Organizational Buyers Are Divided Into What Three Markets

Organizational buyers play a crucial role in the economy, purchasing goods and services needed for their operations, resale, or production of other goods and services. Understanding the different markets they operate in is essential for businesses that target these buyers. Organizational buyers can be broadly divided into three main markets: the industrial market, the reseller market, and the government market. Each market has distinct characteristics, purchasing behaviors, and needs that suppliers must understand to effectively target and serve them.

The Industrial Market

The industrial market, also known as the business-to-business (B2B) market, consists of organizations that purchase products and services to use in the production of other goods and services. These organizations include manufacturers, service providers, and other businesses that require inputs to carry out their operations.

Characteristics of the Industrial Market

• Derived Demand: Demand in the industrial market is derived from the demand for consumer goods. For example, the demand for steel depends on the demand for automobiles, appliances, and construction materials.
• Large Order Sizes: Industrial buyers typically purchase in larger quantities compared to individual consumers. This is because they need a sufficient supply of materials and components to maintain their production schedules.
• Professional Purchasing: Industrial buying decisions are usually made by professional purchasing managers or buying centers. These individuals are trained to evaluate suppliers, negotiate prices, and manage procurement processes.
• Technical Specifications: Industrial buyers often require detailed technical specifications and performance data for the products they purchase. They need to ensure that the inputs meet their quality standards and are compatible with their existing equipment and processes.
• Emphasis on Service: In addition to product quality, industrial buyers place a high value on service and support. They need suppliers who can provide timely delivery, technical assistance, and after-sales service.
• Geographic Concentration: Certain industries tend to cluster in specific geographic regions. For example, the automotive industry is concentrated in the Midwest, while the tech industry is concentrated in Silicon Valley.

Types of Industrial Buyers

• Manufacturers: These companies purchase raw materials, components, and equipment to produce finished goods. Examples include automobile manufacturers, food processors, and electronics companies.
• Service Providers: These organizations provide services to other businesses or consumers. Examples include transportation companies, consulting firms, and healthcare providers.
• Construction Companies: These firms purchase building materials, equipment, and supplies to construct buildings, roads, and other infrastructure projects.
• Mining Companies: These companies extract raw materials from the earth, such as coal, minerals, and oil.
• Agricultural Businesses: These organizations produce crops and livestock. They purchase seeds, fertilizers, equipment, and other inputs.

Purchasing Process in the Industrial Market

The industrial purchasing process typically involves several stages:

1. Problem Recognition: The process begins when an organization identifies a need for a product or service. This need may arise from internal factors, such as a machine breakdown, or external factors, such as a change in customer demand.
2. Need Description: The organization defines the characteristics and quantity of the needed item. This may involve developing detailed technical specifications or performance requirements.
3. Product Specification: The organization determines the exact product or service that will satisfy its needs. This may involve consulting with engineers, technicians, or other experts.
4. Supplier Search: The organization identifies potential suppliers who can provide the needed product or service. This may involve consulting online directories, attending trade shows, or contacting industry associations.
5. Proposal Solicitation: The organization invites qualified suppliers to submit proposals. These proposals typically include information about the supplier's capabilities, pricing, and delivery terms.
6. Supplier Selection: The organization evaluates the proposals and selects the supplier that offers the best value. This may involve considering factors such as price, quality, service, and reliability.
7. Order Routine Specification: The organization places an order with the selected supplier. This order specifies the quantity, delivery schedule, and other terms of the purchase.
8. Performance Review: The organization evaluates the supplier's performance and provides feedback. This feedback may be used to improve the supplier's performance or to make decisions about future purchases.

