Chapter 8 Analyzing Business Markets and Business Buying

Chapter 8 Analyzing Business Markets and Business Buying Behavior by Power. Point by Milton M. Pressley University of New Orleans 1 Copyright © 2003 Prentice-Hall, Inc.

Kotler on Marketing Many businesses are wisely turning their suppliers and distributors into valued partners. 2 Copyright © 2003 Prentice-Hall, Inc.

Chapter Objectives § In this chapter, we focus on six questions: § What is the business market, and how does it differ from the consumer market? § What buying situations do organizational buyers face? § Who participates in the business buying process? § What are the major influences on organizational buyers? § How do business buyers make their decisions? § How do institutions and government agencies do their buying? 3 Copyright © 2003 Prentice-Hall, Inc.

What is Organizational Buying? § Organizational buying § The business market versus the consumer market § Business market § Fewer buyers § Larger buyers § Close supplier-customer relationship § Geographically concentrated buyers 4 Copyright © 2003 Prentice-Hall, Inc.

What is Organizational Buying? § Derived demand § Inelastic demand § Fluctuating demand § Professional purchasing 5 Copyright © 2003 Prentice-Hall, Inc.

What is Organizational Buying? § Several buying influences § Multiple sales calls § Directed purchasing § Reciprocity § Leasing 6 Copyright © 2003 Prentice-Hall, Inc.

What is Organizational Buying? § Buying Situations § Straight rebuy § Modified rebuy § New Task § Systems Buying and Selling § Systems buying § Turnkey solution § Systems selling 7 Copyright © 2003 Prentice-Hall, Inc.

What are some of the benefits to an organization that can be derived from a single source solution, or a systems buying arrangement with a prime contractor? What are some of the potential pitfalls? What can the company do to protect itself from these hazards? 8 Copyright © 2003 Prentice-Hall, Inc.

Participants in the Business Buying Process § The Buying Center § Initiators § Users § Influencers § Deciders § Approvers § Buyers § Gatekeepers § Key buying influencers § Multilevel in-depth selling 9 Copyright © 2003 Prentice-Hall, Inc.

Major Influences on Buying Decisions § Interpersonal and Individual Factors § Cultural Factors § France § Germany § Japan § Korea § Latin America 10 Copyright © 2003 Prentice-Hall, Inc.

The Purchasing/ Procurement Process § Incentive to purchase § Three Company Purchasing Orientations § Buying Orientation § Commoditization § Multisourcing § Procurement Orientation § Materials requirement planning (MRP) § Supply Chain Management Orientation 11 Copyright © 2003 Prentice-Hall, Inc.

Table 8. 1: Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses) Buyclasses Buyphases New Modified Straight Task Rebuy 1. Problem recognition Yes Maybe No 2. General need description Yes Maybe No 3. Product specification Yes Yes 4. Supplier search Yes Maybe No 5. Proposal solicitation Yes Maybe No 6. Supplier selection Yes Maybe No 7. Order-routine specification Yes Maybe No 8. Performance review Yes Yes 12 Copyright © 2003 Prentice-Hall, Inc.

The Purchasing/ Procurement Process § General Need Description and Product Specification § Product value analysis § Supplier Search § Vertical hubs § Functional hubs § Direct extranet links to major suppliers § Buying alliances § Company buying sites § Request for proposals (RFPs) 13 Copyright © 2003 Prentice-Hall, Inc.

Table 8 -2: An Example of Vendor Analysis Attributes Rating Scale Importance Weights Price . 30 Supplier reputation . 20 Product reliability . 30 Service reliability . 10 Supplier Flexibility . 10 Poor (1) Fair (2) Good (3) Excellent (4) x x x Total score: . 30(4) +. 20(3) +. 30(4) +. 10(2) +. 10(3) = 3. 5 14 Copyright © 2003 Prentice-Hall, Inc.

The Purchasing/ Procurement Process § Customer value assessment § Routine-order products § Procedural-problem products § Political-problem products § Order-Routine Specification § Blanket contract § Stockless purchase plans § Performance Review § Buyflow map 15 Copyright © 2003 Prentice-Hall, Inc.