CHAPTER 6 - DOC 2 by lHe42B

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									                                  Chapter 6
                 ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR
                                Test Item Table

                                                                Level of Learning
  Major Section of the      Level 1: Definition         Level 2: Conceptual                 Level 3: Application
       Chapter             (Knows Basic Terms         (Understands Concepts &               (Applies Principles)
                                 & Facts)                   Principles)

 Buying Paper is           1                                                           2, 3, 4
 Serious Business at
 JCPenney
 (pp. 121-122)

 The Nature and Size of    5, 6, 7, 12, 13           8, 9, 11, 142                     10
 Organizational
 Markets
 (pp. 122-123)
 Measuring Industrial,     19, 20, 24, 26, 27, 143   14, 15, 28, 29, 30, 31, 32, 34,   16, 17, 18, 21, 22, 23, 25, 33
 Reseller, and                                       144
 Government Markets
 (p. 123-124)
 Characteristics of        35, 36, 55, 56, 61, 62,   42, 43, 44, 45, 46, 47, 48, 49,   37, 38, 39, 40, 41, 53, 54, 58,
 Organizational Buying     67, 70                    50, 51, 52, 57, 60, 65, 68, 69,   59, 63, 64, 66, 71
 (pp. 124-128)                                       145, 146




 The Organizational        72, 73, 74, 76, 79, 80,   75, 77, 78, 81, 82, 84, 88, 95,   86, 89, 90, 91, 92, 93, 94, 96,
 Buying Process and        83, 85, 87, 97, 98, 99,   106, 109, 121, 122, 147, 151      101, 103, 104, 111, 113, 114,
 the Buying Center         100, 102, 105, 107,                                         116, 117, 119, 150
 (pp. 129-131)             108, 110, 112, 115,
                           118, 120, 148, 149
 Online Buying in          125, 128, 133, 136,       123, 124, 127, 129, 130, 131,     126, 134, 138
 Organizational            153                       132, 135, 137, 152
 Markets
 (pp. 131-134)

 Video Case:                                         139                               140, 141
 Lands’ End: Where
 Buyers Rule
 (pp. 135-137)


Note: Bold numbers indicate short essay questions.




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                               CHAPTER 6
               ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR

                             MULTIPLE CHOICE QUESTIONS

6-1 CHAPTER OPENING EXAMPLE: JCPMEDIA                                               DEFINITION

   JCPMedia:

   a.   buys the fashions that are sold in JCPenney stores.
   b.   is an advertising agency for industrial companies that want brand recognition.
   c.   is the print and paper purchasing subsidiary of JCPenney.
   d.   is a marketing research company that monitors e-commerce activities.
   e.   buys and sells media space for newspapers.

   Answer: c          Page: 121
   Rationale: As described in the chapter opening example, JCPMedia is the print and paper
   purchasing arm of JCPenney, the fifth largest retailer in the United States.

6-2 CHAPTER OPENING EXAMPLE: JCPMEDIA                                            APPLICATION

   When JCPMedia buys paper, it considers the supplier's forest management practices and its
   antipollution performance. How the supplier assumes its __________ is important in the selection
   of a paper supplier for JCPMedia.

   a.   profit responsibility
   b.   societal responsibility
   c.   ecological accountability
   d.   environmental autonomy
   e.   stakeholder responsibility

   Answer: b            Page: 89
   Rationale: Students will need to remember the definition of societal responsibility in chapter 4 to
   answer this question. Societal responsibility is the view that organizations have obligations to the
   general public and to the preservation of the ecological environment. The general public will
   benefit from the forest management practices and antipollution performance of JCPMedia
   suppliers.




                                               320
6-3 CHAPTER OPENING EXAMPLE: JCPMEDIA                                             APPLICATION

   To select a paper supplier, JCPMedia looks at the supplier's capacity to deliver selected grades of
   paper, the availability of specific types of paper as well as quality. This examination would be done
   during JCPMedia's:

   a.   business correlation analysis.
   b.   break-even analysis.
   c.   buying decision process
   d.   database search.
   e.   social audit.

   Answer: c              Page: 121; Figure 6-4
   Rationale: During the alternative evaluation part of the buying decision process, the buyer
   assesses facilities, capacity, quality control and financial status, as shown in Figure 6-4.

6-4 CHAPTER OPENING EXAMPLE: JCPMEDIA                                             APPLICATION

   The size and number of JCPenney catalogs designed and mailed to consumers would determine
   how much paper JCPMedia would need to buy. This is an example of:

   a.   derived demand.
   b.   reciprocity.
   c.   a tying agreement.
   d.   a transactional sale.
   e.   elastic supply.

   Answer: a          Page: 121
   Rationale: Derived demand means the demand for industrial products and services (the paper) is
   driven by the demand for consumer products and services (the demand for the catalog).

6-5 BUSINESS MARKETING                                                               DEFINITION

   __________ is the marketing of products to companies, governments, or not-for-profit
   organizations for use in the creation of goods and services that they then produce and market to
   others.

   a.   A relational enterprise
   b.   Institutional marketing
   c.   Business marketing
   d.   Reseller marketing
   e.   Agricultural marketing

   Answer: c           Page: 122      Other Location: web
   Rationale: Key term definition—business marketing




                                               321
6-6 BUSINESS MARKETING                                                              DEFINITION

   Business marketing is:

   a.   the marketing of products to consumers.
   b.   the ultimate market whereby goods and services are traded.
   c.   the marketing of products to companies, governments, or not-for-profit organizations for use in
        the creation of goods and services that they then produce and market to others.
   d.   entrepreneurship.
   e.   the way all goods, services and ideas are bought and sold.

   Answer: c         Page: 122
   Rationale: Key term definition—business marketing

6-7 ORGANIZATIONAL BUYERS                                                           DEFINITION

   Manufacturers, wholesalers, retailers, and government agencies that buy goods and services for
   their own use or for resale are examples of:

   a.   multinationals.
   b.   cooperatives.
   c.   organizational buyers.
   d.   ultimate consumers.
   e.   multiculturals.

   Answer: c         Page: 122
   Rationale: Key term definition—organizational buyers

6-8 ORGANIZATIONAL BUYERS                                                        CONCEPTUAL

   Organizational buyers include all of the following EXCEPT:

   a.   retailers.
   b.   government.
   c.   manufacturers.
   d.   wholesalers.
   e.   ultimate consumers.

   Answer: e         Page: 122          Other Location: web
   Rationale: Organizational buyers are those manufacturers, wholesalers and retailers, and
   government agencies that buy goods and services for their own use or for resale.




                                               322
6-9 ORGANIZATIONAL BUYERS                                                            CONCEPTUAL

    Organizational buyers can be divided into three different markets. They are:

    a.   industrial, wholesaler, and retailer.
    b.   industrial, retailer, and government.
    c.   retailer, manufacturer, and government agencies.
    d.   industrial, government, and ultimate consumer.
    e.   industrial, reseller, and government.

    Answer: e            Page: 122; Figure 6-1
    Rationale: Figure 6-1 shows that organizational buyers come from three different markets:
    industrial business markets, reseller markets, and government markets.

6-10 ORGANIZATIONAL BUYERS                                                           APPLICATION

    Which of the following statements represents an organizational buying decision?

    a.   Mr. Crowe buys a Toyota minivan to commute to work.
    b.   A dentist buys a new VCR for her den.
    c.   Mr. Langley hires a housecleaning service to clean his apartment.
    d.   The owner of a fried chicken restaurant hires a snow removal service to keep the parking lot
         clear.
    e.   A physician takes her sick child to the doctor.

    Answer: d            Page: 122           Other Location: web
    Rationale: Organizations buy products and services for their own use or for resale. The restaurant
    owner hires a service for the use of the restaurant to make sure customers (ultimate consumers) can
    easily and safely reach the restaurant.

6-11 ORGANIZATIONAL BUYERS                                                           CONCEPTUAL

    Organizational buyers:

    a.   purchase and lease smaller amounts of supplies than ultimate consumers.
    b.   purchase only business services for their firm.
    c.   purchase, in total, far more in a year than ultimate consumers.
    d.   purchase only raw materials for their firm.
    e.   are most likely to be located in the eastern U.S., and operate out of what is called a factory.

    Answer: c             Page: 122
    Rationale: Organizational buyers purchase and lease large volumes of equipment, raw materials,
    manufactured parts, supplies, and business services. Because they often buy raw materials and
    parts, process them, and sell the upgraded product several times before it is purchased by the final
    organizational buyer or ultimate consumer, the total purchases of organizational buyers in a year
    are far greater than those of ultimate consumers.




                                                 323
6-12 INDUSTRIAL FIRMS                                                                 DEFINITION

    An industrial firm is a firm that:

    a.   is distinguished by the amount of energy it uses and potential for pollution to the environment.
    b.   employs more than 500 people, who are paid minimum wage with few or no benefits.
    c.   deals exclusively with federal, state, and local governments, and often mediates governmental
         agency disputes.
    d.   in some way reprocesses a product or service it buys before selling it again to the next buyer.
    e.   is most likely to be located in the eastern U.S., and operates out of what is called a factory.

    Answer: d          Page: 122
    Rationale: Text term definition—industrial firms

6-13 INDUSTRIAL FIRMS                                                                 DEFINITION

    __________ reprocess a product or service they buy before selling it again to the next buyer.

    a.   Industrial firms
    b.   Reseller firms
    c.   Government agencies
    d.   Wholesalers
    e.   Retail firms

    Answer: a          Page: 122
    Rationale: Text term definition—industrial firms

6-14 INDUSTRIAL MARKET SEGMENTS                                                    CONCEPTUAL

    The largest segment of the industrial market, in terms of the number of organizational customers, is
    the __________ segment.

    a.   construction
    b.   transportation and public utilities
    c.   manufacturer
    d.   services
    e.   retail

    Answer: d             Page: 123
    Rationale: Figure 6-1 from the Department of Commerce shows alternative d to be correct.
    (Alternative e is a segment of the reseller market.)




                                                324
6-15 BUSINESS MARKETS                                                            CONCEPTUAL

    The services market sells diverse services such as legal advice, auto repair, and dry cleaning.
    Along with finance, insurance, and __________; transportation, communication and public utility
    firms; and not-for-profit associations, these service firms represent about 73 percent of all
    industrial firms, or about 8.2 million.

    a.   real estate businesses
    b.   wholesalers
    c.   retailers
    d.   government units
    e.   manufacturing firms

    Answer: a           Page: 123
    Rationale: The importance of services in the United States today is emphasized by the
    composition of industrial markets shown in Figure 6-1 and the services component described in this
    question.

6-16 INDUSTRIAL MARKETS                                                          APPLICATION

    Archer Daniels Midland (ADM) Co. is the world's largest cocoa-bean processor. It buys cocoa
    beans and converts the beans into cocoa powder and cocoa butter, which it sells to companies that
    manufacture consumer products that contain chocolate. The cocoa-bean processor is operating in
    a(n) __________ market.

    a.   reseller
    b.   governmental
    c.   psychographic
    d.   product-intensive
    e.   industrial

    Answer: e            Page: 122-123
    Rationale: Marketing organizations operating in an industrial market buy a good or service,
    reprocess that good or service, and then sell the product or service to another buyer. In this
    instance, the cocoa-bean processor buys cocoa beans, reprocesses them, and then resells them to
    consumer food manufacturers.




