Chapter–by–chapter aids: Chapter 6
Instructor’s Manual to Accompany Essentials of Marketing IV-6-1
CHAPTER 6: BUSINESS AND ORGANIZATIONAL CUSTOMERS
AND THEIR BUYING BEHAVIOR
CHAPTER 6 – COMMENTS ON QUESTIONS AND PROBLEMS
6- 1. The answer to this question is discussed in the section “Organizational Customers Are
Different” but the basic ideas are simple. Specifically, while there are some important
differences in business customs in different countries, many of the basic approaches used by
customers, more so than final consumers, are often willing to work with a distant supplier who
has developed a superior marketing mix.
consumers and organizational buyers, to highlight the differences, or both. The behavioral
influences discussed in the previous chapter may apply equally to final consumers and
organizational buyers. In most cases, the organizational buying process is likely to put more
consumer purchases, how extensive the decision process is may depend on how important the
purchase is. Here, it is useful to stress the parallel between the three kinds of organizational
buying processes (new–task buying, straight rebuy, and modified rebuy) and the consumer
probably more common (and more complicated) in organizational purchasing.
6- 3. It is important for a marketing manager to think about who is likely to be involved in the buying
center for a business or organizational purchase because each person may influence the
purchase – and perhaps influence it in different ways. The marketing manager needs to see if
all of the different buyer center’s needs are being met, and if not, why not. Clearly, this kind of
spend it – for a family vacation may be influenced by every member of the household. See
section “Many Different People May Influence a Decision” for more discussion of the buying
center concept.
students should see that. As contrasted with the types of multiple influence in a purchase by a
manufacturing concern, the specific titles of some of the people might be different (for
example, doctors, nurses and imaging technicians – rather than “production” workers in a
specialists who would manage many of the administrative aspects of dealing with potential
vendors and who would actually develop the purchase contracts and place the order. Various
people in the purchasing department – perhaps a secretary or administrative assistant – might
might have final say (be the decider) in the purchase. Others in the hospital – perhaps those
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Part IV
buying process. A number of different people in different roles in the firm may influence the
specification of the lightweight bumper (appearance, materials, crash resistance, finishes used,
etc.) and the selection of one or more vendors who are capable of providing not only the right
who have been selected as meeting the requirements. Such purchases might even be made
based on a longer–term contract negotiated when the supplier was initially selected. However,
if something changes to break the “business as usual” pattern (e.g., there are quality problems,
problem – but rather a predetermined schedule to make sure that the producer isn’t missing
some opportunity (for example, to get bumpers at a lower price) by routinely working with the
same supplier(s).
stimulate price competition among different possible suppliers. Of course, there might also be
a company policy that requires obtaining bids. Competitive bids can be used when the same
basic product is available from different vendors, or if they offer different products, when any of
effort of getting bids may not be justified for a small or insignificant purchase – even if there are
a number of possible sources of supply. In such cases, the convenience of relying on a single
source might outweigh the potential savings of going to the trouble of getting bids. Finally,
purchases that are influenced by unknown factors may not be conducive to bids. For example,
an airplane manufacturer that wants a supplier to develop a new type of jet engine may decide
to select a “partner” on a number of factors (financial solvency, attitudes of top management,
process – although the “bidding process” or “collection of bids” might be more informal in some
cases than in others. However, a hardware store that wants to add a new lawnmower line
would probably be less likely to use competitive bids – as the overall relationship with a
potential supplier might be influenced by many factors that would be hard to anticipate in
setting up bid specifications.
(a) the small town that needs a road resurfaced is probably the most likely to get competitive
bids; government organizations are often required by law to obtain bids, especially on
purchases that are likely to involve a significant expenditure. While a small town might not
have the resources (on its own) to set up an online bidding process, many states have a
system that can be used by local governments (counties, towns, etc.) for their own purchases.
(b) a local scouting organization probably wouldn’t get competitive bids; the people involved in
Chapter–by–chapter aids: Chapter 6
Instructor’s Manual to Accompany Essentials of Marketing IV-6-3
(c) the hardware retailer might first check with its wholesale suppliers to see if one of them
could provide an acceptable line of mowers at a reasonable price. The retailer is more likely to
want to learn about the available alternatives and then make a decision based on the overall
about ease of use by employees, reliability, etc.) and it might very well seek competitive bids –
especially if it could provide detailed specifications of exactly what capabilities were expected
in a scanner. If such detailed specs were not feasible, the bid approach might not be used.
(e) as with the scouting example, the sorority would probably turn to one of its more
knowledgeable members for volunteer help in selecting a computer system; a volunteer might
cost of working with a supplier, especially if it means that lower levels of inventory can be
maintained. On the other hand, the close working relationship and coordination required
between the buyer and seller means that the buyer must provide the seller with a significant
with other, alternative channels). On the other hand, once a decision has been made to work
very closely with a given supplier, it may be much harder to shift to someone else if the
relationship does not work as well as expected. In other words, the close working relationship
6- 9. The idea of a customer building a closer working relationship with a supplier is discussed in the
section “Buyer–Seller Relationships in Business Markets.” There are a number of functions that
can be done better or at lower cost if there is cooperation between the buyer and seller. For
example, a buyer that is able to trust and work closely with a supplier may be able to share
between the customer and the seller may involve operational linkages and/or specific
investments. It simply may not be practical for a buyer to start from scratch with a new supplier
each time there’s a need to make a new purchase.
chain than a single hardware store run by its owner. The large chain might employ buying
specialists for each specific line of tools. The large chain might be very concerned about not
only price and adequate availability but also issues such as computer–ordering compatibility
other words, the personal selling effort might be much more important in the smaller store.
