Marketing 12th Edition Kerin Solutions Manual Download

Chapter 06 - Understanding Organizations as Customers
Solution Manual for Marketing 12th Edition Kerin

Hartley Rudelius 0077861035 9780077861032
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CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ........................................... 6-2
LEARNING OBJECTIVES (LO) ......................................................................................... 6-3
KEY TERMS........................................................................................................................... 6-3
LECTURE NOTES
• Chapter Opener: Buying is Marketing Too! Purchasing Publication Paper
for JCPenney ................................................................................................................ 6-4
• The Nature and Size of Organizational Markets (LO 6-1) ........................................... 6-4
• Measuring Domestic and Global Industrial, Reseller, and Government Markets ........ 6-5
• Characteristics of Organizational Buying (LO 6-2; LO 6-3) ....................................... 6-7
• Charting the Organizational Buying Process ............................................................... 6-13
• Online Buying in Organizational Markets (LO 6-4) ................................................... 6-16
APPLYING MARKETING KNOWLEDGE ...................................................................... 6-20
BUILDING YOUR MARKETING PLAN .......................................................................... 6-23
VIDEO CASE (VC)

6-1
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
• VC-6: Trek: Building Better Bikes through Organizational Buying ........................... 6-24
APPENDIX D CASE (D)

• D-6: Motetronix Technology: Marketing Smart Dust ................................................. 6-27
IN-CLASS ACTIVITY (ICA)

• ICA 6-1: Daktronics: Reaching an Organization’s Buying Center ............................. 6-29
6-2
Education.
POWERPOINT RESOURCES TO USE WITH LECTURES1

PowerPoint
Textbook Figures Slide2
Figure 6-1 NAICS breakdown for information industries sector: NAICS code 51 (p. 142)............. 6-8
Figure 6-2 Key characteristics and dimensions of organizational buying behavior (p. 143) ............ 6-9
Figure 6-3 The buying situation affects buying center behavior in different ways (p. 149) ............ 6-19
Figure 6-4 Comparing the stages in a consumer and organizational purchase decision
process (p. 150) ............................................................................................................. 6-21
Figure 6-5 Product and supplier selection criteria for buying machine vision equipment
emphasize factors other than price (p. 152)................................................................... 6-24
Figure 6-6 Buyer and seller participants and price differ by type of online auction. (p. 155) ......... 6-27
Selected Textbook Images (Ads, People, Products, and Websites)

Chapter Opener: Print ad for JCPenney (p. 139) ................................................................................ 6-4
Video Case VC-6: Photo of cyclist on Trek racing bike and Trek logo (pp. 158-159) ..................... 6-28
Marketing Matters, Making Responsible Decisions, and/or Marketing inSite

Marketing inSite: Supplier Diversity is a Strategic Initiative at AT&T (p. 145) ............................... 6-11
Marketing Matters—Customer Value: At Milsco Manufacturing, “Our Marketing Philosophy
is Designed to Develop Partnerships” and Deliver a Great Ride for Customers’ Seats (p. 146) ...... 6-15
Making Responsible Decisions—Sustainability: Sustainable Procurement for Sustainable
Growth (p. 147)................................................................................................................................. 6-16
Marketing Matters—Entrepreneurship: eBay Means Business for Entrepreneurs (p. 154)............... 6-26
Supplemental Figures
Figure 6-A Type and number of organization establishments in the U.S.: 2007 [pp. 140-141] ........ 6-6
Figure 6-B Key organizational buying criteria [pp. 144-145] .......................................................... 6-13
Quick Response (QR) Codes3

QR 6-1: NASA Video (p. 141) ........................................................................................................... 6-5
QR 6-2: Starbucks Sustainability Video (p. 146) .............................................................................. 6-16
QR 6-3: Trek Video Case (p. 157) ..................................................................................................... 6-28
In-Class Activity (ICA)

ICA 6-1: Daktronics: Reaching an Organization’s Buying Center [pp. 147-148]. ............................ 6-33
1
For each PowerPoint resource listed, the page reference in the textbook (p. x) or [p. y] is where the figure or image is located.
2
The PowerPoint presentation (PPT) for this chapter is either available on the Instructor’s Resource CD-ROM or downloadable from the Marketing: 12/e website
at http://12e.kerin.tv. The PPT slide number references are for this chapter only.
3
TV ads, videos, websites, and video cases with QR Codes can be viewed at http://12e.kerin.tv. Please note that for QR codes, there MUST be the appropriate
QR Code reference (qr1-1, qr1-2, etc.) that follows the “/” after 12e.kerin.tv in the URL. So, to view QR 6-1, the proper URL is http://12e.kerin.tv/qr6-1.
6-3
Education.
LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 6-1: Distinguish among industrial, reseller, and government organizational markets.
LO 6-2: Describe the key characteristics of organizational buying that make it different from
consumer buying.
LO 6-3: Explain how buying centers and buying situations influence organizational purchasing.
LO 6-4: Recognize the importance and nature of online buying in industrial, reseller, and
government organizational markets.
KEY TERMS
bidder’s list p. 151 organizational buyers p. 140

business marketing p. 140 organizational buying behavior p. 149
buy classes p. 148 organizational buying criteria p. 144
buying center p. 147 reciprocity p. 146
derived demand p. 143 reverse auction p. 154
e-marketplaces p. 153 supplier development p. 145
ISO 9000 p. 145 supply partnership p. 146
make-buy decision p. 151 traditional auction p. 154
North American Industry Classification
value analysis p. 151
System (NAICS) p. 141
6-4
Education.
LECTURE NOTES
BUYING IS MARKETING TOO!

