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Lecture 3

MKT 220 Lecture Notes - Lecture 3: Value Engineering

Course Code
MKT 220

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Business markets- purchased a specific product for resale, direct use in producing other products, or use
in daily operations
Producer- purchase products by using them to produce other products or in day-to-day ops
Purchase: raw materials, WIP, or FG
Reseller markets- buy FG and resell them for profit
Wholesalers- purchase products for resale to retailers
Retailers- purchase products and resell them to final customers
Level of demand, profit potential, supplier’s ability to provide goods on demand,
ease of ordering and product support, complementary product characteristics
Government Markets- purchase a broad variety of goods and series- complex buying procedures
Institutional- charitable goals: churches, hospitals, private colleges
Characteristics of Transactions w Business Customers
Orders are much larger and more costly
Purchases are made more frequently
Terms of contracts are longer
Several people may be involved in the business decision
Buyer and seller purchase and sell to each other- reciprocity
Business customers- better informed, more detailed product info, personal goals may influence buying
behavior (get $ if they buy x amount from one company)
Prices of goods
Return on investment
Quality of product and quality of service from the supplier in getting the product out
Methods of Business Buying
1. Description- standardized by certain characteristics (grade A eggs)
2. Inspection- products w particular characteristics (real estate, used equipment)
3. Sampling- product is homogeneous and a single specimen can be evaluated as entire product
4. Negotiation- sellers are asked to bid on specific product and negotiate the price down
Types of Business Purchases
1. New task purchase- 1st time you purchase a product
2. Straight rebuy purchase- simply reorder the product
3. Modified rebuy- same basic product but some big changes are implemented to it
Business Buying Behavior
Buying center- make business purchase decisions
Users- actually use the products
Influencers- develop the specification and evaluate alt. products
Buyers- select suppliers and negotiate terms of purchase
Deciders- actually choose the products
Gatekeepers- control flow of info to others in the buying center
Buying Process
Value analysis- evaluates each component of potential purchase
Vendor analysis- systematic evaluation of potential and current vendors
Multiple sourcing- decision to use several suppliers- keeps them competitive
Single sourcing- decision to only use one source; consistent and dependable, efficient
Environmental, organizational, interpersonal, individual
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