Chapter 7 - Why Organizations Buy Flashcards
Business to Business Marketing/Organizational Markets
Marketing of goods and services that business and organizational customers need to produce other goods and services for resale or to support their operations.
- Purposes other than personal consumption.
Difference of B2B Markets
- Products have to meet requirements of everyone involved.
- Narrow customer base and a small number of buyers.
- Large purchases (high risk and high cost)
- Customers located in small geographic area.
Derived Demand
Demand for business or organizational products derived from demand for consumer goods or services.
- B2B Demand
Inelastic Demand
Changes in price have little or no effect on the amount demanded.
- B2B demand isn’t always inelastic
Acceleration Principle (Multiplier Effect)/Fluctuating Demand
Small changes in consumer demand can create large increases or decreases in business demand.
- A product’s life expectancy influences fluctuations.
Joint Demand
Occurs when two or more goods are necessary to create a product.
Producers
The individuals or organizations that purchase products for use in the production of other goods and services.
Resellers
The individuals or organizations that buy finished goods for the purpose of reselling, renting, or leasing to others to make a profit and to maintain their business operations.
Governments
The federal, state, county, and local governments that buy goods and services to carry out public objectives and to support their operations.
Competitive Bids
A business buying process in which 2 or more suppliers submit proposals (price and data) for a proposed purchase and the firm providing the better offer gets the bid.
Not-for-Profit Institutions
organizations with charitable, educational, community, and other public service goals that buy goods and services to support their functions and to attract and serve their members.
- hospitals, churches, universities, museums, nursing homes.
- Low budgets
North American Industry Classification System
- NAICS
- Numerical coding system that the United States, Canada, and Mexico use to classify firms into detailed categories according to their business activities.
Buy Class
Buying situations that characterizes the degree of time and effort required to make a decision.
Straight Rebuy
A buying situation in which business buyers make routine purchases that require minimal decision making.
- Low risk purchases
Modified Rebuy
A buying situation classification used by business buyers to categorize a previously made purchase that involves some change and that requires limited decision making.
- Firms shop around for suppliers with better prices, quality, or delivery times.
New-Task Buy
A new B2B purchase that is complex or risky and that requires extensive decision making.
Centralized Purchasing
A business buying practice in which a single department does the buying for all the company’s facilities.
Buying Center
The group of people in an organization who participate in a purchasing decision.
- Cross-functional team
Roles in the Buying Center
- Initiator
- User
- Gatekeeper
- Influencer
- Decider
- Buyer
Initiator
Recognized that a purchase needs to be made
User
Individuals who will ultimately use the product
Gatekeeper
Controls flow of information to others in the organization.
Influencer
Affects decision by giving advice and sharing expertise.
Decider
Makes the final purchase decision.
Byuer
Executes the purchase decision.
Business Buying Decision Process
- Problem Recognition
- Information Search
- Evaluation of Alternatives
- Product and Supplier Selection
- Post-purchase Evaluation
“PIEPP”
Problem Recognition
- Occurs when someone sees that a purchase can solve a problem.
- Purchase requisition
- Buying Center Formed
Information Search
The buying center searches for information about products and suppliers.
- Product Specifications Developed
- Potential Suppliers Identified
- Proposals and Quotations Obtained.
Product Specifications
A written description of the quality, size, weight, and so forth required of a product purchase.
Evaluation of Alternatives
- Buying Center assesses the proposals.
Product and Supplier Selection
- Total Quality Management approach helps to select the suppliers.
Just In Time (JIT)
Inventory management and purchasing processes that manufacturers and resellers use to reduce inventory to very low levels and ensure that deliveries from suppliers arrive only when needed.
Single Sourcing
The business practice of buying a particular product from only one supplier.
Multiple Sourcing
The business practice of buying a particular product from many suppliers.
Reciprocity
A trading partnership in which 2 firms agree to buy from one another.
Outsourcing
The business buying process of obtaining outside vendors to provide goods or services that otherwise might be supplied in house.
Reverse Marketing
A business practice in which a buyer firm attempts to identify suppliers who will produce products according to the buyer firm’s specifications.
Post-Purchase Evaluation
When purchases are evaluated to see if the performance of the product and the supplier is living up to expectations.
B2B E-commerce
Internet exchanges between 2 or more business or organizations.
Extranet
Private, corporate computer network that links company departments, employees, and databases to suppliers, customers, and others outside the organization.
Private Exchanges
Systems that link an invited group of suppliers and partners over the Web.
Authentification
Making sure that only authorized individuals are allowed to access a site and place an order.
Firewall
A combination of computer hardware and software that ensure only authorized individuals gain entry into a computer system.
Encryption
Scrambling a message so that only another individual has the right “key” for deciphering it can unscramble it.
