Transcript Organizational Buying Process

Organizational Buyer Behavior
Chapter 7
Organizational Buying Process
• Market Structure & Demand
– Derived demand – Created by companies /
suppliers of products & services
• Types of Decisions & the Buying Process
– More complex
– Involves large sums of money
– Can be exceedingly technical
– More formal than Individual buying
– Buyer & seller much more interdependent
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Participants in the Buying Process
• “Buying Center” shares risk, benefits
– Users: Final users of products/services
• Often initiate the buying process
– Influencers: Influence the process but don’t actually
make the final decision
– Deciders: Select product requirements & suppliers
– Approvers: Authorize proposed actions of deciders or
buyers
– Buyers: Have formal authority to select suppliers,
arrange terms of sale, etc
– Gate keepers: Have the power to prevent sellers or
information from reaching any / all of the above
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Organizational Seller’s Decisions
• Who is/are the major decision maker(s)
• What decisions do they influence
• What is their level of influence
• What criteria does each participant use
• What is the “Chain of Command”
– Must follow protocol
• Should concentrate on /convince the
“Decider”
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Major Influences on Organizational Buyers
• Environmental Factors
– Primary demand, economic outlook, etc..
• Organizational Factors
– Company objectives, policies, procedures,…
• Interpersonal Factors
– Authority, status, empathy, persuasiveness
• Individual Factors
– Age, education, job position, personality, etc
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Organizational Buying Process
1. Problem Recognition
2. General Need Recognition
3. Product Specification
4. Supplier Search
5. Proposal Solution
6. Supplier Selection
7. Order-Routine Specification
8. Performance Review
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Problem Recognition
• First step of the process
• Recognition of a need that can be met by
a service or product
• External – for example, need created by
marketers for some service / product
• Internal – for example, diverse
employees require ESL classes / training
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General Need Description
• What kind of product / service will solve the
problem
– Training materials
– Physical facilities
– Meeting space
– Sleeping rooms
– Other
• User should have input into the description
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Product Specification
• Defines specific product
– Name brand, size, weight, color, etc
• exact quantity
– # of rooms, lbs. Dollar amount, etc
• Price to purchase or cost to produce
• Quality of product / service
– May depend on level of use requires
• Once or many times
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Supplier Search
• Who can best meet our needs
• Reputation of supplier
• Cost of product or service
• Location of supplier
– Local or distant
• Delivery costs, shipping time, etc
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Proposal Solution
• List of Suppliers reduced to several “most
likely”
• Each supplier might bid on final purchase
• Seller must be skilled in sales
presentations, sales process and must
know something about the company
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Supplier Selection
• Corporate “deciders” review potential
suppliers’ proposals
– Review supplier qualifications and relative
importance of each attribute
• Price
• Delivery terms & processes
• Supplier reputation
• Problem resolution policies
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Order-routine Specification
• Decision on final product / service is reached
• Contract terms negotiated
– Cut-off dates
– Guaranteed quantities
• Minimum and maximum
– Breakage13
• Services paid for but not used
– Comps based on total usage
– Penalties for non-performance
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Performance Review
• Post purchase review
– Did we get what we wanted, asked for, paid for
• If yes, would we use this supplier again
– Maybe not, Probably, Yes, Without a doubt
• How serious were any problems
• If not, where do we go next time
• Did we make a good decision using this
supplier / service
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Group Business Markets
• Group business is critical to success
• Conventions
• Association meetings
• Corporate meetings
• SMERF’s
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Conventions
• Annual meeting of specialty market
– Often booked many years in advance
• Require lots of meeting space, F & B, rooms,
etc.
– Large conventions can have 1000s’ of members
– Often handled by local Convention Bureaus
• Registration fees can be substantial
• Purpose of Convention is generally to promote
common goals of organization
• Tradeshow is similar to convention, but purpose
is to promote / sell products to potential buyers
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Association Meetings
• 200,000+ association meetings a year
• Associations include just about any kind
of group
– Corporate, professional, education, etc
• Destination attributes are critical to
Association buyers
– Voluntary attendance at Assoc. meetings
make marketing more critical
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Corporate and Incentive Travel
• Attendance is often required
• May be called with little advance notice
• Major concern of buyers is that meetings are
successful
• Want good food quality, meeting rooms, billing
procedures for attendees
• Incentive travel is reward for top-selling
employees of any company
– Incentive travel usually pays for the best rooms,
entertainment, F & B, etc.
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SMERFs
• Social, Military, Educational, Religious,
Fraternal
• May only meet once every couple of
years
• Are generally very price sensitive
• Good “filler” for slow / off-peak periods
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Corporate Meeting Planners
• Important to develop win-win for buyer & seller
• Meeting planners often return year after year to
properties they like
• Corporate planners often use own in-house
travel planners
– Incentives are important to planners
– For example, 1 comp room for each 25 paid for
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