Business Markets & Organizational Buying Chapter 7 Business Markets & Organizational Buying

Objectives ID components of business markets Learn steps of organizational buying decisions Characterize basic organizational buying situations Explore effect of Internet on B-to-B marketing Understand importance of the buying center Explore needs of organizational buyers, and strategies to meet those needs Overview NAICS and its usefulness

Business-to-Business (B2B) Marketing Any sale to an industrial user, wholesaler, retailer, or organization other than the ultimate consumer. . . Key questions: Who bought it? Why did they buy it? 4

Characteristics of the Business Market Few, concentrated customers Expertise in buying Importance of repeat transactions Derived demand Preference for direct buying Global Competition 6

Buy Phase: Steps in Organizational Buying Identification of the need Step 2: Establish Objectives Step 3: ID Suppliers/ Evaluate Alternatives Step 5: Establish Relationship Step 4: Selection of Suppliers/ Negotiations 9

Three buying situations Straight rebuy: Automatic and regular purchase of familiar products Modified rebuy: Buyer is not completely satisfied with current suppliers and shops around New task buying: Buyer seeks to fill a need never before addressed 11

The Internet Dramatically Changes Organizational Buying 13

The Internet Dramatically Changes Organizational Buying Information availability & dissemination Customer customization Customer service Messaging FAQ’s Increase # of bidders Decrease costs 14

The Buying Center Informal & dynamic Cross-departmental Information center Acquisition Dissemination Processing BUYING CENTER DATA INFORMATION BUYING DECISION 16

Buying Center: Roles Roles of buying center individuals include…. Users Gatekeepers Influencers Deciders Buyers 17

Roles in Organizational Buying: Users Employees and managers who will actually use the product

Roles in Organizational Buying: Buyers Has the formal authority to purchase the product

Roles in Organizational Buying: Gatekeeper Controls the flow of information related to the purchase

Roles in Organizational Buying: Decider Makes the actual purchase decision

Roles in Organizational Buying: Influencer Affects the purchase decision by supplying advice or information

Why Do Organizations Buy? Product Quality Price Related Services Delivery & Inventory Collab- oration Bottom Line 18

Generalizations About Organizational Demand DEMAND FOR AIRPLANES Derived demand: Ore DEMAND FOR SHEET METAL AND ALUMINUM INCREASED INTERNATIONAL TRADE DEMAND FOR BUSINESS FLYING INCREASED MINING REQUIRED 21

Generalizations About Organizational Demand Price inelasticity Price/cost increases passed to customer Component prices small % of total cost 22

Generalizations About Organizational Demand Fluctuating demand Linked to economy’s ups and downs Larger inventories maintained Product durability 23

North American Industry Classification System (NAICS) Replaces SIC (Standard Industrial Classification system) Incorporates technological changes Creates relevant & current industrial databases 24

Review ID components of business markets Learn steps of organizational buying decisions Characterize basic organizational buying situations Explore effect of Internet on B-to-B marketing Understand importance of the buying center Explore needs of organizational buyers, and strategies to meet those needs Overview NAICS and its usefulness