Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
Irwin/McGraw-Hill
C H A P T E R S E V E N
ORGANIZATIONAL MARKETSAND BUYER BEHAVIOR
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
AFTER READING THIS CHAPTER YOU SHOULD AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:BE ABLE TO:
• Distinguish among industrial, reseller, and government markets.
• Recognize key characteristics of organizational buying that make it different from consumer buying.
• Understand how types of buying situations influence organizational purchasing.
• Recognize similarities and differences in industrial and reseller purchase behavior.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-AA Laser Technology is Bright at HoneywellPP7-AA Laser Technology is Bright at Honeywell
• Gary Null believes Honeywell, MICRO SWITCH division, is poised to capture a significant share of the multi-billion dollar global market for laser technology and products.
• However, successful commercialization of their innovative laser technology depends on a coordinated worldwide team of engineers and marketing and sales professionals.
• The key is to show the advantages of VCSEL over existing technology to a diverse worldwide market.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-BB Business MarketingPP7-BB Business Marketing
Business marketing is the marketing of goods and
services to:
1. commercial enterprises,
2. Governments, and
3. other profit and not for profit organizations,
for use in the creation of goods and services that they
then produce and market to other business customers,
as well as individuals and ultimate consumers.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-CC Organizational BuyersPP7-CC Organizational Buyers
Organizational buyers are those manufacturers,
wholesalers and retailers, and government agencies
that buy goods and services for their own use or for
resale.
EXAMPLE: Buying computers and telephones for the
firm’s own use.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-1 Type and Number of Organizational CustomersPP7-1 Type and Number of Organizational Customers Type of Organization Number Kind of Market
Manufacturers 387,000
Mining 28,000
Construction 672,000
Farms, forestry, and fisheries 955,000 Industrial (business)
Service 8,594,000 markets --(11,552,000)
Finance, insurance, and real estate 617,000
Transportation and public utilities 276,000
Not-for-profit associations 23,000
Wholesalers 512,000 Reseller markets --
Retailers 1,564,000 2,076,000
Government units 85,000 Government markets --
85,000
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-DD North American Industry Classification System (NAICS)PP7-DD North American Industry Classification System (NAICS)
• NAICS provides common industry definitions for Canada, Mexico, and the U.S., which facilitate the measurement of economic activity in the three member countries of NAFTA.
• NAICS replaced the Standard Industrial Classification system, a system which had been in place more than 50 years.
• NAICS is consistent with the International Standard Industrial Classification of All Economic Activities, published by the United Nations, to facilitate measurement of global economic activity.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-2 NAICS breakdown for broadcasting and PP7-2 NAICS breakdown for broadcasting and telecommunications industriestelecommunications industries
Broadcasting andtelecommunicationsBroadcasting andtelecommunications
Radio and televisionbroadcastingRadio and televisionbroadcasting
Wiretelecommunicationcarriers
Wiretelecommunicationcarriers
PagingPaging
Cable networks andprogram distributionCable networks andprogram distribution
TelecommunicationsTelecommunications
Wirelesstelecommunicationcarriers, exceptsatellite paging
Wirelesstelecommunicationcarriers, exceptsatellite paging
TelecommunicationsresellersTelecommunicationsresellers
SatellitetelecommunicationsSatellitetelecommunications
OthertelecommunicationsOthertelecommunications
Cellular and otherwirelesstelecommunications
Cellular and otherwirelesstelecommunications
2 DigitIndustry Subsector
3 DigitIndustry Group
4 DigitIndustry
5 DigitU.S. National Industry
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-EE Concept CheckPP7-EE Concept Check
1. What are the three main types of organizational buyers?
2. What is the North American
Industry Classification System
(NAICS)?
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7–3 Key characteristics of organizational buying behaviorPP7–3 Key characteristics of organizational buying behavior
Market Characteristics– Demand for industrial products and services
is derived.
– Few customers typically exist, and their purchaseorders are large.
Product or Service Characteristics– Products or services are technical in nature and
purchased on the basis of specifications.
– There is a predominance of raw and semi-finishedgoods purchased.
– Heavy emphasis is placed on delivery time, technical assistance, postal service, and financing assistance.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7–3 Key characteristics of organizational buying behavior -- PP7–3 Key characteristics of organizational buying behavior -- continued continued
Buying Process Characteristics
– Technically qualified and professional buyers exist and follow established purchasing policies and procedures
– Buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and products (services).
– Multiple buying influences exist, and multiple parties participate in purchase decisions.
– Reciprocal arrangements exist, and negotiation between buyers and sellers is commonplace.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7–3 Key characteristics of organizational buying behavior -- PP7–3 Key characteristics of organizational buying behavior -- continued continued
Other Marketing Mix Characteristics– Direct selling to organizational buyers is the rule,
and physical distribution is very important
– Advertising and other forms of promotion are technical in nature.
– Price is often negotiated, evaluated as part of broader seller and product (service) qualities, typically inelastic owing to deriveddemand, and frequently affected by trade and quality discounts.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-FF Other Organizational Buyer TerminologyPP7-FF Other Organizational Buyer Terminology
• Reverse Marketing involves the deliberate effort by
organizational buyers to build relationships that shape suppliers’ products, services, and capabilities to fit a buyer’s needs and those of its customers.
