consumer behavior

2. Webster and wind defines organizational buying
as the decision-making process by which formal
organizations establish the need for purchased
products and services and identity ,evaluate and
choose among alternative brands and suppliers.

3. ORGANISATIONAL BUYING
BEHAVIOUR
The
business
market v/s
the
consumer
market
Buying
situations
Systems
buying and
selling

4. • Business market : Agriculture, forestry, and fisheries,
mining, manufacturing, construction, transportation,
communication, public utilities , banking, finance, and
insurance, distribution and services.
• Consumer market : It is the market for products and
services bought by individuals for their own or family
use. goods bought in consumer market can be
categorised in several ways like fast moving consumer
goods(FMCG), consumer durables (e.g. Fridge-freezers,
cookers ,DVD player), soft goods(like clothes, shoes),
services(e.g. Hairdressing, dentists, childcare)

5. •Fewer, larger and buyers: The business marketer
normally deals with far fewer, much larger buyers than
the consumer marketer does, particularly in such
industries as aircraft engines and defence weapons.
•Close supplier-customer relationship: Because of the
smaller customer base and the importance and power of
the larger customers, suppliers are frequently expected to
customize their offerings to individual business customer
needs. Ex: a paper manufacturer might buy from a chemical
company that buys a considerable amount of its paper
•Professional purchasing: Business goods are often
purchased by trained purchasing agents who follow their
organisation’s purchasing policies, constraints, and
requirements. Professional buyers spend their careers
learning how to buy better.

6. •Multiple buying influences: More people typically
influence business buying decisions. Buying committees
consisting of technical experts and even senior
management are common in the purchase of major
goods.
•Multiple sales calls : In the case of capital equipment
sales for large projects, it may take many attempts to
fund a project, and the sales cycle-between quoting a
job and delivering the project –is often measured in
years.
•Derived demand :The demand for business goods is
ultimately derived from the demand for consumer
goods. For this reason , the business marketer must
closely monitor the buying patterns of ultimate
consumers.

7. •Inelastic demand: Demand is especially inelastic in the
short run because producers can not make quick changes
in production methods. Demand is also inelastic for
business goods that represent a small percentage of the
item’s total cost.
•Fluctuating demand:The demand for business goods and
services tends to be more volatile than the demand for
consumer goods and services.
•Geographically concentrated buyers:The geographical
concentration of producers helps to reduce the selling
costs. At the same time, business marketer needs to
monitor regional shifts of certain industries.
•Direct purchasing: Business buyers often buy directly
from manufacturers rather than through intermediaries,
especially items that are technically complex or expensive
like air crafts.

8. The business buyer faces many decision in making a
purchase .The number depends on the buying
situations : complexity of the problem being solved,
newness of the buying requirement , number of
people involved, and time required.
Buying situations
STRAIGHT REBUY MODIFIED REBUY NEWTASK

9. • The buyer routinely reorders
something without any
modifications.
STRAIGHT REBUY
• The buyer wants to modify product
specifications, prices, terms, or
suppliers.
MODIFIED REBUY
• The buyer purchases a product or
services for the first time.
NEWTASK

10.  Many business buyers prefer to buy a total solution to a
problem from one seller.
 Called system buying this practice originated with
government purchases of major weapons and
communications systems.
 The government would solicit bids from prime contractors,
who assembled the package or system.
 The contractor who was awarded the contract would be
responsible for bidding out and assembling the system’s
subcomponents from second-tier contractors.

11.  The prime contractor would thus provide a turnkey solution,
so called because the buyer simply had to turn one key to get
the job done.
 Systems contracting,- where a single supplier provides the
buyer with his entire requirement of MRO (maintenance,
repair, operating) supplies. During the contract period, the
supplier manages the customer’s inventory.

12. The Buying Center
Buying Center Influencer
Buying Center Targeting

13. All the individuals and unit that play a role in the business
purchase decision making process called buying center.
Seven roles in the buying center.
Initiators
Users
Influencer
Deciders
Approvers
Buyers
Gatekeep
ers
PARTICIPANT

14.  Users or others in the organization who
request that something be purchased.

15.  They are members of the organization who
will use the product or services.
 In many cases, users initiate the buying
proposal and help define product
specifications.

16.  People who influence the buying decision,
often by helping define specifications and
providing information for evaluating
alternatives.
 Technical personnel are particularly
important influencers.

17.  People who decide on product requirement
or on suppliers.

18.  People who authorize the proposed action of
deciders or buyers.

19.  People who have formal authority to select
the supplier and arrange the purchase terms.
 Buyers may help shape product specification,
but they play their major role in selecting
vendor and negotiating.
 In more complex purchase, buyers might
include high-level managers.

20.  People who have the power to prevent sellers
or information from reaching members of the
buying center.
 For example, purchasing agents, receptions
and telephone operators may prevent
salespersons from contacting users or
deciders.

