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Industrial Marketing
Module 3
Nature of Industrial buying and
buying behavior
Atul Atre
Dec 2009
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SUMMARY OF Module - 2
Types /Classifications of Industrial/ Business Customers are
(i) Commercial Enterprises, (ii) Government
(iii) Institutional, (iv) Cooperative societies.
Industrial Products/Services are classified into
(i) Materials & Parts, (ii) Capital Items, (iii) Suppliers & Services.
Marketing strategies differ for different product & Customer types.
Industrial / business Buyers follow one of the three purchasing
orientations : buying, procurement, or supply chain management.
Purchasing practices vary for different types of customers. It is
important to understand it for each major customer.
Types of environment are Ecological, Physical, Internal, & External,
Strategies used for managing changing external marketing environment
are : (i) Independent, (ii) Cooperative, (iii) Strategic Planning.
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Learning Objectives
Understand Organizational buying objectives.
Gain knowledge of buying activities, including
different phases in buying decision process, types of
buying situations; buygrid framework & its analysis.
Identify members of buying centers.
Understand organizational buying behavior.
Know how industrial buyers choose and evaluate
suppliers.
THE NATURE OF INDUSTRIAL BUYING AND
BUYING BEHAVIOUR
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PURCHASING OBJECTIVES OF FIRMS
Reliability in delivery. Consistent product Quality.
Lowest price (If delivery & Quality objectives are met)
Excellent pre & post sales services. Long Term collaborative relationship.
Industrial buyers try to achieve organizational purchasing
objectives & personal objectives like higher status, job
security, salary increments, promotions & social
relationships.
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Marketers must study this for developing effective
marketing strategy.
In Consumer Marketing, Household / Individual consumer
/ Buyer makes buying decisions based on certain mental
stages like (i) Problem (Need) Recognition,(ii) Information Search (iii) Evaluation
(iv) Purchase decision (v) Post Purchase Behavior
In Industrial Marketing, Buying Decision making process
is observable, involving many people in buying firm &
includes sequential activities / stages / phases, as follows:
Industrial Buying Decision Process
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Introduction and organizational buying activities
Industrial marketing strategy
Based on
Understanding every aspect
Of customers
Buying process
Industrial Marketer
Buyer
CustomerOrganization
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Introduction and organizational buying activities
What influences Organizational buyingactivities?
1.Level of experience
2.Level of information in purchasing certain productsand services
Examples:Routine buys , vast experience , no extra
information required
New buys no or less experience, information
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Buygrid model
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Buygrid model
buygrid framework- A conceptual model
that describes the organizational buying
process. It consists of two dimensions:
buyclasses and buyphases. Thebuyclasses are new task purchase,
modified rebuy, and straight rebuy. The
buyphases are need recognition, needdefinition, need description, seller
identification, proposal solicitation,
proposal evaluation and selection,orderin rocedures and erformance
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Buygrid model
buyclasses - Buying situations that are distinguished on
four characteristics: newness to decision makers,
number of alternatives to be considered, uncertainty
inherent in the buying situation, and the amount of
information needed for making a buying decision.
There are three buy classes: new task purchase,
modified rebuy, and straight rebuy. A new task
purchase is a problem or requirement that has not
arisen before such that the buying center does nothave any relevant experience with the product or
service.
