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Business Marketing VTU,Module 2


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  • The contents, the various theories, strategies and approach of B2B marketing in all the Prof. modules are well explained, relevant and to the point. It has widened my scope of thoughts on Industrial marketing.
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Business Marketing VTU,Module 2

  1. 1. Business/ Industrial Management<br />Prof. Raghavendran.V<br />
  2. 2. MODULE 2: Learning objective<br />Organisational buying Activity<br />Buying models and buying centre concept<br />Inter Personal Dynamics of Industrial<br />Buying Behaviour<br />Roles of Buying centre<br />Conflict Resolution in Decision Making<br />Ethics in Purchasing<br />Prof. Raghavendran.V<br />2<br />
  3. 3. Buying/purchasing Objectives<br />It is defined as buying a right items in the right quantity, at the right price for the delivery at the right time and place. The objective are stated as follows<br /><ul><li>Delivery/Availability.
  4. 4. Product quality
  5. 5. Lowest price
  6. 6. Services
  7. 7. Supplier relationship</li></ul>Prof. Raghavendran.V<br />3<br />
  8. 8. Delivery/ adaptability<br />To ensure that purchased goods and services are available or delivered when and where needed.<br />If not delivered, work will come to grinding halt and this reflect on the performance of the purchase function<br />Prof. Raghavendran.V<br />4<br />
  9. 9. Product quality<br />It should be consistent with the specifications and use of the product. It can happen that a product may meet the Indian Standard (IS) or British Standard (BS) specifications.<br />It is important to ensure to consistency in quality to reduce cost of inspection, interruptions in production process due to rejections and arranging the replacement of rejected material<br />Prof. Raghavendran.V<br />5<br />
  10. 10. Lowest price<br />Buyer would like to buy at the lowest price consistent with availability and quality of the product.<br />This will be important objective, if delivery and quality criteria’s are met.<br />Prof. Raghavendran.V<br />6<br />
  11. 11. Services<br />The industrial buyers need many types of services accompanying in the purchase of goods. Which are listed:<br /><ul><li>Prompt and accurate information of suppliers
  12. 12. Application or technical assistance,
  13. 13. Spare-parts availability
  14. 14. Repairs and maintenance capability &
  15. 15. Training ( if required)</li></ul>Prof. Raghavendran.V<br />7<br />
  16. 16. Supplier relationship<br />To develop long term supplier/ vendor relationship and to develop new sources of supply.<br />Prof. Raghavendran.V<br />8<br />
  17. 17. The organizational buying process<br />The organizational buying (purchase) process consist of various phases of buying- decision making process.<br />The importance to be given to various phases will depend upon type of buying situations.<br />Robinson, Faris and Wind developed eight phases of decision making processand types of buying situations<br />Prof. Raghavendran.V<br />9<br />
  18. 18. Decision making process:<br />It is also known as BUYPHASES and they are logical in sequence.<br />Recognition of a problem or need<br />Determination of application or characteristics & quality of needed product.<br />Development of specifications or description of needed product.<br />Search for and qualifications of potential suppliers<br />Prof. Raghavendran.V<br />10<br />
  19. 19. Continued <br />Obtaining and analyzing supplier proposals<br />Evaluation of proposals and selection of suppliers<br />Selection of an order routine<br />Performance feedback and post-purchase evaluation.<br />Prof. Raghavendran.V<br />11<br />
  20. 20. Recognition of problem<br />It may originate within the buying firm or may also recognized by a smart marketer.<br />Quality of material<br />Machineries<br />Equipment<br />Prof. Raghavendran.V<br />12<br />
  21. 21. Characteristics & quantity<br />The buying firm will try to answer questions such as: <br />what type of products/services to be considered? <br />Quantity?<br />Engineering/design<br />R&D<br />Production<br />Quality control<br />Prof. Raghavendran.V<br />13<br />
  22. 22. Development of specifications<br />Previous stage are closely related with this stage. Here prominence is given to technical specifications of the product. <br />Prof. Raghavendran.V<br />14<br />
  23. 23. Search for & qualifications<br />To obtain all the relevant information & secondly to decide on acceptable or qualifying suppliers and it depends based on following:<br />Type of buying organization<br />The buying situation<br />The decision making members<br />General characters will be quality, reliability in delivery, service are considered to qualifications of suppliers<br />Prof. Raghavendran.V<br />15<br />
  24. 24. Obtaining & Analyzing supplier proposals<br />Proposal can be formal offer, quotation or a formal bid submitted by supplier, it should contain product specification, price, delivery period, payment terms, taxes & duties, transportation cost, transit insurance and any other costing<br />Prof. Raghavendran.V<br />16<br />
  25. 25. Evaluation of proposals & selection<br />Decision makers of buying organization may evaluate each suppliers on the set agreed parameters or factors. For illustration<br />Prof. Raghavendran.V<br />17<br />A supplier evaluation system<br />
