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Dr. S. Borna
MBA 671MBA 671
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ObjectivesObjectivesObjectivesObjectives
How Business & Consumer Markets DifferHow Business & Consumer Markets Differ Organizational Buying SituationsOrganizational Buying Situations Participants in the Business Buying Participants in the Business Buying
ProcessProcess Major Influences on Organizational BuyersMajor Influences on Organizational Buyers Business Buyer Decision MakingBusiness Buyer Decision Making Institutional & Government BuyingInstitutional & Government Buying
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Organizational Organizational BuyersBuyers
ManufacturesManufactures
RetailersRetailersBanking, Finance andBanking, Finance andInsuranceInsurance
ConstructionConstruction
WholesalersWholesalers
Farms, Forestry,Farms, Forestry,FisheriesFisheries
CommunicationsCommunications
Mining and Mineral Mining and Mineral OperationsOperations
ServiceService
Governmental Governmental unitsunits
BUSINESS ORGANIZATIONSBUSINESS ORGANIZATIONS
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Industrial Buying -a Industrial Buying -a definitiondefinition
Industrial buying refers to the Industrial buying refers to the buying activities of buying activities of organizations that purchase organizations that purchase products and services for products and services for
further production, for use infurther production, for use in
operation, and for resale . operation, and for resale .
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A Micro View of Organizational A Micro View of Organizational Buying BehaviorBuying Behavior
Decision-making process Decision-making process that organizations go that organizations go through when deciding through when deciding what to buy.what to buy.
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A Macro View of Organizational A Macro View of Organizational Buying BehaviorBuying Behavior
1.1. Classification of Classification of
organizational customersorganizational customers
and their characteristics.and their characteristics.
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2. 2. Classification of goods Classification of goods and services purchasedand services purchased by organizational by organizational customers and customers and
marketing considerations marketing considerations involved in selling them.involved in selling them.
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Differences between organizational Differences between organizational and consumer marketsand consumer markets
Derived demandDerived demandRelatively inelastic demandRelatively inelastic demandMore erratic More erratic More cyclicalMore cyclical
Demand characteristicsDemand characteristics
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Buyer- Seller RelationshipsBuyer- Seller Relationships
Use of professional buying Use of professional buying specialists following specialists following prescribed proceduresprescribed procedures
Close buyer-seller Close buyer-seller relationshipsrelationships
Presence of multiple buying Presence of multiple buying influencesinfluences
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Business vs. Consumer Business vs. Consumer MarketsMarkets
Business vs. Consumer Business vs. Consumer MarketsMarkets
Fewer buyersFewer buyers Larger buyersLarger buyers Close supplier-customer relationshipClose supplier-customer relationship Geographically concentratedGeographically concentrated Derived demandDerived demand Inelastic demandInelastic demand Fluctuating demandFluctuating demand
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Business vs. Consumer Business vs. Consumer MarketsMarkets
Business vs. Consumer Business vs. Consumer MarketsMarkets
Professional purchasing Professional purchasing Several buying influencesSeveral buying influences Multiple sales callsMultiple sales calls Direct purchasingDirect purchasing ReciprocityReciprocity LeasingLeasing
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Buying Decisions Made ByBuying Decisions Made ByBusiness OrganizationsBusiness Organizations
• Straight RebuyStraight Rebuy• Modified RebuyModified Rebuy• New TaskNew Task
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Participants in the Business Participants in the Business Buying ProcessBuying Process
Participants in the Business Participants in the Business Buying ProcessBuying Process
Gatekeepers
Initiators
Buyers
Influencers
Deciders
Users
Approvers
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Who makes organizational Who makes organizational purchase decisions? purchase decisions?
who is the decision-making unit?who is the decision-making unit?
buying centerbuying centerindividualindividual
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Key Questions to AskKey Questions to Ask
1. Which individuals in the 1. Which individuals in the
buying center are buying center are
responsible for my responsible for my
products?products?
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2. What is the relative 2. What is the relative
influence of each member influence of each member
in this group?in this group?
3. What are the decision 3. What are the decision
criteria of each member?criteria of each member?