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Buygrid model
buyclasses - continued
A modified rebuy is a situation such that thebuying center has some relevant experience todraw upon. The alternatives considered,however, are different, or changed from theones considered the last time a similar problemarose. A straight rebuy is the purchase ofstandard parts; maintenance, repair, andoperating items and supplies; or any recurringneed that is handled on a routine basis
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Buygrid model
Buy class
New task Modified re-buy
Straight re-buy
B
U
Y
P
H
A
S
E
1 Anticipation of problem/need and generalsolution
2 Determination of characteristics and quantity ofneeded item
3 Description of characteristics and quantity ofneeded item
4 Search for and qualification of potential sources
5 Acquisition and analysis of proposals
6 Evaluation of proposals and selection ofsuppliers
7 Selection of order routine
8 Performance feedback and evaluation
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Buygrid model
Buy classNew task Modified re-
buyStraight re-buy
B
UY
P
H
A
S
E
1 Anticipation of problem/need and generalsolution
2Determination of characteristics and quantity of
needed item
3 Description of characteristics and quantity ofneeded item
4 Search for and qualification of potential sources
5
Acquisition and analysis of proposals
6 Evaluation of proposals and selection ofsuppliers
7 Selection of order routine
8
Performance feedback and evaluation
Highly complex/multiple influences
For marketer ..most important time
Creeping
Commitment
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Buygrid model: Buy-classes
Buy-classes: buying situations1) New task: triggered by internal or external factors
New product linenew equipment
External: change in competition product or change in
customer specs
2) Modified re buy: Product improvement cost
reduction , minor changes or present supplier in
adequate
3) Straight re buy: continuing and recurring routine
response well developed choice criteria
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(B) Buying Situations / Buyclasses
3 Common types of purchases / buying situations
i. New Task / New Purchase :Here, buyers have limited knowledge and experience of thenew product/service. Hence, more information is obtained,more people are involved, risks are more, and decisionstake longer time.
ii. Modified Rebuy / Change in supplier :This situation occurs when the firm is not satisfied with theperformance of existing suppliers, or there is a change inproduct specs. Hence, the need for searching alternatesuppliers.
iii. Straight Rebuy / Repeat purchase :Here, the buying firm places repeat orders on suppliers whoare currently supplying certain products/services. Suchdecisions are routine, with less risks and less informationneeds, and can be taken by junior executives.
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(A) PHASES IN INDUSTRIAL BUYING DECISION MAKING
PROCESS / BUYPHASES
PHASE 1 :- Recognizing A problem / need.PHASE 2 :- Determining Characteristics &
Quantity of needed product / Service*.
PHASE 3 :- Developing specifications of the product*.
PHASE 4 :- Searching & Qualifying Suppliers.
PHASE 5 :- Obtaining & Analyzing suppliers offers*PHASE 6 :- Evaluating & Selecting Suppliers.
(shown on next slide)
PHASE 7 :- Selecting an order routine
PHASE 8 :- Post Purchase evaluation* These are in addition to five stages of consumer buying decision
process.
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Buygrid model: phases in purchasing process
Phase 1 ) Anticipation of problem/need and general solutionRecognition of problem
Need
Potential opportunity
( outdated product, equipment failure, un availability ofsupplies)
Marketer,
U must get in here..
U have the big advantage:This the right time
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Buygrid model: phases in purchasing process
Phase 2 : Determination of characteristics andquantity of needed item How to resolve situation arising out of phase 1?
Performance specification/ application requirement
( engineering or user dept prepares these)
Critical decisions/ info needs
are with user department
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Buygrid model: phases in purchasing process
Phase 3: Description of characteristics and
quantity of needed item
1. One critical step for marketer to get into thebuying process
2. Many influencer enters
3. Only close insiders are still aware
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Buygrid model: phases in purchasing process
Phase 4: Search for and qualification of
potential sources
1. Search for alternate suppliers
2. Qualification of suppliers
3. Decision on potential vendors taken in
this phase
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Buygrid model: phases in purchasing process
Phase 5: Acquisition and analysis of
proposals
1. Proposals from qualified short listedvendors
2. Phase 4 and 5 are distinct in complex
cases but may be overlapping in routinepurchases
3. Info requirement are high
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Buygrid model: phases in purchasing process
Phase 6: Evaluation of proposals and
selection of suppliers
1. Weighing and analysis of alternate
proposals
2. Make and buy decisions
3. Terms/prices/delivery/past performance
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Buygrid model: phases in purchasing process
Phase 7:Selection of order routine
1. Forwarding PO
2. Status report
3. Receiving of consignment
4. Order routines are different for capitalgoods, direct material and in-direct
material and service
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Buygrid model: phases in purchasing process
Phase 8: Performance feedback and
evaluation
1. Review and feedback2. Vendor performance analysis
3. Revisit alternate sources if performance of
vendor is not as per original requirementin terms of QCD
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Overview of buy gridCreeping commitmentSequence of choices elimination of certain choices for
further considerations
As you go to next step, commitment level increase as it
affects value in useCreeping commitment: firmer commitment as buyermove down in buy-phases from phase 1 to phase 8
Center of gravity
As one moves down in phases , different departmentor function become more critical than others. Phase2 engineering may be CG but phase 8 , Quality andinspection may be CG.
