Marketing The Core 5th Edition Kerin Solutions Manual 1

Chapter 5 - Understanding Organizations as Customers
Marketing The Core 5th Edition Kerin Solutions Manual
Marketing The Core 5th Edition Kerin

Solutions Manual
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CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ........................................... 5-2
LEARNING OBJECTIVES (LO) ......................................................................................... 5-3
KEY TERMS........................................................................................................................... 5-3
LECTURE NOTES
• Chapter Opener: Buying Publication Paper is a Serious Marketing Responsibility
at JCPenney .................................................................................................................. 5-4
• The Nature and Size of Organizational Markets (LO1) ............................................... 5-4
• Measuring Domestic and Global Industrial, Reseller, and Government Markets ........ 5-5
• Characteristics of Organizational Buying (LO2) ......................................................... 5-6
• The Organizational Buying Process and the Buying Center (LO3) ............................. 5-9
5-1
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
• Online Buying in Organizational Markets (LO4) ....................................................... 5-12
APPLYING MARKETING KNOWLEDGE ...................................................................... 5-15
BUILDING YOUR MARKETING PLAN .......................................................................... 5-18
VIDEO CASE (VC)

• VC 5: Trek: Building Better Bikes through Organizational Buying ........................... 5-19
IN-CLASS ACTIVITY (ICA): See the ICA CD in the Instructor’s Survival Kit Box
• ICA 5-1: Daktronics: Reaching an Organization’s Buying Center
5-2
POWERPOINT RESOURCES TO USE WITH LECTURES1

PowerPoint
Textbook Figures Slide2
Figure 5-1 NAICS breakdown for information industries sector: NAICS code 51 (p. 108)............. 5-8
Figure 5-2 Key characteristics and dimensions of organizational buying behavior (p. 109) ............ 5-9
Figure 5-3 Product and supplier selection criteria for buying machine vision equipment
emphasize factors other than price (p. 110)................................................................... 5-13
Figure 5-4 Comparing the stages in a consumer and organizational purchase decision
process (p. 113) ............................................................................................................. 5-17
Figure 5-5 The buying situation affects buying center behavior in different ways (p. 115) ............ 5-20
Figure 5-6 Buyer and seller participants and price differ by type of online auction. (p. 117) ......... 5-23
Selected Textbook Images of Ads, Photos, and Products for Lecture Notes
Chapter Opener: Photo of JCPenney catalog cover (p. 104) .............................................................. 5-4
Video Case 5: Photo of cyclist on Trek racing bike (p. 120) ............................................................. 5-24
Marketing Matters and/or Making Responsible Decisions

Marketing Matters—Customer Value: Harley-Davidson’s Supplier Collaboration Creates
Customer Value…and a Great Ride (p. 111) .................................................................................... 5-12
Making Responsible Decisions—Sustainability: Sustainable Procurement for Sustainable
Growth (p. 112)................................................................................................................................. 5-15
Marketing Matters—Entrepreneurship: eBay Means Business for Entrepreneurs (p. 116)............... 5-22
Supplemental Figures
Figure 5-A Type and number of organization establishments in the U.S.: 2007 [pp. 106-107] ........ 5-6
Figure 5-B Key organizational buying criteria [p. 110] ................................................................... 5-11
Quick Response (QR) Codes3

QR 5-1: NASA Video (p. 107) ........................................................................................................... 5-5
QR 5-2: Starbucks Sustainability Video (p. 112) .............................................................................. 5-15
QR 5-3: Agentrics Video (p. 117)...................................................................................................... 5-21
QR 5-4: Trek Video Case (p. 119) ..................................................................................................... 5-24
1 For each PowerPoint resource listed, the page reference (p. x) or [p. y] in the textbook is where the figure or image is located.
2 The slide number references are for the PowerPoint presentation for this chapter, which is available on the Instructor’s
Resource CD-ROM or can be downloaded from the Marketing: The Core, 5/e website. See www.mhhe.com/kerin.
3 TV ads, videos, and video cases with QR Codes can be viewed on a separate media website for Marketing: The Core, 5/e,
which is core.kerin.tv. For example, to view QR 5-1, the proper URL syntax is http://core.kerin.tv/qr5-1.
5-3
LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO1: Distinguish among industrial, reseller, and government organizational markets.
LO2: Describe the key characteristics of organizational buying that make it different from
consumer buying.
LO3: Explain how buying centers and buying situations influence organizational purchasing.
LO4: Recognize the importance and nature of online buying in organizational markets.
KEY TERMS
North American Industry Classification

business marketing p. 106
System (NAICS) p. 107
buy classes p. 114 organizational buyers p. 106
buying center p. 113 organizational buying behavior p. 112
derived demand p. 108 reverse auction p. 117
e-marketplaces p. 116 traditional auction p. 117
5-4
LECTURE NOTES
BUYING PUBLICATION PAPER IS A SERIOUS MARKETING