PURCHASING PUBLICATION PAPER FOR JCPENNEY
• JCPMedia buys over 150,000 tons of publication paper for JCPenney, which uses it
for catalogs, newspaper inserts, and direct-mail pieces.
• JCPMedia buys from 10 paper suppliers around the world for JCPenney.
• JCPMedia paper buyers work closely with marketing personnel to ensure that the
right quality and quantity of paper are bought at the right price.
• JCPMedia also consider supplier capabilities:
a. Capacity to deliver selected grades of paper on time.
b. Meeting printing deadlines.
c. Environmental programs, such as forestry management and sustainability

practices.
I. THE NATURE AND SIZE OF

ORGANIZATIONAL MARKETS [LO 6-1]
• Business marketing.
a. Is the marketing of goods and services to companies, governments, or not-for-

profit organizations…
b. For use in the creation of goods and services that they can produce and market to
others.
• Organizational buyers are those manufacturers, wholesalers, retailers, and

government agencies that buy goods and services for their own use or for resale.
a. Manufacturers buy raw materials and parts and reprocess them into finished
goods.
b. Wholesalers and retailers resell the goods they buy without reprocessing them.
c. Organizational buyers include all buyers in a nation except ultimate consumers.
d. The total annual purchases of organizational buyers are far greater than those of
ultimate consumers.
e. [Figure 6-A] These buyers comprise industrial, reseller, and government markets.
6-5
Education.
A. Industrial Markets
• Industrial markets include about 7.5 million business firms.
• Industrial firms in some way reprocess a product or service they buy before
selling it again to the next buyer.
• The composition of industrial markets is that:
a. Physical goods represent 25 percent.
b. Services represent 75 percent.
B. Reseller Markets
• Resellers are wholesalers and retailers that buy physical products and resell them
again without any reprocessing.
• In the U.S., there are about 1.1 million retailers and 435,000 wholesalers.
C. Government Markets
• Government units are the federal, state, and local agencies that buy goods and
services for the constituents they serve.
• There are about 89,500 of these government units in the U.S.
[QR Code 6-1: NASA Video]

D. Global Organizational Markets
• Industrial, reseller, and government markets also exist on a global scale.
• The largest exporting industries in the U.S. focus on organizational customers, not
ultimate consumers.
• Capital equipment and industrial supplies account for about one-half of all U.S.
product exports.
• The majority of world trade involves exchange relationships that span the globe.
II. MEASURING DOMESTIC AND GLOBAL INDUSTRIAL,

RESELLER, AND GOVERNMENT MARKETS
• The North American Industry Classification System (NAICS):
a. Provides common industry definitions for Canada, Mexico, and the United States.
b. Makes it easier to measure economic activity in the three member countries of the
North American Free Trade Agreement (NAFTA).
6-6
Education.
c. Is consistent with the International Standard Industrial Classification of All

Economic Activities published by the United Nations to facilitate measurement of
global economic activity.
d. Groups economic activity to permit studies of market share, demand for goods
and services, and import competition in domestic markets.
• [Figure 6-1] The NAICS designates industries with a six-digit numerical code:
a. The first two digits designate a sector of the economy.
b. The third digit designates a subsector.
c. The fourth digit represents an industry group.
d. The fifth digit designates a specific industry and is the level at which comparable
data are available for Canada, Mexico, and the U.S.
e. The sixth digit designates individual country-level national industries.
• The benefits of the NAICS are that it:
a. Permits a firm to find the NAICS codes of its present customers and then obtain
NAICS-coded lists for similar firms.
b. Is possible to monitor NAICS categories to determine the growth in various

sectors and industries to identify promising marketing opportunities.
• NAICS codes have an important limitation:
a. Five-digit national industry codes are not available for all 3 countries because…
b. The respective governments will not reveal data when too few organizations exist
in a category.
LEARNING REVIEW
6-1. What are the three main types of organizational buyers?
Answer: (1) industrial firms, which in some way reprocess a product or service they
buy before selling again to the next buyer; (2) resellers, which are wholesalers and
retailers that buy physical products and resell them again without any reprocessing; and
(3) government units, which are the federal, state, and local agencies that buy products
and services for the constituents they serve.
6-2. What is the North American Industry Classification System (NAICS)?
Answer: The NAICS provides common industry definitions for Canada, Mexico, and
the United States, which makes it easier to measure economic activity in the three
member countries of the North American Free Trade Agreement (NAFTA).
6-7
Education.
III. CHARACTERISTICS OF ORGANIZATIONAL BUYING [LO 6-2]

[Figure 6-2] Unique objectives and policies of an organization put special constraints on
how it makes buying decisions. Key characteristics and dimensions include:
A. Demand Characteristics
• Consumer demand for products and services is affected by their price,

availability, as well as consumers’ tastes and discretionary income.
• Derived demand.
a. Means that the demand for industrial products and services is driven by, or
derived from, demand for consumer products and services.
b. Is based on expectations of future consumer demand, such as initial and repeat

purchases, which are both influenced by consumer income.
B. Size of the Order or Purchase
• The size of the purchase in organizational buying is much larger than in consumer
buying, with a single purchase running into the thousands or millions of dollars.
• Most organizations place purchasing constraints on their buyers, who must get
competitive bids from at least three prospective suppliers if the order is above a
specific amount.
• The size of the order determines who participates in the purchase decision and the
time required to negotiate a purchase agreement.
C. Number of Potential Buyers
• Firms selling consumer products and services often try to reach thousands or
millions of individuals or households.
• Firms selling to organizations usually have far fewer buyers.
D. Organizational Buying Objectives
• For business firms, the buying objective is usually to increase profits through
reducing costs or increasing revenues.
• The objectives of nonprofit firms and government agencies are usually to meet the
needs of the groups they serve.
• Firms have broadened their objectives to emphasize buying from minority- and
women-owned suppliers and vendors.
• Other companies include sustainable initiatives in their buying objectives.
6-8
Education.
MARKETING INSITE
Supplier Diversity is a Strategic Initiative at AT&T
AT&T is a pioneer and national leader in developing and implementing supplier

diversity best practices:
• In 1968, AT&T’s Minority Business Enterprise (MBE) Program was formed.
• In 1980, AT&T’s Women Business Enterprise (WBE) Program was started.
• In 1993, AT&T’s Disabled Veteran Business Enterprise (DVBE) Program began.
• AT&T has spent over $50 billion with businesses through its supplier diversity
initiatives since 1968.
a. Supplier diversity is critical to AT&T’s business strategy and…
b. A key component of the company’s plan to deliver the best products and services
to its customers.
E. Organizational Buying Criteria
• Organizational buying criteria are the objective attributes of the supplier’s

products and services and the capabilities of the supplier itself.
• These criteria serve the same purpose as the evaluative criteria used by ultimate
consumers.
• [Figure 6-B] Seven commonly used buying criteria are:
a. Price.
b. Ability to meet the quality specifications required for the item.
c. Ability to meet required delivery schedules.
d. Technical capability.
e. Warranties and claim policies in the event of poor performance.
f. Past performance on previous contracts.
g. Production facilities and capacity.
• Suppliers that meet or exceed these criteria create customer value.
• Organizational buyers who purchase products and services in the global

marketplace often supplement their buying criteria with supplier ISO 9000
standards certification.
a. ISO 9000 standards:

6-9
Education.
• Were developed by the International Standards Organization (ISO)

in Geneva, Switzerland.
• Refer to standards for registration and certification of a manufacturer’s
quality management and assurance system.
• Are based on an on-site audit of practices and procedures.
b. Example: 3M has over 80 percent of its manufacturing and service facilities

that are ISO 9000 certified.
• Supplier development:
a. Involves the deliberate effort by organizational buyers to…
b. Build relationships that shape suppliers’ offerings and capabilities to…
c. Fit a buyer’s needs and those of its customers.
d. Some companies train their key suppliers in just-in-time (JIT) inventory

systems, or in other quality improvement programs.
F. Buyer-Seller Relationships and Supply Partnerships
• Organizational buying involves complex and lengthy negotiations concerning

delivery schedules, price, technical specifications, warranties, and claim policies.
• Reciprocity is an industrial buying practice in which two organizations agree to

purchase each other’s products and services.
a. The U.S. Justice Department disapproves of reciprocal buying because it

restricts the normal operation of the free market.
b. However, the practice exists and can limit the flexibility of organizational
buyers in choosing alternative suppliers.
• Long-term contracts are also prevalent.
• A supply partnership:
a. Is a relationship that exists when a buyer and its supplier:

• Adopt mutually beneficial objectives, policies, and procedures…
• For the purpose of lowering the cost or…
• Increasing the value of products and services delivered to the ultimate
consumer.
6-10
Education.
MARKETING MATTERS
Customer Value: At Milsco Manufacturing, “Our Marketing Philosophy is Designed
to Develop Partnerships” and Deliver a Great Ride for Customers’ Seats
• Milsco is a Wisconsin-based designer and producer of seating solutions.
• Its customers include:
a. Harley-Davidson, John Deere, Yamaha, Caterpillar, and others.
b. Well-known names in the motorcycle, power sports, agricultural, construction,

marine recreation, turf care, industrial lift, golf cart, and mobility markets.
• Milsco’s marketing philosophy is to develop partnerships with its customers.
• Example: Harley-Davidson.
a. Since 1934, Milsco has been a supplier of original equipment motorcycle seats
and after-market parts and accessories, such as saddlebags.
b. Milsco engineers and designers work closely with their Harley counterparts in the
design of each year’s new products.
b. Includes provisions for sustainable procurement.
[QR Code 6-2: Starbucks Sustainability Video]
MAKING RESPONSIBLE DECISIONS

Sustainability: Sustainable Procurement for Sustainable Growth
• The concept of sustainable procurement has arisen due to the concerns organizations
have regarding how their buying decisions affect the environment.
• Sustainable procurement:
a. Aims to integrate environmental considerations into all stages of an organization’s

buying process.
b. Has the goal of reducing the negative impact on human health and the physical
environment.
6-11
Education.
G. The Buying Center: A Cross-Functional Group [LO 6-3]
• A buying center:
a. Is a group of people in an organization who…
b. Participate in the buying process and…
c. Share common goals, risks, and knowledge important to a purchase decision.
• In large multi-store chain resellers, the buying center is highly formalized and is
called a buying committee.
• Most industrial firms or government units use informal groups of people or call
meetings to arrive at buying decisions.
• Four questions that provide guidance in understanding the buying center in

organizations include:
a. Which individuals are in the buying center for a particular product or service?
b. What is the relative influence of each member of the group?
c. What are the buying criteria of each member?
d. How does each member perceive the firm, its products, and its salespeople?
1. People in the Buying Center.
a. The composition of the buying center in a given organization depends on the

specific item being bought.
b. The purchasing manager is almost always a member.
c. Individuals from top management and other functional areas are included
depending on the purchase.
d. A key issue is finding and reaching the people in the buying center who will
initiate, influence, and actually make the buying decision.
2. Roles in the Buying Center. There are five specific roles that an individual in a
buying center can play:
a. Users are the people in the organization who actually use the offering.
b. Influencers affect the buying decision, usually by helping define the

specifications for what is bought.
c. Buyers have formal authority and responsibility to select the supplier and
negotiate the terms of the contract.
6-12
Education.
d. Deciders have the formal or informal power to select or approve the supplier
that receives the contract.
• In routine orders the decider is usually the buyer or purchasing manager.
• In important technical purchases it is more likely to be someone from
R&D, engineering, or quality control.
e. Gatekeepers:
• Control the flow of information in the buying center..
• Can keep information from reaching people performing the other 4 roles.
[ICA 6-1: Daktronics: Reaching an Organization’s Buying Center]

3. Buying Situations and the Buying Center.
a. The number of people in the buying center largely depends on the specific
buying situation.
b. [Figure 6-3] Three types of organizational buying situations, called buy

classes, vary from the routine reorder to the completely new purchase:
• New buy.
– The organization is a first-time buyer of the product or service.
– Involves greater risks, so the buying center is enlarged to include all
who have a stake in the new buy.
• Straight rebuy, where the buyer reorders an existing product or service
from the list of acceptable suppliers.
• Modified rebuy, where:
– Users, influencers, or deciders in the buying center want to change the
product specifications, price, delivery schedule, or supplier.
– Although the item purchased is largely the same, the changes usually
necessitate enlarging the buying center to include people outside the
purchasing department.
c. The buy class marketing strategies of sellers can vary greatly because the
participation of personnel from functional areas in the buying center is based
on the:
• Type of buying situation.
• Stage of the purchasing process.
6-13
Education.
LEARNING REVIEW
6-3. What one department is almost always represented by a person in the buying
center?
Answer: purchasing department
6-4. What are the three types of buying situations or buy classes?
Answer: (1) new buy—the organization is a first-time buyer of the product or service;
(2) straight rebuy—the organization reorders an existing product or service from a list
of acceptable suppliers; and (3) modified rebuy—an organization’s buying center
changes the product’s specifications, price, delivery schedule, or supplier.
IV. CHARTING THE ORGANIZATIONAL BUYING PROCESS

Organizational buying behavior:
• Is the decision-making process that organizations use to…
• Establish the need for products and services and...
• Identify, evaluate, and choose among alternative brands and suppliers.
A. Stages in the Organizational Buying Process
• [Figure 6-4] Consumers and organizations use the same five stages of the
purchase decision process: (1) problem recognition, (2) information search, (3)
alternative evaluation, (4) purchase decision, and (5) postpurchase evaluation.
• However, there are some key differences.
B. Buying a Machine Vision System
• The stages of the buying process can be applied to the purchase of components
and assemblies for machine vision systems, which are used for product
inspection.
• The buying process for machine vision components and assemblies is frequently a
new buy because many of these systems contain elements that require some
custom design.
1. Problem Recognition.
a. Sales engineers canvass industrial automation equipment users for leads on

upcoming industrial automation projects.
b. They also keep users current on their company’s offerings.
c. When a firm identifies a project that would benefit from its offerings, the sales
engineers work with the customer to determine its specific needs.
6-14
Education.
d. After a contract is won, project personnel must:

