buying behavior and the buying process what are the different types of customers? how do...

Buying Behavior and the Buying Process

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:

4-1

CHAPTER 4

McGraw-Hill/Irwin

Types of Customers

• 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

4-2McGraw-Hill/Irwin

Capital equipment items are major purchases such as mainframe computers and machine tools.

Maintenance, repair, and operating (MRO) supplies include paper towels and replacement parts for machinery.

Types of Customers (continued)

• Resellers– Finished products or services with

the intention to resell them.

4-3McGraw-Hill/Irwin

Profit margin is how much a reseller makes on each sale.

Turnover is how quickly an item sells, and how much effort it takes to sell.

• 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

4-4

Types of Customers (continued)

McGraw-Hill/Irwin

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

4-5McGraw-Hill/Irwin

4-6

Steps in the Buying Process

McGraw-Hill/Irwin

Step 9 Payment

• 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

4-7

How do Organizations Make Buying Decisions?

McGraw-Hill/Irwin

• 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 new information

4-8

Types of Organizational Buying Decisions

McGraw-Hill/Irwin

Who Makes the Buying Decision?

•Users •Gatekeepers

•Initiators •Deciders

•Influencers

4-9McGraw-Hill/Irwin

4-10

Factors Influencing Organizational Buying Decisions

McGraw-Hill/Irwin

• Economic criteria– Life-cycle costing (total cost of

ownership)

• Quality criteria– What are organizational buyers looking

for?

• Service criteria– Value analysis

4-11

Organizational Needs and Criteria

McGraw-Hill/Irwin

4-12

Life Cycle Costing

McGraw-Hill/Irwin

• Types of needs– Financial security– Self-esteem– Recognition

• Risk reduction– Collect additional information– Develop supplier loyalty– Spread the risk

4-13

Individual Needs of Buying Center Members

McGraw-Hill/Irwin

• Supply chain management– Logistics– Managing inventory while controlling

costs– Just-in-time inventory control system– Material requirements planning– Automatic replenishment– Electronic data interchange

4-14

Professional Purchasing’s Growing Importance

McGraw-Hill/Irwin

Professional Purchasing’s Growing Importance (continued)

• Supplier relationship management– Identify the annual spend– Summarize the benefits and needs satisfied

by a supplier

4-15McGraw-Hill/Irwin

• The Internet and business-to-business selling– Extranets– Reverse auctions

4-16

Professional Purchasing’s Growing Importance (continued)

McGraw-Hill/Irwin

• 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.

4-17

Summary

McGraw-Hill/Irwin

• 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 weights4-18

Appendix: Multiattribute Model of Product Evaluation and Choice

McGraw-Hill/Irwin

4-19

Information about Laptop Computers

McGraw-Hill/Irwin

4-20

Performance Evaluation of Laptop Computers

McGraw-Hill/Irwin

• Overall evaluation

• Value offered

• Supplier selection

• Implications for salespeople

4-21

Appendix: Multiattribute Model of Product Evaluation and Choice (continued)

McGraw-Hill/Irwin

4-22

Information Used to Perform and Overall Evaluation

McGraw-Hill/Irwin

4-23

Value Offered by Each Brand

McGraw-Hill/Irwin

• 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.

4-24

Approaches for Changing Perceived Value

McGraw-Hill/Irwin