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