Page 210 - Foundations of Marketing

Business Markets and Buying Behavior | Chapter 7 177

Government Markets

Federal, state, county, and local governments make up government markets . These
markets spend billions of dollars annually for a wide range of goods and services—from
office supplies and health-care services to vehicles, heavy equipment, and weapons—to
support their internal operations and provide citizens with such products as highways,
education, energy, and national defense. Government spending accounts for more than
40 percent of the United States’ total gross domestic product (GDP). The amount spent
government markets
by federal, state, and local units in recent decades has gone up because the total number
Federal, state, county, or local
of government units and the services they provide have both increased. Costs of providing
governments that buy goods
these services have also risen.
and services to support their
Because government agencies spend public funds to buy the products needed to pro- internal operations and provide
vide services, they are accountable to the public. This need for accountability explains their products to their constituencies
complex buying procedures. Some firms choose not to sell to government buyers because of institutional markets
the additional time and expense the red tape costs them. However, many marketers benefit Organizations with charitable,
enough from government contracts that they do not find these procedures to be a stumbling educational, community, or
block. For certain products, such as defense-related items, the government may be the only other nonbusiness goals
customer.
Governments advertise their purchase needs through
releasing bids or negotiated contracts. Although companies
may be reluctant to approach government markets because
of the complicated bidding process, once they understand the
rules of this process, some firms routinely penetrate govern-
ment markets. To make a sale under the bid system, firms
must apply and be approved for placement on a list of quali-
fied bidders. When a government unit wants to buy, it sends
out a detailed description of the products to qualified bidders.
Businesses whose products fit with the needs described will
submit bids. The government unit is usually required to accept
the lowest-priced bid.
When buying nonstandard or highly complex products, a
government unit often uses a negotiated contract. Under this
procedure, the government unit selects only a few firms and
then negotiates specifications and terms. It eventually awards
the contract to one of the negotiating firms.

Institutional Markets
Organizations with charitable, educational, community, or
other nonbusiness goals constitute institutional markets .
Members of institutional markets include churches, some
hospitals, fraternities and sororities, charitable organizations,
and private colleges. Institutions purchase millions of dollars’
worth of products annually to support their activities and pro-
vide goods, services, and ideas to various audiences. Because
institutions often have different goals and fewer resources than
other types of organizations, marketers may use special efforts
to serve them. For example, Aramark provides a variety of ser- © Shutterstock.com
vices and products to institutional markets, including schools,
hospitals, and senior living centers. It frequently ranks as one
of the most admired companies in its industry. For areas like Institutional Markets
university food service, Aramark aims its marketing efforts This pipe organ producer supplies products mainly to churches,
directly at students. 8 which are a part of institutional markets.

Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.