Organizational Market SS1 Marketing Lesson Note

ORGANIZATIONAL MARKET:

These are individuals and companies who purchase goods and services for some use other than personal consumption.

The organizational buying process is entirely different from the consumer buying process. While buying decisions are made relatively easily and quickly by individual customers, organizational buying involves thorough and deep analysis. Organizations purchase products ranging from highly complex machinery to small components.

In an organization, the purchase decisions are influenced by several individuals and are not made in isolation by an individual. Organizational buyers are more concerned about the price and quality of the product along with the service being provided by the vendor. Price plays a major role since the price of the raw materials is the investment from which profits are generated. Thus, price is a major factor which affects the profitability of the firm. Service also plays an important role, because no organization would like to buy goods from a vendor who cannot provide timely and efficient service.

Organizations adopt certain methods for buying products such as checking a sample before the actual purchase. Most organizational purchases involve the purchase of products in large lots. So, it is not feasible to individually inspect every item in the lot. In such situations, a sample is checked assuming that this sample represents the entire lot. Like the consumer markets, organizational markets also possess certain demand characteristics. The organizational demand for products or services may be inelastic, derived, joint or fluctuating in nature. Organizational markets normally purchase the goods or services for producing other goods and services, using these as raw materials. There are also resellers, who purchase the products to sell directly to other customers without any modifications. Apart from producers, and resellers, there are also government and institutional customers who buy the goods The government buys goods for public utility for use in their departments or for production purposes.

TYPES OF ORGANIZATIONAL MARKETS

i. Industrial Or Producer Market: This is a market that consists of individual organizations that buy products for direct use in manufacturing other products for resale or use in the daily business. These are businesses that make or create goods or services. 

Producers buy raw materials and machinery, often from other producers but sometimes from resellers. Marketing to producers requires technical expertise and a knowledge of the producer’s operations. Typical marketing strategies involve identifying problems in the producer’s industry or particular operations and proposing cost-effective solutions. 

Producers have a long-term view of markets since their needs change slowly. As a result, marketing to producers is usually based on long-term relationships.

ii. Reseller: This is a market that consists of distributors, dealers, wholesalers and retailers who buy raw materials and finished goods to sell the product at a profit. Resellers buy finished goods and resell them to the next level in a given distribution channel.

Resellers do not normally transform the products that they sell. The product usually is re-sold without any modifications to the next channel member. However, there may be some value added by resellers. Occasionally, resellers will bundle products from multiple manufacturers together. For example, a computer reseller may bundle together computer hardware and software and then offer the total package at a discounted price to the consumer.

The key factor for marketing to resellers is to be aware of their added-value proposition. If the reseller is a wholesale company offering low prices for high volume, marketers must develop proposals which address this characteristic. If the company buys specialized equipment according to specifications and re-sells it to customers based on high quality and reliability, the marketing will be different.

iii. Government Market: This market consists of local, state and federal governments that purchase goods and services to support their internal operations and to provide essential services for citizens. The government market consists of government units at the federal, state and local levels. Agencies at all levels purchase goods and services used in performing critical government functions. Governments are huge customers of all kinds of products.

ASSIGNMENT 

1. What is a market in marketing? 
2. Explain the following: (i) government market (ii) reseller market (iii) industrial market (WASSCE June 2017).