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vocab ch. 6

Business Marketing

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

organizational buyers

those manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale

North American Industry Classification System (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).

Has made the measurement of industrial, reseller, and govt. markets easier as it is an important 1st step for a firm interested in gauging the size of 1, 2 or 3 of these markets in the US and around the world.

Industry markets

in some way, these reprocess a product or service they buy before selling it again to the next buyer.

Reseller markets

Wholesalers and retailers that buy physical products and resell them again w/o any reprocessing

Government markets

the federal, state, and local agencies that buy goods and services for the constituents they serve

Derived Demand

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

Key characteristics and dimensions of organizational buying behavior

market characteristics, product or service characteristics, buying process characteristics, marketing mix characteristics

market characteristics of organizational buyers

demand for industrial products is derived
few customers typically exist, and their purchase orders are large

product or service characteristics of organizational buyers

products or services are technical in nature and purchased on the basis of specifications
many of goods purchased are raw and semifinished
heavy emphasis is placed on delivery time, technical assistance, and postsale service

buying process characteristics of organizational buyers

technically qualified and professional buyers follow established purchasing policies and procedures
buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and their products or services
there are multiple buying influences, and multiple parties participate in purchase decisions
there are reciprocal arrangements, and negotiation between buyers and sellers is commonplace
online buying over the internet is widespread

marketing mix characteristics of organizational buyers

direct selling to org. buyers is the rule, and distribution is very important
advertising and other forms of promotion are technical in nature
price is often negotiated, evaluated as part of broader seller and product or service qualities, and frequently affected by quantity discounts

organizational buying criteria

the objective attributes of the supplier's products and services and the capabilities of the supplier itself. most commonly used criteria: 1) price, 2) ability to meet quality specifications required for the item, 3) ability to meet 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

ISO 9000

(international standards organization) standards for registration and certification of a manufacturer's quality management and assurance system based on an on-site audit of practices and procedure.

supplier development

the deliberate effort by org. buyers to build relationships that shape suppliers' products, services, and capabilities to fit a buyer's needs and those of its customers

just-in-time inventory (JIT)

Reduces the inventory of production parts to those to be used within hours or days, on-time delivery is becoming an even more important buying criterion, and in some instances, a requirement


an industrial buying practice in which 2 orgs. agree to purchase each others products and services. US justice department disapproves of this because it restricts the normal operation of the free market
can limit the flexibility of org. buyers in choosing alternative suppliers

Supply partnership

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 customer

sustainable procurement

the buying practice that aims to integrate environmental considerations into all stages of the organization's buying process with the goal of reducing the impact on human health and the physical environment

buying center

several people in the org. participating in the buying process. these individuals share common goals, risks, and knowledge important to a purchase decision. sometimes formalized and called a buying committee

roles in the buying center



role in the buying center:
the ppl in the org. who actually use the product, or service, such as the secretary who uses a new word processor


role in the buying center:
these people affect the buying decision, usually by helping define the specifications for what is bought. ex. information systems manager would be one in the purchase of a new product mainframe computer


role in the buying center:
formal authority and responsibility to select the supplier and negotiate the terms of the contract.


role in the buying center:
these people have the formal or informal power to select or approve the supplier that receives the contract. in routine orders, this 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


role in the buying center:
these ppl control the flow of info in the buying center. ex. purchasing personnel, technical experts, and secretaries can all keep salespeople or info from reaching ppl performing the other 4 roles

buy classes

3 types of buying situations:
straight rebuy
new buy
modified rebuy

straight rebuy

1 person involved, short decision time, well-defined problem definition, low-priced supplier is the buying objective, present suppliers considered, and buying influence is the purchasing agent, the buyer or purchasing manager reorders an existing product or service from a list of acceptable suppliers, probably w/o checking w/ users or influencers from the engineering, production, or quality control departments.

new buy

many ppl involved, long decision time, uncertain problem definition, the buying objective is a good solution, new and present suppliers are considered, and buying influences are technical/operating personnel, 1st time buyer of the product or service,high potential risk

modified rebuy

2-3 ppl involved, moderate decision time, minor modifications to the problem definition, the buying objective is a low-priced supplier, present suppliers are considered, and buying influences that are considered are purchasing agent and others, influencers, or deciders in the buying center want to change the product specifications, price, delivery schedule, or supplier. item purchased is largely the same as straight rebuy, but the changes usually necessitate enlarging the buying center to include ppl outside the purchasing department

organizational buying behavior

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

make-buy decision

an evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself.

value analysis

a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs

bidder's list

a list of firms believed to be qualified to supply a given item. this list is generated from company's purchasing databank as well as from engineering inputs. specific items that are unique may be obtained from a single supplier after careful evaluation by the buying center.


online trading communities. these bring together buyer and supplier organizations

traditional auction

a seller that puts an item up for sale and would-be buyers are invited to bid in competition with each other

reverse auction

a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other

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