Page 2
Objectives of the Session • To distinguish between consumer versus organisational markets and their buying behaviour • To understand organisational markets and their buying behaviour
Page 3
Differences Between Organizational and Consumer Markets Demand characteristics The demand for industrial goods and services is 1. Derived from the demand for consumer goods and services. 2. Relatively inelastic—price changes in the short run are not likely to affect demand drastically. 3. More erratic because small increases or decreases in consumer demand can, over time, strongly affect the demand for manufacturing plants and equipment. 4. More cyclical.
Page 4
Differences Between Organizational and Consumer Markets Market demographics Organizational buyers, when compared with buyers of consumer goods, are: 1. Few in number 2. Larger 3. Geographically concentrated
Page 5
Differences Between Organizational and Consumer Markets Buyer-seller relationships Organizational markets are characterized by: 1. Use of professional buying specialists following prescribed procedures 2. Closer buyer—seller relationships (RM) 3. Presence of multiple buying influences 4. More apt to buy on specifications
Page 6
Organizational Centre • For routine purchases a single buyer or purchasing manager may make the purchase decision. For most high-value organisational purchases, several people from different departments participate in the decision process. • The individuals in this group, called a buying centre, share knowledge and information relevant to the purchase of a particular product. • Different members of the buying centre may participate – and exert different amounts of influence – at different stages in the decision process.
Page 7
Participants in the Organisational Purchasing Process 1. Users: The people in the organisation who must use or work with the product or service often have some influence on the purchase decision. 2. Influencers: Influencers provide information for evaluating alternative products and suppliers. They are usually technical experts from various departments within the organisation. Influencers help determine which specifications and criteria to use in making the purchase decision. 3. Gatekeepers: Gatekeepers control the flow of information to other people in the purchasing process. They primarily include the organisation’s purchasing agents and the suppliers’ salespeople. Gatekeepers influence a purchase by controlling the information that reaches other decision makers.
Page 8
Participants in the Organisational Purchasing Process 4. Buyers: The buyer is usually referred to as a purchasing agent or purchasing manager. In most organisations, buyers have the authority to contact suppliers and negotiate the purchase transaction. In some cases they exercise wide discretion in carrying out their jobs. In other cases, they are tightly constrained by specifications and contract requirements determined by technical experts and top administrators. 5. Deciders: The decider is the person with the authority to make a final purchase decision. Sometimes buyers have this authority, but often lower- level purchasing managers carry out the wishes of more powerful decision makers.
Page 9
Organisational Buying Situations 1. A straight rebuy involves purchasing a common product organisation has bought many times before. Such purchases are often handled routinely by the purchasing department with little participation by other departments. Such purchases are almost automatic, short and routine. 2. A modified rebuy occurs when the organisation’s needs remain unchanged, but buying centre members are not satisfied with the product or the supplier they have been using. They may desire a higher-quality product, a better price, or better service. Here buyers need information about alternative products and suppliers to compare . 3. New-task buying occurs when an organisation faces a new and unique need or problem – one in which buying centre members have little or no experience and, thus, must expend a great deal of effort to define purchasing specifications and to collect information about alternative products and vendors.
Page 10
Marketing Implications of New task purchases • In new-task purchases an organisation is buying a relatively complex product or service for the first time. Buyers in such circumstances tend to collect a lot of information about alternative products and suppliers and to engage in extensive comparisons before making a final purchase decision. • Such situations are relatively favourable to potential new suppliers who have never sold to the organisation. Such newcomers can win the organisation’s business if they can provide superior product benefits, superior customer service, or better prices (i.e. better customer value) band if they can convince the customer of their superiority through an effective sales pitch, a user- friendly website, or promotional efforts. • One major reason for establishing long-term cooperative relationships with major customers is to become an active partner in designing – and setting the specifications for the customer’s products (i.e purchase criteria).
Page 11
The Marketing Implications Straight Rebuy Purchases • In a straight rebuy the customer is reordering an item it has purchased many times before. These purchases tend to be more routine and computerised. • From the seller’s viewpoint, being the established or ‘in’ supplier in such purchase situations provides a major competitive advantage because the customer spends little or no effort evaluating alternatives. • Therefore, established suppliers should develop procedures to maintain and enhance their favoured position with current customers (such as ‘key account’ policies and appoint cross-functional teams to service major customers to help ensure their satisfaction and retention, supply chain management systems and logistical alliances).
Page 12
The Relative Influence of Various Functional Departments at Different Stages in New Buy Organizational Purchasing Decisions 50 New 40 buy 30 20 10 Relative influence 0 Identify need Set specs Evaluate choices Select supplier Engineering Purchasing R&D Production Purchase stages Source: Based on E. Naumann, D. J. Lincoln, and R. D. McWilliams, “The Purchase of Components: Functional Areas of Influence,” Industrial Marketing Management, May 1994, pp. 113-22. Reprinted with permission of the publisher. Copyright © 1984 by Elsevier Science Publishing Co., Inc. See also R. D. McWilliams, E. Naumann, and S. Scott, “Determining Buying Center Size,” Industrial Marketing Management 21 (February 1992), pp. 43-50.
Page 13
The Relative Influence of Various Functional Departments at Different Stages in Straight Rebuy Organizational Purchasing Decisions 70 Straight rebuy 60 50 40 30 20 Relative influence10 0 Identify need Set specs Evaluate choices Select supplier Engineering Purchasing R&D Production Purchase stages Source: Based on E. Naumann, D. J. Lincoln, and R. D. McWilliams, “The Purchase of Components: Functional Areas of Influence,” Industrial Marketing Management, May 1994, pp. 113-22. Reprinted with permission of the publisher. Copyright © 1984 by Elsevier Science Publishing Co., Inc. See also R. D. McWilliams, E. Naumann, and S. Scott, “Determining Buying Center Size,” Industrial Marketing Management 21 (February 1992), pp. 43-50.
Page 14
The Organizational Decision-Making Process for New-Task Purchases Recognition of a problem or need •Derived demand Requirement planning •Determining product specifications Search for information about products and suppliers •Value analysis •Make-or-buy decisions •Information about potential suppliers Evaluation and selection of suppliers •Vendor analysis Purchase decision •Vendor analysis Postpurchase evaluation and feedback
Showing the first 14 pages. Download the document to see it all.
Comments (0)
No comments yet. Be the first!