Description
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
salespeople?
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To:
Satisfy a want or desire
Solve a problem
Satisfy an impulse
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Manufacturers
Resellers
Government agencies
Institutions
Consumers
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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
operation
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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
operations
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Capital
equipment
Maintenance, repair,
and overhaul or M R O
supplies
Services
• Major
purchases
• Mainframe
computers
• Machine
tools
• Paper towels and
replacement parts for
machinery
• Requires major
financial
commitment
• Minor expense
• Availability is critical
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• Internet and
telephone
connections,
employment agencies,
consultants, and
transportation
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
•
Effort
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
negotiations
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
process
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
previously
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
Includes:
Users
Initiators
Influencers
Gatekeepers
Deciders
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Users
Influence the steps of need recognition, product
definition, and postpurchase evaluation in the buying
process
Do not make the ultimate purchase decision
Initiators
Start the buying process
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Influencers
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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Gatekeepers
Control the flow of information and may limit the
alternatives considered
Ensure that purchases are consolidated under one
contract
•
To reduce costs and increase quality
Deciders
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:
Organization
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,
Appendix
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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
needs
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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
product
•
Useful for out-suppliers in straight rebuy situations
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Buying center members have different needs and
aspirations
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
costs
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
interchange
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
Steps
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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