Post on 26-Mar-2015
transcript
XIME –RS–0312-January-2010
B2B Marketing
The Organization Buying Process
XIME–RS–03
Amarnath Krishnaswamy
XIME –RS–0312-January-2010
Plan for this Session
• Building relationships
• Buying behaviour
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Building Relationships
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It’s importance …
Knowledge of the ways and means adopted by an organization for the procurement of its needs is the first step in developing a strategy to cater to these needs
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Buying Process
• The buying process is:
– An ‘exchange ‘ process between buyers & sellers
– Involves a decision
– That comes through an ‘evaluation’
– Establishes a ‘relationship’ between the buyer and the seller
• The seller’s objective is to make it to the last ‘A’ on “AIDA”!!
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Exchange process - Centres
• The exchange process brings 2 centres into play
– Selling centre• Gets all the information &executes selling
strategy
– Buying centre• Group that ‘share’ goals & risks of purchasing
action• Composition of group decided by need, usually
functional
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Buying – Selling process
Selling BuyingR & D R & D
Distribution Marketing
Marketing Purchasing
Engineering Engineering
Manufacturing Manufacturing
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Stages in a ‘buying process’
8 stages in the buying process:
1. Recognition of need & a solution
2. Establish specifications & quantity of the item needed
3. Describe them to the prospective vendor
4. Search for prospective vendors
5. Obtain proposals
6. Evaluate proposals
7. Select a vendor
8. Evaluate performance and feedback
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Stages in a ‘buying process’
8 stages in the buying process:
1. Recognition of need & a solution
2. Establish specs & quantity of the item needed
3. Describe them to the prospective vendor
4. Search for prospective vendors
5. Obtain proposals
6. Evaluate proposals
7. Select a vendor
8. Evaluate performance and feedback
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Buying situations
There are 3 types of buying situations:
1. New task
2. Straight rebuy
3. Modified rebuy
Each of these types must be looked at in terms of the 8 stages
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1. New Task
The “New task” can fall into 2 categories
1. JudgmentalNew activity – with no prior data or experiences to fall back on
Unpredictable. Requires ‘judgment’.
2. Strategic
Of great importance – strategically and financially - to the organization, even for the routine items of purchase
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1. New Task - Guidelines
Gain an advantage by:
– Being involved from the beginning in the ‘New task”
– Those already ‘in’ have distinct advantage in getting first access to the information
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2. Straight rebuy
Characterized by:
• Recurring requirement
• Buyers know the ‘business’ – especially the selection criteria
• Suppliers have already been evaluate
• Conditioned, ‘Pavlovian’ response to new suppliers
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2. Straight rebuy - Guidelines
As the ‘purchase’ is routine, and the approach is likely to be casual:
“In” supplier: Reinforce position – that you’re the best.
“Out” supplier: Develop a relationship. Wait for an opportunity.
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3. Modified rebuy
‘Purchase’ needs constant analysis and evaluation as changes could yield significant benefits
Examples
1. Import substitution
2. Direct relationship with manufacturer – cutting out middlemen
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3. Modified rebuy - Guidelines
Again, would depend on current status:
“In” supplier: • Work towards moving the item into “straight rebuy”
category• Nip moves to source afresh in the bud – be proactive
“Out” supplier:• Hold buyer in “uncertainty”• Determine factors that made buyer want to take
a fresh look• Offer benefits not given by others
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The “Influentials”
• Every buying process would have some “influentials”
• They could change – depending on the stage the purchasing process is in
• Important to identify them
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Evaluating potential suppliers
• Seller cannot afford to be ‘filtered’ out at any stage, especially at the start
• Would apply to ‘product’ and ‘capability’ • Need to understand, and account for, factors
that could influence the buyer– Rational factors: e.g. economic – Emotional factors:
• Both can vary – person, functional area etc • Seller must identify these factors quickly• Both get translated into “value”
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Measuring value
• “Value analysis” – used to measure the value
• Commonly used:– Value-in-use
• Calculates value based on total cost of usage over a period
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Measuring capability
Many areas:
• Technical / production capability• Managerial capability• Financial • Service • Quality
Supplier would be evaluated on each, and an index developed for supplier / product
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Relationship management - Transaction
Relationship between supplier and buyer can be classified on the character of the transaction:
– Pure Transaction: One time
– Repeated Transaction: Frequent, but essentially ‘one-time’ type transactions
– Long term: Relationship is still adversarial in nature
– Partnership: Working together
– Alliance: Working together towards a shared goal
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Relationship management – Duration & Cost
Relationships can also be looked at from the duration of the relationship, and the cost involved in switching suppliers.
