Chapter 2.

The Business Market: Perspectives on the Organizational Buyer

BA 303 BUSINESS 2 BUSINESS MARKETING LINDELL PHILLIP CHEW

The three sectors of the business market, commercial enterprises, government, and institutions.
The

chapter is pivotal to formulating an effective business marketing strategy,

Commercial enterprises
; Unique aspects of the sector, geographic concentration and volume concentration by large firms DERIVED DEMAND

North American Industrial Classification System (NAICS) Replaces SIC system

Commercial Enterprises Unique Characteristics Manufacturing, construction, service, professional groups, resellers

Small in number; large in volume 360,000 manufacturers 10 percent of the manufacturers produce 78 percent of the value added

government purchasing practices and procedures are explored

understand

the contractual and legal side of government purchasing federal buying process is provided to emphasize the type of marketing efforts required by potential suppliers

Government contracts Stringent legal requirements, often unrelated to the purchase, small subcontractor preferences, minority employment Public laws which specify contractual arrangements Vendors must carefully understand government laws

RED TAPE

Knowledge of government requirement needed for effective negotiation Types of contracts Fixed price profit potential is good if inflation is stable and costs are controlled Cost reimbursement effective when extensive developmental efforts are required. Carefully monitored NOTEHORROR STORIES

say hi to Chester & A 12! NOTEHORROR STORIES serving up a fixed price nightmare!!
Various governmental agencies publish booklets explaining how sell to that particular agency please read them!!!!
ENTER AT YOUR OWN RISK

Defense Procurement The Department of Defense spends a large portion of the federal government's budget on procurement Defense Logistics Agency procures & distributes common supplies to all military branches Military branches procure major items

RISKY BUSINESS

institutional buying environment

institutional

buying forms a middle ground between the commercial and government sectors in terms of purchasing processes and procedures

Nondefense procurement Accomplished through a wide variety of cabinet departments, commissions & agencies

FORMAL ADVERTISED, NEGOCIATED, SET ASIDE

the GSA-General Services Administration Centralized procurement of items in common use by all government agencies

Institutional Market: Unique characteristics A large market composed of a vast array of schools, hospitals, universities, libraries, foundations etc A middle ground between business and government
Requires the marketer to respond to the needs of the product users (professional staff) and the buyers (purchasing personnel)

Outsourcing

Group buying

The Market Centered customer driven to driving

organization

Business buyer diversity Marketers must respond to the unique purchasing requirements of each segment of the market The marketing organization is structured so that major customer markets become the centers around which the firm is organized Firm's marketing efforts are therefore focused on each market sectorgovernment, business, institutional, and international