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