Organizational Buyer Behavior Chapter 7

2 Organizational Buying Process Market Structure & Demand –Derived demand – Created by companies / suppliers of products & services Types of Decisions & the Buying Process –More complex –Involves large sums of money –Can be exceedingly technical –More formal than Individual buying –Buyer & seller much more interdependent

3 Participants in the Buying Process “Buying Center” shares risk, benefits –Users: Final users of products/services Often initiate the buying process –Influencers: Influence the process but don’t actually make the final decision –Deciders: Select product requirements & suppliers –Approvers: Authorize proposed actions of deciders or buyers –Buyers: Have formal authority to select suppliers, arrange terms of sale, etc –Gate keepers: Have the power to prevent sellers or information from reaching any / all of the above

4 Organizational Seller’s Decisions Who is/are the major decision maker(s) What decisions do they influence What is their level of influence What criteria does each participant use What is the “Chain of Command” –Must follow protocol Should concentrate on /convince the “Decider”

5 Major Influences on Organizational Buyers Environmental Factors –Primary demand, economic outlook, etc.. Organizational Factors –Company objectives, policies, procedures,… Interpersonal Factors –Authority, status, empathy, persuasiveness Individual Factors –Age, education, job position, personality, etc

6 Organizational Buying Process 1.Problem Recognition 2.General Need Recognition 3.Product Specification 4.Supplier Search 5.Proposal Solution 6.Supplier Selection 7.Order-Routine Specification 8.Performance Review

7 Problem Recognition First step of the process Recognition of a need that can be met by a service or product External – for example, need created by marketers for some service / product Internal – for example, diverse employees require ESL classes / training

8 General Need Description What kind of product / service will solve the problem –Training materials –Physical facilities –Meeting space –Sleeping rooms –Other User should have input into the description

9 Product Specification Defines specific product –Name brand, size, weight, color, etc exact quantity –# of rooms, lbs. Dollar amount, etc Price to purchase or cost to produce Quality of product / service –May depend on level of use requires Once or many times

10 Supplier Search Who can best meet our needs Reputation of supplier Cost of product or service Location of supplier –Local or distant Delivery costs, shipping time, etc

11 Proposal Solution List of Suppliers reduced to several “most likely” Each supplier might bid on final purchase Seller must be skilled in sales presentations, sales process and must know something about the company

12 Supplier Selection Corporate “deciders” review potential suppliers’ proposals –Review supplier qualifications and relative importance of each attribute Price Delivery terms & processes Supplier reputation Problem resolution policies

13 Order-routine Specification Decision on final product / service is reached Contract terms negotiated –Cut-off dates –Guaranteed quantities Minimum and maximum –Breakage13 Services paid for but not used –Comps based on total usage –Penalties for non-performance

14 Performance Review Post purchase review –Did we get what we wanted, asked for, paid for If yes, would we use this supplier again –Maybe not, Probably, Yes, Without a doubt How serious were any problems If not, where do we go next time Did we make a good decision using this supplier / service

15 Group Business Markets Group business is critical to success Conventions Association meetings Corporate meetings SMERF’s

16 Conventions Annual meeting of specialty market –Often booked many years in advance Require lots of meeting space, F & B, rooms, etc. –Large conventions can have 1000s’ of members –Often handled by local Convention Bureaus Registration fees can be substantial Purpose of Convention is generally to promote common goals of organization Tradeshow is similar to convention, but purpose is to promote / sell products to potential buyers

17 Association Meetings 200,000+ association meetings a year Associations include just about any kind of group –Corporate, professional, education, etc Destination attributes are critical to Association buyers –Voluntary attendance at Assoc. meetings make marketing more critical

18 Corporate and Incentive Travel Attendance is often required May be called with little advance notice Major concern of buyers is that meetings are successful Want good food quality, meeting rooms, billing procedures for attendees Incentive travel is reward for top-selling employees of any company –Incentive travel usually pays for the best rooms, entertainment, F & B, etc.

19 SMERFs Social, Military, Educational, Religious, Fraternal May only meet once every couple of years Are generally very price sensitive Good “filler” for slow / off-peak periods

20 Corporate Meeting Planners Important to develop win-win for buyer & seller Meeting planners often return year after year to properties they like Corporate planners often use own in-house travel planners –Incentives are important to planners –For example, 1 comp room for each 25 paid for