MAR Chap 1
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MAR5409_PPT_ch02.pptx0
Chapter 2 Organizational Buying Behavior
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The decision journey organizational buyers follow in making purchase decisions and the resulting strategy implications for the business marketer
The types of buying situations that business customers confront and the appropriate strategy response for each
The individual, group, organizational, and environmental variables that influence organizational buying decisions
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Chapter Outline
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A model of organizational buying behavior that integrates these important influences
How a knowledge of organizational buying characteristics enables the marketer to make more informed decisions about product design, pricing, and promotion strategies
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Chapter Outline (continued)
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Marketers need to recognize how digital media channels have altered the customer decision process
Marketers need to focus on driving advocacy rather than on media spending
Customer Decision Journey
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Problem recognition
General description of need
Product specification
Supplier search
Acquisition and analysis of proposals
Supplier selection
Selection of order routine
Performance review
Organizational Buying Process
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Includes:
Websites, user communities, and Internet search engines
New forms of communication
Mobile and wireless devices
Expanded and enhanced electronic word-of-mouth methodologies, including new technologies
LinkedIn, salesforce.com, Facebook, Twitter, industry-specific blogs
Customer-Driven Pull System
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Types of Buying Situations
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New task
Modified rebuy
Straight rebuy
Problem or need is different from previous experiences
Require extensive information to explore alternative ways of solving the problem
Extensive problem solving: Stage of decision-making that buyers operate in because they lack:
Well-defined criteria for comparing alternative products and suppliers
Strong predispositions toward a particular solution
New Task Buying Situation
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Judgmental new-task situations
Greatest level of uncertainty exists as there is little information or experience to support a decision
Decision-makers conduct information search to analyze key aspects of the buying decision
Strategic new-task decisions
Involve long-range planning, larger investments, and increased risk if they are wrong
Buying Decision Approaches
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Problem or need that is recurring or a continuing requirement
Requires little or no new information
Routine problem solving: Organizational buyers apply well-developed choice criteria to the purchase decision
Straight Rebuy
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Casual purchases
Involve no information search or analysis
Product or service is of minor importance
Routine low priority approach
Decisions are more important
Involve a moderate amount of analysis
Buying Decision Approaches (continued)
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Marketing task appropriate depends on whether the marketer is an in supplier or an out supplier
In supplier must:
Reinforce the buyer-seller relationship
Meet the buying organization’s expectations
Be responsive to the changing needs of the organization
In and Out Supplier
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Out supplier must:
Convince the organization that it can derive significant benefits from breaking the routine
Have an understanding of the basic buying needs of the organization
Persuade decision makers to reexamine alternative solutions
Revise the preferred list to include the new supplier
In and Out Supplier (continued)
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Decision makers feel significant benefits can be derived by reevaluating alternatives
Factors that affect reevaluation
Internal forces - Search for quality improvement and cost reductions
External force - Cost, quality, or service improvements offered by the marketer
Occurs when the firm is displeased with the performance of present suppliers
Modified Rebuy
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Simple modified rebuy
Involves a narrow set of choice alternatives and a moderate amount of both information search and analysis
Complex modified rebuy
Involves a large set of choice alternatives and poses little uncertainty
Buying-Decision Approaches
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Figure 2.2 - Organizational Buying Behavior
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Economic influences
Marketer must be sensitive to the strength of demand in the ultimate consumer market
Best cost approach - Evaluates trade barriers and the inherent risks of longer supply chains
Technological influences
Fast pace of change implies that distinct benefits are associated with search effort and the acquired information is time sensitive
Environmental Forces
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Growing influence of purchasing
Companies outsource many activities and, as a result, procurement remains a strong influence
Ensuing in a shift to more professional procurement positions
Chief procurement officer’s (CPO) role
Delivering cost savings, improving asset utilization, preserving supplier viability, and procuring materials in a socially and environmentally responsible way
Organizational Forces
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Strategic priorities in purchasing
Corporate goals and priorities grow as the purchasing profession grows
Procurement managers give increased emphasis to suppliers’ capabilities
Explore new areas where a strategic supplier can add value to the firm’s product or service offerings
Organizational Forces (continued 1)
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Figure 2.3 - Strategic Priorities
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Procurement manager’s toolkit
