Chapter 6 - JJ Brotton PDF

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JJ Brotton...

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Understanding Organizations as Customers Business-to-Business Marketing and Organizational Buyers ● Business-to-business marketing- the marketing of products and services to companies, governments, or not-for-profit organizations for use in the creation of products and services that they can produce and market to others. ○ Industrial Markets (Industrial Firms ○ Reseller Markets ■ Wholesalers ■ Retailers ○ Government Markets (Government Agencies) Key characteristics and dimensions of organizational buying behavior ● Market characteristics ○ Demand for industrial products and services is derived. ○ Few consumers typically exist, and their purchase orders are large. ● Product or service characteristics ○ Products or service are technical in nature and purchased on the basis of specifications. ○ Many of the goods purchased are raw and semi finished ○ Heavy emphasis is place on delivery time, technical assistance, and postsale service. ● Buying process characteristics ○ Technically qualified and professional buyers follow established purchasing policies and procedures ○ Buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and their products or services. ○ There are reciprocal arrangements, and negotiation between buyers and sellers is commonplace. ○ Online buying over the Internet is widespread. ● Marketing mix characteristics ○ Direct selling to organizational buyers is the rule, and distribution is very important. ○ Advertising and other forms of promotion are technical in nature. ○ Price is often negotiated, evaluated as part of broader seller and product/service qualities, and frequently affected by quality discounts. ● Organizational buyers- those manufacturers, wholesalers, retailers, service companies, not-for-profit, organizations, and government agencies that buy products and services for their own use or for resale. ○ Example: these organizations buy computers and telephone services for their own use. However, manufacturers buy raw material and parts that they reprocess into the finished goods they sell. ● Wholesalers and retailers resell the goods they buy without reprocessing them. ● Organizational buyers are divided into 3 markets: (1) industrial, (2) reseller, (3) government. ● Industrial firms in some way process a product or service they buy before selling it again

to the next buyer. Wholesalers and retailers that buy physical products and resell them again without any reprocessing are resellers. ● North American Industry Classification System (NAICS)- provides common industry for Canada, Mexico, and the United States, which makes it easier to measure economic activity in the three member countries of the North American Free Trade Agreement (NAFTA). Characteristics of Organizational Buying ● Derived demand- the demand from industrial products and services that is driven by, or derived from, the demand for consumer products and services. ○ For example, the demand for Weyerhaeuser’s pulp and paper products is based on consumer demand for newspaper, FedEx packages, and disposable diapers. ● Demand characteristics ○ Size of order or purchase ○ Number of potiential buyers ○ Organizational buying objectives ■ Profits ■ Women and minority suppliers and vendors ■ Efficiency ■ Environment and sustainability ● Supplier diversity: ○ Can be a strategic initiative for organizations ○ Goes hand-in-hand with workplace diversity ○ Some organizations actively engage minority- and women-owned suppliers and vendors Characteristics of organizational buying Organizational buying criteria ● Organizational buying criteria- the objective attributes of the supplier’s products and services and the capabilities of the supplier itself. ● Price ● Ability to meet specs ● Ability to meet schedules ● Technical capacity ● Warranties ● Production capacity ● Supplier development- 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. Buyer-seller relationships and supply partnerships ● Reciprocity- an industrial buying practice in which two organizations agree to purchase each other’s products and services ● Supply partnership- 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. ●

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Sustainable procurement ○ To benefit the environment The Organizational Buying Function and Process and the Buying center ● Organizational buying behavior- the decision-making process the organizations use to establish the need for products and services and identify, evaluate, and choose among the alternative brands and suppliers. ● Buying function in organization responsible for: ○ Selection and purchase of products ○ For organization’s use or resale ○ Formal bids ○ Purchasing contract awards ● Buying center- 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. ● Roles in the buying center ○ Users are the people in the organization who actually use the product or service, such as a secretary who will use a new word processor. ○ Influencers affect the buying decision, usually by helping define the specifications for what is bought. The information technology manager would be a key influencer in the purchase of a new mainframe computer. ○ Buyers have formal authority and responsibility to select the supplier and negotiate the terms of the contract. Senior purchasing managers perform this role at JCP Media. ○ Deciders have formal or informal power to select or approve the supplier that receives the contract. In routine orders the decider is usually the buyer or purchasing manager; in important technical purchases it is more likely to be someone from R&D, engineering, or quality control. The decider for a key component being incorporated in a final manufactured product might be any of these three people. ○ Gatekeepers control the flow of information in the buying center. Purchasing personnel, technical experts, and secretaries can all keep salespeople or information from reaching people performing the other four roles. The buying center ● The number of people in buying center depends on the buying situation ● Buy classes- consists of three types of organizational buying situations: straight rebuy, new buy, and modified rebuy. ○ New buy. Here the organization is a first-time buyer of the product or service. This involves greater potential risks in the purchase, so the buying center is enlarged to include all of those who have a stake in the new buy. BMW’s recent purchase od a multimillion-dollar cloud-based data management system from IMB represents a new buy. ○ Straight rebuy. Here the buyer or purchasing manager reorders an existing product or service from the list of acceptable suppliers, probably without checking with users or influencers from the engineering, production, or quality control

departments. Office supplies and maintenance services are usually obtained as straight rebuyers. ○ Modified rebuy. In this buying situation the users, influencers, or deciders in the buying center want to change the product specifications, price, delivery schedule, or supplier. Although the item purchased is largely the same as with the straight rebuy, the changes usually necessitate enlarging the buying center to include people outside the purchasing department. Online Buying in Business-to-Business Marketing ● Prominence of online buying in organizational markets ○ Provides timely information ● e-Marketplaces- 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. ● Traditional auction- in 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. ● Reverse auction- in an e-marketplace, 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....