RESPONSIBILITY AT JCPENNEY
• JCPMedia is the print and paper purchasing arm for JCPenney, the third-largest
retailer in the U.S.
• JCPMedia spends hundreds of millions of dollars annually buying paper for catalogs,
newspaper inserts, and direct-mail pieces from 10 paper suppliers around the world.
• 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.
b. Meeting printing deadlines.
c. Environmental programs, such as forestry management and sustainability

practices.
I. THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS [LO1]

• Business marketing:
a. Is the marketing of products and services to companies, governments, or not-for-

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

government agencies that buy products 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 products 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 5-A] These buyers comprise industrial, reseller, and government markets.
5-5
A. Industrial Markets
• Industrial markets include over 7.7 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:
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 1.5 million retailers and 435,000 wholesalers.
• Manufacturers use wholesalers and retailers in their distribution strategies as

channels to reach their ultimate consumers.
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 5-1: NASA Video]
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).
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, competition from imports, etc.
5-6
• [Figure 5-1] 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
1. What are the three main types of organizational buyers?
Answer: industrial firms; resellers; government units
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 NAFTA.
III. CHARACTERISTICS OF ORGANIZATIONAL BUYING [LO2]

[Figure 5-2] 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.
5-7
• 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 environmental initiatives in their buying objectives.
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
consumers.
5-8
• [Figure 5-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.
• [Figure 5-3] Shows the actual buying criteria organizational buyers employ for
choosing:
a. Machine vision system products.
b. Suppliers used for product inspection and the frequency with which they’re
used.
c. The price of a machine vision system is the least frequent mentioned criterion.
• 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.
MARKETING MATTERS
Customer Value: Harley-Davidson’s Supplier Collaboration
Creates Customer Value…and a Great Ride
Suppliers respect Harley-Davidson for collaborating with them in product design.

The company involves its suppliers in future products, new-product development, quality
benchmarks, cost control, delivery schedules, and technological innovation to build mutually
beneficial, long-term relationships. Because face-to-face communication is encouraged,
many suppliers have personnel at Harley-Davidson’s Product Development Center.
F. Buyer-Seller Relationships and Supply Partnerships
5-9
• 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 consumers.
b. Includes provisions for sustainable procurement.
[QR Code 5-2: Starbucks Sustainability Video]
MAKING RESPONSIBLE DECISIONS

Sustainablity: 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. Integrates environmental considerations into all stages of an organization’s

buying process.
b. Reduces the negative impact on human health and the physical environment.
IV. THE ORGANIZATIONAL BUYING PROCESS AND

THE BUYING CENTER
Organizational buying behavior:
• Is the decision-making process that organizations use to…
• Establish the need for products and services and...

5-10
• Identify, evaluate, and choose among alternative brands and suppliers.
A. Stages in the Organizational Buying Process
[Figure 5-4] 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.
B. The Buying Center: A Cross-Functional Group [LO3]
• 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.
• Four questions that provide guidance in understanding the buying center in these
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 people in the organization who actually use the product or service.
5-11
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.
d. Deciders have the formal or informal power to select or approve the supplier
that receives the contract.
e. Gatekeepers control the flow of information in the buying center.
[ICA 5-1: 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 5-5] There are three types of organizational buying situations, called
buy classes, which vary from the routine reorder to the completely new
purchase:
• New buy.
– The firm 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.
LEARNING REVIEW
3. What one department is almost always represented by a person in the buying center?
Answer: purchasing department
4. What are the three types of buying situations or buy classes?
Answer: new buy; straight rebuy; modified rebuy
5-12
V. ONLINE BUYING IN ORGANIZATIONAL MARKETS [LO4]

