Business and Organizational Customers and Their Buying Behavior

Chapter 6Business and Organizational Customers and Their Buying Behavior

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

6-2

At the end of this presentation, you should be able to:1. name and give examples of the different

types of business and organizational buyers.

2. describe how organizational and business markets differ from consumer markets.

3. describe each step in the model of organizational/business buying.

4. explain the different types of buying processes.

6-3

At the end of this presentation, you should be able to:5. understand the different types of buyer-seller

relationships and their benefits and limitations.

6. know about the number and distribution of manufacturers and why they are an important customer group.

7. know how buying by service firms, retailers, wholesalers, and governments is similar to—and different from—buying by manufacturers.

8. understand important new terms.

6-4

Business and Organizational Customers – A Big Opportunity

•Federal•State and Local

Government Units

•Wholesalers•Retailers

Intermediaries

•National•LocalNonprofits

•Manufacturers•Farms, mines, etc.

•Financial institutions

•Other providers

Producers

All Business &

Organizational

Customers

6-5

Understanding Business & Organizational Customers for Marketing Strategy Planning (Exhibit 6-1)

A Model of Organizational/Business Buying

• Defining the problem• Buying process • Buyer–seller relationships

Characteristics of Types of OrganizationalCustomers

• Manufacturers• Producers of services• Retailers & wholesalers• Government units

Chapter 5Final Consumersand Their BuyingBehavior

Chapter 6Business and OrganizationalCustomers and Their BuyingBehavior

Business & OrganizationalMarkets and CustomersAre Different• Buyers• Economic needs• Behavioral needs• Ethical issues• Purchasing managers• Multiple buying influence• Buying procedures

6-6

Business and Organizational Customers

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

6-7

Serving International Markets

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

6-8

Differences Between Organizational Customers and Final Consumers (Exhibit 6-2)

Business &Organizatio

nalMarkets Are

Different

Multiple buying

onfluence

Ethical issues arise

Buyers follow

proceduresPurchasingmanagers

arespecialists

Behavioral needs

still matter

Economic needs areprimary

Fewer but larger

customers

6-9

Multiple Buying Influence

6-10

Multiple Influence and Roles in the Buying Center

Gatekeepers Deciders

InfluencersUsers

Buyers

BuyingCenter

6-11

Checking Your Knowledge

Consuela Velasquez is a receptionist for a group of seven physicians. As she controls the calendars for the physicians, any sales representatives from a pharmaceutical company wanting to call on the physicians have to go through Consuela. As a result, it is very important for sales reps to cultivate a good relationship with her. In the buying center, Consuela would be best described as a:

A. buyer.B. user.C. influencer.D. gatekeeper.E. decider.

6-12

Checking Your Knowledge

Ahmed Jamison is a purchasing specialist for a large company. He has the authority to execute purchase orders on amounts up to $100,000. On a purchase order for a higher amount, Ahmed arranges the terms of sale, but the transaction has to be approved by the company president. In the buying center for a purchase in excess of $100,000, Ahmed is a(n) _________ and the president is a(n)_________.

A. buyer; influencer B. influencer; buyerC. buyer; deciderD. gatekeeper; deciderE. user; influencer

6-13

A Model of Organizational Buying (Exhibit 6-4)Step 1: Defining the problem• Problem recognition• Need description• Product

specification

Step 2: Buying process• Establish buying

process• Gather information• Solicit bids and

select the supplier

Step 3: Managing the buyer-seller relationship• Structure the

relationship• Monitor supplier

performance

6-14

Step 1: Define the ProblemFrom

recognizing problems to describing

needs

Specifications describe the

product

Quality certification

6-15

Step 2: The Buying Process

Establish buying

processes

Gather informatio

n

Solicit bids & select

suppliers

6-16

Organizational Buying Processes(Exhibit 6-5)

Characteristics

Time required

Multiple influence

Review of suppliers

Information needed

Type of Process

Medium

Some

Some

Some

ModifiedRebuy

Much

Much

Much

Much

New-TaskBuying

Little

Little

None

Little

StraightRebuy

6-17

Major Sources of Information Used by Organizational Buyers (Exhibit 6-6) Marketing

sourcesNonmarketing

sources

Personal

Sources

Impersonal

Sources

• Salespeople • Others from suppliers firm• Trade shows

• Online events & virtual trade shows• Sales literature and catalogs• Emails & newsletters• Web site content including blogs, videos, case studies, & white papers

• Online searches• Rating services• Trade associations• News publications• Product directories• Online communities

• Buying centre members• Outside business associates• Consultants and outside experts

6-18

New-Task Buying Requires Information

Search Engines

New-Task Buying

RequiresInformation

Competitive Bids

Online Communities

Web Sites

6-19

Checking Your KnowledgeNikita Jackson, a sales representative for an industrial supply house, calls on a prospective business customer. The customer has an established relationship with another supplier, but says that there have been some reliability problems with deliveries. Nikita seizes the opportunity to describe her company’s state-of-the-art logistics and transportation system that provides outstanding delivery reliability at low shipping costs. Nikita is encouraged because her customer seems to be in a ___________ situation.

