Organizational Marketing

Why
Why is
is its
its understanding
understanding critical
critical for
for
running
running businesses?
businesses?

 Value vs volume of transactions

 The Marketing Coin
 Marketer’s job content
Industry
Industry
 It is a group of firms that offer a product or class of
products that are close substitutes for each other.
Kotler

 The commercial production and sale of goods and

services.
 A specific branch of manufacture and trade.
The Heritage Illustrated Dictionary of English Language
Industrial
Industrial Marketing
Marketing
The marketing of products and services to commercial
enterprises, government bodies, and other organs,
either for resale to other industrial consumers or for
use in the production of their own product or service.
Business
Business to
to Business
Business Marketing
Marketing

Marketing activities of any kind of organisation,

public or private, which has exchange
relationships with other organisations.

Peter W. Turnbull
Type of Organizational Markets
 Reseller
 Institutional
 Producer
 Government

Classification of Industrial Goods

 Raw material and Semi-processed
 Manufactured materials and parts
 Capital goods
 Services
The
The Diversity
Diversity of of Organizational
Organizational
Markets
Markets
Raw material extractors and refiners (mining, electricity
generation, petroleum refining, water supply, etc.)
 Agricultural & marine products (farming, forestry, flower
growing, fisheries, abattoirs, etc.)
 Manufactured products, processes and components (cars,
furniture, paint-shops, assemblers, engines, electronics, etc.)
 Resellers and distributors (retailers, wholesalers, cargo
companies, rail & road companies, merchant shipping,
import/export agencies, clearing & forwarding companies, etc.)

 Contd…
The
The Diversity
Diversity of of Organizational
Organizational
Markets
 Commercial and professional service providers (banks,
Markets
accountants, architects, consultants, guards, etc).
 Hiring and leasing agencies (commercial plant and
machinery hire, property leasing, car hire, placement bureaus,
etc.)
 Government departments, agencies and authorities
(customs, income tax, foreign affairs, city admin., etc.)
 Armed forces and paramilitary institutions (armies,
navies, air forces, police, prisons, law enforcement agencies,
etc.)
 Not-necessarily-for-profit institutions (schools, charities,
hospitals, social clubs, professional associations, etc.)
 Major Segmentation Variables for
Business Markets
1. DEMOGRAPHICS
Industry
Company size
Location
2. OPERATING VARIABLES
User/Nonuser status
Technology
Customer capabilities
3. SITUATIONAL FACTORS
Size of order
Specific application
Urgency
Major Segmentation Variables for
Business Markets
4. PURCHASING APPROACHES
Purchasing function organization
Power structure
Nature of existing relationships
General purchase policies
Purchasing criteria

5. PERSONAL CHARACTERISTICS
Buyer-seller similarity
Attitudes towards risk

Loyalty
 20 Features of Marketing in
Organizational Markets

1 Derived nature of demand

2 Means and timing of payment
3 Expertise and bargaining power of customers
4 Fewer customers
5 Larger orders
6 Direct selling
7 Negotiability of terms of purchase and supply
 Negotiations
Negotiations
Recognizes the fact that the parties are
in a bargaining situation of strategic
interaction and that cooperation can
increase the total value of the interaction
rather than maximizing individual shares
 Negotiations

“I win, you win”

Competition - value to individuals

vs
Cooperation - total value to themselves
 20 Features of Marketing in Organizational Markets

8 Regulation of the purchasing process

9 Professionalism of purchasing
10 Complexity of the purchasing decision process
11 Significance of technical specifications
12 Importance of organizational and personal
relationships
13 Reputation of suppliers and customers
20 Features of Marketing in Organizational
Markets

