Chapter 4 - Industrial

7/30/2019 Chapter 4 - Industrial

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Copyright 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin


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OBJECTIVES

Explain, using the most prominent theories oforganizational buyer behavior, how individual

needs may override or influence the rational

decision-making process.

Predict marketing action based on the choice

of a particular buying theory.

Describe the influence of risk on buyerbehavior.

Illustrate how these theories work in concert

with partnering.


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SELLING BUSINESS TO BUSINESS SUCCESSFULLY.

UNDERSTANDING WHAT MAKES BUYERS BUY

THE THEORIES OF BUYER MOTIVATION

REWARD-MEASUREMENT (RM) THEORY

THINK: BENEFITS

BEHAVIOR CHOICE THEORY

THINK: SITUATION

ROLE THEORY

THINK: NORMS / EXPECTATIONS


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REWARD-MEASUREMENT (RM) THEORY

An expectancy theory of organizational buyer

motivation.

Buyers are motivated by both

intrinsic rewards (rewards they give themselves

e.g. feelings of satisfaction) and;

extrinsic rewards (rewards given by the

organization (e.g. salary, promotion)


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REWARD-MEASUREMENT THEORY

Valence degree of importance or valueattached to a reward ((e.g. the important

reward is raise extrinsic reward).

Perceived probability the perception thateffort on a particular set of tasks will lead to

accomplishment of performance outcome

that will lead to the desired reward.

Motivation the amount of effort that the

buyer is willing to expend to engage in the

set of tasks.


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MATHEMATICAL EQUATION

Motivation = Valence x Probability


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MARKETING AND REWARD-MEASUREMENT

THEORY

(Performance measurement) Marketers

understand what features are important and

how to promote their products.

(Valence) able to predict the amount of effort

expended by the buyer on tasks involving

information search, number of bids

requested, and other purchase activities

Might also understand which products might

be purchased in a given situation.


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BEHAVIOR CHOICE REWARD

Behavior choice theory the buyer go

through a choice process to arrive at

decisions ofhowthey will buy.

Orientation the degree to which the

individual works for personal benefits;

Company orientation - the degree to which

the individual works to achieve benefit for the

company.


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BEHAVIOR CHOICE MODEL

1. Identify situationdegree of company orientation

degree of personal orientation

2. Evaluate personal relevanceformal reward system

informal and social reward system

intrinsic rewards

3. Assess action alternatives and requirements

4. Choose behavior strategy4. Defensive: process -oriented, minimized threats

5. Offensive: results-oriented, maximize gain


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ROLE PLAY

People behave within a set of norms or

expectations of others due to the role in

which they have been placed.

Autonomous when a person makes a

purchase decision alone for an organization

Buying center when more than one person

is involved in purchase decision


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BUYING CENTER ROLES

PERSON

SECRETARY

VICE PRESIDENT

OFFICE MANAGER

SECRETARY & OFFICE

MANAGER

OFFICE MANAGER

VICE PRESIDENT OF

OPERATIONS

ROLE

Initiator-reports that fax keeps breaking

down

Controller-sets budget for purchase of

new fax Gatekeeper-gathers review from

vendors.

Influencers-view demonstrations narrow

choices

Recommender-recommends a particular

product to decision maker

Decision MakerSelects fax to purchase


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DIMENSIONS OF BUYING CENTERS

TIME DIMENSIONS TIME IS HIGHLY FRAGMENTED: Many participants for short

time participation

TIME IS NOT FRAGMENTED: Same people stay throughentire process

VERTICAL DIMENSIONS

How many layers of management are involved in decision-making

HORIZONTAL DIMENSIONS How many departments are involved in decision-making

FORMALIZATION DIMENSION

Purchasing tasks and roles are guided and enforcedby

written procedures and policies


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TIME FRAGMENTATION INFLUENCES SELLERS MARKETING

EFFORTS

INVOLVEMENT INFLUENCE

NUMBER OF DECISION MAKERS

HIGHLY MANY FEW MINIMALLY

FRAGMENTED A LITTLE A LOT FRAGMENTED

DECISION CYCLE TIME INFLUENCE

SIZE OF BUYING CENTER

LONGER LARGE SMALL SHORTER

DECISION CYCLE A LITTLE A LOT DECISION CYCLE

EXPERIENCE OF DECISION MAKERS

TIME SPENT ON DECISION STAGES

Sales objective is to move to the right on the continuum


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RECOGNIZING THE

BUYERS DILEMMA: RISK

THERE ARE THREE KINDS OF RISK TO OVERCOME

FINANCIAL RISK

POTENTIAL FOR LOST REVENUE WITH

FAULTY PRODUCT

PERFORMANCE RISK

PRODUCT WONT PERFORM AS INTENDED

SOCIAL RISK THE PURCHASE WILL NOT MEET APPROVAL OF A

REFERENCE GROUP


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OVERCOMING RISK

THREE OPTIONS BUYERS USE TO

REDUCE RISK

GATHER MORE INFORMATION FROM MORESOURCES

USING LOYALTY TO PRESENT SUPPLIERS

BUILD TRUST

SPREAD THE RISK BY USING MORE

DECISION MAKERS OR GETTING MORE

SUPPLIERS


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USING INFORMATION TO REDUCE RISK

ImpersonalPersonal

Trade publications

Word of mouth from

colleagues,

consultants, and

coworkers

Noncommercial

Sales literature

Advertising

Websites

Direct mail

Personal selling

Trade shows

Telemarketing

E-mail

Commercial


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BUYING DETERMINANTS THEORY

Individualfactors

Organizationalfactors

Market factors

Environmental factors


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EXPANDED BUYING DETERMINANTS THEORY

Organizational Factors

Extrinsic reward systemsRole expectations

Corporate culture andintrinsic rewardsCross-functional

purchasing teams

Policies supportingvertical andhorizontal

dimensions

Individual factorsExperience: new buy straight rebuy

Choice of reward-Role orientationValence of reward

Probability perceptions

Environmental factorsMarket factors


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ANNOUNCEMENT

Next meeting Mr. Raymund Tan and his

group will do a video presentation of their

interview with the University purchasing

office.

God bless you all

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Chapter 4 - Industrial