Calculating the total cost of ownership of an acquired good or service
Deploying e-procurement processes
Conducting reverse auctions
Organizational Forces (continued 2)
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Considers the full range of costs associated with the purchase and use of a product or service over its complete life cycle
Acquisition costs: Selling price and transportation costs, administrative costs of evaluating suppliers, expediting orders, and correcting errors in shipments
Possession costs: Financing, storage, inspection, taxes, insurance, and other internal handling costs
Total Cost of Ownership (TCO)
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Usage costs: Associated with ongoing use of the purchased product
Installation, employee training, user labor, field repair, and product replacement and disposal costs
Total Cost of Ownership (TCO) (continued)
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Provide customers with a lower cost-in-use solution
Seek to move the selling proposition
From one that centers on current prices and individual transactions to a longer-term relationship built on value and lower total cost-in-use
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Value-based Sales Tools
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E-procurement
Purchasing managers use the Internet to find new suppliers, communicate with current suppliers, or place an order
Reverse auctions
Involves one buyer who invites bids from several prequalified suppliers who face off in a dynamic, real-time, competitive bidding process
Best suited for commodity-type items
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E-Procurement and Reverse Auctions
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Preempt the auction
Convince the buyer not to go forward with the auction as the firm has a unique value proposition and is not inclined to participate
Manage the process
Influence bid specifications and vendor qualification criteria
Walk away
Simply refuse to participate
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Strategic Approach to Reverse Auctions
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Separate organizational unit that has authority for purchases at a regional, divisional, or headquarters level
Marketer who is sensitive to organizational influences can:
Accurately map the decision-making process
Isolate buying influentials
Identify salient buying criteria
Target marketing strategy for centralized buyers
Centralized Purchasing
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Enterprise-wide initiative to develop strategic relationships with a limited number of customers
To achieve long-term, sustained, significant, and measurable business value for both the customer and the provider
Global account management program
Treats a customer’s worldwide operations as one integrated account
Key Account Management
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Buying center
Consists of individuals who participate in the purchasing decision and share the goals and risks arising from the decision
Plays a vital bridging role in the firm by:
Connecting key personnel across departments who have a stake in a particular buying decision
Facilitating the flow of information and knowledge across units
Group Forces
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Steps involved
Defining the buying situation
Determining whether the firm is in the early or later stages of the procurement decision-making process
Composition may vary and is not prescribed by the organizational chart
Can be predicted by projecting the effect of the industrial product on various functional areas in the organization
Group Forces (continued)
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| User | Personnel who use the product in question and can be inconsequential or major players in the process |
| Gatekeepers | Control information to be reviewed by members of the buying group |
| Influencers | Affect the purchasing decision by providing information for the evaluation of alternatives or by setting buying specifications |
| Deciders | Make the buying decision, whether or not they have formal authority to do so |
| Buyer | Has formal authority to select a supplier and implement all procedures connected with securing the product |
Buying Center Roles
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Identifying Powerful Buying Center Members
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Isolate the personal stakeholders
Follow the information flow
Identify the experts
Trace the connections to the top
Understand purchasing’s role
Differing evaluative criteria
Evaluative criteria: Specifications that organizational buyers use to compare alternative industrial products and services
Responsive marketing strategy
Prepared by marketer who is sensitive to differences in product perceptions and evaluative criteria of individual buying center members
Individual Forces
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Selective process
Selective exposure - Accept communication messages consistent with existing attitudes and beliefs
Selective attention - Filter or screen incoming stimuli to admit only certain ones to cognition
Selective perception - Interpret stimuli in terms of existing attitudes and beliefs
Selective retention - To recall information pertinent to own needs and dispositions
Individual Forces (continued 1)
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Risk-reduction strategies
Perceived risk components
Uncertainty about decision outcomes
Magnitude of consequences associated with making a wrong selection
Individual decision making occurs in organizational buying for straight rebuys and for modified rebuys when the perceived risk is low
Individual Forces (continued 2)
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Confronting risk
Buying center becomes larger and comprises members with high levels of organizational status and authority
Information search is active and a wide variety of information sources are consulted
Buying center members invest greater effort and deliberate more carefully throughout the purchase process
Sellers who have a proven track record are favored
Individual Forces (continued 3)
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