The Characteristics of Organization Buying Behaviour

Organizational Buying When a marketing firm develops a marketing mix that it can use to approach business customers, it should understand the decision making process in organizations Organizational buying may be defined as the decision making process by which firms establish what products they need to purchase and identify, evaluate, and select a brand and a supplier for those products Business markets are different than consumer markets and components that matter include: Number of Buyers Location of Buyers Demand Characteristics Buying Criteria The Formal Buying Process and Centralized Purchasing Characteristics and Relationships

Number of Buyers There are far fewer purchasers in the business to business market than there is in the consumer market These few buyers, however, have immense buying power Example: The Big Three Domestic Automobile Manufactures The domestic market in North America is dominated by General Motors, Daimler Chrysler, and Ford Car parts such as tires, windshields, and engine parts are sold in much larger number to these manufacturers than they are to other consumers While numbers are lower, profits are higher in the business to business market in most cases

Location of Buyers Business markets tend to concentrate in certain areas In the case of Canada the Quebec City to Windsor area has an immense manufacturing presence Quebec and Ontario alone make up 68% of the nations manufacturing elements, 76% of the value of goods manufactured, and 76% of people employed in the manufacturing industry This area is also the center of banking and financial services Other regions dominate sectors such as agriculture, forestry, and fishing

Location of Buyers To identify and locate potential target markets, marketing frims utilize the North American Industry Classification System (NAICS) This is a numbering system established by the United States, Mexico, and Canada that provides statistical information about business activity in North America The system subdivides main categories such as retail into more specific categories The system then divides these categories into even more specific areas using information stats on sales volume and number of employees NAICS is used for creating a guide for businesses to target one another using basic information

Location of Buyers The combination of fewer buyers with a higher dollar value and more geographic concentration makes personal selling an attractive and practical way to market goods and services to these markets despite the high cost of activity Other promotional techniques include direct mail, target marketing, and online communications The growth of e-commerce is not only growing in the consumer targeted market, but the business to business market as well

Demand Characteristics: Derived Demand Derived Demand is a concept that states that the demand for products sold in business-to-business market is actually derived from consumer demand Example: Drinks Switching to Aluminum Cans As beverage manufacturers such as Coca Cola, Pepsi Cola, and Molson moved to the widespread use of the aluminum can, the manufacturers demand for the products produced by aluminum manufacturers increased dramatically At the same time, demand for glass and steel containers fell and these manufacturers were affected negatively

Demand Characteristics: Joint or Shared Demand Joint or Shared Demand occurs when industrial products can be used only in conjunction with one another (Marketing of one product is reliant on others) This happens when various parts needed for a finished product may arrive from various sources to be assembled at one central location Example: Kraft’s Maxwell House Coffee To manufacture this brand, Kraft needs Coffee Beans (from South America), plastic lids, plastics jars, paper labels, cardboard shipping case If one of these is unavailable, the product cannot be made and the demand for the other materials goes down as well For these reasons most companies always have an alternative source at the ready