Marketing Canadian 10th Edition Crane Solutions Manual Download

Marketing Canadian 10th Edition
Crane Solutions Manual

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6
UNDERSTANDING ORGANIZATIONS AS CUSTOMERS
LEARNING OBJECTIVES
After reading this chapter, you 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 centres and buying situations influence organizational purchasing.
LO4 Recognize the importance and nature of online buying in industrial, reseller, and government
organizational markets.
FOCUSING ON KEY TERMS
bidder’s list organizational buyers

business marketing organizational buying behaviour
buy classes organizational buying criteria
buying centre reciprocity
derived demand reseller
e-marketplaces reverse auction
government units supplier development
industrial firm supply partnership
Instructor’s Manual to accompany Marketing, 10ce 1
Copyright © 2017 McGraw-Hill Education Ltd.

ISO 9000 standards traditional auction
make-buy decision value analysis

TEXTBOOK FIGURES
Figure 6-1 NAICS breakdown for information and cultural industries sector: NAICS code 51
(abbreviated).
Figure 6-2 Key characteristics of organizational buying behaviour.
Figure 6-3 How the buying situation affects buying centre behaviour.
Figure 6-4 Comparing the stages in consumer and organizational purchases.
Figure 6-5 How buyer and seller participants and price behaviour differ by type of online auction.

CHAPTER OPENING EXAMPLE
A NEW SOLUTION TO STUDENT HOUSING
▪ CAMPUS LIVING CENTRES IS ONE OF THE LARGEST OWNERS AND OPERATORS OF STUDENT
HOUSING IN CANADA.
▪ CAMPUS LIVING CENTRES OFFERS FOUR BASIC TYPES OF PRODUCTS OR SERVICES TO
CANADIAN COLLEGES AND UNIVERSITIES:
- BUILDING AND FINANCING NEW RESIDENCES,
- MANAGING EXISTING RESIDENCES,
- PROVIDING STUDENT LIFE PROGRAMS AND SERVICES AND
- PROPERTY MANAGEMENT SERVICES.
▪ RESEARCH HAS SHOWN THAT STUDENT HOUSING IS AN IMPORTANT RECRUITMENT AND
RETENTION TOOL AND CAMPUS LIVING CENTRES BUILDS FACILITIES DESIGNED TO
APPEAL TO STUDENTS.
▪ MANY COLLEGES AND UNIVERSITIES CONTINUE TO HANDLE STUDENT HOUSING ON THEIR
OWN INCLUDING BUILDING, MANAGING AND MAINTAINING THESE FACILITIES. ON THE
OTHER HAND.
▪ THE KEY TO CONVINCING COLLEGES AND UNIVERSITIES TO CONTRACT OUT THE
RESPONSIBILITY FOR STUDENT HOUSING IS FOR FIRMS LIKE CAMPUS LIVING CENTRES
MAKING A COMPELLING BUSINESS CASE THAT THEIR “CUSTOMERS” – IN THIS CASE –
THESE ACADEMIC ORGANIZATIONS – ARE BETTER OFF, IN THE END, FINANCIALLY AND
OPERATIONALLY TO DO SO.
1. THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS

LO1 Distinguish among industrial, reseller, and government organizational markets.
BUSINESS MARKETING IS THE MARKETING OF GOODS AND SERVICES TO COMPANIES,
GOVERNMENTS, OR NOT-FOR-PROFIT ORGANIZATIONS FOR USE IN THE CREATION OF
GOODS AND SERVICES THAT THEY PRODUCE AND MARKET TO OTHER BUSINESS
CUSTOMERS, AS WELL AS INDIVIDUALS AND ULTIMATE CONSUMERS. A LARGE

PERCENTAGE OF CANADIAN BUSINESS SCHOOL GRADUATES TAKE JOBS IN BUSINESS
MARKETING.
ORGANIZATIONAL BUYERS ARE THOSE MANUFACTURERS, RETAILERS, AND
GOVERNMENT AGENCIES THAT BUY GOODS AND SERVICES FOR THEIR OWN USE OR FOR
RESALE. ORGANIZATIONAL BUYERS ARE DIVIDED INTO THREE DIFFERENT MARKETS:
INDUSTRIAL FIRMS, RESELLERS, AND GOVERNMENT MARKETS.
i. INDUSTRIAL MARKETS
INDUSTRIAL FIRMS ARE ORGANIZATIONAL BUYERS THAT, IN SOME WAY,
REPROCESSES A GOOD OR SERVICE IT BUYS BEFORE SELLING IT AGAIN TO THE NEXT
BUYER. MORE INDUSTRIAL FIRMS SELL SERVICES THAN PRODUCTS. THERE ARE
THOUSANDS OF INDUSTRIAL FIRMS IN CANADA.
ii. RESELLER MARKETS
RESELLERS ARE WHOLESALERS OR RETAILERS THAT BUY PHYSICAL PRODUCTS
AND SELLS THEM AGAIN WITHOUT ANY PROCESSING. IN CANADA THERE ARE MORE
THAN 200,000 RETAILERS AND 65,000 WHOLESALERS.
iii. GOVERNMENT MARKETS
GOVERNMENT UNITS ARE THE FEDERAL, PROVINCIAL, AND LOCAL AGENCIES THAT
BUY GOODS AND SERVICES FOR THE CONSTITUENTS THEY SERVE.
iv. GLOBAL ORGANIZATIONAL MARKETS
BUSINESS MARKETING EXISTS ON A GLOBAL SCALE. MANY OF THE LARGEST
EXPORTING INDUSTRIES IN CANADA FOCUS ON ORGANIZATIONAL CUSTOMERS, NOT
ULTIMATE CONSUMERS INCLUDING NORTEL, NORANDA, ANTIBI-PRICE AND PRATT
AND WHITNEY.

