Strategic Marketing Fall 2005 Tinker AFB Campus

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Strategic MarketingFall 2005Tinker AFB Campus

• Chapter Seven
• Business Markets and Business Buyer Behavior

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What is Organizational Buying?

• The Business Market Versus the Consumer Market
  Table 7.1, p. 134
• Fewer buyers, larger buyers, close
  supplier-customer relationships, geographically
  concentrated buyers, derived demand, and
  inelastic demand.
• In addition Fluctuating demand, professional
  purchasing, multiple buying influences, direct
  purchasing, reciprocity, and leasing.

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Specialized Organizational Markets

• The Institutional Market
• Institutions tend to have low budgets and captive
  clienteles.
• Firms that serve this market have developed
  unique operations to serve this market.
• The Government Market-a major buyer of goods and
  services.
• Decision to purchase usually based on cost.
• Excessive paperwork, but Internet-based changes
  bringing reform.

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Business Buying Situations

• Straight rebuy (reorder on a routine basis).
• Modified rebuy (product specs, prices, delivery
  requirements, or other terms may be modified).
• New task (a purchaser buys a product or service
  for the first time with major sub decisions
  involved in the buying decision).

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Systems Buying and Selling

• Purchasers buy a total solution to their problem
  from one supplier.
• Effectively provides a turnkey solution.
• Systems selling key to building large scale
  industrial projects.

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Participants in the Business Buying Process

• Buying Center Initiators, users, influencers,
  deciders, approvers, buyers, and gatekeepers
• Important to know the major decision players and
  their motivations and operations.

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Major Influences on Buying Decisions Fig. 7.1,
p. 138

• Environmental factors - Level of demand, economic
  outlook, and interest rate.
• Organizational factors - Objectives, policies,
  procedures, structures and systems. In addition,
  business marketers should be aware of
  organizational trends that influence business
  buying.

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Organizational Factors

• Purchasing-Department Upgrading - Larger and more
  important role.
• Cross-Functional Roles - Purchasing involved
  product design and development.
• Centralized Purchasing
• Decentralized Purchasing and employee empowerment
  (small-ticket Items) changing the process

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Organizational Factors (cont.)

• Online procurement also growing rapidly -
  changing the shape and role of purchasing for the
  future but could also lead to loyalty and
  security issues.
• Other Organizational Factors Long-term contracts
  (vendor managed inventory, etc.),
  purchasing-performance evaluation and buyers'
  professional development, improved supply chain
  management, and lean production (JIT).

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Interpersonal and Individual Factors

• Individuals in buying centers have differing
  interests, authority, status, empathy, and
  persuasiveness.
• Every business buyer has personal individual
  motivations, perceptions, and preferences.

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Cultural Factors

• Relates to customs in different nations and
  regions.
• Different priorities and practices influence the
  process.

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The Purchasing/Procurement Process Table 7.2, p.
142

• Problem recognition - one via direct mail,
  telemarketing, the Internet and personal calls.
• Increasing use of value analysis to determine
  redesign, standardization, and product
  positioning.
• General need description and product
  specification. Product value analysis - search
  for ways to lower costs.

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Supplier search

• Seeking the most appropriate suppliers.
• Vertical hubs, functional hubs, e-procurement
• Proposal Solicitation - Request for proposal (RFP)

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Supplier Selection

• Each bidder rated on specified criteria.
• Companies increasingly reducing the number of
  suppliers to Insure quality, service, and price.

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Order Routine Specification final negotiations
(blanket contract, stockless purchase plans)

• Blanket contract (resupply at agreed-upon prices
  over specific period)
• Also called stockless purchase plans - Automatic
  re-ordering, etc.

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Performance Review

• End user evaluations
• Supplier ratings (weighted score)
• Adjusted costs of purchase based on aggregated
  costs of poor supplier performance