Copyright © 2003 Prentice-Hall, Inc. 8-1 Chapter 8 Analyzing Business Markets and Business Buying Behavior by PowerPoint by Milton M. Pressley University of New Orleans

Copyright © 2003 Prentice-Hall, Inc. 8-2 Kotler on Marketing Many businesses are wisely turning their suppliers and distributors into valued partners. Many businesses are wisely turning their suppliers and distributors into valued partners.

Copyright © 2003 Prentice-Hall, Inc. 8-3 Chapter Objectives  In this chapter, we focus on six questions:  What is the business market, and how does it differ from the consumer market?  What buying situations do organizational buyers face?  Who participates in the business buying process?  What are the major influences on organizational buyers?  How do business buyers make their decisions?  How do institutions and government agencies do their buying?

Copyright © 2003 Prentice-Hall, Inc. 8-4 What is Organizational Buying?  Organizational buying  The business market versus the consumer market  Business market  Fewer buyers  Larger buyers  Close supplier-customer relationship  Geographically concentrated buyers

Copyright © 2003 Prentice-Hall, Inc. 8-5 What is Organizational Buying?  Derived demand  Inelastic demand  Fluctuating demand  Professional purchasing

Copyright © 2003 Prentice-Hall, Inc. 8-6 Blue Shield of California’s mylifepath

Copyright © 2003 Prentice-Hall, Inc. 8-7 What is Organizational Buying?  Several buying influences  Multiple sales calls  Directed purchasing  Reciprocity  Leasing

Copyright © 2003 Prentice-Hall, Inc. 8-8 If you were tasked with marketing a product or service to an organization, would you attempt to initially contact the purchasing department, or potential users of your company’s offerings? Why? Would the product you were selling make a difference? Why?

Copyright © 2003 Prentice-Hall, Inc. 8-9 What is Organizational Buying?  Buying Situations  Straight rebuy  Modified rebuy  New Task  Systems Buying and Selling  Systems buying  Turnkey solution  Systems selling

Copyright © 2003 Prentice-Hall, Inc What are some of the benefits to an organization that can be derived from a single source solution, or a systems buying arrangement with a prime contractor? What are some of the potential pitfalls? What can the company do to protect itself from these hazards?

Copyright © 2003 Prentice-Hall, Inc Participants in the Business Buying Process  The Buying Center  Initiators  Users  Influencers  Deciders  Approvers  Buyers  Gatekeepers  Key buying influencers  Multilevel in-depth selling

Copyright © 2003 Prentice-Hall, Inc Figure 8-1: Major Influences on Industrial Buying Behavior

Copyright © 2003 Prentice-Hall, Inc Major Influences on Buying Decisions  Environmental Factors  Organizational Factors  Purchasing-Department Upgrading  Cross-Functional Roles  Centralized Purchasing  Decentralized Purchasing of Small-Ticket Items  Internet Purchasing

Copyright © 2003 Prentice-Hall, Inc The e-hub Plastics.com home page offers buyers and sellers of plastics a marketplace plus news and information

Copyright © 2003 Prentice-Hall, Inc Covisint’s Web site offers both services and information

Copyright © 2003 Prentice-Hall, Inc Major Influences on Buying Decisions  Other Organizational Factors  Long-Term Contracts  Vendor-managed inventory  Continuous replenishment programs  Purchasing-Performance Evaluation and Buyers’ Professional Development  Improved Supply Chain Management  Lean Production  Just-in-time

Copyright © 2003 Prentice-Hall, Inc Major Influences on Buying Decisions  Interpersonal and Individual Factors  Cultural Factors  France  Germany  Japan  Korea  Latin America

Copyright © 2003 Prentice-Hall, Inc The Purchasing/ Procurement Process  Incentive to purchase  Three Company Purchasing Orientations  Buying Orientation  Commoditization  Multisourcing  Procurement Orientation  Materials requirement planning (MRP)  Supply Chain Management Orientation

Copyright © 2003 Prentice-Hall, Inc The Purchasing/ Procurement Process  Types of Purchasing Processes  Routine products  Leverage products  Strategic products  Bottleneck products

Copyright © 2003 Prentice-Hall, Inc The Purchasing/ Procurement Process  Stages in the Buying Process  Problem Recognition  General Need Description and Product Specification  Product value analysis  Supplier Search  Vertical hubs  Functional hubs  Direct external links to major suppliers  Buying alliances  Company buying sites  Request for proposals (RFPs)

Copyright © 2003 Prentice-Hall, Inc Table 8.1: Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses) Buyclasses NewModifiedStraight TaskRebuyRebuy 1. Problem recognition YesMaybeNo 2. General need description YesMaybeNo 3. Product specification YesYesYes Buyphases 4. Supplier search YesMaybeNo 5. Proposal solicitation YesMaybeNo 6. Supplier selection YesMaybeNo 7. Order-routine specification YesMaybeNo 8. Performance review YesYesYes

Copyright © 2003 Prentice-Hall, Inc The Purchasing/ Procurement Process  General Need Description and Product Specification  Product value analysis  Supplier Search  Vertical hubs  Functional hubs  Direct extranet links to major suppliers  Buying alliances  Company buying sites  Request for proposals (RFPs)

Copyright © 2003 Prentice-Hall, Inc The Purchasing/ Procurement Process  Proposal Solicitation  Supplier Selection

Copyright © 2003 Prentice-Hall, Inc Table 8-2: An Example of Vendor Analysis Attributes Rating Scale ImportanceWeightsPoor(1)Fair(2)Good(3)Excellent(4) Price.30x Supplier reputation.20x Product reliability.30x Service reliability.10x Supplier Flexibility.10x Total score:.30(4) +.20(3) +.30(4) +.10(2) +.10(3) = 3.5

Copyright © 2003 Prentice-Hall, Inc The Purchasing/ Procurement Process  Customer value assessment  Routine-order products  Procedural-problem products  Political-problem products  Order-Routine Specification  Blanket contract  Stockless purchase plans  Performance Review  Buyflow map

Copyright © 2003 Prentice-Hall, Inc Figure 8-2: Major Influences on Industrial Buying Behavior

Copyright © 2003 Prentice-Hall, Inc Institutional and Government Markets  Institutional market