MARKETING MATTERS
SOME FACTS ABOUT CANADA’S MANUFACTURING INDUSTRY
- MANUFACTURING ACCOUNTS FOR roughly 11% OF CANADA’S GDP ) AND 55% WITH
SPINOFFS
- ALMOST 60 % OF GOODS MANUFACTURED ARE EXPORTED
- TO SUSTAIN ITS GROWTH, MANUFATURERS NEED TO FOCUS ON DEVELOPING
DIFFERENTIATED PRODUCTS, REDUCING COSTS AND REACHING GLOBAL MARKETS.
- ONE GOOD EXAMPLE IS THE CANADIAN FOOD MANUFACTURERS, WHICH HAVE EMERGED
AS THE NEW LEADER IN THE MANUFACTURING SECTOR.
- TO LEARN MORE, VISIT WWW.CME-MEC.CA AND WWW.FCPC.CA
2. MEASURING DOMESTIC AND GLOBAL INDUSTRIAL,

RESELLER, AND GOVERNMENT MARKETS
THE MEASUREMENT OF INDUSTRIAL, RESELLER, AND GOVERNMENT MARKETS IS AN
IMPORTANT FIRST STEP FOR A FIRM INTERESTED IN GAUGING THE SIZE OF ONE, TWO, OR
ALL THREE OF THESE MARKETS IN CANADA AND AROUND THE WORLD. THE MEASUREMENT
IS MADE POSSIBLE WITH THE NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM
(NAICS) WHICH GROUPS ORGANIZATIONS ON THE BASIS OF MAJOR ACTIVITY OF THE MAJOR
PRODUCT OR SERVICE PROVIDED. THE NAICS REPLACED THE STANDARD INDUSTRIAL
CLASSIFICATION (SIC) SYSTEM, ON JANUARY 1, 1997. NAICS PROVIDES COMMON INDUSTRY
DEFINITIONS FOR CANADA, MEXICO, AND THE UNITED STATES WHICH WILL FACILITATE
THE MEASUREMENT OF ECONOMIC ACTIVITY IN THE THREE MEMBER COUNTRIES OF
NAFTA.

LEARNING REVIEW
1. WHAT ARE THE THREE MAIN TYPES OF ORGANIZATIONAL BUYERS?

ANSWER: INDUSTRIAL FIRMS, RESELLERS, AND GOVERNMENT UNITS.
2. WHAT IS THE NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (NAICS)?

ANSWER: THE NAICS GROUPS ORGANIZATIONS ON THE BASIS OF MAJOR ACTIVITY
OF THE MAJOR PRODUCT OR SERVICE PROVIDED.
3. CHARACTERISTICS OF ORGANIZATIONAL BUYING

LO2 Describe the key characteristics of organizational buying that make it different from
consumer buying.
ORGANIZATIONAL BUYING BEHAVIOUR 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. THERE
ARE SOME IMPORTANT DISTINCTIONS BETWEEN ORGANIZATIONAL AND CUSTOMER
BUYING BEHAVIOUR.
i. DEMAND CHARACTERISTICS
DERIVED DEMAND MEANS THAT THE DEMAND FOR INDUSTRIAL PRODUCTS AND
SERVICES IS DRIVEN BY OR DERIVED FROM DEMAND FOR CONSUMER PRODUCTS
AND SERVICES.
ii. SIZE OF THE ORDER OR PURCHASE
ORGANIZATIONAL BUYERS' PURCHASES ARE NORMALLY LARGER THAN THOSE
MADE BY THE ULTIMATE CONSUMER. PURCHASING PROCEDURES ARE MORE
FORMALIZED FOR THE ORGANIZATIONAL BUYER THAN FOR THE ULTIMATE
CONSUMER AND DETERMINE WHO PARTICIPATES IN THE PURCHASE DECISION AND
THE LENGTH OF TIME REQUIRED TO ARRIVE AT A PURCHASE AGREEMENT.
iii. NUMBER OF POTENTIAL BUYERS
ORGANIZATIONAL BUYERS ARE USUALLY FEWER IN NUMBER THAN THE NUMBER
OF ULTIMATE CONSUMER BUYERS.

