LO1  Distinguish among industrial, reseller, and government organizational markets.

There are three different organizational markets: industrial, reseller, and government. Industrial firms in some way reprocess a product or service they buy before selling it to the next buyer. Resellers—wholesalers and retailers—buy physical products and resell them again without any reprocessing. Government agencies, at the federal, state, and local levels, buy goods and services for the constituents they serve. Industry classification systems provide common industry definitions for specific countries, which facilitates the measurement of economics activity for these three organizational markets.

LO2  Describe the key characteristics of organizational buying that make it different from consumer buying.

Seven major characteristics of organizational buying make it different from consumer buying. These include demand characteristics, size of the order or purchase, number of potential buyers, buying objectives, buying criteria, buyer–seller relationships and supply partnerships, and multiple buying influences within organizations. The organizational buying process itself is more formalized, more individuals are involved, supplier capability is more important, and the postpurchase evaluation behavior often includes performance of the supplier and the item purchased. Figure 6–8 details how the purchase of an MP3-capable CD player differs between a consumer and organizational purchase. The case example describing the purchase of machine vision systems by an industrial firm illustrates this process in greater depth.

LO3  Explain how buying centers and buying situations influence organizational purchasing.

Buying centers and buying situations have an important influence on organizational purchasing. A buying center consists of a group of individuals who share common goals, risks, and knowledge important to a purchase decision. A buyer or purchasing manager is almost always a member of a buying center. However, other individuals may affect organizational purchasing due to their unique roles in a purchase decision. Five specific roles that a person may play in a buying center include users, influencers, buyers, deciders, and gatekeepers. The specific buying situation will influence the number of people in and the different roles played in a buying center. For a routine reorder of an item—a straight rebuy situation—a purchasing manager or buyer will typically act alone in making a purchasing decision. When an organization is a first-time purchaser of a product or service—a new buy situation—a buying center is enlarged and all five roles in a buying center often emerge. A modified rebuy buying situation lies between these two extremes. Figure 6–7 offers additional insights into how buying centers and buying situations influence organization purchasing.

LO4  Recognize the importance and nature of online buying in industrial, reseller, and government organizational markets.

Organizations dwarf consumers in terms of online transactions made and purchase volume. Online buying in organizational markets is popular for three reasons. First, organizational buyers depend on timely supplier information that describes product availability, technical specifications, application uses, price, and delivery schedules. This information can be conveyed quickly via Internet technology. Second, this technology substantially reduces buyer order processing costs. Third, business marketers have found that Internet technology can reduce marketing costs, particularly sales and advertising expense, and broaden their customer base. Two developments in online buying have been the creation of e-marketplaces and online auctions. E-marketplaces provide a technology trading platform and a centralized market for buyer–seller transactions and make possible the real-time exchange of information, money, products, and services. These e-marketplaces can be independent trading communities, such as FreeMarkets, or private exchanges such as the Worldwide Retail Exchange. Online traditional and reverse auctions represent a second major development. With traditional auctions, the highest-priced bidder "wins." Conversely, the lowest-priced bidder "wins" with reverse auctions.