Lost-for-Good Customers: •Unlikely to change suppliers•High cost involved to change•Benefits of switch not commensurate with the risk
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Relationship management – Duration & Cost
Always-a-Share Customer:•Ever willing to switch!•Low switching cost•Perspective – transaction to transaction
Intermediate Customer:•In between•Flaring-out by Unbundling•Flaring-out with Augmentation
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Relationship management - Strategy
A) Flaring-out by Unbundling• From total package to core• Price lowered at each step• Price of consolidated bundle less than aggregate of
each• Useful for transaction type customers
B) Flaring-out with Augmentation• Collaborative• Product enriched by features valued by customer• Price premium on package
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Buying Behaviour
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It’s importance
• Buyer is influenced by forces within and without his organization
• Necessary to understand these forces, and how they have changed, for the seller to respond effectively to them
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Forces impacting behaviour
Organizational behaviour impacted by primarily four forces:
1. Environmental forces
2. Organizational forces
3. Group forces
4. Individual forces
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Environmental forces
6 types:
1. Economic
2. Political & Legal
3. Cultural
4. Physical
5. Technological
6. Environmental Uncertainty
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Environmental Forces
1. Economic• Very rational• Demand is derived (industrial products); hence
final consumer market has to be watched very carefully
• The same economic force could have a differential impact, and not impact demand equally for all products. Could complicate issues.
(Example: Impact of interest rates on various sectors)
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Environmental Forces
2. Political & Legal
• Rational – generally!
Examples:
1. EEC rules governing imports
2. Preferred status – for many countries
3. State incentives (Setting up automobile units)
4. “Sons of the soil” policy
5. Reservations
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Environmental Forces
3. Cultural
Examples:
1. Women – in the Gulf countries
4. Physical
Examples:
1. Proximity to users
2. Landed cost concept
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Environmental Forces
5. Technological
• Technological change influences what an organization can buy / use, and in turn what it can give
• As pace increases, impacts necessity to take decisions quickly
6. Environmental uncertainty
• More uncertain, more people involved
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Organizational Forces
Buying process influenced by the valence the organization attaches to:
1. Achievement
2. Rules
3. Innovation
4. Industriousness
Selling must consider all this – the ‘personality’ of the organization – and the way it is organized
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Positioning of purchasing
Purchasing can be organized – centralized or decentralized
Centralized:• Originates from a commonality of requirements• Originates from requirement of control• Leads to specialization
Point for discussion:Said that the need to involve other functions likeR&D and Engineering is an important factor for centralization.
Is this true?
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Group Forces
The answers to these questions have to be sought:
1. Who are the members of the buying centre
2. Relative influence of each member
3. Criteria used for evaluation
All can change from stage to stage.
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Individual Forces
The ‘buying’ individual also brings his personal ‘slant’ (selective interpretation) into the picture
• Exposure: Accept those consistent with own beliefs
• Attention: Paying attention to those consistent with own beliefs
• Perception: Interpret inputs in a way consistent with own beliefs
• Retention: Retain those consistent with own beliefs
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Individual Forces
Buyers, as individuals, would also like to lower risk:
• External
– Visit plant, audit supplier
– Check with other organizations using the supplier
• Internal
– Consult with others in the company
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Group vs. Individual decision making
• Product specific– Risk: Higher – rely on group– Purchase type: New task – rely on group– Time (Urgency): Individual
• Company specific– Size: Large – Group– Centralized: Individual
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Exercise!
• Pick a ‘purchase’ situation
• Analyze the situation in terms of the parameters discussed
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Exercise – what would you look at?
Define
1. Buying situationNew task / Straight rebuy / Modified rebuy
2. Status of supplierIn / Out
3. Evaluation
Value
4. Supplier capability (let’s drop this for this exercise!)
5. Relationship soughtTransaction / Long term
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Moving Forward
Next Class PGDM-RS-04: Thursday, Jan 14, 2010
Read: – Business Marketing Management: Hunt &
Speh• Chapter 5: Business Marketing Intelligence• Chapter 7: Demand Analysis
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We can’t forget this!
Dead Cat Bounce
A short-term increase in the value of a stock following a precipitous drop in value.
Jack Speak
Totally confusing!
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