1. A Business Marketing Perspective

2. Business Markets Local to international –Bought by Businesses Government bodies Institutions –For consumption –For use –For resale GE Markets for products and services

3. Figure 1.2 The Consumer Market (B2C) and the Business Market (B2B) at Dell, Inc. B2B Customers B2C Individuals & Households Businesses Global Large corporations Small & Medium sized businesses Institutions Healthcare Education Government Federal State Local Selected Products PC’s Printers Consumer Electronics Simple Service Agreements PC’s Enterprise Storage Servers Complex Service Offerings Dell, Inc.

4. A Market Driven Firm Market sensing capability…company’s ability to sense change and to anticipate customer responses Customer linking…the ability to develop and manage close customer relationships Value : Economic, Technical & Social Value F – Price F > Value a – Price a Has:

5. Business Market Characteristics Derived demand Fluctuating demand Stimulating demand Price sensitivity/demand elasticity Global Market perspective Reciprocity Joint Demand Concentrated Functional Vs. Symbolic Attributes GE

6. Relationship Marketing All marketing activities directed toward establishing, developing, and maintaining successful exchanges with customers

7. Michael Porter and Victor Millar observed that “to gain competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium (more value).” The Supply Chain

8. Business Market Customer Commercial Enterprises Three categories: –Users –OEMs –Dealers and distributors

9. Classifying industrial goods by the following questions: How does the good or service enter the production process? How does it enter the cost structure of the firm? Classifying Goods for the Business Market Source: Adapted from Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4 th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 172, with permission of Prentice- Hall, Inc.

10. A Framework for Business Marketing Management Business marketing strategy is formulated within the boundaries established by the corporate mission and objectives.

11. The Business Market: Perspectives on the Organizational Buyer

12. Commercial Enterprises –Manufacturers –Construction –Service firms –Transportation –Professional –Resellers Includes Manufacturers: -Concentration in geographies. - Centralized Purchasing

13. Purchasing Function Goals Address the needs of business customers of all types. May have to juggle different, clashing objectives. Purchasing Goals

14. Total Cost Considerations of a Product or Service Factors that drive total cost. Acquiring and managing costs. Quality, reliability over the life cycle. Value of product to firm/customers.

15. Firms operate at different levels of development and emphasize different pathways to cost reduction and revenue enhancement. Levels of Procurement Development and Pathways to Savings/Revenue Enhancement

16. Segmenting Purchase Categories 1 st Point, each firm has a unique portfolio. 2 nd Point, more attention on purchases having the greatest impact on revenue generation or the greatest risk to performance. Segmenting the Buy Bottlenecks Criticals Generics Leverage Items

17. Two Types of Contracts 1.Fixed-price contracts A price is agreed to before contract is awarded and payment is made at conclusion of work. Provides for the greatest profit potential. Poses greater risks. 2.Cost-reimbursement contracts Reimbursement for allowable costs may be allowed; sometimes “cost-plus” contracts allow costs and certain percentage of profit.

18. Government Procurement 1.U.S. Department of Defense (DOD)-said to be largest single enterprise in world. 2. Non-defense procurement administered by wide variety of agencies.

19. Two Procurement Strategies 1.Formal Advertising—the government solicits bids from suppliers, and usually the lowest bidder is awarded the contract. 2.Negotiated Contract—used to purchase products or services that are not differentiated on price alone, competition is common. 3.Terms : LI / TI, RC, BOOT, EMD, SD, PBG, Inspection

20. The Institutional Market Schools, health care organizations, non-profit agencies. Similar to government buyers--political considerations and laws. Similar to commercial buyers--often managed like corporations--broad range of purchase requirements. Group purchasing quite common. Multiple Buying Influences

21. 21 Organizational Buying Behavior

22. 22 Organizational Buying Process 1. Problem Recognition 2. General Description of Need 3. Product Specifications 4. Supplier Search 5. Acquisition and Analysis of Proposals 6. Supplier Selection 7. Selection of Order Routine 8. Performance Review

23. 23 Three Buying Situations (slide 1 of 4) 1.New task 2.Modified rebuy 3.Straight rebuy

24. 24 Three Buying Situations 1. New Task (slide 2 of 4) New task—problem or need totally different from previous experiences. –Significant amount of information required –Buyers operate in extensive problem solving stage Buyers lack well defined criteria. Lack strong predisposition toward solution

25. 25 Three Buying Situations 2. Modified Rebuy (slide 3 of 4) Modified rebuy—decision makers feel benefits to be derived by reevaluating alternatives. –Most likely to occur when buyers displeased with current supplier’s performance –Buyers operate in limited problem-solving stage. Buyers have well-defined criteria.