• Often make a make-buy decision—an evaluation of whether components
and assemblies will:
– Be purchased from outside suppliers or…
– Built by the company itself.
• Engage in a thorough supplier search and evaluation process when items
are to be purchased from outside suppliers.
2. Information Search.
a. Companies:
• Employ a sophisticated process for identifying outside suppliers of
components and assemblies.
• Often consult a purchasing databank, which contains information on
suppliers and products.
b. All products in the databank have been prenegotiated as to price, quality, and
delivery time.
c. Value analysis.
• Is a systematic appraisal of the design, quality, and performance of a
product to reduce purchasing costs.
• Assesses many products in the company’s purchasing databank.
d. New developments in product technology are:

• Often found in technical journals, industry magazines or at international
trade shows where…
• Suppliers display their most recent innovations.
e. Supplier representatives may make presentations to the buying center.
3. Alternative Evaluation.
a. [Figure 6-5] The main buying criteria used to select suppliers include:
• Product performance
• Technical support
• Easy of use
• Price is a factor, but less important than the three criteria above.
6-15
Education.
b. Typically, a few suppliers for each standard component and assembly are
identified from a bidder’s list—a list of firms believed to be qualified to
supply a given item.
• This list is generated from the company’s purchasing database as well as
from engineering inputs.
• The buying center carefully evaluates specific items that are uniquely
obtained from a single supplier.
• Suppliers selected from the bidder’s list are:
– Sent a quotation request from the purchasing agent that describes the
desired quantity, delivery date(s), and specifications.
– Expected to respond within 30 days.
4. Purchase Decision.
a. The period from supplier selection to order placement to product delivery can
take several weeks or even months.
b. Even after bids for components and assemblies are submitted, further
negotiation concerning price, performance, and delivery terms is likely.
c. Sometimes two or more suppliers might be awarded contracts when large

orders are requested.
d. Suppliers who are not chosen are informed why their bids were not selected.
5. Postpurchase Behavior.
a. Postpurchase evaluation of the products and services purchased from suppliers

is a formalized and sophisticated process.
b. A supplier’s performance:
• Is monitored and recorded to determine a supplier’s chances of being
asked to bid on future purchases.
• May result in a supplier’s name being dropped from the bidder’s list if its
performance was poor.
c. Four lessons for marketers striving to sell products and services to

organizations are:
• Understand the organization’s needs.
• Get on the right bidder’s list.
• Find the right people in the buying center.
• Provide value to organizational buyers.
6-16
Education.
LEARNING REVIEW
6-5. What is a make-buy decision?
Answer: A make-buy decision is an evaluation of whether components and assemblies

will be purchased from outside suppliers or built by the company itself.
6-6. What is a bidder’s list?
Answer: A bidder’s list is a list of firms generated from a company’s purchasing

database that is believed to be qualified to supply a given item.
V. ONLINE BUYING IN ORGANIZATIONAL MARKETS [LO 6-4]

• Organizations dwarf consumers in terms of online transactions made, average
transaction size, and overall purchase volume.
• Online organizational buyers account for about 80 percent of the global dollar value
of all online transactions.
A. Prominence of Online Buying in Organizational Markets
• Online buying in organizational markets occurs for three reasons:
a. Organizational buyers depend heavily on timely supplier information that

describes product availability, technical specifications, application uses, price,
and delivery schedules.
b. Internet technology has been shown to substantially reduce buyer order

processing costs.
c. Business marketers have found that Internet technology can:

• Reduce marketing costs, particularly sales and advertising expense.
• Broaden their potential customer base for many types of products and
services.
• Organizational buyers can purchase directly from suppliers, through a reseller, or

via e-marketplaces and online auctions.
B. E-Marketplaces: Virtual Organizational Markets
• E-marketplaces are:
a. Online trading communities that bring together buyers and supplier

organizations.
b. Make possible the real time exchange of information, money, and offerings.
c. Also called B2B exchanges or e-hubs.
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Education.
• E-marketplaces can be independent trading communities or private exchanges.
a. Independent e-marketplaces:
• Act as a neutral third-party.
• Provide an Internet technology trading platform and a centralized market
that enable exchanges between buyers and sellers.
• Charge a fee for their service.
• Exist in settings that have one or more of the following features:
– Thousands of geographically dispersed buyers and sellers.
– Frequently changing prices caused by demand and supply fluctuations.
– Time sensitivity due to perishable offerings and changing
technologies.
– Easy-to-compare offerings among a variety of suppliers.
• Offer small business buyers and sellers an economical way to expand their
customer bases and reduce costs.
MARKETING MATTERS
Entrepreneurship: eBay Means Business For Entrepreneurs
• eBay, Inc.:
a. Is the predominant person-to-person trading community in the world.
b. Is a trading platform for millions of small businesses in the U.S. and even greater
numbers around the world.
• According to an eBay-commissioned survey conducted by ACNielsen among small

businesses:
a. 82 percent report that it has helped their business grow and expand.
b. 78 percent say it has helped to reduce their costs.
c. 79 percent say it has helped their business become more profitable.
• eBay promotes entrepreneurship.
b. Private exchanges:
• Streamline purchase transactions of large companies by linking them with
their network of qualified suppliers and customers.
• Provide a technology trading platform and central market for buyer-seller
interactions.
• Are not a neutral third party, but represent the interests of their owners.
6-18
Education.
C. Online Auctions in Organizational Markets
[Figure 6-6] Many e-marketplaces offer online auctions. There are two types:
• In a traditional auction:
a. A seller puts an item up for sale.
b. Would-be buyers are invited to bid in competition with each other.
c. As more would-be buyers become involved, there is an upward pressure on

bid prices because bidding is sequential.
d. Prospective buyers observe the bids of others and decide whether or not to
increase the bid price.
e. The auction ends when a single bidder remains and wins the item with its
highest price.
f. Traditional auctions are often used to dispose of excess merchandise.
• In a reverse auction:
a. A buyer communicates a need for a product or service.
b. Would-be suppliers are invited to bid in competition with each other.
c. As more would-be suppliers become involved, there is a downward pressure

