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Chapter 4: Buying Behavior and the Buying Process

Chapter 4: Buying Behavior and the Buying Process. Selling: Building Partnerships, 7 th ed. By: Weitz , Castleberry and Tanner . Types of Customers. Producers -Buy products for use in manufacturing -Buy products/services to support manufacturing OEM Purchasers

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Chapter 4: Buying Behavior and the Buying Process

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  1. Chapter 4:Buying Behavior and the Buying Process Selling: Building Partnerships, 7th ed. By: Weitz, Castleberry and Tanner

  2. Types of Customers • Producers • -Buy products for use in manufacturing • -Buy products/services to support manufacturing • OEM Purchasers • -Original Equipment Manufacturers • -Large quantities / Annual Contracts

  3. Types of Customers • End Users • -Capital Equipment (Lifetime Operating Cost) • -MRO: Maintenance, Repair, Operating • can be accounting, advertising, etc. • Resellers • -Profit Margin, Turnover, Effort: ROI

  4. Types of Customers • Government Agencies • -1 trillion annually (Biggest consumer on Earth) • -Complicated processes and procedures • Institutions • -Churches, Hospitals, Schools • Consumers • -Individual purchasers

  5. Organizational Buying and Selling • Complexity of the Organizational Buying Process • -Longer time in negotiations • -Many decision makers to deal with • -Global Competitiveness / Global Sourcing • Derived VS Direct Demand • -Derived from customers’ customers

  6. How Do Organizations Make Buying Decisions? • Steps in the Buying Process: 1. Need 2. Product 3. Product specifications 4. Suppliers

  7. How Do Organizations Make Buying Decisions? • Steps in the Buying Process: (Continued) 5. Proposals 6. Supplier 7. Place order 8. Evaluate

  8. How do Organizations Make Buying Decisions? • Creeping Commitment: A customer becomes increasingly committed to a particular course of action while going through the steps in the buying process

  9. Types of Organizational Buying Decisions • New Tasks -Capital Equipment and OEM Products -All Eight Steps in buying process -1st 4 steps establish creeping commitment -Evaluation Step is critical

  10. Types of Organizational Buying Decisions • Straight Rebuys -MRO Supplies and Services -OEM component reorders -Steps 1, 2, 7, & 8 • Modified Rebuys -Arise from a change in needs -may not require all eight steps

  11. Who Makes the Buying Decision? • Buying Center: Informal, cross department group of people involved in the buying process • Users -Influence the early and late steps in buying -Important for converting a straight rebuy • Initiators -The person who starts the buying process -Identifies a need (Can also be a user)

  12. Who Makes the Buying Decision? • Influencers -Can be inside or outside the organization -Provide information during buying process • Gatekeepers -Control the flow of information -Quality Control and Service Departments • Deciders -Those who make the final purchasing decision

  13. Supplier Evaluation and Choice • Rational Needs -Organizational needs directly related to the performance of the product. • Emotional Needs -Personal Needs of buying center member -Rewards and Gratification

  14. Supplier Evaluation and Choice • Organizational Needs and Criteria • -Economic Criteria (Overall profit potential) Life-cycle Costing • -Quality Criteria Support purchaser’s quality objectives • -Service Criteria Value Analysis enables suppliers and customers to work together to reduce costs while maintaining performance levels.

  15. Supplier Evaluation and Choice • Individual Needs of Buying Center Members • -Types of Needs Raise Promotion Recognition Gratification

  16. Supplier Evaluation and Choice • Individual Needs of Buying Center Members • -Risk Reduction Collect additional information Develop loyalty to present suppliers Spread risk by ordering from several suppliers

  17. Professional Purchasing’s Growing Importance • Supply Chain Management • -Began as a way to improve distribution efficiency from producer to end-user • -Now involves inventory management and cost control • -Supplier Relationship Management

  18. Professional Purchasing’s Growing Importance • Supply Chain Management • JIT: Just-In-Time Inventory Control -Minimize inventory -Frequent Deliveries -One Supplier for flexibility • ECR: Efficient Consumer Response -AKA: Quick response -Consumer Product Distribution Channels

  19. Professional Purchasing’s Growing Importance • Supply Chain Management • AR: Automatic Replenishment- Customer’s inventory levels managed by supplier • EDI: Electronic Data Interchange- Consumer systems that share data across companies for implementation of systems such as AR

  20. Professional Purchasing’s Growing Importance • Supply Chain Management • MRP: Material Requirements Planning -Forecast Sales -Develop Production Schedule -Order Parts and Materials -Minimize Inventory and Reduce Costs

  21. Professional Purchasing’s Growing Importance • Supplier Relationship Management Annual Spend: Amount spent annually with each supplier on each product Vendor Analysis: Summarize the benefits and needs satisfied by each supplier

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