CH 7. Organizational buying refers to the decision-making process by which formal organizations...

CH 7

ANALYZING BUSINESS MARKETS

Organizational buying refers to the decision-making process by which formal organizations establish the

need for purchased products and services, and identify, evaluate, and choose among alternative

brands and suppliers.

WHAT IS ORGANIZATIONAL BUYING?

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 2

• Expand understanding of customer needs

• Compete globally as China and India reshape markets

• Master analytical tools and improve quantitative skills

• Reinstate innovation as an engine of growth

• Create new organizational models and linkages

TOP BUSINESS MARKETING CHALLENGES

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 3

• Fewer, larger buyers• Close supplier-customer

relationships• Professional purchasing• Many buying influences

• Multiple sales calls• Derived demand• Inelastic demand• Fluctuating demand• Geographically

concentrated buyers• Direct purchasing

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 4

CHARACTERISTICS OF BUSINESS MARKETS

BUYING SITUATION

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 5

Straight rebuy

Modified rebuy

New task

SYSTEMS BUYING AND SELLING

Turnkey solution desired;

bids solicited

Primecontractors

Second-tiercontractors

System subcomponents

assembled

THE BUYING CENTER

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 7

Initiators

Users

Influencers

Deciders

Approvers

Buyers

Gatekeepers

• Who are the major decision participants?

• What decisions do they influence?

• What is their level of influence?

• What evaluation criteria do they use?

OF CONCERN TO BUSINESS MARKETERS

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 8

SALES STRATEGIES

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 9

Small Sellers

Large Sellers

Key Buying Influencers

MultilevelIn-depthSelling

• Problem recognition• General need

description• Product specification• Supplier search• Proposal solicitation• Supplier selection• Order-routine

specification• Performance review

STAGES IN THE BUYING PROCESS: BUYPHASES

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 0

TABLE 7.2 BUYGRID FRAMEWORK

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 1

• Websites organized using vertical hubs

• Websites organized using functional hubs

• Direct extranet links to major suppliers

• Buying alliances• Company buying sites

METHODS OF E-PROCUREMENT

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 2

TABLE 7.3 VENDOR ANALYSIS

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 3

HANDLING PRICE-ORIENTED CUSTOMERS

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 4

Limit quantity purchased

Allow no refunds

Make no adjustments

Provide no services

• Internal engineering assessment

• Field value-in-use assessment

• Focus-group value assessment

• Direct survey questions

• Conjoint analysis• Benchmarks• Compositional approach• Importance ratings

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 5

METHODS FOR RESEARCHING CUSTOMER VALUE

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 6

ORDER ROUTINE SPECIFICATION

Stockless purchase plans

Vendor-managedinventory

Continuous replenishment

ESTABLISHING CORPORATE TRUST

AND CREDIBILITY

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 7

Expertise

LikeabilityTrustworthiness

FIGURE 7.1 TRUST DIMENSIONS

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 8

Transparent

Product/ServiceQuality

Incentive

Partnering

Cooperating Design

Product Comparison

Supply Chain

Pervasive Advocacy

FACTORS AFFECTING BUYER-SUPPLIER RELATIONSHIPS

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 1 9

Availability of alternatives

Supply marketdynamism

Complexity ofsupply

Importance ofsupply

• Basic buying and selling

• Bare bones• Contractual

transaction• Customer supply

• Cooperative systems• Collaborative• Mutually adaptive• Customer is king

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 2 0

CATEGORIES OF BUYER-SELLER RELATIONSHIPS

Opportunism is some form of cheating or undersupply relative to an implicit or explicit

contract.

WHAT IS OPPORTUNISM?

C O P Y R I G H T © 2 0 0 9 D O R L I N G K I N D E R S L E Y ( I N D I A ) P V T . L T D . 7 - 2 1