BUS M 300 Lecture 14 Outline of Last Lecture I Integrated Marketing II What is promotion III Push vs Pull Strategy IV Determine and Allocate the Total Promotion Budget V Direct Marketing Outline of Current Lecture VI The Nature and Size of Organizational Markets VII North American Industry Classification System NAICS VIII Buying Center IX Characteristics of Organizational Buying Current Lecture EXAM THREE HAS BEEN MOVED TO THURSDAY APRIL 10 The Nature and Size of Organizational Markets o 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 o Organizational buyers are those manufacturers wholesalers retailers and government agencies that buy goods and services for their own use or for resale Types of Organizational Buyers These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Manufacturers Buy raw materials and parts that they reprocess into the finished goods they sell Wholesalers and Retailers Resell the goods they buy without reprocessing them Organizational Buyers Include all buyers except ultimate consumers Organizational buyers are divided into o Industrial Reseller and Government Markets o Industrial Industrial markets include over 12 million firms 26 sell physical products and 73 sell services Industrial firms in some way reprocess a product or service they buy before selling it again to the next buyer o Reseller Markets Resellers are wholesalers and retailers that buy physical products and resell them again without any reprocessing In the U S there are almost 3 million retailers and 860 000 wholesalers o Government Markets Government units are the federal state and local agencies that buy goods and services for the constituents they serve There are about 88 000 of these government units in the U S North American Industry Classification System NAICS o 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 o It is designed to group economic activity together in the 3 NAFTA countries o This allows these counties government to monitor economic activity across the these 3 countries Buying Center o 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 Characteristics of Organizational Buying o Demand Characteristics Consumer demand for products and services is affected by their price availability and consumers tastes and income Derived demand means that the demand for industrial products and services is driven by or derived from demand for consumer products and services o Size of the Order or Purchase The size of the purchase in organizational buying is much larger than that in consumer buying Most organizations place purchasing constraints on their buyers who must get competitive bids from at least three prospective suppliers if the order is above a specific amount The size of the order determines who participates in the purchase decision and the time required to negotiate a purchase agreement o Number of Potential Buyers Firms selling consumer products and services try to reach thousands or millions of individuals or households Firms selling to organizations usually have far fewer buyers o Organizational Buying Objectives For business firms the buying objective is usually to increase profits through reducing costs or increasing revenues The objectives of nonprofit firms and government agencies are usually to meet the needs of the groups they serve Firms have broadened their objectives to emphasize buying from minority and women owned suppliers and vendors Other companies include environmental initiatives in their buying objectives o Organizational buying criteria are the objective attributes of the supplier s products and services and the capabilities of the supplier itself These criteria serve the same purpose as the evaluative criteria used by consumers Seven commonly used buying criteria are Price Ability to meet the quality specifications required for the item Ability to meet required delivery schedules Technical capability Warranties and claim policies in the event of poor performance Past performance on previous contracts Production facilities and capacity