BUSI 406: Principles of Marketing Lecture 8 Outline of Last Lecture I. Review for Test 1 Outline of Current Lecture I. Who are business/organizational customers?a. How are they different from final consumers?II. How do organizational buyers solve problems?III. What are the types of buyer-seller relationships in B2B?IV. What are the key characteristics of specific types of organizational customers?a. Manufacturers & Service Providersb. Wholesales & Retailersc. Government (US & International)Current LectureBusiness/ Organizational BuyersOrganizations, like individual people, make purchases to satisfy their needs. The organizational market is actually bigger than the final consumer market, at least in terms of the number of purchases made. Thus, it presents significant opportunities for marketers.• The organizational consumer market is often referred to as the industrial market, or the business-to-business (B2B) market. • What type of customers are involved? Business and organizational customers buy o for resale o to produce other goods and servicesThere are four main categories of these customers: Producers of goods and services.o Discussion Question: What types of products might a manufacturer buy?• raw materials• component parts Middlemen are intermediaries—o wholesalers o retailers. Government units, at the o federalThese 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.o state and local levelso foreign governments. Nonprofit organizationso both national and local organizations.Characteristics of Business Markets• Organizational customers and their buying behaviors are different from final consumers and their buying behaviors. These differences play a vital role for marketing strategy planning.• Fewer in number but larger in dollars purchased.  While there are fewer business customers, individually each typically makes much larger purchases than the average consumer. This makes it worthwhile to invest more resources in each customer.• Economic needs are primary – organizations typically focus on economic factors but, a marketing manager should not forget that • Behavioral needs still matter.  Buyers want security, they want to look good to their colleagues at work, and they usually want to avoid risk.• Ethical conflicts may arise.  Organizational buyers must be careful that their personal interests don’t conflict with company outcomes. o For example, some companies have policies that prevent buyers from accepting gifts, for fear that the gift might make the buyer less objective when choosing a supplier. • Purchasing managers are specialists, or well trained professionals that want to solve problems with suppliers.• Buying procedures are often standardized.  To make buying more efficient, many firms have specific procedures that must befollowed. • Many buying centers have multiple people influencing the decision.  it is more common in business and organizational buying than in consumer buying; It also has a major influence on marketing strategy planningWho influences decisions?Organizations differ from individual consumers in their buying behavior. • Purchasing managers are specialists in buying activities for their employers.• Multiple buying influences: several people share in making a purchase decision.• The collection of these influences is a buying center:o Buyers • the purchasing managers who are responsible for working with suppliers and arranging for the terms of the sale.o Users• the people who will actually use the product. They may be production workers or support staff.o Influencers• people whose expertise is used to help determine which products are needed. Influencers are often technical people who help write specifications.o Gatekeepers• people in key positions in the organization who control the flow of information. Gatekeepers can include receptionists, secretaries, researchers, and others.Discussion Question: Why is it important for marketers to establish a good rapport with gatekeepers when selling or marketing to organizations?o Deciders• the people in the organization who have the power to select or approve the supplier.Marketers must identify and market to every buying center member. The members of the buying center may change from purchase to purchase.A Model of Organizational Buying- From recognizing problems to describing needs.o Problems that crop up in the organization should be narrowed down to specific needs.- Specifications describe the product.o `Organizational buyers may buy on the basis of a set of purchasing specifications —a written description of what the firm wants to buy.o Purchase specifications for services are detailed because services are less standardized and are not performed until after they’re purchased.- Customers may expect quality certificationo ISO 9000 is a way for a supplier to document its quality procedures according to internationally recognized standards.Step 1: Define the ProblemThe basic need of organizations is to satisfy their customers and clients.- From recognizing problems to describing needs.o Problems that crop up in the organization should be narrowed down to specific needs.- Specifications describe the product.o Organizational buyers may buy on the basis of a set of purchasing specifications —a written description of what the firm wants to buy.o Purchase specifications for services are detailed because services are less standardized and are not performed until after they’re purchased.- Customers may expect quality certificationo ISO 9000 is a way for a supplier to document its quality procedures according to internationally recognized standards.Step 2: The Buying ProcessThis starts with establishing a buying process, gathering information and finally soliciting bids (insome cases) and selecting a supplier.That process results in establishing the buying process for the future. Let’s take a closer look at this process. Step 3: Managing Buyer-Seller Relationships in Business MarketsRelationships between buyers and sellers in the B2B market may be casual, “arm’s length” relationships, or they can be close, long-lasting partnerships. Marketers should know the degreeof closeness that is appropriate for a given relationship.- Close relationships between buyers and sellers may produce mutual benefits. o The