CLEP Principles of Marketing Study Notes

Industrial products products sold to organizational

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Industrial Products - Products sold to organizational customers. Industrial products are sold to business customers, as opposed to consumer products sold to consumers. Consumer goods are usually purchased for final consumption, whereas industrial products are purchased for resale or further production. One of the big differences between organizational markets and consumer markets is in the demand for products. Organizational markets are based on derived demand, where the demand for materials is based on the anticipated demand by consumers for the finished products. This is known as derived demand. The demand for industrial products results from the demand for consumer products. For example, a company that produces transistor radios buys the electronic parts to build the radios to sell to consumers. If sales for the radios drop, the manufacturer in turn cuts back on orders for parts . Penetration Pricing - When trying to gain a large market share quickly, a marketer will set a price below the prices of competing brands and is used when the marketer is trying to gain market share quickly. 3 bases, or variables , which are not used for consumer markets, but used EXCLUSIVELY for segmenting ORGANIZATIONAL markets : 1. Customer Type - include producer, reseller, government, and institutional 2. Customer Size - measures the purchasing power of buyers, whereas in consumer markets a firm typically looks at the number of buyers, not the purchasing power of each.
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3. Buying Situation - can be one of three types: New-task buying - an organization makes an initial purchase of an item to be used to perform a new job or to solve a new problem. Most complex decision-making process for the firm making the purchase. If the organizational buyer is satisfied with the product, the supplier may be able to sell the buyer large quantities of the product for a period of years, so new-task purchases are important to the seller. Straight rebuy - a buyer purchases the same products routinely under the same terms of sale. Buyer requires little information to make these purchases. It is a process used to purchase inexpensive, low-risk products, and alternative products or suppliers are not usually considered. Modified rebuy - Company changes the requirements for a new-task purchase or the requirements for a routinely purchased product are modified. For example, an organizational buyer may decide to look for faster delivery or lower prices, and consider alternative suppliers. The decision process associated with a Modified Rebuy purchase is more complex than a Straight Rebuy, but less complex than a New-Task purchase. The decision making process for the firm usually entails different levels of involvement for these three types. The buying decision process for high-involvement consumer purchases is similar to that of new-task
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Industrial Products Products sold to organizational...

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