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XIME –RS–0312-January-2010 B2B Marketing The Organization Buying Process XIME–RS–03 Amarnath Krishnaswamy.

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Presentation on theme: "XIME –RS–0312-January-2010 B2B Marketing The Organization Buying Process XIME–RS–03 Amarnath Krishnaswamy."— Presentation transcript:

1 XIME –RS–0312-January-2010 B2B Marketing The Organization Buying Process XIME–RS–03 Amarnath Krishnaswamy

2 XIME –RS–0312-January-2010 Plan for this Session Building relationships Buying behaviour

3 XIME –RS–0312-January-2010 Building Relationships

4 XIME –RS–0312-January-2010 Its 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

5 XIME –RS–0312-January-2010 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 sellers objective is to make it to the last A on AIDA!!

6 XIME –RS–0312-January-2010 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

7 XIME –RS–0312-January-2010 Buying – Selling process SellingBuying R & D Distribution Marketing Purchasing Engineering Manufacturing

8 XIME –RS–0312-January-2010 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

9 XIME –RS–0312-January-2010 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

10 XIME –RS–0312-January-2010 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

11 XIME –RS–0312-January-2010 1. New Task The New task can fall into 2 categories 1.Judgmental New 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

12 XIME –RS–0312-January-2010 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

13 XIME –RS–0312-January-2010 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

14 XIME –RS–0312-January-2010 2. Straight rebuy - Guidelines As the purchase is routine, and the approach is likely to be casual: In supplier: Reinforce position – that youre the best. Out supplier: Develop a relationship. Wait for an opportunity.

15 XIME –RS–0312-January-2010 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

16 XIME –RS–0312-January-2010 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

17 XIME –RS–0312-January-2010 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

18 XIME –RS–0312-January-2010 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

19 XIME –RS–0312-January-2010 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

20 XIME –RS–0312-January-2010 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

21 XIME –RS–0312-January-2010 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

22 XIME –RS–0312-January-2010 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

23 XIME –RS–0312-January-2010 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

24 XIME –RS–0312-January-2010 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

25 XIME –RS–0312-January-2010 Buying Behaviour

26 XIME –RS–0312-January-2010 Its 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

27 XIME –RS–0312-January-2010 Forces impacting behaviour Organizational behaviour impacted by primarily four forces: 1.Environmental forces 2.Organizational forces 3.Group forces 4.Individual forces

28 XIME –RS–0312-January-2010 Environmental forces 6 types: 1.Economic 2.Political & Legal 3.Cultural 4.Physical 5.Technological 6.Environmental Uncertainty

29 XIME –RS–0312-January-2010 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)

30 XIME –RS–0312-January-2010 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

31 XIME –RS–0312-January-2010 Environmental Forces 3. Cultural Examples: 1. Women – in the Gulf countries 4. Physical Examples: 1. Proximity to users 2. Landed cost concept

32 XIME –RS–0312-January-2010 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

33 XIME –RS–0312-January-2010 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

34 XIME –RS–0312-January-2010 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 like R&D and Engineering is an important factor for centralization. Is this true?

35 XIME –RS–0312-January-2010 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.

36 XIME –RS–0312-January-2010 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

37 XIME –RS–0312-January-2010 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

38 XIME –RS–0312-January-2010 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

39 XIME –RS–0312-January-2010 Exercise! Pick a purchase situation Analyze the situation in terms of the parameters discussed

40 XIME –RS–0312-January-2010 Exercise – what would you look at? Define 1.Buying situation New task / Straight rebuy / Modified rebuy 2.Status of supplier In / Out 3.Evaluation Value 4.Supplier capability (lets drop this for this exercise!) 5.Relationship sought Transaction / Long term

41 XIME –RS–0312-January-2010 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

42 XIME –RS–0312-January-2010 We cant 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!

43 XIME –RS–0312-January-2010

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