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Value. May not be tangibleValue is PERCEIVED by the buyerCan enhance value:PackagingSupport servicesReliabilityWarrantiesTraining. Selling to Organizations I. Social as well as economic dimensionIndividual behavior contributes to the mission.Formal reward system for individualsBad purchasi
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1. Chapter 3 Organizational Buying
2. Value May not be tangible
Value is PERCEIVED by the buyer
Can enhance value:
Packaging
Support services
Reliability
Warranties
Training
3. Selling to Organizations I Social as well as economic dimension
Individual behavior contributes to the mission.
Formal reward system for individuals
Bad purchasing decisions
Interruptions in production/operations
Reduction in product quality
Slowdown in distribution
Dissatisfied customers
Wasted resources
Higher costs/lower sales and cash flow/lower profit
4. Selling to Organizations II Usually formal contracts
Extensive search for suppliers
Negotiation
Long buying process
Multiple suppliers
Long-term, loyal relationships
5. Why? Reduce risk of mistakes
Formal policies and informal culture
6. Business Customers Fewer
Concentrated
Need long-term relationships because they are not easy to replace
7. Technical Complexities Products and services, and their applications can be complex.
New technology
Interface with existing technology
Custom
High standards (e.g. clean rooms, surgical suites)
8. Commercial Complexities So much is open to negotiation
Product, price, terms, discounts, warranties, delivery, training, service, returns, etc.
Liability, nonperformance
POWER
$ize of deal, characteristics of parties, the deal, # of parties involved, complexity of products
9. Behavioral Complexities Negotiating not just with purchasing agent, but multiple parties from multiple functional areas in the organization
The more people involved, the more complicated it gets
Technical and commercial complexity can exacerbate the behavioral complexity
10. Who’s on first? Key decision maker(s)
Important Product/Vendor attributes
Access to key decision makers
Customer purchasing policies and procedures
11. The Buying Center Roles Initiator
Buyer
User
Influencer
Decider
Gatekeeper
Not really a center at all. Group decision process.
12. Rational Decision-Making? Purchasing for business, not self
Purchaser being judged on performance
Fiduciary responsibility
Formal structure and procedures
# bidders
Evaluation criteria
Multiple signatories
13. Rational Decision-Making? Emotional and Social Factors
Friendship
Like/Dislike vendor/rep
Personal/Professional Favors
Influence of others in organization (+/-)
Personal/Departmental Needs & Objectives may not match those of the organization.
Conflict
14. Rational Decision-Making? Manage process to control social & emotional influences.
Need to have good decisions being made.
15. Buystages Need recognition (May not be decider)
Solution characteristics/quantity (Specs)
Describe solution in detail (Make/Buy)
Find qualified sources (product +)
Receive/analyze proposals (price +)
Evaluate proposals?Select supplier
Establish order routine
Feedback/Evaluate (FOLLOWUP)
16. Buying Scenarios Newness and past experience with product
Amount/Type of information needed by influencers/deciders
Number of alternatives
Common buying situations (buyclasses)
Straight rebuy
Modified rebuy
New task purchase
17. Structural Perspective Vertical Involvement: # levels
Lateral Involvement: # functional areas
Absolute Size: # people
Connectedness: Direct communication among buying center members
Centrality: Degree of communication regarding purchase flowing through purchasing department
18. Power Perspective Ability to influence or make buying decisions; often situation specific
Types
Reward: $, social, political, ?
Coercive: punish, penalty
Referent: personality, charisma, persuasion
Expert: specialized knowledge
Legitimate: formal position/title
19. Risk Perspective Purchase decision is risk reducing behavior
Probability of Loss x Magnitude of Loss
(What about consequences?)
Risk mitigation strategies may help to make the sale
PERCEIVED uncertainty
20. Problem-Solving Perspective Routine orders: little risk
Procedural: How to use product. Learning/training
Performance: Can product meet need?
Political: Internal politics, departmental squabbles (legitimate and petty)
21. Reward Perspective Individual motivation
Influenced by evaluation & reward
Individual values and objectives; brought from department to buying center
Agency Theory