                                               325
6-17 INDUSTRIAL MARKETS                                                              APPLICATION

    A manufacturer of consumer food products for the Chinese market in the U.S. buys several
    thousand tons of camellia nuts annually. It converts those nuts into a cooking oil that is popular
    among the Chinese population because it has a milder taste than olive oil and a higher burning
    point. The oil is sold to supermarkets. The pulp from which the oil is extracted is sold to beef cattle
    farmers who use it to fatten their cattle. These transactions occur in the __________ market.

    a.   reseller
    b.   government
    c.   institutional
    d.   psychographic
    e.   industrial

    Answer: e            Page: 122-123
    Rationale: Marketing organizations operating in an industrial market buy a good or service,
    reprocess that good or service, and then sell the product to another buyer. In this case, the company
    buys camellia nuts, reprocesses them and then resells a finished product to Chinese supermarkets.
    The pulp is sold to beef cattle farmers for feed.

6-18 INDUSTRIAL MARKETS                                                              APPLICATION

    Pride Mobility makes specialty chairs and wheelchairs from component parts and materials it buys.
    It sells its products to hospitals, nursing homes, and retailers of health care products. Pride
    Mobility operates in a(n) __________ market.

    a.   consumer
    b.   psychographic
    c.   industrial
    d.   reseller
    e.   institutional

    Answer: c             Page: 122-123
    Rationale: Industrial firms in some way reprocess a good or service they buy before selling it
    again to the next buyer. The firm buys the mattresses, wheels, metal component parts, etc. and
    makes wheelchairs and specialty chairs before selling them to hospitals, nursing homes, and
    resellers of health care products.




                                                 326
6-19 RESELLER MARKETS                                                              DEFINITION

    Wholesalers and retailers that buy physical products and resell them again without any
    reprocessing are:

    a.   industrial firms.
    b.   resellers.
    c.   nonintermediaries.
    d.   facilitators.
    e.   facilitating markets.

    Answer: b          Page: 123
    Rationale: Text term definition—resellers

6-20 RESELLER MARKETS                                                              DEFINITION

    The reseller market includes:

    a.   manufacturers and service providers.
    b.   transportation providers and other facilitators.
    c.   government agencies and service providers.
    d.   agricultural markets and the mining industry.
    e.   retailers and wholesalers.

    Answer: e          Page: 123
    Rationale: Text term definition—resellers

6-21 RESELLERS                                                                  APPLICATION

    The Scotts Company manufacturers and sells packaged lawn fertilizers to the Home Depot. The
    Home Depot sells the product to the ultimate consumer—the homeowner. The Home Depot is a:

    a.   service provider.
    b.   monopoly.
    c.   reseller.
    d.   industrialist.
    e.   capitalist.

    Answer: c           Page: 123
    Rationale: Resellers are wholesalers and retailers who buy physical products and resell them
    again without any reprocessing.




                                                 327
6-22 RESELLERS                                                                   APPLICATION

    Bloomingdale’s Department store buys a variety of kitchen products, such as mixers and blenders,
    which it then sells to amateur cooks. Bloomingdale’s is a:

    a.   change agent.
    b.   monopoly.
    c.   reseller.
    d.   industrialist.
    e.   capitalist.

    Answer: c           Page: 123
    Rationale: Resellers are wholesalers and retailers who buy physical products and resell them
    again without any reprocessing.

6-23 RESELLERS                                                                   APPLICATION

    In terms of organizational buyers, Amazon.com, Lands' End, and JCPenney would all be classified
    as:

    a.   capitalists.
    b.   resellers.
    c.   monopolies.
    d.   facilitating agents.
    e.   industrialists.

    Answer: b          Page: 123          Other Location: web
    Rationale: Resellers are retailers who buy physical products and resell them again without any
    reprocessing.

6-24 GOVERNMENT UNITS                                                               DEFINITION

    ___________ are the federal, state, and local agencies that buy goods and services for the
    constituents they serve.

    a.   Industrial firms
    b.   Resellers
    c.   Cooperatives
    d.   Government units
    e.   Facilitating agents

    Answer: d          Page: 123
    Rationale: Text term definition—government units




                                               328
6-25 GOVERNMENT UNITS                                                             APPLICATION

    When Louisiana State University buys new computers, monitors, and printers for its student
    computer labs, it is operating as a(n):

    a.   industrial market.
    b.   business market.
    c.   government unit.
    d.   facilitating agent.
    e.   service provider.

    Answer: c          Page: 123
    Rationale: Government units are federal, state (such as a state university), and local agencies that
    buy goods and services for the constituents they serve.

6-26 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                   DEFINITION

    The system that provides common industry definitions for Canada, Mexico, and the United States,
    which make easier the measurement of economic activity in the three member countries of the
    North American Free Trade Agreement (NAFTA) is called:

    a.   Strategic International Classification (SIC).
    b.   Federated Domestic and International Classification (FDIC).
    c.   Federated Trade Codification (FTC).
    d.   the North American Industry Classification System (NAICS).
    e.   Federated System of Listing International Corporations (FSLIC).

    Answer: d         Page: 123
    Rationale: Key term definition—North American Industry Classification System (NAICS)

6-27 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                   DEFINITION

    The North American Industry Classification System (NAICS) provides common industry
    definitions, which make easier the measurement of economic activity for:

    a.   European Economic Community (EEC).
    b.   Fiscal Development International Coalition (FDIC).
    c.   North American Free Trade Agreement (NAFTA).
    d.   North Atlantic Treaty Organization (NATO).
    e.   USCAMEX.

    Answer: c         Page: 123
    Rationale: Key term definition—North American Industry Classification System (NAICS)




                                                329
6-28 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                               CONCEPTUAL

    Which of the following statements about the North American Industry Classification System
    (NAICS) is true?

    a.   After being used more than 50 years, NAICS was replaced by the Standard Industrial
         Classification (SIC system).
    b.   NAICS neither permits comparability across countries nor accurately measures new or
         emerging industries.
    c.   NAICS is inconsistent with the International Standard Industrial Classification of All
         Economic Activities published by the UN.
    d.   NAICS groups economic activity to permit studies of market share, demand for goods and
         services, competition from imports in domestic markets, and similar studies.
    e.   All of the above statements about the North American Industry Classification System (NAICS)
         are true.

    Answer: d           Page: 123
    Rationale: NAICS replaced the SIC system, a version of which had been in place for more than 50
    years. SIC neither permitted comparability across countries nor accurately measured new or
    emerging industries. NAICS is consistent with the International Standard Industrial Classification
    of All Economic Activities, published by the UN. NAICS groups economic activity to permit
    studies of market share, demand for goods and services, and similar studies.

6-29 INTL STANDARD INDUSTRIAL CLASSIFICATION SYSTEM                              CONCEPTUAL

    The International Standard Industrial Classification of All Economic Activities, published by the
    __________ to facilitate global economic activity, is similar in form to the North American
    Industry Classification System (NAICS).

    a.   European Economic Community (EEC).
    b.   Fiscal Development International Coalition (FDIC).
    c.   North American Free Trade Agreement (NAFTA).
    d.   North Atlantic Treaty Organization (NATO).
    e.   United Nations (UN).

    Answer: e          Page: 123
    Rationale: The NAICS is consistent with the International Standard Industrial Classification,
    published by the United Nations, to help measure global economic activity.




                                               330
6-30 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                 CONCEPTUAL

    The North American Industry Classification System (NAICS) permits a firm to:

    a.   find the NAICS codes of its present customers and then obtain NAICS-coded lists for similar
         firms.
    b.   learn the names of the purchasing agents of all prospective customers.
    c.   sell to any company within North America as long as it is not a monopoly.
    d.   engage in benchmarking with companies manufacturing and/or marketing similar products.
    e.   conduct an industry-wide SWOT analysis to determine internal strengths and weaknesses of
         current and prospective competitors.

    Answer: a         Page: 123
    Rationale: The North American Industry Classification System (NAICS) permits a firm to find
    the NAICS codes of its present customers and then obtain NAICS-coded lists for similar firms.

6-31 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                 CONCEPTUAL

    A disadvantage of the North American Industry Classification System (NAICS) systems is that:

    a.   it only lists the top ten firms in any particular industry.
    b.   it is too difficult and confusing to read.
    c.   it assigns one code to each organization based on its major economic activity, so large firms
         that engage in many different activities are given only one code.
    d.   it only covers organizations with sales in excess of (US) $1 million.
    e.   it makes it possible to find how the firm's customers are coded.

    Answer: c          Page: 123
    Rationale: A limitation of the NAICS is that it assigns only one code to each organization based
    on its major economic activity.

6-32 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                 CONCEPTUAL

    How might a marketing manager for a manufacturer of turboprop engines used in private jet planes
    use the North American Industry Classification (NAICS) system to help with his marketing
    planning?

    a.   He could record the NAICS numbers for each of his firm's best customers, and then obtain lists
         of companies with the same NAICS numbers.
    b.   He could go to a library to find the NAICS numbers for all government units, federal, state, and
         local.
    c.   He could identify all NAICS numbers that do not reflect the classifications of his firm's
         customers.
    d.   He could poll his field sales organization to see if his company's sales representatives know
         what NAICS numbers mean.
    e.   He could not use the NAICS system because it is a dated concept that has no current
         usefulness.

    Answer: a          Page: 123
    Rationale: Although the NAICS will have its limitations, it will be extremely useful for analyzing
    and segmenting business markets as described in alternative a.


                                                331
6-33 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                 APPLICATION

    You are the research director of a major marketing research consulting firm. You need to select an
    NAICS (North American Industry Classification System) code that gives you the most detail about
    the competitors in a client's industry. Which of the following levels of classification would provide
    the greatest detail?

    a.   Code 260
    b.   Code 423531
    c.   Code 91
    d.   Code 6575
    e.   Any of the above since each code designation provides an equal amount of detailed
         information about competitors.

    Answer: b             Page: 124; Figure 6-2
    Rationale: A six-digit NAICS classification would give the most detail about numbers, locations,
    and sizes of the client's competitors, as shown in Figure 6-2.

6-34 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                 CONCEPTUAL

    The NAICS system will allow marketing managers to gather and study of all of the following
    information EXCEPT:

    a.   market share.
    b.   demand for goods and services.
    c.   import competition in domestic markets.
    d.   every industry in which a very large firm engages in business.
    e.   All of the above are items of information that can be gathered using the NAICS system.

    Answer: d              Page: 124
    Rationale: A major drawback of the system (like the old SIC) is that NAICS assigns one code to
    each organization based on its major economic activity, so large firms that engage in many
    different activities are still given only one NAICS code, therefore alternative d is incorrect.

6-35 DERIVED DEMAND                                                                   DEFINITION

    The demand for industrial products and services that is driven by, or derived from, demand for
    consumer products and services is called:

    a.   Gross National Product.
    b.   derived demand.
    c.   the Consumer Price Index.
    d.   break-even demand.
    e.   high-risk demand.

    Answer: b         Page: 124
    Rationale: Key term definition—derived demand




                                                332
6-36 DERIVED DEMAND                                                                   DEFINITION

    Derived demand means the demand for industrial products and services is driven by, or derived,
    from:

    a.   mathematical formulas and statistical models.
    b.   the Gross National Product.
    c.   demand for consumer products and services.
    d.   demand for industrial goods.
    e.   profit margins and ratios.

    Answer: c         Page: 124
    Rationale: Key term definition—derived demand

6-37 DERIVED DEMAND                                                                APPLICATION

    Archer Daniels Midland (ADM) Company processes wheat into flour, which it sells to bakeries and
    pasta makers. What kind of demand is there for ADM's flour?

    a.   unitized
    b.   derived
    c.   consumer
    d.   applied
    e.   horizontal

    Answer: b           Page: 124           Other Location: web
    Rationale: The demand for flour is driven by consumer demand for pasta and baked goods, so in
    this case the demand for flour is a derived demand.

