Post on 26-Dec-2015
Chapter 3Chapter 3
Buying Behavior and the Buying Process
Types of CustomersTypes of Customers
Producers• buy goods and services to manufacture and sell other
goods and services to their customers
Original Equipment Manufacturers
• when buyers purchase goods to use in making their products
• some components have such a high reputation they help sell the product
• most bought in large quantities on an annual basis
ContinuedContinued End Users
• action when producers buy goods and services to support their own production and operations
Capital equipment- major purchases that the producer uses for a number of years (Ex. Mainframe computers and machine tools)
MRO supplies- minor purchases that have a short useful life (Ex. Paper towels and pencils)
Resellers• buy furnished products or services with the intention to resell them to
businesses and consumers
• interested primarily in the attractiveness of the products to their customers
ContinuedContinued
Government – (Federal, State, & Local)• Largest customer for goods and services in the U.S. & the world!
(over $1 trillion in goods and services annually)
• Buyers bidding
• Effective selling requires a thorough knowledge for their unique procurement procedures and rules
• Many international salespeople
ContinuedContinued
Institutions
• Public and private (ex.churches, hospitals, and colleges)
• Packaged goods manufacturers sell to both resellers & institutional customers
Consumers• End users vary for consumers
• Text focuses on selling to business enterprises, government agencies, or institutions
(A large number of college graduates frequent these sales positions)
Organizational Buying and SellingOrganizational Buying and Selling
Complexity of the Organizational Buying Process
• involve extensive evaluations and negotiations over a period of time
• salespeople must be able to work effectively with a wide range of people
• increased complexity with increased global businesses
Derived Vs. Direct Demand – See P. 65 Derived demand- purchase made by these customers ultimately
depend on the demand for their products-either other organizations or consumers
Direct demand increases its efforts toward the ultimate consumer (Strategy: increasing in-store displays)
The Organizational Buying ProcessThe Organizational Buying Process
Steps in the buying process:
Recognizing a Need or a Problem Defining the Product Needed Development of Specifications Searching for Qualified Suppliers Acquiring and Analyzing Proposals Evaluation of Proposals and Selection of a Supplier Placement of an Order and Receipt of Product Evaluation of Product Performance
ContinuedContinued
Creeping commitment- a customer becomes increasingly committed to a particular course of action while going through the steps in the buying process
Types of Organizational Buying Types of Organizational Buying DecisionsDecisions
New Task – See Exhibit 3.2-P.69
• a customer purchases a product or service for the first time
• company’s knowledge is limited; initial buying process steps/post purchase evaluation is critical
Straight Rebuy
• a customer buys the same product from the same source it used when the need arose previously
• brand loyalty
Modified Rebuy
• the customer has purchased the product or a similar product in the past but is interested in obtaining new information
Who Makes The Buying DecisionWho Makes The Buying Decision
Buying center- an informal, cross-department group of people involved in a purchase decision
Users
• typically don’t make the ultimate purchase decision
• considerable influence in the early and late steps of the buying process
Initiatorspeople who start the buying process – can be user or executive
ContinuedContinued
Influencers
• people inside or outside the organization who directly or indirectly provide information
Gatekeepers
• control the flow of information and may limit the alternatives considered
Deciders
• one or more members of a group that make the final choice
• mostly senior executives
Supplier Evaluation and ChoiceSupplier Evaluation and Choice
Affected by the needs of both the organization and the individuals making the decisions
Classified into two categories:
Rational needs- directly related to the performance of a product
Emotional needs- associated with the personal rewards and gratification of the person buying the product
Organizational Needs and CriteriaOrganizational Needs and Criteria
Economic Criteria
• Objective of businesses: Profit
• achieve price efficiency by evaluating the cost of equipment
Life-cycle costing (total cost of ownership)- method for determining the cost of equipment or suppliers over their useful lives
Quality Criteria Need for quality varies by industry group and ultimate
market reached
Life-Cycle CostingLife-Cycle Costing
ContinuedContinued
Service Criteria
• buyers want suppliers to work with them to solve their problems
Value analysis- an example of a program in which suppliers and customers work together to reduce costs and still provide the required level of performance (can use to get customers to try a new product)
Individual Needs of Buying Center Individual Needs of Buying Center MembersMembers
Types of Needs
• influence members of the buying center by developing strategies to satisfy individual needs
Risk Reduction
• Buying center sometimes more concerned about losing benefits than increasing benefits
Vendor loyalty- continue buying from suppliers that have proven satisfactory in the past
• Always-a-share – always have a second source for a product
Trends In Organizational BuyingTrends In Organizational Buying
Increasing Importance of Purchasing Agents
• Critical function in the learning organization
• Heavy emphasis on computer information and control systems
Centralized Purchasing & Supply Chain Management
• More purchasing is done at a central location (corporate headquarters)
• A national account manager coordinates the firm’s efforts to satisfy the needs of a major customer
• A NAM works directly with the purchasing department and coordinates the activities of its salespeople
Supply Chain ManagementSupply Chain Management
Definition: a set of programs undertaken to increase the efficiency of the distribution that moves products from the producer’s facilities to the end user
Just-in-time (JIT) inventory control- used by a producer to minimize its inventory by having frequent deliveries, sometimes daily, just in time for assembly into the final product
Supply Chain ManagementSupply Chain Management
Quick response or efficient consumer response (ECR) systems
retailers & distributors work closely with their
suppliers to make sure they minimize their inventory investments, while cutting costs & satisfying customers
Supply Chain ManagementSupply Chain Management
Automatic replenishment – AR
Form of JIT were supplier manages inventory levels for customers. Materials provide on consignment. Used in industrial settings.
See Exhibit 3.6 – Page 83
Supply Chain ManagementSupply Chain Management
Electronic Data Interchange – EDIAutomatic replenishment technology used
electronic data interchange. Computers share data across companies
Materials Requirements Planning – MRPImportant element of JIT systemsForecast sales, schedules, etc.
Supplier Relationship Supplier Relationship Management (SRM)Management (SRM)
Strategy to evaluate buyers
Identify annual spending
Vendor analysis next
Track results
Vendor AnalysisVendor Analysis
Summarizes the benefits and needs satisfied by a supplier
Buyer rates the supplier and its products on a number of criteria (quality, on-time delivery, price & other)
They are then weighed by importance
See exhibit 3.7 – P. 86
Business-to-Business Selling Business-to-Business Selling The InternetThe Internet
Web is a Tool for supporting salespeopleReverse auction – buyer offers a contract &
sellers bidCan save time & moneyBest used with large purchases, clear
descriptions, & a good infrastructure to support an auction
Case – Midwest SurgicalCase – Midwest Surgical
Read thoroughly – class discussion will follow
Will go over in class – questions from the case will be on the test