Organizational Marketing

7/27/2019 Organizational Marketing

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Organizational Marketing


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It is a group of firms that offer a product or class of products thatare close substitutes for each other.

Kotler

The commercial production and sale of goods and services.

A specific branch of manufacture and trade. The Heritage Illustrated Dictionary of English Language

Industry


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The marketing of products and services to commercial

enterprises, government bodies, and other organs, either

for resale to other industrial consumers or for use in theproduction of their own product or service.

Industrial Marketing


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Marketing activities of any kind of organisation, public

or private, which has exchange relationships with other

organisations.

Peter W. Turnbull

Business to Business Marketing


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Type of Organizational Markets Reseller

Institutional

Producer

Government

Classification of Industrial Goods Raw material and Semi-processed

Manufactured materials and parts

Capital goods

Services


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Major Segmentation Variables for Business Markets1. DEMOGRAPHICS

Industry

Company size

Location

2. OPERATING VARIABLESUser/Nonuser status

Technology

Customer capabilities

Size of order

Specific application

Urgency

3. SITUATIONAL FACTORS


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5. PERSONAL CHARACTERISTICSBuyer-seller similarity

Attitudes towards risk

Loyalty

Purchasing function organization

Power structure

Nature of existing relationships

General purchase policies

Purchasing criteria

4. PURCHASING APPROACHES

Major Segmentation Variables for Business Markets


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20 Features of Marketing in Organizational Markets

1 Derived nature of demand

2 Means and timing of payment

3 Expertise and bargaining power of customers

4 Fewer customers

5 Larger orders

6 Direct selling

7 Negotiability of terms of purchase and supply


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Recognizes the fact that the parties are

in a bargaining situation of strategic

interaction and that cooperation can

increase the total value of the interaction

rather than maximizing individual shares

Negotiations


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Negotiations

I win, you win

Competition - value to individualsvs

Cooperation - total value to themselves


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Accommodating

Partys Attempt to Satisfy

others Concern

Avoiding

Compromising

Collaborating

Competing

Day, Michaels & Purdue

Industrial Marketing Management 17 (1988).


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Competing: Desire to win ones own concern at the other partys expense.

Accommodating: Desire to satisfy others concerns without attending to ones own.

Collaborating: Desire to fully satisfy the concerns of both parties.

Avoiding: Exerting an attitude of indifference to the concerns of either party.

Compromising: Desire to reach an expedient, mutually acceptable agreement,short of total

satisfaction for either.


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8 Regulation of the purchasing process

9 Professionalism of purchasing

10 Complexity of the purchasing decision process

11 Significance of technical specifications

12 Importance of organizational and personal relationships

13 Reputation of suppliers and customers


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14 Importance of suppliers financial and competitive strength

15 Importance of repeat purchase flow to all parties

16 Importance of delivery arrangements17 Perception of risk to organizations and careers

18 Flexibility of suppliers in dealing with customers

19 Collaboration between suppliers and customers

20 Reliability and quality of goods or services

Dominic Wilson



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Ten Stages in the Procurement Process

1. Perception of Need - proactive or reaction to internal / external stimuli2. Analysis of Need - internal technical & operational assessment (including

linkages)

3. Specification Setting - (technical, delivery quantity, frequency, quality,packaging, design, etc.)

4. Identification of sources (word of mouth, research, consultancy, call fortenders, long/short lists)

5. Evaluation of Offerings prototypes, trials, site visits, references, rupeechecks


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Ten Stages in the Procurement Process

6. Negotiation over Terms - bargaining with short-listed finalists7. Selection of Supplierdecision, feedback and fallback arrangements8. Delivery & Payment - receipt, inspection, storage, form and timing of

payment, variance causes, etc.

9. Performance Evaluationof need resolution, performance of product andsupplier and relationship

10. Review -periodic review of arrangements due to changed circumstances andstrategies


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(adapted from Robinson et al)

The Buy-Grid Model Buy classesBuy phases Straightrebuy Modifiedrebuy Newtask

1 Perception of Need Yes Yes Yes2 Analysis of Need No Maybe Yes3 Specification Setting No Maybe Yes4 Identification of sources No Maybe Yes5 Evaluation of Offerings No Maybe Yes6 Negotiation over Terms No Maybe Yes7 Selection of supplier No Maybe Yes8 Delivery & Payment No Maybe Yes9 Performance Evaluation Yes Yes Yes10 Review Yes Yes Yes


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The Buying Center orDecision Making Unit


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A buying center (or DMU), in marketing,

procurement, and organizational studies, is a

group of employees, family members, or

members of any type of organization responsible

for finalizing major decisions, usually involving a

purchase.

