Description
It explains joint demand, derived demand and industrial demand, factors governing industrial demand, Accelerator principle, purchasing/buying orientation.
Market implications of joint demand, derived demand and reciprocity
Derived Demand
•The success and purchases of organizational consumers are ultimately based on Final Consumer Demand •Derived Demand is a demand that is produced as a by-product of demand for another item or service •It can be argued that all demands are derived by some generic want or need but for the purposes of marketing derived demands are usually understood to be demands away from consumer markets into the realms of the supply chain behind them •Thus increased standards of living in China and demand for white goods, cars and the suchlike may drive a global demand for steel •The demand for steel therefore would be derived from the increased demand for white goods and cars in China
Derived Demand for Major Appliances
4. Raw materials suppliers extract and refine quantity demanded by manufacturer
3. Manufacturers order raw materials for production from suppliers
2. Retailers order appliances from manufacturers
1. Expected consumer demand for appliances
All intermediate levels of demand are derived from final consumer demand.
Joint demand
• Demand for two or more commodities that are either complements-inconsumption or complements-in-production
• Joint demand results because two or more commodities are used together either to satisfy wants and needs or to produce goods and services • Because the commodities are used jointly, the demand for one good is necessarily based on the use and availability of another good • for example, milk and brownies are complements-in-consumption, but the bakery is out of brownies, then your demand for milk is also likely to decline • Computer assembler's demand for casings might depend on the supply or availability of disk drives
Factors governing industrial demand
1. Fewer, Larger Buyers – Tire manufacturers have OEM contracts with few automobile manufacturers.
2.
Close supplier customer relationship – as there are fewer customers, suppliers tend to develop a closer customer relationship. WIPRO’s close relationship with IIMB, for the sale of computers
Professional purchasing – use of buying instruments such as quotations, proposals and purchasing contracts; buyers guided by firm’s purchasing policies, constraints and requirements Several buying influences – the buying committee may consist of technical experts, senior management, gatekeepers from consultancies etc. Thus the seller should send trained sales people. Multiple sales calls – sales cycles extends from few days to few years; thus seller needs to make multiple sales calls to win orders.
3.
4.
5.
Implications
Accelerator Principle
Final consumer demand affects several layers of organizational consumers.
Retailers Malls Direct Marketers Nonprofits Schools Manufacturers Refineries Wholesalers Jobbers Ore Lumber Farmers Distributors Grains
Consumers
Understanding the Accelerator Principle
Just a 1% change in demand at the final consumer level, may cause several percentage points change in demand for organizational goods and services. Example: 1% decline in auto purchases by final consumers reduces dealers’ demand for cars. This results in reduced demand by auto makers for steel, paint, glass, labor, equipment/plants, as well as reduced demand from steel plants for ore and transportation carriers.
Goals of Organizational Consumers
Product Availability
Customer Service
Good Price Level and Terms
General Goals
Seller Reliability
Consistent Quality
Prompt Delivery
Systems Selling & Reciprocity
? In systems selling, a combination of goods & services
? Reciprocity is a procedure by
is provided to
which organizational consumers select suppliers that agree to purchase goods and services, as well as sell them. ? This concept fuels competition in the industry, so agencies have to be present to keep an eye to avoid any unlawful activity ? E.g NAICS
a buyer by one vendor.
North American Industry Classification System (NAICS)
? This system was introduced in 1997 to ?
?
?
?
classify North American businesses. It provides a common industry classification system for NAFTA. It was developed jointly by U.S., Canada, and Mexico. Goods and services firms that use identical or similar production processes are grouped together. The number, size, and dispersion of firms can be identified from data bases.
End-Use Analysis
? It allows a seller to study
sales made in different industries ? Data bases from government, commercial sources, trade unions and associations are given for marketing research ? Need assessment of consumers is facilitated by this way
Purchasing / Buying Orientations
1. Buying Orientation – Buy at lowest price given a quality level . Use two Techniques (a) commoditization – regard the product is only a commodity and care only about price (b) multisourcing to bring in competition among vendors 2. Procurement Orientation – look for collaborative relationships and seek savings through better management – such as material requirements planning, just-in-time management and even product design. 3. Supply Chain Management Orientation – purchasing is a strategic value adding operation and purchase department betters its role as a part of the value chain from raw materials to finished goods
Institutional and Government Markets
• Institutional Markets are – schools, colleges, universities, hospitals, nursing homes
•
• • • • •
Institutions normally ask for lowest price given a minimum quality
In government organizations the normal process is bidding with the order going to the lowest bidder(s) Negotiated contracts are applicable where the project is complex and risky. Governments tend to favor domestic suppliers Government decisions are subject to review, so there is lot of paperwork in contracting Director General of Supplies and Disposals is the central purchasing unit of Indian Government.
Organizational Decision Making Process
4. Situational Factors 1. Expectations of Purchasing Agents Engineers Users Others 2. Buying Process Autonomous Or Joint
Supplier or Brand Choice 3. Conflict Resolution
Thank you!!
doc_741847123.pptx
It explains joint demand, derived demand and industrial demand, factors governing industrial demand, Accelerator principle, purchasing/buying orientation.
