1. Business and Organizational Customers and Their Buying Behavior
Chapter Seven
Business and Organizational Customers and Their Buying Behavior
Chapter 7
Business and Organizational Customers and Their Buying Behavior
For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © McGraw-Hill Companies, Inc. McGraw-Hill/Irwin 1

2. At the end of this presentation, you should be able to:
This slide refers to material on pp. 172.
Describe who the business and organizational buyers are.
See why business and organizational purchase decisions often involve multiple influences.
Understand the problem-solving behavior of organizational buyers, and how they get market information.
Understand the different types of buyer-seller relationships and their benefits and limitations. 2

3. At the end of this presentation, you should be able to:
This slide refers to material on pp. 172.
Know about the number and distribution of manufacturers and why they are an important customer group.
Know how buying by service firms, retailers, wholesalers, and governments is similar to—and different from—buying by manufacturers.
Understand important new terms. 3

4. All Business & Organizational Customers
Business and Organizational Customers – A Big Opportunity (buy for resale or produce other goods and srvices)
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Manufacturers
Farms, mines, etc.
Financial Institutions
Other providers
Producers
All Business & Organizational Customers
Wholesalers
Retailers
Intermediaries
Federal
State and Local
Governments
National
Local
Nonprofits 6

5. Business and Organizational Customers
This slide refers to material on pp.172.
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 7

6. Serving Small Business Customers
This slide relates to material on pp. 190. 8

7. Serving International Markets
This slide refers to material on pp.174.
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 10

8. Specifications and Quality
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Specifications Describe the Need
Quality Certification
- ISO 9000 11

9. Multiple Influence and Roles in the Buying Center
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Buyers
(work with suppliers & arrange
terms of sale)
Influencers
(write technical
specifications)
Buying Center
Users
Deciders
(power to select &
approve suppliers)
Gatekeepers 12

10. Checking Your Knowledge
This slide relates to material on pp. 176.
Mary is a receptionist for a group of seven physicians. As she controls the calendars for the physicians, any sales representatives from pharmaceutical companies wanting to call on the physicians have to go through Mary. As a result, it is very important for sales reps to cultivate a good relationship with her. In the buying center, Mary would be best described as a:
buyer.
user.
influencer.
gatekeeper.
decider. 13

11. Checking Your Knowledge
This slide relates to material on pp. 176.
Joe is a purchasing specialist for a large company. He has the authority to execute purchase orders or amounts up to $100,000. On a purchase order for a higher amount, Joe arranges the terms of sale, but the transaction has to be approved by the company president. In the buying center for a purchase in excess of $100,000, Joe is a _________ and the president is a _________:
buyer; influencer.
influencer; buyer.
buyer; decider.
gatekeeper; decider.
user; influencer.
Answer: C 14

12. Evaluating Organizational Buying Influences
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Vendor Analysis Considers All Influences for rating suppliers
Behavioral Needs Are Important Too (e.g., uncooperative sales representative)
Ethical Conflicts May Arise—code of conduct governing interactions
Purchasing May Be Centralized to achieve economies of scale
Buying Firm’s Values Affect Purchasing Practices 15

13. Organizational Buying Processes
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Characteristics
Type of Process
Much
New-Task
Buying
Much
New-Task
Buying
Much
New-Task
Buying
Medium
Some
Modified
Rebuy
Little
None
Straight
Rebuy
Little
None
Straight
Rebuy
Time required
Multiple influences
Review of suppliers
Information needed 17

14. New Task Buying Requires Information
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Web sites with useful content
Search Engines to gather information
Online Communities where buyer share experiences
New-Task Buying Requires Information
Reverse Auctions foster price competition among suppliers
Competitive Bids used to compare offerings 19

15. Checking Your Knowledge
This slide relates to material on pp. 180.
Jane, a sales representative for an industrial supply house, calls on a prospective business customer. The customer has an established relationship with another supplier, but says that there have been some reliability problems with deliveries. Jane seizes the opportunity to describe her company’s state-of-the-art logistics and transportation system that provides outstanding delivery reliability at low shipping costs. Jane is encouraged because her customer seems to be in a ___________ situation.
straight rebuy
modified rebuy
new-task
extensive problem-solving
limited problem-solving
ANSWER: B 20

16. Checking Your Knowledge
This slide relates to material on pp. 180.
Auto parts wholesaler Fixem, Inc. decides to invest in a new data management system to increase the efficiency of its warehouse operations. Previously, all record-keeping was done via printed documents, but now all transactions will be electronic. This change will require Fixem to expend a significant amount of money for hardware, software, and training. However, in the long run, the cost savings should exceed the up-front investment. Fixem has arranged for presentations to be made by three different vendors. Fixem seems to be facing a ______________ buying situation.
straight rebuy
modified rebuy
new-task
extensive problem-solving
limited problem-solving
ANSWER: C 21