iv. ORGANIZATIONAL BUYING OBJECTIVES
ORGANIZATIONS BUY PRODUCTS AND SERVICES TO HELP THEM ACHIEVE AND
SATISFY THEIR ORGANIZATIONAL OBJECTIVES.
a. FOR PROFIT-MAKING ORGANIZATIONS, THIS OBJECTIVE IS USUALLY TO
INCREASE PROFITS BY REDUCING COSTS OR INCREASING REVENUES.
b. FOR NONPROFIT FIRMS AND GOVERNMENT AGENCIES THE OBJECTIVE IS
USUALLY TO MEET THE NEEDS OF THE PUBLICS THEY SERVE.
v. ORGANIZATIONAL BUYING CRITERIA
ORGANIZATIONAL BUYING CRITERIA ARE THE OBJECTIVE ATTRIBUTES OF THE
SUPPLIER'S PRODUCTS AND SERVICES AND THE CAPABILITIES OF THE SUPPLIER
ITSELF. SEVEN KEY BUYING CRITERIA INCLUDE:
1. PRICE
2. ABILITY TO MEET THE QUALITY SPECIFICATIONS REQUIRED FOR THE ITEM
3. ABILITY TO MEET REQUIRED DELIVERY SCHEDULES
4. TECHNICAL CAPABILITY
5. WARRANTIES AND CLAIM POLICIES IN THE EVENT OF POOR PERFORMANCE
6. PAST PERFORMANCE, OR HISTORY, ON PREVIOUS CONTRACTS
7. PRODUCTION FACILITIES AND CAPACITY
MANY ORGANIZATIONAL BUYERS ARE TRANSFORMING THEIR BUYING CRITERIA
INTO SPECIFIC REQUIREMENTS THAT ARE COMMUNICATED TO PROSPECTIVE
SUPPLIERS. THIS PRACTICE, CALLED REVERSE MARKETING, INVOLVES THE
DELIBERATE EFFORT BY ORGANIZATIONAL BUYERS TO BUILD RELATIONSHIPS
THAT SHAPE SUPPLIERS' PRODUCTS, SERVICES, AND CAPABILITIES TO FIT A BUYER'S
NEEDS AND THOSE OF ITS CUSTOMERS.
ISO 9000 CERTIFICATION REFERS TO STANDARDS FOR REGISTRATION, AND
CERTIFICATION OF A MANUFACTURERS QUALITY MANAGEMENT AND ASSURANCE
SYSTEM BASED ON AN ON-SITE AUDIT OF PRACTICES AND PROCEDURES.

vi. BUYER-SELLER RELATIONSHIPS AND SUPPLY PARTNERSHIPS
THERE ARE USUALLY LONG-TERM RELATIONSHIPS BETWEEN INDUSTRIAL BUYERS
AND SELLERS. SOMETIMES THESE RELATIONSHIPS LEAD TO RECIPROCITY.
RECIPROCITY IS AN INDUSTRIAL BUYING PRACTICE IN WHICH TWO
ORGANIZATIONS AGREE TO PURCHASE EACH OTHER'S PRODUCTS AND SERVICES.
THIS PRACTICE CAN BE ILLEGAL IF IT LESSENS COMPETITION, HOWEVER.
A SUPPLY PARTNERSHIP EXISTS WHEN A BUYER AND ITS SUPPLIER ADOPT
MUTUALLY BENEFICIAL OBJECTIVES, POLICIES, AND PROCEDURES FOR THE
PURPOSE OF LOWERING THE COST AND/OR INCREASING THE VALUE OF PRODUCTS
AND SERVICES DELIVERED TO THE ULTIMATE CONSUMER.
MAKING RESPONSIBLE DECISIONS
SUSTAINABLE PROCUREMENT FOR SUSTAINABLE GROWTH
▪ MANUFACTURERS, RETAILERS, WHOLESALERS, AND GOVERNMENT AGENCIES ARE
INCREASINGLY SENSITIVE TO HOW THEIR BUYING DECISIONS AFFECT THE ENVIRONMENT.
▪ CONCERNS ABOUT THE DEPLETION OF NATURAL RESOURCES; AIR, WATER, AND SOIL
POLLUTION; AND THE SOCIAL CONSEQUENCES OF ECONOMIC ACTIVITY HAVE GIVEN RISE
TO THE CONCEPT OF SUSTAINABLE PROCUREMENT.
▪ SUSTAINABLE PROCUREMENT AIMS TO INTEGRATE ENVIRONMENTAL CONSIDERATIONS
INTO ALL STAGES OF AN ORGANIZATION’S BUYING PROCESS WITH THE GOAL OF REDUCING
THE IMPACT ON HUMAN HEALTH AND THE PHYSICAL ENVIRONMENT.
▪ STARBUCKS IS A PIONEER AND GLOBAL LEADER IN SUSTAINABLE PROCUREMENT. THE
COMPANY’S ATTENTION TO QUALITY COFFEE EXTENDS TO ITS COFFEE GROWERS LOCATED
ON MORE THAN 20 COUNTRIES.
LO3 Explain how buying centres and buying situations influence organizational
purchasing.
vii. THE BUYING CENTRE: A CROSS-FUNCTIONAL GROUP
A GROUP CALLED A BUYING CENTRE IS OFTEN USED BY ORGANIZATIONS TO REACH
FINAL DECISIONS WHEN COMPLEX, HIGH-VALUE PURCHASING IS REQUIRED.

