Business and Organizational Customers and Their Buying Behavior Chapter Seven Business and Organizational Customers and Their Buying Behavior Chapter 7 Business and Organizational Customers and Their Buying Behavior For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © 2011 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin 1

At the end of this presentation, you should be able to: This slide refers to material on pp. 172. Describe who the business and organizational buyers are. See why business and organizational purchase decisions often involve multiple influences. Understand the problem-solving behavior of organizational buyers, and how they get market information. Understand the different types of buyer-seller relationships and their benefits and limitations. 2

At the end of this presentation, you should be able to: This slide refers to material on pp. 172. Know about the number and distribution of manufacturers and why they are an important customer group. Know how buying by service firms, retailers, wholesalers, and governments is similar to—and different from—buying by manufacturers. Understand important new terms. 3

All Business & Organizational Customers Business and Organizational Customers – A Big Opportunity (buy for resale or produce other goods and srvices) This slide refers to material on pp. 172.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Manufacturers Farms, mines, etc. Financial Institutions Other providers Producers All Business & Organizational Customers Wholesalers Retailers Intermediaries Federal State and Local Governments National Local Nonprofits 6

Business and Organizational Customers This slide refers to material on pp.172. © 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 7

Serving Small Business Customers This slide relates to material on pp. 190. 8

Serving International Markets This slide refers to material on pp.174. © 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 10

Specifications and Quality This slide refers to material on pp. 175.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Specifications Describe the Need Quality Certification - ISO 9000 11

Multiple Influence and Roles in the Buying Center This slide refers to material on pp. 175-177.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Buyers (work with suppliers & arrange terms of sale) Influencers (write technical specifications) Buying Center Users Deciders (power to select & approve suppliers) Gatekeepers 12

Checking Your Knowledge This slide relates to material on pp. 176. Mary is a receptionist for a group of seven physicians. As she controls the calendars for the physicians, any sales representatives from pharmaceutical companies wanting to call on the physicians have to go through Mary. As a result, it is very important for sales reps to cultivate a good relationship with her. In the buying center, Mary would be best described as a: buyer. user. influencer. gatekeeper. decider. 13

Checking Your Knowledge This slide relates to material on pp. 176. Joe is a purchasing specialist for a large company. He has the authority to execute purchase orders or amounts up to $100,000. On a purchase order for a higher amount, Joe arranges the terms of sale, but the transaction has to be approved by the company president. In the buying center for a purchase in excess of $100,000, Joe is a _________ and the president is a _________: buyer; influencer. influencer; buyer. buyer; decider. gatekeeper; decider. user; influencer. Answer: C 14

Evaluating Organizational Buying Influences This slide refers to material on pp. 177-179.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Vendor Analysis Considers All Influences for rating suppliers Behavioral Needs Are Important Too (e.g., uncooperative sales representative) Ethical Conflicts May Arise—code of conduct governing interactions Purchasing May Be Centralized to achieve economies of scale Buying Firm’s Values Affect Purchasing Practices 15

Organizational Buying Processes This slide refers to material on pp. 180-182.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Characteristics Type of Process Much New-Task Buying Much New-Task Buying Much New-Task Buying Medium Some Modified Rebuy Little None Straight Rebuy Little None Straight Rebuy Time required Multiple influences Review of suppliers Information needed 17

New Task Buying Requires Information This slide refers to material on pp. 182-184.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Web sites with useful content Search Engines to gather information Online Communities where buyer share experiences New-Task Buying Requires Information Reverse Auctions foster price competition among suppliers Competitive Bids used to compare offerings 19

Checking Your Knowledge This slide relates to material on pp. 180. Jane, a sales representative for an industrial supply house, calls on a prospective business customer. The customer has an established relationship with another supplier, but says that there have been some reliability problems with deliveries. Jane seizes the opportunity to describe her company’s state-of-the-art logistics and transportation system that provides outstanding delivery reliability at low shipping costs. Jane is encouraged because her customer seems to be in a ___________ situation. straight rebuy modified rebuy new-task extensive problem-solving limited problem-solving ANSWER: B 20

Checking Your Knowledge This slide relates to material on pp. 180. Auto parts wholesaler Fixem, Inc. decides to invest in a new data management system to increase the efficiency of its warehouse operations. Previously, all record-keeping was done via printed documents, but now all transactions will be electronic. This change will require Fixem to expend a significant amount of money for hardware, software, and training. However, in the long run, the cost savings should exceed the up-front investment. Fixem has arranged for presentations to be made by three different vendors. Fixem seems to be facing a ______________ buying situation. straight rebuy modified rebuy new-task extensive problem-solving limited problem-solving ANSWER: C 21

Interactive Exercise: Organizational Buying This slide refers to material on pp. 180. 22