21.  Buying center usually include several participants
with differing interest, authority, status, and
persuasiveness, and sometimes very different
decisions criteria.
 For example:
Engineer may wants to maximize the performance of product.
Financial staff focus on the purchases

22. Business buyers also have personal motivations, perceptions,
and performance influencer.
For example:
 Age, income, education, job position, personality attitudes etc.
 Different buying style of buyers
 Keep-in-smile buyer
 Own-expert buyer
 Want-the-best buyer
 Want-everything-done buyer
Personal needs motivate their behaviour, but organizational needs legitimate
the buying process and its outcomes.
Thus, business people are not buying product but they are buying solutions to
two problems.
1. The origination's economic and strategic problem
2. Their own personal need for individual achievement and reward
The industrial buying decisions are both rational and emotional.

23. Targeting firms:
 Finding those business sectors with the greatest
prospects, most profitable customers, and most promising
opportunities for the firm is crucial.
 Ex: kirloskar oil engines
 In developing selling efforts, business market can also
consider their customers’ customers or end users.

24. • The firm must decide how best to sell to customers
• To target their efforts properly, business marketers need to
figure out:
-who are the major decision participants?
-What decisions do they influence?
-What is their level of influence?
-What evaluation criteria do they use?
• The business marketers is not likely to know exactly what kind
of group dynamic take place during the decision process,
although whatever information he or she can obtain about
personalities and interpersonal factors is useful.

25. The purchasing/procurement process

26. • Procurement is a purchasing process that controls quantity,
quality, sourcing and timing to ensure the best possible total
cost of ownership.
• Example:
 Procurement may be a simple purchasing arrangement
with a suppliers.
 It may also involve a more complex arrangement with the
seller or a group of suppliers that ties required quantity,
quality and delivery into a production process.

27.  There are 8 stages in Buying behavior.
PROBLEM RECOGNITION
GENERAL NEED DESCRIPTION
PRODUCT SPECIFICATION
SUPPLIER SEARCH
PRAPOSAL SOLICITATION
SUPPLIER SELECTION
ORDER ROUTINE SPECIFICATION
PERFORMANCE REVIEW
1
2
3
4
5
6
7
8

28.  The buying process begins when someone in the
company recognizes a problem or need that can be
met by acquiring a good or service.
 Can be trigged by internal and external stimuli.
 Internal stimulus:-decision to develop a new product
that requires new materials, machine breakdown and
requires new parts.
 External stimulus:-buyer may get new ideas at a
trade show, see and ad, or receive a call from a sales
representative who offers a better product or a lower
price.
 Business marketers can stimulate problem
recognition by direct mail, telemarketing and calling
on prospects.

29.  Next, the buyer determines the needed item’s
general characteristics and required quantity.
 For standard items:- Simple
 For complex items:- Buyer will work with
others-engineers, users-to define characteristics
like reliability, durability or price.
 Business marketers can help by describing how
their products meet or even exceed the buyer’s
needs.

30.  Buying org now develops the item’s
specification.
 Company will assign a product- value-
analysis(PVA)engineering team to the project.
 PVA is an approach to cost reduction that
studies whether components can be redesigned
or standardized or made by cheaper methods of
production without adversely impact on product
performance.
 Specification allow the buyer to refuse
components that are too expensive or that fail to
meet specified standards.

31.  The buyer tries to identify the most appropriate
suppliers through trade directories, contacts with
other compnies,trade advertisements, trade shows,
and the internet.
 Companies that purchase over the internet are
utilizing electronics marketplaces in diff forms:-
 Catalog sites:-companies can order thousands of
items through e-catalog distributed by E-
procurement.
 Vertical markets:-companies buying industrial
products such as plastics, steel or chemicals or
services such as logistics or media can go to
specialized web sites(called e-hubs).
 For ex:-plastic.com allows plastics buyers to search
the best price among thousands of plastic sellers.

32. “Pure play” auction sites:-
 Ritchie Bros. auctioneers is the world’s largest
industrial auctioneer, with more than 40 auction sites
worldwide. It sold $3.5 billion of used and unused
equipment at more than unreserved auctions in 2009,
including a wide range of heavy equipment, trucks,
and other assets for the construction, transportation,
agricultural, material handling mining, forestry,
petroleum, and marine industries.
 While most people prefer to bid person at Ritchie
bros. auctions, they are also bid to online in real time
at rbauction.com-the company’s multilingual web
site. In 2009,33percent of the bidders at Ritchie bros.
auctions bid over the internet; online bidders
purchased $ 830 million of equipment.