THE BUYING CENTRE (WHICH MAY BE CALLED A BUYING COMMITTEE IN SOME
ORGANIZATIONS) IS A GROUP OF PEOPLE IN AN ORGANIZATION WHO
PARTICIPATE IN THE BUYING PROCESS AND SHARE COMMON GOALS, RISKS, AND
KNOWLEDGE IMPORTANT TO A PURCHASE DECISION. THESE INDIVIDUALS WHO
MAKE UP THE BUYING CENTRE HAVE UNIQUE EXPERTISE TO APPLY TO THE
PURCHASE DECISION. IN ADDITION TO SOMEONE FROM PURCHASING, IT MAY
INCLUDE REPRESENTATIVES FROM R&D, ENGINEERING, QUALITY CONTROL, AND
PRODUCTION, DEPENDING ON WHAT IS PURCHASED.
1. PEOPLE IN THE BUYING CENTRE. THE PEOPLE WHO MAKE UP THE BUYING
CENTRE CAN PLAY ONE OR MORE ROLES IN A PURCHASE DECISION.
2. ROLES IN THE BUYING CENTRE. RESEARCHERS HAVE IDENTIFIED FIVE
SPECIFIC ROLES OF PEOPLE IN BUYING CENTRES. THESE ARE:
a. USERS - THESE PEOPLE IN THE ORGANIZATION ACTUALLY
USE THE PRODUCT OR SERVICE.
b. INFLUENCERS - THESE PEOPLE AFFECT THE BUYING DECISION.
c. BUYERS - THESE PEOPLE HAVE THE FORMAL AUTHORITY AND
RESPONSIBILITY TO SELECT THE SUPPLIERS AND NEGOTIATE THE
TERMS OF THE CONTRACT.
d. DECIDERS - THESE PEOPLE HAVE THE FORMAL OR INFORMAL POWER
TO SELECT OR APPROVE THE SUPPLIER THAT RECEIVES THE
CONTRACT.
e. GATEKEEPERS - THESE PEOPLE CONTROL THE FLOW OF
INFORMATION TO OTHER MEMBERS OF THE BUYING CENTRE.
THE NUMBER OF PEOPLE IN THE BUYING CENTRE AND THE LENGTH AND
COMPLEXITY OF THE STEPS IN THE BUYING PROCESS LARGELY DEPEND ON
THE SPECIFIC BUYING SITUATION THE ORGANIZATION FACES.

3. BUYING SITUATIONS AND THE BUYING CENTRE
THERE ARE THREE TYPES OF BUYING SITUATIONS, OR BUY CLASSES:
a. STRAIGHT REBUY - THE BUYER REORDERS
AN EXISTING PRODUCT OR SERVICE FROM THE LIST OF ACCEPTABLE
SUPPLIERS LISTED ON A BIDDERS LIST.
b. MODIFIED REBUY - THE USERS, INFLUENCERS, OR DECIDERS
IN THE BUYING CENTRE WANT TO CHANGE THE PRODUCT SPECIFICA-
TIONS, THE PRICE, DELIVERY SCHEDULE, OR SUPPLIER.
c. NEW BUY - THE ORGANIZATION IS A
FIRST-TIME BUYER OF THE PRODUCT OR SERVICE. NEW BUY
DECISIONS REQUIRE THE GREATEST EXPERTISE, AND IT IS HERE
WHERE THE BENEFITS OF A GOOD DECISION OR THE PENALTIES OF
A BAD ONE WILL BE THE GREATEST.
LEARNING REVIEW
3. WHAT ONE DEPARTMENT IS ALMOST ALWAYS REPRESENTED BY A PERSON IN THE

BUYING CENTRE?
ANSWER: PURCHASING DEPARTMENT.
4. WHAT ARE THE THREE TYPES OF BUYING SITUATIONS, OR BUY CLASSES?

