Buying Behavior and the Buying Process

2. Buying Behavior and the Buying Process CHAPTER 4 • What are the different types of customers? • How do organizations make purchase decisions? • Which factors do organizations consider when evaluating products and services? • Who is involved in the buying decision? • What should salespeople do in the different types of buying situations? • Which changes are occurring in organizational buying, and how will these changes affect salespeople? Some questions answered in this chapter are: 4-2 McGraw-Hill/Irwin

3. “A supplier who does a great job at our France location can use the reputation if trying to earn business in Iowa.” ~Marvin WagnerEngineering Manager 4-3 McGraw-Hill/Irwin

4. Types of Customers Capital equipment items are major purchases such as mainframe computers and machine tools. • Producers • Products included in manufacturing • Services to support the manufacturing operation • OEM purchasers • Goods to use in making their products • End users • Goods and services to support their own production and operations Maintenance, repair, and operating (MRO) supplies include paper towels and replacement parts for machinery. 4-4 McGraw-Hill/Irwin

5. Types of Customers (continued) • Resellers • Finished products or services with the intention to resell them. Turnover is how quickly an item sells, and how much effort it takes to sell. Profit margin is how much a reseller makes on each sale. 4-5 McGraw-Hill/Irwin

6. Types of Customers (continued) • Government agencies • Goods and services valued at more than $1 trillion annually • Institutions • Different needs and buying processes • Consumers • Products and services for use by themselves or by their families 4-6 McGraw-Hill/Irwin

7. Organizational Buying and Selling • Complexity of the organizational buying process • Purchasing agents • Evaluations and negotiations • Complexity is increasing • Derived versus direct demand • Customer’s customers 4-7 McGraw-Hill/Irwin

8. Steps in the Buying Process 4-8 McGraw-Hill/Irwin

9. How do Organizations Make Buying Decisions? • Steps in the buying process • Choices to attend a university related to the 8 steps in the organizational buying process • Creeping commitment • Narrowing range of alternatives • Critical that salespeople be involved in the initial steps 4-9 McGraw-Hill/Irwin

10. Types of Organizational Buying Decisions • New tasks • A customer purchases a product or service for the first time • Straight rebuys • A customer buys the same product from the original source • Modified rebuys • The customer has purchased the product in the past but is looking for newinformation 4-10 McGraw-Hill/Irwin

11. Who Makes the Buying Decision? 4-11 McGraw-Hill/Irwin

12. Factors Influencing Organizational Buying Decisions 4-12 McGraw-Hill/Irwin

13. Organizational Needs and Criteria • Economic criteria • Life-cycle costing (total cost of ownership) • Quality criteria • What are organizational buyers looking for? • Service criteria • Value analysis 4-13 McGraw-Hill/Irwin

14. Life Cycle Costing 4-14 McGraw-Hill/Irwin

15. Individual Needs of Buying Center Members • Types of needs • Financial security • Self-esteem • Recognition • Risk reduction • Collect additional information • Develop supplier loyalty • Spread the risk 4-15 McGraw-Hill/Irwin

16. Professional Purchasing’s Growing Importance • Supply chain management • Logistics • Managing inventory while controlling costs • Just-in-time inventory control system • Material requirements planning • Automatic replenishment • Electronic data interchange 4-16 McGraw-Hill/Irwin

17. EDI Transactions 4-17 McGraw-Hill/Irwin

18. Professional Purchasing’s Growing Importance (continued) • Supplier relationship management • Identify the annual spend • Summarize the benefits and needs satisfied by a supplier 4-18 McGraw-Hill/Irwin

19. Professional Purchasing’s Growing Importance (continued) • The Internet and business-to-business selling • Extranets • Support for salespeople rather than replacement • Reverse auctions 4-19 McGraw-Hill/Irwin

20. Summary • Selling to organizations differs from selling to consumers because organizations are more concentrated, demand is derived, and the buying process is more complex. • The organizational buying process consists of eight steps. • The length of the buying process and the role of various participants depend on the customer’s past experiences. • The people involved in the buying process are referred to as the buying center. • Organizations are facing an increasingly dynamic and competitive environment. • The Internet is playing a much more important role in business-to-business transactions. 4-20 McGraw-Hill/Irwin

21. Appendix: Multiattribute Model of Product Evaluation and Choice • Based on the idea that people view a product as a collection of characteristics or attributes. • Buyers evaluate a product by considering how each characteristic satisfies the firm’s needs and perhaps their individual needs. • Performance evaluation of characteristics • Importance weights 4-21 McGraw-Hill/Irwin

22. Information about Laptop Computers 4-22 McGraw-Hill/Irwin

23. Performance Evaluation of Laptop Computers 4-23 McGraw-Hill/Irwin

24. Appendix: Multiattribute Model of Product Evaluation and Choice (continued) • Overall evaluation • Value offered • Supplier selection • Implications for salespeople 4-24 McGraw-Hill/Irwin

25. Information Used to Perform and Overall Evaluation 4-25 McGraw-Hill/Irwin

26. Value Offered by Each Brand 4-26 McGraw-Hill/Irwin

27. Approaches for Changing Perceived Value • Increase the performance rating for your product. • Decrease the performance rating for a competitive product. • Increase or decrease an importance weight. • Add a new dimension. • Decrease the price of your product. 4-27 McGraw-Hill/Irwin