6

Organizational Markets
and Buyer Behaviour

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Learning Objectives
After reading this chapter, you should be able to:

1.Distinguish among industrial, reseller, and government

organizational markets.
2.Describe the key characteristics of organizational buying that
make it different from consumer buying.
3.Explain how buying centres and buying situations influence
organizational purchasing.
4.Recognize the importance and nature of online buying in
industrial, reseller, and government organizational markets.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Business Marketing
The marketing of goods and services
to individuals and organizations for
purposes other than personal
consumption.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Business Products
Are used to manufacture
other products

Become part of another

product

Aid the normal operations of

an organization

Are acquired for resale

without change in form

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Types of business
products
Major
equipmen
t

Accessory
equipmen
t

Raw
materia
ls

Business
services

Major
categories of
business
products

Component
parts

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Supplie
s

Processed
materials

Categories of Business
Customers
Producers

Categories
of business
customers

Resellers

Governments

Institutions
2006 McGraw-Hill Ryerson Ltd. All rights reserved.

THE NATURE AND SIZE OF

ORGANIZATIONAL MARKETS
Business Marketing

Organizational buyers are those manufacturers,

wholesalers and retailers, and government

agencies that buy goods and services for their own
use or for resale.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Business vs. Consumer

Markets
Characteristic
Characteristic
Demand
Demand

Business
BusinessMarket
Market
Organizational
Organizational

Consumer
ConsumerMarket
Market
Individual
Individual

Volume
Volume
##of
ofCustomers
Customers

Larger
Larger
Fewer
Fewer

Smaller
Smaller
Many
Many

Location
Location
Distribution
Distribution

Concentrated
Concentrated
More
MoreDirect
Direct

Dispersed
Dispersed
More
MoreIndirect
Indirect

Nature
Natureof
ofBuy
Buy
Buy
BuyInfluence
Influence

More
MoreProfessional
Professional
Multiple
Multiple

More
MorePersonal
Personal
Single
Single

Negotiations
Negotiations
Reciprocity
Reciprocity

More
MoreComplex
Complex
Yes
Yes

Simpler
Simpler
No
No

Leasing
Leasing
Promotion
Promotion

Greater
Greater
Personal
PersonalSelling
Selling

Lesser
Lesser
Advertising
Advertising

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

NAICS Logo
Providing common
industry definitions
to measure NAFTA
economic activity

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

MEASURING DOMESTIC AND GLOBAL

INDUSTRIAL, RESELLER, AND
GOVERNMENT MARKETS
The North American Industry Classification

System (NAICS) provides common industry

definitions for Canada, Mexico, and the United
States.

Groups organizations based on the major activity

of the major product or service provided.

24 sectors

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 6-1 NAICS breakdown for information and cultural

industries sector: NAICS code 51 (abbreviated)

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 6-2
Key characteristics of organizational buying behaviour

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Demand in Business
Markets
Demand is...
Derived
Inelastic
Joint
Fluctuating

Description
Demand for business products
results from demand for
consumer products
A change in price will not
significantly affect the demand
for product
Multiple items are used together
in final product. Demand for one
item affects all
Demand for business products is
more volatile than for consumer
products
2006 McGraw-Hill Ryerson Ltd. All rights reserved.

CHARACTERISTICS OF ORGANIZATIONAL
BUYING
Buyer-Seller Relationships and Supply Partnerships
Reciprocity

Is reciprocal buying ethical?? IBMs

Reciprocity Policy (Page 148)
Supply partnership
Companies share mutually beneficial objectives, policies and
procedures.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

CHARACTERISTICS OF ORGANIZATIONAL
BUYING
The Buying Centre: A Cross-Functional Group
People in the Buying Centre
Roles in the Buying Centre
Buying Situations and the Buying Centre
Buy classes

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Roles in the Buying

Center
Initiator

Influencers

Gatekeeper
s

Decider

Purchaser

Users

Courtesy of the Nelson RF Collection

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Buy Class
New Buy

Modified
Rebuy

Straight
Rebuy

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 6-3 How they buying situation affects buying

centre behaviour

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

CHARTING THE ORGANIZATIONAL

BUYING PROCESS
Stages in the Organizational Buying
Process

Organizational buying behaviour

Problem Recognition
Information Search
Alternative Evaluation
Purchase Decision
Post-purchase Behaviour

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Machine Vision Systems

Example of lengthy organizational buying process

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

ONLINE BUYING IN ORGANIZATIONAL

MARKETS
Prominence of Online Buying in Organizational Markets
E-Marketplaces: Virtual Organizational Markets
Online Auctions in Organizational Markets
Traditional Auction
Reverse Auction

2006 McGraw-Hill Ryerson Ltd. All rights reserved.