problem Recognition

Sales engineers canvass industrial automation equipment users to ident machine vision technology. After a contract is identified, project personnel must often make a mak whether components and assemblies will be purchased from outside su

o o

Information Search
o

Companies such as Siemans employ a sophisticated process for identif components and assemblies Prenegotiating  price,  quality,  delivery time. Value Analysis a systematic appraisal of the design, quality, and perf purchasing costs.

Alternative Evaluation
o o

Three main buying criteria are used to select suppliers:  price,  performance  delivery. Typically, two or three suppliers for each component and assembly are These suppliers are sent a quotation or bid request.

Purchase Decision

o o

After bids for components and assemblies are submitted, further negot performance, and delivery terms is likely. Sometimes two or more suppliers might be awarded contracts when lar Suppliers who are not chosen are informed why their bids were not sel

Postpurchase
o

Behavior Companies such as Siemans employ a formalized and sophis suppliers and products. A supplier may be dropped from the bidders list if its performance do

Four lessons for organizational marketers

17. Understand the organizations needs. 18. Get on the right bidders list. 19. Find the right people in the buying center. 20. Provide value to organizational buyers.

ONLINE BUYING IN ORGANIZATIONAL MARKETS

o

Organizational buyers account for 80% of the total worldwide value of all online transactions.

o o

Projected that online organizational buyers around the world will spend $6 to $7.5 trillion by 2005 U.S. organizational buyers will account for about 60% of these purchases.

Prominence of Online Buying in Organizational Markets

Prominent for three major reasons

3. Technology provides timely supplier information  product availability  technical specifications  application uses  price  delivery schedules. 4. Technology substantially reduces buyer order processing costs. 5. Technology can reduce marketing costs, particularly sales and advertising exp customer base for many types of products and services.

E-Marketplaces: Virtual Organizational Markets

o o o

e-marketplaces
o

bring together buyers and supplier organizations. make possible the real-time exchange of information, money, products, and s Variety of names  B2B exchanges  e-hubs

o o o

Independent emarketplaces

charge a fee for service Small business use to expand customer base Exist in settings that have one or more of the following features  Thousands of geographically dispersed buyers and sellers.  Volatile prices caused by demand and supply fluctuations.  Time sensitivity due to perishable offerings and changing technologie  Easily comparable offerings from a variety of suppliers. Link large companies them with their network of qualified suppliers and cust They are not a neutral third party, but represent the interests of their owners

private exchanges Online Auctions

o o

Traditional auction

o o o o

Seller puts an item up for sale Buyers bid in competition. As bidders increase, there is upward pressure on price. Auction ends when a single bidder remains

Reverse auction

o o o o

Buyer communicates a need for a product or service Suppliers bid in competition As suppliers increase there is downward pressure on price Auction ends when a single bidder.