33.  Spot or Exchange markets:-
 On spot electronic markets, price change by the minute.
 ChemConnect.com is an online for buyers and sellers of
bulk chemicals such as benzene, and it’s a B2B success in
arena littered with failed sites.
 Private Exchanges:-
Hewlett-Packard , IBM ,Wal-Mart operate private exchanges to
link with specially invited groups of suppliers and partners over
the Web.
 Barter markets:-
Participants offer to trade goods or services.
 Buying alliances:-
Several companies buying the same goods can join together to
form purchasing consortia to gain deeper discounts on volume
purchases.

34. Web sites are designed by e-hubs.
 Vertical hubs:-
centered on industries.(plastics, steel chemicals)
 Functional hubs:-
(logistics, media, buying advertising, energy,
management)
 Other ways:-
Set up direct extranet links to major suppliers.
Form buying alliances.
Set up company buying sites.

35.  The supplier’s task is to ensure it is considered when
customers are-or could be-in the market and
searching for a supplier.
 Identifying good leads and converting them to sales
requires the marketing and sales org to take a
coordinated, multichannel approach to the role of
trusted advisor to prospective customers.
 Marketing must work together with sales to define
what makes a “sales ready” prospect and cooperate to
send the right messages via sales calls, trade shows,
online activities, PR, events, direct mail, and referrals.

36.  The buyers next invites qualified suppliers to
submit praposals.if the item is complex or
expensive the proposal will be written and
detailed. after evaluating the praposals,the
buyer will invite a few suppliers to make
presentations.
 Business marketers must be skilled in
researching,writing,and presenting
proposals.

37.  The stage of the business buying process in
which the buyer reviews proposals and selects a
supplier or suppliers.
 The choice of attributes and their relative imp
varies with the buying situation.
 For procedural problem product:-technical
service, supplier flexibility, product reliability.
 For political problem product:-price, supplier
reputation, product reliability, service reliability,
supplier flexibility.

38.  Overcoming price pressure:-
The buying center may attempt to negotiate with
preferred suppliers for better prices and terms
before making final selection.
 Number of suppliers:-
Companies are increasingly reducing the number
of their suppliers.
Ford, Motorola, Honeywell have cut their
numbers of suppliers 20 percent to 80 percent.

39.  The stage of the buying process in which the buyers
writes the final order with the chosen suppliers, listing
the technical specifications, quantity needed,
expected time of delivery, return policies and
warranties.
 Many large buyers now practice vendor managed
inventory, in which they turnover ordering and
inventory responsibilities to their suppliers.
 For example:- Most major suppliers to large retailers
such as wal-mart,big bazar,croma,E-zone, and
JCPenney vendor managed inventory responsibilities.

40.  The stage of the business buying process in
which the buyer assesses the performance of the
supplier and decides to continue, modify, or
drop the arrangement.
 Many companies have set up incentive systems
to reward purchasing managers for good buying
performance, in much the same way sales
personnel receive bonuses for good selling
performance.These systems lead purchasing
managers to increase pressure on sellers for the
best terms.

42. To improve effectiveness and efficiency in business.
Business suppliers and customers are exploring different ways
to manage their relationship.
Business to business markets are avoiding “spray and pray”
approaches.
An increase use of online social media in the form of company
blogs, online press releases, and forums or discussion with
customers.

43. Vertical coordination between buying partners and sellers.
 Build trust for healthy long term relationship.
Influence the development of a relationship between
business partners.
Four relevant factors such as.
1. Availability of alternatives
2. Importance of supply
3. Complexity of supply
4. Supply market dynamism

44. Basic buying
and selling
Bare bones
Contractual
transaction
Customer
supply
Cooperative
systems
Collaborative
Mutually
adaptive
Customer is
king

45. Establishing a customer- supplier creates tension between
safeguarding and adaption
Vertical coordination can facilitate stronger customer seller ties
but at the same time may increase the risk to the customer’s &
supplier’s specific investment.
Specific investment help firms grow profit and achieve their
positioning.

46. Example:
Xerox has worked closely with its suppliers to develop
customized processes and components that reduced its
copier manufacturing costs by 30 to 40 percent. In return,
suppliers received sales and volume guarantees, an
enhanced understanding of their customer needs, and a
strong position with Xerox for future sales.

47. Risk
One of the primary consideration that any business owner or
manager must make when putting together a marketing plan is
what type of risk he will be talking by engaging in his marketing
efforts.
Opportunism
Opportunism generally connotes the concept of self-serving greed,
but it can take on a different connotation when it comes to
marketing efforts. Here, opportunism refers to the decision to act
at the right time to maximize marketing efforts.

48.  Top firms use technology to improve the way they do
business with their B2B customers
 Some examples of how business are :-
 Redesigning Web sites
 Improving search results
 Leveraging e-mails
 Engaging in social media
 Launching webinars and podcasts to improve their business
performance.

49. 1. Hewlett-Packard launches “Technology at
Work”

50. 2) Emerson Process Management makes
automation systems.
3) Makino introducesWebinars.

51. 4) Cognos provides business intelligence and
performance management software and
services.