• Reciprocity is an industrial buying practice in which two organizations agree to purchase each other’s products and services.
• A supply partnership exists when a 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 consumer.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7–A Key Organizational Buying CriteriaPP7–A Key Organizational Buying Criteria
QualitySpecifications
TechnicalCapability
PastPerformance
OrganizationalOrganizationalBuying CriteriaBuying Criteria
DeliverySchedulesPrice
Warranty/Claim Policies
ProductionFacilities/Capacity
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-GG Four Questions to Provide Guidance in Understanding PP7-GG Four Questions to Provide Guidance in Understanding the Buying Center the Buying Center
1. Which individuals are in the buying center for the product or service?
2. What is the relative influence of each member of
of the group.
3. What are the buying criteria of each member?
4. How does each member of the group perceive
our firm, our products and services, and our
salespeople?
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7–B Five roles in the buying centerPP7–B Five roles in the buying center
DecisionDecisionMakerMaker
InitiatorInitiator UserUser
InfluencerInfluencer GatekeeperGatekeeper
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-4a Comparing the stages in consumer and organizational PP7-4a Comparing the stages in consumer and organizational purchases purchases
Stage in the Buying Consumer Purchase: Portable Organizational Purchase:
Decision Process CD Player for a student Headphones for CD player
Problem recognition Student doesn’t like the sound Marketing research and sales
of the stereo system now owned departments observe that
and desires a portable CD competitors are including
player. headphones on their models.
The firm decides to include
headphones on their own
new
models, which will be
purchased from an outside
supplier.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
Stage in the Buying Consumer Purchase: Portable Organizational Purchase:
Decision Process CD Player for a student Headphones for CD player
Information search Student uses past experience, Design and production
that of friends, ads, and engineers draft specifications
Consumer Reports to collect for headphones. The
information and uncover purchasing department
alternatives. Identifies suppliers of CD
player headphones.
Alternative evaluation Alternative portable CD Purchasing and engineering
players are evaluated on the personnel visit with suppliers
basis of important attributes and assess (1) facilities, (2)
desired in a CD player and capacity, (3) quality control,
several stores are visited. (4) financial status. They drop
any suppliers not satisfactory
on these factors.
PP7-4b Comparing the stages in consumer and organizational PP7-4b Comparing the stages in consumer and organizational purchases -- continued purchases -- continued
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-4c Comparing the stages in consumer and organizational PP7-4c Comparing the stages in consumer and organizational purchases -- continuedpurchases -- continued
Stage in the Buying Consumer Purchase: Portable Organizational Purchase:
Decision Process CD Player for a student Headphones for CD player
Purchase decision A specific brand of portable CD They use (1) quality, (2) price, player is selected, the price is (3) delivery, and (4) technical
paid, and the student leaves capability as key buying
the store. criteria to select a supplier.
Then they negotiate terms
and award a contract.
Postpurchase behavior Student reevaluates the They evaluate suppliers
purchase decision, may return using a formal vendor rating
the portable CD player to the system and notify supplier if
store if it is unsatisfactory, and headphones do not meet its
looks for supportive quality standard. If the
information to justify the problem is not corrected,
purchase. they drop the firm as a
future supplier.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-5 How the buying situation affects buying center behaviorPP7-5 How the buying situation affects buying center behavior
Buying-Class Situation
Buying Center Dimension New Buy Straight/Modified Rebuy
People involved Many Few
Decision Time Long Short
Problem definition Uncertain Well-defined
Buying objective Good solution Low-price supplier
Suppliers considered New/present Present
Buying influence Technical/operating Purchasing Agent
personnel
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-C Three Types of Buying SituationsPP7-C Three Types of Buying SituationsD
ecis
ion
tim
e an
d p
rob
lem
def
init
ion
Short/well defined
Few ManyNumber of people in buying centerand number of suppliers considered
Straightrebuy
Straightrebuy
Modifiedbuy
Modifiedbuy
Newbuy
Newbuy
Long/uncertain
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-HH Concept CheckPP7-HH Concept Check
1. What one department is almost
always represented by a person in
the buying center?
2. What are the three types of
buying situations or buy classes?
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-IIa Stages in the Industrial Buying ProcessPP7-IIa Stages in the Industrial Buying Process
• Problem Recognition often involves a make-buy decision -- an evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself.
• Information Search often involves value analysis -- a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs.
• Alternative Evaluation often involves the generation of a bidders list -- a list of firms believed to be qualified to supply a given item.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
PP7-IIb Stages in the Industrial Buying ProcessPP7-IIb Stages in the Industrial Buying Process
• Purchase Decision -- The period from supplier selection to order placement to product delivery can take several weeks or even months, as negotiations regarding price, performance and delivery terms will continue. Additional negotiations may involve warranties, indemnities, and payment schedules.
• Postpurchase Behavior -- Evaluation occurs in the industrial purchase decision process, but is formal and often sophisticated. The performance of the supplier is monitored and recorded.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS
1. What is a make-buy
decision?
2. What is a bidders list?
PP7-JJ Concept CheckPP7-JJ Concept Check