Chapter 4 Topics

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Chapter 4 Topics

• What are the different types of customers?
• How do organizations make purchase decisions?
• What factors do organizations consider when
  evaluating products and services?
• Who is involved in the buying decision?
• What should salespeople do in the different types
  of buying situations?
• What changes are occurring in organizational
  buying, and how will these changes affect
  salespeople?

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How are these customers different?What would be
different in selling to them?

• Consumers
• Resellers
• OEMs
• End users
• Government agencies and institutions

• Think about
• Their needs.
• The importance of price versus product
  performance.
• The role of the purchasing agent.
• The number of people involved in making a
  decision.
• The tendency to want long-term relationships.

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Derived Demand
Corn Syrup Supplier
Other Raw Materials
Aluminum Mine
Soft Drink Manufacturer
Aluminum Manufacturer
Insurance, Trucking, Other Services
Can Manufacturer
Soft Drink Bottler
Distributors and Retailers
Consumer
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Is Buying Complex?
Describe how you went about purchasing a car.
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Is Buying Complex?
Describe how you went about purchasing a
car. Describe what you did the last time you
bought a soft drink. What were the differences?
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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• Starts when someone realizes that a problem
  exists.
• Employees in the customers firm or outside
  salespeople can trigger this recognition.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• After identifying a problem, organization members
  develop a general approach to solving it.
• Firms often look to a salesperson to help in
  analyzing the situation and considering solutions.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• The specifications for the product needed to
  solve the problem are prepared.
• Potential suppliers use these specifications to
  develop proposals.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• The customer now looks for potential suppliers.
• The customer may contact previous suppliers or go
  through an extensive search process.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• Qualified suppliers are asked to submit
  proposals.
• Salespeople work with people in their own company
  to develop the proposal.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• The customer evaluates the proposals.
• After selecting a preferred supplier, further
  negotiations may take place concerning price,
  delivery, or specific performance features.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• An order is placed with the selected supplier.
• Eventually, the product is shipped to the buying
  firm, which inspects the goods and then pays the
  supplier for the product.

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Steps in the Buying Process
1 Recognition of a need.
3 Development of detailed specifications.
2 Definition of the product-type needed.
4 Search for qualified suppliers.
8 Evaluation of product performance.
5 Acquisition and analysis of proposals.
6 Evaluation of proposals, selection of a
supplier.
7 Place and receive the orders.

• The products performance is evaluated.
• Salespeople need to work with the users to make
  sure the product performs well, and also need to
  make sure the purchasing agents are satisfied.

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Creeping Commitment
Think of a major purchase you made, such as a
car, a computer, or selecting an apartment.

• What were the first decisions you made?
• How did these early decisions affect your choices
  later in the process?

Creeping commitment means that as choices are
made during the buying process, the range of
possible alternatives is reduced.
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Three Types of Buying Situations
Straight rebuy
New task
Modified rebuy
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Straight Rebuy Purchase Process
What research did you do before buying your last
tube of toothpaste?

• Financial risk
• Information search
• Number of people involved in decision

• Financial risk Low
• Information search Minimal
• Number of people involved in decision 1 or 2

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New Task Purchase Process
How did you go about shopping for your first
apartment?

• Financial risk
• Information search
• Number of people involved in decision

• Financial risk High
• Information search Extensive
• Number of people involved in decision Many

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Modified Rebuy Purchase Process
What did you differently when shopping for your
second apartment?

• Financial risk
• Information search
• Number of people involved in decision

• Financial risk Moderate
• Information search Limited
• Number of people involved in decision Few

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Selling Strategy
From Exhibit 4.2
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The Buying Center Users

• Often have considerable influence in the early
  and late steps of buying process.
• Salespeople trying to convert a straight rebuy
  into a modified rebuy demonstrate superior
  performance or new benefits to the users.

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The Buying Center Influencers

• People who directly or indirectly provide
  information during the buying process.
• May provide details on product specifications,
  criteria for evaluating proposals, and
  information about potential suppliers.

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The Buying Center Gatekeepers

• Control the flow of information and may limit the
  alternatives considered.
• Purchasing agents often determine which potential
  suppliers are to be considered.
• Bypassing the purchasing agent is called
  back-door selling.

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The Buying Center Deciders

• Make the final choice.
• In straight rebuys it is usually the purchasing
  agent.
• For new tasks, many people may be required to
  approve the decision and sign the purchase order.

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People Involved in a Buying Center
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What are customer needs?
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Understand the Buyers Needs
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Factors in Organizational Buying
Exhibit 4.4

• Risk Reduction

• Economic criteria

• Friendships

• Quality criteria

• Job Security

• Service criteria

Organizational Needs
Personal Needs
Overlap in needs

• Survival

• Self-esteem

• Profit

• Career Growth

• Growth

• Financial Security

• Innovation

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Life Cycle Costing
Exhibit 4.5
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Trends in Organizational Buying

• Increasing importance of purchasing agents.
• Centralized purchasing
• Global sourcing
• Outsourcing
• Supply chain management
• The Internet and business-to-business selling
• Long-term customer-supplier relationships

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How the Selling Process Relates to the Buying
Process
Selling Process
Buying Process
Identification of buyer needs
Need recognition
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The Multi-attribute Model
Exhibit A.3
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The Multi-attribute Model
Exhibit A.4
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Strategies to Influence Purchase Decisions

• Increase the performance rating for your product.
• Decrease the performance rating for the
  competitors product.
• Increase or decrease an importance weight.
• Add new characteristics to the decision process.
• Decrease the price of your product.

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Any questions about the terminology?

• Buying center
• Capital equipment
• Creeping commitment
• Deciders
• Derived demand
• Efficient consumer response system (ECR)
• Electronic data interchange (EDI)
• Emotional needs
• End users
• Extranet
• Gatekeepers
• Influencers
• Just-in-time (JIT) inventory control
• Life-cycle costing
• Materials requirements planning

• Modified rebuy
• MRO supplies
• National account manager (NAM)
• New task
• Original equipment manufacturer (OEM)
• Outsourcing
• Producer
• Quick-response system
• Rational needs
• Resellers
• Straight rebuy
• Supply chain management
• Total quality management (TQM)
• Users
• Value analysis
• Vendor loyalty

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