6-38 DERIVED DEMAND                                                                APPLICATION

    CHEP is the global leader in pallet and container pooling services. Pallets are used for transporting
    and storing new appliances such as stoves, freezers, and refrigerators, for example. What kind of
    demand is there for CHEP pallets?

    a.   There is creative demand, which is tied to the sales of appliances, not the sale of the pallets.
    b.   There is derived demand, which is tied to the sales of appliances, but independent of the sales
         of pallets.
    c.   There is derived demand for the pallets because demand for the pallets is tied to demand for the
         appliances.
    d.   There is inelastic demand tied to the cost of the components of the pallets.
    e.   There is elastic demand tied to the cost of the components of the pallets.

    Answer: c         Page: 125
    Rationale: The demand for the pallets is driven by the sales of (demand for) appliances.




                                                333
6-39 DERIVED DEMAND                                                             APPLICATION

    Concert Staging Company provides the stage, the roof system, and lighting and sound for outdoor
    concerts and theaters. It is typically hired by the organization sponsoring the event. When the
    economy slows down, consumers are more likely to save their money for a rainy day than buy a
    concert or theater ticket. The number of concert and theater events determines how many times the
    company gets to provide its services. Demand for the services provided by Concert Staging
    Company is __________ demand.

    a.   derived
    b.   unitized
    c.   holistic
    d.   applied
    e.   consumer

    Answer: a            Page: 125
    Rationale: The demand for Concert Staging Company services is driven by the sales of tickets to
    concert/theater attendees so it is a derived demand.

6-40 DERIVED DEMAND                                                             APPLICATION

    Purchases by Procter & Gamble of sodium fluoride for use in Crest toothpaste would be an example
    of __________demand.

    a.   derived
    b.   unitized
    c.   binary
    d.   applied
    e.   consumer

    Answer: a        Page: 125
    Rationale: Demand for the sodium fluoride would be directly related to the demand for Crest
    toothpaste.




                                              334
6-41 DERIVED DEMAND                                                                APPLICATION

    Andersen Windows is a manufacturer of high-quality, energy-efficient windows for homes and
    offices. The number of windows sold is directly linked to the number of new homes being built.
    When the economy is strong and many homes are being built, Andersen sells lots of windows;
    when few homes are being built, few windows are sold. This is an example of:

    a.   derived demand.
    b.   the price-quality relationship.
    c.   the acceleration principle.
    d.   price-elasticity.
    e.   price-inelasticity.

    Answer: a           Page: 125       Other Location: web
    Rationale: Derived demand means that demand for industrial goods and services is driven by, or
    derived from, the demand for consumer products. In this case, the demand for windows is driven
    by the consumer demand for new houses.

6-42 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                      CONCEPTUAL

    Which of the following is a characteristic of products and services purchased within an
    organizational context?

    a.   The focus is on delivery time and post-sale service.
    b.   Raw and semi-finished goods are predominantly purchased.
    c.   Financial assistance with the purchase is important.
    d.   Goods and services are purchased on the basis of specifications that are technical in nature.
    e.   All of the above are characteristics of purchases within an organizational context.

    Answer: e           Page: 125; Figure 6-3
    Rationale: As shown in Figure 6-3, all of the characteristics shown in alternatives a-d are part of
    organizational buying behavior and refer to products and services

6-43 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                      CONCEPTUAL

    Because orders in organizational buying are typically much larger than in consumer buying, buyers
    must often __________ when the order is above a specific amount, such as $5,000.

    a.   get competitive bids from at least three prospective suppliers
    b.   lie to their superiors about how much things really cost
    c.   carry personal insurance to cover possible losses
    d.   pay taxes out of their own pockets
    e.   do all of the above

    Answer: a           Page: 125
    Rationale: With so much money at stake, most organizations place constraints on their buyers in
    the form of purchasing policies or procedures such as obtaining competitive bids.




                                                335
6-44 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                      CONCEPTUAL

    Which of the following statements accurately characterizes the organizational buying process?

    a.   Multiple buying influences exist because many people may be involved in the purchase
         decision process.
    b.   Buying objectives, procedures, and criteria are well-established.
    c.   Negotiations between buyers and sellers regarding price is common.
    d.   The purchase of goods or services is usually handled by expert buyers.
    e.   All of the above statements accurately characterize the organizational buying process.

    Answer: e            Page: 125; Figure 6-3
    Rationale: Figure 6-3 shows the key characteristics of organizational buying behavior.
    Alternatives a-d are suggested in Figure 6-3.

6-45 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                      CONCEPTUAL

    Which of the following is characteristic of the organizational buying process?

    a.   Multiple parties participate in purchase decisions.
    b.   Negotiation between buyers and sellers is commonplace.
    c.   Online buying over the Internet is widespread.
    d.   Buying objectives and criteria are typically spelled out.
    e.   All of the above statements accurately characterize the organizational buying process.

    Answer: e            Page: 125; Figure 6-3
    Rationale: Figure 6-3 shows the key characteristics of organizational buying behavior.
    Alternatives a-d are suggested in Figure 6-3.

6-46 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                      CONCEPTUAL

    Which of the following statements accurately characterizes buying behavior in organizational
    markets?

    a.   Organizational buying behavior is similar to consumer buying behavior since individuals are
         involved in both processes.
    b.   Demand for industrial products is elastic instead of inelastic or derived because companies, not
         ultimate consumers, determine the quantity of goods produced.
    c.   Fewer customers typically exist in organizational markets than in consumer markets.
    d.   Purchase orders are usually small.
    e.   Forecasting is not as important in organizational buying as in consumer buying.

    Answer: c           Page: 125
    Rationale: Firms selling to organizations are always restricted to far fewer buyers than firms
    selling consumer products to ultimate users.




                                                336
6-47 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                     CONCEPTUAL

    When compared to consumer marketing, industrial marketing is simpler because:

    a.   firms have buying centers.
    b.   it is easy to forecast derived demand.
    c.   the buying objectives of industrial buyers are easily identifiable.
    d.   industrial orders are smaller.
    e.   industrial products involve fewer services and types of customer assistance.

    Answer: c          Page: 125
    Rationale: Alternatives a and b make the process more complex, and Alternatives d and e are
    untrue. The main objective of industrial buyers is improved profit; consumers have more varied
    wants and needs.

6-48 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                     CONCEPTUAL

    Which of the following relationships will generally be true regarding organizational versus
    consumer buying decisions?

    a.   The size of the order is almost always larger for a consumer order than for an organizational
         order.
    b.   The number of potential buyers is much larger for a firm selling ultimate consumers than for a
         firm selling to another organization.
    c.   More organizational buying decisions are lower in involvement.
    d.   Organizational buyers are more influenced by lifestyle factors.
    e.   Derived demand is more important in consumer buying.

    Answer: b          Page: 124-126
    Rationale: There are many more ultimate consumers than there are organizations so a firm selling
    to consumers has many more potential buyers than a firm selling to another organization.

6-49 SIZE OF THE ORDER OR PURCHASE                                                CONCEPTUAL

    Because so much money is at stake with an organizational purchase, most organizations place
    __________ on their buyers in the form of purchasing policies or procedures.

    a.   additional duties
    b.   fewer bonuses
    c.   educational restrictions
    d.   constraints
    e.   no requirements

    Answer: d            Page: 125
    Rationale: Organizations place constraints on their buyers such as getting competitive bids from
    at least three prospective suppliers when the order is above a specific amount and/or requiring the
    review and approval of a senior member of the company.




                                                337
6-50 NUMBER OF POTENTIAL BUYERS                                                      CONCEPTUAL

    Firms selling consumer goods or services often try to reach thousands or millions of individuals or
    households. Firms selling to organizations are often:

    a.   inclined to try to reach tens of millions.
    b.   restricted to far fewer buyers.
    c.   hoping to obtain similar numbers of nonconsumer customers.
    d.   restricted by government regulations to only a few industrial categories.
    e.   confused by the effect of duties and tariffs.

    Answer: b         Page: 126
    Rationale: The number of potential buyers is much smaller in organizational buying situations.

6-51 CHARACTERISTICS OF ORGANIZATIONAL BUYING                                        CONCEPTUAL

    Which of the following possible aspects of consumer buying decisions is LEAST likely to enter
    into an organizational buying decision?

    a.   comparison of product performance with expectations
    b.   decision based on highest overall evaluation
    c.   alternatives evaluated on important criteria
    d.   information gathered from internal and external searches
    e.   problem recognition triggered by self-actualization motives

    Answer: e            Page: 126          Other Location: web
    Rationale: Generally, organizations buy products and services for one main reason: to help them
    achieve their objectives. Usually the buying objective is to increase profits through reducing costs
    or increasing sales. Alternatives a-d could be used to achieve that objective. Alternative e is not
    applicable to organization objectives.

6-52 ORGANIZATIONAL BUYING OBJECTIVES                                                CONCEPTUAL

    The primary buying objective for business firms is usually to:

    a.   increase profits through increasing costs and increasing sales.
    b.   increase profits through reducing costs and decreasing sales.
    c.   increase profits through reducing costs or increasing sales.
    d.   maintain profits through reducing costs and increasing sales.
    e.   reduce profits through reducing costs and reducing sales.

    Answer: c            Page: 126        Other Location: web
    Rationale: For business firms, the buying objective is usually to increase profits through reducing
    costs or increasing revenues.




                                                338
6-53 MARKETING NEWSNET                                                              APPLICATION

    Changes in which of the following environmental influences is most likely to have a positive effect
    on the success on the Airbus A380 superjumbo jet?

    a.   sociocultural
    b.   economic
    c.   competitive
    d.   technological
    e.   regulatory

    Answer: a            Page: 126
    Rationale: Students will need to remember the definitions of environmental influences from
    Chapter 3 in addition to recalling that rapidly expanding demand for intercontinental passenger air
    traffic and the growth of the global air freight industry is a good sign for aircraft manufacturers.
    Both of these external events will have a positive effect on sales of the Airbus A380. Both of these
    factors mentioned in the Newsnet reflect an increase in demand or a sociocultural influence.

6-54 ORGANIZATIONAL BUYING CRITERIA                                                 APPLICATION

    A company that runs its trucks on a mixture of petroleum and ethanol buys its ethanol from the
    Archer Daniels Midland (ADM) Company because it is the only large supplier of ethanol that has
    an ethanol manufacturing facility in Illinois and is able to meet the trucking company's delivery
    schedules. The selection of ADM to provide the ethanol was based on:

    a.   supplier value dimensions.
    b.   derived demand factors.
    c.   evaluative criteria.
    d.   performance measures.
    e.   organizational buying criteria.

    Answer: e          Page: 127
    Rationale: The location of ADM in IL and its ability to meet required delivery schedules are
    examples of organizational buying criteria.

6-55 ORGANIZATIONAL BUYING CRITERIA                                                   DEFINITION

    The objective attributes of the supplier's products and services and the capabilities of the supplier
    itself are collectively called:

    a.   supplier evaluative dimensions.
    b.   derived demand factors.
    c.   evaluative criteria.
    d.   performance measures.
    e.   organizational buying criteria.