• 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 can 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 offerings.
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 business-to-business (B2B) exchanges or e-hubs.
• 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 technology.
– Easy-to-compare offerings among a variety of suppliers.
5-13
• 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. is a true Internet phenomenon. By any measure, it is the predominant

person-to-person trading community in the world.
• eBay recently introduced a trading platform for the nearly 23 million small businesses
in the U.S. and even greater numbers around the world.
• Transactions on eBayBusiness exceed sales of $20 billion annually.
The eBayBusiness platform has proven to be a boon for small businesses:
• It has helped them grow, reduce costs, and make them more profitable.
• According to the general manager of eBayBusiness, “Many of our sellers started their
businesses specifically as a result of the ability to use eBay as their e-commerce
platform.”
[QR Code 5-3: Agentrics Video]

b. Private exchanges:
• Streamline purchase transactions of large companies by linking them with
their network of qualified suppliers and customers.
• Are not a neutral third party, but represent the interests of their owners.
• Save members billions of dollars due to purchase transaction efficiencies.
C. Online Auctions in Organizational Markets
[Figure 5-6] 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.
d. The auction ends when a single bidder remains and wins the item with its
highest price.
5-14
• In a reverse auction:
a. A buyer communicates a need for a product or service and would-be suppliers

are invited to bid in competition with each other.
b. As more would-be suppliers become involved, there is a downward pressure

on bid prices for the buyer’s business.
c. The auction ends when a single bidder wins the business with its lowest price.
• Buyers welcome the lower prices generated by reverse auctions.
LEARNING REVIEW
5. 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. 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
5-15
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. 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.
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.
3. What is a buying center? Describe the roles assumed by people in a buying center
and 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.
5-16
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?
4. 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
5-17
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.
BUILDING YOUR MARKETING PLAN
Your marketing plan may need an estimate of the size of the market potential or
industry potential (see Chapter 7) 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.
5-18
TEACHING NOTE FOR VIDEO CASE 5
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 5-24. 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 $600 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, Bontrager, and Klein. 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.
5-19
2. Ask your students how important Trek’s “Eco” perspective is to them. What does
“green” mean to them?
[QR Code 5-4: Trek Video Case]

Answers to Questions
1. What is the role of the buying center at Trek? 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.
5-20
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.
Sources: 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.
5-21

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Chapter 5 - Understanding Organizations as Customers

Marketing The Core 5th Edition Kerin Solutions Manual

Marketing The Core 5th Edition Kerin

Solution Manual: https://testbankpack.com/p/solution-manual-for-

Test Bank: https://testbankpack.com/p/test-bank-for-marketing-the-

LEARNING OBJECTIVES (LO) ......................................................................................... 5-3

KEY TERMS........................................................................................................................... 5-3

• Online Buying in Organizational Markets (LO4) ....................................................... 5-12

APPLYING MARKETING KNOWLEDGE ...................................................................... 5-15

BUILDING YOUR MARKETING PLAN .......................................................................... 5-18

VIDEO CASE (VC)

POWERPOINT RESOURCES TO USE WITH LECTURES1

Marketing Matters and/or Making Responsible Decisions

Quick Response (QR) Codes3

LEARNING OBJECTIVES (LO)

After reading this chapter students should be able to:

LO1: Distinguish among industrial, reseller, and government organizational markets.

North American Industry Classification

BUYING PUBLICATION PAPER IS A SERIOUS MARKETING

• JCPMedia also consider supplier capabilities:

a. Capacity to deliver selected grades of paper.

b. Meeting printing deadlines.

c. Environmental programs, such as forestry management and sustainability

I. THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS [LO1]

a. Is the marketing of products 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 over 7.7 million business firms.

• The composition of industrial markets:

a. Physical goods represent 25 percent.

b. Services represent 75 percent.

• Manufacturers use wholesalers and retailers in their distribution strategies as

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

[QR Code 5-1: NASA Video]

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:

Answer: industrial firms; resellers; government units

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

III. CHARACTERISTICS OF ORGANIZATIONAL BUYING [LO2]

• 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 environmental initiatives in their buying objectives.

E. Organizational Buying Criteria

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

• [Figure 5-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.

f. Past performance on previous contracts.

g. Production facilities and capacity.

• Suppliers that meet or exceed these criteria create customer value.

a. Machine vision system products.