Chapter 6, Business and organizational customers and their buying behavior

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Business and Organizational Customers
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are a big opportunity! organizational market is actually bigger than the final consumer market in terms of number of purchases made Presents significant opportunities for marketers
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Organizational consumer market is often referred to as….
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the industrial market or the business-to-business market (B2B Market)
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What type of consumers are involved?
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Business and organizational customers buy for resale or to produce other goods and services
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Four main categories of these customers:
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producers intermediaries government units nonprofits
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Producers of goods and services…
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manufacturers farms, mines real-estate developers financial institutions other providers
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Intermediareies
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wholesalers retailers
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Government units
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federal state local foreign governments
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nonprofits
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national local
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Organizational customers
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Behavioral of business & organizational customers
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Differences between organizational customers & final consumers
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-Purchase criteria & specifications -multiple buying influences -problem-solving process -B2B e-commerce -buyer-seller relationships
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Key characteristics of four specific types of organizational customers
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-manufacturers -producers of services -retailers & wholesalers -government units
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Business Products
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-used to manufacture other products -become part of another product -business products aid the normal operations of an organization or business -are acquired for resale without any change in form -key is intended use
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Product purchased for personal use is…
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considered a consumer good
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Product purchased for use in a business…
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is a business product the key in classification as a business product is intended use size of the business market in the U.S. and most other countries substantially exceeds that of the consumer market
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Stickiness
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measure of a web site’s effectiveness is calculated by…
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Three of the most important measurements of web site hits are…
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recency frequency monetary value
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analytical measure of site’s stickiness factor
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combining frequency of time a visitor spends on the web site with number of pages viewed during each visit can provide
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Main difference between business and consumer markets are…
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-demand -purchase volume -number of customers -location of buyers -distribution structure -nature of buying -nature of buying influence -type of negotiations -use of reciprocity -use of leasing -primary promotion method
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Demands in business markets
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-derived demand: organizations buy products to be used in producing customer products -inelastic demand: demand without regard to price -joint demand: multiple items are used together in a final product -fluctuating: The demand for business products tends to be more unstable than the demand for consumer products due to the multiplier effect
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Multiplier effect
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A small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and manufacturing equipment needed to make the consumer product.
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Types of major business products
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major equipment accessory equipment raw materials component parts processed materials supplies business services
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Major equipment
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capital goods such as large or expensive machines, mainframe computers, airplanes, and buildings Depreciated over time, often custom-designed Personal selling is an important marketing strategy
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Accessory equipment
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Less expensive and shorter-lived than major equipment, includes fax machines, personal computers, power tools Usually not depreciated Often standardized and purchased by more customers Advertising is an important promotional tool
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Raw Materials
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Unprocessed products, such as minerals, timber, wheat, corn, fish Become part of finished products Personal selling is the marketing mix component used, distribution channels usually direct from producer to business user
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Component parts
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Finished items ready for assembly or that need very little processing markets for component parts: -original equipment manufacturer (OEM) -replacement market
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Processed Materials
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Used directly in manufacturing other products Sheet metals, chemicals, and lumber Do not retain their identity in final products Price and service are important factors in choosing a supplier
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Supplies
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Consumable items that do not become part of the final product short lived and inexpensive generally fall into categories: -maintenance -repair -operating supplies (MRO)
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Business services
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Expense items that do not become part of the final product This includes janitorial, advertising, legal, management consulting, marketing research, and maintenance services
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Serving small business customers
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“At BB&T we don’t think there’s anything small about your business” During the current economic downturn: Watching marginal costs has become more important
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Organizational buyers tend to focus on…
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Purchase specifications & Quality
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Purchasing specifications
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written or electronic descriptions of what the firm wants to buy specifications describe the needs that organizational buyers have specifications may be fairly simple or they may be very detailed
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Organizational buyers often concentrate on…
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quality certification in making purchases ISO 90000 is a way for a supplier to document its quality procedures according to internationally recognized standards Lands’end video
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Multiple Influence and Roles in the Buying Center
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Buyers (formal authority) Influencers Deciders Gatekeepers Users
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Purchasing managers are specialists in…
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buying activities for their employers
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Multiple buying influence…
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several people play a part in making a purchase decision
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Buyers
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the purchasing managers who are responsible for working with suppliers and arranging for the terms of the sale
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Users
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the people who will actually use the product. They may be production workers or support staff
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Influencers
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people whose expertise is used to help determine which products are needed. Influencers are often technical people who help write specifications
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Gatekeepers
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people in key positions in the organization who control the flow of information Gatekeepers can include receptionists, secretaries, researchers, and other servers
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Deciders
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people in the organization who have the power to select or approve the supplier
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Marketers must identify and market to…
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every buying center member
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Members of the buying center may…
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change from purchase to purchase
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Evaluating Organizational Buying Influences
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-vendor analysis considers all influences -behavioral needs are important too -ethical conflicts may arise in buyer-supplier relationships -purchasing may also be centralized in many organizations by concentrating the purchasing for all branches at one location
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Requistition
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request to buy something, eventually becomes a purchase order, electronic requisitions are becoming more poular
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A comprehensive vendor analysis considers…
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-all influences on purchase decisions -formal rating of suppliers on all relevant areas of performance
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Buying situations
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-new buy -modified rebuy -straight rebuy
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New buy
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A situation requiring the purchase of a product for the first time
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Modified rebuy
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A situation where the purchaser wants some change in the original good or service
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Straight Rebuy
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A situation in which the purchaser reorders the same goods or services without looking for new information or investigating other suppliers
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If a firm does decide to buy a product instead of making it…
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the purchase will be a new buy, a modified rebuy, or a straight rebuy
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Three kinds of buying processes are useful:
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-New-task buying -Modified rebuy -Straight rebuy
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New-task buying
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occurs when a customer organization has a new need and wants a great deal of information. New-task buying often involves: -setting product specifications -evaluating sources of supply -establishing an order routine to follow in the future -requires information
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Straight rebuy
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is a routine repurchase that uses existing suppliers to fill a standard order often use e-commerce order systems
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modified rebuy
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the in-between process. Some review of the buying process is done but not as much as in a new-task buy
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A new-task buy starts with a user who becomes….
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aware of a need and begins researching solutions
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Even though a wide variety of information sources are available ….
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business buyers will use the sources they trust
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Buyer-seller relationships in business markets
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Close relationships may produce mutual benefits BUT Relationships may not make sense
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Close relationships may produce mutual benefits
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mutual trust long-term outlook Share tasks at lower total cost
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Close relationships may not make sense
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Reduce flexibility Some purchases are simply too small or too infrequent Some purchases require so much special attention that the relationship would never be profitable for the seller
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Relationships may have many dimensions
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Several key dimensions that characterize a close working relationship between organizational buyers and sellers
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Relationships
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Cooperation treats problems as joint responsibilities Both the supplier and the buyer benefit when they can share information
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Shared information
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useful risky if there is a possibility that one of the partners will misuse it
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Dynamics of buyer-seller relationships
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powerful customer may control the relationship Buyers may still use several sources to reduce their risk Variations in buying by customer type
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The government market
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size and diversity competitive bids may be required approved supplier list (for routine purchases) learn what government wants to buy dealing with foreign governments FCPA (foreign corrupt practices act)
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Is it unethical to buy help in dealing with foreign governments?
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Not in some countries
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FCPA
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Prohibits U.S. firms from paying bribes to foreign officials

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