Organizational Markets

Organizational Markets - Organizational Markets...

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Unformatted text preview: Organizational Markets Organizational O i i l Markets Dr. Kenneth N. Thompson University of North T U i it f N th Texas Marketing Foundations 2/6/2008 University of North Texas 1 Objectives & Overview Marketing Foundations Define organizational markets vs consumer vs. markets Identify the types major categories of organizational markets Understand the characteristics of organizational markets and how they differ from consumer markets Characterize the nature of and steps in the organizational buying process 2/6/2008 University of North Texas 2 2/6/2008 University of North Texas 1 Organizational Markets Consumer or Organizational Product? Why was product purchased? Marketing Foundations Personal or Household Use? Consumer engaged in selling to Marketers product other organizations are said to be marketing`B2B' i.e. Business to Business Organizational product 2/6/2008 University of North Texas 4 To be used in operation of business, made into other products, or for resale to others? Some Examples of Organizational Markets Agriculture Oil Exploration Construction Government 2/6/2008 Marketing Foundations Af farmer purchases a t t f h tractor from a John Deere equipment dealer. EXXON purchases off-shore drilling equipment from the manufacturer. A home construction company hires a consulting firm. The federal government asks for competitive bids on armored vehicles. University of North Texas 5 2/6/2008 University of North Texas 2 Organizational Markets T f Organizational i i l Types of O Markets Resellers Manufacturers Other Producers Services "Non-Business" Government 2/6/2008 University of North Texas 6 Marketing Foundations Resellers Marketing Foundations Buy products and resell yp Wholesalers Retailers No transformation of product May be some value added Add services i Bundling of products & services Also buy goods & services to operate firms 2/6/2008 University of North Texas 7 2/6/2008 University of North Texas 3 Organizational Markets Manufacturers Buy parts, materials that are made into other products Value added, Value analysis. Buy goods, services to operate business , Installations, Equipment, Supplies, Consulting. Marketing Foundations 2/6/2008 University of North Texas 8 Other Producers Marketing Foundations "Business Users" Buy products/services to operate business Do not resell Do not buy parts / materials to into other products Examples Mobil Oil buys drilling equipment, ships Farmers buy tractors, seed, fertilizer Wayerhauser buys trucks, bulldozers, equipment for its lumber mills *Etzel et al separate agriculture out into a separate category. 2/6/2008 University of North Texas 9 2/6/2008 University of North Texas 4 Organizational Markets Services Firms that provide services to businesses and / or consumers Transportation, storage Public utilities Financial, insurance, & real estate Consulting, equipment repair Health care, fitness, personal care, home repair Marketing Foundations Service firms out-number manufacturers Buy goods & services to operate firms 2/6/2008 University of North Texas 10 "Non"Non-Business" Markets Marketing Foundations Non-Business or Non-Profit organizations Organizations perform same business functions 2/6/2008 iti hospitals, Ch h universities, h it l Churches, i charities, political parties, etc. Actually are businesses, but not traditionally thought of in this way! goods, Require similar goods services More & more even have `profitability' as a goal! University of North Texas 11 2/6/2008 University of North Texas 5 Organizational Markets Government Marketing Foundations F d l state, local Federal, t t l l Largest customer group in U.S. Close to 45% of GNP spent by government units Spend over $2.5 trillion per year on products Unique buying requirements Bid buying Negotiated contracts 2/6/2008 University of North Texas 12 Bid Buying Marketing Foundations Buy by specification using mandatory bidding procedure Publish requirements, specifications, deadlines RFPs are `requests for proposals' IFBs are `invitations to bid' Often required to accept the lowest bid that meets p specs Approved buyers lists for more routine purchases 2/6/2008 University of North Texas 13 2/6/2008 University of North Texas 6 Organizational Markets Negotiated Contracts Marketing Foundations Used for complex products that are not "off-the-shelf" Products that require research, development, development custom tailoring Defense systems Buildings 2/6/2008 