on bid prices for the buyer’s business.
d. Like traditional auctions, bidding is sequential.
e. prospective suppliers observe the bids of others and decide whether or not to
decrease the bid price.
f. The auction ends when a single bidder wins the business with its lowest price.
• Buyers welcome the lower prices generated by reverse auctions.
• Some suppliers favor reverse auctions.
a. They give them a chance to capture business that they might not have
otherwise had because of…
b. A long-standing purchase relationship between the buyer and another supplier.
• Other suppliers say that reverse auctions put too much emphasis on prices,
discourage consideration of other important buying criteria, and threaten supply
partnerships.
6-19
Education.
LEARNING REVIEW
6-7. What are e-marketplaces?
Answer: E-marketplaces are online trading communities that bring together buyers and
supplier organizations to make possible the real time exchange of information, money,
products, and services.
6-8. In general, which type of online auction creates upward pressure on bid prices and
which type creates downward pressure on bid prices?
Answer: traditional auction; reverse auction
6-20
Education.
APPLYING MARKETING KNOWLEDGE
1. Describe the major differences among industrial firms, resellers, and government
units in the United States.
Answers:
a. Industrial firms, which account for the majority of all organizational buyers, in some
way reprocess a product or service they buy before reselling it again to the next buyer.
b. Resellers, the second largest group of organizational buyers, consist of wholesalers and
retailers that buy physical products and resell them again without any reprocessing.
c. Government units, the smallest of the three groups, consist of federal, state, and local
agencies that buy goods and services for the constituents they serve.
2. (a) Explain how the North American Industry Classification System (NAICS) might
be helpful in understanding industrial, reseller, and government markets and (b)
discuss the limitations inherent in this system.
Answers:
a. Advantages of the NAICS. The North American Industry Classification System

(NAICS) provides common industry definitions for Canada, Mexico, and the United
States, which makes easier the measurement of economic activity in the three member
countries of the North American Free Trade Agreement (NAFTA). It groups economic
activity to permit studies of market share, demand for goods and services, import
competition in domestic markets, and similar questions.
It then designates industries with a six-digit numerical code. The first two digits
designate a sector of the economy. The third digit designates a subsector while the
fourth digit represents an industry group. The fifth digit designates a specific industry
and is the most detailed level at which comparable data are available for the three
countries. The sixth digit designates individual country-level national industries.
b. Disadvantages of the NAICS. Such breakdowns allow one to identify firms within
categories and to monitor growth or decline with industries. The NAICS has two
important limitations: (1) large firms engaging in different activities or providing
different products or services are given only one NAICS code and (2) the five-digit
national industry codes are not available for all three countries because the respective
governments will not reveal data when too few organizations exist in a category.
3. List and discuss the key characteristics of organizational buying that make it different
from consumer buying.
Answer: Although the buying processes organizations go through when making a purchase
also apply to consumer buying, there are some key differences:
a. Organizations buy products and services to help them achieve organizational

objectives, namely, to increase profits through reducing costs or increasing revenues.
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Education.
b. Demand for products and services from organizations is derived from the demand for
consumer products and services.
c. The size ($ or #) of organizational purchases is much larger than consumer purchases.
d. There are fewer organizational buyers than consumer buyers.
e. The buying criteria for organizational buyers generally focus on three critical factors:
(1) ability to meet quality standards, (2) ability to deliver the product on time, and
(3) past performance on previous contracts.
f. Several people, typically in a buying center, get involved in an organizational purchase.
g. The postpurchase evaluation is often more formalized.
4. (a) What is a buying center? (b) Describe the roles assumed by people in a buying
center and (c) what useful questions should be raised to guide any analysis of the
structure and behavior of a buying center.
Answers:
a. Buying center. A buying center consists of a group of individuals within an

organization who participate in the buying process and share common goals, risks, and
knowledge important to purchase decisions.
b. Buying center roles. Individuals in a buying center perform one or more roles:
• Users are people in the organization who actually use the product or service.
• Influencers affect the buying decision, usually by helping define the specifications
for what is bought.
• Buyers have formal authority and responsibility to select the supplier and negotiate
the terms of the contract.
• Deciders have the formal or informal power to select or approve the supplier that
receives the contract.
• Gatekeepers control the flow of information in the buying center.
c. Questions. Four questions guide an analysis of a buying center:

• Which individuals are in the buying center for the product or service?
• What is the relative influence of each member of the group?
• What are the buying criteria of each member?
• How does each member of the group perceive our firm, our products and services,
and our salespeople?
6-22
Education.
5. Effective marketing is of increasing importance in today’s competitive environment.

How can firms more effectively market to organizations?
Answer: Firms can more effectively market to organizations by following four guidelines
when designing and implementing their marketing strategy: (1) understand the
organization’s needs, (2) get on the right bidder’s list, (3) find the right people in the
buying center, and (4) provide value to organizational buyers.
6. A firm that is marketing multimillion-dollar wastewater treatment systems to cities

has been unable to sell a new type of system. This setback has occurred even though
the firm’s systems are cheaper than competitive systems and meet U.S.
Environmental Protection Agency (EPA) specifications. To date, the firm’s
marketing efforts have been directed to city purchasing departments and the various
state EPAs to get on approved bidder’s lists. Talks with city-employed personnel
have indicated that the new system is very different from current systems and
therefore city sanitary and sewer department engineers, directors of these two
departments, and city council members are unfamiliar with the workings of the
system. Consulting engineers, hired by cities to work on the engineering and design
features of these systems and paid on a percentage of system cost, are also reluctant to
favor the new system. (a) What roles do the various individuals play in the purchase
process for a wastewater treatment system? (b) How could the firm improve the
marketing effort behind the new system?
Answers:
a. Roles played. A number of different constituencies exist in the buying center for a
wastewater treatment system for cities, and each plays one or more roles:
Role Constituency
1. Users City sanitary and sewer department engineers
2. Influencers City sanitary and sewer department engineers; EPA
3. Buyers City council
4. Deciders Directors of the city sanitary and sewer departments;
city council members
5. Gatekeepers Consulting engineers and EPA
b. Marketing improvements. The firm could improve its marketing efforts by reaching
and educating the influencers and deciders (see above). Above all, the firm must
circumvent or satisfy the primary gatekeepers—the consulting engineers. These
individuals are most likely detractors because the system’s lower cost results in smaller
compensation for them as consulting engineers.
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Education.
BUILDING YOUR MARKETING PLAN
Your marketing plan may need an estimate of the size of the market potential or
industry potential (see Chapter 8) for a particular product-market in which you compete.
Use these steps:
1. Define the product-market precisely, such as ice cream.
2. Visit the NAICS website at www.census.gov.
3. Click “NAICS” and enter a keyword that describes your product-market

