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Marketing The Core 5th Edition Kerin Solutions Manual 1
Marketing The Core 5th Edition Kerin Solutions Manual 1
CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ........................................... 5-2
LECTURE NOTES
• Chapter Opener: Buying Publication Paper is a Serious Marketing Responsibility
at JCPenney .................................................................................................................. 5-4
• The Nature and Size of Organizational Markets (LO1) ............................................... 5-4
• Measuring Domestic and Global Industrial, Reseller, and Government Markets ........ 5-5
• Characteristics of Organizational Buying (LO2) ......................................................... 5-6
• The Organizational Buying Process and the Buying Center (LO3) ............................. 5-9
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Chapter 5 - Understanding Organizations as Customers
IN-CLASS ACTIVITY (ICA): See the ICA CD in the Instructor’s Survival Kit Box
• ICA 5-1: Daktronics: Reaching an Organization’s Buying Center
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Chapter 5 - Understanding Organizations as Customers
Selected Textbook Images of Ads, Photos, and Products for Lecture Notes
Chapter Opener: Photo of JCPenney catalog cover (p. 104) .............................................................. 5-4
Video Case 5: Photo of cyclist on Trek racing bike (p. 120) ............................................................. 5-24
Supplemental Figures
Figure 5-A Type and number of organization establishments in the U.S.: 2007 [pp. 106-107] ........ 5-6
Figure 5-B Key organizational buying criteria [p. 110] ................................................................... 5-11
1 For each PowerPoint resource listed, the page reference (p. x) or [p. y] in the textbook is where the figure or image is located.
2 The slide number references are for the PowerPoint presentation for this chapter, which is available on the Instructor’s
Resource CD-ROM or can be downloaded from the Marketing: The Core, 5/e website. See www.mhhe.com/kerin.
3 TV ads, videos, and video cases with QR Codes can be viewed on a separate media website for Marketing: The Core, 5/e,
which is core.kerin.tv. For example, to view QR 5-1, the proper URL syntax is http://core.kerin.tv/qr5-1.
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Chapter 5 - Understanding Organizations as Customers
LO2: Describe the key characteristics of organizational buying that make it different from
consumer buying.
LO3: Explain how buying centers and buying situations influence organizational purchasing.
LO4: Recognize the importance and nature of online buying in organizational markets.
KEY TERMS
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Chapter 5 - Understanding Organizations as Customers
LECTURE NOTES
• JCPMedia spends hundreds of millions of dollars annually buying paper for catalogs,
newspaper inserts, and direct-mail pieces from 10 paper suppliers around the world.
• Paper buyers work closely with marketing personnel to ensure that the right quality
and quantity of paper are bought at the right price.
b. For use in the creation of products and services that they can produce and market
to others.
a. Manufacturers buy raw materials and parts and reprocess them into finished
goods.
b. Wholesalers and retailers resell the products they buy without reprocessing them.
d. The total annual purchases of organizational buyers are far greater than those of
ultimate consumers.
e. [Figure 5-A] These buyers comprise industrial, reseller, and government markets.
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Chapter 5 - Understanding Organizations as Customers
A. Industrial Markets
• Industrial firms in some way reprocess a product or service they buy before
selling it again to the next buyer.
B. Reseller Markets
• Resellers are wholesalers and retailers that buy physical products and resell them
again without any reprocessing.
• In the U.S., there are about 1.5 million retailers and 435,000 wholesalers.
C. Government Markets
• Government units are the federal, state, and local agencies that buy goods and
services for the constituents they serve.
a. Provides common industry definitions for Canada, Mexico, and the United States.
b. Makes it easier to measure economic activity in the three member countries of the
North American Free Trade Agreement (NAFTA).
d. Groups economic activity to permit studies of market share, demand for goods
and services, competition from imports, etc.
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Chapter 5 - Understanding Organizations as Customers
• [Figure 5-1] The NAICS designates industries with a six-digit numerical code:
d. The fifth digit designates a specific industry and is the level at which comparable
data are available for Canada, Mexico, and the U.S.
a. Permits a firm to find the NAICS codes of its present customers and then obtain
NAICS-coded lists for similar firms.
a. Five-digit national industry codes are not available for all 3 countries because…
b. The respective governments will not reveal data when too few organizations exist
in a category.
LEARNING REVIEW
1. What are the three main types of organizational buyers?
Answer: The NAICS provides common industry definitions for Canada, Mexico, and the
United States, which makes it easier to measure economic activity in the three member
countries of NAFTA.
A. Demand Characteristics
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Chapter 5 - Understanding Organizations as Customers
• Derived demand.
a. Means that the demand for industrial products and services is driven by, or
derived from, demand for consumer products and services.
