Industrial Marketing

Organizational buying behavior

www.a2zmba.com

Business buying behavior

1. Should fit the product 2. Should fit the customer profile3. Should fit the situation

www.a2zmba.com

At Ford, purchasing manager has to understand the needs of Ford motor company In turn,Business Marketing Manager should understand the industrial buying behaviorOrganizational buying behavior is a process and not just a behaviorThis process has several stages , each stage expected to yield a decision. Though this is not a binding for all procurements, this model (cited ahead) provides an important insight

www.a2zmba.com

Problem Recognition –int/ext/compProblem Recognition –int/ext/comp

General Need Description-VAGeneral Need Description-VA

Product SpecificationProduct Specification

Supplier SearchSupplier Search

Proposal SolicitationProposal Solicitation

Supplier Selection-VeASupplier Selection-VeA

Order Routine SpecificationOrder Routine Specification

Performance ReviewPerformance ReviewPostPost

PurchasePurchase

PurchasePurchase

InfoInfoSearch/Search/

EvalEval

NeedNeedRecognitionRecognition

www.a2zmba.com

www.a2zmba.com

1.Problem recognition VA

Internal – HS production equipment. Canon drum

External – Euro II norms.Competitor – Turbo charger

( Advertisement – Xerox on overdrive)

2.General description of need

Production manager work with purchasing manager on characteristics of HS equipment( Move from Blurred to clear vision)

3.Product Specifications

Experienced production managers assist procurement manager in developing detailed specs. They will refer some literature of course.

4.Supplier Search Identify a set of possible sources to supply this HS (High speed) equipment

5.Acquisition and analysis of proposals

Obtain offers and analyze. Use vendor analysis technique

It may be necessary to evaluate Make/Buy

6.Supplier selection Negotiation with two finalists at least

7.Selection of order routine

Job is over only on delivery. Follow purchasing guidelines, delivery, payment terms etc

8.Performance Review

Bad – could lead to modified rebuy. Good – would lead to straight rebuy

Organizations with significant experience in buying will approach the problem quite differently.They will separate the situation in to three distinct categories:

1 New Task(also strategic new task)

2 Straight rebuyApproach 1 – Causal Approach –2 Look at others also to make sure that rebuy

is not obsolete3 Modified rebuy

Simple modified rebuyComplex modified rebuy

www.a2zmba.com

In

volv

ed D

ecis

ion

Mak

ing

Modified RebuyModified RebuyModified RebuyModified Rebuy

New Task BuyingNew Task BuyingNew Task BuyingNew Task Buying

Straight RebuyStraight RebuyStraight RebuyStraight Rebuy

UtilitiesOffice SuppliesBulk chemicals

New vehiclesElec. EquipConsultantsComputer equip.

Custom furnitureInstalled componentsBuildingsWeapon systems

www.a2zmba.com

New Task1. Need considerably new ( accounting – to computers)2. No past experience3. Extensive problem solving activityGuidelines :1.Try & Participate from stage 1 (Importance of 3C)2. Buyer uncertain appropriateness of technology (MHN)3. Relationship is vital4. Buyer more willing to entertain a good technical solution over low

price & assured delivery5. Buyer will respect a Techie at this stage

www.a2zmba.com

Straight rebuyEffect of Technology :1. Buy-side requisition process2. Employees can indent online while company retains control over

Procurement3. Ariba/ peoplesoft / oracle software is useful4. Intranet & web based commerce plays a vital roleStrategy Guidelines:Price and DeliveryCommunicate also to employeesOnline enabling

In Supplier : Reinforce relationship / meet the expectations / keep the eyes and ears open.Out Supplier: Persuade decision maker to look at alternatives. Stress on your superiority if it is of relevance

www.a2zmba.com

Modified rebuy

When would the buyer modify ? Displeased with the existing supplier Trifle change in the requirement / technology / product. Strategy

Guidelines:In Supplier : Know the factors that led to modifications.

Address these if you can. Out Supplier: Know the factors that led to modifications.

Out perform and give better solution.

www.a2zmba.com

Buying Grid

www.a2zmba.com

New Modified Straight

Problem Recognition

General need description

Product specification

Supplier search

Proposal solicitation

Supplier selection

Order routine specs

Performance review

One of the memorable case studies – Japanese Management

www.a2zmba.com

A prof began his class by holding up a glass with some water in it. He held it up for all to see and asked the students How much do you think this glass weighs?50 100 125 gms . Students answered.I wouldn’t know unless I weigh it . Said the professorBut my question now is , what will happen if I keep it for 2 minutes – nothing said a studentone hour ? – hands will painone day – Numb , paralysis, Hospitalization perhapsDid the weight of water change? No. Then why this changeStudents were puzzled. Put the glass down said a student.Exactly that is the solution . Said the profDon’t keep the problem for too long. Dispense it.Life is all about this

www.a2zmba.com