(e.g., ice cream).
4. Follow the instructions to find the specific NAICS code and economic census data that
detail the dollar sales and provide the estimate of market or industry potential.
If the marketing plan involves organizational markets, it is often useful first to determine
the size of the market or industrial potential and then to assess the portion—or market share—
that the organization might capture. U.S. Census data is the most common source of information
for this kind of analysis. However, for most small businesses, this kind of analysis is of
secondary importance.
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Education.
TEACHING NOTE FOR VIDEO CASE VC-6
Trek: Building Better Bikes through Organizational Buying
This case focuses on Trek's organizational buying process, including its buying center,
vendor selection and evaluation, buying situations, and buyer-seller relationships.
Environmental impact considerations in Trek’s buying process are also described. This case
covers most of the topics covered in Chapter 6 for a product familiar to students.
Synopsis
Show Slide 6-28. Richard Burke and Bevill Hogg founded trek Bicycle in 1976. With
just five employees, they began manufacturing bicycles in a Wisconsin barn. The first year
they manufactured 900 custom-made bicycles that sold quickly. Today, Trek is one of the
leading manufacturers of bicycles and cycling products with more than $800 million in sales
and 2,000 employees. Trek’s products are now marketed through 1,700 dealers in North
America and wholly-owned subsidiaries in seven countries, and through distributors in 80
other countries. Its brands include Trek, Gary Fisher, and Bontrager. As a global company,
Trek’s mission also has evolved, and today the mission is to “Help the world use the bicycle as
a simple solution to complex problems.” Trek employees believe that the bicycle is the most
efficient form of human transportation and that it can combat climate change, ease urban
congestion, and build human fitness. The firm’s motto: “We believe in bikes.”
Trek’s success at accomplishing its mission is the result of many important business
practices including its organizational buying process. The process begins when managers
specify types of materials needed to produce a Trek product. The next step is to ask the buying
center to find the best suppliers and vendors for the materials. When potential suppliers are
identified they are evaluated on four criteria. Once a business is selected as a Trek supplier, it
is continuously evaluated on elements of these four criteria. Every effort is made to develop
long term relationships with suppliers so that they become partners with Trek. These
partnerships mean that Trek’s success also contributes to the partner’s success.
Trek’s product managers and the buying center are involved in three types of
organizational purchases. First, new buys are purchases that are made for the first time.
Second, modified rebuys involve changing some aspect of a previously ordered product.
Finally, straight rebuys are reorders of existing products from the list of acceptable suppliers.
Teaching Suggestions
Before the case is discussed in class, consider asking students to interview a purchasing
manager from a local business. Suggest that they conduct the interview by asking the purchasing
manager to describe the roles of the buying center at the company. This activity will provide a
good background for the class discussion:
1. A good starting point for introducing this case is to ask if students are familiar with Trek
Bicycle or its brands. Ask them to describe how (a) the buying process influences the
product they know and (b) the textbook description corresponds to different aspects of
Trek’s organizational buying process.
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Education.
2. Ask your students how important Trek’s “Eco” perspective is to them. What does
“green” mean to them?
[QR Code 6-3: Trek Video Case]

Answers to Questions
1. (a) What is the role of the buying center at Trek? (b) Who is likely to comprise the
buying center in the decision to select a new supplier at Trek?
Answers:
a. Buying center roles. The role of the buying center is to find suppliers who can provide
materials, components, and parts that satisfy Trek’s quality requirements, sizing
standards, and delivery schedules. At Trek, the buying center is also tasked with
developing what they call white papers, a sheet that managers can look at that shows
issues and benefits related to working with each supplier.
b. Buying center roles. The Trek buying center typically consists of a purchasing
manager, buyers who identify domestic and international sources of materials and
components, and representatives from R&D, production, and quality control.
2. What selection criteria does Trek utilize when it selects a new supplier or evaluates an
existing supplier?
Answer:
Trek uses four criteria when it selects a new supplier and evaluation existing suppliers.
These are quality, delivery capabilities, price, and environmental impact of their production
process. This allows Trek to compare alternative suppliers and to select the best match for
Trek and its customers. Once a business is selected as a Trek supplier, it is continuously
evaluated on elements of these four criteria.
3. How has Trek’s interest in the environmental impact of its business influenced its
organizational buying process?
Answer:
Trek has a clear interest in minimizing the environmental impact of bicycle production and
use. As mentioned in the case, Trek now has an Eco Design initiative to build bicycles and
parts that are “green” in terms of the environmental impact of the process, longevity, and
recyclability. This initiative also influences supplier choice as described in the case.
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Education.
4. Provide an example of each of the three buying situations—straight rebuy, modified

rebuy, and new buy—at Trek.
Answers:
a. Straight rebuy. This buying situation involves a buyer or purchasing agent reordering
a product or service from the list of acceptable suppliers, probably without checking
with other members of the buying center. An example would be the purchase of handle
bars or pedals from an existing supplier. At Trek, a straight rebuy also includes looking
at the trade-off between a simple repurchase and the cost and benefit of improving on
the item purchased.
b. Modified rebuy. In this buying situation, consideration is given to changing product

