1. B2B Marketing The Organization Buying Process XIME–RS–03
Amarnath Krishnaswamy

2. Plan for this Session
Building relationships
Buying behaviour

3. Building Relationships

4. It’s importance …
Knowledge of the ways and means adopted by an organization for the procurement of its needs is the first step in developing a strategy to cater to these needs

5. Buying Process The buying process is:
An ‘exchange ‘ process between buyers & sellers
Involves a decision
That comes through an ‘evaluation’
Establishes a ‘relationship’ between the buyer and the seller
The seller’s objective is to make it to the last ‘A’ on “AIDA”!!

6. Exchange process - Centres
The exchange process brings 2 centres into play
Selling centre
Gets all the information &executes selling strategy
Buying centre
Group that ‘share’ goals & risks of purchasing action
Composition of group decided by need, usually functional

7. Buying – Selling process
Marketing
Purchasing
Manufacturing
Selling
Buying
R & D
Engineering
Distribution
Marketing

8. Stages in a ‘buying process’
8 stages in the buying process:
Recognition of need & a solution
Establish specifications & quantity of the item needed
Describe them to the prospective vendor
Search for prospective vendors
Obtain proposals
Evaluate proposals
Select a vendor
Evaluate performance and feedback

9. Stages in a ‘buying process’
8 stages in the buying process:
Recognition of need & a solution
Establish specs & quantity of the item needed
Describe them to the prospective vendor
Search for prospective vendors
Obtain proposals
Evaluate proposals
Select a vendor
Evaluate performance and feedback

10. Buying situations There are 3 types of buying situations:
New task
Straight rebuy
Modified rebuy
Each of these types must be looked at in terms of the 8 stages

11. 1. New Task The “New task” can fall into 2 categories Judgmental
New activity – with no prior data or experiences to fall back on
Unpredictable. Requires ‘judgment’.
Strategic
Of great importance – strategically and financially - to the organization, even for the routine items of purchase

12. 1. New Task - Guidelines Gain an advantage by:
Being involved from the beginning in the ‘New task”
Those already ‘in’ have distinct advantage in getting first access to the information

13. 2. Straight rebuy Characterized by: Recurring requirement
Buyers know the ‘business’ – especially the selection criteria
Suppliers have already been evaluate
Conditioned, ‘Pavlovian’ response to new suppliers

14. 2. Straight rebuy - Guidelines
As the ‘purchase’ is routine, and the approach is likely to be casual: “In” supplier: Reinforce position – that you’re the best. “Out” supplier: Develop a relationship. Wait for an opportunity.

15. 3. Modified rebuy
‘Purchase’ needs constant analysis and evaluation as changes could yield significant benefits
Examples
Import substitution
Direct relationship with manufacturer – cutting out middlemen

16. 3. Modified rebuy - Guidelines
Again, would depend on current status:
“In” supplier:
Work towards moving the item into “straight rebuy” category
Nip moves to source afresh in the bud – be proactive
“Out” supplier:
Hold buyer in “uncertainty”
Determine factors that made buyer want to take a fresh look
Offer benefits not given by others

17. The “Influentials” Every buying process would have some “influentials”
They could change – depending on the stage the purchasing process is in
Important to identify them

18. Evaluating potential suppliers
Seller cannot afford to be ‘filtered’ out at any stage, especially at the start
Would apply to ‘product’ and ‘capability’
Need to understand, and account for, factors that could influence the buyer
Rational factors: e.g. economic
Emotional factors:
Both can vary – person, functional area etc
Seller must identify these factors quickly
Both get translated into “value”

19. Measuring value “Value analysis” – used to measure the value
Commonly used:
Value-in-use
Calculates value based on total cost of usage over a period

20. Measuring capability Many areas: Technical / production capability
Managerial capability
Financial
Service
Quality
Supplier would be evaluated on each, and an index developed for supplier / product

21. Relationship management - Transaction
Relationship between supplier and buyer can be classified on the character of the transaction:
Pure Transaction: One time
Repeated Transaction: Frequent, but essentially ‘one-time’ type transactions
Long term: Relationship is still adversarial in nature
Partnership: Working together
Alliance: Working together towards a shared goal

