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V I SUA L
chapter
AU D I O
Organizational buyers are divided into four different markets: industrial,
reseller, government, and non-profit. There are about 1.6 million industrial
firms, 376,000 resellers, 7,800 government units, and 83,000 non-profit
(charitable) organizations in Canada.
business marketing Marketing to firms, governments, or non-profit organizations
organizational buyers Manufacturers, wholesalers, retailers, and government
agencies that buy goods and services for their own use or for resale
Understand how to measure industrial, reseller, government,
and non-profit markets.
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Measuring industrial, reseller, government, and non-profit markets is an
important first step for firms interested in determining the size of markets. The
North American Industry Classification System (NAICS) is a convenient starting
point to begin this process.
North American Industry Classification System (NAICS) Provides common
industry definitions for Canada, Mexico, and the United States
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STU DY
Explain which key characteristics of organizational buying
make the process different from consumer buying.
Many aspects of organizational buying behaviour are different from consumer
buying behaviour. Some key differences between the two include demand
characteristics, number of potential buyers, buying objectives, buying criteria,
size of the order or purchase, buyer-seller relationships and partnerships, and
multiple buying influences within companies.
derived demand Demand for industrial products and services driven by demand
for consumer products and services
fluctuating demand Demand for business products and services fluctuates
more than demand for consumer products and services
inelastic demand Demand for products does not change because of increases
or decreases in price
supply partnership Relationship between a buyer and supplier that adopt
mutually beneficial objectives, policies, and procedures
Figure 5–3
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Describe how buying centres and buying situations influence
organizational purchasing.
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The three types of buying situations, or buy classes, are the straight rebuy,
the modified rebuy, and the new buy. These range from a routine reorder to a
totally new purchase.
l The stages in an organizational buying decision are the same as those for
consumer buying decisions: problem recognition, information search, alternative evaluation, purchase decision, and post-purchase behaviour.
l The buying centre concept is central to understanding organizational buying
behaviour. Knowing who makes up the buying centre and the roles they play
in making purchase decisions is important in marketing to organizations. The
buying centre usually includes a person from the purchasing department and
possibly representatives from R&D, engineering, and production, depending on
what is being purchased. These people can play one or more of five roles in a
purchase decision: user, influencer, buyer, decider, or gatekeeper.
buy classes Three types of organizational buying situations: straight rebuy,
modified rebuy, or new buy
buying centre Group of people in an organization who participate in the buying
process
organizational buying behaviour Process by which organizations determine
the need for goods and then choose among alternative suppliers
Figure 5–5
Comparing the stages in a consumer and organizational purchase
decision process reveals subtle differences
STAGE IN THE
BUYING DECISION
PROCESS
Problem
recognition
Information
search
Evaluation of
alternatives
CONSUMER PURCHASE:
SMARTPHONE FOR A STUDENT
DIMENSIONS
Market
characteristics
• Demand for industrial products and services is derived.
• The number of business customers is typically small, and their purchase orders are
typically large.
Product or service
characteristics
• Products or services are technical in nature and purchased on the basis of
specifications.
• Many goods purchased are raw or semi-finished.
• 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.
• There are multiple buying influences, and multiple parties participate in purchase
decisions.
• There are reciprocal arrangements, and negotiation between buyers and sellers is
commonplace.
• Online buying over the Internet is widespread.
Marketing mix
characteristics
• Personal selling to organizational buyers is used extensively, 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 or service
qualities, and frequently affected by quantity discounts.
Purchase
decision
Post-purchase
behaviour
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ORGANIZATIONAL PURCHASE:
CAMERA FOR A SMARTPHONE
Student doesn’t like the features of the
cellphone now owned as compared to
the features of a smartphone and
desires to purchase one.
Marketing research and sales departments
observe that competitors are improving the
quality of cameras that are contained in a
smartphone. The firm decides to improve
the cameras on their new models, which
will be purchased from an outside supplier.
Student uses past experience, that of
friends, ads, the Internet, and magazines
to collect information and uncover
alternatives.
Design and production engineers draft
specifications for the camera. The
purchasing department identifies suppliers
of cameras.
Alternative smartphones are evaluated on
the basis of important attributes desired
in a smartphone, and several stores are
visited.
Purchasing and engineering personnel visit
with suppliers and assess facilities,
capacity, quality control, and financial
status. They drop any suppliers not
satisfactory on these factors.
A specific brand of smartphone is selected,
the price is paid, and the student leaves
the store.
They use quality, price, delivery, and
technical capability as key buying criteria
to select a supplier. Then they negotiate
terms and award a contract.
Student re-evaluates the purchase
decision, and may return the smartphone
to the store if it is unsatisfactory.
They evaluate the supplier using a formal
vendor rating system and notify the supplier
if camera does not meet their quality
standard. If the problem is not corrected,
they drop the firm as a future supplier.
Key characteristics of organizational buying behaviour
CHARACTERISTICS
CA R D
B2B Marketing
Identify the distinguishing characteristics of industrial,
reseller, government, and non-profit markets.
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Outline the process of business segmentation.
The process of segmenting business markets divides markets based on
type of customer, size, buying situation, customer location, and benefits
sought. By applying market segmentation concepts to groups of business
customers, a marketer can develop a strategy that best suits a particular
segment’s needs.
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Explain the growing importance of and the approaches to
online buying for industrial, reseller, and government markets.
Online buying is prevalent in industrial, reseller, and government markets.
Globally, the number of e-marketplaces for businesses is extensive. Online
auctions are commonly used by organizational buyers and business marketers.
e-marketplaces Online trading communities that bring together buyers and supplier organizations
reverse auction Occurs when a buyer communicates a need for something and
would-be suppliers bid in competition with each other
traditional auction Occurs when a seller puts an item up for sale and would-be
buyers bid in competition with each other