University of North Texas 14 Sources of Government Buying Information Commerce Business Daily Li t d most purchase bid requests over $25 000 Listed t h t $25,000 Replaced in 1992 by Federal Business Opportunities Marketing Foundations U.S. Purchasing, Specifications, and Sales Directory Small Business Administration (http://www.sba.gov/) Explains government procedures related to bidding State & local go ernments have similar governments ha e publications www.state.tx.us/ www.state.tx.us/ 2/6/2008 University of North Texas 15 2/6/2008 University of North Texas 7 Organizational Markets Ch i i f Characteristics of Organizational Markets How organizational markets differ from consumer markets Marketing Foundations 2/6/2008 University of North Texas 19 Range of Characteristics Demand is "derived" Inelastic demand I l ti d d Buy direct from the producer Close relationships between suppliers & customers Markets described by SICs Professional purchasing p g Systems buying Leasing Group buying process University of North Texas 20 Marketing Foundations 2/6/2008 2/6/2008 University of North Texas 8 Organizational Markets Example of Derived Demand Marketing Foundations Demand D d for Computer Equipment Demand for Computer Software Demand for Assembled Circuit Boards & Other Components p Demand for Computer MicroMicroprocessors & Memory Demand for raw materials 2/6/2008 University of North Texas 21 Range of Characteristics Marketing Foundations Demand is "derived" e a d s de ved Inelastic demand Buy direct from the producer Close relationships between suppliers & customers Markets described by SICs Professional purchasing P f i l h i Systems buying Leasing Group buying process University of North Texas 22 2/6/2008 2/6/2008 University of North Texas 9 Organizational Markets What is Price Elasticity of Demand? Refers to `price sensitivity' of the market How much will demand and/or total revenue for products change as price is raised or lowered? Marketing Foundations If demand is `price elastic" Total revenue increases as price is lowered, decreases as price is raised If demand is `price inelastic' Total revenue decreases as price is lowered, increases as price is raised 2/6/2008 University of North Texas 23 Elastic & Inelastic Demand A Graphic Representation Marketing Foundations Price TR=$420 Price $6 $4 TR=$600 TR=$540 TR=$460 70 150 90 115 Quantity Demanded Quantity Demanded Elastic Demand 2/6/2008 University of North Texas Inelastic Demand 24 2/6/2008 University of North Texas 10 Organizational Markets What is the point? Marketing Foundations Industry as a whole f l ti l faces relatively `inelastic demand.' Particularly true if Individual firms face `elastic demand.' cost of item is small proportion of total cost e.g. parts product has no substitutes cannot raise price relative to competitors without suffering a decline in sales can boost demand in the short-term with a price decrease "Industry inelasticity" is a function of derived demand... 2/6/2008 University of North Texas 25 Range of Characteristics Marketing Foundations Demand is "derived" e a d s de ved Inelastic demand Buy direct from the producer Close relationships between suppliers & customers Markets described by SICs Professional purchasing P f i l h i Systems buying Leasing Group buying process University of North Texas 26 2/6/2008 2/6/2008 University of North Texas 11 Organizational Markets Range of Characteristics Demand is "derived" Inelastic demand I l ti d d Buy direct from the producer Close relationships between suppliers & customers Markets described by SICs Professional purchasing P f i l h i Systems buying Leasing Group buying process University of North Texas 27 Marketing Foundations 2/6/2008 Range of Characteristics Demand is "derived" Inelastic demand Buy direct from the producer Close relationships between suppliers & customers Markets described by SICs Professional purchasing Systems buying Leasing Group buying process University of North Texas 28 Marketing Foundations 2/6/2008 2/6/2008 University of North Texas 12 Organizational Markets Primary SIC Divisions Marketing Foundations Primary Division 2-Digit SIC Agriculture, forestry, and fishing 01 to 09 Mining 10 to 14 Construction 15 to 17 Manufacturing 20 to 39 Transportation and public utilities 40 to 49 Wholesale trade 50 to 51 Retail trade 52 to 59 Finance, insurance, and real estate 60 to 67 Services (including agricultural) 70 to 89 Public administration/government 90 to 97 2/6/2008 University of North Texas 29 SIC Example Marketing Foundations 25 Furniture & Fixtures 26 Paper & Allied