1. Buying Behavior and the Buying Process
Chapter 3
Buying Behavior and the Buying Process

2. Types of Customers Producers Original Equipment Manufacturers
buy goods and services to manufacture and sell other goods and services to their customers
Original Equipment Manufacturers
when buyers purchase goods to use in making their products
some components have such a high reputation they help sell the product
most bought in large quantities on an annual basis

3. Continued Resellers End Users
action when producers buy goods and services to support their own production and operations
Capital equipment- major purchases that the producer uses for a number of years (Ex. Mainframe computers and machine tools)
MRO supplies- minor purchases that have a short useful life (Ex. Paper towels and pencils)
Resellers
buy furnished products or services with the intention to resell them to businesses and consumers
interested primarily in the attractiveness of the products to their customers

4. Continued Government – (Federal, State, & Local)
Largest customer for goods and services in the U.S. & the world! (over $1 trillion in goods and services annually)
Buyers bidding
Effective selling requires a thorough knowledge for their unique procurement procedures and rules
Many international salespeople

5. Continued Institutions
Public and private (ex.churches, hospitals, and colleges)
Packaged goods manufacturers sell to both resellers & institutional customers
Consumers
End users vary for consumers
Text focuses on selling to business enterprises, government agencies, or institutions
(A large number of college graduates frequent these sales positions)

6. Organizational Buying and Selling
Complexity of the Organizational Buying Process
involve extensive evaluations and negotiations over a period of time
salespeople must be able to work effectively with a wide range of people
increased complexity with increased global businesses
Derived Vs. Direct Demand – See P. 65
Derived demand- purchase made by these customers ultimately depend on the demand for their products-either other organizations or consumers
Direct demand increases its efforts toward the ultimate consumer
(Strategy: increasing in-store displays)

7. The Organizational Buying Process
Steps in the buying process:
Recognizing a Need or a Problem
Defining the Product Needed
Development of Specifications
Searching for Qualified Suppliers
Acquiring and Analyzing Proposals
Evaluation of Proposals and Selection of a Supplier
Placement of an Order and Receipt of Product
Evaluation of Product Performance

8. Continued
Creeping commitment- a customer becomes increasingly committed to a particular course of action while going through the steps in the buying process

9. Types of Organizational Buying Decisions
New Task – See Exhibit 3.2-P.69
a customer purchases a product or service for the first time
company’s knowledge is limited; initial buying process steps/post purchase evaluation is critical
Straight Rebuy
a customer buys the same product from the same source it used when the need arose previously
brand loyalty
Modified Rebuy
the customer has purchased the product or a similar product in the past but is interested in obtaining new information

10. Who Makes The Buying Decision
Buying center- an informal, cross-department group of people involved in a purchase decision
Users
typically don’t make the ultimate purchase decision
considerable influence in the early and late steps of the buying process
Initiators
people who start the buying process – can be user or executive

11. Continued Influencers
people inside or outside the organization who directly or indirectly provide information
Gatekeepers
control the flow of information and may limit the alternatives considered
Deciders
one or more members of a group that make the final choice
mostly senior executives

12. Supplier Evaluation and Choice
Affected by the needs of both the organization and the individuals making the decisions
Classified into two categories:
Rational needs- directly related to the performance of a product
Emotional needs- associated with the personal rewards and gratification of the person buying the product

13. Organizational Needs and Criteria
Economic Criteria
Objective of businesses: Profit
achieve price efficiency by evaluating the cost of equipment
Life-cycle costing (total cost of ownership)- method for determining the cost of equipment or suppliers over their useful lives
Quality Criteria
Need for quality varies by industry group and ultimate market reached

14. Life-Cycle Costing

15. Continued Service Criteria
buyers want suppliers to work with them to solve their problems
Value analysis- an example of a program in which suppliers and customers work together to reduce costs and still provide the required level of performance (can use to get customers to try a new product)

16. Individual Needs of Buying Center Members
Types of Needs
influence members of the buying center by developing strategies to satisfy individual needs
Risk Reduction
Buying center sometimes more concerned about losing benefits than increasing benefits
Vendor loyalty- continue buying from suppliers that have proven satisfactory in the past
Always-a-share – always have a second source for a product

17. Trends In Organizational Buying
Increasing Importance of Purchasing Agents
Critical function in the learning organization
Heavy emphasis on computer information and control systems
Centralized Purchasing & Supply Chain Management
More purchasing is done at a central location (corporate headquarters)
A national account manager coordinates the firm’s efforts to satisfy the needs of a major customer
A NAM works directly with the purchasing department and coordinates the activities of its salespeople

18. Supply Chain Management
Definition: a set of programs undertaken to increase the efficiency of the distribution that moves products from the producer’s facilities to the end user
Just-in-time (JIT) inventory control- used by a producer to minimize its inventory by having frequent deliveries, sometimes daily, just in time for assembly into the final product

19. Supply Chain Management
Quick response or efficient consumer response (ECR) systems
retailers & distributors work closely with their suppliers to make sure they minimize their inventory investments, while cutting costs & satisfying customers

20. Supply Chain Management
Automatic replenishment – AR
Form of JIT were supplier manages inventory levels for customers. Materials provide on consignment. Used in industrial settings.
See Exhibit 3.6 – Page 83

21. Supply Chain Management
Electronic Data Interchange – EDI
Automatic replenishment technology used electronic data interchange.
Computers share data across companies
Materials Requirements Planning – MRP
Important element of JIT systems
Forecast sales, schedules, etc.

22. Supplier Relationship Management (SRM)
Strategy to evaluate buyers
Identify annual spending
Vendor analysis next
Track results

23. Vendor Analysis
Summarizes the benefits and needs satisfied by a supplier
Buyer rates the supplier and its products on a number of criteria (quality, on-time delivery, price & other)
They are then weighed by importance
See exhibit 3.7 – P. 86

24. Business-to-Business Selling The Internet
Web is a Tool for supporting salespeople
Reverse auction – buyer offers a contract & sellers bid
Can save time & money
Best used with large purchases, clear descriptions, & a good infrastructure to support an auction

25. Case – Midwest Surgical
Read thoroughly – class discussion will follow
Will go over in class – questions from the case will be on the test

26. Questions?