Understanding Business Markets

2  Fewer Buyers, Larger-sized Buyers  Close Supplier-Customer Relationships  Professional Purchasing (Tender, RFQ, Prop, Purch Contracts)  Several Buying Influences  Multiple Sales Calls  Derived Demand Business Buying

3  Geographically concentrated buyers (e.g. auto ancillary near Delhi/Gurgaon, Software in Blr/Hyd)  Direct Purchasing Business Buying

4  Straight Rebuy  Modified Rebuy  New Task SYSTEMS BUYING OR SELLING: Buying a total solution to a problem from one seller Buying Situations

5 The Buying Centre  A group of individuals who participate in decision making process – share the common goals and risks  There are seven different roles – Initiator, Influencer, Decider, Approver, Buyer, Gatekeeper, User  One individual can play multiple roles Participants in Business Buying Process

6 Each individual has different priority  Engg personnel – Maximize productivity, Finance – Economies… similarly for Purchase, etc. …So, different influences, Different buying styles …”Keep-it-simple” buyers, “Own-expert” buyers, “Want-the-best” buyers, etc Buying Centre Influences

7  Who are the major decision makers?  What decisions do they influence?  What is the level of influence?  What criteria are used? Small Sellers: Key buying influencers Large Sellers: Multi-level in-depth selling Buying Centre Targeting

8  Price Oriented Customers (Transactional Selling) – Price is Everything  Solution-Oriented Customers (Consultative Selling) – Not only on costs but also dependable supply or service  Gold-Standard Customers (Quality Selling) – Best performance in Quality, Supply, Reliable service  Strategic-Value Customers (Enterprise Selling) – Permanent Sole Supplier relationship Buying Centre Target Segments

9  Purchasing Orientation – Short-term, tactical. Rewards for lowest price. Commoditization or Multi-sourcing  Procurement Orientation – Quality is important. Collaborative relationship. Supplier is involved in material handling, inventory control, etc  Supply Chain Management Orientation –Strategic, value-added role. Supplier very closely involved in (and almost takes entire control of!!) the entire procurement process PURCHASE / PROCUREMENT PROCESS

10  Routine Products: Low value and Little Risk of Supply (e.g. Office Supply)  Leverage Products: High value and Low Risk of Supply (e.g. Engine Pistons)  Strategic Products: High value and High Risk of Supply (e.g. Mainframe Computers)  Bottleneck Products: Low value and High Risk of Supply (e.g. Spare parts) Type of Procurement Process (by Products)