  26. 26. “Balanced scorecard Technique”<br />It is technique/framework that can evaluate supplier performance in information age companies.<br />It translates companies mission, vision into a set performance measurements. The frame work is divided into 4 parts and they are as follows:<br />Financial, customer, internal business process & learning growth<br />Prof. Raghavendran.V<br />18<br />
  27. 27. Balanced scorecard framework<br />Prof. Raghavendran.V<br />19<br />Financial<br />To succeed financially, company should focus on financial objectives that will satisfy shareholders<br />Internal-business- Process<br />To satisfy shareholders & customers, what business process company must excel at ?<br />Customer<br />Which customer value company should focus on, to achieve its mission<br />Mission & Vision<br />Learning and Growth<br />How can company improve & change to achieve its mission<br />
  28. 28. Internal- Business- Process<br />Prof. Raghavendran.V<br />20<br />Operations Processes<br />Innovation Processes<br />
  29. 29. Selection of an order time<br />Mechanics of exchange of goods and services between buyer and seller is worked out. The activities include <br /><ul><li>Placement of orders
  30. 30. Quantity to be purchased
  31. 31. Frequency of order placement
  32. 32. Levels of inventory needed
  33. 33. Follow up
  34. 34. Payment terms</li></ul>Prof. Raghavendran.V<br />21<br />
  35. 35. Performance feedback and post evaluation<br />A formal or informal review regarding the performance of each supplier (vendor) takes place. The user department will give feedback on whether the purchased items solved the problem or not. If not, the members of the decision making unit review their decision and decide.<br />Prof. Raghavendran.V<br />22<br />
  36. 36. Types of Purchase/buying situations<br />There are three types of buying situations called buy classes:<br />New task /New purchase<br />Change in supplier/ Modified rebuy<br />Repeat purchase/ straight rebuy<br />Prof. Raghavendran.V<br />23<br />
  37. 37. The buy grid framework<br />Prof. Raghavendran.V<br />24<br />
  38. 38. Multiple buying influences<br />The buying centre, the decision making unit, in business marketing is called buying centre. They consists of individuals or members who participate in buying decision & share the common objectives.<br />Size-- varies<br />Prof. Raghavendran.V<br />25<br />
  39. 39. The buying centre roles<br />Usually members of buying centre accept different roles during the buying process. These roles may vary for different stages of the buying process depending upon the buying situations, complexity of the purchase and the functions involved.<br />Assume several roles which are as follows<br />Users, buyers, influentials, deciders & gate keepers<br />Prof. Raghavendran.V<br />26<br />
  40. 40. Recognizing & identifying key persons<br />Recognizing key influential is an important task carried out sales person.<br />Identifying key members of buying centre.<br />Top management persons<br />Technical persons (functions)<br />Buyers<br />Accountants<br />Marketing function<br />Prof. Raghavendran.V<br />27<br />
  41. 41. Models of Organization buying behaviour<br />There are three models available to provide a comprehensive & integrated picture of major factors.<br />The Webster and Wind Model<br />The Sheth Model<br />The Choffray & Lilien Model<br />Prof. Raghavendran.V<br />28<br />
  42. 42. The Webster & Wind Model<br />Prof. Raghavendran.V<br />29<br />Environment Variables <br />Buying decision<br />Individual Variables<br /><ul><li>Need & desires
  43. 43. Perception & learning</li></ul>Buying Decision Process<br /><ul><li>Individual decision making process
  44. 44. Group Decision making process</li></li></ul><li>The Sheth model<br />Prof. Raghavendran.V<br />30<br />Component 1<br />Component 2<br />Component 3<br />Situational Factors<br />Supplier or Brand chice<br />
  45. 45. The Choffray & Lillen Model<br />Prof. Raghavendran.V<br />31<br />Individual Responsibility<br />Obtained set of alterative offers<br />Interaction Structure<br />Evaluation Criteria<br />Sources of Info<br />Organizational constraints<br />Environmental Constraints<br />Likely alternative offers<br />Individual preferences formed<br />Organizational preferences<br />Organizational choices<br />
  46. 46. Interpersonal Dynamics<br />Organizational buying behavior ultimately influenced by forces within the organization.<br /> it is understand and examine the influence of purchasing activities on organizational buyer behavior and how groups and individuals differ in their approach.<br />Prof. Raghavendran.V<br />32<br />
  47. 47. Purchasing influence on BB<br />Material requirement planning<br />Just in time purchasing<br />Centralized purchasing<br />Prof. Raghavendran.V<br />33<br />
  48. 48. Joint decision making<br />Characteristics of the firm ( Employees, Function of the firm)<br />Buying center interaction patterns<br />Vertical involvement<br />Lateral involvement<br />Extensivity<br />Connectedness<br />Prof. Raghavendran.V<br />34<br />
  49. 49. Psychological Factors influencing individual decision making<br />Differences in role orientation<br />Differences in information exposure<br />Perceived risk in the vendor selection process<br />Prof. Raghavendran.V<br />35<br />
  50. 50. Assignment time:<br />Write in detail about conflict and decision making:<br />Refer Reeder Referral book<br />Prof. Raghavendran.V<br />36<br />
  51. 51. END of the Module 2<br />Prof. Raghavendran. V<br />Prof. Raghavendran.V<br />37<br />