Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

7. Business and
   Organizational Customers
   and Their Buying Behavior

Text © The McGraw−Hill

Companies, 2002

Business and Organizational Customers and Their Buying Behavior 205

Manufacturers Are Important Customers

There are not many

big ones

One of the most striking facts about manufacturers is how few there are compared

to final consumers. This is true in every country. In the United States, for example,

there are about 366,000 factories. Exhibit 7-8 shows that the majority of these are

quite small—over half have less than 10 workers. But these small firms account for

less than 3 percent of manufacturing value. In small plants, the owners often do the

buying. And they buy less formally than buyers in the relatively few large manufac-

turing plants—which employ most of the workers and produce a large share of the

value added by manufacturing. For example, plants with 250 or more employees make

up less than 4 percent of the total—yet they employ nearly half of the production

employees and produce about 61 percent of the value added by manufacturers.

In other countries, the size distribution of manufacturers varies. But across dif-

ferent countries, the same general conclusion holds: It is often desirable to segment

industrial markets on the basis of customer size because large firms do so much of

the buying.

In addition to concentration by company size, industrial markets are concentrated

in certain geographic areas. Internationally, industrial customers are concentrated

in countries that are at the more advanced stages of economic development. From

all the talk in the news about the U.S. shifting from an industrial economy to a

service economy or an information economy you might conclude that the U.S. is

an exception—that the industrial market in this country is shrinking. But that’s a

myth. The U.S. is still the world’s leading industrial economy. What’s more, man-

ufacturing output is higher than at any other time in the nation’s history. So in a

global sense, there is a high concentration of manufacturers in the U.S.

Within a country, there is often further concentration in specific areas. In the

U.S., many factories are concentrated in big metropolitan areas—especially in New

York, Pennsylvania, Ohio, Illinois, Texas, and California.^21

There is also concentration by industry. In Germany, for example, the steel indus-

try is concentrated in the Ruhr Valley. Similarly, U.S. manufacturers of high-tech

electronics are concentrated in California’s famous Silicon Valley near San Fran-

cisco and also along Boston’s Route 128.

Exhibit 7-8 Size Distribution of Manufacturing Establishments

(small)

(large)

1–9

3 .5%

10–19

20–49

50–249

250 or

more

Number of

employees

(firm size)

Percentage of

total firms in

each size group

Percentage of

total dollar value added

by each size group

Percentage of all

employed people by

each size group

0 8 16 24 32

Percent

40 48 56 64 0 8 16 24 32

Percent

40 48 56 64 0 8 16 24 32

Percent

40 48 56 64

51 .3%

15 .6%

15 .7%

13 .9%

2 .5%

3 .0%

7 .3%

26 .3 %

60 .9 %

3 .8%

4 .7%

10 .6%

32 .2 %

48 .7 %

Customers cluster in

geographic areas