Organizational Buying Behavior

List and define the components of the business market (organizational market).

      The organizational, or business, market is divided into four

segments: the industrial (producer, commercial) market; trade industries, including wholesalers and retailers; governments; and institution. The industrial market consists of individuals and firms that acquire products to be used, directly or indirectly, to produce other goods and services. Trade industries are organizations, such as retailers and wholesaler, that purchase for resale to others. The primary purpose of government purchasing at the federal, state, and local levels is to provide some form of public benefit. The purchasing behavior of institutions, such as hospitals, universities, museums, and other nonprofit groups is similar to that of the other components.

Identify the major characteristics of organizational markets and industrial market demand.

      The major characteristics of the industrial market are geographic market concentration, a relatively small number of buyers, and a classification system of SIC codes Analysis of value&-added&-by&-manufacturing data shows that over half of the industrial market is concentrated in just three census divisions. The limited number of buyers in the marketplace is illustrated by such industries as commercial aircraft, farm equipment, and oil. The Standard Industrial Classification (SIC) code system is the government's system of subdividing the organizational market place into more detailed industries or market segments.

      Industrial market demand is characterized by derived demand, joint demand, inventory adjustments, and volatile (or variable) demand. Derived demand means that the demand for industrial offerings is linked to the demand for consumer goods and services. Joint demand refers to the relationship of the demand for some industrial products to the demand for other industrial products that are used jointly with the first item. Changes in

inventory policy also can have a significant effect on industrial demand. All these factors influence the nature and extent of industrial market demand.

Describe organizational buying behavior.

      Organizational buying behavior tends to be more complex than individual consumer behavior. More people and time are involved, and buyers often seek several alternative supply sources. The systematic nature of organizational buying is reflected in the use of purchasing managers for directing such efforts. Major organizational purchases may require an elaborate and lengthy decision&-making process involving many people. Purchase decisions typically depend on a combination of such factors as price, service, certainty of supply, and product efficiency.

Classify organizational buying situations.

      Organizational buying situations differ. A straight rebuy is a recurring purchase decision in which an item: that has performed satisfactorily is purchased again by a customer. A modified rebuy is a situation in which purchasers are willing to reevaluate their available options. New&-task buying refers to first&-time or unique purchase situations that require considerable effort on the part of the

decision maker.

Explain the buying center concept.

      The buying center concept refers to everyone who is involved in some fashion in an organizational buying action. There are five buying center roles: users, gatekeepers, influencers,

deciders, and buyers.

Outline the steps in the organizational buying process.

      The actual process of buying an industrial good or service consists of problem recognition,. problem investigation, problem identification, investigation of solutions,  buying decisions, and problem solution. A controversial practice that comes into play for some organizational purchasing situations is reciprocity, in  which purchasing preference is given to suppliers that are also customers.

Compare government markets with other organizational markets.   

            The government is a sizable organizational market that exhibits both similarities to and differences from other organizational markets. The government seeks to buy many of the same goods and services&-for example, office equipment &- but unlike other organizational markets, the government has numerous special regulations governing its purchasing behavior.