    Answer: e          Page: 127
    Rationale: Text term definition—organizational buying criteria




                                                339
6-56 ORGANIZATIONAL BUYING CRITERIA                                                    DEFINITION

    Seven of the most commonly used organizational buying criteria are (1) __________, (2) ability to
    meet the quality specifications required for the item, (3) ability to meet required delivery schedules,
    (4) technical capability, (5) warranties and claim policies in the event of poor performance, (6) past
    performance on previous contracts, and (7) production facilities and capacity.

    a.   taste of the buyer
    b.   personal friendship with sales representative
    c.   price
    d.   current mood of the buyer
    e.   whim of the firm's senior management

    Answer: c          Page: 127
    Rationale: Text term definition—organizational buying criteria

6-57 ORGANIZATIONAL BUYING CRITERIA                                                   CONCEPTUAL

    All of the following are commonly used organizational buying criteria EXCEPT:

    a.   past performance on previous purchases.
    b.   price and other financing assistance.
    c.   the number and distribution of retail outlets likely to carry the product.
    d.   the technical expertise of the salespeople.
    e.   the ability to meet delivery dates.

    Answer: c            Page: 127
    Rationale: Alternative c is neither relevant nor an organizational buying criterion. While
    important in marketing strategy, this criterion applies to the distribution of consumer products, not
    to the purchase of organizational products.

6-58 ORGANIZATIONAL BUYING CRITERIA                                                   APPLICATION

    Many industrial buyers for manufacturing firms place great importance on delivery time because
    they often rely on a just-in-time inventory system. This system has increased the importance of
    which organizational buying criterion?

    a.   low prices
    b.   high quality
    c.   on-time delivery
    d.   customer service and follow-up
    e.   cheap labor

    Answer: c            Page: 127
    Rationale: With a just-in-time system, late deliveries can shut down an entire production line, so
    on-time deliveries are crucial.




                                                 340
6-59 ORG. BUYING OBJECTIVES/MARKETING NEWSNET                                         APPLICATION

    The primary reason organizations buy products and services is to help them achieve their
    objectives. Which of the following statements illustrates a typical organizational buying
    objective?

    a.   Southland Corporation buys automated inventory systems to increase the number of products
         sold in its 7-Eleven outlets and to keep them fresh.
    b.   Sears launches the Anthony Mark Hankins Signature Collection of clothing for women,
         forging a link with minority- and women-owned suppliers and vendors.
    c.   Mercy Hospital buys a high-technology diagnostic device to help serve its patients better.
    d.   Nissan Motor Company switches its ad agency because it expects the new agency to develop a
         more effective ad campaign to sell more cars and increase revenues.
    e.   All of the above may be organizational buying objectives.

    Answer: e            Page: 127
    Rationale: For business firms the buying objective is usually to increase profits through reducing
    costs or increasing revenues, as in alternatives a, c, and d. Many companies have broadened their
    buying objectives to include an emphasis on buying from minority- and women-owned suppliers
    and vendors, as is the case for Sears in alternative b.

6-60 MARKETING NEWSNET                                                                CONCEPTUAL

    Sears regards ethnic customers as:

    a.   inconsequential to their primary business.
    b.   decreasing in importance.
    c.   no different from other customers.
    d.   markets that should be targeted.
    e.   a group they may want to target in the future, but not until it makes up a larger percentage of
         the population.

    Answer: d          Page: 127
    Rationale: Sears knows how important the ethnic customer is. Sears is developing product lines
    and marketing approaches that welcome ethnic customers.

6-61 REVERSE MARKETING                                                                  DEFINITION

    __________ involves the deliberate effort by organizational buyers to build relationships that
    shape suppliers' products, services, and capabilities to fit a buyer's needs and those of its customers.

    a.   Relationship marketing
    b.   Reverse marketing
    c.   Cooperative marketing
    d.   Vertical integration
    e.   Reciprocity

    Answer: b          Page: 127
    Rationale: Text term definition—reverse marketing




                                                 341
6-62 REVERSE MARKETING                                                                 DEFINITION

    Many organizational buyers today are transforming their buying criteria into specific requirements
    that are communicated to prospective suppliers. Called __________, this practice involves the
    deliberate effort by organizational buyers to build relationships that shape suppliers' products,
    services, and capabilities to fit a buyer's needs and those of its customers.

    a.   demarketing
    b.   inverse marketing
    c.   reverse marketing
    d.   inside-out marketing
    e.   upside-down marketing

    Answer: c          Page: 127
    Rationale: Text term definition—reverse marketing

6-63 REVERSE MARKETING                                                              APPLICATION

    The Danish Carsten Maersk is an ocean-going container ship that is longer and only a bit narrower
    than three football fields laid out end zone to end zone. If you were to set the ship's load of
    containers end to end, they would stretch 27 miles. To handle this ship and her sister ships, Los
    Angeles built a completely new facility for Maersk at a cost that topped $800 million. The terminal
    is in the middle of the harbor on dredged material and ten million tons of rock that form a 685-acre
    island connected to the rest of California by rail line and highway. When the initial phase opened in
    2002, Maersk, which has an exclusive 25-year lease, had room to dock three of these huge ships.
    Every city on the West Coast wanted to be selected by Maersk as a terminal city, but only the Port
    Authority of Los Angeles was able to build the relationships needed to convince Maersk it could
    handle the increased container traffic that Maersk ships would bring to the port. This is an example
    of:

    a.   demarketing.
    b.   inverse marketing.
    c.   reverse marketing.
    d.   inside-out marketing.
    e.   upside-down marketing.

    Answer: c            Page: 127
    Rationale: Reverse marketing is the deliberate effort by organizational buyers to build
    relationships that shape suppliers' goods, services, and capabilities to fit a buyer's needs and those
    of its customers. In this case Maersk, as the organizational buyer, specified what they required
    from the Port Authority of Los Angeles (the supplier) to use the port.




                                                 342
6-64 BUYER-SELLER RELATIONSHIPS                                                   APPLICATION

    Scandinavian Airlines System recently announced the purchase of 35 Boeing 737-600 airliners,
    with the option to buy another 35 for a total of $2.4 billion. SAS called Boeing “a professional and
    solid supplier.” Deliveries began in late 1998 and will continue for some years to come. This
    arrangement between Boeing and SAS is an example of:

    a.   reciprocity.
    b.   exclusive dealing.
    c.   review marketing.
    d.   a long-term buyer-seller relationship.
    e.   a tying arrangement.

    Answer: d            Page: 127           Other Location: web
    Rationale: A distinction between organizational and consumer buying behavior lies in the nature
    of the relationship between organizational buyers and suppliers. Specifically, organizational
    buying is more likely to involve complex and lengthy negotiation concerning delivery schedules,
    price, technical specifications, warranties, and claim policies. Long-term relationships are also
    prevalent.

6-65 BUYER-SELLER RELATIONSHIPS                                                   CONCEPTUAL

    Which of the following does NOT characterize organizational buyer-seller relationships?

    a.   Purchases are often made after lengthy negotiations.
    b.   Purchases are usually of large dollar values.
    c.   Long-term relationships are often prevalent.
    d.   Reciprocal arrangements can exist.
    e.   Delivery schedules are largely irrelevant.

    Answer: e           Page: 127
    Rationale: Each of the responses described in a, b, c, and d are characteristics of buyer-seller
    relationships. The delivery schedules mentioned in alternative e are very relevant, not irrelevant.




                                                  343
6-66 RECIPROCITY                                                                 APPLICATION

    Communications service provider Equant primarily is a worldwide long-distance carrier. Focal
    Communications is headquartered in Chicago and provides telecommunications services to
    businesses in the United States. Focal Communications has agreed to buy international
    long-distance capabilities from Equant, and Equant will buy its Internet connections from Focal.
    Their relationship is an example of:

    a.   reciprocity.
    b.   exclusive dealing.
    c.   review marketing.
    d.   a transactional relationship.
    e.   a tying arrangement.

    Answer: a           Page: 128
    Rationale: Reciprocity is an industrial buying practice in which two organizations agree to
    purchase each other's products and services. In this case, Equant buys Internet connections from
    Focal, while Focal buys international long-distance from Equant.

6-67 RECIPROCITY                                                                   DEFINITION

    __________ is an industrial buying practice in which two organizations agree to purchase each
    other's products and services.

    a.   A tying arrangement
    b.   Exclusive dealing
    c.   Reciprocity
    d.   Transactional marketing
    e.   Noncompetitive bidding

    Answer: c          Page: 128        Other Location: web
    Rationale: Text term definition—reciprocity

6-68 RECIPROCITY                                                                 CONCEPTUAL

    When General Motors (GM) purchases Borg-Warner transmissions, and Borg-Warner buys trucks
    and cars from GM, they are demonstrating which type of buyer-seller interaction?

    a.   exclusive dealing
    b.   relationship marketing
    c.   reciprocity
    d.   tying arrangements
    e.   noncompetitive bidding

    Answer: c           Page: 128
    Rationale: Reciprocity is an industrial buying practice in which two organizations agree to
    purchase each other's products and services.




                                               344
6-69 RECIPROCITY                                                                     CONCEPTUAL

    Although the U.S. Justice Department frowns on __________ because it restricts the normal
    operation of a free market, it is still legal for two companies to buy one another's products as long as
    no coercion is involved.

    a.   the buddy system
    b.   just-in-time management
    c.   quid pro quo
    d.   a transactional benefit
    e.   reciprocity

    Answer: e           Page: 128
    Rationale: Reciprocity is an industrial buying practice in which two organizations agree to
    purchase each other’s products and services.

6-70 SUPPLY PARTNERSHIP                                                                 DEFINITION

    A relationship called a __________ exists when a buyer and its supplier adopt mutually beneficial
    objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of
    products and services delivered to the ultimate customer.

    a.   double-deal
    b.   conflict of interest
    c.   restricted access
    d.   supply partnership
    e.   quid pro quo situation

    Answer: d         Page: 128
    Rationale: Key term definition—supply partnership

6-71 SUPPLY PARTNERSHIP                                                              APPLICATION

    Sun Microelectronics custom-orders processors, chips, and circuit boards for Sun's desktop, server,
    and storage products. Sun doesn't actually make any of its microelectronic parts itself. Sun
    contracts the work to outside manufacturers, who in turn rely on components from their own
    subcontracted suppliers. The 150 suppliers involved in making and delivering Sun products have
    adopted mutually beneficial objectives and strategies that give Sun's customers value for their
    money. Sun's method of doing business is an example of a:

    a.   double-deal.
    b.   conflict of interest.
    c.   restricted access.
    d.   supply partnership.
    e.   quid pro quo situation.

    Answer: d             Page: 128
    Rationale: A supply partnership exists when a buyer and its supplier adopt mutually beneficial
    objectives, policies, and procedures for the purpose of lowering the cost of or increasing the value
    of goods and services delivered to the ultimate customer.



                                                 345
6-72 ORGANIZATIONAL BUYING BEHAVIOR                                                DEFINITION

    The decision-making process that organizations use to establish the need for products and services
    and identify, evaluate, and choose among alternative brands and suppliers is called:

    a.   the consumer purchase decision process.
    b.   organizational buying behavior.
    c.   the industrial purchase procedure.
    d.   facilitating behavior.
    e.   the reseller procurement process.

    Answer: b         Page: 129
    Rationale: Key term definition—organizational buying behavior

6-73 PROBLEM RECOGNITION                                                           DEFINITION

    The first stage in the organizational buying decision process is:

    a.   information search.
    b.   postpurchase behavior.
    c.   alternative evaluation.
    d.   purchase decision.
    e.   problem recognition.

    Answer: e          Page: 129: Figure 6-4
    Rationale: The stages of the organizational buying decision process are the same as the stages of
    the consumer buying decision process. The first stage is problem recognition, shown in Figure 6-4.

6-74 INFORMATION SEARCH                                                            DEFINITION

    Once an organization making a purchase decision passes through the problem recognition stage of
    the process, it reaches the __________ stage.

    a.   information search
    b.   postpurchase behavior
    c.   alternative evaluation
    d.   purchase decision
    e.   behavioral learning

    Answer: a          Page: 129: Figure 6-4
    Rationale: The second stage of the organizational buying decision process is information search,
    shown in Figure 6-4.




