Organizational Buying Behavior and Negotiations…

1. Business-to-Business Marketing MKTG533 Fall, 2013 Organizational Buying Behavior and Negotiations… Prof. Gary Lilien, Research Director, ISBM Prof. Ralph Oliva, Executive Director, ISBM www.isbm.org 814 863 2782

2. Organizational Buying Behavior • Who is involved in the buying process? • How do they buy? (Stages? Influences? Interaction?) • Why do they buy (What forces affect the process?) • Internal/external influence (the value chain) • Functional value drives purchases

3. The Organizational Exchange Process • Bargaining is common/key to exchange • Interactive/cyclical product/service exchange • Relationships/networks • Trust • Economic • Personal • Institutional/reputational

4. Some Negotiation Hints “Life is too short, the world is too small . . . when you take advantage of someone in a deal, it is bound to come back to haunt you.”….Anthony Hoffman 1. Put yourself in other person’s position (reflexive thinking) Integrate before distributing (win-win) 2. Prepare. Prepare. Prepare. Learn about person, company, previous negotiations. Knowledge = Power in Negotiation. 3. Don’t reveal reservation price. (Will be floor in further negotiations. Know it and keep as private information.) 4. Be leery. There are often hidden motives. If a deal if “too good to be true,” it probably isn’t true.

5. Some Negotiation Hints (continued) 5. Be firm. Establish limits before negotiating. 6. Be patient. Haste makes waste in negotiations. 7. Be smart. Present your offers in the most attractive way to your opposite number. 8. Be sensitive and LISTEN! If you push too hard/too fast, negotiations break down even if there is a zone of agreement.

6. Segmenting the HVAC Marketfor Small Industrial Buildings A case study on marketing challenges with multiple purchase influencers in the BtoB marketplace.

7. Outline of a Decision Matrix

8. Decision Matrix for the Industrial Air-Conditioning Study

9. Major Microsegments of Organizations in the Industrial Air-Conditioning Study

10. Characteristics of Organizations in Each Microsegment

11. Issues of Importance for Each Category of Decision Participant

12. Major Microsegments of Organizations in the Industrial Air-Conditioning Study

13. Characteristics of Organizations in Each Microsegment

14. Issues of Importance for Each Category of Decision Participant

15. Implications • What are the implications for developing a marketing program for solar a/c if you target segment 4? • What are the general implications for marketing a complex BtoB offering to organizations with multiple purchase influences?

16. The B-to-B Buyer: The “Decision Making Unit” (DMU) • An influencer map contains roles connected by relationships • Typical roles are: • Approver • Buyer • Gate-keeper • Influencer • Sponsor • User Sponsor Approver Reccos. Approval Direction/ Counsel Reccos. Internal Influencer Buyer External Influencer Input Policy Input Vendor Requirements Short-list Management Requirements Users Gate-Keeper Procurement Commercial Requirements User Requirements

17. Linking Decision-Makers to Benefits “Benefit Stack” “Decision-Maker Stack” Least Important Typical Customer Benefits Offered Typical Purchase Team Members Highly Competitive prices and quality Warehouse Manager Purchasing Manager Manufacturing Plants on four Continents Logistics Officer Internet-Base order placement, tracking and Billing System Maintenance Manager 24/7 customer respons facility with radio links to trucks Chief Marketing Officer Customized manufacture and delivery of product to meet plant’s daily needs CFO Supply chain Head Sunday, holiday and 24/7 delivery when required COO Most Important CEO (On Occasion) Just-in-Time Delivery Seller Buyer

18. Benefit/Message Targeting “Benefit Stack” “Decision-Maker Stack” Typical Customer Benefits Offered Typical Purchase Team Members Highly Competitive prices and quality Warehouse Manager Purchasing Manager Manufacturing Plants on four Continents Logistics Officer Internet-Based order placement, tracking and Billing System Maintenance Manager 24/7 customer response facility with radio links to trucks Chief Marketing Officer Customized manufacture and delivery of product to meet plant’s daily needs CFO Supply chain Head Sunday, holiday and 24/7 delivery when required COO CEO (On Occasion) Just-in-Time Delivery Seller Buyer

19. Buying Process Analysis • Customers often follow a buying process, which describes the steps taken by the organization to acquire products or services to meet needs in different buying situations New Task Need Information search for options Evaluate options Decide Purchase Use and feedback Modify Rebuy Need Evaluate options Decide Purchase Use and feedback Straight Rebuy Need Purchase Use and feedback

21. Amscat Corp…. 1.How would you define the problem? • Build a Decision Process map and a Benefit Stack-Decision-Maker Stack for Amscat.—include measurement for Iron, measurement for CCE, differences in price/risk tradeoffs. • If you were an outside vendor, what would you have to do to get business at Amscat? • What actions do you recommend for Amscat's Corporate Director of Procurement?

22. For Monday, Sept 16… • At the time of the case, had Dow Corning really ever "segmented" its market? Explain… • What factors, internal or external, were responsible for Dow Corning's poor performance between 1995 and 2001 -- as shown in Exhibit 3? • What did needs-based segmentation reveal about customers beyond that which the company knew already? • What were the key decisions that helped shape Xiameter's successful business model? • Did Dow Corning really need to create a new brand? • What are the key things Dow Corning must do - and continue to do - to sustain the Xiameter business design? • Given the recent changes in the competitive scene, should the business model be changed again? What would your recommendations be?