1. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-1

2. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-2 ORGANIZA- TIONAL MARKETS AND BUYER BEHAVIOR C HAPTER

3. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-3 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 1.Distinguish among industrial, reseller, and government organizational markets. 2.Describe the key characteristics of organizational buying that make it different from consumer buying.

4. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-4 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 3.Explain how buying centers and buying situations influence organizational purchasing. 4.Recognize the importance and nature of online buying in industrial, reseller, and government markets.

5. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-5 BUYING PAPER IS A STRATEGIC BUSINESS DECISION AT JCPENNEY

6. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS Slide 6-6 Business Marketing Organizational Buyers Industrial Markets (Industrial Firms)Industrial Markets (Industrial Firms) Reseller Markets (Resellers)Reseller Markets (Resellers) Government Markets (Government Units)Government Markets (Government Units) Global Organizational Markets

7. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-7 FIGURE 6-1 FIGURE 6-1 Type and number of organizational customers in the U.S.

8. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-8 Moscow Yellow Pages What type of market?

9. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin MEASURING DOMESTIC AND GLOBAL INDUSTRIAL, RESELLER, AND GOVERNMENT MARKETS Slide 6-9 North American Industry Classification System (NAICS)North American Industry Classification System (NAICS) North American Product Classification System (NAPCS)

10. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-10 FIGURE 6-2 FIGURE 6-2 NAICS breakdown for information industries sector: NAICS code 51 (abbreviated)

11. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-11 Concept Check 1. What are the three main types of organizational buyers? A: industrial firms; resellers; government units

12. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-12 Concept Check A: The NAICS provides common industry definitions for Canada, Mexico, and the United States, which makes easier the measurement of economic activity in the three member countries of NAFTA. 2. What is the North American Industry Classification System (NAICS)?

13. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARACTERISTICS OF ORGANIZATIONAL BUYING Slide 6-13 Demand Characteristics  Derived Demand Derived Demand Size of the Order or Purchase Number of Potential Buyers Organizational Buying Objectives

14. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-14 FIGURE 6-3 FIGURE 6-3 Key characteristics of organizational buying behavior

15. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin MARKETING NEWSNET Slide 6-15 The Airbus A380 Superjumbo Jet is About to Take Flight

16. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARACTERISTICS OF ORGANIZATIONAL BUYING Slide 6-16 Organizational Buying Criteria  ISO 9000 ISO 9000  Reverse Marketing Reverse Marketing

17. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-17 FIGURE 6-A FIGURE 6-A Key organizational buying criteria

18. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin MARKETING NEWSNET Harley-Davidson’s Supplier Collaboration Creates Customer Value…and a Great Ride Slide 6-18

19. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARACTERISTICS OF ORGANIZATIONAL BUYING Slide 6-19 Buyer-Seller Relationships and Supply Partnerships  Reciprocity Reciprocity  Supply Partnership Supply Partnership

20. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin ETHICS AND SOCIAL RESPONSIBILITY ALERT Slide 6-20 Scratching Each Other’s Back— The Ethics of Reciprocity in Organizational Buying

21. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARACTERISTICS OF ORGANIZATIONAL BUYING Slide 6-21 The Buying Center: A Cross-Functional Group  Buying Center Buying Center  Buying Committee  People in the Buying Center

22. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARACTERISTICS OF ORGANIZATIONAL BUYING Slide 6-22 The Buying Center: A Cross-Functional Group  Roles in the Buying Center Users Influencers Buyers Deciders Gatekeepers

23. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-23 Buying Center Who is in the buying center and what roles do they play?

24. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-24 FIGURE 6-B FIGURE 6-B Five roles in the buying center

25. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARACTERISTICS OF ORGANIZATIONAL BUYING Slide 6-25 The Buying Center: A Cross-Functional Group  Buying Situations (Buy Classes) and the Buying Center Buying Situations (Buy Classes) and the Buying Center Straight Rebuy Modified Rebuy New Buy

26. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-26 FIGURE 6-4 FIGURE 6-4 How the buying situation affects buying center behavior

27. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-27 Concept Check 1. What one department is almost always represented by a person in the buying center? A: purchasing department

28. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-28 Concept Check 2. What are the three types of buying situations or buy classes? A: straight rebuy; modified rebuy; new buy

29. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARTING THE ORGANIZATIONAL BUYING PROCESS Slide 6-29 Organizational Buying Behavior Stages in the Organizational Buying Process

30. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-30 FIGURE 6-5 FIGURE 6-5 Comparing the stages in consumer and organizational purchases

31. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARTING THE ORGANIZATIONAL BUYING PROCESS Slide 6-31  Information Search Buying a Machine Vision System Value Analysis Value Analysis  Alternative Evaluation Bidder’s List Bidder’s List  Problem Recognition Make-Buy Decision Make-Buy Decision

32. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CHARTING THE ORGANIZATIONAL BUYING PROCESS Slide 6-32  Purchase Decision  Postpurchase Behavior Buying a Machine Vision System

33. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-33 Machine Vision System What is its organizational buying process?

34. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-34 Concept Check 1. What is a make-buy decision? A: An evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself.

35. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-35 Concept Check 2. What is a bidder’s list? A: A list of firms believed to be qualified to supply a given item.

36. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin ONLINE BUYING IN ORGANIZATIONAL MARKETS Slide 6-36 Prominence of Online Buying in Organizational Markets E-marketplaces: Virtual Organizational MarketsE-marketplaces: Virtual Organizational Markets

37. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-37 WEB LINK eBay Means Business Too

38. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin ONLINE BUYING IN ORGANIZATIONAL MARKETS Slide 6-38 Online Auctions in Organizational Markets  Traditional Auction Traditional Auction  Reverse Auction Reverse Auction

39. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-39 FIGURE 6-6 FIGURE 6-6 How buyer and seller participants and price behavior differ by type of online auction

40. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-40 Concept Check 1. What are e-marketplaces? A: E-marketplaces are online trading communities that bring together buyers and supplier organizations.

41. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-41 Concept Check 2. In general, which type of online auction creates upward pressure on bid prices and which type creates downward pressure on bid prices? A: traditional auction; reverse auction

42. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-42 NAVIGATING THE NAICS GOING ONLINE

43. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-43 1. What is the three-digit industry subsector code for food manufacturing? Going Online

44. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-44 2. What is the six-digit U.S. code for dog and cat food manufacturing? Going Online

45. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-45 3. How many establishments and what is the value of shipments sold by the U.S. dog and cat food manufacturing industry based on the latest government statistics? Going Online

46. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-46 ORGANIZATIONAL BUYING CREATES CUSTOMER VALUE TOO! SUPPLEMENTAL LECTURE NOTE 6-1

47. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-47 HOW ORGANIZATIONS CAN IMPROVE THEIR PURCHASING SUPPLEMENTAL LECTURE NOTE 6-2

48. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-48 LANDS’ END: WHERE BUYERS RULE VIDEO CASE 6

49. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-49 VIDEO CASE 6 Lands’ End

50. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-50 1. Who is likely to make up the buying center in the decision to select a new supplier for Lands’ End? Which of the buying center members are likely to play the roles of users, influencers, buyers, deciders, and gatekeepers? VIDEO CASE 6 Lands’ End

51. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-51 2. Which stages of the organizational buying decision process does Lands’ End follow when it selects a new supplier? What selection criteria does the company use in the process? VIDEO CASE 6 Lands’ End

52. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-52 3. Describe purchases Lands’ End buyers typically face in each of the three buying situations: straight rebuy, modified rebuy, and new buy. VIDEO CASE 6 Lands’ End

53. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-53 MOTETRONIX TECHNOLOGY: MARKETING SMART DUST APPENDIX D CASE D-6

54. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-54 1. What type of buying situation is involved in the purchase of smart dust, and what will be important buying criteria used by companies considering using smart dust in their products or in their facility? APPENDIX D CASE D-6 Motetronix Technology

55. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-55 2. Describe the purchase decision process for adopting smart dust, and state how members in the buying center for this technology might play a part in this process. APPENDIX D CASE D-6 Motetronix Technology

56. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-56 3. What effect will perceived risk have on a company’s decision of whether to use smart dust in its products or in its facility? APPENDIX D CASE D-6 Motetronix Technology

57. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-57 Business Marketing Business marketing is the marketing of goods and services to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they can produce and market to others.

58. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-58 Organizational Buyers Organizational buyers are those manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale.

59. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-59 Industrial Firms Industrial firms are organizational buyers that in some way reprocesses a product or service they buy before selling it again to the next buyer.

60. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-60 Resellers Resellers are wholesalers and retailers that buy physical products and resell them again without any processing.

61. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-61 Government Units Government units are the federal, state, and local agencies that buy goods and services for the constituents they serve.

62. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-62 North American Industry Classification System (NAICS) The NAICS provides common industry definitions for Canada, Mexico, and the United States, which makes easier the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA).

63. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-63 Derived Demand Derived demand means the demand for industrial products and services is driven by, or derived from, demand for consumer products and services.

64. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-64 Organizational Buying Criteria Organizational buying criteria are the objective attributes of the supplier’s products and services and the capabilities of the supplier itself.

65. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-65 ISO 9000 ISO 9000 consists of standards for registration and certification of a manufacturer’s quality management and assurance system based on an on-site audit of practices and procedures developed by the International Standards Organization (ISO).

66. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-66 Reverse Marketing Reverse marketing involves 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.

67. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-67 Reciprocity Reciprocity is an industrial buying practice in which two organizations agree to purchase each other’s products and services.

68. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-68 Supply Partnership A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate consumer.

69. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-69 Buying Center A buying center is the group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a purchase decision.

70. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-70 Buy Classes Buy classes consist of three types of buying situations: straight rebuy; modified rebuy; and new buy.

71. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-71 Organizational Buying Behavior Organizational buying behavior is the decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers.

72. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-72 Make-Buy Decision A make-buy decision is an evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself.

73. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-73 Value Analysis Value analysis is a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs.

74. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-74 Bidder’s List A bidder’s list is a list of firms believed to be qualified to supply a given item.

75. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-75 E-marketplaces are online trading communities that bring together buyers and supplier organizations to make possible the real time exchange of information, money, products, and services. E-Marketplaces

76. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-76 A traditional auction is an online auction in which a seller puts an item up for sale and would-be buyers are invited to bid in competition with each other. Traditional Auction

77. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 6-77 A reverse auction is an online auction in which a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other. Reverse Auction