                                                346
6-75 INFORMATION SEARCH                                                               CONCEPTUAL

    At which stage in the buying decision process would a firm ask its vendors' help in designing
    product specifications?

    a.   problem recognition
    b.   information search
    c.   alternative evaluation
    d.   purchase decision
    e.   postpurchase behavior

    Answer: b            Page: 129; Figure 6-4
    Rationale: The information search for industrial purchases, unlike consumer purchases, cannot
    always rely on past experience. Therefore, a firm often seeks to find out from vendors if what the
    firm needs is actually available, shown in Figure 6-4.

6-76 ALTERNATIVE EVALUATION                                                              DEFINITION

    During the third stage of the organizational purchase decision process, the organization engages in:

    a.   information search.
    b.   postpurchase behavior.
    c.   alternative evaluation.
    d.   purchase decision.
    e.   problem recognition.

    Answer: c          Page: 129; Figure 6-4
    Rationale: The third stage of the organizational buying decision process is alternative evaluation,
    shown in Figure 6-4.

6-77 ALTERNATIVE EVALUATION                                                           CONCEPTUAL

    At which stage in the buying decision process would a firm visit potential suppliers to assess their
    facilities?

    a.   problem recognition
    b.   information search
    c.   alternative evaluation
    d.   purchase decision
    e.   postpurchase behavior

    Answer: c            Page: 129; Figure 6-4
    Rationale: At the alternative evaluation stage, a firm must assess suppliers in terms of facilities,
    production capabilities, financial stability, etc. in order to select which supplier can best satisfy the
    firm's current needs. This is shown in Figure 6-4.




                                                  347
6-78 PURCHASE DECISION                                                               CONCEPTUAL

    At which stage in the buying decision process would a firm clarify its organizational buying criteria
    and select a supplier?

    a.   problem recognition
    b.   information search
    c.   purchase decision
    d.   postpurchase behavior
    e.   alternative evaluation

    Answer: c           Page: 129; Figure 6-4
    Rationale: At the purchase decision stage of the firm's buying decision process, the firm selects its
    organizational buying criteria such as price, quality, delivery time, etc., and then selects a supplier,
    negotiates terms, and awards a contract. This is shown in Figure 6-4.

6-79 PURCHASE DECISION                                                                  DEFINITION

    During the next-to-the-last stage of the organizational purchase decision process, the organization
    engages in:

    a.   information search.
    b.   postpurchase behavior.
    c.   the alternative evaluation.
    d.   the purchase decision.
    e.   problem recognition.

    Answer: d          Page: 129; Figure 6-4
    Rationale: The fourth stage of the organizational buying decision process is the purchase decision,
    shown in Figure 6-4.

6-80 POSTPURCHASE BEHAVIOR                                                              DEFINITION

    What is the last stage of the organizational purchase decision process?

    a.   information search
    b.   postpurchase behavior
    c.   alternative evaluation
    d.   purchase decision
    e.   problem recognition

    Answer: b          Page: 129; Figure 6-4
    Rationale: The final stage of the organizational buying decision process is postpurchase behavior,
    shown in Figure 6-4.




                                                 348
6-81 POSTPURCHASE BEHAVIOR                                                       CONCEPTUAL

    At which point in the buying decision process would a firm use a formal vendor rating system to
    evaluate the quality of the vendor's product and customer service?

    a.   problem recognition
    b.   unformation search
    c.   purchase decision
    d.   postpurchase behavior
    e.   all of the above

    Answer: d            Page: 129; Figure 6-4
    Rationale: At the postpurchase behavior stage a firm would evaluate suppliers using a formal
    vendor rating system and notify suppliers if satisfactory standards are not met. Suppliers who do
    not maintain a satisfactory level or performance are dropped and not asked to bid on future
    products. This is shown in Figure 6-4.

6-82 POSTPURCHASE BEHAVIOR                                                       CONCEPTUAL

    As in the consumer decision process, evaluation occurs in the organizational decision process, but
    it is more formalized and often more sophisticated. The performance of the vendor is evaluated in
    a formal vendor rating system and notified if the purchased product does not meet the quality
    standard. This evaluation is described as:

    a.   problem recognition.
    b.   information search.
    c.   purchase decision.
    d.   postpurchase behavior.
    e.   All of the above.

    Answer: d           Page: 129; Figure 6-4
    Rationale: At the postpurchase behavior stage, the performance of the vendor is evaluated in a
    formal vendor rating system and notified if the purchased product does not meet the quality
    standard. This is shown in Figure 6-4.

6-83 BUYING CENTER                                                                 DEFINITION

    The __________ is a group of persons within an organization who participate in the buying process
    and share common goals, risks, and knowledge important to purchase decisions.

    a.   status quo committee
    b.   purchasing agency
    c.   buying center
    d.   gatekeeper group
    e.   industrial purchasing cohort

    Answer: c         Page: 130
    Rationale: Key term definition—buying center




                                               349
6-84 BUYING CENTER                                                               CONCEPTUAL

    Marketers need to understand the buying centers with which they deal. A series of questions can be
    used to facilitate this process. Which of the following questions would be the LEAST useful when
    trying to understand the operations of a buying center?

    a.   Which individuals are in the buying center for the product or service?
    b.   What is the relative influence of each member of the group?
    c.   What are the buying criteria of each member?
    d.   How does each member of the group perceive our firm, our products and services, and our
         salespeople?
    e.   What selection process was used to confirm each individual’s membership in the buying
         center?

    Answer: e           Page: 130
    Rationale: The importance of the buying center requires that a firm marketing to many industrial
    firms and government units understand the structure, technical and business functions represented,
    and behavior of these groups. One researcher has suggested the four questions in a, b, c, and d.

6-85 BUYING CENTER                                                                 DEFINITION

    Several people often participate in the organizational buying process. Called __________, these
    people share common goals, risks, and knowledge important to purchase decisions.

    a.   a committee
    b.   a feasibility study group
    c.   corporate obstructionists
    d.   a buying center
    e.   a cohort

    Answer: d         Page: 130        Other Location: web
    Rationale: Key term definition—buying center




                                               350
6-86 BUYING CENTER                                                               APPLICATION

    In an effort to make better and more efficient purchase decisions, the Ford Motor Company forms
    loosely organized groups of people who work together on purchase decisions. The people included
    in these groups change depending on the purchase situation and may include key personnel from
    various departments, including research and development, finance, marketing, shipping, and sales.
    Such a loosely organized group of people within an organization who are involved in the purchase
    decision is correctly called an organizational:

    a.   selling committee.
    b.   functional unit.
    c.   purchasing unit.
    d.   buying center.
    e.   decision-making unit.

    Answer: d            Page: 130        Other Location: web
    Rationale: Organizations face a variety of purchase decisions -- some routine, some complex. For
    those purchase decisions that are complex, many organizations include a variety of people from
    various departments within the organization in the buying decision. The members of the group
    change depending on the purchase situation, and so the buying center is loosely organized and very
    dynamic. Members of the buying center share common goals, risks, and knowledge or experiences
    relevant to the purchase decision.

6-87 BUYING COMMITTEE                                                              DEFINITION

    Large multistore chain resellers such as Wal-Mart, Safeway, or Target use a very formal buying
    center called a(n):

    a.   ad hoc committee.
    b.   buying committee.
    c.   central control unit.
    d.   purchasing agency.
    e.   purchasing control system.

    Answer: b          Page: 130
    Rationale: Text term definition—buying committee




                                               351
6-88 BUYING CENTER                                                               CONCEPTUAL

    Which of the following statements accurately describes the people in the buying center of a
    medium-sized manufacturing plant?

    a.   The composition of the buying center never changes.
    b.   The buying center never contains cross-functional teams.
    c.   The organizational buyer or purchasing agent is seldom a member of the buying center.
    d.   The composition of the buying center depends on the specific item being purchased.
    e.   None of the above statements accurately describes the people in the buying center of a
         medium-sized manufacturing plant.

    Answer: d            Page: 130
    Rationale: The composition of the buying center changes as the item that is to be purchased
    changes. Cross-functional teams are used in buying centers, especially if the purchased item is to
    become part of the manufactured product. The only consistency within the buying center is the
    inclusion of the organizational buyer or purchasing agent.

6-89 BUYING CENTER                                                               APPLICATION

    To lower costs and reduce manufacturing time, Michelin has people work together on important
    purchases, including individuals from research and development, purchasing, and various business
    functions. This kind of cross-functional group is known as a(n):

    a.   status quo committee.
    b.   negotiating arm.
    c.   buying center.
    d.   supply partnership.
    e.   strategic agency.

    Answer: c            Page: 130
    Rationale: Members of Michelin's buying center share common goals, risks, and knowledge
    important to the decision.




                                               352
6-90 BUYING CENTER: DECIDER                                                       APPLICATION

    Cards of Wood, Inc. is a company that makes and markets micro-thin wood veneer business cards
    primarily to people in different facets of the woodworking business. A salesperson for Cards of
    Wood who calls on a company that makes cabinets would have the highest probability of making a
    sale if he is able to determine who is the __________ in the company's buying center.

    a.   influencer
    b.   buyer
    c.   decider
    d.   user
    e.   gatekeeper

    Answer: c            Page: 130        Other Location: web
    Rationale: To make a sale, the salesperson must ultimately get the decider to say "yes." All others
    are merely influential.

6-91 BUYING CENTER: USER                                                          APPLICATION

    As the salesperson for West Plains band saw talked to a group from Conner Industries, he
    overheard one of the men saying, "This band saw has a 36-inch wheel that could really save us
    time, and with its adjustable height, it can be operated by someone tall like me and by some of our
    shorter workers. I bet this will speed up production time by 30 percent. Why don't we order this
    band saw?" The person the salesperson heard giving input has which buying center role?

    a.   purchasing agent
    b.   decider
    c.   buyer
    d.   motivator
    e.   user

    Answer: e             Page: 130
    Rationale: Users are the people in the organization who would actually use the band saw and can
    appreciate its features.




                                               353
6-92 BUYING CENTER: INFLUENCERS                                                   APPLICATION

    A mini-computer company salesperson invites the information systems managers of its top ten
    customers (in terms of dollar sales) to view a demonstration of the firm's new product line so she
    can obtain their opinions regarding various options and configurations that could be offered. These
    information system managers are most likely to be the __________ of their organizations' buying
    centers.

    a.   gatekeepers
    b.   reciprocity managers
    c.   buyers
    d.   influencers
    e.   users

    Answer: d           Page: 130
    Rationale: Influencers affect the buying decision, usually by helping define the specifications for
    what is to be bought.

6-93 BUYING CENTER: INFLUENCER                                                    APPLICATION

    The publisher of the Redwood Falls Gazette, a weekly newspaper, decided the production
    department would be more efficient if a new computerized advertising layout system was
    purchased. In an effort to ensure a high quality, functional system was purchased, the publisher
    asked the newspaper's production manager for advice on specific features, components, and
    capabilities of the system. The production manager played the role of __________ in the
    newspaper's buying center.

    a.   user
    b.   gatekeeper
    c.   influencer
    d.   buyer
    e.   decider

    Answer: c            Page: 130
    Rationale: The organizational buying center consists of people who will initiate, influence, and
    ultimately make the buying decision. Influencers are people who serve as advisors or consultants
    and help define the specifications for the products or services to be purchased. In this case the
    production manager played the role of influencer.




