Transcript Introduction to Class What will this class be like?

Chapter 3
Buying Behavior and the Buying
Process
Types of Customers
Producers
• buy goods and services to manufacture and sell other
goods and services to their customers
Original Equipment Manufacturers
• when buyers purchase goods to use in making their
products
• some components have such a high reputation they help
sell the product
• most bought in large quantities on an annual basis
Continued
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End Users
action when producers buy goods and services to support their
own production and operations
Capital equipment- major purchases that the producer uses
for a number of years (Ex. Mainframe computers and machine
tools)
MRO supplies- minor purchases that have a short useful life
(Ex. Paper towels and pencils)
Resellers
• buy furnished products or services with the intention to resell
them to businesses and consumers
• interested primarily in the attractiveness of the products to their
customers
Continued
Government – (Federal, State, & Local)
• Largest customer for goods and services in the U.S. & the world!
(over $1 trillion in goods and services annually)
• Buyers bidding
• Effective selling requires a thorough knowledge for their unique
procurement procedures and rules
• Many international salespeople
Continued
Institutions
• Public and private (ex.churches, hospitals, and colleges)
• institutional
Packaged goods manufacturers sell to both resellers &
customers
Consumers
• End users vary for consumers
• Text
focuses on selling to business enterprises, government
agencies, or institutions
(A large number of college graduates frequent these sales
positions)
Organizational Buying and Selling
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Complexity of the Organizational Buying Process
involve extensive evaluations and negotiations over a period
of time
salespeople must be able to work effectively with a wide
range of people
increased complexity with increased global businesses
Derived Vs. Direct Demand – See P. 65
Derived demand- purchase made by these customers
ultimately depend on the demand for their products-either
other organizations or consumers
Direct demand increases its efforts toward the ultimate
consumer
(Strategy: increasing in-store displays)
The Organizational Buying Process
Steps in the buying process:

Recognizing a Need or a Problem
 Defining the Product Needed
 Development of Specifications
 Searching for Qualified Suppliers
 Acquiring and Analyzing Proposals
 Evaluation of Proposals and Selection of a Supplier
 Placement of an Order and Receipt of Product
 Evaluation of Product Performance
Continued
Creeping commitment- a customer becomes increasingly
committed to a particular course of action while going
through the steps in the buying process
Types of Organizational Buying
Decisions
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New Task – See Exhibit 3.2-P.69
a customer purchases a product or service for the first time
company’s knowledge is limited; initial buying process
steps/post purchase evaluation is critical
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Straight Rebuy
a customer buys the same product from the same source it
used when the need arose previously
brand loyalty
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Modified Rebuy
the customer has purchased the product or a similar product
in the past but is interested in obtaining new information
Who Makes The Buying Decision

Buying center- an informal, cross-department group of
people involved in a purchase decision
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Users
typically don’t make the ultimate purchase decision
considerable influence in the early and late steps of the
buying process
Initiators
people who start the buying process – can be user or
executive
Continued
•
Influencers
people inside or outside the organization who directly or
indirectly provide information
•
Gatekeepers
control the flow of information and may limit the
alternatives considered
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Deciders
one or more members of a group that make the final choice
mostly senior executives
Supplier Evaluation and Choice

Affected by the needs of both the organization and the
individuals making the decisions
Classified into two categories:
Rational needs- directly related to the performance of a
product
Emotional needs- associated with the personal rewards
and gratification of the person buying the product
Organizational Needs and Criteria
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Economic Criteria
Objective of businesses: Profit
achieve price efficiency by evaluating the cost of
equipment
Life-cycle costing (total cost of ownership)- method for
determining the cost of equipment or suppliers over their
useful lives
Quality Criteria
Need for quality varies by industry group and ultimate
market reached
Life-Cycle Costing
Continued
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Service Criteria
buyers want suppliers to work with them to solve their
problems
Value analysis- an example of a program in which
suppliers and customers work together to reduce costs and
still provide the required level of performance (can use to
get customers to try a new product)
Individual Needs of Buying Center
Members
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Types of Needs
influence members of the buying center by developing
strategies to satisfy individual needs
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Risk Reduction
Buying center sometimes more concerned about losing
benefits than increasing benefits
Vendor loyalty- continue buying from suppliers that have
proven satisfactory in the past
Always-a-share – always have a second source for a
product
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Trends In Organizational Buying
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Increasing Importance of Purchasing Agents
Critical function in the learning organization
Heavy emphasis on computer information and control
systems
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Centralized Purchasing & Supply Chain Management
More purchasing is done at a central location (corporate
headquarters)
A national account manager coordinates the firm’s
efforts to satisfy the needs of a major customer
A NAM works directly with the purchasing department
and coordinates the activities of its salespeople
Supply Chain Management
Definition: a set of programs undertaken to
increase the efficiency of the distribution that
moves products from the producer’s facilities
to the end user
Just-in-time (JIT) inventory control- used by
a producer to minimize its inventory by having
frequent deliveries, sometimes daily, just in
time for assembly into the final product
Supply Chain Management
Quick response or efficient consumer response
(ECR) systems
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retailers & distributors work closely with their
suppliers to make sure they minimize their
inventory investments, while cutting costs &
satisfying customers
Supply Chain Management
Automatic replenishment – AR
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Form of JIT were supplier manages
inventory levels for customers. Materials
provide on consignment. Used in industrial
settings.
See Exhibit 3.6 – Page 83
Supply Chain Management
Electronic Data Interchange – EDI
 Automatic replenishment technology used
electronic data interchange.
 Computers share data across companies
Materials Requirements Planning – MRP
 Important element of JIT systems
 Forecast sales, schedules, etc.
Supplier Relationship
Management (SRM)
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Strategy to evaluate buyers
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Identify annual spending
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Vendor analysis next
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Track results
Vendor Analysis
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Summarizes the benefits and needs satisfied by a supplier
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Buyer rates the supplier and its products on a number of
criteria (quality, on-time delivery, price & other)
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They are then weighed by importance
See exhibit 3.7 – P. 86
Business-to-Business Selling
The Internet
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Web is a Tool for supporting salespeople
 Reverse auction – buyer offers a contract &
sellers bid
 Can save time & money
 Best used with large purchases, clear
descriptions, & a good infrastructure to
support an auction
Case – Midwest Surgical
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Read thoroughly – class discussion will follow
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Will go over in class – questions from the case
will be on the test