22. Relationship management – Duration & Cost
Relationships can also be looked at from the duration of the relationship, and the cost involved in switching suppliers.
Lost-for-Good Customers:
Unlikely to change suppliers
High cost involved to change
Benefits of switch not commensurate with the risk

23. Relationship management – Duration & Cost
Always-a-Share Customer:
Ever willing to switch!
Low switching cost
Perspective – transaction to transaction
Intermediate Customer:
In between
Flaring-out by Unbundling
Flaring-out with Augmentation

24. Relationship management - Strategy
A) Flaring-out by Unbundling
From total package to core
Price lowered at each step
Price of consolidated bundle less than aggregate of each
Useful for transaction type customers
B) Flaring-out with Augmentation
Collaborative
Product enriched by features valued by customer
Price premium on package

25. Buying Behaviour

26. It’s importance
Buyer is influenced by forces within and without his organization
Necessary to understand these forces, and how they have changed, for the seller to respond effectively to them

27. Forces impacting behaviour
Organizational behaviour impacted by primarily four forces:
Environmental forces
Organizational forces
Group forces
Individual forces

28. Environmental forces 6 types: Economic Political & Legal Cultural
Physical
Technological
Environmental Uncertainty

29. Environmental Forces 1. Economic Very rational
Demand is derived (industrial products); hence final consumer market has to be watched very carefully
The same economic force could have a differential impact, and not impact demand equally for all products. Could complicate issues.
(Example: Impact of interest rates on various sectors)

30. Environmental Forces 2. Political & Legal Rational – generally!
Examples:
1. EEC rules governing imports
2. Preferred status – for many countries
3. State incentives (Setting up automobile units)
4. “Sons of the soil” policy
5. Reservations

31. Environmental Forces 3. Cultural 4. Physical Examples:
1. Women – in the Gulf countries
4. Physical
1. Proximity to users
2. Landed cost concept

32. Environmental Forces 5. Technological 6. Environmental uncertainty
Technological change influences what an organization can buy / use, and in turn what it can give
As pace increases, impacts necessity to take decisions quickly
6. Environmental uncertainty
More uncertain, more people involved

33. Organizational Forces
Buying process influenced by the valence the organization attaches to:
Achievement
Rules
Innovation
Industriousness
Selling must consider all this – the ‘personality’ of the organization – and the way it is organized

34. Positioning of purchasing
Purchasing can be organized – centralized or decentralized
Centralized:
Originates from a commonality of requirements
Originates from requirement of control
Leads to specialization
Point for discussion:
Said that the need to involve other functions like
R&D and Engineering is an important factor for
centralization.
Is this true?

35. Group Forces The answers to these questions have to be sought:
Who are the members of the buying centre
Relative influence of each member
Criteria used for evaluation
All can change from stage to stage.

36. Individual Forces
The ‘buying’ individual also brings his personal ‘slant’ (selective interpretation) into the picture
Exposure: Accept those consistent with own beliefs
Attention: Paying attention to those consistent with own beliefs
Perception: Interpret inputs in a way consistent with own beliefs
Retention: Retain those consistent with own beliefs
Composition of all can change from stage to stage - it is task dependent.

37. Individual Forces
Buyers, as individuals, would also like to lower risk:
External
Visit plant, audit supplier
Check with other organizations using the supplier
Internal
Consult with others in the company

38. Group vs. Individual decision making
Product specific
Risk: Higher – rely on group
Purchase type: New task – rely on group
Time (Urgency): Individual
Company specific
Size: Large – Group
Centralized: Individual

39. Exercise! Pick a ‘purchase’ situation
Analyze the situation in terms of the parameters discussed

40. Exercise – what would you look at?
Define
Buying situation
New task / Straight rebuy / Modified rebuy
Status of supplier
In / Out
Evaluation
Value
Supplier capability (let’s drop this for this exercise!)
Relationship sought
Transaction / Long term

41. Moving Forward Read: Next Class PGDM-RS-04: Thursday, Jan 14, 2010
Business Marketing Management: Hunt & Speh
Chapter 5: Business Marketing Intelligence
Chapter 7: Demand Analysis

42. We can’t forget this! Dead Cat Bounce
A short-term increase in the value of a stock following a precipitous drop in value.
Jack Speak
Totally confusing!

43. Thank you !