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Marketing implications of buygrid
Marketing strategy is affected by
1. Purchasing situation2. Decision phase
In an organization, different departments andfunctions perceive buygrid differently
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Marketing implications of buygrid
Phase New task Modified re-buy Straight re-buy
1 Problemrecognition
Anticipate problem
Convince buyers ofproblem solvingcapabilities
In supplier : maintainQCD and service
Out suppliers:
Watch for trends and tapon QCD/service of insuppliers trends
In supplier: closetouch with users andbuyers
Out suppliers:Convince buyer /usersabout better value inuse proposals
2 Solution
determination
Provide technicalassistance and info
In/Out suppliers
Stress capability and tapon QCD
Problem solvingcapability demonstration
Same as above
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Marketing implications of buygridPhase New task Modified re-
buyStraight re-
buy
3 Determining needed item Provide detailproduct/service info todecision maker
Same as phase 2 Same as phase 1
4 Searching for andqualifying suppliersIn supplier: maintaindependability
Out suppliers:
Demonstrate ability toperform task
In supplier: watch forproblems
Out supplier:Demonstrate ability toperform the task
Same as phase 1
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Marketing implications of buygridPhase New task Modified re-
buyStraight re-
buy
5 Analysis proposals Understand problemNeeds
Timely proposals
Understand problem
Needs
Timely proposals
Make timelyproposals
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Product analysis for identifying info
needs of key influencersRating scale ( giving weights to each features
as applicable to target) for computers
Buying tires
1. Technical competency
2. Credit terms
3. Maintenance service
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Product info need marketing Purchase management
Tech competency .5 .3 .4
Credit terms .1 .5 .4
Maintenance .4 .2 .2
1 1 1
Buying tires : development of rating scale
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A SUPPLIER EVALUATION SYSTEM.
ATTRIBUTE/
FACTOR
WEIGHT/
IMPORTANCE
SUPPLIERS
PERFORMANCE
SUPPLIERS
RATINGSCORE
PRICE 15 0.5 07.5
QUALITY 30 0.7 21.0
DELIVERY 25 0.6 15.0
SERVICE 20 0.7 14.0
FLEXIBILIY 10 0.4 04.0
TOTAL 100 61.5
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(C) Buygrid Framework
BUYPHASES BUYCLASSES
New Task ModifiedRebuy
StraightRebuy
1. Problem Recognition Yes May Be No
2. Characteristics of Product Yes May Be No
3. Product Specification Yes May Be No
4. Supplier Search Yes Yes No
5. Analyzing Supplier Offers Yes Yes May Be
6. Supplier Selection Yes Yes No7. Order Routine Selection Yes Yes May Be
8. Post Purchase Review Yes Yes Yes
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BUYGRID FRAMEWORK ANALYSIS
All Phases are Applicable for a New Task.
Some Phases are Applicable for modified / Straight
Rebury.
New task situation is most difficult since buyers have
less knowledge, no experience & more people
involved.
Modified Rebury is not difficult situation since it has
few activities. Straight rebury situation is handled routinely, as repeat
purchases are made.
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Buying centers and multiple buying
influencers
DMU
Decision making unit: peopleinvolved in purchasing
decision process directly orindirectly
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Buying centers and multiple buying
influencers DMU is buying center in industrial
marketing consisting of
1. Group of individuals2. Common goals which decision will
help them to achieve
3. Sharing of risk arising fromdecision
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Buying centers and multiple buying influencers
A buying center (also known as a decision making unit), in
marketing, procurement, and organizational studies, is a groupof employees responsible for purchasing an item for theorganization. In a business setting, major purchases typicallyrequire input from various parts of the organization, includingfinance, accounting, purchasing, information technology
management, and senior management. Highly technicalpurchases, such as information systems or productionequipment, also require the expertise of technical specialists. Insome cases the buying center is an informal ad hoc group, but inother cases, it is a formally sanctioned group with specificmandates, criteria, and procedures. The employees that
constitute the buying center will vary depending on the itembeing purchased.