ANSWER: STRAIGHT REBUY, MODIFIED REBUY, AND NEW BUY.
4. CHARTING THE ORGANIZATIONAL BUYING PROCESS

LO2 Describe the key characteristics of organizational buying that make it different from
consumer buying.
THE FIVE STAGES EXPERIENCED BY A CONSUMER IN A BUYING DECISION ARE ALSO
EXPERIENCED BY ORGANIZATIONAL PURCHASERS. DIFFERENCES EXIST BETWEEN THE
TWO AS IS SHOWN IN FIGURE 6-4.
i. STAGES IN THE ORGANIZATIONAL BUYING PROCESS - BUYING A MACHINE
VISION SYSTEM
AS WITH CONSUMER BUYING DECISIONS, THERE ARE FIVE STAGES IN AN
ORGANIZATIONAL BUYING DECISION:

1. PROBLEM RECOGNITION—AND MAKE-BUY DECISION.
2. INFORMATION SEARCH—MAY INCLUDE VALUE ANALYSIS
3. ALTERNATIVE EVALUATION—CREATE BIDDERS LIST
4. PURCHASE DECISION—CAN TAKE WEEKS OR MONTHS
5. POST PURCHASE BEHAVIOUR—OCCURS IN BOTH THE ORGANIZATIONAL
AND CONSUMER PURCHASE DECISION PROCESS.
ALTHOUGH THESE FIVE STEPS ARE UTILIZED BY INDUSTRIAL AND RESELLER
PURCHASERS, MAJOR DIFFERENCE OCCUR IN THE BUYING PROCESS.
LEARNING REVIEW
5. WHAT IS A MAKE-BUY DECISION?

ANSWER: AN EVALUATION OF WHETHER PRODUCTS WILL BE PURCHASED FROM AN
OUTSIDE SUPPLIER OR PRODUCED BY THE COMPANY ITSELF.
6. WHAT IS A BIDDERS LIST?

ANSWER: A LIST OF FIRMS BELIEVED TO BE QUALIFIED TO SUPPLY A GIVEN ITEM.
5. ONLINE BUYING IN ORGANIZATIONAL MARKETS

LO4 Recognize the importance and nature of online buying in industrial, reseller, and
government organizational markets.
ORGANIZATIONAL BUYERS ACCOUNT FOR 80% OF THE TOTAL WORLDWIDE VALUE OF ALL
ONLINE TRANSACTIONS. IT IS PROJECTED THAT ONLINE ORGANIZATIONAL BUYERS
AROUND THE WORLD WILL PURCHASE $6 TO $7.5 TRILLION WORTH OF PRODUCTS AND
SERVICES BY 2005. U.S. ORGANIZATIONAL BUYERS WILL ACCOUNT FOR ABOUT 60% OF
THESE PURCHASES.
i. PROMINENCE OF ONLINE BUYING IN ORGANIZATIONAL MARKETS
ONLINE BUYING IN ORGANIZATIONAL MARKETS IS PROMINENT FOR THREE MAJOR
REASONS:
1) ORGANIZATIONAL BUYERS DEPEND HEAVILY ON TIMELY SUPPLIER
INFORMATION THAT DESCRIBES PRODUCT AVAILABILITY, TECHNICAL
SPECIFICATIONS, APPLICATION USES, PRICE, AND DELIVERY SCHEDULES.

2) THIS TECHNOLOGY HAS BEEN SHOWN TO SUBSTANTIALLY REDUCE
BUYER ORDER PROCESSING COSTS.
3) BUSINESS MARKETERS HAVE FOUND THAT INTERNET/WEB TECHNOLOGY
CAN REDUCE MARKETING COSTS, PARTICULARLY SALES AND
ADVERTISING EXPENSE, AND BROADEN THEIR POTENTIAL CUSTOMER
BASE FOR MANY TYPES OF PRODUCTS AND SERVICES
ii. E-MARKETPLACES: VIRTUAL ORGANIZATIONAL MARKETS
E-MARKETPLACES BRING TOGETHER BUYERS AND SUPPLIER ORGANIZATIONS.
TYPICALLY:
1) THOUSANDS OF BUYERS AND SELLERS
2) SUPPLY AND DEMAND PRICE VOLITILITY
3) TIME SENSITIVITY
4) EASILY COMPARABLE OFFERINGS
MANY MARKETPLACES DEPENDING ON THE PRODUCT/SERVICE…EBAY BUSINESS
LARGE COMPANIES LIKE TO USE PRIVATE EXCHANGES
iii. ONLINE AUCTIONS IN ORGANIZATIONAL MARKETS
TRADITIONAL AUCTION – SELLER PUTS AN ITEM UP FOR SALE AND WOULD-BE
BUYERS ARE INVITED TO BID IN COMPETITION WITH EACH OTHER.
REVERSE AUCTION – BUYERS COMMUNICATE A NEED FOR A PRODUCT OR
SERVICE, AND WOULD-BE SUPPLIERS ARE INVITED TO BID IN COMPETITION WITH
EACH OTHER.
GOING ONLINE
EBAY MEANS BUSINESS, TOO
▪ GO TO HTTP://BUSINESS.EBAY.CA FOR THEIR SMALL BUSINESS SITE.
▪ WORLD WIDE THEY SELL $2.0 BILLION ON EBAY BUSINESS
▪ PRODUCTS FOR INDUSTRIAL, RESELLER AND GOVERNMENT MARKETS.

