The Characteristics of

Organization Buying
Behaviour
Organizational Buying

 When a marketing firm develops a marketing mix that it can use to approach business
customers, it should understand the decision making process in organizations
 Organizational buying may be defined as the decision making process by which firms
establish what products they need to purchase and identify, evaluate, and select a brand and
a supplier for those products
 Business markets are different than consumer markets and components that matter include:
 Number of Buyers
 Location of Buyers
 Demand Characteristics
 Buying Criteria
 The Formal Buying Process and Centralized Purchasing
 Characteristics and Relationships
Number of Buyers

 There are far fewer purchasers in the business to business market than there is in
the consumer market
 These few buyers, however, have immense buying power
 Example: The Big Three Domestic Automobile Manufactures
 The domestic market in North America is dominated by General Motors, Daimler
Chrysler, and Ford
 Car parts such as tires, windshields, and engine parts are sold in much larger number to
these manufacturers than they are to other consumers
 While numbers are lower, profits are higher in the business to business market in most
cases
Location of Buyers

 Business markets tend to concentrate in certain areas

 In the case of Canada the Quebec City to Windsor area has an immense
manufacturing presence
 Quebec and Ontario alone make up 68% of the nations manufacturing elements,
76% of the value of goods manufactured, and 76% of people employed in the
manufacturing industry
 This area is also the center of banking and financial services
 Other regions dominate sectors such as agriculture, forestry, and fishing
Location of Buyers

 To identify and locate potential target markets, marketing frims utilize the North
American Industry Classification System (NAICS)
 This is a numbering system established by the United States, Mexico, and Canada
that provides statistical information about business activity in North America
 The system subdivides main categories such as retail into more specific categories
 The system then divides these categories into even more specific areas using
information stats on sales volume and number of employees
 NAICS is used for creating a guide for businesses to target one another using
basic information
Location of Buyers

 The combination of fewer buyers with a higher dollar value and more geographic
concentration makes personal selling an attractive and practical way to market
goods and services to these markets despite the high cost of activity
 Other promotional techniques include direct mail, target marketing, and online
communications
 The growth of e-commerce is not only growing in the consumer targeted market,
but the business to business market as well
Demand Characteristics: Derived Demand

 Derived Demand is a concept that states that the demand for products sold in
business-to-business market is actually derived from consumer demand
 Example: Drinks Switching to Aluminum Cans
 As beverage manufacturers such as Coca Cola, Pepsi Cola, and Molson moved to the
widespread use of the aluminum can, the manufacturers demand for the products
produced by aluminum manufacturers increased dramatically
 At the same time, demand for glass and steel containers fell and these manufacturers
were affected negatively
Demand Characteristics: Joint or Shared
Demand
 Joint or Shared Demand occurs when industrial products can be used only in
conjunction with one another (Marketing of one product is reliant on others)
 This happens when various parts needed for a finished product may arrive from
various sources to be assembled at one central location
 Example: Kraft’s Maxwell House Coffee
 To manufacture this brand, Kraft needs Coffee Beans (from South America), plastic
lids, plastics jars, paper labels, cardboard shipping case
 If one of these is unavailable, the product cannot be made and the demand for the other
materials goes down as well
 For these reasons most companies always have an alternative source at the ready