A. straight rebuyB. modified rebuyC. new-taskD. extensive problem-solvingE. limited problem-solving

6-20

Checking Your KnowledgeAuto parts wholesaler Fixem, Inc. decides to invest in a new data management system to increase the efficiency of its warehouse operations. Previously, all record-keeping was done via printed documents, but now all transactions will be electronic. This change will require Fixem to expend a significant amount of money for hardware, software, and training. However, in the long run, the cost savings should exceed the up-front investment. Fixem has arranged for presentations to be made by three different vendors. Fixem seems to be facing a ______________ buying situation.

A. straight rebuyB. modified rebuyC. new-taskD. extensive problem-solvingE. limited problem-solving

6-21

Interactive Exercise: Organizational Buying

6-22

Step 3: Managing Buyer-Seller Relationships in Business Markets

Relationships can involve many fromboth sides

Close Relationships

May ProduceMutual Benefits

• Mutual trust • Long-term

outlook• Share tasks at

lower total cost

Relationships May

Not Make Sense

• Reduced flexibility• Some purchases

are too small or infrequent

• Some purchases require much special attention

6-23

Relationships Have Many Dimensions (Exhibit 6-7)

6-24

Relationships Have Many Dimensions (Exhibit 6-7)

6-25

Relationship Dimensions

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

6-26

Relationship Dimensions

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

6-27

Checking Your Knowledge

Gotcha! is a chain of trendy stores catering to the urban contemporary market. As part of its close relationship with suppliers, Gotcha! has an Internet site that is accessible only by suppliers, and it provides up-to-the minute point-of-sale information from all of the Gotcha! stores. Suppliers can see how their products are doing at retail during any time of the day or night. In the relationship between Gotcha! and its suppliers, the Gotcha! supplier site is an example of:

A. information sharing.B. legal bonds.C. reciprocity.D. operational linkages.E. negotiated contracts.

6-28

Buyer-Seller Relationships

6-29

Dynamics of Buyer-Seller Relationships

Buyers May Use Several Sources to

Spread Risks

Powerful Customer May Control the

Relationship

Buying Varies by Customer Type

6-30

Manufacturers Are Important CustomersNot Many Big

Ones

NAICS CodesBusiness

Data Classifies Industries

Clustered in Geographic

Areas

6-31

Illustrative NAICS Code Breakdown for Apparel Manufacturers (Exhibit 6-9)

Food (311) others…Leather (316)

Apparel (315)

Knitting Mills

(3151)others…

Apparel accessories

(3159)

Cut & Sew Apparel (3152)

Men’s & boys’

(31522)others…

Other cut & sew

(31529)

Women’s & girls’

(31523)

Lingerie (315231) others…Dresses

(315233)Blouses

(315232)

Manufacturing (31)

Construction (23) others…Retail

(44)

6-32

Producers of Services — Smaller and More Spread Out

Buying May Not Be Formal

Car Repair Medical Services

Housekeeping Services

LibraryService

Small ServiceBuyers

Legal Services

6-33

Retailers & Wholesalers Buy for Their Customers

Committee Buying Is

Impersonal

Reorders Are Straight Rebuys

Buyers Watch Computer

Output Closely

6-34

The Government MarketSize and Diversity

Competitive Bids

“Approved” Supplier

ListGovernmen

t Wants

Foreign Governmen

ts

FCPA

6-35

You should now be able to:

1. name and give examples of the different types of business and organizational buyers.

2. describe how organizational and business markets differ from consumer markets.

3. describe each step in the model of organizational/business buying.

4. explain the different types of buying processes.

6-36

You should now be able to:

5. understand the different types of buyer-seller relationships and their benefits and limitations.

6. know about the number and distribution of manufacturers and why they are an important customer group.

7. know how buying by service firms, retailers, wholesalers, and governments is similar to—and different from—buying by manufacturers.

8. understand important new terms.

Key Terms1. business and

organizational customers

2. purchasing managers3. multiple buying

influence4. buying center 5. requisition6. purchasing

specifications7. ISO 90008. new task buying

9. straight rebuy10. modified rebuy11. competitive bid12. vendor analysis13. just-in-time delivery 14. negotiated contract

buying15. outsource16. North American

Industry Classification System (NAICS) codes

17. Foreign Corrupt Practices Act6-37