THE MAKE, BUY, OR LEASE DECISION • Firms acquiring needed products can get them in one of three ways: • Make the good or provide the service in-house. • Purchase it from another organization. • Lease it from another organization. • Producing the item may be cheapest route, but most firms cannot make all of the products they need. • Many companies purchase many of the goods they need. • Companies can spread out costs through leasing.

THE RISE OF OFFSHORING AND OUTSOURCING • Offshoring Movement of high-wage jobs from one country to lower-cost overseas locations. • Example: China makes two-thirds of the world’s copiers, microwaves, DVD players, and shoes, and virtually all of the world’s toys. • Allows firms to concentrate their resources on their core business and access specialized talent or expertise. • Nearshoring Moving jobs to vendors in countries close to the business’s home country. • U.S. firms often nearshore in Canada or Mexico. • Outshoring Using outside vendors to provide goods and services formerly produced in-house. • Commonly outshore for three reasons: cost reduction, quality and speed of software maintenance and development, and greater value.

PROBLEMS WITH OFFSHORING AND OUTSOURCING • Many companies discover their cost savings are less than expected. • Can raise security concerns over proprietary technology or customer data. • Can reduce flexibility to respond quickly to marketplace. • Can create conflicts with unions, even leading to shutdowns and strikes. • Can negatively affect employee morale and loyalty.

THE BUSINESS BUYING PROCESS • More complex than the consumer decision process. • Takes place within formal organization’s budget, cost, and profit considerations. INFLUENCES ON PURCHASE DECISIONS Environmental Factors • Economic, political, regulatory, competitive, and technological considerations influence business buying decisions. • Example: Law freezing cable rates or introduction of new product by a competitor will affect demand. • Natural disasters, such as Hurricane Katrina. • Example: Rising fuel prices prompted Viking Energy Management to lock in fuel prices.

Organizational Factors • Successful marketers understand their customers’ organizational structures, policies, and purchasing systems. • Some firms have centralized procurement, others delegate it throughout the units. • Many companies use multiple sourcing to avoid depending too heavily on a sole supplier. Interpersonal Influences • Many different people influence B2B buying decisions, sometimes as individuals and sometimes as part of a committee. • Marketers must know who the influencers are and understand their priorities. • Sales personnel must be flexible and have a good technical understanding of their products.

The Role of the Professional Buyer • Many organizations rely on professionals, often called merchandisers, who implement systematic buying procedures. • Firms usually buy expense items with little delay but carefully consider capital purchases. • May rely on systems integration, centralization of the procurement function. • Corporate buyers often use the Internet to identify sources of supplies.

MODEL OF THE ORGANIZATIONAL BUYING PROCESS

Stage 1: Anticipate a Problem/Need/Opportunity and a General Solution • Example: Need to provide employees with a good cup of coffee to enhance productivity. Stage 2: Determine the Characteristics and Quantity of a Needed Good or Service • Example: Offering a coffee system that brews one cup of coffee at a time according to each employee’s preference. Stage 3: Describe Characteristics and the Quantity of a Needed Good or Service • Example: Firms need a simple system for brewing a good cup of coffee; quantity requirements are easily correlated to the number of coffee drinkers.

Stage 4: Search for and Qualify Potential Sources • Choice of supplier may be fairly straightforward or very complex. Stage 5: Acquire and Analyze Proposals • May involve competitive bidding, especially if the buyer is the government or a public agency. Stage 6: Evaluate Proposals and Select Suppliers • Buyers choose proposal best suited to their needs. • Final choice may involve trade-offs between feature such as price, reliability, quality, and order accuracy.

Stage 7: Select an Order Routine • Buyer and vendor work out best way to process future purchases. Stage 8: Obtain Feedback and Evaluate Performance • Buyers measure vendors’ performance. • Larger firms are more likely to use formal evaluation procedures. • Some firms rely on outside organizations to gather quality feedback and summarize results. • Example: J. D. Power and Associates

CLASSIFYING BUSINESS BUYING SITUATIONS • Business buying behavior involves degree of effort involved in the decision and the levels within the organization in which these decisions are made. Straight Rebuying • A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. • Purchaser see little reason to assess competing options. • Marketers who maintain good relationships with customers can go a long way toward ensuring straight rebuys. • High-quality products. • Superior service. • Prompt delivery.

Modified Rebuying New-Task Buying • Purchaser willing to reevaluate available options. • May occur if supplier has let a rebuy circumstance deteriorate because of poor service or delivery performance. New-Task Buying • First-time or unique purchase situations that require considerable effort by the decision makers. • Most complex category of business buying. • Often requires purchaser to consider alternative offerings and vendors.

Reciprocity ANALYSIS TOOLS • Practice of buying from suppliers that are also customers. • In U.S., Department of Justice and the Federal Trade Commission view reciprocity as an attempt to reduce competition. ANALYSIS TOOLS • Value analysis—examines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute. • Vendor analysis—an ongoing evaluation of a supplier’s performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.

THE BUYING CENTER CONCEPT • Buying center Participants in an organizational buying action. BUYING CENTER ROLES

INTERNATIONAL BUYING CENTERS • Marketers may have difficulty identifying members of foreign buying centers. • Foreign buying centers often include more participants than those in U.S. • Marketers who can quickly identify decision makers have an advantage over competition. TEAM SELLING • Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision. • May include members of the seller firm’s own supply network in the sales situation. • Example: Reseller of specialized computer applications whose clients require access to training.

DEVELOPING EFFECTIVE BUSINESS-TO- BUSINESS MARKETING STRATEGIES • Marketer must develop strategy based on particular organization’s buying behavior and on the buying situation. CHALLENGES OF GOVERNMENT MARKETS • Government agencies make up the largest customer group in the U.S. • More than 85,000 government units buy products. • Purchases typically involve dozens of interested parties. • Influenced by social goals, such as minority subcontracting programs. • Can have either fixed-price contracts or cost-reimbursement contracts.

Government Purchasing Procedures • Many purchases go through Government Services Agency, a central management agency. • By law, most federal government purchases must go through a complex bidding process governed by the Federal Acquisition Regulation. • Recent reforms have sped purchasing and increased flexibility. • State and local governments follow procedures similar to federal government. Online with the Federal Government • Government buyers often rely on electronic commerce. • GSA Advantage allows government buyers to make purchases online at preferred government prices. • Many government units lag behind the private sector in electronic procurement procedures.

CHALLENGES OF INSTITUTIONAL MARKETS • Institutional buyers include schools, hospitals, libraries, foundations, and others. • Have widely diverse buying practices among, and even within, institutions. • Multiple buying influences can affect buying decisions, such as conflicts between professional staff and purchasing departments. CHALLENGES OF INTERNATIONAL MARKETS • Marketers must consider buyers’ attitudes and cultural patterns. • Local industries, economic conditions, geographic characteristics, and legal restrictions must also be considered. • Remanufacturing, or restoring worn-out products to like-new condition, can be an important strategy in places that cannot afford new products. • Foreign governments are also an important market.