CHAPTER
ORGANIZATIONAL
MARKETS AND
BUYER
BEHAVIOR
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-1
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1. Distinguish among industrial, reseller,
and government organizational
markets.
2. Describe the key characteristics of
organizational buying that make it
different from consumer buying.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
3. Explain how buying centers and buying
situations influence organizational
purchasing.
4. Recognize the importance and nature of
online buying in industrial, reseller, and
government organizational markets.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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BUYING PAPER IS A STRATEGIC
BUSINESS DECISION AT JCPENNEY
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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THE NATURE AND SIZE OF
ORGANIZATIONAL MARKETS
• Business Marketing
• Organizational Buyers
• Industrial Markets (Industrial Firms)
• Reseller Markets (Resellers)
• Government Markets (Government Units)
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-5
FIGURE 6-1 Type and number of
organizational customers in the U.S.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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MEASURING DOMESTIC AND
GLOBAL INDUSTRIAL, RESELLER,
AND GOVERNMENT MARKETS
• North American Industry Classification
System (NAICS)
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Slide 6-7
FIGURE 6-2 NAICS breakdown for
information industries sector:
NAICS code 51 (abbreviated)
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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Concept Check
1. What are the three main types of
organizational buyers?
A: industrial firms; resellers;
government units
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-9
Concept Check
2. What is the North American Industry
Classification System (NAICS)?
A: 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 NAFTA.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-10
CHARACTERISTICS OF
ORGANIZATIONAL BUYING
• Demand Characteristics
 Derived Demand
• Size of the Order or Purchase
• Number of Potential Buyers
• Organizational Buying Objectives
• Organizational Buying Criteria
 Reverse Marketing
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-11
FIGURE 6-3 Key characteristics of
organizational buying behavior
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-12
FIGURE 6-A Key organizational buying
criteria
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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CHARACTERISTICS OF
ORGANIZATIONAL BUYING
• Buyer-Seller Relationships and
Supply Partnerships
 Reciprocity
 Supply Partnership
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-14
THE ORGANIZATIONAL BUYING
PROCESS AND THE BUYING CENTER
• Organizational Buying Behavior
• Stages in the Organizational Buying
Process
• The Buying Center: A Cross-Functional
Group
 Buying Center
 Buying Committee
 People in the Buying Center
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-15
FIGURE 6-4 Comparing the stages in
consumer and organizational purchases
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-16
THE ORGANIZATIONAL BUYING
PROCESS AND THE BUYING CENTER
• The Buying Center: A Cross-Functional
Group
 Roles in the Buying Center
• Users
• Deciders
• Influencers
• Gatekeepers
• Buyers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-17
Buying Center
Who is in the buying center and
what roles do they play?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-18
THE ORGANIZATIONAL BUYING
PROCESS AND THE BUYING CENTER
• The Buying Center: A Cross-Functional
Group
 Buying Situations (Buy Classes) and the
Buying Center
• Straight Rebuy
• Modified Rebuy
• New Buy
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-19
FIGURE 6-5 How the buying situation
affects buying center behavior
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Slide 6-20
Concept Check
1. What one department is almost
always represented by a person
in the buying center?
A: purchasing department
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-21
Concept Check
2. What are the three types of buying
situations or buy classes?
A: straight rebuy; modified rebuy;
new buy
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-22
ONLINE BUYING IN
ORGANIZATIONAL MARKETS
• Prominence of Online Buying in
Organizational Markets
• E-marketplaces: Virtual Organizational
Markets
 Trading Communities
 Private Exchanges
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-23
ONLINE BUYING IN
ORGANIZATIONAL MARKETS
• Online Auctions in Organizational
Markets
 Traditional Auction
 Reverse Auction
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-24
FIGURE 6-6 How buyer and seller
participants and price behavior differ by
type of online auction
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-25
Concept Check
1. What are e-marketplaces?
A: E-marketplaces are online trading
communities that bring together
buyers and supplier organizations.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-26
Concept Check
2. In general, which type of online
auction creates upward pressure on
bid prices and which type creates
downward pressure on bid prices?
A: traditional auction; reverse auction
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-27
GOING ONLINE
NAVIGATING THE NAICS
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Slide 6-28
Going Online
1. What is the three-digit industry
subsector code for food
manufacturing?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-29
Going Online
2. What is the six-digit U.S. code for dog
and cat food manufacturing?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-30
Going Online
3. How many establishments and what is
the value of shipments sold by the
U.S. dog and cat food manufacturing
industry based on the latest
government statistics?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-31
VIDEO CASE 6
LANDS’ END:
WHERE BUYERS RULE
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Slide 6-32
VIDEO CASE 6
Lands’ End
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Slide 6-33
VIDEO CASE 6
Lands’ End
1. Who is likely to make up the buying
center in the decision to select a new
supplier for Lands’ End? Which of
the buying center members are likely
to play the roles of users, influencers,
buyers, deciders, and gatekeepers?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-34
VIDEO CASE 6
Lands’ End
2. Which stages of the organizational
buying decision process does Lands’
End follow when it selects a new
supplier? What selection criteria
does the company utilize in the
process?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-35
VIDEO CASE 6
Lands’ End
3. Describe purchases Lands’ End
buyers typically face in each of the
three buying situations: straight
rebuy, modified rebuy, and new buy.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-36
SUPPLEMENTAL
LECTURE NOTE 6-1
HOW ORGANIZATIONS
CAN IMPROVE THEIR
PURCHASING
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-37
IN-CLASS ACTIVITY 6-1
BUYING CENTER ROLE-PLAY
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Sprint FonPromotions Brochure
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Sprint Prepaid Business Card
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Sprint Prepaid Phone Card
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Slide 6-41
Business Marketing
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-42
Organizational Buyers
Organizational buyers are those
manufacturers, wholesalers, retailers, and
government agencies that buy goods and
services for their own use or for resale.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-43
North American Industry
Classification System (NAICS)
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).
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-44
Derived Demand
Derived demand means the demand for
industrial products and services is driven
by, or derived from, demand for consumer
products and services.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-45
Supply Partnership
A supply partnership exists when a
buyer and its supplier adopt mutually
beneficial objectives, policies, and
procedures for the purpose of lowering
the cost or increasing the value of
products and services delivered to the
ultimate consumer.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-46
Organizational Buying Behavior
Organizational buying behavior is the
decision-making process that
organizations use to establish the need for
products and services and identify,
evaluate, and choose among alternative
brands and suppliers.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-47
Buying Center
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-48
Buy Classes
Buy classes consist of three types of
buying situations: straight rebuy;
modified rebuy; and new buy.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-49
E-Marketplaces
E-marketplaces are online trading
communities that bring together buyers
and supplier organizations to make
possible the real time exchange of
information, money, products, and
services.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-50
Traditional Auction
A traditional auction is an online auction
in which a seller puts an item up for sale
and would-be buyers are invited to bid in
competition with each other.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-51
Reverse Auction
A reverse auction is an online auction in
which a buyer communicates a need for a
product or service and would-be suppliers
are invited to bid in competition with each
other.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 6-52