• The size of the purchase in organizational buying is much larger than in consumer
buying, with a single purchase running into the thousands or millions of dollars.
• Most organizations place purchasing constraints on their buyers, who must get
competitive bids from at least three prospective suppliers if the order is above a
specific amount.
• The size of the order determines who participates in the purchase decision and the
time required to negotiate a purchase agreement.
• Firms selling consumer products and services often try to reach thousands or
millions of individuals or households.
• For business firms, the buying objective is usually to increase profits through
reducing costs or increasing revenues.
• The objectives of nonprofit firms and government agencies are usually to meet the
needs of the groups they serve.
• Firms have broadened their objectives to emphasize buying from minority- and
women-owned suppliers and vendors.
• These criteria serve the same purpose as the evaluative criteria used by
consumers.
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Chapter 5 - Understanding Organizations as Customers
a. Price.
d. Technical capability.
• [Figure 5-3] Shows the actual buying criteria organizational buyers employ for
choosing:
b. Suppliers used for product inspection and the frequency with which they’re
used.
c. The price of a machine vision system is the least frequent mentioned criterion.
• Supplier development:
MARKETING MATTERS
Customer Value: Harley-Davidson’s Supplier Collaboration
Creates Customer Value…and a Great Ride
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Chapter 5 - Understanding Organizations as Customers
b. However, the practice exists and can limit the flexibility of organizational
buyers in choosing alternative suppliers.
• A supply partnership:
• The concept of sustainable procurement has arisen due to the concerns organizations
have regarding how their buying decisions affect the environment.
• Sustainable procurement:
b. Reduces the negative impact on human health and the physical environment.
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Chapter 5 - Understanding Organizations as Customers
[Figure 5-4] Consumers and organizations use the same five stages of the purchase
decision process: (1) problem recognition, (2) information search, (3) alternative
evaluation, (4) purchase decision, and (5) postpurchase evaluation.
• A buying center:
• In large multi-store chain resellers, the buying center is highly formalized and is
called a buying committee.
• Four questions that provide guidance in understanding the buying center in these
organizations include:
a. Which individuals are in the buying center for a particular product or service?
d. How does each member perceive the firm, its products, and its salespeople?
c. Individuals from top management and other functional areas are included
depending on the purchase.
d. A key issue is finding and reaching the people in the buying center who will
initiate, influence, and actually make the buying decision.
2. Roles in the Buying Center. There are five specific roles that an individual in a
buying center can play:
a. Users are people in the organization who actually use the product or service.
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Chapter 5 - Understanding Organizations as Customers
c. Buyers have formal authority and responsibility to select the supplier and
negotiate the terms of the contract.
d. Deciders have the formal or informal power to select or approve the supplier
that receives the contract.
a. The number of people in the buying center largely depends on the specific
buying situation.
b. [Figure 5-5] There are three types of organizational buying situations, called
buy classes, which vary from the routine reorder to the completely new
purchase:
• New buy.
– The firm is a first-time buyer of the product or service.
– Involves greater risks, so the buying center is enlarged to include all
who have a stake in the new buy.
• Straight rebuy, where the buyer reorders an existing product or service
from the list of acceptable suppliers.
• Modified rebuy, where:
– Users, influencers, or deciders in the buying center want to change the
product specifications, price, delivery schedule, or supplier.
– Although the item purchased is largely the same, the changes usually
necessitate enlarging the buying center to include people outside the
purchasing department.
LEARNING REVIEW
3. What one department is almost always represented by a person in the buying center?
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Chapter 5 - Understanding Organizations as Customers
• Online organizational buyers account for about 80 percent of the global dollar value
of all online transactions.
• E-marketplaces are:
b. Make possible the real time exchange of information, money, and offerings.
a. Independent e-marketplaces:
• Act as a neutral third-party.
• Provide an Internet technology trading platform and a centralized market
that enable exchanges between buyers and sellers.
• Charge a fee for their service.
• Exist in settings that have one or more of the following features:
– Thousands of geographically dispersed buyers and sellers.
– Frequently changing prices caused by demand and supply fluctuations.
– Time sensitivity due to perishable offerings and changing technology.
– Easy-to-compare offerings among a variety of suppliers.
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Chapter 5 - Understanding Organizations as Customers
• Offer small business buyers and sellers an economical way to expand their
customer bases and reduce costs.
MARKETING MATTERS
Entrepreneurship: eBay Means Business For Entrepreneurs
• eBay recently introduced a trading platform for the nearly 23 million small businesses
in the U.S. and even greater numbers around the world.
