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 211

At the extreme, a government customer who wants a specific brand or supplier

may try to write the description so that no other supplier can meet all the specs.

The buyer may have good reasons for such preferences—a more reliable product,

prompt delivery, or better service after the sale. This kind of loyalty sounds great,

but marketers must be sensitive to the ethical issues involved. Laws that require

government customers to get bids are intended to increase competition among sup-

pliers, not reduce it. Specs that are written primarily to defeat the purpose of these

laws may be viewed as illegal bid rigging.

Specification and bidding difficulties aren’t problems in all government orders.

Some items that are bought frequently—or for which there are widely accepted

standards—are purchased routinely. The government unit simply places an order at

a previously approved price. To share in this business, a supplier must be on the list

of approved suppliers. The list is updated occasionally, sometimes by a bid proce-

dure. Government units buy school supplies, construction materials, and gasoline

this way. Buyers and sellers agree on a price that will stay the same for a specific

period—perhaps a year.

Contracts may be negotiated for items that are not branded or easily described,

for products that require research and development, or in cases where there is no

effective competition. Depending on the government unit involved, the contract

may be subject to audit and renegotiation, especially if the contractor makes a larger

profit than expected.

Negotiation is often necessary when there are many intangible factors. Unfortu-

nately, this is exactly where favoritism and influence can slip in. And such influence

is not unknown—especially in city and state government. Nevertheless, negotia-

tion is an important buying method in government sales—so a marketing mix

should emphasize more than just low price.^27

In the United States, there are more than 85,000 local government units

(school districts, cities, counties, and states) as well as many federal agencies that

make purchases. Keeping on top of all of them is nearly impossible. Potential

The approved

supplier list

Negotiated contracts

are common too

Learning what

government wants

Government agencies are

important customers for a wide

variety of products, even rental

truck services (for example, if

they have to unexpectedly move

ballot boxes from one place to

another as was the case in

Florida in the 2000 national

election).

Rigged specs are

an ethical concern