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20 Cards in this Set

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  • Back
What is organizational buying?
the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.
What does business market consist of?
The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others.
What are the characteristics of business markets?
Business markets have several characteristics:
1.Few, large buyers
2.Close supplier-customer relationship.
3.Professional purchasing
4.Several buying influences.
5.Multiple sales calls
6.Derived Demand
7.Inelastic Demand
8.Fluctuating Demand
9.Geographically concentrated buyers.
10.Direct purchasing
Give some examples of buying situations.
1.Straight buy:The purchasing department reorders on a routine basis (e.g., office supplies,
bulk chemicals) and chooses from suppliers on an "approved list."

2.Modified buy: The buyer wants to modify product specifications, prices, delivery requirements, or other terms. The modified rebuy usually involves additional participants on both sides.

3.New task: A purchaser buys a product or service for the first time (e.g., office building, new security system). The greater the cost or risk, the larger the number of participants and the greater their information gathering—and therefore the longer the time to a decision.
What is system buying or selling?
Many business buyers prefer to buy a total solution to a problem from one seller. This is called system buying.

Sellers have increasingly recognized that buyers like to purchase in this way, and many have adopted systems selling as a marketing tool.
What is a buying center?
A decision-making unit of a buying organization. The buying center includes: initiators, users, influencers, deciders, approvers, buyers, gatekeepers.

Small sellers concentrate on reaching the key buying influencers. Larger sellers go for multilevel in-depth selling to reach as many participants as possible.
Decribe the different types of business customers
Four types of business customers:
1.Price-oriented customers: price is everything.

2.Solution-oriented customers: They want low prices but will respond to arguments about lower total cost or more dependable supply or service.

3.Gold-standard customers: They want the best performance in terms of product quality, assistance, reliable delivery, and so on.

4.Strategic-value customers: They want a fairly permanent sole-supplier relationship with your company.
What are the company purchasing orientations?
Formally, we can distinguish three company purchasing orientations:
1. Buying orientation: The purchaser's focus is short term and tactical. Buyers are rewarded on their ability to obtain the lowest price from suppliers for the given level of quality and availability. Buyers use two tactics: commoditization, where they imply that the product is a commodity and care only about price; and multisourcing, where they use several sources and make them compete for shares of the company's purchases.

2. Procurement orientation: Buyers simultaneously seek quality improvements and cost reductions. Buyers develop collaborative relationships with major suppliers and seek savings through better management of acquisition, conversion, and disposal costs.

3. Supply Chain Mgmt orientation: Here purchasing's role is further broadened to become a more strategic, value-adding operation. Purchasing executives at the firm work with marketing and other company executives to build a seamless supply chain management system from the purchase of raw materials to the on-time arrival of finished goods to the end users.
What are the types of purchasing process?
1. Routine products:These products have low value and cost to the customer and involve little risk (e.g., office supplies).

2. Leverage products:These products have high value and cost to the customer but involve little risk of supply (e.g., engine pistons)

3. Strategic products: These products have high value and cost to the customer and also involve high risk (e.g., mainframe computers).

4. Bottlneck products: These products have low value and cost to the customer but they involve some risk (e.g., spare parts).
Decribe purchasing process of business buyers?
1.Problem recognition
2.General need description
3.Produciton specification
4.Supplier search
5.Proposal solicitation
6.Supplier selection
7.Order-routine specification
8.Performance review
What is institutional market?
The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care.
what is Professional purchasing?
Business goods are often purchased by trained purchasing agents, who must follow their organizations' purchasing policies, constraints, and requirements.
Many of the buying instruments—for example, requests for quotations, proposals, and purchase contracts—are not typically found in consumer buying. Professional buyers spend their careers learning how to buy better.
why does business market need multiple sales calls?
Because more people are involved in the selling process, it takes multiple sales calls to win most business orders, and some sales cycles can take years.
what is derived demand?
The demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the business marketer must closely monitor the buying patterns of ultimate consumers.
why does business market has inelastic demand?
Demand is especially inelastic in the short run because producers cannot make quick changes in production methods. Demand is also inelastic for business goods that represent a small
what is fluctuating demand?
A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Economists refer to this as the acceleration effect. Sometimes a rise of only 10 percent in consumer demand can cause as much as a 200 percent rise in business demand for products in the next period; a 10 percent fall in consumer demand may cause a complete collapse in business demand.
what is direct purchasing?
Business buyers often buy directly from manufacturers rather than through intermediaries, especially items that are technically complex or expensive (such as mainframes or aircraft).
What are the guidelines for selling to small businesses?
1. Don't lump small and midsize businesses together.
2. Don't waste their time
3. Do keep it simple
4. Do use the internet
5. Don't forget about direct contact
6. Do provide support after the sale
7. Do your homework
what is e-procurement?
Web sites are organized around two types of e-hubs: vertical hubs centered on industries (plastics, steel, chemicals, paper) and functional hubs (logistics, media buying, advertising, energy management). In addition to using these Web sites, companies can do e-procurement in other ways:
1. Direct extranet links to major suppliers.
2. Buying alliances.
3. Company buying sites
There are 8 categories of buyer-supplier relationships:
1. Basic buying and selling - relatively simple, routine exchanges with moderately high levels of cooperation and information exchange.
2. Bare bones - similar to basic buying and selling but more adaptation by the seller and less cooperation and information exchange.
3. Contractual transaction - generally low levels of trust, cooperation, and interaction; exchange is defined by formal contract.
4. Customer supply - traditional custom supply situation where competition rather than cooperation is the dominant form of governance.
5. Cooperative systems - although coupled closely in operational ways, neither party demonstrates structural commitment through legal means or adaptation approaches.
6. Collaborative - much trust and commitment leading to true partnership.
7. Mutually adaptive - much relationship-specific adaptation for buyer and seller, but without necessarily strong trust or cooperation.
8. Customer is king- although bonded by a close, cooperative relationship, the seller adapts to meet the customer's needs without expecting much adaptation or change on the part of the customer in exchange.