Key QuestionsKey Questions
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Major Influences on Industrial Major Influences on Industrial Buying BehaviorBuying Behavior
Major Influences on Industrial Major Influences on Industrial Buying BehaviorBuying Behavior
•Level ofdemand
•Economicoutlook
•Interest rate•Rate of techno-logical change
•Political andregulatorydevelopments
•Competitivedevelopments
•Social responsi-bility concerns
Environmental
•Objectives
•Policies
•Procedures
•Organizationalstructures
•Systems
Organizational
•Interests
•Authority
•Status
•Empathy
•Persuasive-ness
Interpersonal
•Age•Income•Education•Job position•Personality•Risk attitudes•Culture
Individual
BusinessBuyer
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Major Factors influencingMajor Factors influencing Business BuyersBusiness Buyers
• EconomicEconomic• EnvironmentalEnvironmental• OrganizationalOrganizational• InterpersonalInterpersonal• PersonalPersonal
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Organizational Factors:Organizational Factors:
Organizational orientation Organizational orientation centralization, policies, centralization, policies, procedures, decentralized procedures, decentralized purchasing of small itemspurchasing of small items
etc.etc.
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InterpersonalInterpersonalFactorsFactors
(Note: buying center and(Note: buying center and type of group dynamicstype of group dynamics taking place during the buying decision process)taking place during the buying decision process) authority, status, interestsauthority, status, interests of group members.of group members.
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Individual Factors:Individual Factors:Education, Age, Cultural BackgroundEducation, Age, Cultural Background
individualbuyersneeds
companiesneeds
job securityjob security
moneymoney overlap in needsoverlap in needs
growthgrowth
innovationinnovation
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Examples of Individual & Org. Examples of Individual & Org. GoalsGoals
Personal Goals:Personal Goals:
Wants a feel of power, seeks personal Wants a feel of power, seeks personal pleasure, desires job security, wants pleasure, desires job security, wants respect.respect.
Organizational Goals:Organizational Goals:
Control costs, few breakdowns of Control costs, few breakdowns of products, cost within budget limit.products, cost within budget limit.
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Organizational Purchase Organizational Purchase Decision-Decision-MakingMaking Process Process
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Problem RecognitionProblem Recognition
General Need DescriptionGeneral Need Description
Product SpecificationProduct Specification
Supplier SearchSupplier Search
Proposal SolicitationProposal Solicitation
Supplier SelectionSupplier Selection
Order Routine SpecificationOrder Routine Specification
Performance ReviewPerformance ReviewPostPost
PurchasePurchase
PurchasePurchase
InfoInfoSearch/Search/
EvalEval
NeedNeedRecognitionRecognition
(Bu
y Ph
ases)(B
uy P
hases)
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Buy classesBuy classes
New taskNew task ModifiedModifiedRebuyRebuy
StraightStraightRebuyRebuy
bbuuyypphhaasseess
1.Need Recog.1.Need Recog.2.Need Desc.2.Need Desc.3.Product Spec.3.Product Spec.4.Supplier Search4.Supplier Search5.Proposal Soli.5.Proposal Soli.6.Supplier selec.6.Supplier selec.7.Order routine 7.Order routine specificationspecification8. Performance 8. Performance ReviewReview
Yes Maybe NoYes Maybe NoYes Maybe NoYes Maybe NoYes Yes YesYes Yes YesYes Maybe NoYes Maybe NoYes Maybe NoYes Maybe NoYes Maybe NoYes Maybe Noyes Maybe Noyes Maybe No
Yes Yes YesYes Yes Yes
Combining buy phases with buy classesCombining buy phases with buy classes
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ReviewReviewReviewReview
How Business & Consumer Markets DifferHow Business & Consumer Markets Differ Organizational Buying SituationsOrganizational Buying Situations Participants in the Business Buying Participants in the Business Buying
ProcessProcess Major Influences on Organizational BuyersMajor Influences on Organizational Buyers Business Buyer Decision MakingBusiness Buyer Decision Making Institutional & Government BuyingInstitutional & Government Buying