MKT 405 Miami University Mid Sized Construction Company Discussion


What are the different types of customers?

How do organizations make purchase decisions?

Which factors do organizations consider when they
evaluate products and services?
Who is involved in the buying decision?
What should salespeople do in the different types
of buying situations?
Which changes are occurring in organizational
buying, and how will these changes affect
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Satisfy a want or desire

Solve a problem

Satisfy an impulse
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Government agencies


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Buy products and services to manufacture and sell
their products and services to customers

Buyers working for manufacturers are involved in the
following buying situations:

Buying products that will be included in the products the
company is manufacturing

Buying products and services to support the manufacturing
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Original equipment manufacturers or O E Ms:
Businesses that purchase goods to use in making
their products
End users: Manufacturers who buy goods and
services to support their own production and
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Maintenance, repair,
and overhaul or M R O
• Major
• Mainframe
• Machine
• Paper towels and
replacement parts for
• Requires major
• Minor expense
• Availability is critical
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• Internet and
employment agencies,
consultants, and
Buy finished products or services with the intention to resell
them to businesses and consumers
Consider the following elements when making decisions about
which products to sell:

Profit margin: Net profit that a seller will make on each sale

Turnover: How quickly a product sells

Salespeople work with resellers to help them build their return
on investment, R O I
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Develop detailed specifications for a product and then
invite qualified suppliers to submit bids

Contract is awarded to the lowest bidder
Conduct small purchases without bidding
Effective selling to government agencies requires a
thorough knowledge of their unique procurement
procedures and rules
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Public and private institutions
Include churches, hospitals, and colleges

Purchasing rules and procedures are as complex and
rigid as those of government agencies
Consumers: Purchase products and services for use
by themselves or by their families
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Typical organizational purchase is larger and more
complex than the typical consumer purchase

Highly trained, knowledgeable purchasing agents
make purchase decisions
Buying decisions involve extensive evaluations and
Complexity of organizational selling is increasing
as more customers become global businesses

Global sourcing is a key factor for achieving a sustainable
competitive advantage
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Sales to O E Ms and resellers are based on derived
demand rather than direct demand

Derived demand: Situation in which the demand for a
producer’s goods is based on what its customers sell
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Jump to Exhibit 3.1: Steps in the Organizational Buying
Process, Appendix
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Customer’s commitment to a particular course of
action while going through the steps in the buying

As decisions are made at each step, the range of
alternatives narrows
While purchasing components or materials as part of
new product development, buyers are interested in
early involvement by possible vendors

In early procurement involvement or early supplier
involvement, potential suppliers participate in the actual
design process of a new product
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New task: When a customer purchases a product or
service for the first time
Straight rebuy: When a customer buys the same
product from the same source it was bought from
Modified rebuy: Customer has purchased the
product or a similar product in the past but is
interested in obtaining new information
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Informal, cross-department group of people involved
in a purchase decision





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Influence the steps of need recognition, product
definition, and postpurchase evaluation in the buying
Do not make the ultimate purchase decision

Start the buying process
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Directly or indirectly provide information during the
buying process
Economic influencer: Concerned about the financial
aspects of a decision
Technical influencer: Makes sure the technical
requirements are met
Coach: Advises and directs a salesperson in a buying
process, leading to a sale
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Control the flow of information and may limit the
alternatives considered
Ensure that purchases are consolidated under one

To reduce costs and increase quality

Make the final choice
For straight rebuys, the purchasing agent usually
selects the vendor and places the order
For new tasks, several people should approve the
decision and sign the purchase order
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Evaluation and selection of products and suppliers are
affected by the needs of:


Individuals making the decisions
Categories of organizational and personal needs

Rational needs: Directly related to the performance of
the product
Emotional needs: Associated with the personal rewards
and gratification of the person buying the product
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Jump to Exhibit 3.4: Factors Influencing Organizational Buying Decisions,
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Economic criteria

Businesses look to procure products and services at the
lowest cost
Life-cycle costing: Method for determining the cost of
equipment or supplies over their useful lives

Helps salespeople demonstrate that a product with a
higher initial cost will have a lower overall cost
Quality criteria

Firms expect their suppliers to support their efforts to
provide quality products
Salespeople need to know what organizational buyers
are looking for in order to satisfy customer quality
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Service criteria

Firms look to develop long-term relationships with
suppliers so that they can learn about each other’s
needs and capabilities and use the information to
enhance their products’ performance
Service level agreements, S L As: Standards for
minimum service delivery for specific objective
measures of how the vendor will perform services, and
are written into a contract
Value analysis: Useful for out-suppliers in straight
rebuy situations

Used by salespeople to get customers to consider a new

Useful for out-suppliers in straight rebuy situations
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Buying center members have different needs and

Salespeople can influence the members by developing
strategies to satisfy individual needs
Risk reduction

To reduce risk, buying center members may:

Collect additional information

Develop a loyalty to present suppliers

Spread the risk by placing orders with several vendors
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Set of programs undertaken to increase the efficiency
of the distribution channel that moves products from
the producer’s facilities to the end user
Strategy of managing inventory while containing

Just-in-time or J I T inventory control: Minimizes
inventory by having frequent deliveries just in time for
assembly into the final product
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• Efficient consumer response systems use automatic
replenishment technology through electronic data
 Automatic replenishment: Form of J I T where the
supplier manages inventory levels for the customer
 Electronic data interchange: Computer systems that
share data across companies
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Strategy by which organizational buyers evaluate the
importance of suppliers

Use the information to determine with whom they want
to develop partnerships

Identify the annual spend to consolidate purchases and
negotiate better terms

Annual spend: Amount that is spent with each vendor
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Conduct vendor analysis

Buyer rates the supplier and its products on a number of
criteria, and an overall score or evaluation of the vendor is
developed based on the ratings
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Used to understand the factors individual members of
a buying center consider in:

Evaluating products

Making choices
Used in complex decisions involving several vendors
Based on the idea that people view a product as a
collection of characteristics or attributes
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