Further, the owner of the small store might be much more concerned with the extent to which
the manufacturer has already presold the tool to the target market (shelf space is scarce) and
Part IV
Chapter–by–chapter aids: Chapter 6
Instructor’s Manual to Accompany Essentials of Marketing IV-6-5
compete in markets where suppliers from other countries use bribes or similar “under the
table” inducements to influence the purchase process. The issue here is whether the U.S.
government should set the rules of behavior for some other market. Some people argue that is
not a reasonable role for the government. On the other hand, it has been argued that the
absence of such rules encourages marketing practices that are not in the best interest of the
citizens of other countries – and the U.S. government shouldn’t directly or indirectly endorse
such harmful approaches.
DISCUSSION OF COMPUTER-AIDED PROBLEM 6: VENDOR ANALYSIS
In this problem, an industrial buyer is evaluating different suppliers of microchips used in producing the
firm’s products. The student uses the PLUS program to do a complete vendor analysis – evaluating the
total cost of buying from the suppliers taking into consideration differences in price, order quantity
discounts, delivery times, the number of defective products in an order, and other factors. The problem
focuses attention on why industrial purchasers evaluate suppliers on many criteria – and shows why the
“best” choice may not always be clear cut. It also shows how changes in a supplier’s marketing mix – for
example, introducing a wholesaler in a channel of distribution – can improve its competitive position in the
industrial market.
This problem can also be used with the discussion of wholesalers in Chapters 10 or 12.
The initial spreadsheet for this problem is given below.
P L U S – Spreadsheet
Supplier 1
Supplier 2
Quantity of Chips Needed
100000
*
100000
*
COST per Chip
1.91
*
1.87
*
Cost for Total Order of Chips
191000.00
187000.00
DEFECTIVE Rate (Percent Defective)
1.000
*
2.000
*
Number of Defective Chips
1000
2000
Cost to Replace Defective Chip
2.00
*
2.00
*
Total Cost of Replacing Chips
2000.00
4000.00
CONNECTOR Cost for Each Chip
0.10
*
0.08
*
Total Cost–Connectors
10000.00
8000.00
INVENTORY Cost as Percent of Total Order
2.000
*
5.400
*
Total Inventory Cost
3820.00
10098.00
TRANSPORTION Cost per Chip
0.02
*
0.03
*
Total Transportation Cost
2000.00
3000.00
TOTAL COSTS FOR VENDOR
208820.00
212098.00
Answers to Computer–Aided Problem 6:
a. Based on the initial spreadsheet (given above), Supplier 1 appears to be the best choice. While the
price of the needed chips is higher, the total cost of Supplier 1`s offering would be lower for
purchaser.
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Part IV
b. At the lower quantity, Supplier 2 would probably be the best choice. At the lower quantity, the price
from Supplier 1 would be substantially higher – and as a result the customer’s total cost of
purchasing from Supplier 2 would be slightly lower ($1,79222.81 vs. $1,79900.50 for Supplier 1.) The
spreadsheet for the analysis is given below.
P L U S – Spreadsheet
Supplier 1
Supplier 2
Quantity of Chips Needed
84500
*
84500
*
COST per Chip
1.95
*
1.87
*
Cost for Total Order of Chips
164775.00
158015.00
DEFECTIVE Rate (Percent Defective)
1.000
*
2.000
*
Number of Defective Chips
845
1690
Cost to Replace Defective Chip
2.00
*
2.00
*
Total Cost of Replacing Chips
1690.00
3380.00
CONNECTOR Cost for Each Chip
0.10
*
0.08
*
Total Cost–Connectors
8450.00
6760.00
INVENTORY Cost as Percent of Total Order
2.000
*
5.400
*
Total Inventory Cost
3295.50
8532.81
TRANSPORTION Cost per Chip
0.02
*
0.03
*
Total Transportation Cost
1690.00
2535.00
TOTAL COSTS FOR VENDOR
179900.50
179222.81
c. $1.87 per chip is the highest price at which Supplier 2 will be the “lowest cost” vendor. This can be
seen from the What If data display below.
Chapter–by–chapter aids: Chapter 6
Situation: Assume that you are a salesperson in a small company. For months you’ve been trying to get a
big order from a large firm. A purchasing manager at the firm casually mentions that she is trying to help
two friends find tickets for a big hockey game. Your boss has season tickets for entertaining customers,
but you know that the purchasing manager’s company strictly prohibits any gift to employees. When you
ask your boss what to do, the reply is, “Well, the tickets would be used by the friends and not the
customer firm’s employee, so you can offer them if you think you should.” What should you do? What are
It might also be useful to discuss the role of the sales manager in this case. The manager leaves it to the
salesperson to decide what to do and, in doing so, puts pressure on the sales rep to do something the rep
considers inconsistent with the customer firm’s policies. Managers in organizations are role models—and
that includes being role models with respect to ethical behavior. So, in a situation like this, it would be
best for the sales manager to voice a clear opinion about what action to take. The gift of the tickets would
violate the spirit of the customer firm’s policies, so it would be a bad idea for the selling firm to disregard
CHAPTER 6 – COMMENTS ON USE OF CREATING MARKETING PLANS
QUESTION WITH THIS CHAPTER
The Marketing Plan Coach software on the text website includes a sample marketing plan for Hillside
Veterinary Clinic. Hillside decided to focus on final consumers and their pets rather than include
Part IV
For example, these business customers would be larger and the higher volume might warrant moving into
the market – even for a smaller number of customers. But the organizational customers may expect a vet
to visit them – and this may not be practical for a small veterinary clinic like HVC that has only one vet.
These customers may also be more price sensitive, which may result in lower prices and lower margins.
Also, they may have different needs – forcing Dr. Hardy to develop new expertise or the clinic to purchase
new equipment. The final answer depends on the assumptions made about these new markets.