specifications and inclusion of input from other buying group members. At Trek, a
modified rebuy involves cosmetic changes to bike components, such as changing the
seat color. It most likely doesn’t involve a new vendor decision.
c. New buy. This buying situation represents a first-time purchase and typically involves
multiple, and potentially, new participants in the buying process, such as product
managers. A new buy situation would likely involve a thorough vendor evaluation
process. At Trek, a new buy would be represented by the purchase of a motor for an
electric-powered bike.
Epilogue
Trek continues to select suppliers that help create eco-friendly bicycles. One aspect of
this is to manufacture new bikes that are made from steel because it is easier to obtain and
recycle. In addition, Trek is starting a program to provide funds to bike shops to recycle old tire
tubes – they are made into bags, seat bags, and panniers! Trek has also become involved in
many events such as the Iceman Cometh race and the Crankworx festival. Events such as these
provide exposure to bicycle enthusiasts and allow Trek to showcase its new materials and
technologies.
Innovation in its products and its manufacturing process is also important at Trek. Trek
recently received patents for a “Lighted Bicycle Wheel Hub Assembly,” which uses the rotation
of the wheel hub to power light emitting diodes (LEDs), and an “Adjustable Nose Width Bicycle
Seat Assembly,” which uses an actuator to adjust the distance between the left and right sides of
the nose portion of the seat. Trek also recently contracted for the development of a demand
planning and inventory management system to manage the annual production of more than
300,000 bikes, parts, and accessories in 25 countries. Today, Trek’s CEO is John Burke, the son
of founder Richard Burke. John spent a year and a half as a Trek salesperson, and then took over
as the head of sales and marketing for 10 years before becoming CEO.
Sources: “USPTO Published Patent Application of Trek Bicycle Corp Titled as ‘Adjustable Nose Width Bicycle
Seat Assembly,’” Plus Media Solutions, November 9, 2013; “USPTO Published Patent Application of Trek Bicycle
Corp Titled as “Lighted Bicycle Wheel Hub Assembly,’” Plus Media Solutions, October 5, 2013; “Trek Bicycle taps
John Galt Solutions for Demand & Supply Planning,” Professional Services Close-Up, September 25, 2013; Don
Walker, “Blog: The Business of Sports: Trek’s John Burke on his Father the ‘Big Guy,’” The Business of Sports,
November 4, 2012; Andrew Rosch, “Trek Superfly Blazes Iceman Cometh”, Trek website, www.trekbikes.com,
November 7, 2011 and David Ebner, “Whistler Flips Over Anti-Gravitational Delights of Crankworxs Mountain-
biking Contest,” The Globe and Mail, July 25, 2011, p. S1.
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Education.
TEACHING NOTE FOR APPENDIX D CASE D-6
Motetronix Technology: Marketing Smart Dust
Synopsis
Marketing a new technology is hard, creative work—as shown in this case describing
Motetronix Technology’s initial look at the organizational buying process for “smart dust.”
As a comparative unknown in the industry, Motetronix executives are studying how to
penetrate the buying process and buying center in companies that would use its technology and
products. After describing “smart dust” and various applications, the case describes the buying
process and possible participants in company buying centers. The student’s job is to decipher
this information and organize it to give direction to Motetronix marketing.
Teaching Suggestions
This case is most suitable for that portion of the course when consumer and
industrial/organization buyer behavior is discussed. Therefore, the case should follow Chapters
5 and 6. Because of the high-tech flavor of smart dust, the case makes for an interesting
reference back to Chapter 3 on the environment of marketing and a nice introduction to Chapters
10 and 11 on product management and Chapters 17, 18, and 20 on IMC, advertising, and
personal selling.
Answers to Questions
1. What type of buying situation is involved in the purchase of smart dust, and what will
be important buying criteria used by companies considering using smart dust in their
products or in their facility?
Answers:
a. Buying situation. Given the newness of the technology, students should note that the
purchase situation is probably a New Buy. Therefore, the purchase situation is likely to
be lengthy, as described in the case and later in this note. Furthermore, several
individuals, playing different roles, will make up the buying center.
b. Buying criteria. The buying criteria used by companies probably include smart dust
reliability, power consumption, and price (all mentioned in the case), plus the capability
of Motetronix (or other manufacturers) to deliver the technology and products.
2. Describe the purchase decision process for adopting smart dust, and state how
members in the buying center for this technology might play a part in this process.
Answers:
a. Purchase decision process. The case describes a useful starting point in answering
this question. In addition, it is useful to consider the roles played by individuals
(positions) described in the case. It would seem that the following position-role
relationships are possible:
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Education.
Position Role
Top Mgmt. (President, Exec. VP) • Influencers, Deciders, Gatekeepers
Engineering & Operations Mgmt. • Gatekeepers, Deciders
Purchasing • Buyers
Design Engineers • Users, Influencers
b. Buying center roles. The purchase process-position relationship can be displayed and
is shown below:
Stage in Purchase Decision Relationship

Need Recognition • Top Mgmt./Engineering & Operations Mgmt.
Identification of Available Products • Engineering & Operations Mgmt.
Comparing Existing Technology • Design Engineers
Vendor/Seller Evaluation • Purchasing
Decision • Top Mgmt./Engineering & Operations Mgmt.
Follow-Up • Top Mgmt./Engineering & Operations Mgmt.
3. What effect will perceived risk have on a company’s decision to use smart dust in its
products or in its facility?
Answer:
Perceived risk in a purchase decision is a function of uncertainty and amount at stake.

Uncertainty will be high given the newness of the technology, an unfamiliar supplier,
and the appropriateness of the technology itself. At the same time, the amount at stake
or financial loss that might arise from putting bad technology into its products or facility
could be devastating. Therefore, uncertainty and amount at stake will produce a long
decision process covering much time and involve many people.
6-29
Education.
ICA 6-1: IN-CLASS ACTIVITY
Daktronics: Reaching an Organization’s Buying Center1
Learning Objective. To have students identify what kinds of buying information should
be in a Daktronics brochure selling video displays that will satisfy initial evaluative criteria of an
organizational buyer making a “new buy.”
Nature of the Activity. To have students identify who might be in the buying center and
what information each person would likely seek.
Estimated Class Time and Teaching Suggestions. About 15 minutes, this ICA can be
done individually or in 4-person teams.
Materials Needed.
• Copies for each student, either in hard copy or electronically, of the “Buying a
College Football Scoreboard” Handout (see DaktronicsHandout.pdf).
Steps to Teach this ICA.
1. OPTIONAL: Read the Daktronics, Inc.: Global Displays in 68 Billion Colors written
case (see DaktronicsCase.pdf, which is located in the ICA06-1WrittenCase folder).
2. OPTIONAL: Bookmark the Daktronics YouTube video clip [TRT = 0:30]

(www.youtube.com/watch?v=Nge0AfflNhs) on your classroom computer.
3. OPTIONAL: Form students into 4-person teams.
4. Show Slide 6-34. Click on the Internet icon to play the Daktronics YouTube video
clip. [TRT = 0:30]
5. Give students this background mini-lecture on Daktronics:
“Daktronics is the world leader in providing large screen LED video displays,
electronic scoreboards, computer-programmable displays, and digital billboards. In
late 2013, Daktronics installed a state-of-the-art center-hung scoreboard in Madison
Square Garden in New York City. It also delivered four “Digital Street Furniture”
LED video displays at the University of California, San Diego to provide messages to
be seen by those on foot or in slow-moving vehicles.
For this activity, let’s assume a small college is thinking about buying a new
scoreboard for its football stadium.”
6. Ask the class the following question and write the answers on the board:
“Who might be members of the buying center for the college football
scoreboard and why might they be in it?”
1
The authors wish to thank Dr. Aelred (Al) J. Kurtenbach, co-founder and Chairman, LaVetta Foster, Assistant to Dr. Kurtenbach, and Nichole
Bjerke of Daktronics, Inc., who assisted in the development of this ICA.
6-30
Education.
Some answers and reasons include:
a. Athletic department representatives (head football coach, athletic director).