LEARNING REVIEW
7. WHAT ARE E-MARKETPLACES?

ANSWER: A MARKETPLACE THAT BRINGS TOGETHER BUYER AND SELLER IN AN
ONLINE ENVIRONMENT.
8. IN GENERAL, WHICH TYPE OF ONLINE AUCTION CREATES UPWARD PRESSURE ON

BID PRICES, AND WHICH TYPE CREATES DOWNWARD PRESSURE ON BID PRICES?
ANSWER: THE TRADITIONAL AUCTION CREATES UPWARD PRESSURE ON PRICES.
THE REVERSE AUCTION CREATES DOWNWARD PRESSURE ON PRICES.

DISCUSSION AND APPLICATION QUESTIONS WITH ANSWERS
1. Describe the major differences among industrial firms, resellers, and government units in Canada.
Answer: Industrial firms account for the majority of all organizational buyers. These firms in
some way reprocess a product or service they buy before reselling it. Resellers
represent the second largest group of organizational buyers. These wholesalers and
retailers buy physical products and resell them again without any
reprocessing. Government units, the smallest of the three groups, are federal,
provincial, and local agencies that buy goods and services for the constituents they
serve.
2. Explain how the North American Industry Classification System (NAICS) might be helpful in
understanding industrial, reseller, and government markets and discuss the limitations inherent in the
this system.
Answer: The NAICS groups organizational buyers on the basis of major activity or major
product or service provided. The NAICS contains broad, two-digit categories that
signify industry subsectors and three- and four-digit categories, which represent
industry groups and industries within each group within the broader two-digit
category. A five-digit category contains country-specific industries. Such
breakdowns allow one to identify firms within categories and 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) five-digit National Industry codes are not available
for all countries.
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 characteristics that
differ. Organizations buy products and services to help them achieve organizational
objectives; namely, to increase profits through reducing costs or increasing
revenues. 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) performance on previous contracts. Furthermore, there are fewer
organizational buyers than consumer buyers and the size of organizational purchases
tends to be much larger. Organizations often have formal positions and specific pur-
chasing policies or procedures. Finally, several people typically get involved in an
organizational purchase, and the post purchase evaluation is often more formalized.
4. What is a buying centre? Describe the roles assumed by people in a buying centre and what useful
questions should be raised to guide any analysis of the structure and behaviour of a buying centre.
Answer: A buying centre consists of those individuals who participate in the buying decision
and share common goals, risks, and knowledge important to it. Individuals in a
buying centre typically perform one or more of the following roles:
• Users are the people who actually use the product or service.

• Influencers affect the buying decision, usually by helping define the
specifications of what is bought.
• Deciders have the formal or informal power to select or approve the supplier
that receives the contract.
• Gatekeepers control the flow of information to other members of the buying

centre.
• Buyers have formal authority and responsibility to select the supplier and
negotiate the terms of a contract.
Four questions should be raised to guide any analysis of the structure and behaviour
of a buying centre: Which individuals are in the buying centre 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, or products and services, and our salespeople?
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 orga-
nization's needs, (2) get on the right bidders list, (3) find the right people in the
buying centre, and (4) do the job.
6. A firm that is marketing multi-million dollar wastewater treatment systems to cities has been unable
to sell a new type of system. To date the firm's marketing efforts have been directed to city purchasing
departments to be included on approved bidders 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 favour 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?
Answer: a. A number of different constituencies exists in the buying centre for

a wastewater treatment system for cities, and each plays one or more roles:
Role Constituency
Influencers City sanitary and sewer department engineers
Deciders Directors of city sanitary and sewer departments; city council
members
Gatekeepers Consulting engineers
Buyer City council
Users City sanitary and sewer department engineers
b. 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 gatekeeper –

the consulting engineer. This individual is most likely a detractor because the firm's system's
lower cost results in a smaller compensation for the consulting engineer.
BUILDING YOUR MARKETING PLAN
YOUR MARKETING PLAN MAY NEED AN ESTIMATE OF THE SIZE OF THE MARKET POTENTIAL
OR INDUSTRY POTENTIAL (SEE CHAPTER 9) FOR A PARTICULAR PRODUCT-MARKET IN WHICH
YOU COMPETE. USE THE INDUSTRY CANADA WEBSITE (http://www.ic.gc.ca/cis-sic/cis-
sic.nsf/IDE/cis31152defe.html) AS A RESOURCE.

