marketing chapter 5

e-market places

-A significant development in organizational buying has been the creation of online trading communities, that bring together buyers and supplier organizations. -E-marketplaces can be independent trading communities or private exchanges. -Independent e-marketplaces act as a neutral third party and provide an Internet technology trading platform and a centralized market that enable exchanges between buyers and sellers. -They charge a fee for their service and exist in settings that have one or more of the following features: (1) thousands of geographically dispersed buyers and sellers, (2) volatile prices caused by demand and supply fluctuations, (3) time sensitivity due to perishable offerings and changing technologies, and (4) easily comparable offerings between a variety of sellers.

influencers

affect the buying decision, usually by helping define the specifications for what is bought. The information technology manager would be a key influencer in the purchase of a new mainframe computer.

government units

are the federal, state, and local agencies that buy goods and services for the constituents they serve. There are about 89,500 of these in the United States.

users

are the people in the organization who actually use the product or service, such as a secretary who will use a new word processor.

Organizational buyers

are those manufacturers, wholesalers, retailers, service companies, not-for-profit organizations, and government agencies that buy products and services for their own use or for resale.

gatekeepers

control the flow of information in the buying center. Purchasing personnel, technical experts, and secretaries can all keep salespeople or information from reaching people performing the other four roles.

what type of auctions do suppliers often favor?

-Clearly, buyers welcome the lower prices generated by reverse auctions. Suppliers often favor reverse auctions because they give them a chance to capture business that they might not have otherwise had, perhaps because of a long-standing purchase relationship between the buyer and another supplier. -On the other hand, suppliers say reverse auctions put too much emphasis on prices, discourage consideration of other important buying criteria, and may threaten supply partnership opportunities.22

supplier development

-Many organizational buyers today are transforming their buying criteria into specific requirements that are communicated to prospective suppliers. - This practice involves the deliberate effort by organizational buyers to build relationships that shape suppliers' products, services, and capabilities to fit a buyer's needs and those of its customers.

buy classes

-Researchers who have studied organizational buying identify three types of buying situations -These vary from the routine reorder, or straight rebuy, to the completely new purchase, termed new buy. In between these extremes is the modified rebuy.

reverse auction

-a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with one another. As more would-be suppliers become involved, there is a downward pressure on bid prices for the buyer's business. -Why? Like traditional auctions, bidding is sequential and prospective suppliers observe the bids of others and decide whether or not to decrease the bid price. -The auction ends when a single bidder remains and "wins" the business with its lowest Page 136price. Reverse auctions benefit organizational buyers by reducing the cost of their purchases. -As an example, United Technologies Corp. estimates that it has saved $600 million on the purchase of $6 billion in supplies using online reverse auctions.21

traditional auction

-a seller puts an item up for sale and would-be buyers are invited to bid in competition with one another. As more would-be buyers become involved, there is an upward pressure on bid prices. -Why? Bidding is sequential. Prospective buyers observe the bids of others and decide whether or not to increase the bid price. The auction ends when a single bidder remains and "wins" the item with its highest price. -Traditional auctions are often used to dispose of excess merchandise. For example, Dell Inc. sells surplus, refurbished, or closeout computer merchandise at its www.dellauction.com website.

The buying function

-an organization is primarily responsible for facilitating the selection and purchase of products and services for the organization's own use or resale to consumers. -The buying function involves gathering and screening information about products and services, prices, and suppliers, called vendors. -The buying function is often responsible for the formal solicitation of bids from suppliers (vendors) and making awards of purchasing contracts.

organizational buying criteria

-are the objective attributes of the supplier's products and services and the capabilities of the supplier itself. These criteria serve the same purpose as the evaluative criteria used by consumers and described in Chapter 4. -The most commonly used criteria are (1) price, (2) ability to meet the quality specifications required for the item, (3) ability to meet required delivery schedules, (4) technical capability, (5) warranties and claim policies in the event of poor performance, (6) past performance on previous contracts, and (7) production facilities and capacity.8 Suppliers that meet or exceed these criteria create customer value.

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.

straight rebuy

Here the buyer or purchasing manager reorders an existing product or service from the list of acceptable suppliers, probably without even checking with users or influencers from the engineering, production, or quality control departments. Office supplies and maintenance services are usually obtained as straight rebuys.

new buy

Here the organization is a first-time buyer of the product or service. This involves greater potential risks in the purchase, so the buying center is enlarged to include all those who have a stake in the new buy. Procter & Gamble's purchase of a multimillion-dollar fiber-optic network from Corning, Inc. for its corporate offices in Cincinnati, represented a new buy.

modified rebuy

In this buying situation the users, influencers, or deciders in the buying center want to change the product specifications, price, delivery schedule, or supplier. Although the item purchased is largely the same as with the straight rebuy, the changes usually necessitate enlarging the buying center to include people outside the purchasing department.

North American Industry Classification System (NAICS).

The measurement of industrial, reseller, and government markets is an important first step for a firm interested in gauging the size of one, two, or all three of these markets in the United States and around the world. -This task has been made easier with this system -The NAICS provides common industry definitions for Canada, Mexico, and the United States, which makes it easier to measure economic activity in the three member countries of the North American Free Trade Agreement (NAFTA).

Industrial markets

There are about 7.5 million firms in the industrial, or business, market. These industrial firms in some way reprocess a product or service they buy before selling it again to the next buyer.

resellers

Wholesalers and retailers that buy physical products and resell them again without any reprocessing are these

buyers

have formal authority and responsibility to select the supplier and negotiate the terms of the contract. Senior purchasing managers at JCPMedia, Inc. perform this role as described in the chapter opening example.

deciders

have the formal or informal power to select or approve the supplier that receives the contract. In routine orders the decider is usually the buyer or purchasing manager; in important technical purchases it is more likely to be someone from R&D, engineering, or quality control. The decider for a key component being incorporated in a final manufactured product might be any of these three people.

reciprocity

is an industrial buying practice in which two organizations agree to purchase each other's products and services.

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.

Business to Business marketing

is the marketing of products and services to companies, governments, or not-for-profit organizations for use in the creation of products and services that they can produce and market to others.

derived demand

means that the demand for industrial products and services is driven by, or derived from, demand for consumer products and services.

buying center

several people Page 132in the organization participate in the buying process. The individuals in this group share common goals, risks, and knowledge important to a purchase decision.