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Buying centers and multiple buying
influencersIn a generic sense, there are typically five roles within
any buying center. They are:
1. End users of the item being purchased.
2. Buyers who are responsible for the contract .
3. Influencers who try to affect the outcome decisionwith their opinions.
4. Deciders who make the final decision.5. Gatekeepers who control the flow of information.
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Objectives1. Acquisition
2. Impartation
(transmission of
information )
3. Processing
Of purchase
related info
Buying centers and multiple buying
influencers
Buying
center1. Informal
2. Cross
departmental
Decision unit
Buying centers and multiple buying
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Buying centers and multiple buying
influencers
Identifying buying center members
1. Marketing: Salability in end product
2. Manufacturing: feasibility and economicconsideration, mainly responsible for cost
reduction. Tendency to minimize changes3. R&D: New product development. early
involvement by marketing to freeze specs in theirfavor
4. General management: new /unfamiliar buyingsituation, establishing guideline and criteria
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Buying centers and multiple buying
influencers Identifying buying center members
Purchasing: not the central figure in
process of purchasing
Influence only if specifications and
suppliers are established
Major influence on negotiations and selected
types of purchases
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Buying centers and multiple buying
influencers Buying center roles
Primary roles
1. Deciders2. Influencers
Secondary roles
1. User 2. Buyer
3. gatekeepers
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Buying centers and multiple buying
influencers Who is the key buying influencer?
Who can sway the deal?
Marketers most difficult task
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(D) Buying Center roles & key members.
Roles of Buying center members are
Initiators. First recognize problem / need. Any individual inbuying firm often, users.
Buyers. Carry out purchase activities. They are purchaseofficers / executives.
User. Any person who uses the product / service.
Influencers. Influence buying decision. Technical people areoften key influencers.
Deciders. Make buying decisions. Senior executives aredeciders for high value & complex products. For straightrebuy / routine purchase, junior purchase officer can decide.
Gatekeepers. They control / filter information & meetingswith buying center members. Often, P.A. / Junior personattached to purchase head is the gatekeeper.
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(E) Identifying key members of buying centre
Sales / Marketing persons must identify important members of
buying centre. Buying centre consists of individuals and groups who take part in
buying decision making process, have common objectives & share
common risks. It is also called purchase committee, buying
committee or decision making unit.
Members of buying centre are
(i) Technical persons. Represent design, production /operations,
maintenance, Q.C., Industrial Engg. Depts.
(ii) Purchasers / Buyers. Purchase / Materials dept. persons.
(iii) Accounts / Finance persons.
(iv) Marketing persons
(v) Top management persons. G. M. & above.
(F) Organizational buying behavior
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(F) Organizational buying behavior
Industrial / business buyers are influenced by many factors.
Two most important factors are (i) Organizational factors /
task oriented objectives, like best product quality, lowestprice, dependable delivery.
(i) Personal factors / Non-task oriented objectives, such
as good increments, promotion, Job security, personal
favors. When suppliers offers are similar, buyers can satisfy
organizational objectives from any supplier. Hence,
personal factors become important.
However, when suppliers offers differ substantially, buyersgive importance to organizational factors to satisfy
organizational objectives.
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Objectives in organizational buying
Organizational goals
Organizational members influenced by
Task and non task oriented objectives
Different criteria used by organization to
rate the suppliers
Roles of buying center members
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Objectives in organizational buying
Task oriented objectives
1. Business goal making profit
2. Technical service
3. Quality
4. Cost delivery
5. Budgetary constraints
6. Economic risk
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Objectives in organizational buying
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Objectives in organizational buying
Task oriented objectives
1. Price : evaluated cannot be considered in isolation
2. Service: technical assistance/spares/training3. Quality: consistent, reliability, inspection
4. Assurance of supply: interruption are costly
5. Reciprocity: exchange of mutually beneficialbusiness
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Objectives in organizational buying
Non task objectives
Personal objective : status, promotions,
salary increase, job security, socialinteraction
Friendship
Reputation
Mutually beneficial interactions
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Objectives in organizational buying
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Objectives in organizational buying
Marketer you have to find the way:
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Product analysis for identifying info
needs of key influencers
Product is bundle of promises to perform
These are important to few but may be incidental to other?