                                               354
6-94 BUYING CENTER: BUYER                                                         APPLICATION

    The person who assumed the __________ role in the buying center shook the salesperson's hand
    and said, "Mrs. Michaels, we've accepted your bid. I'll expect 48 boxes of ring shank nails to be
    delivered by January 16th , and we will pay the agreed-upon price of $21.74 per box."

    a.   gatekeeper
    b.   decider
    c.   buyer
    d.   influencer
    e.   user

    Answer: c            Page: 130
    Rationale: Buyers have the formal authority and responsibility to select the supplier and negotiate
    the terms of the contract.

6-95 BUYING CENTER: DECIDER                                                       CONCEPTUAL

    An information technology specialist specifies the type of plug-in (software programs that extend
    the capabilities of Web browsers to give customers the opportunity to watch a video or hear audio)
    to be used on her company's new website. She also chooses the supplier who receives the contract
    to provide the software. In the buying center, this person is the:

    a.   gatekeeper.
    b.   decider.
    c.   broker.
    d.   influencer.
    e.   user.

    Answer: b            Page: 130
    Rationale: Deciders have the formal or informal power to select or approve the supplier who
    receives the contract. Whereas in routine orders, the decider is usually the buyer or purchasing
    manager, in important technical purchases it is more likely to be someone from research and
    development, engineering, or quality control.




                                               355
6-96 BUYING CENTER                                                                   APPLICATION

    Mark manages a small family-owned amusement park. He believes the park can increase its profits
    if its owners will buy three food concession trailers. He has contacted three dealers of such fully
    customized trailers and has determined Century Industries has the best price. He will present his
    research to the family tomorrow. In which buying center roles is Mark acting?

    a.   gatekeeper and buyer
    b.   decider and gatekeeper
    c.   buyer and decider
    d.   influencer and buyer
    e.   influencer, gatekeeper, and decider

    Answer: e             Page: 130
    Rationale: The family is the buyer or else Mark would not need to present his research to them.
    This is not a routine buying decision so Mark has chosen the supplier (decider) as well as trying to
    convince (influence) the family to see his side. In that he is presenting information from no other
    companies, Mark is also assuming the role of gatekeeper.

6-97 BUYING CENTER: BUYERS                                                             DEFINITION

    In a buying center, __________ have formal authority and responsibility to select the supplier and
    negotiate the terms of a contract.

    a.   gatekeepers
    b.   deciders
    c.   buyers
    d.   influencers
    e.   users

    Answer: c          Page: 130
    Rationale: Text term definition—buyers

6-98 BUYING CENTER: INFLUENCERS                                                        DEFINITION

    Within the buying center, influencers are people who:

    a.   have the formal authority and responsibility to select the supplier and negotiate the terms of the
         contract.
    b.   control the flow of information in the buying center.
    c.   have the formal or informal power to select or approve the supplier that receives the contract.
    d.   affect the buying decision usually by helping define the specifications for what is bought.
    e.   actually use and evaluate the product or service.

    Answer: d          Page: 130
    Rationale: Text term definition—influencers




                                                 356
6-99 BUYING CENTER: USERS                                                               DEFINITION

     The people in the organization who actually use the product or service are called:

     a.   gatekeepers.
     b.   deciders.
     c.   buyers.
     d.   influencers.
     e.   users.

     Answer: e          Page: 130
     Rationale: Text term definition—users

6-100 BUYING CENTER: DECIDERS                                                           DEFINITION

     Within the buying center, deciders are people who:

     a.   have the formal authority and responsibility to select the supplier and negotiate the terms of the
          contract.
     b.   control the flow of information in the buying center.
     c.   have the formal or informal power to select or approve the supplier that receives the contract.
     d.   affect the buying decision usually by helping define the specifications for what is bought.
     e.   actually use and evaluate the product or service.

     Answer: c          Page: 130
     Rationale: Text term definition—deciders

6-101 BUYING CENTER: GATEKEEPER                                                       APPLICATION

     A talent promoter for the House of Blues wants to book one of the acts it represents into the Odeon
     Theater. The talent promoter offers to buy lunch for the receptionist of the manager of the Odeon.
     The talent promoter is probably trying to develop a friendly relationship with a(n):

     a.   user.
     b.   influencer.
     c.   buyer.
     d.   decider.
     e.   gatekeeper.

     Answer: e            Page: 130
     Rationale: The receptionist could facilitate or hinder the flow of information to and from members
     of the buying center and would not otherwise be involved in selecting acts for the theater, thus she
     is a gatekeeper.




                                                  357
6-102 BUYING CENTER: GATEKEEPERS                                                      DEFINITION

     In terms of the buying center, people who control the flow of information in the buying center, such
     as purchasing personnel, technical experts and secretaries, can help or prevent sales people (or
     information) from reaching others in the buying center are called:

     a.   busybodies.
     b.   obstructionists.
     c.   gatekeepers.
     d.   power-brokers.
     e.   apple-polishers.

     Answer: c          Page: 130
     Rationale: Text term definition—gatekeepers

6-103 BUYING CENTER: GATEKEEPERS                                                   APPLICATION

     Gulfstream Aerospace Corp. recently sold three Gulfstream V business jets to a government buyer
     for use as Special Electronic Mission Aircraft. One of the hardest jobs the Gulfstream sales team
     had to perform during the negotiations was to convince the __________ they should be allowed to
     present the information about Gulfstream planes to the other people in the buying center who were
     taking the role of buyers, users, deciders, and influencers.

     a.   gatekeepers
     b.   busybodies
     c.   whistleblowers
     d.   obstructionists
     e.   power-brokers

     Answer: a            Page: 130          Other Location: web
     Rationale: Gatekeepers control the flow of information to others in the buying center. Purchasing
     personnel, technical experts, and secretaries can all keep salespeople or information from reaching
     people performing the other four roles.




                                                 358
6-104 BUYING CENTER: GATEKEEPER                                                       APPLICATION

     The screenwriter walked into the production company office expecting to talk to an executive of the
     company about producing the writer's idea for a new television situation comedy. As he entered the
     office, the receptionist said, "I'm sorry, you can't see my boss. Please leave your manuscript and I'll
     read it. If it's any good, I'll show it to Ms. Friedman who will then get back to you." The
     receptionist was assuming which buying center role?

     a.   gatekeeper
     b.   decider
     c.   buyer
     d.   influencer
     e.   user

     Answer: a            Page: 130          Other Locations: web
     Rationale: Gatekeepers control the flow of information to others in the buying center. Purchasing
     personnel, technical experts, and secretaries can all keep salespeople or information from reaching
     people performing the other four roles.

6-105 BUY CLASSES                                                                       DEFINITION

     The three types of organizational buy classes are:

     a.   industrial, reseller, and government.
     b.   consumer goods, industrial goods, and services.
     c.   users, influencers, and deciders.
     d.   new buy, make-buy, and modified rebuy.
     e.   straight rebuy, new buy, and modified rebuy.

     Answer: e         Page: 131; Figure 6-5
     Rationale: Key term definition—buy classes

6-106 BUY CLASSES                                                                     CONCEPTUAL

     A straight rebuy is a (n) __________ while a modified rebuy is a (n) __________.

     a.   exchange; resale
     b.   reorder; exchange
     c.   first-time order; reorder
     d.   change; first-time order
     e.   reorder; change

     Answer: e           Page: 131
     Rationale: A straight rebuy involves a buyer or purchasing manager reordering an existing
     product or service. A modified rebuy involves the users, influencers, or deciders in the buying
     center changing the product specifications, price, delivery schedule, or supplier.




                                                  359
6-107 BUY CLASSES                                                                      DEFINITION

     Organizations face three kinds of specific buying situations. They are new buy, straight rebuy, and
     modified rebuy. Collectively, these situations are called:

     a.   industrial buying behavior.
     b.   reseller buying behavior.
     c.   buy classes.
     d.   purchasing classes.
     e.   none of the above.

     Answer: c         Page: 131
     Rationale: Key term definition—buy classes

6-108 BUY CLASSES                                                                      DEFINITION

     Researchers who have studied organizational buying identify three types of buying situations
     called:

     a.   purchase criteria.
     b.   buy classes.
     c.   buying alternatives.
     d.   cognitive dissonance.
     e.   buying centers.

     Answer: b         Page: 131
     Rationale: Key term definition—buy classes

6-109 BUY CLASSES                                                                    CONCEPTUAL

     A buy class situation affects buying center tendencies in different ways. If there are few people
     involved, the problem definition is well defined, and the time required for a decision is short, the
     buy class situation which is most likely is a:

     a.   new buy.
     b.   straight or modified rebuy.
     c.   conditional rebuy.
     d.   make-buy.
     e.   standard buy.

     Answer: b          Page: 131
     Rationale: A straight or modified rebuy is characterized by the few people involved, the
     well-defined problem definition, and the short time required for a decision.




                                                 360
6-110 MODIFIED REBUY                                                                    DEFINITION

     In the ___________, users, influencers, or deciders in the buying center want to change product
     specifications, price, delivery schedule, or supplier.

     a.   new buy
     b.   straight rebuy
     c.   modified rebuy
     d.   buy class
     e.   make-buy

     Answer: c          Page: 131
     Rationale: Text term definition—modified rebuy

6-111 STRAIGHT REBUY                                                                 APPLICATION

     The assistant heard her supervisor in the supply room yell, “Call Crate & Barrel—we need another
     case of their coffee mugs for the conference next week.” The supervisor was asking her assistant to
     make a:

     a.   new buy.
     b.   straight rebuy.
     c.   modified rebuy.
     d.   make-buy.
     e.   standard buy.

     Answer: b             Page: 131
     Rationale: In a straight rebuy situation, the buyer or purchasing manager reorders an existing
     product or service from the list of acceptable suppliers. Office supplies and maintenance services
     are often straight rebuys.

6-112 STRAIGHT REBUY                                                                    DEFINITION

     A reorder of an existing product or service from a list of acceptable suppliers is called a:

     a.   new buy.
     b.   straight rebuy.
     c.   modified rebuy.
     d.   standard buy.
     e.   make-buy.

     Answer: b          Page: 131
     Rationale: Text term definition—straight rebuy




                                                  361
6-113 STRAIGHT REBUY                                                                 APPLICATION

     The maintenance crew chief told the head of the hotel housekeeping staff, "Call Ralph at Bright
     Ideas—we need another case of his light bulbs." This would be an example of a:

     a.   new buy.
     b.   straight rebuy.
     c.   modified rebuy.
     d.   make-buy.
     e.   standard buy.

     Answer: b             Page: 131
     Rationale: In a straight rebuy situation, the buyer or purchasing manager reorders an existing
     product or service from the list of acceptable suppliers. Office supplies and maintenance services
     are often straight rebuys.

6-114 MODIFIED REBUY                                                                 APPLICATION

     The office of SFX Entertainment, a talent promoter, needs a new fax machine that will print at three
     seconds a page instead of five seconds per page (like the one it is using now) and that has both local
     and network printing capabilities. Its purchase of a replacement fax machine would be an example
     of a:

     a.   new buy.
     b.   straight rebuy.
     c.   modified rebuy.
     d.   make-buy.
     e.   standard buy.

     Answer: c            Page: 131
     Rationale: In a modified rebuy situation the users, influencers, or deciders want to change the
     product specifications, price, delivery schedule, or supplier.

6-115 MODIFIED REBUY                                                                   DEFINITION

     The buying situation where users, influencers, or deciders want to change product specifications,
     price, delivery schedule, or supplier is called a:

     a.   new buy.
     b.   straight rebuy.
     c.   modified rebuy.
     d.   buy class.
     e.   make-buy.

