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Organizational

Marketing
Why is its understanding critical
for running businesses?

Value vs volume of transactions


The Marketing Coin
Marketer’s job content
Industry
It is a group of firms that offer a product
or class of products that are close
substitutes for each other.
Kotler

The commercial production and sale of


goods and services.
A specific branch of manufacture and
trade.
The Heritage Illustrated Dictionary of English Language
Industrial Marketing
The marketing of products and
services to commercial enterprises,
government bodies, and other organs,
either for resale to other industrial
consumers or for use in the
production of their own product or
service.
Business to Business
Marketing
Marketing activities of any kind of
organisation, public or private, which has
exchange relationships with other
organisations.

Peter W. Turnbull
Type of Organizational Markets
Reseller
Institutional
Producer
Government

Classification of Industrial Goods


Raw material and Semi-processed
Manufactured materials and parts
Capital goods
Services
The Diversity of Organizational
Markets
Raw material extractors and refiners (mining,
electricity generation, petroleum refining, water
supply, etc.)
Agricultural & marine products (farming,
forestry, flower growing, fisheries, abattoirs,
etc.)
Manufactured products, processes and
components (cars, furniture, paint-shops,
assemblers, engines, electronics, etc.)
Resellers and distributors (retailers,
wholesalers, cargo companies, rail & road
companies, merchant shipping, import/export
The Diversity of Organizational
Markets
Commercial and professional service
providers (banks, accountants, architects,
consultants, guards, etc).
Hiring and leasing agencies (commercial plant
and machinery hire, property leasing, car hire,
placement bureaus, etc.)
Government departments, agencies and
authorities (customs, income tax, foreign
affairs, city admin., etc.)
Armed forces and paramilitary institutions
(armies, navies, air forces, police, prisons, law
enforcement agencies, etc.)
Not-necessarily-for-profit institutions
Major Segmentation Variables
for Business Markets
1. DEMOGRAPHICS
Industry
Company size
Location
2. OPERATING VARIABLES
User/Nonuser status
Technology
Customer capabilities

3. SITUATIONAL FACTORS
Size of order
Specific application
Urgency
Major Segmentation Variables
for Business Markets
4. PURCHASING APPROACHES
Purchasing function organization
Power structure
Nature of existing relationships
General purchase policies
Purchasing criteria

5. PERSONAL CHARACTERISTICS
Buyer-seller similarity
Attitudes towards risk
Loyalty
20 Features of Marketing in
Organizational Markets

1 Derived nature of demand


2 Means and timing of payment
3 Expertise and bargaining power of customers
4 Fewer customers
5 Larger orders
6 Direct selling
7 Negotiability of terms of purchase and supply
Negotiations
Recognizes the fact that the parties are
in a bargaining situation of strategic
interaction and that cooperation can
increase the total value of the interaction
rather than maximizing individual shares
Negotiations

“I win, you win”

Competition - value to individuals


vs
Cooperation - total value to themselves
20 Features of Marketing in Organizational
Markets

8 Regulation of the purchasing process


9 Professionalism of purchasing
10 Complexity of the purchasing decision
process
11 Significance of technical specifications
12 Importance of organizational and
personal relationships
13 Reputation of suppliers and customers
20 Features of Marketing in
Organizational Markets

14 Importance of supplier’s financial and competitive


strength
15 Importance of repeat purchase flow to all parties
16 Importance of delivery arrangements
17 Perception of risk to organizations and careers
18 Flexibility of suppliers in dealing with customers
19 Collaboration between suppliers and customers
20 Reliability and quality of goods or services
Dominic Wilson
Ten Stages in the Procurement
Process
1. Perception of Need - proactive or reaction to
internal / external stimuli
2. Analysis of Need - internal technical &
operational assessment (including linkages)
3. Specification Setting - (technical, delivery
quantity, frequency, quality, packaging, design, etc.)
4. Identification of sources – (word of mouth,
research, consultancy, call for tenders, long/short
lists)
5. Evaluation of Offerings – prototypes, trials, site
visits, references, rupee checks
Ten Stages in the Procurement
Process
6. Negotiation over Terms - bargaining with
short-listed finalists
7. Selection of Supplier – decision, feedback and
fallback arrangements
8. Delivery & Payment - receipt, inspection,
storage, form and timing of payment, variance
causes, etc.
9. Performance Evaluation of need resolution,
performance of product and supplier and
relationship
10.Review - periodic review of arrangements due to
changed circumstances and strategies
The Buy-Grid Model Buy classes