14 Importance of supplier’s financial and competitive strength

15 Importance of repeat purchase flow to all parties
16 Importance of delivery arrangements
17 Perception of risk to organizations and careers
18 Flexibility of suppliers in dealing with customers
19 Collaboration between suppliers and customers
20 Reliability and quality of goods or services
Dominic Wilson
 Ten Stages in the Procurement Process
1. Perception of Need - proactive or reaction to internal /
external stimuli
2. Analysis of Need - internal technical & operational
assessment (including linkages)
3. Specification Setting - (technical, delivery quantity,
frequency, quality, packaging, design, etc.)
4. Identification of sources – (word of mouth, research,
consultancy, call for tenders, long/short lists)
5. Evaluation of Offerings – prototypes, trials, site visits,
references, rupee checks
 Ten Stages in the Procurement Process
6. Negotiation over Terms - bargaining with short-listed
finalists
7. Selection of Supplier – decision, feedback and fallback
arrangements
8. Delivery & Payment - receipt, inspection, storage, form and
timing of payment, variance causes, etc.
9. Performance Evaluation of need resolution, performance
of product and supplier and relationship
10. Review - periodic review of arrangements due to changed
circumstances and strategies
The Buy-Grid Model Buy classes

Buy phases Straight Modified New

rebuy rebuy task
1 Perception of Need Yes Yes Yes

2 Analysis of Need No Maybe Yes

3 Specification Setting No Maybe Yes

4 Identification of sources No Maybe Yes

5 Evaluation of Offerings No Maybe Yes

6 Negotiation over Terms No Maybe Yes

7 Selection of supplier No Maybe Yes

8 Delivery & Payment No Maybe Yes

9 Performance Evaluation Yes Yes Yes

10 Review Yes Yes Yes

(adapted from Robinson et al)

The Buying Center or
Decision Making Unit
 The
The Buying
Buying Center Center or or Decision
Decision
Making
Making Unit
A buying center (or DMU), in marketing,
Unit
procurement, and organizational studies, is a
group of employees, family members, or
members of any type of organization responsible
for finalizing major decisions, usually involving a
purchase.
Roles
Roles in
in aa DMU
DMU
1. Initiator who suggests purchasing a product or
service.
2. Influencers who try to affect the outcome decision
with their opinions.
3. Deciders who have the final decision.
4. Buyers who are responsible for the contract.
5. End users of the item being purchased.
6. Gatekeepers who control the flow of information.
Vendor Analysis
&
Value Analysis
 Value Analysis
 An analytical procedure to study the costs
versus the benefits of a currently purchased
material, component, or design in order to reduce
the cost/benefit ratio as much as possible. It is
also called value engineering.

"Can the cost of this part, this subassembly, or this

step be reduced in any way, or even eliminated?"
 Vendor Analysis

• The rating by a buying organisation of all possible

suppliers of a product on a scale to select the
most appropriate; also referred to as Vendor
Rating.
 Vendor Analysis – 7 C’s
• Competency—managerial, technical, administrative, and
professional competence of the supplying firm.
• Capacity—supplier's ability to meet physical, intellectual and
financial requirements.
• Commitment—supplier's willingness to commit physical,
intellectual and financial resources.
• Control—effective management control and information systems.
• Cash resources—financial resources and stability of the supplier.
Profit, ROI, ROE, asset-turnover ratio.
• Cost—total acquisition cost, not just price.
• Consistency—supplier's ability to exhibit quality and reliability
over time.
 Make-or-Buy Decision
 The make-or-buy decision is the act of making a strategic
choice between producing an item internally (in-house)
or buying it externally (from an outside supplier).

 The buy side of the decision also is referred to as

outsourcing. Make-or-buy decisions usually arise when a
firm that has developed a product or part is having
trouble with current suppliers, or has diminishing
capacity or changing demand.
 Selected Differences Between Markets
Consumer Industrial
Segmentation Few buyers
Dispersed mass markets
Stress on demographics & Emporographic grouping
psychographics & reciprocity

Decision making Unobservable mental Distinct observable

stages stages
Few decision makers - More DMUs - formal and
informal buying complex process.

New Products Demand-pull Technology-push

Incremental Innovation Customization

Promotion Mass media, simple Personal selling,

standard message highly rational and verifiable
exaggerated and abstract message for different
 Selected Differences Between Markets
Consumer Industrial
Channels
Indirect and multiple Fewer and direct.
Service Elaborate pre, during
Limited service and after sales service

Pricing Discrimination on Discrimination on

customer self-selection buyer’s price sensitivity
& value
List prices
Competitive bidding and
negotiations

Monitoring & Sales, share & profit Constant evaluation on

over period. customer acquisition
Bottom-line cost & life time value