     Answer: c          Page: 131
     Rationale: Text term definition—modified rebuy




                                                 362
6-116 MODIFIED REBUY                                                                  APPLICATION

     The Cleveland Cavaliers need new basketball uniforms for the upcoming NBA season. The team
     wants a new design and new colors for its road uniforms; many think the current design needs
     redefining. The purchase of new uniforms would be an example of a:

     a.   modified rebuy.
     b.   straight rebuy.
     c.   new buy.
     d.   standard buy.
     e.   class buy.

     Answer: a          Page: 130
     Rationale: This would be a modified rebuy because the team is replacing existing uniforms that in
     some ways will have a different design.

6-117 MODIFIED REBUY                                                                  APPLICATION

     Russ Ross, the owner of a construction company specializing in single family homes, was faced
     with a problem. His workers relied on Black & Decker brand air-powered hammers to reduce
     construction time. Recently, the workers informed him several of the hammers were worn out and
     needed to be replaced. After talking with other members of the buying center, Mr. Ross decided to
     purchase Dewalt brand air hammers because of their reduced weight and the longer warranties
     offered by Dewalt. Ross and the other members of the organizational buying center were engaged
     in what type of organizational buying decision?

     a.   straight-rebuy
     b.   new task buy
     c.   modified new task buy
     d.   modified rebuy
     e.   straight new buy

     Answer: d            Page: 131         Other Location: web
     Rationale: In the modified rebuy situation, members of the organization's buying center seek to
     change some element of the purchase—product, the price, delivery schedule, or supplier. While
     the purchase may resemble a straight rebuy, the changes in the purchase are usually sufficient to
     require additional people be included in the buying center.

6-118 NEW BUY                                                                           DEFINITION

     The buying situation where an organization is a first-time buyer of the product or service is called a:

     a.   new buy.
     b.   straight rebuy.
     c.   modified rebuy.
     d.   buy class.
     e.   make-buy.

     Answer: a          Page: 131
     Rationale: Text term definition—new buy



                                                  363
6-119 NEW BUY                                                                        APPLICATION

     At the weekly meeting for Choice Hotels (the company that owns Clarion Hotel, Quality Inn,
     Comfort Inn, Comfort Suites, Sleep Inn, and Mainstay Inn), the marketing manager said, “Since
     September 11th there has been a noticeable increase in highway traffic as travelers have abandoned
     the airlines and taken to the highways. We need an inexpensive creative way to reach these people
     and make them aware of our hotels. I want to find some new media that the other hotel chains are
     not using.” The purchase of this new media for the hotel chains' advertising would be an example
     of a:
     a. new buy.
     b. straight rebuy.
     c. converted rebuy.
     d. make-buy.
     e. standard rebuy.

     Answer: a            Page: 131
     Rationale: In a new buy situation the organization is a first time buyer of the good or service—in
     this case, a new and different advertising medium. This involves greater potential risk in purchase.

6-120 NEW BUY                                                                          DEFINITION

     A buy class situation affects buying center tendencies in different ways. If there are many people
     involved, the problem definition is uncertain, and the decision time is long, the buy class situation
     which is most likely is a:

     a.   new buy.
     b.   modified rebuy.
     c.   straight rebuy.
     d.   make-buy.
     e.   standard buy.

     Answer: a         Page: 131; Figure 6-5
     Rationale: These characteristics of a new buy are shown in Figure 6-5.

6-121 NEW BUY                                                                        CONCEPTUAL

     If a purchase is a new buy for a manufacturer, the seller should be prepared to act as a consultant to
     the buyer, work with technical personnel, and:

     a.   expect a long time for a buying decision to be reached.
     b.   expect a lot of conflict.
     c.   expect specifications to be changed many times before the buy is completed.
     d.   expect to have to do some favors for the decision-makers.
     e.   entertain lavishly.

     Answer: a           Page: 131         Other Location: web
     Rationale: If a purchase is a new buy the seller should also expect a long time for a buying
     decision to be reached.




                                                 364
6-122 ORGANIZATIONAL BUYING BEHAVIOR                                               CONCEPTUAL

     Organizational buying behavior:

     a.   is similar to consumer buying behavior.
     b.   is the decision-making process organizations use to establish the need for products and
          identify, evaluate, and choose among alternative brands and suppliers.
     c.   involves five different stages of activities.
     d.   will require organizational members to formulate a make-buy decision.
     e.   is accurately described by all of the above.

     Answer: e          Page: 129-131; Figure 6-4
     Rationale: Each of the statements in a, b, c, and d is true and described in Figure 6-4.

6-123 ONLINE BUYING IN ORGANIZATIONAL MARKETS                                      CONCEPTUAL

     Business-to-business electronic commerce over the Internet:

     a.   is not nearly as prevalent as consumer electronic commerce when measured by the total dollar
          value of all Internet transactions.
     b.   is approximately four times greater than consumer electronic commerce when measured by the
          total dollar value of all Internet transactions.
     c.   has dramatically decreased since face-to-face time is so important.
     d.   is impossible to estimate since companies will not share information.
     e.   has decreased since timely information is unavailable.

     Answer: b            Page: 132        Other Location: web
     Rationale: Organizational buyers account for 80 percent of the total dollar value of all Internet
     transactions. The popularity is growing since information describing product availability, users,
     price etc. can be conveyed quickly over the Internet. Additionally, Internet technology has been
     found to reduce costs.

6-124 ONLINE BUYING IN ORGANIZATIONAL MARKETS                                      CONCEPTUAL

     Online buying in organizational markets is prominent because Internet/Web technology:

     a.   increases marketing costs.
     b.   reduces the need for timely information.
     c.   substantially reduces buyer order processing costs.
     d.   narrows the potential customer base for many products.
     e.   is accurately described by all of the above.

     Answer: c           Page: 132
     Rationale: Internet/Web technology actually decreases marketing costs. Organizations depend
     heavily on timely information, and Internet/Web technology increases their ability to receive it.
     Internet/Web technology broadens the potential customer base for many products.




                                                 365
6-125 E-MARKETPLACES                                                                 DEFINITION

    Online trading communities that bring together buyers and supplier organizations are called:

    a.   storefronts.
    b.   Web stock exchanges.
    c.   Web commerce rooms.
    d.   consortiums.
    e.   e-marketplaces.

    Answer: e         Page: 132
    Rationale: Key term definition—e-marketplaces

6-126 E-MARKETPLACE                                                               APPLICATION

    In the construction industry, independent trading communities such as Buzzsaw.com or
    Cephren.com enable a general contractor to manage and coordinate the many suppliers,
    subcontractors, architects, and engineers necessary to complete a project. Buzzsaw.com and
    Cephren.com are examples of:

    a.   storefronts.
    b.   Web stock exchanges.
    c.   Web commerce rooms.
    d.   consortiums.
    e.   e-marketplaces.

    Answer: e           Page: 132
    Rationale: Buzzsaw.com and Cephren.com bring together buyers and suppliers online, the
    definition of an e-marketplace.

6-127 E-MARKETPLACE                                                               CONCEPTUAL

    Which one of the following conditions must be present for the existence of an independent
    e-marketplace?

    a.   thousands of geographically dispersed buyers and sellers
    b.   volatile prices caused by demand and supply fluctuations
    c.   time sensitivity due to perishable offerings and changing technologies
    d.   easily comparable offerings between a variety of suppliers
    e.   All of the above are examples of a condition that must be present for the existence of an
         independent e-marketplace.

    Answer: e           Page: 132         Other Location: web
    Rationale: At lease one of the conditions described in a, b, c, and d must be present for the
    existence of an e-marketplace.




                                                366
6-128 E-MARKETPLACES                                                            DEFINITION

    E-marketplaces can take two different formats. They are:

    a.   bricks-and-mortar exchanges and clicks-and-mortar exchanges.
    b.   privately-owned trading communities and open-to-the-public trading communities.
    c.   networked exchanges and public trading communities.
    d.   independent trading communities and private exchanges.
    e.   public exchanges and networked exchanges.

    Answer: d         Page: 132
    Rationale: Key term definition—e-marketplaces

6-129 E-MARKETPLACES                                                          CONCEPTUAL

    E-marketplace is another name for:

    a.   exchanges.
    b.   e-hubs.
    c.   online private exchanges.
    d.   online independent trading communities.
    e.   All of the above are other names for e-marketplaces.

    Answer: e           Page: 132
    Rationale: E-marketplaces go by a variety of names including exchanges, e-hubs, online
    independent trading communities and online private exchanges

6-130 E-MARKETPLACES                                                          CONCEPTUAL

    E-marketplaces make possible the real-time exchange of:

    a.   information.
    b.   money.
    c.   products.
    d.   services.
    e.   all of the above.

    Answer: e           Page: 132
    Rationale: These online communities go by a variety of names including exchanges and e-hubs,
    and make possible the real-time exchange of information, money, products, and services.




                                               367
6-131 E-MARKETPLACES                                                              CONCEPTUAL

     Which of the following is true about e-marketplaces?

     a.   They focus on many industries.
     b.   They are open-to-the-public trading communities.
     c.   They act as a neutral third-party enabling exchanges between buyers and sellers.
     d.   They are free to use.
     e.   All of the above are true.

     Answer: c            Page: 132
     Rationale: E-marketplaces focus on one industry, not many. They are not open-to-the-public;
     rather they are only used in organizational buying. They charge a fee. Only alternative c is
     accurate.

6-132 E-MARKETPLACES                                                              CONCEPTUAL

     Which of the following services are provided by e-marketplaces?

     a.   They allow small business buyers and sellers an economical way to reduce their customer base.
     b.   They offer small business buyers a reduced cost of purchased products and services.
     c.   They link large companies with all possible suppliers and customers.
     d.   They provide a decentralized market for buyer-seller transactions.
     e.   All of the above are true.

     Answer: b            Page: 132
     Rationale: E-marketplaces allow small business buyers and sellers an economical way to increase,
     not reduce, their customer base. They link large companies with qualified, not all possible,
     suppliers and customers. They provide a central, not decentralized market for buyer-seller
     transactions. Only alternative b is accurate.

6-133 TRADITIONAL AUCTION                                                            DEFINITION

     Traditional auctions:

     a.   are buyer-initiated.
     b.   benefit the buyers significantly more than the sellers.
     c.   have an increasing number of bidders as the auction progresses.
     d.   have sequential bidding.
     e.   have many sellers.

     Answer: d         Page: 133
     Rationale: Key term definition—traditional auction




                                                368
6-134 TRADITIONAL AUCTION                                                             APPLICATION

     If a company wanted to get rid of excess wooden pallets by attracting the greatest number of
     potential buyers online, it could use a(n) __________ to locate the company that was willing to pay
     the highest amount for the used pallets.

     a.   storefront operation
     b.   traditional auction
     c.   Japanese auction
     d.   English auction
     e.   reverse auction

     Answer: b            Page: 133          Other Location: web
     Rationale: In a traditional auction, a seller (the organization wanting to sell the pallets) puts an
     item up for sale and would-be buyers are invited to bid in competition with each other. Presumably
     the seller would accept the highest bid.

6-135 TRADITIONAL AUCTION                                                             CONCEPTUAL

     Which of the following is true of a traditional auction?

     a.   Would-be sellers are invited to bid in competition with each other.
     b.   As the auction progresses, less would-be buyers become involved.
     c.   It only occurs in Japan.
     d.   The bidding is sequential—it occurs in order, one at a time.
     e.   The auction ends when a single bidder “wins” the item with the lowest price.

