Transcript Organizational Buying Behavior

Factors Influencing
Business-to-Business
Purchasing
WHAT COMPANIES REALLY PAY
FOR OWNERSHIP
• Cost of ownership goes beyond the price
paid for a product
• TOTAL COST OF
OWNERSHIP = PRODUCT PRICE
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DELIVERY
INSTALLATION
MAINTENANCE / REPAIR
POWER COSTS
SUPPLY COSTS
OPERATING COSTS
FINANCING
Steps in the Business Buying Process
1.
2.
Recognizing the need
Developing product specifications
a)
b)
3.
Soliciting bids from potential suppliers
a)
b)
4.
Supplier search
Acquisition of proposals
The Make or Buy Decision
a)
b)
5.
6.
7.
General description of need
Detailed & precise product specifications
If decision is to make, process stops
If decision is to outsource, supplier is chosen
Negotiation / Issuing the contract
Inspecting delivered shipment for completeness & quality
Evaluating vendor performance
Quotations and Contracts
• RFQ: Request for Quotation
• RFP: Request for Proposal
• Boilerplate:
– Standard legal clauses (fine print) on
RFQs, your bid, and the customer’s
order.
– May contain terms of sale that
contradict terms on your bid, and often
contain penalties for nonperformance.
Types of Business Buying Situations
• New-task buy:
– Business buying situation that is new and very different
from anything that the buyer has faced previously.
• Straight rebuy:
– Most common type of business buying situation; buyer
purchases a part, material, or service routinely, with
little thought going into buying process.
• Modified rebuy:
– Reevaluation of alternatives; necessary because buying
requirements have changed such that relatively routine
buy or purchase no longer is routine.
Examples of Products Purchased Using
the Buy-Class
Modified
Rebuy
Straight
Rebuy
Office
Supplies
Pure
routine
Vehicles
Consulting
Services
Installations
Complete
negotiation
Electrical
Components
Electricity
Gas/Water
Bulk
Chemicals
New
Buy
Computer
Systems
Moon Shot
Insurance
Insurance for the Apollo 11 Moonshot
Buygrid Analysis Framework
New
Buy
Modified
Rebuy
Straight
Rebuy
Need Recognition
Develop Product Specifications
Solicit Bids
Complexity of
Buying Situation
Make or Buy Decision
Negotiate / Issue Contract
Inspect Shipment
Evaluate Vendor Performance
Creeping
Commitment
Multi-Attribute Theory
• Product offerings are bundles of
attributes.
• Attributes provide benefits.
• Benefits satisfy needs.
• Buyers differ in their needs, therefore
• Buyers differ in the importance they
place upon various attributes.
• Some buyers seek to maximize the set of
attributes.
• Others seek to satisfy most important
attributes first.
Role Theory
• The differing roles people play (in business,
society, or life in general) have differing
norms and expectations.
• Examines how people interact in the Buying
Center (more than one person is involved in
the purchasing decision.)
• In many cases, the buying center is an
informal, complex, changing group.
• In other cases, it is a formal part of the
organization (such as cross-functional
teams)
The Buying Center
• Consists of those individuals
–who participate in the purchasing
decision and
–who share the goals and risks
arising from the decision
• Average buying center includes
more than 4 persons per
purchase
Roles of Buying Center Members
• User
– Will use product in question; minimal - major influence
• Buyer
– Assigned formal authority to select vendors and
complete purchasing transaction.
• Gatekeeper
– Tight controller of information flow to other buying
center members; can open/close gate for salespeople.
• Influencer
– Provides information to other members for evaluating
alternative products or sets purchasing specifications;
can operate within/outside buying center.
• Decider
– Makes buying decision; often difficult to ID.
JSU’s Buying Center for the iPad
• User
– Faculty members that will use the iPad
• Buyer
– JSU’s purchasing department
• Gatekeeper
– Administrative assistants such as Dean Fielding’s
assistant, Ms. Roberts
• Influencer(s)
– Distance Education Department
– Information Technology Department
– College of Education
• Decider
– University Provost, Dr. Rebecca Turner
Buying Center Dimensions
• Time
– Time fragmentation: length of time people
are in the buying center.
– Limits members’ influence
– Can lengthen decision making time due to
inexperience
• Vertical
– Layers of management involved
• Horizontal
– Number of departments involved
Clues for Identifying Powerful
Buying Center Members
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Know purchasing’s true role
Trace connections to the top
Isolate personal stakeholders
Identify experts
Follow the information flow
Individual Forces
• Evaluative criteria
– education, training, experience
• Information Processing
– selective exposure, attention,
perception, and retention
• Risk-Reduction Preferences
– level of uncertainty about outcomes
– magnitude of consequences associated
with incorrect choice
Selective Perception
•Impacts how your buyer views and understands
the world
•Impacts how your buyer views risk
Selective exposure.
Selective attention.
Selective retention.
Impact of Increasing Levels of
Perceived Risk
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Buying center becomes larger
Higher level managers become involved
Information search more active
Wider variety of info sources accessed
Buying center members exert more effort
Sellers with proven track records tend to
be more favored
• Product quality & after-sale service tend
to become more important than price