Market implications of joint demand, derived demand and reciprocity
Derived Demand
•The success and purchases of organizational consumers are ultimately based on Final Consumer Demand •Derived Demand is a demand that is produced as a by-product of demand for another item or service •It can be argued that all demands are derived by some generic want or need but for the purposes of marketing derived demands are usually understood to be demands away from consumer markets into the realms of the supply chain behind them •Thus increased standards of living in China and demand for white goods, cars and the suchlike may drive a global demand for steel •The demand for steel therefore would be derived from the increased demand for white goods and cars in China
Derived Demand for Major Appliances
4. Raw materials suppliers extract and refine quantity demanded by manufacturer
3. Manufacturers order raw materials for production from suppliers
2. Retailers order appliances from manufacturers
1. Expected consumer demand for appliances
All intermediate levels of demand are derived from final consumer demand.
Joint demand
• Demand for two or more commodities that are either complements-inconsumption or complements-in-production
• Joint demand results because two or more commodities are used together either to satisfy wants and needs or to produce goods and services • Because the commodities are used jointly, the demand for one good is necessarily based on the use and availability of another good • for example, milk and brownies are complements-in-consumption, but the bakery is out of brownies, then your demand for milk is also likely to decline • Computer assembler's demand for casings might depend on the supply or availability of disk drives
Factors governing industrial demand
1. Fewer, Larger Buyers – Tire manufacturers have OEM contracts with few automobile manufacturers.
2.
Close supplier customer relationship – as there are fewer customers, suppliers tend to develop a closer customer relationship. WIPRO’s close relationship with IIMB, for the sale of computers
Professional purchasing – use of buying instruments such as quotations, proposals and purchasing contracts; buyers guided by firm’s purchasing policies, constraints and requirements Several buying influences – the buying committee may consist of technical experts, senior management, gatekeepers from consultancies etc. Thus the seller should send trained sales people. Multiple sales calls – sales cycles extends from few days to few years; thus seller needs to make multiple sales calls to win orders.
3.
4.
5.
Implications
Accelerator Principle
Final consumer demand affects several layers of organizational consumers.
Retailers Malls Direct Marketers Nonprofits Schools Manufacturers Refineries Wholesalers Jobbers Ore Lumber Farmers Distributors Grains
Consumers
Understanding the Accelerator Principle
Just a 1% change in demand at the final consumer level, may cause several percentage points change in demand for organizational goods and services. Example: 1% decline in auto purchases by final consumers reduces dealers’ demand for cars. This results in reduced demand by auto makers for steel, paint, glass, labor, equipment/plants, as well as reduced demand from steel plants for ore and transportation carriers.
Goals of Organizational Consumers
Product Availability
Customer Service
Good Price Level and Terms
General Goals
Seller Reliability
Consistent Quality
Prompt Delivery
Systems Selling & Reciprocity
? In systems selling, a combination of goods & services
? Reciprocity is a procedure by
is provided to
which organizational consumers select suppliers that agree to purchase goods and services, as well as sell them. ? This concept fuels competition in the industry, so agencies have to be present to keep an eye to avoid any unlawful activity ? E.g NAICS
a buyer by one vendor.
North American Industry Classification System (NAICS)
? This system was introduced in 1997 to ?
?
?
?
classify North American businesses. It provides a common industry classification system for NAFTA. It was developed jointly by U.S., Canada, and Mexico. Goods and services firms that use identical or similar production processes are grouped together. The number, size, and dispersion of firms can be identified from data bases.
End-Use Analysis
? It allows a seller to study
sales made in different industries ? Data bases from government, commercial sources, trade unions and associations are given for marketing research ? Need assessment of consumers is facilitated by this way
Purchasing / Buying Orientations
1. Buying Orientation – Buy at lowest price given a quality level . Use two Techniques (a) commoditization – regard the product is only a commodity and care only about price (b) multisourcing to bring in competition among vendors 2. Procurement Orientation – look for collaborative relationships and seek savings through better management – such as material requirements planning, just-in-time management and even product design. 3. Supply Chain Management Orientation – purchasing is a strategic value adding operation and purchase department betters its role as a part of the value chain from raw materials to finished goods
Institutional and Government Markets
• Institutional Markets are – schools, colleges, universities, hospitals, nursing homes
•
• • • • •
Institutions normally ask for lowest price given a minimum quality
In government organizations the normal process is bidding with the order going to the lowest bidder(s) Negotiated contracts are applicable where the project is complex and risky. Governments tend to favor domestic suppliers Government decisions are subject to review, so there is lot of paperwork in contracting Director General of Supplies and Disposals is the central purchasing unit of Indian Government.
Organizational Decision Making Process
4. Situational Factors 1. Expectations of Purchasing Agents Engineers Users Others 2. Buying Process Autonomous Or Joint
Supplier or Brand Choice 3. Conflict Resolution
Thank you!!
doc_741847123.pptx