chapter 5 organisational buying behaviour
TRANSCRIPT
Consumer or Organizational Products Why was the product purchased ?
For personal or household use
For use in the operation of a business or organization.
To manufacture other products For resale to others
OrganizationalPRODUCT
CONSUMER
PRODUCT
Some Examples of Organizational Buying
Paper cups by McDonald'sComputer chips by ToshibaConcrete by Local AuthoritiesOil by Electricity GeneratorsFertiliser by FarmersAccountancy services by Ltd. CompaniesTV’s by Comet or Dixons
Characteristics of Organizational Buying
Derived demand Negotiations
Risks Reciprocalbuying
Nature and size of customers
Complexity of buying
Economic
and technical choice
criteria
Buying to specific
requirementsOrganizational
Purchases
Decision-making Unit
Buyers
choose suppliers
and negotiate purchase
terms often reducing
the actual purchase
to a clerical task.
Users
actually use the
product. They may
be the one who initiates
the purchase process
and may develop the
product
specification.
Deciders
(Decision Makers)
have the authority
to approve
the purchase.
Deciders
(Decision Makers)
have the authority
to approve
the purchase.
Influencers
supply information
and advice. Outsiders
such as consultants
sometimes perform
the role.
Gatekeepers
control the flow
of information to the
buying centre. Purchasing
department Staff frequently
fill the role but it could be
any member
of the
organization.
Deciders
have the authority
to select the
supplier or model.
Initiators
begin the purchase
Process.
Initiators
begin the purchase
Process.
Decision-making Unit
Implications.Need to identify key actors in buying decisions.Composition and roles played in the decision
making unit have implications for communications – target audience and message.
Buy phases: the organizational decision-making process
Recognition of a problem (need)
Determination of specification and quantity of needed item
Search for and qualification of potential sources
Acquisition and analysis of proposals
Evaluation of proposals and selection of supplier(s)
Selection of an order routine
Performance feedback and evaluation
Hitachi
Hitachi reinforces the benefits of its eco-
friendly rail-technology by featuring its benefits for passengers in this
advert.
Organizational Decision-making Process
Implications.
Marketing advantage can be gained by:1. Influencing need recognition.
2. Involvement in the determination of the characteristics of the needed product.
Choice CriteriaTypes.Economic.
e.g. price, return on investment.Technical.
e.g. reliability, delivery.Social (Organizational).
e.g. status, office politics.Personal.
e.g. personal risk reduction, liking/disliking.
In all cases PERCEPTION is critical.
Choice CriteriaImplications.
1. Marketing and sales appeals may need to be modified to different members of the decision-making unit.2. Choice criteria may change over time as
circumstances change. Suppliers may need to change their offerings and communications as a result.
Influences on organizational purchasing behaviour
� straight re-buy
� modified re-buy
� new task
Buy class
Organizational buyer
� product constituents
� product facilities
� MROs
Product type
Importance of purchase
Buy ClassT
ime
take
n f
or
dec
isio
n
No. of people involved in buying centre
Straight Rebuy
NewTask
ModifiedRebuy
New Task Buying
The organization makes an initial purchase of an item to be used to perform a new job or to solve a new problem. Often this involves development of specifications for products and suppliers as well as procedures for future purchases. High information requirement from many suppliers.
Example: new IT facility.
Modified Rebuy
When a new task purchase is changed on repeat purchases. The buyer may require faster delivery lower prices or modified specifications. Regular suppliers become more competitive and new suppliers may be included in the selection. Moderate amounts of information are required.
Example: upgrading office software.
Straight Rebuy
The buyer purchases the same products again routinely under approximately the same terms of sale. Suppliers are familiar, have provided satisfactory service in the past and may even have set up automatic re-ordering systems. Little information is required.
Example: re-ordering photocopying paper.
Buy ClassImplications:
1. New Task.- big gains for those suppliers involved in the decision-
making process at the start.- many people are involved and the process is long –
suppliers need to invest heavily in time to influence all of them.2. Straight Rebuy.
- current suppliers need to build a strong defensible position and maintain it.
- potential suppliers need to reduce risk of change for purchaser.
Developments in Purchasing Practice
1. 1. Just-in-time purchasing.2. 2. Centralised purchasing.3. 3. Online purchasing.4. 4. Reverse marketing.5. 5. Leasing.
Reverse marketing
Supplier Buyer
Supplier sells by taking initiative
Buyer takes initiative to persuade supplier to provide
Traditional marketing
Reverse marketing
Relationship Marketing - CRM
Definition:The process of creating, maintaining and enhancing strong relationships with customers and other stakeholders.
Relationship MarketingCenters On:
• Establishing,• Developing, and• Maintaining
Successful exchanges with customers.
Transactional Exchange
• Centers on timely exchange of basic products for highly competitive market prices.
Collaborative Exchange
• Features close information, social, and operational linkages, as well as mutual commitments.
Types of Relationships• Buyer-seller relationships positioned on a continuum with
transactional exchange and collaborative exchange serving as end points.
The Relationship Spectrum
Buyers and sellers craft different types of relationships in response to: a) market conditions and b) characteristics of the purchase situation.
Spectrum of Buyer-Seller Relationships
Managing Relationship Portfolio
• Mix of relationships based on customers.• Collaborative Customers – build relationships with
trust and commitment.• Transactional Customers – focus efforts on purchasing
staff and offer attractive benefits.
Customer Profitability
High
Low
Net
Mar
gin
Rea
lized
Cost-to-Serve
Passive• Product is Crucial• Good Supplier Match
Costly to Service,but Pay TopDollar
Price Sensitive butFew SpecialDemands
Aggressive• Leverage Their Buying Power• Low Price and Lots of Customized Features
Profits
Losses
Low High
SOURCE: From “Manage Customers for Profits (Not Just Sales)” by B.P. Shapiro et al., September-October 1987, p. 104, Harvard Business Review.
Customer Relationship Management
• A Continuing Dialogue with Customers,• Across all their Contact and Access
Points, with• Personalized Treatment of the Most
Valuable Customers,• To Ensure Customer Retention and
Effectiveness of Marketing Initiatives.
Learning to Retain Customers
• Provide superior value to ensure high satisfaction.
• Nurture trust and mutual commitment.
BASF
BASF illustrate its commitment to having close relations with its customers in order to improve performance.
Development of buyer–seller relationships in Industrial Markets
Pre-relationship stageEvaluation of a new potential supplier
Early stageNegotiation of a trial
Development stageContract signed or delivery built up
Long term stageSeveral major purchases or large-scale deliveries have been made
Final stageEstablished patterns of trading in long-term stable markets