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ORGANIZA-TIONAL
MARKETS AND BUYER
BEHAVIOR
CHAPTER
THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS
• Business Marketing
• Industrial Markets (Producers)
• Reseller Markets (Resellers)
• Government Markets (Fed, St, City)• Not for Profit Associations
Key is Key is intended intended
useuse
Organizational Customers in the U.S.
Not for Profit Associations 56,000
HOW TO MEASURE ORGANIZATIONAL MARKETS
• (NAICS)
• 1. Find your competition• 2. Measure your market’s size and your share of it
• 3. Monitor growth in other industries to spot
new business opportunities
THE BENEFITS OF NAICS CODES
http://www.census.gov/epcd/naics02/naico602.htm#N21
DEMAND CHARACTERISTICS OF ORGANIZATIONAL BUYING
Demand is...Demand is...Demand is...Demand is... DescriptionDescriptionDescriptionDescription
DerivedDerivedDerivedDerived Demand for business products results from demand for consumer products
Demand for business products results from demand for consumer products
InelasticInelasticInelasticInelastic A change in price will not significantly affect the demand for product
A change in price will not significantly affect the demand for product
JointJointJointJoint Multiple items are used together in final product. Demand for one item affects allMultiple items are used together in final
product. Demand for one item affects all
FluctuatingFluctuatingFluctuatingFluctuating Demand for business products is more volatile than for consumer products
Demand for business products is more volatile than for consumer products
Characteristics of Organizational Buying Behavior
CharacteristicCharacteristicCharacteristicCharacteristic
DemandDemand
VolumeVolume
# of Customers# of Customers
LocationLocation
DistributionDistribution
Nature of BuyNature of Buy
Buy InfluenceBuy Influence
NegotiationsNegotiations
ReciprocityReciprocity
LeasingLeasing
PromotionPromotion
Business MarketBusiness MarketBusiness MarketBusiness Market
OrganizationalOrganizational
Larger Larger
FewerFewer
ConcentratedConcentrated
More DirectMore Direct
More ProfessionalMore Professional
MultipleMultiple
More ComplexMore Complex
YesYes
GreaterGreater
Personal SellingPersonal Selling
Consumer MarketConsumer MarketConsumer MarketConsumer Market
IndividualIndividual
SmallerSmaller
ManyMany
DispersedDispersed
More IndirectMore Indirect
More PersonalMore Personal
SingleSingle
SimplerSimpler
NoNo
LesserLesser
AdvertisingAdvertising
Business vs Consumer Markets
HOW BUSINESSES CHOOSE A VENDOR
BUYER-SELLER RELATIONSHIPS IN ORGANIZATIONAL BUYING
Reciprocity Ford and Firestone
Supply Partnership – Walmart and P & G
BUYING CENTERS
Buying Situations and the Buying Center
1) Straight Rebuy
2) Modified Rebuy
3) New Buy
BUSINESS BUYING SITUATIONS
How the buying situation affects buying center behavior
ONLINE BUYING IN ORGANIZATIONAL MARKETS
• 80% of e-trade dollar value is B2B
WHY?
1.Buyers need timely, detailed information2.Buyers need to get that info quickly3.E-trade reduces processing costs4.E-trade reduces marketing costs5.Wider potential customer or supplier base
ONLINE BUYING IN ORGANIZATIONAL MARKETS
• Online Auctions in Organizational Markets
Traditional Auction –looking for buyers
Reverse Auction- looking for sellers
How buyer and seller participants and price behavior differ by type of online auction
Concept Check
1. What are the three main types of organizational buyers?
A: industrial firms; resellers; government units
Concept Check
A: The 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 NAFTA.
2. What is the North American Industry Classification System (NAICS)?
Concept Check
2. In general, which type of online auction creates upward pressure on bid prices and which type creates downward pressure on bid prices?
A: traditional auction; reverse auction
Concept Check
2. What are the three types of buying situations or buy classes?
A: straight rebuy; modified rebuy;new buy
Concept Check
1. What are e-marketplaces?
A: E-marketplaces are online trading communities that bring together buyers and supplier organizations.
Business Marketing
Business marketing- The marketing of goods and services to individuals and organizations for purposes other than personal consumption.
Business marketing- The marketing of goods and services to individuals and organizations for purposes other than personal consumption.
North American Industry Classification System (NAICS)
The 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).
The 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).
Supply Partnership
A supply partnership 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.
A supply partnership 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.
Buying Center
A buying center is the group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a purchase decision.
A buying center is the group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a purchase decision.
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.
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.
E-Marketplaces
A traditional auction is 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.
A traditional auction is 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.
Traditional Auction
A reverse auction is 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.
A reverse auction is 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.
Reverse Auction