A scoreboard is a big part of student experiences at a home football game.
b. College president. Wants the scoreboard to look “respectable” for alumni.
c. College vice-president of finance. Is concerned about paying for the scoreboard.
d. College alumni relations/development director. Might get an alumnus to
contribute/pay for scoreboard as a gift to the college.
e. College director of buildings and grounds. Must be able to maintain the
scoreboard (replace lighting, etc.).
f. College director of purchasing. Perhaps needs to get competitive bids and
secure a formal contract with the supplier, such as Daktronics.
g. Potential sponsor. Organization/alumnus that/who might be willing to pay a
“naming rights” fee to cover some or all of the scoreboard’s cost.
h. President of the Boosters Group. The person who heads the group of people
who support and promote the college’s football program through donations, etc.
i. Others as identified.
7. Pass out copies of the “Buying a College Football Scoreboard” Handout to each
student.
8. Describe these factors that might affect the buying decision:
a. Supplier’s past experience in building scoreboards.

b. Attractiveness of the scoreboard.
c. Ease of installation and operation.
d. Technical support/service.
e. Price.
9. Show Slide 6-35. Then ask the class to put checks “√’s” in the boxes that indicate the
information that might be important to each member of the buying center. Ask them
to explain their answers.
10. Show Slide 6-36: “Buying a College Football Scoreboard Answers” Handout. The
“√’s” on the handout should lead to student discussion on these points and illustrate
the wide variation in factors considered important by different members of the buying
center.
Marketing Lesson. In trying to reach complex buying centers in organizations in
different market segments, Daktronics can use its website, press releases, promotional brochures
and initial calls by sales representatives to obtain good sales leads. Then Daktronics can follow-
up by responding to questions, setting up a demonstration, writing proposals, etc.
6-31
Education.
BUYING A COLLEGE FOOTBALL SCOREBOARD HANDOUT:

(1) WHO IS IN THE “BUYING CENTER” AND
(2) WHAT FACTORS AFFECT THE BUYING DECISION OF EACH?
Factors Affecting the Buying Decision

Individual in
the “Buying Past
Ease of Technical
Attractive-
Center” Experience
in College
Installation/ Support/ Price
ness Operation Service
Scoreboards
Athletic
department
representatives
College President
College vice-
president of
finance
College alumni
relations/develop
ment director
College director
of buildings and
grounds
College director
of purchasing
Potential sponsor
6-32
Education.
BUYING A COLLEGE FOOTBALL SCOREBOARD ANSWERS HANDOUT:

(1) WHO IS IN THE “BUYING CENTER” AND
(2) WHAT FACTORS AFFECT THE BUYING DECISION OF EACH?
Factors Affecting the Buying Decision

Individual in
the “Buying Past
Ease of Technical
Attractive-
Center” Experience
in College
Installation/ Support/ Price
ness Operation Service
Scoreboards
Athletic
department
representatives
√ √
College President √ √
College vice-
president of
finance
√ √ √
College alumni
relations/develop
ment director
√
College director
of buildings and
grounds
√ √
College director
of purchasing √ √ √ √
Potential sponsor √ √ √ √
6-33
Education.

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Chapter 06 - Understanding Organizations as Customers

Solution Manual for Marketing 12th Edition Kerin

Download full test bank at:

LEARNING OBJECTIVES (LO) ......................................................................................... 6-3

KEY TERMS........................................................................................................................... 6-3

APPLYING MARKETING KNOWLEDGE ...................................................................... 6-20

BUILDING YOUR MARKETING PLAN .......................................................................... 6-23

VIDEO CASE (VC)

APPENDIX D CASE (D)

IN-CLASS ACTIVITY (ICA)

POWERPOINT RESOURCES TO USE WITH LECTURES1

Selected Textbook Images (Ads, People, Products, and Websites)

Marketing Matters, Making Responsible Decisions, and/or Marketing inSite

Quick Response (QR) Codes3

In-Class Activity (ICA)

LEARNING OBJECTIVES (LO)

After reading this chapter students should be able to:

LO 6-1: Distinguish among industrial, reseller, and government organizational markets.

bidder’s list p. 151 organizational buyers p. 140

BUYING IS MARKETING TOO!

• JCPMedia also consider supplier capabilities:

a. Capacity to deliver selected grades of paper on time.

b. Meeting printing deadlines.

c. Environmental programs, such as forestry management and sustainability

I. THE NATURE AND SIZE OF

a. Is the marketing of goods and services to companies, governments, or not-for-

• Organizational buyers are those manufacturers, wholesalers, retailers, and

c. Organizational buyers include all buyers in a nation except ultimate consumers.

• Industrial markets include about 7.5 million business firms.

• The composition of industrial markets is that:

a. Physical goods represent 25 percent.

b. Services represent 75 percent.

• There are about 89,500 of these government units in the U.S.

[QR Code 6-1: NASA Video]

• Industrial, reseller, and government markets also exist on a global scale.

II. MEASURING DOMESTIC AND GLOBAL INDUSTRIAL,

c. Is consistent with the International Standard Industrial Classification of All

a. The first two digits designate a sector of the economy.

b. The third digit designates a subsector.

c. The fourth digit represents an industry group.

e. The sixth digit designates individual country-level national industries.

• The benefits of the NAICS are that it:

b. Is possible to monitor NAICS categories to determine the growth in various

• NAICS codes have an important limitation:

6-2. What is the North American Industry Classification System (NAICS)?

III. CHARACTERISTICS OF ORGANIZATIONAL BUYING [LO 6-2]

• Consumer demand for products and services is affected by their price,

b. Is based on expectations of future consumer demand, such as initial and repeat

B. Size of the Order or Purchase

C. Number of Potential Buyers

• Firms selling to organizations usually have far fewer buyers.

D. Organizational Buying Objectives

• Other companies include sustainable initiatives in their buying objectives.

AT&T is a pioneer and national leader in developing and implementing supplier

• In 1968, AT&T’s Minority Business Enterprise (MBE) Program was formed.

• In 1980, AT&T’s Women Business Enterprise (WBE) Program was started.

• In 1993, AT&T’s Disabled Veteran Business Enterprise (DVBE) Program began.

a. Supplier diversity is critical to AT&T’s business strategy and…

E. Organizational Buying Criteria

• Organizational buying criteria are the objective attributes of the supplier’s

• [Figure 6-B] Seven commonly used buying criteria are:

b. Ability to meet the quality specifications required for the item.

c. Ability to meet required delivery schedules.

e. Warranties and claim policies in the event of poor performance.