Four basic categories define the business market:
1. The commercial market
2. Trade industries
3. Government organizations
Commercial markets include individuals and firms that acquire goods and services to support, directly or indirectly, production of other goods and services.
When Lufthansa buys aircraft built by the European consortium Airbus Industry, when Sara Lee purchases wheat to mill into flour for an ingredient in its cakes.
Trade industries include retailers or whole sellers that purchase products for resale to others.
Example: retail meat markets may carry out bulk purchases of sides of beef and then cut individual pieces for their customers.
Institutions include a wide range of organizations, such as hospitals, churches, nursing homes, colleges and universities, museums and not-for-profit organizations.
Example: state universities.
Government organizations include domestic units of government- federal, state, and local as well as foreign governments.
Example: national defense or pollution control.
Q2. What are the characteristics of the commercial market? Show how each characteristic affects the marketing strategies of firms serving that market.
The commercial market is the largest segment of the business market. It includes all individuals and firms that acquire goods and services to supports directly or indirectly, production of other goods and services.
Some products aid in producing another good or service. Others are physically used up in the production of a good or service. Still others contribute to the firms day to day operations.
Q3. What are the SIC codes? How do the marketers use these codes?
Standard Industries Classification codes are the US government classification system that subsides the business market place into detailed market segments. Businesses use SIC code data for more then segmentation. These codes also help them to estimate the demand and forecast sales.
Q4. Contrast organizational buying behavior and consumer purchasing behavior. What are the primary differences and similarities?
Business buying behavior takes place with in a formal organization with its budget, costs and profit considerations. The primary differences include excessive organizational steps, considering budget, costs, prioritizing techniques for purchase decision analyses.
Where as, consumer-purchasing behavior includes knowledge of business buying situations and is influenced by peers and ads.
Q5. Give examples of the effect of industrial market demand of derived demand, volatile demand, joint demand, inventory adjustments, and the accelerator principal.
Demand for a business product that results from demand for a consumer product of which it is a component. Example:
The growing global demand by food service firms for packs of Heinz ketchup, mustard, mayo, etc. is all driven by consumer’s appetite for their convenience and joy of dining out.
Demand for a business product that depends on the demand for another business product that is necessary for the use of the first.
Coke and iron ore are required to make pig iron. If the coke supply falls, the drop in pig iron will affect the demand for iron ore.
Derived demand creates immense volatility in the business market demand.
Marketers in a particular industry consider a 60-day supply of raw materials to be the optimum inventory level. If economic factors induce these firms to increase there inventories to a 90-day supply. The change will bombard the raw material supplier with new orders.
This disproportionate impact of changes in consumer demand on business market demand is called the accelerator principal.
Q6. What is out sourcing? Explain the advantages and disadvantages of this practice.
Acquiring inputs from outside vendors for goods and services formerly produced in house.
Advantages include of it being an opportunity to deal with cost effective outside suppliers or those with specialized technological expertise.
Disadvantages include the major risks of losing touch with customers.
Q7. Discuss the major influences on organizational purchasing with examples of each.
1. Environmental factors:
Environment conditions such as economical, political, regulatory, competitive, and technological considerations influences organizational buying decisions.
During a recession, sales to cable companies might drop cause households hesitate to spend money on cable services.
2. Organizational factors:
It’s important for marketers to understand customers, or policies and purchasing systems.
Centralized buyers tend to emphasize long-term relationships while decentralized buyers focuses more on short-term results.
3. Interpersonal influences:
Both, groups and individuals, affect buying behavior.
If your friends dress a certain way, you maybe influence to dress the same way.
Q8. Describe the roles in a buying center. Identify the person in an organization who would most likely play each role.
A company’s buying center consists of participants in an organizational buying action.
Users are people who will use the purchased good or service. Their influences may range from negligible to extremely important. People like you and me are users.
Gatekeepers control the information that all buying center members will review. They may exert this control by distributing printed product data or adjustments or by deciding which sales people will speak to which individuals in the buying center.
Influencers affect the buying decision by supplying information to guide buying specifications. Technically personal such as engineers, quality control specialists, architects, etc. are all influencers.
A decider actually chooses a good or service, although a person may have the formal authority to do so. A decider could be a design engineer who develops specifications that only one vendor can meet.
A buyer has formal authority to select a supplier and implement the procedures for securing the good or service.
Q9. In what ways is the government market similar to other organizational markets? How does it differ?
Government markets have contractual guidelines and they’re purchases are influenced by social goals. They buy under two basic types of contracts: a fixed price contract and a price reimbursement contract.
Organizational markets have to deal with segmentation by purchasing situation, geographic factors, size, and number of buyers etc.
Q10. Describe major characteristics of institutional and international markets. How might these characteristics affect marketing strategy?
Institutional markets consist of schools, hospitals, libraries, churches, etc. Governments units may even manage many of them, such as schools and prisons. Other privately managed institutions may implement buying procedures that resemble those of pvt. companies. Group purchasing is an important factor.
To sell successfully in international markets, buyer’s attitudes and cultural patterns must be considered. They must adapt to the local customers of that area. The international markets must also respond to economic conditions, geographic characteristics, legal restrictions, and local industries. It’s important to be aware of these factors otherwise the marketing strategy will fail.