• It has helped them grow, reduce costs, and make them more profitable.
• According to the general manager of eBayBusiness, “Many of our sellers started their
businesses specifically as a result of the ability to use eBay as their e-commerce
platform.”
[Figure 5-6] Many e-marketplaces offer online auctions. There are two types:
• In a traditional auction:
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Chapter 5 - Understanding Organizations as Customers
• In a reverse auction:
c. The auction ends when a single bidder wins the business with its lowest price.
LEARNING REVIEW
5. What are e-marketplaces?
Answer: E-marketplaces are online trading communities that bring together buyers and
supplier organizations to make possible the real time exchange of information, money,
products, and services.
6. In general, which type of online auction creates upward pressure on bid prices and
which type creates downward pressure on bid prices?
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Chapter 5 - Understanding Organizations as Customers
1. Describe the major differences among industrial firms, resellers, and government
units in the United States.
Answers:
a. Industrial firms, which account for the majority of all organizational buyers, in some
way reprocess a product or service they buy before reselling it again to the next buyer.
b. Resellers, the second largest group of organizational buyers, consist of wholesalers and
retailers that buy physical products and resell them again without any reprocessing.
c. Government units, the smallest of the three groups, consist of federal, state, and local
agencies that buy goods and services for the constituents they serve.
2. List and discuss the key characteristics of organizational buying that make it different
from consumer buying.
Answer: Although the buying processes organizations go through when making a purchase
also apply to consumer buying, there are some key differences:
b. Demand for products and services from organizations is derived from the demand for
consumer products and services.
e. The buying criteria for organizational buyers generally focus on three critical factors:
(1) ability to meet quality standards, (2) ability to deliver the product on time, and
(3) past performance on previous contracts.
3. What is a buying center? Describe the roles assumed by people in a buying center
and what useful questions should be raised to guide any analysis of the structure and
behavior of a buying center.
Answers:
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Chapter 5 - Understanding Organizations as Customers
b. Buying center roles. Individuals in a buying center perform one or more roles:
• Users are people in the organization who actually use the product or service.
• Influencers affect the buying decision, usually by helping define the specifications
for what is bought.
• Buyers have formal authority and responsibility to select the supplier and negotiate
the terms of the contract.
• Deciders have the formal or informal power to select or approve the supplier that
receives the contract.
• Gatekeepers control the flow of information in the buying center.
Answers:
a. Roles played. A number of different constituencies exist in the buying center for a
wastewater treatment system for cities, and each plays one or more roles:
Role Constituency
1. Users City sanitary and sewer department engineers
2. Influencers City sanitary and sewer department engineers; EPA
3. Buyers City council
4. Deciders Directors of the city sanitary and sewer departments;
city council members
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Chapter 5 - Understanding Organizations as Customers
b.Marketing improvements. The firm could improve its marketing efforts by reaching
and educating the influencers and deciders (see above). Above all, the firm must
circumvent or satisfy the primary gatekeepers—the consulting engineers. These
individuals are most likely detractors because the system’s lower cost results in smaller
compensation for them as consulting engineers.
Your marketing plan may need an estimate of the size of the market potential or
industry potential (see Chapter 7) for a particular product-market in which you compete.
Use these steps:
4. Follow the instructions to find the specific NAICS code and economic census data that
detail the dollar sales and provide the estimate of market or industry potential.
If the marketing plan involves organizational markets, it is often useful first to determine
the size of the market or industrial potential and then to assess the portion—or market share—
that the organization might capture. U.S. Census data is the most common source of information
for this kind of analysis. However, for most small businesses, this kind of analysis is of
secondary importance.
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Chapter 5 - Understanding Organizations as Customers
This case focuses on Trek's organizational buying process, including its buying center,
vendor selection and evaluation, buying situations, and buyer-seller relationships.
Environmental impact considerations in Trek’s buying process are also described. This case
covers most of the topics covered in Chapter 6 for a product familiar to students.
Synopsis
Show Slide 5-24. Richard Burke and Bevill Hogg founded trek Bicycle in 1976. With
just five employees, they began manufacturing bicycles in a Wisconsin barn. The first year
they manufactured 900 custom-made bicycles that sold quickly. Today, Trek is one of the
leading manufacturers of bicycles and cycling products with more than $600 million in sales
and 2,000 employees. Trek’s products are now marketed through 1,700 dealers in North
America and wholly-owned subsidiaries in seven countries, and through distributors in 80
other countries. Its brands include Trek, Gary Fisher, Bontrager, and Klein. As a global
company, Trek’s mission also has evolved, and today the mission is to “Help the world use the
bicycle as a simple solution to complex problems.” Trek employees believe that the bicycle is
the most efficient form of human transportation and that it can combat climate change, ease
urban congestion, and build human fitness. The firm’s motto: “We believe in bikes.”
