Presentation on theme: "ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR"— Presentation transcript:
1 ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR C H A P T E R S E V E NORGANIZATIONAL MARKETSAND BUYER BEHAVIORIrwin/McGraw-Hill
2 AFTER READING THIS CHAPTER YOU SHOULD 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.
3 PP7-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.
4 PP7-BB Business Marketing Business marketing is the marketing of goods andservices to:1. commercial enterprises,2. Governments, and3. other profit and not for profit organizations,for use in the creation of goods and services that theythen produce and market to other business customers,as well as individuals and ultimate consumers.
5 PP7-CC Organizational Buyers Organizational buyers are those manufacturers,wholesalers and retailers, and government agenciesthat buy goods and services for their own use or forresale.EXAMPLE: Buying computers and telephones for thefirm’s own use.
6 PP7-1 Type and Number of Organizational Customers Type of Organization Number Kind of MarketManufacturers ,000Mining ,000Construction ,000Farms, forestry, and fisheries 955,000 Industrial (business)Service ,594,000 markets --(11,552,000)Finance, insurance, and real estate 617,000Transportation and public utilities 276,000Not-for-profit associations 23,000Wholesalers ,000 Reseller markets --Retailers ,564,000 2,076,000Government units ,000 Government markets --85,000
7 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.
8 2 Digit Industry Subsector 5 Digit U.S. National Industry PP7-2 NAICS breakdown for broadcasting and telecommunications industries2 Digit Industry Subsector3 Digit Industry Group4 Digit Industry5 Digit U.S. National IndustryBroadcasting and telecommunicationsRadio and television broadcastingWire telecommunication carriersPagingCable networks and program distributionWireless telecommunication carriers, except satellite pagingCellular and other wireless telecommunicationsTelecommunicationsTelecommunications resellersSatellite telecommunicationsOther telecommunications
9 1. What are the three main types of organizational buyers? PP7-EE Concept Check1. What are the three main types of organizational buyers?2. What is the North AmericanIndustry Classification System(NAICS)?
10 PP7–3 Key characteristics of organizational buying behavior Market CharacteristicsDemand for industrial products and services is derived.Few customers typically exist, and their purchase orders are large.Product or Service CharacteristicsProducts or services are technical in nature and purchased on the basis of specifications.There is a predominance of raw and semi-finished goods purchased.Heavy emphasis is placed on delivery time, technical assistance, postal service, and financing assistance.
11 PP7–3 Key characteristics of organizational buying behavior -- PP7–3 Key characteristics of organizational buying behavior continuedBuying Process CharacteristicsTechnically qualified and professional buyers exist and follow established purchasing policies and proceduresBuying 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.
12 Other Marketing Mix Characteristics PP7–3 Key characteristics of organizational buying behavior continuedOther Marketing Mix CharacteristicsDirect selling to organizational buyers is the rule, and physical distribution is very importantAdvertising 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 derived demand, and frequently affected by trade and quality discounts.
13 PP7-FF Other Organizational Buyer Terminology Reverse Marketing involves the deliberate effort byorganizational 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.
15 2. What is the relative influence of each member of of the group. PP7-GG Four Questions to Provide Guidance in Understanding the Buying Center1. Which individuals are in the buying center for the product or service?2. What is the relative influence of each member ofof the group.3. What are the buying criteria of each member?4. How does each member of the group perceiveour firm, our products and services, and oursalespeople?
16 PP7–B Five roles in the buying center InitiatorUserDecision MakerInfluencerGatekeeper
17 PP7-4a Comparing the stages in consumer and organizational purchases Stage in the Buying Consumer Purchase: Portable Organizational Purchase:Decision Process CD Player for a student Headphones for CD playerProblem recognition Student doesn’t like the sound Marketing research and salesof the stereo system now owned departments observe thatand desires a portable CD competitors are includingplayer headphones on their models.The firm decides to includeheadphones on their own newmodels, which will bepurchased from an outsidesupplier.(continued)
18 PP7-4b Comparing the stages in consumer and organizational PP7-4b Comparing the stages in consumer and organizational purchases -- continuedStage in the Buying Consumer Purchase: Portable Organizational Purchase:Decision Process CD Player for a student Headphones for CD playerInformation search Student uses past experience, Design and productionthat of friends, ads, and engineers draft specificationsConsumer Reports to collect for headphones. Theinformation and uncover purchasing departmentalternatives Identifies suppliers of CDplayer headphones.Alternative evaluation Alternative portable CD Purchasing and engineeringplayers are evaluated on the personnel visit with suppliersbasis 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 dropany suppliers not satisfactoryon these factors.(continued)
19 PP7-4c Comparing the stages in consumer and organizational PP7-4c Comparing the stages in consumer and organizational purchases -- continuedStage in the Buying Consumer Purchase: Portable Organizational Purchase:Decision Process CD Player for a student Headphones for CD playerPurchase decision A specific brand of portable CD They use (1) quality, (2) price, player is selected, the price is (3) delivery, and (4) technicalpaid, and the student leaves capability as key buyingthe store criteria to select a supplier.Then they negotiate termsand award a contract.Postpurchase behavior Student reevaluates the They evaluate supplierspurchase decision, may return using a formal vendor ratingthe portable CD player to the system and notify supplier ifstore if it is unsatisfactory, and headphones do not meet itslooks for supportive quality standard. If theinformation to justify the problem is not corrected,purchase they drop the firm as afuture supplier.
20 PP7-5 How the buying situation affects buying center behavior Buying-Class SituationBuying Center Dimension New Buy Straight/Modified RebuyPeople involved Many FewDecision Time Long ShortProblem definition Uncertain Well-definedBuying objective Good solution Low-price supplierSuppliers considered New/present PresentBuying influence Technical/operating Purchasing Agentpersonnel
21 PP7-C Three Types of Buying Situations Decision time and problem definitionShort/well definedFewManyNumber of people in buying center and number of suppliers consideredStraight rebuyModified buyNew buyLong/uncertain
22 1. What one department is almost always represented by a person in PP7-HH Concept Check1. What one department is almostalways represented by a person inthe buying center?2. What are the three types ofbuying situations or buy classes?
23 PP7-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.(continued)
24 PP7-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.
25 decision? 2. What is a bidders list? 1. What is a make-buy PP7-JJ Concept Check1. What is a make-buydecision?2. What is a bidders list?