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Gilbert A. Churchill, Jr. J. Paul Peter

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” . A Comparison of Organizational Buyers and Consumers. Slide 7-1. Figure 7.1.

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Gilbert A. Churchill, Jr. J. Paul Peter

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  1. 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”

  2. A Comparison of Organizational Buyers and Consumers Slide 7-1 Figure 7.1 Organizational Buyers Consumers Characteristic Few Number of buyers in market Many Size of Purchases Large Small Decision Criteria Primarily Rational Rational and emotional Location Concentrated Dispersed Distribution More Direct More Indirect Interdependencebetween buyer andseller Strong Weak Few Many Number of peopleinvolved in purchasedecisions Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10.

  3. Categories of Organizational Buyers Slide 7-2 Purchase goods & services for carrying out the main functions of the government National & local organizations providing goods & services to people in their care Buy goods & services to produce other goods & services Buy finished goods & sell them to other businesses or customers for a profit GovernmentAgencies Producers Intermediaries Institution General Motors Boeing Crown Books Campus Store Amazon.com Air Force Park Service New York City Harvard University St Mary’s Hospital United Way

  4. Business Classification Systems Slide 7-3 Standard Industrial Classification Code Thomas Register PrivateSystem US Government System

  5. Demand Principles Slide 7-4 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.

  6. The Organizational Buying Process Slide 7-5 Figure 7.5 Recognize a Need orProblem Assign Responsibility for Making a Purchase Decision Search for Alternatives Evaluate and Select an Alternative Make a Purchase Evaluate Performance of Product and Supplier

  7. Types of Business Products Slide 7-6 Major Categories of Business-to- Business Products Major Equipment (machinery, generators) Accessory Equipment (drills, fax machines) Raw Materials (lumber, wheat, vegetables Component Parts (tires spark plugs) Processed Materials (corn syrup, sheet metal) Supplies (pencils, paper towels) Business Services (janitorial & legal services)

  8. Types of Organizational Purchases Slide 7-7 Table 7.2 Low Involvement Complexity Purchase Type TimeFrame Number of Suppliers Applications Straight rebuy Simple Short One Frequently purchased routine products, such as printer cartridges Modified buy Routine purchase that has changed in some way, such as air travel (new fares, flights, destinations) Moderate Medium Few New taskpurchase Expensive, seldom-purchased products, such as new production equipment Complex Long Many High Involvement

  9. Vendor Analysis - Compare Suppliers Slide 7-8 Example of Vendor Analysis in a Microcomputer Buying Situation Rating scale Attributes Excellent (4) Good (3) Fair (2) Unacceptable (0) Poor (1) Compatibility X Affordability X Reliability X X Product line depth Service/support X Flexibility X Total score: 4 + 2 + 4 + 2 + 4 + 3 = 19 Average score: 19 ÷ 6 = 3.17

  10. Functional Areas and Their Key Purchasing Concerns Slide 7-9 Table 7.3 Functional Area Key Concerns in Purchasing Decision Making Design and development engineering Name reputation of vendor; ability of vendors to meet design specifications Production Delivery and reliability of purchases Sales/Marketing 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

  11. Approaches to Organizational Buying Slide 7-10 OfficeSpace InspectionBuying GovernmentContracts SamplingBuying Fruits &Vegetables CompetitiveBidding Buyer ContractBuying DescriptionBuying NewBuilding Bolts

  12. Ethical Issues Slide 7-11 Source Loyalty Ethics Reciprocity

  13. The Buying Center Slide 7-12 Figure 7.8 InitiatorIdentifies Need UserUses Product GatekeeperControls Information Flow InfluencerAffects BuyingDecision DeciderHas Expertise or Power to Make or Approve Selection BuyerHas Responsibility to Select Vendor and Negotiate Terms

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