Organizational Buyer Behavior
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Transcript of Organizational Buyer Behavior
Part I- BackgroundOrganizational Buyer
Behavior (OBB)
OBB-Agenda
1. What is OBB?
2. Organizational Buying process
3. Organizational Buying model
4. E-procurement in OBB- ariba/econstroi
1. What isOrganizational Buyer Behavior
(OBB)
1.What is OBB ?
What distinguishes business marketing from consumer
goods is the intended use of the product and the
intended consumer.
Hewlett -Packard used to be a B2B marketer until it
introduced laser printers and personal computers.
Sony used to be mainly a B2C until it introduced office automation products.
Consumer Markets and
Organizational Markets
Consumer Markets and
Organizational Markets
Characteristics of Business Market
Customers
UsersPurchase industrial goods and services to produce other goods and services
OEMs (Original equipment manufacturers)
Purchase to incorporate into other products sold in the business or
ultimate consumer market – When Dell buys microprocessors from Intel it is a OEM
Dealers and distributors
Commercial enterprises that purchase industrial goods for resale
Retailers
Hutt & Speh
Characteristics of Business Market
Customers
Cross functional teams at P&G
evaluate alternative laptop PC’s and
select IBM
Multiple buying influences rather
than a single decision maker
SAP can maintain customer
relatonships for many years
Enduring Relationships
New home purchases stimulate
demand for appliances, cabinets,
carpeting etc
Derived demand
Consumer buys one unit of software
from Microsoft. A company buys
thousands
Single purchase is far larger
Dell sells to Boing, Universities, and
numerous government/public units
(local, central)
Composed of commercial
enterprises,institutions and
government organizations
ExampleCharacteristic
Hutt & Speh
Characteristics of Business Market
CustomersDerived demand
Manage requirements tree from original (e.g. car) demand
Fluctuating demand
Monitor demand patterns: interest rate setting by the ECB results in changes in Home construction
Stimulating demand
Programs directed at stimulating the ultimate consumer directly –
Tetra Pack & Intel ( Intel inside) Price sensitivity/demand elasticity
Derived demand elasticity e.g. if digital cameras buyers insensitive to price then manufacturers less sensitive
Global Market perspectiveRelevant unit of analysis is not domestic but regional or global
Hutt & Speh
Nestlé Waters in Portugal:
Consumer and Business Marketer
Nestlé has two lines of Business in the water category in Portugal :
Consumer Business
Selling the brands Aquarel, Castello, Campilho and others via
the food channel and the Horeca channel.
Nestlé Waters Portugal SA: website Nestlé Portugal, accessed Aug
2006
Organizational Business
Selling water coolers to Business customers (and also to consumers according to the company website) under the Selda brand.
Nestlé Waters Direct : website Quem Somos
Supply Chain in the Auto industry-
an example- stable relationships
Hutt & Speh pp 15
Purchasing Function Goals
To adress the needs of business customers the
marketer should understand:
Goals and contribution of the purchasing function
towards the organization objectives
Tradeoffs or clashing objectives of the
purchasing manager: lowest total cost and
quality standard can conflict
Purchasing Function Goals
Supply Chain management : technique for
linking a manufacturer’s operations with those of
all of its strategic suppliers and its key
intermediaries and customers
Keiper-Recaro Group
The Recaro group, a supplier specialized in
seating for several industries,had production
units embedded in the production line of auto
manufacturers, with complete JIT integration :
website .: RECARO :. Acessed august 2006
Purchasing Function Goals –what
are purchasing managers seeking
Strategic Procurement
Purchasing at leading companies create profit
opportunities (e.g. Honda succeded in reducing by 20% the costs of the Honda Accord)
Doing so requires an understanding of Total Cost,
beyond purchase price:
– Supply chain drivers like transportation
– Cost of acquiring and managing
– Quality, reliability and other attributes over the PLC
Total cost of Ownership : e.g. Car cost is Purchase
Price,maintenance & fuel costs and resale value
Decision Making Unit-
characteristics
Who is involved in the buying center:
–User
–Buyer
–Analyzer
–Influencer
–Gatekeepers
–Decider
Hutt & Speh based on Webster & Wind
Decision Making Unit-
characteristicsWho is involved in the buying center:
• Users- may initiate process and determine specifications
• Buyer- formal authority to select supplier and implement all procedures connected with securing the product
• Analyzer- assesses information and alternatives
• Influencer- supply information for the evaluation of alternatives or sets buying specifications
• Gatekeepers- control information to be reviewed by other members of the buying center
• Decider- those who actually make the buying decision,
whether or not they have the formal authority to do so
Hutt & Speh based on Webster & Wind
2. The Organizational Buying Process
2. The Organizational Buying
Process – Major stages-Buyphases
Alternative proposals are evaluated by
purchasing manager and members of the
production department.
5. Aquisition and analysis of proposals
After conferring with production managers a
purchasing manager identifies a set of
alternative suppliers.