     Answer: d            Page: 133
     Rationale: In a traditional auction, a seller puts an item up for sale; sellers don’t bid in competition
     with each other. Would-be buyers bid in competition with each other with more, not less buyers
     involved as the auction progresses. These auctions occur worldwide, not just in Japan. Presumably
     the seller would accept the highest bid. Only alternative d is accurate.

6-136 REVERSE AUCTION                                                                    DEFINITION

     Reverse auctions:

     a.   are seller-initiated.
     b.   benefit the sellers significantly more than the buyers.
     c.   have a decreasing number of bidders as the auction progresses.
     d.   have sequential bidding.
     e.   have many buyers.

     Answer: d         Page: 133
     Rationale: Key term definition—reverse auction




                                                  369
6-137 REVERSE AUCTION                                                               CONCEPTUAL

     Which of the following is true of a reverse auction?

     a.   Would-be buyers are invited to bid in competition with each other.
     b.   As the auction progresses, more would-be sellers become involved.
     c.   It only occurs in the United States.
     d.   The bidding is sequential—it occurs in order, one at a time.
     e.   The auction ends when a single bidder “wins” the business with the highest price.

     Answer: d             Page: 133
     Rationale: In a reverse auction, a buyer communicates a need for a product or service; buyers
     don’t bid in competition with each other. Would-be sellers bid in competition with each other with
     less, not more sellers involved as the auction progresses. These auctions occur worldwide, not just
     in the United States. Presumably the buyer would accept the lowest bid. Only alternative d is
     accurate.

6-138 REVERSE AUCTION                                                               APPLICATION

     PowerChain Solutions is an e-commerce marketplace serving companies and organizations
     world-wide. It helps buyers of parts and services to purchase these items for the lowest price, using
     bids from prospective sellers. In this example, what type of auction would PowerChain Solutions
     facilitate?
     a.   Reverse
     b.   Traditional
     c.   Thematic
     d.   Consumer
     e.   Individual

     Answer: a            Page: 133
     Rationale: In a reverse auction, a buyer communicates a need for a product or service; would-be
     sellers bid in competition with each other with less sellers involved as the auction progresses.
     Presumably the buyer would accept the lowest bid.

6-139 VIDEO CASE: LANDS’ END                                                        CONCEPTUAL

     Which of the following statements BEST describes the relationship Lands' End has with its many
     suppliers?

     a.   Disintermediation best describes the relationship.
     b.   They experience persistent conflicts of interest.
     c.   Lands’ End restricts information flow.
     d.   Lands’ End enters into supply partnerships.
     e.   Lands’ End relationships exemplify quid pro quo situations.

     Answer: d             Page: 136
     Rationale: A supply partnership exists when a buyer and its supplier adopt mutually beneficial
     objectives, policies, and procedures for the purpose of lowering the cost of or increasing the value
     of products and services delivered to the ultimate customer.



                                                 370
6-140 VIDEO CASE: LANDS’ END                                                       APPLICATION

     When Lands' End reorders linen blend blazers in new larger women’s sizes, that it has been selling
     for the last 20 years in misses sizes, this would more than likely be an example of a:

     a.   new buy.
     b.   modified rebuy.
     c.   conditional rebuy.
     d.   make-buy.
     e.   standard buy.

     Answer: b            Page: 131
     Rationale: In a modified rebuy, users, influencers, or deciders in the buying center want to change
     product specifications.

6-141 VIDEO CASE: LANDS’ END                                                       APPLICATION

     In terms of the buying center, Lands' End quality assurance personnel would assume the role of:

     a.   gatekeepers
     b.   deciders
     c.   buyers
     d.   influencers
     e.   users

     Answer: d           Page: 130
     Rationale: Influencers affect the buying decision, usually by helping define the specifications for
     what is bought, which is the role played by the quality assurance personnel.




                                                371
                             CHAPTER 6
             ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR

                                SHORT ESSAY QUESTIONS

6-142 ORGANIZATIONAL MARKETS                                                       CONCEPTUAL

     Describe the three types of organizational markets and give examples of each.

     Answer:
     There are three types of organizational markets:
     (1) An industrial market is a market in which a business reprocesses a good or service it buys
          before selling it again to the buyer. (Examples: mining, construction, insurance companies,
          public utility firms)
     (2) A reseller market is composed of wholesalers and retailers who buy physical products and
          resell them again without reprocessing. (Examples: Sears, Wal-Mart, Target)
     (3) A government market is comprised of federal, state and local agencies that buy goods and
          services for the constituents they serve. (Examples: NASA, City of San Francisco, New
          York City Police Department)

     Page: 122-123

6-143 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                   DEFINITION

     What is the North American Industry Classification System (NAICS) system?

     Answer:
     NAICS is a replacement for the earlier Standard Industrial Classification (SIC) system. The North
     American Industry Classification System (NAICS) designates industries with a numerical code in a
     defined structure. The first digit of the NAICS code designates a sector of the economy followed
     by a two-digit code signifying a subsector. Subsectors are further divided into three-digit industry
     groups, four-digit industries, and five-digit country-specific industries. The system became
     effective January 1, 1997, to provide common industry definitions for Canada, Mexico, and the
     United States to facilitate the measurement of economic activity in the three member countries of
     the North American Free Trade Agreement (NAFTA).

     Page: 123




                                                 372
6-144 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM                                CONCEPTUAL

     What are the two limitations of NAICS codes?

     Answer:
     The two major limitations of NAICS codes are:
     (1) Because only one code is assigned to each organization based on its primary activity or
           product, large firms that engage in many different businesses or offer several different goods
           or services still receive only one code number
     (2) The codes may not be available for all industries in every geographic area because
           governments may not report data when there are too few organizations in a category.

     Page: 124

6-145 ORGANIZATIONAL BUYING BEHAVIOR                                               CONCEPTUAL

     What are the characteristics of the organizational buying process?

     Answer:
     Technically qualified and professional buyers exist and follow established purchasing policies and
     procedures to purchase large orders. There are only a few buyers. Buying objectives and criteria
     are typically spelled out, as are procedures for evaluating sellers and goods and services. Multiple
     buying influences exist, and multiple parties participate in purchase decisions. Reciprocal
     arrangements exist, and negotiation between buyers and sellers is commonplace. Buyer-seller
     relationships may develop into supply partnerships. Online buying over the Internet is widespread.

     Page: 124-128

6-146 ORGANIZATIONAL BUYING CRITERIA                                               CONCEPTUAL

     Name four key organizational buying criteria. Give example of a type of product for which that
     criterion would be a very important factor in the choice of a vendor.

     Answer:
     Key organizational buying criteria and an example of each include:
     (1) price: standardized items, such as desks.
     (2) quality specifications: technically more complex items, such as computers.
     (3) delivery schedule: parts used in a "just-in-time" inventory system for manufacturing
          automobiles.
     (4) technical capability: seals for space capsules.
     (5) warranties and claim policies: Sears Craftsman tools.
     (6) past performance: a trucking firm's services.
     (7) production facilities and capacity: An F-16 Air Force jet fighter.

     Page: 127




                                                 373
6-147 ORGANIZATIONAL BUYING PROCESS                                                    CONCEPTUAL

     What are the five stages of the organizational buying process?

     Answer:
     The five stages of the organizational buying process, like those for the consumer buying process,
     are:
     (1) problem recognition
     (2) information search
     (3) alternative evaluation
     (4) purchase decision
     (5) postpurchase behavior.

     Page: 129; Figure 6-4

6-148 BUYING CENTER                                                                     DEFINITION

     What is the buying center and in what type of business would a person expect to find one operating?

     Answer:
     A buying center is a group of individuals within an organization who participate in the buying
     process. They share common goals, risks, and knowledge important to a purchase decision. One
     would see a buying center in most larger, multistore resellers such as Sears, 7-Eleven, K Mart,
     Safeway, and Target. In addition, most industrial firms or government units use groups to arrive at
     buying decisions.

     Page: 130

6-149 BUYING CENTER                                                                     DEFINITION

     Identify and describe the five roles an individual can play in a buying center:

     Answer:
     There are five roles an individual can play in a buying center and that are mentioned in the text:
     (1) Users, who actually use the product or service
     (2) Influencers, who help define the specifications for what is bought
     (3) Buyers, who have the formal authority and responsibility to select the supplier and negotiate
          the terms of the contract
     (4) Deciders, who have the formal or informal power to select or approve the supplier
     (5) Gatekeepers, who control the flow of information in the buying center.

     Page: 130




                                                 374
6-150 FAMILY DECISION MAKING; BUYING CENTER                                         APPLICATION

     Just as there are different inputs into an organization's decision to make a major buy, so there is a
     similar situation that occurs within a family. Various members of an organization and of a family
     will take different roles depending upon the product being purchased. What are the two major
     differences between how organizations and families make purchase decisions? (These differences
     are based on the roles members play.)

     Answer:
     The family has an information gatherer because it is assumed it will not have ready access to the
     information it needs to make a decision. The organization is much more likely to have that
     information readily available. The organization has a gatekeeper, which controls the flow of
     information. The existence of information flow control is due the existence of organizational
     hierarchy that limits the free flow of information. The informality of most family structures makes
     the gatekeeper's role unnecessary. Students may also discuss the fact that most organizational
     buying decisions are made by a cross-functional group.

     Page: 130

6-151 BUY CLASSES                                                                   CONCEPTUAL

     What are the three types of organizational buying situations? Give an example of each.

     Answer:
     There are three types of buying situations:
     (1) Straight rebuy: simply reordering an existing product of service from the list of acceptable
          suppliers (e.g., printer ink cartridges for an office.
     (2) Modified rebuy: when the users, influencers, or deciders in the buying center want to change
          the product's specifications, price, delivery, schedule, or supplier (e.g., Ford wants a smaller
          steering wheel for their new cars).
     (3) New buy: when the organization is a first time buyer of the product of service (e.g., a
          computer company must purchase new types of chips for its new line of computers).

     Page: 131




                                                 375
6-152 E-MARKETPLACE                                                                  CONCEPTUAL

     According to a Web-research company just 7 percent of online business-to-business transactions
     occurred in independent trading communities, and 93 percent occurred at private exchanges in
     2001. What are the differences between independent trading communities and private exchanges?
     Can you suggest a reason for this disparity in usage?

     Answer:
     Both are forms of e-marketplaces. Independent trading communities offer thousands of
     geographically dispersed buyers and sellers, volatile prices caused by demand and supply
     fluctuations, time sensitivity due to perishable offerings and changing technologies, and easily
     comparable offerings between a variety of suppliers. Independent e-marketplaces typically focus
     on a product or serve a particular industry. Independent e-marketplaces offer small business buyers
     and sellers an economical way to expand their customer base and reduce the cost of purchased
     products. Private exchanges focus on streamlining a company's purchase transactions with its
     suppliers and customers. Like independent marketplaces, private exchanges provide a technology
     trading platform and central market for buyer-seller interactions. They are not a neutral third party,
     however, but represent the interests of the company that owns the exchange. The reason for the
     disparity in usage is largely explained by the fact that large companies favor the private
     exchanges—the size and number of their transactions are much greater than those of small
     businesses.

     Page: 132

6-153 ONLINE AUCTIONS                                                                  DEFINITION

     Differentiate between traditional and reverse auctions.

     Answer:
     With a traditional auction, there is one seller and many prospective buyers. Prospective buyers
     observe the bidding process and decide whether to increase the bid price. The auction ends when a
     single buyer who is willing to pay the highest price remains. With a reverse auction, there is one
     buyer and many sellers. A buyer communicates a need for a product and invites potential suppliers
     to bid in competition with each other. As more prospective suppliers become involved, there is a
     downward pressure on price. The auction ends when a single supplier willing to offer the lowest
     price remains.

     Page: 133




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