Trek’s success at accomplishing its mission is the result of many important business
practices including its organizational buying process. The process begins when managers
specify types of materials needed to produce a Trek product. The next step is to ask the buying
center to find the best suppliers and vendors for the materials. When potential suppliers are
identified they are evaluated on four criteria. Once a business is selected as a Trek supplier, it
is continuously evaluated on elements of these four criteria. Every effort is made to develop
long term relationships with suppliers so that they become partners with Trek. These
partnerships mean that Trek’s success also contributes to the partner’s success.
Trek’s product managers and the buying center are involved in three types of
organizational purchases. First, new buys are purchases that are made for the first time.
Second, modified rebuys involve changing some aspect of a previously ordered product.
Finally, straight rebuys are reorders of existing products from the list of acceptable suppliers.
Teaching Suggestions
Before the case is discussed in class, consider asking students to interview a purchasing
manager from a local business. Suggest that they conduct the interview by asking the purchasing
manager to describe the roles of the buying center at the company. This activity will provide a
good background for the class discussion:
1. A good starting point for introducing this case is to ask if students are familiar with Trek
Bicycle or its brands. Ask them to describe how (a) the buying process influences the
product they know and (b) the textbook description corresponds to different aspects of
Trek’s organizational buying process.
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Chapter 5 - Understanding Organizations as Customers
2. Ask your students how important Trek’s “Eco” perspective is to them. What does
“green” mean to them?
1. What is the role of the buying center at Trek? Who is likely to comprise the buying
center in the decision to select a new supplier at Trek?
Answers:
a. Buying center roles. The role of the buying center is to find suppliers who can provide
materials, components, and parts that satisfy Trek’s quality requirements, sizing
standards, and delivery schedules. At Trek, the buying center is also tasked with
developing what they call white papers, a sheet that managers can look at that shows
issues and benefits related to working with each supplier.
b. Buying center roles. The Trek buying center typically consists of a purchasing
manager, buyers who identify domestic and international sources of materials and
components, and representatives from R&D, production, and quality control.
2. What selection criteria does Trek utilize when it selects a new supplier or evaluates an
existing supplier?
Answer:
Trek uses four criteria when it selects a new supplier and evaluation existing suppliers.
These are quality, delivery capabilities, price, and environmental impact of their production
process. This allows Trek to compare alternative suppliers and to select the best match for
Trek and its customers. Once a business is selected as a Trek supplier, it is continuously
evaluated on elements of these four criteria.
3. How has Trek’s interest in the environmental impact of its business influenced its
organizational buying process?
Answer:
Trek has a clear interest in minimizing the environmental impact of bicycle production and
use. As mentioned in the case, Trek now has an Eco Design initiative to build bicycles and
parts that are “green” in terms of the environmental impact of the process, longevity, and
recyclability. This initiative also influences supplier choice as described in the case.
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Chapter 5 - Understanding Organizations as Customers
Answers:
a. Straight rebuy. This buying situation involves a buyer or purchasing agent reordering
a product or service from the list of acceptable suppliers, probably without checking
with other members of the buying center. An example would be the purchase of handle
bars or pedals from an existing supplier. At Trek, a straight rebuy also includes looking
at the trade-off between a simple repurchase and the cost and benefit of improving on
the item purchased.
c. New buy. This buying situation represents a first-time purchase and typically involves
multiple, and potentially, new participants in the buying process, such as product
managers. A new buy situation would likely involve a thorough vendor evaluation
process. At Trek, a new buy would be represented by the purchase of a motor for an
electric-powered bike.
Epilogue
Trek continues to select suppliers that help create eco-friendly bicycles. One aspect of
this is to manufacture new bikes that are made from steel because it is easier to obtain and
recycle. In addition, Trek is starting a program to provide funds to bike shops to recycle old tire
tubes – they are made into bags, seat bags, and panniers! Trek has also become involved in
many events such as the Iceman Cometh race and the Crankworx festival. Events such as these
provide exposure to bicycle enthusiasts and allow Trek to showcase its new materials and
technologies.
Sources: Andrew Rosch, “Trek Superfly Blazes Iceman Cometh”, Trek website, www.trekbikes.com, November 7,
2011 and David Ebner, “Whistler Flips Over Anti-Gravitational Delights of Crankworxs Mountain-biking Contest,”
The Globe and Mail, July 25, 2011, p. S1.
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