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LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 6, YOU SHOULD BE ABLE TO: Distinguish among industrial, reseller, and government organizational markets. LO2 Describe the key characteristics of organizational buying that make it different from consumer buying. 6-2

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 6, YOU SHOULD BE ABLE TO: Explain how buying centers and buying situations influence organizational purchasing. LO4 Recognize the importance and nature of online buying in industrial, reseller, and government organizational markets. 6-3

BUYING PAPER IS A GLOBAL BUSINESS DECISION AT JCPENNEY 6-4

THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS LO1 Business Marketing Organizational Buyers Industrial Markets (Industrial Firms) Reseller Markets (Resellers) Government Markets (Government Units) Wholesalers Retailers Global Organizational Markets 6-5

FIGURE 6-A Type and number of organization establishments in the U.S. 6-6

North American Industry Classification System (NAICS) MEASURING DOMESTIC AND GLOBAL INDUSTRIAL, RESELLER, AND GOVERNMENT MARKETS LO1 North American Industry Classification System (NAICS) North American Product Classification System (NAPCS) 6-7

FIGURE 6-1 NAICS breakdown for the information industries sector: NAICS code 51 (abbreviated) 6-8

FIGURE 6-2 Key characteristics and dimensions of organizational buying behavior 6-9

CHARACTERISTICS OF ORGANIZATIONAL BUYING LO2 Derived Demand Size of Order or Purchase Number of Potential Buyers Organizational Buying Objectives 6-10

FIGURE 6-B Key organizational buying criteria 6-11

CHARACTERISTICS OF ORGANIZATIONAL BUYING LO2 Organizational Buying Criteria ISO 9000 Supplier Development Just-in-Time 6-12

MARKETING MATTERS Harley-Davidson’s Supplier Collaboration Creates Customer Value…and a Great Ride 6-13

CHARACTERISTICS OF ORGANIZATIONAL BUYING LO2 Buyer-Seller Relationships and Supply Partnerships Reciprocity Supply Partnership 6-14

People in the Buying Center CHARACTERISTICS OF ORGANIZATIONAL BUYING THE BUYING CENTER—A CROSS-FUNCTIONAL GROUP LO3 Buying Center Buying Committee People in the Buying Center Roles in the Buying Center Users Deciders Influencers Gatekeepers Buyers 6-15

CHARACTERISTICS OF ORGANIZATIONAL BUYING THE BUYING CENTER—A CROSS-FUNCTIONAL GROUP LO3 Buy Classes Straight Rebuy Modified Rebuy New Rebuy 6-16

FIGURE 6-3 The buying situation affects buying center behavior in different ways 6-17

FIGURE 6-4 Comparing the stages in a consumer and organizational purchase decision process 6-18

Organizational Buying Behavior for a Machine Vision System CHARTING THE ORGANIZATIONAL BUYING PROCESS STAGES IN BUYING A MACHINE VISION SYSTEM LO3 Organizational Buying Behavior for a Machine Vision System Stage 1: Problem Recognition Make-Buy Decision Stage 2: Information Search Value Analysis 6-19

Stage 3: Alternative Evaluation CHARTING THE ORGANIZATIONAL BUYING PROCESS STAGES IN BUYING A MACHINE VISION SYSTEM LO3 Stage 3: Alternative Evaluation Bidder’s List Stage 4: Purchase Decision Stage 5: Postpurchase Behavior 6-20

FIGURE 6-5 Product and supplier selection criteria for buying machine vision equipment emphasize factors other than price 6-21

ONLINE BUYING IN ORGANIZATIONAL MARKETS LO4 Prominence of Online Buying in Organizational Markets E-marketplaces Online Auctions in Organizational Markets Traditional Auction Reverse Auction 6-22

FIGURE 6-6 How buyer and seller participants and price behavior differ by type of online auction 6-23

LANDS’ END: WHERE BUYERS RULE VIDEO CASE 6 6-24

VIDEO CASE 6 LANDS’ END 1. (a) Who is likely to comprise the buying center in the decision to select a new supplier for Lands’ End? (b) Which of the buying center members are likely to play the roles of users, influencers, buyers, deciders, and gatekeepers? 6-25

VIDEO CASE 6 LANDS’ END 2. (a) Which stages of the organizational buying decision process does Lands’ End follow when it selects a new supplier? (b) What selection criteria does the company utilize in the process. 6-26

VIDEO CASE 6 LANDS’ END 3. Describe purchases Lands’ End buyers typically face in each of the three buying situations: straight rebuy, modified rebuy, new buy. 6-27

SUPPLEMENTAL LECTURE NOTE 6-1 HOW ORGANIZATIONS CAN IMPROVE THEIR PURCHASING SUPPLEMENTAL LECTURE NOTE 6-1 6-28

DAKTRONICS: REACHING AN ORGANIZATION’S BUYING CENTER IN-CLASS ACTIVITY 6-1 6-29

Daktronics Brochure (Cover & Sports) 6-30

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Business Marketing Business marketing involves the marketing of goods and services to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they can produce and market to others. 6-33

Organizational Buyers Organizational buyers are those manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale. 6-34

North American Industry Classification System (NAICS) The North American Industry Classification System (NAICS) provides common industry definitions for Canada, Mexico, and the United States, which makes easier the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA). 6-35

Derived Demand Derived demand is the demand for industrial products and services is driven by, or derived from, demand for consumer products and services. 6-36

Organizational Buying Criteria Organizational buying criteria are the objective attributes of the supplier’s products and services and the capabilities of the supplier itself. 6-37

ISO 9000 ISO 9000 consists of standards for registration and certification of a manufacturer’s quality management and assurance system based on an on-site audit of practices and procedures developed by the International Standards Organization (ISO). 6-38

Supplier Development Supplier development is 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. 6-39

Reciprocity Reciprocity is an industrial buying practice in which two organizations agree to purchase each other’s products and services. 6-40

Supply Partnership Supply partnership is a relationship that exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate consumer. 6-41

Buying Center A buying center consists of a group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a purchase decision. 6-42

Buy Classes Buy classes consists of three types of organizational buying situations: straight rebuy, new buy, and modified rebuy. 6-43

Organizational Buying Behavior Organizational buying behavior is the decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers. 6-44

Make-Buy Decision A make-buy decision involves an evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself. 6-45

Value Analysis Value analysis involves a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs. 6-46

Bidder’s List A bidder’s list is a list of firms believed to be qualified to supply a given item. 6-47

E-marketplaces E-marketplaces are online trading communities that bring together buyers and supplier organizations to make possible the real time exchange of information, money, products, and services. Also called B2B exchanges or e-hubs. 6-48

Traditional Auction A traditional auction is, within an e-marketplace, an online auction in which a seller puts an item up for sale and would-be buyers are invited to bid in competition with each other. 6-49

Reverse Auction A reverse auction is, within an e-marketplace, an online auction in which a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other. 6-50