Organizational Buyers

ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR

Business Marketing - Marketing to firms, governments, or not-for-profit organizations.

Organizational Buyers - Manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale.

TYPES OF ORGANIZATIONS

• Industrial - manufacturers

                        Mining
Construction
Farms, timber and fisheries
Service
Finance
Transportation
Not-for-profit

• Reseller - wholesalers

                                 Retailers

• Government - federal, state and local agencies that buy goods and services for the constituents they serve

NAICS - North American Industry Classification System created to classify all organizations.  If provides common industry definitions for Canada, Mexico, and the United States. It permits studies of market share, demand for goods and services, import competition, etc.

Organizational Buying

Derived Demand - demand for industrial products and services driven by demand for consumer products and services. It is based on expectations of future consumer demand.

Size of order or purchase is typically much larger than that in consumer buying

Number of potential buyers is usually much smaller than in consumer buying

Organizations buy products and services for one main reason: to help them achieve their objectives.  The buying objective is usually to increase profits through reducing costs or increasing sales.

Organizational Buying Criteria are objective
1) Price
2) Ability to meet the quality specifications required for the item
3) ability to meet delivery schedules
4) technical capability
5) warranties and claim policies
6) past performance on previous contracts
7) production facilities and capacity

Organizational Buying is more likely to involve complex negotiations about delivery, price, technical specifications, etc.

Organizational Buying Behavior - process by which organizations determine the need for goods and then choose among alternative suppliers.

Stages in buying decision process are similar: 1 problem recognition, 2 information search, 3 alternative evaluation, 4 purchase decision, 5 postpurchase behavior.

Buying Center - a group of individuals who participate in the buying process, share common goals, risks and knowledge important to the purchase decision. There are different roles an individual can play.

• Users - people who actually use the product or service
• Influencers - affect the buying decision, usually by helping define specifications
• Buyers - have formal authority and responsibility to select the supplier and negotiate the terms of the contract
• Deciders - have the formal or informal power to select or approve the supplier that receives the contract
• Gatekeepers - control the flow of information in the buying center.

Three types of buying situations called buy classes

• Straight rebuy - reorders an existing product or service
• Modified rebuy - decision makers and influencers want to change some of the specifications and so the number of buyers increases
• New buy - the organization is a first time buyer of a product or service.  This involves greater potential risks so the buying center is enlarged.

Online Buying Organizations

Organizational Buyers account for 80 percent of the total worldwide dollar value of all online transactions.
Information can be conveyed quickly
Buyer order processing costs can be reduced
Can reduce marketing costs, particularly sales and advertising

e-marketplaces - Online trading communities that bring together buyers and supplier organizations.

Traditional auction - occurs when a seller puts  an item up for sale and would-be buyers bid in competition with each other.

Reverse auction - occurs when a buyer communicates a need for something and would-be suppliers bid in competition with each other.