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Chapter 2. The Business

Market: Perspectives on the

Organizational Buyer

BA 303

BUSINESS 2 BUSINESSMARKETING

LINDELL PHILLIP CHEW

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The three sectors of the

business market, commercialenterprises, government, and

institutions.The chapter is pivotal to

formulating an effectivebusiness marketing strategy,

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Commercial enterprises;

Unique aspects of the sector,geographic concentration and

volume concentration by largefirms

DERIVED DEMAND

North American Industrial Classification System(NAICS)

Replaces SIC system

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Commercial Enterprises

Unique Characteristics

Manufacturing,construction, service,

professional groups, resellers

Small in number; large in volume

360,000 manufacturers10 percent of the manufacturers

produce 78 percent of the valueadded

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government purchasing

practices and proceduresare explored

understand the contractual andlegal side of government

purchasing federal buying processis provided to emphasize the typeof marketing efforts required by

potential suppliers

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Government contracts

Stringent legal requirements,

often unrelated to the purchase,small subcontractor preferences,

minority employmentPublic laws which specify

contractual arrangements

Vendors must carefully understandgovernment laws

RED TAPE

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now e ge o government requ rementneeded for effective negotiation

Types of contractsFixed price profit potential is good if

inflation is stable and

costs are controlledCost reimbursement effective when

extensivedevelopmental efforts are required.

Carefully monitored

NOTEHORROR STORIES

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say hi to Chester & A 12!

NOTEHORROR STORIESserving up a fixed price nightmare!!

Various governmental agencies

publish booklets explaining how

sell to that particular agencyplease read them!!!!

ENTER AT YOUR OWN RISK

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Defense Procurement

The Department of Defense

spends a large portion of the

federal government's budget on

procurementDefense Logistics Agency procures &

distributes common supplies to all

military branchesMilitary branches procure major items

RISKY BUSINESS

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institutional buying

environment

institutional buying forms a

middle ground between thecommercial and government

sectors in terms of purchasingprocesses and procedures

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Nondefense procurement

Accomplished through a wide variety

of cabinet departments, commissions& agencies

the GSA-General Services

Administration

Centralized procurement of itemsin common use by

all government agencies FORMAL ADVERTISED, NEGOCIATED, SET ASIDE

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Institutional Market: Unique

characteristics

A large market composed of avast array of schools, hospitals,

universities,

libraries, foundations etcA middle ground between

business and governmentRequires the marketer to respond to the needs of the product

users (professional staff) and the buyers (purchasing

personnel)

Outsourcing Group buying

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The Market Centered

customer driven to driving

organization Business buyer diversity

Marketers must respond to the unique

purchasing requirements of each segment ofthe marketThe marketing organization is structured

so that major customer markets become the

centers around which the firm is organizedFirm's marketing efforts are thereforefocused on each marketsectorgovernment, business, institutional,and international