1. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski ORGANISATIONAL BUYING BEHAVIOUR

2. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-2 Organisational buying behaviour At the end of this session, you should understand: The nature and types of business markets The influences on business market buying behaviour and demand The business buying decision process The types of business buying decisions (straight rebuy, modified rebuy, new task buying) The influence of the buying centre on purchase decision making The application of relationship marketing in business markets The role of the Internet in business-to-business (B2B) marketing

3. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-3 What is organisational (business to business) buying? Business markets use the products or services they buy to produce or trade their own products or services Consumer markets make purchases for personal consumption Three main differences exist between consumer and business decision making – Nature of demand – Composition of the business market – Motives of the buyers in each market

4. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-4 The business decision-making process

5. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-5 The scope of the business market Agriculture Mining Construction Manufacturing Transport Wholesale and retail trade Finance, insurance, real estate Government Non-profit organisations

6. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-6 Marketing to B2B Innovative B2B promotions can gain attention – Bankwest targets business with pizza delivery Successful marketing to the agriculture sector – Product focus combats lower price See EXHIBIT 4.2 Optus targets businesses, page 97.

7. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-7 The nature of business markets Organisational buyers have different needs and buying patterns across different buying situations – e.g. medical purchase of simple box of rubber gloves vs complex purchase of an X-ray machine Vary primarily from consumers through type of customer, reason for buying or product usage – See Exhibit 4.2 previous slide B2B – Purchase inputs to make other goods and services  e.g. sugar and flavouring as inputs for Coca-Cola – Resell purchases to other business users or consumers  e.g. Woolworths – Use purchases to conduct business  e.g. stationery, legal services, marketing services

8. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-8 Organisational buyers and consumers

9. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-9 Purchase decision making in business markets Buying is often a group process Buying is less frequent and in large quantities Negotiation period is often prolonged Customer service is frequently a main requirement Consistency of quality and supply are important

10. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-10 Types of buying situations New task rebuy – A similar purchase decision has never been made A modified rebuy – A similar purchase decision has been made before but this time modifications to the purchase are needed or a new supplier is to be chosen A straight rebuy – A routine purchase that has been made many times before

11. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-11 Business market demand Consumer demand is influenced by marketing environment factors, such as – Interest rate, social trends, marketing communications Demand for business goods incorporates four main considerations – Demand is derived from the underlying consumer demand for its goods and services – Demand is relatively inelastic to changes in price – Demand can fluctuate widely – Business market buyers are well informed

12. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-12 Buying motives Assumptions exist that B2B buying motives are rational, methodical and objective However, personal factors also play a part: relationships, self advancement Primary motivators include – Cost and profit-related benefits – Ongoing promotional support – Ability to generate store traffic – Improvements in productivity

13. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-13 Organisational buying criteria and motives

14. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-14 Multiple buying influences Buying centre – A group of individuals involved in the purchase decision making Users – The people who actually use the product e.g. safety goggles Influencers – Have a direct or indirect influence on the purchase decision due to some technical knowledge, financial power or other factor Deciders – Make the actual buying decision: purchasing officer, management, product/service user Gatekeepers – Control the flow of information Buyers – Select the suppliers and negotiate the terms of agreement

15. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-15 Relationship marketing in business markets Relationship marketing – All marketing activities directed toward establishing, developing and maintaining successful exchanges with customers Create a ‘value proposition’ – Strategies should include use of specific competencies to create better value for customers Customer relationship management (CRM) – Maximising customer retention rates and share of individual customer’s business – Past behaviour is important in CRM

16. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-16 Factors influencing growth of relationship marketing 1970s increased global competition, forcing adoption of defensive strategies 1980s and 1990s growth in services marketing based on direct relationships, leading to a professional focus in this area Adoption of the ‘value chain’ approach by Japanese businesses – A link of value-creating activities producing maximum efficiency across all areas The future for relationship marketing – Increased use of the Internet – Increasing costs servicing unprofitable customers, leading to a focus on better servicing other customers

17. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-17 Trends in organisational buying

18. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-18 Measuring CRM programs Key measurement programs for a customer satisfaction system in the B2B market

19. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 4-19 ‘Autocratic management versus the buying group’ Case study: – Autocratic management versus the buying group Read the above case study and discuss the associated questions