SUPPLEMENTAL LECTURE NOTE 6-1
HOW ORGANIZATIONS CAN IMPROVE THEIR PURCHASING
SAVINGS IN PURCHASING PRODUCTS AND SERVICES CONTRIBUTE DIRECTLY TO A BUSINESS FIRMS

PROFITS OR ALLOW A GOVERNMENT AGENCY TO USE THE SAVINGS FOR OTHER PROJECTS, SO
EFFECTIVE BUYING IS OF INCREASING IMPORTANCE IN TODAY'S COMPETITIVE ENVIRONMENT.
BOTH BUSINESS AND GOVERNMENT BUYERS HAVE IDENTIFIED KEY STEPS THAT LEAD TO MORE
EFFECTIVE PURCHASES
1. CLARIFY THE OBJECTIVES IN MAKING THE PURCHASE

MOST PURCHASING DEPARTMENTS SEEK SOME COMBINATION OF SIX OBJECTIVES ON ANY SPECIFIC
PURCHASE: (a) HIGH QUALITY, (b) LOW PRICE, (c) NO OUT-OF-STOCK PROBLEMS, (d) A SMALL
INVESTMENT IN INVENTORY, (e) CONTINUING SOURCES OF SUPPLY, AND (f) GOOD SERVICING OF
THE ORDER BY TECHNICAL AND FIELD SUPPORT PERSONNEL. BECAUSE THESE OBJECTIVES OFTEN
CONFLICT, THE PURCHASING DEPARTMENT MUST PRIORITIZE THEM FOR EACH PURCHASE IN
ESTABLISHING ITS BUYING CRITERIA. WARD'S NEED FOR AN ASSURED SOURCE OF SUPPLY ON THE
HOME FOOD DEHYDRATOR IT PLANNED TO FEATURE MEANT REQUIRING ITS SMALL SUPPLIER TO
AUGMENT ITS PRODUCTION CAPABILITY BY CONTRACTING WITH A LARGE MANUFACTURER FOR
THE ACTUAL PRODUCTION.
2. DEVELOP PRECISE PURCHASE SPECIFICATIONS

AS A GENERAL RULE, THE MORE PRECISE THE PURCHASE SPECIFICATIONS, THE BETTER ABLE THE
SUPPLIER IS TO DELIVER THE RIGHT PRODUCT OR SERVICE AT THE RIGHT TIME. THE PRECISE
SPECIFICATIONS ON THE PURCHASE OF COMPONENTS AND ASSEMBLIES ASSURES THE BUYER THAT
SUPPLIERS UNDERSTAND AND CAN DELIVER WHAT WAS WANTED.
3. CREATE EFFECTIVE COMPETITION IN THE SELECTION OF SUPPLIERS

PRECISE SPECIFICATIONS MAKE IT POSSIBLE TO ADVERTISE A PROPOSED PURCHASE PUBLICLY,
INVITE QUOTATIONS FROM QUALIFIED VENDORS, AND SELECT THE ONE OR TWO THAT OFFER THE
BEST PRICE AND QUALITY.
4. EVALUATE AND TEST SUPPLIERS' PRODUCTS AND SERVICES AND INFORM THEM OF THE
RESULTS
WARD'S QUALITY-CONTROL DEPARTMENT PERIODICALLY TESTS THE HARVEST MAID FOOD
DEHYDRATORS TO SEE THAT THEIR PERFORMANCE REMAINS HIGH. THESE RESULTS ARE FED
BACK TO THE SUPPLIER SO IT CAN TAKE NECESSARY CORRECTIVE ACTIONS
5. MAINTAIN A VENDOR-RATING SYSTEM

COMPANIES DO THIS, WHICH PERMITS IT TO DROP UNSATISFACTORY SUPPLIERS FROM ITS
BIDDERS LIST AND TO ADD NEW SUPPLIERS THAT MEET ITS STANDARDS
WHEN PURCHASING DEPARTMENTS VIOLATE THESE COMMON-SENSE GUIDELINES, THEY USUALLY

FIND THEMSELVES IN TROUBLE.

