Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

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The industrial and domestic consumers

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Business MarketingBusiness Marketing

Business marketing is the marketing of goods andservices to:1. commercial enterprises,2. Governments, and3. other profit and not for profit organizations,for use in the creation of goods and services that they then produce and market to other business customers,as well as individuals and ultimate consumers.

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Organizational BuyersOrganizational Buyers

Organizational buyers: Are those manufacturers, wholesalers and retailers,

and government agencies that buy goods and services for their own use or for resale.

EXAMPLE: Buying computers and telephones for the firm’s own use.

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Key characteristics of organizational buying behaviorKey characteristics of organizational buying behavior

Market Characteristics– Demand for industrial products and services

is derived.– Few customers typically exist, and their purchase

orders are large.

Product or Service Characteristics– Products or services are technical in nature and

purchased on the basis of specifications.– There is a predominance of raw and semi-finished

goods purchased.– Heavy emphasis is placed on delivery time, technical

assistance, postal service, and financing assistance.

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Key characteristics of organizational buying behavior -- Key characteristics of organizational buying behavior -- continued continued

Buying Process Characteristics– Technically qualified and professional buyers exist

and follow established purchasing policies and procedures

– Buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and products (services).

– Multiple buying influences exist, and multiple parties participate in purchase decisions.

– Reciprocal arrangements exist, and negotiation between buyers and sellers is commonplace.

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Key characteristics of organizational buying behavior -- Key characteristics of organizational buying behavior -- continued continued

Other Marketing Mix Characteristics– Direct selling to organizational buyers is the rule,

and physical distribution is very important– Advertising and other forms of promotion are

technical in nature.– Price is often negotiated, evaluated as part of

broader seller and product (service) qualities, typically inelastic owing to deriveddemand, and frequently affected by trade and quality discounts.

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Other Organizational Buyer TerminologyOther Organizational Buyer Terminology• 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.

• Reciprocity is an industrial buying practice in which two organizations agree to purchase each other’s products and services.

• A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost and/or increasing the value of products and services delivered to the ultimate consumer.

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Key Organizational Buying CriteriaKey Organizational Buying Criteria

OrganizationalOrganizationalBuying CriteriaBuying Criteria

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Comparing the stages in consumer and organizational Comparing the stages in consumer and organizational purchasespurchases

Stage in the Buying Consumer Purchase: Portable Organizational Purchase:Decision Process CD Player for a student Headphones for CD player

Problem recognition Student doesn’t like the sound Marketing research and sales

of the stereo system now owned departments observe that

and desires a portable CD competitors are including

player. headphones on their models.

The firm decides to include

headphones on their own new

models, which will be

purchased from an outside

supplier.

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Stage in the Buying Consumer Purchase: Portable Organizational Purchase:Decision Process CD Player for a student Headphones for CD playerInformation search Student uses past experience, Design and production

that of friends, ads, and engineers draft specifications

Consumer Reports to collect for headphones. The information and uncover purchasing department alternatives. Identifies suppliers of CD

player headphones.Alternative evaluation Alternative portable CD Purchasing and

engineering players are evaluated on the personnel visit with

suppliers basis of important attributes and assess (1) facilities, (2) desired in a CD player and capacity, (3) quality

control, several stores are visited. (4) financial status. They

drop any suppliers not

satisfactory on these factors.

PP7-4b Comparing the stages in consumer and organizational PP7-4b Comparing the stages in consumer and organizational purchases -- continued purchases -- continued

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Comparing the stages in consumer and organizational Comparing the stages in consumer and organizational purchases -- continuedpurchases -- continued

Stage in the Buying Consumer Purchase: Portable Organizational Purchase:Decision Process CD Player for a student Headphones for CD playerPurchase decision A specific brand of portable CD They use (1) quality, (2)

price, player is selected, the price is (3) delivery, and (4) technical

paid, and the student leaves capability as key buying the store. criteria to select a

supplier. Then they negotiate terms and award a contract.

Postpurchase behavior Student reevaluates the They evaluate suppliers purchase decision, may return using a formal vendor

rating the portable CD player to the system and notify

supplier if store if it is unsatisfactory, and headphones do not meet

its looks for supportive quality standard. If the information to justify the problem is not

corrected, purchase. they drop the firm as a

future supplier.

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Stages in the Industrial Buying ProcessStages in the Industrial Buying Process

• Problem Recognition often involves a make-buy decision -- an evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself.

• Information Search often involves value analysis -- a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs.

• Alternative Evaluation often involves the generation of a bidders list -- a list of firms believed to be qualified to supply a given item.

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

Stages in the Industrial Buying ProcessStages in the Industrial Buying Process

• Purchase Decision -- The period from supplier selection to order placement to product delivery can take several weeks or even months, as negotiations regarding price, performance and delivery terms will continue. Additional negotiations may involve warranties, indemnities, and payment schedules.

• Postpurchase Behavior -- Evaluation occurs in the industrial purchase decision process, but is formal and often sophisticated. The performance of the supplier is monitored and recorded.

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

1. What is a make-buy decision?

2. What is a bidders list?

Concept Check: QuestionsConcept Check: Questions

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Assignment Questions:a. What do you understand by Marketing information systems and marketing

research? Differentiate the two by enumerating the components of the two.b. A study on consumer behavior is imperative to remain competitive and profitable

in the market. In the light of this statement, explain the consumer behavior and its importance .

c. An organizational consumer and a domestic consumers have similar needs and undergoes similar buying process, however there are some difference how both of them buy their needs. Compare the buying behavior of industrial/Organizational and domestics consumers

d. Explain the following with examples(i) Primary and secondary data(ii) Likert Scale and semantic differentiation scale(iii) Qualitative and quantitative research(iv) Consumer decision making process

Submissions date: 09 Nov 09