Products Apparel 27 Printing, Publishing, & Allied Industries 271 Newspapers 272 Periodicals 2752 Lithograph 2754 Gravure 2759 Oth not Other t elsewhere classified 275 Commercial Printing 2/6/2008 University of North Texas 30 2/6/2008 University of North Texas 13 Organizational Markets Marketing Foundations http://www.osha.gov/pls/imis/sicsearch.html 2/6/2008 University of North Texas 31 NAICS Marketing Foundations North American Industry Classification System Replacing SICs 6 digit codes for 20 industry sectors 1,170 idustries (1,004 in SIC System) 5 product sectors 15 service sectors http://www.census.gov/epcd/naics02/naicod0 2.htm 2/6/2008 University of North Texas 32 2/6/2008 University of North Texas 14 Organizational Markets Using SIC and NAICS Codes Treat SICs / NAICS as unique market segments Identifying specific potential customers Identify SICs for current customers Use directories to identify other firms with same and related SICs / NAICS Marketing Foundations Some sources for identifying names of firms by SIC / NAICS fi b Compact Disclosure Census of Manufacturers (www.census.gov/) (www.census.gov/) Standard & Poor's Register of Corporations 2/6/2008 University of North Texas 33 Marketing Foundations Decide on 2711, 2721, 2731, 2732, 2741 2/6/2008 University of North Texas 35 2/6/2008 University of North Texas 15 Organizational Markets Marketing Foundations 2/6/2008 University of North Texas 36 Marketing Foundations Repeat process for each SIC! 2/6/2008 University of North Texas 37 2/6/2008 University of North Texas 16 Organizational Markets Professional Purchasing Marketing Foundations Trained purchasing personnel, experts University trained, corporate programs f Institute for Supply Management l M t M b Members of I tit t f S (http://www.ism.ws/) Group process is used Technical analysis of proposals Computer-aided decision making Suppliers provide more technical data Require competitive bidding & negotiation The focus is on relationship marketing rather than single transactions. 2/6/2008 University of North Texas 48 Systems Buying Marketing Foundations Prefer to buy "total solution" y Originated with government purchases of weapons systems Contractor would bid entire "turnkey solution" Arrange for all "subsystems" or subcontracting for buyer systems selling" Lead to "systems selling by suppliers Variation is "systems contracting" 2/6/2008 University of North Texas 50 2/6/2008 University of North Texas 17 Organizational Markets Range of Characteristics Demand is "derived" Inelastic demand Buy direct from the producer Close relationships between suppliers & customers Markets described by SICs Professional purchasing Systems buying Leasing Group buying process University of North Texas 51 Marketing Foundations 2/6/2008 The Buying Center Marketing Foundations All individuals who impact the buying process in the firm Informal group Not an identified organization `Buying Committees' are formally organized groups Consists of `roles' Varies in composition & size 2/6/2008 University of North Texas 52 2/6/2008 University of North Texas 18 Organizational Markets Roles in the Buying Center Role Title Users U Initiators Gatekeepers Influencers Deciders Buyers Description of Role Marketing Foundations Actually A t ll uses the product. May initiate the purchase th d t M i iti t th h process. Provides expertise on criteria & alternatives. Request the purchase. May be users. Provides expertise on criteria & alternatives. Power to prevent sellers or information from reaching buying center. Purchasing agents, receptionists, clerks. Supply advice or information for decision. Define specification, evaluate alternatives. Often technicians. ifi ti l t lt ti Oft t h i i Power to make or approve final decision. Formal authority to negotiate contract, arrange terms. Determine specifications, select vendors, negotiate terms. University of North Texas 53 2/6/2008 The "Buy Classes" Buying Center Changes With Buying Situation Marketing Foundations A Continuum Electricity Water Gas Bulk Chemicals Consulting Services Major Equipment Office Supplies Computer Electrical Components Terminal Buildings Bridges Dams Straight Rebuy 2/6/2008 Modified Rebuy University of North Texas New Task 54 2/6/2008 University of North Texas 19 Organizational Markets 2/6/2008 University of North Texas 20 ...
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This note was uploaded on 03/27/2008 for the course MKTG 3650 taught by Professor Thompson during the Spring '08 term at North Texas.

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