17. Interactive Exercise: Organizational Buying
This slide refers to material on pp. 180. 22

18. Buyer-Seller Relationships in Business Markets
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Close Relationships
May Produce
Mutual Benefits
Mutual trust
Long-term outlook
Share tasks at lower total cost
Relationships May
Not Make Sense
Reduced flexibility
Some purchases are too small or infrequent
Some purchases require much special attention
BUT 23

19. Relationships Have Many Dimensions (cooperation treats problems as joint responsibilities)
This slide refers to material on pp. 185. 24

20. Relationships Have Many Dimensions (operational linkages are direct ties between internal operations of the buyer and seller firms—just-in-time delivery); RSA--outsource
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21. Relationship Dimensions
This slide refers to material on pp.185.
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 26

22. Relationship Dimensions
This slide refers to material on pp.185.
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 27

23. Checking Your Knowledge
This slide relates to material on pp. 185.
Gotcha! is a chain of trendy stores catering to the urban contemporary market. As part of its close relationship with suppliers, Gotcha! has an Internet site that is accessible only by suppliers, and it provides up-to-the minute point-of-sale information from all of the Gotcha! stores. Suppliers can see how their products are doing at retail during any time of the day or night. In the relationship between Gotcha! and its suppliers, the Gotcha! supplier site is an example of:
information sharing.
legal bonds.
reciprocity.
operational linkages.
negotiated contracts.
ANSWER: A 28

24. Dynamics of Buyer-Seller Relationships
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Powerful Customer May Control the Relationship
Buyers May Use Several Sources to Spread Risks
Buying Varies by Customer Type 29

25. Illustrative NAICS Code Breakdown for Apparel Manufacturers
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Food (311)
others…
Leather (316)
Apparel (315)
Manufacturing (31)
Construction (23)
Manufacturing (31)
Retail
(44)
others…
Knitting Mills (3151)
others…
Apparel accessories (3159)
Cut & Sew Apparel (3152)
Apparel
(315)
Men’s & boys’ (31522)
others…
Other cut & sew (31529)
Women’s & girls’ (31523)
Cut & sew apparel (3152)
Lingerie (315231)
others…
Dresses (315233)
Blouses (315232)
Women’s & girls’ (31523) 30

26. Manufacturers Are Important Customers
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Not Many Big Ones (50% have less than 10 workers)
Clustered in Geographic Areas
NAICS Codes
Business Data Classifies (similar) Industries (e.g., apparel manufactures are the main customers for zippers) 31

27. Buying May Not Be Formal
Producers of Services – Smaller and More Spread Out (about 4.6 MM service firms in U.S.)
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Car Repair
Medical Services
Legal Services
Housekeeping Services
Library Service
Small Service Buyers
Buying May Not Be Formal 32

28. Retailers & Wholesalers Buy for Their Customers
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Buyers Watch Computer Output Closely to track inventory and price
Committee Buying Is Impersonal
Reorders Are Straight Rebuys
Resident Buyers May Help (independent buying agents)
Some Are Not “Open to Buy” (availability of funds within an organization’s separate divisions) 33

29. The Government Market Size and Diversity Competitive Bids
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Size and Diversity
Competitive Bids
Foreign Corrupt Practices Act—prohibits bribes
Rigged Specifications
Foreign Governments information is less available
“Approved” Supplier List
Government Wants contain in government publications
Negotiated Contracts 34

30. Study Question 1
This slide relates to material on p. 188.
Which of the following is NOT an example of an organizational buyer? 
A. a government buyer purchasing a new desk for the mayor's office.
B. a woman buying cookware to sell to her friends and neighbors.
C. a sales rep buying a new necktie to make a good impression.
D. a wholesaler buying a delivery truck.
E. None of the above is a good example.
ANSWER: C

31. Study Question 2
This slide relates to material on p. 188.
Which of the following is a business or organizational customer, as opposed to an individual final consumer? 
A. A wholesaler purchasing merchandise for resale.
B. A business executive who purchases a new suit.
C. A teacher who fills her car with gasoline.
D. A homeowner who buys flowers at a garden center.
E. None of the above example.
ANSWER: A

32. Study Question 3
This slide relates to material on p. 188.
John Deere is considered which type of organizational customer? 
A. Producer.
B. Intermediary.
C. Government.
D. Nonprofit.
ANSWER: A

33. Study Question 4
This slide relates to material on p. 188.
In the purchase of a new computer monitor, which of the following is an example of a user? 
A. A purchasing manager who arranges the terms of the sale.
B. An IT manager who supplies information for evaluating alternatives.
C. A secretary whose computer monitor is being replaced.
D. A receptionist who controls the flow of information.
E. A supply manager who helps write specifications.
ANSWER: C

34. Study Question 5 A straight rebuy is MOST likely to occur for:
This slide relates to material on p. 188.
A straight rebuy is MOST likely to occur for: 
A. a new computer network.
B. a pension plan which meets the new government regulations.
C. paper supplies for the copy equipment.
D. electronic components for a new product.
E. executive chairs for a new office building.
ANSWER: C