Buy phases Straight Modified New


rebuy rebuy task

1 Perception of Need Yes Yes Yes

2 Analysis of Need No Maybe Yes

3 Specification Setting No Maybe Yes

4 Identification of sources No Maybe Yes

5 Evaluation of Offerings No Maybe Yes

6 Negotiation over Terms No Maybe Yes

7 Selection of supplier No Maybe Yes

8 Delivery & Payment No Maybe Yes

9 Performance Evaluation Yes Yes Yes

10 Review Yes Yes Yes

(adapted from Robinson et al)


The Buying Center or
Decision Making Unit
The Buying Center or
Decision
A buying center (or Making Unit
DMU), in marketing,
procurement, and organizational studies,
is a
group of employees, family members, or
members of any type of organization
responsible
for finalizing major decisions, usually
involving a
Roles in a DMU
1. Initiator who suggests purchasing a
product or service.
2. Influencers who try to affect the
outcome decision with their opinions.
3. Deciders who have the final decision.
4. Buyers who are responsible for the
contract.
5. End users of the item being purchased.
Vendor Analysis
&
Value Analysis
Value Analysis
An analytical procedure to study the
costs versus the benefits of a currently
purchased material, component, or
design in order to reduce the
cost/benefit ratio as much as possible.
It is also called value engineering.

"Can the cost of this part, this


subassembly, or this step be reduced
Vendor Analysis

• The rating by a buying organisation of all


possible suppliers of a product on a scale
to select the most appropriate; also
referred to as Vendor Rating.
Vendor Analysis – 7 C’s
• Competency—managerial, technical, administrative,
and professional competence of the supplying firm.
• Capacity—supplier's ability to meet physical,
intellectual and financial requirements.
• Commitment—supplier's willingness to commit
physical, intellectual and financial resources.
• Control—effective management control and
information systems.
• Cash resources—financial resources and stability of
the supplier. Profit, ROI, ROE, asset-turnover ratio.
• Cost—total acquisition cost, not just price.
• Consistency—supplier's ability to exhibit quality and
reliability over time.
Make-or-Buy Decision
The make-or-buy decision is the act of making
a strategic choice between producing an item
internally (in-house) or buying it externally
(from an outside supplier).

The buy side of the decision also is referred to


as outsourcing. Make-or-buy decisions usually
arise when a firm that has developed a product
or part is having trouble with current suppliers,
or has diminishing capacity or changing
demand.
Selected Differences Between
Markets
Consumer Industrial
Segmentation Dispersed mass markets
Few buyers

Emporographic grouping &


Stress on demographics &
psychographics reciprocity

Decision making Unobservable mental stages Distinct observable stages

Few decision makers - informal More DMUs - formal and


buying complex process.

New Products Demand-pull Technology-push


Incremental Innovation Customization

Promotion Mass media, simple standard Personal selling, rational and


message highly exaggerated verifiable message for
and abstract images different functional DMU’S
Selected Differences Between
Markets
Consumer Industrial
Channels
Indirect and multiple Fewer and direct.

Service Elaborate pre, during


Limited service and after sales service

Pricing Discrimination on Discrimination on


customer self- buyer’s price sensitivity
selection & value

List prices Competitive bidding


and negotiations

Monitoring & Sales, share & profit Constant evaluation on


over period. customer acquisition
Bottom-line cost & life time value

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