Nature of industrial buying


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Nature of industrial buying

  1. 1. Nature of Industrial Buying
  2. 2. Organizational Buying Process 1. Problem Recognition 2. General Description of Need 3. Product Specifications 4. Supplier Search 5. Acquisition and Analysis of Proposals 6. Supplier Selection 7. Selection of Order Routine 8. Performance Review
  3. 3. Three Buying Situations (slide 1 of 4) <ul><li>New task </li></ul><ul><li>Modified rebuy </li></ul><ul><li>Straight rebuy </li></ul>
  4. 4. Three Buying Situations 1. New Task (slide 2 of 4) <ul><li>New task —the problem or need is totally different from previous experiences. </li></ul><ul><ul><li>Significant amount of information is required. </li></ul></ul><ul><ul><li>Buyers operate in the extensive problem solving stage. </li></ul></ul><ul><ul><ul><li>Buyers lack well defined criteria. </li></ul></ul></ul><ul><ul><ul><li>Lack strong predispositions toward a solution. </li></ul></ul></ul>
  5. 5. Three Buying Situations 2. Modified Rebuy (slide 3 of 4) <ul><li>Modified rebuy —decision makers feel there are benefits to be derived by reevaluating alternatives. </li></ul><ul><ul><li>Most likely to occur when displeased with the performance of current supplier. </li></ul></ul><ul><ul><li>Buyers operate in the limited problem solving stage. </li></ul></ul><ul><ul><ul><li>Buyers have well defined criteria. </li></ul></ul></ul>
  6. 6. Three Buying Situations 3. Straight rebuy (slide 4 of 4) <ul><li>Straight rebuy —the problem or need is a recurring or continuing situation. </li></ul><ul><ul><li>Buyers have experience in the area in question. </li></ul></ul><ul><ul><li>Require little or no new information. </li></ul></ul><ul><ul><li>Buyers operate in the routine problem solving stage. </li></ul></ul>
  7. 7. Buying Decision Approaches Causal purchases …involve no information search or analysis. Routine low priority …decisions are more important and involve a moderate amount of analysis.
  8. 8. <ul><li>Enables individual employees to buy online while the company retains control of the purchasing process. </li></ul>The Buy-Side Requisitioning Process
  9. 9. Forces Influencing Organizational Buying Behavior Environmental Forces Organizational Forces Group Forces Individual Forces Organizational Buying Behavior <ul><li>Economic Outlook: Domestic & Global </li></ul><ul><li>Pace of Technological Change </li></ul><ul><li>Global Trade Relations </li></ul><ul><li>Goals, Objectives, and Strategies </li></ul><ul><li>Organizational Position of Purchasing </li></ul><ul><li>Roles, relative influence, and patterns of interaction of buying decision participants </li></ul><ul><li>Job function, past experience, and buying motives of individual decision participants </li></ul>A projected change in business conditions can drastically alter buying plan.
  10. 10. With rising competitive pressures managers are using rigorous cost modeling approaches to identify factors that drive the cost of purchased goods and services. The Buygrid Framework for Organizational Buying Situations
  11. 11. Overview of the Buyer Grid <ul><li>Creeping commitment </li></ul><ul><li>Center of gravity </li></ul><ul><li>Marketing implications </li></ul>
  12. 12. Questions for the Industrial Salesperson <ul><li>Which member takes part in the buying process? </li></ul><ul><li>What is each members relative influence in the decision? </li></ul><ul><li>What criteria is important to members in the evaluation process? </li></ul>
  13. 13. Members of the buying center assume different roles throughout the procurement process. Clues for Identifying Powerful Buying Center Members
  14. 14. Buying Center Influence Matrix Purchasing Engineering Production Purchasing Engineering Production Engineering Purchasing R & D Modification & evaluation of buying alternatives Purchasing Engineering Production Purchasing Engineering Production Purchasing Engineering R & D Quality control Supplier selection Purchasing Engineering Production Engineering Purchasing Production R & D Quality control Engineering Purchasing Production R & D Establishment of specification Production Purchasing Purchasing Production Engineering Engineering Purchasing R & D Production Need identifcation Straight Rebuy Modified Rebuy New Buy Phase
  15. 15. Buying Center Roles <ul><li>1) Primary roles </li></ul><ul><ul><li>Deciders </li></ul></ul><ul><ul><li>Influencers </li></ul></ul><ul><ul><li>2) Secondary roles </li></ul></ul><ul><ul><li>-Users </li></ul></ul><ul><ul><li>-Buyers </li></ul></ul><ul><ul><li>-Gate keepers </li></ul></ul>
  16. 16. A model for determining composition of organizational buying center <ul><li>Environment: Economic, technical, social & cultural, legal & political </li></ul>FIRM Buyer mission Purchase needs Buy class Buy phase Dollar value complexity Time commitment & life cycle Procurement Buying center membership Other members Transaction BUYGRID Components INTERFIRM BOUNDARY SPAN
  17. 17. Selective Process & Cognition <ul><li>Selective exposure. </li></ul><ul><li>Selective attention. </li></ul><ul><li>Selective perception. </li></ul><ul><li>Selective retention. </li></ul>
  18. 18. Perceived Risk Components <ul><li>Uncertainty about the outcomes of a decision. </li></ul><ul><li>The magnitude of consequences associated with making the wrong selection. </li></ul>
  19. 19. The behavior of organizational buyers is influenced by environmental, organizational, group, and individual factors. Major Elements of Organizational Buying Behavior
  20. 20. Objectives of organizational buying <ul><li>Task oriented objectives: </li></ul><ul><li>1) Price </li></ul><ul><li>2) Service </li></ul><ul><li>3) Quality </li></ul><ul><li>4) Assurance of supply </li></ul><ul><li>5) Reciprocity </li></ul><ul><li>Non-task objectives </li></ul>