Buyer-Seller Relationships in Business Markets This slide refers to material on pp. 184-185.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Close Relationships May Produce Mutual Benefits Mutual trust Long-term outlook Share tasks at lower total cost Relationships May Not Make Sense Reduced flexibility Some purchases are too small or infrequent Some purchases require much special attention BUT 23

Relationships Have Many Dimensions (cooperation treats problems as joint responsibilities) This slide refers to material on pp. 185. 24

Relationships Have Many Dimensions (operational linkages are direct ties between internal operations of the buyer and seller firms—just-in-time delivery); RSA--outsource This slide refers to material on pp. 186-187.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). 25

Relationship Dimensions This slide refers to material on pp.185. © 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 26

Relationship Dimensions This slide refers to material on pp.185. © 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 27

Checking Your Knowledge This slide relates to material on pp. 185. Gotcha! is a chain of trendy stores catering to the urban contemporary market. As part of its close relationship with suppliers, Gotcha! has an Internet site that is accessible only by suppliers, and it provides up-to-the minute point-of-sale information from all of the Gotcha! stores. Suppliers can see how their products are doing at retail during any time of the day or night. In the relationship between Gotcha! and its suppliers, the Gotcha! supplier site is an example of: information sharing. legal bonds. reciprocity. operational linkages. negotiated contracts. ANSWER: A 28

Dynamics of Buyer-Seller Relationships This slide refers to material on pp. 187-188.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Powerful Customer May Control the Relationship Buyers May Use Several Sources to Spread Risks Buying Varies by Customer Type 29

Illustrative NAICS Code Breakdown for Apparel Manufacturers This slide refers to material on pp. 190.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Food (311) others… Leather (316) Apparel (315) Manufacturing (31) Construction (23) Manufacturing (31) Retail (44) others… Knitting Mills (3151) others… Apparel accessories (3159) Cut & Sew Apparel (3152) Apparel (315) Men’s & boys’ (31522) others… Other cut & sew (31529) Women’s & girls’ (31523) Cut & sew apparel (3152) Lingerie (315231) others… Dresses (315233) Blouses (315232) Women’s & girls’ (31523) 30

Manufacturers Are Important Customers This slide refers to material on pp. 188-189.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Not Many Big Ones (50% have less than 10 workers) Clustered in Geographic Areas NAICS Codes Business Data Classifies (similar) Industries (e.g., apparel manufactures are the main customers for zippers) 31

Buying May Not Be Formal Producers of Services – Smaller and More Spread Out (about 4.6 MM service firms in U.S.) This slide refers to material on pp. 190-191.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Car Repair Medical Services Legal Services Housekeeping Services Library Service Small Service Buyers Buying May Not Be Formal 32

Retailers & Wholesalers Buy for Their Customers This slide refers to material on pp. 191-193.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Buyers Watch Computer Output Closely to track inventory and price Committee Buying Is Impersonal Reorders Are Straight Rebuys Resident Buyers May Help (independent buying agents) Some Are Not “Open to Buy” (availability of funds within an organization’s separate divisions) 33

The Government Market Size and Diversity Competitive Bids This slide refers to material on pp. 193-195.  Indicates place where slide “builds” to include the corresponding point (upon mouse click). Size and Diversity Competitive Bids Foreign Corrupt Practices Act—prohibits bribes Rigged Specifications Foreign Governments information is less available “Approved” Supplier List Government Wants contain in government publications Negotiated Contracts 34

Study Question 1 This slide relates to material on p. 188. Which of the following is NOT an example of an organizational buyer?  A. a government buyer purchasing a new desk for the mayor's office. B. a woman buying cookware to sell to her friends and neighbors. C. a sales rep buying a new necktie to make a good impression. D. a wholesaler buying a delivery truck. E. None of the above is a good example. ANSWER: C

Study Question 2 This slide relates to material on p. 188. Which of the following is a business or organizational customer, as opposed to an individual final consumer?  A. A wholesaler purchasing merchandise for resale. B. A business executive who purchases a new suit. C. A teacher who fills her car with gasoline. D. A homeowner who buys flowers at a garden center. E. None of the above example. ANSWER: A

Study Question 3 This slide relates to material on p. 188. John Deere is considered which type of organizational customer?  A. Producer. B. Intermediary. C. Government. D. Nonprofit. ANSWER: A

Study Question 4 This slide relates to material on p. 188. In the purchase of a new computer monitor, which of the following is an example of a user?  A. A purchasing manager who arranges the terms of the sale. B. An IT manager who supplies information for evaluating alternatives. C. A secretary whose computer monitor is being replaced. D. A receptionist who controls the flow of information. E. A supply manager who helps write specifications. ANSWER: C

Study Question 5 A straight rebuy is MOST likely to occur for: This slide relates to material on p. 188. A straight rebuy is MOST likely to occur for:  A. a new computer network. B. a pension plan which meets the new government regulations. C. paper supplies for the copy equipment. D. electronic components for a new product. E. executive chairs for a new office building. ANSWER: C