Marketing Strategies for the Industrial Market

• Focus on Building Relationships: Building strong relationships with industrial buyers is crucial for long-term success. This involves providing excellent customer service, being responsive to their needs, and demonstrating a commitment to their success.
• Emphasize Value and ROI: Industrial buyers are primarily concerned with value and return on investment (ROI). Marketing messages should focus on how the product or service can help them reduce costs, improve efficiency, or increase profits.
• Provide Technical Expertise: Industrial buyers often require technical assistance and support. Suppliers should have knowledgeable sales representatives and technical experts who can answer their questions and solve their problems.
• Participate in Trade Shows and Industry Events: Trade shows and industry events are excellent opportunities to network with potential customers, showcase products, and learn about industry trends.
• Utilize Digital Marketing: Digital marketing channels, such as websites, email marketing, and social media, can be effective for reaching industrial buyers. However, it is important to tailor the content to their specific needs and interests.

The Reseller Market

The reseller market consists of organizations that purchase products for the purpose of reselling them to other businesses or consumers. These organizations include retailers, wholesalers, and distributors.

Characteristics of the Reseller Market

• Profit Motive: Resellers are primarily motivated by profit. They purchase products at a lower price and resell them at a higher price to make a profit.
• Inventory Management: Resellers must carefully manage their inventory to ensure that they have enough products to meet customer demand without incurring excessive storage costs.
• Marketing and Promotion: Resellers are responsible for marketing and promoting the products they sell. This may involve advertising, sales promotions, and other marketing activities.
• Customer Service: Resellers must provide excellent customer service to attract and retain customers. This includes providing product information, handling complaints, and processing returns.
• Location: The location of a reseller's business is critical to its success. Resellers need to be located in areas that are easily accessible to their target customers.
• Competitive Landscape: The reseller market is often highly competitive. Resellers must differentiate themselves from their competitors by offering unique products, superior service, or lower prices.

Types of Resellers

• Retailers: Retailers sell products directly to consumers. They include department stores, supermarkets, specialty stores, and online retailers.
• Wholesalers: Wholesalers purchase products from manufacturers or other wholesalers and sell them to retailers. They typically operate in large warehouses and do not sell directly to consumers.
• Distributors: Distributors are similar to wholesalers, but they often provide additional services, such as marketing support, technical assistance, and inventory management.

Purchasing Process in the Reseller Market

The reseller purchasing process typically involves the following steps:

1. Identifying Customer Needs: Resellers must understand the needs and preferences of their target customers. This may involve conducting market research, analyzing sales data, or monitoring customer feedback.
2. Evaluating Potential Products: Resellers evaluate potential products based on factors such as quality, price, and marketability. They may also consider the supplier's reputation, reliability, and service.
3. Negotiating Terms: Resellers negotiate terms with suppliers, such as price, payment terms, and delivery schedules. They may also negotiate for marketing support or other incentives.
4. Placing Orders: Resellers place orders with suppliers based on their inventory needs and anticipated customer demand.
5. Managing Inventory: Resellers manage their inventory to ensure that they have enough products to meet customer demand without incurring excessive storage costs.
6. Marketing and Promoting Products: Resellers market and promote the products they sell through advertising, sales promotions, and other marketing activities.
7. Providing Customer Service: Resellers provide customer service to attract and retain customers. This includes providing product information, handling complaints, and processing returns.

Marketing Strategies for the Reseller Market

• Offer Attractive Margins: Resellers are motivated by profit, so suppliers should offer attractive margins to incentivize them to sell their products.
• Provide Marketing Support: Suppliers can support resellers by providing marketing materials, such as brochures, flyers, and advertisements. They can also offer co-op advertising programs or other marketing incentives.
• Offer Training and Education: Suppliers can provide training and education to resellers' employees to help them better understand and sell their products.
• Develop Strong Relationships: Building strong relationships with resellers is crucial for long-term success. This involves providing excellent customer service, being responsive to their needs, and demonstrating a commitment to their success.
• Offer Exclusive Products or Services: Offering exclusive products or services can help resellers differentiate themselves from their competitors and attract customers.

The Government Market

The government market consists of federal, state, and local government agencies that purchase products and services to carry out their functions. This market is one of the largest and most complex in the world.