26. 26 Three Buying Situations 3. Straight rebuy (slide 4 of 4) Straight rebuy—problem or need is recurring or continuing requirement. –Buyers have experience in area. –Require little or no new information –Buyers operate in routine problem-solving stage –Electronic Purchasing –Buy-side Requisitioning Process.

27. 27 Buying Decision Approaches Casual purchases…involve no information search or analysis. Routine low priority…decisions more important and involve moderate amount of analysis.

28. 28 Forces Influencing Organizational Buying Behavior Environmental Forces Organizational Forces Group Forces Individual Forces Organizational Buying Behavior Economic Outlook: Domestic & Global Pace of Technological Change Global Trade Relations Goals, Objectives, and Strategies Organizational Position of Purchasing Roles, relative influence, and patterns of interaction of buying decision participants Job function, past experience, and buying motives of individual decision participants Projected change in business conditions can drastically alter buying plan.

29. 29 Strategic Priorities in Purchasing Becoming Business Partners, Not Just Buyers Exploring New Value Frontiers: It’s Not Just About Price Putting Suppliers Inside: The Best Value Chain Wins Pursuing Los-Cost Sources: A World Worth Exploring Shift from administrative role to value- creating function that serves internal stakeholders and provides competitive edge in market. Focus on suppliers’ capabilities, emphasizing business outcomes, total ownership costs, and potential for long-term value creation. Develop fewer and deeper relationships with strategic suppliers and involve them in decision- making processes, ranging from new product development to cost-reduction initiatives. Overcome hurdles imposed by geographical differences and seek out cost-effective suppliers around globe. Source: Adapted from Marc Bourde, Charlie Hawker, and Theo Theocharides, “Taking Center Stage: The 2005 Chief Procurement Officer Survey,” (Somers NY: IBM Global Services, May 2005), pp. 1-14. Accessed at http://www.ibm.com/bcshttp://www.ibm.com/bcs on July 1, 2005.

30. 30 Questions for the Industrial Salesperson when Assessing Group Forces 1.Which member takes part in the buying process? 2.What is each member’s relative influence in decision? 3.What criteria is important to each member in evaluation process?

31. 31 Members of the buying center assume different roles throughout the procurement process. Clues for Identifying Powerful Buying Center Members (Users, Influences, buyers, deciders, gate-keepers 1.Isolate the Personal Stakeholders 2.Follow the Information Flow 3.Identify the Experts 4.Trace the Connections to the Top 5.Understand Purchasing’s Role SOURCE: Adapted from John R. Ronchetto, Michael D. Hutt, and Peter H. Reingen, “Embedded Influence Patterns in Organizational Buying Systems,’ Journal of Marketing 53 (October 1989), pp. 51-62.

32. 32 Selective Processes in Information Processing  Selective exposure.  Selective attention.  Selective perception.  Selective retention.

33. 33 Perceived Risk Components 1.Uncertainty about decision outcomes. 2.Magnitude of consequences associated with making wrong selection.

34. 34 Organizational buyers’ behavior influenced by environmental, organizational, group, and individual factors. Major Elements of Organizational Buying Behavior

35. ONGC 35 -Geopic Buying Seismic Simultation Equipment : Modified Rebuy / L2 or L3 -Exploration : Scada – Modi -Tech & Field Services : Drilling of well in Orissa Basin – MR / L2 -Offshore : Buying of Photocopiers for Mumbai High Office – SR / L1 -Infocomm : SAP Package for ERP : New Task / L4