The Buying Center or Decision

Making Unit


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1. Initiator who suggests purchasing a product or service.

2. Influencers who try to affect the outcome decision with their

opinions.

3. Deciders who have the final decision.

4. Buyers who are responsible for the contract.

5. End users of the item being purchased.

6. Gatekeepers who control the flow of information.

Roles in a DMU


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Vendor Analysis&Value Analysis


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Value Analysis

An analytical procedure to study the costs versus the benefits of acurrently purchased material, component, or design in order to

reduce the cost/benefit ratio as much as possible. It is also called

value engineering.

"Can the cost of this part, this subassembly, or this step be reduced in any way,

or even eliminated?"


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Vendor Analysis

The rating by a buying organisation of all possible suppliers

of a product on a scale to select the most appropriate; also

referred to as Vendor Rating.


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Vendor Analysis 7 Cs

Competencymanagerial, technical, administrative, and professional competence of thesupplying firm.

Capacitysupplier's ability to meet physical, intellectual and financial requirements.

Commitmentsupplier's willingness to commit physical, intellectual and financial resources.

Controleffective management control and information systems. Cash resourcesfinancial resources and stability of the supplier. Profit, ROI, ROE, asset-

turnover ratio.

Costtotal acquisition cost, not just price.

Consistencysupplier's ability to exhibit quality and reliability over time.


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Make-or-Buy Decision (Outsourcing)


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Make-or-Buy Decision

The make-or-buy decision is the act of making a strategic choice

between producing an item internally (in-house) or buying it externally

(from an outside supplier).

The buy side of the decision also is referred to as outsourcing. Make-or-buy decisions usually arise when a firm that has developed a product or

part is having trouble with current suppliers, or has diminishing capacity

or changing demand.


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Original Equipment Manufacturer


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An OEM (original equipment manufacturer) is a company that uses product components

from one or more other companies to build a product that it sells under its own company

name and brand.

Arguments for selling to an OEM are that you may be able to make money from a market

sector that your competitor already owns (perhaps because they have an existing customer

base) and that you can be a more efficient producer because you sell and manufacture

more of your product.

Frequently, an OEM company differentiates itself from the company it buys parts from by

adding features or using different selling concepts.

Original Equipment Manufacturer


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Reciprocity


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Reciprocity

Each party is both a buyer from and a

seller to the other party


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Product: quality, reliability specifications, design, product development, customization,and service emphasis

Price: negotiation over terms, make/buy decisions, discounting for scale or prestige oorder, reciprocity and role of leading customers

Promotion: direct sales force, key decision influencers, trade advertising, directmarketing, supplier reputation, contract process, source approval process and trade

shows

Place: delivery procedures, inventory implications, just-in-time implications andspecial handing

People: key decision influencers, long-term relationship, sales staff and managementproblems

The Marketing Mix in Organizational Markets

Selected Differences Between Markets


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Consumer Industrial

Segmentation Dispersed mass markets

Stress on demographics & psychographics

Few buyers

Emporographic grouping & reciprocity

Decision making Unobservable mental stages

Few decision makers - informal buying

Distinct observable stages

More DMUs - formal and complex

process.

New Products Demand-pull

Incremental InnovationTechnology-push Customization

Promotion Mass media, simple standard messagehighly exaggerated and abstract images

Personal selling, rational and verifiable

message for different functional

DMUS

l d ff k


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Consumer Industrial

ChannelsIndirect and multiple Fewer and direct.

Service Limited service Elaborate pre, during and after salesservice

Pricing Discrimination on customer self-selection

List prices

Discrimination on buyers price

sensitivity & value

Competitive bidding and negotiations

Monitoring & Bottom-

line

Sales, share & profit over period. Constant evaluation on customer

acquisition cost & life time value

Documents

Organizational Marketing