How about steam engine?
Product features appeal to few but not all in buying center
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Product analysis for identifying info
needs of key influencers
Product analysis consist of
A list of criteria considered relevant to
needs of target market
Developing rating scale
Examples : engine weight important in
buses and trucks but not important forgenset buyer
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modelsDefinition
A model can be defined as a simplified
representation of reality.
It simplifies only those aspects of reality
that interest model builder.
Types of models
Just verbal
Limited Scope
Comprehensive model
d l
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models
Use of models
Assist in constructing theory that guideresearch on consumer behavior
To facilitate the learning what is presently
known Model serves structured, systematic and
logical thinking about consumer.
Identify relevant variablesIndicate their characteristics
Specify inter-relationships
M d l f d t i i iti f b i t
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Model for determining composition of org buying center :
Purchase
Needs
Buying
Mission
Time
Life cycle
Long/short
Money
Value
High/low
Buyphase
Buyclass
Other
members
Buying center
Member-shipProcurement
Transaction
FirmNew/modified/rebuy
Executive/manager/agent/
buyer/computer
Management/R&D/ Engg
Pod/Finance/Traffic/Mktg
Mngt levels
Functional
areas
Roles
Interaction
Prod/distribution /service
Capital/product/
support/consumption
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Many models have been developed to explain organizational
buying behavior. One of the comprehensive models is the Sheth
model, described below.
The Sheth model of industrial buyer behavior, shown below ,
focuses on (i) Psychological aspects of individual buyers
(Component 1), (ii) Conditions causing joint decision making
(Component 2), (iii) Conflict among those involved in decision
process & resolution of conflict
(Component 3).
Situational factors include economic conditions, labor disputes,
mergers & acquisitions. The model does not explain their
influence on buying process.
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AGA/Dec 2009F i g . : T H E S H E T H M O D E L
C o m p o n e n t ( 1 )C o m p o n e n t ( 2 )C o m p o n e n t ( 3 )S i t u a t i o
D i f f e r e n c e s a m o n gi n d i v i d u a l b u y e r sc a u s e d b y f a c t o r s :
B a c k g r o u n d o f i n d i v i d u a l s ( E d u c a t i o n ,r o l e & l i f e s t y l e ) .
T h e i r i n f o r m a t i o ns o u r c e s .A c t i v e S e a r c hP e r c e p t u a l D i s t o r t i o nS a t i s f a c t i o n w i t h
p a s t p u r c h a s e s
V a r i a b l e s t h a t D e t e r m i n ei f b u y i n g d e c i s i o n i sa u t o n o m o u s o r j o i n t :A ) P r o d u c t S p e c i f i cF a c t o r s :
T i m e P r e s s u r e
P e r c e i v e d R i s kT y p e o f P u r c h a s e
B ) C o m p a n y S p e c i f i cF a c t o r s :C o m p a n y S i z e
C o m p a n y O r i e n t a t i o nD e g r e e o f C e n t r a l i s a t i o n
M e t h o d s u s e d f oc o n f l i c t r e s o l u t i oi n j o i n t - d e c i s i o nm a k i n g p r o c e s s
P r o b l e m S o l v i n g
P e r s u a s i o nB a r g a i n i n gP o l i t i c k i n g
S u p p l i e rB r a n d C
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Webster and wind model
Webster and wind model
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Webster and wind model A buying centre makes joint purchase decisions as an
informal group. Its task consists of information acquisition,
search processes, the development of choice criteria anddecision making among alternatives. The buying centre hasthree principal aspects:1. composition: the size, hierarchical levels and functionalareas involved;
2. influence: those individuals with the most influence in thebuying process;3. roles: the identification of different roles played by
buying centre members.
A buying centre includes all members of the purchasingorganization who play any of six roles in the purchase
process:
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Webster and wind model
The model structured industrial buying processesthat are characterized by multi- person involvementlevels, extensive internal and external coordination
effort, and long lead times. An individual canfacilitate or assume more than one role in the
purchase process and several individuals may holdthe same role. The importance of the different roles
varies by buy phase and organization size.
