Chapter 7 Business Markets & Organizational Buying.

Chapter 7Chapter 7

Business Markets & Business Markets & Organizational BuyingOrganizational Buying

ObjectivesObjectives

ID components of business marketsLearn steps of organizational buying

decisionsCharacterize basic organizational buying

situationsExplore effect of Internet on B-to-B marketingUnderstand importance of the buying centerExplore needs of organizational buyers, and

strategies to meet those needsDescribe nature of organizational demandOverview NAICS and its usefulness

Key questions:

•Who bought it?

•Why did they buy it?

Key questions:

•Who bought it?

•Why did they buy it?

Business-to-Business Business-to-Business MarketingMarketing

Any sale to an industrial user, wholesaler, retailer, or organization other than the ultimate consumer. . .

Characteristics of the Characteristics of the Business MarketBusiness Market

RelativelyRelativelyfew customersfew customersRelativelyRelativelyfew customersfew customers

GeographicalGeographicalConcentrationConcentrationGeographicalGeographicalConcentrationConcentration

Prefer to buyPrefer to buydirect fromdirect frommanufacturermanufacturer

Prefer to buyPrefer to buydirect fromdirect frommanufacturermanufacturer

Expertise inExpertise inbuyingbuyingExpertise inExpertise inbuyingbuying

ImportanceImportanceof repeat of repeat transactionstransactions

ImportanceImportanceof repeat of repeat transactionstransactions

GlobalGlobalCompetitionCompetition

Buy Phase: Steps in Buy Phase: Steps in Organizational BuyingOrganizational Buying

Step 1:Step 1:IdentificationIdentificationof the needof the need

Step 2:Step 2:EstablishEstablishObjectivesObjectives

Step 3:Step 3:ID Suppliers/ID Suppliers/Evaluate Evaluate AlternativesAlternatives

Step 4:Step 4:Selection ofSelection ofSuppliers/Suppliers/NegotiationsNegotiations

Step 5:Step 5:Establish Establish RelationshipRelationship

Three buying situationsThree buying situations

Straight rebuy: Automatic and regular purchase of familiar productsModified rebuy: Buyer is not completely satisfied with current suppliers and shops aroundNew task buying: Buyer seeks to fill a need never before addressed

The Internet Dramatically The Internet Dramatically Changes Organizational Changes Organizational

BuyingBuying

The Internet Dramatically The Internet Dramatically Changes Organizational Changes Organizational

BuyingBuying

Information availability & dissemination

Customer customization

Customer serviceMessagingFAQ’s

Increase # of biddersDecrease costs

BUYING CENTER

The Buying CenterThe Buying Center

Informal & dynamic

Cross-departmental

Information centerAcquisitionDisseminationProcessing

DATA INFORMATION

BUYING

DECISION

Buying Center: RolesBuying Center: Roles

Roles of buying center individuals include….UsersGatekeepersInfluencersDecidersBuyers

Roles in Organizational Roles in Organizational Buying: UsersBuying: Users

Roles in Organizational Roles in Organizational Buying: UsersBuying: Users

Employees and managers who will actually use the product

Employees and managers who will actually use the product

Roles in Organizational Roles in Organizational Buying: BuyersBuying: Buyers

Roles in Organizational Roles in Organizational Buying: BuyersBuying: Buyers

Has the formal authority to purchase the product

Has the formal authority to purchase the product

Roles in Organizational Roles in Organizational Buying: GatekeeperBuying: Gatekeeper

Roles in Organizational Roles in Organizational Buying: GatekeeperBuying: Gatekeeper

Controls the flow of information related to the purchase

Controls the flow of information related to the purchase

Roles in Organizational Roles in Organizational Buying: DeciderBuying: Decider

Roles in Organizational Roles in Organizational Buying: DeciderBuying: Decider

Makes the actual purchase decision

Makes the actual purchase decision

Roles in Organizational Roles in Organizational Buying: InfluencerBuying: Influencer

Roles in Organizational Roles in Organizational Buying: InfluencerBuying: Influencer

Affects the purchase decision by supplying advice or information

Affects the purchase decision by supplying advice or information

Why Do Organizations Why Do Organizations Buy?Buy?

ProductProductQualityQuality

RelatedRelatedServicesServices

PricePrice

Delivery &Delivery &InventoryInventory

BottomBottomLineLine

Collab-Collab-orationoration

Generalizations About Generalizations About Organizational DemandOrganizational Demand

INCREASED INTERNATIONAL

TRADE

DEMAND FOR BUSINESS

FLYING

DEMAND FOR AIRPLANES

DEMAND FOR SHEET METAL AND ALUMINUM

INCREASED MINING

REQUIRED

Derived demand: Ore

Generalizations About Generalizations About Organizational DemandOrganizational Demand

Price inelasticityPrice/cost increases

passed to customerComponent prices small

% of total cost

Generalizations About Generalizations About Organizational DemandOrganizational Demand

Fluctuating demandLinked to

economy’s ups and downs

Larger inventories maintained

Product durability

North American Industry North American Industry Classification System Classification System

(NAICS)(NAICS)

Replaces SIC (Standard Industrial Classification system)

Incorporates technological changesCreates relevant & current industrial

databases

ReviewReview

ID components of business marketsLearn steps of organizational buying

decisionsCharacterize basic organizational buying

situationsExplore effect of Internet on B-to-B marketingUnderstand importance of the buying centerExplore needs of organizational buyers, and

strategies to meet those needsDescribe nature of organizational demandOverview NAICS and its usefulness