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    Chapter 3, Lesson 3: Organizational Market Segmentation

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    Cristel Tomas
    Organizational markets have fewer, larger buyers who purchase in bulk. Selling to organizations has lower overhead than retail since it involves fewer promotional and customer service costs. Organizational buyers prioritize product quality, price, and service. Their purchasing processes aim to be impartial by gathering supplier information and running competitive assessments. The buying process involves problem recognition, need description, specification setting, supplier search, selection, ordering, and performance review.

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    Chapter 3, Lesson 3: Organizational Market Segmentation

    Uploaded by

    Cristel Tomas
    668 views12 pages
    Organizational markets have fewer, larger buyers who purchase in bulk. Selling to organizations has lower overhead than retail since it involves fewer promotional and customer service costs. Organizational buyers prioritize product quality, price, and service. Their purchasing processes aim to be impartial by gathering supplier information and running competitive assessments. The buying process involves problem recognition, need description, specification setting, supplier search, selection, ordering, and performance review.

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    9 Organizational Market Segmentation

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    Organizational markets have fewer, larger buyers who purchase in bulk. Selling to organizations has lower overhead than retail since it involves fewer promotional and customer service costs. Organizational buyers prioritize product quality, price, and service. Their purchasing processes aim to be impartial by gathering supplier information and running competitive assessments. The buying process involves problem recognition, need description, specification setting, supplier search, selection, ordering, and performance review.

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    Download as pptx, pdf, or txt
    668 views12 pages

    Chapter 3, Lesson 3: Organizational Market Segmentation

    Uploaded by

    Cristel Tomas
    Organizational markets have fewer, larger buyers who purchase in bulk. Selling to organizations has lower overhead than retail since it involves fewer promotional and customer service costs. Organizational buyers prioritize product quality, price, and service. Their purchasing processes aim to be impartial by gathering supplier information and running competitive assessments. The buying process involves problem recognition, need description, specification setting, supplier search, selection, ordering, and performance review.

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    of 12

    Chapter 3, Lesson 3:

    Organizational Market Segmentation


    Learning Objectives
    • To understand the differences
    between selling to retail consumers
    and selling to organizations
    • To understand the characteristics of
    organizational markets
    • To understand the concept of
    locking clients to a supplier
    Factors that Make Dealing with
    Organizations Much Better than
    with the Retail Market
     In selling to the retail market, more often than not
    you need to invest heavily in promotions,
    distribution, merchandise management, customer
    service systems, and a host of other factors.
     Selling directly to allows you to have an operation
    with potentially lower overhead.
     There are generally fewer factors to worry about
    when dealing with enterprise buyers as these
    generally buy in bulk and are mostly concerned
    about product quality, competitive prices, and
    service quality.
    Examples of Organizational Markets

    • Manufacturers
    • Restaurants and quick-service food chains
    • Wholesalers and retail chains
    • Marketing and distribution companies
    • Local government units (LGUs)
    • Government owned and controlled corporations
    (GOCCs)
    • Non-profit organizations
    • Hospitals and health centers
    Characteristics of
    Organizational Markets
    • Fewer and Larger Buyers
    ‒ The company will be dealing with private or
    public institutions and these tend to be few in
    number for any given industry. But when they
    do purchase items, they tend to do so in bulk.

    • Close Customer Relationships


    ‒ The company’s salespeople try to build
    lasting relations with organizational customers,
    which generally includes the scheduling of
    regular client calls to always be attuned to the
    clients’ needs.
    Characteristics of
    Organizational Markets
    • Geographic Concentration
    ‒ Industries tend to locate in the same area as
    this allows for economies of industrial scale.
    Suppliers and buyers alike will locate at the
    same area to minimize transport, coordination,
    and other logistical costs.
    • Derived and Fluctuating Demand
    ‒ When dealing with organizations, the demand
    for the company’s product will actually be a
    function of the demand for its client’s
    products.
    Characteristics of
    Organizational Markets
    • Potential for Inelastic Demand
    ‒ Inelasticity refers to a relative insensitivity of
    the sales of the company’s product to any
    increase or decrease in its price.

    • Professional Purchasing
    ‒ While consumer markets are often
    characterized by emotionally-triggered
    purchasing, well-run organizations typically set
    up purchasing offices that seek to maximize
    the impartiality of their purchase decisions.
    Procedures that Minimize
    the Risk of Purchase

    (1) Ensure access to sufficient information about


    potential suppliers and their products
    (2) Maximize the impersonality of the buying process
    (3) Ensure a fair and competitive assessment of
    potential suppliers and their products
    Different Buying Situations
    • Straight Rebuy
    ‒ This refers to routinized purchases.
    • Modified Rebuy
    ‒ Here, a firm has already purchased the
    product in the past, so it is now familiar with
    the suppliers and basic data about their wares.
    However, the firm’s specifications have
    changed from the last time, necessitating a
    new round of searching.
    • New Task
    ‒ At this point, a firm still has no experience
    with the different suppliers in the market.
    Typical Buying Roles
    in Organizational Markets

    • Initiators – identify problems.


    • Influencers – affect buying decisions.
    • Buyers – have formal authority to select suppliers
    and arrange terms.
    • Deciders – have formal or informal power to select
    or approve final suppliers.
    • Gatekeepers – control the flow of information to
    others.
    The Buying Process Can Be
    Summarized as Follows:
    • Problem Recognition. The client organization
    acknowledges the need for a particular product or
    service.
    • General Need Description. This is the start of a
    formal buying process where forms are filled out
    that justify the need for the purchase.
    • Product Specification. Technical personnel are
    engaged in this process in order to provide the
    specific technical details for the needed product
    or service.
    • Supplier Search and/or Proposal Solicitation.
    Possible suppliers are sought out or ads are
    placed in order to invite potential bidders.
    The Buying Process Can Be
    Summarized as Follows:
    • Supplier Selection. A formal selection process is
    consummated based on pre-established guidelines,
    leading to the determination of the supplying
    enterprise.
    • Order-Routine Specification. The purchase order is
    made out. If this will be a recurring purchase, then it
    is possible that this will become a long-term and
    therefore, routine transaction.
    • Performance Review. Both the product and the
    relationship with the supplier are evaluated in order
    to establish if there may be a need to look for
    alternative suppliers on the next round.

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