Marketing Chapter 7 Organizational Buying Behavior Gilbert A. Churchill, Jr. J. Paul Peter “A transaction in which a product is sold for any use other than personal.
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Marketing Chapter 7 Organizational Buying Behavior Gilbert A. Churchill, Jr. J. Paul Peter “A transaction in which a product is sold for any use other than personal consumption” Slide 7-1 Figure 7.1 A Comparison of Organizational Buyers and Consumers Characteristic Organizational Buyers Consumers Number of buyers in market Few Size of Purchases Large Decision Criteria Primarily Rational Rational and emotional Location Concentrated Dispersed Distribution More Direct More Indirect Interdependence between buyer and seller Strong Weak Number of people involved in purchase decisions Many Few Many Small Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10. Slide 7-2 Categories of Organizational Buyers National & local organizations providing goods & services to people in their care Buy finished goods & sell them to other businesses or customers for a profit Purchase goods Producers Intermediaries Government Agencies General Motors Crown Books Air Force Harvard University Boeing Campus Store Park Service St Mary’s Hospital Amazon.com New York City United Way Buy goods & services to produce other goods & services & services for carrying out the main functions of the government Institution Slide 7-3 Business Classification Systems Standard US Government System Industrial Thomas Classification Register Code Private System Slide 7-4 Demand Principles Derived Demand Demand for organizational goods that is dependent on the demand for consumer goods. Accelerated Principle A small change in consumer demand for a product can result in a large change in the demand for organizational goods and services to produce the product. Joint Demand Demand for one organizational good is dependent on the demand for another organization good. Slide 7-5 Figure 7.5 The Organizational Buying Process Recognize a Need or Problem Assign Responsibility for Making a Purchase Decision Search for Alternatives Evaluate and Select an Alternative Make a Purchase Evaluate Performance of Product and Supplier Slide 7-6 Types of Business Products Major Equipment (machinery, generators) Accessory Equipment (drills, fax machines) Raw Materials (lumber, wheat, vegetables Component Parts (tires spark plugs) Major Categories of Business-toBusiness Products Processed Materials (corn syrup, sheet metal) Supplies (pencils, paper towels) Business Services (janitorial & legal services) Slide 7-7 Table 7.2 Types of Organizational Purchases Low Involvement Purchase Type Complexity Time Frame Number of Suppliers Applications Straight rebuy Simple Short One Frequently purchased routine products, such as printer cartridges Modified buy Moderate Medium Few Routine purchase that has changed in some way, such as air travel (new fares, flights, destinations) New task purchase Complex Long Many Expensive, seldompurchased products, such as new production equipment High Involvement Slide 7-8 Vendor Analysis - Compare Suppliers Example of Vendor Analysis in a Microcomputer Buying Situation Rating scale Attributes Unacceptable (0) Poor (1) Fair (2) Good (3) X Compatibility Affordability X X Reliability Product line depth Excellent (4) X X Service/support X Flexibility Total score: 4 + 2 + 4 + 2 + 4 + 3 = 19 Average score: 19 ÷ 6 = 3.17 Slide 7-9 Table 7.3 Functional Areas and Their Key Purchasing Concerns Functional Area Design and development engineering Production Sales/Marketing Key Concerns in Purchasing Decision Making Name reputation of vendor; ability of vendors to meet design specifications Delivery and reliability of purchases Impact of purchased items on marketability of the company’s products Maintenance Compatibility with existing facilities, maintenance service and installation arrangements Finance/accounting Effects of purchases on cash flow, financial statements and existing budgets Purchasing Obtaining lowest possible price at acceptable quality levels; maintaining good relations with vendors Quality Control Assurance that purchased items meet prescribed specifications Slide 7-10 Approaches to Organizational Buying Office Space Inspection Buying Government Contracts Competitive Bidding Buyer Contract Buying New Building Sampling Buying Fruits & Vegetables Description Buying Bolts Slide 7-11 Ethical Issues Source Loyalty Ethics Reciprocity Slide 7-12 Figure 7.8 The Buying Center Initiator Identifies Need Gatekeeper Controls Information Flow User Uses Product Influencer Affects Buying Decision Decider Has Expertise or Power to Make or Approve Selection Buyer Has Responsibility to Select Vendor and Negotiate Terms