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Understanding Organizational
Buying Behaviour
Jobber chap. 5
Consumer or Organizational Products
Why was the product purchased ?
 For personal or
household use
 For use in the opera...
Some Examples of Organizational
Buying
Paper cups by McDonald's
Computer chips by Toshiba
Concrete by Local Authorities...
Characteristics of Organizational
Buying
Derived demand Negotiations
Risks Reciprocal
buying
Nature and size
of customers
...
Decision-making Unit
Buyer
Decider
(Decision
Maker)
User
Gatekeeper
Influencer
Decider
Initiator
Decision-making Unit
Buyers
choose suppliers
and negotiate purchase
terms often reducing
the actual purchase
to a clerical...
Decision-making Unit
Implications.
Need to identify key actors in buying decisions.
Composition and roles played in the de...
Buy phases: the organizational
decision-making process
Recognition of a problem (need)
Determination of specification and ...
Hitachi
Hitachi reinforces the
benefits of its eco-
friendly rail-technology
by featuring its benefits
for passengers in t...
Organizational Decision-making Process
Implications.
Marketing advantage can be gained by:
1. Influencing need recognition...
Choice Criteria
Types.
Economic.
e.g. price, return on investment.
Technical.
e.g. reliability, delivery.
Social (Organi...
Choice Criteria
Implications.
1. Marketing and sales appeals may need to
be modified to different members of the
decision-...
Influences on organizational purchasing
behaviour
straight
re-buy
modified
re-buy
new task
Buy class
Organizational
buyer
...
Buy Class
Timetakenfordecision
No. of people involved in buying centre
Straight
Rebuy
New
Task
Modified
Rebuy
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
pr...
Modified Rebuy
When a new task purchase is changed on repeat
purchases. The buyer may require faster delivery
lower prices...
Straight Rebuy
The buyer purchases the same products again
routinely under approximately the same terms of
sale. Suppliers...
Buy Class
Implications:
1. New Task.
- big gains for those suppliers involved in the decision-
making process at the start...
Developments in Purchasing Practice
1. 1. Just-in-time purchasing.
2. 2. Centralised purchasing.
3. 3. Online purchasing.
...
Reverse marketing
Supplier Buyer
Supplier sells by taking initiative
Buyer takes initiative to persuade supplier to provid...
Relationship Marketing - CRM
Definition:
The process of creating, maintaining and
enhancing strong relationships with
cust...
Relationship Marketing
Centers 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 collaborativ...
Buyers and sellers craft different types of relationships in response to:
a) market conditions and
b) characteristics of t...
Managing Relationship Portfolio
• Mix of relationships based on customers.
• Collaborative Customers – build relationships...
Customer Profitability
High
Low
NetMarginRealized
Cost-to-Serve
Passive
• Product is Crucial
• Good Supplier Match
Costly ...
Customer Relationship Management
• A Continuing Dialogue with Customers,
• Across all their Contact and Access
Points, wit...
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 stage
Evaluation of a new potential suppl...
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Chapter 5 organisational buying behaviour

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Chapter 5 organisational buying behaviour

  1. 1. Understanding Organizational Buying Behaviour Jobber chap. 5
  2. 2. 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 Organizational PRODUCT CONSUMER PRODUCT
  3. 3. Some Examples of Organizational Buying Paper cups by McDonald's Computer chips by Toshiba Concrete by Local Authorities Oil by Electricity Generators Fertiliser by Farmers Accountancy services by Ltd. Companies TV’s by Comet or Dixons
  4. 4. Characteristics of Organizational Buying Derived demand Negotiations Risks Reciprocal buying Nature and size of customers Complexity of buying Economic and technical choice criteria Buying to specific requirements Organizational Purchases
  5. 5. Decision-making Unit Buyer Decider (Decision Maker) User Gatekeeper Influencer Decider Initiator
  6. 6. 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.
  7. 7. 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.
  8. 8. 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
  9. 9. Hitachi Hitachi reinforces the benefits of its eco- friendly rail-technology by featuring its benefits for passengers in this advert.
  10. 10. 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.
  11. 11. Choice Criteria Types. 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.
  12. 12. Choice Criteria Implications. 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.
  13. 13. 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
  14. 14. Buy Class Timetakenfordecision No. of people involved in buying centre Straight Rebuy New Task Modified Rebuy
  15. 15. 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.
  16. 16. 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.
  17. 17. 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.
  18. 18. Buy Class Implications: 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.
  19. 19. 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.
  20. 20. Reverse marketing Supplier Buyer Supplier sells by taking initiative Buyer takes initiative to persuade supplier to provide Traditional marketing Reverse marketing
  21. 21. Relationship Marketing - CRM Definition: The process of creating, maintaining and enhancing strong relationships with customers and other stakeholders.
  22. 22. Relationship Marketing Centers On: • Establishing, • Developing, and • Maintaining Successful exchanges with customers.
  23. 23. Transactional Exchange • Centers on timely exchange of basic products for highly competitive market prices.
  24. 24. Collaborative Exchange • Features close information, social, and operational linkages, as well as mutual commitments.
  25. 25. Types of Relationships • Buyer-seller relationships positioned on a continuum with transactional exchange and collaborative exchange serving as end points. The Relationship Spectrum
  26. 26. 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
  27. 27. 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.
  28. 28. Customer Profitability High Low NetMarginRealized Cost-to-Serve Passive • Product is Crucial • Good Supplier Match Costly to Service, but Pay Top Dollar Price Sensitive but Few Special Demands 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.
  29. 29. 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.
  30. 30. Learning to Retain Customers • Provide superior value to ensure high satisfaction. • Nurture trust and mutual commitment.
  31. 31. BASF BASF illustrate its commitment to having close relations with its customers in order to improve performance.
  32. 32. Development of buyer–seller relationships in Industrial Markets Pre-relationship stage Evaluation of a new potential supplier Early stage Negotiation of a trial Development stage Contract signed or delivery built up Long term stage Several major purchases or large-scale deliveries have been made Final stage Established patterns of trading in long-term stable markets

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