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MP Chapter 5

Understanding Organizations as Customers

TermDefinition
business marketing The marketing of products and services to firms, governments, or not-for-profit organizations.
organizational buyers Manufacturers, wholesalers, retailers, and government agencies that buy products and services for their own use or for resale. 3 categories of markets: industrial, resellers, and government
industrial markets Industrial firms in some way reprocess a product or service they buy before selling it again to the next buyer.
reseller markets Wholesalers and retailers that buy physical products and resell them again without any reprocessing.
government markets Government units are the federal, state, and local agencies that buy products and services for the constituents they serve.
North American Industry Classification System (NAICS) Provides common industry definitions for Canada, Mexico, and the United States.
6 digit classification code First 2 digits designate a sector of the economy, 3rd digit is a subsector, 4th digit is the industry group, 5th digit is a specific industry, and 6th digit is the individual country-level national industries.
derived demand The demand for industrial products and services is driven by demand for consumer products and services.
key characteristics of organizational buying behavior marketing characteristics product or service characteristics buying process characteristics marketing mix characteristics
market characteristics -Demand for industrial products and services is derived. -Few customers typically exist, and their purchase orders are large.
product or service characteristics -Products or services are technical in nature and purchased on the basis of specifications. -Many of the goods purchased are raw and semifinished. -Heavy emphasis is placed 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.
buying process characteristics (continued) -There are multiple buying influences, and multiple parties participate in purchase decisions. -There are reciprocal arrangements, and negotiation between buyers and sellers is common place. -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.
marketing mix characteristics (continued) -Price is often negotiated, evaluated as part of broader seller and product or service qualities, and frequently affected by quantity discounts.
organizational buying critieria -price -ability to meet the quality specifications required for item -ability to meet required delivery schedules -technical ability -warranties/claim policies if poor performance -past performance prior contracts -production facilities & 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.
reciprocity Industrial buying practice in which two organizations agree to purchase each other's products and services.
supply partnership When a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value or products and services delivered to the ultimate consumer.
sustainable procurement The process of integrating environmental considerations into all stages of an organization's buying process with the goal of reducing the negative impact on human health and the physical environment.
organizational buying behavior The process by which organizations determine the need for products and then choose among alternative suppliers.
5 stages in the buying decision process -Problem recognition -information search -alternative evaluation -purchase decision -postpurchase behavior
buying center The group of people in an organization that participates in the buying process.
5 roles in the buying center -users -influencers -buyers -deciders -gatekeepers
users in the buying center The people in the organization who actually use the product or service.
influencers in the buying center These people affect the buying decision, usually by helping define the specifications for what is bought.
buyers in the buying center These people have formal authority and responsibility to select the supplier and negotiate the terms of the contract.
deciders in the buying center These people have the formal and informal power to select or approve the supplier that receives the contract.
gatekeepers in the buying center These people control the flow of information in the buying center.
buy classes Three types of organizational buying situations: new buy, straight rebuy, or modified rebuy.
new buy 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 those who have a stake in the new buy.
straight rebuy The buyer or the purchasing manager reorders an existing product or service from the list of acceptable suppliers, probably without even checking with users or influencers from the engineering, production, or quality control departments.
modified rebuy The users, influencers, or deciders in the buying center want to change the product specifications, price, delivery schedule, or supplier. The order remains largely the same.
e-marketplaces Online trading communities that bring together buyers and supplier organizations.
traditional auction Occurs when a seller puts an item up for sale and would-be buyers bid in competition with each other.
reverse auction Occurs when a buyer communicates a need for something and would-be suppliers bid in competition with each other.
Created by: mariwalsh
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