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Industrial buying-behavior

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  • 1. Dynamics of industrialbuying behavior Presented By- Rajnish Kumar Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 2. Industrial buying behavior Consumer vs. Industrial buying behavior Main types of buying situations in B2B Stages of decision in B2B Roles in B2B procurement Influences on organizational behavior Buying centres in summary Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 3. Consumer vs. Industrial buyingbehavior Decisions made by consumers are quite simple Industrial buying processes are more complicated, there are several phases and steps Different buying behavior for different products and target groups Simple consumer goods like food and beverages are bought very spontaneously – influenced by advertising and product presentation For premium consumer goods (expensive clothes, computers) – buying behavior is getting more rational – comparison Private investment goods – price bargaining Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 4. B2B products –Industrialprocurement starts More than one person involved Buying process follows certain rules Price comparison, standardisation, tenders = Ausschreibungen) Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 5. B2B systems involve more capabilities and greater workloads From the buyer‘s and the supplier‘s side decision has more extensive consequences Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 6. B2B facilities Industrial plants Manufacturing installations Office buildings Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 7. Main types of buyingsituations in B2B Straigtht rebuy – routine decision, repetitive process (energy, office supplies, raw materials, wood, cigarettes), component suppliers for the automotive industry – little or no new information Modified rebuy – more complicated but less sophisticated: cars, trucks, computers, consulting – modified rebuys are often treated too uncautious New task – calls for thorough research – industrial plant – highest level of uncertainty. Strategic new tasks are of extreme strategic and financial importance (aircrafts, military equipment, infrastructure) – re- evaluation of alternatives and search for new information and new alternatives Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 8. Buying phases Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 9. Stages of decision in B2Bprocurement Backhaus developed a widely usable model to distinguish between 5 phases of procurement Preliminary application (initiation phase) Tender proposal Negotiation Processing of order Warranty and services Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 10. Preliminary application Recognition of a problem (need) and a general solution Released by top management = operating department or external consultants Result  request for an offer addressed to a number of potential suppliers Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 11. Tender preparation phase Determination of characteristics and quantity of needed items Search for and qualification of potential sources Supplier has to provide an offer Tries to be incomparable with his competitors Customer tries to make the offer best comparable Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 12. Negotiation phase = core selling process Comprises acquisition and analysis of proposals, evaluation of proposals and selection of suppliers Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 13. Processing phase/warranty/service phase Contains selection of an order routine Realisation of the transaction along with the fixation of after sales service tasks Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 14. Roles in B2B procurement –buying center concept Group of people involved in the buying process – buying center Webster/Wind model shows 5 different roles – not institutionalised This causes probleme in identifying and targeting the right people within the decision process Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 15. Buying center Role keepers have different tasks – not mandatory Buyer User Initiator Gatekeeper Influencer Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 16. Buyer Formal authority to sign contracts Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and conditions of the contract Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 17. User Person working with the product Interested in benefits and unobstructed function of the product to buy Large knowhow and preconceived opinion Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 18. Influencer A person with high technical knowledge and practical experience  definition of minimum requirements on technical or company standards Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 19. Gatekeeper Controls the flow of information within the buying center Assistant of decision maker Influence by preparing the decision and the relevant documents (Scriptum p 33-34 + summary) Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 20. Decider Right to say yes or no Mightiest person Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 21. Initiator Person who brings new ideas and solutions into the company Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 22. Specific marketingconsiderations in the industrialfacilities business Long decision taking process High risk Complex buying center The specific competitive situation Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 23. Product policy Focuses on innovation Has to care for high flexibility in research and development And manufacturing and assembling Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 24. Price Strict bid and tender rules High transparency Add value with service offering to achieve a differentiating position Another aspect: financing and sourcing models Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 25. Distribution policy Focus on negotiation phase Provide excellent people in the selling center High technical knowledge Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 26. Communication Problem solver! Proving success with comparable tasks Reference projects! Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)
  • 27. THANK YOU Rajnish Kumar Accman Institute of management PGDM-MKT (2011-13)