Purchasing Decision


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Purchasing Decision

  1. 1. The Purchasing Decision
  2. 2. Learning Objectives of this Session <ul><li>The Decision Making Unit (DMU) </li></ul><ul><li>The Decision Making Process (DMP) </li></ul><ul><li>Factors affecting the Purchasing Decision </li></ul><ul><li>B2C and B2B Purchasing Decisions </li></ul>
  3. 3. 1: The Decision Making Unit (DMU) Model
  4. 4. The elements of the DMU are: <ul><li>The Gatekeeper </li></ul><ul><li>The Initiator </li></ul><ul><li>The Decider </li></ul><ul><li>The Buyer </li></ul><ul><li>The User </li></ul><ul><li>The Financier </li></ul><ul><li>Other Influencers </li></ul>
  5. 5. The Gatekeeper <ul><li>Controls access to the DMU </li></ul><ul><li>Controls information input into DMU </li></ul><ul><li>Could be an individual (Secretary / PA) </li></ul><ul><li>Could be a department (Customer Service, Sales, Procurement) </li></ul>
  6. 6. The Initiator <ul><li>The person who recognises a problem / need to be addressed </li></ul><ul><li>May or may not be part of ‘formal’ DMU </li></ul><ul><li>Often associated with ‘The User’ </li></ul>
  7. 7. The Decider <ul><li>The person with the authority to make the decision to buy </li></ul><ul><li>May or may not be the person who makes the final choice </li></ul><ul><li>Level of seniority depends on importance of purchase / budget / company culture </li></ul>
  8. 8. The Buyer <ul><li>The person tasked to make the actual purchase </li></ul><ul><li>Degree of choice / power depends on organisation structure </li></ul><ul><li>May be part of a formal ‘Buying Department’ </li></ul>
  9. 9. The User <ul><li>The person/s who actually use or consume the product / service </li></ul><ul><li>Degree of influence on DMU depends on company culture </li></ul><ul><li>Importance of feedback / satisfaction depends on company culture </li></ul>
  10. 10. The Financier <ul><li>The person or department which authorises expenditure </li></ul><ul><li>Degree of influence / authority depends on company culture / budget involved </li></ul>
  11. 11. Influencers <ul><li>Anyone outside of the DMU which has an influence on its members: </li></ul><ul><li>Formal ‘consultants’ </li></ul><ul><li>Informal personal contacts / WoM </li></ul><ul><li>Recognised ‘experts’, role models, personalities and endorsees </li></ul>
  12. 12. The Decision Making Unit: B2B B2C <ul><li>Roles tend to be more formal </li></ul><ul><li>Roles tend to be by job title – but some multi-role play </li></ul><ul><li>Degree of influence may still be affected by strength of personality </li></ul><ul><li>Roles tend to be more informal </li></ul><ul><li>Many roles played by one person </li></ul><ul><li>DMU sometimes associated with members of Family </li></ul><ul><li>Recognises influence of children / non wage earners </li></ul>
  13. 13. 2: The Decision Making Process (DMP) Model
  14. 14. The stages of the DMP are: Recognition of need Developing product specification Search for information / supplier Evaluation of alternatives Select product / supplier Decision to buy / Determining terms of contract Fulfilment of contract Evaluation
  15. 15. 1: Recognition of need <ul><li>Many purchases are made to meet a perceived problem </li></ul><ul><li>Customers are interested in ‘benefits’ (solutions) rather than ‘features’ </li></ul><ul><li>Problems may be ‘real’ or ‘imagined’ </li></ul><ul><li>High priority vs low priority problem solving </li></ul><ul><li>New technology may create its own ‘need’ eg Walkman, GPS, iPhone </li></ul>
  16. 16. 2: Product specification <ul><li>May be complex formal B2B process </li></ul><ul><li>Also B2C – especially for major purchases </li></ul><ul><li>Budget </li></ul>
  17. 17. 3: Search for information <ul><li>Previous purchasing experience </li></ul><ul><li>Intensity of search depends on: New Buy / Re-Buy / Modified Re-buy (Extended, Limited and Routine Problem Solving) </li></ul><ul><li>Advertising and sales literature </li></ul><ul><li>Internet </li></ul><ul><li>Sales representatives </li></ul><ul><li>Store visits </li></ul><ul><li>Recommendation from friends and other users </li></ul>
  18. 18. 4: Evaluating alternatives <ul><li>Factors compared: </li></ul><ul><li>Performance (Capable of meeting need) </li></ul><ul><li>Availability </li></ul><ul><li>Price </li></ul><ul><li>Value for money </li></ul><ul><li>Brand? </li></ul>
  19. 19. 5: Selection of product / supplier <ul><li>Shortlisting </li></ul><ul><li>Request for tenders </li></ul><ul><li>Prioritising choices </li></ul>
  20. 20. 6: Decision to buy / Terms of contract <ul><li>To buy or not to buy </li></ul><ul><li>Buy now or buy later (re-evaluation of priorities) </li></ul><ul><li>Negotiating terms </li></ul><ul><ul><li>Price / Payment </li></ul></ul><ul><ul><li>‘ Added value’ benefits </li></ul></ul>
  21. 21. 7: Fulfilment of contract <ul><li>Delivery </li></ul><ul><li>Fitting </li></ul><ul><li>Schedules </li></ul><ul><li>Specifications </li></ul>
  22. 22. 8: Evaluation <ul><li>Has need been met? </li></ul><ul><li>Problem areas: </li></ul><ul><li>Was product / service misrepresented? </li></ul><ul><li>Were specifications correctly determined? </li></ul><ul><li>Were expectations raised unrealistically? (overselling) </li></ul><ul><li>Customer ‘satisfaction’ or ‘delight’? </li></ul><ul><li>Post-purchase dissonance? </li></ul><ul><li>Repeat purchase? </li></ul>
  23. 23. Conclusions: <ul><li>Need to identify customers’ decision making processes </li></ul><ul><li>Need to identify members of DMU and their relative influence on the DMP </li></ul><ul><li>What are the customers’ buying criteria </li></ul><ul><li>Need to understand buyer behaviour at each stage of the DMP </li></ul><ul><li>Need to adapt customer communications for each of the above </li></ul>
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