108 CHAPTER6ANALYZINGBUSINESSMARKETS ANDBUYERBEHAVIOR
WHAT IS ORGANIZATIONAL BUYING?
Organizational buying,according to Webster and Wind, is the decision-making
process by which formal organizations establish the need for purchased products and
services and identify, evaluate, and choose among alternative brands and suppliers.^1
Just as no two consumers buy in exactly the same way, no two organizations buy in
exactly the same way. Therefore, as they do for the consumer market, business sellers
work hard to distinguish clusters of customers that buy in similar ways and then create
suitable marketing strategies for reaching those targeted business market segments.
However, the business market differs from the consumer market in a number of sig-
nificant ways.The Business Market Versus the Consumer Market
Thebusiness marketconsists of all of the organizations that acquire goods and services
used in the production of other products or services that are sold, rented, or supplied
to other customers. The major industries making up the business market are agricul-
ture, forestry, and fisheries; mining; manufacturing; construction; transportation;
communication; public utilities; banking, finance, and insurance; distribution; and
services. U.S. marketers can learn more about specific industries by consulting the
North American Industry Classification System (NAICS), a categorized listing of all of
the industries operating in Canada, the United States, and Mexico.
In general, more dollars and items are involved in sales to business buyers than
to consumers. Consider the process of producing and selling a simple pair of shoes.
Hide dealers must sell hides to tanners, who sell leather to shoe manufacturers, who
sell shoes to wholesalers, who sell shoes to retailers, who finally sell them to con-
sumers. Along the way, each party in the supply chain also has to buy many other
goods and services, which means that every business seller is a business buyer, as well.
From the number and size of buyers to geographical location, demand, and buy-
ing behaviors, business markets have a number of characteristics that contrast sharply
with those of consumer markets. These characteristics are described in Table 3.3.
Understanding the impact of these characteristics can help a supplier target
business buyers more effectively. Pittsburgh-based Cutler-Hammer, for example, sells
circuit breakers, motor starters, and other electrical equipment to industrial manufac-
turers such as Ford Motor. As its product line grew larger and more complex, C-H
developed “pods” of salespeople that focus on a particular geographical region, indus-
try, or market concentration. Each individual brings a degree of expertise about a
product or service that the other members of the team can take to the customer. This
allows the salespeople to leverage the knowledge of co-workers to sell to increasingly
sophisticated buying teams, instead of working in isolation.^2Specialized Organizational Markets
The overall business market includes institutional and government organizations in
addition to profit-seeking companies. However, the buying goals, needs, and methods
of these two specialized organizational markets are generally different from those of
businesses, something firms must keep in mind when planning their business market-
ing strategies.The Institutional Market
Theinstitutional marketconsists of schools, hospitals, nursing homes, prisons, and
other institutions that provide goods and services to people in their care. Many of