Marketing Canadian 10th Edition Crane Solutions Manual Download

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Marketing Canadian 10th Edition

Crane Solutions Manual

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

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

After reading this chapter, you should be able to:

FOCUSING ON KEY TERMS

bidder’s list organizational buyers

Copyright © 2017 McGraw-Hill Education Ltd.

Instructor’s Manual to accompany Marketing, 10ce 2

Copyright © 2017 McGraw-Hill Education Ltd.

Figure 6-2 Key characteristics of organizational buying behaviour.

Figure 6-4 Comparing the stages in consumer and organizational purchases.

Instructor’s Manual to accompany Marketing, 10ce 3

Copyright © 2017 McGraw-Hill Education Ltd.

A NEW SOLUTION TO STUDENT HOUSING

▪ CAMPUS LIVING CENTRES OFFERS FOUR BASIC TYPES OF PRODUCTS OR SERVICES TO

CANADIAN COLLEGES AND UNIVERSITIES:

- BUILDING AND FINANCING NEW RESIDENCES,

- MANAGING EXISTING RESIDENCES,

- PROVIDING STUDENT LIFE PROGRAMS AND SERVICES AND

- PROPERTY MANAGEMENT SERVICES.

▪ RESEARCH HAS SHOWN THAT STUDENT HOUSING IS AN IMPORTANT RECRUITMENT AND

RETENTION TOOL AND CAMPUS LIVING CENTRES BUILDS FACILITIES DESIGNED TO

▪ MANY COLLEGES AND UNIVERSITIES CONTINUE TO HANDLE STUDENT HOUSING ON THEIR

OWN INCLUDING BUILDING, MANAGING AND MAINTAINING THESE FACILITIES. ON THE

▪ THE KEY TO CONVINCING COLLEGES AND UNIVERSITIES TO CONTRACT OUT THE

MAKING A COMPELLING BUSINESS CASE THAT THEIR “CUSTOMERS” – IN THIS CASE –

1. THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS

GOVERNMENTS, OR NOT-FOR-PROFIT ORGANIZATIONS FOR USE IN THE CREATION OF

CUSTOMERS, AS WELL AS INDIVIDUALS AND ULTIMATE CONSUMERS. A LARGE

Instructor’s Manual to accompany Marketing, 10ce 4

Copyright © 2017 McGraw-Hill Education Ltd.

ORGANIZATIONAL BUYERS ARE THOSE MANUFACTURERS, RETAILERS, AND

RESALE. ORGANIZATIONAL BUYERS ARE DIVIDED INTO THREE DIFFERENT MARKETS:

INDUSTRIAL FIRMS, RESELLERS, AND GOVERNMENT MARKETS.

INDUSTRIAL FIRMS ARE ORGANIZATIONAL BUYERS THAT, IN SOME WAY,

REPROCESSES A GOOD OR SERVICE IT BUYS BEFORE SELLING IT AGAIN TO THE NEXT

THOUSANDS OF INDUSTRIAL FIRMS IN CANADA.

ii. RESELLER MARKETS

RESELLERS ARE WHOLESALERS OR RETAILERS THAT BUY PHYSICAL PRODUCTS

THAN 200,000 RETAILERS AND 65,000 WHOLESALERS.

iii. GOVERNMENT MARKETS

BUY GOODS AND SERVICES FOR THE CONSTITUENTS THEY SERVE.

iv. GLOBAL ORGANIZATIONAL MARKETS

BUSINESS MARKETING EXISTS ON A GLOBAL SCALE. MANY OF THE LARGEST

EXPORTING INDUSTRIES IN CANADA FOCUS ON ORGANIZATIONAL CUSTOMERS, NOT

ULTIMATE CONSUMERS INCLUDING NORTEL, NORANDA, ANTIBI-PRICE AND PRATT

Instructor’s Manual to accompany Marketing, 10ce 5

Copyright © 2017 McGraw-Hill Education Ltd.

SOME FACTS ABOUT CANADA’S MANUFACTURING INDUSTRY

- ALMOST 60 % OF GOODS MANUFACTURED ARE EXPORTED

- TO SUSTAIN ITS GROWTH, MANUFATURERS NEED TO FOCUS ON DEVELOPING

DIFFERENTIATED PRODUCTS, REDUCING COSTS AND REACHING GLOBAL MARKETS.

AS THE NEW LEADER IN THE MANUFACTURING SECTOR.

- TO LEARN MORE, VISIT WWW.CME-MEC.CA AND WWW.FCPC.CA

2. MEASURING DOMESTIC AND GLOBAL INDUSTRIAL,

IS MADE POSSIBLE WITH THE NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM

PRODUCT OR SERVICE PROVIDED. THE NAICS REPLACED THE STANDARD INDUSTRIAL

CLASSIFICATION (SIC) SYSTEM, ON JANUARY 1, 1997. NAICS PROVIDES COMMON INDUSTRY