4. Supplier Search
Experienced production manager assists
purchasing manager in developing a
detailed description.
3. Product specifications
Production managers from the CoE work
with a purchasing manager to determine
characteristics.
2. General description of need
Managers at SLH&BC need new high
speed packaging equipment to support a
new product launch.
1.Problem Recognition
DescriptionStage
2. The Organizational Buying
Process – Major stages-Buyphases
After the equipment is installed, purchasing
and production managers evaluate the
performance of the equipment and the
service support provided by the supplier.
8. Performance review
Delivery date is established.7. Selection of order routine
Negotiations with two finalists are
conducted and a supplier is chosen.
6.Supplier selection
DescriptionStage
Hutt & Speh
2. The Organizational Buying
Process -Buyclasses
Three types of Buying situations :
1. New task
2. Modified rebuy
3. Straight rebuy
organizations that buy professionally and frequently apply different approaches than first timers- so buy situation counts not product !
2. The Organizational Buying
Process –Buyclasses
1.New task—the problem or need is totally
different from previous experiences.
Significant amount of information is required.
Buyers operate in the extensive problem solving stage.
• Buyers lack well defined criteria.
• Lack strong predispositions toward a solution.
Buying decision approaches : judgmental new tasksituations happens when the level of difficulty is very
high (complexity, unpredictability) – moderate amounts of search and formal evaluation
strategic new task situations are of strategic importance – very high effort involved.
2. The Organizational Buying
Process –Buyclasses
2.Modified rebuy—decision makers feel there are
benefits to be derived by reevaluating
alternatives.
Most likely to occur when displeased with the performance of current supplier.
Buyers operate in the limited problem solving stage.
• Buyers have well defined criteria.
Buying decision approaches : simple modified rebuy or complex modified rebuys where there is a large set of choice alternatives and buyers apply sophisticated analysis techniques – this is suitable for competitive bidding with on line reverse auctions
2. The Organizational Buying
Process –Buyclasses
3. Straight rebuy—the problem or need is a
recurring or continuing situation.
Buyers have experience in the area in question.
Require little or no new information.
Buyers operate in the routine problem solving stage.
2. The Organizational Buying
Process –Buyclasses
Straight rebuy : buying decision approaches
Causal purchases : no information search or analysis, product of low importance to the firm,
transmitting the order
Routine low priority: moderate amount of analysis
OnLine Purchasing
Many organizations have moved routine purchasing activities to employees : travel, personal
computers,spare parts, office supplies (e.g. SLDE e-sourcing initiative)
Buy-side requisitioning software
3. Organizational Buying Model
3. Organizational Buying Model
EnvironmentalForces
OrganizationalForces
GroupForces
IndividualForces
OrganizationalBuying
Behavior
•Economic Outlook:
Domestic & Global
•Pace of Technological
Change
•Global Trade Relations
•Goals, Objectives, and
Strategies
•Organizational Position
of Purchasing
•Roles, relative
influence, and patterns
of interaction of buying
decision participants
•Job function, past
experience, and buying
motives of individual
decision participants
Webster & Wind adapted by Hutt, Speh
Forces shaping OBB
Environmental forces
Economic – derived demand means following consumer
markets e.g. Portugal was the only country in the eu with
negative consumer expectations for the next 12 months – euro barometer 64 Autumn 2005
http://ec.europa.eu/public_opinion/archives/eb/eb64/eb64
_pt_nat.pdf
Technological influences – technology can change the
way an industry operates: EDI and continous replenishment and later RFID becoming musts in FMCG
Forces shaping OBB
Organizational forces
Goals, Strategies and objectives of purchasing
There is an increased trend for purchasing to
become a more strategic actor in the
corporation e.g. Sales & Operations planning
become a way of life to reduce
inventories,slow moving & speed up
launches. E-procurement & EDI to align.
Organizational positioning of Purchasing
Centralizing vs decentralizing
Forces shaping OBB-Group Forces:Buying Center- Medical Supplier
LowModerateModerateLowEngineering
ModerateLowLowLowPurchasing
HighModerateModerateModerateAdministration
LowHighHighLowNursing
HighHighHighHighPhysicians
Selection of suppliers
Identification and evaluation of buying alternatives
Establishment of objectives
Identification of need
Buying Center Participants
Questions: which members take part, what is each members’s relative
Influence, what criteria are important in evaluating .
Study of hospital Buying, cit Hutt & Speh
Forces shaping OBB-Group Forces:Buying Center- Typical influences
USER GATEKEEPERINFLUENCERANALYZERDECIDERBUYER
Need assessment √√ √√
Choice criteria √ √√√√
RFP √√
Supplier evaluation √√√√
Selection √ √√√√√√√
Fulfillment/monitoring √√ √√
√ Influence
√√ Strong Influence
BUYING CENTER ROLES
Sheth, Mittal, Newman 99