Webster and wind model
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Webster and wind model
Isolating the important player involves:
1. Isolate the personal stakeholdersThose individuals who have an important personal stake inthe purchase decision- making exert more influence thanother members of the buying centre.
2. Follow the information flowInfluential members are central to the information flow thatsurrounds the purchase decision. Other members directinformation to them.
3. Identify the experts
Expertise is an important determinant of influence in thebuying centre. Those individuals who possess the mostknowledge and ask the most questions of the sales personare often influential.
Webster and wind model
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Webster and wind model
Isolating the important player involves:
4. Trace the connections to the topPowerful individuals often have direct access to topmanagement that provides a direct link to valuableinformation and resources and enhances the status and
influence of those individuals within the buying centre.
5. Understand the role of the purchasing departmentThe purchasing department is dominant in repetitive buyingsituations through its technical expertise, knowledge of thedynamics of the supplier's industry and close workingrelationships with individual suppliers.
W E B S T E R A N D W I N D M O D E L
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E n v i r o n m e n t a l V a r i a b l e s
P h y s i c a l , T e c h n o l o g i c a l
E c o n o m i c , C u l t u r a l
P o l i t i c a l a n d L e g a l
L a b o u r u n i o n s
C u s t o m e r d e m a n d s
C o m p e t i t i v e p r a c t i c e s
S u p p l i e r i n f o r m a t i o n
O r g a n i s a t i o n V a r i a b l e s
O b j e c t i v e s a n d g o a l s
O r g a n i s a t i o n S t r u c t u r e
P u r c h a s i n g P o l i c i e s / P r o c e d u r e s
E v a l u a t i o n & r e w a r d s y s t e m s
D e g r e e o f d e c e n t r a l i s a t i o n
B u y i n g C e n t r e V a r i a b l e s
A u t h o r i t y , S i z e
K e y i n f l u e n c e r s
I n t e r p e r s o n a l r e l a t i o n s h i p
C o m m u n i c a t i o n
O r g a n i s a t i o n B u y i n g D e c i s i o n s
C h o i c e o f S u p p l i e r s
D e l a y d e c i s i o n & g e t m o r e i n f o r m a t i o
M a k e , L e a s e o r b u y
D o n o t b u y
I n d i v i d u a l V a r i a b l e s
P e r s o n a l G o a l s , V a l u e s
E d u c a t i o n , E x p e r i e n c e
E x p e r t i s e , J o b P o s i t i o n
L i f e s t y l e , I n c o m e
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Webster and wind model
pros: The six buying roles help the sales person structure largescale sales in complex corporate environments. Successfulinside selling requires planning and preparation beforemaking first contact.
cons: The concept does not include the political aspect of decisionmaking. The sales person must consider multiple, oftenconflicting goals.
The model omits the selling side. A complex transaction
often requires the involvement of multiple individuals fromthe selling party, e.g. mixed teams consisting of sales peopleand product engineers. This group of actors is called theProblem-Solving Unit (PSU).
CUSTOMER SERVICE
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CUSTOMER SERVICE
Important Customer Service Elements. Carry out market survey to
understand which of the following elements of customer service are
important to customers, what service levels are expected bycustomers, the service levels offered by the firm and its competitors.
(i) Pre Sales Service : Advising, Informing,
Problem solving
(ii) During Sales Service : Product availability,ontime delivery, order cycle time, and information.
(iii) Post Sales Service : Warranty, AMC, Repair,
Installation & Training.
Develop superior service package.
Test, Set Goals, and Establish Control system
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Contemporary purchasing activities
1. JIT2. Outsourcing
3. Single sourcing
4. Value analysis
5. Buying committee
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Contemporary purchasing activitiesJIT is an inventory strategy implemented to improve the return on
investment of a business by reducing in-process inventory and itsassociated carrying costs. In order to achieve JIT the process must
have signals of what is going on elsewhere within the process. This
means that the process is often driven by a series of signals, which can
be Kanban that tell production processes when to make the next part.
O t i
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Outsourcing
Outsourcing iscontracting with another
company or person to do
a particular function.