Characteristics of the Government Market

• Large Purchasing Volume: Government agencies purchase a wide variety of products and services, ranging from office supplies to military equipment.
• Formal Purchasing Procedures: Government purchasing is governed by strict regulations and procedures. These procedures are designed to ensure transparency, fairness, and accountability.
• Emphasis on Price: Government agencies are often required to purchase from the lowest bidder. This can put pressure on suppliers to offer competitive prices.
• Bureaucracy: Government purchasing can be bureaucratic and time-consuming. Suppliers need to be patient and persistent when dealing with government agencies.
• Political Influence: Government purchasing decisions can be influenced by political factors. Suppliers need to be aware of the political environment and build relationships with key government officials.
• Social Responsibility: Government agencies are increasingly concerned with social responsibility. Suppliers need to demonstrate a commitment to environmental sustainability, ethical labor practices, and diversity.

Types of Government Buyers

• Federal Government: The federal government is the largest purchaser of goods and services in the world. Federal agencies include the Department of Defense, the Department of Homeland Security, and the Department of Veterans Affairs.
• State Government: State governments purchase a wide variety of products and services, including education, transportation, and healthcare.
• Local Government: Local governments, such as cities and counties, purchase products and services for their residents. These include public safety, infrastructure, and sanitation.

Purchasing Process in the Government Market

The government purchasing process typically involves the following steps:

1. Needs Assessment: Government agencies identify their needs for products and services. This may involve conducting market research, consulting with experts, or reviewing internal requirements.
2. Solicitation Development: Government agencies develop solicitations, such as requests for proposals (RFPs) or invitations for bids (IFBs), to solicit offers from suppliers.
3. Bid Submission: Suppliers submit bids or proposals in response to the solicitations. These bids typically include information about the supplier's capabilities, pricing, and delivery terms.
4. Evaluation: Government agencies evaluate the bids or proposals based on established criteria. These criteria may include price, quality, technical expertise, and past performance.
5. Award: Government agencies award contracts to the suppliers that offer the best value.
6. Contract Management: Government agencies manage the contracts to ensure that the suppliers are meeting their obligations. This may involve monitoring performance, tracking payments, and resolving disputes.

Marketing Strategies for the Government Market

• Understand the Regulations: Suppliers need to understand the regulations and procedures that govern government purchasing. This may involve attending training sessions, consulting with experts, or reviewing government websites.
• Register with Government Agencies: Suppliers need to register with government agencies to be eligible to bid on contracts. This may involve completing registration forms, providing financial information, and obtaining certifications.
• Develop Relationships: Building relationships with government officials is crucial for success in the government market. This involves attending industry events, participating in outreach programs, and networking with key decision-makers.
• Highlight Value and Benefits: Government agencies are concerned with value and benefits. Suppliers should highlight how their products or services can help government agencies achieve their goals, such as reducing costs, improving efficiency, or enhancing public safety.
• Demonstrate Past Performance: Government agencies often consider past performance when evaluating bids. Suppliers should provide evidence of their successful past projects, such as testimonials, case studies, or performance reports.
• Emphasize Compliance: Government agencies are concerned with compliance. Suppliers should demonstrate a commitment to environmental sustainability, ethical labor practices, and diversity.

Key Differences and Similarities

While each of the three organizational buyer markets – industrial, reseller, and government – has unique characteristics, there are also some similarities and key differences to consider:

• Similarities: All three markets involve organizations making purchasing decisions, require suppliers to understand the needs of their buyers, and benefit from strong relationships between buyers and sellers.
• Differences: The primary motivation differs (production needs, profit, public service), as do the buying processes (technical evaluation, market analysis, regulatory compliance) and the key decision-making factors (performance, profitability, societal impact).

In conclusion, understanding the distinct characteristics, purchasing behaviors, and needs of the industrial, reseller, and government markets is essential for businesses that target organizational buyers. By tailoring their marketing strategies to each market, suppliers can increase their chances of success and build long-term relationships with their customers. Recognizing the nuances of each market segment will lead to more effective targeting and ultimately, increased sales and market share.