Chapter 2. The Business
Market: Perspectives on the
Organizational Buyer
BA 303
BUSINESS 2 BUSINESS
MARKETING
LINDELL PHILLIP CHEW
The three sectors of the
business market, commercial
enterprises, government, and
institutions.
The
chapter is pivotal to
formulating an effective
business marketing strategy,
Commercial enterprises
;
 Unique aspects of the sector,
geographic concentration and
volume concentration by large
firms
 DERIVED DEMAND

North American Industrial Classification System
(NAICS)
Replaces SIC system
Commercial Enterprises
Unique Characteristics
Manufacturing,
construction, service,
professional groups, resellers

Small in number; large in volume
360,000 manufacturers
10 percent of the manufacturers
produce 78 percent of the value
added
government purchasing
practices and procedures
are explored
 understand
the contractual and
legal side of government
purchasing federal buying process
is provided to emphasize the type
of marketing efforts required by
potential suppliers
Government contracts
Stringent legal requirements,
often unrelated to the purchase,
small subcontractor preferences,
minority employment
Public laws which specify
contractual arrangements
Vendors must carefully understand
government laws

RED TAPE
Knowledge of government requirement
needed for effective negotiation
Types of contracts
Fixed price profit potential is good if
inflation is stable and
costs are controlled
Cost reimbursement effective when
extensive
developmental efforts are required.
Carefully monitored
NOTE…HORROR STORIES
say hi to Chester & A 12!
NOTE…HORROR STORIES
serving up a fixed price nightmare!!
Various governmental agencies
publish booklets explaining how
sell to that particular agency
please read them!!!!
ENTER AT YOUR OWN RISK
Defense Procurement
The Department of Defense
spends a large portion of the
federal government's budget on
procurement
Defense Logistics Agency procures &
distributes common supplies to all
military branches
Military branches procure major items

RISKY BUSINESS
institutional buying
environment
institutional
buying forms a
middle ground between the
commercial and government
sectors in terms of purchasing
processes and procedures
Nondefense procurement
Accomplished through a wide variety
of cabinet departments, commissions
& agencies
the GSA-General Services
Administration
Centralized procurement of items
in common use by
all government agencies

FORMAL ADVERTISED, NEGOCIATED, SET ASIDE
Institutional Market: Unique
characteristics
A large market composed of a
vast array of schools, hospitals,
universities,
libraries, foundations etc
A middle ground between
business and government
Requires the marketer to respond to the needs of the product
users (professional staff) and the buyers (purchasing
personnel)
Outsourcing
Group buying
The Market Centered
customer driven to driving
organization

Business buyer diversity
Marketers must respond to the unique
purchasing requirements of each segment of
the market
The marketing organization is structured
so that major customer markets become the
centers around which the firm is organized
Firm's marketing efforts are therefore
focused on each market
sector…government, business, institutional,
and international