Almost everyorganization outsources
in some way. Typically,
the function being
outsourced is considerednon-core to the business
O t i
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Outsourcing
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Buying committee
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VALUE ANALYSIS
An organized effort directed at analyzing thefunction of systems, products,
specifications, standards, practices, and
procedures for the purpose of satisfying therequired function at the lowest total cost of
effective ownership consistent with the
requirements for performance, reliability,
quality and maintainability.
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SUMMARY OF CHAPTER - 3
Industrial marketers should understand that business buyers try to
achieve both organizational & personal objectives.
Industrial buying decision process consists of eight steps / stages
(buyphases) & three types of buying situations (buyclasses).
Buygrid model combines buyphases & buyclasses.
Marketers must understand roles & key members of buying centre,including key buying influencers.
Many factors influence organizational buying behavior, but major
factors are organizational ( or task oriented ) objectives and personal
(non task oriented ) objectives.
The Sheth model of industrial buyer behavior is comprehensive,focusing of psychological & joint decision making aspects.
Webster and wind model is also widely used & comprehensive model
on buyer behavior.
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Howard Sheth model
Three level of decision making :Extensive/limited/routine problem solving orresponse behavior.
Four major components of the model
1. Input variables
2. Output variables3. Hypothetical construct
4. Exogenous ( External) variables
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Input variablesInput stimuli are two types
1. Significative : actual element of brand orproduct such as quality, price, distinctiveness
,availability, service
2. Symbolic: Projected element of brand or
product by advertisersuch as quality,
price, distinctiveness ,availability, serviceSocial stimuli created by society, group, family
Howard Sheth model
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Exogenous variablesImportance of purchase, Personality variables, Social class,
Culture, Organization, Time pressure, Financial status
InputPerceptual
construct
Learning
construct
Output
Inhibitor
Pre-
disposition
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Inputs (stimuli)
significative
The 'real' (physical) aspects of the product or service
symbolicThe ideas or images attached by the supplier
socialThe ideas or images attached to the product by society, such as reference groups.
Outputs
The consumers actions
Constructs
perceptual
Obtaining and handling information about the product or service.
learningThe process of learning leading to the decision itself
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Output variables
1. Attention: magnitude of buyers2. Information intake
3. Comprehension: buyers store of
info about brand
1. Attitude: Buyers evaluation of brands potentialto satisfy motive
2. Intention: Buyers forecast of which brand hewill buy
3. Purchase behavior : Actual purchase act bybuyer. Pre disposition modified by any inhibitors
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Hypothetical construct:
There are number of intervening variables. Two
major groups are
1. Perceptual: related to how consumer processthe information
2. Learning : related to How buyers form the
concept
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Hypothetical construct:
1. Perceptual: related to how consumer process
the information
Sensitivity to information: How muchinformation buyer try to regulate
Perceptual bias: How buyer distort or alter
informationSearch for information: How actively buyer
search for additional information
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Hypothetical construct:
2) Six learning constructs1. Motive: General and specific goal impelling
action ( taken with force or urge)
2. Brand potential of evoked set (that is inmemory and under active consideration)
3. Decision mediators: Buyers mental rules formatching and ranking purchase alternatives
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Hypothetical construct:
2) Six learning constructs
4) Pre dispositions: Preference towards brand as
expressed by attitude5)Inhibitors : they restrains purchasing. Typical
inhibitors are time and price
6)Satisfaction: degree to which consequences ofa purchase measures upto buyers
expectations
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Exogenous or external variables
1. Importance of purchase
2. Personality variables
3. Social class
4. Culture
5. Organization
6. Time pressure
7. Financial status
These are not well defined as external to buyer
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Model dynamic : how this work
1. Start of process: When buyer confronts input stimuli andachieves attention
2. Stimulus is subjected to perceptual bias as a results of hispredispositions as affected by motives, decision mediators andevoked set
3. Modified info will again influence these variables leading tochange in predisposition
4. Actual purchase will be influenced by buyers intentions andinhibitors
5. Purchase will lead to satisfaction that will changepredisposition.
6. With more knowledge, it will lead to routine purchase behavior
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Howard Sheth model evaluation Significant contribution in understanding CB/
organizational behavior
Different types of customer problem solving and infosearch behavior
Limitations:No sharp difference between exogenous and other
variables
Limited generality. not useful for joint family decisions
Complex model difficult to use.